FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, October 30, 2001

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[English]

The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call the meeting to order this afternoon.

This is our first panel. We'll have two this afternoon, actually.

As you know, we're engaged in pre-budget consultation. The finance committee has completed its travels outside of Ottawa and now it's back to Ottawa for the next three days to hear the final submissions from some very interesting groups. And this panel, obviously, is also going to offer this committee a lot of things to think about.

We have the following groups: the Canadian Fertilizer Institute; the Insurance Brokers Association of Canada; the Canadian Electricity Association; the Federation of Saskatchewan Indian Nations; the National Coalition on Housing and Homelessness; and the Assembly of First Nations, if I'm correct.

You all know how this committee functions. You have approximately five to seven minutes. I expect everybody to stay within that time slot. Thereafter, once all the witnesses have presented and made their case to the finance committee, we'll engage in a question and answer session.

We'll begin in the order in which the organizations appear on the official agenda of today. First is the Canadian Fertilizer Institute—Norm Beug, the chairman of the board, and Daphne Arnason, chair, CFI Business.

Welcome.

Mr. Norm Beug (Chairman of the Board, Canadian Fertilizer Institute): Thank you.

Mr. Chairman, honourable members, thanks for the opportunity to appear before you today. My name is Norm Beug; I am the CFI's chairman of the board. I am also the general manager at the IMC potash mine in Belle Plaine, Saskatchewan. Presenting with me is Daphne Arnason, director of taxation for the Potash Corporation of Saskatchewan and chair of the Canadian Fertilizer Institute's business tax reform working group.

Also in attendance are Karen Rowbottom, from Agrium; Darrell Zwarych, from IMC; Bud Knudtson, from the Saskatchewan Potash Producers Association; and Roger Larson, president of the CFI.

Canada's fertilizer industry is a medium-size export-oriented industry. The industry exports $3.7 billion to nearly 60 countries around the world. These sales include over $2 billion in potash exports. Canada supplies 12% of the world's fertilizer materials and we are the largest potash producer and exporter, at about one-third of the world's production.

Total sales for the industry are in excess of $5.5 billion annually. This generates roughly 6,000 high-paying manufacturing jobs and 6,000 jobs in distribution and retail operations. Most of these jobs are in rural centres in Canada.

Canada's macro-economic focus has been on international competitiveness. In June 2000, Minister Martin said:

We want Canadian firms that are world leaders in the new economy. We want Canadian research to create new technologies and new industries. The challenge before us is to build on this momentum and put into place the lasting conditions for sustained economic growth.

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Our member companies are on the leading edge of technical innovation and cost-effectiveness before taxes. Unfortunately, on an after-tax basis, our companies are at a distinct competitive disadvantage on a world scale.

As commodity businesses, we must maintain low total-cost structures to be competitive in the world market. Our ability to grow our businesses in Canada, along with the world market, will be dependent on a fully loaded competitive cost structure, which will include operating costs, transportation costs, and taxes.

I'd now like to turn it over to Daphne Arnason to outline the specifics of our concerns.

Ms. Daphne Arnason (Director of Taxation, Potash Corporation of Saskatchewan; Chair, Business Tax Reform Working Group, Canadian Fertilizer Institute): Good afternoon.

I'm here to explain our tax disadvantage. We are disadvantaged against the rest of the world. The resource sector is disadvantaged against the rest of the economy. Potash is disadvantaged against the rest of the resource sector.

We ask that you recommend to the government that the seven-point federal income tax rate reduction be extended to all sectors. This is the same tax change as other Canadian industry has already received.

The resource sector does not receive full deductibility of provincial royalties, whereas other sectors do. An amendment to the tax act allowing full deductibility of all royalties would help alleviate the unfair tax burden and help level the playing field. The cost to the federal treasury to ensure tax fairness is minimal: approximately $25 million annually.

In terms of international competitiveness, Canada's potash industry is the world's lowest-cost producer before taxes but is a high-cost producer after tax. Our industry faces a marginal effective tax rate in excess of 70%—approximately 71%.

This is illustrated in the map in front of you, which compares the combined federal-provincial or state statutory rates. As you can see, when you include the resource taxes, Canada is nearly 30 points higher than the rate of the next highest jurisdiction.

Tax treatment has an obvious impact on our competitiveness. Competition for investment occurs not just with other industries and other fertilizer producers but also within the company itself for investment in the manufacture of other fertilizer nutrients, or in investment in other commercial opportunities. Investments will flow to the projects providing the best after-tax return. The current tax disadvantage does not encourage further investment in Canada.

The potash industry is one of those excluded from the rate reduction announced in the previous budget and economic statement. Thus, we have not only been historically disadvantaged by the inadequacy of the resource allowance—unlike the mining sector as a whole—but we continue to be excluded from measures aimed at increasing equity in Canada's tax structure.

Canada is the only federal state in the world that does not provide for full deductibility of provincial royalties, leaving us subject to double taxation. This places the potash industry in a unique and unfair tax situation.

In general, the mining sector benefits from the resource allowance and other fast write-off provisions. The federal average effective tax rate for potash is 50% higher than for mining as a whole.

Potash royalties far exceed the compensation provided by the resource allowance. Non-deductibility results in double taxation on the amount of royalties that exceed the resource allowance. This translates into double taxation on an average of $62 million a year.

Resolution of these inequities is urgent. In the interest of tax fairness, a solution cannot be put off any longer.

We would like to point out that CFI is a member of the multi-industry coalition on business tax reform. In addition to the specific concerns just highlighted, we support the recommendations put forth by the coalition in its submission and its appearance before you on September 25.

Mr. Chairman, CFI realizes the complexities in reviewing and developing tax policies, particularly in the current political climate. We must, in closing, stress the significant impact of the 71% marginal tax rate.

We are not an inefficient industry asking for concessions. We are a highly efficient, internationally respected industry harmed by a government-induced competitive disadvantage. Particularly in light of recent world events, we request a level playing field for competing investment alternatives.

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We thank you for the opportunity to appear before this committee, and we would be pleased to answer any questions you or your colleagues may have. Thank you.

The Chair: Thank you very much for your presentation.

We'll now proceed and will hear from the Insurance Brokers Association of Canada. We have two representatives: the president, Ginny Bannerman; and Francesca Iacurto, director of public affairs. Welcome.

Ms. Francesca Iacurto (Director, Public Affairs, Insurance Brokers Association of Canada): Good afternoon, Mr. Chair and committee members.

On behalf of the Insurance Brokers Association of Canada, we would like to thank you for the opportunity to present our views on what we believe should be included in the December budget.

[Translation]

My name is Francesca Iacurto and I am the Director, Public Affairs, of the Insurance Brokers Association of Canada. Our president, Ginny Bannerman, is with me. She is an insurance broker for the Calgary area.

IBAC is a national professional organization whose members are the 11 regional and provincial associations of liability insurance brokers in Canada. These associations represent approximately 25,000 insurance brokers across the country. Most brokerage firms have about 10 employees.

Insurance brokers are the main distribution network of liability insurance companies. Generally speaking, liability insurance include movable property, vehicles and various types of risk other than life insurance.

Brokers provide objective advice to their clients regarding their insurance needs. They also help them to interpret their insurance policies, which are legal documents, and make representations on their behalf when a claim is made to an insurer.

[English]

I will now turn to Ms. Bannerman, who will continue our presentation.

Ms. Ginny Bannerman (President, Insurance Brokers Association of Canada): Thank you, Francesca.

Good afternoon, Mr. Chair, committee members.

I'll open my remarks by giving IBAC's views on the overall fiscal agenda before turning to specific matters of concern to insurance brokers.

At the outset, IBAC commends the federal government for its conviction and performance in soundly managing the economy in recent years. There's a lot of great news in its four consecutive budget surpluses, its commitment to a five-year tax reduction plan, and the tangible progress made in the reduction of the national debt.

Unfortunately, as many people have said, the world changed on September 11. While most of us had only fleeting thoughts about terrorism and national security just a few short months ago, those words have since become part of the everyday vocabulary of individual Canadians and the federal government alike.

As a sidebar, you may be interested to note that representatives from various segments of the property and casualty insurance industry are currently assessing the short-term and long-term impact on our industry of these attacks.

Another regrettable effect of the events of September 11 has been to exacerbate a global economic downturn that had already begun to affect Canada. Given this less-than-rosy context, IBAC's main recommendation for the federal government is to exercise great prudence in its fiscal planning for 2002. Specifically, we firmly believe that the federal government should under no circumstance plan for a deficit. In other words, proposals for major new tax cuts and spending initiatives for the sole purpose of stimulating the economy should not be considered, as they would most certainly result in a deficit position.

That said, we strongly urge the federal government to maintain its commitment to the five-year tax reduction plan announced last year. We also believe that further broad-based tax cuts should remain key priorities in the medium to long term. In the short term, however, new expenditures relating to combating terrorism and enhancing national security must be accorded priority. Increased spending in these areas is not only desirable but necessary. However, following from what I mentioned just a few minutes ago, if additional spending in the area of national security would lead to a deficit, then spending in other areas should be curtailed.

I'll now briefly turn to specific taxation issues of concern to insurance brokers. I'll emphasize that the changes we are recommending in these areas should only be contemplated as fiscal conditions permit.

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Our first area of concern is the $200,000 small-business income tax threshold. As Francesca mentioned, most brokerages in Canada have about ten employees and therefore have taxable earnings of less than $200,000. We're grateful that the federal government acknowledges, through special fiscal measures, the challenges faced by small businesses. However, we are increasingly concerned that this threshold, which has not been raised since 1982, is an incentive to keeping taxable income low and deters brokerages from getting bigger. We therefore recommend an increase in this threshold and a decrease in the taxation rate.

Second, we urge the federal government to provide members of the SME community, such as insurance brokers, with improved means to save for their retirement. We therefore recommend that RRSP contribution limits be increased to $18,000 and be fully indexed to inflation.

IBAC's third area of concern relates to employment insurance premiums. We believe that the surplus in the account should be reduced by accelerating the pace of premium reduction for all contributors to the program in order to reach a rate that is closer to the break-even and because there have been considerable changes to the types of benefits paid to claimants over the years. We recommend a gradual reduction in the EI multiplier in order to reach a 50-50 split between employee and employer contributions.

We'd like to thank you for the opportunity to appear before you today and would be pleased to answer any questions you may have.

Thank you.

The Chair: Thank you very much, Ms. Bannerman and Ms. Iacurto.

We'll now hear from the Canadian Electricity Association with Roy Staveley, senior vice-president, public affairs and environment. Welcome.

Mr. Roy G. Staveley (Senior Vice-President, Public Affairs and Environment, Canadian Electricity Association): Thank you.

On behalf of the Canadian Electricity Association, I would like to thank the distinguished standing committee members for the opportunity to present our views today.

CEA represents almost 95% of the electricity industry in Canada, which contributes 3.6% to Canada's gross domestic product and employs over 80,000 people. Today I would like to continue by outlining the reason the electricity industry in Canada is changing, the importance of improving capital investment trends, CEA's recommendations for revising the capital cost allowance to increase such investment, and the benefits to the Canadian economy.

The electricity industry is restructuring in response to a more open and competitive market, new technology, increasing customer service requirements, and the need to improve environmental performance. For many in the industry, restructuring to achieve economies of scale, to increase levels of market capitalization, or to gain access to millions of customers in the North American market is seen as vital to compete successfully in the future. This emerging competitive yet uncertain electricity market brings increased business risk and introduces greater exposure to the realities of the capital market, where investment will flow to those offering lower tax costs and where rates of return are most attractive.

We also need to appreciate that this is occurring at a time when domestic growth and aging infrastructure require significant infusions of capital investment in electricity assets. Investment is considered essential if Canada is to maintain adequate domestic supply, energy security, reliability, and existing trade flow.

Our research shows that the investment in generation, transmission, and distribution assets is down by 50% since 1991 despite a 1.5% per year domestic load growth over the 1990s and declining reserve margins in Canada, which are reaching historically low levels. It is estimated that the Canadian electricity industry will need to replace, repower, or build capacity equivalent to 25,000 megawatts, perhaps up to 45,000 megawatts, in addition to supporting infrastructure over the next 20 years. This is equivalent to up to 40% of Canada's current electricity production. Such development is estimated to cost at least $100 billion and perhaps as much as $200 billion over the next 20 years.

The ability to track these levels of investment will depend on industry earnings and rates of return being comparable to those of other sectors. Such investment returns will at least in part hinge on appropriate CCA rate provisions for the electricity industry. While the government has recognized the need for change by granting access to the manufacturing and processing income tax rate and by increasing CCA rates for generation from 4% to 8%, these improvements are not sufficient.

Our studies show that for generation assets, CCA rates of 15% to 20% are needed to accurately reflect useful economic life and that a case can be made for 30% on the grounds of neutrality with M and P investments. By comparison, the U.S. is moving to consider seven-year write-offs, which is equivalent to 30%. CCA rates for transmission and distribution assets should be at 8% to 12% to accurately reflect useful economic life. At present, Canada provides 4%, while in comparison the U.S. currently provides 8%.

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For assets used in generation, transmission, and distribution, CCA rates must move to 10% to 12%, based on a remaining economic life of 15 to 20 years. The rate currently being applied is 4%.

For class 43.1, CEA advocates broadening the class, using efficiency as the criterion, with the objective of reducing greenhouse gas emissions. It is also proposed that in addition to the broadening of the CCA rate class, the current flow-through share mechanism called the Canadian renewable conservation expense allowance should be improved. Alternatively, a refundable investment tax credit should be applied to provide a sufficient tax-based incentive under this class.

We urge the federal government to view this as an opportunity, where the immediate loss of tax dollars is outweighed in the longer term by an expanding taxable base and by benefits that can flow to Canadians in a number of other ways. Changes to CCA rates will contribute significantly to the sector's competitiveness and ability to continue supplying reliable, low-cost energy.

Since environmental performance in reducing greenhouse gases is vital to this country, the proposed CCA rate changes will contribute to the turnover of capital stock, favour more efficient plants, and encourage emerging technology development. The construction and development of generating facilities and infrastructure in Canada will provide effective fiscal policy stimulus to the Canadian economy, and increased levels of investment in new capacity and infrastructure will contribute to energy security and reliability at a time when reserve margins are at a historic low and further consideration is being given to protecting Canada's critical infrastructure.

In conclusion, we believe that the federal government has the opportunity to significantly influence the construction and development of generating facilities and infrastructure in Canada through changes to the CCA rates. Investors require enhanced tax rates and strong signals to produce rates of return needed to attract the necessary capital. The resulting inflow of investment capital will contribute to economic growth, increased jobs, and a more competitive industry sector in today's global marketplace.

