EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, April 25, 1995

.1530

[English]

The Chairman: I call the meeting to order. Good afternoon.

Our order of reference this afternoon deals with the main estimates 1995-96. Other than Industry votes 1, 5, 10, L15, L20, 25 and 30, the order of reference also involves ACOA, Finance, and Western Economic Diversification.

We're pleased to welcome the Minister of Industry, the Hon. John Manley, and the Secretary of State for Science, Research and Development, the Hon. Jon M. Gerrard. They are joined by Harry Swain, the Deputy Minister from the Department of Industry.

If there is unanimous consent, I would like to call for votes on votes 1, 5, 10, L15, L20, 25 and 30, which means we will be only dealing with the Minister of Industry and the Secretary of State for Science, Research and Development, and those votes or estimates that are related to those subjects. If that's unanimously agreed to, that's what we would like to focus our discussion on.

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I would remind you there will be other meetings for ACOA, Finance, and the other Industry votes that are not mentioned, as well as Western Economic Diversification. I believe the clerk already circulated the schedule earlier in the day.

Ms Bethel (Edmonton East): Mr. Chairman, on a point of information, it would be wonderful to have this information a day or so prior to these meetings. When it comes time for the others, could we kindly have the information from the clerk's office prior to the meeting so we can prepare?

The Chairman: You're going to get the statement by the minister the day the minister speaks, so I have no control over that.

Ms Bethel: I understand that. What about briefing notes?

The Chairman: The researcher has noted your concern. I think it's a valid point.

[Translation]

Mr. Ménard (Hochelaga - Maisonneuve): If I understand correctly, in the exchange that we will have the pleasure to have with the minister, about the votes before us, I would not be out of order in dealing with DIPP, which is important as you know. That's the Defence Industry Productivity Program, which the minister is also committed to...

[English]

The Chairman: No, that's fine. You can put the question to him and we'll see if he wants to answer.

Are we unanimously agreed about these specific items for the minister so we can proceed? Agreed.

I understand the minister has a brief opening statement and he will be followed by his colleague Dr. Gerrard, with a brief opening statement.

[Translation]

Hon. John Manley (Industry Minister): I can answer any question.

Mr. Ménard: I know, Minister. You are my hero.

[English]

I think I will be able to better illustrate the broad range of departmental activities in implementing some of the work and commitments made in the red book.

Some of the red book commitments we've completed to this point include the establishment of the Canadian technology network and the technology partnership program.

Our report, ``Building an Innovative Economy'', laid out a road-map for improving the economic climate in Canada.

We completed a new long-term space plan.

The Agreement on Internal Trade will come into effect on July 1, 1995.

Phase two of the networks of centres of excellence is a particularly good example of multidisciplinary and cooperative arrangements with private sector partners.

Reform and renewal of SME support has begun, and the Information Highway Advisory Council has been established.

[Translation]

Our School Net Initiative makes it possible for all Canadian schools to be electronically linked. It is only an example of the kind of investments the government makes on behalf of Canadians.

[English]

There was hard work done by everybody on the Lobbyists Registration Act, including this committee. The committee has proved to be very helpful in improving the bill and giving advice to the government. I particularly want to congratulate you, Mr. Chair, on your efforts in pioneering a new parliamentary promise in the deliberations over the Lobbyists Registration Act.

Finally, there was our examination of more effective trade development and promotion, in which aboriginal Canadians work with mainstream business.

The committee's work in exploring small business financing has brought that issue to the forefront. There's still more to be done here, but I think you've opened the door and there's pressure on the financial community to respond.

I think your help will be useful to us in the coming months in our continuing investigation into telemarketing fraud. As you're aware, new technologies have provided marketers with new means to sell their products. I'd like this committee to examine the problem of deceptive and fraudulent telemarketing and direct mail solicitations.

[Translation]

Mr. Chairman, we know that the Canadian and the global economy are in developing rapidly and that our greatest economic challenge is to move from recovery to economic expansion.

We took up this challenge by changing the way we do business. As you know, we no longer invest vast sums of money in the weak sectors of the economy. If we no longer do that, what do we do then?

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[English]

Industry Canada's role is to help create a marketplace that is efficient, competitive and fair, and one that is driven by informed and demanding consumers. I want to help our clients take advantage of opportunities through the application of science and technology.

We're focusing our efforts along three mutually reinforcing lines of business: micro-economic policy, marketplace rules and services, and industry sector development. I will be providing you with more details when I present to you our outlook document in the next few days.

In brief, I would note that we are focusing our efforts on key competitiveness gaps facing Canadian industry. Our pro-growth micro-economic agenda includes resources to create specialized products and services to foster productivity growth, exports, expansion and innovation.

With that, I'd be pleased to turn the table over to Dr. Gerrard for his comments.

The Chairman: Thank you, Minister Manley.

Dr. Gerrard.

Hon. Jon M. Gerrard (Secretary of State (Science, Research and Development)): I would just comment briefly about the areas that relate to science, research and development, areas that are quite important to the future of Canada. These areas have been relatively protected in the budget; that is to say that in the next three years the funding for the granting councils will decrease only by 14% whereas for the department it will be some 43% less. The Canadian Space Agency and the NRC are similarly protected, decreasing only 15% from projected.

The initiatives that have been undertaken in the last year include the support of the pre-competitive consortium, CANARIE and PRECARN, critical science partnership efforts bringing together university, industry, and to some extent the federal laboratories to advance a Canadian technology and science.

The SchoolNet initiative has now come forward as a major part of our promotion of science culture in the schools, and we're building on this the use of computers and information technology to help build not only learning in the schools but lifelong learning and potential for new jobs through the community access centre program.

We have an agreement now with the European Union, which is close to being ratified, in science and technology, which should facilitate partnerships between Canadian and European scientists and businesses.

We went through the comprehensive science and technology review last yea. The report of the national advisory board on science and technology is due within the next few weeks and the full strategy to be released within the next two or three months.

The Chairman: Thank you very much for your presentation.

I would now invite our colleague Mr. Rocheleau to begin questions.

[Translation]

Mr. Rocheleau (Trois-Rivières): First, I would like to ask a few questions on research and development. How do you explain, Minister, given the fact that the Canadian situation is constantly falling behind the other OEDC countries, a cutback of $321 million in the granting councils appropriation, especially with regard to postsecondary studies? How does that fit in the Canadian government's development strategy?

Mr. Manley: I will make a few comments and Mr. Gerrard may follow up on that. I don't remember if I said so in the House, but I am telling you quite frankly that I would be very happy to avoid any cuts in science, technology, research and development. That is very clear.

I also appreciate full well the fact that we need to find a way to reduce our fiscal deficit and our $550 billion debt, at the federal level alone. When the pie is smaller, all of its pieces are also smaller. First, the issue was to establish our priorities. That is why, as Mr. Gerrard said, even with a reduction of about 40% at the departmental level, we managed to reduce the appropriations for the scientific agencies by only 9.2% on average. This I think is an indication that science and technology, as well as research and development, are our highest priorities. That is obvious.

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You said in your question that it was very important for Canada to encourage research. I realize that with our tax credit system which is recognized as the most generous in the world, it is in the private sector that we will have to look for an increase in support for research and development.

[English]

Mr. Gerrard: I will address the point specifically that you referred to in terms of funding for universities.

Transfers to the universities come under the comprehensive transfer, and that is being dealt with by Human Resources Development Canada. I'm not going to deal with that. But I want to refer to the funding through NSERC and SSHRC, which are two primary granting councils funding the universities.

These two organizations, as you know, function independently. They have been reviewing their budget and focusing their efforts. The Natural Sciences and Engineering Research Council, for example, has streamlined its programs quite significantly over the last few months so that they are more focused. We anticipate that support to the universities and the research efforts will continue to be strong.

Now, in spite of the reductions to the granting councils, I think it should be pointed out that the networks of centres of excellence program, phase two, is continuing. In that context, even at the moment, the second phase of that competition is proceeding so that we have, even in this area, some new initiatives, which we think will strengthen university research.

