[Recorded by Electronic Apparatus]
Friday, November 8, 1996
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[English]
The Chairman: Could we come to order?
The finance committee of the House of Commons is very pleased to have its hearings today on the pre-budget discussions in Toronto.
We have a number of very important witnesses with us today. Could I suggest that you limit your opening remarks to three minutes? If that doesn't turn out to be sufficient, I can assure you that there will be ample opportunity afterwards to make the rest of your case, through the question and answer period or before we sum up.
I welcome you all and thank you for being with us. Our first witness is from the Canadian Council for Public-Private Partnerships, President Glenna Carr. Welcome Glenna. Would you like to start?
Ms Glenna Carr (President-Elect, Canadian Council for Public-Private Partnerships): Thank you, I'd be pleased to.
Good morning, ladies and gentlemen. I'm delighted to be here with you this morning. I have with me in the audience Cathy Boynton, who is the executive director of the council.
The council is delighted to have the opportunity to propose to the committee some ways in which the government's job creation efforts and fiscal objectives can be achieved.
The council is a non-partisan, non-profit organization representing a broad spectrum of government and private organizations from every region in this country. It was established about five years ago to foster cooperative approaches between the public and the private sectors to the financing and the delivery of public services and infrastructure.
Last year we outlined during the pre-budget consultation the necessity for governments to accelerate the pace of public-private partnership activities. Today we would like to propose a specific action plan by which this government can accomplish its objectives.
Our comments are based on a groundswell of public opinion in this country, which would like to see these kinds of public-private partnerships fostered. The council itself commissioned a national opinion poll, released earlier this year, that interviewed people at federal, provincial and municipal levels right across the country - both politicians and public servants. They indicated that they saw a real swell of such activity in the next two years. Seventy-seven percent said they saw public-private partnerships as a way of increasing the value of what they were doing, of reducing the size of governments, of creating a more responsive public service, and of cutting their operating costs.
The areas in which they saw these partnerships occurring were environment and energy, real estate, recreational activities, and transportation. They were less bullish about opportunities in criminal justice, in social services, in health, education and training.
They indicated to us in the interviews that we conducted that they were looking to the federal government and to provincial governments to provide a framework to encourage these kinds of public-private partnerships.
Our proposal today is that you should be looking to private investment in Canada's public services to help create jobs. It will allow projects to be initiated that, given the demands on the resources of governments, would not otherwise be possible, and it does offer you additional tax revenues as you move from public entities into the private sector.
Secondly, as private investment looks for a home, Canada needs to create the conditions that make investment in this country attractive, strengthening public services and national infrastructure at the same time.
Thirdly, a coherent national public-private partnership policy framework and strategy is essential to creating those conditions. We are leaving behind a written submission, Mr. Chairman, that outlines those features. Essentially I'd just like to speak to two core items.
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I have a chart with me that shows what we are recommending: establishing a partnerships minister and a partnerships secretariat that would recommend a policy framework for the federal government; would recommend selection criteria for selecting opportunities and developing a fair and equitable process; select candidate departments and agencies from among existing federal departments and programs; provide financing advice to select whether public or private or a combination of the two would be most appropriate. You are all aware of the P.E.I. fixed link and how that was funded. That is an example of public-private partnership. The secretariat would also allow for some stimulation and coordination of departmental initiatives.
We filled in one box on the chart - the Department of Transport, which has been a leader in the federal government in establishing these kinds of partnerships - but our organization would like to work with you directly and with the partnerships secretariat to establish other opportunities. We'd like to help fill in the rest of this chart with opportunities that are going to provide both jobs and a streamlined public service for the country.
We also have ideas on the drafting of legislation and regulatory reform, which would help facilitate the speedy implementation of such initiatives.
We have lots of models in this country and other jurisdictions: RADARSAT, the National Defence training centre, the national airport policy, and CN Rail, but they do seem to revolve primarily around the transportation area, and we'd like to see that broadened out.
Our council is willing to play a facilitating role, lending the experience and the expertise of our members. We do combine uniquely both the public and the private sector. We believe we're in a strong position to identify opportunities for partnerships, alternative service delivery and financing to our members. Thank you, Mr. Chairman.
The Chairman: Thank you very much, Glenna Carr.
Now, from the Brighter Futures CAPC Coalition for Etobicoke, Rick Kelly. Welcome.
Mr. Rick Kelly (Project Manager, Better Beginnings, Brighter Futures Community Action Program for Children (CAPC) Coalition for Etobicoke): Thank you.
Is this turned on? Yes, it is.
The Chairman: The real question is whether we are or not.
Mr. Kelly: Right.
I will just explain what a CAPC is. This is a child development initiative that was previously called the Brighter Futures initiative by the Conservative government under Brian Mulroney. It's a cross-sectoral response by the federal government to address childhood/youth issues in Canada. There are six departments involved, including Health Canada, Canadian Heritage, Human Resources, Justice Canada, RCMP and the Solicitor General, totalling 34 separate initiatives, with the bulk of them under the auspices of Health Canada.
The CDI was generated as Canada's response to the UN Convention on the Rights of the Child, and under Health Canada, CAPC is one of those programs.
The focus of that is to reduce low birthweight babies; to increase improved community resources for parents; to give families and communities the tools to assist and support at-risk children; to encourage organizations and governments that provide services for very young children to work together to provide culturally sensitive programs and services for at-risk children; and to help communities take part in planning and delivering services to at-risk young children.
What does this have to do with finances? We'll get to that point.
It seems that a number of current snapshots of our national economy would suggest a return to economic health: consistent lowering of the prime lending rate; an optimistic picture of corporate profits; a statement from Gordon Thiessen that says the economy may thrive; the ratio of the GDP to the deficit.
Yet at the same time we have a number of indicators that clearly tell us we have effectively de-linked economic health and social well-being. These would include the increasing numbers of individuals - and for the sake of my argument I would emphasize the large number of children, approximately 1.25 million, and that can be corrected - using food banks; the increasing numbers of homeless; and increasing levels of youth unemployment.
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On the other hand, there are other solid and well-researched bodies of information we have at hand. The Carnegie Corporation, in the 1994 report ``Starting Point: Meeting the Needs of Our Youngest Children'', states that:
- ...we can now say, with greater confidence than ever before, that the quality of young children's
environment and social experience has a decisive, long-lasting impact on their well-being and
ability to learn.
The ability to learn is the basis for innovation and creativity, let alone the ability to cope and to succeed in modern daily life. What we also know is that if early intervention and primary prevention programs are provided for all children, but especially those in disadvantaged neighbourhoods, where children and families live in conditions of risk, the cycle of disadvantage can be broken. Not only can the cycle be broken, but it can create some of those quality environments that can lead to success for all children. I would suggest, along with Dr. Mustard, that this ability to raise successful, healthy children will have an effect bearing on our ability to function effectively in the global economy.
The other aspect of this early intervention and primary prevention coin is that these forms of intervention are also cost-effective. Evidence from the Perry Preschool Project demonstrated that $1 invested wisely has a return on investment of $7, through the prevention of the need to provide more expensive remedial, rehabilitative, correctional, and family assistance measures at a later date.
However, we do not have to turn to the United States to find examples of such programs. In Ontario there's a province-wide 25-year longitudinal children's policy research program called Better Beginnings, which is yielding similar results in healthy children, reduced service costs, and increased social and economic benefits.
Nationally there is the CAPC: Community Action Program for Children. These programs use the same principles for early intervention and primary prevention, in the context of developing the capacity of communities to guide their own affairs. I must admit these are disadvantaged communities.
It is this latter program I would like to draw your attention to. In February 1995 this program had its funding cut by $35 million before any available research outcomes, essentially reducing the amount allocated by 50%. Clearly this was a financial decision, and I believe it once again reveals the delinking of economic concerns from those of social well-being. What this ultimately represents is a total cost of $245 million for the futures of our children in consequent systems costs, if we use the primary prevention formula.
Mr. Pettigrew, Minister for Human Resources, stated, as reported in The Globe and Mail, that he would like to address issues of childhood poverty but he's concerned he may not be prepared for the upcoming budget. I think I'm here on his behalf, and this is what I'm suggesting. First of all, restore the amount of money that was eliminated from this valuable children's research project.
However, I cannot leave my thoughts to simply this item. I would also suggest we utilize financial policies as a way to link both economic and social issues. Programs such as CAPC and Better Beginnings can at the same time be forms of economic development through the strategic placement of local wages. If one of the goals of the upcoming budget is to support and actively encourage job creation, then support these types of local community child health projects, which are immediate job creation efforts as well as opportunities for our future generations of a skilled labour force.
Use the capacity of financial policy to encourage corporations to direct their excess profits more readily to charitable contributions, so they can participate in the well-being of children at a community level.
Fund national child care programs, which are the vehicle by which many individuals and families are able to participate in the local economy.
The Chairman: Thanks very much, Mr. Kelly.
From the Mount Sinai Hospital Foundation, Nicholas Offord.
Mr. Nicholas Offord (President, Mount Sinai Hospital Foundation): Thank you,Mr. Chairman. It's a pleasure to be here to talk to you this morning about the challenges faced by the charitable sector.
Mount Sinai Hospital, like many other institutions and organizations across the country, has felt the austerity programs of both federal and provincial governments directly over the last two or three years and will continue to do so for the foreseeable future.
