STFC Committee Meeting

SUB-COMMITTEE ON TAX EQUITY FOR CANADIAN FAMILIES WITH DEPENDENT CHILDREN OF THE STANDING COMMITTEE ON FINANCE

SOUS-COMITÉ SUR L'ÉQUITÉ FISCALE POUR LES FAMILLES CANADIENNES AVEC DES ENFANTS À CHARGE DU COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, May 13, 1999

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[Translation]

The Chairman (Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.)): In accordance with the motion passed on March 17, 1999 by the Standing Committee on Finance, the sub-committee will now resume its study of tax equity for Canadian families with dependent children.

This afternoon, we are pleased to welcome Mr. Claude Snow, who represents the Groupe des 12 pour la justice sociale. Welcome, Mr. Snow. You have between five and ten minutes to make your presentation. This will leave members ample time afterward to ask questions.

Mr. Claude Snow (Representative, Groupe des 12 pour la justice sociale): I appreciate that the witnesses' time is limited. I will spare you the details and simply focus on some of the key points of my submission.

First, let me give you some background information. I'm from northeastern New Brunswick, the poorest region of the province. Many residents are on social assistance, in fact 7,500 out of a population of 50,000. That's almost one in every seven residents of the region.

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Cuts to unemployment insurance have dealt a harsh blow to our region. We still refer to these benefits as UI benefits, because we think the term is more appropriate than employment insurance benefits. The fact is that these benefits provide an insurance of sorts when people are unemployed and we don't understand why the designation was changed in the first place.

We estimate that in our expanded region which has a population of 100,000, $35 million a year has been lost as a results to cuts to unemployment insurance. Most of the jobs in the region are seasonal and each of the 12,000 households affected has had to absorb a shortfall of approximately $3,000, or $250 a month. I don't have to tell you how hard hit families have been.

I would also like to discuss the trend to neoliberalism which has had an enormous impact on low-income families. We have seen the government download responsibilities onto the provinces, and the provinces further download onto municipalities, communities and families. Ultimately, families are left to deal with the aftereffects. They find themselves in a weakened position and with a reduced level of service.

Add to this mix the trend to privatization. Many services once provided by the public sector have now been privatized and are now available only to the wealthier families.

The Government of New Brunswick has put a great deal of emphasis on self-sufficiency. This has had disastrous consequences for poor families which have come under tremendous pressure.

In our view, it's very important for the federal government to be there to meet people's basic needs. When the federal government downloaded certain responsibilities to the province, the province in turn proceeded to make some drastic cuts, all for the sake of balancing its budget. As a result of its policies, the government now invests less in provincial income security programs and since the federal government has also been busy making cuts of its own, a void has opened up. Hence the shortfall we are seeing.

The advantage of sound federal income support programs is that they set national standards. I'm a social worker. I've been working in this particular field since 1967, after the Canada Assistance Plan, or CAP, was first introduced. I lived with the CAP until 1997, at which time it was replaced by the Canada Social Transfer, or CST. The CAP provided Canadians with some measure of security in that it set standards that the provinces were required to meet.

Take, for example, emergency benefits. This is one thing that amazes me. It's inconceivable that the government today does not provide emergency benefits to people in dire straits, people whose power has been disconnected, who have nothing to eat when the last week of the month rolls around or who keep their children home because they cannot afford to clothe them.

In the past, this wouldn't have happened because under the income assistance program, a full 50 per cent of which was funded by the federal government under the CAP, persons in these circumstances would have received emergency benefits.

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The problem today is that there are no longer any standards and provinces can do what they like. They adopt whatever policies they want and many people are left on the sidelines. Let me go back to the example cited earlier. Today, when a person comes down to the office and explains his or her predicament, that person is given a food voucher to be used at a food bank where the quality of the food is sometimes questionable.

This is a radical departure from the former system. In the past, a person received a monthly social assistance cheque. When an emergency of some kind arose, additional money was provided, although sometimes, the recipient was chastised for being negligent in some way. In any case, some assistance was forthcoming, allowing a person to retain some dignity and go out and buy some food or whatever and get through a difficult stretch.

Today, things have changed. The social safety net which once provided some measure of security to people is now full of holes. People are falling through the cracks that have developed in the system. In fact, there is no social safety net to speak of today and people are scared. They are scared to talk openly, scared to lose whatever little they have left. This unhealthy climate of fear didn't exist when stronger federal programs were in place or before the Canada Social Transfer was brought in.

The talk we are hearing today is of a social union. This gives us even more reason to be concerned because the rules are being relaxed even more. We have to wonder what fate awaits us if this kind of arrangement ever becomes a reality.

In conclusion, I want you to understand that New Brunswick's situation is unique. Even though by law we don't have a minority community - New Brunswick law guarantees equality for both linguistic communities - in actual fact, we have a minority community as well as a majority community. There's no denying this fact.

What matters to members of the minority community is not equality of means, but rather equal results. When the same per capita calculation formulas are used for members of both communities, then clearly, this puts the minority community at a disadvantage. Public policies need to take this fact into account. To ensure equality, we need to look at results, not means.

Overly centralistic policies that allow for no exceptions are unfair because they lack any nuance and fail to take account special circumstances.

As a result of overly inflexible public policies, the needs of too many people are not met and they are relegated to the sidelines. This explains why our quality of life has deteriorated a great deal in recent years. One has to wonder if our province wants to or is even capable of providing residents with the quality of life they once enjoyed. Even though the disadvantaged had a poor quality of life in the past, their situation has deteriorated further in recent years.

