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37th PARLIAMENT, 2nd SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Wednesday, November 5, 2003

1405

The Chair (Mrs. Sue Barnes (London West, Lib.))

Ms. France Latreille (Acting Coordinator, Union des consommateurs)

Ms. Ghislaine Beaulieu (Coordinator, Association coopérative d'économie familiale de l'Estrie, Union des consommateurs)

1410

Ms. France Latreille

1415

The Chair

Ms. Anne Legars (Director, Policy and Government Affairs, Shipping Federation of Canada)

1420

The Chair

Mr. Richard Gauthier (President, Canadian Automobile Dealers Association)

1425

1430

The Chair

Mr. François Auger (Director of Research, Centre hospitalier affilié universitaire de Québec)

1440

The Chair

Mr. François Auger

The Chair

Mr. François Auger

The Chair

Mr. Rahim Jaffer (Edmonton—Strathcona, Canadian Alliance)

1445

Ms. France Latreille

Mr. Rahim Jaffer

Ms. Ghislaine Beaulieu

Mr. Rahim Jaffer

Ms. Anne Legars

1450

The Chair

Ms. Anne Legars

The Chair

Ms. Pauline Picard (Drummond, BQ)

Ms. Ghislaine Beaulieu

1455

Ms. Pauline Picard

Captain Ivan Lantz (Director, Marine Operations, Shipping Federation of Canada)

1500

The Chair

Mr. Shawn Murphy (Hillsborough, Lib.)

Ms. Anne Legars

Mr. Shawn Murphy

1505

Ms. Anne Legars

Mr. Shawn Murphy

Ms. Anne Legars

Mr. Shawn Murphy

Mr. Richard Gauthier

Mr. Shawn Murphy

Mr. Richard Gauthier

Mr. Shawn Murphy

Mr. Richard Gauthier

Mr. Shawn Murphy

Mr. Richard Gauthier

Mr. Shawn Murphy

Ms. France Latreille

The Chair

1510

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP)

Ms. Ghislaine Beaulieu

Ms. France Latreille

Ms. Judy Wasylycia-Leis

Ms. Ghislaine Beaulieu

1515

Ms. Judy Wasylycia-Leis

Ms. Ghislaine Beaulieu

Ms. Judy Wasylycia-Leis

The Chair

Ms. Judy Wasylycia-Leis

Mr. Richard Gauthier

The Chair

M. François Auger

1520

The Chair

Mr. François Auger

The Chair

Mr. François Auger

1525

The Chair

Mr. François Auger

The Chair

Mr. Peter Sandmark (National Director, Independent Media Arts Alliance)

1535

The Chair

Mr. Peter Sandmark

1540

The Chair

Mr. Peter Sandmark

The Chair

Mr. Laurent Pellerin (President, Union des producteurs agricoles du Québec)

Mr. Serge Lebeau (Deputy Director, Research and Agriculture, Union des producteurs agricoles du Québec)

1545

1550

The Chair

Mr. Jules Arsenault (President, Université du Québec en Abitibi-Témiscamingue)

1555

The Chair

Mrs. Lucie Poirier (Organizer, Front d'action populaire en réaménagement urbain)

1600

Mr. François Saillant (Coordinator, Front d'action populaire en réaménagement urbain)

The Chair

1605

Mr. Claude Dauphin (Member, Executive Council of the City of Montreal; Chair, Board of Directors, Société de transport de Montréal)

1610

The Chair

Mr. Michel Beauséjour (Director General, Fédération des chambres immobilières du Québec)

1615

The Chair

Mr. Peter Sandmark

1620

The Chair

Mr. Pierre Paquette (Joliette, BQ)

Mr. Laurent Pellerin

Mr. Pierre Paquette

M. Laurent Pellerin

1625

Mr. Pierre Paquette

Mr. François Saillant

Mr. Pierre Paquette

Mr. Michel Beauséjour

1630

Mr. Pierre Paquette

Mr. Claude Dauphin

Mr. Pierre Paquette

The Chair

Mr. Shawn Murphy

Mr. Laurent Pellerin

Mr. Shawn Murphy

1635

Mr. Laurent Pellerin

Mr. Shawn Murphy

Mr. Claude Dauphin

Mr. Shawn Murphy

Mr. Claude Dauphin

1640

Mr. Shawn Murphy

Mr. Michel Beauséjour

Mr. Shawn Murphy

Mr. Michel Beauséjour

Mr. Shawn Murphy

Mr. Michel Beauséjour

Mr. Shawn Murphy

Mr. Michel Beauséjour

Mr. Shawn Murphy

Mr. Michel Beauséjour

The Chair

Mr. Michel Beauséjour

The Chair

Mr. Michel Beauséjour

The Chair

1645

Mr. Michel Beauséjour

The Chair

M. François Saillant

The Chair

Mr. Jules Arsenault

1650

The Chair

Mr. Claude Dauphin

The Chair

1655

CANADA

Standing Committee on Finance

NUMBER 100

2nd SESSION

37th PARLIAMENT

EVIDENCE

Wednesday, November 5, 2003

[Recorded by Electronic Apparatus]

¸ (1405)

[English]

The Chair (Mrs. Sue Barnes (London West, Lib.)): Pursuant to Standing Order 83.1, we will continue with pre-budget consultations in Montreal on November 5. This is the fourth panel of the day.

[Translation]

Welcome everyone. On behalf of my colleagues, I would like to thank you for your participation today. We now have four groups. First, we have Ms. France Latreille, Acting Coordinator of the Union des consommateurs, as well as Ghislaine Beaulieu.

[English]

From the Shipping Federation of Canada, we have Anne Legars, who is a director, and Ivan Lantz, who is a director. Both of you, welcome again, bienvenue.

From the Canadian Automobile Dealers Association, we have the president today, Richard Gauthier. Bienvenue, monsieur.

[Translation]

We also welcome François Auger, Director of Research at the Centre hospitalier affilié universitaire de Québec.

[English]

I think we will go in the order of the briefs.

[Translation]

We will now start with Ms. Latreille.

Ms. France Latreille (Acting Coordinator, Union des consommateurs): Good afternoon. My name is France Latreille and I am the Acting Coordinator of the Union des consommateurs. Ms. Ghislaine Beaulieu, Coordinator of the Association coopérative d'économie familiale de l'Estrie, joins me as a spokesperson.

Thank you for this opportunity to include our comments in the prebudget consultations. Despite an increase in the number of jobs, a string of federal budget surpluses and growth in the gross domestic product, the Union des consommateurs, through the work of its member groups, has for many years noted a deterioration in the quality of life of citizens, due in large part to a lack of income and to many social programs which do not respond appropriately to people's needs.

Our recommendations pertain chiefly to the second theme, i.e. what taxation, spending and other measures should be taken to ensure progress in investing in, and caring for, all members of Canadian society. The goal of our recommendations is to make a genuine improvement in Canadians' living conditions possible.

I will say a few words of introduction about our organization, the Union des consommateurs, which brings together eight ACEF, or associations coopératives d'économie familiale. Our membership also includes the Regroupement des consommateurs d'assurance as well as individual members.

The mission of the Union des consommateurs is to represent and defend consumers, with a focus on the interests of low-income households.

I will now turn the floor over to Ms. Ghislaine Beaulieu.

Ms. Ghislaine Beaulieu (Coordinator, Association coopérative d'économie familiale de l'Estrie, Union des consommateurs): +At the federal level, there have been great changes to the taxation system over the past 20 years. The battle against the deficit combined with a deep recession in the early 1990s helped to widen the income gap between the richest and poorest.

The economic growth of recent years has not succeeded in reducing this gap, as governments have opted for tax cuts that benefit higher-income earners rather than reinvestment in social programs. In fact, the tax cuts since 2001 will reach $100 billion over five years.

It's important to note that according to Statistics Canada 2001 census data, the average annual income of the richest 10% of families jumped by over $23,000 during that decade, to an average of $185,070. The poorest 10% of families increased their income by $81 over 10 years, for an across-Canada average of $10,341.

In addition, commodity taxes have more than doubled since 1984. These taxes are the most regressive way of financing the government and its programs. Low-income households pay proportionally higher sales taxes on staples than the well-off. One Statistics Canada publication shows that the poorest households in Canada spend about 10% of their income on heat, hydro and telephone service, versus only 3% of income for the richest households. So it is quite clear that they are more highly taxed than people with higher incomes.

It is important to recall that over the last 20 years, companies have contributed less and less to government tax revenues. They have been entitled to generous reductions of income and other taxes and to large government subsidies, not to mention the wide range of tax shelters open to them.

According to the Union des consommateurs, the tax system needs a complete overhaul in order to provide for better wealth distribution. I would like to list some of our main recommendations. You will find other, more detailed recommendations in our brief.

The Canadian tax system should be more progressive, that is, a household's contribution to financing the government and its programs should be proportionate to its income. All households living under the poverty line should pay no federal income tax. The Union des consommateurs recommends that income tax be the basis of the Canadian taxation system.

We are asking that the GST be abolished on essential goods and services such as hydro, heating fuel and basic telephone service, children's clothing and school materials, and all food and health products. We are also requesting an increase in refundable GST credits. The Union des consommateurs also recommends that the tax base be broaden to cover the profits of all corporations.

¸ (1410)

Ms. France Latreille: In the health sector, the federal government has opted for a draconian reduction in the financing of provincial spending. These cuts have led to a marked deterioration in the quality and accessibility of services, from which the public system has still not recovered. Waiting lists are growing longer, services are not available in certain regions, and it is increasingly difficult to find a physician.

Last November, the report of the Commission on the Future of Health Care in Canada was tabled. The report proposes to build the future on universal public health services, promotes the right to health care, and sets forth certain values of equality, social justice and solidarity. The report indicates that it is essential to protect health care services by preventing them from being merchandised and commercialized. The commission proposes that the Canada Health Act and its two bans on user fees and extra billing be maintained.

That is why the Union des consommateurs recommends that the federal government reinvest in health care by transferring substantial additional funding to the provinces. We are delighted with Mr. Manley's announcement that $2 billion would be transferred to the provinces. We hope this will be done as quickly as possible.

Employment insurance has undergone enormous changes over the last 15 years, with access to this program for thousands of people on each occasion. The employment insurance fund is racking up billions of dollars in surpluses, expected to total $45 billion by the end of 2002-2003. The number of claimants has been reduced by half, as has the maximum number of weeks of benefits payable and the maximum insurable earnings. All of that is unacceptable.

Recently, a Canadian Labour Congress report showed that the employment insurance program was providing benefits to only a third of female workers losing their jobs. Once again, this is intolerable. These workers have paid their contributions to acquire the protection of employment insurance, and it is unspeakable that they should not have access to it when it is needed. For men, this rate is 44%, and neither is that acceptable.

The Union des consommateurs demands a major improvement in benefit coverage, by reducing the number of hours of work needed to quality for benefits, extending the benefit period, increasing the percentage of insurable earnings, and repealing the provision that removes entitlement to benefits for person who voluntarily leave their employment.

We will now deal with the issue of support for the family. In 1989, the House of Commons passed a resolution calling for an end to child poverty by the year 2000. However, in 1998, there were 400,000 more poor children than in 1989.

In November 2002, the Canadian Council on Social Development released a report that showed, among other things, that the child poverty rate is still extremely high and that the poverty of the poorest children in Canada, those whose parents are dependent on social assistance, has indeed deepened.

This report stresses that certain groups of children are increasingly excluded from full participation in Canadian society. This situation must be reversed. It is not normal for Canadian families and their children to be barely scraping by and just one problem away from economic disaster. That is why the Union des consommateurs recommends a substantial increase to the Canada Child Tax Benefit.

The parental leave system is in need of substantial improvement. Quebec is negotiating with the federal government to introduce a new parental insurance program that would be more generous to women who are self-employed and those who have accumulated a certain number of hours of work. We recommend that the federal government agree to negotiate with the provincial government so that families can receive a decent income during their parental leave.

Finding adequate housing should not be a problem in Canada. However, in February 2003, 833,500 Canadian tenant households had to allocate more than half their income to paying their rent, in all parts of the country, regardless of whether there was a local housing shortage. The Union des consommateurs therefore recommends that the federal government reinvest more in this sector, so that citizens have access to decent and affordable housing.

In conclusion, we invite the federal government to significantly improve the lot of disadvantaged persons. It is imperative that we reinvest in the social programs that can provide a more solid base for the foundations of our society. It is inconceivable that in 2003, in a nation as prosperous as Canada, so many families have to seek food at food banks.

Thank you for your attention.

¸ (1415)

[English]

The Chair: Thank you very much.

I would now like to move to the Shipping Federation of Canada.

Go ahead, madame.

[Translation]

Ms. Anne Legars (Director, Policy and Government Affairs, Shipping Federation of Canada): Ladies and gentlemen, members of the Standing Committee on Finance, good afternoon.

Since 1903, the Shipping Federation of Canada has been representing ship owners, operators and agents involved in Canada's overseas trade. In our brief, we explain why the shipping industry deserves as serious and sustained a commitment from the federal government in terms of investment in infrastructure as other modes of transportation. This is warranted given the immense, albeit largely unrecognized, contribution of the shipping industry to the health and competitiveness of the Canadian economy.

International trade is expected to double by 2020, and the importance of shipping is made even greater by the fact that the Canadian transportation network is already showing signs of congestion, and it is widely recognized that the existing transportation model is not sustainable in the long term.

We firmly believe that the shipping industry has a key role to play in developing new transportation networks able to handle increased trade flows in a sustainable and efficient manner. However, if we want this to happen in the future, the government has to act now, with appropriate planning, investment and decisions regarding the financing of Canada's transportation infrastructure.