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For my own institution, annual cutbacks of 8% or 9% a year cannot be accommodated for simply with growth and charitable giving, which, at our institution, has been 4% or 5%. I understand that is somewhat ahead of the national average of 3% or 4% reported in recent days by Statistics Canada.
It's also true that the cutbacks are making us rethink the way we do business. We are becoming more efficient and more effective in many of the ways we deliver our services, but the reality is that in hospitals across Canada, patient services are beginning to suffer. Changes in the hospital system cannot begin to keep up with the pace at which the cutbacks are occurring. This is true in all other charitable sectors.
The greatest implication for all of us in the charitable sector is that the role of government in providing essential services is changing considerably. It is in this context that we have a unique opportunity to change the way in which Canadians perceive the role of government and indeed the role of philanthropy and volunteerism in meeting the needs of their communities.
Mr. Chairman, over the last few months, the charitable incentives review task force, which consists of a national coalition of charitable organizations, has begun a nationwide consultation process with finance officials to look at various options for improving the tax environment. This would create an improved climate that would encourage people to support community organizations and institutions.
Thirty-three proposals have been considered, and I'll talk about a number of these initiatives later on today. They're basically designed to achieve four objectives.
First, they are designed to encourage corporate donations. In 1995, according to finance department figures, fewer than 5% of corporations reported charitable giving.
The second recommendation is to encourage endowment building so that charities can provide a solid financial footing rather than relying on annual handouts from the government or indeed on annual cash infusions from the community.
Third, we want to encourage larger gifts by wealthy Canadians.
Fourth, we want to create an environment that encourages all Canadians to give more.
Much has been made about the possibility of a tax cut in the upcoming budget. We would prefer that the government instead consider allowing the opportunity for Canadians to choose a tax cut by choosing to support their community organizations and charities in a very direct way.
Thank you, Mr. Chairman.
The Chairman: Thank you very much, Mr. Offord. Congratulations on your timing.
From Different Products and MORGIJ2 Software -
Mr. Ron Cirotto (Mortgage Consultant, Mortgage Commentator and Financial Software Developer, Different Products and MORGIJ2 Software): MORGIJ2 - Mortgage 2.
The Chairman: You spell it funny....
Mr. Cirotto: That's the phonetic spelling. If we - and our children - would have been taught phonetics properly, we would all recognize that.
We won't get into that topic.
The Chairman: That's a provincial matter. We'll stay out of that.
Some hon. members: Oh, oh!
Mr. Cirotto: Thank you, Mr. Chairman, and good morning.
Good morning, committee members. First of all, I'd like to thank you for allowing me to speak today on a topic that I feel is of great importance to the Canadian consumer.
As the chairman just said, my name is Ron Cirotto and I'm the software developer of a mortgage analysis program that has been used and is still being used by all of the major lenders in Canada - since 1984, I might add. In fact, most Ontario real estate lawyers refer to my software package as the de facto standard in the industry.
That's the end of my commercial.
The topic that I want to present to you today is disclosure of interest rates and interest costs. Canadians enjoy one of the best financial systems in the world because we continually work at improving the system. Nothing is perfect. I'm giving credit, but I'm also constructively criticizing the system.
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The changes - and I'm referring to Bill C-19 - to the 1992 legislation were a small step in the right direction. However, as I just said, there is still room for a lot of improvement.
The improvements to the legislation, and I want to underline this and emphasize it, must be written in simple language and simple sentences. This would enable all Canadians, not just real estate lawyers, financial wizards and financial planners.... We're talking about the average Canadian who needs to understand financial matters. It has to be simple. It has to be the KISS method. This would enable all Canadians to understand interest costs and interest rates.
Wherever possible, numerical examples must accompany the written law in order to avoid confusion. Mathematics is not an ambiguous language. Two times two is four now, the same way two times two was equal to four in 450 B.C. when Nehemiah, the governor of Jerusalem, revised the mortgage laws. There is nothing new under the sun when it comes to mortgages. This has been around a long time and yet we've allowed it to become a very complicated issue with that infamous Interest Act or ``an act respecting interest''. That is mumbo-jumbo and jargon and it confuses people, especially real estate lawyers.
The three main areas where I feel disclosure is of vital importance are the following. First, all lenders should provide amortization schedules, displaying on them at least the annual interest rate along with the effective interest rate - and you need to know the effective interest rate.
There are at least two major Canadian lenders that are gouging the Canadian public out of millions of dollars because the effective interest rate does not legally have to be displayed on the amortization schedule, which they will reluctantly give you if you ask for it. That's point number one, and I made it point number one because it's very important. I can back up my claims with numbers, because I've talked to at least ten lawyers a day for the last decade. I've seen this happen over and over again.
Here's my second point, and the Hon. Paul Martin is aware of this. I have personally sent him many letters about this since the introduction of the interest rate differential in 1984 when it died on the floor of the House of Commons. Point number two is that you must provide standard interest rate differential calculations based upon present value and future value calculations. This is not rocket science. Any good actuary or any good accountant can do and understand present value and future value calculations.
There is nothing mystical or magical or complicated about doing an interest rate differential calculation, and I think government has a responsibility to force all lenders. Get over this provincial-federal jurisdiction dilemma. That's paperwork and laws. The bottom line is to get it done.
Third, provide a standard disclosure method showing interest costs for mortgages or loans that are referred to as ``blend and extend''. And that is a topic all unto itself.
Those are my three points. Thank you for letting me voice my opinion.
The Chairman: Thank you very much.
Next we will hear from Mark Daniels, president of the Canadian Life and Health Insurance Association.
Mr. Mark Daniels (President, Canadian Life and Health Insurance Association): Good morning. Thank you, Mr. Chairman. I want to say in particular how much I appreciate the opportunity to appear in this forum. Also -
[Translation]
The Chairman: I'm sorry. Mr. Mark Daniels is representing the Canadian Life and Health Insurance Association.
[English]
Mr. Daniels: Mr. Chairman, I'll just say thank you for allowing my colleagues and I this opportunity, and also, I must say, the opportunity to hear the presentations of others. I think that speaks very much to the importance of this forum.
I want to make two points very briefly, the first on overall fiscal management. In terms of overall fiscal posture, the federal government deserves high marks for reducing the annual budgetary deficit over the past year to the point where it's now one of the lowest in the G-7 countries. We strongly support the government's broad plan of action for fiscal restraint aimed at restoring the financial health of the country.
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Mr. Chairman, I have to be very mindful, especially around this table, when listening toMr. Kelly's remarks and I'm sure those of others here, of the kinds of demands that face parliamentarians - legitimate demands for resources - and how difficult it is to stay the kind of course on which the government has set itself over the last couple of years. But I need to make it clear that in counselling very much a stay-the-course posture, as we are doing here, we are very mindful that it is not a simple act for the government or indeed for members of Parliament.
Secondly, Mr. Chairman, by way of a brief project report on the matter of supplementary health and dental plans, which is really an issue that this committee brought to our attention, along with others, a couple of years ago when you and the Minister of Finance both raised the concern that there might be a large group of Canadians, up to eight million or nine million, who did not have supplementary health and dental protection because they could not benefit from current tax treatment, frankly, because of your initiative, a number of organizations, mine included, got busy and took a hard look at the numbers. You may recall that last year we reported here that for the first time we had a pretty good handle on just what the extent of coverage was. It turned out that, roughly speaking, about 25 million Canadians, 88% of the population, were actually covered by supplementary health and dental plans, 20 million of those by the companies I represent and the balance by special government programs aimed at the elderly or perhaps low-income persons. But that left 3.6 million people who weren't covered, and the question was, who are these people and what can we do about it?
We were able to identify that group a year ago. We saw it made up of three parts. The first was about two million individuals, a group that consisted of employees, and their dependents, in workplaces that could but don't currently provide a supplementary plan. So for whatever reasons, but not tax factors, these people weren't currently on supplementary plans.
The second group of about one million people, consisting of unincorporated, self-employed individuals and their families, could in fact not use the current tax laws. Unlike incorporated small business, the unincorporated could not.
The third group of about 600,000 people simply fell through the cracks. These were disenfranchised for all intents and purposes. They had no attachment to the workplace, and they weren't being picked up either by government programs aimed at the elderly or welfare people. Changes to tax treatment for them of employer contributions to private supplementary plans, or indeed even the scope of some government plans, would not necessarily pick these people up.
The question we had to address was, what can we do about these three groups? We put our attention over the last year on the first two groups, about three million people. I can say that we and the Canadian Federation of Independent Business have had an active program going for the last year, and we have, I think, managed to identify the kinds of problems we have in reaching out to these existing groups. We've put a program in place with three initiatives: one, to obtain more extensive and precise information on the factors contributing to lower coverage among small business; two, to increase awareness and information on products; and three, to target our insurers themselves to make sure they reach out to these communities in a better way. I'm pleased to say we're proceeding apace, and I hope we can report some real progress the next time around.
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The Chairman: Will you have a program in place for these three million Canadians shortly?
Mr. Daniels: Again with respect to the time, I could talk a bit about the details of who these people are and how we're reaching out to them.
The Chairman: We'll come back to that then.
Mr. Daniels: Surely.
The Chairman: Thank you very much.
From the Canadian Professional Sales Association, Terry Ruffell.
Mr. Terry Ruffell (President, Canadian Professional Sales Association): Thank you,Mr. Chairman.