The Chairman: Mr. Rocheleau, do you have some more questions?

[Translation]

Mr. Rocheleau: Minister, is it normal that in the Canadian capital region, Hull-Ottawa, where you have 46 research centres, 43 of them should be in Ottawa and three in Hull?

Mr. Manley: I believe that the National Capital Region, in economic terms, is one single area straddling two provinces. I have lived here all my life and there still is a difference between the two. The city of Hull is an integral part of the National Capital economy. Many research centres of the National Capital area are located on specific sites for historical reasons, but for many years now, as a general rule, the federal government launches one quarter of its activities on the Quebec side of the National Capital area. It is not easy to relocate a research centre such as the Experimental Farm.

As I said, it may be for historical reasons that there are many research centres on this side of the river, but you must remember that scientists, people who are in the technology business who work in institutes or in departments involved in research, live on both sides of the river. It is really one single region.

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Mr. Rocheleau: I would point out that only 11% of federal public servants working in research centres are from Quebec, whereas 52% of employees working in the same centres are from Ontario.

Mr. Manley: it is very difficult to establish such a comparison because, in Canada, we have a very small scientific establishment. So we need to find means to generate a lot of activities with very few resources. For instance, we have the Spacial Agency which is located in Saint Hubert, near Montreal.

Are we going to take such an agency and attempt to distribute it equally among the ten provinces? Then we would not have any Spacial Agency. So we need to find efficient ways that work well. You can't have it both ways.

[English]

The Chairman: Mr. Rocheleau, if you don't want it in Montreal, we'll take it in New Brunswick.

[Translation]

Mr. Rocheleau: Mr. Chairman, I can give you the breakdown of research centres in Canada: Ontario, 73, the West, 50, Quebec, 30, Maritimes, 24. So we have a little bit more in Quebec than in the Maritimes.

Mr. Manley: No, that is not accurate, Mr. Rocheleau, because, as I just said, the National Capital Region is in fact a region of its own. If you go to the Government of Quebec, look where the departmental research institutes are located. They are very close to the Capital. It is the same thing in British Columbia and in the other provinces. For the federal government, it is necessary to generate a lot of scientific activities in order to sustain the efforts of all departments.

Since we are in the National Capital Region, the scientific agencies must be very close to the Capital because that is where you find the seat of government. It is not a question of provincial boundaries, such as the one between Ontario and Quebec.

Mr. Rocheleau: In that case, could you give us the breakdown of intra muros and extra muros expenditures made by the federal government in the field of research.

Mr. Manley: In the field of research?

Mr. Rocheleau: With regards to research centres. In other words, what is done directly by the federal government -

Mr. Manley: Sorry?

Mr. Rocheleau: Intra muros and extra muros. What is done directly by federal institutions and what is farmed out in terms of research and development.

Mr. Manley: The Public Accounts Committee put a similar question to Mr. Swain. There were information available for -

Mr. Harry Swain (Deputy Minister, Department of Industry): For intra muros expenditures.

Mr. Manley: The intra muros expenditures.

Mr. Swain: With regards to contracts, I don't know if the figures are available.

Mr. Manley: We can check to see if there are figures for the outside contracts.

Mr. Rocheleau: I would have one last question, Mr. Chairman, this one on the Small Businesses Loans Act. You brought in changes which attempt to limit credit access for legitimate reasons, obviously, or for budgetary reasons.

Before going any further, in the context of discussions which took place within this Committee, would it not have been appropriate for the federal government to do some sort of cost benefit analysis of the implementation of that act, of this program with the banks, given the fact that it is widely used by clients and given the economic and socio-economic impact of that program on the community, before cutting any further?

We felt in this Committee that there was a rather negative approach to want this act. They said that it was too costly for the public purse. Did you assess the benefits which would flow from the implementation of that act before limiting access to credit?

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Mr. Manley: If I understood the question well, it was necessary. As you know, in the Orange Book, we indicated our desire to make that program to operate at no net cost for the government. That was the objective.

As far as small and medium-sized enterprises are concerned, we indicated that the problem was not the cost of capital, but its availability. Therefore, the objective of the program was to ensure that small business get access to capital, even with government guarantee.

Of course, it was necessary to find a way of eliminating losses by introducing guarantees in the program. We were criticized by the banks who argued that in fact, it was a tax on them. If the program was very costly to the government in the past and does not cost anything now, it is obvious that somebody will have to pay in the future. So for us, it was a method which will ensure that capital users pay, instead of Canadian taxpayers.

Mr. Rocheleau: If I may, Mr. Chairman, I will make a comment.

[English]

Mr. Schmidt (Okanagan Centre): There are a number of questions I'd like to ask.

I'm really wondering about the cuts you did make, in particular those in the student scholarship program. It's going to carry on with the commitments that have been made, yet there will be no new students in the scholarship program.

In terms of the overall science and technology program and the need to develop research and science capability in Canada, what was the rationale behind eliminating the student scholarship program in science and engineering in particular?

Mr. Gerrard: You're referring to the Canada scholarships program -

Mr. Schmidt: I am.

Mr. Gerrard: - which has been going now for a number of years. It was originally set up to run for a certain period of time, and then it was to sunset. When we came to look at the fiscal situation, it was clearly quite difficult to continue programs that were sunsetting, given that we were cutting back in many other areas. So we started in a difficult spot.

For this year, we had to say that for those scholarships already awarded, the students will continue to receive their dollars. We are actively exploring participation by the private sector at this point in a program that could be taken up and continued. We are conscious of the benefit of this program, and we are trying to find a solution with partners from the private sector as to how it might be possible to continue this in some modified fashion in the future.

Mr. Schmidt: The difficulty I have with that is not so much that there might not be money in the private sector. There is a lot of money there now for scholarships and things like that. My difficulty is that there seems to be a lack of a well-formulated strategy in terms of how the cuts were made, not only in this area but in a variety of other areas.

I can't help but remember the Attorney General's comments. He said a department, in particular in science and technology development, seems to have no particular strategy as to how this is to happen. It's all over the place. There's a lot of activity, but there are very few results. This seems to me -

The Chairman: Let's try to stay on this minister and this department instead of on the Attorney General.

Mr. Schmidt: But just a minute. That Attorney General's department was -

Mr. Manley: The Auditor General.

Mr. Schmidt: It's the Auditor General. I'm sorry about that. It's the Auditor General to whom I am referring in terms of his comments with regard to this particular department and that of science and technology. He said there is lots of activity, but there are very few results. That is one of his comments.

There's also this. Just because there was a sunset clause for a scholarship program that was doing good work - I have all kinds of evidence, as you do too, I'm sure - why would we cut that kind of program, which seems to be having an effect? Is it simply because there's a sunset clause? Where's the strategy that says we are moving ahead in the development of science and technology, preparing our young people to be the engineers and scientists of the future, which is what we need to push our economy along?

.1600

Mr. Gerrard: During the last year we have undertaken a science and technology review. We will come forward, as I indicated earlier, with a science and technology strategy.

At the same time, during the last year we went through a process of program review that was difficult and carefully carried out. During that program review, one of the questions asked was which programs must be carried out at the federal level and which can also be carried out at the provincial level? The Canada scholarships program deals with one of those areas that falls between the cracks, as it may be provincial or federal. The decision was made for us to proceed while protecting those areas we felt were absolutely core.

As I told you already, there are the granting council programs. We made sure there was a minimum decrease in the space agency and the NRC, compared with many of the other programs. So we protected those core programs and we proceeded in a step-by-step, logical fashion. We will be proceeding with the development of a strategy that will answer many of the concerns raised by the Auditor General.

Mr. Schmidt: I still have difficulty with that answer because it seems to me that we're going to have a strategy, and yet we have a budget that shows cuts that were apparently done by some other strategy.

We either have a strategy or we're going to have one. Do we or don't we have one? Do we cut on a willy-nilly basis? If we have to cut $100 million, then we'll cut that someplace. Where is the strategy that says there is a focus to all of this and that this is what we want to achieve?