There are three main sets of recommendations in our brief, and I'd like to come back to them briefly.

[English]

First and foremost, there is a very serious need for a national transportation infrastructure plan that includes a methodology for allocating funds to various modes and segments based on the core values that will define our transportation system in the future. These values include promoting fluidity and flexibility within the system as a whole, facilitating intermodal movements and just-in-time delivery, acknowledging the concept of public good in the transportation system, and incorporating an environmental dimension to ensure that current and future transportation requirements can be fulfilled on an environmentally sustainable basis.

Our second set of recommendations focuses on infrastructure financing in the wake of events of September 11.

We had been optimistic that the Canadian government's long-awaited marine security policy, unveiled last January, would help ease the financial pressure on the marine sector as it works to implement the requirements of an international ship and port facility security code, or ISPS code. Unfortunately, not only did the funding contained in the security package amount to only $34 million per year over the next five years, it was also allocated entirely to the federal departments and agencies involved in overseeing and enforcing the new security regime, with not a single penny set aside for ports or other elements of the marine transportation system.

Canada's 18 major ports have estimated that the price for heightened port security will be $40 million in its initial phase, and this will increase significantly as maintenance costs come into place. Similar costs will have to be borne by Canada's many regional and local ports that handle varying levels and types of international traffic, and they will also have to meet ISPS requirements.

Unlike ship-related ISPS costs, which are unquestionably for the account of a shipowner, the issue of who should ultimately pay the code's port-related costs is less clear-cut. Canadian ports, which must currently finance their own security costs, have already begun to increase their port tariffs in order to recover some of their security expenditures from customers. In contrast, ports in the U.S. have benefited from security-related appropriations, amounting to almost $400 million over the last two years alone. Given the disparity, Canadian ports must be assured of their ability to retain their share of international North American traffic.

Our third and final set of recommendations centre on the chronic underfunding faced by the Canadian Coast Guard, which creates a variety of problems for users of coast guard services.

More specifically, we believe that the coast guard's overall budget must be a workable tool that does not lead to chronic deficits and that allows for long-term investment in items such as the renewal of its rapidly aging fleet.

We also believe that the coast guard must be provided with the financial means to conclude a long-term agreement with industry on user fees, with a view to ultimately eliminating such fees altogether. User fees currently cost the shipping industry $40 million per year and they have had a serious impact on the competitiveness of Canadian marine routings. It is time that steps be taken to reduce this impact.

Those, then, are our major recommendations to the committee, the details of which can be found in our written brief.

Before we conclude, we wish to mention two recent transportation policy developments that we did not cover in our brief that are important and merit some kind of budgetary support.

The first one is Transport Canada's effort to develop a green certification program, similar to those found in Europe and elsewhere, that recognizes ships and ship operators that consistently exceed standards of environmental protection.

The second is Transport Canada's recent effort to promote short-sea shipping as a means of facilitating trade, minimizing highway congestion, and reducing greenhouse gas emissions.

I thank you for your attention, and with the assistance of my colleagues, Ivan Lantz, the federation's director of marine operations, and Mario Minotti, the federation's director of finance, I would be pleased to answer any questions you may have.

¸ (1420)

The Chair: Thank you. I forgot to welcome Mr. Minotti when I did the panel. My apologies to you, sir; you are certainly welcome.

Now we'll go to the president of the Canadian Automobile Dealers Association.

[Translation]

Mr. Richard Gauthier (President, Canadian Automobile Dealers Association): Madam Chairman, committee members, good afternoon.

The Canadian Automobile Dealers Association highly appreciates the opportunity we have today to make recommendations on strengthening Canada's economy.

First, our association, commonly known by the acronym CADA, represents over 3,000 new car and new truck dealers across Canada. We represent dealers who carry brands like Toyota, Ford, Kia, Honda and so on. Our members employ over 115,000 men and women. As a matter of fact, we employ more people than the auto makers represented here, in Canada.

I would like to point out that our dealers are not employees of the auto makers, they are individual business people who invest their own money in their business in order to contribute to the Canadian economy and their community. On average, our members invest over $3.5 million in their business and sell 390 vehicles per year.

[English]

On Monday, the Minister of Finance presented to you his annual economic and fiscal update. He explained that because of the crisis that affected different regions of the country and because of the stronger Canadian dollar, federal revenues are going to be lower than originally forecast in last February's budget. Costs were also forecast to be higher as the government came to the assistance of those who suffered as a result of those crises. On a more positive note, the year 2003 will have demonstrated the value of maintaining a $3 billion emergency fund and a $1 billion prudence fund.

But it has also demonstrated the fragility of the government's fiscal framework. The Organization for Economic Cooperation and Development, in its survey of the Canadian economy for 2003, made this very point even before the crises. Spending pressures, and in particular rising health care costs, could easily upset the fiscal balance. In the words of the OECD survey, “This year's budget left virtually no fiscal room over the next few years for further spending increases, tax cuts or debt reduction beyond what is already planned.” One remedy proposed by the OECD is for the government to adopt a medium-term debt reduction target.

CADA recognizes that the government has already done a lot on this front, bringing the federal debt-to-GDP ratio down from its peak of 67.5% in 1995 to 44%. The Honourable Paul Martin has proposed a medium-term target of 25%. Without advocating a particular figure, CADA believes it is important for the government to commit to a target, so that the tax-paying public is able to benchmark Canada's fiscal well-being beyond a one- or two-year budgetary cycle.

On the corporate income tax front, CADA also recognizes the very positive effects of a number of government measures. These measures include the reduction of the general rate from 28% to 21% by 2004, the elimination of the federal capital tax by 2007, and an increase in the small business deduction limit from the current $200,000 to $300,000 over four years. There are, however, two other tax provisions that we would like to bring to your attention today that are of concern to auto dealers in particular.

The first deals with the definition of taxable capital. Currently, in order for a small business to benefit from the lower tax rate of 12%, its capital must not exceed $10 million, but because of the way capital is defined, many automobile dealers do not qualify for the lower rate. Currently, a corporation's capital includes all forms of indebtedness, including the method known as lien notes by which automobile dealers finance the acquisition of their inventory. Because automobiles are high-cost items with a relatively slow turnover time period, the effect on capital of this method of acquiring inventory is much greater than for other retailers who typically finance the acquisition of their inventory through trade accounts payable, which are not included in the definition of capital.

To rectify this anomaly, CADA recommends that the definition of taxable capital found in subsection 181.2(3) of the Income Tax Act be amended to exclude lien notes specifically. This unintended imposition has already been remedied in some of the provinces that levy taxes based on a business's capital.

The second provision deals with the definition of small business category. Another way in which a small business retailer, especially in the automotive sector, can be disadvantaged by the current tax rules is if that person has de facto control over more than one small enterprise. In that case the capital of these different businesses is aggregated, and if it exceeds $10 million, that business person loses his small business status. Automobile retailers are often obliged by their suppliers to divide their product lines into separate businesses. This requirement, combined with high inventory costs that count as capital, often push automobile dealers unfairly and inappropriately out of the small business category.

CADA recognizes that our issue may appear to be very technical, but what really is at stake is Canada's definition of small business. We all agree on the many economic and social benefits that flow from a vibrant small business community. It is our duty and yours, I believe, to make sure that no group of entrepreneurs is inadvertently excluded from generating those benefits through an outdated formulation of the tax rules.

¸ (1425)

In closing, CADA certainly would like to thank the committee once again for its long-standing support on the issue of automotive technicians' tools. This has been a long-standing discussion amongst our groups, and we clearly appreciated the way the government supported us a few years ago. You've made a difference, and we are very grateful.

May we simply suggest to you now that perhaps the time has come for the government to consider making all vehicle technicians, not just apprentices, eligible for this tax relief.

One of the original ideas behind this limited tax relief was to allow the government to address the shortage of apprentice technicians in Canada. This is still a very valid concern. The other reason behind the limited measure was to allow the Department of Finance to better understand the impact of tax relief on our industry. So a recommendation by this committee that Finance review this issue based on their current experience would be very much appreciated.

Again, I want to thank you for the opportunity to present to you today. I will look forward to entertaining your questions. Merci beaucoup.

¸ (1430)

The Chair: Maintenant Dr. Auger.

[Translation]

Mr. François Auger (Director of Research, Centre hospitalier affilié universitaire de Québec): Madam Chair, committee members, I'm delighted to be here. I'm going to do my presentation in English, because that is the language of the brief I submitted to you.

[English]

Dear members of the standing committee, I've separated my short talk--seven minutes--into two parts. the first part is general comment and the other one is more specific.

I'm a little bit like the fly in the soup, in a sense, because I'm going to raise some issues and I don't want you to see it as a derogatory or negative thing. I think research in Canada, biomedical research, is very fine and we're doing wonderful things. On the other hand, we also need more money. That's a stated fact. I'm going to try to set the stage with something a little bit different from what you hear usually. If you have heard it before, let me know, because I'd like to meet those people.

These are hypothetical questions I never hear in meetings and they are complex. They can't be answered right now, but they should be asked at one point. In some countries they're very well asked and they're very well unanswered and sometimes answered.

I'm drawing on 22 years of experience in research and I'm now head of a rather large research centre. I thought it wasn't all that large, but when I compare my own with others, I find it larger than I thought. I have visited a lot of countries and visited a lot of research centres and systems.

First, is Canada creating and conducting truly original research? I won't answer it. But we should ask ourselves this, really. There's a lot of it, but how much and how? It's very subjective. But how much? Let's ask the question seriously at one point.

When I was in the U.S.A. at the NIH, they said, yes, that's a Canadian project; it's been proven in the United States, so now we can do it in Canada. It was a joke, but every joke has a little something behind it. It's less and less that way, but we should think about that.

Are there any other models in the G-8 for biomedical research? The answer is yes, and there are some interesting things. Bernstein and other people went and saw a lot of interesting things, but there's more to see, and there's more to discuss.

What about the American way, since I was very icily--actually, I was not in the minutes, I was struck from the minutes; it was wonderful when I asked them the question--told that this “is not the Canadian way?” I alluded to what I had seen in the United States.

It's not perfect, but it goes from the top down. When they take a decision and they enact it for important priorities--you know about their rapidity, and I've seen how it goes--that's a plus. They do make mistakes, but when they're right, they're right and fast.

From down up, when there's a problem down below--they have many systems I can't talk about--they bring it back up right away. That's interesting. We don't have that speed, I'm sorry.

There is a research adviser, as you know, to the President of the United States. I don't know his name right now. I think he's a physicist. That person has full access to the President of the United States, maybe not in time of war, but he has full access for many things--and even in time of war, I would say. There may be now a research czar in Canada, but I don't see him or he's well hidden.

How is efficient is Canadian research? There's a lot being said about the cost-benefit ratio, but I'm not sure this is the right angle when we're really discussing those things.

Now I'll come down to specific comments. The present situation in Canada, despite all I've said, is really very positive. The funding, as you all know, went from nearly the very bottom of the G-8--I won't say what was the last country so I won't insult anybody--in dollars per citizen to the very top of that group. Now, it's a complex issue. Dollars per citizen is not only what the government gives.

On the other hand, that's extremely positive. The research organization model changed from the MRC. That is presented as stale and bad right now, but it wasn't that way. That ain't it, as they say in the United States. It wasn't all that bad. But it had to change. There was some needed evolution, agreed.

Now it's the CIHR, and there are many institutes. Maybe we should think of some of the institutes. Are they all that necessary? Some people are going to kill me when I come back to Quebec City, but what the hell. The FRSQ has changed also, and now there is a new FRSQ that is actually following what's happening at CIHR.

The results are quite stunning. The training initiatives are very nice. You have a lot of trainees at all levels. We're pouring out people. Some of the new programs are very interesting. They're slow in coming, but they're very interesting. On the other hand, the training initiatives were very rapid in coming.

There was also synergistic research with the multidisciplinary approach. I was always for that, and you'll know why from the nota bene there.I do what is called restorative medicine--skin for burn patients, vascular blood vessels, etc.

On the new frontiers right now, the CFI does a wonderful job. Really, that was a very big plus, which even the Americans don't have, by the way. This is a plus for Canada. The Canada research chairs program is also something the Americans don't have, and it's a beautiful system also.

All of this has been possible, you can see, only because money was channelled to well-thought-out, new organizations and original foundations. This is no small feat in a few years. It's a big change. However, if money is to be entrusted to future budgets—and I want more, by the way—a few comments and facts should be discussed in a realistic way.

In the evolution of biomedical research in Canada in the last five years, there has been more money, no doubt, but is it spread thinly? We've created something big and large, and that's okay, because that's how it should be, as it was very low. We're now up to par, where we should be. We need technology we can export; we need high-level goods that we can export.

But there's a problem, which you've heard about from Bernstein. You're spreading thinly in some parts somewhere. There was an equation that the money would go up, and it's not going as quickly as it could, should, or whatever. There's a problem there, and I'm telling you, let's find a way to be original.

Also, the success has a drawback: there are many more investigators and an exponential augmentation in research demands, so the percentage of positive demands that get money is the same as it was 10 years ago. So people are a little bit annoyed, but I understand that.

Published papers, abstracts, and conferences, and the number of investigators are going up like hell. There are trained investigators and we are reversing the brain drain. There was so much discussion, and now I can see it; I have the numbers. You know about them.

As for the number of patents, that's a sore issue. I can't see those numbers, I don't see those numbers, and I'd like to see those numbers. This is... [Inaudible—Editor] ...research from the bench, from all the commercialization people around us here, and this is money, and this is employees.

Now, the role of universities to help in the process has been tepid, I'm sorry to say. They have their own problems. It's a little bit of a cascade, and I'm at the receiving end. I'm the director of a research centre, and I can tell you that it's like a municipality. I'm at the very end of the problems—indirect costs from the federal government, for example.