First, I'll tell you a little bit about the CPSA. It's a sales and marketing organization with 30,000 members located in every region across Canada. But you're going to get the price of five for one here, because we've also had input from four other associations including the Canadian Gift & Tableware Association, the Canadian Hardware and Housewares Manufacturers Association, the Canadian Office Products Association, and finally, the Canadian Retail Building Supply Council. Together these five groups represent about 100,000 Canadians and generate somewhere in the area of $30 billion in total sales. Here's a little bit of background on who the organizations are: manufacturers, wholesalers, retailers, importers and exporters. So on behalf of those five organizations,Mr. Chairman, I'll give you these comments.
We have also left a written brief with the committee. The brief talks about 21 recommendations. In my summary this morning, I'll talk about three threads that run throughout our presentation, but I just want to preface my comments on deficit reduction with basically the same comments Mr. Daniels made.
Obviously there are tremendous demands on government to supply services. We, too, are in favour of continued deficit reduction, and we are totally sympathetic to the demands that the hospitals and charities have, so I'd like to preface our comments in that regard. One other comment I might make - and the gentleman second to my right also talked about interest payments - is that in where we're coming from as several organizations, we'd rather see hospital services and charitable donations rather than interest payments.
It is imperative that the Government of Canada eliminate the federal deficit as quickly as possible. Now is not the time to become overconfident with the achievements to date - there have been many - particularly since the economy remains weak on the retail side of things and when higher interest rates could significantly impede further deficit reduction. It relates to that expression about our neighbours to the south: if they catch a cold, we get pneumonia. I think if things turn a little bit downward in the U.S., certainly the progress we've made to date could be eliminated.
I think the government's commitment to reducing its own costs is a major approach that should be continued - and I think this is important. While it is tempting to advocate tax reductions as a means of stimulating the economy, our coalition opposes the step of reducing taxes at this time. I think we've worked too hard to eliminate the deficit. We've made a great deal of progress, and now is not the time to put that in jeopardy.
Levels of taxation are certainly important to anybody in business, and to small and medium-sized businesses in particular - and that includes many of our memberships. Neither Canadian businesses nor individual taxpayers can absorb any higher levels of taxation.
Briefly, on the harmonized sales tax front, we are encouraged. We firmly believe that harmonization is extremely important to Canadian businesses, and we have stated so in the past. We see harmonization as a top priority. We also see it as an important message that we have tax simplification and equity for all Canadians.
I'm going to leave some concerns with the committee this morning. They're concerns that we have on the recent HST model that has been developed. Our coalition is concerned that the HST model, as outlined in the technical paper, does not address the need for simplicity. It is complex and can lead to tax duplication and tax gaps. In this instance, the HST could become a barrier to doing business in the Maritimes. Harmonization for harmonization's sake is not a worthy objective, in the view of our coalition. Based on some of the advice that we have received recently from our tax advisers, the status quo may be better than some of the technicalities they are introducing with HST.
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Another major concern is the idea of tax-in sticker pricing. Partial tax-in pricing will be costly to small and medium-sized businesses. Unless we get a much broader tax system, we are opposed to tax-in pricing at this time. A second problem with tax-in pricing comes in how people in business can claim their input tax credits. Some of the simplification methods that we've adopted are gone, and we have some concern that it will be a small business deterrent.
I have a couple of quick comments on growth and job creation.
The Chairman: Can I just ask you to sum up very quickly please, Mr. Ruffell?
Mr. Ruffell: Here it comes.
Economic stimulation can be developed with an expanded use of RRSPs. In our presentation, we've talked about that a little bit. Part of our theme again is tax simplification and tax administration. I think that has to be addressed, and I encourage the committee to further look at simplification. A broadly based, lower tax rate is a better way to go, so we're recommending very strongly that there be no new exemptions to the GST. Make it as broadly based and simple as possible.
Finally, Mr. Chairman, on tax simplification as it relates to cars, our people make a living on the road and the tax benefits and car deductions are extremely complicated right now.
Finally, don't take your eye off deficit reduction.
The Chairman: Thanks very much, Mr. Ruffell.
From the Financial Executives Institute Canada, Peter Rollason, please.
Mr. W. Peter Rollason (Chair, Government Affairs Committee, Financial Executives Institute Canada): Thank you very much. It's a pleasure to be here today. I represent the Financial Executives Institute Canada. We cover approximately 1,350 senior financial managers in the country, representing approximately 900 companies across Canada. This is our third year before this committee.
Mr. Chairman and committee members, we are encouraged by the progress the government has made towards its program of deficit reduction. We feel this progress is manifest now in the fact that we have lower interest rates and strong equity markets, and we believe there is an associated benefit to the economy in terms of the longer-term job creation and stimulation of business activity.
What I'd like to talk about today are three major points: deficit and debt reduction, the Canada Pension Plan, and employment insurance.
With respect to deficit and debt reduction, we recommend the continual work of the government towards the elimination of the deficit. It should remain a top priority of the government. The progress to date is commendable in that regard; however, we believe there should be ongoing emphasis on declining government spending and taking advantage of the lower interest rates that exist today. We should continue to avoid any increases in taxes, and avoid decreases in taxes as well at this time.
We feel any further, second infrastructure project would be untimely at this point. Yes, there were some benefits in regard to employment, but most of those benefits were of a temporary nature and were of course quite costly.
We acknowledge the government's position today that general tax cuts are not an appropriate thing to do. We do propose that the government cast ahead a little further in time now to when the deficit is reduced. It should come up with a detailed plan on how it intends to manage the overall debt reduction program that will carry on well into the next century.
We recognize that Canadians have a heavy tax burden. I think dealing with this tax burden in light of global positioning and competitiveness has to be taken into account in the management of the deficit and in the debt reduction programs. We believe that continuing along this vein we are following will lead to ongoing, tough fiscal actions, but will generate a positive environment for business and consumers in the country.
With respect to the Canada Pension Plan, we believe urgent action is required on a number of fronts that are laid out in our written report to you, Mr. Chairman. However, it is necessary to proceed quickly with this because the deficit position with CPP is mounting annually at significant rates, and we do not believe that focusing solely on the increase in contribution premiums by companies and individuals is the way to deal with this problem.
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In our report to you we've noted a variety of actions for the government to undertake. The fact is many Canadians use the Canada Pension Plan as a focal point of their retirement plans, and this is a necessary feature of those plans.
With respect to employment insurance, the government has taken major steps to improve the program. Our concern, however, is there is no program in place to immediately reduce premiums, given the fact that a surplus is contemplated at the end of the year. Reduction in this type of payroll tax would benefit both companies and consumers and possibly would lead to increased spending and further employment.
We also talk briefly about harmonization of the GST. We're in favour of that.
Stability is needed in the RRSP environment so that, together with the CPP, Canadians can have security in their future retirement planning.
Finally, with respect to budget legislation, if legislation is proposed within six months of the budget, then the types of actions contemplated effective the budget date should be allowed to occur. Otherwise those action dates would become effective the date of passing of the legislation.
Thank you, Mr. Chairman.
The Chairman: Thank you, Mr. Rollason, very much.
From ABC Canada, Colleen Albiston, please.
Ms Colleen Albiston (Executive Director, ABC Canada): Good morning.
[Translation]
Good morning, ladies and gentlemen.
[English]
My name is Colleen Albiston and I'm the executive director of ABC Canada, a national literacy organization. We're a business-labour partnership.
We raise awareness about literacy in the public and private sectors through advertising. Our other major role is to promote workplace education with business and labour through our workplace education centre, which provides information, referral and consulting services to business and labour.
We also provide support to community-based literacy groups through fund-raising initiatives such as the PGI golf tournaments for literacy around the country, which raise $500,000 annually. We're currently engaged with Canada Post in marketing the family literacy stamp - I'll sell you some out of my purse later - to raise $500,000 for family literacy initiatives.
This morning I'd like to briefly address three points that we hope will be part of your budget deliberations this year: the GST on books, your investment in the National Literacy Secretariat, and the federal investment in workplace training.
We're very pleased that the government has taken the first step in removing the tax from books. We would like to note that in its 1994 report, Replacing the GST, this committee recommended that the tax be removed from reading materials. We're very pleased to see that recommendation is bearing some fruit today. We congratulate you for your insight on this issue.
New information contained in the Canadian report, IALS, which was recently released by Stats Canada, demonstrates that there's a strong link between use of literacy skills and literacy ability. Basically the report says literacy is like a muscle: if you don't use it, you lose it.
Any barrier to reading is a blow against maintaining the very skills needed to ensure Canada has a healthy economy and society. All of the current research shows a strong correlation between economic issues, a healthy society and the success of individuals' literacy levels.
At ABC Canada we want to encourage reading, and we believe taxing reading materials is a deterrent to reading. ABC Canada does not support any tax on reading.
We want to congratulate you for your commitment to the National Literacy Secretariat. They're doing a very large job with a small budget. The NLS funds literacy initiatives across the country. Without their support we would indeed be working in a desert. They've also entered into cost-sharing arrangements with provinces that have helped to build provincial commitment for this cause.
Without going into detail about the projects we work on, with a very small amount of money from the federal government through NLS, each year we are able to leverage millions of dollars from the private sector for advertising campaigns and involvement in workplace literacy. We think this is a very good investment that's bearing fruit.