I cannot bring together what seems to be a lackadaisical or a haphazard cutting over here and the anticipation of a strategy. Why wouldn't we wait to cut programs we know are working well until we have a strategy in place that says why we want to cut this program and not put money into it?

Mr. Gerrard: Let me just make two points. First, this program sunsetted before we came in. We're not cutting it; we're just not, at this point, able to find new funds to continue it.

Second, there is clearly a strategy, as I indicated. We have cut back some 60% in terms of subsidies to business. We have protected, in relative terms, expenditures in the area of science and technology, which in most cases over the next three years will only be decreased by some 15%.

Mr. Schmidt: I don't disagree. I want to protect science and technology money. We did that in our taxpayers budget too. We totally support the idea.

This is what I'm trying to get at. Where is the strategy or plan behind all this? I think it's missing. I feel we need to put that in place.

I want to move to another area, which is related. Do you feel that R and D in particular would be served better under one department or under the 17 departments - there may be more, but I'm not sure - that are now doing this? A variety of departments are carrying out R and D. Would we be better off by having R and D coordinated by one department so we could have a strategy that would really move us ahead?

Mr. Gerrard: As I indicated, we will be bringing forward the overall science and technology strategy in the next two or three months.

It's clear from what we know about research and development, whether it's funded through government or industry, that the purpose of that R and D is tied to the goal or the mandate of what you want to do as a government or as a department. So the rationale for having R and D activities tied to mandates of individual departments is to make sure there's an underpinning of research and development so those departments can carry out their functions and mandates very well. In trying to answer the question you raised, I suggest that one should look at those sorts of issues.

Mr. Schmidt: There's no doubt about that, but that still leaves my question: would it be better to have this coordinated by one or not?

The Chairman: Mr. Schmidt, I think the witness said to wait for the science and technology review, which is coming out shortly.

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Do you wish to add to that, Minister?

Mr. Manley: Mr. Chairman, what Mr. Schmidt is suggesting would be quite a significant change in the machinery of government. Generally speaking, we wouldn't begin to speculate on what the Prime Minister might want to do with machinery issues. I think Dr. Gerrard has given a clear indication as to why the system has evolved the way it has. The Department of Agriculture needs research done for many reasons, some of which relate to the health and safety of Canadians, and they advise the Minister of Agriculture in constitutional terms. That's why they are in his department; they are advising him. Likewise, the Ministers of Fisheries and Oceans, Environment, Health, and so on - all have departmental reasons to have science performed within them.

Experiments in the past with a central scientific bureaucracy such as MOSST have not been particularly successful, and it's often difficult for a central science bureaucracy to understand with sufficient depth the objectives and needs of particular government departments. That's not to say someone wouldn't want to experiment with it in the future.

In the U.S. at the moment you may know there are some who think there should be a department of science that would do all the science for the government. Maybe if they try that we'll be able to learn from their experience.

Mr. Schmidt: Mr. Chairman, I don't want the witness in any way to think that I'm unaware of how difficult that question is to answer. I'm only too well aware of the implications. I ask the question sincerely, because we are in a place where money is not as easily accessible as it was. We have to find the most efficient way to move ahead. We know that Canada is falling behind in the marketing of its high-tech business. It doesn't have the market share that it used to have and it needs to get into that area.

It seems to me that one of the reasons is the lack of a clearly defined goal-oriented and well-focused policy in science and technology development, in research and development, in the coordination between universities and industry and the marketplace. It seems to me that we're lacking. There seems to be one group running in this direction, the university groups over here, the marketplace running over here, industry running over here. There isn't that careful coordination, or there doesn't appear to be. That seems to be what's coming out of the Auditor General's report as well.

Mr. Manley: Let me jump into that, and I don't know, maybe Dr. Gerrard may want to as well. As always, Mr. Schmidt is quite stimulating when he gets some of these questions going.

I don't agree with you there. I agree with the Auditor General saying that we need to have a handle on what the federal government is spending in terms of science and we need to have priorities and so on. But your question goes far beyond that and suggests to me a kind of central planning that would extend across the economy.

You talked about Canada's success in trade and technology in the world and so on. I agree with you on this point. I think we ought to have a good handle on where our strength is in technology development and we ought to make that a priority and push as hard as we can to sell that in the world.

Mr. Schmidt: Mr. Chairman, that's great.

Mr. Manley: This country should not have a trade deficit in advanced technology goods and services. We have too many smart people and too many good companies, and that's where we ought to be putting some of our resources. But all of the government S and T doesn't have to do with that. A lot of it has nothing to do with that, nor should it. It's dealing with the health and safety and environmental satisfaction of Canadians.

For example, if you take the information highway and telecommunications initiatives that we've brought in, that's where we've endeavoured to say that in this area we're strong, and in this area we're going to spend some money. We've brought in phase two of CANARIE. We've put money into the SchoolNet program, and that's an area where we can succeed. That should be the model you're looking at, not at whether the Canada scholarships program has sunsetted, but rather where have we brought in new programs and where are we going with them. I think that fits the test you're talking about.

Mr. Gerrard: Very quickly, one way of bringing a coordinated approach is through programs like CANARIE. CANARIE phase two, on which we are spending $80 million over the next four years, will bring in almost $400 million from other partners in the Canadian context. This sort of fashion, in a world where we may be spending less in some areas, is a way for the whole country to make a larger effort.

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Ms Bethel: Mr. Minister, I have some questions about the outlook document. I had hoped we would have that. For instance, are we talking about program review here, or do you want to wait for the outlook document?

Mr. Manley: Feel free to ask whatever you want. If I can't answer your question I'll just say I don't know.

Ms Bethel: Why don't I just ask the questions and you can provide them for the outlook? I would like to know, in terms of program review and the outlook, whether performance measures will be included in the outlook. How will the department measure output and results? How will you determine client service? What will the established performance evaluation criteria be, and will they be available to this committee?

I'd also like to know a little more about the ongoing evaluation of your program review process and how it will be managed.

Moving on to your comments, I'm delighted to see there is reform and renewal of the SME support. My concern, which we hear across Alberta and I'm sure in every province in this country, relates to simply duplication and overlap. We've heard it over and over again. I need to know from you how we're going to work with Trade, ACOA, Western Economic Diversification, and Industry. Your department has taken a really heavy hit in cuts, and yet it seems you have the responsibility for the SME renewal and reform.

How are we going to manage it to ensure there isn't duplication and overlap at the provincial level, and all provinces are being treated equitably and fairly in economic development?

Mr. Manley: First of all, with respect to the early questions, we'll undertake to give you a written response to some of those, rather than endeavouring to give partial responses, if that's agreeable.

With respect to SME and overlap and duplication in regional agencies, provinces and so on, what we've endeavoured to do - and you'll see this in the outlook document as well - is be quite focused in what we see the mandate of Industry Canada to be.

First of all, it is a national mandate rather than a regional mandate. Our focus is on providing advice to the government on micro-economic policy matters, creating a marketplace that is competitive and works efficiently, and being active in the development of industrial sectors in the Canadian economy. All of those are within the umbrella of science and technology policy, being a paramount concern of economic growth and development.

In living out that mandate, we interact with quite a number of departments. We interact with some on a sectoral level, such as Agriculture or Natural Resources, and some on a regional level, such as ACOA, FORD-Q, or Western Economic Diversification. There are agencies that also interact, including the Federal Business Development Bank.

The endeavour, first of all, within each region is to be well coordinated in terms of who's doing what. We have memoranda of understanding with regional agencies in terms of how we function within a region and who's responsible for what.

We have also been working very closely with the provinces to ensure we provide one-window services to small and medium-sized businesses in each province. There are now ten Canada business service centres up and running, one in each province of Canada. They have 1-800 numbers and in some cases walk-in service where small businesses can get access to whatever information they require federally or provincially. In some cases municipal services can be obtained as well in the one stop.

