FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Friday, October 30, 1998

• 0902

[English]

The Chairman (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call this meeting to order and welcome everyone here this morning.

As you know, the finance committee is presently undertaking a study for pre-budget consultation. This morning, we have the pleasure of having with us three members of Parliament. We have the leader of the Bloc Québécois, Mr. Gilles Duceppe, and members of Parliament Yvan Loubier and Odina Desrochers.

I welcome you. I think you know how this committee operates. You've been here for a number of years now. You have 10 to 15 minutes to make your presentation, and thereafter we will engage in a question and answer session.

Welcome.

[Translation]

Mr. Gilles Duceppe (Laurier—Sainte-Marie, BQ): I am indeed accompanied today by Mr. Odina Desrochers, the Member for Lotbinière, who will explain the process behind the preparation of this brief, and Mr. Yvan Loubier, the Member for Saint-Hyacinthe—Bagot, Finance Critic for the Bloc Québécois, who will provide a detailed explanation of the proposals we will be presenting this morning.

I want to begin by saying that we conducted broad consultations. Without wanting to offend anyone here, we did feel the Finance Committee's consultations were too limited and that we had to consult more broadly. We felt that was necessary in order to gain a clear understanding of the needs and wishes of all the men and women who pay taxes, given our belief that Quebeckers' and Canadians' tax dollars have to benefit them and that the economy has to serve those men and women, rather than the opposite, that they serve the economy.

I will move immediately to our main points. For this year, we are forecasting a surplus of approximately $15 billion. I would point out that in previous years, all the Bloc Québécois' forecasts turned out to be pretty well accurate. I remember that Paul Martin at one point was forecasting a deficit of about $24 billion, whereas our estimate was $10 billion. The actual deficit turned out to be $9 billion. And we could engage in the same exercise for every year in succession.

Our figure of $15 billion is based on a rigorous analysis of the situation. For example, the Conseil du patronat, which took part in our consultations, is predicting a surplus of $19 billion, and the Mouvement coopératif Desjardins, a surplus of $17 billion. So, we feel our estimate of $15 billion is a conservative one, in the positive sense of the term.

• 0905

According to the people we consulted, that $15 billion should be used, on a priority basis, for social programs, particularly in the areas of health, post-secondary education and welfare—in other words, for what are commonly called transfer payments, which are also the subject of a social union proposal signed and put forward by all the provincial premiers in Saskatoon, last August.

The second priority is tax cuts, in the sense that taxpayers feel they have made a considerable effort in recent years and should now reap the benefits of that contribution, at least in part.

The third priority is employment insurance because, for one thing, businesses and workers are paying for a service that has decreased enormously, and also because premiums are far higher than they need to be.

So, there are the three major priorities, health care being at the top of the list.

It's important to remember what the agreement reached in Saskatoon by the provincial premiers was all about. First of all, between 1994 and the year 2003, the federal government will have cut transfer payments by some $42 billion. We are told that $6 billion will be put back in. In actual fact, however, under one of Paul Martin's budgets, the amount of the cuts was to be $48 billion, and only subsequently was that amount lowered to $42 billion. That translates into a shortfall for last year of $6.3 billion.

I would also remind you of the statement made by Jean Charest, who said that health care problems in Canada could not be blamed on Harris, Klein, Rochon or Bouchard, but rather on Jean Chrétien.

The second priority is a lowering of taxes via indexation of the tax tables. Since 1994, Canadians have paid $37 billion more in taxes than they did previously. Sixty per cent of that burden has been borne by the middle class. Consequently, there is a need to index the tax tables, at a cost of $2 billion.

Another way of lowering Canadians' tax burden would obviously bo to look at employment insurance premiums, which leads me to our third priority.

Employment insurance was conceived for the purpose of providing benefits to workers hit by unemployment. However, the latest figures show that only 40% of unemployed workers who contributed to EI are actually receiving benefits while unemployed. That means that 58%t of those who have paid premiums are not receiving benefits.

We are simply saying not to touch employment insurance. That means $7 billion: a cushion of $1 billion, in addition to the surplus accumulated during the year; $3 billion in order to lower premiums by 35¢ for every $100; and $3 billion to improve access and benefit levels. Thus, out of a forecasted surplus of $15 billion, $7 billion would be used for employment insurance, $6 billion for transfer payments and $2 billion tax cuts, giving a total of $15 billion.

We are not touching the debt this year, even though the people we consulted did say it was important to pay down the debt, and we obviously agree. At the same time, we think the important thing is the timing of that debt reduction.

In that sense, we are all aware of the danger of a recession. Over the past four months, the Gross Domestic Product has dropped, economic activity has declined and the main economic indicators have slipped. Faced with a situation like this, a responsible government has a duty to inject money into the economy by lowering taxes, reducing employment insurance premiums and restoring transfer payments to their previous level.

It is also important to be aware that the index used to assess a country's debt must be calculated based on the Gross Domestic Product. Mr. Loubier will explain the need to consider the debt to GDP ratio. We believe the debt should be reduced when we are able to put at least $5 or $6 billion into achieving that goal.

We are therefore proposing two options in the eventuality that the surplus exceeds $15 billion: either to apply to the debt whatever surplus exceeds the $15 billion mark—for example, if the surplus is $25 billion, $10 billion would be used to pay down the debt, leading to a significant decline in the debt-to-GDP ratio—or use 50% of the surplus amount in excess of $15 billion. In my example, that would be $5 billion, so that the other $5 billion would remain available to cover contingencies or establish major new programs within federal areas of jurisdiction or through the transfer of tax points to the provinces.

• 0910

We are also proposing that much of the non-budgetary operational surplus be used to service the debt. That suggestion was also made by the Mouvement des caisses Desjardins.

That is an outline of our main proposals. We believe that these surpluses belong to taxpayers, in keeping with the promises made by the government, which were to devote 50% to social programs and tax cuts, something that has not actually happened. In our views, these suggestions truly reflect the wishes of the people we consulted.

I want to thank you for giving us this time to make our presentation. Mr. Desrochers will now very briefly explain the processus through which we arrived at these conclusions.

Mr. Odina Desrochers (Lotbinière, BQ): Thank you, Mr. Duceppe. This wonderful democratic exercise began with consultations held as part of a public awareness initiative led by the Leader of the Bloc Québécois, Mr. Gilles Duceppe, the Finance Critic, Mr. Yvan Loubier, the Chairman of the Caucus, Mr. Bernard Bigras, and a variety of other B.Q. Members all across Quebec.

These consultations took place between September 15 and 19, 1998. We put together a paper that explores the following themes: reimbursing the provinces by increasing transfer payments for heath care, education and welfare; managing the employment insurance system better; significantly reducing Quebeckers tax burden; not creating any new programs; and passing balanced budget legislation.

How were these consultations held? In a variety of ways, in fact. First of all, we organized round table discussions, open-house meetings and public assemblies. We mailed out questionnaires and surveys, including a scientific survey in the riding of Rimouski-Mitis that is represented by Ms. Suzanne Tremblay. Other Members also used toll-free numbers as a means of ensuring that everyone could express their views on the budget surplus issue.

Here are the results. In all, 100 regional organizations representing a variety of stakeholders, such as community, educational, union, business, financial, political, environmental, municipal and agricultural groups, answered our call. As well, fourteen national organizations took part in this process initiated by the Bloc Québécois. The national organizations presented their views at two separate meetings, one in Quebec City and the other in Montreal.

This morning, it is our pleasure to table a document that presents twenty-six summaries covering eleven regions of Quebec. That means that more than 2,500 people representing several hundred thousand Quebeckers made representations with respect to the use of the budget surpluses, in anticipation of federal Finance Minister Paul Martin's next budget.

To give you an idea of just how seriously we took this whole consultation process, we even met with the Quebec Minister of Finance and the Economy, Mr. Bernard Landry, who came to present his government's position and comment on the document provided to all participants.

How did we initiate this process of reflection and discussion? The participants were invited to answer the following questions: do you agree with the position taken thus far by the Bloc Québécois; is there a need to supplement or develop that position further and, if so, why?

I will now turn it over to my colleague from Saint-Hyacinthe—Bagot, Mr. Yvan Loubier, to present the essence of that report and the specific issues it addresses.

Mr. Yvan Loubier (Saint-Hyacinthe—Bagot, BQ): Thank you, Mr. Desrochers. Mr. Chairman, if you don't mind, I would like to take a few minutes to explain the majority opinions expressed through the consultations.

First of all, when we held these consultations, we wanted our starting point to be actual figures—specifically, the most credible forecasts possible of the budget surplus for the current fiscal year, 1998-99. Why are we talking about actual figures? Because we believe that there has been what might be called a democratic deficit for the past four years—in other words, we believe Mr. Martin has been fudging the figures to a certain extent, including the figures for Budget Estimate. For example, over a six-month period, he may make "minor" forecasting errors of as much as 63% as far as his deficits or surpluses are concerned. No one believes the figures the Minister of Finance puts forward anymore. In fact, when he tabled his last budget, for the very first time, the Minister of Finance not only said, but wrote, that in this fiscal year, the next one and two years from now, the budget surplus would be zero. Everybody knows that can't be true. Mr. Martin's figures have zero credibility. Indeed, since he made his economic statement here at the Finance Committee, a number of analysts have been expressing their doubts and no longer have any faith in the figures being presented.

• 0915

During the first five months of this fiscal year, Mr. Martin accumulated surpluses amounting to $8 billion. We are leap years away from the zero surplus estimate presented by Mr. Martin. As was indicated by my leader, Mr. Duceppe, last year in the month of February, the government's budget deficit was forecasted to come in around $10 billion. Mr. Martin, however, refuted our claims and said that the deficit could be approximately $24 billion. Later he changed his mind and said it would be $19 billion. He even accused us of throwing out empty figures. Six months later, however, at a conference in Vancouver, he presented the real deficit figure for 1996-97: it was $9 billion—in other words, pretty well what the Bloc Québécois had forecasted. The Minister of Finance's forecast was out by 60% in a period of less than six months.

So, we used the actual figures—albeit conservative forecasts—because as Mr. Duceppe mentioned, some organizations who took part in the broad consultations held by the Bloc Québécois told us that it could exceed $17, $18 or even $19 billion, at least in the view of one of these organizations, despite the economic slowdown. So, we worked from the assumption that there would be a $15 billion surplus.

A number of majority views were expressed that I would like to present in sequence. The vast majority—indeed, there was almost a consensus on this—of participants asked that the federal government use this year's surplus and those of the coming years to reimburse the provinces on a priority basis for the cuts made to transfer payments. Health care emerged as the most important priority of those we have mentioned. So, almost all of those who appeared before the Bloc Québécois during the consultations cited this as their number one priority.

Our second major conclusion is that the vast majority of Quebeckers—and again, it is almost unanimous—want $6 billion to be put back into transfer payments to the provinces, just as the provincial premiers, including the Premier of Quebec, have been asking. But they also want that money, which would serve mainly to fund health care, to be paid back to the provinces in the form of tax points, so that the provinces would never again have to go through what they did four years ago, when the Minister of Finance imposed arbitrary cuts. Those, then, are our recommendations as to how the first $6 billion of this year's $15 billion surplus should be used.

I would now like to move on to the second point on which there was quite a broad consensus, since the vast majority of participants agreed on this point. The opinion of the majority was that personal income tax must be lowered substantially, but at the same time intelligently—in other words, not across the board, since the richest could potentially benefit from any reduction in the tax burden. In fact, tax reductions must be targeted to low- and middle-income taxpayers, for two important reasons.

First of all, for the past four years, they are the ones who have borne the largest burden of the tax increases decreed by Mr. Martin, which amount to some $20 billion. They are the ones who have paid and in the process been crushed by a tax burden that has never been lowered in the four and a half years the Liberals have been in power.

Secondly, since we are currently in a period of economic slowdown—which Quebeckers are well aware of—and uncertainty as a result of the Asian crisis and its impact in North America and the planet as a whole, taxpayers in these income brackets are most likely to take the new income they would receive through targeted tax cuts—accomplished through either full indexation of the tax tables or a highly targeted reduction in employment insurance premiums—and spend it, rather than putting it away or saving it, thereby boosting economic growth.

First of all, we think that a major contribution on the part of the Minister of Finance, in terms of using these surpluses to reduce the burden of taxpayers in specific income brackets, would be to set aside $2 billion for full indexation of the tax tables.

The third point on which there was quite a bit of consensus was the need to improve the employment insurance system. I would even say that it was unanimous. Whatever aspect of employment insurance you happen to refer to, people are critical of the fact that the system is obsolete and no longer meets the needs of the labour market, jobless or even employers. I would remind you that when a number of seasonal employers, such as farmers, appeared before us, they made the point that they are no longer able to recruit people—and it was already quite difficult before—because of the stringent criteria now in place under the Employment Insurance Program, reduced benefits and the high level of disqualification.

• 0920

The $7 billion of surplus that have accumulated and are forecasted for this year in the Employment Insurance Fund should all be devoted to improving access and benefits, as well as lowering premiums, which are a hidden tax that both employers and employees are required to pay. Thus $7 billion would be devoted to that on a priority basis. In all, the $15 billion of budget surplus would be allocated to three separate areas seen as vitally important by the vast majority of Quebeckers whose views were solicited through this broad public consultation process undertaken by the Bloc Québécois in every region of Quebec.

During these consultations, a number of participants placed considerable emphasis on the debt. We also believe it to be important. A debt as high as ours warrants not only our attention but appropriate measures to control it, which is just what we have been doing since we achieved the goal of a zero deficit, primarily so that we can use part of the surpluses to pay down part of what is a very large debt.

If there is such broad consensus on the debt reduction issue, it is primarily because of the need to respond to people's needs by attending to the priorities they clearly articulated during the pre-budget consultation process: increase transfer payments to the provinces, which are to be invested in health care particularly; tax cuts for lower- and middle-income taxpayers; and in-depth reform of the employment insurance system.

Once those three priorities have been achieved, whatever else is available after that could be devoted partly to debt reduction and partly to new initiatives.

I can already hear your reaction. You're going to say: "You are calling for very tight management of forecasted surpluses, yet we are currently in a period of uncertainty as a result of the Asian crisis, and if it weren't $15 billion...". I want to make a couple comments in that respect before moving on to your questions.

The first is that the forecasts we have presented are based on the information currently available to us. In the business of forecasting, anything can happen. We are currently in a period where we don't know when the Asian crisis and its effects will cease to be felt. Today we feel confident of a $15 billion surplus. That amount is determined based on what we call ceteris paribus, meaning all other things being equal. Based on the current tax structure and system, we can expect the surplus at the end of the current fiscal year to amount to some $15 billion. If the Minister of Finance were to decide to reform the personal and corporate income tax systems, as the Bloc Québécois has been asking ever since it came to Ottawa—and again, a very broad consensus has emerged in Quebec on that very issue since we carried out our consultations—he would be able to free up other sources of income and use the money associated with certain tax expenditures more productively. For example, those monies could be used to serve Canadians better. In many ways, the tax system is in fact obsolete.

Three years ago, we presented 400 pages of analysis on how to reform the personal and corporate income tax systems. When we tabled our study—everyone sitting at the table today will remember that—Mr. Martin said that it was a good, serious piece of work that warranted further consideration. Since then, he has established a working group, called the Mintz Group. But that group has accepted barely 10 percent of what we proposed. Yet the purpose of our suggestions truly was to improve the lot of low- and middle-income taxpayers and ensure that tax dollars are being used to create jobs. Yet he has not implemented more than 10% of the suggestions we made. Furthermore, he has not freed up the funds he could have, that could then be added to the $15 billion surplus and other similar surpluses we will have in the coming years.

If he were to do that, he could fund a variety of initiatives, such as the development of a real shipbuilding policy in Canada. Canada is in fact the only industrialized nation not to have a shipbuilding policy, even though it happens to be a country surrounded by water. What could be more absurd. You often hear people say: "If Mr. Martin tabled a draft shipbuilding policy, you would accuse him of playing favourites with his own industry and you would come at him with both barrels, like you did last year on Bill C-28."

• 0925

Our response to Mr. Martin, if that's what he thinks, is that there is a difference between tabling legislation as the Minister of Finance, when you're a shipbuilder—legislation that could or would provide you with considerable tax benefits—and establishing a shipbuilding policy that would benefit Quebeckers and Canadians as a whole, by creating jobs and ensuring that shipyards in both Quebec and the rest of Canada benefit from the same kind of policy that exists in other industrialized countries. At the present time, we are the only ones without such a policy.

We would also be in a position to free up additional monies as a result of both tax reform and economic conditions in the coming years. We could thus take a variety of positive, structural economic initiatives. Also, we could invest in the provinces so that they, too, could contribute to new social housing construction, for example. Finally, we could use the rest of the surplus to pay down part of the debt.

That is the additional information I wanted to bring forward with respect to the broad consultations held by the Bloc Québécois in Quebec. Mr. Duceppe, Mr. Desrochers and myself would now be very pleased to answer any questions you may have.

[English]

The Chairman: Thank you very much, Mr. Loubier, Mr. Duceppe and Mr. Desrochers.

I will now go into question and answer session. We'll begin with Mr. Valeri.

Mr. Tony Valeri (Stoney Creek, Lib.): Thank you, Mr. Chairman.

I first want to thank the party, in particular Mr. Duceppe, Mr. Loubier and Mr. Desrochers, for actually doing what in fact this committee had asked parliamentarians to do, and that is to engage in their own pre-budget consultation.

As you'll recall, the chair of the Standing Committee on Finance sent out a letter in June, and certainly last year, under the same sort of format, and had asked that we expand the consultation to allow Canadians from every part of this country to participate in a public forum so that they can have input into the consultation process and again come back to the committee and allow us to take that information into consideration. So I want to thank you for in fact doing what the committee had asked many parliamentarians to do.

I have a couple of questions, and I want to start off by saying first that the general thrust of the proposal you've made is essentially that you'd like to see an increase in transfers to the provinces, you'd like to see a reduction in personal income tax, you'd like to see some reduction in employment insurance premiums, and subsequent to that you'd like to see a paydown of debt.

So essentially again I would like to thank you for supporting what has essentially been the government policy: an increase in transfers, a desire to reduce personal income tax, a downward trend on employment insurance premiums, and a paydown of debt. We might disagree perhaps on the actual percentage, but generally the thrust is the same, and so I want to take the opportunity to thank you for supporting the government policy as well.

My specific questions would be along the following lines. You talk about tax cuts, but there was no mention of whether you were interested in broad-based tax cuts or whether you were interested in targeted tax cuts. Are you suggesting, when you talk about personal income tax cuts, a more progressive personal income tax regime? What would the impact be on the brain drain? Essentially, we have to remember that those who are earning more than $50,000 in income represent only approximately 12.4% of taxpayers. And you'll also know, Mr. Loubier, being the economist, that they pay 55.3% of the personal income tax at the federal level. It's quite progressive in most people's minds.

In fact, let me go further. You also talk about the prudence factor. You suggest that we spend the first $15 billion—I think that's what the presentation indicated—rather than using any part of that to reduce debt. So the first $15 billion would be used for other initiatives. I'm assuming, because Mr. Loubier had indicated that you were using the data that are available, that the contingency reserve is part of the $15 billion. I guess it was only the other day that Pierre Fortin came to the committee to say unequivocally that the contingency reserve should be dedicated to debt repayment. Are you now indicating that you would like to see the contingency reserve become an item that is spent rather than there to deal with any unforeseen circumstances or paydown of debt?

• 0930

With respect to the prudence factors, essentially you made the comment that the projections have been somewhat off the mark. I want to be very clear. The government certainly is not going to apologize for exceeding a target that in fact puts the country in a better condition, Mr. Chairman. So are you saying that we should now dismiss the process of building budgets that has occurred in the past number of years? Are you suggesting that prudence factors that were introduced by the government should now be abandoned and that we eliminate the element of cautiousness?

I do believe Mr. Loubier indicated that they were well aware of the international circumstance and the financial turbulence that's out there. Again, it was only the other day—and these are economists, so they are colleagues of Mr. Loubier—Maureen Farrow indicated that she has never seen the world economy so fragile. So at a time when the world economy is so fragile, are you suggesting—and based on your proposal and the suggestion to spend $15 billion before you do anything on debt—that we abandon the prudence factors? What kind of signal does that send to the markets? I'm sure Mr. Loubier would like to respond.

