FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Monday, October 5, 1998

• 0738

[English]

The Vice-Chair (Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.)): Good morning. I call this meeting to order. I'd like to welcome all our guests, as well as our colleagues from the House of Commons.

This is the first session of our finance committee hearings. We started five years ago consulting Canadians. Our group has split into two groups for convenience as well as economic reasons. Our group is travelling out east. We will be here in Newfoundland today and tomorrow as well as in the Halifax-Dartmouth area Wednesday and Thursday.

Then we have a swing into the Toronto area. After that we come back to P.E.I. and Nova Scotia while the other group is doing out west. So in the space of almost four weeks we will be consulting Canadians on two issues. One is your input into the budget process and the other issue is the MacKay task force report on financial institutions.

So I'd like to welcome our presenters. Before I start I'd like to introduce our members of Parliament. Mr. Gary Pillitteri is from Niagara-on-the-Lake, Karen Redman is from Kitchener Centre, Paul Szabo is from Mississauga South—three members of Parliament, my Liberal colleagues. Paul Forseth is a Reform MP from New Westminster—Coquitlam—Burnaby, B.C., and Lorne Nystrom is from the NDP from Qu'Appelle, Saskatchewan. That's my former province, Lorne; I grew up there for five or six years. Scott Brison is from Nova Scotia, Kings—Hants. I believe we have Mr. Yvon Loubier from the Bloc Québécois. He should be arriving later on this morning.

With us this morning we have Mr. Jack Harris, on his personal behalf, leader of the Newfoundland New Democrats; from the Newfoundland and Labrador Federation of Labour, Elaine Price, president; from the Newfoundland and Labrador Federation of Students, Dale Kirby; from the St. John's Board of Trade, Mr. Sandy Gibbons, president, and Lori Lee Oates, research assistant, government affairs; and from Stella Burry Corporation, Jocelyn Greene, executive director.

• 0740

The format, ladies and gentlemen, is that I'll ask each of you to present for about 10 minutes and then we'll open up to questions from the floor from the members of Parliament, and hopefully we'll be able to have a good dialogue.

We'll start with Mr. Harris, since you're first on my list. Welcome.

Mr. Jack Harris (Individual Presentation): Thank you, Mr. Chairman, and thank you to the members of the finance committee for travelling and hearing the views of people across the country.

It's important, as we all know, particularly in this part of the country, to have our voices heard in Ottawa. A good way to do that is through a committee. Those suggestions and ideas sometimes, even if they're not government policy at the particular time, may be made government policy if the committee goes to work and finds out things that the government will have to listen to. I have a suggestion on that for you in a few moments during my presentation.

I was quite interested over the weekend to read in Maclean's magazine a report of a speech by the former premier of British Columbia Bill Van der Zalm, who complained that since the government had changed in British Columbia the province now has the highest unemployment rate in the country. Maclean's did not point out, of course, that they were probably wrong on that, since an 8.6% unemployment rate in British Columbia hardly compares with a 18.9% unemployment rate in this province. I want to start by talking about the important and continuing situation in this province regarding the high unemployment rate.

This ties in as well, of course, with the notion of what happens when you are unemployed. We all know what has happened to the unemployment insurance scheme for this country. We have gone from a situation where those who are unemployed, for the most part—more than 85%—would have access to unemployment insurance and the benefits of unemployment insurance while seeking another job. We now know, of course, that less than 40% of the people who are unemployed in this country have access to unemployment insurance. The first priority for any surplus that exists in the UI fund would have to be to restore some fairness in that system, not necessarily to put back everything that was there but to ensure that those who are unemployed can benefit from that system.

There's a lot of talk about surplus in this country. Most of that surplus seems to be coming from the unemployment insurance scheme. I would see the first priority to be for any surplus there to be returned to workers, to unemployed workers in particular. There's also a notion that there should be a reserve in the fund in any event, for periods of time when the premiums might not meet the current demand.

What we see happening here, I think, is at a time when we've had one of the highest unemployment rates in the last while, although it's diminishing slightly nationally, we have so many unemployed people without any assistance.

The second area of priority in my view has to be a restoration of health care, and we support the call of the federal party for a $2.5 billion injection into the health care system.

There's a particular concern in this province about youth unemployment and opportunities for young people. We have a situation here in which the province has, as a result of its own policies and also the lack of support from the federal government—and we have some speakers who will deal directly with some of these issues.... We have a situation in post-secondary schools where there are hardships being imposed upon students attempting to get a post-secondary education.

• 0745

At the university level, of course, the costs are rapidly increasing for tuition, are otherwise well beyond the capacity of students, and are setting forth a debt that is unconscionable in many instances because people don't have the means to pay it back. There needs to be a major look at the whole student aid system across the country.

Secondly, for post-secondary students in this province, we have a situation in which approximately one-half of the students who attend post-secondary institutions outside of the university sphere are attending private colleges. They're doing that because there is not enough access to public colleges, and there are a number of consequences.

There were approximately 11,000 of these students as of last year. They have to pay the full costs of instruction through their tuition. In some cases, there is very considerable marketing that goes on to attract and recruit students. And thirdly, there is the profit for the owners. All of this is on top of the taxes they and their families pay to support the public system. The public post-secondary system, whether it's university or the public college system, receives the assistance of the taxpayers. In the case of these taxpayers, though, they are also required to pay the full costs of tuition, marketing, and profit, as well as contributing their taxes to the education of others.

In my view, this is a situation that is intolerable. We are fighting against it here in this province, but there is a federal element to it. As we know, federal support to established programs financing has been reduced almost annually for the last number of years.

I also want to raise concerns about employment for young people. We do have a considerably higher unemployment rate for young people in this province than in the others. It's in excess of 30% most of the time. This needs to be addressed by an all-out national program that understands and responds to the unemployment rate in various parts of the country. Where the need is greater, the program ought to be greater.

Once again, I want to offer my support for the initiative of the federal party in proposing a program for young people that would see them having one of four alternatives: a job, job experience, job training, or continued education. This is something that all young people really deserve to have a shot at if they are not going to be relegated to the part-time job market. We are in a situation in which a high school education by itself is not enough any more. There needs to be a major effort to ensure that young people have a chance to participate in our economy.

I'll end by referring to one further point. Obviously, this country and other countries are now at the whim of international financial money traders. The vicissitudes of international finance place a tax on our dollar and a tax on investment in this country through interest rate changes. We see this as a failure of policy at the national level not only in this country but in others. I think it's time that this country started insisting that we get involved in some control of capital movements: slowing them down, making international agreements, or taking unilateral measures to try to protect our economy and, therefore, our people and our earning power, from the unregulated international capital system.

I've recently read an account of that system. Perhaps many of you are familiar with Linda McQuaig's book The cult of impotence. It describes in great detail the international financial situation and the history of how the Bretton Woods controls were developed after World War II. I think it's a very good study, and a very insightful look at how the financial capital system works against the national interests of this country and other countries.

• 0750

Maybe this committee should consider looking at issues such as the Tobin tax. As I think he himself might have said it, it is designed to put a stick between the spokes of capital movements. It would at least slow down those kinds of capital movements and would provide some protection to economies. They would not be as subject to the whims of money traders.

Money traders are trading over $3 trillion dollars a day and are taking advantage of fractions of a cent of movement in monetary values of currencies for substantial profit for certain people. They are doing so at a great cost to the economies and social programs of countries that can be subject to this type of attack, and they are doing so for the sake of the profit of a few. So I think that's something this financial committee may be willing to take on.

There's some indication that some serious study has been undertaken by officials in the Department of Finance, some of whom have done so contrary to the wishes of senior Finance bureaucrats. There is work that has been done, though, and it might well be helpful to have this committee look at such an issue. Perhaps it would be in a position to provide recommendations to the Minister of Finance on what he might do to control financial capital movements.

Thank you.

The Vice-Chair (Mr. Nick Discepola): Thank you very much, Mr. Harris.

I'd like to now ask Ms. Price to continue, please.

Ms. Elaine Price (President, Newfoundland and Labrador Federation of Labour): Thank you, and good morning. It gives me great pleasure to appear before the committee on behalf of the Newfoundland and Labrador Federation of Labour. In actual fact, what I am going to say to the committee will support the points that Mr. Harris has just made.

I think it's significant that December 10, 1998, will mark the fiftieth anniversary of the signing of the Universal Declaration of Human Rights, which outlines fundamental social and economic rights that all citizens should be guaranteed. I think it is indeed unfortunate that many Canadians will never fully get to enjoy these rights because public policy has guaranteed that inequality, poverty and unemployment have been entrenched in our society.

A balanced budget should really be good news for the people in this country. We should be breathing a sigh of relief. We should be looking with anticipation to better times and a return to a kinder, more compassionate and socially just society. Unfortunately, I don't believe this will be the case. My sense is that many Canadians, particularly those who have been systemically marginalized, will remain on the economic and social scrap heap where public policy has in fact ditched them.

I think it's important to note that I, like many others, believe that a budget is about political choice. It's a reflection of the basic values and priorities that our governments use to shape the social and economic realities of the lives of people in this country. Unfortunately, Ottawa's political choices have consistently favoured wealthy individuals and highly profitable businesses over the rest of us. Unfortunately, the news continues to be bad for most Canadians.

Thousands of people have been thrown out of work because of the budget choices that have been made by the federal government. Continuous cuts to unemployment insurance and income support programs have added to the misery and the desperation that people are experiencing all across this country. Funding for health, education and other vital public services has been slashed. Our programs have been gutted, and the social safety net that Canadians value has just about been destroyed. Unfortunately, a disproportionate share of the pain from these cuts is being shouldered by those in the lower income brackets and by children, who are particularly vulnerable. In spite of that, it doesn't appear as though government is willing to transfer a part of this burden that's being experienced by poor Canadians to those in the wealthy business and financial communities who could well afford to help pay their own way.

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I believe it's clear that the values and priorities that we've seen reflected in previous federal budgets have been fundamentally one-sided, and I think it is indeed sad that we don't see any evidence that will give us hope that this is about to change. I believe the current debate on how to spend the fiscal dividends we are supposed to reap from a balanced budget is a clear indication of this.

Mr. Harris touched on unemployment insurance. On the debate about where the budget surplus should be spent, I think it's significant to note that we wouldn't have a balanced budget this year if government hadn't stolen from the unemployed people in this country. Instead of achieving a balanced budget in 1997-98, the deficit would have been close to $7 billion. This year the books would be showing a $3 billion deficit, and that would be carried over into next year.

I think it's also important to note that in 1989, 87% of unemployed people in this country qualified to receive unemployment insurance. Last year only 46% of unemployed people received unemployment insurance, and that number is expected to drop to 36% this year. It's clear that the federal budget has been balanced to a large extent on the backs of unemployed people in this country, and that is totally unacceptable.

I think it's also important to note that when government did the overhaul of the unemployment insurance program in 1995, it wasn't because our system was unaffordable. There was another agenda there. For government to be considering the introduction of legislation that will legitimize this theft that has occurred from unemployed people is utterly ridiculous. Unfortunately, provincial governments, through their silence, have given consent to federal government actions.

The other thing is, when you combine the cuts that have occurred to unemployment insurance with the cuts for health, post-secondary education, and social assistance, you get a pretty mean picture. Our society, Canadian society, has become a pretty mean society for an awful lot of Canadians.

The Federation of Labour urges the federal government to make the restoration of UI coverage and benefit rates top priority. There shouldn't be a debate about where the surplus from the UI funds go, whether it should go to health care or taxes. The money belongs to unemployed people in this country and they should be able to access it.

I should also point out that improvements to the unemployment insurance system are affordable. The Canadian Labour Congress has called for improvements to the UI system, which would see the elimination of rules penalizing seasonal workers and improving the act to ensure that at least 70%—and that's not as high as it was in 1989—of unemployed people in this country receive 60% of their earnings. The UI-commissioned chief actuary estimates that the yearly cost of the CLC improvements would be $6.5 billion. That's much less than the current $8 billion yearly surplus. By maintaining current premium rates, the accumulated surplus of around $12 billion would still be there as a cushion for the next rainy day. Based on the stalling occurring in our economy, I fear it's probably much closer than people would want it to be, or would want to acknowledge that it is.

The Federation of Labour believes the goals of job creation, equity, and long-term economic and social well-being should be the guiding principles in setting priorities for next year's budget. The social deficit that has been created—and it's a huge one—alongside the decline in the federal deficit, has to be addressed. The damage that has been done to our social infrastructure has to be repaired.

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We cannot support focusing strictly on debt reduction. All surpluses from our budget should be reinvested to deal with social concerns and raising our potential for stronger economic growth. If we pay down the debt, that's taxpayers' money just going. If we invest in job creation, repairing our social safety net, and restoring our public services, we're creating jobs. When people work, people pay taxes. I believe the experience of the past couple of years, where we have experienced economic growth alongside low interest rates, has demonstrated that this approach does work, as the alternative federal budget has consistently argued it would for the past two to three years.

We believe that rather than implementing across-the-board tax reductions, the federal government should redesign our taxation system to redistribute the tax burden and leave federal taxes unchanged as a share of the economy. If we could reform our tax system by changing the corporate income tax structure, we could eliminate a lot of the special tax treatments that are currently given for things like capital gains and dividends, and we could introduce a new tax on inheritance. People who inherit a lot of money can sure pay for it. Unemployed people and poor people in this country have paid a high enough price already.

We believe you could address the tax problem by implementing what I would call progressive tax reform, and I use those words somewhat cautiously because every time reform has been used in the past five or six years, it's meant tremendous pain for a lot of people.

We believe job creation has to be a priority. The alternative federal budget over the past few years has consistently shown how the government can create jobs. Last year's AFB showed how government could create 1.8 million jobs over a four-year period and still maintain a balanced budget.

It's obvious that government has the financial means to implement job creation strategies. The only thing that appears to be missing is political will.

We feel the federal government has to take a serious look at the poverty crisis that exists in this country. In 1996, 5.3 million people in Canada were living below the National Council of Welfare's poverty line. That means that one in five children live in poverty. The other horrific fact is that one-quarter of these children have at least one parent who works full time but earns inadequate wages. We have a poverty crisis in this country. We would encourage the federal government to make the reduction of poverty a priority in the upcoming budget.

In addition to that, our health care system has been gutted. In Newfoundland this past summer we were bringing in military doctors for three-month stints to deal with the crises that exist in health care here. That's utterly ridiculous. Newfoundland is not a third world country. Yet when it comes to basic services such as health care it would appear as though we're heading that way.

We would also encourage the federal government to restore the cuts that have occurred to post-secondary education and make it a priority in this upcoming budget. Tuition fees in Canada have increased by 45% since 1993 and are now the third highest of all the OECD countries.

Youth employment is rising and average full-time earnings for young people are falling. While that is occurring, student debt load is escalating. With the vicious cuts that have been made to the post-secondary education transfers to the provinces, the federal government has in fact designed a system that callously transfers the responsibility for post-secondary education from the state to the backs of individuals.

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We believe it's time to restore some balance to the federal budget and to the Canadian economy. Our lopsided economy has left millions of Canadians out in the cold, and this imbalance has to be corrected. Immediate steps must be taken to undo the damage that has been done to the social fabric of our country since the federal Liberals came into office. Alternatives to the free market economic policies that have been embraced by this government clearly exist, and it's time the federal government started making choices that will benefit all Canadians, instead of pandering to the corporate and financial elite.

Job creation, poverty reduction, renewal of social programs, and revitalized public services are all achievable through our federal budgetary process. Canadians could be and should be enjoying a high quality of life in an economically fair and socially just society. We just need a federal government that has the political will to make it happen. I would certainly urge the federal government to start restoring some balance in the budget that will be introduced next spring. Thank you.

The Vice-Chair (Mr. Nick Discepola): Thank you, Mrs. Price.

I'd like to turn now to Dale Kirby of the Newfoundland and Labrador Federation of Students. Is it you or Tracey who's going to make the presentation?

Mr. Dale Kirby (Chairperson, Newfoundland and Labrador Federation of Students): Actually, I'm the chairperson of the federation. Ms. O'Reilly is the deputy chairperson and also president of the Memorial University Student Union.

The Vice-Chair (Mr. Nick Discepola): Welcome.

Mr. Dale Kirby: We'd like to go back and forth. I'm going to speak about funding, Tracey's going to speak about the student aid program, and then we'll have a couple of comments about the millennium scholarship fund.

The Vice-Chair (Mr. Nick Discepola): Okay.

Mr. Dale Kirby: This is my third time before the committee in three years, and Tracey is two for two. So we're well experienced with the committee, and we see some familiar faces from last year. If you've been here three times, you're going to be bored because if you compare the briefs that have been presented over the last three years, you will find that some are relatively similar. I start to get the feeling I'm saying the same thing over and over again.

With regards to funding, over the last few years we've seen $2.29 billion cut from post-secondary education across the country. The result of that in this province has been a $13 million to $14 million cut to the College of the North Atlantic, which is the province-wide public college with 18 campuses. We've seen about $19 million to $20 million cut from Memorial University's budget.

Whenever we ask why this is happening, you guys get all the blame. The provincial government always tells us that the federal government is responsible for this, and they take no responsibility. When you talk to the board of governors, they say that it's the federal government's responsibility and that they're not giving the money to the province any more. So I think we're in the right place.

The result of these cuts has been a 45% increase in tuition at both institutions since 1993, and people are living in poverty as a result. This is taken directly out of the mouths of students who are studying. People have less money for books and necessities. The quality of life is not what it should be and not what it used to be.

I believe there's a feeling in the institutions and amongst students that we've bled enough. Our institutions are really hurting, and we can see it. We talked to our administrators, and we're all together on this. We have big problems, and something has to be done. Basically, what we've been saying is that we want a national grant system, and we want increased funding. Last year we asked that the funding be restored, the year before we asked that the funding be restored, and here we are again asking for the funding to be restored in the budget. But it's not helping.

We're supposed to be the best country in the world to live in, but I look around and see that Canada is one of two OECD countries that doesn't have a national system of grants. It doesn't make a lot of sense. You'll see as you go across the country that our counterparts will say very similar things about this.

People say that tuition has no effect on enrolment. After doing a bachelor of science, and now doing a master's degree, I can tell you it's kind of like getting a lawyer, because you can get research that tells you that increasing tuition has a negative effect on enrolment, and you can get research that says increasing tuition has no effect on enrolment. In some cases it says it will increase enrolment.

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So you can go out and find research that says either thing, particularly here in this province, where we have some interesting-looking graphs that show that the feeder population, the population of graduates that are coming out high school in this province, is going to decrease significantly over the next few years. A lot of that has to do with the fact that our outport communities have been literally gutted.

I'm from a small outport community in this province, and I wouldn't chance to try to tell you how many people live there, because it's less than half what it was when I grew up. It really breaks my heart when I go home and it's my folks and everybody in their generation, and a few baby boomers who are going to retire to my community, and there's nothing else going on there. There are no university or college students going to come out of there. We just lost 10,000 people in the last year. Our population is going to decline. There's not going to be enough people to go to the institutions. That's going to be another problem.

The funding issue is the one thing. We don't have enough money to run the institutions for the people who are there today, but for tomorrow, your guess is as good as mine as to what's going to happen.

Once those enrolment numbers start going down, what do we do? Memorial University is a comprehensive university. It has a lot of programs. We have everything from medicine to BAs in folklore. But what do we do? It looks to me as though the only alternative in the end will be to chop some of those faculties out of there.

That university was put there as a memorial to our forefathers who fought in the wars, and if you start dismantling that, Mr. Tobin won't see this great feeling that people in this province are supposed to have. It will certainly dig into the optimism, because that's the core of our education in this province.

Similar things will happen at the College of the North Atlantic. So let's mark peace on funding, at least.

Ms. Tracey O'Reilly (President, Memorial University Student Union; Deputy Chairperson, Newfoundland and Labrador Federation of Students): I really appreciate the opportunity to appear before the committee today. The issues we all have been talking about have been interlinked.

As Dale has said, we've lost 10,000 people in Newfoundland. There are various reasons for that. The collapse of the fishery is one reason, but student debt loads is another. We're losing our best people to other provinces and to other countries because they simply can't find jobs that can pay for their student debt payments when they get out.

Student debt is approximately $25,000 per student at this point in time. That isn't a number that is meant to instil fear; it's meant to bring the reality of student life to you.

The Canada student loans program is a program that is so ridden with problems that I'd have to take up your whole day to explain them all, but I'll touch on a couple of major points.

One of the big problems with the Canada student loans program and the Newfoundland student loans program is that they are very different. They have different rules; they have different application forms. You may get approved for a Canada student loan and not get approved for a Newfoundland student loan, or vice versa. One of the things we're calling for is complete harmonization of both types of student loans, so that the bureaucratic mess that students have to go through is a lot less, a lot simpler and a lot more efficient.

Many times, students have to wait until halfway through a semester before they get their money, which means they have to go without food and without books, and that obviously reflects in their studies. If you can't concentrate on what you're there for, to study for your degree, because of financial problems, it's obviously going to reflect in the final results. That is very unfortunate. It's something we should be ashamed of as a society.

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The second point I'd like to touch on is the suggestion that we should have a federal loans remission program. I don't know if you're familiar with loans remission, so I'll just explain it briefly.

In Newfoundland we have the Newfoundland loans remission program, which is basically a loans forgiveness program. If you reach a certain amount of student debt during your time at university, and you've completed your degree in the specified amount of time, you can get some of your loan forgiven.

The program itself has a multitude of problems; however, it's a step in the right direction. And we've seen that the government doesn't have any tendency to implement one at the federal level, which is something we think would be quite useful.

Although we frown upon giving students more debt, the fact is that students have to get loans. And if we're going to start dealing with the problems, we should probably start right here and try to help the students who have been burdened, and then look at the future so we can prevent problems later on. It is, I think, a shame and a mark on our society if we are punishing people for trying to better themselves, for trying to make that allowance for themselves so they can contribute economically to our country. We should really look at our priorities and see where we're going.

CIBC has even said that student debt is a very bad idea for the economy. Students can't buy cars, can't start businesses, can't buy houses. They're crippled for years and years once they're finished university. And with the new bankruptcy laws, we're going to see a bigger problem in the coming years.

So I think I'm going to stop right here, because I could go on for hours about student loans and student debt. I'm going to pass along to Dale and we're going to talk about the millennium scholarship fund at this point.

Mr. Dale Kirby: I have a few brief comments about the millennium scholarship fund. I just want to impress upon you how I felt when the federal budget was released this year.

Since 1981, when the Canadian Federation of Students was formed, students in this country have been asking for a national system of grants. We had our provincial student grant program ripped out from under us a few years ago, because it was the tendency across the provinces to do that, and they instigated this loan remission program.

So basically we've been asking since 1981 for a national system of grants, and with the buzz last year about education and what the Prime Minister's Office was saying, I thought for sure this was it. You can imagine my disappointment, and I'll be quite frank about it. I didn't have very many good comments for the media about the federal budget last year. No student leader in this province, and consequently no student, had any great accolades regarding the budget either. We got the millennium scholarship fund. There are some comments in the brief about the millennium scholarship fund, but I'll just sum it up for you very quickly.

It's not the smart students who need money. It's all students who are having a lot of trouble getting through school. All students are faced with this rising tuition, and a lot of those students face this student debt. I have a massive one myself for a bachelor of science. Now I'm doing graduate-level courses and I refuse to borrow more, so I'm just working to try not to accumulate any more debt because it's bad enough for me now. And the only thing I'm faced with is that I can see if I can win one of these scholarships.

It shouldn't be like that. I feel like I'm playing the lottery. It's not what we expected, and the amount of money that's there is not going to help a hell of a lot of people. Again, it's not the smart students who are having trouble, it's all of the students, and there should be a more equitable way of doing this.

Do you have any comments on this?

Ms. Tracey O'Reilly: I'm going to basically echo what you've just said.

I think that sums up our problem with the millennium scholarship fund, that it isn't something that will be conducive to universal accessibility.

The government, and particularly the Prime Minister's Office, says the student debt and student accessibility problems are all going to be solved now because this millennium scholarship fund is there, when in fact I think the percentage of students who will be helped by this fund is 6% or 7%. That's not universal accessibility at all, and I too am very disappointed that this is the government's response to a problem that spans the country from coast to coast.

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I want to stop there. That's all I need to say.