With International Trade, our responsibility is really the domestic side of trade development. International Trade takes the international initiative of helping firms when they're out there in the destination markets. PEMD, for example, is a program to assist in export marketing. We deliver that program domestically.

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Ms Bethel: How do you measure the effectiveness of these programs and agreements, then?

Mr. Manley: As you know, we're certainly in a period of transition. When you see the outlook document it will give you an idea of what we intend to do over the three years. We're going to endeavour to ensure, as we implement, a very reduced size of department.

As you know, we've gone from last year with a budget of well over $1.1 billion to one that will be under $500 million in the third year out. Implementing those changes is going to be the first priority. The measuring of the results then becomes something you can do once you've implemented.

Ms Bethel: From what you've told me, I understand that your mandate is to look at the national scope and determine policy based on national needs. But if you farm out those responsibilities to others, how do you know whether the policy you develop is being carried out and is effective? Do you evaluate the effectiveness of the programs that are being regionally delivered, so to speak?

Mr. Manley: Perhaps the best way to describe it is to take, as Dr. Gerrard suggested, the CBSC program as an example of how that can work.

The Canada business service centres are a national program. However, the managing partner in Alberta is Western Economic Diversification. We have people there who can answer questions on industry matters. Our database is available there with information about potential opportunities, trade development and so on.

In that context, in Alberta that agency is expected to be in the forefront in terms of managing that particular operation. That's an example of how we see the partnership working out. Where the agencies exist, they play a role in understanding the local economy, being on the ground and understanding local communities.

Ms Bethel: That tells me what is delivered and to whom, but I'm not sure of its effectiveness. The example I'd like to use is tourism.

At a tourism conference I believe there were nine people from federal government departments, because everybody has a piece of tourism. To the folks out there that looked like duplication and overlap, but they all did have responsibilities.

Mr. Manley: They all have responsibilities. I'm not sure if you can evaluate whether departments are working together. Superficially it looks like duplication, but in fact it probably is not.

In the case of Industry Canada, we have delegated our tourism responsibility to the Canadian Tourism Commission. Its responsibility is tourism promotion. But you have interests in Heritage in the national parks; you have an interest in Indian and Northern Affairs in aboriginal tourism; and you have an interest in the regional development agencies in tourism prospects in a particular region because it's part of the economic development of that region. So you have legitimate reasons why you want multiple government departments to be looking at an important economic sector from different points of view. That's one of the reasons we have more than one department -

Ms Bethel: I agree passionately with you that all the people need to be involved, but how do we determine if it's effective - in other words, if we're getting the most bang for our tourism buck?

Mr. Manley: Perhaps Dr. Swain can give us a bureaucratic point of view in terms of the evaluative measures that exist.

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Mr. Swain: We do have a program evaluation division that reports directly to me and it does evaluate all of our programs on a cyclical basis, not every one every year, but every one gets examined at least every five years. Last year during program review we did quite a heroic amount of work in looking at the outputs, the value for money of every single thing we did. Those kinds of considerations guided ministers in their choices about what got kept - and what got cut, too, I might say.

Ms Bethel: Did you evaluate the regionals?

Mr. Swain: No. They are responsible to their own ministers. We evaluated our own work in Ontario through FedNor, which is our only regional development program within the department.

We also have performance standards set for every one of our services in terms of, for example, how long it should take to get an answer when you phone a CBSC. We have measures for this. We have standards and we measure how well we're doing against the standards. We have standards for how long it should take you to get a patent or a radio licence and so on with all of our services.

Ms Bethel: I appreciate that.

Mr. Chairman, I would really like an opportunity to perhaps speak sometime with them privately. It looks like there is maybe not enough interest with my -

The Chairman: You don't need to ask our permission for that.

Ms Bethel: Thank you.

Mr. Mitchell (Parry Sound - Muskoka): I have a couple of questions. First, to speak very generally along the lines of what we've been doing as a committee - and that is examining the whole question of assisting SMEs - we've dealt specifically with the access to capital issue. But to go a little bit beyond that, perhaps you could take a minute to describe what the department is doing specifically in terms of helping the small business sector and some of your approaches to that.

Mr. Manley: First of all, I want to acknowledge, as I did in my opening remarks, the work this committee did on its report ``Taking Care of Small Business'', which set out quite a broad agenda. That, together with the work of the small business consultation groups that we received, provided us with a base of ideas, suggestions and commentary to which we've recently responded in tabling a reply to this committee's report and also issuing a reply to the small business consultative groups.

Let me try to put this in a broad perspective rather than a narrow one. The consultations provoked one clear indication on the part of the small business community in terms of what their number one priority was, and it was reducing the deficit. That's what we heard repeatedly. I think that in the context in which the program review unfolded and we've taken on the obligations that we have for programs in the department, everything has to be looked at from that perspective.

We took a leadership role within the government, saying we think that business subsidies ought to be cut, we think we can do with less, and we think reducing government spending is a priority. In fact, I believe that reducing the deficit, which ultimately will reduce tax burdens, is probably the best thing we can do for small and medium-sized businesses in this country by far.

Now, that being said, in terms of programs, as you know, we moved on the Small Businesses Loans Act fairly rapidly in ways I was explaining in answer to Mr. Rocheleau's questions. We're endeavouring of course to make it self-sustaining but at the same time increasing the access that small businesses have to it.

We've also been moving forward with many of the proposals this committee made concerning the Federal Business Development Bank. I hope to be making an announcement before too much longer concerning FBDB and the changes we'll bring in with respect to it.

We have endeavoured, through the maintenance of IRAP, to play a role through NRC in the assistance with technology development and diffusion in the small and medium-sized business sector, and I think overall we have continued to put the emphasis, in many of the programming ways, on that sector. It was an important component in the orange book. Several of those initiatives are still moving forward, including the Canada community investment plan, the procurement initiative and so on. I think there is a fairly broad list of things, broad and fairly deep, in terms of initiatives to be of assistance to the small business community.

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Mr. Mitchell: One of the things the committee did a few weeks ago was talk to Judd Buchanan, who's heading up the new initiative in tourism. One of the questions we asked at that time and I'd like to ask the department as well is this. Exactly what type of evaluation on that new initiative are we going to undertake, and in what kind of timeframe are we going to be undertaking it?

Mr. Swain: Each of the projects that the tourism commission undertakes, essentially trying to stimulate demand for Canadian product, will be the subject of its own, as it were, mini-evaluation. We want to see whether we're getting associate results for particular expenditures. On top of that, on an annual or multi-annual basis we will evaluate the whole program.

Mr. Manley: The important design feature of the Canadian Tourism Commission, of course, is that we expect the private sector to put some of their bucks up. It's not just politicians and officials spending taxpayers' money; we're doing this in partnership with the private sector. The private sector board of the CTC predominates. They have to make the decisions and it will be project by project. Somebody with scared money is going to have to back each project; otherwise, it's not going to happen. There's a built-in determination of whether they're worth while to do. There's leveraging, but also that outside check on the utility of a particular program.

Mr. Mitchell: I have just one last area, the regional development agencies. According to the announcement at the time of the budget, we're going to move away from forgivable grants and go into a program of repayable loans. That raises the possibility of creating these funds as self-sustaining funds and in fact the ability to grow them, given the right type of investments made by the managers. Is that something the department will be looking at in the future?

Mr. Manley: Well, as you know, the only agency within our department is FedNor -

Mr. Mitchell: One very dear to my heart.

Mr. Manley: Yes, very dear to your heart. Of course it also will be based only on repayable contributions. One of the possible views that may emerge in our discussions concerning how we structure the FedNor program, now that it has some financing behind it, is to use not only the repayable stream as a means of building the fund but also potentially the gearing ratio available in the Federal Business Development Bank to in fact increase the amount that's available for use by business in small towns in northern Ontario. That's something we're actively looking at, and I hope that when we have the conference on economic development in northern Ontario late in June that will be one of the issues that conferees may want to consider and give us advice on.

Mr. Murray (Lanark - Carleton): I have two questions really, one for each minister. I'll start with Mr. Manley.

