[Recorded by Electronic Apparatus]
Wednesday, October 30, 1996
.1532 
[English]
The Chairman: Order. The finance committee of the House of Commons is very pleased to continue its pre-budget hearings.
With us this afternoon at our round table, we have: from the Canadian Centre for Policy Alternatives, executive director Bruce Campbell; from the Bank of Canada for Canadians Coalition, Jordan Grant; from the Canadian Pharmaceutical Association, Noëlle-Dominique Willems and Jeff Poston; from Ottawa city council, Her Honour Mayor Jacquelin Holzman; from the Health Action Lobby, Mary Ellen Jeans, Sharon Sholzberg-Gray and Alastair Thomson; from the Professional Institute of the Public Service of Canada, Bob McIntosh; and from the Canadian Federation of Labour, Jim McCambly. Welcome.
Perhaps we could start off this afternoon with brief three- or four-minute presentations on your main concerns about the budget. Then we'll look forward to a lot of discussion.
Mr. McCambly, perhaps you would be good enough to start off.
Mr. James A. McCambly (President, Canadian Federation of Labour): Thank you, Mr. Chair. I was with you last week on another matter, wearing the same hat, but the subject was a little different. I see this is your 47th meeting, so I should consider myself lucky.
The Chairman: I don't think too many other people would in your position, sir, but we're delighted you feel that way.
Mr. McCambly: I don't know if I can do this in two or three minutes, but I will try to be as brief as I can in making this presentation on behalf of the Canadian Federation of Labour.
We have in excess of 200,000 members in Canada, and I'd like to start with what we think should be the emphasis for budget-making this year. We think the number one concern has to be the jobless rate in the country and the number one priority needs to be how the government can create priorities to reduce the number of unemployed. We've had near double-digit rates for a good long while. There have been efforts, but in our view they have failed to stimulate a level of growth in the private sector sufficient to develop a sustained decrease in unemployment levels.
We feel it's time for the government to stop focusing exclusively on the deficit. The situation is well under control and low interest rates are certainly the government's best ally. What we need now is an obsession, really, for creating jobs in Canada.
The CFL believes that the government can achieve the goal of real job creation in a few ways: stimulate more investment; invest in targeted training; encourage consumer spending; and invest in targeted infrastructure spending. I'll touch on these briefly.
.1535
First of all, on stimulating investment, we were here last week as the chair of the Working Ventures Canadian Fund, which has some $860 million. I might just quickly say again that this fund supports almost 10,000 jobs. It has annual sales of $1.5 billion. It exports $600 million and does R and D of $99 million. This kind of thing is very important for concentrated stimulation of the economy.
About investment and training, we feel the government has abdicated responsibility for one of the most successful programs in the country, apprenticeship. Despite the red book promises to support a national apprenticeship program, the government has prevented new apprenticeable occupations from developing within sectors desperately in need of some systemic training systems.
I might point out something I feel is really specific to a dichotomy, I suppose: that we had funding of some $20 million that came from consolidated revenue and it was cut off. This was to pay for classroom support for four to eight weeks for apprentices, the first two weeks of income support; and for those who have to travel to the training, to give them some transportation and income support. The other side of that $20 million coin is in excess of $5 billion that is now taken out of the EI account and put into the account of general revenue. We feel this is one example - an extreme example - of cutting off our nose to spite our face, by not supporting those most in need of education services.
About consumer spending, which seems to be at a low notwithstanding the low interest rates, we point out that virtually 100% of the huge EI surplus that exists now, and that is expected to increase to some $5 billion, maybe $9 billion, has come from workers whose EI eligibility has been cut off or eliminated. One of the ways we would suggest as a means of stimulating consumer spending and getting some money back into the economy is similar to what has been done before with the UI account, and that is to get some money in the hands of those desperately in need of it.
To the extent that the reserve goes beyond $5 billion - which, by the way, we supported; we didn't object to $5 billion being put away for a rainier day than we already have - and it has been suggested it may go up to $9 billion, it would be better to put that $4 billion back into the economy and to allow at least some people who currently cannot qualify for UI to qualify, to get that injected back into their hands. They certainly would not hesitate for a moment to spend it, because they're all broke.
On targeted infrastructure spending, first of all it's our view that the government should consider a second infrastructure program. We would support infrastructure, but we would really need to be very, very careful it's justifiable and not politically motivated. At a time when the economy is at virtually an all-time low, counter-cyclical spending on the part of the government makes good sense. We have the most competitive time to be able to do reconstruction or new construction work. So we would support the government's taking that kind of action.
Just a couple of points on that. Targeting can be done, for example with gasoline taxes. They could be targeted to some extent on restoration or repair of highways and bridges. We have examples now such as the Confederation Bridge to Prince Edward Island and New Brunswick, where a toll is being charged or considered for the capital expenditure. Again, I think this is a good way to get on with some work at this time, when the government does not have a lot of money to put out as capital works.
.1540
One additional point is that in any work undertaken that way we would say the federal fair wage program ought to be applied where any federal funding is involved, to ensure those taxes are used to the best advantage of workers and to minimize the underground economy.
The Chairman: Thank you, Mr. McCambly.
Mr. McIntosh.
Mr. Robert J. McIntosh (Manager, Collective Bargaining, Professional Institute of the Public Service of Canada): Thank you, Mr. Chair. We also are very pleased to be here today during your pre-budget considerations. Like our friends from the Canadian Federation of Labour, we share a deep concern about the high level of unemployment that continues to face Canadians and we're hopeful the 1997 budget ends the era of cutbacks and puts Canada back on track to full employment and renewed opportunity for all.
The institute is one of the larger unions representing professionals in Canada. We represent approximately 33,000 professional workers, in fields ranging from computer science to auditing and scientific research, both here in the federal government and in the provinces of Manitoba and New Brunswick.
Our remarks will focus on the management and structure of the public service of Canada. We are doing so with the firm belief that an efficient and well-managed public service is an element critical to the infrastructure needed to secure economic growth and opportunity for all Canadians, regardless of region. Secondly, we raise this issue because this government has used the annual budget process to rewrite the rules governing labour relations and management in the public service.
Starting with the 1995 budget, the federal government embarked on a policy to downsize the public service by transferring responsibilities to the private sector, to other governments, or to new service agencies. This policy is now known as ``alternative service delivery'', or ASD, and it follows a fashion in government organization that was initiated in Britain and New Zealand during the 1980s. These examples have not produced the desired economic results. However, they have had serious negative social consequences.
Nav Canada, which is taking over federal air navigation services this Friday, November 1, was a forerunner of this new policy in Canada. Last year's budget announced the creation of agencies for Parks Canada, Revenue Canada, and food inspection that would operate outside the public service and the normal structure of government departments. Many more government functions are due to get the same treatment.
The shape of things to come is outlined in the bill to establish a Canadian food inspection agency, a bill that is currently before the Commons committee on agriculture and agrifood. Because this bill establishes a precedent, it raises some important questions. Authority for food inspection is to be divided between the agency's chief executive officer and the responsible minister. The Department of Health will set standards for food safety and public health and assess the new agency's performance. Treasury Board will also play a role because of its ongoing control of the purse strings.
It's hard to envisage an independent agency with so many masters. It's also not clear how the new agency will be accountable to Parliament, nor where the projected $44 million in savings will come from. Particularly, problems will arise because of the labour relations regime, which will deny transferred employees rights they currently hold as public sector workers without giving equivalent rights that could be applied under the Canada Labour Code.
The institute has been looking at the ASD concept both in Canada and abroad. We've just released a discussion paper entitled ``Alternative Service Delivery: Snake Oil or Antidote?'', which we have distributed here to the committee members. I would hope you'll have a few minutes to read that over.
The Chairman: Which side do you come down on, Mr. McIntosh?
Mr. McIntosh: I think it'll be fairly clear by the time I'm finished.
In it we suggest that the concept of ASD may be flawed and the place to begin looking for efficiencies should be within the public service. We also question the idea that government can be run like a business. The driving force for what governments do should be service to every citizen. For business the priority is finding the particular customers who will buy the product or service that's being offered.
We're particularly concerned that the implementation of ASD may endanger Canada's proud tradition of public service - a tradition Liberal governments have played a large role in creating. For the past half century, Canada's public service has been driven by a sense of responsibility for the health and well-being of Canadians. This same sense is what drew many of our members to work for government.
.1545
With the new concept of ASD, many public services and functions are being privatized or moved into quasi-public agencies with limited accountability to Parliament. Looking ahead, the consequences of this policy could be disastrous.
Former federal employees will find themselves committed to a specific agency, but not to the wider concept of public service. People's ability to pursue a career by moving within different sectors of government will be seriously restricted. The federal government's presence in Canadian life will diminish and with it the capacity to help bind the country together. When the public service has been carved into autonomous segments, the sense of pride and purpose that traditionally motivated federal employees will be lost.
We bring these concerns to the finance committee because the changes that we've discussed are being implemented as matters of budgetary policy. We will raise these issues where there are other opportunities for consultation as well. Thousands of institute members are affected and are obviously concerned for their future. From a wider perspective, we think the concept of public service by government is something to be cherished on behalf of Canadians, not destroyed.
On a final note, I wish to emphasize our concern about this government's practice of rewriting the laws governing labour relations in the public service. Setting conditions of employment via the Budget Implementation Act denies employee rights, undermines management's ability to manage, and creates uncertainty about how the parties will conduct their affairs. Labour relations must be done by the parties through a collective bargaining relationship. So, please, no more legislated wage freezes or other measures that undermine this process.
With that, I'll hold my further comments.
The Chairman: Thank you, Bob McIntosh.
From HEAL, Mary Ellen Jeans.
Ms Mary Ellen Jeans (Executive Director, Canadian Nurses Association): Thank you, Mr. Chair, for the opportunity to appear before you today. With me are Sharon Sholzberg-Gray, co-executive director of the Canadian Association of Community Care, and our technical adviser, Dr. Alastair Thomson.