Thank you.

The Chair: Thank you very much.

We'll now hear from the Federation of Saskatchewan Indian Nations with Chief Perry Bellegarde and Terry Goodtrack. Welcome.

Chief Perry Bellegarde (Federation of Saskatchewan Indian Nations): Thank you, Mr. Chairman.

Good afternoon to all friends and relatives.

In Canada you have over 633 first nations communities and over 55 different tribes or nations. In Saskatchewan you have 74 first nations reserves and six different tribes: Cree, Saulteaux, Dene, Dakota, Lakota, and Nakota people.

We have over 100,000 first nations people, and we're united. We continually send our prayers and thoughts to the Arizona Diamondbacks in their quest for the World Series championship. That's why they're up two games, so we've got energy. We have to use it in a good way.

The Chair: Can you write a report?

Chief Perry Bellegarde: Mr. Chairman, I am pleased to have the opportunity to address the Standing Committee on Finance during your pre-budget consultation exercise.

The federation represents 74 first nations within the province of Saskatchewan. We wanted to be included within your processes to present our views and issues. We want to influence your decision-making process to ensure that first nations within Saskatchewan and across Canada have every opportunity to enjoy the benefits that are afforded all Canadians.

Unfortunately, in the past this was clearly not the case. Certain events occurred that forever changed the lives of first nations peoples. There were two key portals, two gateways of change, that significantly impacted on our people. The first portal was that of contact and pre-Confederation treaties. With the arrival of the Europeans, first nations embraced the newcomers in the spirit of friendship and sharing resources, and establishing pre-Confederation treaties benefited both parties. The way first nations people lived on the continent changed.

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The second portal of change was that of colonization and legislation. During this time our relationship to the land was altered, so our mobility was severely restricted and our way of being was irrevocably changed. Our lives were impacted on by oppressive legislation, the Indian Act, and other federal policies that were premised upon domination, ownership, and assimilation.

These past portals have had major negative impacts that continue to plague first nations today. As you are aware, the United Nations human development index rated Canada as the number three country in the world to live in. However, according to the same index first nations in Canada ranked 63rd. Clearly, this should be an embarrassment to Canada. While we have begun the processes to rebuild our lives and our nationhood and to revitalize our treaties, there is a need to do much more.

I am pleased to see that one of the objectives of the pre-budget consultations is to provide Canadians with equal opportunity to succeed. We require policies, programs, and funding that allow us to quickly close the gap between first nations and the rest of Canada.

I would like to turn your attention to my home province of Saskatchewan in terms of current demographics to highlight our vision for a new portal of opportunity and prosperity that focuses on tangible investments in Saskatchewan first nations. In relation to the socio-economic conditions in Saskatchewan as seen on slide 1, first nations are well behind the rest of the people in Saskatchewan. For example, 25% of first nations have less than a grade 9 education, as compared to 12% of the Saskatchewan population. This obviously impacts negatively upon our ability to secure highly skilled professionals and highly paid jobs. The percentage of one-parent families for first nations is 33%, as compared to 12% for the rest of Saskatchewan. This means that the household income of first nations is lower, and this places many of our children in poverty. This is not in keeping with the objective of first nations citizens enjoying the best quality of life in Canada.

Slide 2 demonstrates that the population of first nations in Saskatchewan is increasing. Today first nations represent approximately 10% of the population, and this is expected to grow to 32% by the year 2045. It is clear that first nations in Saskatchewan heavily influence the labour force, and ways must be found to ensure that they do so in a positive manner.

Finally, slide 3 shows that in 1996 the median age of a first nations person in Saskatchewan was 17, compared to 35 for a non-first-nations person. Thus, the first nations population is much younger. Approximately 54% of the first nations people were less than 20 years of age, compared to 30% of non-first-nations people. This clearly shows that the priorities and needs of first nations are different. The priorities of non-first-nations people are paying off their mortgages, investing in RRSPs, and helping their children achieve high school and post-secondary education. The priorities of first nations people focus on improving our basic standard of living in terms of health care, housing, education, and employment opportunities.

First nations within Saskatchewan and the FSIN recognize this first nations human explosion and the importance of investment in our people. To do this, first nations institutions have been established to address the needs of our young and growing population. Some of the institutions in our region are the Saskatchewan Indian Cultural Centre, our Saskatchewan Indian Institute of Technologies, our Saskatchewan Indian Federated College, our Saskatchewan Indian Training Assessment Group, our Saskatchewan Indian Equity Foundation, our Saskatchewan Indian Loan Company, the National Indian Financial Corporation, and our First Nations Bank of Canada. Institutions we're working on are the Indigenous Governance Institute of Canada, an office of our own auditor general, and our own internal treaty governance processes.

I notice that in the 2001 throne speech it was stated that:

The Government is committed to strengthening its relationship with Aboriginal people. It will support First Nations communities in strengthening governance, including implementing more effective and transparent administrative practices.

The FSIN believes these current and new governance processes are important to our future.

Committee members, I believe we are again at a crossroads, a time of change. The vision of a new portal is before us. It will again change the way we live and our relationship with Canada. This portal of opportunity and prosperity will bring us full circle to a place where we live in accordance with our treaties and the governance structures we have envisioned for ourselves.

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We want to share the resources in Canada and ensure that first nations have equal opportunity to succeed in the future. We want to increase our quality of life and standard of living. On the United Nations human development index, we want to be number one, as all Canadians aspire to achieve in this day and age.

I would ask the Government of Canada to invest in first nations in Saskatchewan. We have a human explosion about to happen. We have institutions in place that can help manage the situation, to ensure success and accountability to first nations and the Canadian public.

What we need from you is monetary investment in the following areas. First is to expedite the resolution of our past grievances. We have a number of grievances that are still outstanding. We have individual grievances that include dealing with first nations veterans, and the residential school issues. We also have collective grievances that include land claims, resource and revenue sharing, benefit sharing—the 1930 natural resource transfer agreements—treaties, culture and language.

While there are some processes in place to address these grievances, their resolution must be expedited for us to move forward. Of course, included within these grievances are oppressive legislation and policies, like the Indian Act.

In Saskatchewan, we have a process in place to take us out of the Indian Act. We call it the treaty governance processes, moving toward a treaty implementation act. We need that process to continue to be supported, so it takes us out of that Indian Act into something new that will breathe life into our treaties.

Second is investing in our communities and people. Work with us to increase the level of funding to deal with Saskatchewan's first nations human explosion. This means the provision of increased spending on health services, housing, education and economic development.

The funding formula imposed by the Department of Indian and Northern Affairs Canada does not adequately reflect the growing population. We're losing ground. There's a gap that's growing. The population is increasing very rapidly, but the dollars coming forward don't correspond. There's already a cap on housing and a cap on post-secondary education. There's just not enough there to meet the need, and the gap continues to grow.

I would ask that you increase the funding levels to ensure we adequately address the funding gap. Not only do I ask, we say it's vital that these budgets increase now. The theme is to invest now to bring about change. If nothing is done now, the status quo will not be acceptable, and the high socio-economic conditions and costs associated with that will continue to rise and escalate, unless something is done very seriously.

Third is to further enhance our governance institutions and processes. Continue to fund the treaty governance processes and pilot projects. We are negotiating new governance and fiscal arrangements that will assist first nations in defining our jurisdiction. Work with us in establishing our indigenous governing institute of Canada and office of the FSIN auditor general.

A concept under the new fiscal agreement that we're trying to work out is a macro-comparability fund. You have to look at investing in socio-economic conditions in employment, housing and education. Our standards are down here; everybody else is up there. In order to come up to the same level, there must be a very concentrated macro-comparability fund to deal with the socio-economic conditions. That's a concept under our new fiscal arrangement.

In conclusion, we have an opportunity to make significant advances in first nations government relations within Canada. The 2001 throne speech highlights the importance the Prime Minister places upon first nations affairs. I believe the 2001 pre-budget consultation objectives of the standing committee are tailor-made to the current priorities and needs of first nations in Saskatchewan.

We want an equal opportunity to succeed, and we want a better quality of life and standard of living.

I would like to thank you for your time, and for affording me the opportunity to present our views and issues.

Thank you very much, Mr. Chairman.

The Chair: Thank you very much, Chief Bellegarde.

We'll now hear from the National Coalition on Housing and Homelessness, Mr. Mark Goldblatt and Sharon Chisholm. Mr. Goldblatt.

Mr. Mark Goldblatt (National Coalition on Housing and Homelessness): Good afternoon. My name is Mark Goldblatt, and with me is my colleague, Sharon Chisholm. We appear today on behalf of the National Coalition on Housing and Homelessness.

Our national coalition consists of 25 national and regional organizations that have come together to advocate a strategy for affordable housing. I just want to say who a few of our members are. It's not the whole list, but they include the Assembly of First Nations, the Co-operative Housing Federation of Canada, Canadian Housing and Renewal Association, Canadian Council for Reformed Judaism, the National Anti-Poverty Organization, the Métis National Council, the Ontario Non-Profit Housing Association, Family Service Canada, and the Canadian Co-operative Association.

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This morning the coalition held a press conference here on Parliament Hill. We were represented by four of our members. They were Marion Pardy, the moderator of the United Church of Canada; Jean-Claude Parrot, the executive vice-president of the Canadian Labour Congress; Charley Hill, from Native Home Providers in Ontario; and Sister Nicole Fournier, who works with an organization in Montreal called l'Accueil Bonneau.

We thought we would just share with you a few of the comments our four presenters made this morning at the press conference.

Marion Pardy, from the United Church of Canada, said that the desperate need for affordable rental housing by low- and moderate-income households should not be sacrificed in the name of fighting terrorism.

Mr. Parrot, from the Canadian Labour Congress, said that the Canadian economy needs a fiscal stimulus, and each new unit of housing generates 2.8 jobs. These units can be targeted to low- and moderate-income households, addressing a pressing social need and strengthening the economy at the same time.

Sister Fournier, from Montreal, said that shelters for homeless people address the short-term crisis only. After shelters must come affordable housing for the long term. She added that if you live in a shelter, you're still homeless.

Mr. Hill, from the Native Home Providers in Ontario, said that any new federal program must address the needs of aboriginal households living in urban areas. Mr. Hill closed the press conference by saying that the federal government's intention to fund a new affordable rental housing program was the right thing to do before the events of September 11, and it's still the right thing to do.

The federal government has promised new spending on affordable housing of $680 million over four years. This spending program was included in the Liberals red book III. It was in the last throne speech. Minister Gagliano, at a federal-provincial-territorial housing ministers' conference in mid-August in London, Ontario, once again tabled the spending for this program. We look forward now to its implementation.

When the program moves into its delivery stage, we would like to see a majority of the budget delivered by non-profit cooperatives and other types of non-profit housing. That's because the non-profit housing will deliver at-cost rental housing on a permanent basis, something no private developer could ever agree to.

Rents in non-profit housing go up over the years, but they only increase with operating costs. For example, as property taxes go up, the non-profit co-ops, and so on, have to raise their property taxes through their housing charges, whereas the private developers follow whatever the market will bear.

I would now like to pass along our remarks to Sharon Chisholm.

Ms. Sharon Chisholm (National Coalition on Housing and Homelessness): I would just like to add that during these times of turbulence and rapid change, the house is a really important area of security for Canadians, and a lot of Canadians are doing without housing. As you know, the number of homeless is growing, and we have 1.7 million households in Canada in need of core housing.

We want to congratulate Minister Gagliano on the progress he's made to date. But we want to ask you for your support in giving him the kind of flexibility he will need to complete his negotiations with the provinces, and hopefully come to a successful announcement at the end of November, when he meets with his colleagues in Quebec.

We're hearing from all of our allies that housing is central to their work. Campaign 2000, which focuses on child poverty, is saying that housing is a major impediment to the employment and employability of single parents in the workforce.

The Canadian Health Coalition and Canadian Labour Congress are recognizing that housing is a major determinant of health. In fact, good housing policy is health policy.

CCSD is starting to focus more of its work on housing and homelessness. The Laidlaw Foundation has just engaged with us to look at the connection between children's well-being, their social inclusion, and housing. We're hearing from our colleagues in different hospitals. The Royal Ottawa Hospital is now focusing on housing as one of their main advocacy issues for their out-patients.

I want to mention again that the need for affordable housing is growing substantially in Canada. Just to give you an example, whereas the difference in wealth between homeowners and renters in 1984 was that homeowners had 29 times the amount of wealth put away as renters, by 1999 that had jumped to 70 times. So the income disparities we're starting to face in Canada will affect our security and communities. Aboriginal households in urban areas are particularly disadvantaged and need to be brought into our discussions on forming a good housing policy for Canada.

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The federal government has put its hand out but can't meet these challenges alone. We agree that provinces and territories ought to play a role, that municipalities have an important role to play, and as Mark said, that communities and cooperatives play an important role.

A “housing first” policy in relation to the disposal of federal lands is needed. It's not enough for the federal government to say it wants to act in partnership. The federal government must be a true partner and show its partnership by making sure it looks at its policies that can support the development of affordable housing—including its mortgage insurance policies, which we strongly suggest need review in order to make a housing policy work.

All of us together are the facilitators of the development of housing communities in Canada. Alone we won't be successful, but together we have immense power to assist individuals to form community, be part of community, and be formed by communities. Housing is the foundation for us all to participate in our community, and I urge you to support us.

Thank you.

The Chair: Thank you very much, Mr. Goldblatt and Ms. Chisholm.

We will now hear from the Assembly of First Nations, the National Chief, Grand Chief Matthew Coon Come. Welcome.

Grand Chief Matthew Coon Come (National Chief, Assembly of First Nations): [Witness speaks in his native language]

Mr. Chairman, members of the committee, I want to thank you for the opportunity to make this presentation.

Whatever social indicator you examine—be it poverty, unemployment, ill health, substance addiction, under-education, violence and abuse, crime and incarceration, or suicide—first nations peoples' rates are many times higher than other Canadians' rates. The root cause is not that we are susceptible to these things. We are not. The root causes lie in the conditions we have faced and still face in Canada.

At the recent United Nations racism summit in Durban, South Africa, I quoted directly from the 1996 final report of the Royal Commission on Aboriginal Peoples. Here's what the Royal Commission wrote:

Aboriginal people have tried for more than a century to maintain their own land base and derive a decent living from the natural resources and revenues on their traditional territories, but these aspirations have been frustrated. Reserves and community lands have shrunk drastically in size over the past century and have been stripped of their most valuable resources. Moreover, as governments allocated resources and economic opportunities on traditional lands, aboriginal peoples found themselves either excluded or positioned at the back of the line.