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Government policies must take into account not only the different abilities and needs of individuals and families, but also regional differences. For instance, the socioeconomic status of residents of our region is well below the provincial average. The gap is anywhere from 5 per cent to 20 per cent in some areas.

Government policies should be sufficiently nuanced to allow for some catching up when a person's socioeconomic status is too low.

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

We will now move to questions. The members each have five minutes.

[English]

Five minutes, please, Mr. Forseth.

Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, Ref.): Thank you very much.

You understand the mandate of the committee. I'm just wondering if, besides advocating broad social support for low-income people in general, you could give us maybe one or two suggestions for technical changes we could make on the income tax form that would assist parents with children.

[Translation]

Mr. Claude Snow: Unfortunately, I'm not in a position to give you exact details about taxation as the preceding witnesses did. I preferred to focus my presentation on federal-provincial transfers because I feel these have a greater impact on families.

[English]

Mr. Paul Forseth: Certainly.

What about the area where the federal government does transfer directly to individuals? On the notion of so-called focusing transfers on those who need it most through a clawback system or deductions or whatever, we have heard some testimony that those slopes are too steep. A policy initiative could be to change the slope of clawbacks or reductions or disqualifications of benefits or whatever, because the steepness creates its own problems.

[Translation]

Mr. Claude Snow: We have observed that different tax measures have had very few positive effects on the day-to-day lives of families. In our region, families no longer enjoy the same safeguards or even the same financial security they enjoyed under the old system, specifically the family allowances that Ms. Boyd referred to this morning.

When various legislative provisions were overhauled, families lost out. I'm not talking only about federal government measures, but also about the TVH. Even though the government claimed that the effect of this tax would be neutral, we believe disadvantaged families were adversely affected by this measure.

[English]

Mr. Paul Forseth: Maybe I could just cut you off there, because you did talk about the harmonized tax or the GST in the rest of the country. It is a flat tax but it's a consumption tax. To bring back some progressivity in it, there's a GST rebate. I'm wondering about those low-income people. Are they really able to access that GST rebate or are they not able to properly file returns? Are they perhaps not aware? Is the GST rebate really being taken up?

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[Translation]

Mr. Claude Snow: I will admit that I have never seen so many women claim GST credits. People make sure that they claim the credit to which they are entitled, although the amount collected doesn't offset the tax imposed on consumer goods.

The Chairman: Thank you very much.

You have five minutes, Mr. Cardin.

Mr. Serge Cardin (Sherbrooke, BQ): I'd like to focus as always on the committee's basic mandate, which is to consider the fairness of the tax system for one or two-income families.

You've stated that the situation isn't the same everywhere. In some regions, it doesn't seem to matter that a couple earning $60,000 will pay slightly less or slightly more tax, or whether it has to file one or two tax returns. You have come to sound the alarm about regions facing problems. You would like the social safety net to be tightened somewhat. As some witnesses told us this morning, there aren't really any poor children, only parents living in poverty and children suffering as a result of this situation. Aside from this social safety net which, in my view, needs to be reworked so that families enjoy more effective coverage, I'd like to hear your views on people in your industry who hold down regular jobs and on women who decide either to stay home and to go out in the workforce. Do you think it's easy for parents to choose between staying home to care for their children and going out into the workforce and relying on quality child care services?

Mr. Claude Snow: There are virtually no child care services to speak of in rural areas like ours. Our choices are dictated to us by economic considerations rather than by the quality of child care services. Our choices are far more basic. In our region, families generally earn between $10,000 and $12,000 a year and survival is a daily struggle. These persons don't ever think about RRSPs. That's out of the question.

Mr. Serge Cardin: The very concept is foreign to them.

Mr. Claude Snow: They aren't thinking about the long term. Their only concern is surviving from one season to the next and maintaining their EI eligibility. That is the daily struggle they face. They don't ever think about pension funds or other such things. They merely eke out a living.

Once they've completed their tax return, they rush down to a tax broker who in exchange for a 10 per cent or 20 per cent commission, provides them with instant cash. The only thing they have in mind is to get some cash in their pockets.

Times have been tough for families in our region for several years now. More and more of them have had their power cut off because they couldn't pay their bill. This happens to about 1,000 families every year in our small region which has a population of 50,000. That's an extremely high number of people affected. As we mentioned this morning, these persons are faced with very different choices. They can choose between eating or paying their hydro bill. They must choose between sending their children to school or paying the rent. Their situation has nothing whatsoever to do with the questions you're asking. Should they enjoy a better quality of life? Would that quality of life be better if one parent stayed home instead of going out into the workforce? Ultimately, would these families be any further ahead? Quite simply, their choices are driven by their need to survive.

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Mr. Serge Cardin: Therefore, to all intents and purposes, you are sounding an alarm, one that your are hoping the government will heed.

Mr. Claude Snow: Yes.

Mr. Serge Cardin: We have to understand that in many places across the country, the issue people face is not whether they should be paying marginally more or less taxes. Their concern is having an income of any kind.

Mr. Claude Snow: That's right. Doesn't the federal government have an obligation of some kind toward regions like ours? This obligation has been offloaded onto the province and the province is shirking its responsibility. We are currently in the midst of an election campaign, but the facts have been ignored for too long. We have always considered the federal government as our saviour, but its social safety net is now full of holes.