We welcome this opportunity to present the views of the Health Action Lobby, or HEAL, as we are more commonly known. HEAL is a coalition of nearly thirty national health and consumer organizations dedicated to protecting and strengthening Canada's health care system. For over five years we have worked together to provide positive, constructive advice on how the funding for Canada's cherished health care system can be protected and what the federal government's roles and responsibilities should be with respect to health care.
When we refer to health care, we refer to a universally accessible system encompassing the broad continuum of care, from risk identification and disease prevention through to long-term care.
We have appeared before this committee before and have shared our views with the Minister of Health and the Minister of Finance on a regular basis. We've consistently called upon the government to provide stable and adequate funding for health care.
Between 1982 and 1995-96, successive freezes to EPF transfer payments have resulted in $30 billion being withheld from health transfers. Moreover, the declining cash component of these transfers has brought enforcement of the Canada Health Act into question.
While we were mildly heartened that the federal government introduced a cash floor last year, we're very concerned that this may be too little, too late. We're skeptical. This government has made repeated claims that medicare is a sacred trust that will be defended, but it has done little to demonstrate this commitment.
In spite of the cash floor announced in the 1996 budget, the government will cut $2.5 billion from the Canada health and social transfer this year. Another $4.5 billion will be cut in 1997, and another $1.4 billion in the following two years.
The health care system cannot sustain these cuts. I would argue that Canadians cannot sustain these cuts. I think if you read your press daily, you'll see repeated stories of how Canadians are suffering as a result of these cuts.
.1550
I'd like to tell you what Canadians are experiencing in the health care sector these days, but I would like to begin by saying that health care spending is not out of control. Costs have been contained and spending has been reduced. While total expenditures as a percentage of GDP are down, private health care spending is going up. Increasingly the publicly funded system is not providing medication, convalescent care, or other necessary services. You and your own families may have experienced some of these results. The federal government is offloading its responsibility on families and on some small and medium-sized businesses. The increased burden on Canadian families is tremendous.
The recently released consultation report of the National Forum on Health tells us the average Canadian is very worried about the ability of the health care system to meet their needs, and they should be worried. The members I represent, the registered nurses of Canada, have gone from worrying about being able to provide quality nursing care to worrying about providing even safe care.
Last week I met with a number of nurses working on the front lines of health care here in Ottawa, and their stories are frightening. Mothers are being sent home after what has become known as a ``drive-by delivery'': 24 hours in and out of hospital, with no support at home. There's mounting evidence that within a couple of weeks mothers are no longer breastfeeding. We are putting an entire generation of infants at risk of having poorly developed immune systems...which are gained from at least the first three months of mothers' milk.
Parents are frightened to leave their child at our reputable children's hospital because of lack of care. New health service workers are being introduced with three and four weeks of training, and they look after acutely ill children, so parents are frightened. They would rather take their children home than leave them in the hospital, where they do not feel they are safe.
After major surgery elderly people are being sent home, where no community resources are in place and they can't cope. Increasingly the evidence tells us they are being readmitted to hospital with complications, and often they are much more ill than they were when they were discharged.
A public health nurse - that is becoming almost an extinct breed of person - reported she is responsible for seventeen schools, eight of which she can't even get to; it's humanely impossible. Therefore she doesn't know the children. She's not there to deal with immunization and other kinds of public health problems.
The list goes on. I know my HEAL colleagues could join me in providing many more examples of the results of the cuts to the health care budget.
The last few years have been extremely difficult in health care. Many cuts have been made in the name of health care reform. The system has not yet had the opportunity to adjust from the recurrent fiscal shocks. We're too busy scrambling to provide basic services. The members of HEAL are not against health reform, but what we are seeing is not health reform, it's budget-driven cuts, with no large plan or strategy to reform the system to a broader primary health system that Canada believes is needed.
Ladies and gentlemen, we believe it's time for the federal government to reinvest in health care. There are a number of ways to do this. We'll provide you with several options and our recommendations in a written brief shortly.
We support fiscal restraint, but fiscal health should not come at the cost of the health of Canadians. It's not good enough for the government to say they aren't cutting health this year. They already have. We have not begun to feel the effects of the $4.5 billion in health cuts still to come in 1997.
We know Canadians depend on their health care system as a unifying expression of what it means to be Canadian. In a recent poll conducted by the Department of Finance, Canadians indicated health care was the only program for which they would support a tax increase to maintain access to quality health care services.
.1555
As well, delegates at the Liberal convention this past weekend called on the Prime Minister to invest in health care. Provincial governments and various political platforms are recognizing that cuts to health care must stop.
The Health Action Lobby will continue to work to safeguard the health of Canadians and our medicare system. We look to the government to make good on its commitment and reinvest in health care.
Mr. Chairman, we thank you and all the members on the committee for the opportunity to participate in the budget consultation.
The Chairman: Thank you, Ms Jeans. Do you know when we'll have your specific recommendations?
Ms Jeans: In about ten days.
The Chairman: Thank you very much.
Your Worship Mayor Holzman.
Ms Jacquelin Holzman (Mayor of Ottawa): Thank you.
[Translation]
Good evening. I am very happy to be here today.
[English]
On behalf of the council of the City of Ottawa, I am pleased to express our views to the Government of Canada as we approach the 1997-98 federal budget.
Our pre-budget submission, which was unanimously approved by council, has already been submitted to you. Since we have limited time available, I have chosen to focus on four themes: grants in lieu of taxes, office accommodation, economic development agreements, and community consultations.
For Ottawa, the federal government is our major employer, directly employing over 100,000 people in the national capital region. It's our major landowner and tenant, directly responsible for up to 40% of all office space in our city. The federal government directly supports 30% of the city's budget through grants in lieu of property taxes. So the first point I want to speak about is grants in lieu of taxes - GILs.
Since the federal government owns so much land and has so many assets in the city of Ottawa, annual grant-in-lieu payments represent 30% of the city operating budget, $72 million. Given our dependency on these payments for our own budgets, uncertainty, inconsistency, and unpredictability are unmanageable for us.
The federal government has rightly pointed out the importance of certainty, of stability, and of predictability in its transfers to the provinces, and we believe the city situation is comparable. The federal government has firm five-year arrangements for the Canadian health and social transfer and equalization programs, and they are now entrenched in legislation. All we ask for at the municipal level is similar treatment and consistent payment principles across all departments as GIL payments are devolved to departments and agencies.
The second point is on office accommodation. We are already seeing evidence of downsizing in our downtown as a number of buildings now stand empty. The potential exists to vacate 200,000 square metres of leased space over the next few years because of federal downsizing. Major employers that are downsizing and laying off thousands of employees have responsibilities to the communities in which they live. We believe Ottawa requires attention and a coordinated effort to mitigate the impacts of downsizing. This is only consistent with the Liberal government's red book commitment to community and regional economic development.
That brings me to my third topic, economic development agreements. We note that over the past ten years the federal government has signed economic development agreements with a number of municipalities in Canada. They focus attention and resources on specific economic development objectives for those communities. Why not Ottawa? While we acknowledge the work of REDO, the federal government needs to commit and be committed to a consistent vision and a consistent framework for the economic development of the capital of Canada. I quote from the red book:
- Liberals believe that we must work in partnership and support community development where
local creativity and initiative is shown.
- Presumably the Liberal government still holds this view, and certainly Ottawa's emerging
private sector is enough of a demonstration of our initiative.
.1600
It's not uncommon for me to hear from major corporations in the city if they're going to be leaving the city or downsizing. They generally come to tell me or consult with me about it first.
This obligation to consult is particularly crucial at this time, as more and more responsibility for people, infrastructure and economic development is downloaded to communities.
In conclusion, I'm sure that none of these preceding comments come as a surprise to you, Mr. Chairman, or members of the committee, because I'm sure you hear this from your own municipalities. I know the Prime Minister puts great stock in the role of individual communities and in good federal-municipal relations. In fact, he mentions it in almost every one of his speeches.
On behalf of the city council of the City of Ottawa, I appreciate the opportunity to appear before this committee. We believe our submission offers some good advice for the government, and we look forward to your recommendations on the issues we raise.
We also hope that our submission and the dialogue it creates is only the beginning in creating a greater understanding of the responsibility of the federal role in our community.
Thank you.
The Chairman: Thank you very much, Your Worship.
Next, from the Canadian Pharmaceutical Association, we have Noëlle-Dominique Willems and Jeff Poston.
Ms Noëlle-Dominique Willems (Director of Government and Public Affairs, Canadian Pharmaceutical Association): Thank you, Mr. Chairman.
I have a brief note. We are a national association that represents more then 10,000 pharmacists across Canada. We have been appearing in front of this committee on a regular basis.
We have opposed the taxation of health benefits, and I think we would like to reiterate that. Also, there should be no more playing with RRSPs, if possible. Our members would definitely appreciate that. We also, as an affiliate member of HEAL, support what was said by Mary Ellen a little bit earlier.
We could also give you some very grim stories from our pharmacists across the country, as drugs are getting harder to come by for people who are on private plans or who don't have insurance at all.
This is the reason why we're here today: to try to start laying the foundation for a program that would ensure that people are covered under a drug plan.
I will pass it over to Jeff Poston. Thank you.
Mr. Jeff Poston (Research Director, Canadian Pharmaceutical Association): Thank you very much.
We believe that the development of a global program that integrates policy and practice is needed to meet the goal of achieving a better value for money from drug therapy. Escalating drug expenditures, an inappropriate use of drugs and providing equal access to needed drug therapy, while at the same time maintaining a successful research-based pharmaceutical sector, are key drug-related issues for the Canadian health care system.