In this era of diminishing resources, both federally and provincially, we have to look at how we're spending science and technology dollars wisely. I know the minister had a baptism by fire in federal-provincial relations when it came to the internal trade barriers in Canada. I'm wondering if you see any possibility of building on that experience to try to have the federal government work more closely with the provinces, who each have their own programs to try to stimulate science and technology and R and D in their provinces. Is there anything coming out of that, or are you working in another area to build on that?

Mr. Manley: I'd say there are really two parts to answering that. First of all, the internal trade agreement itself should reduce some of the competition, some of the dislocation the programming has created. In other words, it should get at the code of conduct on incentives as well as the procurement practices in the internal trade agreement. I'm hopeful that means that public resources are going to be spent more efficiently for the benefit of the country as a whole.

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You could say, in terms of actual intergovernmental cooperation, we've been trying to work on that with every government. We have good working relationships with most provincial governments, where we have programming for which we share responsibility. The CBSC concept has stimulated greater cooperation. There are officials from Industry Canada and the Ontario Ministry of Economic Development and Trade working side by side in the same office, dealing with calls from business people within the province, and that kind of thing is duplicated in provinces across the country. That has meant a greater engagement, for example, of Industry Canada in Ontario with the Ontario ministry, as has been the case in fact with most of the other provinces as well.

So I think there are prospects for that. With declining and limited resources, I think all governments have an interest in being cooperative in areas of economic development.

Mr. Murray: Again, along the same lines of there not being a lot of money to be thrown around by governments, there's been talk for many years about the need for a science culture in Canada. Again, if we're going to adapt to the global economy and the information age, etc., we really need to do something to try to stimulate that science culture within Canadians.

My question for Dr. Gerrard is, as he's been doing a lot of travelling across the country lately, has he sensed any change or has he picked up on any turnaround in that area during his travels across the country?

Mr. Gerrard: The program that is really making a very significant difference in terms of the use of science and technology in schools is the SchoolNet program. This program now connects more than 4,000 of the country's 16,500 schools. It is providing resources to schools across the country, and there are something like 700 individual components or programs delivered nationally that are part of that.

It is quite exciting to be able to visit a school where this program is now working - it operates both in English and in French - and to see the excitement there in children who are learning about computers, learning about technology and learning about science. I think this is a program that is making a difference in terms of the promotion of science from one end of the country to the other.

Mr. Murray: Could you see that expanding beyond the schools into the community at large in any of these communities that are linked up?

Mr. Gerrard: Through the community access program, for example, a community like Gagetown, New Brunswick, is using the base within the school to teach the whole community. In that community, for example, a very substantial number of the people have got training looking not only at educational learning about computers and networks but using these for jobs, using the information highway and providing jobs and services in ways that would not have been possible before. It's quite exciting in many rural areas.

The Chairman: That's in my riding, Dr. Gerrard. You were well briefed as to what was in my riding. But it's a great project. I must concur with the minister on that one.

[Translation]

Mr. Ménard: I would like to discuss with the Minister an issue that is very close to my heart and which deals with conversion. The Minister knows that I can be quite obsessive about this and, Mr. Chairman, I would like to give you notice of a motion which I would like to table at the end of my questioning. I will gladly leave a copy with the Minister.

What disappoints me the most in you is related to the DIPP program. Let's be frank about the future of this program. In the good years, not even five years ago, it had a budget of roughly $300 millions. We have had indications which lead us to believe that it could be left with a total budget of $21 millions.

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It is worth looking into it because: several players in the field who are not members of a political party but who are interested in the conversion program were of the opinion that the DIPP program could have been a priviledged tool for the government in setting up a conversion program like the one proposed in the Red Book. Just as you did, I'm sure, I read the Red Book from cover to cover and I know for a fact that conversion is one of the things the government is committed to.

Here is my first question to the Minister: Is it true that the anticipated cuts over the next years could be so drastic that the DIPP program's budget could be reduced to 21 million dollars for the fiscal year 1997-1998? We went from a budget of $102 millions for this year to $48 millions next year and $21 millions in 1997-1998.

Mr. Manley: What we said in the estimates is that we will meet our commitments to the DIPP program without making new ones. This is the reason why there is such a reduction. The figure gives an estimate of our legal commitments.

As for the policy aspect which is, I gather, more important to you, I agree that it is a very efficient program in many areas, particularly in the aeronautic industry which took advantage of the defence conversion program. That is the reason why the DIPP program and the environmental technology in the estimates program were slated for Cabinet review.

Mr. Ménard: Let me understand, Mr. Minister: We are starting with $300 millions. I am fully aware that there is a financial crisis and that your government must obviously select programs that are the most efficient. What seems to be contradictory is that your officials who are obviously very loyal to you admit that this program is one of the most efficient.

It is so very true that at the breefing session that is organized for those who are interested, your officials explain that the program has stood the test of time, given the economic spinoffs, and your officials speak highly of the program. They say it is one of the most efficient programs since administration expenses are very low. Don't you find it paradoxical that on the one hand, your officials praise a highly efficient program, a program which has possibly planted the seed of a conversion fund and that, on the other hand, your department would want to abolish it? Shifting from a budget of $300 millions to a budget of $21 millions means for all practical purposes abolishing the program.

Mr. Manley: First, the program's budget is not $300 million anymore and has not been for a long while.

Mr. Ménard: It has not been that long. I am 32 years old and I remember it.

Mr. Manley: No, when I became Minister, the program's budget was $160 million and not 300 millions.

Mr. Ménard: I know it is not of your making.

Mr. Manley: I am not here to try to explain the previous government's decisions; I have enough problems with my own government's decisions.

Mr. Ménard: I couldn't agree more.

Mr. Manley: The fundamental decision was to reduce grants to businesses.

Mr. Ménard: These are not grants.

Mr. Manley: Yes, they are.

Mr. Ménard: Listen, that's not what your officials say. They say it is a lending program and that there are royalties, but no grants.

Mr. Manley: As a lawyer, I counselled several businesses. I clearly understand that when you receive free money, without having to pay interests, it is a grant.

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Mr. Ménard: I know that lawyers understand the difference, Mr. Minister.

Mr. Manley: And when their clients have won the support of the DIPP program...

Mr. Ménard: But are you going to abolish it or maintain it?

Mr. Manley: ...it isn't bad since in fact it is a grant. I recognized that it is an efficient program, didn't I? It is also a very important program for our aerospace industry. But given the overall decision to seriously reduce grants to businesses, it was impossible that Industry Canada's largest program would be left untouched.

Now, even with a reduced program, there are payments to be received with which we might create a fund and...

Mr. Ménard: I see you are talkative, but may we go back to the conversion program.

I understand that you have not...

[English]

The Chairman: You're out of time. Conclude with your question.

[Translation]

Mr. Ménard: In that case, I would like to give notice of a motion. You were much more generous with the Liberal members.

The Chairman: There are many questions.

Mr. Ménard: Then, Mr. Minister, before you leave... We could discuss this at length. I know that you are intelligent and professional enough to understand that as Quebeckers, we are concerned with the conversion program since some 15 000 jobs are at stake.

Here is my last question: Would you accept the Official Opposition's suggestion to create a subcomittee that would examine the program's terms and conditions? In other words, how would the conversion apply? How can the DIPP program be used to that end with the definite understanding that there will be no new injection of funds? We understand your dilemma.

According to a report sponsored by FORD, Quebec, your department and the city of Montreal, it would have been possible with $50 millions to take the first steps that would have led to conversion.

Will the Minister then receive favourably the suggestion to create a subcommitte that would allow the Industry Committee to examine the matter of conversion?

[English]

The Chairman: First, it's not within the minister's purview; it's within the committee's purview.

I'm sorry, Minister, but this is one of the areas in which I -

[Translation]

Mr. Ménard: I therefore give notice of my motion.

[English]

The Chairman: I suggest that you give it to your colleague, who is the vice-chairman of our committee. At an appropriate time the committee will consider this as future business.