Mr. Serge Cardin: We agree on that point. We don't think of the federal government as the people's saviour either.

Mr. Claude Snow: No.

The Chairman: Thank you, Mr. Snow.

Ms. Dockrill.

[English]

Ms. Michelle Dockrill (Bras d'Or—Cape Breton, NDP): Thank you, Mr. Chair.

When I go back and look at the terms of reference for the subcommittee, it clearly states that we are to study the tax and transfer system as it applies to families with dependent children. I think what we've seen from our presenters today with respect to the portion of the terms of reference you and other presenters have decided to focus on shows us that possibly there are some regional inequities within this country that have to be recognized, and dealt with the best we can.

I wonder if you could give me your comments on whether or not you would be favourable to a universal program, one that all Canadian families would receive.

[Translation]

Mr. Claude Snow: Of course. As Ms. Boyd was saying, universal programs offer the best kind of protection, not programs which target specific needs. Conventional wisdom says that when you devise programs for the poor, you end up with poor programs. Universal programs are geared to all population groups and are generally much better. The proof is universal health care. Individuals receive the same level of care, whether rich or poor. This is an example of a good program.

In the past, we had two excellent programs, the other being the Canada Assistance Plan or CAP. Our country suffered a tremendous loss when the CAP was scrapped.

[English]

Ms. Michelle Dockrill: I have one final question. There has been some suggestion by some presenters that we should be possibly looking at... Actually, I think the statement was made that she felt it was futile to target parental activity; rather, we should be targeting children.

I'm wondering if you'd like to comment on whether or not you agree with that.

[Translation]

Mr. Claude Snow: I'm a strong advocate for the family. If child poverty exists, it's because we have families living in poverty. Poor children have poor parents.

The greater the cuts to family benefits, the more children suffer. I would like families to become our focus, not solely in economic terms, but also in terms of safeguards and guidance. Children need to be protected and they need parental guidance. The instability plaguing families today has enormous social costs. Children no longer have any kind of support system. That's our biggest problem.

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Obviously, the government doesn't have a natural support system in place, but families do need some help in meeting their obligations. Can you understand that? Families are overburdened and stressed out and they need help in meeting their parental obligations. In the meantime, the government is cutting family benefits. And the problem persists.

[English]

Ms. Michelle Dockrill: I have one comment and then I'll be finished.

I asked that question because one of the things that has clearly come across from travelling the country is that there are various family configurations within this country. Some say it would be impossible to find one solution to assist all family configurations. If we were focusing our public policies and our tax system as it relates to children, would that not in effect assist all of those family configurations within the country as opposed to the reverse?

[Translation]

Mr. Claude Snow: By focussing on children. For instance, meals are served to school children to ensure that they eat properly. I'm not in favour of this practice. I prefer an income security program where families are left with more money in their pockets to feed their children.

Now I realize this is a complex issue because the money might not necessarily go to provide proper nutrition for children. That's why three types of assistance are needed: physical assistance, financial assistance and assistance in the form of services. Financial assistance alone isn't enough. Sometimes, all three types of aid must be provided simultaneously.

While families make take different shapes, they are still families. Whether children have one or two parents, they still refer to themselves as a family. That is not the problem. I think we need to reinstate the critical components of the Canada Assistance Plan, that is shift our focus once again to needs and means. We need to reinstate the needs and means test, as it was once called. Whether the family is composed of one or two parents, needs and means are assessed and the government makes up any shortfall.

The Chairman: Thank you very much.

Mr. Szabo.

[English]

Mr. Paul Szabo (Mississauga South, Lib.): Thank you.

Mr. Snow, I'm glad you've raised the issue of the poor, because it's something we have to continue to be reminded about.

When someone moves off welfare or social assistance and gets that first job, or a paying job, they—well, according to the finance department, all workers—incur employment expenses of about $1,500 a year. I think that's the average. This is not deductible on the income tax return. So when you get that first job, you automatically lose certain expenses because they're not taken into account.

As well, if you're working for an employer who doesn't have a benefit program of note, all of a sudden your medical expenses and your dental and vision care and drugs are a new cost to you. They were formerly provided under social assistance in addition to the welfare payments you got.

In fact, a lot of people who talk to us about poverty talk more passionately about the working poor than they do about those on welfare, because in fact the economic circumstances of many people who enter the labour force are in fact disadvantaged relative to what they were getting on welfare.

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Is there something we should do to help the working poor as much as, if not more than, those who are on social assistance?

[Translation]

Mr. Claude Snow: I don't know what the federal government can do. What you're saying is very important because this is a crucial problem. However, I would like to clarify a few things.

In our region, persons who go off social assistance to take a job usually end up earning no more than $6 or $7 an hour. I don't know anyone in this situation earning more than $7 an hour. These jobs do not pay very well and people remain poor.

Secondly, people are under a great deal of pressure to get off welfare and accept these jobs because this lowers the overall statistics on the number of welfare recipients. Some individuals, referred to as participants, are placed in one- to five-week programs and paid minimum wage. They become project or program participants. Their status is tenuous at best. There's no other way to describe it. These participants have no pension fund, no benefits and no union. They have no security whatsoever. Often, they must stay close to the phone because they are called in to work only two or three hours per day. They have to be available to work. Generally, they succumb to the stress and rack up hefty medical bills. Moreover, they no longer receive the drug benefits associated with welfare. Often, they end up poorer than they were before when they were on welfare. That's why the province has introduced a plan for these workers. They can keep their drug benefit card as an incentive to continue working.