We've seen several provincial and national initiatives that have tried to meet these issues. They've resulted quite frequently in restrictive formularies, increased cost-sharing through co-pays and deductibles, national pharmacoeconomic guidelines and a variety of price control methods. Yet little emphasis has been placed on determining the value of these interventions or the effect of any of them on the well-being of Canadians. We hear from our members of pharmacists having to sit down with elderly patients to answer the question of which prescription medicine they really need, because they can't afford all of them.
The initiatives have also resulted in significant cost-shifting to the private sector. I think HEAL elaborated on some of the issues here quite well.
The impact of this on overall industrial competitiveness has received very little attention. We tend to forget that 44% or 45% of drugs in Canada are paid for by the private sector, 44% are covered by public plans, and about 10% are paid for by cash-paying consumers.
Efforts to improve drug use have not been well coordinated and have not been based on a consistent philosophy or approach in different jurisdictions. De-listing drugs from formularies, cost-shifting and restrictive formularies are all short-term measures.
The next therapeutic revolution, which some of us may live to enjoy, may create products to prevent heart disease, cure cancers and prevent dementia. Such products will need a more effective and sophisticated system of management if they are to be priced fairly, distributed equitably and used appropriately.
Against this background, we believe that a major national initiative is required to create an effective resource system to support drug-use management in both the public and private sectors.
.1605
We aim to provide equitable access to pharmaceuticals for all Canadians to: promote cost-effective drug use; support research in new drug development; measure and effectively promote the cost-effective use of pharmaceuticals; and importantly, establish mechanisms to carry out post-marketing surveillance and drug-use review programs to assure the quality of drug use for Canadians.
We propose the establishment of a Canadian drug-use management program that would be based on principles and responsible for the following functions: the therapeutic and pharmacoeconomic evaluation of drugs, particularly new drugs; the development of guidelines for pharmacotherapy and disease management; the development, the implementation and evaluation of methods to improve drug prescribing and drug use; the development of criteria and standards for electronic data transmission, storage, access and use; criteria and standards for patient information leaflets and a patient information service - we need to better educate consumers about drug use - and the coordination of research activities.
The benefits that would accrue from such a system would affect both public and private sector drug benefit programs. Tools and services would be made available to establish equitable, cost-effective and quality drug use. There could be a reduction of the duplication of effort and expenditures by provincial governments and private sector drug benefit plan managers. Governments would get more value for money for the appropriate use of pharmaceuticals. Consumers would be exposed to less risk and would receive better care. Physicians would receive assistance to evaluate new drugs and maintain the quality of their prescribing. Pharmacists would be more effectively utilized, and the industry in general would be relieved by excessive burdens created by cost-shifting. The goals of harmonization of access, portability and transfer of services across provincial boundaries could also be achieved.
So we request that you consider seed funding in the budget to develop this program, which is aimed at looking for long-term solutions to providing cost-effective, high-quality drug therapy for Canadians.
Thank you very much for the opportunity to present at this meeting.
The Chairman: Do you have any idea of how much that seed funding would be, Mr. Poston?
Mr. Poston: From estimates that we did initially, we were thinking that an initial program could be started for somewhere between $3 million to $4 million. There's a lot of material and infrastructure already in place. It would require some reorganization of some existing initiatives, but it shouldn't be a huge amount of money.
Ms Willems: And you would have a lot of cost savings from stopping the duplication at different levels.
The Chairman: Thank you very much.
Jordan Grant.
Mr. Jordan B. Grant (Chairperson, Bank of Canada for Canadians Coalition): Thank you, Mr. Chairman, and members of the committee.
In the nature of this panel, we're jumping from the micro to the macro to the micro and back to the macro. I see my role as making an attempt at translating the language of economists into language that ordinary people can understand.
Government is to be congratulated for achievements it has made in some of its major objectives. When this government started out, it set really only two overriding financial objectives for itself in terms of specific numeric targets. Those objectives were the maintenance of the inflation rate between 1% and 3%, and reducing the deficit down to 3% of GDP, and subsequently, down to 2% and 1%. Hopefully, in subsequent years, it would go to zero.
The government has achieved those objectives. It has also achieved a very important and much overlooked current account surplus.
But there remains a much more important overriding goal, which is the reduction of the unemployment rate. It's something that the Liberal Party was elected on. It's something that, poll after poll, people are consistently most interested in. In terms of even your own objectives, it's incredibly important.
The prevailing economic advice that you've been receiving and following has simply been to cut spending to get the deficit down. The markets will reward you with low interest rates, and those low interest rates will entice people to begin borrowing and spending again, which will get the economy going.
.1610
The undercurrent to that is it will get the economy going in terms of GDP growth but not too much in the way of jobs. The advice you're getting is that the best you can expect under that advice is an unemployment rate hovering just a bit below what we have now. Basically they're looking at 9%, perhaps a little lower.
The reason for that is that unemployment is being used to maintain the inflation target and the inflation target that has been set is paramount. The Bank of Canada estimates unemployment has to be kept within a range of 8% to 9% in order to maintain its inflation targets. Its estimate is that in the short term it's closer to 9% than 8%. It hopes with the UI changes you've made and other micro-changes that will move down towards the 8% range. That's the best you can hope for under the current economic advice you're receiving.
Is it going to work? Well, there aren't any precedents for its working. If we look back in Canadian economic history there are a few very startling correlations. The most startling is the relationship between the unemployment rate and deficits. Since the Second World War, in every year in which unemployment has been below 6% the government has run a surplus. Since the Second World War, in every year when unemployment has been above 6% the government has run a deficit.
In fact, the last time the government was able to balance its budget while running unemployment above 6% was 1937. In 1937 we had just endured four years of depression. Unemployment had gradually dropped down to about where it is today. It was still the Depression, but it was down to about 9.5%. In 1937 the government, having received the same economic advice it's receiving today, balanced its budget.
In 1938 the unemployment rate jumped back up to 11%. That was in one year. The deficit also reappeared, to about 1.5% of GDP.
It wasn't until the Second World War, when financial policies changed and we received a whole new set of policies aimed at fighting the war, that unemployment immediately plummeted and within about three years unemployment was down to full employment.
There's a warning there. The prevailing policy may not work.
People point to 1994. We had very low interest rates in 1993, and they worked. In 1994 we had excellent growth. Unemployment dropped from 11.5% down below 10% and into the 9.5% range. It worked then. People are asking, well, why doesn't it work now?
There's a big difference between the 1993-94 fiscal year and this fiscal year. That difference is fiscal policy. In 1993-94 you were still running a big deficit and you were borrowing back from the financial markets almost as much as you were paying to the financial markets. In 1993-94 you were paying to the financial markets about $38 billion in interest payments and you were borrowing back $30 billion, so there was a net drain of $8 billion. This year you're paying to the financial markets $48 billion in interest charges, $10 billion more, and you're borrowing back only $14 billion. There's a net transfer from taxpayers to bondholders of $34 billion this year. That's money that's being taken out of ordinary people's hands and being put into the financial markets. No wonder we see the stock market at all-time highs.
We're just beginning to see the impact of the job cuts in the federal government and the provincial governments, particularly with Ontario and now Quebec getting into the act, and even B.C. There's a great danger this policy will not work.
Now, what can you do about it? Luckily - and the government is to be congratulated for this - interest rates have been brought down much below what was projected in last year's budget and previous budgets. You have savings of about $4 billion. Our immediate suggestion is that in this budget you put that $4 billion back into the economy.
Paul Martin, in establishing his deficit figures, said we will meet those deficit objectives ``come hell or high water''. We suggest you meet those deficit figures come hell or high water. Don't try to beat them. We're not asking you to come in higher than your projections. We're just saying come in at your projections and put the money back into the economy.
.1615
How you do it is a matter of debate. Our Reform friends are saying put it back by way of tax cuts. We would suggest that would not be the most economically efficient way to do it. The way to do it would be to roll back a few of the worst of your cuts, perhaps through some infrastructure spending and perhaps through a few selected and targeted tax cuts designed specifically for those who are most in need, who are also those most likely to re-spend the money.
If you do that, with the low interest rates we have, you are likely to start to see the unemployment rate moving down. But how far down? Only to about 9%, or perhaps slightly under that. If you want to get unemployment down further, it is possible. It's a question of political will.
There are essentially three schools of economists. There are those who say the best we can do is 8% to 9% unemployment, and their projections will be borne out if you put that $4 billion back into the economy.
The next school of economists are those who are ascendant in the States, who are basically saying the Bank of Canada is overestimating the danger of inflation and that there is room to move unemployment down to perhaps 7% or 7.5% without re-triggering inflation. They do call for a few fairly minor changes, such as fine-tuning the inflation statistics. Biases have been identified in the statistics. When we say we have 1% to 3% inflation, most economists now acknowledge that's really 0% to 2%, or even negative inflation to 1%. So they say ``fine-tune the statistics''.
The second thing you would have to do is try to modify the judgment calls at the Bank of Canada. We have officials in the Bank of Canada who have consistently erred on the side of lower inflation, even at the expense of creating more unemployment than they would consider ``necessary''.
There are plenty of good economists, including the recently retired president of the Canadian Economics Association, who have a different judgment. If you want to put some fear into the officials at the Bank of Canada, replace a few of the senior officials with more wise and more humane economists.
The Chairman: Is there such a thing?
Mr. Grant: There are, let me assure you.
A voice: [Inaudible - Editor]
Mr. Grant: Well, that's the third point. In order to have that moderation, you would have to do what has been done in the States.
In the States the estimate of the so-called NAIRU was about 6%, and they're now down to 5% unemployment with no inflation in sight. What has been happening is that a lot of studies have been done. The word is getting out that there is some virtue in this NAIRU. There is plenty of good academic work. The government should be funding that and publicizing it.
The Chairman: Thank you very much, Jordan Grant. Could I come back to you later?
Mr. Grant: Okay. Thank you.
The Chairman: I just want to give everybody a chance to put their major themes on the table. We'll have lots of time to elaborate later, and I apologize for having let you run on too long.
