EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, November 6, 1996

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[English]

The Chairman: Can we come to order?

The finance committee of the House of Commons is very pleased to be in St. John's today to continue our pre-budget hearings... [Inaudible - Editor]

This morning we have, from the Seniors Resource Centre, Charlie Rennie; from the Board of Trade, a regular on our committee, Rob Crosbie; from St. John's Status of Women, Gail Ryan... [Inaudible - Editor]

Perhaps we can start off with, say, three minutes for an overview of what you'd like us to put in the budget, and then we'll have lots of time for questions, answers and discussion. We'll give you all the time you need. If the three-minute opening is not enough, we'll give you all the extra time you need to put anything you want on the record.

Maybe you'd start, Mr. Rennie.

Mr. Charlie Rennie (Chairman of the Board, Seniors Resource Centre): Mr. Chair, I was somewhat afraid that you might call upon the older person in the group to start the -

The Chairman: No, that would have been Herb Grubel.

Mr. Rennie: Okay.

As you know, I'm chairman of the board of the Seniors Resource Centre here in St. John's. We're basically a St. John's-based organization, but we do have activities and contacts outside St. John's and involvement all across the province. In addition to that, I'm also heavily involved in the long-term care sector in the province. So I hope I can bring a senior's perspective to this committee.

I've also just come back from a number of national meetings dealing with seniors' issues, and some of the comments I'm going to make to you this morning are the concerns of seniors, not only in the St. John's region but all across this country.

As I've said on many occasions, seniors are prepared to bear their fair share of deficit reduction. I'd ask you to note that I've said ``their fair share''. It is the feeling of seniors that they're being asked to assume a far greater responsibility because of the costs associated with the social safety network, which we've built over our working lives.

Some of the younger generation are looking at the costs they have to pay and are saying they are not prepared to pay this cost. They are somewhat forgetful that what they're going to lose now by that type of attitude will never be replaced. As the older generation and some of the ones coming forward, which I might class as the farm team for the seniors - if that social safety network is not there, they'll still have to pay the cost of looking after the older generation.

Some of the issues we're concerned about are, first, pensions, particularly the government's clawback of the OAS. It was particularly identified as part of the income tax we paid and set out in the income tax form. We paid for it, and we're still paying for it. Back in the 1970s it was rolled into the regular tax. I presume it's still there; we're still paying for it.

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The other thing is that government is now changing the OAS and GIS system and bringing in the new seniors' benefit. That seniors' benefit will be of greater benefit to less affluent people in society, but we still feel as seniors that the seniors who worked hard all their lives and put aside money for their retirement should not now be asked to support other seniors who did not do that. That matter should be left to the general populace as a whole to support.

With respect to seniors' programs, we are concerned about the fact that government may cut federal funding for such programs as New Horizons and the seniors independence research program, both of which are sponsored through Health Canada at the present time. Our resource centre has used those programs to great advantage of seniors in this area and we would be most unhappy to see them discontinued.

Government is desirous of seniors remaining in the community longer, maintaining a healthier life system, and supporting themselves in the community for a much longer period of time.

In addition, government is downloading onto, really, the volunteer groups, because it's coming down from the feds to the province, from the province to the municipal, and then to the volunteer groups.

If politicians figure that volunteering is free and doesn't cost the volunteers anything, then I have a bridge I want to sell you, because it does cost people who volunteer. People like myself and others who are involved in volunteer organizations pay a fairly heavy cost to do it. We're also saddled with a great potential liability when we sit on boards of volunteer organizations, which really don't have the money to buy the appropriate insurance should we get into difficulty.

You are downloading all this onto volunteers, expecting the volunteers to pay for it. Most of the volunteers are seniors. In addition to that, you're saying, ``Thanks for doing all this work for us; we're now going to claw back some of your benefits''.

The Chairman: Thanks very much, Mr. Rennie. We appreciate it. We'll get back to you and give you lots of time. We need an overview before we start the discussion.

Mr. Robert Crosbie (Senior Vice-President, St. John's Board of Trade): Thank you for giving us the opportunity to appear before the committee. I'll try to cut out a lot of what I had here.

The most pressing issue at this time as far as we're concerned is the debt and deficit, namely, the need to continue reduction measures.

The government is reminded that the real fiscal problem facing Canadians today is not represented by the deficit or even the deficit-to-GDP ratio. The real problem is the level of that relative to our ability to pay for it. Focusing on the deficit masks the real problem. While government has been reducing the deficit sharply over the past few years, the fact that we have been incurring deficits rather than surpluses means the debt has been growing.

Most importantly, when government reaches their deficit target in 1997-98, the debt will have grown by more than 13% during the three previous years. Debt servicing costs will have increased from $42 billion to $49 billion, the GDP will have grown at a slower rate, thus the debt and GDP ratio will be at about 74%, which we believe is too high.

We need to focus more attention on the debt, more specifically the debt-to-GDP ratio. A significant portion of our debt payments, about 36¢ of every dollar in 1995-96, was spent paying the interest on public debt.

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Average real rates of interest are still high and are likely to stay high for the next several years. Public debt charges increased 11.6% or $4.9 billion in 1995-96. Of this increase, about $3 billion was due to the increase in interest-bearing debt, which was up $36.2 billion, with the remainder due to the increased average effective rate on the government's debt. The average interest rate on the government's debt in 1995-96 was 8.1%, up from 7.78% in 1994-95.

These high real rates of interest are another reason to accelerate the pace of deficit reduction. Interest rate payments will do nothing but negatively affect the government's ability to fund important programs.

The St. John's Board of Trade and the Canadian Chamber of Commerce recommend the federal government adopt a fiscal policy that will result in steady and significant annual reductions in the debt-to-GDP ratio towards a target zone of below 60%.

We believe this may be achieved by keeping program expenditures level in nominal terms, without any increase in the level of taxation and by reducing payroll taxes, specifically capping the UI surplus at $5 billion.

The board has consistently said our national debt is too high and continues to act as a barrier to the nation's growth and prosperity. We believe the solution lies in government's ability to reduce the costs of government by freeing up resources that can be reallocated to reducing and ultimately eliminating deficits.

Rather than raising taxes, the board urges government to use expenditure cuts where possible and justify these as a means of achieving fiscal targets. We feel raising taxes, while providing some short-term revenue gains, will not address the real problems facing our economy.

Before cutting any benefits and programs for individuals who truly need them, the board also implores government to do a thorough review of all its programs and trim otherwise unnecessary programs.

In another instance, the board sees money being spent by the federal government for delivery of services and programs that are inefficient or non-essential. These should also be examined.

For the past several years, the combined pressures of taxpayer fatigue and demands to reduce or eliminate deficits and long-term debt have forced all governments to review and reinvent government. Although government has undertaken a rigorous review of current programs, it may not yet have focused its attention on the first principles.

First, what is the role of government in the 21st century? What core programs and services should government be responsible for? Which level of government should deliver these programs and do it most effectively?

The federal government needs to return to its original mandate of a regulator and facilitator and avoid providing inefficient or non-essential programs and services. In doing so, the government can ensure it is providing the highest quality of service in the most economic fashion.

For example, we question the efficiency of maintaining the head office of the Department of Fisheries and Oceans in Ottawa and maintaining Marine Atlantic's headquarters in Moncton, New Brunswick. This is far away from where its business activities are taking place.

At the same time, the Board of Trade has been a strong advocate of decentralizing where government departments conduct their business and, thus, where their headquarters should be located. Recent statistics reveal when it comes to federal government jobs in Atlantic Canada, Newfoundland ranks last. There are 24 government jobs for every 1,000 people, well below the Atlantic Canada average of 38.5. We feel this is a significant issue for this province.

The board is also concerned about the level of morale among government employees. In order to restore confidence, we recommend the government strive to ensure further efficiencies come not from job cuts but through other methods, such as transfer of jobs to the private sector when operations are outsourced or commercialized.

The board is strongly opposed to a tax increase as a means of increasing revenues and decreasing the need to borrow by the federal government. Rather, the government should look at cutting spending in a fair, equitable and socially acceptable manner as a means of meeting fiscal targets.

As our economy shows signs it has turned the corner from the recession and sluggish economic recovery, tax increases will likely only cause the economy to back-pedal once again. While increased taxes will result in higher revenue in the short term, the long-term impacts will far outweigh any gains to be attained up front. In fact, when and where possible, the federal government should look at tax reductions as a means of stimulating the economy and business development.

The Chairman: Rob, can I ask you to wind it up quickly? We can give you lots of time.

Mr. Crosbie: That is the main part of it.

The Chairman: Okay. Thanks.

Hilda Pollard, if you wouldn't mind, maybe I could call on you next.

Ms Hilda Pollard (President, Adult Career Centres Inc.): First of all, I would like to welcome the committee to St. John's, North America's oldest city. We'll be celebrating our 500th anniversary of discovery by John Cabot. I have to say this because I'm involved in the tourism industry and we like to promote our province as often as possible.

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I'm certainly glad to have the opportunity to say a few words to the committee. I represent a small business. Presently I own and operate a private training institution called Adult Career Centres. Our main focus is tourism training. Tourism has been identified as one of the growth industries in the new economy, particularly in this province, where we look at the decline in the fishery and look for alternatives to support and keep our people at home.

As a small business operator, I've been involved in businesses over a number of years, including businesses other than the one I'm in right now. But I guess our biggest concern is that we continually seek support from government and from the community to keep these small businesses in operation.