The Vice-Chair (Mr. Nick Discepola): Thank you very much.

I'd like now to go to the St. John's Board of Trade. Mr. Gibbons.

Mr. Sandy Gibbons (President, St. John's Board of Trade): First of all, I would like to thank the House of Commons Standing Committee on Finance for allowing us to speak here today and to discuss recommendations for your federal budget of the year 1999-2000.

St. John's Board of Trade is the largest organization in this province that speaks for business. We represent about 650 organizations, which employ about 21,000 people. The St. John's Board of Trade's primary focus is on issues that affect the economic stability of this region—St. John's—the province, and the country.

According to the federal Department of Finance, a budgetary surplus is expected in the year 1999-2000, and while there is a great deal of debate about what actually the surplus is going to be, we certainly believe there will be a surplus. Today I would like to speak about three items that we believe are necessary in making our economy grow and three items that we think should be in your budget.

The three items we would like to address today are a further reduction in the national debt, taxation reform, and rebuilding the national infrastructure.

The first issue I would like to speak to you about is the reduction of the national debt. The board applauds the federal government's elimination of the deficit in the 1997-98 budget and the 1998-99 budget. However, the board believes that Canada's low interest rates have been an essential factor in keeping this debt down. For this reason, we believe there should be no increase in interest rates, and this should be a priority. We feel from our discussions with Mr. Gordon Thiessen just this past week that this is probably on track.

The St. John's Board of Trade is really concerned about the high debt-to-GDP ratio in Canada. According to the Canadian Chamber of Commerce, the federal debt-to-GDP ratio was calculated at approximately 68% in March 1998. A high debt-to-GDP ratio removes government's ability to exercise taxation and spending policies in a flexible and responsive manner.

According to a study by the C.D. Howe Institute entitled Beyond the Deficit, the maximum debt-to-GDP ratio that would prevent a significant risk premium from being built into the Canadian interest rates should be around 60%. This is why the St. John's Board of Trade recommends that the federal government actively target national debt reduction and that the debt-to-GDP ratio be reduced to a minimum of 60%.

The federal government should aim to accomplish this by the budget year 2001-02. Further, the board believes that the federal government should establish a long-term target for sustainable debt-to-GDP ratio—so there should be long-term planning.

The St. John's Board of Trade recognizes that the debt-to-GDP ratio has been decreasing. However, the board also recognizes that the reduction is the result of a stronger than expected economy in recent years. However, the lesson of the last few months is that the federal government cannot assume that we will have a strong economy. The current fiscal crises in the Asian economy and the Russian federation's economy have adverse effects on the Canadian economy. We're seeing this right now.

While St. John's Board of Trade believes that the fiscal control must continue to focus on national planning, the board would be in favour of setting aside an appropriate portion of the budgetary surplus for high-priority items such as health care, education, and social services, as has been mentioned previously. We're not going to get into detail on this, but we do believe there should be some money set aside for these priority areas. These items have obviously been hardest hit in the last decade.

The board also believes that government expenditures should be monitored against predetermined measurable goals, or performance indicators, in order to determine the effectiveness of government programs. Programs that do not provide the desired outcomes should be either adjusted or discontinued.

• 0825

The second item I'd like to speak to you about is taxation. The St. John's Board of Trade recommends that the federal government redirect an appropriate portion of budgetary surplus toward reducing taxes. At present, Canada is one of the highest-taxed countries among the G-7 nations. Consequently, Canada will not be viewed as an attractive place to do business in the global marketplace. The St. John's Board of Trade believes that whenever and wherever possible, the federal government should look at reducing taxes as a means of stimulating the economy.

The St. John's Board of Trade is strongly opposed to any increase in taxes as a means of increasing government revenues or decreasing the need to borrow. Increases in taxation can only result in a struggling economy in the long term. The long-term impact of increased taxation negates any short-term benefits that might accrue from increased federal government revenues.

High taxes result in an active underground economy—and we see this here in Newfoundland in particular—and an increased number of bankruptcies, whereas lowering taxes stimulates the economy.

One form of taxation the St. John's Board of Trade wishes to address is the personal income tax. Previously a surtax was put in place on individuals, with the condition that it was temporary until the goods and services tax was firmly in place and the annual deficit was under control. The board now believes that such time has arrived and a surtax should be eliminated in the federal budget for the year 1999-2000. Once this surtax has been abolished, the board would recommend addressing the reduction of other forms of personal income tax.

The St. John's Board of Trade is strongly in favour of further reducing the employment insurance premiums, as high EI premiums have the effect of increasing the cost of labour. When EI premiums are high, employers may reduce personnel in order to cut costs. With lower EI premiums, employers are left with more money to hire additional personnel. Therefore, cutting EI premiums can actually help stimulate job growth in this country.

While the St. John's Board of Trade applauds the 1998 reduction of employers' contributions to EI premiums, the board is strongly opposed to using the annual or accumulated EI surplus for any purpose other than lowering the premiums that are charged to employers and employees. The board believes that the existing surplus is high enough, and the EI premiums can be substantially reduced. At the end of the 1998-99 fiscal year there is an estimated $7.1 billion surplus for the EI program for that particular year.

The St. John's Board of Trade recognizes the need to operate at a surplus in order to protect against running deficit during times of recession. However, the board believes the current surplus is more than adequate to deal with any further downturns in the Canadian economy. Therefore, the board advocates never allowing the surplus to surpass $5 billion in any given year. Any surplus exceeding this amount should be remitted back to the employers and the employees in the form of lower premiums. The board also believes that returning the surplus through lower premiums is something that should be accomplished as soon as possible.

According to the report of the chief actuary responsible for EI programs, a steady premium rate of $2.10 for every $100 of insurable earnings would be sufficient for the federal government to run the program at a surplus and avoid the need to raise premiums in the event of economic downturn. At present, the federal government is charging a premium of $2.70 for every $100 of insurable earnings. Therefore, the St. John's Board of Trade recommends a reduction in EI of about 60¢. This would put money back into the hands of hard-working Canadians and their employers.

It has also been estimated there will be about $20 billion accumulated surplus in the employment insurance program at the end of the 1998-99 fiscal year. The St. John's Board of Trade recommends never allowing this surplus to surpass $15 billion. Again, the board believes that any surplus exceeding this amount should be remitted back to the employers and employees in the form of lower premiums.

• 0830

The St. John's Board of Trade strongly opposes the transfer of the EI surplus to general revenues. The board believes the EI program should be maintained in a separate account. Therefore the board is strongly opposed to the federal government's plan to amend the Employment Insurance Act to allow the government to continue pocketing the EI surplus. Such a policy would allow the federal government to charge higher premiums than are required to maintain the necessary surplus. The board believes that this has the effect of creating a hidden tax.

The final item I'd like to discuss is rebuilding our national infrastructure. The board believes that the federal, provincial, municipal, and private partners should share responsibility for a new national infrastructure program. This would be the second program of its kind. Many agree that the first program was a success.

An infrastructure deficit can be defined as a gap between investment required to maintain or upgrade existing infrastructure to acceptable standards and the amount actually invested. According to the Association of Consulting Engineers of Canada, Canada's growing infrastructure deficit is estimated to be about $60 billion.

The St. John's Board of Trade believes that infrastructure deficit has the potential to become a serious problem. Like any deficit, if nothing is done about it, the problem will continue to grow and the mounting costs will be passed on to future generations. Consequently, they will be seriously limited in their ability to meet the country's future infrastructure needs. Failure to address Canada's infrastructure deficit goes directly against the principle of sustainability.

The St. John's Board of Trade feels that the national highways program also needs to be addressed. If the program continues to be ignored, the potential effects include the following: a loss of revenues from international export markets and interprovincial trade; a loss of revenues that the transportation industry is currently generating; decreased motor vehicle safety; a loss of revenues that the tourist industries are currently generating.

According to the Association of Consulting Engineers, a recent Transport Canada study has shown that increased highway investment will result in a gain in economic output of $3 for every dollar invested. Also, it is estimated that every dollar invested in engineering results in a return of 95¢ to the Canadian economy. Additionally, of this 95¢, it was estimated that 26¢ would flow back to all levels of government—municipal, provincial, federal—in the form of taxation.

Furthermore, the added safety and efficiency that are the result of a well-maintained infrastructure are reflected in an improved quality of life and a healthier economy for all Canadians.

At this time I'd like to thank the standing committee for allowing us to present our views to the House of Commons standing committee. Thank you very much.

The Vice-Chair (Mr. Nick Discepola): Thank you very much, Mr. Gibbons.

I'd like now to conclude this round by asking Mrs. Greene to present, please.

Ms. Jocelyn Greene (Executive Director, Stella Burry Corporation): Thank you.

I'd like to begin by just describing to you a little bit of who I represent. It may be just as well that I'm last, because I'm going to try to put a personal flavour on some of the issues we've been discussing. I'm not going to repeat a lot of the comments by most of the members here at this table in terms of the economic policies and what you should be doing. I'll certainly make some statements, but I'd like to give you some flavour of what this has meant for the people I work with.

Stella Burry Corporation is basically a non-profit organization that oversees primarily two residential programs. One is an alternative mental health treatment centre, Emmanuel House, and the other is Naomi Centre, which is a shelter for homeless young women—who do exist in Newfoundland. We also provide a myriad of services. We have a long-term housing project, not supported by any federal dollars, and I'll speak to that. As well, we deliver a number of contractual services, primarily in the area of working with sexual abuse victims and offenders.

We also have the mandate—which is part of why I'm here, my job—to critique social policy and to try to bring about systemic changes for the people we work with. We work from a philosophy that is not charity-based and very much that people need to have the opportunities for a good quality of life and that should be open to all people. We're very concerned about a philosophy that has arisen about the deserving poor and non-deserving poor. The people I work with won't be leaving this province; they won't get enough money to get on the boat.

• 0835

So if you look at talking about best people and brain drain, while I understand the sentiments meant by that, we are certainly losing people who are able to leave. The reality is the people I work with are going to be here and are very much suffering from the impact of social policy in this country.

I'm not giving you a written brief, because I don't have time to write one. I spend all my time looking for money. Last week, to give you a flavour of what we do, I was writing a proposal for $10,000 from the Community Health Board to open a community kitchen and a food buying club for the clients we work with. It takes two or three days to write a proposal for $10,000 and you have to jump through hoops, when the reality is people shouldn't need the benefits of this. But that's what we needed to do.

Another example of the impact of cuts that have occurred over the last few years is in terms of the whole devolution. We are now funded by the Community Health Board. We used to receive our funding from the provincial government. Obviously those funding dollars were tied to CAP, which of course is no more. As a result of that, this is the reality of what I face. I have a staff of maybe 15, and we have a commitment to pay equity in the agreement. However, I get my budget from the Community Health Board, which gets its budget from the Department of Health, which has no more dollars because there has been a reduction in dollars, and there is no increase in funding. You find it within your existing organization—that's what Health does.

For me to find any extra money.... Treasury Board signed on to a legal commitment, and I recognize that this is provincial but the province is very clearly tied to federal policies, and I'll speak to that in a minute. That's the reality for me. Where do I find that money as the director of that kind of agency? We do very good work, and we work with people to help them find their own solutions, but if we have to spend our time looking for dollars, that is not good business.

We're a typical non-government organization. You get a lot more for your buck when you work with agencies like this. We happen to be incorporated by the United Church of Canada, which owns and operates the facilities and has the maintenance budgets and the grants. Government could not replicate what we're doing in any way, shape or form. But in the meantime, we have no back-up if somebody is sick. I don't have anybody to fill in for me. I just want to give you the flavour of what that means.

I want to speak a little bit about how the decisions of the government and the previous government have impacted on agencies such as ours, and I speak not only from a provincial perspective. I am a member of several national organizations, a housing organization called Raising the Roof, and an urban core support network, which is a myriad of agencies across the province and the country. We've come together collectively to share our stories, and the stories are very similar. What's happening to the homeless on the streets of Toronto and the social policy that dictates that is relevant to us because the young women in the Naomi Centre for women's safety and support are ending up in Toronto, if they can manage to hitch their way across in the boat, because of the things that are happening in this province.

The elimination of CAP and the reduction in transfer payments have been devastating for this province. These cuts have made it impossible for this province to address the inadequacy of social assistance rates, and our rates are about the lowest in the country. Despite the regressive steps that have happened, in my opinion, in Ontario, their rates are still higher than the rates in Newfoundland.

I served on this province's committee to redesign income support programs, and I will give credit that there is some real initiative to do some things differently here at the provincial level. I found out that since 1990 our social assistance rate, the amount we had to pay out, was $250 million compared to $100 million in the early 1990s, when it had been at a consistent level. That's two and a half times the amount at a time when CAP transfer payments were reduced. Again, we are not looking for handouts, but the reality is that this is the impact.

We sat in a room looking at how we would redesign income support and employment creation. We got to the point of thinking, where are we going find extra money? We were going to cut the money for funerals for social assistance recipients. It was at the point of ludicrousness with some of the solutions we started to come up with, but that was the reality.

• 0840

Therefore, those kinds of policies have really made it very difficult for the provincial governments. I don't say they get it all right, but the federal government's decision to eliminate or cut transfer payments has really negatively impacted on people.

Obviously we want to help people to get off social assistance and get back to work, but the reality is that our current system means—according to this internal document done by the province—a single parent who has to pay the market rate for child care in St. John's would have to make approximately $1,679 per month before they would be better off than on social assistance. That would amount to a gross income of approximately $2,000 per month or $11.50 per hour.

The reality is that unless there is some real overhaul of things.... People need to be better off. They can't afford to pay their rent because of the amount they're living on. They're in a catch-22. I have clients who go to work, get cut off, and then it's 60 days before they can get back on. They literally lose their housing.

So we need to address those issues and find creative ways of doing it. To say that you can just cut off things and people will just pull themselves up by the bootstraps just doesn't work. The reality is that people are really hurting.

The other big point I'd like to raise is that the federal government has abdicated its responsibility for social housing. That is one of the issues that really has to be addressed in this country.

I would like to read to you from the report done by your own Liberal task force on housing, which was actually co-written by the present Minister of Finance, Paul Martin. I cannot give it to you because I cannot afford to make 30 copies, but I will give you one and if you would just implement the recommendations of the finance minister when he was the housing critic, I would be totally happy. I would just say take this document and implement it, because it's quite good.

It says:

The main cause of the housing crisis in Canada is poverty. Poor Canadians are forced to choose between paying the rent and feeding their family. The first line of attack on the housing problem is assuring a decent income for all Canadians. The second is a much stronger government commitment to increasing the supply of low-cost housing.

Programs such as education, training and social assistance are meaningless without adequate housing. In many provinces, an individual cannot receive social assistance without a fixed address. It is ridiculous to assume that an individual can retrain for a new job if three-quarters of their income is going to rent and there is not enough left over to ensure a proper diet.

I could go on. I will give you a copy, although I'm sure you all have copies of it, certainly within the Liberal caucus. That's my document for you. Implement that and a lot of the people I work with will be much better off.

I could go on, but I know you probably want some time for discussion and a lot of the things have already been said. I do hope you're listening. I would like to make two points, however, about the government.

One, I would ask this government to make a commitment to a social audit as well as a financial audit. I am happy to say that the Province of Newfoundland has made a commitment to that in its new social strategic plan, and if you want copies of it I'm sure you can get them. I certainly hope it pans out—not that I'm a bit skeptical, of course. Certainly the statements are very important, and I'm going to try to be a part of that process.

The other thing I would like to say to you is about the issue of child poverty and the commitment the government made to eliminate child poverty by 2000. Obviously, you have all kinds of documents and statistics that tell you we're going the wrong way. When you look at Toronto in particular and the number of children who are being housed in shelters, it's absolutely disgraceful.

One of the things that always cracks me up about the child poverty issues is, where do people think poor children live? They live in poor families. If you're cutting social assistance rates, there's a lack of housing and all those things. You're talking about the deserving poor and if only people would only pull themselves up by the bootstraps, but I don't know where you think the children are. That needs to be kept as an overview in terms of social policy decisions.

• 0845

Again, a lot of the economic things that need to be done have been stated, but I wanted to share with you some of the flavour of what recent social policy changes have done for people in this province and across the country. Thank you.

The Vice-Chair (Mr. Nick Discepola): Thank you to all of you. When I got up this morning I looked out the window and I saw beautiful sunshine and I was very, very upbeat. After listening to all of you, I realize that after 15 years of politics, as governments we never do anything right. We are always criticized, and when we do some things right, it's not to our credit, it's the interest rates or it's a better and improving economy.

We are here to listen to your recommendations. I realize that Newfoundland has very special and very acute problems and concerns, and justifiably so. We will try to spend the next hour or hour and a half here trying to set goals for ourselves, after listening to you and your priorities. I would like to come out of this meeting essentially targeting key areas with good recommendations for our Minister of Finance in what you feel should be the priority areas that would address your areas of concern. Thank you.

We will start 10-minute rounds with Mr. Forseth, please.

Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, Ref.): Thank you very much. We are here, certainly, to listen. I am from British Columbia, and some of the philosophical feelings about alienation from the centre that eastern Canada has felt we have also sometimes felt way out in the west.

I just want to make a little side comment to Mr. Harris. You talked about Mr. Van der Zalm from British Columbia. I don't want to get into a debate, but I would think that at this point probably Mr. Van der Zalm is a political footnote in history and really will not have much of a significant impact in provincial politics.

The situation in British Columbia is that British Columbia has gone from number one in Canada in growth and investment to number ten under the NDP administration. The NDP government there has really hurt the province. Not that their goals are wrong; I have a lot of friends who have been involved in NDP affairs. The community that I come from, and that I represent, has had an NDP MLA for as long as living memory.

But the fact is that the goals are correct but the method of getting there is obviously wrong. That's not political commentary; that is just the actual results. The evidence is there, and that's over and over again.

I think Mr. Van der Zalm is political history. It's sad that a former premier of a province is seen as almost a snickering joke at this point, but we'll see. Times are a'changing. That's just an aside.

I would like to hear, across the table, from all of the presenters, narrowing in on one issue at this point, and that is the debate that the government has said we should have across the country about the parameters of employment insurance.

I understand the chief actuary says that in order to maintain the integrity of the current rules and the current program, probably premiums are some 30% too high. There is, in the bookkeeping exercise, somewhat of a surplus approaching—if we are keeping score—somewhere in the $20 billion mark.

Some of the options that have been suggested are, first of all, a lowering of premiums. Government documents have shown that excessive EI premiums represent a tax on jobs and a financial disincentive to job creation. The other issue that Mr. Nystrom's party has certainly been strongly putting forward in the House of Commons is the benefit side. I think that is an issue as well.

• 0850

I would like, first of all, to open it up by getting back to the underlying question about the criticisms of the fact of EI being there, that it sets up a perverse incentive system that unreasonably interferes with the marketplace in that it's seen as a program where individuals make their lifestyle choices and plan their careers around the EI system, and that it is seen as basically an annual subsidy, a government subsidy to income, rather than typically an insurance program that is there for unforeseen events—and you know what I'm getting at by that approach.

One of the other discussions has been around whether perhaps employment insurance could be more narrowly designed as a true insurance program, and all the training components and all the other social-responsive aspects would be better dealt with outside the EI system in other more straight educational job training programs, and not to try to mix the two up, because then it always has to do with the problem of who qualifies, and benefits running out before the training program, or the waiting periods, and it gets to be an administrative nightmare.

I'm certainly sure you folks have thought an awful lot about how EI should be designed, how it should be delivered. It's probably the one social program in Canada that has been absolutely studied to death. How many master's degrees and PhDs have been written on this particular subject? The shelves in Ottawa are full of commissions, and so on, that have studied this thing to death. So I suppose we don't need more information; what we need is to get back to the community, where we have to live the experience of how to design a program that's really efficacious and helpful to people, yet does not set up perverse incentives and, in the long run, hurt more than help.

I'll leave it at that, and the answer I'm looking for at this point is to perhaps go across the board and hear what your prescriptions are to improve the EI system.

The Vice-Chair (Mr. Nick Discepola): Thank you, Paul. I see Mr. Harris' hand quickly rising. I guess he'd be the one to answer first.

Mr. Jack Harris: I'm not going to get into a debate about your aside, but I think Mr. Van der Zalm does claim to be the leader of the Reform Party of B.C.

On the B.C. economic issue, B.C. is the province of Canada that is most dependent upon Pacific Rim trade and Asia as a market for its resources. Certainly the downturn in that is not the responsibility of the Government of British Columbia.

But I do want to comment on the unemployment insurance issue. I suppose you could say the premiums are 30% higher than they need to be actuarially to fund a program that's grossly inadequate. So the issue is, if you take the guts out of the program and keep the same premiums, obviously you're collecting more money than you need.

I don't believe the disincentive theory is defensible. If you look back to 1971, when the program was fully funded and operational and 85% to 90% of the people who were unemployed were getting unemployment insurance, the unemployment rate in the country was 6.5%. People want jobs; they don't want unemployment insurance. We have to bring back the responsibility of the unemployment insurance system and support those who are unemployed.

We have a situation now where, as everyone knows, less than 40% of the people who are without work qualify, and that's very, very wrong.

We have targets, and we talked about targets here. Mr. Gibbons talked about targets for debt to GDP. Ms. Greene talked about the target of eliminating child poverty by the year 2000. We know John Crow and the Bank of Canada had targets to kill inflation. When we set targets and want to do things, we can actually accomplish them. We accomplished a near zero inflation rate at a cost of high unemployment, and people were forced to go through pain to suffer that.

• 0855

But we can certainly set targets for employment. If we set targets for employment, we don't need as much dependence on the unemployment system. If we have a better unemployment insurance system for those who are unemployed and a target for reducing unemployment, then I think we can accomplish that balance that's needed, and if the premiums are then too high, well sure, let's reduce them.

But I don't think we should play some sort of manipulative role that says this is part of social engineering. I don't think unemployment insurance is about social engineering. It's supposed to be about providing a means for people who are unemployed to support themselves, or gain job training—I suppose it's similar to a disability insurance program that would have rehabilitation as one of its expenses or costs. The idea of retraining is not antithetical to the insurance principle at all and I think it can fit quite comfortably there. If the premiums are 30% too high, it's obvious that the program is lacking in substance for those who are unemployed. That's my view.

The Vice-Chair (Mr. Nick Discepola): Mrs. Price.

Ms. Elaine Price: I have to make a comment. The suggestion that a worker would make a conscious choice to go on unemployment, the suggestion that the fact that workers have to use unemployment is reflective of a lifestyle choice, I find really offensive. Most workers can't make it from payday to payday when they're working and receiving 100% of their salary. To suggest that a worker would sit down and say “Well, now I think I'm going to go on 55% of my wages” when they can't make it on 100% of their wages most of the time is ridiculous.

The other point I will make is that 55% of wages is the standard rate. That's before the penalties kick in for seasonal employees, because since the unemployment insurance system got overhauled last year, people who work in seasonal industries are being penalized for each 20 consecutive weeks that they draw unemployment insurance. In addition to that, they're penalized if they have weeks with low earnings. So it's not a lifestyle choice.

The other point I will make is that when unemployment insurance was brought in it was to ensure that people had incomes when they lost their jobs. Years ago people starved to death in this country. People froze to death because once they lost their jobs and winter set in, they had no income. They were at the mercy of charity, which seems to be where we're heading now, and the resources just were not in the community to respond.

The other point that seems to get forgotten when we talk about unemployment insurance is that not only does unemployment insurance provide workers with incomes when they lose their jobs, the unemployment insurance system also ensures that employers can maintain a highly skilled and qualified workforce in seasonal industries. That's a point that seems to be forgotten, and in this province we have a lot of seasonal industries.

Our fishing industry is seasonal. Our tourism industry is seasonal. Our forest industry, or certain aspects of it, is seasonal. People aren't saying, “Well, I think I'll work in one of those industries because I can get unemployment for part of the year.” These are the only jobs that are available. They're critical jobs and the people who work in those sectors are contributing to the economy, and the GDP in those sectors makes a valuable contribution—not just to the provincial economy, but to the national economy. That seems to be a point that's quite frequently overlooked.

I want to agree with Jack in that when we are into this debate about what to do with the surplus, we have to look at where that surplus came from. That surplus came out of the pockets of unemployed workers in this country. I think it's utterly shameful.