Bruce Campbell, please.
Mr. Bruce Campbell (Executive Director, Canadian Centre for Policy Alternatives): Thank you, Mr. Chairman, and thank you for inviting me to participate in this discussion on behalf of the Canadian Centre for Policy Alternatives.
Like the previous speaker, I too am going to focus my remarks, given the constraints of time, on unemployment, as we come to the end of the sixth year of the great depression of the 1990s.
Reliable estimates are that so far it has cost us about $400 billion in lost output and about 5.2 million person years in lost employment. The government didn't start this crisis, but the government's policies have aggravated the crisis.
You know the official unemployment rates. They haven't changed much since October 1993, when you came to power. You have created just over 200,000 jobs a year for the last three years, which is not even enough to accommodate the new entrants into the labour market.
Perhaps more significantly, the ratio of employment to working-age population has remained constant in the last three years at about 58%. What this means - offsetting job creation - are large numbers of individuals who have left the labour force or who have remained outside the labour force.
.1620
My advice is pretty simple, and it complements advice of others who have spoken. Acknowledge that we have a profound unemployment crisis, that your own policies have aggravated the crisis, and make reducing unemployment the very highest priority.
Just make the connection with the health care people. There is a tremendous burden on the health system from this prolonged high unemployment. Estimates have put it at least, very conservatively, at $1 billion a year.
My recommendations have two main thrusts. Firstly, interest rates have come down greatly, though in real terms, short-term rates are still slightly above the average from 1950 to 1980. It's important to note that they followed the economy as it has spiralled downward.
The government must keep rates low to allow their stimulative effect to begin to work. This may be some time in coming because of the prolonged unemployment, because of the income stagnation, because of the lack of consumer confidence. But it's not clear to me that the government, through the Bank of Canada, has given up its preoccupation with inflation overall.
I would urge the government to keep interest rates low even as - and it will probably occur - the U.S. Federal Reserve raises its lending rates. Furthermore, I would urge the government to instruct the Bank of Canada to abandon its narrow or natural rate of unemployment mentality, which says that if unemployment drops below 9% or whatever, it threatens to rekindle inflation and necessitates again a monetary tightening.
So keep rates low even if unemployment falls, even if the exchange rate falls, even if inflation rises. Some say inflation at 3% to 4% is the appropriate target; some say higher.
Secondly, the federal Liberal government will have, during its mandate, taken cumulatively about $33 billion of purchasing power out of the economy by the end of next year. This, along with provincial spending cuts, has done great damage, particularly to unemployment; the Wood Gundy estimate from 1994 to 1996 is 470,000 jobs lost.
It's important to keep interest rates low, but it's not enough. Governments must reverse the spiral of spending cuts. Neither consumer spending nor domestic business investments are going to spearhead a recovery, nor will a payroll tax or general tax increase spearhead a recovery by itself.
My recommendation is that the government should embark on a major public investment drive. It should divide its program accounts into current and capital spending, and under capital spending it should undertake a major program to refurbish and strengthen the country's infrastructure, broadly defined - physical, transportation, social, health, education, ecological, communications, etc.
As it has done in the past, it should use the Bank of Canada to help finance this borrowing. This low-interest borrowing, combined with low rates in the bond markets, will help to keep the all-important debt-servicing ratio at manageable levels. Those are my two main proposals for this part of it.
The Chairman: Thank you very much, Bruce Campbell.
From the International Health, Racquet and Sportsclub Association, IHRSA, Mike McPhee, president, and Don Longwell, executive director.
Mr. Mike McPhee (Ontario President, International Health, Racquet and Sportsclub Association (IHRSA)): Thank you, Mr. Chairman and members of the committee. As you said, I'm the president and Don Longwell is the executive director. We are here to discuss unfair competition in the health and fitness industry, and we thank you for the opportunity to appear before this committee.
Our purpose is to address the impact of federal income tax policies that are permitting charitable organizations to behave as for-profit business enterprises, unfairly competing with commercial business and eroding a substantial tax base of considerable value to the Canadian economy.
.1625
We represent the International Health, Racquet and Sportsclub Association, IHRSA, which has over 200 commercial health and fitness clubs in Canada, 3,500 worldwide. But we also speak on behalf of over 1,500 private commercial clubs Canada-wide.
We are small business owners and operators who are struggling to compete with charitable entrepreneurs, most notably the huge charitable corporate entity known as the Y. Good intentions; bad economics.
We have the support of the Canadian Federation of Independent Business, who have written to the Minister of National Revenue on this issue. We also have a copy of John Bryden's October 1996 report on Canadian charities, which specifically addresses this issue.
A growing number of YMCAs, YWCAs and YMHAs have been built in Canada, with the primary purpose of serving the upscale health club market. Their traditional programming, which IHRSA fully supports and which serves the youth and less advantaged in our society, is clearly becoming secondary. Millions of dollars have been spent on expensive fitness facilities that exceed the most lavish of private clubs. These fitness businesses offer the same or often superior equipment and amenities as privately owned health clubs and compete directly with them.
Under the federal Income Tax Act, entities holding the status of registered charity receive a number of tax exemptions and other tax breaks on their federal, provincial and municipal taxes. They are also eligible for a range of federal, provincial and municipal grants.
The chart that is with this briefing, a copy of which will be made, shows that by our estimates, this can mean start-up and operational cost advantages of up to $1.7 million per club. This includes charitable receipts; federal, provincial and municipal grants; federal and provincial tax benefits; property and premises tax benefits; mortgage land-carrying costs; and United Way agency donations.
The Income Tax Act also seeks to ensure that registered charities that carry on private business activities may do so to a very limited extent, and that the resources from this business must be devoted and related to the mandate of the charity. They understandably are not allowed to compete with the private sector. While the Income Tax Act seeks in principle to restrict the level of private sector-style activities and services that may be conducted by a registered charity, we feel these rules are insufficient in practice.
Why is this a problem? It is a problem because it puts at risk investment, jobs and tax revenues. Private sector health and fitness clubs have made serious investments in property, facilities and people in communities throughout Canada. They have provided local employment for thousands of Canadians. They represent an important source of tax revenue for all levels of government, with PIT, CIT, source deductions, property taxes, GST, excise taxes, etc. It is difficult enough in these economic times to succeed in business, but it is doubly so when major competition does not have to pay taxes and has greater financial strength to equip themselves and pay higher wages.
We wish to reinforce that we applaud the Y's traditional mandate. Over the last five years we have urged them in writing on numerous occasions to return to this mandate, with modest facilities and programs for those who are in need. To do less is to undermine the core principles of registered charities, and it creates unfair competition.
The Y has responded on several occasions with the following comments.
They said they give discounts to the underprivileged. We can show this is less than 10% of their membership, and in some cases less than 5%.
They now sell ``membership-plus'' executive memberships to their clubs, which give exclusive access to changing rooms and locker room facilities that are bigger than some clubs of private owners. They include massage therapy, free coffee, TVs and fitness facilities in their own right. This membership plan is not available to the underprivileged.
Also, a plan is under way to build an exclusive executive club in downtown Ottawa. An exclusive executive Y - that is an oxymoron for us.
They also have many facilities that are inaccessible to the underprivileged in that they are not accessible without a vehicle. The Corel Centre in Ottawa is an example of that.
They will tell you they've been in the fitness business for years. I will tell you they have not been in the upscale fitness business for years. What happened to the boys' and girls' clubs? Why are doctors, lawyers and business people being subsidized to work out on upscale equipment? This venture into the upscale is as recent as 15 years.
.1630
We have no problem with multi-purpose gymnasiums and swimming pools, but a skipping rope can do the same as a treadmill, a box step the same as a Stairmaster. A treadmill costs $8,000, a Stairmaster $4,000. They're using money from the United Way tax advantages to purchase very expensive equipment, which then requires very expensive upkeep. We ask them if they've converted their hostels to five-star hotels, while the hotel industry sits by to watch. My Mississauga club would fit in the lobby of the Mississauga Y.
We feel with their tax breaks they have an obligation to serve the sedentary market, which unfortunately right now is the majority of low-income people. If you are getting tax breaks, you have a job to stretch those tax dollars. Fitness is about programs and creative programming, not about equipment. You don't get filet mignon at the food bank; why do you get $8,000 treadmills at the Y? Stretch your dollars. In other words, you're getting handouts, so keep it cheap and cheerful.
They say their profits go to good use, but should charities being raising money in an industry well served by the private sector? Their income tax submission reports indicate that 75% of -
The Chairman: Excuse me, Mr. McPhee. Could you wind up? I'll let you come back if you haven't had time to finish your presentation.
Mr. McPhee: Yes, sir. Sorry.
We recommend legislation that will tighten the limitations on business being set up by registered charities, preventing unfair competition with the private sector, and recommend that this committee ask whether there is some means of putting these upscale YMCAs and YWCAs on an even footing with their private sector competitors, perhaps by removing the tax exempt status of these profit centres, where they exist, thus restoring a full tax base to our economy.
The Chairman: Thank you, Mr. McPhee.
[Translation]
We will start our questioning with Mr. Gilbert Fillion, which we welcome to our committee.
Mr. Fillion (Chicoutimi): My name is Gilbert Fillion. I represent the Official Opposition as the member for Chicoutimi, a riding in the Saguenay - Lac-St-Jean area where unemployment is very high. I thank you all for your mostly constructive comments.
The general conclusion I am coming to is that we should give a very high priority next year to reducing unemployment and creating jobs. I think everybody here agrees with that. We have also talked about ways to get the unemployment rate down or to create jobs. Mr. Campbell's recommendation, in particular, has caught my attention. We know that to create jobs, we have to put money back in the system instead of using it to reduce the deficit.
Mr. Campbell was saying that the Bank of Canada could finance the government's expenditures and investments. Mr. Grant, do you agree with that? Are there possibilities we could explore in that area?