It is not difficult to identify the solution. Aboriginal peoples need much more territory to become economically, culturally, and politically self-sufficient. If they cannot obtain a greater share of the lands and resources in this country, their institutions of self-government will fail. Without adequate lands and resources aboriginal nations will be unable to build their communities and structure the employment opportunities necessary to achieve self-sufficiency. Currently on the margins of Canadian society, they will be pushed to the edge of economic, cultural, and political extinction. The government must act forcefully, generously, and swiftly to ensure the economic, cultural, and political survival of aboriginal nations.

It was a former Supreme Court justice who reached these conclusions and not Matthew Coon Come, and yet I was attacked in the media in Canada for saying this. Minister Nault demanded I apologize for saying this and told Canadians that these words would set back relations with first nations by several years. Do you know what part of that royal commission quote stands out in my mind? It is this, and I quote it again: “It is not difficult to identify the solution.”

Let us hear again briefly from the Royal Commission on Aboriginal Peoples:

Aboriginal people have limited resources. Their land and resources were taken from them by settler society and became the basis for the high standard of living enjoyed by other Canadians over the years.

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Only a small proportion of Canada's resource income has come back to aboriginal people, most in the form of transfer payments such as social assistance. This has never been and is not now the choice of aboriginal people. They want to free themselves from the destructive burden of welfare and dependency, but to do this they need to have back some of what was taken away. They need land and they need resources.

Again I want to remind you that these are not my words. I agree with these conclusions of the report of the Royal Commission on Aboriginal Peoples.

Our objective, as first nations, is self-sufficiency. In economic terms, self-sufficiency translates into the need to have our own source of revenue. There is no other way to obtain self-sufficiency. And one does not have to become a corporate CEO, an economist, or a chartered accountant to know this.

In this regard, the royal commission, which consulted widely corporate CEOs, economists, the resource sector, provincial governments, and first nations people themselves, warned that Canada must act swiftly and generously. Let us examine why.

There are hundreds of thousands of first nations people in this country existing on the margins of Canadian society. All the way around us, wherever they are, are economies that are viable, and often thriving. In my own James Bay, where I'm from, billions of dollars of revenue are extracted each year from Cree traditional lands. And yes, we Crees are the majority of the permanent residents in Nouveau Québec. Still, we have only 3% or less of the thousands of jobs in the resource sector in our own backyard. In hydro, it's less than 1%.

And as the royal commission observed has happened, we have been pushed aside and left at the end of the line. The James Bay Crees are making great strides to remedy this, but the federal government, the government with both constitutional responsibility and fiscal capacity, has failed to meet its developmental responsibilities to us in Quebec and everywhere else in the land.

A marginalized, a dispossessed population is a blot on the nation's economy and reputation. Remedying the marginalization is a social and an economic win-win. It is obvious that if first nations peoples are brought into the economy and achieve par with average Canadians, Canada's economy will be strengthened. One recent economic study suggests that if this were done, and I quote: “Canadian productivity would rise by 7% overnight. Canada would then surpass Japan and Germany in terms of real per capita GDP.”

That is a very remarkable benefit that can be achieved for Canada. In the end, everyone will benefit. And we can demonstrate this. But it means giving back a little bit of what was taken.

It has been said that first nations' leaders are advancing a “grievance agenda”. My agenda is, by and large, the same as the agenda called for by the federal royal commission, leading economists, human rights commissions and many others. The people dismissing these solutions as a grievance agenda are resorting to slogans, not solutions.

Yes, many first nations' people are aggrieved, justifiably so. They have been excluded or positioned at the back of the Canadian economic line. But we are asking only for what is in the national interest: an end to our poverty, an end to landlessness, and the economic inclusion of our peoples in Canada.

It is said again and again, “We spend $7 billion on first nations each year. Why are we”—that is, the crown and Canada—“not getting results?”

First, half or more of this money is consumed by the Department of Indian Affairs right here in Hull. This expenditure may benefit all Canadians, but does not reach or hardly benefits us.

Second, the expenditure is actually not large. If you measure the equivalent government expenditures by all levels of government on all other Canadians, you will find that the same, or even a greater per capita amount is spent on all Canadians, especially in the north. In our case, the per capita amount of the expenditure is declining in real terms, whereas for all other Canadians it is increasing.

Most importantly, the money is in large part targeted of necessity to vast amounts of welfare and emergency spending. It has little or no development effect.

• 1625

I was a chief and grand chief for many years. Hundreds of chiefs and councils across Canada work honestly and hard on the impossible task of administering 600 or so federal towns for which we are responsible in this country. We do so on budgets that are half or even one-third of the amounts non-native towns of similar size and location have available for the same purpose. Our nations and communities have been put on permanent operational starvation diets.

This thin economic diet has a predictable and devastating impact. Our roads are often unpaved, unlit, and lack sidewalks. Infrastructure, if it's provided at all, is often second-rate, and always physically impossible to maintain. Our first nations public sectors are disproportionately small, contributing to both local social tension and the mass unemployment that is a result of our economic exclusion.

The royal commission called for an additional $1.5 billion per year over 10 years just to arrest social degradation. If spent as proposed in the recent throne speech, this should be a very good start and will have major spinoffs in employment, well-being, and foundations for economic development, which would be impossible without basic infrastructure.

I challenge the federal government or this committee to undertake authoritative studies in cooperation with the Assembly of First Nations on the questions arising from this famous $7 billion expenditure. Let us dispel these harmful myths once and for all. At the same time, let's look outside the box at a Marshall Plan for aboriginal Canada.

I'm not saying these things to build a first nations empire. We are tired of being perceived as whiners with a grievance agenda. Why did Prime Minister Chrétien talk about third-world conditions in our communities? Why did the most recent throne speech state that conditions in our communities are appalling? Because these conditions are real, and because a concerted effort to end first nations dependency is essential, long overdue, urgent, and not discretionary.

If done properly, this will not be a handout. It will be a hand up and an investment in Canada itself. It will be true international development between first nations and the Canadian nation.

Ladies and gentlemen, budgets are or should be about leadership, about progressive social policy, and about slicing and distributing the economic pie fairly and productively. Yes, there are other pressing and urgent needs, including security, but there will always be other pressing, even critical, needs.

In light of the persistent and morbid challenges facing first nations, challenges that cost thousands of first nations lives that end prematurely and unnecessarily each year, it is time to acknowledge that yesterday's budget choices have not been made fairly or effectively. The time to change is now.

You have before you, ladies and gentlemen, Mr. Chairman, the first nations peoples' agenda pre-budget submission. If I may, just for a few more minutes, I'll highlight our submission for you.

Our submission speaks to building resilient first nations, eradicating first nations poverty, increasing first nations participation in the economy, and developing a national security strategy. These issues are addressed through enabling individuals and families, which is about putting in place the social infrastructure through adequate housing, a safe environment, clean water, and greater access to health services, comparable to average Canadians. This will help address first nations individuals' needs for their eventual participation in the economy.

We talk about community and tribal and regional nation-building. This is about supporting fundamental governmental infrastructure that is needed to develop and sustain local and regional structures and economies. It means expediting settlements of land, and entitlements to provide access to lands, resources, and better markets.

It talks about national institution-building. This is about facilitating the set-up of institutions of education, health, social services, resource management, housing, communications, economic development, and the environment. Institutions to permit financial and non-financial services are critical to developing a new fiscal relationship between the first nations and Canada.

• 1630

It talks about external relationships and further developing and defining relationships with the federal, provincial, and territorial governments and the associated jurisdictions, from service delivery to revenue options, of all levels of government—another critical step to developing accountable government.

This plan estimates $4.2 billion annually for five years. The Royal Commission on Aboriginal Peoples recommended, without reference to inflation, $24 billion of investment over 15 years.

In summary, the essence of the Assembly of First Nations' submission is to utilize the human resource advantage by improving the social, housing, education, culture, language, and other programs targeted at individuals, and to develop a more supportive public sector through an improved fiscal relationship, better economic infrastructure, and more responsive first nations institutions.

With that, Mr. Chairman, ladies and gentlemen, I thank you very much.

The Chair: Thank you very much.

We will now proceed to the question and answer session. We're going to have a seven-minute shared round for Mr. Kenney and Mr. Epp.

Mr. Ken Epp (Elk Island, Canadian Alliance): How much do you want, Jason?

Thank you very much for your presentations. We always find these interesting and challenging. I would like to go in the order you presented, and I hope I can get through in this little time we have. I'd appreciate your making your responses very quick.

I have a question for the Fertilizer Institute. You are asking for full deductibility of provincial royalties, which is in effect a tax of sorts. What you're saying is right now, you have to pay taxes on the money you earn before you can pay those royalties. Is that true?

Ms. Daphne Arnason: That's not quite the ordering. We pay the royalties and there is no recognition for that payment of royalties in computing the income tax.

Mr. Ken Epp: In other words, you are paying them with after-tax dollars.

Ms. Daphne Arnason: Right.

Mr. Ken Epp: How about some of your other expenses. For example, if in a province you have a tax on machinery and equipment or any municipal taxes, can you deduct those from your taxable income?

Ms. Daphne Arnason: Yes. Those would be treated as operating costs.

Mr. Ken Epp: This is obviously an anomaly that needs to be corrected. I think I understand that.

To the insurance brokers, you say avoid a deficit, don't go back into a deficit at any cost. But you're also saying don't fall for the pleas to increase spending and don't have any new tax cuts. If the economy is reduced, income will go down, and it's possible there will have to be a deficit if the government doesn't take tax measures in order to keep the economy strong. Is there a contradiction in what you're asking for?

Ms. Francesca Iacurto: I'll answer that.

What we're saying is don't plan for a deficit. However, should one happen because of additional spending on national security measures, that's fine. But our intent was that we not plan for one.

Mr. Ken Epp: Okay, I think I understand that.

Then the other question I have for you is on the EI surplus. We know the government has collected more in the accumulated EI surplus than it has applied to the debt so far, so when you said at the beginning of your presentation you commend the government for its fine fiscal management, we must never forget we are deeper in debt now, by far, than we were in 1993 when this government took power.

In other words, the debt has increased. It has come down somewhat, but we're still farther in debt than we were then. A lot of the money they've spent in reducing the debt has come from the EI surplus. In fact, most of it.... It's a nominal entry in the books, of course, because it all goes into the consolidated revenue fund.

But you're asking for a reduction in premiums at a time when it's quite likely the demands on EI will be higher due to the economic downturn and the disaster that faced us after September 11. Are you really sure you want the premiums reduced right now from where they are?

Ms. Ginny Bannerman: I'm sorry, I couldn't hear your last sentence.

Mr. Ken Epp: Basically, I understood you to say you wanted the EI premiums further reduced. I just want to make sure that is what you said, because that is how I understood you.

• 1635

Ms. Francesca Iacurto: Yes, to the extent possible within the current fiscal context in which we're operating. I don't know where we're going to be in six months or in a year, but it's to the extent that it is possible to do so. It is not an absolute must, but should there be some kind of a windfall or should economic conditions take a turn for the better, it's something that should be looked at.

Mr. Ken Epp: Okay, thank you very much. I have way more questions for all of you, but I have to hurry.

Mr. Staveley, I want to ask you about Canadian electricity. You said you need an investment of close to $100 billion over the next 20 years. Where do you expect that money to come from?

Mr. Roy Staveley: The private sector.

Mr. Ken Epp: The private sector. So that wasn't a request to put that into the budget.

Mr. Roy Staveley: No.

Mr. Ken Epp: That's very good.

How do you propose or what should the government do to encourage that investment in Canadian electricity-producing infrastructure?

Mr. Roy Staveley: Our central position is that the capital cost allowance provisions are well below what they should be relative to the normal or useful economic life of those assets, and as a result of that, it is very difficult for our utilities, particularly those that are becoming of taxable status, to be able to attract the kind of investment that's required, because the rate of returns are inadequate. CCA rates play a very critical role in that. I'm not suggesting it's the only consideration, but it is certainly an important one.

Mr. Ken Epp: Okay, thank you.

The Chair: You have 20 seconds.

Mr. Ken Epp: No, I don't. I have a minute and a half. You said seven minutes.

The Chair: Do you want to say hi to somebody in your riding?

Mr. Ken Epp: I want to ask the Federation of Saskatchewan Indian Nations a question.

I am aware of the fact that natives are behind the eight ball. It's quite evident from all the evidence we have. How do you think the things you have suggested are actually going to produce a better life for the natives in our country, when it's my view that neither you nor the Assembly of First Nations have proposed to us today that perhaps the natives themselves should be able to own their own property and be able to put it up for collateral in order to raise capital and do their businesses or whatever?

It still seems to me that you are looking at the reserve, council, and chief model of self-government. Are you thinking of getting away from that to give individual natives economic independence?

Chief Perry Bellegarde: I always put the people on top now because of the recent Supreme Court decision where they have the right to vote for the chief in council, the Corbière decision. Now every first nations person, regardless of residency, will have the right to vote for their chief in council. So that's the fundamental first nations government, the chief in council. At Little Black Bear, my home reserve, I get to vote for my chief in council now.

Little Black Bear is one Indian reservation that belongs to an agency, five reserves working collectively. Little Black Bear also belongs to a tribal council, 11 reserves working collectively. Little Black Bear also belongs to the FSIN, the Federation of Saskatchewan Indian Nations, 74 reserves working collectively. Little Black Bear is also a member of the Assembly of First Nations, 633 reserves working collectively. That's the structure.

Little Black Bear is also signatory to something very significant: a treaty. Little Black Bear was the chief that made the treaty with the crown in right of Great Britain at one time, and now the crown in right of Canada. As a result, there are structures in governance that treaty relationship has to be respected and honoured.

The reserve system is a collective, because nobody owns the land on the reserve. It's collectively held. So you have individual rights and also collective rights.

The whole idea is, when we start talking about self-determination, it is linked to economic self-sufficiency; there's no question about that. But again you have different levels. All we're doing now is embarking on a journey to say, what will the Little Black Bear chief in council be responsible for on the reserve but off-reserve as well?

There's the issue of portability of rights and services and programs, because in Saskatchewan we might have 100,000 first nations people, but there's migration to the urban centres—Regina, Saskatoon, Prince Albert—that type of thing. So you have to find ways and mechanisms to deal with services and programs for those individuals as well, and that's all part of self-determination and self-government, but again, it's linked to self-sufficiency, self-determination.

• 1640

The Chair: On behalf of Mr. Kenney, I'd like to thank you.

Now, twelve minutes will be shared by Mr. Cullen, Mr. Murphy, and Mrs. Barnes.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Mr. Chairman, and thank you to the presenters.