The biggest handicap or the biggest barrier we have as a small business is trying to deal with the banks. We know the banks today are making excessive profits. It has been recorded that many of them are making over $1 billion a year profit, and we hear that in the next 15 years the six large banks within Canada will be making a profit of over $90 billion.

As a small business person I have great difficulty trying to come to grips with this when I'm out there trying to keep my business running. Certainly small businesses today are the backbone of employment and job creation within our country. Is there some way we can come together and make a decision about how we can better provide services for small business?

I know the recent handout passed around the country - I imagine they were in most of the newspapers - outlines the commitments of government regarding small businesses. I notice there may be an ombudsman appointed to help small business work with banks and try to come up with more equitable ways of helping keep the business running.

I'd like you to expand on this, or I'd like to get some information back from the committee on this as we continue this morning. I think we need to set up a safety net to monitor the operations of big business in their dealings with small business.

When we look at the banks and at the major large corporations in this country, these are the people who are downsizing and laying off, while small business is the area where the growth is and where they're looking to hire and keep more employees.

As an opening statement, I really want to throw this out to the table. We should look at ways and means of encouraging and keeping the small business person going, and we should discourage the large profits the banks are making. Much of this money can be better used to help the social needs and the social programs in Canada, particularly in education, training and health care.

Thank you.

The Chairman: Thanks very much, Hilda Pollard. I'll bet you two cents Charlie Hutton will probably agree with you.

Maybe you'd like to go next, Charlie.

Mr. Charlie Hutton (President, Canadian Bankwatch Inc.): Hilda, thanks for setting the stage perfectly.

Basically I represent, unofficially I guess, the 900,000 small businesses in Canada. We're actively seeking out each of them to become a member of our organization. Our organization is Canadian Bankwatch Incorporated.

Approximately a year ago we set up a rather unique web site to deal with complaints with the banks. Our hit rates are rising steadily. We do use standard communications, but the Internet has provided us with an avenue, I guess, to reach all Canadians very inexpensively in comparison to a traditional group that would have to use mailouts and phone calls. This is not to say we haven't been deluged with calls and with mail.

I guess out of general frustration, I personally and a group of other individuals formed Canadian Bankwatch. We're actively seeking members. I don't know if this is the appropriate venue, but I guess it's been reiterated that the Standing Committee on Finance would be an appropriate group to lobby, as I assume they have some effect on the general budgets. What we're aiming more toward here right now is the possible introduction of legislation. I'll get into this in just a second, if I may.

The bottom line is this. How do you expect a crop of small businesses to grow if you don't plant seeds? Just yesterday I noticed there was a press release from CIBC. This bank has allocated millions and maybe billions of dollars to small business loans. Of course, their minimum is $250,000. I'm sorry, but $250,000 is just not a low enough minimum to actually stimulate any small business. A student coming out of university who's faced with no job and no prospects other than creating his own employment does not have the equity to go into a bank and borrow $250,000. If anybody thinks that, they're dreaming.

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If we continually go on year after year not planting seeds, I'm sorry, but we will not have a small business base to grow. To be realistic, we have a small business failure rate of probably nine out of ten, and that's to be expected. Unfortunately, with the banks and with most finance companies, unless you hit the ball over the fence every time, you're not a winner.

So we go ahead patting our few winners on the back and feeding them with more cash, and yes, they do grow into very sizeable companies, but unfortunately the nature of the beast is that banks are set up to make a profit. They're not set up to better mankind, as much as some of their advertising might want you to believe otherwise.

The Small Business Loans Act was introduced a number of years ago, and I think the idea was correct. The government made a great move in that direction. The funny thing about it is that the feedback we're getting is - despite the loan guarantees of 80% or 90% from the federal government - that we're still finding it extremely difficult, if not impossible, to acquire small business loans. Banks have to exercise due diligence and prudence in their loaning ability, but as you know, the banks are extremely conservative. I think if we had to depend on bank financing, there wouldn't be a North America, because the banks certainly did not finance any trips to our fair city here or to North America.

Again, the ability of a small business person to find private money seems to be the only way he or she can actually get a start. So if you're not coming out of a situation whereby your parents or your family or your friends are well-heeled, you really don't have a lot of opportunity to get a start. I think that's unfortunate, because there are a lot of good potential business people out there who cannot get financing.

We made moves many years ago, as the Canadian government, to ensure that all students had equal opportunity to employment. As any business person will tell you, you can have good management and great ideas, but if you don't have capital you just can't get your business started. I think we've grossly fallen down there.

In the meantime, then, we have this situation whereby we have crazy profits being bragged about by the banks. I guess they like to try to keep that under their hats right now. I'm not a socialist or a communist, nor is anybody who lives in Canada, as far as I know. I'm not promoting the concept that we should essentially have some sort of profit ceiling put on these places.

There's nothing the matter with profits, but they have an opportunity here to act in a proper manner. Will they? I don't think so. As much as I don't like to have more regulation or legislation introduced, I think it's essential right now to introduce some legislation so that a certain portion of their profits has to go back into small business loans. I don't call small business loans $250,000. I would say somewhere in the range of $10,000 to $20,000 is a minimum.

Unfortunately, the banks, although they have the loan guarantee by the federal government in place, are still reluctant to loan because these accounts are real nuisance accounts. They don't want to handle 1,000 accounts of $10,000. They want to handle 5 or 10 accounts of $500,000 or $1 million because of the administration involved. To the banks, administration of course means lack of profit. Unfortunately, I think legislation has to be introduced at this stage of the game to earmark a certain portion of bank profits.

Let me make one statement in closing. Based on their current profit levels, if we asked them for 3% of their profits, that would turn into over $1 billion in over seven years that would be reinvested in Canadian small businesses. We're asking them to loan that back out to the businesses, not give it back to them.

Thank you.

The Chairman: Thanks very much, Charlie Hutton.

Ms Dingwell-Corbin, please, from the Status of Women Council.

Ms Colleen Dingwell-Corbin (Member, St. John's Status of Women Council Women's Centre): Greetings to the members of the committee from the St. John's Women's Centre.

I was initially hesitant about appearing before the committee, as I, along with other Canadian women, feel deeply that our government has betrayed us. We are finding it increasingly difficult to participate in meetings such as these only to have those in power tell us that they must continue to restructure, downsize and outsource because of the deficit. In translation, these words have come to mean poverty, unemployment, despair, and hopelessness for many Canadians. Far too many are left out in the cold, literally and figuratively.

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We are well into the jobless recovery, which is one of the few promises made and actually kept. We see too well the results of the changes to our social programs because of the Canada health and social transfer. The Employment Insurance Act, proposed changes to the Canada Pension Plan, and other programs have many of us reeling when trying to help women feed, clothe, and shelter their children, find meaningful employment, realize their educational goals, or plan further than today.

Again and again we hear that Canada is one of the wealthiest nations in the world and one of the best countries to live in; that we should consider ourselves fortunate to call ourselves Canadians. We don't need reminding of these facts. As Canadians, we created the very social programs that made Canada the envy of our neighbours. We worked hard to bring peace of mind and security to Canadians. Even though we fought and still fight against the dismantling of these structures, they are systematically disappearing, and as they go, so goes the very essence of being Canadian.

With the breaking of this social contract, the Liberal government and its Progressive Conservative predecessors have tried to break the spirit of Canadians. This devastation is visible in the face of most of the women who come through our door or telephone us. The problems facing these women include sexual harassment, lack of adequate, affordable housing, decreasing social assistance, overwhelming joblessness, abuse, loneliness, fear, hunger...and the list goes on. Yet the women's centre is often the last place these women turn to, having exhausted every other avenue and resource within their reach.

In turn, we go to the wall to try to help these women help themselves, since our resources limit us to providing information and referral services. That is becoming more difficult, because every community group is also operating at capacity or not operating, because of the lack of resources.

For example, the St. John's Women's Centre operates within a budget of less than $40,000 annually. The centre serves the St. John's metro region but is not limited to that area. One staff person is responsible for keeping the centre open daily from 9 a.m. to 5 p.m. We have one telephone line, one operational computer, a donated coffee machine that sometimes works, and few other resources apart from the strength and wisdom of the women in our community.

Our centre opened its doors in 1971 and continues as the longest-running centre in Canada. A volunteer steering committee oversees the direction and operation of the centre. When funding from other sources permits, an employee may be added to coordinate that project.

The average number of telephone calls on a daily basis is twelve to fifteen, and the number of drop-ins is approximately ten. As mentioned, the requests for our services range from information to advocacy to counselling to basics such as food and clothing. Many women come just because they find a safe, welcoming environment where they can express concerns and share joy.

As I was writing this presentation, news of the murder of another woman reached the centre. The few details given in reports led us to think we know this woman, and later on Monday we came to realize we did. Marguerite came to our centre often and had done so for many years. As we came to know her, she gradually began to trust us and share her life story with us.

Physically, she was a very small woman, quick in her movements and unobtrusive in her manner. She had a ready sense of humour and cared greatly for those she called friends.

Marguerite was an aboriginal woman born in Cartwright, Labrador, where many of her family still live. She had eight children and several grandchildren, and she loved and missed having them in her life.

Marguerite survived much physical and mental abuse in her adult life. She married twice. One of her husbands beat her so severely she was hospitalized. She lost a kidney and very nearly died as a result. She lived with depression, for which she was also hospitalized, and was trying to escape the trap of alcohol abuse and violence that defined her life most days. I remember one day in particular when a women disclosed her story of abuse and Marguerite sat at the table listening and sobbing as if the story were hers - and in a very real way it was.