[Translation]

M. Ménard: I would have liked to get the Minister's opinion.

[English]

The Chairman: He's welcome to give an opinion as to what he thinks about the concept of a study.

Mr. Minister, would you like to respond to his comment?

Mr. Manley: Frankly, I would like the opportunity to read the proposal and give it consideration before I respond.

The Chairman: That's fair.

Mr. McClelland (Edmonton Southwest): Mr. Minister, through you, I would like to compliment Mr. Addy, who is the director of investigation and research for the Bureau of Competition Policy.

I'd like to confine my comments to the services to the marketplace. In particular, I'll preface this by reading a sentence from the introduction addressed to you by the director: ``A competitive marketplace is in the best interests of Canada.'' I believe the government thinks that is obviously the case. Yet further in the same report....

I'd like to speak about the relationship between Canada Post and the marketplace, and the fact that Canada Post, as a crown corporation, is directly competing with other carriers, such as Purolator, and in the distribution of flyers and leaflets and things like that all across the country. Yet it's using its privileged position as a crown corporation with the ability to deliver first-class mail to cross-subsidize other aspects of its business. In the opinion of your government, does that do anything to enhance competition?

The Chairman: Mr. McClelland, you sound as if you're headed toward being out of order.

Mr. McClelland: I'm finished, so either I'm out of order or I'm not.

The Chairman: Is this in relation to the estimates?

Mr. McClelland: Yes, it is. It's part of the report of the competition policy. If the minister would like to take that under advisement, I would be quite happy.

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Mr. Manley: The best answer I can give, if I might, Mr. Chairman, is to say, first of all, obviously Canada Post Corporation is a federal crown corporation that is not under my responsibility, so I would defer to Mr. Dingwall in answering questions related to Canada Post and its activities.

With respect to the competition bureau, the director acts very much independently. Effectively, he's an independent law enforcement officer. He is accountable through me to Parliament for his supply, but he acts independently from me except for the very limited areas in which I can direct him under the act - for example, to commence an investigation. I do not have the power to evaluate his judgment with respect to investigations. If he determines there's nothing to investigate or there's no offence committed or there's no -

Mr. McClelland: Okay, I accept that.

Would it be possible, Mr. Chairman, just to get the opinion of the minister as it affects competition in general, because we're looking at competition in the direct-to-home satellites -

Mr. Manley: You can certainly get my opinion on competition in direct-to-home satellites, but as to whether a crown corporation that reports to another minister is non-competitive, which I think is where your question is leading, you won't get my opinion.

Mr. McClelland: We're leaving that and we're going on then to the general concept of competition and the encouragement of competition.

The Chairman: I think the minister could answer a question generally on competition policy. Do you want to put a question specifically, Mr. McClelland?

Mr. McClelland: Sure. Is it the minister's opinion then that competition should be encouraged in all aspects of communication? For instance, in direct-to-home communications through satellite, how does the minister feel about competition from American satellites, for instance, competing with Canadian providers?

Mr. Manley: Your question is very germane to the issues of the last few days that have been raised in the House of Commons. Although the government has yet to take a final decision with respect to what we will do with the recommendations of the expert panel on direct-to-home, I have attempted to make it clear that we believe fundamentally the direct-to-home satellite business ought to be structured on a competitive basis.

Many of the criticisms of the CRTC's exemption order that was issued last August came from groups saying that the consortium that had been created in order to take advantage of the exemption order effectively created a monopoly. That's why very rapidly on September 12 Mr. Dupuy and I issued a press release saying we're going to review this policy.

There's no question the CRTC applied a policy that existed, and it did so correctly, but we felt two things. One is that there is a danger of monopoly here, and second is that exemption orders really aren't intended to be used to give people the power to do things that would otherwise be issued by a licence. A licensing application is one that has public hearings and so on.

Mr. McClelland: Mr. Minister, following that logic, then, if competition between two providers of direct-to-home satellite is good, wouldn't competition between three or four or five direct-to-home satellite providers be even better?

Mr. Manley: Sure.

Mr. McClelland: In that case, wouldn't it follow that American providers of direct-to-home should be able to bill in Canada so that users of satellites existent here in Canada today don't have to circumvent the law by having a post office box in the United States?

Mr. Manley: First of all, you're right, they are circumventing the law, and we want to put an end to that. We think as a minimum, though, broadcasters should be on a level playing field. We believe very much that Canadian content, the support of Canadian development of product, should be part of what broadcasters contribute to Canada when they have the right to reach into Canadian homes and living rooms. That's important because of the size of our market compared to the U.S. market.

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The marginal cost, for example, of running an episode of Roseanne in Canada is next to zero. But if we want to have Canadian dramatic productions largely only for a Canadian market, if they're really going to tell Canadian stories in a Canadian way, the marginal cost for a Canadian production is quite significant.

Therefore, just on economic grounds, I want all the competition I can get, but I want them to be committed to carrying Canadian programming, Canadian news and current events, Canadian sports and so on.

Mr. McClelland: Wouldn't it be marvellous if Canadian carriers had the whole U.S. market opened up to them - that huge, ten times larger market? Our producers can compete on a world basis.

I have one quick question in a different area.

The Chairman: I'm sorry, I'm going to have to move on. I'll try to come back to you.

Mr. Discepola (Vaudreuil): For Mr. McClelland's benefit, I have sent a letter to the Minister of Public Works on exactly that issue, on the post office. As soon as I get a response I'll be glad to share it with you.

I'd like to make the minister equally aware that with regard to the SBLA measures we introduced in the last budget, we received testimony from the six major banks as well as the Canadian Bankers Association as early as this morning. They have indicated that because we've built cost recovery into the program it's going to drive the costs of administering that program up for them. This morning Ms Sinclair stated categorically that because these costs are going to be increased, the demand will be decreased.

You were expecting to make access more readily available to such small businesses, but it may have the opposite effect because of the cost recovery measures. I'd like your comments on that.

My last question is this. Quite frequently, especially with the regional programs, we've cut back the budgets, yet the bureaucracy seems to remain in place. An awful lot of the concerns from small business people I've talked to are exactly about that.

I took a look at your 1995-96 organizational chart. I'm not one to look at figures, and I presume FTE stands for full-time employees.

Mr. Manley: Right.

Mr. Discepola: I'm not trying to relate the budget to full-time employees, but I do have a certain empathy to do that anyway.

I've looked at some of the programs. Industry and science policy, for example, is roughly $63 million and we're administering that with 260 employees, yet corporate advisory services has a budget of $85 million and is administered by 730 employees. Then you take a look at the services to the marketplace, with a budget of $150 million administered by 2,000 employees, versus a budget of $1.1 billion for the rest of the services you provide with 2,400 employees.

Can you rationalize that for my better understanding?

Mr. Manley: I'll let Dr. Swain take the second part of the question.

With respect to the SBLA, it's not a surprise that when you take a program that was costing you $150 million a year and make it pay for itself, the demand may fall. It's a simple price-demand curve. You can expect that when there is a price, demand is reduced.

The growth in that program from the time the previous changes were implemented was virtually ten times within a year and a half. It went from less than $500 million to almost $4 billion in a year and a half. It makes me kind of suspicious that maybe some of that lending was not incremental. Perhaps some loans would have otherwise been made by the banks anyway, but it was found that a government guarantee was comfortable to have.

We've now put it on a basis that if a borrower who comes in needs the government guarantee he can get it. He'll have to pay for it. If he can get the loan without the government guarantee, he will demand it. To me, that's how the program needs to work.

Of course, demand may fall and the banks may have to make a hard-nosed decision on whether they want to turn a customer away or force him or her to pay for a government guarantee. I recognize there may be additional costs involved in that, but we're not running a charity. We're trying to establish a program that makes capital available to small businesses that might not otherwise be able to get it. We're doing that my putting the Government of Canada on the line for some of those loans. But you have to pay for what you get, and that's why the increased fees are going to be picked up through the interest rates.