As for the federal government, I can't really answer your question. Mention was made this morning of the minimum wage rate. The provincial government sets the minimum wage, not the federal government.

[English]

Mr. Paul Szabo: But it sounds as though you agree that there is a possibility that there are people in the paid labour force who are actually worse off financially than those who have social assistance—

[Translation]

Mr. Claude Snow: Yes.

[English]

Mr. Paul Szabo: —all things taken into account. If we were going to support them in transitioning into the workforce, it sounds as though possibly a benefit for the working poor might be appropriate, maybe something like the national child benefit, which is available to those who work but is not available to people who are on social assistance.

Do you think it's fair, then?

[Translation]

Mr. Claude Snow: Are you talking about tax credits?

[English]

Mr. Paul Szabo: No. What I'm saying is, do you think it's fair that because of the clawback of the child tax benefit program, the benefits... It's a poverty program, and the benefits, including the national child benefit component, go to the lowest-income-earning Canadians, and in fact are targeted primarily, and intended primarily, to help people transition into the workforce, understanding that they have this loss when they get into the workforce. So the national child benefit is a positive benefit for someone entering the labour force but it is no benefit to someone who stays on social assistance. But it at least puts them together.

Do you think that's reasonable?

[Translation]

Mr. Claude Snow: These individuals require various forms of assistance if it is to be really worth their while to return to work. Otherwise, it won't work because of the problems we mentioned. I think an initiative such as this would encourage people to remain in the workforce instead of going back on welfare. Even though it is still minimal, a person enjoys more security on welfare than in the workforce where he may be earning $6 or $7 an hour and his employment status is tenuous at best.

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

Thank you, Mr. Snow, for taking the time to share your views with us.

Mr. Claude Snow: It was my pleasure.

The Chairman: Rest assured that we will take your views into account in our final report. This is not an uncomplicated issue, as you know. Much is at stake.

Again, thank you very much.

[English]

Hi, Jack.

Mr. Jack Harris (Individual Presentation): Hi, how are you?

The Chair: All right.

Mr. Jack Harris: It's getting to be habit-forming appearing before House of Commons committees.

The Chair: Yes, how is that?

Mr. Jack Harris: I don't know. I don't know how it happens. We were in Ottawa recently before the fisheries committee. We had an all-party committee of our legislature talking to the fisheries committee about seals.

The Chair: Members, I'm pleased to welcome to the committee Mr. Jack Harris, leader of the Newfoundland New Democrats.

It seems that the leaders of most political parties in Newfoundland like to get involved at the political level.

Mr. Harris, I will take it upon myself to advise Mrs. McDonough to be on her guard when I get there.

Welcome. You know the format, I think. You've been here most of the morning.

Mr. Jack Harris: Yes. In fact, I was there one time, as some of you may know, as a member for St. John's East, from 1987 to 1988. One never knows, I may join you again one of these years.

I don't have a formal written brief, but I do want to address the question—and it's an interesting and important question—before your committee. It is part of the public debate. It's given rise to an examination, I think, of how the Canadian government actually treats families with children.

I do believe, however, that the focus on the issue of comparison of the child care expense deduction available to a two-income family as opposed to a situation where there is one parent working and one at home doesn't really reflect what I think is the real issue. The real issue is this: What level of support is the tax system, or other systems, providing to families with children in this country?

If you look at the numbers—and some of them are tax expenditures, some of them are individual transfers—the Canadian government spends about $5 billion now on children. Estimates using current dollars show that $7.9 billion was spent in 1984, and we're spending about $5 billion now. It may rise again to $7 billion after 2000, when the 1999 budget changes come into effect.

That's as a result of changes to the then universal system, with the family allowance, refundable child tax credit, and tax exemptions right in the system for dependent children. We've gone to targeted programs.

I guess the modern program—the only serious program, I believe—is the Canada child benefit. Ironically, I suppose, in light of the issue before this committee, that's not available to, by design, single mothers on welfare. It's available to those single mothers on welfare if they get off welfare and go to work, but it's not available except in Newfoundland and New Brunswick—and I'll get to that—because it's designed to be there only for people who are getting out of the workforce and going to work.

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It's ironic that the thrust, I suppose, of this consideration is what can we do to encourage or to provide some incentive or reward—whatever the phrase would be—to middle-class women who choose to stay home and raise their children in a single-earner situation?

Frankly, that's a shocking comparison. From a social policy perspective, from a tax policy perspective, we should not be having one attitude toward a particular social class and group and another attitude for those who have the luxury of being able to make a choice. The reality is that most families who have two parents working are doing it for economic reasons. They need the income. The most serious issue is having an adequate income for a family to be able to raise children.

We need to focus, I think, on the cost of raising children and what role the tax system plays in sharing that responsibility as a society. It's the most important way to alleviate poverty. As has been said, the children are neither poor nor rich, but they may live in poor or rich families. It's how the tax system and other social systems treat families that affects how many children we have in poverty.

We've gone 10 years from the 1989 declaration of the House of Commons, supported by all parties, to eliminate child poverty by 2000.

[Editor's Note: Inaudible]

An hon. member: —

Mr. Jack Harris: Yes, well, somebody didn't pay too much attention to it, because in fact we've increased child poverty since 1989 to the point where now at least 20% of children live in poverty, whereas it was around 15% in 1989.