We told her often that we loved her and she often wondered why. Slowly she came to believe she was special to us and deserving of the best life possible.

Poverty was a major factor in Marguerite's life. She often came to us because she had no food or cigarettes. At other times she would ask me to cut her hair or make telephone calls to those she was uncomfortable talking to.

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Poverty kept Marguerite living the way she did, in a barren, ugly room in a boarding house downtown in the presence of a drunken, violent man who terrified her. She learned to have her own small space, where she could live safely with her cats, surrounded by her special pictures and writings. It would have cost so very little for these, and now Marguerite will never know them. Her life ended at the age of 51 in poverty and in violence.

I feel responsible for Marguerite's death and her life of pain and poverty. I believe we as a society are collectively responsible for this and other breaches of the social contract. For the sake of all the other Marguerites and every Canadian woman, child and man, we must stop taking away the hope, the promise of living a life without hunger, free from violence and with dignity. It is our birthright, and it is necessary if we want a country and a nation of which we can be proud. I thank you very much.

The Chairman: Thank you very much, Ms Dingwell-Corbin.

Next is Mike Stokes from the Public Service Alliance of Canada.

Mr. Mike Stokes (Regional Representative, Public Service Alliance of Canada, St. John's Region): Thank you, Mr. Chairman, for the invitation to appear. I just got my call on Friday, so I didn't have a lot of time, but I have prepared a few speaker's notes.

When I came to the desk half an hour ago and asked where the committee was meeting, I was told it was in the Trinity Bay room. I went down to the Trinity Bay room and your sign is on the door, but it's a very small room. I think it was meant for your luggage.

The Chairman: We're trying to get as much publicity as we possibly can.

Mr. Stokes: That's what it is.

The Chairman: You'll probably find signs on a lot of other places around St. John's too.

Mr. Stokes: I thought it was the ultimate in downsizing that you were meeting in a closet.

My presentation will be in two parts. The first part will be about the members I represent, and the second part will be about the problems where I was born and lived. I have it in point form. First I'd like to see a line item in the budget to cover the equal pay settlement for federal government employees that has been outstanding since 1974.

The Chairman: Could you tell me what that equal pay settlement is?

Mr. Stokes: That's equal pay for work of equal value.

The Chairman: Okay.

Mr. Stokes: Then I'd like to see a line item in the budget to cover the cost of an audit to investigate the effectiveness of contracting out work previously done by federal government employees and if the government is realizing any saving. The government doesn't know at this point - at least that's the latest information we have - whether it's saving or not. We think they're not and it's costing a lot extra. The audit should be done by the Auditor General. If it's done by Treasury Board, public service unions would be full participants.

Then I'd like to see a line item in the budget to cover the cost of an audit of why 13.7% of Newfoundlanders were declared redundant in the first seven or eight months of downsizing with this new workforce adjustment, when the Canadian average was 7.8%. We know why, but it doesn't seem very fair that Newfoundlanders have been discriminated against. We had DSS move to Halifax, we had the forestry taken out of St. John's and moved to New Brunswick, the weather office was closed, and on it goes. Our fair share is one thing, but to be at least 50% higher than the Canadian average doesn't seem very fair.

I'd like to see another line item in the budget - and I think this is something your committee can address - to discover why 13.1% of people with disabilities in the public service, under this workforce adjustment, have lost their jobs. That's half as much again as for the ordinary worker, and they're being forced out.

I'd like to see a line item to investigate the negative effects of balancing the budget on the backs of the workers and the 1.5 million who are unemployed. How does the country recover from that?

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I'd like to see a line item in the budget to cover the cost of removing an estimated 7,000 miles of ghost nets in the fishing waters around Newfoundland and Labrador. If you want, I'll explain.

The Chairman: Yes.

Mr. Stokes: These are the nets that are lost in storms. They have floats on top - you know all about them.

Why have we gone for the last five years or so with fishermen on TAGS who would love to be out there taking these nets that were lost in storms out of the water? As I said, they have a lead bottom, leather ropes and floats on top. They fill up with fish, sink, the fish rot, they float up again, fill again and sink again.

They've been there for the last 20 years. It's a federal government responsibility, and if you're not going to take care of your responsibility in a very minute way that wouldn't really cost you anything, it makes one wonder.

I'd like to see a line item in the budget to guarantee massive financing to people who want to go into fish farming. There are many small communities with only 20 houses where sewage is running into the ocean. A minimum sewage treatment plant would keep that area of the ocean clean for fish farming. I'm talking about shellfish in that context.

I'd like to see a line item in the budget to investigate changing the year-end of the government from the end of March to something that could be more practical. I will explain for a minute.

When the year-end is March - I suppose that came from England - it's April or May before the new estimates are out. For an engineer with the federal Public Works, for example, that means he's getting data in June and July, writing up the plans and speculations in August, and calling for tenders in September. So major government works start in the winter when they cost double, instead of in the summer. That's not very practical, and I think it could be changed quite easily. Maybe it means either changing the year-end or going to two-year planning.

The bottom line is that you work smart.

The Chairman: Thanks very much, Mike Stokes.

That's a good list. We're up to eight already.

[Translation]

Mr. Laurin, would you like to begin?

Mr. Laurin (Joliette): Mr. Crosbie spoke of a certain number of cuts in social programs. I wonder if he could be more specific and tell us, in his view, which programs should be cut first.

[English]

Mr. Crosbie: I'm not sure we said we wanted the social programs cut. We want expenditures reduced in other areas that aren't necessary in order to protect the social programs. We obviously are spending more money than we're bringing in, so we need to change the situation, or everything will be at risk, including the social programs.

[Translation]

Mr. Laurin: I'm sorry, I thought you were referring to cutting the costs of certain social programs. If I've understood you correctly, I would like you to tell me in which social programs those cost-cutting measures could be introduced. That question might also be answered by the other witnesses.

[English]

Mr. Crosbie: We never specified that we wanted social program spending cut. We said we want expenditures kept at the same level as they are now. We want programs looked at, and if they are being delivered inefficiently and ineffectively, change the way they're delivered, although we never specified cutting social programs.

[Translation]

Mr. Laurin: Thank you for making that more explicit.

Mrs. Pollard, you spoke of helping small businesses and also of what the banks are doing.

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Several of the witnesses we heard this week have told us that we should no longer subsidize businesses and that is why I am asking you whether you believe that government should put an end to this type of assistance to businesses.

[English]

Ms Pollard: Thank you. I think there's a certain amount of responsibility and facilitation that government can do to assist small business. We need a voice. Again, I speak from my experience as a small business operator. I can tell you that it has been hell with the banks.

I'll just give you a very brief story on why I say that.

We operated a small business for a number of years, which was seasonal. I had a line of credit, which was my personal guarantee. I went to the bank once - I normally did this every year at this time - and we took the bank manager out for lunch. My husband accompanied me to the meeting. The loan officer said there was no problem with our line of credit; it was there as always, so we should carry on.

One month later I get a call. They said they were sorry, but they were calling in the loan. Meanwhile, it was the very time that the Olympia and York deal and the Canary Wharf problems were going on in England. The major banks at that point were losing a lot of their profits, and their shareholders were up in arms.

So you see, I was one of the small businesses that suffered because of that. As a small business, I didn't have all that money to fight the bureaucracy by having lawyers to do that.

It was in the month of December. They called in a loan from a retail business on December 1. Where could I go? What could I do? I couldn't fight them. It was easier to have the business close down and pay the difference myself with my own personal guarantee. So the bank wasn't out anything.

It's just their approach. I feel there has to be some way, whether by government subsidy or the bank making more allowances in allowing small business to have loans.... We're not talking about huge loans. As Charlie mentioned, we're not talking about $250,000; we're talking about $10,000, $15,000 or $50,000 loans here. There has to be some way in which government can add their support to us.

We talked today about how everything is in partnership. ``Partnership'' is the buzzword. We need some support. We need a voice. We need an ombudsman.

I mentioned earlier that I was glad to see there will be an ombudsman in place, but there also should be somebody there to oversee the excessive profits these banks make. There must be a way to reinvest part of that and give businesses an opportunity to have a loan and be able to pay it back.

Right now, the twenty students I have in this tourism training program are all very excited. They want to be entrepreneurs in the tourism business. We're starting an entrepreneurial module within that course after Christmas. They're asking me where they can go to get loans of $10,000.

Next year is going to be a very big year in this province with the promotion of Cabot 500 and the influx of tourists we're expecting. A lot of them want to begin their own small business. They'd like to be able to go out and get $5,000 or $10,000. They're students of 20 or 21 years of age. They don't have the equity or collateral to start a small business.

So when we talk about support, I think we do need it. We do need some kind of assistance from government to help bridge that gap. We're not talking about out and out gifts; we're talking about loans or the consideration of extensions of time for paying these loans back.

I don't know if that answered your question, Mr. Laurin.

[Translation]

Mr. Laurin: Yes, Mrs. Pollard, you have partly answered my question, but I would like you to tell me more specifically whether it would not be enough for the government to simply promote loans to small businesses rather than also providing subsidies which, often, do help small businesses but are also an even greater help to large corporations. Corporations set up shop and then, after a while, just go, taking with them the government's and the taxpayers' money. That is certainly what happened with a number of large corporations such as Hyundai. That corporation got some very large subsidies and, five years later, just shut down its operations.