[English]
The Chairman: Mr. Grant.
Mr. Grant: In order to have the Bank of Canada begin funding more of the public debt or funding infrastructure investments, you have to bring back one piece of legislation, which is the requirement that the banks hold a percentage of their deposits as reserves in the Bank of Canada. This requirement was eliminated in the 1991 Bank Act amendments and could be put back in the current round of financial services legislation that is being dealt with by the government now.
If that is put back in place, there's no reason why the Bank of Canada couldn't fund needed infrastructure investment. Without it, it would cause a huge increase in the money supply through the private banking sector.
.1635
[Translation]
Mr. Fillion: Do you think that we could reach that target or implement Mr. Campbell's recommendation if we changed the law? You suggest putting that requirement back into the law, don't you?
[English]
Mr. Grant: That's correct. Just to give you one piece of information, since the reserve requirement was eliminated the chartered banks have in fact monetized approximately $65 billion of federal debt. Basically they've printed money and they and their customers are getting the interest on that. If the Bank Act were amended to put back the reserve requirement, yes, the Bank of Canada could fund provincial or municipal infrastructure projects and it would not be inflationary. The only difference between the chartered banks funding that work and the Bank of Canada funding that work is who gets the interest.
[Translation]
Mr. Fillion: I suppose you give advice to the government from time to time. At the beginning of your presentation, Mr. Grant, you congratulated the government for controlling inflation and reducing the deficit, among other achievements. There was a message there.
As an advisor to the government, why haven't you recommended that? If you think that modifying the 1991 Act could make it easier to implement that recommendation, how come you have not advised the government to do it?
[English]
Mr. Grant: I met with Frank Swedlove, the official in charge of the Bank Act review, early on in the process and made a written submission to him, making that suggestion. I was never invited back to consult with the government, and I was not invited to appear before the committee.
The Chairman: May I ask whether you asked to appear before the committee?
Mr. Grant: No, I wasn't informed the committee was meeting.
The Chairman: It wasn't a secret.
Mr. Grant: I did write to -
[Translation]
Mr. Fillion: Excuse me, Mr. Chairman.
The Chairman: Yes, Mr. Fillion.
Mr. Fillion: Mr. Chairman, it is worth mentioning that the Bank of Canada officials have agreed to come to the committee to present that recommendation. We could reinvite them a second time to discuss that issue only. I leave that up to you.
The Chairman: The executive committee could discuss your proposal.
Mr. Fillion: I would be pleased.
The Chairman: Thank you very much, Mr. Fillion.
[English]
Mr. Grubel.
Mr. Grubel (Capilano - Howe Sound): Mr. Chairman, when I listened to Mr. Grant and Mr. Campbell I thought I was stepping out of a time warp. When I first heard this theory of how to fix an economy, I was back at Yale, lecturing on economics. This was a theory of the 1960s. If you want low unemployment you run big deficits, because it's such an obvious insight that if the government takes the money and builds a bridge, infrastructure, workers will be hired who otherwise wouldn't work. It's a wonderful theory.
Well, we did this to the fullest extent possible. By 1991 we had a deficit, with government spending and borrowing, of 4% of national income. The unemployment rate should have been near zero at that point.
I think this Keynesian idea has been debunked by experience, not just as recently as this but throughout the post-war years. It just doesn't work.
Then I can't believe I hear the theory that we need more inflation. There are two versions. One of them calls for lots and lots of inflation, because that really lubricates the economy. In the 1970s we had double-digit inflation, and what did it bring us? We saw the word ``stagflation'' born. We had inflation and stagnation.
The textbooks have changed since then. Now we've had stability for a while and we have Mr. Fortin writing a challenging article. He was here, sitting right there where Ms Sholzberg-Gray is sitting, and he said, after he was confronted with some academic evidence - really, I think, gutting his argument - well, I was really just being controversial, because only through controversy do we advance knowledge.
.1640
As far as I can see, this has no foundation in reality.
Then another time warp - we have discussed this every decade since the 1950s at least - that the consumer price index ought to be adjusted so this would change. Well, the consumer price index.... If you start fiddling around with Statistics Canada and tell them to do things like this, you're as dead as a church mouse. Nobody will believe you any more, because this is for a short-run gain. It has been discussed around the world and nobody wants to fix it, for good reason.
This other time warp: increase the reserve requirement. You are trained as an economist. If you impose a tax on banks, you know what they are going to do. Well, lots of people around here say they're going to pass it on to consumers. You know enough about how banks work. How will they do it? They raise the rate they charge borrowers and they pay less to people who are lending to them, making deposits.
When they did that in the 1960s and 1970s because of those large reserve requirements, do you know what the lenders did and what the borrowers did? They took their money abroad. They took it to London. They took it to Paris. They took it to Guernsey. Why? Because those centres had no reserve requirements on foreign currency deposits. The banks were losing their shirts. It was a tax that simply was not working. It was a response of the Bank of Canada to the realization that we have globalization in the integrated capital market. That is why the reserve requirement was removed.
So I really don't understand where you have been since the 1960s, when these theories you are now propagating have been disproved empirically and have been shown to be seriously flawed theoretically.
The Chairman: Should we give them a little chance to answer that question?
Where have you been...?
Voices: Oh, oh!
Mr. Grubel: Thank you, Mr. Chairman. I would really be interested.
Mr. Campbell: The gap between the way we perceive the economy and the relationships among the government and economy and society is rather large, and we probably haven't had time to fully explore our differences. But I must say, Mr. Grubel, listening to you and thinking about time warps, I think of the 19th century. You may think of the 1960s, but I tend to think of the 19th century. I don't think your preoccupation and your obsession with the market as the panacea for everything are supported by the empirical evidence.
Mr. Grubel: Would you deal with the arguments, please?
Mr. Campbell: I am trying to deal with -
Mr. Grubel: That has nothing to do with it.
Mr. Campbell: It has everything to do with it. It deals with -
Mr. Grubel: It has nothing to do with it.
Mr. Campbell: - the underlying thinking behind your comments.
Mr. Grubel: Stick with the recommendations you've made.
Mr. Campbell: Listen, you talked about the period when there was this great accumulation of deficits by government. Between 1945 and 1975 debt to GDP declined in a very steady fashion. It was 138% of GDP in 1945. By the mid-1970s it was down to about 22% of GDP on a national accounts basis. It was a period in which there was great spending, in which the social infrastructure grew and was constructed, and it was a time of cumulatively balanced budgets.
It was only in the post-1975 period, with a number of circumstances we can't go into in detail...but one of the components of those was a reversion to a monetarist approach to dealing with inflation. That was the period from 1975 or 1980 to the present period of slow growth, a period of permanent recession, a period of deficits, a period of huge accumulation of debt.
.1645
So I would submit it was the resurgence of the orthodoxy you adhere to, the neoclassical orthodoxy, that is responsible. That thinking is responsible for the current malaise we're in.
Mr. Grubel: Could I ask you a quick question? Why did Canada, in spite of the wage and price controls imposed by Mr. Trudeau, not solve the inflation problem? Do you think the inflation problem was all part of a 19th century neoclassical conspiracy?
The Chairman: Just a second. I think I'm on your side now, Bruce, because the wage and price controls did solve the situation.
Mr. Grubel: Yes, but why were they abandoned, sir?
I've tried to understand what you're saying. For the audience, how should they have been controlled?
Mr. Campbell: It might be worth having a discussion about how best to deal with inflation other than through monetary policy. I think that's a discussion worth having. It's important to look at the experience of wage and price controls and income policies, what the successes were, what the failures were, as well as to look at other approaches to dealing with inflation. But when I compare inflation and unemployment, I see inflation as a relatively minor problem, certainly of the two.
I'd like to quote you something. I'll quote you part of something and then I'll ask you to guess who said it. It's not necessarily the case that I subscribe to this; I'll preface it that way.
- 5% unemployment with 10% inflation would be far preferable to 8% unemployment with 3%
inflation, and 2% unemployment with 20% inflation would be still better, from the standpoint
of the results in terms of human welfare.
Mr. Grubel: He didn't get it for his macro-economics, that's for sure.
In economics it is so easy to cook up theory. We know this. Therefore I would like to suggest we look at empirical evidence. Would you please tell me why, of the dozens of industrialized countries around the world that suffered inflation during the 1970s, not one of them, not even Sweden, solved its inflation problem through wage and price controls?
Can you tell me why in the 1970s we had accelerating inflation and accelerating unemployment? Do you have any explanations of this for the people who would like to believe all we have to do is go over to the Bank of Canada, replace them with directors like you, and all the problems of Canada would be okay?
Mr. Grant: Let me jump in to address a few of your specifics. First of all, on the question of which policies worked and which policies didn't work, during the period from 1945 to 1965 we had both monetary and fiscal policy working together in the same direction and we had an unprecedented period of growth, full employment, rising prosperity, and fair distribution of income. A rising boat, as we've heard, solves an awful lot of problems.
I'll get to your inflation question in a second, but where we went wrong was in the 1970s we went through a number of experiments with how to fight inflation. The one we finally settled on was.... Well, it wasn't settled on. We went through a muddy period, when we had fiscal and monetary policy working at cross-purposes to each other. We had loose fiscal policy trying to stimulate, particularly under Reagan with his tax cuts, at the same time as we had the U.S. Federal Reserve and the Bank of Canada trying to take that money back out of the economy through tight monetary policy. That was the worst of both worlds, because we had neither the benefits of the stimulatory fiscal policy nor of the monetary policy except by putting ourselves through a severe recession, again in the early 1990s.
.1650
The result of those policies working at cross-purposes was the debt and deficit that we have today. I don't think this is a controversial statement.
As for your question about what caused the inflation and what else could have been done about it, the inflation was caused by a bunch of things. It was caused by the financing of the Vietnam War. Without them trying to take money back out of the economy, the U.S. economy got overheated. It was accelerated by the oil price shocks of the early 1970s, and eventually we got into a spiral, with people trying to catch up.