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Finally, ABC Canada believes that the federal government can play a valuable role in supporting workplace education and training initiatives. Recently, we received funding from the now defunct innovations fund to support the Workplace Education Centre to help business and labour address workplace education needs.
The leadership of the federal government can encourage the private sector's involvement in workplace education and support lifelong learning. With the government's leadership, support, and commitment to partnerships among governments, education, and the private sector, we can help bring Canada into the 21st century with a workforce willing and able to take on the challenges of the global economy.
Finally, Statistic Canada's own study underscores the need to incorporate literacy issues into government policy to ensure that there is funding to invest in literacy. The ways and means motion removing the GST from materials purchased by target groups, continuing the financial support of the NLS, and ensuring that funding to continue to play a role in workplace education will pay large dividends.
The Chairman: Thank you very much, Ms Albiston.
Ms Albiston: I can't believe I took more time than they did.
The Chairman: You packed so much in, and did it so well. I'm probably not being very fair in the way I'm cutting you off. I apologize. The main thing we want to do is get to the major points so that members can come back and really get into the details with you.
Ms Albiston: I just thought I'd give you a little humour, because I always get into trouble when I do this when others are talking.
The Chairman: You realize that I'm not very literate.
From Campaign 2000, we have Rosemarie Popham and Colin Hughes. Welcome.
Ms Rosemarie Popham (Coordinator, Campaign 2000): Thank you, Mr. Chairman. Maybe I should get a clarification, just so I don't violate any cultural norms, of what the expectation is in terms of the length of a presentation.
The Chairman: It is three minutes for opening comments, which nobody has adhered to, so maybe you can get four if you're really good.
Ms Popham: Thank you. My name is Rosemarie Popham. I'm the coordinator of a national coalition of organizations committed to ending child poverty.
With me today is Colin Hughes, a representative of one of the partner organizations in Campaign 2000, the Child Poverty Action Group. Colin is going to do a brief introduction, then I'm going to make some specific recommendations.
Mr. Colin Hughes (Community Worker, Toronto East Children's Aid Society): Since the 1989 federal resolution to end child poverty, we've seen a fairly substantial disinvestment in children.
Today, national social programs are pretty much on the verge of collapse. High unemployment and deficit reduction through social program cuts, are increasing the incidence and severity of child poverty.
We know that we're going to continue to pay for these kinds of problems that are associated with child poverty. Of course, the federal government has studied these issues as well. These are problems that do tend to last into adulthood.
What we also believe is that a fairly substantial burden for deficit reduction is being transferred onto those who are least able to cope with it. So I think we have to really go back to looking at some pretty basic principles: notions of fairness and an equality of sacrifice.
In Metro, we have about one in three kids who are relying on social assistance, commonly called welfare. The Canada Assistance Plan, which provided income assistance and services that benefited Canada's poorest children, has been slashed by billions, well over 20%. It was frozen. Then it was rolled into the Canada health and social transfer.
This transfer will be cut by 50% overall, and much more in terms of its cash portion. The cash transfer cuts of $0.7 billion and $1.4 billion are in store until 2000.
Canada is cutting its connection and commitment to its poorest children. We have not seen any promised action on child care. Also, the federal child income benefit has been allowed to erode. The welcome top-up of about $250 million doesn't cover the loss in the value of the benefit that has accrued to date.
Our message for this budget is fairly simple. Manage your deficits fairly and responsibly, and reverse actions that transfer the burden onto those who are poorest. We hear a lot about how painful this is. Let's be up front about who it's painful for. Also, make new investments in children.
Ms Popham: Colin presented the bad news. I'd like to comment briefly on the good news. We believe that this budget presents a moment in time to do the right thing for children.
We have four very specific recommendations.
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Campaign 2000 believes that there are three foundations for building support for children: first, a labour market strategy; second, community services, including programs like CAPC and child care; and third, income security strategies. It's around those that we are going to make our recommendations today. Other partners will speak to the others.
First, we believe this budget must index the child tax benefit.
Second, we believe it must announce an integrated child benefit with the provinces to reduce and prevent child poverty.
Third, we believe it must restore the $600 million that has been taken out of children's benefits since this government came to power.
Fourth, we believe it should announce an integrated child benefit as a downpayment on a longer-term strategy, such as a social investment strategy for children.
Do I have a moment to speak to any of those, Mr. Chair?
The Chairman: I would rather we get through the main points. The idea is to have every individual or group put their agenda on the table. We can then discuss it among ourselves, if you don't mind. I congratulate you on your timing. Thank you very much.
Finally, from Perigee Investment Counsel, Lloyd Atkinson. Welcome, Mr. Atkinson.
Mr. Lloyd Atkinson (Individual Presentation): Thank you very much, Mr. Chairman.
My name is Lloyd Atkinson. I'm the chief investment officer of Perigee Investment Counsel. I was formerly the chief economist of the Bank of Montreal.
I am here on my own. These are my own views, not necessarily the views of the company with which I'm associated.
I will certainly stick to my three-minute time limit.
My position can be really summarized quite succinctly. Stay the course with respect to monetary and fiscal policy. Although monetary policy is not an area in which you have immediate oversight, the links between monetary and fiscal policy are very clear.
We have seen our federal and provincial governments deal a decisive blow to the debt/deficit problem. It's a huge confidence builder from the point of view of the international investment community, and it goes a long way toward explaining why these interest rates, nominal and real, have come down as much as they have.
Importantly, however, investor confidence is a fragile thing. Three to four years ago, there was anything but strong investor confidence in Canada.
As for tax cuts, sure, but in my estimation, only if accompanied by an equally aggressive additional cut in expenditures. By and large, I'm not recommending a tax cut overall.
Importantly, a tax cut on its own, if it in fact were to do any damage to the confidence that has been built in terms of dealing with the debt/deficit problem...we could end up with a significant backup in interest rates that could ultimately undo whatever positives might occur as a consequence of a tax cut.
We should remind ourselves that although there is a great deal of talk about fiscal dividends all over the place, we are three to four years into what is a multi-year project to deal with the debt/deficit problem. It is still important to recognize that even though we have made progress, government debt is still rising faster than our gross domestic product. There may be light at the end of the tunnel, but I think it's worth reminding ourselves that we're still in that tunnel.
Also, there is a widespread view that, of course, a further reduction of interest rates simply won't do any good. It's the old ``pushing on a string'' kind of argument. In my estimation, that is nonsense. To put it in comparable terms, it may be that we're looking at interest rates that are the lowest in the past 40 years. We're also looking at inflation on a sustained basis that's also the lowest in the last 40 years.
In real terms, adjusted for inflation, our interest rates really aren't all that low. In fact, even today, despite the substantial reduction, we're looking at long-term interest rates in Canada, in real terms, that are still fully two percentage points above those in the United States.
Let's turn the question around and ask this: if we were to raise long-term interest rates in the United States by two full percentage points, would that have no impact whatsoever? Very few people would adhere to that. Yet one of the reasons we're in the situation we're in is because real interest rates in fact are very high.
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Finally, the important point is that sticking to this course will lead, in my view, to significantly stronger growth in 1997 and 1998. We just had bad news out this morning. The unemployment rate in Canada did touch 10% despite a 46,000 gain in employment, which is fairly good. It's just that the labour force also was boosted by a substantial amount. But my guess is that in consequence of the debt initiatives that have been undertaken, the easing in monetary policy, the increased capital flows, and the like, by the middle of 1998 we will see the unemployment rate down toward 8% and declining.
The Chairman: Good news.
Thank you very much, Mr. Atkinson, and thank you, witnesses.
[Translation]
We will now begin the question period. Mr. Rocheleau, please.
Mr. Rocheleau (Trois-Rivières): I am somewhat uncomfortable and even somewhat distressed, given the week that we just lived. What we hear here, with a few exceptions, are very positive statements. The government is being praised and invited to stay the course, as a witness put it, without caring about the impacts of its measures on a large portion of the population.
I don't feel, from the most well-off and well-informed people - I'm thinking of Mr. Atkinson and Mr. Rollason - , a willingness to make a special contribution for the elimination of the deficit. We hear nothing about family trusts and tax havens. The stratagems of Bay Street and of the large accounting firms to help businesses to reduce as much as possible their tax bill are never mentioned. Yet, things are not going so well, Mr. Chairman.
Today, in Quebec, we are seeing growing demonstrations by students who are questioning the eventual rise of tuition fees planned by the Quebec government.
Last week, between 200,000 and 300,000 people were demonstrating in Toronto, which shows a deep dissatisfaction among people. That's what we have seen all the way through the week. We have seen it in Vancouver also. Yesterday, in Winnipeg, someone even used the word ``revolution''.
So, a gulf is lying more and more between the citizens of this country. Anger is growing up and I can't see any sensivity in that regard. Yet, we know that the number of homeless, of soup kitchens and of food banks is constantly rising.
I would like to know what the Financial Executives Institute of Canada people think about that. Do you accept, in moral terms, Mr. Rollason, that a business which shows huge profits for a semester allows itself, during the same semester, to lay off tens if not hundreds of employees, as we have seen in the course of the last year? Should we accept that? Is it an act of God? Is this in the nature of things?
The Chairman: Who would like to answer those questions?
[English]
Peter Rollason.
Mr. Rollason: I'm not sure exactly how I can answer the question. There were many facets to your comments.