Consider that 87% of unemployed people in this country got unemployment insurance benefits in 1989 and that has now dropped down to 46% last year; this year it's going down to 36%. It's not just fewer people qualifying; they're qualifying for a lot fewer benefits, and seasonal workers are being penalized.

You talk about disincentives. People who accept work in a week when they have low salaries are going to get penalized even further. In actual fact, what you've done is taken a program that was designed, for very good reasons, for the benefit of employers and employees and torn it apart and put all kinds of disincentives to work in there.

• 0900

In terms of the surplus, it belongs to workers and employers, and that's where it should go. And before we get into reducing or talking about reducing premiums, let's make sure the program provides the services and the income support that unemployed people in this country need and deserve.

The Vice-Chair (Mr. Nick Discepola): I'd like you to focus on your recommendations. If what you're saying is that surplus should go down and reduce the premiums, that's what I'd like you to hear. I'll let the others address it, but if we can get into specifics....

Mr. Gibbons, please.

Mr. Sandy Gibbons: I'd like to start off by a comment the chairman made earlier, that he got up this morning and it was a bright and positive.... Well, another part of the St. John's Board of Trade is to say things are going very well in Newfoundland. We are changing our attitude. There are a lot of great things happening in this province. The oil industry is growing, our IT industry is growing, we're really moving ahead. Our fishery is diversifying. So there are very positive things happening in Newfoundland. Unfortunately, we still also have 18.7% unemployment.

A voice: The sun doesn't shine for everybody.

Mr. Sandy Gibbons: No, and we agree. But the province is trying to diversify. I can say that.

On the item of UI, first of all, I don't think we can compartmentalize how we look at EI and move to training separately. Everything is all tied together. I can refer back to our former premier, Clyde Wells, who had prepared a program through Dr. House's report, had tried to negotiate part of a new social program tying EI together with that. I don't know what happened, but he couldn't get it to work with the federal government.

I think a part of this has to do with how we look at our programs. In this country we are decentralizing in certain areas. In other areas we want to have national standards. I don't think our country has really got everything together on how we would like to see our country. There are too many players, obviously, in what has been said. Maybe that's a good thing too. But the provinces are asking for certain things, the federal government is saying certain things, lobby groups are asking for others. So it's sort of a hard way to try to find all the answers to what we should be looking for.

There's no doubt about it that even as representatives of business groups, we would like to see low unemployment rates. I think everybody is looking for the same thing. Maybe we have different philosophies on how it should done. Some people agree that government should be the be-all and end-all for everything. Business groups feel that governments should be there for governance, to set policies, and that the economy should be able to move on its own. Governments should set standards and business groups and social groups should meet those standards. I guess that's more the discussion we should be into, rather than saying that government should be the be-all and end-all.

The Vice-Chair (Mr. Nick Discepola): Mr. Kirby.

Mr. Dale Kirby: Thank you. I have some brief comments on this.

The question is what should Minister Martin be doing with this surplus. I guess that's the question.

Our membership is hurting. Tuition is higher. I'm tempted to say take that money and put it into social programs, like post-secondary education, but this is like that saying, robbing Peter to pay Paul. The federal government cut $2.29 billion from post-secondary education, and then they created a $2 billion millennium scholarship fund. It doesn't make much sense. Minister Martin has a way of doing things with numbers like that.

To make it very simple, if I have a car and I have insurance on that car and my house burns down, I'm not going to get a new TV because I have car insurance. This is employment insurance. And government's tightened up the regulations and legislation around the employment insurance now, and fewer people are qualifying. So maybe you should look at that, and see if those regulations should be eased up a little bit, and that surplus would be eaten up probably by those extra people who aren't qualifying for benefits now. It is employment insurance.

I've been listening to the open-line radio stations here in Newfoundland, and a lot of the sentiment—not all of it, but a lot of it—is look at those unemployed workers; they're the people this fund is here for. In the end, if there's more money than enough, then maybe you can look at reducing premiums. But I wouldn't jump and reduce the premiums right away, because there are unemployed workers out there who would benefit from a loosening of these really stringent regulations the government has right now.

The Vice-Chair (Mr. Nick Discepola): Thank you, Mr. Kirby.

I'll now turn to Mr. Pillitteri.

• 0905

Mr. Gary Pillitteri (Niagara Falls, Lib.): Thank you very much, Mr. Chairman.

Good morning, everyone.

The comment was made this morning that some us have been coming here for three or four years. I think this is my fifth time here since we were elected. I wonder if we're listening. Also, allow me to remind you of some of the discussion that took place four and five years ago: there was a $42 billion deficit, and we were to eliminate the deficit and stop the debt from growing. Every time that deficit was going down, we were getting a little pat on the back to know that we were headed in the right direction.

But now, coming back after that for the first time, and we're talking about fiscal dividend, it's a little bit tougher now. The demand on the cookie jar is a lot more, just thinking of much is out there. What I'm afraid of is how do we juggle this from the cookie jar?

Presentations this morning from Elaine Price, from the Federation of Labour, said the money belongs to EI, belongs to the workers and to the people employed. Well, 60% is paid by those people you call the employers, and most of them are corporations. Corporations start from one person to ten or twenty people. I'm a corporation. I pay those funds. And I don't think by having those funds returned to me I'm going to create any jobs. But that's personal.

Also here is the Board of Trade. I thought for a moment, Mr. Gibbons, that we had done the best things we could have, but then also I hear of the UI fund, you know, who's paying for it and how much is in there. The fact is that it's only an accounting facility. It was never funded, now or ten years ago. As a matter of fact, in 1986 the fund was already $6 billion in deficit and it started coming from general revenues. It was never funded, the UI fund. It was only an accounting facility, just on paper. And the government, of course, was dipping into it. That's not now; that's 12 years ago already.

Now having gone to this surplus, going up to $20 billion, as everybody says, and that's what I'm being told too.... Let me also say it should be reduced to $2.10, a reduction of 60¢. My calculation is that with 60¢, 10¢ is $700 million, so it would be reduced by $4.2 billion. The total surplus that I've heard could be anywhere between $5 billion and $6 billion. Where is all of this fiscal dividend going to be spent if we cut to $2.10?

I just wonder if some of you had to really make a choice in putting more money into health care, or putting more money into programs like education, or also tax reduction....

By the way, we already stopped on the debt, Mr. Gibbons. The debt has stopped. As a matter of fact, it has been paid down for the last couple of years because of the contingency fund. We have done that.

If we were to cut this down to $2.10, it would eliminate $4 billion. Or would you rather see...? We did have 3% tax cuts on the surtax. Or would you rather see tax cuts across the board, by leaving that $2.70 and by upping the deduction so every Canadian would benefit in a tax reduction? That would mean that the employer, which is me, and the employees both would benefit, because by having a higher deduction everyone would benefit in a tax reduction. If you had to make a choice, which way would you go?

The Vice-Chair (Mr. Nick Discepola): Mr. Gibbons.

• 0910

Mr. Sandy Gibbons: What we're saying to the government is, why don't you start getting your accounting procedures in place to have the EI as a separate program? We're saying this a hidden tax and, if you continue, it should be a separate fund. If you're going to continue to tax us and then use this to move in another direction to pay for other programs, you're using a hidden tax.

The Vice-Chair (Mr. Nick Discepola): The Auditor General, who is supposed to represent the public, or Canadians at large, demanded that the unemployment insurance fund at the time be consolidated into general revenues. It was at his request at the time. So it's not the subsequent governments that have made that conscious choice; it was a demand by the Auditor General of Canada and that's been going on since 1986.

Mr. Sandy Gibbons: Exactly, 1986. What we're saying is that we're now 12 years later and the country's a different country. We have different economics and that should be a separate fund. Our country's changed. That was when we had national programs. Now we're decentralizing. Programs are changing and you're shifting programs around. What we're saying is today, at this particular time, that should be a separate account.

Mr. Gary Pillitteri: Are you trying to say it should be totally funded in a separate account?

Mr. Sandy Gibbons: In a separate account.

Mr. Gary Pillitteri: Totally funded, as it is not funded today.

The Vice-Chair (Mr. Nick Discepola): When the deficit was $5 billion in 1993, who would have funded that $5 billion?

Mr. Sandy Gibbons: We are talking today in today's terms. If that discussion was in 1986, the discussion would be different at that particular time.

The Vice-Chair (Mr. Nick Discepola): Your recommendation then is that if it is a separate fund, it's self-funded, and if it turns into a deficit stage, then workers are going to be paying it? Who's going to pay it?

Mr. Sandy Gibbons: You mention workers, but 60% of funds are paid by employers and 40% are paid by employees. Right now according to accounting procedures, the fund is approximately $20 billion. You've overcharged the employers and employees $7.1 billion in this last fiscal year. What we're saying is that if you have $15 billion on your books, that should be enough to take care of any downturn.

The Vice-Chair (Mr. Nick Discepola): There's nothing on the books that says here's a special account with $20 billion. It's been in the consolidated revenue fund, and it's gone to write down the deficit and write down the debt. It's gone to all kinds of things. It's been spent. There's no $20 billion out there, magically sitting in an account. It's been spent.

Mr. Sandy Gibbons: It's been spent? The cash isn't there. How can you say...? Maybe there has to be a transition period in order to accumulate that money in a fund. Obviously it can't happen over a one-day period, as a transition from one day's budget to another.

The Vice-Chair (Mr. Nick Discepola): Somebody else?

Mr. Gary Pillitteri: He hasn't answered my question. Mr. Chairman, I want some specifics here. Do you want EI cuts, sir, or personal reduction? We don't have the luxury of both. Do you want EI cuts or personal reductions, sir?

Mr. Sandy Gibbons: That is your question, on the choice. What we're saying is that you need to look at two of those items separately. The EI fund is a separate item and should be looked at as a separate item. Personal income taxes should come out of the general revenue fund as a separate item.

Mr. Gary Pillitteri: That's the same fund, sir.

The Vice-Chair (Mr. Nick Discepola): What Mr. Pillitteri is saying is let's put ourselves in the perspective of three or four ago. Three or four years ago the debate in Canada was that we must address our fiscal situation; we must write down our debt and we must eliminate our deficit. I think it was unanimous among Canadians that it didn't matter how we achieved that goal so long as it didn't increase personal taxes, etc., but that we had to do it. So we did it by cutting social programs. I admit we may have cut over-zealously in certain aspects.

Now, to come back after the fact and say that you're going to have a surplus, therefore you shouldn't have cut this area or that area, it's kind of like saying.... Let me use the argument of GST revenues, for example: because consumption is higher, the GST projected revenues are higher, we have a surplus in the GST revenue account, and therefore we should reduce the GST and give it back to the consumers.

• 0915

We have a surplus that is generated by various sources. One of the sources is the EI premiums, which are generating roughly $5 billion to $6 billion annually. If your recommendation is that 60% of that $5 billion to $6 billion belongs to the small businesses and the large corporations, so therefore let's give it to them, and your other recommendation is that the remaining 40% belongs to the unemployed people as well as the workers, so let's give it to them, then lo and behold, we end up with no surplus to do anything with. So the result of your recommendations about investing in health care and reducing personal income taxes is that we have no money.

That's the debate we're trying to focus on. What should be our priorities? If you're saying that we should give it all to a certain sector, then we don't have the latitude in the other sector. That's what Mr. Pillitteri is trying to address.

Mr. Sandy Gibbons: I'd like to ask a question. Then, do you believe as a government that you should have hidden taxes, all these separate taxes?

Mr. Gary Pillitteri: We know it's there, sir. We're admitting that the EI surplus has helped the deficit. We're admitting that this is going to be the fiscal dividend.

I'm asking you, sir, today what is the government to do—give it back 60%-40% or apply it across the board? It's simple. It's either one way or the other. That's all I'm asking you, sir. It's either to give 60% to the corporations and 40% to employees or to give it to everyone across the board.

The Vice-Chair (Mr. Nick Discepola): Or some combination of the two.

Does anybody want to jump in here? Ms. Price.

Ms. Elaine Price: I have to start off by saying that when we get into a debate on the federal budget, we're talking about making choices. But I don't believe it has to be a choice in terms of who we give the boot to—the sick, the poor, the young, or the unemployed. I think you're looking at it that way because that sort of approach supports the free market policies government has embraced in its budgetary process.

Mr. Gary Pillitteri: What does the social policy do?

Ms. Elaine Price: The alternative federal budget has shown, and will continue to show this year, that it is possible to maintain and to improve our social programs. You don't have to ask who we're going to give it to this time. We can have strong social programs in Canada. It has been shown consistently, and in actual fact the giant steps we made in reducing the deficit confirm it, that if you use a combination of low interest rates, combined economic growth and job creation, and progressive tax reforms, it is possible to reach government's fiscal goals, to maintain and improve our social programs, and to build a socially just and economically fair society for Canadians.

What we're dealing with is the fallout from the choices that have been made, the choices that support what I call free market policies. As Jocelyn said this morning, the expectation that everybody can pull themselves up by their bootstraps is totally unrealistic. So I don't believe our choices are limited in the way you indicated they were.

The other point I'll make as we're talking about the surplus from the EI fund—and I'm going to say it again—is that we have a surplus, a cumulative surplus. Even though it doesn't go into a fund, it's money that was collected from employers and workers. The federal government stole it from workers and employers. But we have a cumulative surplus. The fund has taken in more money than it has paid out, because you have gutted the UI program. Whichever way you twist it, that's it.

Mr. Gary Pillitteri: I'm sorry, but we've already started paying down the debt over the last two years by contributing $3 billion each year from the contingency fund. So it's a choice. What you're talking about is political choices.

Ms. Elaine Price: Exactly, and you decided—

Mr. Gary Pillitteri: And the political choices—

Ms. Elaine Price: —to take it out of the pockets of unemployed workers and to put it towards the deficit.

Ms. Jocelyn Greene: I'd like to respond to that. Your question was, is that the only choice open to the federal government in terms of resolving the many problems we're facing? You asked if we should give tax cuts across the board so that everybody can benefit. Let's be clear that the people who are on social assistance or whatever won't benefit from the tax cuts across the system.

• 0920

Elaine mentioned the alternative federal budget. There are other ways besides progressive tax cuts. I hear you saying the money is gone now, but we're looking to the future. If you go the same route, there will be another surplus in the fund next year. To just say it's one or the other is too simplistic.

I also want to respond to the issue of how this whole business reinforces dependency, that we have all these people just looking to make their career choices this way. One of the realities of this approach that has eliminated a number of people who can receive EI—and those statistics have been stated—is the fact that there is a real cost to that. There are social costs for people who are proud, and the people of Newfoundland who live here...cultural genocide has been referred to. People leave here; they cannot live. You go to Toronto and try to live there. What is your choice?

Yes, people chose to stay in Newfoundland and maybe relied on EI to do that. But you are going to pay when they cannot get jobs, when they end up on social assistance. There are mental health costs, criminal justice costs. You're seeing it in Toronto now. There is a cost to ensuring that only 46% of workers can now benefit from EI.

Do we need some restructuring in the way EI and the whole of HRDC have been managed? I think of the amount of hoops you have to jump through to get some of these training and retraining programs. There is a lot of reform that can happen. I think that needs to be said. And yes, there are people who may be going through a cycle of having to rely on things.

You can say, look at So-and-so, he won't take a job even if it's given to him. The reality is that in B.C. and New Brunswick, they looked at the people who were on welfare. I'm sure people would now be worse off by working. They had no problem in the workfare projects they put forward. In New Brunswick in particular, they didn't have to convince people to work. People want to work. There's a value in doing that for your children, in being able to come home with pride. We see people who haven't worked in twenty years being able to come back and feel that; you cannot put a financial cost on that.

I think it's just too simplistic to ask what we are going to do. There are other ways you can get money, but I think you need to look at things in a broader context. I mean, you're just saying this EI fund is the only choice the federal government has in terms of its decisions on how to continue to maintain a balanced budget. That's the way you are asking the question.

Mr. Gary Pillitteri: Thank you very much, Mr. Chairman. I have nothing else right now.

The Vice-Chair (Mr. Nick Discepola): Mr. Nystrom, please.

Mr. Lorne Nystrom (Regina—Qu'Appelle, NDP): Thank you very much, Mr. Chairman.

I want to welcome people here to the committee this morning. I think somebody said it's a matter of robbing Paul to pay Peter. I think this is a case of robbing Peter to pay Paul. Those moneys have gone into the consolidated revenue fund, bang, right?

I have two questions to ask. The first one concerns what I think is a very major international crisis. I want to get your reaction as to what we should do as the Parliament of Canada.

There were a couple of headlines in the Globe and Mail this morning: “IMF eyes tourniquet for capital” and “Canada gets behind proposal for emergency ban on cross-border transactions”. I want to ask particularly the chamber of commerce what your advice is regarding what you might call capital controls around the world.

We have over a trillion dollars a day being traded. There is an idea being bandied about called the Tobin tax—and I'm not talking about the Brian Tobin tax. Maybe you have too many Tobin taxes here, but I'm not sure. Anyway, it's named after James Tobin, who was the winner of the Nobel Prize a number of years ago. It would be a very small tax on currency transactions around the world, and it would be applied for two purposes.

The main purpose is to have some control over the so-called free flow in the marketplace that is now causing havoc around the world, not just in Asia but also in Russia and in Brazil, which is the most recent one. It's knocking down the Canadian dollar and so on.

Also, this tax, which would be a tax of 0.1% or something in that ballpark, would build up a fund of billions and billions of dollars that could be used for international development, emergencies and so on. It has been referred to by Mr. Harris—whom I welcome, by the way; Mr. Harris was a member of the federal Parliament a number of years ago and is one of our former colleagues in the House of Commons.

So what is your reaction, Mr. Gibbons or anybody else? Is now the time for our country to take the lead in pursuing this as one way of bringing some order and some sense of regulation to the international economy?

Mr. Sandy Gibbons: From our perspective, we were lucky enough to have the board of governors of the Bank of Canada here about a week and a half ago. I'm no economist and I don't profess to know a lot about this, but I actually posed that very question to some of the board members: if the G-7 or G-11—or whatever they're called these days—got together to discuss these particular issues, what would they do? In very general terms, I'm surprised about what I see in the papers these days. Let me tell you about the reaction I got. I was told countries are really going to protect their own economies first.

• 0925

Of late, I've seen in the Globe and Mail and in local papers that the U.S., led by Alan Greenspan, are in fact looking to create policies that can actually protect small economies. Maybe part of the commentary was actually that the U.S. are really protecting themselves.

The fact is that $1.2 trillion are spent, are transferred every day. From what I understand, Canada has about $20 billion to protect its own economy. I think that's what was put in in order to protect the interest rates. Canada, from a monetary perspective, really doesn't have the money to do it.

I understand the governors from the G-7 meet once a month in Switzerland. We certainly believe there should be some policies put together by the G-7 in order to protect economies, because you have these free traders who, in reality, can wipe out a country in very short order.

I also think Canada has a pretty good policy in that it actually allows its money to float. Yes, the free traders did affect our dollar. From what I understand, in real terms the Canadian dollar should be in the 71¢ to 72¢ range, but it's in the 65¢ to 66¢ range because of the free trade. Some of the other countries that have had really tough times don't allow their economies to float. That may be rightly so, certainly since they really could be wiped out.

So there should probably be some international monetary policies to protect economies, because there are those who are richer than the economies of certain countries.

Mr. Lorne Nystrom: In principle, then, you support the direction of what's called the Tobin tax.

Mr. Sandy Gibbons: Yes.

Mr. Lorne Nystrom: Any other comments?

Mr. Jack Harris: I'd like to add that I think the Tobin tax is one idea. It seems to be the one on which there is the most consensus about what it is and how it might work. I think it's important and, as I said, the direction we should go in.

What I wanted to say was that if we had some form of capital controls, it would also allow our country to have more control over its domestic interest rates. You could then lower interest rates. There are those who say ours are too high compared to those in the United States, for example. Combined with perhaps the Bank of Canada taking over some of the debt directly, it would serve to start cutting back on the debt considerably when you start lowering the interest rates.

Obviously one of the groups of people paying a considerable amount of interest is the taxpayers of Canada. Last year, I think they paid $46 billion on our national debt. If we can lower the interest rates for ourselves and our economy, we're also lowering the rate for taxpayers in that the taxpayers will be paying less than $46 billion a year in interest on the national debt. That would therefore allow us to pay back the debt while having a further dividend that could be used for social programs and for improving the economy. It would also give us some control over issues like employment.

So I think it's a very positive move. I'm delighted to see there may be some softening by the world leaders on this issue. I hope they follow through, and I hope Canada can play a strong role in making it happen.

Mr. Lorne Nystrom: I want to thank you for your comments. We are here today to listen to you and to bring back recommendations. I think this is one on which there's a broad consensus at the table here this morning.

The second question, I guess, is directed more specifically at the St. John's Board of Trade, because I think the other people have pretty well commented on it. It deals with the size of government programs. In the last decade, I think we've had two major changes in how this country's been governed. One was the decision by John Crow and the Bank of Canada a number of years ago, in the late 1980s, to go the whole monetarist route in terms of very high interest rates that would slow down the economy and wrestle inflation to the ground. The consequence was diminishing growth and high unemployment.

At one time, we had actually interest rates in this country that were 5% higher than those in the United States. The policy followed by Crow was much more radical than the one followed by Greenspan and the foreign reserve in the United States, and I think it really harmed the country. I think you all, including the Board of Trade, have talked about it this morning.

• 0930

The second major decision that I think really hurt the country was made by Mr. Martin in his budget of February 1995, in which there was a radical cutback in terms of government spending. The size of the federal public sector now is smaller than it's been since the late 1940s—the last 50 years. In the late 1940s we didn't have national health care, so if you took national health care out of the formula, there'd be just a radical difference.

That agenda, which by the way makes Brian Mulroney look like a raving socialist...and Mr. Brison over here—

Mr. Scott Brison (Kings—Hants, PC):

[Editor's Note: Inaudible]...the raving socialist or a horrified Brian Mulroney?

Mr. Lorne Nystrom: Probably both, but that was the most conservative government approach we've had in this country since before the Second World War.

I wanted to ask you the following question. Basically, that agenda is supported by the chamber of commerce or the BCNI across the country, but here in Newfoundland, historically there's been a lot of support for government transfers to the provinces—the employment plan, transfers in health and education, assistance to the fishery and so on. I wonder if you would agree in general with your national colleagues that the government is going the right way by radically restricting the role of the federal government, which means cutting down those transfers and keeping them low, or whether you would break from your national colleagues in your recommendation?

I'm thinking here of the Thomas d'Aquinos of the world, people who think this is the right way to go and the public sector should indeed keep on shrinking. It's an idea that's supported in general by the Reform Party as well, that you have to keep these transfers down and get the role of government to be smaller and smaller and smaller.

That seems to go against the grain of the reality here in Newfoundland and Labrador, and I wondered whether or not you agree with people like d'Aquino, or whether you agree with the general consensus around the table here this morning?

Mr. Sandy Gibbons: I don't know what you mean by general consensus. I think the cutback of the federal government was part of the Liberal policy. I don't know why you refer to the Reform. Are you indicating the that chambers of commerce are kind of right wing? Boards of trade have a social conscience as well.

Mr. Lorne Nystrom: I guess I'm asking you whether or not you agree with the Paul Martin before the 1993 election campaign—that the role of government has to be kept and enhanced—or with the Paul Martin as of February 1995, where there was a radical reduction in government spending, which I think really hurt places like Newfoundland and Labrador?

There are two Paul Martins here: the one you were raving about and then the Paul Martin post-1995, after the bureaucrats and Finance got hold of him, changed his mind, and flipped him around. People like Doug Peters, who used to be in the federal cabinet, eventually didn't run again because he disagreed with the direction fundamentally. Which side are you on in terms of...? That's a fundamental question: which way do we go as a country, the new Paul Martin or the old Paul Martin?

Mr. Sandy Gibbons: I don't think I can refer to Mr. Martin, but I could probably give you the philosophy of the chambers of commerce and the St. John's Board of Trade. In fact, we feel government's role should be one of governance, and any programs that can be carried out by the private sector should actually be carried out by the private sector. As a statement, we also feel the private sector can spend its money more wisely than government, that we don't have as large a bureaucracy. I don't know whether that answers your question.

Mr. Lorne Nystrom: I wonder if Ms. Price would agree with that.