So I accept your hairsplitting on that, Mr. Szabo, but—

[Editor's Note: Inaudible]

Mr. Paul Szabo: ...Ed Broadbent, by the way.

Mr. Jack Harris: I understand that, yes. He was a good NDPer, and my leader when I was in the House of Commons. It was certainly a good resolution, and I would have thought it would have helped guide national policy on these issues.

Unfortunately, the commitment to universal programs has disappeared, and we now have targeted programs. Recent research has shown that in fact the countries that are least successful at effecting reductions in poverty are those with targeted programs, and the most successful are those with universal programs. Part of my thrust here today is to talk about how we can really address the concerns that exist with families with dependent children.

I would not be in favour of dealing specifically with this issue by what is, I guess, a form of family taxation—splitting the income of the family. I presume the idea of how to do this is up for consideration if you want to eliminate the perceived unfairness, but presumably there would be a tax expenditure of some type. I would imagine you could have a tax deduction offered to two-parent families, but that would be unfair to single-parent families. If you're looking at a particular anomaly, it's very very easy to create other anomalies by trying to deal with that one specific perceived inequity.

The greater inequity, in my view, is the inequity between poor families, who don't have the resources to raise their children and not expose them to risk, and families who have the luxury of making choices as to whether or not a second parent works.

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My suggestion, then, is that we start looking at the programs we have. I think the Canada child benefit is a good one. I think the solution that Newfoundland and New Brunswick chose, to not claw it back from social assistance recipients, is something that should be recommended across the country. I think the federal government in fact was putting pressure on all governments to actually claw it back from the social assistance recipients. Newfoundland and New Brunswick didn't do that. I think it's been a very positive thing for people in Newfoundland, because it effected an increase in their actual income.

We have in Newfoundland a very low participation rate in the labour force. It's not because more people choose to stay at home and raise their children; it's because the availability of jobs just isn't there.

I think it is pretty clear from any research that's been done that the great majority of women are either holding or actively looking for jobs. Eight of ten women aged 25 years to 54 years are in the paid labour force. Two out of three women with children work outside the home.

We recognize that if we did not have double-earner families, the poverty rate for children in two-parent families would actually double, from 10% to 20%. So we're dealing here with a very small part of a large problem. I think it would be unfair to take that one piece and say, first, we regard this as a great inequity, and second, we will recommend a tax expenditure to fix that and leave the other inequities and problems unresolved.

I think we have to look back at the 1989 resolution and find out what recommendations can be made that will in fact effect the reduction of child poverty by 2000 or very shortly thereafter. We have to find ways to do that.

I think we ought to reconsider the family allowance issue. The child tax benefit may be the model to do it. It doesn't have to be a straight family allowance. I think you can either make it universal or vastly increase the levels at which the clawback starts. I think that proposal would benefit all families, and as you move up the income scale, obviously the people who are able to make the choice to stay home will also receive the benefit of the child tax benefit as well.

The other issue, of course, is the availability of early childhood education or child care programs. If we had a universal or national program of this nature that would be available to all families, not just to working families where two parents are working, then a family with a stay-at-home parent would also benefit from the availability of early childhood education on the same basis as people who are working.

Those are the comments I want to make, with one other. Again, looking at our tax system—and I suppose the EI system is part of that, although it's directly related to the labour force—one of the things we've seen happen with the maternity leave provisions is that they're now much less accessible. I'll give an example that is rather stark.

An individual in my city, a woman who taught at elementary school for seven or eight or nine years, had two children. After the first child was born, she took maternity leave. After the second child was born, she took maternity leave, again through the EI system.

Unfortunately, the second child had cerebral palsy. As a result, she stayed out of the paid labour force for an extra two or three years until the child was able to be looked after a little better. She went back teaching in the classroom last September. She is now pregnant and will not qualify for EI maternity benefits at all because there are not enough earning hours for her to be considered a permanent member of the labour force. She will not qualify for maternity benefits for her third child.

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Again, that's a policy anomaly in a country where, most of us would agree, we try to support family choices, working or not working. We should try to design our programs to allow people to have choices, some of which may involve sacrifices. I think that's the reality of life. Some may involve some financial sacrifices. People make choices for all sorts of reasons, but we should not have policies that penalize people for exercising those choices.

For example, staying at home to look after a child with cerebral palsy should not eliminate someone from attachment to the workforce so as to eliminate the possibility of maternity leave benefits.

I leave my comments at that, and would be happy to answer any questions you may have.

The Chair: Thank you very much.

Mr. Forseth.

Mr. Paul Forseth: Perhaps just to restate your recommendations, I'll frame it this way for you. If you were the finance minister and you had $1.5 billion to address some of your concerns, or to address the concerns of the committee—and remember, it's $1.5 billion, so obviously it's limited spending—what would you do? What are the one or two things you'd do to help kids?

Mr. Jack Harris: I guess that's a funny way to phrase it. If I were the finance minister I would recognize that we have gone through a period of deficit reductions and are now in a surplus position. We should strive to increase the universal-type programs we have to the point where we can spend money to improve our social programs as opposed to finding ways to reduce taxes.

I mean, it's a question of choice. If you had $1.5 billion, I guess you could do less than you could if you had $7 billion, $8 billion or $9 billion. I don't quite understand your question. Why would you limit it to a $1.5 billion expenditure?

Mr. Paul Forseth: Well, perhaps we could make it $2 billion. I'm thinking about the realm of possibilities. It's just my eyeball guess as to what kind of latitude the finance minister has to perhaps consider what this subcommittee is looking at.