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Many borrowers under the SBLA weren't even aware, because of the complexity of the forms they were signing, that they had government guarantees. I don't think that program was sustainable. When you look at the growth in the use and everything, it just cried out for some reform.

We'll see how it works. If we really stifle the program then maybe we'll have to go back to the drawing board. But I think the principles we're following are sound in saying the user should pay; let's make sure we give access to capital, but the user gets to pay for it.

Mr. Swain: The general question of differing ratios of expenditures to full-time equivalent staff in different parts of the department really relates to the kinds of services that are provided there. For example, it used to be in the industrial programs, and it will be during the period of a wind-down, that the total expenditures included the grants and repayable contributions that went to businesses under those programs. Hence, the ratio of total expenditures to people was quite large.

That ratio will diminish markedly as our expenditures on subsidy programs decline. It will decline not quite that rapidly because we are also divesting ourselves of a large number of the people involved. During the three-year period of the program review, we anticipate that employment in the department, which is now about 5,600, will decline by about 1,200.

Other areas of the department are very strongly labour intensive. The output is pretty much a direct function of the number of FTEs who are employed in competition law and enforcement, for example. That's a good example of that sort of thing.

Communications research - except that one needs a budget for laboratory and experimental equipment on top of that - is still pretty much a function of the number of people you have as well.

I think the numbers of people who are employed in each of these areas, the earnings associated with a number of the services we have, and the changing mix in the outputs of the departments make those figures all fairly explicable; at least I hope so.

It is not generally recognized that there is about a $300 million income associated with the services provided by the department, notably in the areas of inspector management, intellectual property and so on. So our net cost is smaller than it appears.

[Translation]

Mr. Bélanger (Ottawa - Vanier): Mr. Minister, I have several fields of interest, but I will limit myself to only one for the time being. Insofar as grants by the federal government to private businesses are concerned, their amount should according to the budget decrease by 60% over the next three years.

Mr. Manley: Yes.

Mr. Bélanger: What does that amount to in absolute figures?

Mr. Manley: For the department, it amounts to $535 millions.

Mr. Bélanger: From what?

[English]

Mr. Swain: There's a five-year reduction to the sum of these three in grants and contributions.

Mr. Manley: Our table indicates that we will have savings in 1995-96 in grants and contributions of $97.1 million, $118.6 million the following year, and $131.5 million the following year.

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Mr. Swain: That's a bit of an accounting convention because those are reductions off the reference levels previously established.

[Translation]

Mr. Bélanger: What are the total amout of grants given by the Department of Industry to the private sector? Anyway, you don't have to answer me today...

[English]

Mr. Manley: How much?

[Translation]

Mr. Bélanger: Is that only for the Department of Industry?

Mr. Manley: The exact information is hard to access, but we can get it for you...

Mr. Bélanger: My point is this. In the future, when the federal government makes a contribution or a grant to a private company and that a year or two later, for example, that company is resold or bought out by a third party, will the federal government make a practice to ask for the reimbursement of that contribution?

Mr. Manley: Not exactly, but the conditions attached to the contribution will continue to apply. They will be maintained.

Mr. Bélanger: Are there conditions attached to all grants? Does the federal government sometimes ask for the grant to be paid back?

Mr. Swain: No, it only requires that the conditions continue to be met.

Mr. Bélanger: What if they are not met?

Mr. Swain: Then we see what we can do.

Mr. Bélanger: As it happened before?

Mr. Swain: Yes.

Mr. Bélanger: Did the federal government ask that the grant be paid back in some cases?

[English]

Mr. Swain: There have been occasions.

[Translation]

Mr. Bélanger: Where can we find the relevant information?

[English]

Mr. Swain: These cases often entail commercial confidentiality. But, yes, there have been cases where non-performance or malperformance of obligations has led us to go back to the company and call them to their duty. If they do not perform, we then begin proceedings to recover the contribution or at the very least to stop what's already going on.

[Translation]

Mr. Rocheleau: Thank you, Mr. Chairman. I have a comment to make, Mr. Minister, before I ask my question. Concerning the Small Businesses Loans Act, we, of the Bloc Québécois, would have wished that, before it was revised downward, there had been a cost benefit study to avoid a short-sighted approach to the act, such as we have unfortunately seen, to judge the spill-over effect in terms of job creation and tax revenues and to see if the immediate outlay of a few million dollars are not more than compensated by the resulting social and economic benefits in the middle and the long term.

This is why we have insisted in the committee, but unfortunately...

I would like to query you on two points mentioned in your presentation: first, the electronic highway, secondly, the SchoolNet. Regarding the management of the electronic highway, I would like to know what you think of the place given to Quebec. Quebec is a distinct society, as far as I know, but neither Quebec as a people nor its government have been invited to participate in the management of that issue by the federal government. At the international level, there is no representation by the only francophone government in America.

Given the importance of telecommunications in the daily life of the citizens of the world, why isn't the federal government more inclusive in its conception of federalism on that score?

Also, regarding the SchoolNet, do you take into account the fact that the issue comes under provincial jurisdiction and that Quebec is a distinct society? It's a very delicate situation when the federal government intrudes electronically in the schools of the country.

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What is the minister's intent?

Mr. Manley: First, despite what you might think, Mr. Rocheleau, you have to understand that the electronic highway is going to link together all peoples of the world. This is not going to be a highway just in Quebec. It wouldn't be possible and it wouldn't appeal to anybody. It is really an international phenomenon.

On another council dealing with the electronic highway sit many members from Quebec; even the Chairman is a Quebec resident. All provincial governments are not represented however. I personally don't think that we should have a council for every provincial government. I organize other forums where I can meet with the provincial ministers.

Secondly, I can give you examples where Quebec will benefit from our interest in the electronic highway. The Board of Internet International has chosen Canada as host of its next conference in 1996. We have chosen Montreal as the city that will receive the Internet users and the people from all over the world for a simple reason: Internet now plans to add other languages to its system.

We have decided that Canada, and more particularly the City of Montreal, will help to stage that event. I hope that you will be in Montreal next June to welcome the visitors from all over the world who will want to participate.

Finally, the idea to integrate Internet into the school network has been well received by all provincial governments. We will not be in the schools, the highway will. It will link the schools of Quebec to those of British Columbia, the United States and the whole world. You do not live on a desolate island. Being linked to the electronic highway, will make it extremely difficult to continue to live in isolation.

Mr. Gerrard: I would like to add that our advisory committee on the information highway has three members, Charles Sirois, André Chagnon and somebody from the task force, Monique Lefebvre, who were chosen to act as such by the Quebec provincial government. So, there's a good exchange between the two committees.

[English]

I'm sure the council that we have set up federally will also coordinate its efforts with those of the council for the province of Quebec. So it is another example, in fact, of how this is happening in a more coordinated fashion than one might imagined initially....

The Chairman: I'm running out of time, Mr. Rocheleau, but I'm in the committee's hands. I'm just the chairman.

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We have a vote in the House. Have you five more minutes, Minister, or ten minutes?

Mr. Manley: I believe the bells start ringing in a few minutes.

The Chairman: The bells are going to ring.

I have two questioners left on the government side. I have a short question from Mr. Schmidt. I have a short question, and I know you'd want the chair to get his question in because I can get grumpy in future meetings.

The other process is that we'd like to also decide on the votes, and then there's the overview. Minister, are you going to come back for the overview? Is that the plan?

Mr. Manley: The outlook, yes.

The Chairman: The outlook, sorry. You'll be back for that, and then we'll have votes. Are we agreed? Good.

Mr. Bélanger: No votes now?

The Chairman: There will be votes on the seven issues that are on the table.

Minister, I have a question that involves the funding for phase two of CANARIE. It's not necessarily an answer you might want to give today, but since everybody's putting regional questions, as your chair I want to give a kick at it from Atlantic Canada.

I notice that CANARIE is an $80 million project in federal funds and $396 million is from the private industry and provincial governments. I was wondering if you could tell us what share of that might come from Atlantic Canada, and on what basis is the project spending being distributed. You don't need to answer today, but if you know the answer it will be interesting.