Ms. Elaine Price: I just can't resist. I would like to talk about the career academy for a moment—the college—which just went bankrupt back in September. We have a number of them in Newfoundland because of the perception that the private system is much more accountable and much better able to spend public money. Several have also gone belly-up over the past year.

No, I don't agree with it. It's a myth that has been put forward by organizations like the Board of Trade and the Canadian Chamber of Commerce to support public-private partnerships. Basically, it's the privatization of public services, and that is the same rationale that Mr. Martin used when he went after social programs and eliminated, I think it was 45,000, federal public sector jobs since the 1995 budget.

I also want to pick up on Mr. Gibbons' comments with respect to infrastructure. I would support the Board of Trade in terms of improving and building our infrastructure. I think we might go about it differently. I would argue that it should be public infrastructure paid for with public money and administered through the public service.

• 0935

I would also point out, though, that for every job we lose out of the public sector, we also lose three jobs out of the economy. When you multiply the 45,000 jobs that the federal government has cut since 1995 by three, we have lost an awful lot of jobs.

I don't think there's any doubt where the federation sits in terms of Mr. Martin's approach. But I do think sometimes that some of our business organizations try to play both sides against the middle, and when you start taking the jobs and the public services out of the economy, businesses also pay a price. I'm surprised that businesses haven't been more vocal than they have been in the past.

Mr. Jack Harris: Can I add to that? On the issue of government spending, we don't seem to be part of the world at all. I mean, we're only compared to the United States by people who want to cut programs and cut government spending. They say government spending in the U.S. is at this level, and we're way higher than they are. We may well be and so we should be.

But if you start comparing this country with the European nations, the mature European nations that have had to deal with all sorts of crises—world wars on their doorsteps, etc.—and try to deal with the social problems and try to create a country and an economy that works for its people and is good to its citizens, whether it be France or Germany or Italy or the Scandinavian countries, they have a much higher level of government spending than we have here in Canada and a much fairer system of distribution of wealth and less poverty. Now, we may be way up there on the human development index of the United Nations, but when it comes to distribution within our country, we're in a very low place.

So on the issue of government, we don't have a lot to learn from the Americans on this issue. But we may get a greater comfort level in terms of government spending if we start looking at our European neighbours. If people like to talk about globalization so much, let's look around the globe and not just to our neighbour to the south when it comes to these issues.

Mr. Lorne Nystrom: Thank you, Mr. Harris.

I have a question. Can you tell us a bit more about the social audit? That might be a useful thing to know in terms of what we can look at as a recommendation. Can you elaborate a bit more on that?

Ms. Jocelyn Greene: It's an idea that's been put forward by a number of those of us working in the community and social sectors. It is about looking at the impact of social policy changes not just from a fiscal point of view. Obviously, and despite my passion about spending, I recognize that nobody was being served by the deficit spiralling out of control.

So you have a financial audit that shows that all of a sudden we're balancing our books. Fine. Is that sufficient in terms of really doing an analysis of what the implications of social policy decisions have been? I don't think it is, and there are many of us who work particularly in the service sector who would say we need to go beyond that. We need to do more of a social audit that really looks at what the long-term implications are. Some of the results of decisions that have been made now we're really only going to see 10 years from now.

The commitment that the Newfoundland government has now put to paper on a social strategic plan would be to commit to a social audit, which I think is a very significant statement. The process is yet to be developed.

This document was released in September. For those of us who have some experience, there is some information. But it's a new process. I think it has to be developed. What will be the standards? What will be the benchmarks? How will you determine in a way that's reasonable the implications of social policy decisions?

I think that philosophically governments should be committed to economic and social costing, side by side, of social policy decisions. In the long run social policy cuts that hurt people hurt economically. We certainly know the cost of keeping somebody in prison, of drug addicts, and those kinds of things. We are paying.

It's that kind of process. As for giving you a dissertation on it, I'm sure you don't want to spend the time. But I certainly think it's something philosophically that we should commit to.

The Vice-Chair (Mr. Nick Discepola): Thank you, Ms. Greene.

Mrs. Redman.

• 0940

Mrs. Karen Redman (Kitchener Centre, Lib.): Thank you, Mr. Chair.

I have two questions—and a quick comment to Ms. Greene that I really appreciated your comment earlier, which really reflected a pan-Canadian view of a lot of these issues, and I think that's key. We're half of the finance committee, and we're going across Canada to hear from all Canadians, and the solutions we come up with have to be things that fit all Canadians, so I really appreciate that perspective.

I would like to direct my first question to Ms. Price and Mr. Gibbons.

Last spring we dealt with the Mintz report, which looked at our corporate tax structure as to how it related to the rest of the G-8 group, and we came up in a comfortable position. It was actually a fairly positive report. We were somewhere in the middle, which is where Canada would like to be.

But when we looked at our personal income tax structure, we found that we were higher than a lot of our G-8 members. There's a fact that those earning $50,000 or more represent only 12.4% of all people who file income tax in Canada, but they pay more than 55% of the net federal income tax collected.

My question is, is that fair? Is that progressive enough? Should the tax burden really be on the middle- and high-income earners, or should it be reduced?

Mr. Sandy Gibbons: One comment we made was that the surtax was put on the middle-income earners in order to help implement the GST and to help with the deficit. At this particular time we feel that, as a priority item, the surtax on personal income tax should now be reduced, because the GST has now been implemented and is moving smoothly, and the debt is now under control and we're working on our deficit.

Mrs. Karen Redman: In the last budget, we did take the surtax off low incomes. Are you suggesting that we continue to expand that for middle incomes?

Mr. Sandy Gibbons: That's correct.

Mrs. Karen Redman: Okay.

Ms. Elaine Price: I'm not so sure that we have a progressive tax structure. If you look at the percentage of taxes that are being paid by corporations and by individuals in this country, you will see that again there has been a massive transfer and that the bulk of the money that government is collecting in revenue is in fact coming from individual taxpayers, and not corporations. If you go back as far as the 1950s, 1960s, and 1970s and follow it up through, there has been a massive shift away from corporations onto the shoulders of individuals.

I really think there have to be some progressive tax reforms, and corporations have to start paying their fair share. When you look at what their portion is in comparison to what individuals are paying in this country, it is obvious they're not. There is a lot of room to make some progressive changes to the taxation system in terms of inheritance tax and all that money that got transferred out of the country a little while ago to avoid taxes, with the government's blessing.

So if you start talking about a fair taxation system, Canadians have to be convinced that the government is actually committed to ensuring that the taxation system is fair. Right now, I think people in lower- and middle-income brackets are in fact shouldering a disproportionate share of the load.

I'm going to go back to the alternative federal budget again because that budget has consistently shown what the alternatives are, and they also address the issue of progressive taxation.

Mrs. Karen Redman: Thank you.

I appreciate the fact you're making some concrete suggestions, but the other thing I would like to underline is that we have to appreciate the fact that we're in a global economy. One of the things that the Mintz report did was look at corporations and look at them on a global playing field and the fact that if we are too punitive with corporate tax, that will lead to employment investment going to countries other than Canada—and I would stress again that Canada is not at the lowest end of the G-8 group but in the middle. So it is a very fine balance. It is not something that can just be looked at internally any longer.

Ms. Elaine Price: I have to respond. I think we have to look at the big picture when we start talking globally—and Jack alluded to it earlier.

I believe globalization has been used against Canadians, and it's being used to justify the shift in wealth and the redistribution of wealth that has occurred. It's being used to justify the move towards a low-wage economy. It's being used to justify the gutting of our social programs. As a matter of fact, globalization has been used to justify the erosion of the quality of life for Canadian people.

• 0945

Again, I believe there are alternatives. I'm not going to talk now about the alternative federal budget. I'm going to pick up on something Jack said a little while ago, which is let's look at how other countries are doing it.

Two weekends ago I attended a North Atlantic island forum. It was a gathering, and it was part of a project that Memorial University, the University of Prince Edward Island, and our provincial governments had been involved in. I looked at the unemployment rates and the social programs that are being maintained and the quality of life that is being enjoyed by people on some of those other North Atlantic islands. Then I looked at the resources we have, which are far greater than a lot of these islands could ever hope to have. I looked at the imbalance and I wondered why it existed. I think it's reflective of public policy.

So I think we really have to start to look at some of the Scandinavian countries, some of the European countries, and even some of the other North Atlantic island economies that seem to be doing very well in terms of creating jobs and looking after or protecting the quality of life on behalf of their citizens.

Mrs. Karen Redman: Thank you.

I would like to address my second question to Mr. Kirby and Ms. O'Reilly. I represent Kitchener Centre, and in the city of Waterloo, which is a twin city, there are two universities, the University of Waterloo and WLU. One of the things I heard from my university sector—and it's interesting that you didn't touch on it because it's something that very often the post-secondary people have pleaded for—was a request for more research and development money. In the last budget we put $405 million back into that sector through the granting councils.

I just wondered if you wanted to comment on that. The university people where I'm from say that our ability to keep the best and brightest here really depends on having that kind of research and development money.

Mr. Dale Kirby: I would say that in the last federal budget, that was probably one of the areas we found to be most amiable.

Memorial University has probably the largest R and D function in the entire province. I'll give you an example as to how this is kind of hooked up with a bunch of other things. Although there is more money out there for SSHRC grants, NRC grants, and that kind of thing, Memorial University is in a perilous situation right now with its budget.

But it has something called FRET funds. Those were extra moneys that each division and faculty had for research functions. Basically, you need money to get money. You need to have the infrastructure at the institution in order to get the granting councils to give the grants out. Basically, what Memorial has done now is they've spent all of the FRET funds, because the government is bleeding them. It is saying to them, you have room to breathe so you can squeeze out some more money. So at Memorial they spent all of the money they had to keep the equipment up to date in order to entice granting councils and perhaps the private sector to give more money to the institute for R and D.

I think that's a part of funding. If funding was at the right level, then we would be able to create an infrastructure at Memorial University whereby granting councils and the private sector would look at it and say, they have the facilities there to conduct the research, so we'll give them money. But the lack of funding is having a detrimental effect on Memorial University's ability to get grants.

It's an interesting situation, and that's what we're dealing with. But it was a progressive move, I think.

Mrs. Karen Redman: Thank you.

The Vice-Chair (Mr. Nick Discepola): Thank you, Mrs. Redman.

I want to pick up on the suggestion, which surfaces year after year after year, that corporations may not be paying their fair share of taxes. I wonder if the comparison is logical from the following perspective. When I was involved in municipal matters, as a government we always tried to introduce what I considered fairness in taxation by making sure that those people who benefited from the service also paid for the service, and we implemented an awful lot of user fees based on that. Certainly a corporation doesn't require the $19 billion or $20 billion that we pay in social programs. It doesn't require the $8 billion or $9 billion we pay in medicare, for example. Its employees do.

• 0950

There seems to be a general feeling that they're not paying their fair share, even though year after year studies show that we're right in the middle, as Ms. Redman said. I think that's where we'd want to be as a country. My concern is that, notwithstanding that if we do put an extra burden on corporations, let's say, the argument may involve their simply moving and locating elsewhere.

I see all your hands rising.

The shareholders are ultimately part of the people who are going to bear this extra burden, and the workers, because possibly lower wages may ensue; and obviously, ultimately the consumers, because a corporation is there to respond to the bottom line, to respond to the shareholders and make sure they survive in business. Are you not concerned that by putting an extra burden on corporations, some of the effects I mentioned before will ensue? How will that benefit us as Canadians if we can't remain globally competitive?

I saw fourteen hands up there. I'll hear from Mr. Gibbons now.

Mr. Sandy Gibbons: The first comment I'd like to make is that it really gets my back up when I hear people attack corporations, because in fact the St. John's Board of Trade represents business. I would say that most of these are small businesses; in fact, the owners of those corporations probably make less money than some of the people the labour movement represents. I really need to say this. When I hear people attacking corporations, I get the feeling that maybe they are attacking large corporations—and the big ones you hit on these days are banks. However, we represent a lot of corporations that are made up of a really small number of people.

I think we really need to define which corporations we attack. In fact, I understand even the NDP are reanalyzing their attachments and who they represent, because a lot of people who own small corporations or companies are really small-business people who are trying to make this country grow.

So first of all, I'd like to make that particular comment.

As for the comment about corporations being taxed, Canada was always in the middle of the road on this, and I think that's what makes Canada a good country. We are a sort of middle-of-the-road, conservative area, and I think that's where we lie in the tax structure.

Speaking as a representative of the business community, I'd like to say that we don't actually see that our taxes should be increased. In fact, I could also make the comment that a lot of corporations these days are owned and controlled by pension funds that represent large labour groups. The fact is they do control the management of profits from corporations, and the corporations that make the money eventually send it down the line to the individual shareholders of those companies, who in fact take those small earnings—because they're small amounts and small percentages of the big picture—and do spend money to make our economy grow.

Mr. Jack Harris: First of all, I'm not going to jump on you, but I do take strong exception to the fact that corporations don't benefit from social programs. I know the American corporations are quite envious of the fact that Canada has a medicare program while they have to pay big, hefty premiums for health care insurance in the United States to attract employees or keep them happy. That's just one example, but in general, the corporations benefit from social programs and government spending in a myriad of ways. A fairer economy would have more money in the hands of poor people to spend in businesses, or spend on goods and services, thereby supporting the economy as well.

It's not correct to say corporations are just kind of there—these non-entities who don't use any services. They use services like an educated workforce, for example, which is the product of social programs and public support for education at the elementary, secondary, and post-secondary levels. Training programs in the federal training budget and all sorts of other things are there to support individuals, yes, but also to support a corporate economy and make it possible for these companies to grow.

• 0955

I agree with Sandy on this issue. Many businesses, and many of those represented by the St. John's Board of Trade, are small businesses. They're not the people I talk about when I say the wealthy, high-profit corporations are getting away without paying taxes. I have some statistics in front of me showing that in 1994 there was $17 billion in untaxed profit, of which 80% came from companies that were making more than $1 million in profits, and nearly half of which came from companies making more than $25 million in profits. So when I talk about the wealthy corporations not paying their fair share, that's who I'm talking about. I think the small business sector has a very difficult time trying to find ways to avoid paying taxes, while the big business sector seems to have no end of loopholes or ways of doing that.

So I challenge your assumptions about the role of the corporations and the value they get from social programs and taxation.

The Vice-Chair (Mr. Nick Discepola): Mr. Brison, please.

Mr. Scott Brison: Thank you, Mr. Chairman. I'm Mr. Brison the raving socialist—the first for that label. Welcome and thank you for your interventions today.

Mr. Harris, you've stated that we should be looking more globally in terms of other examples, and you cited European examples. Would you suggest that since we have the highest income tax in the G-7 countries, one of the things we should address is reducing income taxes with the other G-7 countries? Are you familiar with the Maastricht Treaty?

Mr. Jack Harris: Yes. I can't say I've read it, but I've heard of it.

Mr. Scott Brison: I'll let you know a little bit about the examples you cite in Europe.

Mr. Jack Harris: I found out today that John Crosbie didn't read the free trade agreement.

Mr. Scott Brison: Well, I would suggest to you that he had a better understanding of the free trade agreement than you have of the Maastricht agreement.

In any case, the Maastricht Treaty, which all European countries agreed to prior to EMU, required a 60% debt-to-GDP ratio for countries to sign on to the common currency. So there has been a significant change in Europe under social democrat countries that are acting a lot more like conservatives, including people like Tony Blair, or more recently Mr. Schroeder.

In Ireland, we have seen a slashing of corporate taxes and a significant amount of tax incentives used to attract the knowledge-based industry—those terrible corporations—into creating jobs.

With those examples, would you continue to agree that we should be moving more in line with our European partners?

Mr. Jack Harris: The rate of taxation for Canada is about 35% of GDP, which is about the twelfth lowest in developing countries in terms of overall taxation, if you want to pick out a particular tax.

Mr. Scott Brison: Let's talk about our income tax.

Mr. Jack Harris: I'm talking about the level of taxation generally, and each economy, of course, chooses the way it taxes people. I'm not suggesting that our tax system, by any means—

Mr. Scott Brison: What about our debt-to-GDP ratio?

Mr. Jack Harris: The debt-to-GDP ratio is another target I would be quite happy to work toward if we could match the other targets in terms of tax fairness and distribution of wealth and opportunity that the Maastricht nations have. We can work toward all this at once. I don't have any problem with that, but I'm not going to choose between one or the other. I don't have a problem with the debt-to-GDP ratio as a goal, but I think when working toward that goal we ought to make sure our other goals for employment and elimination of child poverty are met as well.

We can all stand up in the House of Commons—in 1989 I wasn't there, I was defeated in November 1988—and say unanimously that we shall reduce child poverty by 2000. That target hasn't been met, yet John Crow and the Bank of Canada could say our goal for inflation, regardless of the pain it's going to cause, is zero or near zero. He was prepared to go after that goal, and the people of Canada were prepared to let him, regardless of the pain and cost.

• 1000

Yet the goal of eliminating child poverty, which is unanimously endorsed by all members of Parliament and their parties, is one we're prepared to let fall by the wayside. I have no problem with targets, but let's choose those targets, make them fair and go for them.

Mr. Scott Brison: There's probably no one around this table and nobody at your table who would disagree with the goals of what we are trying to achieve. I'm an Atlantic Canadian, and part of the difficulty we have in Atlantic Canada is that successive governments have worked together to implement policies that ultimately have quite potentially hurt Atlantic Canada. I point to the fisheries as one example.

The law of unintended consequences has played a real role in what has happened in Atlantic Canada, because ultimately governments have tried to protect Atlantic Canadians from the risks of the future. I fear the government has prevented, in many ways, Atlantic Canadians and at least one generation of Atlantic Canadians from participating fully in the opportunities of the future, in implementing some of these policies. I think we may differ on the means of how to get there, but we have to respect that we agree we want prosperity for people, and we want the ability for people to be able to bootstrap themselves.

On the corporate tax issue, corporate capital is quite mobile, and we can discuss the idea of handcuffing capital with things like a Tobin tax. But when we talk about corporate taxation, one thing we should realize is that 50% of working Canadians own bank shares either directly or indirectly. Including such things as union pension funds, we have an unprecedented percentage of Canadians now participating in the equity markets with mutual funds and that sort of thing. So when corporations make money—they don't necessarily pay as much tax as you'd like to see—a lot of Canadians benefit—parents and young working families—in RRSP growth and that kind of thing. So that's important to realize.

Mr. Harris, you mentioned private colleges and said the students don't qualify for the millennium scholarship fund with the private colleges. Was that your point?

Mr. Jack Harris: I didn't say that, but it's probably true. My concern about private colleges—there's a whole series of concerns—has to do with quality as well as fairness and equity issues for the individuals. In many cases these are students or young people who come from the poorer families who don't qualify for university or can't get in because they're at the lower tiers. They're paying $10,000, $12,000 or $15,000 for a course that will get them a $6-an-hour job when they finish.

Ms. Jocelyn Green: It's actually a form of social assistance subsidy as well. We have had a lot of people who enrolled because of the marketing. These colleges take clients in who have no ability at this stage of their lives to go. They get $10,000 student loans and one week later they're thrown out of the school and the private college has its $10,000. Now you're talking about how you're paying or I'm paying. These people now have $10,000 student loans, they're on social assistance and have no capacity to pay them back. These are not isolated cases. This is a form of subsidy of the group of individuals with the lowest income in this province, certainly.

Mr. Scott Brison: I understand.

There are exceptions and failures certainly, and there are failures in public education as well. I'm not talking about financial failures; I'm talking in terms of failure to provide the skills needed by employers. But one of the advantages of the emerging private college system is the ability to actually reflect the needs of employers.

Mr. Harris, you are suggesting that public institutions are effectively being subsidized and private institutions do not have that advantage. Are you suggesting perhaps some type of voucher system so students can chose?

• 1005

Mr. Jack Harris: No, not at all. I'm suggesting that the private education system that exists in this province has failed to deliver the goods and I don't think is in a position to deliver the goods. That's for core issues. I'm not opposed to any form of private training. These are individuals who are entitled, in my view, as a right of citizenship, to an opportunity to participate in the economy. What we ought to do is strengthen the public system, because it doesn't—

Mr. Scott Brison: So nationalize or...?

Mr. Jack Harris: I don't know about nationalizing. Algonquin College, for example, in Ontario—I don't know if it's nationalized—is a public college system that serves very well the people of the Ottawa area and region. The College of the North Atlantic here, when allowed to operate properly, serves the students well. What has happened in this province is that there's been a gap created by the withdrawal of public funds to the private sector, so they've rushed into.... A market has been created for them by the absence of public support for public education.

So no, I'm not suggesting a voucher system that you could take anywhere. What I'm suggesting is strengthening the public system, proper support for public education, with the goal of giving every young person an opportunity to get a training program and to get qualification.

Mr. Scott Brison: So you feel there's not a role for private delivery of post-secondary education, or private delivery vehicles?

Mr. Jack Harris: What I'm suggesting is that the first priority is to guarantee an opportunity for young people to get an education and job skills to allow them to go to work. That's a public responsibility, and the delivery of that system should be a public delivery of the system for the core operation.

There's certainly room for the private technical training of a technological nature that we have around us, but I think that's an add-on, not a part of the core system.

The Vice-Chair (Mr. Nick Discepola): I believe Ms. O'Reilly would like to add something.

Ms. Tracey O'Reilly: I just wanted to comment on something you said a minute ago, that one of the advantages of private colleges is that they can deliver courses that are reflective of the job market. In theory you are right, but the reality in Newfoundland and Labrador is that these colleges create programs that have no demand. You end up in insurmountable student debt, and come out and get a job that pays $6 an hour or maybe less. What you just said really isn't the reality of the system as it stands.

That's one of our big problems with the system right now in our province, that it's not regulated.

When the career academy closed...it went bankrupt. I don't know if you heard about that.

Mr. Scott Brison: Yes.

Ms. Tracey O'Reilly: It went bankrupt a little over a month ago. When that happened people started to say, well, buyer beware; if you take a chance on a private school and something happens, well, that's your own fault.

I think that's a very bad attitude. Students have nowhere to turn sometimes, because the money isn't in the public system and they end up in the hands of these people who are opportunists.

Mr. Scott Brison: You've raised a good point. I think what has occurred in Newfoundland with private schools may not necessarily reflect what has occurred in some of the other provinces.

There have been failures, there have been successes. It's important for us to know if a system...I think the government can play a role in the regulation side, ensuring that there are standards, ensuring that—

Mr. Dale Kirby: The reason they have proliferated the way they have is that the federal government has its funding for post-secondary education.... For example, in the College of the North Atlantic here, there are two- and three-year wait lists for many of the programs. As a result, the private college enrolment has increased by 500% since 1989, or around there.

The reason people are gong there generally is because they couldn't get into the public college. I talked to about 100, 120, 200 students who were thrown out by the career academy in their failure to do what the public system does best. The majority of them, 85% to 90% of them, said the reason they were going there is that they couldn't get into a public college because they couldn't be on a wait list for three years.

• 1010

Ms. Tracey O'Reilly: If I can add to that, another reason students go to private colleges is because programs that were in the public colleges are cut because of funding problems, and then all of a sudden they emerge in a private school. Carpentry is good example of that. The College of the North Atlantic used to have it at three campuses, I think, and now it has it at one. It has popped up everywhere else. You can see directly there that the problem is that it's not publicly funded.

The Vice-Chair (Mr. Nick Discepola): Ms. Price.

Ms. Elaine Price: There's a difference in having the private sector involved in education and training, and education for profit. I think there is a role for the private sector, in the same way as there is a role for the labour movement to have input and to have some say in terms of the type of training programs that are needed to be able to respond to the needs of their respective members.

However, I do think, when we get into talking about private colleges here, we're talking about the provision of education for profit. I think it's somewhat ironic that a government that used the debt that we are passing on to future generations as justification for addressing the deficit has in turn also created a situation where young people today are shouldering.... And when you talk private colleges, the debts are much higher, and the people who are shouldering the debt load out of the private college system are people who are least able to afford to do so.

I worked with a lot of the career academy students when the school went bankrupt. There were a lot of single parents and a lot of people on social assistance. They were people who were least able to respond to the circumstances they found themselves in.

So I really think when we get into education for profit, we need to have a debate about what rights people are entitled to as citizens in this country. I believe education and access to post-secondary education has to be a very basic and fundamental right, and it should not be provided on a for-profit basis.