.0820

Would it not be enough for the government to promote a greater access to capital for small businesses, to cut out subsidies altogether and to focus, rather, on loans, whether these be secured loans or other types of bank loans? After all, that is part of a bank's business. Do you believe that subsidies should be completely eliminated?

[English]

Ms Pollard: First of all, we're not talking about huge businesses like Hyundai or other large corporations; we're talking about very small businesses. This province does not have a heavy industrial base. When we talk about small business, we're talking about businesses that maybe have five or ten employees.

Right now, I have two full-time employees and four part-time ones. That's a small business, and we're barely making it from day to day.

I still think that, yes, there has to be a certain responsibility on small business. Again, I'm not saying there should be out and out gifts. We're not looking for government gifts.

What we do want is more flexibility and greater consideration when we do approach banks and lending corporations to be able to get those dollars. We want greater consideration given to us. If a young person in my training program doesn't have $20,000 for collateral, how will they ever begin to get a small business going?

I think there should be something in place. How much money should government invest in subsidies? I'm not sure about that, but I do feel it has a certain responsibility, particularly in Atlantic Canada and particularly when we know that small businesses are the backbone of this country. Small businesses provide the greater number of employees.

If small businesses succeed, the government will succeed. The government will make a profit as well. The bottom line is that these people are employed, contributing to the economy and paying their taxes.

[Translation]

The Chairman: Thank you very much, Mr. Laurin.

[English]

Mr. Grubel, please.

Mr. Grubel (Capilano - Howe Sound): Thank you, Mr. Peterson. It's always a pleasure to be here.

I have one short question for Mr. Stokes and then two for Mr. Crosbie.

Mr. Stokes, how many hours or days of work does it take to catch a certain percentage of those drifting fish nets? Is it a huge effort?

Mr. Stokes: I understand they had an experiment down by Fogo five, six or seven years ago. They took out several hundred nets in two or three days. They search and seek to find them. There may be a way, such as a bounty system, for anybody to find an old net on the bottom and get a cheque for x dollars if they bring it in to a fisheries officer. I don't think it has to be a fortune in money or anything.

Mr. Grubel: Fishermen find them presumably when they are dragging. They find them periodically. What do they do with them?

Mr. Stokes: Newfoundland fishermen are not allowed on the water.

Mr. Grubel: I mean in the past. Surely this is the accumulation of many years of neglect, right?

Mr. Stokes: Yes. Inshore fishermen don't drag in that area. If they did drag in that area, the nets would have been pulled up by draggers. Nets are lost in areas of netting and hand lines.

Mr. Grubel: I see. I just find it an appalling idea that in a region where there is this shortage of fish that such an obvious source of replenishment should be neglected.

Mr. Stokes: Yes, it is. It's a disgrace.

Mr. Grubel: I'd like to ask a couple of questions of Mr. Crosbie, if I may.

As you may know, probably every year, as a result of economic growth - we're hoping it will continue for a few more years - the government, with the same tax rate, receives $7 billion in extra income.

The deficit has reached a level at which this growth can be used to eliminate the deficit in about two years. If the interest rates stay low, it would be even less than that. In a year, or a year and a half, the deficit will be eliminated.

After that, the $7 billion per year will continue to accrue to the government. The question faced by the finance minister will be what to do with that surplus.

There are three possibilities. One of them is to increase spending again. The second is to pay down the debt. The third is to reduce taxes.

.0825

I wondered whether Mr. Crosbie and his colleagues in business, who have thought about these kinds of issues, have any preference. But I would also like to have comments from anybody else on what kind of choice you would recommend the government make.

Mr. Crosbie: For our province it would have to be a combination of two and three, basically paying down the debt. I feel until the debt issue is brought down, as soon as you get a downturn in the economy or the interest rate starts to go up again the deficits will resurface very quickly, because you have a structural problem with that amount of debt per capita.

However, if this does occur, it will leave some room for the government perhaps to reduce the burden on the taxpayer. There is a lot of taxpayer fatigue around. Loopholes are being closed, and while the rates may not be changing, our actual dollars being paid in are increasing significantly.

Mr. Grubel: Yes. I am very pleased to know this is a view also held in Newfoundland, because I have had surveys and asked constituents in my area about their preferences, and they're very much like what you have just said.

I have a second question for you. An astounding study was published by a research institute in Halifax about the effects of subsidies to this area in the past. A figure that is truly staggering is that if you take the value of all the subsidies received by the Atlantic provinces in the post-war years, they are worth $400,000 per man, woman, and child in the Atlantic provinces. As I think about that, if that had been invested and it yielded 8%, there would now be, without touching the capital, an income of about $32,000 per man, woman, and child.

The question I have is what happened to all that money? Where is it? The equivalent of $400,000 per person, spread over those fifty years since the end of the war, is now.... Where is it? What happened?

I would also like to ask Ms Pollard, or whoever thinks more subsidies should be paid, what should be done differently in future to prevent what we have seen. In spite of those huge subsidies we see this depressed area, or at least some part of it, in this region. What went wrong and what could we do differently the next time?

Mr. Crosbie: My guess is that most of that money is probably back in Ontario or somewhere like that. Essentially since Newfoundland joined Canada we've been an economy captive to the central regions. So where the money is going to be found, in infrastructure and things like that...I don't think a lot of it, so to speak, stuck to the wall here, to provide real development here. Our preference would be, instead of seeing subsidies, for the government to make a genuine effort to diversify its purchasing practices and where it delivers services and to rectify the imbalances in where federal employees are - things of that nature.

Mr. Grubel: But you see how it works. With this $30,000 a year you could get, for a family of three, $90,000, and you could spend all of that money on goods produced in Ontario or Maine or Boston and you would still have $90,000 the next year. You could finance all your imports. That is how much money the government has poured into this region. Where has it gone and what should we do differently the next time?

Mr. Crosbie: My guess is that a fair bit of it has gone into infrastructure: hospitals, universities, schools, roads, and things of that nature. Newfoundland had a lot of catching up to do when it joined Confederation and now we're about where we were when we joined Confederation. It hasn't equalized us with the rest of Canada.

.0830

Mr. Grubel: Do you have any suggestions for us on how we might do it differently in the future?

Mr. Crosbie: Have real jobs here; have real people working and living in the community and -

Mr. Grubel: How does that translate into action?

Mr. Crosbie: A sincere effort to diversify the purchasing practices and where you buy things, so the manufacturing and value-added jobs will be in Newfoundland...and not a cheque coming into Newfoundland that provides for someone to buy...that stays here for about eight seconds on its way back to Florida for vegetables or somewhere else for produce.

Mr. Grubel: When you say ``you'', what do you mean?

Mr. Crosbie: The federal government.

Mr. Grubel: Federal government spending should be more diversified.

Mr. Crosbie: Yes.

Mr. Grubel: That is the main change you would make. Are there any others?

Mr. Crosbie: That's a good start. There has to be some way for the regions to obtain more of the government spending dollar, the real dollar, the jobs and the people living in the community and the purchasing, the space agencies - all these things that government spends an awful lot of money on in central Canada. There's no reason why it should be there if they sincerely want to have equalization across the nation.

Mr. Grubel: If, for example, a big, highly visible expenditure has been for the Canadarm or something of this sort, who could produce it here in Newfoundland?

Mr. Crosbie: Probably the same people who are subsidized to produce it in central Ontario.

Mr. Stokes: There are a number of things where the Government of Canada in effect discriminates against Newfoundland. In the headlines the last thing was the Bull Arm.... When it was being built you had a lot of protests coming from Quebec: what are you doing, building that in Newfoundland? Now they're going to have a shipyard and they're going to be able to compete with us.

You have Churchill Falls. We weren't allowed to ship our power to market. We had to turn it over to a sister province at the border for a penny a kilowatt, we'll say, and they can sell it for a dollar a kilowatt. Every cent you put in here in the Atlantic you're getting back on that alone.

Under the Atlantic accord the Hibernia oil was not allowed to come ashore in Newfoundland. It had to go into Montreal.

Quebec and Ontario have the majority of the seats and they call the shots. If a building is built here, and if you read the specifications, everything in that building has to come from Ontario. You can't use Newfoundland materials in the building.

Mr. Grubel: Is that so?

Mr. Stokes: All you have to do is write the specifications. If you look at the specification and it's made by ABC Construction and ABC Construction is located wherever, the person writing the specifications knows right where the paint is coming from, the piece of steel, the nail; it doesn't matter.

Another comes to mind. A certain business was in New Brunswick and hadn't paid any taxes for a long time. The government of the day went to the business and said, look, this is getting embarrassing; how about volunteering to pay some taxes? The next morning they found the business was relocated in Bermuda. It has operated offshore ever since. The owner was deceased a year or so ago and $6.2 billion was able to avoid Canadian taxes by charging from offshore.

This is an area where Canada is totally missing the boat. You can have a company do your research and development outside Canada and charge them against your Canadian company and avoid taxes.

When you read a report, you really have to ask who paid for it. Depending on who paid for it, you can have a report -

Mr. Grubel: We've heard this before. The answer that appears to me most obvious is to make corporate taxes so low here that they will all want to report their profits here and the expenses somewhere else. You will probably get more revenue out of the overnight sector. Do you agree?

Mr. Stokes: We lose in the game of politics.