[Translation]

Mr. Yvan Loubier: Mr. Valeri, your question is very broad. But I also have a lot of answers for you.

[English]

Mr. Tony Valeri: The questions are quite similar to yours, actually. It's the first opportunity I've had to actually ask them.

[Translation]

Mr. Yvan Loubier: I would like to begin, Mr. Valeri, by addressing what you call "the prudence factor". I want you to know that prudence is also a watchword for us. Indeed, I would remind you that we are the only party in the House of Commons to have tabled an anti-deficit bill. We don't want the federal government to fall back into the bad habits of the past, which put us in the hole, with an accumulated debt of $600 billion.

If anyone can be called prudent, I can assure you it is certainly the Members of the Bloc Québécois. However, there is a difference between prudence and doctoring the data, to the point where we are really talking in some cases about barefaced lies. Prudence does not mean lies. In February of 1997, Paul Martin forecasted a deficit of $24 billion for 1996-97. Several weeks later the amount had dropped to $19 billion. Yet in our party, with the few resources and limited means at our disposal—we don't have access to the combined manpower of the Departments of Revenue and Finance—we were able to pinpoint with some accuracy the real size of the deficit.

Six months after Mr. Martin had told us that our figures were completely out of line, those figures turned out to be the right ones. Mr. Martin has been doing this consistently. I would never fault anyone for being prudent and wanting to have a cushion, but between being prudent and becoming a laughing stock, there is quite a difference. I think that Mr. Martin crossed that line some time ago.

As I pointed out earlier, the Bloc Québécois is very much aware that the debt represents a major problem. I reminded you a few moments ago, Mr. Valeri, that during our consultations, a number of people made the point that the debt was a concern. Don't you think, as Mr. Chrétien was saying a few weeks ago, that you have done enough on the debt reduction side for this year? In fifteen months, you have taken $20 billion of surplus that you freed up, in one way or another, to pay down the debt, even though all across Canada, people have been asking you to put at least several billion dollars more into health care. The statement on the part of the provincial premiers was unanimous. They said: "We need the money you have been cutting, year after year, over the last three years, because there are very pressing needs in the health care sector."

However, you turned a deaf ear to their representations and put everything into debt reduction. That, too, is one definition of prudence, I suppose.

• 0935

When you take all your fiscal resources and decide—a return to rustic good sense, it would seem—to put all your eggs in the same basket, which is what your government did by putting $20 billion worth of available fiscal resources into debt reduction over the last fifteen months, that is not prudence. And the effect of that is to deprive us of part of the available resources we might need if the economic slowdown were to continue. In that respect, I agree with the idea that found a consensus among G-7 Finance Ministers, who said that all industrialized G-7 countries should take action to shore up economic growth, which has had a rough ride because of the Asian crisis and four months of lower GDP growth in Canada.

Using the entire $20 billion to pay down the debt is not demonstrating prudence. In my view, what it demonstrates is total incoherence. First of all, it contributed to an even greater drop in the value of the Canadian dollar. Paul Martin even admitted that when he came before the Finance Committee to make his economic statement. Secondly, there is a need to stimulate the economy, which is what everyone is now asking.

You may recall that in mid-August, the Bloc Québécois was warning the government that with three consecutive months of decline in GDP growth, it was becoming clear that we had to take the fiscal resources available—in other words, the surpluses—and use them to stimulate the economy. What was needed was an injection of cash into the economy via social programs in order to strengthen economic growth. It was also clear that we needed to give a boost to the business sector by substantially lowering employment insurance premiums, for example, because they are nothing more than a payroll tax. At the present time, given slower demand, businesses need this kind of boost.

Some analysts agreed with us, but most of them, including John McCallum, Chief Economist for the Royal Bank, told us that we were way out in left field, that what we were proposing made no sense and that he didn't have enough data to conclude that we were really in the midst of an economic slowdown.

Well, last week, on Monday, October 26, John McCallum declared that there was indeed a problem. This is what was said:

At the largest Canadian bank, the Royal, the Chief Economist shares these concerns with respect to the recession. Our economic problems are far from being over and they will continue to make themselves felt within the economy, says John McCallum.

And I continue to quote:

Mr. McCallum, for his part, suggests that Ottawa stimulate the economy, either by increased federal spending or tax cuts.

So, opinion is clearly unanimous. If John McCallum, whom the federal Finance Minister is always citing as a reference, is now telling him precisely what the Bloc Québécois has been saying, then perhaps in the wake of the pre-budget consultations, our suggestions and those of all Quebeckers are worth paying attention to.

You talked about tax cuts. You were probably talking to the researchers, but we did specify that any tax cuts should first and foremost target low- and middle-income taxpayers, since they are the ones who have made an ongoing contribution to the government's effort to put its fiscal house in order over the past the four years, and they are also the most likely group to devote the additional resources made available to them through tax cuts on consumer spending, thereby stimulating the economy.

I don't know whether that answers your questions, Mr. Valeri, but you asked broad questions that required broad answers.

[English]

Mr. Tony Valeri: No, it does, but I should just point out that when you were focusing on transfers, the other aspect of your presentation made reference to essentially increasing those transfers via the tax points. That was quite interesting, actually. You indicated that you wanted to have the money increased through tax points, and you then went on to say that you want to replace the $6 billion that has been taken out of the social transfer.

Forgive me for being blunt, but the inconsistency is obvious to me. Again, Monsieur Duceppe, you're the leader of the party, so I would expect that you would have access to this kind of information. Mr. Loubier is the economist.

When you calculate total entitlements, which I'm sure you realize is a combination of cash and tax points, it's really not $6 billion but is effectively $3.8 billion. You cannot on one hand argue that the cash transfers have been reduced by $6 billion so give them back, but give us what we want back in tax points. While you're making that argument, you're discarding the actual fact that it's total entitlements that should be the issue—no one disputes that—rather than just the cash transfers that you're referring to.

• 0940

Do you agree that total entitlements are the basis of the discussion, and that tax points are a significant part of those total entitlements that go to provinces? Or are you merely saying that they're important on the one hand, but you're not really that concerned about them on the other?

[Translation]

Mr. Gilles Duceppe: It's important to remember that the tax points were negotiated by Jean Lesage and Pearson and that twenty-nine federal programs were withdrawn. The greater the increase in tax points, the greater the increase in revenues. It's also important to be cognizant of the fact that spending increases in the same way over the years and that it is estimated in current dollars; we don't consider only what things cost previously, but what they are costing now. If we want this issue to be resolved, we believe it's important to consider converting the monies paid out in the form of transfer payments into tax points. We support that approach and we can already confirm that if you accept it, that issue will be resolved immediately.

However, once we have resolved the matter of tax points, there is another matter we will have to consider. The Liberal Party, under Pierre Elliott Trudeau, established a number of joint programs whereby the federal government made transfer payments in order to ensure its own visibility, something it was very successful at. Over time, and I would even say rather perniciously, the federal government withdrew from the programs it had put in place and used the money that was supposed to fund those programs to bring down the deficit. Now that it has money, it is saying it intends to establish new programs. Our reaction to that is that we have had quite enough of this silly game, that only leads the provinces to a dead end, since they end up having to continue to provide the services. That is why we are recommending that the problem be dealt with by converting this money into tax points under the federal system, as long as we remain part of it.

So don't try to now claim that the transfer payments issue did not originate with the federal government and ask us to agree to the federal government's withdrawal. And sovereignists are not the only ones saying that; all the provincial premiers, the Forum on Health and the Opposition parties are saying the same thing. I guess you're the only ones who are right.

[English]

Mr. Tony Valeri: No one is disputing the idea that transfers to the provinces are important, but you are in essence confirming to me that tax points are important in your argument but are not important in the argument of total entitlements. That's fine.

[Translation]

Mr. Gilles Duceppe: No.

[English]

Mr. Tony Valeri: Well, that's essentially what you said. You want to deal with the past problem through tax points, but going forward, you ignore tax points as an issue that is part of total entitlements.

[Translation]

Mr. Yvan Loubier: If you don't mind, I would like to add to what my leader has said. What we're asking for is quite simple. In his 1995 Budget, Mr. Martin introduced a plan to cut transfer payments to the provinces, which are primarily used to fund health care, welfare and higher education. If this plan continues until the year 2003, the government will have taken some $42 billion in cash transfers away from the provinces—money that could have been used to fund those three program areas. Before the election last year, he had predicted cuts of $48 billion, but your Prime Minister then undertook to put some $6 billion back into social programs. So, rather than amounting to $48 billion, the cuts will end up totalling $42 billion. In actual fact, however, he has not increased transfers to the provinces. He only decided that rather than cutting $48 billion between now and 2003, he would only cut $42 billion. Like the Quebeckers we consulted, as well as all the provincial premiers who met in Saskatoon, we are asking you to announce that the $6 billion in cuts will not go ahead this year. The premiers are even more flexible in that area.

You talked about a cushion and the prudence factor. The provincial premiers have said that the $6 billion to be repaid them in the form of tax points—because that is a more prudent approach, given the arbitrary way in which you make cuts—could be given back over a two- or three-year period. Rather than returning the $6 billion to the provinces all at once, you could give them $2 or $3 billion one year and pay the rest the following year. That would certainly be in keeping with your desire for a cushion and your concern for the prudence factor; the logic of our suggestion speaks for itself.

Mr. Gilles Duceppe: I wanted to make one clarification with respect to tax points and transfer payments. It's worth making this point because it doesn't happen every day that the Bloc Québécois and the Liberal Party of Canada see eye to eye. The fact is, our position on transfer payments, tax points and unilateral cuts on the part of the federal government is exactly the one the Liberal Party adopted under Jean Chrétien when he was in Opposition and denounced the actions taken by the Conservatives. We used exactly the same reasoning and arguments that you made when you were sitting on the other side of the House. But it seems that things have changed since, because now you are doing exactly what the Conservative government did back then. We took much of our inspiration from the comments made by Jean Chrétien when he was Leader of the Opposition.

• 0945

[English]

Mr. Tony Valeri: Then as you go forward in the provincial election, I guess you'll be inspired to support Jean Charest. In the last federal election, he indicated that transfer to the provinces should be entirely in tax points. Now that you have indicated your position formally with the committee, when you go door to door in Quebec, I guess you'll say that during the last federal election Mr. Charest indicated that transfers to the provinces should be entirely in tax points and that there should be no further tax transfers. I guess you're somewhere between the Conservative Party federally and the Liberal Party federally, but I'm not quite sure.

[Translation]

Mr. Gilles Duceppe: Let's not go too far here. I think Mr. Charest has very little use now for Mr. Chrétien's support.

[English]

Mr. Tony Valeri: I do have one final comment, Mr. Chairman. I guess it was Mr. Loubier who mentioned something about more money for social housing for the provinces as well.

In your wrap-up, you talked about additional money for social housing. I could be wrong and I stand to be corrected, but I understood that there was actually a process of transferring responsibility to the provinces to allow for the provinces to have greater control over social housing. I guess you would agree with that type of policy in terms of labour market agreement, transfer of social housing and those types of things to the provinces.

[Translation]

Mr. Gilles Duceppe: Yes, they're very worthwhile.

[English]

Mr. Tony Valeri: And once again a federal government initiative.

[Translation]

Mr. Gilles Duceppe: Indeed, I would point out that the examples you have cited—labour, school boards and immigration—have always been achieved.

[English]

Mr. Tony Valeri: I didn't use school boards, labour or immigration.

[Translation]

Mr. Gilles Duceppe: No, but your Prime Minister did. And I would remind you that all of that occurred with a sovereignist government in power in Quebec City. I guess there was enough of a balance of power to force the federal government to do certain things.

Having said that, we are asking not only that we be given responsibility for social housing, but that we receive the necessary funding to take on that responsibility, because you have levied taxes for social housing. You are withdrawing from that area, but you are not passing on the associated funding. That's why there is no agreement with Quebec at this time in the area of social housing. Because the costs of social housing in Quebec are lower than they are in Ontario, we have been penalized for being more successful. That is why there is no agreement and why it is so important that there be one in the area of social housing. The government mustn't just symbolically hand over this responsibility; it also has to hand over the cash. That is what everyone in Quebec is asking.

Mr. Yvan Loubier: And that relates to a promise made by Mr. Chrétien during the 1993 and 1997 election campaigns. He undertook at that time to transfer that crucial sector to the provinces, as well as increase funding for it, something you chose to completely ignore. As concerns Quebec more specifically, social workers have made their views very clear. Having done our own calculations, we note that Quebec has a shortfall of $450 million, compared to the funds other Canadian provinces are receiving.

[English]

The Chairman: Thank you, Mr. Loubier.

Mr. Tony Valeri: I wanted to conclude, Mr. Chairman. I know my time is finished and I hope I get a chance to come back. Again, though, I just wanted to thank the witnesses for essentially supporting the thrust of the government, and I welcome them to the committee.

The Chairman: Mr. Forseth.

Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, Ref.): Thank you very much. I'm sort of sure our guests would not agree with that, but I wanted to try to narrow the discussion to some specific, particular points. I would also hope that I could have some very specific, clear answers.

One of the things I picked up was that you said the Bloc was the only party that presented an anti-deficit bill. Perhaps you've forgotten the Reform Party's big thrust about balanced budget legislation, so I wanted to ask you about that in a general way.

What is your commitment to balanced budgets in the future? Could you outline your economic philosophy about five years or ten years down the line? If you say you have an anti-deficit bill, does it imply that you'd be fundamentally committed as a party to balancing the budget every single year unless there was some unusual national emergency? Let's deal with that point first.

[Translation]

Mr. Yvan Loubier: Mr. Forseth, I have to apologize for being unaware of the Reform Party's initiative. During last year's election campaign, the possibility of balanced budget legislation was raised as part of our election platform. I tabled a bill to that end and recently appeared before the Sub-committee to discuss my bill. I was unaware of your party's bill, but as far as I'm concerned, if you support that kind of legislation, that is very good news. We will be on the same side. We may not always use the same terminology, but we can certainly take a united stand on that issue.

• 0950

People's minds tend to become clouded during periods of budget surpluses. They tend to forget that the Liberals may return to their bad habits by continuing to spend inordinate amounts of taxpayers' money for the sole purpose of increasing their own visibility—for example, by taking more and more initiatives in areas of provincial jurisdiction, like the Millenium Scholarship Fund and other such programs—at the risk of allowing us to be caught up once again in the spiral of annual deficits.

Our balanced budget legislation is intended to prevent the federal government—along the lines of what was done in Quebec by Mr. Landry through the excellent piece of legislation passed by the National Assembly—from running annual deficits, as a basic principle, except under very specific circumstances, such as a deterioration in the general economic situation requiring an increase in social transfers to individuals in the form of income support payments and so on. In the case of a natural disaster or the need for Canada to help resolve international conflicts requiring increased spending, there would be some flexibility and a deficit could be incurred.

However, in the event of a deficit exceeding $3 billion, the legislation would force the Minister of Finance to present a six-year plan to wipe out the deficit and pay back 75% of the deficit incurred that year over the first three years of the plan. It would also force the Minister of Finance—and this is something we see as particularly positive—to be accountable to the House of Commons, something which is not currently the case. He throws out whatever figures come to mind and however much we may question him, there is no rigorous process in place to control either public spending or the accounting methods used by the Minister of Finance.

Our legislation, which we will have an opportunity to debate in the House of Commons, contains a section that specifically deals with the impact of accounting changes within government—or of the interpretation of such accounting changes—on the public finances in general. The Minister of Finance would be required to justify such changes. What exactly does that mean? Well, he could no longer pull a fast one on us the way he did when he included in his current balance sheet the sum of $1 billion in compensation he was going to be paying subsequently to the Maritime provinces for the harmonization of the GST and provincial sales taxes. He did the same thing with the Millenium Scholarship Fund, charging the entire expenditure for the Millenium Fund to last year's budget, when in fact they will only begin giving these scholarships in the year 2000. This legislation would not longer allow him to do that. That is the advantage of balanced budget legislation. And I'm happy to know that you support it.

[English]

Mr. Paul Forseth: That's a note of mutual support. Now, if your party is not prepared to form the government to achieve your agenda, then you should be telling Quebeckers that a Reform Party government would deliver your agenda and you should be out there campaigning for that and letting the people of Quebec know that.

I would ask for you to specify a little bit about—

Mr. Gilles Duceppe: Do you want to be re-elected?

Mr. Paul Forseth: I was hearing something of a dual and conflicting message from you.

Mr. Tony Valeri: It's actually nice to confirm that you've been working together for a while.

Mr. Paul Forseth: You talked about balanced budgets and tax cuts, but then you also outlined continuing spending initiatives. I'm wondering if you have any thought about additional fiscal responsibility in perhaps areas where the federal government should not be spending money so that you would be more realistically presenting a picture that allows you to maintain your stated goal now. You have a clearly stated goal of having balanced budgets in the future, yet you continue to come, cap in hand, and say that you want additional spending initiatives. Where's your list of suggested items where the government could be much wiser in not spending money?

[Translation]

Mr. Yvan Loubier: Thank you, Mr. Forseth. As regards anti-deficit legislation and promoting the Reform Party, I can tell you we are going to start by promoting ourselves, particularly since there is already anti-deficit legislation in place in Quebec. From the perspective of the Bloc Québécois, which has sovereignist aims, our country will be well-equipped to meet new challenges.

Mr. Gilles Duceppe: We'll negotiate with you.

Mr. Yvan Loubier: Yes, we will negotiate with you, and we'll be pleased to do so.

• 0955

Let's talk about the areas where the federal government should not be looking for additional cash to add to its already considerable annual surplus for this year and the coming years. We have already stated again and again since we were elected in 1993—and this came through very clearly in the pre-budget consultations held in Quebec—that a major overhaul of the tax system might allow us...

Indeed, if memory serves me well, the Reform Party supported us three years ago when we tabled our 400 pages of analysis of major tax expenditures and of the personal income tax structure, and when we proposed a re-balancing of the current system with a view to freeing up funds through the abolition of certain tax measures that no longer fulfilled a need, such as those implemented during the 1960s, for example.

By re-balancing and completely overhauling—rather than just acting on minor suggestions such as those of Mr. Mintz—the current tax system, we could identify other surpluses.

Also, if the federal government minded its own business, there would be additional funds available. How many times have we told the federal government to stay away from education with its Millenium Scholarship Fund? Indeed, there is unanimous support for that view in Quebec because education is the Quebec government's responsibility. And how many other initiatives is it taking in areas of provincial jurisdiction in both Quebec and the other provinces? If it stuck to its own areas of jurisdiction, cash would be freed up that could then be used to fund other initiatives, such as shipbuilding.

[English]

Mr. Paul Forseth: I again particularly enjoyed what you had to say in that the Reform Party also has not been talking about decentralization, but has been talking specifically about rebalancing. It's a fundamental principle in that you would find a change in Ottawa if we had a different government.

I want to specifically look at your tax reform proposal. Are you suggesting something in line with a flatter tax that eliminates a lot of the loopholes while perhaps significantly increasing the base personal exemption that particularly helps those who are on marginal income bases?

[Translation]

Mr. Yvan Loubier: What we proposed, Mr. Forseth—and I would be very pleased to provide you with a copy of our two analyses on personal and corporate income tax—is a review of what are called tax expenditures, meaning all the tax benefits and privileges that benefit corporations or individuals whose income exceeds $150,000. Our purpose was not to create an overall increase in the tax burden, but rather to re-balance the system to ensure that there is greater tax equity, particularly in terms of what taxpayers are paying and large corporations are often not paying, as well as the small business contribution.

Indeed, we said that by reforming the corporate income tax system, we could free up close to $4 or $5 billion, if memory serves me well, which could then be allocated to the small business sector, which is the main source of job creation, precisely with a view to fostering the creation of lasting jobs.

[English]

The Chairman: Thank you, Mr. Forseth.

[Translation]

Mr. Dubé, do you have a question?

Mr. Antoine Dubé (Lévis-et-Chutes-de-la-Chaudière, BQ): My first question is for Mr. Duceppe. I'm no expert on this, but it seems to me we don't see party leaders appearing before committees every day. You were personally involved in the pre-budget consultations held at the invitation of the Finance Minister himself. This is the general question I want to put to you first: What prompted you to become so heavily involved yourself in this pre-budget consultation process?