The Vice-Chair (Mr. Nick Discepola): Thank you.

Mr. Sandy Gibbons: Could I make a comment, please? Obviously private education is something that the business community would support, but I think there are two things that need to be distinguished here.

There is a difference between education and training. Some of these colleges do provide training, which is something that the business community has done for years and years, internally and externally. So I think you need to look at that difference right there.

The second thing is that in this particular province we have a lack of regulations in private colleges. In fact, Dr. Phil Warren is going around the province right now seeking commentary from our community on what our community feels about regulations for private colleges.

So we really need to look at those issues; I think they're important.

On another aside, we can also say, even in the education end of it, there are people who are really “buyer beware”.

I have a niece who graduated from nursing school just this past spring. She doesn't have a job. She may have to leave here. This is a publicly funded institution, and in Newfoundland this is common thing—you can't always be guaranteed to have a job after you are educated.

The Vice-Chair (Mr. Nick Discepola): Scott, ask just a very small question, please.

Mr. Scott Brison: There are a bunch of issues, and we're under limited time, but I want to focus briefly on the whole idea of the Tobin tax.

One of the issues we had with the Asian currency crisis was that we had a group of nations that were individually operating fiscal policies that were completely inconsistent with their monetary policies. Ultimately that had to be, or would have been, corrected. It would have happened either over a long period of time, with arguably worse effects, or very quickly.

I would argue, in fact, regarding the efficiencies of the global capital markets in correcting and their inability to operate two inconsistent policies, that ten years from now we'll look back and recognize that the global markets corrected what was wrong in a way that, while dramatic and drastic, ultimately will be positive in effect.

The difficulty I have with the Tobin tax is that it would tax legitimate transactions within a country. It would reduce the liquidity of financial markets.

• 1015

Ultimately, one of the things we can do very well in Canada, particularly with the death of distance as a determinant in the cost of telecommunications, is be an international or a global leader in the financial services sector. Those jobs can be in Newfoundland, those jobs can be in Nova Scotia, or they can be anywhere else, because it's information technology. I would be very concerned with any move to a Tobin-type tax. I would support a new global monetary bank, for instance, a more advanced form of the Bretton Woods institutions like the World Bank and the IMF.

Sweden implemented a transaction fee and reduced the local trading of bonds by 85% within its own borders, and the trading of futures by about 98% within its own borders. That was within one week of introduction. If we stop the efficient flow of capital, I think we're going to be putting ourselves back a long way, potentially risking far more serious damage.

I have to make one statement. While many of you are well-intentioned—

An hon. member: I think they're all well-intentioned.

Mr. Scott Brison: —if you had an opportunity to implement your policies, I think they would be a continuation of the same policies that have hurt provinces like my province of Nova Scotia, that have hurt provinces like Newfoundland, that have hurt Atlantic Canada. I would therefore caution us against economic naiveté in trying to promote public policies that are popular but would hurt in the long term.

The Vice-Chair (Mr. Nick Discepola): Thank you for that very short question, Mr. Brison.

Ms. Elaine Price: I want to state a point of personal privilege. I find that to be really condescending, and I know I'm speaking on behalf of a number of people here. We're not stupid. We don't come here naive.

Mr. Scott Brison: We differ.

Ms. Elaine Price: We differ, but don't suggest we're stupid. I do take offence to your suggestion that we are—

Mr. Scott Brison: I didn't say you were stupid.

Ms. Elaine Price: —economically naive, because the people around this table are not.

Mr. Jack Harris: The gentleman who proposed the Tobin tax won the Nobel Prize for his efforts, and I don't propose to debate with him whether or not it's technically unfeasible or has technical merit. The objections to the Tobin tax are political and ideological, as we have heard. We're not talking about an internal transaction tax, we're talking about a tax on international financial transactions that have to do with the fast flow of capital for speculative reasons.

All the analyses that I've read that have been done on the Tobin tax indicate that it would not stop legitimate investment, but would in fact help to slow down the kind of speculative damage that has been done to very healthy economies—not the problems of Southeast Asia, but Canada does not deserve what's happening to it. Now, if you believe it does, you should take that position. But I don't believe Canada deserves what's happening to its economy as a result of the free flow of capital. If that's a naive position, so be it, I'll trade my naiveté for yours any day.

Mr. Lorne Nystrom: On a small point of order, I don't think Scott meant it in that way. He said some of the witnesses are well-intentioned. Well, I think they're all well-intentioned. I just want that on the record, Mr. Chair.

Mr. Scott Brison: Yes, absolutely. I would argue that everyone here is well-intentioned. But there is—

Ms. Jocelyn Greene: But obviously we don't have all the answers that obviously you feel you have—

Mr. Scott Brison: No, no.

Ms. Jocelyn Greene: —and when we suggest that there should be national standards, if you think what we're saying means that we're very naive around the economics of it, I would like to echo Elaine's sentiments in terms of the naiveté of our analysis.

Mr. Scott Brison: But you have to be willing to accept and to understand that the government has a perspective, and that we opposition parties have varying perspectives. There has to be a recognition that there have been mistakes made under the guise of doing the right thing over the past 35 years.

There were 10,000 people in the fisheries in the 1950s in Atlantic Canada. Around 60,000 applied to TAGS because government subsidies were going to build fish plants and build boats and put people in an industry that was not sustainable. So when I hear about policies designed by well-intentioned but economically naive people, they have hurt Atlantic Canada.

• 1020

In any case, on the dollar—

The Vice-Chair (Mr. Nick Discepola): Scott, we have to reconvene at one o'clock and we have to go to lunch and everything, and I still have another person who would like to speak. Besides, I learned in politics that when you're in a hole the only way to stop getting in deeper is to stop digging.

Mr. Szabo, please.

Mr. Paul Szabo (Mississauga South, Lib.): Mr. Harris, you refer to $17 billion of corporate profits that were untaxed. Could you explain why these corporations haven't paid their taxes?

Mr. Jack Harris: That's a very good question. I guess their tax policies and the way the tax code is written and the loopholes and the room for deferrals and everything else that's there allows corporations to defer or not pay taxes on profitable enterprises. And I understand that your committee in fact is going to be—

Mr. Paul Szabo: Okay, hold on—

Mr. Jack Harris: I understand your committee's going to be reviewing—

Mr. Paul Szabo: No, no, hold on. We've only got a limited time here, and you're rambling.

Mr. Jack Harris: I'm not rambling.

Mr. Paul Szabo: Actually I raised it because we do have lots.... Forgetting about small business that for the first $200,000 gets a small-business deduction, effectively a lower rate, and they create most of the jobs, manufacturing processing has special credits to pay a little lower taxes. But the corporate tax rate in Canada is about 50%. It's not that there are loopholes or whatever. In fact I want to get into that, because I think Mr. Gibbons may have something to add here. Do you know the difference between accounting income and taxable income?

Mr. Jack Harris: Do I know the difference? Is this a quiz?

Mr. Paul Szabo: Do you know the difference?

Mr. Jack Harris: Yes, I do.

Mr. Paul Szabo: You do. So you're aware that there are certain things that are either included in income or excluded from income and similarly for expenses in accounting income—

Mr. Jack Harris: Yes, and that may well be the way—

Mr. Paul Szabo: —and in tax income.

Mr. Jack Harris: That may well be the way they avoid paying tax on profit.

Mr. Paul Szabo: No, no, but there's a difference. The accounting income, as you know, is how everybody does their books. As a very simple example, the entertainment expenses of a business are fully deductible for accounting income. For income tax purposes, only 50% is. So there would be a difference in the bottom line, because the accountants say “Cash out is still expenses. For tax purposes we're only going to allow you a certain proportion of benefit.”

The fact remains, though, that for corporations who have accounting income of say some $17 billion but don't have any income tax payable in that particular year, it could be due to two major reasons. Number one, in prior years they lost money and they have loss carry-forwards. When we go through a recession a lot of businesses lose money and they accumulate loss carry-forwards. When they finally get back into a profitable situation on a tax year basis, the losses are able to be applied forward. So even in a year in which I might make $1 million, I may pay no tax to the government in that year because of the loss carry-forward.

The other situation that would give rise to paying no taxes in a year would be the difference between capital cost allowance and depreciation. I think Mr. Gibbons knows that depreciation is an accounting concept that actually spreads the—

Mr. Jack Harris: I've heard of depreciation before, yes.

Mr. Paul Szabo: The amortization of the expense over the useful life of the asset—

Mr. Lorne Nystrom: Is this a question, Mr. Chairman, or is it a—

Mr. Paul Szabo: There's a very important point here.

The Vice-Chair (Mr. Nick Discepola): Mr. Szabo's been very patient. He's the last speaker. I would like him to get his points across.

Mr. Paul Szabo: Capital cost allowance is the amount of write-off for a particular investment that you can get for tax purposes. Sometimes to stimulate investment in manufacturing and processing, or in computer equipment or whatever, the CCA rules provide for write-offs at a faster rate than for depreciation. So there are timing differences. But over the lifespan of that asset, you're only going to get to write off that asset once, not more. It's just the timing; there are timing differences.

• 1025

By far the largest single reason that corporations who have income in a particular year did not actually pay any income tax in a year was because they had made loses in prior years. So the question now—and this is where Mr. Harris and Mr. Gibbons may have some disagreement—is are you suggesting that losses of prior years should not be carried forward?

Maybe we should just say if you have an income in a particular year you have to pay taxes, and if you've lost money you don't pay any taxes, but we're not going to give you any benefit for that over the lifespan of the business. Do you want to eliminate or curtail loss carried forward so that of the $17 billion...? It's a big number. A corporation may have made $17 billion of profits and paid no taxes in that year, but if the reason is not illegality, it is not some special consideration, they have a 50% tax rate, there are legitimate reasons—one is loss carried forward, the other is timing differences.

Please explain, because I think it's important. You raised this. You said they're not paying their fair share. How do we get them to pay their fair share? That's the question.

Mr. Jack Harris: Well, I suppose you can trot out a whole series of assumptions and then ask for a choice at the end.

I think that's an issue that presumably this committee will be discussing if it accepts Mr. Riis' resolution to review all of the tax considerations, the tax loopholes or tax provisions that provide for remission of tax with a difference between the accounting side and the taxable income side.

But the reality is, Mr. Szabo, that over the past 20 years the share of taxes paid by corporations has decreased dramatically in this country and the share paid by individuals has increased dramatically.

Mr. Paul Szabo: But, Mr. Harris, it's not because of income tax rate. It's not because the corporate tax rate has been the same for 30 years. It's not because of rate. It's because corporations have made money or lost money.

Mr. Jack Harris: It hasn't been the same.

Mr. Paul Szabo: Okay. We're not making any progress.

The last question has to be for Ms. Greene. Thank you for raising the poverty issue. I think it's extremely important. And I really think that investing in children is a big, big part of the focus.

I'm aware, however, that lone-parent families, who represent roughly 12% of all families in Canada, also account for about 46% of all children living in poverty. Have you any thoughts on how we can address them? It really is a targeted area that might have something. I'd be interested to know if you think there's something we can do for lone parents with kids.

Ms. Jocelyn Greene: Well, you know, which comes first? And any discussion we had here today, to think that when we responded it was as simplistic as you're saying.... On that point, one of the things is the disincentives to work that I raised for lone-parent families or the fact that the working poor are really people working in low-paying jobs, which is linked to the education being trained for jobs because they can't have access to some of the other educational things. So they're all linked together.

I know people are saying we've been going through this whole deficit reduction, which was an important factor, but the thing is that certainly in Newfoundland the disincentive to work is really a shame. Our provincial government has just done an internal paper that looks at that, and I suspect that's similar to the New Brunswick and B.C. experiences. They're trying to deal with that.

I don't think workfare is the answer. I think there have to be national standards.

I think the only way the provincial governments, at least this provincial government at this point in time, can address some of these issues is either through transfer payments or less clawback when things like Hibernia go on. We have to have some room to manoeuvre. You know, which comes first, the chicken or the egg?

If we had people who maybe want to rely on social assistance or unemployment insurance, then let's be clear that there's an attitude across this country that is fairly pervasive about Newfoundlanders not wanting to work. That is not the case.

Mr. Paul Szabo: Sure.

Ms. Jocelyn Greene: But I do think that if you say we're being naive to say you have to reinvest and raise social transfer payments, this is just a handout. But it's not a handout. Your question is the point. One is linked to the other.

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Now, I think there have to be national standards. There has to be a better partnership; there's been a lot of money wasted. I think the third sector and public and private partnerships can work. And there needs to be better choices made. There have been some very poor choices made, and I would agree with one statement that was made by the honourable member over there, but I think we all have to genuinely be listened to and contribute to that.

But I do think the disincentives have to be.... Most people are worse off working. In Ontario, there's some information around the amount of money people are paying on housing. The low-income families can't...so it's linked. I think you really have to look at removing those disincentives so people can get back in the workforce, so that there's better access to education, the student loan rates...

So there's no quick answer to your question.

Mr. Paul Szabo: Okay. Thank you.

Thank you, Mr. Chairman.

The Vice-Chair (Mr. Nick Discepola): Thank you.

I want to thank all the witnesses. It's not comforting sometimes, as witnesses, to sit there and listen to our questions. At times it's not reassuring from our point of view also. But our challenge is a rather difficult one, one we have had for the past five consecutive years that some of us have been attending, and that is to listen to all the varied opinions and suggestions across Canada.

We have a very diversified country, and it's not always easy balancing the needs of one region or one group of people with the needs of the other. But I want to leave you with the assurance that not only has everything you have said here been registered—there's a transcript of it—but your suggestions are also very valued.

From my perspective, we want to hear what Canadians have to say, and I believe the budgets have been successful the past three or four years because of the work of this committee in taking the time to listen to varied opinions across the country.

To that end, we will take your suggestions. Obviously, as you see even amongst your own groups, it's not only opposition party members who differ, but even amongst Canadians we're going to have to try to establish what I feel was the key to the success of the past budgets, which is to find that equilibrium, that balance within all the varied expressions of opinion you have very eloquently stated.

Dale, maybe in the next budget your concern may be partially addressed, but when it's partially addressed don't think we've ignored it totally. And that goes for some of the other people. What I feel we have to do—I guess it's our duty—is make sure we represent your wishes to the best of our abilities in what's reflected ultimately in the budget.

Some years we give more priority.... Last year we gave priority to education, for example. This year I believe we have to find the equilibrium between personal tax reduction and reinvesting in health and social programs.

To that end, I want to thank you all for taking the time to make your viewpoints known. We wish you good luck in Newfoundland, because I know you need it the most, and we will take that into account also.

To the members of the committee, we will reconvene at 1 p.m. to hear our second set of witnesses.

Once again, thank you very, very much.

The meeting is adjourned until 1 p.m.

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• 1143

The Vice-Chair (Mr. Nick Discepola): Good afternoon. We're going to continue our pre-budget consultation process.

I understand that some of the witnesses have a plane to catch at 2.30 p.m. or so. Therefore, Dr. Keough is going to excuse himself afterwards. It's not because he doesn't want to hear the questions from the members of Parliament, it's that he was fill-in for a fill-in at the very last minute. I'd like to thank Dr. Keough as well as Mrs. Reid and Mr. Davis for taking the time to make their viewpoints known.

Our committee is on the first day of an eastern leg. The other half of the committee is on the western leg in Vancouver, Calgary, Edmonton, Saskatchewan, etc. We will hopefully complete our hearings over the next three or four weeks and then make recommendations based on witnesses' testimony, such as yours, to the Minister of Finance. So your viewpoints will be welcomed and heard.

Dr. Keough mentioned that he does not have a brief. If you'd like to add something you may have overlooked in your presentation here today, please forward it to the clerk of the committee, and we will make sure that your written briefs or other submissions that follow will be included in the deliberations.

I've already introduced Dr. Keough. He's the vice-president, research and international relations, of Memorial University, and today he's representing the Coalition for Biomedical Health Research. From the Independent Living Resource Centre, we have Mary Reid, executive director, and Leon Mills, the chairperson; and from the Brophy Place Tenants' Action Association, we have Mr. Keith Davis, the vice-president.

Welcome to all of you. Who would like to start? Maybe we'll go from right to left. Mr. Davis, would you like to start?

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[Translation]

Mr. Keith Davis (Vice President, Brophy Place Tenants' Action Association): The United Nations has named Canada the best country in the world. In spite of this honour, the federal government continues to neglect its responsibilities to Canadian citizens.

[English]

Basically, we've been declared the best nation in the world, and yet Canada is neglecting some of its responsibilities to its citizens. Canada has signed several United Nation's declarations and conventions that clearly state certain obligations a nation has towards its citizens. These United Nation's agreements include the Universal Declaration of Human Rights; the Convention on Economic, Social and Cultural Rights; and the Convention on the Rights of the Child.

Among the most fundamental rights included in these declarations and conventions are the following: article 25 of the Universal Declaration of Human Rights states that:

Everyone has the right to a standard of living adequate for the health and well-being of himself and his family, including food, clothing, housing, medical care, and necessary social services.

Also, article 11, section 1, of the International Covenant on Economic, Social and Cultural Rights says that:

The states parties

—that is, the countries who signed, including Canada—

to the present Covenant recognize the right of everyone to an adequate standard of living for himself and his family, including adequate food, clothing and housing, and to the continuous improvement of living conditions. The states parties will take appropriate steps to ensure the realization of this right, recognizing to this effect the essential importance of international co-operation based on free consent.

Article 11, section 2, says that:

The states parties to the present Covenant, recognizing the fundamental right of everyone to be free from hunger, shall take, individually and through international co-operation, the measures, including civic programs, which are needed.

Although Canadians enjoy one of the highest standards of living in the world, there are still many citizens among us who are deprived. The number of Canadians in poverty increases each year. Particularly disturbing is the number of children living in poverty. There are more food banks today than there were several years ago, and the demands placed on them are increasing.

During the past few years, the budgetary cuts of the federal government have decreased Canada's ability to address these problems. The Government of Canada has the responsibility to eliminate poverty and to ensure not only an adequate standard of living, but also the continuous improvement of living conditions. Feeding the hungry in Canada is not the responsibility of food banks; it is the responsibility of the federal government.

The federal government must fulfil the above-mentioned obligations. One measure that this government can take is to spend the employment insurance surplus directly on the unemployed. This money is rightfully theirs. In negotiating a new social union with the provinces, the federal government must continue to insist that the Government of Canada maintain the right to spend funds in the areas of provincial jurisdiction and to enforce minimum standards across Canada for health care, education, and social services.

In the area of education, article 28 of the United Nation's Convention on the Rights of the Child states that:

States parties recognize the right of the child to education, with a view to achieving this right progressively and on the basis of equal opportunity. They shall, in particular, make primary education compulsory and available free to all; encourage the development of different forms of secondary education, including general and vocational education; make them available and accessible to every child; and take appropriate measures, such as the introduction of free education and offering financial assistance in case of need.

In this province education for children is far from free. Parents are required to pay for school supplies. For example, I have four children in school. As a recipient of social assistance, I am loaned textbooks by the Department of Education. I must pay for consumable school supplies, such as exercise books, pencils, photocopying paper, etc. I have to pay $300 for school supplies, and in addition to that, I have to pay $250 for school bus transportation, which does not include the money I shall be required to pay for field trips. Although education is a provincial responsibility, the federal government has an obligation to take the appropriate measures to ensure that parents can send their children to school at no cost to themselves.

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In conclusion, when Canada signed these United Nations declarations and conventions, the Government of Canada made certain commitments to the citizens of Canada. It is time for the Government of Canada to fulfil these commitments.

The Vice-Chair (Mr. Nick Discepola): Thank you, Mr. Davis.

From the Independent Living Resource Centre, Ms. Reid.

Ms. Mary Reid (Executive Director, Independent Living Resource Centre):

Those priorities, I would submit to you, are clear.

First, we must preserve and improve the valued programs on which all Canadians depend, such as our health care, our education and our pension systems.

Second, we must work together to enhance the learning and training opportunities available to all Canadians, focusing on accessibility and addressing the wide range of needs that begin in early childhood and extend through working life.

Third, we must foster and seize the opportunities to make Canada a leader in the modern knowledge-based economy. And finally, throughout, we must continue to act on a new ethic of partnership, anchored in a strong sense of the national interest.

...

Some see the discussion ahead as a financial debate only. It isn't. It's a debate about values.

Honourable chair, members of the committee, and colleagues, if these words sound familiar, it's because they are the words of the Honourable Paul Martin on his presentation to the House of Commons Standing Committee on Finance, October 15, 1997. I've repeated them because I believe they reflect what many Canadians value.

To resume:

A strong economy is dependent on a strong society.

...

...we have our basic values: our recognition that fiscal health is not the end but the beginning of our march to a better life for all Canadians; our desire to reach out to those in need even as we reach forward to the future; our abiding belief that the pursuit of prosperity should not cause the principle of fairness to be set aside.

These comments, while not altered by my lifting them, are misleading. In the past two years since these words were spoken, the impacts of previous and subsequent budgets have been to put aside the principle of fairness, to discuss values only in the context of fiscal restraints, and to build economy at the detriment of social support programs. The lives of many Canadians have become more of a struggle due to continued erosion of our health care system, our social service system, and our educational system. Reforms during the past three years to CPP, EI, and cost sharing of social programs have not reflected stated goals of increased flexibility and improved services, but rather have most seriously and negatively impacted on the health and well-being of individuals and communities throughout the country. We call upon the Government of Canada to reverse these actions and truly reflect principles of values upon which our country was built.

Mr. Leon Mills (Chairperson, Independent Living Resource Centre): We speak to you as members of the Independent Living Resource Centre. The ILRC provides services designed by and for persons who have disabilities. The ILRC is managed under the direction of a membership-elected board of directors that is consumer controlled, cross-disability, and not for profit. As an accredited member of the Canadian Association of Independent Living Centres, we join 23 other centres across the country in promoting independent living, choices, and opportunities for persons who have disabilities. We strive for the full inclusion of all citizens within our communities, for the removal of barriers, and for the end of discrimination that currently prevents people who have disabilities from being fully engaged in this country.

We firmly believe that we as individuals must have full opportunity to take control and responsibility for decisions that affect our lives. We are entitled to clear and accurate information, to the expertise of our friends and neighbours, and to the support systems that enable our full contributions to our communities and country, realizing that the independent living paradigm means supporting individuals who have disabilities to make choices about our own lives. It is about people taking responsibility for our own resources.

This route of service delivery, this building of the IL expertise provides a cost-efficient, community-supportive, and proven model of service delivery, while reducing dependencies on expensive medical and rehabilitative systems. While mode of service delivery is within provincial jurisdiction, access of independent living supports and resources is intricately linked to citizenship and is therefore an issue as well for the federal government. Resources must be sufficient to provide full and equitable access to independent living services and supports.

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Ms. Mary Reid: The Government of Canada, while stressing the need to address deficit and debt reduction, led an attack on social programs and citizenship supports. We continuously spoke of the obvious contradictions of the risk of eroding social infrastructure and the inherent injustice of taking from individuals with the least capacity to contribute. The anticipated surplus of the social dividend is best directed to the rebuilding of and reinvesting in supports tied to individuals and their capacities.

The introduction of the Canada health and social transfers is still causing tremendous strain and devastation throughout much of our province. The guise of offering greater control while significantly reducing the amount of revenue for social programs has translated into a loss of essential supports and services, as well as a decrease in the minimal income levels for many individuals. Within this province, the reduced revenue has resulted in cuts to social programs, resulting in greater poverty and isolation.

The ability to provide adequate and appropriate services is not possible, given the amount of revenue. Although measures to increase efficiency and effectiveness can be identified within the system, the degree of revenue reduction has been unrealistic.

The devolution of powers to the provinces and deficit-cutting exercises have taken place at the expense of collective caring. This weakens the country and challenges the pride we have as citizens who share with each other. Protections such as those formerly provided under the Canada Assistance Plan addressed issues of fairness and equality, values that we know are desired by Canadians.

But we're not here to tell all bad news and we're not going to yell at you the whole time, because I believe there are solutions as well. We have some positive capacity, suggestions and ways to contribute rather than just saying what's wrong.