I have a question for Chief Coon Come, and I'll preface it by saying I believe the challenges for our aboriginal peoples, and indeed for all Canadians in that context, are large. But I'm wondering if what you quoted here as what you said in Durban is all that you said. To say that you just quoted from the royal commission.... I wasn't in Durban, and we all get misquoted, but I was under the impression that you equated the reservation system in Canada with the homelands under apartheid and the townships in South Africa. I don't know if you said that or not, and maybe you were misquoted or misinterpreted, but I do take offence to that.

I lived in South Africa, and I saw the townships and the homelands firsthand. While I understand that you have challenges with your people, I find that analogy a bit offensive.

I wonder if I could take it to the next step, Chief, and say maybe the analogy is as follows: In South Africa they abandoned and dismantled apartheid; maybe we should dismantle the reservation system, because I'm not sure it's working. Do you think it's working? Maybe we should revisit that.

Grand Chief Matthew Coon Come: That's about a three-part question, Mr. Chairman.

I'm not sure how you want me to answer that, but let me make it very clear that I certainly quoted from the UN documents, which I am very familiar with, a UN report that clearly talked about the gross disparity between the aboriginal and non-aboriginal people in this country. I certainly quoted from the UN reports that talk about Canada's fundamental violation of basic human rights and about the marginalization and dispossession of our people.

Certainly I did not use the settlements, which I have visited, which I have seen, in comparison to our system, though the settlements are very small and very poor.... You've been there yourselves. Our conditions are very alarming here in this county, and I wanted to convey the message that our issues are front and centre.

What you did not hear was that I praised Canada for their peacekeeping efforts and for their contribution to other third-world countries through CIDA. I made reference to Canada's participation in peace effort commissions, and so on. I was trying to convey a balanced presentation, but you're a politician and you know that you can be misquoted.

But I certainly feel that we are behind the eight ball and that we can participate in stimulating the economy of this country, but this country has to deal with the essentials of contributing capital in order to stimulate the economy in our areas. We need capital injection in terms of infrastructure, whether you're talking about water, sewage, transportation systems, airstrips, and marinas. We need essential infrastructure that everybody else takes for granted, in order for us to participate in this country.

We are excluded from sharing in access to resources. If you look at our reports, we're talking about accelerating the additions to the reserves policy. We're talking about revisiting the comprehensive land claims settlement, because these talk about access to resources and about increasing the lands that we are presently occupying, because it's land that it's given nobody wants.

Certainly we'd like to be able to strengthen our institutions and participate in the economy, and certainly we want to concentrate on the individual and families in eradicating the poverty of this country. We need the investment of funds for adequate housing, the environment, cleaner water, and so on.

Mr. Roy Cullen: Thank you. I'm glad you made that distinction. Certainly under apartheid, on questions of mobility and human rights, I don't think there are many parallels. I saw that up close and personal, and I'm sure you did as well.

I'd like to move to the Canadian Fertilizer Institute, Mr. Chairman. I have a quick question for them.

• 1645

One of the arguments against allowing the deductibility of royalties is that provinces of course could move in and claim royalties as being a deductible for tax purposes and crowd out the federal revenue opportunities. By the same token, the resource allowance has become administratively cumbersome. In the move from 28% to 21% for the other sectors, your industries, the oil and gas industry and the mining industry weren't forgotten, as you know; it was because there was the view that in oil and gas and mining there were other tax incentives—accelerated CCA, exploration tax credits, and the resource allowance, etc.

In terms of potash and fertilizer, I know you have a unique situation. What do you think about the argument about the provinces crowding out the federal government in terms of taxation, or rents? What other tax incentives do you have in your particular sector of mining that the department would be interested in?

Ms. Daphne Arnason: In terms of the tax incentives, the potash industry is a mature industry in a mature market, and there really are no other special incentives that we benefit from. We truly are seeing the full impact of the high income tax rates.

With respect to what the province is doing, we do have certain assurances. Norm would like to speak to that.

Mr. Norm Beug: From the provincial point of view, the province has recognized the situation with high taxation in the industry, and in 1998 they did make a move to reduce the resource taxes. As recently as last Friday, as an industry we met with the premier and the new deputy minister of energy and mines and discussed the issues. I think there is a recognition that we are a high-taxed industry and that relief is warranted. However, just like you need to balance budgets, they're dealing with the same issues.

Mr. Roy Cullen: Thank you.

The Chair: Thank you.

Mr. Murphy.

Mr. Shawn Murphy (Hillsborough, Lib.): Thank you, Mr. Chair.

I'll reduce my questions to one question for Ms. Bannerman, and this is a philosophical question on your argument about the GST. In this committee we have a lot of economists who come before us, and they basically say the same thing when you talk about taxes. They say that taxes on consumption and taxes on labour are generally more effective and more efficient from an economic development point of view as opposed to income taxes, and especially taxes on capital, which are more mobile.

You've complained about—and this is something I've always wondered about—insurance brokers being GST-exempt, not getting the input tax credits on their expenses, and some of the people who provide the insurance products directly can pass the GST or can pass these input tax credits on as an increased cost.

My question to you is, why is it that the insurance industry is GST-exempt? It would appear to me that it might make more sense if everyone paid GST on insurance. And what are the philosophical reasons to continue this exemption?

Ms. Ginny Bannerman: The position of being GST-exempt goes back to the time the GST was implemented a number of years ago. As far as I'm aware, there are no VAT countries where insurance is actually taxed. I think it's consistent on a worldwide basis.

Ms. Francesca Iacurto: There are a couple of countries that do tax insurance. Australia and I believe France are countries that have just recently started to tax insurance. But this is very recent, in the past year or so. By and large it's not just insurance that's not taxable; it's financial services generally that are not taxable throughout most of the world.

Ms. Ginny Bannerman: I think it was never the intent of the GST that small businesses like insurance brokers should become the end user in this stream. But that's exactly what has happened, and as a small businessperson, when I pay GST on my purchases, I can't pass that along to the policyholder, my customer, so in essence I do become the end user.

Mr. Shawn Murphy: No, my question was.... Let's compare an insurance broker to a law firm. If you hire a lawyer, you pay GST. If you purchase insurance services, you don't pay GST. The problem I'm confronted with is that I can't see a whole lot of difference. I think if the whole system were fair, there would be GST on insurance for the whole industry. If you bought your car insurance policy for $450, you would pay GST.

• 1650

Ms. Ginny Bannerman: I think we would agree with you. It's certainly our position. I don't know that there's an appetite with the public to pass GST on insurance premiums. But there certainly is an inequity in the financial services.

The Chair: Thank you, Mr. Murphy.

Mrs. Barnes.

Mrs. Sue Barnes (London West, Lib.): Thank you very much, and thank you for the time you've taken to make your submissions. Chief, I especially enjoyed reading this presentation. I thought it had a lot of accuracy.

What I'm going to try to do is place you a little bit in our shoes right now, because we've been hearing for weeks people saying, “Invest in me”, “Compensate me”, “Because of a slowdown in the economy perhaps my industry is having problems for a short term”.... There are many unfinished pieces of business.

The insurance people have already addressed whether we go into your position on deficit financing. But there are not the same tax revenues likely to come in the short term to the federal coffers.

I'd like to hear your position on whether or not, when you're a government trying to maintain fiscal credibility, short-term deficit financing is something you would look at as being a viable solution, especially if it's something that is a deficit where your debt to GDP is still on a downward trend, which would then put it in the range of a few billion dollars, give or take a few billion. Or do you just say, no, hold the line, and we're prepared to wait? Do you say we're equally going to have to work through this period and we're all on a level playing field at that point in time? Yes, we'll make our arguments, and maybe there are going to be some things, like security measures, that have a rollout where it's going to be condensed, and some things that had been planned have a longer rollout.

I'd like to ask that very valid question at this point in time. I appreciate that it may be difficult.

The Chair: Ms. Chisholm.

Ms. Sharon Chisholm: I think we are heading into economically uncertain times, so over the next six months to a year we don't know what's going to happen on the revenue side of the government ledger.

What this committee is I think looking at for the most part, or what we're talking to you about, is what's happening on the expense side of the ledger. We're saying that in terms of housing there's an expense line that's been on the budget all of this year. It hasn't been spent yet, but we're saying don't claw it back. It's not a good time to claw it back. We're probably facing huge layoffs among low-income sectors, probably in the service sector and other sectors that will be affected. Let's not at the same time claw back the resources that those groups are going to need to get themselves re-established and back on their feet.

I would think that this government would want to act prudently, but where it can't measure what its revenue is going to be next year, and there could be declining revenues that are related to a whole number of factors that are a bit unpredictable right now, we may have to live with a deficit for the next few years.

What we have done prudently over the last number of years through this government is put money away, pay down our debt, work to balance our budget. We've done that very well and we've been able to have a surplus situation going on for quite a number of years. That's precisely what ought to happen in good times.

If we're going to face bad times over the next short period of time, then I think we have to be prepared to look at a deficit. What I hear from economists is that economic downturn needn't be a long-term downturn. I think if this government looks at making the right investments, then we might be able to come out of it in a couple of quarters. So I would encourage you to invest wisely and to run a deficit if necessary.

The Chair: Chief.

Chief Perry Bellegarde: I think it's always important to live within your means, no question, but also to identify your priorities as a government.

From our perspective as indigenous peoples, aboriginal peoples, we have been identified as one of those priorities. So we have to see what is there, of course, but definitely we should live within the means of government.

Again, we understand finance and interest rates, inflation, gross domestic product, and everything else. We also understand there's only so much there, that you have to live within your means. We understand the deficit is a burgeoning thing and we have to be careful of that. At the same time, our position is if nothing changes now for first nations people in Canada, those high social costs of keeping Indians in jail, Indians on welfare, child poverty, child prostitution, are going to continue to escalate, and the educational awareness we're trying to promote among people is that you have to prioritize that now and deal with that now or those things are not going to come down.

• 1655

The Chair: Thank you.

Mr. Norm Beug: Speaking for the fertilizer industry, my position would be that you have to be fiscally responsible. I do not recommend deficit financing, but what I would do is encourage you to look at what your economic engines are. In terms of our industry, we are 95% export oriented. We are bringing money into the country. So is your bet that by stimulating our industry by levelling the playing field—we're not asking for a handout—are we going to be better able to grow the Canadian economy?

The Chair: Any further comments? Grand Chief.

Grand Chief Matthew Coon Come: There's the question that was raised in the Royal Commission on Aboriginal Peoples on the cost of doing nothing, and Chief Perry Bellegarde made reference to it—when you look at the escalating costs of dependency on social assistance programs, all the problems that are associated with overcrowding, lack of infrastructure, and lack of investment within the first nations community.

But I think you have to seriously consider how you can attract investment and stimulate the economy within the first nations. Certainly investing in the economic infrastructure in those areas, whether it be telecommunications or transportation, would attract investors. Things like settling the land claims issues, settling the treaty disputes, dealing with finalizing these additions to reserve agreements that have been agreed to, could stimulate the economy and contribute towards first nations participation in the economy.

The Chair: Mr. Staveley.

Mr. Roy Staveley: The Canadian electricity industry is a little unique in that there was a time when all the electricity production and generation was crown-owned by the provinces. They would look into the future and estimate what the electricity requirements would be and then subsequently put a plan in place over an extended period of time, because sometimes it can take five or ten years to develop large capacity. They would proceed on that basis, and the crown corporations would borrow the money and would fund it through their rates.

That world is changing. It's changing very fast as part of the North American global experience. There are now utilities operating that have a taxable status, that are competing, that are price-takers, and they're looking for signals that will encourage investors to commit funds and resources to new capacity. This is generating these competing electricity companies competing in a North American marketplace.

We see that in Alberta. If Ontario opens its market, we'll see that in Ontario. That alone puts the electricity industry in a position where 45% of its capacity is now in a competitive marketplace.

It's a different game.

What also needs to be understood in this country is that our reserve margins in this country are now at a historic low of 17% compared to traditionally 30%.

It's partly a reflection of the shift to that competing open market, but it's also a reflection of the lack of investment in electricity. And we have to understand that this country was built on electricity, cheap, low-cost, reliable electricity.

If we do not increase investment in that industry, we are at risk of lacking the infrastructure to support our economy. We also have to appreciate that as the industry transforms itself and more and more of that industry assumes a taxable status, it expands the base by which federal government taxes can increase.

New investment in that industry also provides, I believe, greater capacity to meet environmental and greenhouse gas emission expectations. I believe it also provides the opportunity for this economy to perform and meet its productivity and competitive needs in a global economy.

So I think there are many gains that can be achieved by a very minimal investment on the part of this government.

The Chair: Thank you very much.

• 1700

We'll go to Mr. Nystrom and Mr. Brison.

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

It's not very often you have a constituent before the committee. I wanted to ask one of my constituents a question today. He, like me, is just a shy country boy from Saskatchewan, Mr. Chair.

I wanted to ask Mr. Bellegarde a couple of questions relating to the future of first nations people.

I think the most relevant suggestion you mentioned to us this afternoon is that according to the human resources index of the United Nations, the country is number three in ranking and first nations people are number 63. It's getting pretty close to third world conditions. Certainly, in many a first nation community there are third world conditions.

In my riding, as you know, Mr. Bellegarde, I represent not just 12 first nations in the rural area, but many first nations people, including the Little Black Bear First Nation. I've known the Bellegarde family for many years, including other Bellegardes who were leaders at the provincial and national levels. I also represent many people with a first nations background in the inner city of Regina.

Could you give us a bit of your vision on how some of the Saskatchewan Indian institutes fit into your vision of prosperity? I am thinking here of the Saskatchewan Indian Equity Foundation, the Saskatchewan Indian Federated College, and other institutions you mentioned, in terms of your vision of future economic development. How do they fit in? How could the federal government play a role in terms of helping some of the institutions develop some hope, training, skills, jobs, and education for first nations people?

Chief Perry Bellegarde: Thanks, Lorne.

Due to the unity in Saskatchewan, we have a strong unified basis. Seventy-four reserves work collectively together. With the collectivity in Saskatchewan, the FSIN can do things.

Our institutions are key for our self-determination and self-governance as first nations peoples. We have our own equity foundation and first nations bank. Again, with economic development, they're linked to self-sufficiency. We have Indian access to capital, economic development ventures, and those types of things in place.

There are some things we're working on with the off-reserve issue. The federal crown, the federal cabinet, has to deal with giving mandates for off-reserve first nations jurisdiction. Right now, Indian Affairs will only fund on-reserve.

Our people live off the reserve in urban centres. What about their portability of services and programs and their quality of life? If this were cabinet, I'd say extend and mandate our self-government process in Saskatchewan to deal with the macro-comparability fund and off-reserve first nations jurisdiction.