I am seeking your advice, your perspective, because it's your business to always be thinking in terms of those broad policy objectives and priorities. If you finally had the levers of power at the federal level to do that, and you had that many dollars, what would be your advice as to where to go first?

Mr. Jack Harris: Okay. That's a good question.

I certainly wouldn't look at the inequity in relation to the double-earner family versus the single-earner family. That would certainly not be the priority. The first priority would have to be to ensure an adequate income for families with children.

I realize, just looking at basic exemptions, it costs a lot of money to have any significant effect; nevertheless, the more money you can put into the hands of families whose children are going to school hungry—and that's something we have happening today in vast numbers—the better. If $2 billion is all you have at this point in time, the best thing, as I see it, would be to raise the Canada child tax benefit. That one goes straight into the families who have children. I'd put it there.

Mr. Paul Forseth: We have heard suggestions like that, to enhance that and perhaps also to reduce the steep slope of the clawback, to let it broaden out a bit.

Mr. Jack Harris: I agree. Lower- and middle-income families have really seen a lot of cuts in actual, real wages. The tax system is hurting them. I suppose the steep slope is part of the concerns the committee is trying to address.

• 1425

Mr. Paul Forseth: Concerning the EI example you gave, do you have any quick fix to help that lady? Obviously she didn't have enough hours worked since her last claim. You obviously outlined the case where throughout a working lifetime, there is a record of...

How would you address that?

Mr. Jack Harris: I think this whole notion of labour force attachment is something that could be addressed. There could be a quick fix on that in the sense of saying, look, if someone has an attachment to the labour force for half of the last ten years...

I wouldn't want to be arbitrary here, but I think you easily can do something to ensure that maternity leave benefits are available. There might not be any reason why maternity leave benefits shouldn't be available generally, in any event, for someone who has had attachment to the labour force. Maternity leave benefits shouldn't necessarily be part of the EI system. I think Canada's chosen to do that, but other countries don't bother.

Mr. Paul Forseth: Thank you.

[Translation]

The Chairman: Mr. Cardin.

Mr. Serge Cardin: Good afternoon, Mr. Harris. Judging from our discussions with Mr. Snow and from your presentation, it's clear that the biggest problem in terms of tax inequity is not whether a family has one or two incomes, but rather the overall family income and the fact that some families are poor and have few opportunities to overcome their situation.

It's a fact that some moderate income families are also affected by the benefit, the clawback provisions and so forth. However, if we want to improve the lot of low-income families, we can accept Mr. Szabo's proposal. He suggested a benefit for low- income workers. If policies focussed more on providing benefits for children, we would have a situation where in some respect, we would be paying incomes to children. From the start, we've heard that the focus must be on children, not on parents. For some low-income families, child benefits are practically the reason why the family manages to get by.

Increasingly, our discussions have centred on the poverty experienced by low-income families and on government responsibility. People want the government to assume more responsibility for the quality of child care. Some argue that quality child care depends primarily on the presence of a parent who stays home to care for the child during the first few years of that child' life. Others, however, want to be able to choose between staying at home to care for their children and returning to the workforce and availing themselves of the best child care possible.

In your opinion, should the government have some say in the choice parents make by giving them everything they need to make the right choice?

[English]

Mr. Jack Harris: I suppose we all could sit down and design an ideal world, but the real issue is that we're not doing enough to ensure that we have fewer people living in poverty.

A study—and it may well have come before your committee already—has looked at the effects of social transfers on child poverty rates compared with, first, what would happen before income tax excluding transfers. Comparing Norway, the United States and Canada, the child poverty rate would be in the same neighbourhood—61% in Norway, 68% in the U.S., and 66% in Canada.

• 1430

Still before taxes but now including transfers, the child poverty rate in Norway was down to 14.8%, in the U.S. down to 57% or 58%, and in Canada down to 41%. So while we're certainly better in Canada than in the U.S., we're nowhere near what has happened in Norway with their social transfers for children.

I guess the real issue is that, first of all, we have to ensure that our families with dependent children have adequate means to come out of poverty. The issue of choices, I suppose, is something beyond that. The real problem I see is with families who don't have any choice but to work because they don't have the income there.

You and I could design a system that allowed choices and involvement in child care, but it may be creating an ideal world that doesn't exist right now. Rather than think of it that way, I think we should design a program that's going to eliminate poor families. The other choices, I suppose, are a luxury for afterwards.

[Translation]

Mr. Serge Cardin: You claim that we must make choices. However, each choice is a step toward the attainment of an ideal. People are entitled to have dreams.

[English]

Mr. Jack Harris: Oh, yes, I can list the kinds of choices I think parents should have. I have two young girls, one four and a half and the other just two. The ideal world would allow people to have lots of choice to spend time with their children, to give their children opportunities for early childhood education experiences, to have flexible work times, and to have better maternity and paternity leave provisions all built in. I think these are some of the things we would see as part of an ideal, family-oriented government program.

Some elements already exist. For instance, it's better in Quebec than in the rest of Canada for labour standards on maternity leave and other things. We have a lot of improvements to make at both the provincial and the federal level.

One of the great advantages of the child tax benefit is that it can override the differences in welfare rates or can contribute to increased income despite differences in welfare rates, which, as a result of the loss of CAP, provinces are finding it increasingly difficult to support without a strong provincial tax base. So the efforts at the federal level are very important.