So we challenge you and the Government of Canada to invest in the positive capacity of persons who have disabilities to be a major part of the social economy. We urge the continuation of strategic initiates that network the talents and skills of people across the country. Given necessary supports, individuals, volunteer sectors and communities are well situated to contribute to social policy, research and the sharing of best practices, which demonstrate a strong, vibrant network of communities.

As demonstrated through independent living centres, persons who have disabilities have been finding new and creative solutions, building community-based resources, and developing skills of peer support and expertise sharing. These skills and experiences are now being shared with the community as a whole.

This sharing of skills, information and solutions is really what defines communities. Significant support of national, cross-disability and consumer-controlled organizations is essential to continued engagement of persons who have disabilities within the economic and social growth of our country.

We challenge Canada to reaffirm its leadership through supporting demonstration models and the sharing of information best practices. We challenge the Government of Canada to reaffirm its ultimate responsibility for the citizenship and mobility rights of Canadians with disabilities.

We acknowledge and commend the federal support of citizenship issues through the initiative of the federal Task Force on Disability Issues, the Opportunity Fund, and especially through the continued support of the Canadian Association of Independent Living Centres and the Council of Canadians with Disabilities.

As organizations of persons who have disabilities, these groups and their provincial affiliates provide a strong foundation to the increased participation, throughout all aspects of community life, of persons with disabilities. This participation enhances the economic and social life of our country.

It has long been recognized that the extra costs associated with disability-related needs impede many persons from being employed, from participating in the life of their community and country, and from being able to move away from income support systems. It is imperative that the different levels of government work with the community of persons who have disabilities in seeking ways to disassociate the cost of disabilities from income programs.

There needs to be a system of covering disability-related costs that is pan-Canadian in scope, addresses needs, reduces gatekeepers, and encompasses principles of independent living.

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Mr. Leon Mills: We have witnessed the growth of the national social safety net being reversed through clawbacks, restrictions, removal of social housing and national standards, and significant spending reductions. While it has been clear for some time that the social safety net of Canada, developed during a specific historical time, was in need of change, its demise was not a realistic option. Its elimination in the name of deficit reduction was misleading.

There are alternatives. Some of these involve risk taking; some involve greater spending. However, there is no greater risk than increasing joblessness and poverty and removing health and social supports. There is no greater risk than moving towards a society that does not value all people equally.

We challenge you to focus on the positive capacity of all citizens as integral to the economic and social growth of our country. As you struggle with the role of the volunteer sector and particularly the role of individuals who have disabilities, we challenge you to focus on our skills and abilities to contribute to economic growth, to social policy, to development of best practices to the social economy.

Finally, we challenge you to reaffirm your leadership role in supporting the network of persons who have disabilities, across this country, through dynamic and strategic initiatives.

Thank you.

The Vice-Chair (Mr. Nick Discepola): Thank you to you both.

I'll turn now to Dr. Keough.

Dr. Kevin Keough (Vice-President, Research and International Relations, Memorial University; Coalition for Biomedical and Health Research): Thank you, Mr. Chairman and members of the committee, for hearing from me today.

As the chair said, I'm the vice-president of research and international relations at Memorial University. I'm also a professor of biochemistry there. I should tell the committee I'm also the vice-president of the Medical Research Council of Canada, but I don't wear that hat here today. I'm actually here as a biomedical scientist and in my Memorial University role, and in particular, as a representative on behalf of the Coalition for Biomedical and Health Research.

I apologize for your being stuck with a third-string player today. The notice was somewhat short, and travel schedules turned out to be impossible—including mine, I'm afraid. I also apologize that I have not provided you with any written material in advance; timing did not allow for that. But it's my understanding that the coalition will be providing some written material to the committee before your hearings are finished.

I want to impress upon the committee the strong support from this community for the development of the Canadian institutes of health research. This concept involves a new paradigm for the investment of federal support for health research in the country. It's receiving major interest and support from a wide spectrum of groups, institutions, and health care systems across the country.

Canadians are proud of our first-class health care system. We have in Canada, also, a strong community dealing with health research, from molecules through to population and things like the determinants of health.

The proposed Canadian institutes of health research will fully integrate health research with the health care system. It will also allow us to close the gap in funding of health research in this country in comparison to that funded in many other developed countries, especially our G-7 partners, and most especially in the United States, where the provision of funding for health research is estimated to be some three to four times per capita greater than this country spends.

Given the funding gap, Canadians do not get as much high-quality and competitive research as others per capita. Also, the funding gap increasingly is causing a personnel gap. We're losing our best and brightest once again in this area.

The Canadian institutes of health research would build upon the existing strengths of our academic health centres, research institutes and hospitals, together with their outreach networks. These constitute, across the country, a very powerful set of active research and treatment facilities, located in all regions of the country and extending through their networks out to all sub-regions of the regions. The institutes would link this rather amazing and powerful network in a new and efficient way to link health research to health care delivery.

It would create a series of virtual nation-wide research institutes targeted at the major health care priorities of the country. It would integrate the role of the federal government in the funding of health research with that of the provinces in the delivery of health care, in a way that we've not been successful in doing in the past.

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We currently spend in Canada about $76.5 billion per year on total health care spending. The recommendation from those who are in favour of the creation of the Canadian institutes of health research is that we spend 1% of that amount of money on health research in the country. It wouldn't seem unreasonable for any enterprise, either a small business or a large business, or a government or a corporation of other sorts, to allocate 1% of its total spending to finding out how to do things better, more efficiently, and more inclusively and extensively.

The university here, the medical school, the local health care community, both the deliverers and the funders, all see the Canadian institutes of health research as a very positive step in enhancing our ability to use some unique characteristics of our community, particularly, to carry out high-class research, not only on very basic biomedical problems but also on applied health services research.

This community has already integrated its health research and delivery systems to a much greater extent than almost any other jurisdiction in the country. This fact and some unique aspects of our population could enable us, with the assistance of the new Canadian institutes of health research, to do some of the very best research to solve problems of national and international importance but also of regional effectiveness in areas such as cost-effectiveness of treatment protocols, utilization of the health system resources, and population genetics, just for some examples.

So we would urge the committee, as it goes through its pre-budget deliberations, to pay very close attention to the development of Canadian institutes of health research proposals. We strongly endorse the formation of such an institute and hope that it will become a serious matter for the committee's discussions with the finance minister as the budget is prepared.

Thanks, Mr. Chairman.

The Vice-Chair (Mr. Nick Discepola): Thank you to all of you.

Dr. Keough has to leave in about 10 or 15 minutes, so maybe I'll forgo the formality of going from opposition to government members, and just ask for a show of hands of those who want to ask questions directly to Dr. Keough.

Mrs. Redman, please.

Mrs. Karen Redman: Thank you, Mr. Chair.

Dr. Keough, you raised some really interesting points, and I'm looking forward to seeing them written down.

One of the things I've asked myself very often as a member of Parliament is, what is the right balance between government-funded research and the private sector corporate research, and are there things government can do to leverage that money so that we do get more dollars? As evidenced by last year's budget, it's something that this committee and the government realize is an investment we need to make for the future.

Dr. Kevin Keough: I think government has already taken some significant steps to enhance the private sector spending for research in general and health research in particular.

The spending in overall health research by the pharmaceutical industry in Canada has gone up enormously in the last decade, for example, and there probably remains room to stimulate this a little more. However, at the same point, I think we have one of the stronger tax regimes to stimulate research by the private sector already existing in the country, and what is now missing in terms of our G-7 partners, for example, is the type of spending that really can only be done by government. It is that longer-term, broad-spectrum, either basic biomedical or health care delivery problem type of thing that when one has to also deal with the bottom line of a group of shareholders is perhaps difficult to sell. We are falling behind enormously in that particular area, and there's deep concern in the country that while we have a very strong system, it's eroding quickly.

So yes, we probably can treat the system a little more to encourage biotechnology companies, insurance companies, pharmaceutical companies, to spend a little more. I think a major signal from the federal government becomes important in this area.

If you were to spend what we're suggesting from the federal government, it still would not match the current private sector spending. The private sector is now spending more than the federal government—at least darn close to more—on health research. Perhaps that's not the way we want to have the balance set. It certainly is true we're still underspending many of our G-7 partners in terms of our federal and governmental support. That support, in places like the United States, has led to an enormous competitive advantage in the long term. So I think we need to look at it in that light.

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Mrs. Karen Redman: I have one other question on a bit of a different tack.

You mentioned virtual research centres. I know that getting doctors in remote areas, both in Newfoundland and Labrador as well as in the rest of Canada, has been an ongoing problem, and we've already acknowledged it's really the provinces' jurisdiction to deal with it. I represent Kitchener Centre, which is in southern Ontario, and Cambridge, which is part of Waterloo region, has been declared officially underserviced. So it isn't just northern Ontario remote areas that are suffering this problem.

One of the things in particular that we found when we scouted around to attract a specialist was that the Hamiltons and the Londons and the Torontos that had world-class research and medical centres affiliated with major universities were able to attract, for a variety of reasons, those doctors. Have you looked at how having virtual research centres might impact attracting doctors to areas where it's now hard to get them to go?

Dr. Kevin Keough: I think the dynamic of why doctors go to some regions and not others has to do partly with research and accessibility to major research facilities, but it also has a lot to do with many other factors, which I don't really think I can deal with.

I can't say this has been looked at, because I don't think we've evolved that far with the concept of the Canadian institutes of health research. It has evolved to some extent, and the way it's evolved is that we have a network of academic health centres across the country. Almost every single one of those has a series of outreach operations in more remote or underserviced areas. These are all now linked in a much more effective way than they were before, so that in Newfoundland, for example, there is a linkage between the medical school and a large number of family physicians in 50 different communities, who for certain kinds of community-based research can become actively involved with their patients in doing larger-scale protocols.

This type of thing is one of the things the Canadian institutes of health research would foster, and that's one of the things, although by no means the only type of thing, that would make it somewhat more attractive and would help retain people in underserviced areas.

So it is being thought of in those terms, because some of those facilities are already there and could be built upon. I think what this would do is enable the funding to be in place that would allow this to happen in a much more effective way. Right now we're kind of scratching and scrambling, to be quite honest, to put a lot of this sort of stuff together, particularly on areas such as determinants of health, population health, and other kinds of effectiveness trials. Funding for that is not easy to find. We're falling behind in biomedical funding, but it's very difficult to find the other.

I think it would help some, but I would be lying if I said it was going to solve the whole problem.

Mrs. Karen Redman: Thank you very much.

The Vice-Chair (Mr. Nick Discepola): Mr. Brison.

Mr. Scott Brison: Dr. Keough, you touched briefly on the brain drain issue and the loss of some of our brightest and best in your field. It's affected other fields as well. To what extent is our tax policy playing a role? Are there areas in terms of tax policy you would like to see changed to effect improvements in that area?

Dr. Kevin Keough: Canadian tax policy, both...and I suppose the combination of federal and provincial income tax, sales tax of various forms, and other taxes of various forms certainly are considered to be relatively high in comparison to some of our G-7 colleagues, particularly again in comparison to the United States. In terms of holding some individuals, I think tax relief in certain areas may help. For the types of individuals who are driven to research and compelled to do research in their life, I don't think they are motivated by quite the same things in personal terms. I think for them it is the accessibility and being able to have the facilities to do the kind of research they think is important.

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Yes, all of us would like to pay less tax. But I think the real motivation here is access to equipment, and the government has helped recently by creating the Canada Foundation for Innovation. But also unrestricted access to funds—not unrestricted in a nasty sense—that would enable people to do really high-class research in this form is going to be as strong a motivator for many of these people as tax relief.

Going back to the other point vis-à-vis encouraging the private sector to invest in research, I think the tax system can be tweaked up a bit. In many respects it is not bad in terms of some of our players.

Mr. Scott Brison: Thank you.

The Vice-Chair (Mr. Nick Discepola): Is it mainly research scientists who are leaving or is it young graduates also? Could you elaborate on what other types of things we could be doing to try to curtail the exodus?

Dr. Kevin Keough: You want to buy Bill Gates?

The Vice-Chair (Mr. Nick Discepola): What upsets me is when Bill Gates comes into some Canadian universities and can afford to pay these young scientists what they are requiring and entice them to leave.

Dr. Kevin Keough: Money will talk to some extent in almost all instances, at a certain level. Also, the people who are leaving are bright researchers who feel they cannot get enough equipment and operational support. There are young people in the information technology and biotechnology industries who are not particularly going into research per se but are innovative young people. They don't go into the traditional research areas but they go into other areas. Medical practitioners are leaving because they have been actively recruited, particularly by the United States, because they didn't have any GPs for years and they really need them.

I think they are being recruited partly because of salary and partly because of the excitement of what is going on. It is bigger and there is greater opportunity to be able to do things. Even in the groups that are not officially in research but what I will call being very innovative in the information technology area, many are being motivated because of the innovative aspects.

If we can provide an atmosphere and a funding structure, and maybe a tax structure, that enables us to have our companies and our universities and research institutes move up a point or two, I think we would retain them a lot better. It is a combination of salary and other things that drive these people. There are some changes we can make. Some of it is directly putting money in. Some of it is providing the right kind of atmosphere for this sort of thing to grow.

The Vice-Chair (Mr. Nick Discepola): Thank you very much, Dr. Keough.

Dr. Kevin Keough: Thank you, Mr. Chairman. My apologies to the committee members for having to leave, but this was short notice for me. Thank you for listening to me.

The Vice-Chair (Mr. Nick Discepola): We thank you very much for your input. Have a safe trip back.

We will continue with the other witnesses. Mr. Forseth.

Mr. Paul Forseth: I did defer previously. I was looking at the brochure of the Independent Living Resource Centre.

I know in this type of organization funds are very critical and you are always on the edge. You consider just how much it costs to produce this package, how to use it, and where you're placing this particular advertising piece. You also perhaps look at how long you've been using it. If it has been out in the community for a while, you look at what kind of results you've had using this method versus other ones in supporting the viability of the organization.

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You mentioned that in some respects information is power and that if people don't know you exist, how can you help them. Perhaps you can use this as a launching pad to talk about costs and so on, as well as the larger issues of service and the feedback you get.

Ms. Mary Reid: Sure. The brochure package that you see is something we are proud of. It was a one-time-only project, and we do feel pretty good about it.

We presented to you one year ago as an organization called Civic #4 Eskasoni Place. We talked to you then about our dreams, our work, and our endeavour to become an independent living resource centre. This year we're very happy to be able to say we did it, and we did it with the support of governments, organizations, and corporations. The provincial government is our main funder, and they did support us in our transition. We were able to utilize some of the previous budget for PR. We knew it was a one-shot-only situation, so we went for it.

We are also very fortunate to have some strong corporate support, which is usually done in kind and involves assistance through such things as printing, designs, or our Web site, which has been designed by NewTel Information Solutions, a subsidiary of Newfoundland Telephone. In all of those partnerships, I guess they are, we've not just been on the receiving end but have been able to work with the corporations in terms of helping them learn about issues of accommodation and how persons with disabilities can fit into their organization.

So we've been pleased with the types of relationships we've been able to develop with corporations and with our main funder, the provincial government. It does look flashy, and once it runs out, it's gone. I won't have any more.

You mentioned that information is power, and we feel very strongly about that. We feel that many of the barriers that persons with disabilities run into individually can be solved, perhaps worked around, gone through, or gone over. All sorts of different solutions exist, and they come usually from other persons with disabilities and not from a huge investment of dollars. So the creativity and the tier-sharing is something that allows individuals to find solutions, services, and programs that are unlike our traditional expensive medical rehabilitation approach to delivering a program.

So on that end, I think that our support provincially has come because we've been able to demonstrate that this type of service delivery is very inexpensive compared to others.

Mr. Leon Mills: Perhaps I could add to Mary's comments. There's an old adage in business that says you have to spend money to make money. As you well know, for many years prior to the last decade community groups were funded almost exclusively by various levels of government. With the current downsizing and what not, community groups have seen their income levels drop, so in order to survive and prosper in today's economy, community groups have had to take a more business-like approach in terms of how they operate and who they operate with.

So the ILRC, like a lot of community groups, has had to build networks with corporations and private industry and basically create a win-win situation for both. By doing so, it allows corporations to be seen as good corporate citizens and also to do their part outside of the normal taxation route. It also allows community groups to fill the gap that was created by the lack of government funding.

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So those kinds of initiatives help get our message out there in the community. It helps us to broaden our range of allegiances, if you will, partnerships with other community groups, other corporations, and basically it creates a new way of working.

Groups like ours don't want to say we're just there with a hand out; give us some money. We know that's not the way it works any more. There's a different dynamic, and all we're saying is that we can do our part but we need a bit of help. We don't want a handout, as the saying goes; we want a hand up.

Mr. Paul Forseth: I have a number of questions with quick, one-line answers.

How many paid staff do you have?

Ms. Mary Reid: Our core staff is four, and the rest are project people.

Mr. Paul Forseth: What is your approximate global budget per year?

Ms. Mary Reid: The budget right now is approximately $285,000.

Mr. Paul Forseth: Okay. Of your revenue sources, approximately what percentage is from non-government sources?

Ms. Mary Reid: Right now, if we look at in kind, it would be about 20%.

Mr. Paul Forseth: Okay, and what is the approximate size of the client base that you now serve?

Ms. Mary Reid: It's growing all the time. Right now we're serving approximately 250 or 260 individuals, and that's from active day-to-day to once-a-year call-in. As the new centre just opened a year ago, I suspect that's going to continue to expand rapidly.

Mr. Paul Forseth: Do you have some place like a storefront operation, or do you have a back office in another social services office? How many different locations do you have?

Ms. Mary Reid: We have one location, and it's a facility, because we grew out of what began originally as a group home. So we're still operating in that facility.

Mr. Leon Mills: I would add a comment.

More clients could be accessed. Of course, in Newfoundland you have the geographical problem. We're a very large province, and in rural Newfoundland particularly the ILRC is no exception to a lot of community groups.

I currently work with the hard-of-hearing association. One of our problems is that we call ourselves a provincial association, but because there's a lack of funding, we're limited to basically the St. John's office, with occasional outreach. We want to establish a number of satellite offices around the province to coincide with the local health care boards and in that way access more people. There are literally tens of thousands of potential clients out there that we can't help in any significant way because we don't have the funding, and the ILRC is in a similar boat.

We're hoping, over time, to build up our contacts again, maybe through corporate support and different levels of government, and so on. But we hope to establish some satellite offices as well.

Mr. Paul Forseth: I have one last question.

Have you ever thought of having a student from university perhaps do their master's degree by coming in and doing a thorough evaluation of your organization? That's one way of getting free service, because often if you're continuing to go to government funds, at some point someone's going to say we need a kind of social audit and value for dollar, and so on, and often you can get a university student to take it on as a project.

Ms. Mary Reid: Yes, we've done that, and it has been very successful. It provides a link there, too, and a partnership.

There was a student from the school of business who did the feasibility study for the ILRC. Just a week ago we presented to graduate students of sociology as part of a community contingency, talking about different research ideas.

We are exploring how to use social auditing ourselves to make sure we're on the right track, and we're doing what consumers want us to do, and we'll be negotiating that with the university as well. It's a great resource there within the university.

Mr. Paul Forseth: Thank you.

Mr. Leon Mills: On the social audit point—and I'm glad you raised that—we are also working closely with the provincial government to develop a social audit of their programs and services. In the past there has been an adversarial kind of relationship, which didn't really accomplish much—it caused a lot of good media. It didn't really do a lot. So we've approached government to try to operate in a different dynamic.

We met with cabinet last year and made a presentation about doing a social audit about their programs and services, with the idea being not to present a report card to say you did this well and this badly, or whatever, but basically to establish an evolutionary process by working together, by creating a dialogue, to show that we're on the same wavelength and we don't have to have to be on opposite sides of the fence.

We know times are tough economically, but by using resources in the best possible way, we can create innovative programs, in which Newfoundland is a leader in a lot of respects. But we can do a lot more to help people with disabilities by working together, instead of being adversarial. A social audit is one way we hope to do that, not only for ourselves but also for our province, government, and community groups.

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The Vice-Chair (Mr. Nick Discepola): Thank you, Mr. Forseth. Now I'd like to turn to Mr. Szabo for questions.

Mr. Paul Szabo: Thank you very much for your interventions. It's really important that you keep the message in front of the legislators to make sure the sensitivities are up.

You're probably aware that in the last budget there was some progress made with regard to the disabled. I think the budget initiatives actually don't fully kick in until 1998-99, with an aggregate of just a little under $200 million. I don't know how much of that would trickle down to Newfoundland, for instance.

One of the points you raised in your brief had to do with the whole aspect of the Canada health and social transfer. There's no question that when you take the programs it represents—the health, the post-secondary, and the CAP—there are fewer dollars being transferred. There is a floor, though, and it's coming back a little bit. One of the things I'd be interested to know is if we were to, for instance, increase the Canada health and social transfer, do you feel the provinces would direct those funds in a way that would help to focus in on your problems?

I can tell you there's a little bit of concern, because we have health standards only to the standpoint of the five principles of the Canada Health Act. We have some standards with regard to the welfare system, but the dollars ostensibly are not colour-coded and don't necessarily go to the areas used to calculate the need. I'd be interested in your thoughts as to whether you would be comforted by Canada health and social transfer increases, or whether you would be more amenable to programs that were directly federally initiated, and maybe tax changes or programs that would not infringe upon the jurisdictional authority of provinces.

Mr. Leon Mills: Yes, your point is well taken. To give you a short answer, can we bypass provincial governments—can you give money directly to us? No, I'm being facetious. As I just said, we try to work with the provincial government, but the provincial governments of course are having to balance their budgets. We all know of instances in the past where federal moneys or provincial moneys were used in ways that weren't initially directed.

I think the increases to health and social safety would be important, but I think they'd have to be earmarked specifically and then audited to make sure they're spent in that way. Otherwise, my own thinking is that a lot of it would just go into general revenues and be spent in different ways. I don't really, honestly believe it would be spent as it would be directed.

Ms. Mary Reid: I'd like to echo that. I have a second concern, in that I do believe it should be a federal initiative. I don't think the dollars would come to persons with disabilities. We're not high on a priority list. What started as a health and social transfer is really a health transfer now.

My other concern has more to do with citizenship itself and the role of the federal government. I do believe strongly that the role of the federal government is to protect citizenship issues and is to hold a country together. I fear that with the CHST that was part of a dismantling of social programs that were national and spoke to our national identity.

I think with disability initiatives it's another way of saying yes, as a nation we have concerns and values associated to persons with disabilities, and concerns with citizenship, period. This is a way for the federal government to demonstrate that.

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I know it's a very sensitive area right now, with discussion about the social union going on and provinces now wanting even to opt out if they don't want to spend a certain way. Then it becomes even more important that there be a sign from Ottawa saying they're here to keep the country together.

Mr. Paul Szabo: One of the aspects of the provincial transfers that really gets left off the table, which is also I think quite relevant, is the tax points component, the taxing authority. I would think some analysts would say the biggest mistake the federal government ever made was to transfer taxing authority to the provinces, because it's created some fog.

As economies grow and more people are working and tax revenues to the provinces are also increasimg, even under the former program the combination of cash transfers and tax points would only come up to a certain dollar, and it was moving in a way in which the cash component was always going down. I'm fascinated by the fact that the federal government is getting criticized regularly for reducing the block transfers, the CHST, even though that's exactly how it could have happened under the old programs.

I think you're quite right—you still have to look at how you target. Everybody can't get everything at all times, because that way you'd never be effective anywhere. I think you've got to deal with the need. Your point about holding the country together I think is well taken, and it's fundamentally the kind of thinking we need right across the country.

I want to ask you something else. We get a chance to report here and I think you've raised a lot of the macro issues. Have you given some thought specifically to something or have you a suggestion in terms of an initiative that would move in the direction of giving you the kind of assistance you want? I hate to be blunt, but if you could be more specific as to your priority or priorities it might be useful in terms of lobbying. You know, you're not asking for $1 billion but some money dedicated to a particular area that would be your priority, if it's housing or if it's employment initiatives for the disabled or if it's home care, etc. Where is the real need? You're on the front line.

Ms. Mary Reid: I'm going to get in trouble for setting a priority, but I'm going to do it anyway, because you asked and I think it's a very good question, and let's be clear.