I'll just give you a real example, but I won't say from where. Your government, my government, is giving $8.7 million to a university. That university takes out $2.7 million, because the provincial government took out $2.7 million. That's ridiculous stuff; it doesn't make sense. The money doesn't come to us: $2.7 million is channelled elsewhere. Did I complain? Yes, I complained.

As for results as precise indicators of the output levels, we need precise analysis parameters. I have discussed that.

As for accountability--I can't say that word very well in English, but you hear imputabilité en français--you hear that everywhere. Well, let's put it everywhere also, at all sorts of levels. I don't have time to discuss that.

You know what I mean by technological transfer, as I just discussed it with patents and elsewhere.

As for the rapidity of money in the pocket for investigators, the only place where it comes rapidly is the Canada research chairs program, and also with the CFI when the money went to the new investigators. That was very rapid, taking weeks to months at the most. That was beautiful. For the other indirect costs, we're talking about six, nine, or twelve months to get the money—if it comes.

I heard about money going to the hospital fund, because they have a deficit. It has disappeared; the money has gone “whoosh” and disappeared.

There's a multiplicity of programs, and the paper flow is overwhelming. The investigators' response is that some of them have an e-mail limitation on their computers. Now, you would say, yes, nobody wants to receive bad e-mail. We're talking of people who are just asking for three programs, because they say they can't answer to 18 or 20 programs. I would, but not when they're 11 months a year. We're attacking it as an inside problem, but I'm giving you some insight about it.

When I started research 20 years ago, we worked like hell all the time; but for those programs, we were asking for money over a three-month period. It went from something like September to October. Now, we're asking for money 11 months a year. I'm doing okay because my very own research team is 63 people deep. I can sectorize and say, “You do this, you do that, you do that.” What am I saying? The big will be big, but the small are having a hell of a time. That's what I'm saying.

As for student response, when they see that, they say, no, I'm going to go into business—not into a car dealership, unfortunately for you, but they're going to go into industry. I won't cite anybody, but they'll go into the private sector. They'll say, “Dr. Auger, you're a young man, but you're working 80 hours a week. I don't want to do that.” This is stupid. My coordinator, who is a fine scientist, is working 80 to 85 hours. She's sending e-mails late at night.

The CFI is a must. Please protect it. But please be careful with new rules in hospitals. We can't build within 18 months. It's impossible. It can be built on a campus, but we can't do it in a hospital. As for indirect costs, I talked to you about it.

The four-pillar approach is very nice on paper, but there's a limit to that--always trying to be good to everybody, nice to everybody, in the Canadian way. In science, there's a limit to that. In spending money for research, there's also a limit to that.

As for the Canadian consensus game, when you're coming into something, it takes two years to get consensus. The Americans are ready within six to twelve months. We should be provocative and try to find “Howard Hughes” funding.

I'm going to a meeting right after this at the NIH on digital biology. They're going to have this meeting, and I can tell you that within six months they're going to have an initiative, and they're going to work hard. I have it here; I can give you the website. It's out of this world. I'm going there; I have not been invited, but I'm going anyway.

¸ (1440)

The Chair: Okay, Dr. Auger, I've got to—

Mr. François Auger: The bottom line is thank you very much, and I appreciate the extra minute you've given me. Merci.

The Chair: Thank you very much. You actually got three or four minutes more.

Mr. François Auger: Oh, it's my style. I'm sorry.

The Chair: The thing is that I then have to give it to everybody, which is difficult.

I'm going to cut back on my colleagues, as I normally do. How about for seven minutes each, and we're going to do four rounds, then.

So I'll go to Mr. Jaffer, Madame Picard, Mr. Murphy, and Ms. Judy Wasylycia-Leis for seven minutes each.

Mr. Rahim Jaffer (Edmonton—Strathcona, Canadian Alliance): Thank you Madam Chair, and thanks to all the presenters this afternoon.

[Translation]

I'm going to begin with the representatives of the Union des consommateurs.

I have a question about the suggestion you make in your brief concerning the Child Tax Benefit. I think the suggestion was to increase the benefit levels for low-income families. Last election, some thought it might help families to increase the exemption level to $10,000. I believe that suggestion was made. However, there is no specific suggestion here in that sense. I just wanted to ask you if you knew exactly how high you wanted the benefit raised?

¸ (1445)

Ms. France Latreille: No, we didn't really contemplate any particular figure. We'd have to analyze that in order to come up with numbers. Basically, what we're asking for is an increase in the benefit and the income threshold at which benefits will be reduced for families.

Mr. Rahim Jaffer: I think that with the changes to date, the benefits are at a little over $8,000.

[English]

I'll just switch to English, as I am mixing it up.

But I was talking about the personal exemption for children, which is currently just over $8,000. We had talked about raising that to $10,000, so that it would move almost 1.2 million low-income Canadians right off the tax roll. There have even been some suggestions to raise that further.

I was wondering if that's something your organization has thought about and would endorse, looking at raising that basic exemption for families.

[Translation]

Ms. Ghislaine Beaulieu:

I think that we are in favour of any practice that will increase family income.

We know that basic exemptions are not as good federally as they are in Quebec. Basic personal exemptions are lower.

It's the same when a family has children; it's not very high. When you take a look at the Child Tax Benefit or the GST credit, you can see that when a family has over $20,000 or $22,000 in income, there is a draconian cut in credits.

What we want is to increase family income through the Child Tax Benefit, GST credits and an exemption. The cut off for GST credits and income has to be increased as well as the basic exemption. What we're asking for, in the end, is personal income tax relief.

We know that a lot of this has already been done for corporations, and we're asking for personal income tax relief for people with very low income.

We know that the way tax cuts are currently presented, there is $100 billion in tax cuts, but that largely goes to high-income people or big business; very little of it goes to low-income families.

We would like to completely change the system in that regard.

[English]

Mr. Rahim Jaffer: Merci beaucoup.

If I can switch to the presentation by the Shipping Federation and Ms. Legars, the area that I had asked a previous witness about was the issue of security measures at our ports and some of the challenges you have been facing as an industry. One of the things I'm concerned about is that in the last budget, even after many efforts were made by the government to put more emphasis on our ports, our land crossings, and a number of other areas where security is a concern--there has been significant money put aside in the budget to go toward the upgrading of many of our security features in those areas--from what I'm hearing from you today, it doesn't seem it has translated into...especially in the area of marine ports, where obviously it's a concern if we are not meeting our security obligations with the U.S. Clearly, that puts you at a disadvantage in the situation.

One of the other concerns was that there should be more harmonization with the U.S., particularly when it comes to dealing with areas of trade, so that you aren't caused further problems when it comes to getting your goods and services, and your members that are operating businesses are able to compete with the U.S. and have unfettered access to those markets.

So I'm curious. If you could clarify this, has any of that money... Because it was supposed to be allocated to some of the ports, not just for infrastructure, but in the area of security. If that hasn't happened, what are your suggestions?

Clearly, that's something that should be a concern for all Canadians.

Ms. Anne Legars: Thank you.

As a first response, I want to mention that I just realized that in the briefs I put on the table, page 8 is missing, and that's precisely where we list all the security initiatives that were put in place with the last announcement on security. So I will check with the clerk to see if it was missing from the original or whether when it was copied and assembled, one page was left out.

¸ (1450)

The Chair: We'll check that for you. I saw that something was missing. We'll check that at our end and we'll be in contact if there is something missing from you. It's more likely at our end, that it got photocopied incorrectly.

Ms. Anne Legars: Basically, in that missing page, we explained the various items where money was put by the federal government--or planned to be put, because sometimes, of course, it takes time.

There was the installation and operation of shore-based AIS system by the Canadian Coast Guard, which is for the long-range vessel identification and tracking capability of the coast guard; the implementation of expanded air surveillance by the Department of Fisheries and Oceans; the hiring of new immigration officers and putting teams at major ports by CIC; the testing, purchase, and installation of new equipment for scanning marine containers and screening them for radiation by CCRA; the installation of RCMP emergency response teams and permanent investigators at major ports; the enhancing of coordination and cooperation among the many governing departments and agencies involved in marine security--and there are many, about a dozen; the establishment of restricted areas at ports, and requiring people working within such areas to undergo background checks; and the implementation of new international marine organization regulations for port security plans, where we should be hiring and training new marine security officers to provide site compliance with ISPS, the international safety and security code.

So these were good measures. They are all spread among the various agencies. It is a good first start, I would say, but it's the bare minimum that we would have expected, because now Canada has international obligations under the ISPS code, obligations for government to implement those codes and make sure all of the security measures are put into place.

It was very important also for the Canada-U.S. trade relationship, to show the U.S. that we are concerned by all the security things and that we want to be a secure country and a secure port of entry for North American trade.

Now, there is more to be done, because these cover only government agencies. There is still more to be done to implement the new code. Maybe I will let my colleague--

The Chair: Actually, we're right out of time, so maybe somebody else can get to that.

Madame Picard, s'il vous plaît, pour sept minutes.

[Translation]

Ms. Pauline Picard (Drummond, BQ): Thank you, Madam Chair. My comments are directed to the Union des consommateurs.

I'm really very impressed with your brief. I was aware of the extent of the poverty and I must say that your brief is very well done. To my mind, you are raising the right points. I particularly appreciated how concisely you referred to opportunities to avoid hunger, to have decent housing, to heat one's residence, to have suitable clothing, to develop normally, to preserve one's health, and to avoid debt. It's unthinkable that in a country like Canada, which has some wealth, and which is a G-7 country, these are the kind of conclusions we should be drawing. There were 1.4 million poor people according to 1998 statistics. Apparently, that figure is now 1.5 million.

I would like to know whether you agree with the fact that the federal government and other organizations are so focused on reducing the debt so quickly. Do you agree with that? When you look at where we're at in 2003, you can see that this has been done at the expense of the provinces. The provinces have been forced to cut social programs for the unemployed.

Ms. Ghislaine Beaulieu: We certainly say that there has already been a reduction in the debt, but it is the surpluses posted in 2001-2002 and even before that went toward reducing the debt. So currently the debt is much smaller in relation to GDP than it was four years ago, let's say, when we stopped having deficits.

Obviously, we agree on not having a deficit. We would not want the government to go into deficit again either. However, with respect to the 100 billion dollars in tax cuts, for example, we disagree with this policy. We think that the tax cuts as they are currently done go only to high-income people. Thus the government is foregoing very significant amounts that could actually help to reduce the debt, if necessary.

Currently, the debt-to-GDP ratio is no higher, I believe, in Canada than in most European countries. It was mentioned earlier that Mr. Martin would like to reduce that rate to 25%. I think that once again, it would come at the cost of enormous sacrifices, which we know would be made by low-income families and individuals.

At present, 40% of unemployed people are entitled to employment insurance benefits. Those who lose their job and are not entitled to benefits are going to collect social assistance after a while. Of course, it's not like that everywhere. I agree that the level of employment has gone up, but there are still a lot of people who don't have a job. There are people who get small contracts for five or six months but are not eligible because you need 900 hours, for a first job, to be eligible for employment insurance. So, all of these people have no income after leaving their job or finishing a contract.

We think that the government should take steps to protect these people and families with low income, the most vulnerable people. People may sometimes get the impression that the federal government is detached from the people, detached from those with whom we work every day, people who have trouble paying their hydro bill or who need help paying for heating oil, which went up in price last year and the year before that. We have had to create emergency funds to help them out. We see truly dramatic situations in some cases.

¸ (1455)

Ms. Pauline Picard: I agree with you. I support you in all of your demands. You sum up the situation well and I am glad to have a copy of your recommendations. We, in the Bloc Québécois, have one more piece of support for our position.

I would now like to turn to the representatives of the Shipping Federation of Canada. Ms. Legars, I read a passage in your brief that raised questions in my mind and I would like you to reassure me.

On the subject of Canadian participation in the St. Lawrence Seaway feasibility study, you recommended:

[...] that the government of Canada should be a key participant in the U.S. army corps of engineers study on the Great Lakes/St. Lawrence navigation system by contributing time and expertise to the project, as well as providing funding as appropriate.

In reference to the feasibility assessment, you say:

Such improvements could include deepening of the connecting channels of the Great Lakes, the St. Lawrence Seaway and specific ports, as well as reconstructing the locks along the system.

Does that mean that the Americans could enter the St. Lawrence Seaway and invest in and do all of this work with our financial support and expertise? Wouldn't that be dangerous? They are much stronger than us, but we know full well that they need the St. Lawrence Seaway for their shipping. Wouldn't that be an intrusion that would pave the way for them to become owners of the St. Lawrence Seaway, if we are not careful?

[English]

Captain Ivan Lantz (Director, Marine Operations, Shipping Federation of Canada): Thank you for the question.

I think your concern is that the Americans are going to come and take over the infrastructure of the Canadian seaway system. I relatively highly doubt that this will ever happen. The sovereignty of Canada will remain intact as far as any of our intentions or any concerns there are concerned.

The St. Lawrence Seaway system is mostly Canadian. There are only two American locks, one at Snell and the other one at Eisenhower, at Massena, New York, just across from Cornwall, but all the rest of the system through the seaway, from Montreal to Lake Ontario and through the Welland Canal, which joins Lake Ontario and Lake Erie, is entirely Canadian. That will in the future remain Canadian. There is no question about it changing hands. However, 60% of the cargo moving through it is destined for or coming from the United States, so there is a very significant amount of American interest in the functionality of the waterway.