As I picked up what you were saying at the beginning, several of us were representing large corporations, business, etc., and did not appear to have in our recommendations comments reflecting the social responsibilities of business. I'm not denying we did not comment directly on that, although we did talk about employment insurance, the Canada Pension Plan and RRSPs. The fact was, we chose to comment on what we felt were some very important underlying issues. To put it in one word, it's probably ``affordability''. Once you mention that word you end up juggling priorities at governmental and company levels.
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In my opinion, in any event, I believe the direction being taken is not easy on a lot of people. It's not easy on government, nor on business. Everyone has to learn to cut back somewhat until such time as we can afford to do the things we really want to do.
A comment was made earlier that it is in fact a very long-term project we've undertaken. I think the New Zealand model is something to look at, in that New Zealand was almost brought to its knees because of its financial difficulties. They had considerable restructuring to do. They're much farther down the road than we are now. They have started to reinstitute some of their programs in response to the needs of their populace, but they can afford to do them now. In the meantime, they've also cut out a lot of things that proved over time not to be required.
In terms of your other comment on job lay-offs, I can't really comment on that. A lot of these tend to be specific to the situations in particular companies. There's no doubt from what you said that there are some angry people out there today. We have seen evidence of that recently, but I don't think that was reflective of the total population's feeling. We had a certain number of people freely expressing their rights. The silent majority wasn't there, and I guess you and I could debate that for a long while.
Mr. Chairman, those are my comments in that regard.
The Chairman: Thank you.
Mr. Atkinson, and then Rosemarie.
Mr. Atkinson: I might make a couple of comments. I don't think it is an insensitivity at all with respect to the plight of large numbers of Canadians that I would make a recommendation to stay the course. We have been through some very difficult periods of time.
First, we look, for example, at the magnitude of the restructuring of companies south of the border, which has actually been statistically larger than it has been here to date, yet they will sit with a near 5% unemployment rate.
We can talk about the social safety nets that don't exist there. We can talk about a lot of those elements. But I do think restructuring and putting appropriate macro-economic policies in place is not the enemy of this.
In point of fact, if we had continued down the path we were moving, my guess is that we would be looking at a 1997 and a 1998 that would be much bleaker than I think we're looking at now.
We are in a situation.... If we look at New Zealand, after a huge, difficult ten-year adjustment period, New Zealand's economic growth in real terms is in the neighbourhood of 5% to 6% annually.
Look at the magnitude of the restructuring that has been taken in a very small country, Ireland. It's almost the Silicon Valley of Europe, attracting huge amounts of investment. Look at the dynamics of what has taken place, for example, in Dublin, in terms of attracting young people back into the country and a much more vibrant economy. It is change. It is difficult. It is painful.
It isn't to get into the question of what are the appropriate priorities in terms of very particular programs, but I think the greatest success is likely to be achieved in fact by an environment that deals with this debt/deficit problem and keeps inflation low.
[Translation]
Mr. Rocheleau: I started by asking what was the contribution of the private sector. Those who have less are asked to deprive themselves more than others. What is the contribution of the private sector in those efforts to eliminate the deficit? We know that there was a time when 25% to 30% of the tax revenues were coming from the private sector, from corporations. Today, the corporate contribution is only 8%. That might explain a large part of the deficit. That is the type of contribution, of new efforts that we are expecting from the private sector.
[English]
The Chairman: Rosemarie Popham, please.
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Ms Popham: I'd prefer to hear the answer from my colleagues.
The Chairman: Lloyd Atkinson.
Mr. Atkinson: Let me just say one thing. It is true that in terms of total revenues, the contributions from corporations are down. It's a direct reflection, however, of the magnitude of the decline we have seen in corporate profits. In 1992, for example, corporate profits as a percentage of gross domestic product were lower than they were during the Great Depression. So that doesn't disturb me at all.
Secondly, when we look at the private sector in terms of their contribution to dealing with the needs of this country, we have a tax burden today that sits at 25% higher than that of our major competitor, which is a sad story for a country that derives most of its living from exports. They represent 33% of our gross domestic product, and 80% of that is essentially to the United States.
Getting it correct overall, in terms of macro-policy, is the much more critical issue.
The Chairman: Lastly, Rosemarie Popham.
Ms Popham: Now I definitely would like to respond.
Mr. Rocheleau's question is the seminal question about the role of all of us in addressing the income disparities.
I'm perplexed by the statement that all of us have suffered equally, because I think everyone knows that, certainly in terms of wealth, Canada is number one on the UN human development index. In terms of child poverty, we're 17th out of 18 in the industrialized world. Only the U.S. is worse.
One of the reasons those other 17 countries have done better with less wealth is they have had better government policies and higher contributions from the corporate sector to support those government policies. In Canada the corporate tax rate is lower than the average of the OECD countries and our child poverty rate is higher than all those OECD countries. I think there's a direct relationship.
I'm also concerned about New Zealand being held up as the template of where we want to go. They have the highest youth suicide rate of any industrialized country, because of the marginalization that's occurred.
I have one other thing to say about this issue of what we are going to do about disparities. The UN human development index found that Canada's wealthiest kids are wealthier than any kids in any other country except the U.S. and Switzerland, but our poor kids are poorer than the kids in ten other countries. So it isn't that we've all suffered equally. Our wealthy kids are still doing fine, thank you very much, but our poor kids are getting poorer and poorer.
I understand why people feel limited and want to focus on the macro-issues, but as a country, where our policies are being shaped is at the finance committee table. Maybe it's up to the finance committee, when you invite people to present, to address the question of what the corporate responsibility is as well as what the government's responsibility is to the income disparities.
[Translation]
The Chairman: Thank you very much, Mr. Rocheleau.
[English]
Mr. Solberg.
Mr. Solberg (Medicine Hat): Thank you very much, Mr. Chairman.
I want to welcome people here today. It's a pleasure to meet with you today and hear what you have to say.
This comes up at every meeting, but I feel I must raise that it's not just people who believe in large government who feel compassionate toward people who don't have as much as they do. I don't think people who believe in a large state have a monopoly on compassion. We need to follow up on what Mr. Atkinson said.
I want to start by correcting something Mr. Rocheleau said. He said corporate tax constitutes 8%. In fact, according to the budget documents here, it's 25%, Mr. Rocheleau. It's right here. That's important to point out.
I feel I must also point out that as the interest on the debt has grown, we've seen a very direct decrease in the ability of the government to fund the social programs that people say are so important. I agree with that. To me, it's absolutely critical that we deal with the rising interest payments on the debt.
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I just want to go a step further and say that there are two ways of helping people. One way is to have a large state that intervenes and provides all kinds of services. Sometimes it is done very inefficiently. The other way is to balance your budget, run surpluses and give people lower taxes so that people like the working poor, for instance, don't have to pay taxes. I think it would be a welcome relief for them. I think there are ways to do that.
I know that when Mr. Atkinson mentioned tax relief he did put some caveats on it. There would have to be matching spending reductions. I am sure some people are horrified at that thought, but I would argue that a number of areas today do not provide very efficient service. There are all kinds of areas of overlap and duplication.
At any rate, I just wanted to have my say on that because I felt Mr. Rocheleau was presenting a very one-sided view of how people show they are compassionate towards people who don't have as much. I'd be interested in people's comments on that.
Ms Carr has apparently left us, unfortunately.
The Chairman: I'm sorry, but she had to leave.
Mr. Solberg: I had a specific question for her.
The Chairman: I'll be happy to answer on behalf of Ms Carr....
Voices: Oh, oh!
Mr. Solberg: I think I'll leave it at that for now, Mr. Chairman, and see if people want to comment on what I have said.
The Chairman: Are there any comments?
Mr. Cirotto.
Mr. Cirotto: Mr. Chairman, I'd like to add this, not to belittle or marginalize what we're talking about right now, but just to make a point with a little bit of humour.
There's a joke going around - and don't worry, it's clean - about an American, a Scotsman and a Canadian who get involved in a car accident. The three of them are killed. They're all standing at the Pearly Gates in heaven and St. Peter says, ``Before I allow you in, you know times are tough, even here in heaven, what with budget constraints, etc. There's been a terrible mistake and you all have to go back to earth, but it's going to cost you $500 each.'' Immediately, the American has his chequebook out and writes a cheque. Then he's back at the scene of the accident and the investigating officer asks where his other two friends are. He says, ``Well, the last I heard up there, the Scotsman was haggling about the price and the Canadian was demanding that the government pay it.''
Some hon. members: Oh, oh!
Mr. Cirotto: I wanted to make that point because.... I have four children, and my wife and I find raising four children very difficult. I look around at other families that have children and I agree that children are suffering today. However, we also have to note what has happened over the last twenty or thirty years. It's called ``creeping socialism''. We ask the government to do everything. We have to learn to wean ourselves from that bad habit.
The family structure in this country has deteriorated because we feel everyone has to be out working now. So we slough the kids off on the educational system. Then we come up with reports proving that children who are in pre-kindergarten and kindergarten do much better. As parents, we have shrugged off our responsibilities and we are now paying the piper.
Look at the social problems we have with the children. It starts with the family unit. The family unit - and I don't think anyone in this room will argue with me - has deteriorated over the last twenty or thirty years in this country. We don't need to look at other countries in the world and say how good or bad we are compared to them. We have to look at our own backyard first and stop using models of New Zealand or the Netherlands or whatever. We have a problem in this country that has stemmed from each and every one of us not being a responsible parent and doing the right thing.