We're trying to develop a framework for institution building: our indigenous governance institute of Canada, developing constitutions, developing proper financial policies and human resource development policies. The institutions, Lorne, and more importantly our self-determination processes, are key.

We have a fiscal table, a common table, a treaty table, and a governance table. We're trying to establish our jurisdiction. You have the federal crown, the provincial crown, and the first nations crown. It's like three circles intertwined. The feds are responsible for certain things. The provinces are responsible for certain things. But so are we. Some of them are shared and joint. In first nations treaty governance processes in Saskatchewan, all we're doing is mapping out who's responsible for what.

Mr. Lorne Nystrom: Okay.

Chief Perry Bellegarde: It's very clear. We need those to be supported.

Mr. Lorne Nystrom: Can you give us a few more details about treaty governance in the province?

I know the Saskatchewan first nations people are probably the best organized historically in Canada. You do have a legislative assembly. You, as chief, act as sort of the premier or prime minister of the assembly. You have different ministers responsible for different jurisdictions.

Perhaps you can give us more detail. How does it work? How can we plug into it?

Chief Perry Bellegarde: I'm a chief of the FSIN. I also have four vice-chiefs.

If you've read the papers, we're looking at one Indian with one vote in Saskatchewan. We're looking at developing our legislative branch of government, our executive branch, and our judicial branch of government. We have to have that in place.

Do you ever wonder what we mean by self-government? What do we mean? What do Indian people mean?

In Saskatchewan, we have a plan and a model. We're looking at revisions. On November 15—National Chief, we hope you can make it for our announcement—in terms of looking at alternatives to the existing justice system in Saskatchewan, we're looking at alternatives to the existing system.

Within the three branches, we have our legislative assembly where our 74 chiefs sit. We have our executive branch with myself and the four vice-chiefs. The judicial branch needs some work. It needs a lot of work. We're developing the three branches.

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We are very structured and organized. We are entertaining a discussion and debate about one first nation with one vote. To give more credit to our legislative assembly, we're looking at our own auditor general. We want our own ombudsman. We want to have our own systems at arm's length as well, separating the political from the management. Our chief financial officer is here. We have our chief of staff. We're very structured.

Again, the bottom line is, Lorne, when we start looking at first nations in Saskatchewan, we can't be concerned with on-reserve any more, on the rez. I grew up on the Little Black Bear reserve. It's my home reserve. I grew up there. We also have to be concerned with the urban centres in housing, education, jobs, employment opportunities, and poverty. We need both.

If we had more time, I would go through a quick Indian studies 101 in terms of treaties. I know, Mr. Chairman, you're going to cut me off soon.

The Chair: Yes, I will.

Thank you very much. You're out of time.

Mr. Brison.

Mr. Scott Brison (Kings—Hants, PC/DR): Thank you, Mr. Chairman, and thanks to all our witnesses for their interventions today. They're all very valuable and helpful as we deliberate the recommendations we will make to the government.

My first question is to the Canadian Fertilizer Institute. It is relative to the exclusion of your industry in the resource sector from the corporate rate reductions that emanated from the Mintz report. The idea of the exclusion was based on the premise that all sectors should be taxed about equally.

We need to address and eliminate the distortions that discriminate against some of our sectors, in particular this service and IT- or knowledge-based sectors. Once the rates are equalized, then all should move down in tandem, or in lockstep, in the future.

Why would you be opposed to having the rates equalized, then moving forward with a more rapid corporate tax reduction upon which we could all agree?

Ms. Daphne Arnason: In our report we agree with rate equalization. In order for us to achieve it, we do need deductibility of all our expenses. Without it, we're applying a rate to the incorrect number.

Mr. Scott Brison: You would agree with perhaps being excluded from the rate reductions if in fact they were through capital cost allowance? I think that was associated with the energy side of it, but there were some others. Are the deductions, not the rate, the problem?

Ms. Daphne Arnason: The resource sector was excluded because this resource allowance, in effect, is intended to bring, or should bring, the rate from 28 to 21. It is not the case for us.

Mr. Scott Brison: It's helpful information. I may want more details on it.

I have a question relative to the National Coalition on Housing and Homelessness. If we're talking about issues, we almost always speak of food and housing at the same time. Typically when we're speaking about food, we rarely talk about building a new federal, provincial, or municipal infrastructure to address food shortages. We talk about effecting change in transfers such that people always have, regardless of socio-economic stature, access to food. Ought we not to consider housing through that lens? Perhaps we should be addressing it.

Clearly, if someone does not have enough income to afford basic housing, we can address it in one of two ways. We either address it by providing a housing infrastructure, with some level of cooperation between federal, municipal, provincial, first nations, and various governments, or through personal transfers such that people have the ability to afford housing.

It seems to me, particularly with interest rates as low as they are, there ought to be some way we can engage the private sector and also augment, through transfers, the ability of individuals to afford housing.

I'm playing devil's advocate because I'm looking for your arguments to help me better understand this. We may not be best served by addressing this through major national, provincial, and municipal infrastructure. It may be better to address it through the transfers. I share your notion of end gains in what we're trying to achieve.

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The Chair: Thank you, Mr. Brison.

Ms. Sharon Chisholm: I think if you look at how the interventions can be made, there's a whole variety of ways of making them, and you correctly pointed out a couple. In every other industrialized country in the world, there have been major interventions by governments to make housing affordable. There are a number of reasons for that, historically.

The incomes of some income groups never meet the needs and costs of providing themselves with housing, especially in inner cities that are experiencing economic growth, like Toronto, Montreal, Vancouver, and many others. The cost of land and the cost of housing go up to such an extent that people earning almost average incomes of $20,000 to $40,000 a year cannot access housing through the marketplace. So there is a need for government to intervene. It's been proven through the years and through research in every area.

We're still saying there's a role for the private sector. We're having round tables with banks and trying to see what they can do to make interest rates affordable for housing. We're also saying, through our work with FCM, there is a role for promoting home ownership in certain areas. We've supported that in areas where home ownership is the most affordable option. There are some areas of Saskatchewan and Manitoba where you can even get a family on social assistance into a home ownership situation. That might be the right solution for them.

But if we're looking at urban areas, some of which are experiencing decline now, where the cost of housing is astronomical, there is need for intervention. There are all kinds of good economic reasons for doing that kind of intervention.

The Chair: Thank you very much, Mr. Brison. Thank you.

On behalf of the committee, I want to express to you our sincerest gratitude for the input. We really count on Canadians from coast to coast to coast to give us their insight. It will certainly help us address some of the issues we have to deal with before we write the report to the House of Commons and indeed to the Minister of Finance.

I also want to say a special thank you to those of you who came from far away to be with us here in Ottawa. We certainly appreciate that. We look forward to producing a report that will, in many ways, reflect some of the concerns you have cited today and Canadians have cited across the country.

Having said that, I don't want to mislead you. The reality is that we need to have trade-offs. The resources are limited and the wants are unlimited. So we always have to balance those things. We'll try to do it in the most responsible way, keeping in mind that at the end of the day we want to improve the quality of life and the standard of living for Canadians.

For your input I want to once again, of course, express our gratitude. Thank you.

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The Chair: I'd like to call the meeting to order and welcome everyone here for the second panel. Just before we begin, you'll probably start hearing bells. They will mean we're supposed to go to vote. It will be a 15-minute bell. This is what I'd like to achieve in the next 20 to 25 minutes. We'd like to hear the panellists, then we'll go to vote, and we'll come back and do the question and answer session. Is that okay?

We'll begin with the Association of Canadian Travel Agents. You have five to seven minutes. We have 25 minutes to cover five individuals, so stay within the five-minute slot.

We'll now hear from Randall M. Williams, president of the Association of Canadian Travel Agents.

Mr. Randall M. Williams (President, Association of Canadian Travel Agents): Mr. Chairman, members, the Association of Canadian Travel Agents represents over 5,000 agencies across Canada that employ about 30,000 people. We are pleased that the Minister of Finance, in moving up his budget to December, has recognized the urgency to provide fiscal and economic direction in these troubled times.

ACTA appreciates the need for the government to abide by its hard-won achievements of deficit elimination and tax cuts. But representing an industry that was directly and severely affected by the events of September 11, we have no choice but to request that certain short-term measures be taken to remedy the immediate impact, while other medium-term measures be taken to restore Canadians' confidence in air travel, thus ensuring it remains an integral part of our way of life.

In the week that followed September 11, at a time when commercial air travel was suspended in North America, travel agencies worked harder than ever. Under extremely stressful circumstances, their staff assisted displaced passengers in returning home. They cancelled previous bookings, refunded tickets, and answered queries—all without booking any new sales.

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ACTA estimates agencies lost approximately $20 million in revenue that week: nearly $16 million in lost commissions, $3 million in lost service fees, and $1 million in overtime labour costs.

In light of these emergency circumstances, ACTA requests that the government establish a fund of $20 million, to which individual agencies could apply for compensation, based on their volume of business during that same one-week period the previous year.

Our businesses continue to suffer, but we're limiting our request to our immediate and active involvement in this crisis only. We are not asking for a bail-out. We are asking for compensation, as has been provided to the airlines.

The government has recognized that the airlines lost $160 million during this week and has compensated them accordingly. Travel agencies were also on the front lines and deserve proportionate treatment. We are joined at the hip to the airline industry. We are their distribution channel.

Looking ahead over the next six months, ACTA can see a number of ways in which the government can help agencies retain their employees or diminish the impact on those who may be laid off. The employment insurance program could be adjusted by allowing two employees to share one position, with their pay supported by EI; by not penalizing employees who will be working reduced hours in the coming months, in the event that they are laid off eventually—in other words, their benefits could be based on their pay earned up to September 15; or by removing the waiting period for personnel who are laid off.

ACTA also proposes that the government arrange for a short-term loan program, just as it's done with Canada 3000, to allow travel agencies to cover cashflow concerns over the same period.

I'm pleased to say that our counterparts in the United States have just confirmed short-term loans to travel agencies in the U.S. of up to $1.5 million per individual business. If we don't consider some comparable program in Canada, we'll be putting our Canadian businesses at a disadvantage competitively to a lot of the agencies that are Canadian-owned.

Looking even further into the future, the government is to be congratulated for its recently announced investment of $250 million in improved equipment and staffing at airports. But beyond the strict question of security, there is a more pervasive question of Canadians' desire to travel. Without a positive stimulus, there is a danger that the psychological ripple effects of September 11 will extend throughout an already faltering economy.

In this regard, we support the government's just-announced $20 million to the Canadian Tourism Commission as a one-time fee to promote travel in Canada and from close border states into Canada. We congratulate the Government of Canada for its $20 million announcement made in the last couple of days.

Another positive incentive to get people to travel again would be to provide for a tax deduction of up to $1,000 for personal travel expenses occurring during 2002. There's a member's bill in front of Congress asking for $500 for an individual, or $1,000 for a couple in the U.S. as well. We want to be consistent with that request.

This deduction would be further limited by being restricted to travel within North America and could cover airplane, cruise, train and bus tickets, hotel and motel accommodations, and rental cars. Just as all Canadians were stunned by the horrible events of last month, so should all Canadians be now encouraged by their government to reaffirm their right to be mobile.

To summarize, ACTA recognizes the overall need for the government to stay the fiscal course. Our recommendations to the committee can be viewed as part of the government's national security package, which it has already begun to unveil. Like other parts of the package, our recommendations arise out of unfortunate circumstances, but they are necessary measures, if only for a very limited period of time.

I thank you for your attention and look forward to your questions.

The Chair: Thank you very much, Mr. Williams.

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Now we'll hear from the Canadian Certified General Accountants Association, Everett Colby and Dawn McGeachy.

Mr. Everett E. Colby (Chairman, Taxation Policy, Canadian Certified General Accountants Association of Canada): Thank you, Mr. Chairman.

The last time we appeared before this committee, the Certified General Accountants Association of Canada provided members with several options for business that were designed to improve incentives, spur productivity, competitiveness, and further economic growth. We're pleased the Minister of Finance has now adopted many of our recommendations.

Since last year, the world is now a different and perhaps more dangerous place. CGA Canada today comes before this committee with a clear message as you help the minister prepare the next federal budget. The Government of Canada has put in place a fundamentally sound fiscal plan. Despite the horrendous events of September 11 and their impact in deepening an already weakened economic environment, it is essential for the federal government to show leadership resolve in keeping on track.

As members of the committee may know, CGA Canada represents over 55,000 certified general accountants and CGA students right across Canada. CGAs are accounting and tax practitioners who serve individuals and businesses of all sizes. Our members have links to small and medium-sized enterprises and are well positioned to explain the needs of these organizations in the budgetary process.

CGAs also occupy administrative, management, and policy positions in governments, financial institutions, charities, and corporations at the most senior levels. CGA Canada and its members take our role and duty in helping to shape Canada's budgetary policy very seriously.

Mr. Chairman, the events of September 11 in America have shocked and saddened Canadians. These acts place a fresh scar on humanity. The thousands who have lost their lives are joined by thousands who have lost their livelihoods. Faced with the unpredictability of war, financial markets will continue to be extremely volatile. The consumer confidence that was keeping the global economy afloat is now seriously eroded. There is no doubt that our collective sense of security has been shaken. There remains a high level of uncertainty. Some general trends for the Canadian economy are clear: consumer spending and business investment activity are expected to drop sharply in the third and fourth quarters of this year, pushing the North American economy further towards a recession. Analysts agree, though, that any recovery will likely not begin until the latter half of 2002.

The manufacturing sector will be hit hard, as will other important sectors such as the airlines, hospitality, insurance, and financial services. Employment in these areas can be expected to decline, along with corporate and government revenues. The federal government will be forced into spending on security and defence to bolster the perimeter around our borders. This spending, combined with slower-than-anticipated growth, could consume much of the anticipated surplus for this fiscal year.

Mr. Chairman, in light of these circumstances, CGA Canada strongly urges the federal government to proceed with caution to keep on track with the priorities set out in Budget 2000, the October economic statement, and the May 2001 update.

The Chair: You have two minutes.

Mr. Everett Colby: To do otherwise could jeopardize the tax cuts promised to Canadians and eliminate the deficit that Canadians worked so hard to achieve. Yet Canada must not lose sight of the future.

For several years, CGA Canada has voiced its concern over Canada's lagging ability to increase wealth through gains and productivity. Lower growth in productivity relative to our largest trading partner, especially in the manufacturing sector, has plagued the Canadian economy for more than two decades. Factoring in dramatic increases in the high-tech sector in both Canada and the United States, the overall productivity of Canadians still sits at a rate equal to 80% of our U.S. counterparts. We're simply not keeping pace.