Mr. Grubel: It's a counter-intuitive idea that by lowering the tax rates you would actually induce changes in behaviour that would raise the taxes they pay.

Mr. Stokes: Another example is that while this moratorium is on in the fishing and Newfoundlanders are not allowed to fish, all kinds of foreign boats are out there. It's lit up like a city. So you ask them, ``Why are you here?'' They say, ``Oh, Canada gave us a fish quota because we have a whole lot of tractors made in Ontario''.

.0835

What? The Government of Canada signs trade deals with various countries, they buy Canadian products made in Ontario and Quebec, and in return they get a quota for 6,000 metric tonnes for capelin or whatever the case may be. That really annoys me because -

The Chairman: When was the last one?

Mr. Stokes: When was the last one?

The Chairman: When did this happen?

Mr. Stokes: It's been in place -

The Chairman: Give me an example of a country that has that deal with us.

Mr. Stokes: Russia was fishing out there, and Japan, Spain.... Spain has historic rights, I guess, and France has certain historic rights. But when we have a 200-mile limit...Canada just used that to license other countries to come in. You've basically decided to treat Newfoundlanders on a social assistance level for the benefit of the central government - and it's not the government, it's the Canadian manufacturers.

Let's say I work for a business in Ontario and go to Poland to sell tractors. Somebody gives me an order for 100 tractors if they can get 5,000 metric tonnes of capelin. I'm a salesman from Ontario. I don't even know what a capelin is. So I call my boss and say, ``Look, I have them sold; all I need is 5,000 metric tonnes of capelin. What is that anyway?'' The boss says, ``I don't know. Let me look it up in a dictionary...it's a little fish off Newfoundland, a food fish.''

So before the day is over, the embassy for that country has an agreement signed with the Minister of Fisheries and they have their quota and the salesman has his sale. It's as simple as that. That's just how it works.

The Chairman: How should we do it?

Mr. Grubel: Can I just have one last point?

The Chairman: I'm sorry, Mr. Grubel.

Mr. Grubel: I come from Vancouver. All of the west has stories that are not quite as strong and blatant as yours, but we also feel disadvantaged with respect to the centre. For a long time we've been buying refrigerators at a cost that includes transportation from Toronto when we could have bought them with a fraction of the transportation costs from just a few miles south. They always come back and say they supported us when we were young, and all of those kinds of stories.

Nevertheless, looking forward, one answer for change is to decentralize more of the functions of government so that the work that needs to be done in Newfoundland really gets done in Newfoundland. The responsibility would be here, and so on, with the financing for some of the functions still coming from the federal government, but in the region closest to the province, closest to the people.

Mr. Stokes: Yes.

Mr. Grubel: Would you see that as a solution, as we do in the west?

Mr. Stokes: Yes. It's very much a solution, but if you can't benefit from your own natural resources because the centre deems that it has to go to a refinery in Montreal, or whatever....

That was changed, by the way, but, again, the oil is still not coming ashore. But that's another story.

It's a part of the answer. Again, a lot of the problem is that the centre really doesn't understand. A lot of people sitting in Ottawa have never seen the ocean. They have no concept of what it is they're dealing with. That's my firm belief.

People are normal and they like to be home with their families every night. They don't like to travel, so they create work. What I mean by ``work'' is government projects. If I were a government employee working in Ottawa, 90% of my work would be within an hour's or two hours' travelling time of Ottawa. I would be home every night and home every weekend if I could. I wouldn't be trying to do something up in northern Labrador. I'd kill that project so fast it wouldn't be funny.

Mr. Grubel: Mr. Chairman, they not only haven't seen the ocean, they also haven't seen the culture on the other side of the big mountains called the Rockies. We feel the same way.

I will close with a little commercial: vote Reform.

Mr. Stokes: If I can just make a comment to you, you have ten times the drift nets we do. The Japanese lost them....

Mr. Grubel: Thank you.

The Chairman: This should be a new industry.

Could we turn to you, Ms Brushett, please?

Mrs. Brushett (Cumberland - Colchester): Thank you, Mr. Chair.

Welcome, everybody. It's good to see some faces from last year, and it's nice to be here to share the morning with you.

.0840

I would like to refer to our TAGS program for just a moment and find out what your views are on it. Many of you will know that it has perhaps been the lifeline from Ottawa to Newfoundland over the past three years.

While we were coming over in the taxi last night, the taxi driver said to us that TAGS has been detrimental. This man who is driving a cab now had a nice business going two years ago. He was contracting out, he was doing many services, and he owned heavy equipment. Now, because people have had a guaranteed income under TAGS from Ottawa, several people have gotten into this business. He is a private businessman facing the banks on a regular basis in doing his financing. He has been virtually ruined by Ottawa's TAGS programs. This comes back to the idea of whether or not we need subsidies constantly, whether or not we need government interference. I leave that open to any one around the table.

Ms Pollard: First of all, I want to congratulate the government on its handling of the deficit. I think anybody around this table would agree that we want our children and our grandchildren to live the Canadian dream as we have lived it. You hear about the American dream. Well, there's also a Canadian dream that you can certainly have your own home, eventually have a mortgage paid off, get your education, and raise your family.

When we talk about the subsidies - and I think Mr. Laurin questioned me on this - I'm not sure we need subsidies per se, but I think there has to be a responsibility from the point of the small business operator. I have to go look for my loan and negotiate with my bank. I guess what we are saying is that if I do that, I'm buying into that far more than if everything was handed to me.

Mrs. Brushett: On that point, though, we have what's called self-employment assistance for young, beginning entrepreneurs under the HRD program, and that's a $1,000 to $5,000 loan. Can your students not access that program?

Ms Pollard: This is what we're hoping to do, and I will be having somebody come in to speak to them. Another part of the problem, Dianne, is that a lot of this information needs to get out there too. Communication may be one part of it. We don't always know all these things, so I think that's one consideration.

It's like anything else. If a student buys into a program, or if I buy into what I'm doing in my business, I've invested more in that than just having everything given to me. I think I'm therefore going to work harder to try to make that succeed.

Specifically, I think what we were talking about was the fact that there has to be an easier way for small business to operate. There has to be an ombudsman, a facilitator, who will help these people. We have the highest unemployment rate in this country.

Newfoundlanders did not want handouts, but with the TAGS program, what other way was there at times? How do we begin to train and retrain fishermen who have been in the industry for a lifetime, generation after generation? It makes it extremely difficult when many of them at that point didn't have the educational background to go out and do other jobs. From all the assessments that were done, many of them needed a lot of education and training just to get to a level where they'd be employable. That's not to say I'm putting down my fellow Newfoundlanders, though. This is a fact.

Education and training certainly are major components of all of this, particularly when we look at all the downsizing and when we talk about educating for the new economy. That's the problem a lot of major and bigger corporations were having. They weren't ready to deal with the jobs in the new economy. Entrepreneurs or small business people who are beginning their businesses have to look very strongly at that and look at where the jobs are going to be - in what sector - in the new economy.

Again, I come back not necessarily to subsidy, but there has to be assistance in some way, such as a 3% tax on the banks to invest back into small business, as Charlie mentioned. I don't mind going in and borrowing while knowing that I have to pay it back, but I don't like to go in to constantly hear ``no'', or to constantly have barriers put in front of me. I know my product. I know I can do this, and I feel I can employ five to ten people in the community. That's giving me self-satisfaction because I'm doing what I feel I can do, and I'm employing people with jobs and am keeping the economy going.

.0845

So subsidies are not necessarily the answer, but there has to be a way to support small business.

The Chairman: Ms Dingwell-Corbin.

Ms Dingwell-Corbin: I would also like to say that we had more than 30,000 people laid off in the fishery. That was one of the largest single lay-offs in Canadian history. What choice did we have with those people? What could we do? They had to have some source of income. As such, it was just money that was thrown at another problem. It wasn't well thought out.

We had women who couldn't get TAGS at all, women who've worked out in the boats for fifteen and twenty years alongside men. They had to fill out form after form and find witnesses to prove they were in the boats working with the men, and they still couldn't get TAGS. We had women who trained for two years, and more than two years. One woman in particular trained for more than two years at computer accounting and other computer courses. They come out with all this training and they still don't have jobs.

Mrs. Brushett: Shouldn't we just scrap the programming and say we may need a basic guaranteed income in certain areas of this country where jobs perhaps just aren't ever going to come, whether it's because of distance or climate or whatever it is that influences a very accelerated economic growth? Might that be the reality rather than having the abuse of the so-called programs?

Mr. Crosbie has indicated here that he would like to see us stop inefficient programs or non-essential services. I don't know what those non-essential services are in your agenda, but we have found that what is non-essential to you is perhaps a lifeline to somebody else in this country. How do you balance that out and get accountability for those tax dollars that Canadians want everywhere, in every corner of the country?

Ms Dingwell-Corbin: When is the Government of Canada going to stop listening to the people with money and power and start listening to the citizens who are right down here working on the floor, on the ground? We are here, but no one is giving us a voice. We were here at this Standing Committee on Finance last year and we were laughed right out of the room. That's why you don't have a lot of people coming back here to this committee this year. We're tired of fighting. We are tired of having to scrape and scrounge at the bottom for every penny we get. The answers are there. When are they going to be listened to?

Mrs. Brushett: Just as comeback, Ms Corbin, in terms of the lady...Marguerite's situation is very regrettable.