It was certainly the adjustment to the huge energy price increases. As we know, energy works its way into the cost of everything. Once energy went up, people started putting up the prices of anything that included transportation or that was based on petrochemicals. As those prices went up, naturally they were chased.
As far as what slowed down the inflation, Canada in fact started to play with money policies again in the 1970s. Canada adopted the monetarist approach before the States did and tried to target money supply growth. It wasn't working. Inflation was rising while we were trying monetarism. When the wage and price controls were brought in, inflation dropped. Then the wage and price controls were dropped and extreme monetarism was brought in. Interest rates were jacked way up and inflation actually went up even further, to the point where the economy just couldn't bear the tight monetary policy any more and we collapsed into recession.
In fact, what triggered the recession in the States was that they finally brought in some other policies, such as credit controls. But by then we were in such a speculative frenzy that when the credit controls were brought in they just sent everything tumbling down.
The second part of my brief, which I didn't get to, describes some alternative inflation-fighting measures. The point I was going to make is that without an awful lot of changes, we can probably get employment down into the 7% to 7.5% range. But it is possible to get unemployment down even further, down into the 3% to 4% range. It requires a much more radical set of policies, including, as Bruce has suggested, Bank of Canada funding of infrastructure. It does require a serious look at inflation control, though, because if you get unemployment down into that range without other measures to control inflation, we would have inflation. Personally, I don't advocate -
Mr. Grubel: What are these controls, please? What are these direct measures? Would you please tell us? Do you mean wage and price controls?
Mr. Grant: No. That would be as a very last resort. Here are a few examples.
Give the Bank of Canada the power to regulate down payments and amortization periods for home mortgages. If we have southern Ontario real estate taking off like we did in the late 1980s, and yet the rest of the economy wasn't really overheated.... Instead of increasing the interest rate, just increase the amortization period and/or the down payment required. It has the same effect on the monthly payments for the people buying the houses. It would tend to cool off the real estate market, but it wouldn't affect the rest of the economy. It wouldn't hammer the rest of the economy.
Mr. Grubel: But the rest of the economy is having a big inflation. Labour settlements are 15% to 20% and inflation is 15% to 20%. How would you solve this? I would really love to hear your story.
Mr. Grant: I wouldn't let it get to that point. There are all sorts -
Mr. Grubel: Let's assume for a moment.... We were into double-digit inflation in the 1970s. How would you have done it?
Mr. Grant: I advocate very finely targeted inflation-fighting measures. If you get price increases, first of all you have to figure out what is causing those price increases. Instead of trying to hit it back down by dampening the whole economy, take a look at the cause of the inflation and put in.... I've submitted a whole list of suggestions to this committee for fighting inflation, but apparently none of you have seen it. It's a very -
Mr. Grubel: Mr. Chairman, I think this can go on for a long time, and that's not fair to everyone here.
The Chairman: No.
Mr. Grubel: I just want to say one thing. If you ever want to enter into the 1990s, I urge you to read what mainstream economists have to say about the causes of the high unemployment rate in Europe and in Canada relative to the United States. The OECD looked carefully at the differences in these countries. The OECD explanation is that it lies in the distortions and the barriers to adjustment that governments have imposed in labour markets. If you want to get a lower unemployment rate, it will not be costless, but you should really try to enter that century that is talking about those things.
.1655
Historically, if you look back to 1900, the unemployment rate was determined by the relationship between the productivity of labour and the cost of labour. In the immediate post-war years, labour costs remained low, productivity rose rapidly as we increased our output and we had economies of scale. That is why unemployment was low. If in turn you have wages going up and overshooting productivity increases, you have unemployment. If you run annual regressions on that from 1900 to 1990, you get a correlation of 0.9 on exactly that kind of...including explaining the recession.
Thank you very much, Mr. Chairman.
The Chairman: Thank you, Mr. Grubel.
Ms Whelan, please.
Ms Whelan (Essex - Windsor): Thank you, Mr. Chairman.
I want to pick up on a comment made by Mr. Grant early on and ask some of the other witnesses if they care to comment on it. He commented on the fact that the Minister of Finance has said he's going to make his deficit targets come hell or high water.
I guess my question is directed to the Health Action Lobby. If we are under target again, are you suggesting we meet our deficit target of zero quicker - which is the line this government seems to be on - or would you suggest we just keep the course and use those extra dollars to put back into program spending?
Ms Jeans: Certainly some of the provinces have done just that: where they have met their deficit more quickly than they had originally planned, they have reinvested in health. In fact I think right now about four provinces are looking at that.
In the long run there's no point in meeting the deficit if we end up with an entire generation of unhealthy Canadians who are only going to be an enormous drain on the country's budget in many ways, not just in health.
What we're saying is the cuts have gone too far in health, and we want the cuts to stop now. We want to see a commitment to the health of Canadians.
I don't know if Ms Sholzberg-Gray would like to add to that.
Ms Sharon Sholzberg-Gray (Co-Chair, Health Action Lobby (HEAL)): I'd just like to say we're pleased the government is committed to a cash floor in the year 2000. What we're more than slightly unhappy about is the fact that the years 1996 to 2000 have to take place, and enormous cuts are taking place as we sit here.
The issue is what's going to be left in the year 2000, as these cuts unfold against the backdrop of an increasing population in this country - that is, more people to take care of - an increasing elderly population, increased health needs if we have the high unemployment rates we have and the fact that we're a country that's trying to grapple with changes to our health care system. We want to make all kinds of shifts in the system, and the replacement services aren't sitting there waiting while the cuts are taking place on another side.
Perhaps the government could look at reinvesting some of the money, as it's ahead of its targets, in order to ensure that when we have a floor in the year 2000, it won't be too late.
Ms Whelan: Thank you.
The Chairman: Thank you very much, Ms Whelan.
Ms Brushett.
Mrs. Brushett (Cumberland - Colchester): I have a couple of questions, Mr. Chairman.
Thank you. This has certainly been very interesting.
The Chairman: One question.
Mrs. Brushett: One only? Then I'll direct it to.... Her Worship has since left us, but her associate is taking her place.
Municipalities have long complained about the grants in lieu of taxes in our municipal systems. As I understand, the way in which the granting mechanisms work is that the grant is significantly low because the building or the real estate is appraised very low. If you were to go to a tax system, would you accept the appraised value brought in by the appraiser from the territory or area where the property was?
How would you advocate we change that system? I know it's been on the books for a long time.
.1700
Ms Peggy Schenk (Coordinator, Governmental and External Relations, City of Ottawa): I'm sorry, I'm not able to respond to that question. I can get an answer back to you tomorrow, if that would help.
Mrs. Brushett: You are not aware whether the FCM has discussed any mechanisms by which they would recommend this?
Ms Schenk: I know the city is involved in the FCM and their work with this whole process, but I can't tell you what our position is on that.
The Chairman: Mrs. Brushett, your first question is so good you may have another.
Mrs. Brushett: Thank you, Mr. Chairman.
I won't get back into this discussion, but I'd like to have another go at it. I just want to say how much we'll miss Herb Grubel if he's not in our finance committee to share these very interesting discussions.
I'd like to come back to the Public Service Alliance. It brought to our attention the fact that perhaps we are duplicating by special agencies and doing things that are maybe even premature without evaluating what we're doing at the existing time. Something that was brought to my attention just recently by some farmers was the fact that with our special food inspection agency we will be inspecting garden-grown tomatoes under Health Canada and Agriculture Canada and we will inspect biotechnology-grown tomatoes under the special agency. So we'll be sending tomatoes in two different directions. Has this been evaluated within the public service? Do we know we are gaining efficiency there and what some of my farmers are telling me may not be absolutely true?
Mr. McIntosh: Certainly this is one of the points of our submission. Any alternative service delivery model, such as the food inspection agency, must be very carefully evaluated to ensure we don't have those kinds of inefficiencies. Our concern is that the government, certainly under the advice of senior bureaucrats, has embarked on a policy of creating agencies that reflect a kind of flavour-of-the-month approach to organizing government. Surely we owe employees, we owe the citizens we're serving, the time to study very carefully the way we provide services to the public, to ensure it's done efficiently. We just feel this move towards various agencies without careful thought is going to cause us a lot of problems, and you've identified exactly one of those concerns. If we can engage employees there now in a dialogue about how we go about delivering our services, I think we'll be much better served.
By the way, we're the Professional Institute. Our sister union is the Public Service Alliance.
Mrs. Brushett: My chairman here got me confused when he gave me a second chance.
The Chairman: Thank you, Mrs. Brushett.
[Translation]
Mr. Fillion.
Mr. Fillion: The HEAL people are bringing us back to reality when they say that we have been taking 30 billion dollars out of the system over several years. That is why there are less health care services accessible to Canadians. We have also been told that the Canadian transfer, which amounts to 2.5 billion dollars, doesn't help either. Therefore, we realize that certain sums have gone out of the system, but that other moneys are coming back to it, for example through the low interest rate and the Employment Insurance Fund.
My question goes to Mr. McCambly, of the Canadian Labour Federation. You have said in your presentation that the government should stop focusing on the deficit. Could you elaborate on that? You have also suggested many solutions to create jobs; I have noted four or five more. You were saying, however, that it would be shortsighted to use the 5 billion dollars surplus from the Employment Insurance Fund.
.1705
Are you saying that that money should be used only for labour training or be reinvested in job creation?
[English]
Mr. McCambly: First of all, about not paying attention to the deficit or debt, I don't want to suggest they are not important. I would say generally I think we have been quite supportive of the speed of action the government has taken on deficit control.
When I said it's not something to be worrying about too much now, I meant the biggest problem with debt and getting down to deficit control is the cost of debt service. If you can reduce the cost of the debt, that's a hell of an advantage. In time now, if the interest rates can be kept low, that's your biggest ally. When that's happening it will keep you ahead of the targets quite easily.