Also, I must impress upon you that the levels of the Great Lakes, naturally--the supply, the rainfall and so on--has decreased over the past few years. We are having some significant problems in management of the water levels. We have major studies going on regarding the management of those water levels, and one of the key concerns is, within the face of falling water levels and naturally occurring events, how can we continue to navigate as we navigate today or as we are going to need to navigate into the future? That's a very important part of the transportation equation, especially within Canada, if we need to move toward more opportunities within marine transportation in order to avoid the congestion on highways and railroads that will happen if we don't move our commerce off those surface modes.

¹ (1500)

The Chair: Thank you, madame.

Now I'm going to go to Mr. Murphy for seven minutes.

Mr. Shawn Murphy (Hillsborough, Lib.): Thank you, Madam Chair. I just want to follow with a few questions to the Shipping Federation of Canada, Madame Legars and Mr. Lantz.

Do I take it that the actual ports themselves along the seaway, such as the Port of Montreal, are not members?

Ms. Anne Legars: No, we don't represent ports. We use them. We need them. We are the clients.

Mr. Shawn Murphy: We are always being accused in this committee, and I guess in the Department of Finance, of not having a level playing field on intermodal, that one mode of transportation has competitive advantage over another. Of course, I think the mode that is perhaps complaining most vigorously these days is the airline industry, with the fees and charges that they say they pay, but how does that compare to the marine mode? Do you think you are paying too many charges?

¹ (1505)

Ms. Anne Legars: Our big concern, as we explain in our brief, speaking about the funds, is that the infrastructure programs established in the last budget were targeting other modes. That did not apply to marine. But marine, too, has needs. Marine, too, will need more infrastructure and things like that. So basically we're saying don't forget that we exist too, that we carry 55% of the volume of Canada's international trade, and this has to be channelled somewhere in terms of infrastructure.

So just don't forget us. We are part of the picture as well, and we are also part of the solution to bottlenecks and all these kinds of things, like the transportation infrastructure, which is already kind of saturated in many parts of the country. We are part of the solution, so don't forget us.

Basically, we want to be put back into the big picture, because we are not targeted on this front, the infrastructure front that was put in place in the past budgets.

Mr. Shawn Murphy: With the $1 billion municipal rural infrastructure fund, I can see where you wouldn't really fit within that program, but with the Canada strategic infrastructure fund, I'm not aware of any criteria within that program that would exclude ports or major projects along the St. Lawrence Seaway.

Ms. Anne Legars: Well, a couple of marine projects tried to get into the program, and they were told, “You are not targeted by these programs. That's not for you.” It was understood as other kinds of infrastructure, but not marine infrastructure.

It's a concern for us, because we think our industry has needs too in terms of infrastructure and should be part of this program or any new program that would be put in place.

Mr. Shawn Murphy: I agree with you 100%, and there's no reason I can think of why the needs of the marine industry would be excluded from this program. I'm involved with one program myself strategically. I've worked with it. It's much smaller than some of the projects in Quebec or Ontario, but I certainly haven't been told that it doesn't meet the criteria of the program. But anyway, perhaps the people who are administering it want to prioritize some of the larger programs or projects in Ontario and Quebec.

I have another question for the Canadian Automobile Dealers Association on their tax deduction, the small business deduction. What would be the percentage on the lien notes? Would that rule out a lot of your member dealers taking advantage of the small business deduction?

Mr. Richard Gauthier: Yes, it would, Mr. Murphy, because an average vehicle today has a carrying cost of about $28,000. So a substantial number of dealers would be impacted by that.

Mr. Shawn Murphy: It just seems to me that the objective of the legislation is not being followed here. I assume you've had discussions with the Department of Finance.

Mr. Richard Gauthier: Yes, we have, and the objective of the legislation clearly was not to exclude small businesses such as auto dealers. It's strictly an anomaly in the way the tax act is written that picks up on lien notes. In fact, two provinces, Manitoba and Quebec, have recognized that and have passed legislation provincially.

Mr. Shawn Murphy: What's the holdup with the finance department?

Mr. Richard Gauthier: It has been a long-standing discussion. This is something that I think goes back many, many years, and really it's just a question of priorities. Finance has just not turned its mind to it, and we think it's time they should.

Mr. Shawn Murphy: I agree with you 100%. It just seems to me that a small dealer wouldn't have to be that large to get into the $10-million lien note. You wouldn't have to be that big a lot to carry that kind of--

Mr. Richard Gauthier: You're right, Mr. Murphy. Finance has never come back with a specific objection. I think it's just something that has not been on their radar screen, and at this point we believe, and certainly we're hoping by this presentation today, that we can put it on their radar screen.

Mr. Shawn Murphy: I certainly agree with you 100%.

I have just one last question, to the Union des consommateurs, Madame Beaulieu. I hate to bring it up, but I just feel that I have to. You have a good submission, and I really appreciate the work you've put into it, but you come back with this figure that I've seen before, on page 9. Perhaps you won't be able to answer it now, but could you just give me the source of the information?

On the first two lines, health expenditures in 2002 accounted for a mere 14%. Could you at some point in time provide the committee with the source of that 14%? I don't think it's accurate. I know where it might have come from. It might have come from some ads that the provincial premiers put in the paper.

In the province that I represent, the federal government is at 68%, and I'm sure in Quebec it's a lot more than 14%. But if you could get back to us as to where the 14% came from, I'd be happy with that.

[Translation]

Ms. France Latreille: We will send that information. We certainly did not invent those numbers. I do not have the source with me, but we will send the information and give you the source.

[English]

The Chair: If you could just send that in to either our researcher or our clerk, it will then be circulated to all members. It makes it easier for you.

That's it, and I actually agree with Mr. Murphy's comments. For the record, I think it is an anomaly.

Now we'll go to Madame Judy Wasylycia-Leis.

¹ (1510)

[Translation]

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP): Thank you, Madam Chair. I have a few questions for the representatives of the Union des consommateurs.

You gave a very interesting presentation. Like Ms. Picard, I agree with your conclusions. However, I am looking for ways to convince the federal government to change direction. That is crucial in order to deal with increasing poverty and to meet the needs of Canadians.

You said very clearly in your conclusion that low-income people are worse off than they were 10 years ago. Has the situation not improved at all?

Ms. Ghislaine Beaulieu: Not very much.

Ms. France Latreille: People come for budget consultations to the Associations coopératives d'économie familiale. In the groups sessions where we give advice on budgeting, credit and debt management, it is obvious that people's quality of life has definitely declined over the past 10 years and maybe more. This is true in all respects, whether we are talking about buying power or the ability to find proper housing. We have seen the results of the employment insurance reforms.

So it is very clear that low-income people have seen a definite decrease in their quality of life.

Ms. Judy Wasylycia-Leis: Paul Martin said recently that the fiscal program needs to be kept as it is and the debt level must be reduced to 25 per cent of GDP, as you said. What can you tell him in that regard? What arguments can we use to change that approach?

Ms. Ghislaine Beaulieu: As we said earlier, the latest Statistics Canada census indicates that, over the past few years, the average income of low-income families has increased by about $50 and middle-income families—this is in our brief as well, by about $160, in the past 10 years. Since their income is not increasing, these people are obviously getting poorer, because the cost of living is increasing.

We see that in the cost of food and housing, in particular with the current housing crisis. People can no longer find decent housing. Since there is too little housing available, owners will let their buildings become run down or will simply refuse to rent to certain segments, such as families with young children. As a result, it is increasingly difficult for people to find housing. I believe that you will be hearing from other witnesses later who specialize in this area.

Since low-income families spend a large share of their income on housing—more than 50 per cent, in some cases—other basic needs are clearly not being met. People will cut where they can cut. Since it is impossible to cut in some areas, they will reduce their spending on food, and that is why we have children coming to school without having had breakfast and children with nutritional problems. Then various little services are set up to try to meet that need, like breakfast programs and so on, but that is not where the problem lies. Parents want to feed their children, but they need adequate income to do so.

We see people every day with problems. Mr. Martin and some of his ministers may be far from the front lines, but they can come and meet with us. They can invite us to talk about these things with them.

We also feel that some of the spending that Ottawa does misses the mark. We mentioned earlier, of course, the $100 billion in tax cuts. In our opinion, the federal government is denying itself of a huge amount of money. We also believe that part of that money needs to be targeted at families and low-income people, either through GST credits or the elimination of the GST, as has been suggested, on essential goods.

For example, we pay GST on electricity, certain consumer goods and school supplies. We are saying that if the government really wants to help needy families, the GST should perhaps be eliminated on these essential goods, which we have listed in our brief.

¹ (1515)

Ms. Judy Wasylycia-Leis: How do you answer people who say that the debt must be eliminated in order to save our future?

Ms. Ghislaine Beaulieu: Right now, the debt ratio has come down to what we consider a reasonable level and is similar to the ratio in a number of European countries. So we feel that it is not necessary to reduce the debt to 25 per cent of GDP.

There could be an annual amount. For example, if there is a budget surplus, then one or two or three billion dollars could go toward debt reduction. However, eliminating the debt should not be our only focus, when there are people who need goods or income to pay for their basic needs.

Ms. Judy Wasylycia-Leis: Mr. Gauthier, you have recommended reducing the debt. I would like to know why you made that recommendation. It seems that the debt-to-GDP ratio is now almost ideal—

[English]

The Chair: ...[Inaudible—Editor] ...a quick answer to that--

Ms. Judy Wasylycia-Leis: According to international standards—I'll say it quickly in English.

[Translation]

Mr. Richard Gauthier: Actually, I am not necessarily recommending that the debt be reduced. I said that we appreciate the government efforts to reduce the debt, and I mentioned that Mr. Martin had proposed reducing it to around 25 per cent of GDP over the medium term. I did mention in my brief that we did not advocate a particular number. However, we feel that it is very important to let Canadians know the specific objective, so that the government's progress in that respect can be measured. I did not mention a specific number.

[English]

The Chair: Thank you very much for them.

I'm going to take a round of questions myself, having seen the very interesting briefs and noticing that we have not had any questions on research, something this committee has championed. I do want to ask Dr. Auger some questions.

First of all, just about every researcher in university has sung the praises of CFI. But at the same time, as a government, we are being questioned by the Auditor General about the accountability structure currently existing at the CFI. Canadians, rightfully so, think that if it's there, there must be something wrong. In your professional opinion as a researcher, do you believe there is sufficient accountability through Parliament for CFI funds and through peer review—or at least the way those dollars are granted right now?

[Translation]

M. François Auger: Madam Chair, I would like to answer from a very personal point of view.

¹ (1520)

[English]

I'm no expert in the way things function at the Ottawa level, but the way I see things is this. I have a $15-million grant--$13.2 million-plus--but the numbers I have to produce and the level of precision I have to give is at the level of contracts I had with the army about 10 or 15 years ago. In the army, I can tell you.... I was okay with that, because I like it when it's black and white up to a certain point. When you're doing a contract, it's black and white up to a certain point.

The bottom line is that we have to account for a lot of things; we have to be extremely precise. In the last 24 months, they turned the screw in such a way that our response is, please don't turn it more.

If you want, I can come at any point to Ottawa to testify—even at my own expense—and tell you that the demand for checking and rechecking is at a level I haven't seen since 10 years, when I was working with the army, where if you were out of whack by $5 you had to redo it. On a $150,000 account, if we were out of whack by $5, we redid the whole thing to try to find the balance. We're now more or less at that level. Please, that's enough. I think the accountability, the bottom line, is superb right now.

The line of checking in the government is different. I'm aware of that. The vérificateur général is very “flustered”, because it's a little bit out of her range. But I think what they've done in the last 24 months is to get into line with the usual level of accountability in the Canadian government.

The Chair: Thank you very much.

This committee and its recommendations have been very supportive of moving indirect costs up to 40%. You know it's not close to that yet. But at the same time, we're hearing very much a request from the research community—and not just the CIHR, but all the granting communities—for increases in their budgets.

If you had the horrible choice of increasing indirect costs or going more to being able to bring in more researchers or augmenting them, where should we be looking to strike that balance? You've seen the economic update that we saw on Monday. It's not going to be there; we can't do everything. We've got some priorities here. If we can go incrementally, where would your druthers be?

I know that's a difficult question, but I put it in the context that...you're also putting some unacceptable practices here in our country, and I don't know what that means. I'm going to give you an opportunity to say whether that's an overstatement and widespread, or whether it's an unusual situation.

Mr. François Auger: What I'm saying basically, to answer your question, is that it's the lesser of two evils. It would be right now...theoretically, you did it, you helped indirect costs. I mean you, the federal government. It's been done. I think the effort is close enough. We won't reach any higher than that because of the constraints.

Now, if there's a little leeway--and I'm asking for that leeway--put it more into direct costs for research. Because if, within the indirect costs, you do a double checking and you do another more in-depth questioning of what's happening, that aspect will take care of itself.

Once again, if my university receives $8.3 million for indirect costs and the provincial government was giving $2.7 million and unilaterally they stop giving that $2.7 million, and then the university unilaterally decides to slip that $2.7 million into their pockets from indirect costs from the federal government, something's wrong. That $2.7 million just disappeared. It's not there any more. It's not coming to me for those indirect costs in my new facility of 50,000 square feet. It will not come to me. I'm losing--make the equation--about 22%, or 23% of what I would be receiving.

So what I'm telling you is that you have two evils, but I actually took very good care of one of them, not perfect, but I took very good care of indirect costs. We were ecstatic about it. But that was one example. There were some beautiful universities and hospitals where it went very well, but mostly there are some unsavoury practices. I cannot comment on all of them, because I don't know all of them, but you hear them and you will hear more about them.

So please put more into direct costs nowadays and check the indirect costs.

The Chair: You have something in your written brief and I just don't understand what you're meaning. I'd like to get your ideas. It says in paragraph (j) that we should be provocative by funding a Howard Hughes-like Canadian to create such a foundation. What are you talking about here?