For example, where I live, had that situation been brought to my attention in Nova Scotia, I know there are some empty spaces at our senior citizens complex, even if this was a lady who was 50 years old. There is a real gap between 50 and maybe 65, but they're letting people in there now who are not of the retirement age of 65 - before women have assistance - because of the spaces, and particularly women who may have limited education. Could you not have accessed something like that? Is there not an opportunity here such as I might have had in Nova Scotia?

Ms Dingwell-Corbin: The opportunities for women in this province are dismally, abysmally just so different from what they are in every other province in this country. It's not funny by any means.

Mrs. Brushett: It's tragic.

Ms Dingwell-Corbin: It is very tragic.

Mr. Rennie, you can address what has happened to seniors over the past few months. Perhaps you could tell the committee about the little changes in government programs made towards seniors.

Mr. Rennie: Certainly. In this province, they increased the rate for stays in nursing homes from $1,510 per month to $4,000 per month, which was about a 150% increase. Granted, this would affect greatly the people who could pay, but certainly if somebody had saved a lot of money over their lifetime - probably about $40,000 or $50,000, which is not a lot of money - they could have gone through that in a 12-month period and have lost pretty well all their dignity after that. After much debate with the seniors, the government reduced it to $2,800. But we still feel that's a very high rate.

.0850

The other thing that is happening is the restrictions that will now be put on the amount of funding available for care for persons staying in their own residences. It's becoming more difficult to get and it is causing some concern.

I agree with my friend that the people most affected by this are older women, who are basically in the majority as far as the seniors group is concerned. It's definitely a problem.

Since I've been sitting here patiently listening to the debate on the issue of subsidies and so on, I think in providing subsidies to people, like the TAGS program and other programs of that nature, it really destroys the work ethic that people build up over the years. I don't think it's the way to go. I agree that in our particular case what else could we have done? As was said, we had the largest lay-off in Canadian history and the government rushed in to counteract that.

I don't think subsidies are the proper.... I think it should have been thought out and the input of people sought. I think the real answer to these problems in this particular area is jobs, not subsidies. We don't want handouts.

The Chairman: We love it. Give us the answers then, John. Let's keep working on this one.

Mr. Rennie: There has to be some incentive given to business to come here. One of the biggest disincentives to businesses coming to this province - some of it is probably the fault of the feds and some is the fault of the province - is the taxes that businesses are being hit with. You have the workers' compensation, you have the payroll tax, the ordinary other business taxes, both federal and provincial, which are causing a major disincentive to businesses coming here. That affects the whole of the population.

One of the most seriously affected age groups is the 45 and over group, who are being laid off by government and by business. These people can't get work in this province - they just can't get it - both male and female. That's going to have a major effect on governments down the road and their ability to be able to provide the pension and other benefits to these people. In the end it's going to have to come out of the tax dollars of those people who are working, so we have to do something about it.

Mrs. Brushett: Mr. Rennie, if I may come back to the incentive to bring jobs, all we need to do is look back about five years at the cucumber greenhouse fiasco. The multimillions - we said, where did the money go? Nobody knows where the money really went, but it never succeeded in creating the jobs and developing a secure, sustainable growth in the economy here.

That has sort of been the history, not only of Newfoundland but of Nova Scotia and other provinces in the east, and that's where.... Can we give an incentive? Does it work?

.0855

Mr. Rennie: It has to be properly planned. I don't know how many others around the table wondered, but I wondered why when we heard the government was subsidizing a greenhouse project for the growing of cucumbers in Newfoundland. If you looked at the numbers of cucumbers eaten by the average Newfoundlander in the run of the year, you'd sort of have to wonder why.

Secondly, putting it in St. John's, which is about the foggiest place in Canada -

Mrs. Brushett: And the furthest distance to markets.

Mr. Rennie: Yes. You might be able to overcome the distance to market if the other things made sense. I'll have to admit we don't....

The Chairman: Charlie Hutton, do you want to answer that?

Mr. Hutton: Well, first of all, I'd like to start it off -

The Chairman: Will you stick to cucumbers?

Mr. Hutton: I'll get there very quickly. That was a provincial fiasco, probably one of many. I think it's indicative, again, of provincial and federal government attempts to put quick, big fixes in place to solve all this - not well thought out.

I'd like to give a little historical perspective here, starting about 1949 when Newfoundland joined Confederation. I listen with as much patience as I can when we're treated like a welfare state and a banana republic, when in actual fact I feel we've got the mind power here that would probably put the rest of Canada to shame if we were allowed.

Essentially, the work ethic died when seasonal workers in the fishery were allowed to collect unemployment insurance over the winter. That's when they stopped going into the woods and cutting, as they normally did. They took the path of least resistance and said, ``Why should I?'' They were subsidized. That's where the basic mistake started. I'm not sure when that was actually instituted, when the -

The Chairman: How many years ago was that, Mike?

Mr. Stokes: Close to 1960.

Mr. Hutton: That's when the work ethic started to essentially die in Newfoundland. The mice have been trained to be in a handout state since that point. I don't like the attitude that Newfoundland has been a bad deal for Canada financially. I don't think that's the case at all. I think our Quebec neighbour - which is a part of Canada and we welcome it - has done quite well by the deal, by the fact that they're associated with Newfoundland and the whole hydro deal.

I would like to see more barriers broken down to at least allow us, like Alberta and the rest of the provinces, to properly export our natural resources. I'd like to see our natural resources developed here.

I don't want to get into the fishery situation, but essentially because of UIC we've had at least 30,000 to 40,000 or 50,000 people directly or indirectly supported by that fishery, where there probably should have been 10,000 or 15,000. That's when the crisis started. It was UIC-based.

Then, of course, the whole federal management of the fisheries.... I don't think anybody here can dispute that it has been nothing less than shameful. We've got a natural resource here that's gone to rack and ruin because of mismanagement at the federal level.

I'm sorry. You've created the problem. Thank you for the handout and the tax program, but again, this is compounding the problem. The work ethic is virtually dead here right now. When the bubble gum patch of tax pops...as a Newfoundlander who wants to stay here, who has family here and has had family here for hundreds of years, I'm extremely concerned about the possibility of social unrest and everything else that comes with the sudden stoppage of handouts.

How do we get the work ethic back? I think the work ethic has to come back in the sense that there has to be.... Again, it's closely related to what I'm proposing, that.... I don't want another government agency. I don't want another ACOA. We don't want any major fiascos, no more Hyundais and all those problems, and all the other crazy ideas as people try to put in a quick fix.

The solution lies with where the Canadian economy is headed, to small business with five to ten employees. Why are we not helping those people in the form of legitimate funding? You can't expect a kid getting out of university to walk into a bank - and they're expecting a $25,000 to $30,000 proposal, because that's what it costs to put a proper business plan in place by any consultant and team of accountants - to get a $10,000 loan. It just doesn't make common sense. We've cut him off at the knees right out of the gate.

Essentially, the funding is not there for these seeds to grow. We're not even germinating them, let alone letting them grow.

.0900

The problem is after so many hits at every bank and every institution, and the hoops, the red tape, involved in trying to get basic funding.... It should be a sensible meeting of a couple of hours to get in and get out of there with $10,000, if the simple laws of physics were applied to our economy. What I mean by that is it takes a lot less energy to keep something moving than it does to start something. The simple laws of physics are not being applied here to a financing method.

About Mrs. Pollard's case, again, I've heard that, unfortunately, thousands of times since we started a year ago: how the bank has come in and cut people off at the knees. In the meantime they're loaning money to third world countries. It's at outrageous rates, but do they ever get it back? We don't know.

I don't think there's enough policing of these particular agencies, and there's certainly not enough regulation in place. They operate an oligopoly. It's not necessarily that we need more banks. I just think we need better regulation of the banks in place right now.

Mrs. Brushett: Just a comment on that, Mr. Hutton. Just last week the chairman had the pleasure of tabling in the House of Commons our response to the white paper on the reform of the Bank of Canada Act for 1997, which will be brought in during the first three months of the new year. In that, as a committee, we have opened our doors to more competition, and in particular to small business loans. So I think you will see that open up more visibly in the year ahead.

Mr. Hutton: Unless the banks are actually regulated to put a quota in place, the Government of Canada is either going to take that money from them in the form of a tax, a 3% tax or whatever the percentage turns out to be, or loan out small business loans and let them pick the best of the loans. If they have a quota in place of 100,000 loans at $10,000 or less, then they'll have to do it. Either that or they just cut the cheque to the government: it's as simple as that.

Unfortunately, until we train the banks to think in that method, regulation is necessary. No more handouts for Newfoundland. We're not interested in that.

The Chairman: Mrs. Chamberlain.

Mrs. Chamberlain (Guelph - Wellington): Thank you. We've really heard a lot of views this morning, and I'm really appreciative, because it does help us when we go back. You may not think we listen, but we do, very, very carefully.

Mrs. Pollard, a national ombudsman is appointed. His name is Michael Lauber. If you give me a card, I'll get you a brochure so you can contact him. There are numbers and it will tell you exactly what his role is. In fact, I met with Michael last week. I meet with him on an ongoing basis. If there is anything I personally can do to help you in that manner, at least to hook up to the right avenues, please.... I'll also give you my card.

Mr. Rennie, you talked a lot about seniors, and obviously they're a very valuable resource we've had in our community. The government does not wish to have them as a forgotten resource.