[Translation]

The Chairman: Thank you, Mr. Cardin.

Ms. Dockrill.

[English]

Ms. Michelle Dockrill: Thank you, Mr. Chair.

It's nice to see you again, Jack.

Mr. Jack Harris: And you.

Ms. Michelle Dockrill: I'm telling you, there are lots of New Democrats around this end of the country. I just had to get that in.

Mr. Jack Harris: When I was in Ottawa it was only me. I was the only one east of Oshawa.

Ms. Michelle Dockrill: The times, they are a-changin'.

Mr. Jack Harris: Yes.

Ms. Michelle Dockrill: Jack, you talked about maternal and paternal benefits. There have been suggestions by some presenters that those benefits should not be attached to workforce participation, and should be afforded to all.

You brought up a portion of a study. When I looked at Norway I found it interesting the flexibility that is within their maternal and parental leave. It's 42 weeks at 100%, I think, and then 52 weeks at 80%. It allows flexibility so that the parent can return to work part time and draw from those benefits part time.

• 1435

Mr. Jack Harris: I think that's wonderful.

Your colleague was talking about how we can build a better system. If we look to the Scandinavian countries on social policy, we're always told by the hard-nosed number crunchers that this is impossible, it's beyond the capacity of our government, or our tax system, to have.

I don't believe these notions are pie in the sky at all. If we have a committed political will and are willing to digress from the individualistic notions south of the border, which cause a lot of pressure, I think we can create quality programs in our country with the kind of flexibility you're talking about in terms of Norway. The economic performance of Norway is very positive.

If you look at what caused the deficit, what increased the deficit, you talk about anti-inflation policies, high interest rates and their contributions. I think we're in a situation now where we can expand the cost of these types of programs without increasing the deficit, without setting off inflation. We can improve our labour force statistics as a result as well.

So I think we do have lots of room. I know it's contrary to the notion that we need to have a tax break as an expenditure of our surplus, but I don't really think we do. I think we can take advantage of this opportunity to expand our programs.

Ms. Michelle Dockrill: One of the other points that continued to come up was the fact and the recognition that, as you said, New Brunswick and Newfoundland do not claw back the child tax benefit. I think one witness had talked about how no money changes hands—you know, the federal government giveth and then the province taketh away, so there's actually no—

Mr. Jack Harris: Oh, I think that's cruel.

Ms. Michelle Dockrill: I want to know, has there been a difference, and if so, can you inform us in terms of Newfoundland on how removing that clawback has assisted low-income families?

Mr. Jack Harris: I think there may be a real question in there as to why Newfoundland and New Brunswick did it and the others didn't.

Ms. Michelle Dockrill: Okay, then, I'll ask you that question.

Mr. Jack Harris: I could give you a very political answer, one having a lot to do with the pressure put on the government in the House of Assembly when the idea of the federal government... We have good new and bad news; the Government of Canada—or the Minister of Finance, one might say—is going to help you out by giving you $600, and the Premier of Newfoundland is going to take it back from you.

For people whose incomes are so low as to make it impossible for them to live properly, the prospect of that kind of money was very great. It meant a lot to be able to have that money.

I think it was politically difficult for government to recognize that a person who lives on one side of the street will not get the money when her sister, who lives on the other side of the street and works part time at the fish plant, is going to get the national child tax benefit. The inequities of that were evident to the government. I think they responded to both the public pressure and the evidence their own members were finding out, because the amount of money made a big difference to people.

I don't know of any study that's been done to see what exact effect that particular amount of money had on families, but obviously it helped them buy food they wouldn't otherwise be able to buy to feed their families better, to look after their children better.

Ms. Michelle Dockrill: I think one of the things that clearly has been stated by the child advocacy groups is that low-income families deal in real money, real dollars—in their hand, in their pocket.

I'll throw this question at you. I've asked it of several of the witnesses. It's pretty clear there's not a one-size-fits-all here. We all agree there's been a number of inequities. I'm wondering if you believe we should be targeting the child as opposed to parental activity.

• 1440

Mr. Jack Harris: When I try to get my head around this question of whether or not a parent works, or is able to choose whether or not to work—I think that's the way the question is framed, is it not?—I just don't think that is the important thing. I don't believe we can eliminate child poverty without eliminating family poverty as well. I guess this phrase, “Children are poor because their parents are poor”, is the real answer.

I think we do have to look at the ability of a family to look after children. That's the important question. Whether it's done by two-income earners or one part-time, one full-time, a lone parent who is required to provide the income himself or herself, perhaps with some support from the support order and perhaps not, I think that's the real question. That's the one we should address.

I think the minor inequity... I have to call it a minor inequity because it's very difficult to see how it would play out. Obviously, it would depend on your income how much of an inequity it would be.

The other side of that is parental choices. Where is the money going to go? Would you give a tax credit to the spouse who is working? If you do, will the other spouse ever see it? Will the other spouse, who is the stay-at-home parent—and let's be honest, it's the stay-at-home mother—get the money or have any control over it, or will it just be a tax deduction for the wage earner?

Ms. Michelle Dockrill: Can I have just one other short question?

The Chair: We have a flight to catch in 15 or 20 minutes, and Mr. Szabo has a question.

Ms. Michelle Dockrill: Oh, God. We'll be here until tomorrow.

Mr. Paul Szabo: No questions.

Voices: Oh, oh.