Mr. François Auger: It's not for you, actually. I would say it's not even for this committee. It's more for Canadian society in general.

Fortunately for the Americans, Howard Hughes didn't do his testament and that trust went to.... The bottom line was that he said he wanted it for “medical research”; you know, there was a little writing. They were bright enough to change it and they had enough lawyers on the right side of things, from my perspective--Anna Nicole wouldn't say the same thing--to create a foundation that was wide open to medical research. This foundation is giving about 80% of the same level as NIH. It's out of this world. And they're not bypassing NIH; they're working hand in hand. At first NIH was very leery about it, as the Canadian government and CIHR would be leery.

So what I'm saying is, if we could find somebody, somewhere.... We have a lot of billionaires. Let's challenge some of them and find some big money somewhere--and big money wouldn't be all that much in Canada; I'm talking about $500 million to $600 million--make a fund and grow it from—

¹ (1525)

The Chair: So you're talking along the lines of private foundations, and this particular committee has done enough on that one.

Mr. François Auger: Yes. The federal government could be very helpful, as the American government was very helpful to Howard Hughes. We were talking about many billions of dollars; it's easier to be helpful. For Howard Hughes, I don't remember, but I think it was $8 billion or $9 billion.

The Chair: Okay. Thank you very much for clarifying that.

[Translation]

On behalf of my committee colleagues, I would like to thank you for your participation and your testimony. I feel that it is very important. This is a very important process for the government and for all Canadians.

[English]

I am going to suspend this meeting for only about five minutes or so to bring up our next committee. That's five minutes only, because we have to leave.

¹ (1526)

¹ (1532)

The Chair: I will call the meeting back to order, please. The order of the day is pursuant to Standing Order 83.1. We will continue with our fifth panel of the day, on November 5 in Montreal, on pre-budget consultations.

This panel has with it Union des producteurs agricoles du Québec, with Laurent Pellerin, the president. Bienvenue. And Serge Lebeau, deputy director.

From Front d'action populaire en réaménagement urbain, we have François Saillant, coordinator, and Lucie Poirier, organizer.

From Université du Québec en Abitibi-Témiscamingue, we have the president, Jules Arsenault. Bonjour.

From Société de transport de Montréal, we have Claude Dauphin, a member of the executive council of the City of Montreal and president of the administrative council of the STM, with Pierre Vandelac, the CEO. Bonjour.

From Fédération des chambres immobilières du Québec, we have Michel Beauséjour, director general, and Pierre Langlois, director of government regulations. Bienvenue.

Also, we have added from our former panel the Independent Media Arts Alliance, and we have Peter Sandmark, who is the national director.

Who is with you? I cannot see the name.

Mr. Peter Sandmark (National Director, Independent Media Arts Alliance): Katherine Jerkovic.

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The Chair: She is communications coordinator.

Okay, thank you very much.

Now, we will start with the Independent Media Arts Alliance for up to seven minutes. And seven minutes is seven minutes, please, because we are time-constrained.

Mr. Peter Sandmark: Good afternoon. Thank you very much. Thank you to the committee for letting us have this opportunity with our communications coordinator.

The Independent Media Arts Alliance was formed in 1981. It was formerly called Independent Film and Video Alliance. It's a national association of 81 media arts organizations across Canada, collectively representing some 12,000 independent media artists. These organizations are non-profit, publicly accessible centres that provide support for production, distribution, exhibition of independent films, videos, new media, and audio artwork.

The independent media arts sector is recognized by institutions like the Department of Canadian Heritage, Telefilm Canada, and so on as a primary source of talent for the Canadian film and television industry, but it's much more than that. It is part of the overall ecology of the arts and cultural industries, but it is a separate sector of its own, with its own distinct needs. Our organizations are grassroots groups, accessible to the public and reflecting what's happening on the street.

The Cultural Human Resources Council study Faces of the Future stated that the three most pressing issues facing the cultural sector are the undervaluing of art and culture in mainstream society, the underfunding of the cultural sector, and the instability of employers and institutions in the cultural sector. We agree and feel that these issues are tied together. Art and culture are undervalued in society so they need to be promoted more. This cannot be over-emphasized.

Many Canadian artists have received critical acclaim on the international level, yet their work is not known back home here in Canada. We need promotion for that work here in Canada. With more support, we could do even more internationally.

In our brief, we called for the renewal of the heritage program, Tomorrow Starts Today. The components of that program, the Arts Presentation Canada and Cultural Spaces Canada, provide support for the presentation of artworks and the creation of presentation venues, both key to increasing the profile of the arts in Canada.

In order to better promote all the arts, we also need more critical writing about independent and local art in magazines and books that are accessible to the public. Increased support for publishing programs that fund writing about art and culture would address this issue.

Our recommendation in our brief to increase core funding to arts organizations, specifically the Canada Council for the Arts, speaks to the second issue of the underfunding of the arts. The council's budget should be doubled. It is the best, most efficient, and fairest institution to deliver support to the arts community. The council funds a wide range of artists and art groups from the grassroots up.

They have been at the forefront of striving to address the needs of aboriginal artists. However, there is need for more cultural development in the north, more opportunities for aboriginal artists, and support for aboriginal arts organizations. With the support of the council, our organization, the alliance, recently helped to develop a national coalition of aboriginal media arts groups, which was urgently needed because the communities that these groups represent are so isolated from each other. This initiative is a positive step in bringing aboriginal artists and presenters together, but it only indicates the need for more support to sustain and increase the outreach to aboriginal communities.

There are many areas where the council should provide support, but cannot without a significant increase in funding. The entire field of new media, which includes interactive art, web art, Internet art, audio art, is exploding, and yet the council cannot provide the necessary support.

Broadband networks are the next step in the digital revolution. Canada has the CANARIE consortium that is helping to develop research in this field. However, there are inadequate resources for cultural groups to participate in this research. Equipment and technical resource people are needed, and the costs of connecting to the network are high.

We're going to illustrate the importance of this in anecdote. American movies dominate our cinema screens. Some studies have said that, in the past, up to 97% of screen time in Canada has been foreign films. This was because U.S. companies dominated the field when the distribution was developing back in the 1920s.

It was the same situation in the early days of television. The CBC was created to counter the influence of American networks that were, at that time, broadcasting over the border into Canada. The CBC was essentially a government intervention to preserve and disseminate Canadian culture.

It's important that we do not miss the boat on being a significant participant in the development of broadband culture. We have, here in Canada, the technical infrastructure and the technical and creative talent, but we need specific support programs for arts groups to get cultural broadband projects and research off the ground. We urge the government to make a specific effort to support new media through its existing cultural agencies--for example, the new media programs at the Canada Council for the Arts.

¹ (1540)

There is support for independent film and video within government agencies, but the situation is far from ideal. Among the arts programs at the Canada Council, the media arts section is the least funded one.

At Telefilm Canada, there's a budget for low-budget independent features, a small fund of $1.7 million that they say they would like to increase.

The National Film Board has several programs that assist independent filmmakers, the Filmmaker Assistance Program and Aide au cinéma indépendant canadien, which together represent $1.2 million, a small amount, but the NFB cannot do more without an increase to their funding.

Canada is renowned for its documentary filmmaking, and yet its most important fund for independent documentary films, the Canadian independent film and video fund, was cut by 14% this past year. We strongly recommend that this funding be reinstated.

We feel the government should show a clear commitment to Canadian culture by making cultural funding statutory. According to the government's own main estimates for 2003-04, 97.8% of the Department of Canadian Heritage's funding is non-statutory, the highest proportion of non-statutory funding of any ministry. This leaves arts and cultural funding in a precarious position.

There is an urgency for arts organizations to meet their human resources needs, and what's needed there, again, is more core funding. The arts infrastructure in Canada has grown significantly since the 1970s; however, we need to consolidate that growth. We need to ensure an ability, in the words of the Canada Council for the Arts director, John Hobday, “to attract and retain the highly skilled administrative staff required to connect artists and audiences.”

A common notion expressed in the arts is that of “sweat equity” to denote the fact that much of the cultural sector is supported by the underpaid and unpaid hard work of many artists. Canada is a prosperous nation. Even in a tough year, the federal government's surplus is estimated to be $2.3 billion; and it could be more, as it was last year. It's a condemnation of our society that we should have to count on voluntary labour for the very survival of the arts infrastructure in Canada. If well-off countries like Canada cannot properly support the arts, who can?

I'd like to point out a couple of other points.

The Chair: Not now.

Mr. Peter Sandmark: Thank you.

The Chair: We have your written brief. Thank you very much.

Now we will go to the Union des producteurs agricoles du Québec. Go ahead.

[Translation]

Mr. Laurent Pellerin (President, Union des producteurs agricoles du Québec): Good afternoon, Madam Chair and members of the committee.

I would like to begin by saying that I represent the Union des producteurs agricoles. Our organization was created in Quebec in 1924 and so has weathered a lot of storms. We represent 44,000 Quebec farmers. We have 3,000 men and women involved around the province in the UPA structure and 41 affiliated federations covering all of the Quebec and all agricultural products that our farmers produce.

I will ask my colleague, Mr. Lebeau, to give you a quick overview of the points in the brief that we provided you. I will answer any questions afterwards. I will now give the floor to Mr. Lebeau.

Mr. Serge Lebeau (Deputy Director, Research and Agriculture, Union des producteurs agricoles du Québec): Thank you, Madam Chair.

My presentation will deal with four points. First, I would like to quickly review the importance of agriculture and forestry in Quebec. Then I will explain why we need to provide support for agriculture. I will also look at federal support for agriculture and then conclude by bringing out various current issues.

I will begin with the importance of the agricultural sector. This is an important sector for Quebec, where it accounts for one out of every seven jobs. It is Quebec's most important primary sector activity. As Mr. Pellerin pointed out, there are 44,000 farmers, 33,000 farms and 60,000 direct jobs created by this sector. Annual investments in the primary sector alone total $720 million.

Private forestry is also important, with 128,000 forestry producers, whose harvest is worth $580 million. In the regions, the agrifood and forestry sectors account for between 8 and 14% of the jobs, depending on the region.

Why should the government support agriculture? It is because agriculture is a special sector with particular characteristics. Left to itself, it could not survive pure market forces. I think that we have a good example of what we are currently experiencing with the mad cow problem.

This sector requires very high capitalization, with around $1 in income for every $6 in capitalization, compared with a ratio of one to two or one to three in many other sectors. So farmers are at a disadvantage in relation to other players. There are very few buyers or retailers, but there are a great many producers. It is also important to point out that the agricultural sector plays other important roles in addition to producing food. It keeps people on the land and contributes to the vitality of rural regions.

The federal government support for agriculture has declined over the past 10 years. It decreased from $6.1 billion to $2.2 billion in 2000, and then increased, up to 2002. For 2002-2003, the federal government provided $3.8 billion. We congratulate the government on that, but this support is not adequate. It is much less than what is given elsewhere. The brief provides you with a very revealing table that compares support in various countries in terms of dollars per inhabitant. These are OECD statistics. As we can see, Japan provides support worth $451 per inhabitant, whereas Canada provides $171. The United States gives close to $342, and the European Union some $268. So if we compare Canada with these other countries, and even with the overall level for OECD countries, we see that the Canadian government is underfunding the agricultural sector.

Without saying that this is a direct cause, it is reasonable to suspect that this must be one of the reasons for the dramatic drop in income reported between 2001 and 2002. A similar drop may occur for 2003. We are talking about a 50% decrease in net income for farmers in Quebec and across Canada. In Quebec, net income has fallen from $828 million to $443 million. With the mad cow problem this year, income will certainly be lower than in 2001.

With respect to federal support for the agricultural sector, a table on page 28 of our brief shows that Canadian agrifood exports have still managed to increase significantly since 1970. However, those exports are not reflected in greater net income. The table shows the export line increasing but the net income line relatively unchanged.

It is at least puzzling, and sometimes even frustrating, to see that the people who have probably benefited the least from the growth in the agrifood sector are the first to be blamed for negative environmental impacts. Moreover, producers do not yet benefit fully from the fruits of their labour. In order to achieve a fairer distribution of income, the UPA favours two basic tools for the agricultural sector and would like to suggest improvements to them.

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The first is supply management. In order for it to be successful, supply management must be used for a number of very important agricultural activities in Quebec, such as dairy, poultry and egg production. These three account for over 40%of agricultural income earnings in Quebec. They are very important activities. The federal government has not invested a penny in these areas; they pay their own way. If you compare products sold in Canada that are under a supply management system with the situation in other countries, you will see that our products are among the cheapest in the world. So the agricultural sector has proven that it is efficient.

However, in order to preserve agriculture, three conditions have to be met: imports of products and by products have to be controlled, the price policy needs to cover production costs, and supply management needs to be used in managing production. At both the national and international levels, the Canadian government must maintain these three conditions guaranteeing that this system will continue to exist.

Another major pillar of Canadian agricultural policy is the Agricultural Policy Framework, which was adopted not long ago. We are quite critical of that framework. First of all, there was a meeting in Whitehorse in 2001 to redefine Canada's agricultural policy, but with the focus on greater flexibility and more complementarity. But that is not really what we have seen happen. It is very disappointing to see what has been done with this program.

In short, what we can say about the agricultural policy framework and particularly—

¹ (1550)

[English]

The Chair: We will go to our next participant, Dr. Arsenault.

[Translation]

Mr. Jules Arsenault (President, Université du Québec en Abitibi-Témiscamingue): Good afternoon, madam. Thank you for inviting me, as rector of the Université du Québec en Abitibi-Témiscamingue, to this federal government budget consultation. I see a strategic interest in training, education and research. I also see an interest in developing the economy and education in all regions of Canada.