That's the only comment I wanted to make. I wanted to start it off with a bit of humour, but the humour is very subtle. We keep asking government to do more of what we should be doing as parents in this country.
The Chairman: Thank you very much.
Mr. Kelly.
Mr. Kelly: We'll stay with the humourous side of that. Yesterday we did a presentation at a school. Contrary to just one view of math, I think there are alternative maths. From our point of view, one plus one actually equals three.
We don't believe it is simply the responsibility of government to care for children and their families. In our local projects, we believe it is basically a community responsibility. From our point of view, the government role is to set a framework around national standards. Caring for the children is the role of the family, of local businesses and of other service providers. I agree that it is everyone's responsibility, but I think government has a critical role.
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When we talk about families, I speak from the perspective that I have in Rexdale, which is probably one of the major settlement areas in Canada. When we look at those families that are not intact...if someone comes from Somalia, from Croatia, from other African countries - those families often do not come as a whole. Those are the families we're dealing with. This is a reality that we're dealing with. Thank God we are, because those people are very hard-pressed in their own countries, and we have opened the doors for them to come here.
As I said before, when we talk about families, Beaver Cleaver and Mrs. Cleaver are no longer looking after everyone.
Mr. Ruffell: Mr. Chairman, I have something that touches on Mr. Solberg's comment. Part of the way to go - and I'm even hearing this from the charitable sector - is partnerships. I'll just talk a little bit about one of our recommendations, which is about government working with trade associations to help us enhance our export opportunities. Rather than the government going it alone, there are tremendous opportunities to work with other organizations to expand our impact.
One example that you are aware of, Mr. Chairman, is our association with HRD - Human Resources Development - in promoting certification programs across Canada for both sales and sales management.
This program will be taught in forty universities and colleges. We brought our chequebook to the table. Some assistance from government put us over the top and made the program possible. When HRD looked at us, they looked at a contribution agreement, and not only did we bring our skill set, we brought our chequebook. I think these types of partnerships are the way to leverage your dollars and get that corporate involvement.
I encourage that type of direction from government and I encourage partnerships to do a lot more with less government money. Really, come to us, the corporate sector and the associations, and ask us to do more. There are tremendous opportunities.
The Chairman: Mr. Offord, please.
Mr. Offord: There are a lot of truths being said here. The government has a role, big corporations have a role, communities have a role, and tax relief has a role. We probably also know that not any one of those components can really solve all of the problems. The one thing I'd like to say is that we're really entering a new era in which we can all work together.
I do think, though, that the tax burden on Canadians is such that when it comes to philanthropy it's difficult for them to make choices in supporting community organizations.
If they're going to take responsibility for what's going on in their communities and if they're going to support organizations like A, B, or C, or any of the social services agencies out there, the opportunity to do that can really be created by a tax environment that allows them to make choices and to say, ``I can support my community directly. Government can't make all those decisions for me; I know what's going on here in my community.'' Once again, it's an opportunity to engage Canadians in their organizations as a community, in a way that thirty or forty years of the social welfare state really hasn't allowed us to do.
Just to give you some specific examples, eight years ago at Mount Sinai Hospital, the impact of the corporate funding, of grants from external organizations and of private support together constituted about 3% or 4% of our overall operating budget. In 1996, it will constitute close to 18% or 19%. That's a very real shift in the way in which major institutions and community organizations are being funded. It's a very positive step. I encourage the government to continue the process of being sound fiscally while at the same time working with community partners in making these things happen.
The Chairman: Thanks very much, Mr. Solberg.
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Next is our vice-chair, Susan Whelan.
Ms Whelan (Essex - Windsor): Thank you very much. I have a number of brief questions.
My first question is to Mr. Rollason, please, in regard to your comment about a second infrastructure program. I have to tell you that having travelled from Vancouver to Toronto this week I believe it's the first time we've heard that we shouldn't have a second infrastructure program. In fact, we've heard presentations on just the opposite, and different types of federal initiatives and partnerships.
I come from Windsor-Essex County, an area that is probably doing the best, I guess you could say, or one of the best in Ontario right now in regard to the largest number of housing starts in the history of the city of Windsor. The economy is booming. If I were to tell them that there shouldn't be a second infrastructure program, I can tell you what my municipalities in the county of Windsor-Essex would say, and that is that I'm crazy.
I think sometimes we have blinders on, depending on what area we live in, in the province of Ontario. But I guess I say that coming from an area that has never sent or sent very few government representatives to the provincial legislature, except for a very short term. For forty years our infrastructure has not been adequately funded in certain areas, so I think you have to be careful when you say there shouldn't be a second infrastructure program.
I'm very concerned. We just travelled from Vancouver to Toronto and we didn't hear that message, so I wonder what your rationale for that statement is.
Mr. Rollason: Our rationale, I think, has to be taken within the context of, number one, the deficit and the debt, and we're looking more from the financial management side of the government's perspective. Part of that is obviously, as has happened, declining expenditures by the government, and I think they've been very successful in that area. That has posed many difficulties in assessing priorities.
We have focused on that one in our report as one where we feel, about the amount of money that was being spent, that although beneficial in the local economic sense, if we stand back for a moment, these programs do cost a lot of money. To the extent that they were created to create jobs, they're extremely expensive and in many cases they do not create permanent jobs.
We are just assessing it from that perspective. There may be other ways to take that pot of money and use it in a different sense that may be more productive for Canadians. That's the approach we're looking at. We don't know enough about the actual inner workings of government to be that specific, but that's one of the ones we've -
Ms Whelan: I just want to make sure it's on the record that everyone around the table understands that the accounting system of government is a little bit different from the accounting system in any private industry, and no one would write off that type of investment in one year or two years' time when you're talking about ten or twenty years investment-wise. I think when we talk about the cost per job and the short-term nature of it, it's the future and it's the basis that infrastructure creates. It allows the economy to expand. That's my concern, but I'll leave it at that.
Mr. Rollason: I recognize that.
Ms Whelan: In regard to Mr. Atkinson's earlier comments, I guess having sat around the table for a whole week and having heard the devastating effects that are taking place in certain provinces, especially in the health care sector, I'm concerned.
What I'm concerned about is that presently we spend, I believe, about 9% of our GDP on health care. A number of people who have come before us have suggested that as we try to become more efficient in health care we may end up spending more by having a larger combined private-public amount into it, which could have a very negative effect on the total economy in Canada. I'm more concerned about the effect we're having on children and the future in long-term health care.
What I'm asking you is, as the Minister of Finance puts forward rolling targets of two years and has been able to do substantially well in not only meeting those targets but in bettering those targets, in your opinion - and I respect the fact that you come from the financial sector and don't have that background - would you say it is better to get to zero six months sooner at the cost to our health care system, or is it better to take another look at what we're doing and maintain our original two-year targets?
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Mr. Atkinson: In point of fact, it probably doesn't matter much whether it's six months or not six months. However, it's that kind of thinking that we have seen and that has been prevalent for a good 25 years.
With respect to our deficit problem, we've been digging ourselves a deeper and deeper hole over a 20-year period. Just look at it strictly from a financial management point of view. At the federal level, we now see 25 - no, that's total government. We're sitting at a point where about 36¢ out of every tax dollar just goes to pay interest on the debt. That is 36¢ out of every tax dollar that is not available for exactly those kinds of programs.
Secondly, for a large number of years, we have increasingly gone into international financial markets to borrow, to borrow and to borrow, to basically finance expenditures well in excess of our income. We're told repeatedly that the United States is the largest net debtor in the world. Well, it's 9% of their gross domestic product, but it's over 50% of ours. It's one of the reasons why we had sustained real interest rates so dramatically higher than those in the United States and elsewhere in the world. By continuing down that track, I have no doubt that we would have hit the debt wall that would have forced on us the kinds of adjustments we saw in New Zealand.
These are very difficult questions that you ask, and they have to do with individual kinds of programs. But they ultimately have to be put in the context of an overall financial management of the economy that is going to enable us to in fact ultimately achieve our objectives, and, partly as a consequence of having studied economies as much as I have, I am absolutely convinced that we're going to see a significantly stronger economy in 1997 and again in 1998. If we signal our intention to abandon or simply ease up in dealing with this debt/deficit problem, though, I'm fearful that what we're going to get is a backup in interest rates that will in fact undo what we in fact can do in the private economy and on debt service costs. That's the perspective I come from on this.
Ms Whelan: Thank you.
Mr. Chairman, will you indulge me one brief question?
The Chairman: Have I ever been able to say no to you?
Ms Whelan: Mr. Daniels, I just wanted to ask you a brief question with regard to the 20 million Canadians who have supplementary coverage. It's a big issue in certain parts of Canada with regard to the issue of taxing health and dental benefits. Obviously, we decided not to do that in the last budget, and I wouldn't support doing it. But I'm concerned that many Canadians have a tax advantage over other Canadians because you've lumped those 20 million Canadians together and their health care coverage is not similar at all.
The reason I'm concerned is that I know what coverage I had when I was in small business versus what coverage my neighbours had while working at Chrysler, Ford or General Motors. Their 35¢ and my 20-80 co-pay was very different on prescription drugs and life insurance offers, etc. So I'm just not sure. Do you have any breakdown of how we work out that 20 million, or a dollar figure on what advantage that establishes per Canadian?