Mr. Gilles Duceppe: I think this point was made at the very beginning of the meeting: it is important to have a clear understanding of people's needs. This is the first time in many years that we have had a surplus. We are not against the idea of there being a surplus. In Quebec, we are heading towards a zero deficit, after inheriting a $6 billion deficit from the Quebec Liberal Party.

But now that we have a surplus, we want to know how it was accumulated. We have come to the realization that the current surpluses have primarily been produced by businesses, workers and the provinces in the areas of health, education and welfare.

Knowing that taxpayers have devoted a lot of their own resources to this—that is where the surpluses came from; they didn't just appear out of nowhere—we want to know how those surpluses can be used best to improve their situation, considering the dangers of the current economic situation, with all that is going on in Asia and Russia—hence the need to consult our people and gather the information we need to make proposals that meet their needs.

• 1000

Mr. Antoine Dubé: Earlier, Mr. Valeri talked about balance in reference to the issue of tax points. As I understand it, as far as tax points are concerned, things would have continued along the same lines in any case. The cuts to cash transfer payments resulted in a net loss for the provinces.

Mr. Gilles Duceppe: As far as transfer payments are concerned, everyone agrees—not only sovereignists, but all the provincial premiers, the Forum on Health, editorialists, and so on. And the federal government must recognize that transfer payments were established so that the federal government could have greater visibility.

If these transfers were made in the form of tax points, the impact of that change would be that in areas of provincial jurisdiction, the money would come directly from the transfer of tax points, rather than being subjected to unilateral decisions on the part of the federal government. We believe it would be far better simply to transfer those tax points to us.

Mr. Antoine Dubé: I have a supplementary question on that same point. During the consultations, it became clear that one of Quebeckers' priorities is that the provinces be reimbursed the money owed to them. Based on the results of the consultation, what areas did Quebeckers identify as priorities?

Mr. Gilles Duceppe: Well, it is quite clear that their priority is the health care system. And that is not the case only in Quebec. Indeed, the statements made by the premiers of all the other provinces have clearly identified health care as a priority. The premiers even stated, during negotiations with the federal government, that the $6.3 billion could be paid back over a three-year period, providing even greater flexibility. We will have a surplus of approximately $15 billion.

Mr. Antoine Dubé: Those were my main questions. Thank you.

[English]

The Chairman: On behalf of the committee, Mr. Duceppe, Mr. Loubier and Mr. Desrochers, I'd like to thank you very much for your input. As you probably already know, we deeply care about getting political parties and members of Parliament involved in the process. I think your report speaks to that commitment. For that, I'm very grateful.

[Translation]

Mr. Gilles Duceppe: I want to thank you all for your kind attention. I especially want to thank my colleagues who took part in this exercise, as well as all the groups and individuals, and men and women across Quebec who took part in the consultations held by the Bloc Québécois in every region.

[English]

The Chairman: Thank you.

We'll suspend for two minutes.

• 1002

• 1011

The Acting Chair (Ms. Carolyn Bennett (St. Paul's, Lib)): From the Heritage Canada Foundation, we welcome Brian Anthony; and from the Canadian Trucking Alliance, we welcome Graham Cooper and David Bradley.

I'll bet you were surprised to find that you were together on this panel.

Mr. Brian Anthony (Executive Director, Heritage Canada Foundation): Trucking is a very important part of our heritage, Madam Chair.

The Acting Chair (Ms. Carolyn Bennett): Perhaps you can give us a brief overview, although we do have 45 minutes.

Mr. David H. Bradley (Chief Executive Officer, Canadian Trucking Alliance): We know how to clear a room, obviously. We haven't even started yet.

The Acting Chair (Ms. Carolyn Bennett): As you know, the problem on Fridays is that Question Period is at eleven o'clock. It's an acutely different day for the parliamentarians. The people who have to do Question Period have to go, but we do apologize. As you know, though, we all read all of it carefully, and the happy people watching this on television will be very happy, too.

A witness: It's the quality of the audience that matters.

The Acting Chair (Ms. Carolyn Bennett): It's the quality, right.

Mr. Anthony.

Mr. Brian Anthony: Madam Chairman and committee members, I'd like to thank you all for the invitation to appear before you again today. I assumed the role of chief executive officer of the Heritage Canada Foundation in the fall of 1995, and this is my fourth appearance before this committee for its pre-budget discussions and consultations. I want to thank you very much for your ongoing interest in support of our concerns. In that I have filed three briefs in previous years with the committee, and in that none of our requests have really changed, I thought that since they're a matter of record I would not bother filing a brief this year but would simply recapitulate our interests and concerns.

Let me give you a little background on the Heritage Canada Foundation, if I may. We were created by the federal government 25 years ago as a non-governmental charitable foundation whose purpose is to promote the preservation of the built heritage or architectural heritage of Canada. While non-governmental in all material aspects, we are nonetheless a trustee of the crown, which makes us somewhat of a quango, or quasi-non-governmental organization. We were created by way of endowment, so we live off the interest from what is now worth $23 million in book value. We're independent financially, politically and bureaucratically from the federal government, although we are a trustee of the crown, as I say, and can act appropriately on behalf of the federal government in certain instances.

Madam Chairman, this committee has in the past taken a great deal of interest in the requests that we have put to the Minister of Finance, in the pre-budget context, for certain tax concessions to favour the preservation of the built environment of Canada. You have indeed made recommendations to the Minister of Finance in the past, and I want to thank the committee for that support. I must say that while our discussions with the Department of Finance are becoming more and more productive and promising, the ongoing interest and support of this committee is vital. To have your support, as a matter of record, in the pre-budget context is essential to us.

• 1015

Let me perhaps summarize for you the three principal tax concerns we have had under discussion with this committee and the Minister of Finance and his officials in recent years.

The first is the tax treatment of restoration costs of revenue-producing heritage buildings. It's a matter of considerable concern, and we feel if we can address this issue satisfactorily, we will encourage the restoration and preservation of buildings at minimal cost to the fisc and with great impact in terms of economic employment opportunities.

We have also been pressing for more favourable tax treatment of donations of heritage buildings to the crown or trustees of the crown. As you know, if you donate a building you get a tax credit for that, but if the building has appreciated in capital terms during your period of ownership, you get dinged with a huge capital gains tax assessment, which is a powerful disincentive.

We feel if ample precedent for the waiving of capital gains exists, as it does in environmentally sensitive lands and in the case of movable cultural property, art and artifacts, there is every good reason that theoretically immovable cultural properties, such as heritage buildings, should be given similar treatment. And indeed, the Cultural Property Export Review Board has in six instances waived capital gains tax for the donation of heritage buildings.

I'm assuming, therefore, that they assume any building is movable in theory, and therefore they can cast their mantle over even heritage buildings, however difficult moving them might prove to be.

Finally, we have been pressing for movement on the issue of the so-called terminal loss provision. In our discussions with the Department of Finance, they say this is not a significant incentive to the demolition of a building. They've asked us to poll our membership to determine if there is any concrete evidence to support the fact that the terminal loss provision does act as an incentive to demolish an old building and turn it, for example, into a parking lot.

I must admit, as I've been forced to admit to the Department of Finance, although I do not like to eat humble pie, I've not been able so far to find any evidence to support the notion that the terminal loss provision is as nefarious an instrument as we have been led to believe. I think, perhaps, simply the name alone is enough to conjure up all sorts of evil impressions.

We will continue to poll our members in the hope we might be able to shed some light on this, but at the moment we have to concede we have not been able to find any evidence.

Those are the three principal thrusts of our pre-budget shopping list, if you will, not only this year but in previous years. As I say, you have in the past supported it, and I hope to count on your continuing support.

In the letter of invitation to appear before this committee, the chair asked a number of questions, which I believe I spoke to in very general terms in my reply. Perhaps in the interest of brevity, rather than going into greater detail at this point I might wait until we have the opportunity of questions, so I can reply in detail at that point.

To sum up, Madam Chair, I believe in terms of the need for preserving the built heritage of the country, given the interest of Canadians in their history and heritage, and given the troubled times we live in, I can think of no better area for investing in than the preservation of our past for future generations. And I believe all the ways and means at the disposal of the Minister of Finance, on the recommendations from this committee—indirect means such as tax measures, and direct means such as program expenditures that could be devoted to the preservation of our built environment and our heritage places—would resonate with Canadians now and in the future.

I would like to thank you for the opportunity of appearing before you today again.

The Acting Chair (Ms. Carolyn Bennett): Thank you very much.

Mr. Cooper. Mr. Bradley.

Mr. David Bradley: I'll start it off.

Good morning, Madam Chairperson, members of the committee. My name is David Bradley and I'm CEO of the Canadian Trucking Alliance. On my right is Graham Cooper, senior vice-president of the alliance.

We have submitted a one-page summary for you, which I believe you all have. A copy of our more detailed submission is being distributed.

• 1020

The Canadian Trucking Alliance is a federation of the Canadian provincial trucking associations. We represent approximately 2,000 motor carriers in Canada. They, in turn, generate about $20 billion a year in revenues.

I think the Canadian trucking industry is sometimes misunderstood in terms of the role it plays in the Canadian economy. It's really quite startling. More than 90% of land freight, by the value of the goods, moved within Canada is shipped by truck, while on the export side of the equation, trucks move more than 70% of Canada's trade with the United States, also by value.

Trucking is also a labour-intensive industry. The entire total commercial trucking sector employs about 400,000 Canadians. These Canadians are dispersed across the country in virtually every community that's accessible by road. Indeed, in the 1996 Canadian census, it was found that truck driver was the top occupation among males in Canada. More than 220,000 Canadian males said that their primary occupation was driving a truck.

I have, over the years, participated in a number of studies and task forces by Transport Canada and the Department of Finance that looked at the tax competitiveness of Canadian industry and of the transportation sector in particular. This is an important issue, because any increased costs in transportation eventually show up in the cost of goods sold and in the competitiveness of the overall Canadian economy.

Most of those studies have indicated that if you were to include all taxes, then in fact there's probably a wash between the Canadian and U.S. tax systems. That hinges primarily and predominantly on the cost of U.S. social security and health care. If you look at other variables, Canada is quite out of whack.

Maybe it's because we're typically Canadian that we are always in pursuit of a level playing field. I wonder why we couldn't have a non-level playing field that was tilted the odd time in Canada's favour. Given the size and structure of our economy, I think we need that. Certainly the top three or four U.S. motor carriers are the same size as the entire Canadian trucking industry, so there are rather significant economies of scale giving them an advantage.

What we're really seeking from the committee, and eventually in this budget and budgets down the road, is to enter into an era of consistency and fairness within the Canadian tax system, not only as it compares to our major competitors but also between industries in Canada. The service sector, the transportation sector in particular, in many respects is discriminated against in the Canadian tax system compared with some of the other manufacturing or producing sectors, yet we are indelibly linked with those sectors. Without trucks, the economy stops, the goods don't get to market, and the final consumer doesn't get to consume those products.

As well, the government has set an ambitious agenda in terms of improving highway safety, improving the environmental performance of industry, and job creation. I think there are some impediments to each of those in the current tax structure.

Here is one of our detailed recommendations. I think you probably heard from other groups that when you look at the combined corporate income tax rates in Canada, federal and provincial, versus those in the U.S., federal and state, we're at a disadvantage. Therefore, we would be advocates of some lowering of the corporate income tax rate. In addition, we've had the current threshold in terms of the small business tax rate for a long time, and perhaps that's also something that should be reviewed.

Specific to trucking, we are at a competitive disadvantage vis-à-vis U.S. carriers in terms of the capital cost allowances on our equipment versus those in the United States. This makes it more difficult for Canadian motor carriers to move into newer equipment, which is safer and uses the new, environmentally friendly engine technology and the like. To be competitive, we need to be turning over our fleets every five to seven years. We're not able to do that, whereas in the United States, as you'll see from the information we've provided, they can virtually write off their equipment during that period.

• 1025

The Technical Committee on Business Taxation, which I'm sure you're aware of, made some interesting comments as well in terms of business input taxes. It drew particular attention to the excise tax on diesel fuel, which is presently 4¢ a litre and costs the Canadian trucking industry approximately $2 billion a year. It pointed out that there really is no justification, other than revenue generation, for that tax at the present time, because most of the funds generated through that tax do not find their way into the highway infrastructure, nor do they find their way into environmental enhancement.

I can recall around this table some years ago, in the run-up to the introduction of the GST, the Standing Committee on Finance of the day felt that the excise tax on diesel fuel really should have been woven in with the GST, because one of the goals of introducing the GST was to end tax cascading, a tax-on-tax situation. We still have that with respect to the excise tax on diesel fuel. Unfortunately, for the committee of the day fiscal imbalance was not what it is today. In fact it was significantly worse, as you know, and they felt that while our arguments were justified, the country couldn't afford it at the time. Perhaps now it's time to revisit.

In their report, the Technical Committee on Business Taxation said that if you're going to use a fuel tax like that as an environmental tax, what you need to do is to lower the overall rate amount and move it into other energy pollution-producing industries, that to discriminate solely against transportation simply put our carriers at competitive risk vis-à-vis U.S. carriers.

Tied into that of course is the issue of federal investment in the highway infrastructure. A study was conducted 10 years ago by the Transportation Association of Canada that identified 40% of the national highway system as being substandard. It's our understanding that this study has recently been updated. The results have not been released publicly, but we are given to understand that the figures are significantly worse and that the infrastructure has deteriorated further. Notwithstanding that, the Government of Canada only contributes about 4% of the $4 billion that it raises from the excise tax on gasoline and diesel fuel back into the infrastructure. Canada is the only major industrialized nation at the present time without a national highway policy, yet every economist from every political stripe, every economic theoretical persuasion, will tell you that without a competitive infrastructure an economy will suffer.

In addition, our brief outlined some of the significant savings in terms of safety and wear and tear on vehicles that would accrue if in fact we were to upgrade the national highway system. We believe the money is there. We know there are many other priorities, but this is a priority as well.

In terms of fairness, in one of the current government's first budgets, the allowable meal tax deductibility for employees, including truck drivers, was reduced from 80% to 50%. That was to match what was happening in the United States at the time. The impact of that tax has been to take about a thousand dollars a year more directly out of the pocket of the Canadian truck driver, most of whom spend most of their time on the road away from home. They don't have the luxury of where to eat and when to eat. The hours of service dictate when they stop...those kinds of issues. Interestingly, in the United States last year, measures were introduced to reverse the U.S. situation, to restore the 80% tax deductibility. We think fairness should dictate that the same occur in Canada.

We understand full well that this rule was introduced in order to preclude the $150 bottle of wine at lunch, or down at the Rideau Club. We accept that. We're not talking about that here; we're talking about subsistence nutrition. And certainly we think that some reasonable limits could be put around this, but it should be restored.

We met with the Minister of Finance less than a year ago, and he indicated to us at the time that he understood where we were coming from, that he realized we weren't talking about those kinds of entertainment style lunches, and we were hopeful that there would be some changes. We're still, obviously, looking forward to that and would appreciate the committee's support for it in your report.

• 1030

Finally, it may seem like a small item, but again talking about consistency in terms of policy, this government has spoken out loudly and strongly with respect to improving safety and improving safety in the trucking industry and rewarding those companies, those employees, that maintain an acceptable safety performance. However, what we're finding is that in some cases Revenue Canada has gone in and taxed the individual, for instance a truck driver who wins a safety award from their company. Maybe he'll get a $100 bonus or maybe he'll get a company jacket, a belt buckle, baseball caps. Those kinds of things have become taxable, which not only is unfair to the employee who thought he was doing a good job and being rewarded for that, but it makes for such an administrative nightmare for the companies that it really works against the introduction and the provision of these types of awards.

We think that some amendment may be needed. We're not sure why the department of revenue is interpreting things this way. Notwithstanding that, it's something we would like to see changed.

Trucking in Canada is a Canadian industry. It is a bastion of Canadian entrepreneurship. While we go head to head across the border with American carriers and there are 10 million truck trips per year across the border, our industry still remains essentially Canadian-owned and provides jobs in every single community in Canada. We're not asking for the moon, we're simply seeking fairness.

We thank you for the time today. We'd be pleased to entertain any questions you might have.

The Acting Chair (Ms. Carolyn Bennett): Mr. Jordan, did you have to leave?

Mr. Forseth, would you mind if Mr. Jordan asked a quick question first?

Mr. Joe Jordan (Leeds—Grenville, Lib.): I have a couple of things. Actually mine is more of a comment.

I just want to say to Mr. Anthony that this is a good news-bad news thing. I agree with everything you say, but I'm not on this committee, I'm a sub. I'm on the heritage committee. So I hope your words resonated with the committee.

To Mr. Bradley, I like what you said and agree with what you said about the level playing field analogy, because we hear it so much. But clearly we don't start off with a level playing field. I think you mentioned that in terms of the geography of our country, we're requiring our businesses to pay disproportionately high transportation costs to reach ports and things like that. So even if the rates are the same, they're still not level. So the situation we're in is compounded.

Another example of that is the depreciation time line on equipment. Again, if we're dealing with substandard roads and we're dealing with salted roads, then Canadian equipment is going to wear out more quickly than the equipment of somebody who's driving around a nice paved road in Florida. So I think your argument is a very strong argument in that regard.

I have one question on the relationship between truck and rail. I've seen some of the technologies that allow trucks to drive up on a train, or the trailer on a train, and then go through maybe a metro centre and then go back on the road. Could you very briefly give me some insights. Is the trucking industry working with the rail industry on those sorts of things? Those things make sense, to me at least.

Mr. David Bradley: I would argue that the trucking industry is leading that, because what the railways need to do is try to emulate trucking service and then work in partnership. Intermodalism, which is what that is called, is a growing part of the business. However, it's not new. As well, people have to understand the limitations on intermodalism.

Truck and rail only compete on about 10% of the total freight, and really where intermodalism could apply and will apply is in the long distance market. Rail concentrates in long-distance bulk commodity. Trucking concentrates in short-distance, small-shipment, time-sensitive freight. People sometimes think we're interchangeable parts, but we're not. So intermodalism is a growing part of the business but people have to realize its limitations.

The other issue is that it all boils down to price and service. For most of my members, they could care less if the freight is moving over the highway or over the steel wheels. We have driver shortages and other issues; if we can avoid them, so be it. But it's the customer, the shipper, who's the important part of the equation here, and if they're having to pay more, or if they're not getting the service, that's why they're choosing trucking and that's why trucking has the upper hand.

So much of what we produce now in our economy is high-value-added manufactured goods that operate on just-in-time or quick response types of systems. The whole notion of intermodalism is that for the economics to work, you have to load that train up and wait until it's loaded before it can leave, and by that time the truck is already halfway to Chicago.

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So that's the problem. I think it has a role to play, and I think the railways are investing in the technology that you've talked about, but it is not a panacea. It's particularly not going to solve environmental or smog problems or congestion problems in urban areas. I don't know many rail lines running, say, into downtown Toronto, or downtown anywhere any more. Even in the long distance market, as we've seen in the west in the bulk commodity market with grain and what not, you see the railways abandoning their branch lines. So the communities depend on trucking at that point.

So yes, it has some impact, but any of the studies that have been conducted by the federal government, whether they're looking at it from a highway congestion situation or an environmental situation, indicate that the scope for modal shift is extremely narrow. Maybe 4% of the freight would be a candidate.

The Acting Chair (Ms. Carolyn Bennett): Mr. Anthony has a comment.

Mr. Brian Anthony: Thank you, Madam Chairman. I have a quick comment in response to Mr. Jordan's observation.

I'm glad he's a member of the Standing Committee on Canadian Heritage, and indeed, I appeared before that standing committee yesterday in the course of its cultural policy deliberations. I intend to circulate to the members of this committee the brief I filed before that committee and spoke to yesterday, because it does embrace the tax concerns that I mentioned and it puts them in a proper context. I thought you might appreciate having that context available to you, so I'll make that available, particularly since I'm coming back next week to talk about heritage bank buildings in the context of the financial institutional review. So perhaps that brief might be useful to you and your committee colleagues, Madam.

Mr. Joe Jordan: Thanks very much, and I thank my colleague for giving me the floor.

The Acting Chair (Ms. Carolyn Bennett): Mr. Forseth.

Mr. Paul Forseth: Thank you very much.