The UQAT is the most-recently created university in Quebec and the second most recently created in Canada. It serves two thirds of the province of Quebec, in terms of area. It has 2,700 students and serves 9 northern Cree communities, two Inuit communities and 9 Algonquin communities.

I accepted your invitation because I realized that, over the past few years, your recommendations had an impact on government policy, especially with respect to reinvestment in education, research and development. In 1997, Canada indicated its intention to move up from 15th to 5th place in the world ranking for research and development. Using that vision, the Canadian government has created the Canadian Foundation for Innovation, increased with a view to doubling by 2010 the budgets for granting agencies, has created or is creating 2,000 research chairs in Canada, has begun funding part of the indirect costs and has created scholarships for post-graduate students.

In addition to those programs, there has been emphasis on small universities. With programs such as the CFI, the indirect costs and the millennium chairs, you have been able to protect the resources for small universities across Canada. These investments and programs have promoted research throughout Quebec and made it possible to develop expertise. As a result, the UQAT, which is a small university, has tripled its research performance in terms of grants and developed expertise in mining, forestry, agri-food and water resources.

That investment has served as an incentive for Canadian companies and various departments, at both the provincial and federal levels, to invest in research and development. I believe that this is a great achievement. At the same time, it is a catastrophe for small institutions and Quebec universities.

In the years following 1997, there have been only two years in which indirect costs were funded and only those for accredited organizations. So the indirect costs in research and development sponsored by departments are not covered. They are funded at a rate currently assessed by the AUCC. Studies done in Quebec show that the funding rate varies from 50 to 65% and that the overall funding is around 250 million dollars for all of Canada, which amounts to an average of some 25 or 27% of indirect research costs.

When the indirect costs are not fully funded, we have to find the money somewhere, because the cost have to be covered. But where do we take that money from. It is done by increasing the universities deficit, reducing the support for research and development, cutting back on the maintenance of our assets and moving money earmarked for training to fund raising. So it is particularly in that sense that the situation is catastrophic. When it comes down to it, it is often the university that support the companies, since these indirect research costs are not covered.

In that context, universities like the UQAT are in debt. Moreover, these investments, combined with those of the Quebec government, have led to shift in university staff. Over the past three years, the UQAT has lost 18% of its teaching staff. Professors are attracted by investments from the larger universities. The UQAT is an incubator for the major Quebec and Canadian universities and we are always having to renew our teaching staff.

¹ (1555)

Which leads me to make a few recommendations for the Standing Committee on Finance. The first three deal with indirect costs.

First, I would like the Canadian government to uphold its contribution to indirect costs, that it increase it to 40%, and that it also increase the global envelope of $225 million because, by 2010, research will have doubled in Canada, and if the amount remains the same, there will be less money for everyone.

My second recommendation is also with respect to indirect costs. I recommend that we increase the budgets of the two departments for Canada and for Quebec—it would therefore fall under provincial jurisdiction—the necessary resources to finance their indirect costs. It would be unacceptable for Agriculture and Agri-Food Canada, or the Canadian forestry service, not to pay these indirect costs.

My third recommendation with regard to these costs would be to require companies to pay them, but to give them tax credits for the payment of universities' indirect costs.

My fourth recommendation deals with research investment. The university has invested in and supported projects, creating synergy and developing centres of excellence in outlying Canadian regions. I am thinking mainly of northeastern Ontario and northwestern Quebec and the mining sector.

Fifth, if you want economic benefits which go beyond those generated by research and development tax credits, I think tax credits should also be awarded for marketing research projects, as there are tax credits for money invested in research and development.

My final recommendation is that we find a way to attract new professors to Canada's small universities. Indeed, small universities bear the burden of training professors when they are only still at the master's level.

Thank you, madam Chair.

[English]

The Chair: Thank you very much.

Now, we will go to Madame Poirier.

[Translation]

Mrs. Lucie Poirier (Organizer, Front d'action populaire en réaménagement urbain) Good afternoon. My name is Lucie Poirier and I represent the Front d'action populaire en réaménagement urbain, otherwise known as FRAPRU. Mr. François Saillant, the coordinator, is on my right. We will be making a joint presentation.

I would like to begin by point out that FRAPRU is a provincial organization which fights for housing rights. We have 80 member groups throughout Quebec, including many housing committees which work directly with tenants.

I will begin my presentation with a quote:

Canada is undergoing a serious housing crisis. Over the last few months, the working group heard the same thing throughout the country: the situation is critical and we must act immediately to solve it [...] The numbers speak for themselves, but beyond the numbers, the deep despair created by Canada's housing crisis affects many more families and individuals.

Paul Martin wrote this text in 1990, when he was co-chair of the Liberal caucus working group on housing, which produced the report.

Unfortunately, since 1990, the housing crisis has worsened. Whereas in 1990, 583,000 Canadian families spent over half of their income on housing, that figure increased by 26%, amounting to 735,000 families. These are families who, at the beginning of the month, have to pay more than half their income for shelter and who, the rest of the month, have very little over to pay for food, clothing and other needs.

Furthermore, the vacancy rate, which stood at 4.8% in Canada's metropolitan areas in 1992, plummetted to 1,7% in 2002, whereas the vacancy rate of the areas of Quebec City, Gatineau and Montreal fell by 0.3%, 0.5% and 0.7% respectively. As a result, there is a huge housing shortage in Quebec. Hundreds of tenant households had no place to stay. The government of Quebec had to adopt an emergency program which the cities of Quebec City, Laval, Longueuil, Montreal, Gatineau, Saint-Jérôme and Châteauguay, amongst others, had to sign on to. Dozens, and even hundreds of people, including families with three, four, five and sometimes six children, had to stay in emergency shelters, such as gymnasiums.

Emergency measures were funded by the government of Quebec and by its municipalities. Unfortunately, throughout that time, the federal government did nothing.

The housing shortage was marked by ever increasing rents. In the Montreal area, rents increased by about 10%. Many more people were evicted from their homes, an increase of approximately 60% in the last year. Families with children are also victims of discrimination.

Therefore, in this context, it is obvious that the house crisis today is much more important than the one Paul Martin was talking about in 1990, and we think the federal government is partly responsible for the situation.

º (1600)

Mr. François Saillant (Coordinator, Front d'action populaire en réaménagement urbain): In the housing report which was mentioned a few moments ago, Mr. Martin denounced the cuts made by the conservative government in the area of social housing. He denounced them for as long as the Conservatives were in power, but once Mr. Martin was in power, he implemented the worst measures announced by the Conservatives, that is, the complete withdrawal of the federal government from the financing of new social housing. The measure took effect in January 1994. Since then, and for eight consecutive years, not a single cent has been allocated in the federal budget for social housing. These cuts have had an impact.

At the end of the 1980s about 5,000 social housing units were financed through the federal government. If Quebec had maintained the same rate of social housing allocation, there would be 40,000 low rent units more today. However, it is estimated that the rental housing unit shortage in Quebec, which you have just heard about, amounts to about 33,000 units. When the government withdrew, we lost 40,000 low rent units. This goes to show the catastrophic repercussions of the federal government's decision.

In the 2000 budget, the federal government set aside money for social housing. Mr. Martin announced that $680 million would be invested in the sector, and Mr. Manley added another $320 million on top of that in his last budget. However, this falls far short of the need and does not even compensate for what has been lost.

In Quebec, money the federal government spends on affordable housing actually goes to finance 6,500 affordable units. Out of that number, 3,600 are real social housing units. However, this is a far cry from the 40,000 units which we lost. Therefore, despite all the announcements which have been made, we continue to say that the federal government must do more than what it has been doing until now. I am guessing that you are hearing the same message across the country.

We are asking for an additional investment of $2 billion a year. This is the same amount called for by other groups who work with homeless or people who do not have adequate shelter in Canada. This is not only necessary, but it is the only way for us to get out of the current housing crisis.

Of course, apart from investment in housing, our organization supports many other requests which have been made by other organizations, including calls for fully restored health care, education and income security transfers to the provinces.

Thank you.

[English]

The Chair: Thank you.

We have heard similar views from Halifax to Vancouver to Winnipeg. Affordable housing is what I think we are all talking about here, not just the SCPI and homelessness, but the affordable housing crunch.

Okay. Thank you very much.

Now we'll go to Monsieur Dauphin.

º (1605)

[Translation]

Mr. Claude Dauphin (Member, Executive Council of the City of Montreal; Chair, Board of Directors, Société de transport de Montréal): Thank you very much, madam Chair. Ladies and gentlemen, members of the Standing Committee on Finance, thank you for welcoming us here.

I will only say a few words as a preamble on what the Société de transport de Montréal is although you already have a good idea.

It's the 15th biggest business in Quebec. It has 7,300 employees half of whom are in direct contact with its users every day. There are 1,600 buses in the bus fleet. There are 65 metro stations and 1 metro. We provide 1.4 million para transit trips a year for people with decreased mobility.

How important is public transport? Why are we here today as the biggest transportation company in Quebec and one of the biggest in Canada? It is because we would like to see the federal government get involved and invest in transportation especially in public transportation and especially in infrastructure.

I know that money was invested in public transportation in the Toronto area and we would hope to see the same kind of thing in Montreal.

As for the advantages of public transport, as experienced parliamentarians you are all aware of the advantages of public transport especially if we want to be consistent with the ratification of the Kyoto Protocol. In Quebec, for example, roughly 50% of greenhouse gases are caused by transportation. We are convinced that if all Quebeckers and Canadians increase their use of public transportation it would help decrease greenhouse gases.

For example, madam Chair, few months ago we held a Car Free Day in a few streets in Montreal. For those who know Montreal a bit it was from Guy Street to McGill College and Maisonneuve to Ste. Catherine. We shut that sector down to car traffic for only four hours.

According to the Direction du suivi de l'état de l'environnement du Québec, the fact that very small area was closed for four hours meant there was 40% less carbon monoxide and nitric oxide compared to other Mondays as the experience was on a Monday. So there was 40% less carbon monoxide and nitric oxide simply because of few streets were closed for 3 1/2 hours, a demonstration of how important it is to invest in the public transportation.

You know that we have had a subway—I mentioned the metro earlier— for 37 years. After 37 years, and this goes for houses too, one can expect to make certain changes. So we have a $311 million program for the first stage in order to renovate the metro's fixed assets like the control centre, cables and ventilation. We put in a request under the Canada-Québec Infrastructure Program for federal government involvement to the tune of one third of this first stage of the Réno-system program.

Of course, we were also glad to see that during these last few weeks the House of Commons held a vote—and you can see me coming on this one already—that would allow the federal government to open things up in the field of taxes on gasoline. You know that there is a 1,2¢ tax in Ottawa that was supposed to serve to cancel out the federal deficit, don't you? There hasn't been any federal deficit, at least since 1998, so we would really like the Canadian Parliament to open up on this. The Bloc Québécois did not vote in favour of it, but I know why. It is because insofar as there is a formula with the provincial governments and more especially with the Quebec government, a way must of course be found that will not lead to useless constitutional conflict.

So, of course, we would be favourable to see an opening on the gas tax especially the 1.2 ¢ one. That is one our proposal.

Another one of our proposals is that we would like to see more infrastructure programs. Even though there were some differences, at the outset, when the infrastructure programs were launched, in my opinion it is marvellous to be able to share out one third, one third, one third between the municipality, Quebec, that is, the province and the federal government. That allows us to anticipate a lot of infrastructure investment.

For example, last March the Quebec government decided that the cost of monthly public transportation passes would be tax deductible, especially for workers.

º (1610)

We would like the federal government to provide the same deductions, which, we feel, would encourage the use of public transit.

We would also like the government to continue to invest in research on alternate fuels that would reduce greenhouse gas emissions. As an example, for the past year, we have had a bio diesel pilot project. This is a fuel that combines diesel, vegetable oil and cooking oil. The results have been extremely promising. The use of bio diesel fuel has greatly reduced the amount of CO₂ in the air. We now must convince both levels of government to grant us some tax relief. At the federal level, we have been told that this is a done deal. The government would be prepared to give us a 4¢ exemption on the diesel excise tax. We must now convince the Quebec government to do the same which would allow us to purchase this bio diesel fuel at a competitive price.

By adopting all of these measures, the federal government would help us to attract more riders. You know that even if public transit ridership has increased since 1995—in Montreal, at least—there has been a double or triple increase in the number of private vehicles on the road. For example, 30% of Montrealers used public transit in 1970. In 1984, it was 24%. In 1998, it dropped to 16 or 17%. So even though there is trend towards public transit, the increase in automobile use is two or three times greater. We believe that the federal government must become involved in convincing our fellow citizens that public transit is the way to go.

Thank you very much for your attention.

The Chair: Thank you very much.

Mr. Beauséjour.

Mr. Michel Beauséjour (Director General, Fédération des chambres immobilières du Québec): Honourable members, Madam Chair, I am Michel Beauséjour. I'm the Director General of the Fédération des chambres immobilières du Québec made up of the 12 Quebec real estate boards representing some 10,000 professionals in the field. We are in favour of the recommendations made by the Canadian Real Estate Association which tabled a pre-budget brief a little earlier during your Canadian tour. However, we will be looking at an element that's important for us, the measures that would serve to wipe out the present housing shortage.

Real estate is an important but often overlooked industry. The impact of real estate and the economic impact of real estate brokerage are considerable. Last year, the economic impact of the real estate brokerage industry in Quebec was estimated to be $1.1 billion. Those professionals are important economic players helping Canadians to complete the transaction which is often the most important one of their lives. They are the first to witness the impact of the economy's swings on the daily lives of consumers. Our industry must advise its clients in a changing economic environment and that includes tax, budget and monetary policies. So we believe that our industry because of its structure is an indispensable player when it comes to knowing what one's fellow citizen's priorities are.