I'd also like to know, say for New Brunswick Telephone Company Limited or Fundy Cable Ltd., which are very large regional companies, leading-edge performance companies in fact, how that might affect the share that goes to Atlantic Canada. Is there some formula for their participation that would impact on it?

Mr. Manley: I can't answer all of that. What I can say is that, again, with CANARIE we have a predominantly private sector board of directors, which deals with the program, the applications that are under it. Of course the $396 million that comes from the private sector is necessarily an estimate, because much of that is project financing, so it depends on what projects come forward and are approved. There is an application process, which is staged and which has been under way for a while. In fact, the initial application stage, if I'm not mistaken, is already closed.

I can't tell you right now what the results of that are, nor how you would break it down regionally, nor how it could be driven in those terms. But we'll undertake to get that information for you.

The Chairman: Thanks. That satisfies me.

I have two short interventions, one from Mr. Ianno and one from Mr. Valeri. That's on the government side.

Mr. Ianno (Trinity - Spadina): I'll be very brief. I have three questions, actually.

The Chairman: One question.

Mr. Ianno: I'm going to put three of them and then he can answer them.

The Chairman: Okay.

Mr. Ianno: First, I come from a region that is a distinct society - in reference to your portfolio - that is ``fed south''. We have ACOA, Western Economic Diversification, FORD-Q and FedNor. But ``fed south'' doesn't seem to exist. On the estimates, Mr. minister, I'm wondering how we are going to participate, at some point in the future regarding southern Ontario, since we were left out in the process.

My second question is about NSERC - a question I asked last year regarding the potential of royalty from funding that is a winner, that somehow spins off in terms of the private sector, and if there's a way the federal government can get a return so that we can lend out to positive projects again.

The last question is regarding the benchmarks we're dealing with in this committee. What is your opinion on our approach of trying to encourage the banks to lend more to small businesses and the approach we're taking regarding trying to find the benchmark?

Mr. Manley: I would say there's no plan under way at the moment for the federal government to introduce what would be called a regional development program for southern Ontario. In fact, as you look at what we've been doing in the budget, we're moving in the other direction. There are sharp declines in the budgets for regional development agencies, and what is there is going to a repayable basis.

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What I think is important for the part of Ontario to which you're referring will be both the continuation and indeed the increase in the limits under the SBLA program as well as the changes we make to FBDB. Those are both important contributions to helping economic development activity occur in that part of the province.

As for using the repayables on a revolving fund basis, particularly with DIPP, this is the part I was getting at before, and I don't think I actually ever really completed the answer to Mr. Ménard. Both in DIPP and environmental technologies we'd like to see the repayable stream dedicated to a technology development fund, and I'm going to be working on that. The reason the budget papers left the door open to some extent was there is a recognition that not only do we have to figure out a way to deal with our need for fiscal reasons as well as other reasons to reduce sharply subsidies to business, but at the same time we do have to look at what other countries are doing and competitive factors as they relate to that.

With respect to the financial institutions, the report I've had of the visit this morning from the banks was a very positive one. I think we've made some progress over the past year. I think monitoring is important. I hope the committee continues to have the banks come in to talk about what they're doing, what they've got under way.

As you'll know from my testimony last year, I'm not a believer in regulation. I'm a believer in voluntary measures. I think we should recognize that the banks have made some efforts in the past year, exemplified by some of the recent testimony to this committee, to deal with issues such as dispute resolution, code of conduct and so on, and today, I understand, to contribute to the statistical base we have for understanding what the heck's going on, which has been one of our concerns. I think all of those deserve credit where credit has been earned. So I hope the committee keeps up its work.

Mr. Valeri (Lincoln): Mr. Minister, you mentioned earlier the FBDB and the Canada community investment plan. Would you be able to comment on whether you could foresee a combined effort out there in order to increase the availability of venture capital and management support to SMEs, an area perhaps to fill the gap that the banks aren't doing now?

Secondly, perhaps you would comment on the Canadian Business Networks Coalition and the work that's going on there and how the SMEs may benefit from the work, in conjunction with the Canadian Chamber of Commerce, in launching that national business networks demonstration project. What are some of the tangible things we can expect in terms of benefits for SMEs?

Mr. Manley: First, starting with the Canadian Business Networks Coalition, we negotiated that with some length with the Canadian Chamber. We think it's potentially a key way in which we can enable small business particularly to make up economies of scale, to get some of the expertise, information and connections that large businesses have in-house. That will enable small business to be more fleet of foot as well as having some of the benefits that a larger enterprise may have. So it's at a very early stage. I know they were working as recently as yesterday on some of the implementation phase, and I think it's money very well spent.

With respect to targeting the gap in venture capital - and I believe I said this at the committee last year - my belief is that the gap is not so much in Canada a lack of venture capital itself as a lack of venture capital at the small end. In other words, these are companies that are going from their early stages of development, with personal promoters' money and family money, to the first stages in which they need outside investment assistance. It doesn't really matter whether it's equity or loans, because at that stage those are both equally difficult to get.

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This is when they are still below a threshold of $5 million. In other words, the due diligence for venture capitalists, for example, to invest in such a company is just as great as if it were a $50 million investment. So it doesn't really merit the time and effort required in order to assess a business opportunity in that range of $750,000 to $1 million or $2 million. That's where there's clearly a venture capital gap in the country.

I believe that both the community investment plan, as we anticipated it in the orange book, as well as the renewed mandate of the FBDB will endeavour to target that. In the former case, this will be by enabling people in communities who actually know the business and understand.... They know the people involved and have a better judgment of what's doable and who should be trusted and relied upon than somebody at a distance. In the former case, FBDB's mandate already enables it to do some venture capital. I want to see that expanded in trying to fill this gap as a complementary lender to the banks.

The Chairman: Ministers and Mr. Swain, on behalf of the committee we want to thank you sincerely for presenting today. We heard with great interest the issue of telemarketing. I can assure you that the committee will consider that very seriously in some of its future business.

Are you ready for the votes?

INDUSTRY CANADA

Industry and Science Development Program

Vote 1 - Operating expenditures $299,759,000

Vote 5 - Capital expenditures $64,445,000

Vote 10 - Grants and Contributions $729,747,000

Vote L15 - Payments pursuant to subsection 15(2) of the Department of
Industry, Science and TechnologyAct $300,000

Vote L20 - Loans pursuant to paragraph 15(1)(a) of the Department of Industry, Science and Technology Act $500,000

Services to the Marketplace Program

Vote 25 - Operating expenditures $130,913,000

Vote 30 - Capital expenditures $38,780,000

Vote 1 agreed to on division

Vote 5 agreed to on division

Vote 10 agreed to on division

Vote L15 agreed to on division

Vote L20 agreed to on division

Vote 25 agreed to on division

Vote 30 agreed to on division

The Chairman: Shall I report the votes to the House?

Some hon. members: Agreed.

Some hon. members: On division.

Mr. McClelland: May I make a motion that the Canada scholarships program be reinstated and that the necessary funds for it -

The Chairman: The problem is that we've just voted -

Mr. McClelland: I realize that.

The Chairman: - so you're now out of order.

Mr. McClelland: What if I come back with a notice of motion that the Canada scholarships program be reinstated and that the funds necessary to accommodate that be removed from some other portion, so the dollar value is not increased?

Mr. Manley: Not some other portion.

The Chairman: Which portion?

Mr. McClelland: All right, grants to business. I'll be happy to advise the minister as to the necessary percentage to be taken out of each one in order to accommodate it.

The Chairman: Mr. McClelland, I'm afraid I have to rule you out of order.

Mr. McClelland: Oh, come on. Consider all those students.

The Chairman: I'm sorry. The problem is that we've already voted, and your motion relates to portions or funds that are already allocated.

Thank you, Ministers and Mr. Swain.

Our next meeting will be held tomorrow at 3:30 p.m. in Room 701, 151 Sparks Street, and we shall have before us the Canadian Federation of Independent Business.

The meeting is adjourned.