Mr. Anthony, you outlined three basic points about your agenda. You also outlined that repeatedly you've come to Parliament Hill to outline your agenda, and repeatedly your points have been rejected or haven't appeared in a government response. So I wonder if you could perhaps outline what some of the traditional objections to your proposals have been.

When I think of it, in some respects our heritage really has no price, and when we've had financial difficulty in Canada as a whole, or even in particular provinces, often we hear politicians and leaders still talking, well, maybe tourism and our heritage, and so on, is a selling point. Even in bad times we can always look to that to do a better job. We can market ourselves around the world. That especially helps us in foreign exchange and really helps our economic fundamentals.

So there's certainly an economic component, not just to feel good about ourselves, but our economic welfare is often predicted and based and planned upon taking care of our heritage.

Can you outline some of the objections? Is the government particularly deaf or uncaring, or why are your three particular points not being met with a favourable response?

Mr. Brian Anthony: Thank you very much for that question.

I have been working in the cultural sector, largely defined, for a quarter of a century, and this is not the first time I've had to deal with the Department of Finance. I must say—perhaps we're all getting old and mellow—that the Department of Finance is responding much more favourably to these concerns than I've ever had it respond to me in the past. That said, these things do take time.

When I was much younger, first crusading for tax reform with regard to the treatment of the arts and artists, I thought I could wrap these things up in a year. I had to discover the hard way, over time, that you cannot change the tax regime overnight. I no longer anticipate doing that, but I am encouraged by the progress we have been making. As I mentioned earlier, the support of this committee has been really vital in focusing the attention of the department on our concerns.

With regard to the terminal loss provision, as I mentioned, the Department of Finance has done an analysis of this and thinks there are other, more powerful considerations that affect a decision to demolish a heritage building than the terminal loss provision. They consider it to be a minor factor. As I mentioned, I've polled our membership and I've polled municipal and provincial departments and agencies responsible for heritage, and they have not been able to show me there is any concrete proof that the terminal loss provision is the powerful incentive for demolition many believe it to be. So I've had to give on that point.

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I believe there was some modification of the capital gains tax treatment of donations of heritage buildings in the budget of two years ago, but it wasn't specifically associated with the gifting of heritage buildings and it wasn't as complete as we would have liked it to be. If we accord 100% forgiveness of capital gains in the case of gifting of such movable cultural property as works of art or artifacts, then I believe we can do the same for our heritage buildings.

The third point is the tax treatment of restoration costs of heritage buildings. We've been spending a lot of time with Revenue and Finance. Revenue is trying to find a way to clarify or modify its interpretation bulletin in that regard. They admit that in one jurisdiction somebody who restores a heritage building can write off most of the restoration costs as current, whereas in another jurisdiction, given a slightly different interpretation by the officers involved, they will be forced to treat that as capital for tax purposes. They recognize there are major imbalances in their own interpretation of their own application of the law.

Finance also recognizes there is an issue here that Revenue may not be able to address simply by modifying the interpretation bulletin in question. Indeed, Finance has suggested to us they would be willing to go much farther down the road of allowing true restoration costs of heritage buildings to be considered current, if we could find a way to certify those restoration activities for tax purposes. They have pointed to the Department of Canadian Heritage, which certifies investment in audiovisual production for tax purposes and a number of other related things. The Cultural Property Export and Import Commission plays a certifying role as well for movable cultural property.

Finance has suggested that if we could find a way to create a list of eligible properties that would be designated by federal, provincial or local authorities duly constituted, in order to define the universe—which of course is always a problem for Finance, as they fear open-ended propositions and the scientific tax credit still gives them nightmares, I suspect—they would want a body in the Department of Canadian Heritage that says, yes, this restoration cost is legitimate and is therefore eligible for a certain kind of tax treatment, or that restoration activity is not.

So I feel we are making progress. I've had to learn in my old age that progress in these matters is slow—and I don't want to sound philosophically resigned or as though I'm trying to justify this in any way—and perhaps true change that takes a long time is longer lasting than instantaneous change that can equally be instantaneously reversed.

Mr. Paul Forseth: I just have one last question; it's too bad we have such a short time. Are you saying that in Canada we have no equivalent to the American national register of historic sites, which lists thousands if not millions of buildings and sites in the United States, but is still able on a particular island to describe a particular individual who has a building on a heritage site and tell them what colour of paint they can put on that building to maintain it? Their national register gets down to that kind of fine detail. Don't we have anything similar in Canada?

Mr. Brian Anthony: We have the makings of a list of heritage buildings, an inventory if you will, but there is nothing as comprehensive as what the Americans have and nothing as comprehensive as what we would need in order to satisfy the concerns of the Department of Finance with regard to eligibility for tax treatment of those buildings.

The Chairman: Mr. Keyes.

Mr. Stan Keyes (Hamilton West, Lib.): I'll lend my voice to thanking Mr. Anthony and the representatives of the Canadian Trucking Alliance for their presentations.

In my hometown of Hamilton there are many churches and homes of prominent Hamiltonians who have benefited from the designations made by the Historic Sites and Monuments Board. For my benefit and the benefit of the people who may be watching this on CPAC, can you give me, Mr. Anthony, a comparison between how your foundation and the Historic Sites and Monuments Board work, either in concert or in their own direction? Having heard your requests, I'd like to know if there is an opportunity the foundation could pursue to accomplish your desired and stated goal, possibly through a change in designation or the creation of a statute that would parallel that of the Historic Sites and Monuments Board, in order that you may gain more favourable tax treatment.

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Mr. Brian Anthony: Thank you very much. The Historic Sites and Monuments Board is a venerable institution that plays a very important role in terms of designating properties of national importance. Of course, as you know, there are provincial institutions and local authorities that do the same across the country.

As you will see from the cultural brief I will forward to you later, one of the things we've been arguing is that the powers of the Historic Sites and Monuments Board needs to be strengthened. At the moment, the active designation only has moral weight in terms of protecting the building in question. There is no real legal clout to that. If a determined owner of a building—and most heritage properties are in private hands—wishes to demolish it, there is really nothing much the Historic Sites and Monuments Board or any other body can do to stop that.

So we would like those powers reinforced in much the same way, as Mr. Forseth was mentioning, as they do in the U.S., where there are real protective powers that permit certain things but do not permit others, such as demolition.

With regard to strengthening my organization, committee members would be interested to know that 25 years ago when we were created, the expression “national trust” was very much embedded into the public relations material generated announcing the creation of Heritage Canada. However, my organization never really could play that role, because you need an incredible amount of tax leverage, as in the case of the British national trust system, which was largely based on the death duty sword hanging over the head of a property owner. If you wished to avoid massive penalizing death duties, you donated the property in perpetuity to the national trust. Then you breathed a sigh of relief and got to live out your life in the property in question, even though tourists tramped through your kitchen as you were having breakfast.

In the United States they have an incredibly effective and complex but workable system of tax treatment that allows the U.S. national trust to play a really meaningful role in acquiring property and making sure that property is preserved. It also makes sure heritage properties in the hands of private individuals and corporate entities are similarly given favourable treatment.

My organization was never given those complete powers. I should also mention that at the time—and this will sound familiar—provincial governments contested the ability of the federal government to create such a body because they felt that under the constitutional arrangements we enjoy in Canada, the powers should be properly vested in the provinces.

In those heady days of the early 1970s, with the tendency to spend our children's money very much in evidence, most of the provinces created provincial trusts of their own or adapted existing organizations to play that role. So there was huge competition, and my organization felt that in the absence of sufficient powers we would simply not try to exert that role. However, the provinces, for the most part, have married in haste and repented at leisure because they realize that acquiring heritage properties is one thing, but maintaining them over a generation, as many of them have done, is another thing entirely.

There is an opportunity for us now to rethink the trust issue in Canada and how we can develop a made-in-Canada intergovernmental cooperative model for exercising that role. My organization would certainly need to have its mandate and its means reinforced, but we would certainly be willing to play that role. I feel there is an opportunity here for us to not necessary hold, own and operate heritage properties on an ongoing basis, although I wouldn't rule that out, but perhaps to provide a bridging mechanism.

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With a bridging mechanism in the private sector, for example, if a financial institution has deemed that a heritage building within its possession is surplus to requirements, we could absorb that building with the appropriate tax powers and give the tax credits we would like to be able to give to the bank, if we had them within our power. We could then work with the local community and find a new user for that building, perhaps establish a local group that would assume ownership and operation of that building in perpetuity. It would also give us the time to make sure the building in question was protected with the appropriate covenants, designations and so on.

We could also play that role for the federal government. The tidal wave of the federal government is now receding and leaving up on the shore many heritage buildings that are on the inventory of custodial departments. The Department of National Defence is an obvious example. Similarly, many of the lighthouses owned and operated by the Department of Transport are being deemed surplus to requirements, as are post offices.

There's an opportunity, because we are a trustee of the crown, to take them off the inventory of the custodial departments, assume responsibility for them, find new uses and users for them, and find a way of protecting them in perpetuity so the post offices, railway stations and lighthouses that in many instances define a community and are the characteristic, most obvious, most tangible, most visible landmarks of that community are not lost forever but are maintained forever.

Mr. Stan Keyes: Thank you.

The Acting Chair (Ms. Carolyn Bennett): Mr. Gallaway.

Mr. Roger Gallaway (Sarnia—Lambton, Lib.): Mr. Bradley, I want to ask you a question with respect to your recommendation on the waiver of safety awards. A number of businesses will reward employees for performance, whether it's for safety or sales, at the end of the year. For example, Mr. Cleghorn from the Royal Bank gets a rather large award for performance from year to year. But across a large segment of industries in this country, monetary awards are presented at the end of the year. Why should truckers be exempt when everyone else pays tax on these awards?

Mr. David Bradley: I'm not saying if a trucker were to receive the kind of bonus Mr. Cleghorn receives they should be exempt. I'm talking about jackets and ties and those kinds of things. I think this could be approached by setting some reasonable limit, maybe $250 to $500, and outlining what qualifies for the exemption. I'm not talking about finding a way to provide people bonuses that are non-taxable; I'm talking about tangible, non-financial rewards of a small value.

Mr. Roger Gallaway: I'm sorry, I misunderstood you. I thought you were talking about cash.

Mr. David Bradley: No.

Mr. Roger Gallaway: Okay, fine.

Mr. Anthony, I think you partially answered my question. Heritage Canada has asked you to draw up an inventory of buildings that might be transferred. Do you have any idea, if some sort of general waiver were proposed, what the cost would be to the federal treasury?

Mr. Brian Anthony: We've had some initial discussions, Madam Chairman, about the impact on the fisc of building into the tax regime the things we had requested. The Department of Canadian Heritage has done a lot of work in this area. We have been sharing a consultant, a former director of the Canadian Tax Foundation, who has been very helpful in this regard.

This is a ballpark figure at the moment, because we can't define the universe fully until we have the exhaustive or comprehensive inventory in place. We have been able to do enough back-of-the-envelope calculations to suggest that even if we got everything we wanted, it would probably cost at the outside no more than a dollar per Canadian per annum. That's assuming an initial flurry of gifting of heritage buildings. But we don't see that as a major phenomenon that would be—

Mr. Roger Gallaway: Your conclusion is $30 million per annum.

Mr. Brian Anthony: Tops, I would say.

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Mr. Roger Gallaway: Now, I don't understand all the provisions of the Income Tax Act. You may have seen the article. I don't know if you live in Ottawa, but there's a building that is going to be demolished in Ottawa—or has been demolished, I'm not certain—which a number of people have suggested is a heritage building. I'm told there's something called a terminal loss provision in the Income Tax Act, which many people perceive to be an incentive to demolition, as opposed to an incentive to preservation. I wonder if you could tell me why there's this perception that the terminal loss provision is in fact an incentive to demolition.

Mr. Brian Anthony: As I mentioned earlier, Madam Chairman, the terminal loss provision has such an unfortunate name, to start with, that it's enough to cause nightmares. If they called it the “happy smurf provision” people would feel a whole lot better about it. But “terminal loss” conjures up nightmarish scenarios.

Certainly there was a time, a decade or so ago, when the terminal loss provision was much more powerful in terms of the incentive it provided. But it has, to the credit of the Department of Finance, been modified, although not for heritage reasons but for other reasons presumably.

Now, as I said earlier, according to the Department of Finance, they do not consider it to be the powerful incentive it once was. Indeed, they have suggested there are probably other incentives that have a greater magnetic power to attract owners to the conclusion that they should demolish heritage properties on their inventory. Let me give you an example.

I do live in Ottawa; I've lived in Ottawa since, I hate to tell you, the late 1950s. And I've seen many prime bits of Ottawa's built heritage torn down over the years, to my lasting regret. Let me give you an example and we can discuss later whether or not you would have deemed these to be heritage buildings.

On the Sparks Street Mall, just a couple of blocks away, there were two, the old Kresge and Woolworth buildings, which had been built between the first and second world war and were rather unique buildings, typical of the architecture of the time. They were torn down by the bank that had acquired them by default when the owner defaulted on the financing. The bank tried to sell the buildings and couldn't, so they demolished them.

Now, we discussed this with the Department of Finance—we don't have access to the financial transactions involved, clearly, because that's confidential—and Finance says the terminal loss provision would not be enough to cause demolition. In fact, to be fair, probably what provided the greater magnetic appeal was the fact that by tearing down a building and turning it into a parking lot, you reduce your tax exposure considerably, because you no longer own a building, you simply own a piece of land. And you provide a revenue stream, which they hadn't had before, because parking is a lucrative activity.

So that, I suspect, would be a far greater incentive to demolish those buildings, or any building, than the terminal loss provision. I say that because we haven't found any evidence, one way or the other, to suggest the terminal loss provision plays that kind of crucial role any more.

But we do know there are local and provincial taxes as well as federal taxes and other measures, zoning and so on, that do provide incentives—ludicrous incentives. Indeed, there was a fairly modern building down on Albert or Slater, and given the rental slump, the owner gutted the building and took out all the windows. It therefore became a sort of non-building, and his tax exposure was reduced dramatically. So for two or three years that building sat there with no windows, just a lot of pigeons nesting in it, being an eyesore. That's what local tax treatment does to the built environment.

So things like that are probably much more powerful than we have been led, I guess reluctantly, to conclude the terminal loss provision may be.

The Acting Chair (Ms. Carolyn Bennett): Thank you.

Was the purpose of the terminal loss provision to get rid of eyesores, so it would be possible for people to tear down something that's really an eyesore?

Mr. Brian Anthony: No. It's one of these things that was created without any reference to its impact on heritage buildings. It enabled an owner of a property, whether it was new, old, big, or small, to demolish the building and be given a favourable break for having done so. It perhaps encouraged development when people thought that development was good, and that new was good and old was bad. But it wasn't intended to get at older buildings or heritage buildings in particular. That was incidental to the—

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The Acting Chair (Ms. Carolyn Bennett): So your recommendation is it can stay until you continue to poll and find out the effect it may be having.

Mr. Brian Anthony: Yes. It seems to me it's not a battle worth fighting if we can't prove it has any nefarious effect.

The Acting Chair (Ms. Carolyn Bennett): Thank you.

Mr. Graham Cooper (Senior Vice-President, Canadian Trucking Alliance): Madam Chair, I wonder if I might interject just one thing to add a little bit of information with respect to Mr. Gallaway's question of a few moments ago and to clarify this issue of the employee safety awards and incentives.

Essentially what we are seeking here is something similar to what currently exists in the United States, which is an exclusion for nominal awards. In the U.S., for example, it's $400. That's the kind of range we're looking at.

The Acting Chair (Ms. Carolyn Bennett): It wasn't really clear in the brief that you weren't talking about cash awards. So thank you for that clarification.

Mr. Graham Cooper: Thank you. I appreciate it.

The Acting Chair (Ms. Carolyn Bennett): I think Mr. Forseth had one little question.

Mr. Paul Forseth: I have just one quick question for the trucking industry.

Mr. Bradley and Mr. Cooper, the main thrust of your recommendations was comparability with your main competitors. I'm asking, would you join forces with your Canadian competitors, the rail industry, who are also asking for comparability with their American competitors? Perhaps you might find joint forces on the general argument about capital cost allowance, that looking at the North American market, we've got to move to some kind of competitive situation when it clearly can be identified that you're at a specific disadvantage.

Mr. David Bradley: I believe we have, and we don't classify the railways as our competitors. I think perhaps they were historically—50 years ago, or 30 years ago. They're not today. We're essentially in two separate businesses. We're transportation service providers on the same side, and for both of us, our major competition comes from U.S. carriers, whether that's truck or rail.

Mr. Paul Forseth: So then my suggestion is about really joining forces with the Canadian rail industry to look at the capital cost allowance comparability issue in the North American market, because the presentations of the rail people are certainly along that agenda, and they appear completely coincident with your suggestion. So I'm suggesting you get together and make that point.

Mr. David Bradley: Thank you.

The Acting Chair (Ms. Carolyn Bennett): Thank you very much. The finance committee will resume its pre-budget consultation process at 12.30 p.m.

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The Chairman: I'll call the meeting to order and welcome everyone here this afternoon. As everyone knows, the finance committee is presently getting ready to make recommendations to the Minister of Finance as to what the priorities for the 1999 budget should be, and we always look forward to hearing from Canadians from coast to coast to coast as to what their views and expectations are vis-à-vis the upcoming budget.

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We have the pleasure to have with us representatives from the following organizations: Childcare Advocacy Association; Canadian Association of Independent Living Centres; Canadian Co-operative Association; Canadian National; Goldstein and Goldstein; T-Base Communications Inc.; and appearing as an individual, André Lizotte.

We will begin our panel with the representative from the Childcare Advocacy Association, Kim Rudd. Welcome.

Ms. Kim Rudd (Board Member, Childcare Advocacy Association of Canada): Thank you for inviting me here this afternoon.

I would like to take a little bit of your time to discuss what we believe funding of early childhood care and education in the millennium should look like, and the responsibilities that this government has to deliver it to that end.

We believe it's time for a social dividend. The Government of Canada is approaching the millennium in the optimal position of being able to afford to reinvest funds from a fiscal dividend.

Social dividends, including at least 50% of budget surpluses, have been promised in the next federal budget. Canadians who have witnessed the cuts to social programs on which communities thrive hope that the year 2000 will bring a restoration of our social infrastructure.

There is significant public support for increased spending on early childhood education and care, and a minimum $460 million is needed as an immediate payment towards the child care funding deficit created by the disappearance of designated CAP funds when the Canada health and social transfer was introduced in 1996, and in fulfilment of the 1993 election commitments.

The last three years in Canada have seen massive changes and cuts to health care and social programs. The implementation of the Canada health and social transfer in 1996 collapsed separate funding programs for health, social services and post-secondary education into one reduced block fund.

The erosion of funding, combined with trends towards decentralization of responsibility and targeting programs for specific populations, has weakened the social infrastructure. The Childcare Advocacy Association of Canada supports the call that many individuals, as well as our social policy partners, have made for this government to honour its commitments to restore 50% of its budget surplus to social programs in the next federal budget.

The cuts have hit early childhood education and care services, which include a range of programs such as child care centres, nursery schools, kindergartens, community action programs for children and head start programs, with full force, notwithstanding the already weak foundations in the child care sector, which has never received full public investment.

A recent study of the child care sector conducted by Human Resources Development Canada concluded that the federal government should take leadership, in collaboration with provincial and territorial governments, as well as first nations, in developing an integrated policy framework for the provision of public funding to support quality child care services that are affordable and accessible to Canadian families. Immediate restoration of the $460 million lost through the CHST and the abandonment of the red book child care promise would help to secure and improve the early childhood education and care infrastructure.

Secondly, we believe a comprehensive family policy is also a priority. In countries with successful early childhood education and care strategies, child care services complement a range of well-designed employment and tax policies.

Maternity and parental leave benefits in Canada pay just 55% of wages, to a maximum of 25 weeks. With the employment insurance system administering these benefits, there is little accommodation for the shifting nature of work and the need to make more parents eligible for parental leave. Surpluses in the Employment Insurance Fund should be directed towards improving parental leave programs, in order to support families with children.