So what happens with the savings that are there? The real savings will come when the deficit is under control and you start reducing debt. That will be in time.
The issue of the EI account, which has been taken into general revenue, is slightly different. Bear in mind that the money collected in EI is greater than in GST. It's really huge. The substantial reduction of the ability to qualify is what is generating the surplus.
I said the $5 billion is probably justifiable. We could support it if it were committed to a rainy day for workers' assistance. But there is additional money, which could be used for other purposes, and they are looking at that going up to $9 billion, or maybe even more, over the next year or so.
The move of the federal government to get out of funding training, particularly apprenticeship training - I might say I sit as the national labour co-chair of the apprenticeship committee - is something that disturbs me, because I see a lot of occupations that could have been taken into an apprenticeship type of training situation and expanded. Just a week ago here in Ottawa there were lists of people who were needed in the high-tech area for kinds of classifications for which there is.... There's some university training, there's some college training, but they are not targeted or focused. Some of that could be apprenticeship-type training.
So we don't have a problem with focusing money that's in the EI system on training, provided it's targeted on jobs that are real, that exist, and where training is needed and not wasted.
Does that answer your question, sir?
[Translation]
Mr. Fillion: You have answered part of my question. As a secondary question, I would like to ask you if you are opposed to using the Employment Insurance Fund surplus to encourage labour training or job creation. All the witnesses here have told us that we are cutting too much in the health care system and not investing enough in research and development.
Where is the government going to get the money for creating jobs as you are suggesting? I kind of remember hearing you suggest a special tax on gasoline. Do you recommend that to the government? Jobs are not created without money.
[English]
Mr. McCambly: I didn't say an additional tax on gasoline. I said there's already a tax, and maybe part of that could be focused on infrastructure repair or upgrading.
When we talk about a surplus in the EI account, we said if a $5 billion reserve is put away, as is already indicated by previous budgets, we support it. If we're talking about a surplus beyond that, we're saying it has gone too far. That should be put back in the hands of people who are destitute now and cannot qualify for any unemployment benefits; people who really deserve them and who paid the premiums in the first place.
It's our view that the government is exceeding its mandate or role to govern that fund by simply allowing it to increase without giving some of that money back.
.1710
I want to point out one thing. The Canadian Labour Market and Productivity Centre, with the Canadian Chamber of Commerce, the Manufacturers' Association, the BCNI, the Canadian Labour Congress, and the Canadian Federation of Labour, gave a position and proposition to the government saying that fund, those moneys, ought really to be trusteed, in the sense of guiding the government on what they should be spent for, by the people paying the premiums, namely workers and the employer associations. I still hold with that, and I think it's long overdue that it should be done.
The Chairman: Mr. Benoit.
Mr. Benoit (Vegreville): Thank you, Mr. Chairman. I'd like to pursue the line of questioning started by Ms Whelan and aimed at Sharon Sholzberg-Gray. It has to do with health care.
I understand your concern about this government cutting $6 billion to $7 billion in transfer payments to the provinces for health care, education, and welfare. It should never have happened. But in my question I'd like to build around the comment - I think it was part of your answer - where you indicated that if the Liberal government is doing better than its targets, which were pretty much picked out of the air, we should be putting some of the money back into health care right away.
My concern is that in 1993 the Reform campaigned on a zero-and-three plan, a plan to balance the budget in three years. Had the Liberals implemented that plan, which was a very sound plan, right now, today, we would be debating what to do with the surplus. Should we be reinvesting part of the surplus back into health care? Should we be paying the debt down faster? Should we be giving a tax break? Should it be a combination of the three? That's what we would be debating today, had this government implemented our zero-and-three plan.
That's why I'm concerned when we start talking about increasing spending before the deficit has been eliminated. As long as you continue to add to the debt, interest payments on the debt increase. We have interest payments on the debt that are taking close to $50 billion away from useful spending because the job hasn't been done.
I would like to ask Sharon to balance this and then comment on exactly how she thinks the job should be done.
Ms Sholzberg-Gray: We're going to be presenting precise figures, or more precise ones, in about ten days.
The position of the Health Action Lobby has always been to try to make constructive recommendations in the context of a responsible fiscal framework. We think it might well be the government went too far. It might well also be it's not really going to achieve lower overall health spending by cutting the amount of money that's going into the government side of spending.
For instance, in the health care sector, if the government spends less, the private sector is spending more, and that's a very uncontrolled growth. We might find out we have much more than 9% of the GDP spent on health. Of course that's ultimately going to be borne by consumers, because the private sector is going to pass it on to consumers and all Canadians are going to have to pay more for health care anyway.
So cutting government spending on health care might not ultimately save the economy anything. We know that by looking at the United States, where they spend almost 15% of their GDP on health care.
What we're really saying is that in the past we accepted a certain amount of cuts. We're saying the cuts have perhaps gone too far. We need to take another look. We're having problems. We see the effects of those cuts. They're not exactly very pretty out there. A lot of Canadians have expressed concern because they've seen the effects of the cuts.
We think it's good economics to have a proper level of government spending on health care. It makes us more economically competitive. The Conference Board of Canada has said so.
We have to have the proper balance. We may have gone just a little overboard in some of the cuts we made. We're asking the government to take another look and see about reinvesting in health care, not only because it makes good health sense but because it makes good economic sense.
Mr. Benoit: Should the government have directed its spending cuts to different areas, as we have in our plan? We've proposed cutting some spending from economic development. We've proposed cutting federal government spending on multiculturalism programs, on official bilingualism, and so on. We've listed where we think the cuts should be made.
Health care wasn't one of the areas we said should be cut. In fact, of course, in our fresh start program we are proposing to put $4 billion back in to help compensate for the $6 billion to $7 billion cut in transfer payments made by this Liberal government.
.1715
Ms Sholzberg-Gray: I wouldn't want to address the issues of multiculturalism and bilingualism because I don't think the amount of money there is really significant compared to the health care dollars.
But you all know the amount of money the federal government transfers to the provinces goes to the consolidated revenue funds of the provinces in one big amount. The provinces don't have all kinds of different bank accounts. If you have a net decline in transfers to the provinces, which I understand your programs cumulatively add up to....
So because you want to reduce equalization and you want to reduce payments that would have been transferred under the former CAP, but you want to increase health, there would still - from what I read in the newspaper - be a net decrease in transfers to the provinces, which really won't help the provinces in their efforts to balance their budgets and deliver health care. I think trying to do that isn't going to achieve your objective either, unless you track every dollar along the way, which I think we stopped doing almost twenty years ago and isn't going to work anyway.
Mr. Benoit: In fact, our plan actually increases transfer payments to the provinces for health, education and welfare combined -
Ms Sholzberg-Gray: Yes, I know, but it subtracts -
Mr. Benoit: Increases.
Ms Sholzberg-Gray: - it for equalization, as far as I can recall, which would still result in a net decrease. But I don't want to get into that debate. I'm just saying -
The Chairman: But you just did, and very well too.
Some hon. members: Oh, oh!
The Chairman: Thank you very much, Mr. Benoit.
Mr. Pillitteri.
Mr. Pillitteri (Niagara Falls): Thank you, Mr. Chairman.
Mr. Grant, I took great exception...in following your presentation.... If I would have known as much in the mid-1970s as I know about financing today, I would be a very rich man. As a businessman I was trying to follow the ups and downs in the market, but somewhere along the line I was missing them.
A little while ago the Governor of the Bank of Canada came before the committee. I asked him a specific question about the Bank of Canada to hold.... Could municipalities, let's say, borrow from the Bank of Canada? Would that have done any good? Actually the response was almost that the Bank of Canada is trading money. If we take a look at the changes that occurred in 1991 to the Bank Act, as you say, there was very little credibility left as far as the Bank of Canada being able to stabilize the monetary flows within the country.
Also, the target of this government is not direct job creation. The target is to create the environment in which the private business sector can create jobs. Yes, they have set a target of between 1% and 3% inflation, and for the last eighteen consecutive months there's been a decline in the bank rate. It's down to 5.35%. Yet inflation has not moved from that 1% or close to 0%. It really has not moved. Given all of the stimulus, the ability for businesses to create jobs....
Would you elaborate on how we could be creating jobs indirectly, rather than directly, as you stated, where the government would be involved? You're saying that government could get fully involved in creating jobs.
Mr. Grant: First of all, just to let you know where I'm coming from, I'm a private businessman. I dearly wish that the government's strategy works. I'm about to put a housing project on the market in the spring, and I sure as hell hope the market's there. I'm afraid that the fiscal cuts are going to keep people on the sidelines, that they'll just be afraid to borrow and spend.
Low interest rates will stimulate spending only if people are prepared to take on additional debt. As we all know, both businesses and consumers are already up to here in debt. We're advocating a relatively small stimulus just to turn the psychology around. All we need is a little bit of movement downward in the unemployment figures. I think you'll find that makes the difference between people having a negative psychology or a positive psychology.
Once you have that initial stimulus just to get the psychology going in the right way, I think you'll find that the private sector does pick up.
.1720
The key here is consumer spending. Businesses are willing to invest and take advantage of any opportunity that you see in the market. It's not so much whether business is willing to spend, it's that business is waiting to see some demand on the consumer side.
I'm not talking about the government creating all the new jobs. I'm talking about the government putting a bit of money back into the system, which will get the confidence going and just get that jobless rate headed down a little bit. Then the economy will take over and the private sector will do the rest.
Mr. Pillitteri: Just as a follow-up to that, having always been a businessman and having travelled across other parts of the world, I have found that in Canada we really have one of the lowest costs of living.
I go to Europe, where hotel rooms are twice the price and the cost of living is incredible, compared to Canada. I live in Niagara Falls, an area where there is an immense amount of tourism, especially in the last couple of years. The outsiders coming into Canada are buying up any possible real estate.