We've obviously struggled with the debt situation. The Canada Pension Plan has been an issue. When we made changes we did try to protect seniors 60 and over by having a phase-in period. If there's anything we have learned, it's that if changes are to be made it's really important to give a phase-in period so people can prepare in some way. We're trying hard to do that with the information we've gathered.

One thing you talked about, and it particularly struck me, is volunteerism. I happen to believe in it, and I have volunteered a lot in my duties particularly as a mom of three teenage boys. It isn't without a cost. I just want to say to you that my belief has always been that you get a lot more out of it than you ever put in dollar-wise when you volunteer. I really believe you do it because you want to make a difference. You want to help a certain agency or group or thought you want to move further ahead. I've always believed it's part of my commitment as a Canadian.

I would like you to talk a little more about that, because while I recognize there's a financial cost or a time commitment cost or an energy cost, I think that's part of our heritage. That's part of being Canada. I would like to know your thoughts on that.

.0905

Mr. Rennie: I don't disagree with you on that. I wouldn't spend as much time volunteering as I do, but I'm retired and basically 100% of my free time now is spent in volunteering with seniors and health care organizations and other aspects of life in this community. I've often been quoted as saying now I work full-time for the Government of Newfoundland for nothing, particularly doing things on a volunteer basis in health care and long-term care.

So yes, I do it because I get a lot out of it and I'm giving back to the society in which I grew up some of the benefits I gained.

What concerns me is that sometimes I feel volunteers are being expected now to take up the slack as a result of the downloading of government programs on the volunteer sector without any type of support. Neither I nor any of the volunteers I know, be they seniors or teenagers or whoever, are looking to be compensated for their time. They're not interested in that, because they get personal satisfaction out of doing the job. But if government is going to expect an organization such as the Seniors Resource Centre to provide services to seniors in this community or communities across Canada, then for heaven's sake don't cut off some of the funding they currently provide for programs that will be beneficial to seniors. We'll deliver the service for you far cheaper than you'll get it anywhere else, because you're not going to pay for our time or anything.

Mrs. Chamberlain: I appreciate that clarification because now I understand exactly the point you were trying to make, and I think it's a very noteworthy point. I just wasn't sure when you mentioned it.

Further on that volunteerism line of thought, I would like to talk to Ms Dingwell-Corbin.

The story you talked about in your opening remarks was really heart-wrenching. It really tore at me, being a woman.

Obviously I have no idea of the things you've encountered. I've worked with some women in these positions, and I have some friends, actually, in some pretty tough positions.

What I wanted to understand more, because I don't know much about Newfoundland, and I would be very honest to say that, is this. You've indicated you have a budget of only $40,000, which is not very much to run an agency like that, quite frankly. I don't know the numbers you would handle through the year, but from what you've said, because of the high population and the problems, it seems to me they are probably significant. Do you have people helping you on a volunteer basis? Do you have the companies in the communities in some way contributing? Do you access all those avenues to help your organization have some sort of a secure footing to be able to help women?

How do you manage? I guess that's my question. How can you do it? It's not very much for the huge problems you're dealing with.

Ms Dingwell-Corbin: We're women; that's how we manage. We're quite used to doing it.

Mrs. Chamberlain: Bravo, bravo!

Ms Dingwell-Corbin: We've actually had a decrease in funding of 5% every year. It just keeps going down and down. Our services keep going up and up.

We network throughout the community, availing ourselves of whatever resources are offered to us. Rarely are they financial resources.

We network with groups such as the Public Service Alliance of Canada and other union groups, with other community agencies. As I said, a lot of those agencies are facing a severe lack of resources as well -

.0910

Mrs. Chamberlain: Do you do fund-raising?

I've worked with a number of agencies that are what we call non-profit agencies, so they have a very low base of money too. They have to supplement it. In our community we do everything from bake sales to what we actually call our tags program. We make up tags and volunteers ask passers-by on the streets for their help in supporting the literacy program. Somebody will put maybe a dollar in or whatever and get a tag. There are a number of programs like that. We have guest speakers or local artists who come in and perform for free to support the agencies.

Do you do these things to help the agencies?

Ms Dingwell-Corbin: We do them when we have the people, the time and the energy, which is not often, because we are just so overwhelmed. It is just so difficult to keep asking people to keep giving. It's well documented that Newfoundlanders are among the most generous people in this country. How much more can we give? We don't know. We're practically exhausted.

We're an agency that helps women, and women are traditionally the poorest. Those women can't help us. They can't even help themselves. How can we expect them to help us? They give what they can and we don't feel right in asking any more of them.

Mrs. Chamberlain: Thank you very much.

The Chairman: Thanks, Ms Chamberlain -

Mrs. Chamberlain: I think Mrs. Pollard wanted to make a comment.

The Chairman: Sorry, Mrs. Pollard.

Ms Pollard: I have just a couple of comments, Mr. Chairman, please. The radio stations here carry a slogan. They carry this comment from business people in the province: ``I believe in Newfoundland and Labrador''. All of us Newfoundlanders around the table certainly believe in Newfoundland and Labrador, and we're here because we believe.

We have great difficulties to overcome. We have a declining population. I think we have the lowest birth rate in Canada. We have a severe outward migration. All our young people are leaving. I think there are more people who live in southern Ontario who have Newfoundland roots than there are people who live in the province of Newfoundland itself. These are all concerns. We have an erosion of our tax base because of all of this.

I lived in Ontario and Quebec for many years. I came back. I'm here because I believe in this province. I believe we need job creation. We don't want those continual handouts that we talked about. We want to get back on track. None of us mind working, but as we talked about earlier, and as Charlie and some people said, yes, the work ethic has been eroded because of the handouts. Again, I believe there has to be a buy-in. You have to take ownership of something to really put your all into it.

I know Newfoundlanders are hardy people, and I'll bet if you talk to those who live outside the province, 99% wish they could come back. If the jobs were here they would come back. I think we have a more positive note to look at if the Voisey Bay project takes off. We're looking at Hibernia. We're looking at the Terra Nova fields. Possibly there will be more job creation for Newfoundlanders to come back to and to keep us going.

Meanwhile I come back to the same thing. I think the small business person has a responsibility to try to keep the business going. We have another severe problem with demographics. This province is spread out. There are all kinds of remote and rural communities along the south coast of this province and along the coast of Labrador, which certainly adds to the difficulties in delivering services and delivering jobs and programs.

Again, I think we have to be confident. We have to be here. We need the central government support. There's no doubt about it. But we're also asking you to understand and try to see where we as a people are coming from.

Continuing the handouts is certainly going to hurt, not help, but under past circumstances these handouts may have been necessary to keep the hope in the province alive. Now we're into a new paradigm, a new way of delivering services, and I think we have to look at that. With the onslaught of technology and the fast pace of technology and communications, you're not isolated anywhere. We have to look at the opportunities for setting up small businesses, even in remote and rural areas of this province. But we need that support. We need a way of delivering those services and coming up and supporting you to provide those jobs for our people and keep them in Newfoundland.

.0915

Mrs. Chamberlain: I wanted just personally to say I'm so pleased to see four women on this panel. We've had a number of panels and we rarely have women at them; at some of them, none in a day. It's just so very important that we hear that point of view too, and that the representation be there. So I just wanted to note that I really applaud the courage it takes to come before us and speak so eloquently. Thank you for your appearance today.

The Chairman: Hear, hear!

Brent St. Denis, please.

Mr. St. Denis (Algoma): Thank you, Mr. Chairman.

Thank you, witnesses. As is most often the case, we have learned a lot from these sessions. Among the many things that were very insightful today, I would like to pick up on a thought created by a word Mr. Hutton used, which was ``seeds''; that the very small businesses, which sometimes can become medium and larger businesses, generally start as one- or two-person operations, be they the student out of university or the single parent who decides to start something out of a home.

Even though the finance minister and this and other committees have pointed out the importance of access to capital, as I listen to some of the comments of Ms Pollard and others, there seems to be a wall. As you get down to the relatively smaller amounts, the $5,000 and $10,000 and $15,000 loans, those dollars just aren't there, because, to a degree understandably, the cost of administering a $10,000 loan is probably the same as for a $100,000 or $200,000 loan.

If as a committee or as a government we were somehow able to get the banks to be more effective in the area of micro-lending, be it by regulation or by voluntary efforts, by whatever means, it will require on the community side groups such as the women's centre and social support groups providing as well, because most often even though a business may need only $10,000, there has to be some kind of a plan, but there aren't the dollars there to spend $2,000 to make a plan for a $10,000 loan. It will require the resources of the community to help others prepare business plans and support each other through peer counselling in the nurturing of these ``seed'' businesses.

I wonder if you could tell us if the community infrastructure is there for women and students who wish to go into business. If they could get $10,000 or $15,000 of loan money, would the supports be there in the community to help them with business plans and help them through the early stages of getting a business going? It would have to be done on a community basis. I would be interested to hear whether there would be the local support if the banks were somehow more effective in the area of small lending.

Ms Dingwell-Corbin: If the banks.... It's a very big ``if''. Particularly here in Newfoundland we just had the closure province-wide of the offices of the Women's Enterprise Bureau. That doesn't help us a great deal.

I would also like to say I disagree with a couple of people sitting at the table. The work ethic in Newfoundland is far from dead. We are far from the laziest people I have ever met. I don't know any of them, as a matter of fact. I get really almost annoyed, I guess I would say, at hearing it called ``handouts''. We all make contributions to the community, to the country, no matter what they are. They're not handouts. We work for them. Whatever it is we get, we work for it. We work damned hard for it.