Mr. Daniels: The ``20 million Canadians'' simply means that there are 20 million of us - and I'm sure that includes virtually everyone around this table - who are covered under some group plan or other by their employer. It's true that some of those plans are richer than others, but my recollection, Ms Whelan, is that the average value is about $1,400 or $1,500 a person. I don't think there are wildly varying benefits, but it's true some are richer than others, and very often that's part of a collective bargaining strategy.
Ms Whelan: I understand that, but with regard to the three million Canadians you are addressing - their needs and those of the 600,000 who are falling through the cracks - are they going to come in at that $1,500 average or are they going to come in paying a lot more and receiving a lot less? That's my concern.
Mr. Daniels: No, I wouldn't think so. There's more in the material we've sent you and tonnes more behind that, but in point of fact, it turns out that the reality is that you can get at the three million essentially through the small business community. That's the community that hasn't been served by insurers in the past because insurers were targeting big employers. They weren't targeting companies with ten people or less, but the fact of the matter is that with the Canadian Federation of Independent Business, we're starting to address that. There are new packages being offered by insurers, and frankly, they're going to be in the same price range that the rest of them are in.
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In any event, in looking at the initial material, there's no big cost disadvantage as far as I can tell. Although it's true that all these plans are under pressure, as you know, I don't think you're going to see any vast differences between what's being offered out to the smaller groups. In fact, I think the contrary.
Ms Whelan: Thank you very much.
The Chairman: Thank you, Ms Whelan.
Mr. Campbell.
Mr. Campbell (St. Paul's): Thank you, Mr. Chairman.
I have some observations, a clarification, and a question.
First, Mr. Daniels, I want to thank you for being here again. You're almost an honorary member of this committee because you've been before us so many times. Your presence here, combined with the work that you have done, demonstrates the importance of this process.
For those of you who may be appearing for the first time, we've had an ongoing dialogue with Mr. Daniels and other representatives of his industry. It has resulted in a back-and-forth flow of information and in the industry taking a look at just how good a job they're doing or not doing in serving Canadians.
Granted, Mr. Chairman, they have a vested interest because they want to avoid the taxation of these benefits, but I think it has resulted in improved information for us as members of Parliament and, I suggest, improved opportunities for Canadians as they have changed the focus within their industry to understand why certain people aren't served and how they might be served. So I commend them for that.
Mr. Cirotto, I just want to observe that in your discussion about families, we can't have it both ways. We can't turn to schools to do a lot of the things that need to be done and then cut those school budgets. Part of the problem, too, is that parents - that includes some of us around this table - are not consistent. It's not just whether or not families are doing their job. It's whether or not kids out there and people in need out there have the adequate support they need.
Mr. Hughes, I just want to clarify something, because I think you mentioned this. We hear a great deal about this 50% cut in the CHST. Did you say 15% or 50%?
Mr. Hughes: Fifteen percent.
Mr. Campbell: I wanted to clarify that. It is 15%, not 50%.
Mr. Hughes: Yes. However, as I understood it, there are estimates of around 40% on the cash side. That's the conclusion of most provinces. Indeed, the provinces view those cash transfers as being the true level of federal contributions.
Mr. Campbell: It's a little like when the Province of Quebec complains about its transfers from the federal government. They always leave equalization payments out of the overall total.
Thank you for clarifying that.
Mr. Hughes: Just to underline that again, we're talking about very large cuts that do translate into what kind of support is available to families. I just want to point out something else. There's this whole issue of how this is painful, this is painful, this is painful. Again, painful for who?
I think there are people who are really hurting in this society, families with children in particular. I would invite members of the business community and so on.... I understand it's a macro-context, but I think there are all kinds of macro-issues around greater social cohesion and greater equality and the role of redistribution. I would invite you to go down to your food banks and to the shelters to check things out. People are really hurting there, and that's pain.
Mr. Campbell: Thank you, Mr. Hughes. On behalf of my colleagues, I would want to say that we do understand that. We are concerned about that; we're not oblivious to it. We don't discuss the issues we discuss - and they are serious issues - without regard to impact.
I just want to come to my question, Mr. Chairman, and it is really to the representatives of ABC Canada. In this environment that we function in, there are choices that unfortunately have to be made, as Mr. Hughes was just suggesting. If you had a choice in how to spend what you have in the way of revenue, and if you had a choice between now going and eliminating the rest of the GST on books and periodicals or continuing your assistance to literacy programs in the workplace through the educational system and otherwise, which would be more effective from the perspective of ABC Canada if you couldn't do it all?
Ms Albiston: That's the most difficult question you could ask.
Mr. Campbell: That's why I asked it.
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Ms Albiston: As you know, we're a business-labour partnership, so I can't speak emphatically about which way we would go. We do not have a position of one or the other. The position we would suggest is that you've taken steps to designate certain groups that will be relieved under the amendment to the GST act. As far as the purchase of materials, that's a step in the right direction, and the next step would be to remove the tax on all learning materials.
I think what you're asking me about is the support you get from an organization like the National Literacy Secretariat, or removing the GST on books. I think those two things are apples and oranges, because the support of the National Literacy Secretariat is going directly to one particular group and the tax on reading materials affects many. What we do know from the government's most recent report is that the tax on reading material is having a negative impact on literacy levels in this country. Those literacy levels are unacceptable and will not allow us to continue to compete as a nation.
Mr. Campbell: But you will appreciate that a large component of that tax on reading materials is tax on newspapers, periodicals, books from abroad - a whole category of things. Are you suggesting that we could carve out, further to what we've already done, reading materials that would benefit from a further exemption?
Ms Albiston: If you are going to take the next step, the recommendation would be that you look at learning materials exclusively. That covers reading learning materials and computer-assisted learning materials. I think that's an easier next step. I recognize the challenges you face, particularly with the harmonization issue, and hopefully other strategies will evolve, but your next step would be learning materials.
Mr. Campbell: That would include, I guess, textbooks that are purchased.
Ms Albiston: Yes. Even with the change you've made, when I go into the university bookstore, I'm still paying the GST as a consumer.
Mr. Campbell: Thank you very much.
Thank you, Mr. Chairman.
The Chairman: Thank you, Mr. Campbell.
Mr. Ovid Jackson, member of Parliament from Owen Sound, thank you for joining us.
Mr. Jackson (Bruce - Grey): Thank you, Mr. Chairman and colleagues. I'm certainly glad to be here today and to listen. I miss these kinds of forums. As you know, I'm a former mayor, and these are some of the best forums in which to exchange information and get things done.
I'm a little late in coming in, so I have a couple of comments and not too many questions. My first observation is with regard to infrastructure. The Romans used to put infrastructure on the top. They never buried it, because sometimes people don't see that you have to separate storm sewers from septic sewers, the impact on the environment.... For those who don't believe that infrastructure is important, just go to a community where you can't drink the water out of the taps, or the roads are bad, or you have a really rotten environment, or the community can't grow because it doesn't have the capacity to provide certain services. There are net deficits in some areas with regard to technology transfer in order to get every community up and running.
It is not a bottomless pit. There is an end to infrastructure. I think at the moment there is a capacity for infrastructure, but it's not something you want to add ad infinitum.
It's difficult to put a handle on the job situation. There are permanent jobs. With infrastructure you may not necessarily have jobs into the future, but it does have a very important role to play.
I just wanted to make those points for those of you who are not familiar with them. I'm a mayor from a municipality. I know that if I have a compressor in my arena for the kids to play hockey and I get those kids off the street and get them organized, I have something going. In some cases they're putting in golf courses and what not, but if industrialists are going to a community looking for a place to locate, families want good schools and good infrastructure, and that might be the final straw in determining why a person does not locate their firm....
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So small communities have very good reasons for the things they ask for. Once it comes up from the grassroots and once the participation of the three levels of government are there.... I think the first infrastructure was actually quite successful.
As well, we get a lot of comments about people and family and all that kind of stuff. They don't want to be compared with the world, but health care is the single most important issue in any country, because people are the most important and valuable product you have. I will tell you that if you go to any community that is doing well in any part of this world, you will find that they have a very good family structure and pre-natal support for people to make sure they have food to eat, to make sure they don't have bad habits like smoking or drinking a lot during pregnancy and get fetal alcohol syndrome and so on. Health care is extremely important, and it's a complex situation. You can't cure it just by one way or the other way. We need to sit down and find the correct way to do that.
The Chairman: Thank you.
Any reaction to Mr. Jackson's comments?
I take it that silence is total assent.
Mr. Rocheleau, s'il vous plaît.
[Translation]
Mr. Rocheleau: My question is for Mr. Ruffell. First, I want to thank you and Mr. Daniels to have tabled your brief in French also. That's the first time, since Vancouver, that this happens.
You made three recommendations, which are undoubtedly well- based, concerning the use of RRSPs, but isn't it a kind of diversion of the purpose for which those funds were put aside in the first place? RRSPs were established to allow people to prepare for their retirement. Now, due to financial constraints that we don't dare to admit, governments are more and more pressed to allow those funds to be used to other ends than those initially set. Is this part of your reflexions or is it clear in your mind that the changes you propose should be carried on?