I want to go back to one thing you asked before in terms of how money trickles down to Newfoundland. The Opportunity Fund, which was a fund for persons with disabilities announced in the last budget, was $30 million. That trickles to Newfoundland $267,000, because we're not a big province.

The priority area right now, I believe, is one that has been looked at for the last 15 years at least and it has to with looking at the extra cost of disability. The provinces, with the Honourable Mr. Pettigrew, have been looking at the issue for the last 18 months in terms of integrating disability-related benefits and services. It's a stumbler. It's long been acknowledged that extra cost of disability is really one of the biggest barriers faced by persons in terms of getting ahead and moving through labour force participation.

How to address it has I think been perhaps the biggest problem in not getting the job done. It's so massive. There are so many income supports out there now. They all have different eligibilities; they have different systems attached to them. There's the EI and workers compensation and CPP and social assistance and VRDP. There are so many, and it becomes very complicated.

I think if we can move back from those complications and look at the initial problem, which is that the cost associated with disability is a barrier for individuals, we can then look at it perhaps as setting up a universal—and I'm afraid to say the word, but it's there—disability insurance plan that would be applicable to all citizens of this country and used if required, knowing that we all have the potential of becoming disabled and having to run into extra costs.

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I think in partnership with insurance agencies, organizations of persons with disabilities, the provinces, and the federal government sitting down together, within a couple of years we can come up with something that is sensible and affordable and that would address the real issues that aren't being addressed right now.

Barring that, I think that another way of approaching it is to set it up in a similar way to the national child tax credit—that is, as a national disability tax credit. This way it becomes a national endeavour with some provincial delivery and provincial differences, and that might be more palatable to the provinces. But I think that's certainly where the money needs to go right now.

Mr. Paul Szabo: Thank you.

The Vice-Chair (Mr. Nick Discepola): Mr. Nystrom.

Mr. Lorne Nystrom: I want to thank our witnesses for their words today and to commend you on the work you are doing. The whole issue of disabilities is one I think we've fallen behind on in terms of public policies, so I'm very pleased to see you here raising the profile of, as Paul said, a very important issue.

I want to ask you a number of questions just to get a better picture of what's happening in Newfoundland. You're talking about poverty increasing since the massive cutbacks in the social programs in the famous 1995 budget of Paul Martin. Can you elaborate a bit more on that? I know your unemployment rate is about 18%. What is the hidden unemployment rate? What percentage of people are on welfare? Can you draw us a little bit more of a picture that might be useful in terms of the impact on real Canadians in Newfoundland and Labrador?

Ms. Mary Reid: I'm not going to be very good on the statistical end, but I do know that there have been some policy changes because of cuts within the social programs that have resulted in hidden costs, such as having to pay more for prescriptions and reduced dollars going into a home support system. That then means that there's less money within families, and it brings down the income level of families in that situation. There are increased costs with regard to transportation, especially for persons with disabilities, which have again reduced the income.

There was a small raise in the social assistance rate of around 1%, but when we looked at the additional costs as a result of other policies, the costs were higher than the raise. So that has reduced the level of income for individuals and for families.

I think it's not a clear situation of just rates going down. It's a situation of other costs going up, such as school busing systems being cut back so that individuals have to pay more for public transportation or to find other ways to get their children to school. As Keith mentioned, in terms of cost, the price of school supplies is going up. So those kinds of policy changes are what's bringing down the income on which people have to live.

Keith might be better situated to respond on that than I am, but that's what we see and that's what we're hearing from individuals; that is, there are fewer supports than they had before.

Mr. Lorne Nystrom: You've been talking also about national standards, and you're implying that you'd like to see more federally initiated programs. I can certainly sympathize with you, but there's a problem, in that through our wonderful Constitution and federation, many of these programs come under the jurisdictional authority of the provinces. I'm a strong believer in what I call cooperative federalism—that is, having both levels of government work together. The federal government of course can initiate programs by using the spending power under the Constitution, but they run into all kinds of problems in terms of the provinces wanting more input, and not just in the province of Quebec but also in western Canada, where I'm from. So when you talk about national standards, I hope you're not talking about just the federal government setting the standards by itself. I hope you're talking about the provinces and the federal government working together to establish what the standards may be. Am I right on that?

Ms. Mary Reid: “Pan-Canadian” would have been a better term in terms of agreement between provinces and the federal government. I apologize.

Mr. Lorne Nystrom: No, don't apologize; I just wanted to clarify that. Otherwise, we'd get into all kinds of wrangling, as we've seen in the constitutional debate over the years, in terms of these being provincial domains, rather than having a cooperative approach to it.

Ms. Mary Reid: It doesn't do much for the relationship between provinces and the federal government when one is being heavy-handed.

Mr. Lorne Nystrom: That's right. For about 30 years we've wasted a lot of time with constitutional debates and all the constitutional rounds. In the 1960s I thought we were going off in a pretty good direction with what I called cooperative federalism, with Lester Pearson, Bob Stanfield, and from my party, Tommy Douglas. Somehow we got away from that into all the confrontation, which is not just Quebec-Ottawa, but federal-provincial in general. So I think those are important things.

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I want to ask you two macro-economic questions. There were two major decisions made in this country a while back that I think really made things a lot more difficult for organizations like yours and for ordinary people in the country. One was a decision by the Bank of Canada back in 1987-88 to make fighting inflation the big priority at the expense of growth and employment and driving up interest rates. John Crow at the bank had the interest rates at one time five points higher than the American interest rates. That really slowed down the economy and created all kinds of unemployment, poverty, and so on.

The other decision was made by Paul Martin to do a conversion on the road to Damascus, so to speak, in part of 1993. I know Mr. Martin well. I remember him in opposition very well talking a very progressive line about emphasizing growth, development, and job creation. It comes out of his background, his father's legacy, or his own position as the head of Canada Steamship Lines, in terms of growing and developing and all of a sudden getting captured by the bureaucrats in the finance department, which had the philosophy of the John Crows of the world, saying “Oh look, we have to have massive cutbacks to bring down the deficit, and the way to do that is by cutting back on social programs, UI, and so on”.

I assume you'd be siding more with the old Paul Martin, in terms of the emphasis on growth and development rather than deficit cutting, and you'd share the concerns I have about the over-zealousness of the Bank of Canada in terms of holding down interest rates as well.

Do you have any advice in those general areas? These are two of the major changes in public policy that had a tremendous impact on a lot of people in this country in the last decade. One was done under the previous government and one was done under the current government, but both are certainly supported by the present establishment in the Department of Finance. Unfortunately, Mr. Martin has been captured by them, in my opinion.

Mr. Leon Mills: I appreciate your comments.

Politics, as you all know, is a game of opportunism, and unfortunately politics often reflects what best suits the opportunity.

There was an interesting article in yesterday's Telegram about Mr. Martin's policies and how he's changing them to suit the financial situation, as it were. I'm not interested in the politics of it; we're just interested in how it affects people with disabilities. Unfortunately, policies in recent years and the economy in general have caused a lot of hardship for a lot of people in a lot of different ways and have reduced the standard of living for a lot of low-income Canadians.

The point that's often forgotten is if Joe Average Citizen's status of living is lowered and reduced as a result of economic and fiscal policy, or whatever, then those with disabilities who are marginalized are pushed even further down. There's often a lot of rhetoric applied to trying to help people with disabilities, and various programs are implemented. That's fine, but to me half the time they're only lip service; they're not broad enough in scope and aren't funded enough to really have an impact.

While the federal government should be commended, I guess, in recent years for some of its newer initiatives, like the opportunities fund and whatever, it's very underfunded. It's nice to get $30 million, but $300 million would have been pretty good and a more equitable distribution.

Our point is simply that regardless of what opportunities are taken advantage of to promote one's own position, if the government is serious in trying to help people they should implement long-ranging, broader-scope policies, especially for people with disabilities, by setting up a separate ministry for people with disabilities and whatever, and have provincial counterparts, etc. Then you could really talk about doing some kind of work on behalf of people with disabilities.

Mr. Lorne Nystrom: In terms of a special ministry or department for people with disabilities, has that been pushed very hard across the country with the various provinces? What kind of response have you received? This may be something we will want to profile and report on to Parliament from this committee.

I guess the other question along the same vein, which would not technically be a financial question, is are there any changes you'd like to see in terms of rights for people with disabilities in the charter or in human rights legislation around the country that we should perhaps be aware of and could flag in terms of our colleagues on the justice committee?

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Ms. Mary Reid: Those are good questions. Right now, the only body set up is the Office of Disability Issues, which is under Human Resources Development Canada. It is really a weak link between what is happening in the community and getting messages through. For whatever reason, that office is not working especially well. It has been pushed to have either a ministerial council, a secretariat, or even a minister responsible.

We believe it has to be at the democratic level. It can't be an office set up with bureaucrats; it needs to be accountable by elected officials with regular reports to the House, at least on a yearly basis, and perhaps with some outside advisers.

The idea of a prime minister's advisory council is one that has pretty well been rejected by many consumers and consumer organizations as something that is quite elitist. The examples of premiers' councils across the country have been found to be unable to really reflect the views of consumers at the grassroots level and have become just another piece of the bureaucracy. So we support something at an elected officials' level, whether it be a minister responsible or secretariat.

Mr. Leon Mills: In relation to that, there is another point that needs to be made here. From a budget standpoint, if you want to talk about setting up a separate ministry and broader programs, the idea of a Canadians with disabilities act needs to be pushed. As you know, the ADA was established five years ago and has had a wide-ranging impact in the United States for disabled people. There are a lot of positives there, and some negatives as well, but by and large it has done much to create better accessibility for people with disabilities.

I know a number of provinces, such as Ontario and B.C., are working on their own provincial acts. This is something we'll be starting to push here soon that should be legislated. It could do a lot for people with disabilities.

Mr. Lorne Nystrom: Are there any changes to the charter or affirmative action programs you want to flag with us at this time?

Ms. Mary Reid: I think the human rights code needs to have an overview, and a real look should be taken at systemic discrimination. It's not very blatant right now that some type of barrier identification removal is a right within the code. Within the charter, I don't have any suggestions for the committee right now.

I would like to add to what Leon said in terms of a Canadians with disabilities act. I think that would be best placed as a barrier identification and removal act, as opposed to the ADA. I think we often talk about a CDA, but I'm not sure we know what it means. It might mean something different to all of us, so a process to determine what that really is about and what is best for this country would be important.

Mr. Lorne Nystrom: Would the disabilities act you are looking at be strictly a federal act, or would you want a federal-provincial agreement on this? So many things under provincial jurisdiction affect everyone, not just people with disabilities. Are you looking for a federal initiative here, or something we can work on with the provinces?

Ms. Mary Reid: I would see it as a federal initiative and perhaps an example, and provinces would likely develop their own acts. I don't see that type of thing being able to be negotiated with the provinces and territories with any one agreement. There may have to be some differences among the different provinces.

Mr. Lorne Nystrom: Good. Thank you.

Ms. Mary Reid: Thank you.

The Vice-Chair (Mr. Nick Discepola): Mr. Nystrom raises a good point, but isn't there a strengthened role the provinces should be playing and an enhanced role the municipalities should also be playing? We can only do our share, but if all of a sudden you get down to the municipal level, for example, and they don't provide the infrastructure to allow a simple thing like handicapped access to their public buildings, where do we stand? Have you made any effort to sensitize the municipalities?

Ms. Mary Reid: There has been work ongoing with the Federation of Canadian Municipalities for a concerted effort across the country. Many municipalities have their own advisory councils on the status of persons with disabilities. At that level that format works quite well. In this municipality, in several across this province, and in some right across the country they've been fairly effective, because it is small government, usually.

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We are calling so much for a federal agenda for disability because we had a missing piece with the provinces. There was always a sense that disability was an issue of the federal and municipal governments, and it wasn't a strong reflection at a provincial level. Then when disability seemed to be dropped off the federal agenda a couple of years ago, we weren't ready to move in and provinces weren't ready to move in. It wasn't something that had had a lot of educational effort at a provincial level. I think that was our responsibility, and we have to be accountable for that. We had spent a lot of time talking federally and not a lot of time at a provincial level, unless it was very specific on a program for a group of people, but not on the wider human rights and systemic levels. We're starting to do that now.

Mr. Lorne Nystrom: I want to ask one more question as a follow-up here.

Are there great differences in the country from municipality to municipality? Are there some municipalities you hold up as a model, who have gone a long way in terms of, as the chairman talked about, accessibility and so on? Are there great discrepancies? Are there some models you can point to and say Pembroke does well, or whatever?

Ms. Mary Reid: Well, I'm trying to think. It might even be Kitchener, I think, that's been tremendous.

Mr. Lorne Nystrom: It could be. I don't know. I'm just asking the question out of ignorance. I just don't know.

A voice: Kitchener does have very good MPs, Lorne.

Mr. Leon Mills: There are a number of different initiatives around the country in Windsor, Kingston, and a few places that are moving very proactively, but generally it's not something most people pay attention to.

As you know, in the last decade a lot has been done in terms of access for physically and mobility-impaired people. They did a really good job of selling the problem and getting legislation enacted and all that kind of stuff, and a lot of places now have had to become accessible and spend the money to do it. Unfortunately, there are still a lot of other people with disabilities for whom public places are not accessible, such as myself.

I'm hard of hearing. This place here today is not really totally accessible to me. It is almost, with all this equipment around, but unfortunately there were no closed loops so I could interact with my hearing aids. I had to take them off and use this thing, which works but is not the best. This is the kind of thing that exists.

For instance, if I go to a hotel right now I can't hear the alarm clock or the fire alarm. I can't listen to the TV. I can hear it, but I don't understand it without my hearing aids. And in the morning I don't have those on, so I don't hear wake-up calls and those kinds of things. I've missed flights because I couldn't hear the call.

So there are all kinds of accessibilities for different kinds of disabilities that are not being addressed. This is where I'm saying a disabilities act needs to be implemented to cover all people with disabilities. I agree with the chair; I don't think it should be just a federal initiative. We're all Canadians. It affects all Canadians. It can affect everybody here, today, tomorrow, or next week. It's something I think our country needs to give a higher profile to.

We should all work together. It should be a federal initiative, of course, but also the federal and municipal councils and everybody. A lot of it is an education issue, as well. I agree that municipalities, especially, have to develop more.

You wanted an example. Some places in Canada are starting to move toward it, but in the States, if you want a model, visit Phoenix or contact them and get some information. Pick up an old copy that came out last fall of Disability International and look at its profile, a whole section. They've just done some amazing work with the mayor's council on disability and access. Basically the whole city, wherever you want to go, has accessibility regardless of your disability.

So there is an awful lot that needs to be done. Right now it's only the tip of the iceberg in what's been done, and we've got a big job ahead of us. That's why I pushed for a disabilities act, a ministry, and everything else. There's an awful lot of work that needs to be done. If you want to move forward, of course, it all has a lot of implications from a budget standpoint.

The Vice-Chair (Mr. Nick Discepola): Thank you.

I'll now turn to Mr. Pillitteri.

Mr. Gary Pillitteri: Thank you, Mr. Chairman.

First, I know that we came here for pre-budget consultations and I know Mr. Martin doesn't need any help specifically from me, but I just wondered if Mr. Nystrom has anything against an entrepreneur. Let's not forget that Mr. Martin, prior to entering politics, was a private citizen and someone who educated himself and therefore became an entrepreneur and acquired some wealth. I just wondered if Mr. Nystrom, from his questions and remarks, had anything against any Canadian, not just Mr. Martin alone, who acquired any wealth.

But my question is not for you. I just wanted to make a point that he's been pursuing this line of questioning—

Mr. Lorne Nystrom: I thought the question was for me.

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An hon. member: He can ask that in Ottawa.

Mr. Gary Pillitteri: This does lead me to my question for the presenters, Mr. Chairman.

In Canada we have many forms of taxes. We have the corporate tax, which is mostly paid by corporations or is paid as individuals incorporate. That also has a component of redistribution of wealth added into it. We have income tax. Every Canadian citizen pays tax, and it also has a component of redistribution of wealth. Also, we have the GST that was brought in. There again we have a redistribution of wealth. We have now come up with the EI fund. There, 60% of the pay-out is by the corporation or the employers, and 40% is paid out by the employees.

A tax is a tax is a tax. If we look at this, there are four different types of tax there. Of course, there is also property tax. In some communities in some parts of Canada, you have that what you call market value assessment and others.

With the EI fund, it seems to be that there's a surplus. Many people have said the deficit has been reduced because of the EI fund. If my memory is correct, in his presentation Mr. Davis said the EI fund belongs to those people who paid into it, and it should be given back to them. I don't have anything before me, but he said it should be given back to them in the form of possibly job creation and so on.

Tell me something. Having said all of these taxes are a redistribution of wealth, maybe we should take a look at that EI fund. If we are to have a redistribution of of wealth, it may be by tax cuts across the board. That would be of more benefit to lower-income Canadians—and the last budget's elimination of the surtax of 3% benefited some 13 million Canadians. Now, by raising the tax deductions, it would benefit almost every Canadian. Don't you think that by doing that, it would possibly also result in a redistribution of wealth into that? Would you favour that, or would you totally give it back to the people, the workers who have paid into it? And you would have to give it back to the employers, too, of course.

Mr. Keith Davis: The purpose of the employment insurance fund is to help those people who are unemployed. It's like a blanket for those people; it's a safety net to catch them. It also has the potential for creating jobs. If you can demonstrate to the public that by giving them a tax break, corporations will then use this tax break to create more employment, then certainly we could support that.

Unemployment is unacceptably high. I'm not sure exactly what it is now, but we have an unemployment rate in Canada that's in the neighbourhood of 9%. Other countries are doing much better. I think Norway has an unemployment rate of 5%. For a country like Canada, we should certainly not have the unemployment rate that we have. This employment insurance fund, however it is spent, should be used to ensure that people do have work that will gainfully employ them not for the short term, but for the long term. This is what people are looking for.

Mr. Gary Pillitteri: It has been used for that, too. It has been used for job creation in my area. Of course I understand that every area has programs administered by the federal government. Now, however, we're talking specifically about the surplus. There being one, which way should it be spent? The surplus would come from that fund, actually, because the UI fund is the only thing that's increased. Would you want to give it back through tax cuts? Would you want to give it back through helping more in the medicare system, helping different programs, or do you want to go just specifically for that? I'm asking that question.

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Mr. Keith Davis: I think it should go specifically toward the purpose of reducing the unemployment rate in Canada. And consultations between business, the unemployed, and the general public.... It must be a concerted effort. I think we need to consult more on that before we decide. But certainly it should be used to reduce the unemployment rate in Canada. That was the original purpose of it, as I understand it.

The Vice-Chair (Mr. Nick Discepola): So are you saying then instead of giving the 60 cents back to employers and employees, you might favour some form of investment in job retraining measures, for example?

Mr. Keith Davis: Yes. But we have to be certain it isn't something that's short term. I've seen so many projects here in Newfoundland where money went into just make-work projects. People work for a few weeks and then get unemployment insurance, in the past, or employment insurance now. We need long-term job creation.

So we don't need to rush this decision. We really need to have the focus of this fund be the reduction of the unemployment rate. Now how can we best use this? Let's not make a rushed decision. Let's examine this further.

The Vice-Chair (Mr. Nick Discepola): Maybe we should stop calling it a fund. Also, we'd probably best stop saying that the EI premium we actually charge right now is generating a surplus of $5 billion to $6 billion. And what should we do with that rate? Should we reduce it? Should we keep it and use the surplus that it generates for other measures and other priorities?

Mr. Leon Mills: Can I just make a comment?

The rhetoric surrounding this is really interesting. From our perspective, the bottom line for us is as workers we pay the money and as an employer you pay the money. And if it were needed for EI, it would be paid back in EI. So all it is, again, is that you're creating a circle of redistribution of wealth in a different way.

So if it's used for that, fine. If we've got this huge surplus, I don't personally see anything wrong with using it for some legitimate purpose if it makes life better for Canadians, creates more employment, or makes our economy better, that kind of thing. But I don't necessarily agree with just giving it back and having it go back into somebody's pocket and having them take it and spend it. That's personal redistribution of wealth. It maybe gives them more disposable income to pay for their lifestyle, but I'd prefer to see the money used for some legitimate purpose, to reduce unemployment or create more jobs, that kind of thing.

So if it does that, fine. But I don't agree with just paying it back and letting people spend it on their own purposes.

The Vice-Chair (Mr. Nick Discepola): I would concur with you, because both Mr. Pillitteri and myself, and I think a few others around the table, are small-business people, and the most important thing for my small-business community in my area is to make sure, after having the deficit almost wrangled to the floor, that we keep interest rates low. Because as a small-business person, if the interest rates are low I can invest—I can borrow money, for example, at a lower rate—and those low interest rates are more beneficial to my company and its future than you dropping the EI rate by 50 cents or 60 cents.

And the whole debate is around that, because I'm not hearing anyone from small or even large business saying “Give me back that money because I've paid into it”. They understand the benefits that were derived from the attack on the deficit accrued to all Canadians, more importantly to those such as them, who have to rely on interest rates, for example.

So it's a debate we're having now that we couldn't have had three or four years ago, but it is an important one, because very few Canadians understand that the fund is not there—the $20 billion has already been spent. And now what we're really talking about is whether we should keep the rates up at that level so if the economy keeps on improving, if the interest rates stay low, and if the unemployment rate stays low or gets lower, we'll then again have a surplus.

So the issue is how do we spend the surpluses that are projected from various sources. Obviously one of the sources is the EI rate. And maybe what we should be doing is a combination of the two. Maybe we should be looking at job retraining measures. Maybe we should be looking at reducing the rate, like we have for the past three or four years, gradually by ten cents every year, something like that. And as Paul Martin is saying, with an impending recession possibly down the road, maybe we should be also looking at keeping a certain cushion to give us the latitude we'll require.

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Mr. Leon Mills: Unfortunately, there are no easy answers to this type of question. The argument can be presented to suit your own particular position. From a business aspect, I read some months back that I think for every percentage increase in borrowing costs for a small business, they have to lay off x number of people, depending on their size. So that has a direct impact on the economy.

If interest rates go up and it leads to higher unemployment, that leads to less tax being paid and it creates a bigger deficit for the government. So you you get the downward spiral. If you go the other way, it reduces the burden and keeps inflation rates low and creates more employment. And if there's more employment, then there are more taxes paid, and if there are more taxes paid the rate at the personal level can be cut back and that kind of thing. So the benefits are spread wider.

So I agree with you, you've got to look at a number of scenarios and just decide which is the best thing to do for the economy. I'm not an economist, but for those who understand basic principles, there's a lot of inter-connectedness here, cause and effect. You can't just say off the cuff we'll do this; it has to be carefully considered.

This is the first time in a long time that we've had a surplus in this area, such a big surplus, and I think it has to be used wisely.

Mr. Mary Reid: I might just add one other thing.

Mr. Pillitteri, in your question you asked about putting the money towards low-income individuals and assisting people, and of course we're all for that. But perhaps we could do that by looking at the benefits as another option that wasn't listed and reinstating the benefits that were cut a couple of years ago, recognizing that many of the individuals now require assistance as low income perhaps because their benefits have become more difficult to get or have been cut off more quickly. So perhaps a way of assisting low income would be reinstating EI benefits.

Mr. Gary Pillitteri: That's exactly what a tax cut across the board would mean. It would mean that those in the lower income.... It is a redistribution of wealth. If we take a look at it, that's directed totally in reduction of premiums, and it would be.... As they're saying, in order to maintain that fund premiums should only be $2.10 per hundred, which would lower it by 60 cents. This 60 cents would mean almost $4.2 billion, and the amount of surplus would only be between $4 billion and $6 billion.

If we were to give that directly to the employer and the employees for some job creation, there would be nothing else left for any other programs. That's why we're asking the question specifically, which way we should do it.

Ms. Mary Reid: I guess I'm suggesting—and this is not on behalf of the ILRC, this is more personal—that we review whether what's being spent out in the EI rate is even suitable. Maybe the reduction in benefits that took place reduced the pay-out to a level that wasn't realistic, that perhaps wasn't fair. Perhaps if we reinstate those benefits there's less of a problem with the surplus. I'm suggesting we have an EI insurance system that is being paid into and received back for the purpose for which it was originally put forward, which is as an insurance, and that insurance should fit the need. Do you see what I'm saying?