Tax measures need to surpass the limitations of the child care expense deduction, which benefits mostly middle-income families, and “vouchers” for short-term child care for low-income earners, which lack public accountability. Public opinion in Canada supports the investment of tax dollars in programs that help to create thriving communities and essential supports for child development. At least one study, by the CPRN in 1998, indicates that people would be willing to pay more taxes in order to provide children with access to quality child care and education programs.

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The programs we have for children and families in Canada are ill-equipped to meet the challenges of the new economy. In parental leave administered under employment insurance, there's an urgent need to bring more parents into eligibility in order to improve access to flexible leave with adequate income that will help to broaden child care choices. It's up to the federal government to allocate EI surpluses towards restoring benefit levels and extending benefits to parents with non-standard work arrangements.

The tax system is also sorely lacking in measures that will support access for children and families to a broad range of choices in child care. The child care expense deduction benefits mainly those families with middle incomes and, in spite of last year's increment, does not reflect the true cost of child care for many families. Instead, fairer taxation would incorporate the true needs of children living in families, for example, as a first step by indexing the child tax benefit to inflation.

Third, there's the national children's agenda. The national children's agenda gives us a chance to ensure that investments for children are directed in a way that supports their current and future well-being within a comprehensive child and family policy.

To date, four initiatives have emerged from the federal-provincial-territorial NCA working group: the national child benefit, the expansion of aboriginal head start programs, the establishment of centres of excellence for children's well-being, and the development of learning readiness indicators. We urge the government to ensure that these initiatives are secure, with adequate public investment to sustain them, and that they be integrated into an overall child development strategy.

As a first step, the national child benefit will need a $2.5 billion investment by 2000 in order to address the rising child poverty crisis in this country. It's exciting to see the federal, provincial, and territorial governments in Canada starting to cooperate in developing integrated policies for children through the national children's agenda working group.

The Childcare Advocacy Association looks forward to participating in discussions around effective ways to provide public policy support for children and their families. In particular, the development of an integrated system of high-quality early childhood care and education will be the first step toward an effective strategy. The care and education of Canada's young children have been the subject of considerable debate and careful study, resulting in the identification of the need for a comprehensive, coordinated system of high-quality and affordable early childhood care and education programs for children and families.

Although no report has recommended market-based approaches or targeted voucher-based transfers to individuals, this model has prevailed in the absence of an integrated policy framework for child care in Canada. To date, the small program changes and the child tax benefit are small additions to a sum that cannot be considered a whole solution for children and families.

The child tax benefit is currently inadequate to deal in a meaningful way with the astonishingly high rate of child poverty that prevails, which has in fact increased in a country that is preparing to enter the millennium equipped for the new economy. The additional $850 million in the 1999 budget will not lift the more than 1.4 million children out of poverty—these figures come from the 1997 figures from Campaign 2000—nor will it help children living in families on social assistance, who have this increase deducted from their social assistance payments.

If the national children's agenda is to be truly responsive to all children in Canada, then it must integrate its first tiny steps with a comprehensive family policy that will move us forward to promoting child development while supporting families in facing new economic realities.

Last, there are the costs and benefits of high-quality child care. We feel this fourth point to be very timely, given the release of the cost-benefit analysis that was recently done and sponsored by HRDC.

Child care is unique in simultaneously producing a range of benefits at minimal cost to the public. In our new economy, a well-designed system of early childhood care and education will provide developmental opportunities for children while supporting parents to work, study, and parent effectively. A new economic study by two University of Toronto economists shows that for every $1 spent on comprehensive public child care programs, $2 worth of benefits is generated to children and their parents. This program can be developed at a cost of less than 1% of Canada's GDP.

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The Childcare Advocacy Association of Canada believes that a comprehensive, coordinated, affordable and high-quality system of early childhood care and education should be a top priority of any national strategy that supports and promotes the health and well-being of children.

A comprehensive family policy, including a range of early childhood care and education programs, will help restore the ground that has been lost for families in Canada. The lack of high-quality, affordable child care options has put many parents out of the workforce and placed children in less than optimal environments.

For women especially, whose average wages are 64.8% of men's wages, the conditions of work and the lack of affordable child care have presented hardships for those who have dropped out of the labour market as well as those who have had to accept lower-paying jobs and part-time jobs in which there's little opportunity for advancement.

The care and education of young children is too important to be left to the marketplace, and the benefits for parents far outweigh the cost of providing this essential support to families. Economists estimate that a quality child care program for children between the ages of 2 and 5 can be developed at a cost of less than 1% of Canada's annual GDP, or $5.3 billion annually.

It will be up to the federal government to take leadership in the development of early childhood care and education programs that will turn the vision of Canada's national children's agenda into action. We're asking for these considerations to be used in the formulation of the next budget this government is preparing.

I'm open to any questions that anyone might have. Thank you.

The Chairman: Thank you very much, Ms. Rudd.

We'll now hear from the Canadian Association of Independent Living Centres. I welcome Ms. Tracey Walters, the national director.

Ms. Tracey Walters (National Director, Canadian Association of Independent Living Centres): My name is Tracey Walters. I'm the national director of the Canadian Association of Independent Living Centres.

I passed out a part of red book two. It was wonderful for me because I didn't have to prepare a written report. You have it in both official languages. I'm here to give you an overview of what's really happening across this country for people with disabilities.

In my job, I'm responsible for developing and supporting the growth of independent living centres, which are organizations run by and for people with disabilities. These organizations are assisting other people with disabilities to face the traumatic fallout from the CHST. Right now, across the country, we have people with disabilities who cannot access transportation, housing, or appropriate services to be able to get out of bed in the morning to go to school or to work.

I'm going to read a quote from Mr. Martin's 1997 budget. He says:

Despite the many difficulties Canadians face in day-to-day life, most are able to do so as healthy, able-bodied citizens. However, Canadians with disabilities do not have the same opportunities. They face real barriers in everyday life. Mr. Speaker, what these Canadians seek is not special treatment. They seek equal citizenship. And they need our support to secure it.

I also brought in some Liberal task force reports on disability that are available in both languages. I was fortunate enough to travel with the task force as a member of the task force from the disability community. I travelled in 1996 to every province and territory with Andy Scott, Andy Mitchell, Anna Terrana, and Clifford Lincoln.

I had to dust off my report, and I'm sure many people around this table have not even seen or read it. When we released this report, we held a press conference in this room with the MPs. It was quoted in media sources that we needed the government to act very quickly—now—because the fallout of downloading and block funding was having a tremendously negative impact on people with disabilities.

This week marks the second anniversary of our press conference. Today, eight recommendations have been fulfilled, the easiest recommendations. Most of these things were actually already in place.

We begged Doug Young not to hive off vocational rehabilitation to the provinces, because that would give the provinces the ability to spend the money on roads and sewers if they so wished. So we asked the federal government to hold on to it. The federal government did hold on to it.

We asked for $45 million. It was an old Canada jobs strategy fund to help people with disabilities who are not attached to the labour force. That fund was cut to zero by Mr. Young. Then we asked for the $45 million to be reinstated. It was, but it was called the mew opportunities fund, and it was only $30 million. So the people in Canada were sort of fooled in the budget because it was called the new opportunities fund. It was not that; it was an old Canada jobs strategy fund cut by $15 million.

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So what was actually brought into the House of Commons were eight recommendations, two years old, and most of them had been worked on for ten years by other governments.

People across this country are losing their rights to get assistive devices such as wheelchairs and scooters. With the downloading of responsibility by the transportation minister, everything now is voluntary. That means that nobody has to have transportation for people with disabilities.

That means that 17% of the population does not have the same citizenship rights as everybody here sitting at the table. Right now you are able to travel from one province to another, from one city to another, to take a job in one city and go to another. But people with disabilities do not have that opportunity, they do not have that right.

We just held a national meeting in Halifax, and I heard some stories. In B.C., for example, if you need a scooter, you have to beg for it from service clubs. You have to do that old pathetic thing: look at poor me, maybe you'll give me a handout, and maybe I'll have a device to get around town and get my food. We have the same sort of situation happening in other provinces as well.

We see labour market agreements being made with the provinces without anything being done about people with disabilities. As people who are citizens and taxpayers, we have the right to have every tax dollar in this country spent fairly, for all Canadians. That is not the case. Even the Auditor General says this in his statement.

All the government departments spend money without even thinking about people with disabilities, and then only when they're challenged. Maybe they come up with a tiny band-aid solution and throw in a few dollars to keep people happy until the next election.

When they were first elected, we had a concerted effort by this government to wipe out the voice of Canadians with disabilities, and the voice of other social policy groups as well. When you have a full democracy you have small amounts of dollars that help support the voices of minority groups. There was a tiny amount of money that supported the organizations that speak for, and are made up of, people with disabilities. We had the Liberal government cut that money entirely and cut that voice, the part of democracy that was needed to ensure a society for all people.

In the House of Commons in 1996 Mr. Young said he cared about people with disabilities but not the organizations that purport to represent them. Then after a great deal of media awareness and public education, the Liberal budget of 1997 temporarily reinstated money for organizations representing people with disabilities. So that was in there because basically they had no choice.

There was a concerted effort to wipe out the voices of many groups. In my office I actually keep the hit list of all the groups whose funding the government actually tried to eliminate.

The government had a new policy: they were going to wean everybody off funding over a three-year period. So they said, thanks for all your works, thanks for your ability to be at meetings like this, thanks for your ability to prepare all these papers and to prepare them in both official languages, but we're no longer going to support you.

That's the only relationship the federal government really wants any more with people: cutting cheques, and through the tax system. They want no other relationship.

It's unfortunate, but I guess the one major victory the folks can refer to is that in their budget two years ago they gave $70 million in tax incentives for people with disabilities. However, we said over and over again that of this 17% of the population, the majority live in poverty, earning less than $10,000 a year, and they do not have a taxable income. So those tax incentives were only for people—of course, a certain number of people—who were able to claim certain credits, who had a taxable income. So that was really the big victory for the government.

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The section on people with disabilities in the second red book is mostly true. However, I totally disagree with one part of it, about the income program. What's driving this is that the federal government thought, well, maybe if we had a super-welfare program for people with disabilities, then we wouldn't have to worry about anything else. So in a number of documents, including this report, whose section on income support was not supported, the tactic was that maybe if we have a super-welfare program for people with disabilities, then we don't have to include them in EI measures or in CPP measures; we can basically cut them out of most programs.

That was actually demonstrated. The CPP rules have just changed to make it harder for people with disabilities to get benefits. This will save Ottawa $1 billion by the year 2005. So that's a major victory for the party.

But what have you really done? You've eliminated thousands of people from CPP. But I guess the hope is that one day there'll be a ghetto program for people with disabilities, that we can give them a small amount of money. Then the provinces don't have to do anything, the federal government doesn't have to do anything, and we can say, yes, but we have this ghetto program for people with disabilities.

The theme of the day is shared responsibility. Do you know what shared responsibility means? It means no responsibility. And we hear that in every report. We read it, we see it. What it means is that you don't have to get everybody around the table. It means that, okay, eventually the provinces and the federal government might agree to do something.

Shared responsibility is a cop-out. Who leads the way in shared responsibility? If everybody shares it, who's the chair, who's the leader, who puts forth recommendations? But most important, who is accountable?

Right now, quite apart from my personal situation—what I'm trying to fight for, services—I have nobody to whom I can even send a copy of a letter. The letter would say that ultimately there has to be somebody responsible for disability issues in this country.

The feds are so busy right now dumping on the provinces, and the provinces are so busy dumping on the regions and therefore on the municipalities, that there's actually nobody in this country who is responsible for people with disabilities.

That was a major recommendation: we need a minister responsible for disability issues.

So what we want to say is that it costs you billions of dollars to keep people with disabilities out of the workforce, out of society. And it takes a small investment to keep people with disabilities integrated in society.

Right now the human rights record regarding people with disabilities is looking pretty dismal. So even though we travel across the globe boasting about how great we are in the area of human rights, we should really examine what we do in our backyard.

So what we're saying is that there are major contributions to be made by people with disabilities economically, politically, socially and culturally. And I recommend that with respect to this budget you seriously take the task force recommendations—involving millions of dollars again spent by the Liberal government to produce this—re-examine the report, give it to all the parties, and move forward with the recommendations. Also, make sure they're done before the next election, because you have made some serious promises, and you need to continue moving forward with these recommendations in the second red book.

Please support people with disabilities, and make sure that if there is an amount of money to be spent, it's spent fairly and equitably across the country for all Canadians. Thank you.

The Chairman: Thank you very much, Ms. Walters.

We'll now hear from the Canadian Co-operative Association: Nora Sobolov, chief executive officer; Bill Turner, president; and Mary Pat MacKinnon, Ddrector of policy, government affairs.

Welcome.

Ms. Nora Sobolov (Chief Executive Officer, Canadian Co-operative Association): Thank you, Mr. Chairman. Good afternoon to committee members and fellow witnesses.

We're pleased to be here this afternoon to participate in the round table. But before sharing some of our thoughts on budgetary policy issues, I'd like to take a moment to describe the Canadian Co-operative Association.

Although we've participated in previous finance committee budget consultations, the membership has changed over the past year, and it might be helpful to provide some background on the CCA. We've also provided information kits that contain additional information on the CCA and our members, as well as a constituency-based map showing some of the co-ops and credit unions in your riding areas.

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The CCA is the national umbrella organization for anglophone co-ops and credit unions. On behalf of its 35 members, CCA promotes cooperatives and credit unions as distinct enterprises that pursue both economic and social goals, and supports sustainable communities all across the country, and indeed around the globe.

Our members are found in virtually all economic sectors, with a particularly strong presence in the agrifood and agriculture, wholesale, retail and financial services sector. CCA members also have a solid presence in the service, child care, housing, employment and health care sectors. The members collectively represent over $56 billion in assets, and include over 5 million individual members employing tens of thousands of workers.

Looking at the whole co-op system in Canada, including the francophone and anglophone sectors, one finds a formidable economic and social force: over 10,000 cooperatives with assets in excess of $120 billion, a workforce of 151,000 people, and over 7,000 volunteer board and committee members.

While many co-ops are small and medium businesses, others are very large enterprises. There are 32 cooperatives and credit union or caisses populaires in the Financial Post's most recent listing of top 100 businesses in Canada. You might also have seen our Financial Post supplement during co-op week.

The passage of new federal co-op legislation this year, which provides a modern legislative vehicle for co-ops, should encourage increased co-op activity under the federal jurisdiction. We'd like to thank the ministers, departments, the cooperative secretariat, and the committees involved, which worked with us on this venture.

In addition, the MacKay task force report recommendations directed at the financial cooperative sector, if implemented, will help create a very enabling legislative framework within which financial cooperatives can flourish as the domestic alternative to banks.

You may recall that our sister organization, Credit Union Central of Canada, and a number of our members—most of the provincial credit union centrals and the Co-operators Group Limited—have appeared before this committee as witnesses on the MacKay task force report consultation.

The CCA works very closely with our francophone counterpart, le Conseil canadien de la coopération, and globally we're connected with the International Co-operative Alliance and the World Council of Credit Unions, which represent over 100 countries with more than 700 million members.

The bedrock of co-op identity is the cooperative principles that guide cooperative behaviour. These principles are voluntary and open membership, democratic member control, member economic participation, autonomy and independence, education, training and information, cooperation among cooperatives, and concern for the community.

To assist in the preparation of a pre-budget submission to the Minister of Finance, each year the CCA surveys its members on federal budgetary policy. We're still in the process of receiving this feedback from our members, and we'll reflect that input in our submission to the minister.

However, today we'll share the views that we've received to date. I will now turn to our director of policy, Mary Pat MacKinnon, who will continue the presentation.

Ms. Mary Pat MacKinnon (Director of Policy, Government Affairs, Canadian Co-operative Association): The committee has asked witnesses to address four questions: what to do with the fiscal dividend, what strategic investments and tax changes are needed, how Canadians can take advantage of opportunities, and how the government can best ensure job opportunities in the new economy. As this is a round table, we'll summarize our points with respect to the budget and the questions posed. Indeed some of our members, such as the wheat pools and some of the provincial centrals, have already appeared before this committee.

Before actually addressing the fiscal dividend issue, let us just say that while our members certainly do congratulate the government for getting its books in order, they continue to be distressed by high unemployment, especially in Atlantic Canada, British Columbia and aboriginal communities.

They're also very worried about Canada's slipping standard of living and the serious consequences arising from that slippage. Indeed, this very day there is a conference at the Chateau Laurier next door, put on by the Centre for the Study of Living Standards. It is exploring that very problem—that is, Canada's slipping standard of living, its lowering productivity, and the consequences for the great majority of Canadians.

We're also worried about the fact that despite strong economic growth in the last couple of years, we still have persistent economic problems, and they must be addressed.

While the recent economic downturn will likely mean smaller fiscal dividends this year and next, we will still have surpluses. So the question posed by the committee last June is indeed still relevant.

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Our members support a balanced approach with respect to the three measures: program spending, debt reduction, and tax reduction. Given the diversity of our members both sectorally and geographically, it's not surprising that there's not complete consensus on the percentages for each measure or category. However, in general it's fair to say that there's greater priority given to program spending and debt reduction than tax reduction.

With respect to the strategic investment question, CCA members advocate a commitment or a recommitment of funds in the following areas: a federal-provincial transportation infrastructure program; Canada health and social transfers, especially for health care, and including funding for home care; basic research and development funding; official development assistance; youth training and employment initiatives; and cooperative development.

We'd like to highlight several budgetary policy issues of concern to our members. Most of them advocate reform of the employment insurance fund to create a self-financing segregated fund, similar to the Canada Pension Plan. Members don't believe that the federal government should continue to absorb the EI fund surplus into general revenues.

On the issue of EI premiums, there is divided opinion. Some members strongly support a reduction in premiums, and others would maintain premiums as they are, and direct more moneys to training or extending coverage to more of the unemployed.

As you've already heard, there is growing concern about the inadequacies of farm safety net programs in light of the dramatic decline of commodity prices and the associated after-effects of the Asian economic crisis. Our western producers are also distressed by the recent trade harassment at the border.

The CCA fully supports our agricultural members in their request that the committee re-examine the government's spending commitment to safety net programs, with a view to providing farmers with programs that provide a degree of stability they need to invest for the future.

With respect to the government's approach to economic development, our members agree that the government must work with the private and voluntary sectors to create and sustain employment and communities. In that context, the cooperative sector is currently engaged in a number of partnerships with government.

By way of example, the CCA partners with CIDA to deliver international development assistance using the cooperative model. The credit union sector has an alliance with the Business Development Bank of Canada to better serve small and medium businesses. The CCA also delivers an international youth intern program for CIDA.

Our regional affiliates in Atlantic Canada, the Regional Co-operative Development Centre and the Newfoundland-Labrador Federation of Co-operatives, have partnered with ACOA to create and administer an equity investment fund for cooperatives and community economic development. In western Canada, the Western Economic Diversification Agency has partnered with a number of our credit unions to provide micro-credit lending programs.

Our members are interested in exploring and realizing new partnerships with the federal government to support rural and remote communities, to promote and enhance the cooperative model as a way of providing more citizen-centred service delivery, to explore how we could use the cooperative model to help address the social and economic needs of aboriginal communities in both the north and south, and to implement a new administrative program for federal cooperative housing.

The CCA and the Conseil canadien de la coopération are now working on a joint cooperative development proposal to the federal government. The proposed capacity-building partnership would support sustainable economic and social advancement of communities in need through a cooperative development model.

In closing, the CCA would like to wish this committee all the best as you prepare your report to the House of Commons and the finance minister. We urge you to reflect on the need for a visionary economic development strategy, which our members find to be quite important. This is more than an exercise in balancing the books. Canadians deserve more than the sacrifices they have made, and our members are very clear on that point.

We look forward to the round table discussion, and we invite questions. Thank you very much.

The Chairman: Thank you very much for your presentation. We'll now hear from Canadian National: Ms. Thi Nguyen, who is president of the Canadian Employee Relocation Council, and Mr. Scott Roberts. Welcome.

Ms. Thi Nguyen (President, Canadian Employee Relocation Council; Manager, Employee Relocation and Financial Planning, Canadian National): Good afternoon, Mr. Chairman. Thank you for the opportunity to address your committee. I am a chartered accountant and hold the position of manager of employee relocation and financial planning at Canadian National, based in Montreal.

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The council represents almost 400 Canadian businesses and organizations involved in one way or another with employee relocations.