Closing this gap is one of the most important economic challenges that Canadians will confront in coming years. Innovation is the key to generate growth and create the wealth necessary to strengthen our social safety net, health care, and education. That is why in past pre-budget submissions, CGA Canada has urged the federal government to address its fiscal weaknesses, cut taxes, and put in place a framework for building an innovative society. CGA Canada believes this framework should include the following: sustaining cuts to personal income taxes while exploring structural reform of the tax system itself; accelerating and deepening reductions in corporate taxes; aggressively paying down the national debt; and articulating a national innovation strategy that includes support for lifelong learning.

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Collaboration will be needed among governments, business, individuals, and institutions to ignite Canada's powers of innovation. A new and expanding skills base is becoming the norm. To compete in the global marketplace and to further improve our standard of living, individuals and business must create a culture of lifelong learning. The federal government can help ensure that Canadians receive the training and education they need throughout their lives by implementing various direct and indirect funding policies as well as legislative measures. These measures have been explored in greater detail in the document you have before you.

In closing, Mr. Chairman, may I re-emphasize that it is the view of CGA Canada that the current circumstances and events require the federal government to show leadership and resolve. Commitment to its sound fiscal strategy, carrying through promised income tax reductions, and lower interest rates will serve to rebuild Canadians' confidence.

CGA Canada appreciates this opportunity to participate in your pre-budget deliberations and we look forward to the discussion with members.

Thank you.

The Chair: Thank you very much.

We'll now proceed to T-Base Research and Communications Inc., Sharlyn Ayotte and Jillian Deevy, manager of web projects. Welcome.

Ms. Sharlyn Ayotte (President, T-Base Research and Communications Inc.): Thank you very much for the invitation to participate once again in the parliamentary Standing Committee on Finance's pre-budgetary consultations.

This is my fourth presentation. During the last three, I've identified a number of issues that have an impact on the ability of Canadians to participate, particularly in the area of equality, in the delivery of information, communications, and technology.

This is an honour being here before this committee. It's one that I cherish as a Canadian, and I also cherish the responsibilities that go with it.

I'm going to introduce Jillian Deevy, who works with me—an esteemed colleague—who will go through our presentation, since I'm unable to read it. Thank you.

Ms. Jillian Deevy (Manager, Web Projects, T-Base Research and Communications Inc.): Thank you.

Accessibility as it pertains to information and technology is a serious issue that must be addressed by the Government of Canada. How can the 40% of adult Canadians unable to access information through conventional methods be served by a government committed to providing equal opportunities for all citizens? Is it appropriate or equitable for the Government of Canada to exact taxes from all citizens to support service systems that are available and accessible to only some?

The government is committed to the single-window-of-service concept. Therefore, the single window must be open to everyone. What measures can the Government of Canada take to ensure that our information, programs, services, and technologies are available and accessible in the mainstream to everyone?

The Government of Canada is committed to becoming the most connected country in the world. By 2004, our goal is to be known around the world as the government most connected to its citizens, with Canadians able to access all government information and services online at the time and place of their choosing.

With millions of Canadians unable to access information through conventional means because of differences in ability, language, culture, literacy, and age, providing a single window of service that considers the various communications methods of our citizens is paramount to achieving this goal.

Getting government online by 2004 involves much more than delivering programs and services on the Internet. Among the challenges faced by the Government of Canada is the need for collaboration among all sectors in order to serve Canadians better. The social union agreement is based on a mutual respect between orders of government and the willingness to work more closely together to meet the needs of Canadians. The guiding principles for this agreement are equality, respect for diversity, fairness, individual dignity, responsibility, and our responsibilities for one another.

Governing in the 21st century will place the citizen at the centre of information and service delivery, reflecting Canadians' expectations of government in our knowledge-based economy and society. The way we design, integrate, and deliver information must improve if we are to provide accessible online resources for all Canadians.

The collection and analysis of information pertaining to social issues has traditionally been of a categorical nature. As a result, the collation of information as it pertains to different stakeholders has been categorized in vertical social markets. We have created silos of information in the areas of disability, older adults, literacy, language, culture, demographics, economics, and more. Having analyzed information in this way, the resulting policy reflects and supports segregated service delivery models. We must now examine these vertical statistics and identify shared communication barriers experienced by many different social groups.

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To resolve modern accessibility issues we must consider these barriers from a horizontal perspective to reflect common and shared communication and infrastructure requirements. Such a horizontal examination will demonstrate that fully 40% of the Canadian population will be excluded from the 2004 government online delivery of programs and services, if websites in the associated technology and infrastructures are not accessible or usable.

Information is made available to the public through a variety of channels such as conventional print, telephony, radio and television broadcast, and/or through the Internet. However, there's a significant and growing portion of the population unable to access the required information through these methods. Every day millions of citizens are prevented from participating in and contributing to the social and economic life of our country because information about important government programs, services, and decision-making processes are not readily available or accessible. People may become isolated by differences in culture, language, literacy, physical, cognitive, or sensory ability.

Canadians provided with essential information and services through accessible communication methods are more able to become active participants and contributors. The full and active participation of citizens in government processes is a hallmark of a strong and successful democratic society.

The implementation of technology is dramatically altering the nature and quantity of services offered by government and industry as well as how and where they are available to consumers. The swift pace of technology development promotes healthy competition in the market and offers opportunities for consumers to benefit from new and enhanced products and services.

The Internet has gained public acceptance faster than any other communication medium in history. Internet technology has caused a massive global revolution and restructuring of the way government and business is conducted. E-commerce activities enabled by advanced online information networking systems include government services, financial services, retail product marketing and service delivery, research and information retrieval, and more.

The application of new technology in all areas of service provision, however, is creating a widening gap between people who have access to technology and electronic networks and those who do not. This is known as the digital divide. This technological revolution's resulting trend is creating an electronic gap between rich and poor nations and between enabling and disabling designs, making the disabled of the future people who cannot access the Internet because they cannot access the technology or because information designs do not encompass a broad range of requirements. This is of paramount concern, and world leaders conducting global efforts are designing a new framework for development aid and increased funding to shrink the divide.

The Government of Canada is committed to making Internet and e-commerce technology broadly available to Canadians in the mainstream through initiatives such as Government On-Line and Connecting Canadians. But it is not and will never truly be accessible to all citizens unless we make a commitment to eliminate the systemic communication barriers that exclude many of our people.

If Internet technology is to become a mainstream provider of essential services and offer significant social, economic, and cultural benefits to all Canadians, accessibility issues must be addressed and resolved. Universal design could be defined as a skilful organization of all elements inherent in a project or plan with the intention to make the outcome accessible to everyone. Universal design is the principle that guides the process to integrate all elements required to ensure facilities, technology, information, programs, products, and services meet the diverse requirements of today's society.

Making information systems and technologies universally accessible in mainstream applications can be achieved easily and cost effectively through appropriate human machine interface design coupled with accessible program, service, and information design. If engineers and designers are required to consider and apply universal design principles and accessibility criteria at the concept stage of project development, accessibility will become inherent to the successful outcome of a project.

In the U.S. in 1998, legislation amending section 508 of the Rehabilitation Act created binding enforceable guidelines on accessibility to any electronic or information technology utilized by the American government. Basically Congress said if you want to sell electronic and information technology to us, it must be accessible to persons with disabilities. They made the Federal Communications Commission responsible for enforcement of the legislation. This is significant because the federal government is the largest procurer of electronic information technology in the U.S.

The American market is pertinent to the Canadian market as neighbours, business partners, and often competitors. We must stay abreast of electronic communication developments in order to maintain Canada's leadership role in the global market.

Recommendations. The Government of Canada is responding to the modern challenges of designing, producing, and supporting accessibility within the areas of information, programs, services, technologies, and supporting infrastructures as they integrate online services into the business of government.

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I recommend that the Government of Canada provide leadership by ensuring the fullest possible participation and contribution of all citizens in the social and economic mainstream of our country. I request that funding and resources for the following initiatives be provided for and allocated in the next federal budget of the Government of Canada.

Legislation. Direct the government in accordance with human rights legislation to develop and enforce regulations that address systemic communication barriers affecting the equitable delivery of public programs and services.

Policy. Amend the Treasury Board communications policy and develop strategies to govern the provision of accessible information and delivery methods for program services and technologies.

Broaden the scope and definition of the communications policy to include all information formats and delivery systems so that all Canadians may be fully and equally informed.

Ensure that the Government of Canada provides accessible information, programs, services, and technologies by integrating accessibility criteria into federal procurement policy and in the terms and conditions of government contracts.

Standards. Develop and apply government-wide standards, guidelines, and specifications for the design, production, and distribution of accessible information to ensure compatibility with adaptive and emerging Internet technologies and applications.

Establish a centre of excellence for accessibility design to ensure that the federal public service has access to the tools, resources, and knowledge to assist in the universal design of accessible information and related technology infrastructures.

Technology and information. Integrate accessible work station technology into all public points of access in support of Government On-Line initiatives, including community access centres and human resources centres to ensure that Canadians have access to online resources.

Design and implement accessible methodologies for all federal consultation initiatives such as the children's agenda, disability agenda, health care agenda, literacy agenda, etc., and notify Canadians about upcoming consultations via accessible channels and methods that facilitate participation by the widest possible cross-section of Canadians.

Expand the mandate of the national depository services program—Canada's information safety net—to establish it as the national clearing house for the collection and dissemination of crown copyright information in multiple formats and ensure that all new government publications are available to the public in multiple formats at designated library affiliates across the country.

Ensure that the accessibility rights of all Canadian citizens are protected and that equal opportunities to access information, program services, and electronic delivery systems are guaranteed by incorporating the above into all federal-provincial and federal-territorial agreements within the social union framework.

In conclusion, responsibly serving Canada's diverse population requires addressing citizens' various communication requirements. With universal design we can provide all citizens with the ways and means to communicate through their preferred interface. For example, sight, sound, and touch are common senses. By addressing the diverse communication requirements of our citizens, we can position Canada to move forward in the global economy.

Thank you.

The Chair: You did that all in one breath.

Thank you very much.

What we'll do is this. We're going to suspend for approximately...well, the time it takes to go to vote. Then we'll come back and we'll hear from the Council for Business and the Arts in Canada and La Fédération des producteurs de pomme du Québec right after that. Then we'll get into the question and answer session.

Thank you, and thank you very much for your patience.

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The Chair: I would like to call the meeting to order and welcome everyone back.

Now that we have finished voting, we can get back to the business of the committee. We left after the presentation made by Ms. Jillian Deevy and Sharlyn Ayotte from T-Base Research and Communications Inc. We're back with the presentation from the president of the Council for Business and the Arts in Canada, Sarah Iley.

Welcome.

Ms. Sarah Iley (President, Council for Business and the Arts in Canada): Thank you very much, Mr. Chairman and members of the committee.

The Council for Business and the Arts in Canada welcomes the opportunity to participate yet again in the process of budget-making. I think this may be a first.

We will start by saying how incredibly efficient the committee is. We made recommendations to this committee in August, and the finance minister has acted upon them already. So kudos to you, and our thanks to the finance minister.

Our first recommendation was to have an immediate extension beyond December 31, which was the original deadline of the tax incentives for gifts of publicly listed securities. We had undertaken a study with other associations in the charitable sector that proved that this particular tax incentive has really had an enormous difference in terms of the level of gifts and the number of gifts to the charitable sector, so we were very pleased with the announcement of the minister on October 12 that this will in fact be made a permanent measure.

That said, I must go on to our second recommendation, which is that the Council for Business and the Arts in Canada believes very strongly that it would be extremely beneficial for Canada and would put our country on a level playing field with the United States and the United Kingdom if in fact gifts of appreciated securities were exempt completely from capital gains tax.

The Chair: Done.

Ms. Sarah Iley: That is an enormously important incentive, and we think it very important that this tax incentive be introduced, particularly when you walk into the British Museum and see that it is massively endowed by a family named Weston, for instance. There are lots of things we could be doing to keep philanthropic dollars in this country.

So that is our second recommendation, but we do welcome the minister's extension of the present incentive, and we know many charities across this country will welcome that.

We also would like to see some extension of the tax incentives that exist to some other quarters. One would be to private foundations. Presently 86% of foundations that are very active in charitable support in this country are precluded from accepting gifts of publicly listed securities in the same way. They are precluded from the same tax incentives that apply to public foundations, and we think it would be very useful for private foundations to be able to have the same tax benefits of receiving gifts of publicly listed securities. So that is another recommendation.

Thirdly, we think it is high time to thank the Prime Minister and the Minister of Canadian Heritage for their leadership in the announcement of “Tomorrow Starts Today” back in May, an enormous leadership backed by $500 million to support the arts across this country. We have been, along with many other arts organizations, very concerned that the level of federal support of the arts in this country has not kept pace, and we've been very grateful for the infusion of this new money.

That said, we think it's very important that this particular allocation of $500 million really be seen as a leadership act by the federal government because we feel very strongly that the public purse cannot be the only purse that supports the arts across this country and we would like to see that money used in as many ways as possible to lever more private sector support.

The original intention of that money, when it was announced in May, was that it would be given out over three years. With the present circumstances, we're not sure that will all be flowed, but we want to encourage the government to think very seriously about continuing to not only make good on that promise of $500 million but look at how that could be used to lever more sustainable support of the arts from other levels of government as well as from the private sector right across this country.

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So really, Mr. Chairman and members of the committee, I'm here to say thank you very much for the work you've done to date. I think you have done an awful lot to support philanthropy in this country. Thank you also for the support of the arts in this country. I only echo the words of a fellow panellist who said “Stay the course”. We are very pleased with the course you have taken to date.

Thank you.

The Chair: Thank you very much, Ms. Iley. You can come back tomorrow, if you like, and say the same thing.

We'll hear from the Federation of Quebec Apple Growers: François Rochon, the president; Jean Louis Roy; and Réal Caron. Welcome.

[Translation]

Mr. François Rochon (President, Fédération des producteurs de pommes du Québec): Mr. Chairman, members of the committee, since the early 1990s, many apple growers in Quebec have been buffeted by events outside their control, such as natural disasters—a winter freeze in 1994, hail, tissue breakdown, drought—and market disasters—collapse of the price for processing apples, fierce competition from apples from all over the world—the United States, Chile, New Zealand, South Africa and elsewhere, which led to a fall in prices. Further, the concentration of supermarket chains, which led to restricted market access; distortion between the agreement reached by the Table filière de la pomme, which represents all stakeholders, on quality standards and those demanded by the big chains.

Despite this problematic situation, Quebec's apple producers and packers have developed a quality-centred approach, a targeted promotion and an ordered marketing at very competitive prices, to cope with dumping of certain products by certain countries, for example Washington State's Delicious crop.