If Canadians had the same belief in Canada that these outsiders have, maybe we would be a lot better off. All of this doom and gloom about our economy not picking up is mostly internal. It's borne by us, by the fear of putting onto people.... I think we should have more stimulus within, enticing people to invest in our beautiful country.
It is perhaps business that has to get on with the job of being international. I think it still has a tendency to be a a little too parochial, and I hope this changes. But certainly government creating the environment...it is the people. I surely hope this changes, but not by direct government spending.
The Chairman: Mr. Pillitteri, thank you very much.
Lastly, Mr. Solberg.
Mr. Solberg (Medicine Hat): Thank you, Mr. Chairman. I have a question for Mr. McPhee.
I am somewhat sympathetic to what you've said. I had a similar complaint in my own riding, from a fitness club that is competing directly with the Y. The Y receives federal grants and perhaps even provincial grants - I really don't know. My question is, where do you draw the line?
It's not just a question of direct grants; it's also organizations like tennis clubs and those sorts of associations who have charitable status and don't pay any tax. Where do you draw the line? How far can you go before you start to cut out all these little groups that do a lot of good and at the same time preserve a sector like yours?
Mr. McPhee: We'd like to draw the line with - to coin the phrase, it's a little corny - the ``cheap and cheerful''. If you think of the abundance of public outdoor tennis courts - nobody in the outdoor tennis business has a problem with that. Kids play there, and it's a cheap way of providing a great sport.
But when municipalities begin putting up tennis bubbles that cost $200,000 and housing indoor tennis facilities, which is a very expensive enterprise, and taking members from a sport already indicating less participation, and it hurts a private operator already in that business, that's where we draw the line.
Let's face it. If an isolated community decided to put up a tennis bubble and there was no private operator there, that would be valid. You have to look at it case by case. There are situations where nobody would argue with an indoor tennis facility, but very often they appear in areas that are already well served by the private market.
Mr. Solberg: So there are grey areas, but you're saying direct federal grants in areas where there is already lots of competition - sports clubs, for instance - are out of line.
.1725
Mr. McPhee: We think it's out of line, because fitness comes in many ways. It doesn't have to come as an $8,000 treadmill when a skipping rope does the same thing. So we're saying if you're using tax dollars, there's a great.... In Mississauga the parks and recreation department told me I didn't have to worry about their taking our members any more, because they were raising their fees to pay for this expensive stuff. I asked, well, who is serving the lower-income market; who is getting those people, the sedentary people, moving; don't you have an obligation to do so? I'm not trying to monopolize the fitness market, but if we don't have the opportunity to serve the upscale market, what opportunities do we have?
Mr. Solberg: Would it make more sense to subsidize low-income people directly and provide them with membership in a local club instead of paying $8,000 for a machine when there are already a whole bunch of machines in the community?
Mr. McPhee: Our preference would be to have them served with cheaper equipment and be very creative with their programming, mall-walking programs, and outdoor fitness classes, keeping it focused on programs as opposed to equipment. Then those people, once they get a job, may say they want more sophisticated equipment. Then the parks and recreation clubs will be what they tend to say they are now, though they are not: feeder systems to the private system.
The Chairman: We've come to the end of the time for a very interesting round table. Perhaps I could ask each one of you to summarize in no more than thirty seconds what you would like us to take away.
Why do you laugh when I say that? Is it impossible? It could be.
Before we do that, does anybody feel they have not had adequate time to put their case before us and they would like to take a minute or two to do so?
In that case, perhaps we could start with you, Mr. Campbell.
Mr. Campbell: Paul Martin has said the reason interest rates are down is that he has the deficit under control. If that's the case, when the U.S. Federal Reserve rate goes up, or if unemployment goes down below 9% or 8%, then I would not expect Mr. Martin to use that logic to tighten monetary policy, based on his logic. That's an important message I want to get out.
The other important message, one I've stated before, is on the spending side. I think the time has come to stop the cuts, to reverse them, and to look at ways in which public investment projects can be put into place to get things moving.
The Chairman: Jordan Grant.
Mr. Grant: In the very short term, I'd say what's achievable through this budget is to get your unemployment rate down to 9%. The way to do that is to stick to your deficit target come hell or high water. Don't undershoot the deficit.
In the medium term you could start to put a bit of funding into research and discussion and debate on alternative methods of inflation control, and also fund some research, debate, and discussion on CPI measurement and this so-called NAIRU.
I'd also be pleased to participate in a debate with Mr. Grubel or a discussion with other experts on these topics in front of this committee.
The Chairman: Ms Willems, please.
Ms Willems: I find it uplifting to hear that since we are meeting our targets we may be redirecting some moneys to health. I would strongly recommend to start with you look at what we've proposed, but also look at the fact that by trying to reduce the deficit at all costs you are creating a human deficit in the process. We really need to take that seriously.
The Chairman: Representing Her Worship Mayor Holzman, Peggy Schenk. Thank you for joining us.
Ms Schenk: I guess the thing I'd like to touch on is just the impact of the federal government on the city of Ottawa. Any actions that happen have a major impact on our city, and specifically the four issues the mayor touched on: the issue of grants in lieu of taxes, office accommodation, the potential for economic development agreements, and the importance of community consultation.
.1730
The Chairman: Dr. Mary Ellen Jeans, let me congratulate you on having recently been appointed the executive director of the Canadian Nurses Association.
Ms Jeans: Thank you very much.
I'll ask Ms Sholzberg-Gray to give our final statement.
The Chairman: Thank you.
Ms Sholzberg-Gray: The 1997 federal budget has to send a strong signal to Canadians that the government really supports our health care system, not only after the year 2000, but right now and over the next three to four years. It's important that the Canada Health Act remain the cornerstone of Canadian social policy, and we have to keep reminding ourselves and everybody that it's also a cornerstone of Canadian economic policy, because it ensures our economic competitiveness.
The Health Action Lobby will continue to work on behalf of Canadians for a strong national health care system, one that covers the entire continuum of care and not just a narrow definition of care.
The Chairman: Thank you very much.
Mr. Bob McIntosh.
Mr. McIntosh: Thank you.
The message we would like to leave with the committee is that the structure of government and the structure of the public service certainly affects the ability of the government to deliver efficient and effective services to the public. The apparent fixation with the creation of agencies must be scrutinized very carefully from that perspective and also from the perspective of ensuring that employees are allowed to work in an environment where they can fulfil their potential.
I just have one other point I'd like to make, Mr. Chair, which you know is near and dear to my heart. Please do not legislate any more freezes or other conditions of employment. That is for the parties to negotiate. Don't let the managers off the hook and don't force this on employees.
The Chairman: Thank you, Mr. McIntosh.
Jim McCambly.
Mr. McCambly: We're very fortunate to be here today with interest rates dropping as they are, because if they were high, we'd have a hell of a lot more difficult problem. It gives you a little bit of flexibility to make a little bit of choice.
Part of that choice should be to accelerate deficit reduction, but the other part should be to stimulate the economy. As some other people have said, to the extent that we can put a little back into the economy to help get it rolling and to get consumer confidence and some jobs created - and the number one priority right now is employment creation - we've given three or four recommendations as to how employment might be improved.
Thank you.
The Chairman: Thanks, Mr. McCambly.
Lastly, Mr. McPhee.
Mr. McPhee: Thank you.
I just want to apologize for going over my time. I've been looking forward to this day for so long that I tried to pack too much information in.
The Chairman: You did wonderfully.
Mr. McPhee: Thank you.
The Chairman: You had us convinced within two minutes.
Mr. McPhee: For what it's worth, I agree with Mr. Grubel's economic policies. I'm not here to say that either, but I'm also not too proud to say that a tax handout....
We're here to recommend legislation that would tighten limitations on business and registered charities in order to collect taxes that are not being paid now, not just from YMCAs, but as you'll see in Mr. Bryden's report, from lots of industries. The implications mean billions of dollars for the government.
The Chairman: Thanks very much, Mr. McPhee.
We have heard a variety of opinions expressed today, but I think it's fair to say everybody feels we have to meet our deficit targets.
There are some people who suggest we might meet them in other ways and maybe be a little less stringent. There are people who have asked us to provide more funding for health care, and I appreciate that within ten days HEAL will be giving us the details of how we achieve that within the context of our deficit targets. That's very important to us.
We commend you for your monitoring role in the health care of Canadians.
The pharmacists presented us with a very interesting proposal whereby, with a small investment in starting up some important studies in conjunction with the industry, we might be able to foster even greater savings down the road in what is an increasingly costly aspect of health delivery.
.1735
To the Professional Institute of the Public Service, Bob McIntosh, last year and maybe even before that, it was your group that came to our committee and said: ``In these brutal lay-offs of 45,000 federal public servants, could you please, instead of dismissing a whole department, consider the concept of substitution?'' We went back and recommended that, and we believe in large measure that recommendation was adhered to. We thank you for that and the government thanks you for that. We will study your proposal this year.
Jordan Grant and Bruce Campbell, we appreciate your being here. We have heard some of these arguments in the past. I don't think we dismiss them out of hand. We look forward to reading your presentations to us. You were saying there are better ways we can get out of the mess we're in and that monetary policy is a contributing factor to the problems we have. All the people at the table echo the sentiments of Jim McCambly that our major problem today is unemployment, and you have suggested ways a monetary fix could cure that. I will always be looking for that way. In the past I haven't been able to find it through that particular route.
On behalf of all members, may I thank you all very much for being with us, some of you having returned for the second or third time.
We're scheduled to start a new round right now. I understand from the clerk that we are having a vote at 5:45 p.m. It's one vote, so that means we could be back here by 6 o'clock, hopefully. I apologize to you for this unforeseen messing up of your schedules, but if you'll bear with us, we look forward to hearing you as well.
Thank you very much on behalf of all members for having been with us.
The meeting is adjourned.