[English]
Mr. Ruffell: There's an opportunity to use those funds. We were talking about that earlier, and somebody mentioned putting their talented daughter through university and the cost of doing that. Where he doesn't have the funds to do that presently would really stretch the family; yet over here is a pool of RRSP money that could be used for that purpose. So we think there are opportunities. You've already got into it in the first homeowners' plan, and there are probably limited opportunities to use those funds for other purposes with a cash-strapped family.
Mr. Rocheleau, I think you're absolutely right. To not have a strict repayment program that money gets poured back into the RRSP would be a mistake. We think there are opportunities to stimulate the economy as long as there are very strict rules. We've seen tax initiatives before that didn't work, so you'd have to structure the thing very strictly with a cash repayment program.
We think there could be some pay-offs. I believe the Province of Quebec is allowing some of those funds to be used for renovations to homes for the disabled. Maybe there are some creative opportunities to use a substantial pile of resources. I know my friend over here from the insurance business would say that money is for a purpose, for retirement, so if it is used, it must be for a very strict use and there must be a very strict repayment policy to get the money back in there for what it was originally intended for.
The Chairman: Thank you, Mr. Rocheleau.
Mr. Solberg.
Mr. Solberg: Thank you, Mr. Chairman.
I want to start by saying that I think there is an optimal size and role for government, and we always have to try to determine what that is. People here have talked about funding partnerships, and I think that makes eminent sense. Ms Albiston from ABC Canada and Mr. Offord and others have talked about that, and better involving people in their communities by ensuring that they're involved in some of these charitable organizations, for instance.
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On the other hand, Mr. Hughes commented that it's important for people to come down to the food bank and see what kind of poverty is out there, and I appreciate what he's saying.
The point I want to make is that I think there is a need, whenever we design these programs, to ensure there are as many partnerships as possible so that people have an active role in ensuring their tax dollars are spent well. As well, we don't want to delink the whole idea of charity, of giving - people may not like it put that way - from receiving. Right now the money is taken from people through their taxes, and they never see the good it does, or sometimes it is wasted.
It is important to have those partnerships, but at every level and in all kinds of programs, not just the ones Mr. Offord is talking about. There are also programs like social welfare and others.
Maybe Mr. Hughes or Ms Popham would like to comment on that.
Mr. Hughes: The non-governmental organizations, the charities in Canada and Ontario that I am much more familiar with, have a strong history in that regard. I'd like to point out that the 30-year history of the Canada Assistance Plan contributed to the development of that kind of community infrastructure that really does bring together the public, through community boards. It provides important community services and helps promote the kind of social cohesion and social understanding that I think you are alluding to.
However, I wouldn't suggest that the Government of Canada doesn't have a major role to play in terms of its redistributive role in ensuring that this kind of social cohesion is enabled. That redistributive role, I think, is one that has been forgotten and neglected.
The Chairman: Ms Albiston.
Ms Albiston: I think there is a lot of value in what you said. There are two points that I would like to make. One refers to the gentleman from Mount Sinai and his earlier comment about the tax credit related to charitable giving. Looking at that tax credit is a model for rewarding partnership as we are downloading responsibility to the private sector. We want the private sector and individual Canadians to give, and the reward is in a tax credit that at least equals the tax credit we get for our political contributions.
The second is rewarding private sector investment or partnership. When we deal with the National Literacy Secretariat, and I refer to them because they are the most successful model that I've worked with - I feel I must do a very good job leveraging their money, or I won't have a longstanding partnership with them. They give me $250,000 a year, and I leverage $7 million to $11 million out of the private sector. That's good business.
As a taxpayer I'm happy to have my money come to ABC Canada for a couple of reasons, but certainly because it's engaging the private sector. The second is the expectation with some of the partnerships within HRD that programs become sustainable. As a taxpayer and as someone who manages a non-profit organization, when I come to the federal government and I'm looking for a partnership, I expect that my program eventually will have to be sustainable or the money won't be there in the future.
The Chairman: Thank you, Mr. Solberg.
We're coming to a close. Are there any of you who feel you have not had adequate time to make your case before us this morning?
In that case I would ask Jean Augustine to make a few comments.
Ms Augustine (Etobicoke - Lakeshore): Thank you, Mr. Chairman.
I want to take a minute or so to welcome you and the finance committee to Etobicoke - Lakeshore. This consultation taking place here is very important for the constituents of Etobicoke - Lakeshore, our businesses and all those who are working to ensure that we do what is necessary for all Canadians.
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I am not a regular member of this committee, but the deliberations today do bring to mind the work I do on other committees. I'm the vice-chair of human resources development. You can see from the back and forth of the deliberations here that we parliamentarians face several challenges as we try to respond to the issues that face us daily.
So I am very pleased that you are here. I'm very pleased that the presentations made before this committee are such that they will help advance our work.
The Chairman: Thank you for having invited us here. This is the second-best riding in Canada.
Would any of you like to take a maximum of 15 seconds to leave us with one key message you want us to go to sleep on tonight?
Mr. Cirotto.
Mr. Cirotto: I'd like to start by saying that I have to admire one of your colleagues,the Hon. John Bryden, from my neck of the woods. He introduced, as you're well aware, a private member's bill concerning the multibillion dollar industry known as charitable and non-profit organizations. This man alone has been a crusader against windmills. He would like simple things like a mission statement so that we don't have an overlapping of do-gooders spending money. I want to give a plug for John.
The Chairman: You just did, very well.
Nick.
Mr. Offord: Let's not stand in the way of people wanting to do good for their communities. Let's give people the tools to change their communities for the better, whether it's in the health sector, the social services sector, the literacy sector, the educational sector. Let's leave a generation ahead of us the kind of infrastructure in our community that we need.
The Chairman: Thank you very much.
Mr. Kelly.
Mr. Kelly: I'll be very brief. Stay the course, as many people have said, but stay the course of the promises made previously to the children of this nation and follow those through.
The Chairman: Thank you, Mr. Kelly.
Mr. Daniels.
Mr. Daniels: I think Lloyd Atkinson's comments were very helpful on the macro-context in which you have to work. It's difficult and it's challenging, and I respect the difficulty.
The Chairman: Thank you.
Mr. Ruffell.
Mr. Ruffell: This is just about the same. Like the committee members...there are tremendous demands and priorities - a very, very tough job you have.
You have to straighten out the macro. We're going to crowd out so many things we could do as Canadians with interest payments. I'd rather see help going here and there.
I'm pleased, Mr. Chairman, that you did recognize Etobicoke North as one of the top ridings. That is the other one, I believe.
The Chairman: Absolutely.
Mr. Rollason.
Mr. Rollason: It's important to continue to improve the financial performance of the government, but I think everyone has to recognize that there will be some very difficult decisions to be made about spending priorities. That's probably equally important in keeping the trend going forward in an improved fashion.
The Chairman: Thank you.
Ms Albiston.
Ms Albiston: I would of course encourage you to maintain some support for literacy. Literacy is the most political issue. It affects health, social justice, the economy. I will leave you with this last thought: the reason it's the most political issue is that if you can't read, someone is going to do it for you.
The Chairman: Thanks.
Ms Popham.
Ms Popham: If this year is an opportunity to invest in children, the two things we will look for in this budget are restoration of the $600 million lost in the child tax benefit since this government came to power, and indexing of the child tax benefit.
The Chairman: Thank you.
Lastly, Mr. Hughes.
Mr. Hughes: I'm with Rosemarie. I would take a close look at a couple of principles. With 15 seconds I would say that some really important ones are who pays, where the burden falls of the fiscal priorities you make, where the principle of fairness and equality of sacrifice is as we talk about the deficit and so on.
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The Chairman: Thanks very much.
I want to thank all of you on behalf of members from all sides. A lot of people have put it very well. In our travels right across this country, I have seldom seen a panel where the contrasting positions were put in the form of the great dilemma we face.
Lloyd Atkinson expressed very clearly that even though things are going better than they were, our debt is still growing faster than our economy and our long-term interest rates are still, in real terms, higher than in the United States. Although we've made incredible progress and there's been a lot of sacrifice, we're not out of the woods yet.
We contrasted that with the impact our cuts have had on various sectors, particularly those relating to child poverty. Rick Kelly, Rosemarie Popham and Colin Hughes have brought this home to us in very real and graphic terms.
Colleen Albiston has done it in terms of literacy. Peter Rollason even suggested it would be his priority that we have a tax cut on payroll taxes if we could find the money somewhere in terms of cutting other programs.
So there are demands on us for tax cuts and for new expenditure programs.
The big thing that's come out of this - and Mr. Solberg expressed it extremely well - is the whole concept of partnerships. We've seen that directly presented by Glenna Carr, with public-private sector partnerships for infrastructure projects, and others. We've seen how Terry Ruffell has developed a partnership for setting standards for sales training right across Canada, working with the federal government. We've seen how ABC has a partnership with the private sector and with government for literacy.
We've seen what really, as Mr. Campbell described, is a working relationship, but it's almost a bit of a partnership, where we've identified needs for Canadians to have supplemental health and medical benefits and we're putting the onus on the industry to come up with the solutions.
Lastly, Nick Offord, you have given us the overall position, which I know this committee supports very enthusiastically, that we, having withdrawn or cut down on direct funding of so many of these things, have an obligation to give back to our partners, the private sector, the tools to go about doing the job, through increased tax breaks for charitable donations.
The task is not easy, as you've said, but because of your help, it is made a lot easier. Thank you very much on behalf of all members.
We're adjourned.