Mr. Gary Pillitteri: I do understand. The fact is that this would have more impact on lower-income Canadians. This reduction of a tax by increasing the deductible would have more benefit to the lower-income Canadians and to those who've fallen through the cracks, rather than just singling out that one specific in EI.

The Vice-Chair (Mr. Nick Discepola): What Mrs. Reid is saying right now is that the surplus was generated as a result of the rate being reduced, but more importantly because of economic conditions, etc., and also because fewer people received smaller benefits. Therefore, she's saying maybe we should increase the number of weeks again, back to a more reasonable level.

Mr. Gary Pillitteri: Non-productive.

Mr. Leon Mills: There are a number of ways you can do it and have impact; there's no doubt. But again to use an analogy, if I need money for rent, and you have a surplus, you can give me some money for rent, and I can pay for one month; but if you give me a job, after that I can pay for my rent myself. So it comes from me.

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It's a matter of how you best use the money to make people more independent and productive at paying taxes. That way you could create a positive cycle, instead of a dependency cycle. It is much more effective. For people at the lower end of the scale, you give the money back—it doesn't mean a whole lot. It's only a one-time thing. It's like getting a bonus on your paycheque—big deal; but in the longer term, what does it really mean? Not a whole lot.

The Vice-Chair (Mr. Nick Discepola): To quote another wise Peter or wise Paul, I think the analogy was if you give a fisherman a fish, he eats for one meal, but if you teach him to fish, he eats for a lifetime.

Speaking of Peter and Paul, we will go to Mr. Brison.

Mr. Scott Brison: Certainly if we could create more fish, we would probably be a lot better off. I can say that with some level of authority as a Nova Scotian.

Thank you for your interventions today. It has been very helpful.

There are some truisms we can almost all recognize in the current context, whether we're from the left side or the right, and one of those is there's a limit to how much debt a country can sustain. Even European countries that were previously very wanton in their spending are now recognizing that a 60% debt-to-GDP target is realistic and important. There's a limit to how high you can drive taxes without reducing employment. There is also a recognition that high taxes can kill jobs.

Even the debate on the EI account is a zero-sum game of a kind. We constantly talk about whether we're going to reduce the EI payroll tax effectively or reduce general taxation or increase spending. An area of debate I don't think we engage in often enough is the efficacy or effectiveness of government program spending. How can we take the programs or the money we are spending now and develop a better return on investment for society long term? I would like to think that a partnership with or a greater engagement of the volunteer sector is one way we could do that.

Governments have recognized that in some ways, for instance, the whole private-public partnership drive is partially driven towards achieving better economies out of an ever more limited pool of public money. Arguably the engagement of the volunteer sector could achieve some of those ends.

I'd be interested in your feedback on that. I would argue that potentially we could find that public investment will be more focused on real needs, as opposed to what some bureaucrat deems to be those needs, and that ultimately it will be more results-oriented. You can demonstrate through investments in increasing opportunities for the disabled.

What poverty can do to children in terms of diminishing equality of opportunity is an issue. You were mentioning books and saying about $500 per year in busing and books. That's a significant hit. As a percentage of your income, that's a significant hit to your ability to provide equality of opportunity to your children.

In any case, I would be very interested to hear your feedback. That's the first question, on the volunteer sector. How can federal and provincial governments play a role in improving those linkages? Because I think we have to do something like that if we're going to improve the delivery of services.

Mr. Leon Mills: That's a really good point, and a nice question. As I mentioned earlier, because of the cutbacks in recent years, community groups have had to look for other sources to try to find funding. Traditionally they had probably 90% or more of the funding from various levels of government directly, probably from the provincial government.

I know in our own particular organization, the hard-of-hearing association, we used to be funded for an executive director, a secretary, and an office, which gave us stability year in and year out, and allowed us to pursue our programs and other things. Within the last seven or eight years, that funding has been decreased probably 80%, so that now we're at a point where if we didn't fund-raise we would not be open. We have had to become more businesslike and do it ourselves. But we realize that there's a new kind of thinking. We don't want a handout from government to fund us completely, but we need some funding to help give us stability and allow us to pursue other avenues of fund-raising.

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Last year the provincial government sent out a report on the social consultation process held a couple of years ago. In the paper they said that the provincial government recognizes that community groups and the non-profit volunteer sector provide $300 million worth of direct savings to government. Our own feeling is that estimate was probably quite low and that there's a heck of a lot more, hundreds of millions of dollars more, that could be included there. It's fast getting to the point that a lot of community groups are dying. Their people are getting worn out. The volunteers don't have the ability to carry on any more.

So if that process is going to be effective, somehow, again, some federal-provincial cooperation could be worked out to make sure that volunteer groups get more money. Right now all the revenues that are raised on gambling are absolutely enormous in this country. If any business saw growth to equal the revenues the government has received from gambling in the last ten years, they would be quite well off indeed.

Unfortunately, a lot of that money is not redirected to the people that need it the most. It's directed into general revenue and government projects, or whatever, that may or may not have some benefit for people with disabilities and volunteer groups.

I think a lot of that kind of money could be earmarked more specifically, and not a great percentage either. From the Newfoundland perspective, if the government gave us an extra, I don't know, $5 million or $10 million a year to distribute to community groups, it would give them some security on a yearly basis and allow them to move forward and over time become more independent. They'd reach more people and do more work. The more people they help in the long run means less cost to society. So it's a small investment for a big return. I think right now governments are being very short-sighted by not doing that. They're only going to cost more money in the long run.

Mr. Scott Brison: Okay, thank you.

Also in terms of disabilities, perhaps we could avert.... I tend to think that if we invest early with people and identify the disabilities and help people earlier, the return on our investment for society can be huge. I'm thinking of national head start programs. I'm thinking of head start programs and early intervention designed to identify children at risk. Children with disabilities, for instance, could be one of the groups that would benefit.

I know there are projects in some provinces that focus on early intervention and head start. Are there projects like that in Newfoundland now?

Ms. Mary Reid: In the national child tax credit situation, the funds that came in were used to assist communities in family resource centres, which is a type of preventative program to assist families with young children. The school milk program, school lunch program, are all early intervention.

For disabilities, an additive has recently been put into the flour here, I think. It will help reduce the rate of spina bifida. There's a very high rate of spina bifida in this province, as there is in Nova Scotia. So yes, there's some work being done on prevention. I guess it's never enough. We as an ILRC are not doing a lot in terms of prevention because we're so involved in services to people who have disabilities now.

Mr. Scott Brison: Yes.

Ms. Mary Reid: I think there's a need and there needs to be some energy there. There also needs to be some energy toward research on assisting individuals afterwards, in terms of spinal cord regeneration and that kind of thing.

Mr. Scott Brison: Thank you.

The next question I have is on the issue of disabilities. Perhaps there's a stigmatization of those with mental health issues. You know, mental health is a real disability issue. Even health care programs, even insurance programs, even government health care programs deal with mental health in what could arguably be called a discriminatory way.

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I was reading in an article recently that in the urban centres, 70% of the homeless suffer from some sort of mental health issue and have effectively fallen through the cracks completely. Within the system that ultimately tries to help those with disabilities, are there some systemic discriminatory policies against mental health issues that don't really recognize it as as much as it should be?

Ms. Mary Reid: Undoubtedly there are. A lot of them have to do with control issues and gatekeepers. Many of the decision-makers for persons who are consumers of mental health services lie within medical realms, and I think we've overblown the role of the medical professional in terms of the lives of people. When that happens, it becomes very discriminatory because people lose control of their own lives, their own decisions, and where they're going to live and how they're going to live.

If we look just at this province and the resources that are put towards mental health, close to 97% or 98% of those dollars are in acute care, in a hospital setting. So that's what's happening. People who are living on the street are not having access to any type of resource. It turns into a revolving door in terms of being admitted and coming out and readmitted and out again. That's certainly not the choice of the individual consumer; it's the lack of resources on the street. Part of it is stigma, part of it is control issues, and part of it is resources.

Mr. Leon Mills: Along that line, you mentioned funding. The provincial mental health association receives absolutely no funding from our provincial government to the organization directly, to keep it operating. To me, that is mind-boggling, because mental health is so important across society. The only bit of money they do get is through some very specific project work.

A lot of the initiatives that have been developed in recent years in Newfoundland are a direct result of the work of the association, not the government. As Mary said, it's all directed towards the medical model, and that's lacking in a lot of respects. But at the community level there are certainly some very big gaps, and there's no doubt that it's really hurting people.

Ms. Mary Reid: About disabilities, there is so much to learn here in terms of general service delivery, the whole concept of sharing information with each other, peer support, how to get around problems. It's not just within persons with disabilities; it's within any type of social context. Given the resources and the support, the long-term tertiary costs are brought down to something that's affordable.

Mr. Scott Brison: One thing that's never factored in when you're dealing with issues of those who are disabled is that when they're prevented from participating in society, there's a loss to society. There's a cost to society that in many ways is far greater than the individual cost they sustain. So that's something that is typically not taken into account unless you have friends or family who suffer from a disability or you yourself suffer from a disability.

I have a question on information technology and the growth of the knowledge-based sector, the potential for connectivity and the IT linkages that can effectively improve if people who are disabled are provided access to the levers of this global economic engine and information technology. In many ways, there are fewer barriers if you have the ability to attach yourself to those levers. What can government do to help ensure that access? I think it might be a huge opportunity for us to engage people with disabilities.

Mr. Leon Mills: I think you're right. I've been pumping that idea locally for quite a while now. I think information technology is the engine for a lot of people with disabilities. It's no panacea, because a lot of people might not be interested in that kind of work. We've moved from an agrarian, physical-work-oriented society. Now we think with our heads, and we interact with the mouse to do the work.

The computer and the application of that area is a whole new industry that's being developed. It has an awful lot of potential for people with disabilities. But again, we go back to the barriers that exist in society in general because of attitudinal problems of employers and institutions and other things.

• 1330

Right now we talk about training people for the workplace, but even a lot of our training institutions are not accessible for people with disabilities. Just before we came to this presentation we were at a presentation at the Holiday Inn with Dr. Phil Warren, former minister of education, who is conducting a review of private colleges, and we raised the whole issue of accessibility. Right now they are just not accessible for people with disabilities. So that's something we are hoping to change. A lot of these things work hand in glove, and I think more resources need to be directed to that area.

Again, we don't want people just living off the system. People with disabilities want an opportunity. They want the barriers reduced; they want to be given supports and accommodation in the workplace so that they can work on an equal footing with anybody else and be judged on that level. But more supports need to be put in place in that regard; probably more resources need to be directed that way. You're right, I think it is a fantastic unlimited opportunity. It really creates a level playing field.

Mr. Scott Brison: Can I make a brief statement, Mr. Chair?

The Vice-Chair (Mr. Nick Discepola): You said that ten minutes ago.

Mr. Scott Brison: May I make one brief statement?

The Vice-Chair (Mr. Nick Discepola): Go ahead.

Mr. Scott Brison: Thank you very much, Mr. Chair. You're way too good to me.

What you just said struck a chord with me. You said that people who had disabilities don't simply want a handout or income support. As an Atlantic Canadian who serves as a member of Parliament and sits on this committee, and I say this to members of Parliament from across the country, what I have said in the past is analogous to what you said. That is, that Atlantic Canadians don't want a handout. What we do want is an opportunity to participate in the economic growth that many areas of the country have enjoyed. We want to sit at the table and to participate in that growth. What you said about those who are disabled I think is analogous.

Somehow we as a nation are grappling with the notion of what to do with Atlantic Canada. What can we do to attach people in Atlantic Canada to the levers of economic growth? I think some of the answers are there, but we have to become more creative with public policy to achieve them. I think the same challenges exist when we are developing public policy that enables the disabled to participate fully, and to benefit not only themselves but to benefit society.

Mr. Leon Mills: Thank you very much.

Mr. Gary Pillitteri: Just to further your comment, examples of this abound, according to the study on disabilities.

Mr. Leon Mills: Yes, you're right, and too often we have sat on the fringes as Atlantic Canadians geographically, and people of lower incomes and people with disabilities. I often hear it said by people elsewhere in Canada that we are a burden to the rest of the country, that we drain financial resources. It's so much garbage. Everybody contributes in their own way and makes a contribution to the growth of the country and the fabric of the country. We provide a lot of the basic raw resources that our country fuels itself on, the secondary processing. That's where Atlantic Canada needs to do more, if we're going to share in the wealth.

We can look at other examples around the world, like Iceland, Norway, and Ireland. What we're going through now is what they went through 20 years ago. We've got to take some of those hard lessons. They're going to be hard, but this whole mentality of dependency that Atlantic Canada has developed over the years has to change. We recognize it, and the rest of Canada recognizes it. You have to put things in place that will make people work. We're going through it now because we have been forced to because of the cod moratorium.

We still have a long way to go. With the combination of I think processing and application information technology, and getting back to the can-do attitude that we're so proud of, we can do it, but it's going to be a long road.

The Vice-Chair (Mr. Nick Discepola): Thank you for your brief statement.

We have another two brief questions, I hope, from Mr. Forseth and Mrs. Redman, and then we will be able to thank our guests.

Mr. Paul Forseth: I'm looking for some very short answers.

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Recently the Prime Minister talked about wanting to raise the standard of living for all Canadians. Perhaps that was an admission of his own record, because there has been actually a decreasing standard of living. For example, the declining dollar particularly hurts the local grocery bill. We think that the health care system is deteriorating, with waiting lists longer than ever. More and more high-income earners and the most skilled are moving to the U.S. They are voting with their feet. The debt load for students is increasing. We heard that today. The disposable income of Canadian families is stagnant or falling. Child poverty is rising. We've heard that testimony this morning.

Certainly in view of that record, increasing the standard of living is a very noble goal. But how can the Prime Minister deliver this? Is this just perhaps the preamble of the next red book or political platform?

I'd like to hear from you some precise points. What specific measures, the top two or three items, would you like to see included in the very next budget so that we could raise the standard of living for everyone across the country? We're looking at the very next budget, and I'd like you to tell us from your perspective one or two items you'd recommend that the government should act on.

Mr. Keith Davis: That's a really tough question.

Lower interest rates would certainly help in stimulating economic activity. The high unemployment rate, especially in this province, where it is a staggering 18%, is the root cause of much of the poverty. Also, the social programs are inadequate. We need more social spending. The employment insurance rates and the social assistance rates are much too low. So we do need more social spending until we can get our unemployment rates down.

Mr. Paul Forseth: I just want to interrupt. You mentioned the unemployment rates. Are you saying that the premiums could stay the same but that you want more benefits? Is that what you're saying?

Mr. Keith Davis: We need more benefits. I understand the benefits under the employment insurance program are now lower than they were under the unemployment insurance program. This is contributing to poverty.

The social assistance rates across the country vary, but overall, no matter what province you live in, if you're on social assistance you're living in poverty. We do need more money to give to people. For example, if you invest in higher social assistance rates for families, they'll have more options. They'll be able to cope better with life's stresses. Children will eat better; they'll do better in school; they'll develop better; and hopefully, in the future they won't end up on social assistance as well. So we need to inject more money into social spending. Social spending has been slashed, and this is one of the reasons we have more and more people falling below the poverty line.

Mr. Leon Mills: There's no simple answer to your question, but I will raise a couple of points. Right now the world is in the grip of an economic crisis, depending on who you talk to, that started in Asia and is now spreading across the world. It is affecting us, and it may affect us a lot more. That's driven in part by big business. And we all know that the Government of Canada is a big business, regardless of who is in there, whether it's Liberals, PCs, or whoever.

Part of the problem we're experiencing right now is due to policies that were made a few years back, with the introduction of NAFTA and the MAI, the Multilateral Agreement on Investment, which is coming up now and which our government isn't talking about. That is driven by big business and the OECD. I think these kinds of things are in large part the reason we're in the stew we're in.

If the government wants to get serious about creating a stable country and economy, what they have to do is go further afield and probably get out of NAFTA, stop the MAI in its tracks, and work with other G-7 countries to bring some sort of sense to the free-for-all that's on the go now in the marketplace with regard to the flow of money and how it's going to be handled.

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Make businesses pay their taxes on time, just like individuals have to pay their taxes. Right now, as far as I know, there are tens of billions of dollars, if not hundreds of billions of dollars, in unpaid taxes by corporations. Then once you have that, you can start looking at working with the country as whole to make sure that regions share in the growth and that it's not focused on any one area. And you have to try to make some tough medicine, I guess, maybe for Atlantic Canada and other parts of the country that have had a dependent nature for a long time. You have to say to people, look, if your place is not working, if there's nothing there for you, move. That's harsh reality, but that's what Newfoundland is going through right now.

In the past year we've lost 10,000 people, which is the most in our history, and it's because communities are dying because there's nothing there from an economic standpoint. So there's no point in pouring more money into it. If it's not working, if there's nothing there, let's get realistic and just say to people, look, we'll give you some money to relocate somewhere else where there are jobs. There are lots of places in Canada right now where there's work, where there are jobs going wanting. They're bringing in people from other countries because positions can't be filled.

There are no pat answers. I guess it's a combination of looking at the global economy, the national economy, and the regional economy, and how they're all sort of interconnected. But you have to make some real tough decisions on some of these things.

The Vice-Chair (Mr. Nick Discepola): Mrs. Redman.

Mrs. Karen Redman: Thank you, Mr. Chair.

Mr. Brison touched on the volunteer sector. It's too bad you weren't here this morning to hear the delegations that came. I would have been interested in asking them this question, but I'm going to ask you, because you're here.

We had labour and the board of trade represented, and specifically, you've brought forward the case and the concerns of disabled people.

I was really pleased to hear the ILC in my area was actually started by the Mennonite Central Committee. One of the things the Mennonite Central Committee says is something of value should sustain itself after five years, and indeed they have for many years and they've flourished.

Obviously government does have a role to play both in setting standards and legislation and making sure that it's in the public interest that disabled people are integrated in a meaningful way in the workforce, as well as the rest of the community. Are there other partnerships, besides levels of government, perhaps labour or boards of trade, that we could look to?

If the answer is yes, are there ways that government could form partnerships with the disabled communities? And if they do have a role to play, is there a role that government could play or should play that we're not currently playing, to make those partnerships more viable?

Ms. Mary Reid: Should I be Elaine or Sandy from this morning? Do you want an answer as the board of trade or labour?

Mrs. Karen Redman: Be both; that would be good.

Ms. Mary Reid: I think there's a lot of room for us to build some partnerships there, with both the board of trade and labour. Specifically, and perhaps more recently, there have been some inroads made with the board of trade, but I guess the support of that partnership could come from the three levels of government as other players around the table. I don't think it's necessarily a financial support, but a collaborative support, so that we start building the issues as ones we're all in together and the solutions are found together.

At the same time, while I'm saying that, I'm also a little bit wary, because I think back to the examples of the Labour Force Development Board, which really fell apart in this province and is no longer even in existence. I think that was because it was a vision from Ottawa. It brought the players together, and sometimes that really falls apart at the ground level when it doesn't come from there up; it was a top-down decision.

So labour and business and community were at the same table, and all we did was fight and bicker and carry on foolishly. But if we built it from the grassroots up, and as community, go to labour and go to business and go to governments and start collaborating, then I think, as a partner, it would be good to have you back.

Mr. Leon Mills: I'd like to add a couple of comments about that.

I think in the past we have shot ourselves in the foot, in a lot of ways—and when I say “we”, I mean Canadians, the way we do things, as a democracy. Business and labour are always at odds. Why?

You're my employer. You give me a salary, and “I say I want a 10% wage increase”. You say “No, I can't; I'll give you 5%”. I say “Okay, I'm going to go on strike”, and I go on strike for three or four months. So everybody ends up losing money. Eventually the strike is settled at some point, but nobody gains in the long run. They'll never recover what they lost.

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My own thinking is that while, yes, we're a democracy, the one thing we should do is abolish strikes. As far as I'm concerned, they should be outlawed. Business and labour have to stop thinking from adversarial viewpoints. That's old-style thinking. It should be enforced arbitration based on procedures that could be established and that make sense.

If you're going to run a business, you're a businessman. If you have x number of employees, say ten employees, there are several ways you can do it: you can pay them a base salary and that's all they get, or you can pay them a base salary plus a bonus system based on how well the company performs. If the company does well, everybody will do well. If the company does poorly, everybody does poorly. But at least nobody starves. Right?

The point is right now you're talking about the distribution of wealth and the gap between the rich and the poor getting bigger and everything else. The people who run the companies are still getting their bonuses, but the workers are not.

So I think in business and the economy we have to develop a different way of thinking. We should share the burden, and when times are good we should share the wealth. Right? I'm not saying everybody has to be paid equally, but you share in the wealth. Studies have shown that companies that run this way are very productive. The employees are very loyal and the whole culture is very positive.

It ties in to what we talked about earlier, about the social audit. Instead of governments—us and them—fighting against each other, we're trying to look at a new way of working in a more cooperative fashion. It's how Canadians define themselves as a country and as a people. We've always been looked upon as the best place in the world to live because we've been open-minded, we can talk things through, we can work things out. If you take some of that in the macro sense and apply it down through, everybody works in a more cooperative fashion and develops a different kind of dynamic about how we're going to operate business.

People have to stop thinking of themselves as us and them. We're all in it together. You should be working together to share the wealth when times are good and share the burden when times are bad. I think if you adopt that kind of approach, a lot of other problems will take care of themselves. I know it sounds simplistic, but an idea has to start somewhere and somebody has to implement it.

The Vice-Chair (Mr. Nick Discepola): I hope the members of the opposition were listening, because it could start in the House of Commons with the members of the opposition, instead of always criticizing the government. Maybe it is a simplistic idea, but I don't believe so.

I think there's only one taxpayer at the bottom line. Maybe it's my upbringing as a municipal politician, but it's easy to always blame the other level. I think we have to stop doing that, because at the end of the day there's always one person. It's the same person that we're all serving. So from a political point of view, I hear your message loud and clear.

Mr. Leon Mills: May I just add one more comment to Mr. Brison's comments earlier about shooting yourselves in the foot, or what's lacking in terms of policies for people with disabilities?

A lot of programs the government initiates are good. They have been over the years. But the problem is just as they get to the point where they're up and running and they're starting to have some impact, the funding is cut. Then you start the whole thing over again from another perspective. So my question is this. If a person has a disability, if it costs $20,000 a year to keep that person at home doing nothing and on social supports, isn't it much more effective to give an employer that $20,000 and let him pay the individual to work and pay their taxes and everything else and then keep that kind of thing going?

The Vice-Chair (Mr. Nick Discepola): On behalf of the members of Parliament and the staff, I'd like to thank all three of you for your valued input, Mr. Davis, Mrs. Reid, and Mr. Mills. We have started a process again, as we're following tradition. I believe the success of the receptivity of the previous budgets was that we did involve Canadians from coast to coast in the planning process of the budget. This year I hope will be no exception. I hope the sacrifices that Canadians have made will translate into a dividend that may or may not be italicized, as Mr. Nystrom might say, or may or may not be in quotes, but I believe will translate hopefully into something concrete for all Canadians. Your input is valuable to that process, and we thank you for it.

I would ask members not to leave right away. I have one small item of business. Our counterparts, as you know, have been meeting in Vancouver. I would like to entertain a motion that we ask Mr. Paul Martin, the Minister of Finance, to deliver his economic and fiscal update next Wednesday, October 14, in Ottawa.

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I know we were scheduled to be in Toronto for that day, but in view of the finding process, we've asked Mr. Martin to come and testify, as he does every fall, and the date that he is available is October 14. If members are free, then we would be travelling to Toronto after that.

Mr. Lorne Nystrom: Are the Toronto meetings being partially rescheduled?

The Vice-Chair (Mr. Nick Discepola): They are being rescheduled, and we would travel to Toronto that afternoon or evening and continue.

That's next week. The House is not sitting next week.

Mr. Paul Forseth: That's the Wednesday?

The Vice-Chair (Mr. Nick Discepola): Yes, it's the Wednesday.

Is there any debate? It was adopted unanimously in Vancouver, and we're—

Mr. Paul Szabo: You're not giving us any option?

Some hon. members: Agreed.

Mr. Scott Brison: We'll advise our offices on the change.

The Vice-Chair (Mr. Nick Discepola): Thank you very much.

The meeting is adjourned until tomorrow morning at 9 a.m., in the same room. Again, I want to thank everybody for their presence.