Mr. Paul Szabo: In your example of a part-time worker at a fish plant and her sister being on welfare, you said it was inequitable that the part-time worker got the national child benefit. Is that what you said?

Mr. Jack Harris: Yes, that's what I said.

Mr. Paul Szabo: Is it possible that the part-time fish plant worker is getting more money than somebody on welfare?

Mr. Jack Harris: Is it possible?

Mr. Paul Szabo: How much does a part-time fish plant worker make?

Mr. Jack Harris: It would be a combination of unemployment and... When I say part-time, it would be part-year, I suppose.

Mr. Paul Szabo: Okay.

Mr. Jack Harris: It would be a combination of EI and earned income, yes.

Mr. Paul Szabo: You're suggesting, in the specific example you gave us, that this part-time fish plant worker was economically better off than the welfare person.

Mr. Jack Harris: I would say that, yes.

Mr. Paul Szabo: Really. When someone is on welfare and then they decide it's time, they're ready, there's an opportunity, and they go into the paid labour force—

Mr. Jack Harris: I don't think that's the way it works.

Mr. Paul Szabo: I haven't asked the question yet.

When somebody wants to move off welfare and go into the paid labour force, chances are, in a large number of cases, they may have to start off at a minimum wage job. Some may get a little break and get a little bit more. In addition to losing the welfare payments, the direct cash payments—and you heard the dialogue before that they lose ancillary benefits, etc.—

Mr. Jack Harris: They lose their drug card, which is so important.

Mr. Paul Szabo: So probably a number of the so-called working poor would be worse off economically than if they were on welfare.

Mr. Jack Harris: Your point about the transition for someone who has a steady paycheque coming in, the same day every month, into a low-wage, insecure, part-time job is a leap. I've long been a supporter of programs that make it easier for people to take a job that's available to them. As you say, there are situations or circumstances where someone is getting a steady cheque every month, and can get a job with inconsistent hours at a local bar or whatever—

Mr. Paul Szabo: So I think we agree that there may be some transitional help needed.

Mr. Jack Harris: Absolutely. I think that's great.

• 1445

Mr. Paul Szabo: So the debate would be whether or not the national child benefit is that, or maybe it's too much or not enough.

Mr. Jack Harris: Things are so bad in fact that this becomes a piece of income that people would want to have access to.

Mr. Paul Szabo: I have one last question.

You made a statement about people going to work because they have to work. There's a presumption there that there is a correlation between whether a mother works in the paid labour force or does unpaid work based on family income.

Mr. Jack Harris: There is a relationship, yes, but that's not the only thing.

Mr. Paul Szabo: Okay.

I thought you might interested to know that we were presented with information that was confirmed by Human Resources Development, presented by a Mr. Shillington, that showed that the decision to work full time, part time, or in the home was totally insensitive to the husband's income. In fact, ostensibly, on average, and in each income quintile, one-third had both parents working, one-third had one stay at home, and the other third had some part-time income.

It fascinates me, because I think our normal bias is that we think higher-income earners have a wife stay at home because they can afford to do it, and yet the actual data shows that parents are making choices that seem to be inelastic to family income. That means maybe something more is motivating choices. I have a feeling it's one of the reasons why the word “choice” has been used so much in our dialogue.

It seems that regardless of the income, there are a lot of families out there whose principal choice, if they can do it, would be to have a parent at home caring for the children. It matches better their values system and circumstances with regard to accessibility of alternative care options, etc. It just happens to stream out that money really isn't a factor.

Mr. Jack Harris: Well, I don't know. I wouldn't say money isn't a factor. The fact that people with lesser family incomes would also wish to make that choice, if they could—

Mr. Paul Szabo: I'll bet they would, sure.

Mr. Jack Harris: —doesn't surprise me either.

The issue of choice is one I support, and we should try to find a way to ensure that the choice doesn't hurt the child.

Mr. Paul Szabo: I'm delighted to hear that.

Thank you, Mr. Chairman.

The Chair: Thank you, Mr. Szabo.

I would like to thank you, Mr. Harris, for taking the time to share your views with us. They are important views, obviously.

Perhaps I can leave you with a comment more than a question. If we're going to address child poverty in the long term, it's not going to be done at just one level of government. I would implore you to follow the lead of your province and New Brunswick. Whenever the federal government is trying to negotiate things with the provinces, maybe the premiers should take off their premiers' hats and look for the very good of all Canadians as opposed to what's better in their interests for their province alone.

We've seen it recently with the social union negotiations, with the health transfer. Some premiers refused to actually sign a covenant that they would actually spend it in that area. We've seen it now with the child tax benefit, where it's clawed back.

It's unfortunate that when one level of government takes one initiative, the others don't follow in step. If we're going to achieve that laudable goal of eliminating child poverty by 2000—and obviously we're going to have to change the year—we're going to need the help of everyone. I'd ask you to work towards that end.

Mr. Jack Harris: I will. I thank you for that comment. It's one that I share.

Perhaps the era of the use of spending powers—that's what it's called, I guess—was one that gave all Canadians access to very beneficial social programs, including universality and national standards.

• 1450

I'm saddened by the fact that things are literally getting worse than better for people in this country. That's not for everybody but for lower-income groups, for the regions of this country, for rural parts of the country. That makes me very sad. We know from our history that we can do better.

The Chair: Thank you, and have a safe journey back home.

Mr. Jack Harris: Thank you.

The Chair: Colleagues, we are adjourned until tomorrow at 8.30 a.m. in Montreal.