There are approximately 30,000 employer-initiated moves in Canada each year. At a cost of $40,000 for each move, employers inject about $1.2 billion directly into the Canadian economy. These figures do not capture moves that individuals initiate themselves when they change jobs, find new employment or start a new business.

The purpose of my presentation is to speak about the recent tax change that will reduce the number of employer-initiated moves as much as 20% and cost the Canadian economy $250,000 in exchange for approximately $13 million in tax revenues. Allow me to explain.

All our member companies pay for the costs associated with moving when an employee is forced to move in order to keep his or her job, or to advance his or her career in a new location. These include legal fees, real estate commissions, moving costs, house hunting, and interim and temporary accommodation. Ninety-five per cent of our members reimburse their employees who move from low-cost areas to high-cost areas and must borrow more to purchase a comparable home for the family. Moving from Calgary to Vancouver this year means that an individual will have to increase his or her mortgage by more than $125,000 just to maintain the same-standard two-storey home.

Over 90% of our members reimburse their employees for loss of personal equity in their homes. For example, house prices in Vancouver declined by about 15% between 1994 and 1998. A homeowner of a standard two-storey home in 1994 in Vancouver who has to move this year will have about $40,000 less in personal equity, and will therefore have to mortgage more when buying a new home. The tax change implemented this year taxes individuals as though reimbursements for equity loss and additional mortgage interest costs are income from employment. Employees forced to move to keep their jobs are being asked to pay taxes if they receive these types of reimbursements. The view of the council is that this is fundamentally unfair.

Mr. Chairman, moving a family is a difficult decision for employees, as they have already faced family disruptions and loss of spousal income. Companies acting as responsible employers only attempt to minimize additional financial impact by protecting individual equity. This protection is by no means an improvement in individual equity or a creation of an economic gain. Often, this protection is governed by union agreements. Asking individuals to absorb this tax burden will create negative impacts on labour-management relations.

Mr. Chairman, I have met with financial officials to discuss these changes. Unfortunately, they say this measure is necessary to level the playing field. They argue that employees who initiate a move should receive the same tax treatment as those who are forced to move, and that the solution is to therefore introduce this tax change. This flawed logic has a deceptively large impact on the economy.

Relocating employees is a means for most companies to remain competitive and to retain or train employees on badly needed, irreplaceable skills. It is also a means for employees to keep their jobs when they otherwise would be faced with unemployment. Employees will be less inclined to accept transfers that may result in increased government spending on employment insurance and other social costs.

A tax on reimbursements that keep an employee whole is a disincentive to individuals and companies. Council members predict that relocations will fall by approximately 6,000 per year, costing the Canadian economy $250 million. There will be further job losses from the relocation service sector due to the reduction in relocations.

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Mr. Chairman, allow me to do the math. This tax generates $13 million in tax revenues, costing the Canadian economy $250 million, thus reducing tax revenues by $120 million.

It is more than numbers, Mr. Chairman. Workforce mobility and removing barriers to increase domestic trade are two objectives of this current government that businesses can easily support. NAFTA has been a success, but Canadian companies and their employees already lag behind their U.S. competitors in after-tax income. Imposing more tax on individuals widens this gap further and will frustrate commercial mobility.

Mr. Chairman, there are a number of reasons why this tax is harmful to individual Canadians and their employers. On behalf of the members of the council, I ask your committee to recommend that this tax change be repealed and that the tax exemptions for reimbursement be restored.

Thank you.

The Chairman: Thank you very much for your presentation.

We'll now hear from Mr. Sidney Goldstein, from Goldstein and Goldstein.

Mr. Sidney W. Goldstein (Senior Partner, Goldstein and Goldstein, Barristers and Solicitors): Thank you very much, Mr. Chairman.

I represent my law firm and a number of our clients. Our practice is related to a variety of matters, including commercial tax, estate planning and high-tech clients. I'm appearing here to express my concern about the general direction of the tax system in Canada, and about the fact that Canada's tax base, depending on the direction taken by the government—not merely this year but over the next few years—may be placed at risk over the long term. It also may mean forgone opportunities for increased tax revenues for the country.

Every tax system does affect choices. The Canadian tax system is no different. The impacts on choices are both within and without Canada. Canada's tax system is an integral and critical component in the world competition to attract and retain enterprises and individual taxpayers forming the base for sustaining the wonderful Canadian social benefits system, with all its imperfections, that a number of the presentations here have noted.

We are in a competitive world. We are not in the situation that we were in during the Carter tax reform system. We are not in the 1970s or 1980s any more. We have to take into account more liberalized choices for all Canadian taxpayers. I will leave it to others to determine the macroeconomic demands of tax revenues to sustain all of the programs that we so cherish, and many of the ones that have been discussed this afternoon. However, I wish to emphasize that the impact of the decision to make changes in the tax system is not a neutral decision. We are now dealing with three factors that have never had as significant a role to play in the Canadian governmental decision-making system.

One is the increased mobility of taxpayers. The previous presenter indicated the impact of mobility and movement of employees. That's a result of the competitive requirement to have personnel located in the most effective and efficient locations. This is not merely a question within Canada. It also affects decisions on where to locate between Canada and other jurisdictions.

The second situation is the increased mobility of services. It is now possible to provide services from Canada to the rest of the world and from the rest of the world to Canada. The decision of where or where not to locate the enterprise providing those services or goods is not restricted by barriers that previously were in place.

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The third is that the increased knowledge through Internet, combined with the variety and awareness of international situations, has made individuals and entrepreneurs increasingly aware of their choices, one of them being sensitivity to differentials in tax treatment and tax rates.

Without specifying these choices, I'm specifically concerned about the differentials between systems in Canada and the United States. In fact, the choices that are made by Canadian individuals and entrepreneurs—and I include professionals amongst them—increasingly deal with selections of living, working, etc., in Europe, here, Hong Kong, or a variety of other jurisdictions.

There is an increasing elasticity of choices, and it is a factor that was not present in debates over priorities that were set over the last hundred years. We were a much more self-contained country, for better or for worse, and the leakage resulting from the ability of taxpayers and enterprises to move did not have to be given as much weight as I would suggest it needs to be given today.

There have been significant analyses over the years as to whether, overall, the tax burden in Canada compares favourably with the United States or not. In my reading—and I've been a student of the subject far longer than I care to admit—when we take into account all of the things, including social benefits and lifestyle and so on, Canada often does compare much more favourably than it would if we just discussed the issues of the tax system directly. That includes things like mortgage deductibility and bald tax rates.

However, we cannot group those things together because many of the things we discuss in terms of benefits relate to social services primarily consumed by the very young and the aged. Obviously there are significant components of Canadian society that require social nets throughout their lives, but the primary consumption and the benefits in terms of accounting for the balance between the tax systems relate to medical care costs and the like.

For people who are in the prime of their lives, including many of the ones I have dealt with, everybody is an optimist. People in the prime of their lives are less concerned about health requirements. They've completed their education, and they're not expecting to be sick in the near future. As a primary concern at that point, the actual tax burden on whatever economic benefits they will produce over their working lives is much more of a factor. In that period, I submit, the Canadian tax system is currently not in a favourable position when compared to other jurisdictions.

I should point out that over the last number of years the Department of Finance has made great strides in eliminating many of the supposedly preferential tax planning techniques such as income splitting, investment planning, or the relative advantages of such provisions as the use of corporations, trusts and retirement plans. While these developments have played to the arguments of equity and fairness—and I'm not even quibbling with that—the bottom line is that it has removed one component for those who are in the active, productive years of their lives and have mobility. It has produced an effective tax rate over and above any general tax increases or restrictions on deductions.

In a society in which we are concerned about an explosion in demands from an aging population, and with a declining workforce to provide the tax revenues to support the system, I worry that we may lose productive young Canadians who do have choices and will opt for lower-tax jurisdictions, particularly our neighbour to the south but also a variety of other countries.

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I don't even disagree with those who may say that some of those decisions may be shortsighted. However, a 27-year-old who has finished his Canadian education and is looking for a place to gain employment may choose to go to California, planning his next 30 years, and may regret it at age 65 when his health fails, but in the meantime we have lost that income flow and tax revenue, and the enterprise effects and spinoffs, for a long period of time.

Decisions that are affected by these factors are not easily reversed. Right now I can tell you that my discussions and dealings with a variety of people indicate that between the effects of the dollar exchange rate and tax revenues, there are significant numbers of decisions being made to locate in other jurisdictions. And unfortunately these are not temporary decisions.

Every decision to locate an enterprise outside Canada, every decision for highly skilled engineers, physicians, etc., to locate elsewhere removes tens of millions of future lifetime tax revenues and economic spinoffs from the Canadian system.

The same differentials militate against decisions by foreign residents, and foreign entrepreneurs and enterprises, to locate in Canada, which is an additional loss of opportunities, even though with the new technologies there's no reason why someone cannot be living in North Bay and supplying technology information data, a variety of services, to the world. But it is the decision on the personal benefits of the entrepreneurs and their concern for the tax burdens on their staff that will determine whether that enterprise is located in North Bay or in Raleigh, North Carolina.

The sustainability of all the social programs we have discussed this afternoon and that have been presented over the last number of weeks to this committee, and the opportunities to maximize the benefits from free trade, from the new technologies, depend on an increased sensitivity to the role that is being played by the tax system. And I suggest that currently the Canadian tax system is not competitive with other jurisdictions. I'm not commenting on this today, but within the Canadian tax system there remain a number of factors that prejudice or help a variety of sectors. But those relate to the somewhat less critical issue that we're dealing with for the economy as a whole of a division and an allocation of resources amongst Canadian taxpayers who remain so.

I am more concerned about the costs of mobility for taxpayers who can choose and are choosing to locate elsewhere because of unattractive tax system rules here in Canada versus other jurisdictions, as well as the missed opportunities, a number of which I have dealt with in the last few weeks in fact. One is that foreign enterprises have chosen not to locate here in Canada, and a significant and specific reason given is the tax costs on the employees and the difficulty in attracting skilled personnel to man their operations.

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My submission is not specifically for this budget, although I can assure you that if the minister is proposing to make some changes, there are numerous specific changes that could be made to reduce this differential. However, I point out that we are losing today taxpayers because of the failure to be competitive in the tax system, and these are not going to be recouped by future changes unless we make even more aggressive changes.

I thank you for your attention and I'm open for any questions.

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

We'll now proceed to hear from Mr. André Lizotte.

[Translation]

Mr. André Lizotte (as individual): Mr. Chairman and Committee members, I would like to begin by expressing my thanks for this opportunity to present my views regarding the recommendations of the Task Force on the Future of the Canadian Financial Services Sector.

In reading the Task Force report, I was particularly interested in seeing how the Task Force had addressed the issues of competition, competitiveness, profitability and soundness in our financial services industry. I was also curious to see what the Task Force would say in connection with the two proposed bank mergers. I certainly was not disappointed.

The Task Force members are to be congratulated for the outstanding quality of their work. Also, I fully endorse the report's recommendations as regards, first of all, allowing life insurance companies, mutual funds and investment dealers direct access to the payments system; second, supporting the rapid demutualization of major life insurance companies, so that they are in a better position to compete with the large banks; third, allowing foreign banks to operate in Canada and open as many branches as they wish; fourth, establishing a framework that will provide clear rules whereby foreign firms can make loans to Canadians without establishing a physical presence here in Canada; fifth, empowering financial services customers; and sixth, improving the regulatory framework, including strengthening the mandate of the Office of the Superintendent of Financial Institutions to ensure that consumers are protected and allow it to balance competition and innovation considerations with its present statutory obligations as regards the safety and soundness of the financial system.

It was no surprise to me that the Task Force noted that our major financial institutions do not currently enjoy the confidence and support of Canadians. I can only applaud its recognition that there is a legitimate basis for higher expectations as regards the behaviour of our big banks. Canadians are absolutely right to believe that, in return for being awarded the privilege of operating in the financial services industry, the large banks should be held to a higher standard of behaviour than is generally expected of other financial institutions or other businesses.

Canadians know that such high standards are not always met by our big banks, and they deeply resent it. It should, then, come as no surprise that, when faced with the merger proposals involving the Royal Bank of Canada, the Bank of Montreal, the Canadian Imperial Bank of Commerce, and the Toronto Dominion Bank, the reaction of Canadians is one of considerable reluctance. One of their concerns is that economic power will become even more concentrated in the hands of relatively few powerful institutions and individuals who already exert tremendous influence over people's ability to manage their lives and pursue their plans.

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[English]

As one who experienced the heavy-handed tactics of the Royal Bank and its affiliate RBC Dominion Securities in late 1991 and early 1992 and who, rather than bowing to a bully, decided to fight back with a multi-million dollar breach of contract lawsuit and whose case is at long last to be heard in a Montreal courtroom this fall, I have no difficulty whatsoever accepting the views of most suspicious Canadians regarding big banks and individuals who run them.

For having had the guts, or should I say the temerity, to stand up for my rights and fight tooth and nail to resist confiscation of my property, RBC Dominion Securities made sure I was to pay a heavy price. They didn't spare any effort and I have the scars to prove it. My marriage became a casualty. I soon became destitute. My business, professional and social life was absolutely destroyed, and to a large extent I became a pariah in my former community. From their standpoint it was a remarkable success. There is only one problem: they have not been successful in shaking me off.

Mr. Chairman, it may be of interest for this committee to know what this case is all about. In a nutshell, it has to do with RBCDS, as represented by senior management, reaching a legally binding partnership contract and then resorting to a lousy pretext in order to cover up its liability so as to frustrate me at compensation. This case has to do with the value of commitments and the sanctity of contracts. It's a matter of trust.

The central issue here is nothing less than good faith and integrity in business transactions—pretty serious stuff indeed. It's hardly credible, some of you may well think, and I certainly won't blame anyone for being most reluctant to accept outright that a member of the Royal Bank Financial Group, considered a pillar of Canada's corporate community, would walk away from a legally binding contract and foolishly embark on a botched cover-up operation.

The Chairman: Mr. Lizotte, excuse me, we would like you to stick to the subject at hand. I know you're commenting on the MacKay report, and if you could kindly contain your comments within the framework of that report we certainly would appreciate it as a committee.

Mr. André Lizotte: I'm just about to finish on that theme, Mr. Chairman, or do you want me to just skip that and go immediately to the other part?

The Chairman: Yes, instead of things you're dealing with in regard to your court case, perhaps you can just deal with the issue related to MacKay.

Mr. André Lizotte: I'll just pass on and move to the latter part of my presentation then.

The Chairman: Sure.

Mr. André Lizotte: Thank you very much.

[Translation]

I noted that the Task Force recommends that each bank merger proposal be assessed on its own merits. It adds that big bank mergers should be permitted only if, after implementing any necessary remedial and mitigating steps, the Minister of Finance is of the opinion that: first, markets will remain competitive; second, that there are no material safety and soundness concerns; and finally, that the merger is in the public interest.

As an ordinary Canadian and small businessman, Mr. Chairman, I would like to express my strong opposition to the proposed bank mergers. I am absolutely convinced that such mergers would in no way serve the best interests of bank customers and the Canadian public. The only ones who stand to gain by such mergers are the senior executives and shareholders of these big banks.

Furthermore, it is important that the Minister of Finance not confuse the narrow interests of the big banks senior executives and shareholders with the wider interests of financial services consumers and the public at large.

He also has to be fully aware that authorizing these bank mergers would be an irreversible decision resulting in the immediate elimination of one third of our country's banking system. This would have far-reaching consequences for Canada.

As a general rule, Canadians believe that their large banks are big enough as they are, and as far as I am concerned, they're absolutely right. However many justifications have been put forward by Messrs. Cleghorn, Barrett, Flood and Bailey with respect to the proposed mergers of these big banks, I have yet to hear any rally compelling arguments from either them or anyone else.

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[English]

In summary, Mr. Chairman, I believe the strong and persuasive MacKay report has satisfactorily addressed the concerns of competition and competitiveness, as well as profitability and soundness of our financial services industry. It is now up to the Government of Canada to respond promptly to this report and to start implementing those recommendations that do not require legislation, as it has already done in the banning of the practice of tied selling by banks.

As to the megabank mergers, I see no compelling arguments to support the contention that the banks must merge to become big enough to compete with large foreign banks. Moreover, such mega-mergers are not in the consumer and public interest. The Government of Canada should turn them down. We don't need bigger banks; we need better banks.

As far as I'm concerned, after wrestling with an 800-pound gorilla for seven years now, I would hate for the Government of Canada to permit it to morph into a Godzilla. Thank you very much, Mr. Chairman.

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

We'll hear now from T-Base Communications Inc.: Sharlyn Ayotte, president and CEO; and Leonard J. Fowler, Jr. Welcome.

Ms. Sharlyn Ayotte (President and CEO, T-Base Communications Inc.): Good afternoon, ladies and gentlemen, Mr. Chairman. I'd like to thank you for the opportunity to appear today, and I'd also like to say, as a Canadian citizen and as a business owner, it is indeed an honour.

My presentation is going to be a little bit unusual this afternoon. Since I do not have access to print, I am requesting that you allow me to share with you the way in which I access information, to do the presentation.

The Chairman: If everyone would put on their earpieces, we are going to hear a tape.

We're having some technical difficulties. Obviously we can hear the sound, but it's not loud enough. I'm sure the technicians will fix this really quickly.

I think we'll suspend for a few minutes.

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• 1350

The Chairman: I'd like to call the meeting back to order.

Now, I think we have been able to solve the technical glitches here. I think we're about to begin. Just put your ear piece back in.

Presentation to the Standing Committee on Finance, pre-budgetary consultations, House of Commons, Ottawa, by Sharlyn Ayotte, president and CEO, T-Base Communications Incorporated, October 30, 1998:

Introduction: Earlier this month, I phoned the Department of Finance to obtain a copy of the September 1998 report of the Task Force on the Future of the Canadian Financial Services Sector, the MacKay report. I asked if the task force report was available on audio cassette. I was informed the report contained six separate documents, and was available to the public free of charge, in conventional print and electronically on the Internet.

My primary method of communication is through sound. I obtain access to the world through radio, television, telephone, audio recordings, and personal conversations. Print-based information must be read to me or recorded on audio cassette.

Talking books give me access to the wonderful world of literature. Audio recordings give me access to essential information in the wonderful worlds of business and government.

For me as the CEO of a Canadian company, and as a consumer of corporate and personal financial services, the future of the financial services sector is a matter of serious concern. However, as a businesswoman who happens to be blind, the narrow range of communication methods provided to make information available limits my access to a process and to information that will have significant impact on me, my employees, and the future of my business.

This is a systemic barrier. Because the report is not available on audio cassette, and I am not able to read paper-based conventional print or Internet text, I had no alternative but to engage a colleague to read the 800-page report aloud. The process took two full work days for two people.

I am very fortunate to be able to enjoy this luxury. Many other Canadians are not. Every day thousands of citizens are prevented from participating in and contributing to the social and economic life of our country because they are unable to access information about important government programs, services, and decision-making processes. We can become isolated by culture, language, or literacy, and by physical, cognitive, or sensory ability.

The invitation to Canadians to contribute to the public consultations for the development of the task force report was extended in print and on the Internet. Therefore, Canadians who are unable to access print-based information were excluded. This is systemic discrimination.

Canadians provided with essential information and services through accessible communications methods, such as large print, Braille, audio recording, teletypewriter, listening systems, and computer technology, are more able to become active participants and contributors.

The full and active participation of citizens in government processes is a hallmark of a strong and successful democratic society. This is, I discovered, a point the task force report emphasized time and again. When systemic barriers stand in the way of all Canadians participating, all Canadians suffer.

Highlights and human rights: Advances in medical science have made it possible to save and extend lives of all ages, which can result in disabilities of various kinds. The Health and Activity Limitations Survey published in 1991 by Statistics Canada estimates that 16% of adult Canadians have some form of disability. It is further projected that by 2001, 37% of the population over the age of 55 will experience a loss of sensory and physical ability. Eyesight, hearing and mobility are particularly sensitive to deterioration as we age. As the largest segment of the population ages, the baby boomers will continue to require access to information, products and services that facilitate the ability to live, work and communicate independently in society.

• 1355

The National Literacy Secretariat reports that almost 40% of adult Canadians have difficulty reading everyday print. Statistics Canada's 1997 household survey states that of 11,580,000 Canadian households, 1,500,000 have access to the Internet—approximately 10%.