The health of our industry goes hand in hand with the state of the economy. When people are worried about their economic positioning, they automatically delay any decision about real estate investment. The present economic expansion has lasted since 1992 and the present year should also end on a growth note. Maintaining this growth period should be a primary objective for the government. The Quebec real estate industry believes that the priority in this respect should be increasing disposable income for all Canadians through a decrease in taxes. Until clearer signals are sent about getting the world economy back on a better footing, prudence leads us to believe that it would be best to stimulate domestic demand.

Therefore, we will focus our recommendations on setting up concrete measures to deal with the difficult situation in the present real estate rental market. In this respect, our observations lead us to state that in Canada not enough is done to encourage investment in income property. The result is simple: there has been increased demand for housing because of economic growth but supply was not in a position to adjust. There are multiple reasons for that. However, based on our observations, our conclusion is this: most income property owners are small investors, people like you and me who, at a given point or specific time in their lives, decide to include real estate in their investment portfolio. Income property thus has to compete with a whole range of financial products now available on the market. So, as a society, we must ask ourselves if we collectively want to support that kind of investment which, contrary to many others, provides an essential service to the population: housing. It seems to us in this industry that the answer is clear but efforts must be made if we want our Canadian decision-makers to become aware of this.

So we're suggesting two specific measures that would make investment in real estate more profitable and thus support expansion in overall housing supplies. These are essentially two fiscal arrangements for owners or small owners, small-scale owners. Our first proposal is to permit the rollover of capital gains resulting from the sale of an income property if this gain is used to purchase another income property. Basically, this allows to defer the taxing of these capital gains to some future date, something like the RRSP model.

Our next proposal is to allow investors to qualify for the small business tax deduction. Real estate is a sector that is specifically excluded from that deduction. Improving tax treatment for those investors is an essential condition to breathe new life into the rental real-estate market. Besides, our rental market analysis leads us to believe that an interesting number of tenants, with a little bit of help, might qualify for mortgage loans and free up a good number of apartments.

In this area, the Canadian Mortgage and Housing Corporation, the CMHC, already has a huge mortgage insurance program allowing thousands of Canadians to qualify for a mortgage despite their having less than 25 per cent of the purchase price to put down. We are aware of that and we also know that CMHC is presently working on a project based on an American experience of the American Dream Foundation Corp. This involves setting up special deposit accounts for low-income families where their deposit is matched by a contribution of $1 for every $8 deposited.

º (1615)

This kind of program is based on the real estate industry's understanding of the problems surrounding the present housing crisis. There are a number of households in the rental market now who, with a bit of help, could qualify to become owners. Moving the households from rental status to ownership status would free up rental units and this would take off a lot of the pressure now being exercised on the rental market.

Basically, government action to put an end to the present housing crisis in many major Canadian cities must be based on an understanding of the real estate market and lead to simple measures focusing on specific points of the present structure.

Thus, our recommendations pursue two objectives. First, increase supply by making investments in rental property far more attractive and also decrease demand by helping some households to become owners more quickly.

In conclusion, we would like to remind the members of this committee that the next budget will be most important. This budget will be an opportunity for the federal government to breath fresh life into the Canadian economy which, in a context of a worldwide slowdown is still one of the rare ones that can hope for sustained growth.

The Fédération des chambres immobilières du Québec has presented three recommendations on housing. Based on the observations of our members working in the field with their clients and their knowledge of consumer expectations, we firmly believe that the measures we are suggesting, dealing mainly with housing, express the concerns of a vast majority of all Canadians.

[English]

The Chair: Thank you very much.

I'm just going to give Mr. Sandmark two minutes to make his two points.

Mr. Peter Sandmark: Thank you.

We just wanted to add that there is a taxation issue. As proposed in our written brief, we'd like to suggest that the federal government consider a tax credit on copyright incomes, such as the Quebec tax regime has. But also, we'd like to ask that the government reaffirm its reasonable approach to evaluating artists' expectation of profit. To quote from the information bulletin IT-504R2, section 4: “in the case of artists and writers it is recognized that a longer period of time may be required in establishing that such reasonable expectation [of profit] does exist.”

This is in reaction to things we have heard about artists being audited, and not being able to show immediately. It takes a while for artists to develop an inventory, to develop a reputation, and therefore to develop an expectation of profit.

Another taxation issue has to do with customs and duties charges for artist-run organizations engaged in exhibition and distribution. We'd like to recommend that the government help to stimulate international cultural exchanges by providing a blanket exemption for customs and duties charges for non-profit organizations.

º (1620)

[Translation]

The Chair: Thank you very much.

Mr. Paquette, you have 10 minutes for your questions or comments.

Mr. Pierre Paquette (Joliette, BQ): Thank you, madam Chair. I thank you all for your presentations. There is an enormous amount of material. Of course, we don't have much time to put all the questions we would like to ask.

First, I would like to reassure Mr. Dauphin and tell him that, in effect, his analysis is correct. If the recommendation in the motion had been worded like the recommendation you passed at your meeting last October, we would have no problem supporting it. I think it will evolve over time. It was a motion so we actually have to look at it in a positive light.

As for the representatives from the Union des producteurs agricoles, you unfortunately did not have enough time to finish. However, I have read your brief attentively and it contains an abundance of ideas. It's the kind of brief one has to read several times over in order to understand all its ramifications.

In your recommendations there is absolutely nothing on the agriculture policy framework. In fact, in the chapter V recommendations, I did not see anything dealing specifically with the agriculture policy framework. You say that the money available under this heading should be increased and invested in the environment and renewal on a priority basis. You described what these are, in other words $30 million over five years which means $6 million a year. As for risk management, you do explain a certain number of conditions but there is no amount attached. I was wondering if it was because I had not understood you correctly or if there was another aspect.

Concerning the policy framework, I would like to know if you have put any numbers on what the adequate amounts could be and more specifically what would have to be done to improve risk management.

Mr. Laurent Pellerin: There are five chapters in the Agriculture Policy Framework. Four of them are the environment, renewal, research and food safety and quality. We agree on the objectives. There is very little money Canada wide in those areas; it's minimal. We need a lot more money if we want to do a proper job of meeting those objectives.

As for risk management, that's the number one objective and that's where Canada has totally missed the boat during the last 10 years. Canadian agriculture is faced with an alarming situation. There are just about no agricultural products in Canada being sold for more than it costs to produce them. Canadian agricultural producers have suffered a drop of 50 per cent of their net income in 2002 and the forecast for 2003 is a further drop. It can't go on.

There are not many solutions. When you look at what is being done on the farms, the producers are competitive and we rank amongst the best producers in the world when dealing with things we can do something about such as the number of kilos of milk per cow, the number of piglets per sow, food conversion, output per hectare in our fields. Where we're not competitive is in those areas that depend on the competitiveness of our government, especially the federal government, which just absolutely isn't in the international game.

Serge gave you the figures from the OECD. They are not our figures, they are the OECD figures. I can't believe that Canada is too poor to keep up with those industrialized countries in agricultural support.

Our present figure for risk management is 1.1 billion dollars with occasional amounts of 600 million dollars for this year for a total of 1.7 billion dollars. The figure below which you can't do proper work in the area of risk management in Canada is something around 2.6 billion dollars a year.

Mr. Pierre Paquette: How about the other two aspects whose funding you would increase, renewal and the environment?

M. Laurent Pellerin: We didn't put numbers to those aspects, but we asked for a review of the Policy Framework after one year and that was approved by the federal government. You know that the Whitehorse agreement in June 2001 meant that the policy framework for agriculture was to be developed in partnership with the producers and the provinces and the agreement was to be flexible in its application in Canada's major regions.

Now, neither the flexibility nor the partnership did in fact materialize. On the contrary, the federal government paid firms of private consultants to undertake consultations that were a total sham; the money was totally wasted. There was no result on the flexibility and nothing was done about the partnership despite all the flowery words thrown our way.

I think we have to redo the whole exercise. We hope that within a year, with coming changes, they will be more responsive than in the last two years.

º (1625)

Mr. Pierre Paquette: Thank you.

Of course, I cannot help but try to find solutions for the housing crisis, along with FRAPRU and the Fédération des Chambres immobilières du Québec.

On the one hand, FRAPRU is saying that the federal government should massively invest in social housing: low-rent housing and housing coops, for the most part. I would like you to clarify this, because the federal government has been talking more about affordable housing, something you mention in your brief. I would like you to focus on that particular aspect. Do you think there should also be solutions involving the private sector?

I will hit the ball back over to you, because you recommend a strictly private sector approach. In your vision, is there room for social housing in response to the housing crisis, or should it really only be the private market that responds to the urgent need for housing?

I know that both of you used the expression "housing crisis". Already, that marks an interesting starting point.

Mr. François Saillant: At least we can agree that there is a housing crisis.

Certainly, FRAPRU feels that social housing should be the first priority, that is, housing which is affordable to low-income families. Over the past years, most renters have been affected by the housing crisis: rent increases affect everyone. However, the main victims of this crisis are people with low incomes.

With regard to affordable housing—and that was part of your question—it should be pointed out that, when it come to the federal government definition, we are not talking about the same thing. Quebec's affordable housing program has two main objectives: first—and this was the Government of Quebec's choice, which we supported, but which does not necessarily reflect the choice of the federal government—social housing. Under this system, rent for a four and a half is about $450 a month, which is already expensive compared to previous rent levels.

The other objective is to get the private sector to build rental housing where rent for a four and a half can hit $800. But this type of housing is much too expensive for low-income people. In our opinion, $800 a month for a four and a half does not represent affordable housing.

As for whether we are open to the idea of making room for the private sector, I would say that, irrespective of our position, the private sector has a role to play. In Quebec, 90 per cent of rental units are privately owned. That is the reality. Another reality in Quebec, and in Canada, is the fact that, compared to European countries, there was very little social housing. In our view, this is where progress needs to be made, especially since the apartment vacancy rate, such as in the Montreal area, is 0.7 per cent.

That is an average, but if you look at the figures more closely, you will realize that there is a crying need—and the CMHC carried a study on the subject—in the area of what is called low-rent housing, housing at the very bottom. The vacancy rate for that area is 0.4 per cent. Conversely, the vacancy rate for high-rent housing, for better housing, is 1 per cent.

I do not think building more expensive housing is the solution to this crisis. We feel that we should concentrate on building housing for low-income people. We think social housing should be a priority.

Mr. Pierre Paquette: The federation.

Mr. Michel Beauséjour: It is a very relevant question, and I agree with FRAPRU, when they say that we are not talking about the same thing.

There is a demand for social housing, and I agree that the need is pressing. However, I would prefer to let the specialists debate that issue. I think they are in a much better position to do so than is the Fédération des Chambres immobilières.

We deal mostly with access to property ownership. Two things can be done to ensure availability of affordable housing: first, increase the housing supply. As we have seen, the greater the number of available units on the market, the lower the prices are. Low availability is often what leads to higher prices.

Next, we can lessen the demand for affordable housing by making it easier for families who can barely afford to become homeowners. All these people need is a little boost. This would get them out of the vicious circle in which they now exist as tenants. I am favour of these measures, since they will reduce the demand on existing housing. Moreover, this could help to complement any future social housing policies.

I might point out that home ownership in Quebec, more particularly in Montreal, is well below the rest of Canada. Here, in Montreal, 36% of the population are homeowners. In Vancouver, the rate is 44% and in Ottawa, it is 60%.

We must allow low-income wage earners to own their own homes so that they can finally escape the vicious circle of relentless poverty.

º (1630)

Mr. Pierre Paquette: If we look at Europe, we see that the ownership rate in Montreal is higher than the European average. These issues are related to culture.

Do I have any time remaining? I have a question for Mr. Dauphin.

Have you determined how much the tax measures for public transit would cost? Do you think that being able to deduct monthly transit passes—as, I believe, Ms. Marois suggested in her budget—would be compensated by making parking a taxable benefit? That might perhaps create a net effect.

I wondered if that was the reason why the two recommendations were made together. I must admit that it is a first for me. Nevertheless, I feel that it is a choice that can easily be defended when it comes to the public purse.

Mr. Claude Dauphin: It is a relevant question, Mr. Paquette. I believe that for the province of Quebec, if memory serves, $30 million were recovered by taxing employer-provided parking. The costs could be eliminated by twinning the two provisions.

Mr. Pierre Paquette: That is very interesting. Thank you. I think that would take care of one of the arguments that we often hear to the effect that there would be a cost.

Of course, one thing remains, and I have already mentioned it: when we talk about benefits provided by employers, in your case, it is perhaps not as clear, but the rest of Canada feel that transit passes provided by the employers should not be taxable.

This raises an issue of fairness for students, retired people or the unemployed who would have to pay for all of their own transportation. That is why I would prefer a measure that would benefit the entire population rather than those who already have a financial advantage.

Thank you.

[English]

The Chair: Mr. Murphy, 11 to 12 minutes.

Mr. Shawn Murphy: Thank you very much, Madam Chairman.

I have a follow-up for the Union de producteurs agricoles du Québec. Do I take it that Quebec has signed on with the policy framework agreement, and that you're satisfied with the general agreement but there's just not enough money available?

Mr. Laurent Pellerin: As well as what happened in other provinces, there is a large consensus with the farmers across Canada that we have been forced to enter into this agreement. The large majority of the provincial agriculture ministers signed that agreement because if they didn't sign the agreement, they'd lose the federal money. It's not because they support the agreement or they think it's the best way to support agriculture. The fact is that for the production season of 2003, if they don't sign the agreement, there is no money on the table. You already know that, for example, in beef it's a disaster.