But the industry does not enjoy the margin needed to ensure tree stock renewal, which is forcing it to live on its depreciation while postponing the required new investment unduly. The delay in replanting Quebec's orchards is going to cause a lack of competitiveness and undermine their profitability.

In June 1995, a committee set up to investigate special measures for the apple industry tabled with the federal Minister of Agriculture a strategic plan for Canada's apple industry that stressed the importance of setting up a genuine replanting program in Canadian orchards. We would like to propose a comprehensive development policy for Quebec's apple industry.

Our objectives are to introduce a comprehensive development policy for the apple industry in order to reinvest in orchard replanting with a view to increasing productivity by diversifying the varieties of apples that Quebec offers consumers; re-establish a healthier financial situation for apple growers and become more competitive.

To improve farm insurance programs, we must improve the income security programs to safeguard apple growers' investments. We have begun talks with the Quebec government in this regard. We expect the federal government to maintain an open-minded attitude on the issue.

As regards the crop insurance program, we achieved a major reform of the crop insurance program in 1999. However, certain adjustments must be made to safeguard real orchard potential and to get a program that recognizes the unique features of a perennial crop where quality involves very demanding visual criteria. Apples have to be perfect or they're worth nothing!

As for the replanting program, improved orchard productivity depends inevitably on a program for renewing orchards. Stands that have reached the end of their productive life or have become unprofitable must be replaced.

According to the statistics that the Fédération obtained from a tree inventory carried out by the Institut des statistiques du Québec and published on December 1, 1998, we have more than 3,106 hectares of standard apple trees, in other words 38% of our surface area in Quebec, in addition to a certain percentage of dwarf and semi-dwarf apple trees planted following the 1981 freeze, which will have to be renewed shortly.

This replanting program should cover the start-up cost of more than $21,000/hectare. This program will be available to established apple growers, and will cover 50% of set-up costs. We estimate that the project will require approximately $60 million in capital; hence, a request for $30 million in funding.

• 1820

Given that the apple industry in Quebec is experiencing fierce competition, as described in the “background” section, we believe that the planting that has taken place over the last five years should justify this assistance to help these producers remain competitive and stay in business.

As regards business turnarounds, the deletion of a portion of debts with the Farm Debt Review Board of Canada would help heavily indebted apple growers. We will have to refer several businesses to the Farm Debt Review Board.

Let me now turn to the manpower problem. If it were financially healthy, the apple industry could generate jobs in the craft trades, such as tree pruning and high density orchard management. But in addition to having difficulty recruiting manpower for picking, producers find it difficult to pay adequate wages to keep pickers interested.

The Canadian government should also promote the construction of farm buildings to house pickers, namely financial assistance in the order of $2 million.

Unlike other countries, Canada does not advocate labour market integration for welfare recipients. In our opinion, this manpower could be a significant source of help for apple producers and other agricultural sectors, if their benefits were not cut during the harvest period.

We believe that these individuals should be encouraged to help with the harvest, as is done in several OECD countries. In fact, the harvesting of apples is just about the only task which cannot be done mechanically in the orchard.

Many apple producers lost part of their orchards as a result of the severe winter freeze of 1994. We estimate that uninsured capital losses in 1994 amounted to more than $7.7 million that year, which represents an actuarial loss of over $12 million today. That disaster, unlike the ice storm of 1998, was not adequately compensated, and producers who were hard hit had to go further into debt or sell part of their business in order to take care of short-term debts.

As for product marketing, since the early 1990s, despite many obstacles, the Fédération and its partners have implemented a more structured marketing of the product that takes into consideration competition and quality control. This strategy, which is the only one of its kind in North America, is known as “Pommes Qualité-Québec”. The Fédération has also implemented a dynamic marketing campaign, and Quebec's apple producers and packers have invested more than $5 million in these two projects in recent years.

Quebec's apple marketing system will have to be enhanced in light of the destructuring of apple marketing in Ontario as a result of the closure of the Ontario Apple Commission following a decision by the Government of Ontario. We need technical and financial assistance in order to expand our exports.

In conclusion, if it were financially healthy, the apple industry could generate many jobs. For this reason, our demands are as follows: a 30-million-dollar orchard renewal program for Quebec; $12 million in financial assistance for producers affected by the winter freeze of 1994; a business turnaround program for apple producers; a manpower policy for the apple industry that supports a quality harvest which is competitive; an income security policy and crop insurance program that is adapted to the apple industry and technical and financial assistance to expand exports.

Thank you.

The Chair: Thank you, Mr. Rochon.

[English]

We'll now proceed to the question and answer session. It will be a seven-minute round for everybody.

Mr. Epp, you'll start.

Mr. Ken Epp: Thank you very much, Mr. Chairman.

And thank you to all of the participants this afternoon. Thank you for joining us in our vote.

Beginning with the travel agents, there's no doubt that the events in the second week of September had a significant effect on a whole bunch of different sectors in western economy. You're here asking, I think, for more help than you got. Or am I wrong in that? Are you content with the kind of assistance the federal government gave at this stage, or are you looking for more?

Mr. Randall Williams: I'm sorry, did you say “with the help the government has already given”?

Mr. Ken Epp: Yes.

Mr. Randall Williams: Sorry, I just didn't hear the last part of that question.

Mr. Ken Epp: Well, are you content with the help you have already received from the federal government, or are you asking for more?

Mr. Randall Williams: To my knowledge we have not received any assistance at this point. There was $160 million provided to the airlines.

• 1825

Mr. Ken Epp: I thought you said something about there being some amount of money provided to your industry as well, to your sector.

Mr. Randall Williams: No. In the United States the government there has announced a loan program for up to $1.5 million per agency, but in Canada we have not received any assistance from the federal government, for travel agencies in Canada. You have given $20 million to the Canadian Tourism Commission to promote and advertise travel. That has been done.

Mr. Ken Epp: Okay.

I have a question also with respect to the EI benefits. You indicated you'd like to have any possible benefits for staff laid off be based on the period prior to September 15, I think you said. Is this because you're keeping people on now, but their incomes are so low that eventually they'll probably not be able to stay? Is that why—so that their benefits would be based on their higher rate of earnings before the event?

Mr. Randall Williams: We're making that suggestion because most agencies in the country have cut the hours from five days a week to three or four days a week. We want the countback period, if they are eventually laid off, to be prior to September 15—not for, let's say, three months. For example, if you were to keep employees now on staff, let's say, for three days a week instead of five for three months, and then after three months you decide it's not turning around and you have to lay them off, we want them to be paid benefits based on earnings up to September 15 counting back, rather than up to, let's say, December 15 counting back. It would be penalizing them on what they should be earning—on a lower income, rather than on what they were making pre-September 11.

Mr. Ken Epp: I'm not sure such ad hoc changes to the regulations—even though this is a very important event that I'm sure makes a significant difference to your people.... In that sense, I'm sympathetic. But if you open the can of worms on ad hoc changes to the regulations based on individual catastrophes, I'm not sure we'd be able to sustain any kind of dependability on the whole program. That's just a question I have and something we'd have to look at.

I'd like to ask the Certified General Accountants a question. You have indicated you want the announced tax cuts to be done and then indicated you'd like to see some improvement to the tax system. What specifically are you talking about there?

Mr. Everett Colby: Part of the structural reform we are referring to stems from there having been a number of economists in other countries who have looked at lowering personal income tax rates while broadening consumption-based taxes. That would be an area of potential structural reform we would suggest warrants further research.

Mr. Ken Epp: You're suggesting this government should, say, increase the size of the GST. Is that what you're suggesting?

Mr. Everett Colby: When the GST was introduced and the unfortunate backlash we're all aware of followed, I believe part of the problem was it was introduced without a corresponding reduction to personal income taxes. It was, in effect, in most people's eyes, an increase in taxation. If the government is going to look at structurally reforming the tax system to move towards a broad-based consumption tax, it would have to be done in conjunction with further and deeper cuts to personal income tax so the people don't just view it as another additional tax. You can't do one without the other in that respect.

Mr. Ken Epp: That explains that to me.

Now, to T-Base Research and Communications Inc., you gave quite a lengthy presentation and certainly laid forward a strong case with respect to increasing and providing access to information for people who cannot receive it in the usual way, but through touch instead of through sight, and through sound perhaps, in other ways. You made a very compelling case.

• 1830

But while you were giving your presentation—and I recognize it was very hurried, and we were all anxious because we had to leave—the thought kept going through my mind, because this is a pre-budget consultation: Specifically what should the Minister of Finance do in his budget? Specifically what should we tell the finance minister in order to achieve your goals?

I guess I could ask you the question I asked some people when we were doing our cross-country tour. I said, if you had the opportunity to write one sentence for the budget speech, what would that sentence be?

Ms. Sharlyn Ayotte: It would be to have the government allocate the funding and the necessary resources to establish a centre of excellence to ensure that our public sector employees have the resources, the skills, and the knowledge to design accessible products, services, and technology.

Mr. Ken Epp: That sounds pretty impressive, Mr. Chairman. Now you, of course, are talking about more research being done to improve accessibility standards and so on. I would like to ask you to what degree you think these standards are now...? Well, they're basically nonexistent, as far as I know; there aren't any in Canada. It's pretty well what the market provides and what the market will bear. But, for example, different computer companies and different software companies do have accessibility software. Is this inadequate, and what should the government do beyond what's provided by the software and the hardware manufacturers?

Ms. Sharlyn Ayotte: There are a couple of pieces of standards. One comes from the W3C web accessibility initiative out of the U.S.—or actually it's an international standard. We have the “common look and feel” standard within the Government of Canada. What's been happening is that new technologies have been developing with no reference to the existing infrastructure standards for technology implementation. So you have the development of adaptive technologies, based on absence of standards, trying to tie into a federal infrastructure technology base. We need standards to push out to industry so we can comply and our systems can be compatible.

Mr. Ken Epp: You're talking about technical standards here.

Ms. Sharlyn Ayotte: About technical standards and guidelines—that's practices, procedures—yes.

Mr. Ken Epp: Well, it's certainly a goal I think should probably be pursued through the ministry of industry. I think it probably has a role where it would apply more than through the budget process, but that's my opinion only.

I have one question for the Quebec Apple Growers, and that has to do with the overall picture for farmers. We have farmers in western Canada—grain growers particularly and also people who raise cattle—who have had four or five years of drought and other difficulties, and we know the people of Quebec have had their challenges in the last several years: the ice storm and, as you indicated, the winter freeze several years earlier that affected the apple growers significantly.

In your view, what proportion of those losses should be covered by the taxpayer in general through grants that come from the taxpayers? In other words, basically what you're asking for is that the losses farmers are experiencing be covered not by their industry, not by them as individuals, but by all of society. Should it be 100%? Should it be 20%? What would be the number you think would be reasonable?

[Translation]

Mr. François Rochon: You could put it this way. To answer that question, you would have to ask yourself how much producers make from the sale and the level of risk they take. If an industry cannot make a profit on its sales, it will die because the risks are too high and it doesn't matter if the percentage is 10, 50 or 80%.

• 1835

In my view, the mission of farming is to feed a country, but a country also has the obligation to ensure that its farmers survive.

You want to know what percentage would be acceptable. For me, it's not a question of percentages. I feel that the point is for all Canadian citizens to have a healthy and diversified diet and for the farmers who produce food to be able to live off their work. Today, Quebec apple producers are in a tight spot because of weather disasters and competition.

Quebec imports more kinds of apples than it produces. This situation does not apply to any other type of fruit. The imported apples come from the four corners of the earth. Therefore, we must remain competitive, even if we maintain some of the most expensive social programs in the world, since Canada is a country which treats all of its citizens well, namely in the areas of health and social benefits. Our competitors, however, don't have these types of expenses.

[English]

Mr. Ken Epp: I'd like to have another round if there's time later, Mr. Chairman.

[Translation]

The Chair: Madame Picard, you have the floor.

Ms. Pauline Picard (Drummond, BQ): I am very pleased to welcome you. Since you don't have much time, I will ask a couple of specific questions.

But even if I don't ask any questions of you, I would like to tell you how pleased I am that you are here. There are two apple producers in my riding, Drummond, which are Duhaine and Blanchard, whom you no doubt know. I'm very pleased that you took the trouble to present a brief. I will read it carefully.

I would like to ask Mr. Williams a few questions. In your presentation, you said that the travel agency business lost about $20 million because of the events of September 11 and that you would like to be compensated for your loss. How can you be sure that that figure is accurate and who would make sure that the compensation is paid out fairly?

[English]

Mr. Randall Williams: Thank you for your question.

The amount we're proposing, $20 million, is calculated from the numbers that came out of BSP Canada. BSP stands for bank settlement program. It's part of IATA, the International Air Transportation Association, out of Montreal. It's a weekly processing of all the funds that are collected through airlines and travel agencies in the country. It's done on a strict accounting process every week. All the moneys are sent to credit card companies, to banks, all the cheques are processed—all of that kind of thing is done. So the numbers I'm quoting come from a reliable source.

We know that in Canada there was $105 million less in airline travel during the week of September 11 to 18 versus the previous year. We've done a calculation based on our normal commissions, based on those numbers, and that's how we arrived at the $20 million amount.

My recommendation to this group is that the fund be set up with $20 million. It would be available, let's say, until January 31 and travel agencies would apply to this fund. After January 31, whatever is remaining in that fund is turned back to the Government of Canada. But it would be a fund sufficient enough to provide compensation for travel agencies for their lost customers for that one-week period, the same that was given to the airlines.

[Translation]

Ms. Pauline Picard: If I understood correctly, you said that this fund—or the compensation—would be enough to provide working capital for travel agencies. Is that right?

• 1840

The media have said that some agencies may go under because of the events of September 11 and because of the economic slowdown. Do you have any other short-term solutions?

[English]

Mr. Randall Williams: Madame Picard, thank you for the follow-up question.

We want to convey two points to this committee, two points really that we need to reinforce with you. First, we need to be compensated because the Government of Canada told our customers to come down from the skies the week of September 11 to 18. That was the case made by the airline industry. Our customers who were going to Los Angeles, Zurich, London, New York, and all over the world, and to Canada, Vancouver, and so on, were displaced. They were put down in places unknown, in places they didn't have any plans to go to. Then we had to get them home in a situation where, day by day, we didn't know whether the air travel would be up and running again. They were phoning our offices saying, “How do I get home? Where can I stay? What can I do?” Travel agencies were left dealing with that severe situation.

You found it important enough to compensate airlines for that week with the $160-million fund you gave because you recognized that the Government of Canada suspended the airline industry for one week. Well, you did the same thing with travel agencies. Those were our customers. Three out of every four—and the airlines won't argue this number—are our customers. During that week, they were calling us because you couldn't get through to an airline. There was no way. Even the one-quarter of the customers who had booked directly with the airlines came to travel agencies looking for help because they couldn't get to their airline supplier.