The Government of Canada has publicly endorsed the rights of all citizens to have equal access to federal government information, programs and services. In May 1992, Parliament passed Bill C-78. This omnibus bill, an act to amend certain acts, modified six pieces of legislation to ensure that the rights of people with disabilities are respected. Information is to be made available in alternative formats, such as large print, Braille, audio cassette and computer diskette, to ensure equal access to information for all Canadians.

On June 10, 1998, the S-5 amendment to the Human Rights Act was passed by Parliament. The amendment addresses the equitable delivery of services to the public, with particular reference to people with disabilities. Treasury Board communications policy prescribes the use of all reasonable measures to ensure that people with disabilities receive the information they need to participate in the social and economic mainstream of Canadian life.

The success of the barrier-free concept for physical access is influencing forward-looking public service and business leaders to challenge architects, engineers and designers to expand their thinking about universal accessibility to include related areas such as technology design and application, information design and delivery, and marketing and promotion of goods and services.

In the past, disability strategies have translated into the development of special products and special services for special people. Universal design reflects the principle of a dynamic approach to total accessibility, not separate planning for separate needs. The focus then becomes accessibility, not disability. If the universal design principle is considered and applied during the creative process of the development cycle, it can ensure that the broadest range of people is automatically included.

The criteria that guide the design and development of systems and methods for providing information, services and products must be broadened to encompass the communication requirements of all citizens. At public points of inquiry, where interaction takes places between members of the public and the government, appropriate services must be provided according to individual needs. It is imperative that the message, the medium and the facilities be designed to include all members of the public. Contact may be in person, by mail, by phone, in print, on public broadcasting systems or by electronic media.

Consultation with consumers is essential. Consulting with a wide range of consumers, including people with disabilities and people of various age groups and with diverse cultural backgrounds, will establish the criteria to ensure that products and services are accessible. By developing an integrated, accessible approach to deliver information programs and services to our diverse population, the government can demonstrate leadership and enhance the capacity to serve a broader public in a timely and cost-effective manner.

• 1400

I recommend that the Government of Canada provide leadership by ensuring the fullest possible participation and contribution of all citizens in the social and economic mainstream of this country to more accurately reflect the realities of legislation, statistics and demographics. I request that funding for the following initiatives be provided for and allocated in the 1999 federal budget of the Government of Canada.

A national communications policy and strategy should be developed and implemented to govern the provision of accessible information and delivery methods for government programs and services, to ensure that all citizens may be fully and equally informed.

On public consultation, the government should design and implement accessible methodologies for all federally sponsored consultation initiatives, such as the MacKay report, and notify Canadians about upcoming consultation initiatives via channels and methods that facilitate participation by the widest possible cross-section of Canadians.

On electronic media, the government should ensure that the human-machine interface for technology and applications, including government community access centres, electronic information kiosks and Internet web sites are accessible to people with disabilities and compatible with adaptive technology.

On print media, the government should ensure that all government publications included in the national depository services program—Canada's information safety net—are available in multiple formats at designated library affiliates across the country.

The Chairman: Thank you very much. We apologize for the technical difficulties we had earlier.

Ms. Sharlyn Ayotte: Thank you.

The Chairman: Just as a point of order here, Monsieur André Lizotte, you commented on the MacKay task force. As you probably know, this is a round table for pre-budget consultations, so I will ask the clerk to incorporate your presentation as evidence in the MacKay report consultation. Is that okay?

Mr. André Lizotte: Sure.

The Chairman: Wonderful.

Now we have time for a question and answer session. We'll begin with Mr. Forseth.

Mr. Paul Forseth: Thank you very much, and welcome, presenters.

We have many presenters and I won't be able to get into a dialogue with each one of you. I believe Tracey Walters of the Canadian Association of Independent Living Centres cited a previous considerable work of Parliament, the federal Task Force on Disability Issues. The title of this report is Equal Citizenship for Canadians with Disabilities: The will to act. I'm wondering about using the word “act”. Instead of deriving from the word “action”, the other aspect of the word “to act” is to play a role, and it's not the real thing.

We have the introduction written by Mr. Andy Scott, who's now the Solicitor General of Canada—part of the government in the cabinet. He says in this report:

Canadians associated with a multitude of organizations, once again, placed their faith in a process that has not always produced results in the past. Their confidence inspired our work.

He goes on to say:

And individual Canadians poured out their hearts to us appealing to their government to prove worthy of their commitment to Canada.

Some time has passed since those words were written. Has the government's track record proved worthy, in view of the report and its 52 recommendations and these words of Mr. Scott, who's now directly a part of the cabinet? Maybe his words seem somewhat hollow now in view of what has been done or what has not been done.

So I ask you directly—we don't have a lot of time—what needs to be done, perhaps short of just dumping this government and replacing them with those who will deliver on the report? Let's get specifically to the recommendations in the report. What needs remain to be fulfilled?

I understand that some of the recommendations were fulfilled in part. But a lot of sub-action was contained within the 52 recommendations, so in essence there could really be more like 150 recommendations in the report. You've had a lot of time to reflect upon this major effort of Parliament. There were cross-country consultations. I would like you, in the next couple of minutes, to cite where we should go from here and what needs to be done to fulfil the rest of this report.

• 1405

Ms. Tracey Walters: You're absolutely right about people with disabilities being very, very tired of consultations and working groups and reference groups. We had a hard time getting thousands of people to show up, because nobody really wanted to waste their time once again.

We're talking about people with significant disabilities, with multiple disabilities, with different sensory disabilities, mobility disabilities, who were then being told by the task force members that they promise that when they get back something will be done.

Again, in the Globe and Mail article the day of the press conference here, October 26, 1996, was a guarantee: the government will act quickly. As you can see, they have not. I basically question whether they're going to even move forward at all.

I am totally disappointed, having been an observer to the task force and having spent three months, basically, away from my children, away from the medical supports I need, putting my health at risk. I find I'm totally disappointed and disillusioned by it all. Andy Scott was at least somebody who was following through, but now he's Solicitor General and it's obvious he's no longer involved with this issue.

So what can be done? Let's take both Sharlyn's concerns. There's something called a Canadians with disabilities act, which is long overdue. The Americans have an Americans with Disabilities Act. If created with people with disabilities, it would ensure Sharlyn's needs were being met, as well as those of 4.6 million in Canada. That is one—legislation.

All of that nonsense about the provinces doing everything voluntarily, that's ridiculous. Basically, people with disabilities can't even fight the powerful interest groups in the provinces. They can't even get to Queen's Park in Ontario to state their concerns. So we need an act; we need legislation. We need something that will demonstrate leadership from a government.

That act, or some type of legislation to make sure that the taxpayers' dollars are accountable and meeting the needs of all people in this country, not just the selected elite or people with some sort of money, would probably be, to me, the first thing to do. We need something, and we're away behind the Americans on that.

Also, there was a recommendation about $1,000 for a supplement for people with low incomes, people who do not have taxable incomes. It would be somewhat like the child tax credit that many of us receive. You wouldn't have to claim it as income. It would be a way to address many disability-related costs on which many people are forced to beg for assistance and beg from their welfare departments and are treated like this is a privilege. This is basic costs that could be covered.

There is a coordinated approach asked for. There's interdepartmental cooperation. Most departments of the federal government really don't even know there was a task force. We need a commitment, maybe a minister responsible at the federal level so we know somebody in this country is responsible for something here and we all know who it is.

Basically, those are probably places where you could begin: an act or legislation to ensure all of this; and access to all of society for people. Thank you.

Mr. Paul Forseth: I'll ask one supplementary question before I go on to others who may want to ask questions.

You also brought along with you a photocopy excerpt from the Liberal red book, Securing Our Future Together. I'll read to you some lines on page 67, and I would like you to reflect back what they specifically mean to you.

It says, in nice-sounding phrases:

federal and provincial governments will work to harmonize initiatives that provide tangible results for Canadians with disabilities and will move towards single-window delivery of services. In the longer term, federal, provincial, and territorial governments will pursue a more integrated approach to ensuring adequate income support systems. This will involve looking at all income supports currently provided, including Workers' Compensation, the disability provisions of CPP, and private insurance.

I'm asking you to provide an interpretation of really what they're saying. What is inherent, the reading between the lines, of that particular red book promise, and what has been said versus what has been delivered?

Ms. Tracey Walters: That's a very good question, I was trying to allude to it earlier. That was one segment that we did not ask for.

People without disabilities have the right to claim EI; if they're injured at work, they have the right to go to workers' compensation; they have the right to go to CPP. But this is basically a message from the leaders that what they want to do is have a single door. They want to change the definition of disability to make it very hard to access.

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They want one ghetto program. I was talking earlier about a ghetto program. They want to say that people with disabilities are not eligible for CPP, workers' compensation, or EI, and they want to shut the door, cut them off, and have them go somewhere else to another door, another single window, where maybe they'll get in and maybe they won't.

Basically, that's my interpretation of red book two and that single door. We fought many years to have many doors open and not be forced to go to one door.

Mr. Paul Forseth: Thank you. Time is slipping away.

I believe it was Kim Rudd who talked about child care programs. Perhaps you could just give me a brief response.

There's been a call across the country for better funding for institutionalized daycare and so on, but I'm wondering if you could comment particularly on the inherent discrimination within the income tax form itself for families in which there's clearly a tax problem—this has been called discrimination—between those who would pay for child care services outside the home and those who would choose to perform that child care themselves. As for the completely different tax treatment of that, do you have any policy or particular response to that problem related to the income tax form?

Ms. Kim Rudd: First of all, I think I should clarify a point. We certainly are not advocating for the institutionalization of child care, we're advocating for a range of services for early childhood care and education that would be available to all children and families across this country. That would mean anything from a parenting course or parenting drop-in centre to licensed child care and other supports that would be offered to families.

The Income Tax Act certainly does have a great number of limitations, including the fact that the benefit of the child tax credit is often.... Actually, Tracey was talking about people who have taxable income. There are people who require child care who don't necessarily have taxable income. Where are the supports for those people?

Because of the devolution of these responsibilities to the provinces, regions, and municipalities, what's happening is that the people who, in a lot of cases, most require assistance in terms of child care costs or early childhood education costs are left out in the cold. They don't qualify for a tax deduction because they don't have any taxable income, and those parents who do qualify often fall in the middle tax bracket in which it's taking two parents, two people, to earn enough income to be able to support their family.

Those parents who have the option and choose to stay at home to assist with those child care requirements also need supports outside their home. We often think that if a parent chooses to stay home and is able to, then they don't need child care. Well, those parents have all sorts of needs, including other supports.

I come from a rural community in Ontario. I'll tell you, if you're a stay-at-home parent and you don't have access to anything, you need supports to keep you—I won't say “sane” as it may not be the right word—in a frame of mind that allows you to do that parenting in a very constructive, positive way.

Certainly, the income tax situation needs to be addressed from a whole lot of angles. Some of the suggestions that have come forward in our presentation address that. These will be given to all of you in both languages on Monday.

Mr. Paul Forseth: Now, the particular question I asked tried to zero in on the specific inherent discrimination in the personal income tax form related to a parenting choice. I hear from you something of a reluctance to really want to deal with that narrow issue. You deal with all the other legitimate issues, such the broader aspect of support for parents in the community, which does include institutional day care, but what about other forms of payment that support the parenting role?

Could you direct your comment specifically to the item I'm talking about? I acknowledge all the others, but I want to deal with that specific issue and see if you have any suggestions or recommendations in that regard.

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Ms. Kim Rudd: I would say one is not an exclusion of the other. I think specifically there has to be some equity in terms of parents who have the ability and choose to stay at home versus parents who, for a whole variety of reasons, seem to access outside support. Do I have a specific number or a specific formula that I would use? No, I don't. I think there has been study after study, and while my memory is not that good to quote them, I'm sure I could supply them for you.

What we tend to do, and what I'm hearing you ask, is make that division, and I don't think it's necessarily an appropriate division. I think there's too much crossover to say one should have one and one should have the other.

Mr. Paul Forseth: Thank you. I have another one.

The Chairman: Go ahead.

[Translation]

Ms. Christiane Gagnon (Québec, BQ): Mr. Chairman, perhaps we could go back to the Reform Party later, because I have to leave and I would like an opportunity to ask some questions.

[English]

The Chairman: Sure. Madame Gagnon, please.

[Translation]

Ms. Christiane Gagnon: I'm sorry, but I have a train to catch and I have to be at the station by 3 p.m. One is always is little torn on a Friday afternoon when a committee is having such an interesting meeting, with guests who are able to provide important information on a variety of issues. So, it's important for me to have an opportunity to ask some questions before I leave.

I would like to address a question to Ms. Nora Sobolov, who presented her priorities, which are to put money back into social programs, pay down the debt and, thirdly, cut taxes.

Do you not think the government should start by lowering taxes? Shouldn't paying down the debt be priority number three? It is a well-known fact that during a recession or difficult economic times, there is slower growth and, if people start consuming less, that has an impact on the economy. If that were to happen, we could find ourselves in a much deeper recession than expected.

Paying down the debt when we have just wiped out the deficit... I think it was a good idea, even though it was hard on the people. We can see that all across our ridings. I can tell you that everybody needs some breathing space. Without suggesting that we engage in major spending, I do think we have to give families, that pay a lot of taxes, some time to catch their breath.

I am also cognizant of the decline occurring in the middle class, the average income of which dropped by 27% in recent years. We know that has an impact on buying and that the sector hit the hardest by recession is small business.

[English]

Ms. Nora Sobolov: Madam, what we tried to do is reflect in our presentation the opinions we received back from our members. We have a fairly diverse group of members who represent fairly large businesses, small businesses and service organizations. But among those groups the reflection of the information we got back from them was that the greatest priority was given to reinvesting in program spending and debt reduction.

Their reasoning on this was probably a range of things, but their view is that there would probably be more bang for the buck in program spending at this point in reinvesting in that way than in investing individual money. Some of them, particularly the ones from Ontario, have experienced the tax cut and have found it to have a relatively minor impact on the economy in the way that you describe. So I think, given those experiences, what our members have said is if we have to make a choice among these things we would say that we think there should be some percentage in each category, because we think that all of these things are important for the economy.

But if we had to give a priority, we are leaning towards reinvesting in the programs that we can all have some benefit from and then move into debt reduction. Our experience with tax reduction has not been so positive. So this is why they made those choices and this is why we presented as we did.

[Translation]

Ms. Christiane Gagnon: I also wanted to ask you whether you are in favour of targeted, as opposed to across-the-board, tax cuts. We already know that the middle class is paying a lot of tax. It is presently in decline and is gradually losing it buying power.

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[English]

Ms. Mary Pat MacKinnon: In response to that, we really did give our members an opportunity to be more specific in addressing whether that was their priority around taxation. And on that there was a range, because a number of our members did express concern around the, shall we call it, growing inequality between the top and the bottom, the shrinking middle, or the growing bottom and the growing top.

So there were some concerns that tax relief should be targeted more at the lower to middle income and that the top didn't need it as much. But I have to say that there wasn't sufficient response to be able to give you a lot on that. Those were some of the comments.

As Ms. Sobolov said, it wasn't the first priority of our members to look at tax reduction as the key thing that had to happen in the 1999 federal budget.

[Translation]

Ms. Christiane Gagnon: Thank you. I have a question for Ms. Walters. As we all know, the Employment Insurance Act has been amended to provide for much stricter eligibility criteria. By changing the eligibility criteria, the government has been able to accumulate a surplus of $20 billion in the Employment Insurance Fund. We also know that a great many groups have been affected by this decision to tighten up the criteria and thus are no longer eligible for employment insurance benefits.

You mentioned earlier that the government had promised better access to employment insurance to your members, the people you represent. Have you seen concrete evidence of the way the new provisions of the Employment Insurance Act are affecting your constituency? Given the government's decision to tighten up these criteria, it's clear that it is looking for any possible way of making people ineligible.

[English]

Ms. Tracey Walters: Exactly. As with CPP and many other government programs, the needs of people with disabilities are not being met. So they're the first ones off all those programs, including EI, because they do not necessarily meet the eligibility criteria.

As an example, the federal government has an Employment Equity Act and they are not living up to it either. People with disabilities were the last ones in the door because they only hire them as contract workers for maternity leave, etc., and now they're the first ones out. So as with EI, many people are not working long enough for both CPP and EI because of the barriers in government and in society.

The labour market agreements, as I said, are being made with no consideration to people with disabilities. In the task force report that I handed out, there are a number of measures to ensure that people with disabilities have some sort of labour market coverage or support. Those are the actions that have not been addressed yet. So of course in every program, whether federal or provincial, as soon as they cut.... People with disabilities are the least vocal; they're the least able to speak up, and they're the ones who are being cut at all levels in all programs, EI, everything across the board.

So yes, people are being severely hurt by all of these changes and the federal government is doing nothing—or very little, a few small band-aid initiatives—to counteract these changes.

[Translation]

Ms. Christiane Gagnon: In closing, I especially want to thank Ms. Sharlyn Ayotte, and you, Ms. Tracy Walters, for making us aware of some important issues. It may be seen as secondary, but certainly isn't when you are living with a handicap. As a Member of Parliament, I again want to thank you for bringing this issue forward. Every time another person's awareness is raised, he or she becomes a spokesperson by making your representations in the House and raising other people's awareness. So, thank you very much for your presentation.

[English]

The Chairman: Thank you.

First of all, I would like to comment on the presentation made by the representatives from Canadian National. Ms. Nguyen, I'm going to personally look at this proposal for you. I want to follow up with the minister responsible, but you're going to have to help me with this particular issue by providing to the committee how you came up with the math, basically.

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By that I mean that this tax generates $13 million in tax revenue, costing the Canadian economy $250 million, and thus reducing the tax revenue by $120 million. If you can provide a small calculation to the committee and forward it to us, I'd appreciate it, but I personally undertake to look at this particular issue for you.

Ms. Thi Nguyen: Thank you so much.

Basically, this is how the math is being calculated. Our guesstimate, based on our member survey, says that 79% of them will pass the tax on to the employees. We use a percentage of 30% of the members who will gross up, meaning they will keep the employee whole by paying the taxes on behalf of the employee. If we average 30% gross-up, we come up with $15 million in tax revenue which this tax change will generate.

However, our members also say that with this 79% of corporations passing the tax on to their members, they estimate that there will be a reduction of as much as 20% in relocations. So if we relocate 30,000 employees a year, 20% of that represents 6,000 moves that will not take place. At $40,000 cost per move per year, and with 6,000 fewer moves, that will account for about a quarter of billion dollars lost in the economy related to relocation. If you have lost a quarter of a billion dollars in revenue, that means the tax revenue related to this loss will be approximately $120 million.

The Chairman: You've explained all this to the finance ministry?

Ms. Thi Nguyen: Yes, and they say they would like to have more data.

The Chairman: Okay. So we're more or less at the same place then. While you provide them with the data, if you can do the same thing for the committee, I'll look into it for you personally.

Mr. Goldstein, you're referring to some tax measures that we should take to make things better for this country, as you say. There are a number of issues that we're looking at in relation to tax. I just want to know what you think the priorities should be. We have a number of things we could do. We could reduce the federal surtax, restore indexation, we could reduce the marginal tax rate; but all these things cost money, as you probably know. According to you, where should we move first?

Mr. Sidney Goldstein: I think the most visible part of the equation is tax rates, but obviously any specific move on tax rates is probably the most expensive place to get involved.

In the longer term, I think it's as important to have an indication of concern as having a dramatic.... I'm not suggesting we go down to the 30% top rates they have in the United States but an indication, whether it is a reduction of the surtax or something of that nature, which would obviously have an effect.

I know this is not the most popular subject to be talking about, because the main beneficiaries of any reduction in surtaxes or top tax rates would be the “ wealthy”; but ultimately my experience has shown me what we are losing. The basic impression I get from people who are making these decisions is that they don't see any long-term commitment to attempting to reduce any differentials of this nature.

In the political environment in the United States, whether we approve of it or accept or not, there is more pressure.... First of all, their rates are lower; but second of all, there is a much greater segment in the political scenario, the Republicans and so on, who are pushing for tax rate reductions, even from where they are now. For people who have the mobility, they are looking at long-term trends as much...and they want to stay. In fact, there are many things we have to offer in Canada that are not available in the States and can't be.