If you don't have the money as a provincial minister, you are in trouble. They, as well as Quebec, didn't have a choice other than to sign this agreement, because there is too much risk now.

Imagine that you changed a program last April 1. Nobody in Canada knew what the program was, and we are in November now. There have been changes to the program in the year 2003 that will be covered by the new program, and nobody in Canada knows how this program will work. I think it's very poor risk management. As a security enhancement for farmers who want money to support their family and their farm...but yet they don't know what will be the program for the year 2003, and the year is just about finished. That's a big problem.

Mr. Shawn Murphy: I want to relay a point that's somewhat related. I notice when I read all this literature on the agricultural industry, not only in the province of Quebec but right across Canada, the demographics are somewhat startling in that the average age of a farmer is, I believe, between 55 and 60. We don't have that whole cohort of younger farmers in the system. Do you see anything that the federal government should be doing to try to address this situation? If you take this thing ten years out, what's going to happen?

º (1635)

Mr. Laurent Pellerin: That's a very good point. That's one of the important reasons why we said this program had to be flexible. The average age in western Canada, you are right, is over 60. Perhaps there you need a program to have farmers to get out of the business, to sell their business to somebody else, to concentrate the acreage perhaps. We don't know.

But in Quebec, with the average age of 46, we don't need to have a program to convince farmers to get out of business. They are young farmers, they've already made the investment, and they are now the productive farmers we need. If there is no flexibility, which is the case in this program....

Prime Minister Chrétien, Minister Vanclief wrote letters more than once that a Canadian is a Canadian everywhere in Canada and has to be treated the same way. I agree with that, but I don't think that growing potatoes in P.E.I. is the same thing as growing vegetables in the Okanagan Valley in B.C., so we have to look at that very differently. When we have a disaster like what we have in beef in Canada, it's not the same situation in Alberta as in Quebec. In fact, it's a very different product. We have veal in Quebec, we have culled cow with the big milk production we have, and in Alberta they have finished beef, and they are two different problems, so we have to address that with two different programs. Those are the options you have.

Mr. Shawn Murphy: Mr. Dauphin, I want to follow up on some of the issues dealing with the financing of the public transport systems in the major cities, which are part of.... I'm aware of the private member's bill on tax deductibility, but I looked at that bill and it seems to me that your biggest problem, perhaps not in Montreal but certainly in Toronto and Ottawa, is one of capacity rather than trying to get more riders. At this point in your history you don't need more riders, you need more capacity. Is that correct?

Mr. Claude Dauphin: In terms of capacity you are right. We are looking for some measures to increase the ridership. But at the same time, as you know, we are looking for a new financial framework, first of all, from the provincial government, from the Quebec government.

In terms of the federal government, we are thinking more, of course, of deductibility of the titles, but more than that, for the transportation infrastructure. For example, there is more than $2 billion to invest in the metro in Montreal in the next ten years. So it's more this that we are looking for from the federal government in terms of investments.

But you are right, in terms of capacity, if we increase our ridership in the near future we will have to invest more money, and we have a problem. We don't have money.

Mr. Shawn Murphy: I don't know where it is in the whole public policy stage, but there has been some discussion on--and you have it in your brief--having so many cents per litre coming from the gasoline tax to assist other levels of government. They talk about municipalities, but obviously it would be for specific projects like the public transport, which is the intent. There is a bit of a log-jam that is particular to the province of Quebec whereby they will resist any type of initiative such as this. Do you see this log-jam being overcome in the future?

Mr. Claude Dauphin: As I was saying before, we are very proud of the fact that Mr. Martin, for example, is willing to be open on the tax on gas, but we have to find a formula with the Quebec government. I'm sure we will be able to find a formula, because Quebec also is in need of money, just like Montreal or any public transit authority. I'm pretty sure we'll find a formula as soon as the money is available.

º (1640)

Mr. Shawn Murphy: My last question is to you, Mr. Beauséjour.

There is this whole affordable housing issue, and I agree that there has to be something done here for social housing. There is a tremendous problem, and the vacancy rate is almost nil, not only in Montreal but in all major cities right across Canada. But is there anything that your association would recommend to spur on private development in this area? We have a situation where the vacancy rate is, let's say, for all practical purposes, nil. They are not responding to the market. The market is not working out there. I know rents have gone up, but so have expenses and so have construction costs. But obviously the private sector is still not stepping in to fill the need.

I'm probably talking now apples and oranges, because social housing is not.... If there was construction, it would be for rents far greater than people living below the poverty line could afford. But having said that, the private sector in the larger centres is still not responding to the market. Is there anything the federal government should be doing to try to remedy this problem?

Mr. Michel Beauséjour: It is clear to me that as soon as you are talking about new construction you are talking about actual costs. So it's very expensive to build a building and then to see your investment and say, it's a profitable investment on the one hand, and on the other hand, you have also to have affordable apartments for people.

So I think the best thing to do right now, the short-term measure that can apply, is probably the rollout of the capital gain, which will bring people to reinvest their money into real estate and make sure that if they are selling their duplexes and triplexes, they will buy new construction to maintain this money in real estate, to offer new apartments. So I think it's a very simple measure: keep the money within the real estate industry, and make sure the people who invest in the real estate industry have a reasonable profit on it.

Real estate investment is in competition with other sources of investment. So you have to have comparable profit on it. I think that's probably the best measure you can do on this side.

Mr. Shawn Murphy: I realize that's not responding to the concerns.

Mr. Michel Beauséjour: No. This is another problem. There are two specific problems there.

Mr. Shawn Murphy: But I think it would assist, to a certain degree, if the private sector were to respond a little more, especially in the major cities.

Mr. Michel Beauséjour: Exactly.

Mr. Shawn Murphy: Obviously, you can't argue that the market's not there. The market is there.

Mr. Michel Beauséjour: The market is there, but we need to make sure people are interested in investing.

Mr. Shawn Murphy: The rate of return is not there, though.

Mr. Michel Beauséjour: The return on investment is not there.

The Chair: I'd like to ask you a question, too. To your knowledge, in your province is there brownfield reinvestment going on, or are you still waiting for a national policy on this?

As you know, this committee made a very strong--

Mr. Michel Beauséjour: Yes. You already received the documents from the Canadian Real Estate Association, which really gets into the details of this problem.

The Chair: I understand they know the issue. What I want to know is, in your province, is there any brownfield redevelopment going on now?

Mr. Michel Beauséjour: I must tell you that we didn't intend to focus on this problem specifically, so I could say yes, but I don't have the background to answer this specific question.

The Chair: All right, then. That's fine.

Just as an aside, in my city the real estate board works very well with my homelessness initiative, with my affordable housing people, and I hope this is something that is going on across the country. I'm certainly advocating it, even though that's not necessarily my role. I see the expertise that your association has as being very helpful, and I'll give you one example of that.

If you go to the testimony before this committee--I think it was in Edmonton--we had the real estate board come up from Calgary. They have a land trust situation that they're putting together, which has not yet been ruled on by CCRA, the old Revenue Canada, where they are buying up old properties that are not that great, putting them out, and then putting them back on the market. They're looking for some tax assistance. It looks quite innovative and it seems to be working. So again, you might want to take a look at our Hansard for that. It may be able to be used here.

º (1645)

Mr. Michel Beauséjour: And the fact that we have decided to focus specifically on this problem here in front of you is a sign that we are engaged to try to find solutions for it.

The Chair: Thank you.

Would you like to comment, Monsieur Saillant?

[Translation]

M. François Saillant: All I can say is that there is no shortage of initiatives. In Montreal, for example, a number of wonderful things have happened over the past years, in order to provide housing for the homeless. However, the number of homeless was increasing as the services were being provided, and this is a direct consequence of the housing crisis.

This situation is a new one. I remember that when we first appeared before the committee, FRAPRU had never heard of itinerant or homeless families. But we are now well aware of the phenomenon. In Quebec, for the past three years, there have been families that remain homeless year-round. Of course, it reaches a peak around July 1^st, and it is well publicized. However, at this point in time, there are still hundreds of families who are living with other families, with relatives or friends.

There have been initiatives. For example, the Accès-Logis program in Quebec. The City of Montreal help to build some housing, for example, la Maison du Père or other organizations that help the homeless. These are all worthwhile, nevertheless, the number of people in need continues to increase.

And even though these programs are desirable in themselves, they do require more money and more investments. Despite the fact that the last two budgets provided for $1 billion over six years, the federal government has yet to become involved.

A great deal of effort must be made in this area, much more than has already been done over the past six years, so that communities might be able to help themselves. They have all kinds of ideas and initiatives, all they need now is the money.

[English]

The Chair: Dr. Arsenault, I wanted to ask you, if there had to be a terrible choice between an increase in the percentage of indirect costs or an increase, an increment to the research budgets of the various research organizations...these are difficult choices, but I can tell you there's not enough money to fulfill all the requests that are before this committee--I think in any government.

Before the end of this week, we will have heard from over 500 sets of witnesses since September, and many billions of dollars' worth of requests are before us. You all heard the economic update last Monday. Whether or not you believe it's as grave as was put forward or you think it's going to be much rosier, the bottom line is that there's not going to be enough money ever to do everything, and certainly not at the same time.

If you have to make that difficult choice, what would your priority be if you were thinking of your own university? Where would it be most beneficial?

[Translation]

Mr. Jules Arsenault: In a very short span of time, the UQAT has tripled what it spends on research, which I believe represents the largest share of university funding. We do not receive very much by way of indirect costs and this does cause major problems in terms of space. We have no room for our researchers. We now have a team of 60 professional researchers at the UQAT who receive no accommodation subsidies. This money must be taken from the operations' budget that should be used to educate our students.

The Canadian government's long-term objective, which is to move from the fifteenth to fifth place, increase productivity and become competitive around the world is in jeopardy because if we take money away from education, then the very heart of research development will be affected in the long-term. So if I had to make a choice today, it would be to maintain the indirect research costs and to go a little further: we would have to force or encourage the departments to increase their contribution. For example, when Economic Development Canada awards a $1 million contract to Agriculture and Agri-Food Canada, this costs the university $1.4 million or $1.5 million. There are indirect costs related to research: we have to house these people, provide financial, personnel, and computer services and the UQAT subsidizes other services from its education fund. If we want to remain competitive in the long-term, we must absolutely invest in research and development, through indirect costs and investment in training.

If the Université du Québec en Abitibi-Témiscamingue, in including indirect costs, were to undertake research to the tune of more than $7 million, and if everyone paid these indirect costs, the university would have no trouble training future researchers, providing services and continuing development. When research costs $7 million and the university's total budget is $21 million, this represents one-third of our budget. If it costs the university 40 per cent of this amount to fulfill its contracts, that would represent about $2.8 million or $3 million. The amounts we receive in indirect research costs total $300,000 to $400,000. So we are subsidizing development. Provincial and federal governments and departments, businesses, those who use the research, in other words, the users who pay, must pay for all the indirect costs of research. The government, through its departments, both provincially and federally, must lead by example. And we see that this example is always followed, because funding has been reviewed.

º (1650)

[English]

The Chair: Thank you.

To our transportation sector here at the table, over the course of less than two weeks I've heard a lot of input on the gas tax. Right now it's an idea that people are getting more comfortable with. Certainly there's no detail in any implementation plan, at least that I've seen or heard about. I think a lot of people across the country are making assumptions.

When we had the trucking industry before us, they said the taxes have to come out of existing taxes--no increment in gas taxes. Then we had the roads people here a couple of days ago, and they said now we need roads so badly and our infrastructure is crumbling so quickly, so significantly, that even if you increase the tax, it's fine.

We all heard the economic update. Again, my same comment applies. Do you think people could be comfortable with a raise in gas taxes if so many cents were going back into infrastructure across the country?

I know this is not something you would have canvassed your membership on, but I just want to get a sense of how you might think about it.

Mr. Claude Dauphin: Madame la présidente, I was just thinking about the existing tax, not raising the taxes. But at the same time, let's be honest; in terms of the region of Montreal, the former Quebec government had mandated some people to make recommendations to that, and one of the recommendations was to add 1¢ on each litre of gas.

There are not that many ways of having more money for public transit, in my opinion. It's even tax on gas; it's even on the registered plates.

Louis Bernard was proposing to the Quebec government that they increase the registration fee for plates by $5. That's $15 million for the region of Montréal. We already have 1.5¢ per litre on gas, for public transit; 1¢ is $30 million. The 1.5¢ that I was referring to before, for the CMM, the region of Montreal, would be another $45 million. So $45 million here and $30 million there...that's a lot of money.

But I agree with you. Every field has their own requests. The road construction people will ask you for some money. But for the Quebec government, for example, their priority, as they say, is health. In our opinion, if there's less pollution in Montreal, that's good for your health.

It's the same thing with the federal government, if they are sincere about the Kyoto accord ratification, because 50% of the greenhouse gas is coming from transportation. If we invest in public transit, we have less greenhouse gas. So there's only one recipe; it's to invest in public transit systems. We're convinced of that. It's a matter of health.

The Chair: I think most of the members on this committee feel that social and economic development are flip sides of the same coin. So I think we have a lot of difficult choices.

We're faced with something. We got the economic update later because it went into full accrual accounting, so I think that may have impacted a little bit differently the presentations we could have heard.

But I think it's very important that you've all participated here. I know some of you were not able to put all your thoughts down because your briefs were longer, but we have the benefit of those written briefs, and all those briefs will find their way to the Department of Finance, as well as to all our committee members. We're fiscally responsible too; we don't get to bring everybody on the road who's a member of our committee, but we take turns across the country.

º (1655)

[Translation]

Thank you for your participation and your evidence. Goodbye.

The meeting is adjourned.