So we are asking for two things. One is that we need to be compensated for that one week. The Government of Canada shut down our business. It's different from hotels and car rental companies. We are the distribution channel for the airline industry. We have IATA regulations that govern us. Hotels don't. We have the plates to write tickets for the airlines. No other industry has that. Travel agencies do. We are recognized for the last three decades for distributing three-quarters of all airline tickets. It hasn't changed. You cannot give to one sector like that without recognizing that travel agencies need to be compensated. That's for that one week.

We were doing fine on September 10. Our industry was healthy—not like some of the others. September 11 and that one week took all our cashflow out. We were paying overtime. We had staff working 16 hours a day dealing with customers from all over the world trying to get home or to find out where they could stay or whatever. So we had overtime payments and we had no revenue coming in and a tremendous amount of business. That drained all reserves we had in our bank account to sustain our business.

Then we get back again into what we call operations, where the industry is down 30% to 40%. We have no chance of recouping that one week in lost revenue. Now we're trying to sustain our business in a low-income environment. We can't recoup.

We need two things from you. We need to get back that one week of lost revenue so we can get back to our September 10 bank account status. We'll deal with the recession. That's fine. But at least give us a loan guarantee like they have in the United States—up to $1.5 million—just to ride out this period. Otherwise, ladies and gentlemen, you're going to have small businesses, all in your constituencies, going out of business. These are small businesses. If Canada 3000 is worth protecting, then 30,000 employees in the retail travel business are worth protecting in small communities—small businesses around this country that are serving people on a personal basis. So you need to support that industry.

[Translation]

The Chair: Mr. Paradis, you have the floor.

Mr. Denis Paradis (Brome—Missisquoi, Lib.): Thank you, Mr. Chairman.

• 1845

I would like to begin by thanking all the witnesses who made a presentation, and in particular Mr. Rochon, the President of the Fédération des producteurs de pommes du Québec, who is accompanied by apple producers from my riding of Brome—Missisquoi.

I've learned that the State of Washington recently gave 500 to $600 million to the State's apple industry.

My question deals with certain items in Mr. Rochon's presentation. I'm referring to the crop-insurance program. You mentioned, sir, that the crop-insurance program underwent a major reform in 1999 but that some adjustments were still needed. You also said that “Apples have to be perfect or they're worth nothing.” The English version says:

[English]

apples have to be perfect or they're worth nothing.

[Translation]

Could you develop your thoughts on this issue? I will then have a shorter question about labour but I will let you answer this one first.

Mr. François Rochon: For apple growers, producing apples and producing other crops is different under the crop insurance program. Insured apples are those aimed at the fresh apple market, the target market for all producers. The processing apple market earns nothing for the producer. It involves costs normally associated with production.

If the apple is blemished by hail or drought, it no longer meets the visual standards in terms of shape or colour, for instance. Either it makes the grade for the fresh market or earns nothing for the producer and is nothing but a source of costs.

This is different for crops used for cattle or animal feed. Identical weather hazards will have a different impact. Slightly flawed corn will get a lower grade but its price will not go from $150 a ton to $2 a ton. Apples worth $10 a bushel will be worth only $2, which is less than the picking costs.

That's why we say either the apple is perfect or it is useless. Growers can't control nature; it's unfortunate, but that's the way it is.

Mr. Denis Paradis: You say it's not very profitable to grow processing apples, which are downgraded, but that consumer apples—

Mr. François Rochon: Growers try to survive with this type of apple.

Mr. Denis Paradis: Okay.

Mr. François Rochon: As I said earlier, though, the market is very competitive.

Mr. Denis Paradis: Let's talk about the labour issues, especially pickers. One of the problems is that this is one of those rare crops where harvesting is not done with machines.

You say that Canada does not advocate labour market integration for welfare or EI recipients. If we did not deny them these benefits, we could use more attractive local labour. As in other similar sectors, we are encouraged to resort to a foreign labour force whereas there is enough labour in Canada to meet the need.

Growers also need extra hands occasionally during harvest time. I know it happened in my own riding. This workforce, as you said, is made up of welfare or EI recipients. Quite often, in order not to lose their benefits, they will ask to be paid cash without any pay statement.

• 1850

Are these issues solved and how could we attract these people to work at harvest time?

Mr. François Rochon: The problem is not solved. Benefit recipients who could work at harvest time have no interest in doing so because their income will be deducted from their welfare payments. These are low-income earners, as you know.

I could talk about this at length. No high-income earners will leave their job to experience nature for a day. The weather is nice on Monday and you pick apples. The weather is bad on Tuesday, so you wait. Even if you put aside two weeks of your time, nature gives you no guarantee that there will be work for 15 days in a row, it doesn't work this way.

The problem is that people on welfare or who are receiving benefits under another program are penalized. Their income is not calculated on an annual basis, but on a weekly, bi-weekly or monthly basis. If their earnings were spread over the entire year, it would be more advantageous for the people who are more eager and those who continue to work five or six weeks.

What you must understand is that, quite often, these people, who live in isolated regions, are already in contact with nature; they have already got one foot in the field, in the grass and they know about agriculture.

[English]

The Chair: Mr. Cullen.

Mr. Roy Cullen: Thank you, Mr. Chairman, and thank you to the presenters.

[Translation]

I have a lovely apple here. I do not know if it comes from Rougemont or elsewhere, but I am sure that it will taste good.

[English]

I have a question for Mr. Colby. I'd like to congratulate you on CGA Canada's brief. It's very comprehensive and I'm going to read it in more detail later. You have a section exploring structural reform of the tax system. In 1972, when the tax system was reformed, the government introduced the capital gains tax. There were a number of issues in calibrating it so that income from various sources was treated roughly the same in terms of the tax system.

Over time, we've done a number of things: the government has reduced the capital gains inclusion rate, etc. So I'm wondering, when we talk about the structure of the tax system.... There's been more complexity introduced. Is there a need for a recalibration in the sense of the various tax forms, the income forms, and maybe on the expenditure side as well?

If you could comment on that and also on the question of structural reform and reducing personal income taxes—where clearly Canada is higher than we should be—and on commodity-type taxes where we're probably in the lower quartile.... In fact, there are some economists who would argue we should be reducing personal income taxes, and not only broadening the base—I think for Canada to broaden the base of the GST would mean bringing in clothing and food, which could be a problem—but increasing the rate. Now, politically, I'm not sure that's a direction all of us here would like to go. But there is a certain economic rationale to reducing personal income taxes and increasing commodity taxes.

I wonder if you could comment on that and—I know you're just saying here that we should have a discussion and I think that's a very good idea—just give us some ideas in terms of the recalibration and the complexity, also looking at GST versus personal income taxes...your thoughts on that at this point.

Mr. Everett Colby: Thank you very much for your question, Mr. Cullen.

• 1855

There can be any number of types of structural reforms to the tax system. You pointed out capital gains taxation, which was introduced in 1972. Since then we've seen it changed and adjusted, as particular needs arose. For example, the most recent reductions, in large part, stemmed from the option benefits high-tech workers were being lured to the United States with, and we needed to be competitive.

So using our tax system to bring about social policy that you as a government may want to effect is fine. There are a lot of inefficiencies in the system, and they would be internal, structural reforms. Many countries and governments are opting for a more broad-based consumption type of tax, as opposed to a personal tax. We have not done research into all of the elements of this, but we would be more than happy to assist the government in doing that. As I answered the question earlier, there has to be a corresponding change.

So if you look at page 5 in our detailed report—in the French version on page 6—you'll see that with every type of tax there's an economic cost to output. The lowest economic cost to output, based on tax, deals with sales taxes. It's only 17¢ versus 56¢ for personal tax.

So if the government is going to look at and research the effects of broadening the base of the GST, it must be done in conjunction with a rather drastic cut to personal income taxes; otherwise you guys won't be here in the next election, because that's what happened when the GST was brought in the first time.

In terms of that type of consumption, it's kind of a rule of thumb that the lowest tax bracket is roughly 25%. I polled a number of individuals and asked them if they would rather pay an 18% sales tax on everything they consumed, but have no personal income taxes whatsoever. That's not a proposal I'm putting forth, because obviously for our industry it would not be very good. But from an economic standpoint and for the health of Canada and its economy, it is certainly an area that should be investigated, in terms of reducing corporate taxes while broadening that consumption-based tax.

Mr. Roy Cullen: I know that when the GST was introduced by the previous government, it replaced the manufacturer's sale tax and was supposed to be revenue-neutral. Of course, the government of the day didn't get much credit for getting rid of the manufacturer's sales tax.

But there are some other taxes, like the large corporation capital tax, which doesn't seem to have a lot of policy rationale. Some would even suggest we should get back into estate taxes, to catch the baby boomers on the way out. Being a baby boomer, I'm not sure I'd support that either, but it's a good policy discussion and I think you make a good point.

The Chair: You can always increase the GST, if you like.

Mr. Roy Cullen: I just have one question for the apple growers.

[Translation]

I would like to ask my question in English. It is already complicated enough doing so in English.

[English]

Have you had a program of continuous renewal of your orchards over the years, or is it all coming together now that the apple trees are mature and all need to be replaced? Clearly some have been damaged.

Secondly, in your area, are you able to convert your orchards to other uses, or are you precluded...? I know in British Columbia, for example, because they were in an agricultural land reserve, the fruit farmers weren't allowed to convert their orchards to other uses. Do you have similar constraints?

I would guess you all want to stay producing apples, so I'm not suggesting that's where you would want go. I'm just wondering if you have that kind of constraint in your industry in Quebec.

[Translation]

Mr. François Rochon: We are not necessarily required to renew everything, fortunately, because that requires a lot of capital and during that time, we have no income. It wipes out all our income. Bear in mind that to replant an orchard, a producer must invest venture capital and work for several years without an income.

• 1900

That is what replanting a section of the orchard means. It means accepting a risk for several years. During the time you devote to replanting, you cannot do anything else if you are a commercial producer. Do not think that when you are an apple producer, there are more than 24 hours in a day and more than seven days in a week.

That constraint must be taken into account. Moreover, we cannot replant everything all at once; it must be done progressively. The people who have made that mistake have been unsuccessful.

You also wanted to know if producers came under some legislation. The only act that governs producers is the one covering soil. In certain soils, orchards are planted because the soil is rocky; machinery breaks down if other crops are planted, for example. The law of nature determines the choice of crop. Orchards are planted in hilly or mountainous terrain.

Orchards in Quebec are all located close to mountains or hills in Montérégie or in neighbouring regions. The same is true in British Columbia, where orchards are planted in soil... I will stick to Quebec, as I prefer not venturing an opinion on British Columbia. My experience is limited to a visit there. It is because of the nature of the soil and its components that we have chosen to plant orchards in those regions in Quebec.

[English]

Mr. Roy Cullen: Merci.

I have a quick one for Mr. Williams, if we have time.

The Chair: Go ahead.

Mr. Roy Cullen: I just want to say, Mr. Williams, that I hear what you're saying. You make your case on what some might argue is a fine point that all those customers in the air are your customers, or a good percentage of them.

My riding is right near Pearson International Airport. I have a lot of airline limousine drivers and airport taxi drivers as my constituents. Their business has just shut down completely. There are also some rental car companies, many hotels, and a whole host of other businesses.

I'm just worried about where we should draw the line. I know we could create a lot of work for Mr. Colby and his colleague over many years, in sorting this all out. Right now, the government has said airlines, period.

I wonder if you could react to that.

Mr. Randall Williams: I understand the point that there are a lot of related businesses. I can't speak to the related businesses. Obviously there's a big impact on tourism in general, and there are a lot of sectors involved.

But I can say that the limousine drivers don't have plates to issue airline tickets. They don't have to comply with IATA regulations, which are the airline industry's regulations, to operate. They haven't been dealing with three out of every four of the airlines' customers.

We are the distribution channel for the airlines. I'm not saying they don't have a case to receive some funds as well. But I don't believe you, the government, can say you're going to compensate the airlines for their lost business because you took the planes out of the sky on the week of September 11, without saying and recognizing that three out of every four of those customers were ours. We put them on those planes. We had to get them home.

You can't separate that. They were our customers that we put on those airplanes. We need to be compensated just like the airlines were. That's only one point out of a number of initiatives we put forward to you today. We're looking for compensation of up to $20 million for what we lost that week. We're not asking for any bailouts or anything; we're just asking for support to get us through this difficult time.

I believe the government, as it's done with the CTC, recognizes that we need to promote and market tourism, so the limousine drivers and the other sectors can be sparked and get more revenues. But I believe the others also have a case to have some kind of initiatives put in place to spark people's interest in travelling again.

Mr. Roy Cullen: I know we're out of time, but I'm not going to debate the point because I know there are a lot of small businesses that are suffering, including many travel agents.

But if you're looking at someone who has a plate, as an airport limo or taxi to the airport only, they can't pick up fares downtown. Their business went to zero. By saying just airlines, it's maybe seen by some as somewhat unjust, because I know many sectors were affected. But it seems to me it's a slippery slope that would just carry on forever. That's my concern. I hear what you're saying.

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The Chair: Thank you very much.

On behalf of the committee, I want to leave you with a couple of thoughts before you leave tonight. This is the world this committee is in. After travelling across the country, listening to literally hundreds of individuals and receiving hundreds of submissions, we're of the opinion that the vast majority of Canadians, generally speaking, do not want us to go back into a deficit position. They also want us to make sure the transfers to the provinces in health care and education—the commitment we made in the October 2000 mini-budget, or economic and fiscal update, whatever you want to call it—be honoured, as well as the $100-billion tax cut.

There was also very strong support for a federal government-led national security package. That will also, of course, cost some money, the extent of which we're still trying to assess. Hopefully, before we write the report, we'll have a clear assessment of the amount. But this is sort of the framework we are operating within.

Above and beyond that, debate will take place in this committee on which areas we would like to actually make investments in. We have always been driven by the idea of being a pro-growth committee. We want to generate wealth before we distribute it, and we understand the productivity challenge Canada faces. So many of the policies we've advocated in the past speak to that reality.

I also want to make sure you understand that we want to generate greater wealth, not just for the sake of generating greater wealth, but as a means to an end. The end is that we want to improve the standard of living and quality of life for Canadians, which means we want to make investments in key social and economic areas that give us that end.

On that note, you have always contributed to the finance committee. We're very grateful, because the insight you offer us makes our job a lot easier. You're truly experts in your fields, and on behalf of the committee I want to express to you our sincerest gratitude for your contributions.

Thank you. The meeting is adjourned.