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But when you're talking about someone who may be earning $150,000, the differential in tax rates year after year is $25,000 to $30,000, plus the differentials in earning capacity in the States. A physician I was dealing with recently had a choice of going from Canada to the States, and it's not a question of the medical care system, but his gross income more than doubled in U.S. dollars, and his tax rate dropped by one-third.

People do not make these moves lightly, and I think the pressure and the differentials have reached a point where there are a lot of people who are facing these decisions. And it is so easy to do now. I was involved with deliberations during the Carter, Macdonald, and other reforms, and the assumptions that were made in tax policy in those times were that the elasticity of choices amongst taxpayers was not significant. I can tell you, and I'm only talking for the private sector, people assume it is no more difficult to move from Ottawa to Toronto than to move from Ottawa to Phoenix, and they're doing it. These are the workers. These are the long-term.... With each move like this, you're talking about millions of dollars of tax revenue.

We have a situation in which an operation that is currently located in Canada has chosen, in terms of its expansion, to operate—they're not moving—a new operation in the States, primarily because of the difficulty attracting technical personnel.

Tax rates are critical, and having a change to a visible item like the tax rate.... The surtax is one that I think is directed primarily at high-income earners, for equity reasons originally, and I don't even quibble with that. But I'm saying the offsetting detractions from having this red flag are going to prove to be a long-term detriment.

The Chairman: You want the marginal tax rate changed?

Mr. Sidney Goldstein: The marginal tax rate is a primary visible item. One thing I will tell you, and I mentioned it in my comments, is that over the years there has been an elimination of a lot of things that people considered abuses, things like income splitting, use of corporations, and so on, which were considered distortions of the system by those who opposed them. For those who didn't, they were techniques that were used for reducing tax burdens by earning income in different forms that were recognized by the system, and they allowed people to manage their affairs to minimize the tax system.

I would say that in terms of the clientele I deal with, the elimination of those tax planning techniques probably increased the effective tax rate on the taxpayers who were using them by 10 to 15 points, which, for those who opposed those techniques, may be proof they should have been done. But it operated as a release valve. People were prepared to have nominally high tax rates if they could direct themselves to earning their income, for instance, through active business income, which in itself had some specific advantages to the Canadian economy, but—

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The Chairman: Thank you. But the point you're making basically is that we have to reduce the marginal tax rates and we should be signalling to the people of Canada that there's a plan in place for the long term that speaks to resolving this particular issue. That's very important.

We also need to get our productivity higher, of course, to get our incomes up. If you're telling me that in the States they're offering three times what they're offering here, it can't just be the issue of taxes. To triple your income, you're talking about a big difference, unless it becomes a tax-free world, in Canada, which it never will by the way.

Mr. Sidney Goldstein: I don't think we have to match the U.S. tax rates; there are other inherent advantages of being in Canada.

When the differentials, as reflected in the exchange rate and tax rates, are counted in dollars and cents by individuals who have the choice of where to locate their businesses or themselves either professionally or as employees, then that cost is measured by people who are not major consumers of health care and are beyond being consumers of education benefits, both of which are phenomenal advantages to being in Canada versus the States.

But say you're 27 to 50. When you're making the decision, you're optimistic, so you're not looking at hospital or education costs. You're past one and you assume you're never going to need the other one. So the differentials, translated in dollars and cents, impact them much more in terms of their decision.

Consider even those people who stay in Canada by way of inertia. I know there are many instances where, for those reasons, people are urging their children, who also have these choices, to take those things into consideration in terms of their ultimate place of residence.

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

Mr. Sidney Goldstein: You're welcome.

The Chairman: I want to go back to Ms. Walters.

During my years in opposition, I was the critic for disabled persons. I remember when this report came out. There were 3,300,000 Canadians. Is that right?

Ms. Tracey Walters: It's much higher now.

The Chairman: It is much higher now?

Ms. Tracey Walters: Yes, it's 4.6 million Canadians, at least.

The Chairman: So that's an outdated report, I gather. Do you remember that report? It spoke of 3,300,000 Canadians.

Ms. Tracey Walters: Yes, that was quite a while ago, though. Through Statistics Canada and also with new medicine and new technology, a lot more people are surviving after accidents. Things like that put it at 4.6 million people now.

The Chairman: There are 4.6 million people. Obviously the challenges are growing, not diminishing. What you're saying is that while the challenges are growing, the commitment is not as high as it should be.

Ms. Tracey Walters: I'm sorry, you said the challenges and...?

The Chairman: I mentioned the commitment. You're saying we need to commit ourselves a lot more.

Now, if you had to give us two or three priorities, what would they be?

Ms. Tracey Walters: The federal government, as I said, has to become more responsible and provide leadership. You need have legislation of some sort to ensure that all the citizens of this country can participate.

We're not talking about money. It costs you billions of dollars to keep people with disabilities oppressed, segregated, isolated, and institutionalized. So it's not a money issue. You're going to be much better off financially. We need legislation.

Right now, all over this country, everybody's version at the local level of what the needs of people with disabilities are.... We could have Mr. Latimer deciding what the needs of people with disabilities are in Saskatchewan. Wouldn't that be a scary thought?

So I think it's very important for you to understand that you need something at the top. We can't just all think that we're all going to hold hands and all the provinces are going to do a good job. So we made recommendations for an act for Canadians with disabilities to be created along with people with disabilities that would be a mechanism of ensuring....

Section 15 of the charter says we will not discriminate against people with disabilities, but people with disabilities cannot litigate. If you're being discriminated against 30 times a day, you cannot litigate, as you don't have the money, resources, or energy. So we need a mechanism. Legislation; leadership; reaffirm who you are, what this government does in the way of governing. We need somebody accountable for the citizens of this country.

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Sharlyn, I thought I heard you....

Ms. Sharlyn Ayotte: Oh yes.

Ms. Tracey Walters: So that's critical. You need something like that.

The Chairman: Is it called the Americans with Disabilities Act?

Ms. Tracey Walters: Right. The Americans, with President Bush, have something called an Americans With Disabilities Act, which ensures access to society. We are years and years behind it. Really, if you look at it economically, you have high-tech companies here who can't necessarily really compete with the American market in some respects, because we're not making all of our industry accessible for all people. So the United States is ahead in certain respects, by having equipment and programs and technology that they have to have in order to meet their own Americans With Disabilities Act.

So a Canadian act, however it may look, to make sure section 15 of the charter.... It's not a hammer act, that you're going to do this now; it's to create a mechanism to ensure that in provinces and municipalities and federal government jurisdictions, we all have a standard of some sort in how we treat our citizens with disabilities.

The Chairman: On federal agencies responding, I remember there was a challenge there with the National Transportation Agency vis-à-vis accommodation for a disabled person. Has that been resolved at all?

Ms. Tracey Walters: Do you know which one he's talking abut, Sharlyn? What one is that? There have been so many that it's hard to narrow it down.

The Chairman: That's my question. Do you find that there's really a lag in government action on this particular problem?

Ms. Tracey Walters: It's awful. It's something we should really all be ashamed of as a country, that nothing any more is mandatory. Everything is voluntary.

I sit in my office every day, and I have complaints that come by my desk from the Canadian Transportation Agency. I'll bet I get two or three of them on my desk per week. It's constant, and a lot of it's because of our voluntary measures. We have nothing to really say that the public sector, the private sector, governments.... We still have MPs who have offices that aren't even accessible.

The Chairman: Why is it that I believe that awareness of the challenges faced by disabled persons is actually higher now than it was 10 years ago?

Ms. Tracey Walters: The awareness?

The Chairman: Awareness, yes. Awareness and people's understanding of the challenges that disabled Canadians face.

Ms. Tracey Walters: I don't agree with that at all. Some people are becoming a little bit more aware, because there might be some equipment that helps somebody, or a certain type of electric chair. You might see people a little bit more. But you're not seeing people who are warehoused still in institutions and in certain types of nursing homes and hospitals. A lot of people who were living in the community are being thrown back into hospitals that are overburdened and understaffed.

It's sad, but to say there's a lot more awareness...I'm not going to necessarily agree with that. Here in Parliament a couple of decades ago some of our colleagues had to be carried up the stairs in order to make the House of Commons accessible. So maybe there's a bit of awareness, but there's tons to do.

The Chairman: But you said a few years ago. They don't do that now, right?

Ms. Tracey Walters: Right now, in the House of Commons itself, can people run for politics and be able to get their wheelchair into the House and have a seat? I don't know. I'm asking. Can we run as politicians and be able to get our scooters and wheelchairs into the House? Do you think there's room there so that you can actually have a seat where your party sits in the House of Commons?

The Chairman: Actually, I think Mr. Robinson came in with a wheelchair when he had his accident, but I understand the point you're making. I want to know if you see any progress or not. I was under the impression that in fact we're a more sensitive society than we were 10, 15, or 20 years ago.

Ms. Tracey Walters: Okay, just give me one more minute.

You know what happened? In the previous government we had something called the strategy for the integration of people with disabilities. That was $158 million over five years. When this government came to be, they cut that to zero. So we did have some advances, but right now we're going backwards and we have nothing. We have no strategy right now. We have no vision. The federal government has absolutely no vision, nor something written that this is where we want to be for many of our citizens.

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Yes, we were going someplace, but it was all cut in 1994, 1995 and 1996.

The Chairman: Is there a united vision amongst the groups they represent?

Ms. Tracey Walters: Oh yes, we're very united on what the vision is.

The Chairman: There's no debate amongst the various groups at all?

Ms. Tracey Walters: There might be a debate if it's a group of people who are not people with disabilities, who would like to see certain people still in institutions. But never before has the disability community been so united. A lot of it has been brought on by what has happened, and it has been unbelievable. There is no debate. We're all heading in the same direction with this.

The Chairman: Ms. Ayotte.

Ms. Sharlyn Ayotte: What I wanted to say around that whole issue of vision is that in many cases I agree with Tracey; there is starting to be a united vision around strategies for integration. Where it stops happening is with 50% of people who have disabilities that are communication-based in nature. No budgets exist to allow us, as communities, to communicate with each other in a way in which we're going to get any kind of united vision. It's like telling us we can come to the party but not drawing us the map. That's kind of where it sits right now.

Along the lines of what we need to do, a first step would be to acknowledge that people with disabilities just may have a contribution to make to society; that we create employment; that we have vision; that we do really powerful and really great things. That's a good first step.

The second step is actually to follow through on the commitments that have already been made around information and communication. Let's start with the important things: essential information, health, safety, security, economy, education, employment and transportation. Without those things, we're not part of the same world you're in.

Thank you.

The Chairman: Thank you. There's no question about the fact that we in this committee are very concerned about maximizing the human resources potential of this country.

Ms. Bennett.

Ms. Carolyn Bennett: I'd like to keep going on the Canadians with disabilities project. I think there was huge support for the Scott task force. Some of the comments I've heard are that we've done some of the easier things—the tax treatment things—but have lagged on the others.

I apologize for not hearing the initial presentation. Certainly, when Laurie met with us in Winnipeg, and last week when I met with David Baker at ARCH, I was inclined to think there's obviously more we can do on the tax side. As a family physician, I certainly am still worried about the qualification for the disability tax credit. Whether it's cystic fibrosis or whether it's a brain injury, it's difficult to fill out forms because everybody's different.

When you are disagreeing with professionals who say this person is disabled or challenged in such a way that they aren't able to contribute in the full way, or when being able to contribute costs more—that's the other way we try to deal with the tax credit, because it costs these people more to get out and to be able to contribute—we should try to even that up a bit. Are those the kinds of...?

Ms. Tracey Walters: I'm getting a bit confused. Are we talking about the disability tax credit?

Ms. Carolyn Bennett: I'm talking about all of the tax treatments or the ways in which we can help. I guess it's going back to the chair's question about the things we could actually.... At the pre-budget consultations, we would love to be able to say there has to be a Canadians with disabilities act, but it's harder for us to do that than it is to make a line entry in a budget to say this is a tax treatment or whatever. Those are the things we sometimes get to do first in pre-budget consultations, and then we have to lobby in our regular ways in order to get the act with the teeth in it that I think you know you need.

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Ms. Tracy Walters: Why is it that we can't have champions within the finance committee? Go back and say that if we're going to really address issues, we need a little bit of that budget to start looking at it in order to start becoming a leader in the world in this area. If you want to do something with real teeth, legislation is the beginning. And yes, I think there should be a line item, because it doesn't take much money to begin the discussions to explore. This is how you're going to have a better tax system, because you're going to have more people with disabilities paying tax.

In Ontario, we just completed a study in which we were able to get direct funding for individuals to purchase their own attendant services. We had a hundred people on the pilot. After a thorough investigation by the Roeher Institute, it was shown that the government saved 50% of taxpayers' dollars and the quality of life improved 100%. People with disabilities were now able to go to work, go to university and pay tax dollars.

We have to have a broader vision than just being able to give somebody a couple of bucks through the tax system. As I said—maybe when you weren't here—many people with disabilities live on less than $10,000 a year and their income is not taxable, so we're still not going to address that issue.

So I think you can commit to your promises in your budget, as a government. Let's begin to address the real concerns that will help society.

Ms. Carolyn Bennett: There must be something in the tax system that we could change. I was quite worried to hear that some of the corporations did good things on a voluntary basis—frankly, they even got awards for them—but the minute things became voluntary, they withdrew whatever it was they were doing. Is there a tax incentive to get corporations doing the right thing in terms of the...?

Ms. Tracy Walters: I think a lot of it has been tried. Maybe in Halifax we'll get a company that'll be nice. Maybe in Winnipeg somebody will do something good one day a year for the cause. That's not meaningful, though. It's a good idea, but I think it's been done everywhere. Actually the National Access Awareness Week that we used to have has been dismantled because it doesn't work that way.

The tax system? No, you can't, not if you are set on a child tax credit system, a credit for people with disabilities who have no incomes, no taxable incomes. There's a recommendation for $1,000 per year, and that could be one possible idea. But if you want to do something meaningful before the turn of the century, let's have some legislation. I think it's time we do something concrete to ensure that every level of government leads the way in this area.

Ms. Carolyn Bennett: Thank you.

The Chairman: Thanks, Ms. Bennett.

Mr. Forseth.

Mr. Paul Forseth: Following up your desire for legislation, of course, we have the Canadian Human Rights Act and the duty of companies and corporations to accommodate, and to particularly accommodate specific disabilities. Of course, one of the issues was banks and their duty to accommodate. Whether it was with bank machines or general access, although banks are a private enterprise in some respects, they're almost like a public utility. They are so fundamental to the operation of our economy that certainly the duty to accommodate various needs has been an issue under the Human Rights Act. Maybe some adjustments around that particular process could be done.

I want to ask Sharlyn Ayotte a few questions. First of all, I was quite impressed by her cassette recording of her narrative related to the printed text that we had in front of us. It sounded to me as though she was reading the text, because it was perfect according to the print. It was not done the way someone would speak extemporaneously, so you were obviously reading text and following it in order to speak it.

You were saying that:

as a businesswoman who happens to be blind, the narrow range of communication methods provided to make information available limits my access to a process and to information that will have significant impact on me, my employees, and the future of my business. This is a systemic barrier.

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I want you to describe to us how you're able to accomplish that particular feat, which I thought was at a very high level. I have a supplemental after that.

Ms. Sharlyn Ayotte: I spent some money employing a professional narrator to reproduce my speech on audio cassette so I could share it with you in a way that would not be jolted and give all of the points I needed to make within my presentation.

Mr. Paul Forseth: So that wasn't you on the tape?

Ms. Sharlyn Ayotte: No, but she's very good, isn't she?

Mr. Paul Forseth: Okay. Do you have any experience with the new disincentive tax on audio cassette tapes that is now operational? It's been gazetted recently and was under a statute passed in the last Parliament that was supposed to support music performing artists in this country by placing a penalty tax, you might say, on blank cassette tapes. We're finding that of course most recordings and blank cassette tapes are not for music at all, they're used for things like you're asking for, and companies are using them for promotional narratives, training issues and backups to manuals.

Do you have any experience now on what's happening to the small companies that earn a livelihood from doing this type of thing and providing the kind of services you may be looking for? Is this disincentive tax really making a casualty of that small industry?

Ms. Sharlyn Ayotte: I would like my colleague, Len Fowler, to answer that question, please. Go ahead, Len.

Mr. Leonard J. Fowler, Jr. (T. Base Communications Inc.): The net effect of the tax has simply made it more difficult for most small companies and medium-sized companies to be willing to spend the money to provide information in a manner that's effective to their employees, because the domino effect, starting with the cassette manufacturer, just adds to the cost all the way through the process. It makes training more expensive; it makes all of those things more expensive to the organizations interested in doing them.

Mr. Paul Forseth: Perhaps the full implications of just how the tax will be applied are not clear yet. But a young entrepreneur in my riding who has three employees says that with what he sees is going to happen with this tax, he will be closing his door and will no longer be operating. His service of providing recorded cassettes for training seminars and other things is not related to the intent of the tax in the first place. Artists felt that somehow they were losing revenue from people pirating their copyrighted material, so this tax was dedicated to go to support performing arts in Canada. I'm told this small firm in my riding and probably others will go out of business and that contract work will go to Bellingham, Washington.

Ms. Sharlyn Ayotte: Can I respond to that, please?

Mr. Paul Forseth: Yes, go ahead.

Ms. Sharlyn Ayotte: Essentially, any way you distribute information, whether it's on audio cassette, computer diskette, large print Braille, the Internet or however you do it, whatever taxes are applicable to the dissemination of information for that product should be applicable across the board. Whether it's on an audio cassette or a computer diskette, it is simply an information product, so there should be no levy on empty audio cassettes if they're being used to create information products.

Mr. Paul Forseth: In summary of your presentation, you're asking for some kind of general support. Obviously the kind of enabling hardware that's available now wasn't available 20 years ago, so technology is advancing that boundary of access, but you're asking the regulatory climate to also help expand that boundary. If you could just review from a policy perspective related to the budget and taxes and that particular aspect, what are you asking for?

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Ms. Sharlyn Ayotte: What I would ask for is that, within the budget, moneys be allocated in a fairer way to ensure that departments are able to meet the requirements of all of the citizens they serve; that either new moneys be made available or existing moneys for communication, information distribution, be reallocated to ensure that we all have access to the same information equally. It's just a different way of allocating budgets.

Mr. Paul Forseth: I'll close with a comment that's similar to something I've heard the health minister say. There's enough money in the system, but we must spend it more wisely.

When I think of the tons of paper material and whatever else just hauled away every year from this Parliament Hill, and I see what comes in my mailbox.... I have about a foot-high stack of documents, brochures, journals, reports such as this one, arriving every day. My ability to pay attention to that is. It is sorted by staff, and so much of it is shredded and hauled away.

You might say what a waste of resources. Within a government, for instance, you might look at the life of this particular report, how many times it was read, how many were never opened, never taken out of the box, and how many were eventually destroyed. Perhaps what you're talking about is that when the funds were made available for the printing of this particular report there should perhaps have been a percentage reallocated into audio cassettes or other forms. Is that what you're saying?

Ms. Sharlyn Ayotte: Technology can make it possible. It's the application of technology that can make it possible to produce information in whatever formats are required upon demand.

It's a different way of looking at how we allocate our budgets. If you have a $100,000 budget to produce this document, create it as electronic masters and simply produce the information upon request in the appropriate formats being requested, and produce it equally to Canadians. We also need to make sure we have strategies that are equal for all Canadians when we need to tell people that it's there. If we advertise that in a newspaper, I'm not getting the message and therefore I've been unfairly treated.

Mr. Paul Forseth: I think you've said it quite eloquently. Thank you very much.

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

On behalf of the committee, I'd like to thank all of you members of the panel for your presentation. As you've probably gathered, there are many needs to be addressed in the upcoming budget.

Some Canadians from coast to coast to coast have also advocated that budget speeches start talking about a long-term strategy, as opposed to the past where the budget was limited to, at the most, five years. That's something we're very mindful of, because we fundamentally believe that in the final analysis this committee is driven by one essential goal—to improve the quality of life for the people of Canada. That is our ultimate goal.

On behalf of the committee, thank you very much for your contribution.

The meeting is adjourned.