.0920

Mr. Crosbie: There's a YM-YWCA Enterprise Centre here in St. John's. I'm not sure what it's like across the province. The YM-YWCA Enterprise Centre has done some fairly good work with getting young entrepreneurs out. I think they can stay there for little or no rent for a period of time and get some mentoring services from the staff.

I think that has provided some good success. One study says that about 85% of the graduates who went into business remained in business. This was at the time they found that number. That was funded partially by government and partially by donations, I think.

There are other services around, but I think they're scarce. If there was an onslaught of goodness on behalf of the banks, I think some infrastructure would have to be put in place to assist.

Mrs. Brushett: Do you have mentoring through FBDB and those programs?

Mr. Crosbie: Yes, they have mentoring services here.

Ms Pollard: I have a comment. I guess we could go back to talk about education and training. I guess education is the very backbone of what we do. As education goes, so goes society. We know this. The more education you have, the higher the standard of living you'll have. I think education and training are certainly important components in this province.

More and more, we hear about partnerships. I'm sure that if there was some mechanism put in place to help these young entrepreneurs, the community would respond.

We have all kinds of business people. I know that from my particular program, having dealt in high school cooperative education programs over the years, the business community has been more than receptive and willing to take students into their businesses to let them learn.

I think there are three or four high schools in this province right now that are putting in cooperative education, work internship and entrepreneurship programs. These young students have an opportunity to go out to work with entrepreneurs who have set up their own businesses. They can begin to learn the skills the need if they so desire to go into that type of venture.

I go back again to the declining population and the difficulty of keeping things going because of that. This province has a population of 580,000. That would fit in the centre of Toronto, for goodness' sake. We have to look at that too when we look at delivering services.

But I know from working in the business community and the education system that people are more than receptive to partner and provide these services for young people who do want to get out to find a job and work.

The Chairman: Thanks, Mr. St. Denis.

Finally, Mr. Grubel.

Mr. Grubel: Mr. Axworthy is well known as a man of compassion who wants to do the best for Canadians. He introduced the reform of the UI system.

This is what he was asked: if small business is supposed to be the creator of jobs, then how come they're not doing the job in Newfoundland and the rest of the Atlantic provinces and unemployment remains so high? This was his answer, which I will never forget in my entire life: small business in that area can't compete with the money paid by UI.

I just want to throw that out and ask whether, from your experience, this is a serious element. We're talking about education. Sure we're talking about loans. I'm a trained economist. Employers will hire people when the productivity of the worker is a little bit higher than the wages that have to be paid so they can make a profit. Otherwise they won't go.

If the wages are too high - it was Axworthy, not me, who said the wage was too high because of the generosity of UI - then I see one problem with that. I'm just going to raise it with you as one other dimension that is being bandied about.

Ms Dingwell-Corbin: I'd like to know where the statistics are about people who got wealthy from UI.

Mr. Grubel: That wasn't the point, Madam, I'm sorry.

Mr. Crosbie: I think there's something that may be happening, but I think they did fail to prove that all the people who are collecting UI would have jobs in small businesses if there wasn't UI. It's difficult to say you should cut off all the UI so everybody will become gainfully employed. I don't think that will happen. I think the harm will be far greater than what the benefit will be.

.0925

Mr. Hutton: I think it would be irresponsible to cut off assistance all of a sudden. There's a problem that exists there right now. I didn't mean to infer that all Newfoundlanders don't want to work. That's not the case. As a matter of fact, most people do not like taking that cheque. They would much rather have a meaningful job.

The concept of workfare has been bandied about. It has actually been implemented in some areas of Ontario.

Mrs. Chamberlain: With no success.

Mr. Hutton: Yes, I agree that there's no success at this moment. The difficulty becomes a question of how we wean people off that particular form. I sincerely believe they do want to work. We're just not going to create 30,000 or 50,000 jobs overnight. That's a reality. You just can't, all of a sudden, cut off all assistance and set them adrift, because you'll have mass chaos.

I firmly believe that most people do want to put in a day's work. Those who do want to work, if they are shown that they can and will produce and are productive, feel much more satisfied with their existence at the end of the day. As a normal human being, nobody wants to take anything in the form of what might be considered something for nothing. They do want to produce.

I apologize. I did not mean to infer that this was the case.

Mrs. Chamberlain: I was just going to make a point about what Mr. Hutton said about workfare. In the last election, Ontario voted en masse, and that was one of the huge programs that appealed to people. But we've had absolutely no success. Granted, there's still time to go in that mandate. But they've tried it, and it just hasn't been implementable.

That's a good lesson for us. The reason we're here is to get many ideas and go back. We'll hear what you say and then try to implement some of those things. But the solutions are not simple. Some things that sound good on the surface are just not workable or doable.

Mr. Hutton: This is the same sort of thing. Just because something that is implemented doesn't work right out of the gate, you don't give up. It's as simple as that. I don't think you should throw out the baby with the bath water, so to speak, just because Ontario made attempts in this particular area that may be deemed a failure, or whatever you want to name it.

Maybe the approach or the implementation of it didn't work properly, but that's not to say that something along those lines.... Say factories were set up using government subsidies. At least they're keeping people employed. It would still be a less expensive solution than just mailing out a cheque every month.

The social implications of mailing out a cheque every month are....

The Chairman: Mr. Stokes.

Mr. Stokes: I wanted to comment on TAGS. I think that for a program brought in hastily, it is one of the better programs the federal government has done. In effect, people on TAGS had freedom to look for work and do anything else. I think if you did a study, you'd find out that 20% to 30% of them are now working in Ontario, B.C. or somewhere else. What if you had just put them on some kind of unemployment, or extended their unemployment so that they weren't allowed to travel, etc.? I think that, overall, TAGS is one of your better government programs.

That's one thing. Here's the other thing.

There's the thought that too many fishermen are chasing too few fish; the opposite is the truth. The truth of the matter is that we've introduced dragger technology. We've also introduced boats that can operate in ice. We've gone on the spawning grounds, along with other countries, and dragged the fish when they're spawning. We've killed ten million eggs to catch one fish.

We should go back to our roots and catch the fish when they come ashore.

We've been selling our female capelin to the Japanese for more than twenty years. Now our capelin are about three-quarters of the size they used to be.

We were breeding Newfoundland dogs and selling all the big pups to the Japanese for 25 years. So you shouldn't be very surprised if the dogs you are left with are small and runty.

It's time for a wake-up call.

The Chairman: Thank you very much, Mrs. Chamberlain and members.

I'm confident that your representatives from Newfoundland, your provincial government, know a great deal more than this committee about the future of the fishery and how to best protect it. I fully expect that the provincial government will have a very strong voice in Ottawa as to what that future fish policy should be. I don't want to pre-empt that.

We've heard you. We know this great resource was ruined through mismanagement and that we, as a federal government, through the fisheries department, bear an incredible part of that blame. We are looking to you for the solutions, and we'll work with you.

.0930

We've heard calls for two types of support here today. We've heard a compelling case made by the women's centre. This is not support for business. This is never going to be a profit-making enterprise and no bank is going to lend them money. We have to invest through our government in this type of social capital. These women not only deserve the help; they can, through this small public investment, again become highly functioning citizens.

I have no problem saying your need is dire. We're fortunate to have people like you who are on the delivery end of this and who understand the problems of the people you're dealing with. Thank you.

The other type of support we're talking about is to business. A very compelling case was made by Hilda Pollard and Charlie Hutton for the funding of small business. This is going to be our future. I was surprised I only heard once today about Hibernia and what Hibernia may or may not have done for this province. I suspect if the Churchill Falls agreement could be renegotiated to a fair rate per kilowatt-hour - I didn't realize it was 1¢ per kilowatt hour; I thought it might be 2¢ - I would think this would be an incredible part of the industrial infrastructure for this province.

I remember when I was a negotiator. Back then I started very carefully and I was shocked at the rate, but Smallwood was held up to blackmail by the then premier of the province. He couldn't get the power out otherwise.

Small business is going to be the creator of jobs. What shocked me the most out of what I heard today is when Charlie Hutton said the work ethic died when seasonal workers from the fishery could get UI over the winter. You no longer had to go into the woods. He again repeated the work ethic is virtually dead here.

It may be in certain ways. We've heard in the past that UI had been a joke and Newfoundlanders themselves were ashamed of it. We'd heard this in previous testimony here. But I really don't believe the work ethic is dead when I see people like those working with our women, seniors working as volunteers, and Hilda Pollard fighting like hell to add a few more people to her payroll in the tourism industry, an industry we all hope could be a burgeoning one in Newfoundland.

I think we have an obligation to come back to you. Mr. Hutton has presented one course of action. In the meantime, I think he might pick up on what Mrs. Chamberlain said. Whenever I have small business persons in my riding who feel they've been unfairly treated by a financial institution, I want to know about it and I'm prepared to intervene. I would suggest you also get in touch with your local MP very quickly, as well as maybe the ombudsman. I would start there and be prepared to make your case to your member of Parliament. We all think, around this table, this is part of our job.

I've talked far too long. This has been extremely helpful to us. Every time we come here we realize this is an incredible province. We realize, as Charlie Hutton also said, maybe with a bit of hyperbole, you probably have more brainpower per head here than anywhere in Canada. It is a thrill to be with you. Thank you very much.

We will adjourn for ten minutes.

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