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37th PARLIAMENT, 2nd SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Tuesday, October 28, 2003

0900

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

Mr. Jim Fulton (Executive Director, David Suzuki Foundation)

0905

0910

The Chair

Mr. Donald Fisher (Vice-President, Research Dissemination, Canadian Federation for the Humanities and Social Sciences)

0915

0920

0925

The Chair

Mr. Ronald W. Britton (President and CEO, Fuel Cells Canada)

0930

0935

The Chair

Professor Thomas Calvert (Acting Director of Information Technology Program, Simon Fraser University, As Individual)

The Chair

Mr. Alain Deschenes (Graduate Student, School of Interactive Arts and Technology - Simon Fraser University, As Individual)

The Chair

Mr. Alain Deschenes

0940

The Chair

Mr. Monte Solberg (Medicine Hat, Canadian Alliance)

Mr. Jim Fulton

0945

Mr. Monte Solberg

Mr. Ronald W. Britton

0950

Mr. Jim Fulton

Mr. Ronald W. Britton

Mr. Monte Solberg

The Vice-Chair (Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.))

Mr. Monte Solberg

Mr. Donald Fisher

The Vice-Chair (Mr. Nick Discepola)

Ms. Sophia Leung (Vancouver Kingsway, Lib.)

Mr. Jim Fulton

Ms. Sophia Leung

0955

Mr. Jim Fulton

1000

The Chair

Mr. Donald Fisher

Ms. Sophia Leung

Mr. Donald Fisher

The Chair

Ms. Sophia Leung

Mr. Ronald W. Britton

Ms. Sophia Leung

Mr. Ronald W. Britton

1005

The Chair

Mr. Nick Discepola

The Chair

Mr. Donald Fisher

Mr. Nick Discepola

Mr. Donald Fisher

1010

Mr. Nick Discepola

Mr. Donald Fisher

Mr. Nick Discepola

Mr. Donald Fisher

Mr. Nick Discepola

Prof. Thomas Calvert

Mr. Nick Discepola

Prof. Thomas Calvert

Mr. Nick Discepola

1015

Mr. Ronald W. Britton

Mr. Nick Discepola

Mr. Ronald W. Britton

Mr. Nick Discepola

Mr. Ronald W. Britton

Mr. Nick Discepola

Mr. Ronald W. Britton

Mr. Nick Discepola

Mr. Ronald W. Britton

1020

The Chair

Mr. Jim Fulton

The Chair

1035

Mr. Rick Mahler (Director, Vancouver Board of Trade)

Ms. Janette Pantry (Vice-Chair, Vancouver Board of Trade)

The Chair

Ms. Janette Pantry

1040

The Chair

Professor Rick Coe (President, Confederation of University Faculty Associations of British Columbia)

1045

The Chair

Ms. Anne Roberts (Councillor, City of Vancouver)

1050

The Chair

Ms. Carol Ann Young (Coordinator, Child Development, City of Vancouver)

1055

The Chair

Mr. John Watson (Executive Director, Association of Canadian Polytechnic Institutes)

The Chair

Mr. John Watson

1100

1105

The Chair

Mr. Monte Solberg

The Chair

Mr. Rick Mahler

Ms. Janette Pantry

1110

Mr. Monte Solberg

The Chair

Ms. Janette Pantry

Mr. Rick Mahler

Mr. Monte Solberg

The Chair

Mr. John Watson

1115

Mr. Monte Solberg

The Chair

Mr. Monte Solberg

Ms. Anne Roberts

The Chair

Ms. Carol Ann Young

Mr. Monte Solberg

Ms. Anne Roberts

1120

The Chair

Mr. Nick Discepola

Ms. Janette Pantry

Mr. Nick Discepola

Ms. Janette Pantry

Mr. Nick Discepola

Ms. Janette Pantry

Mr. Nick Discepola

Ms. Janette Pantry

Mr. Nick Discepola

Ms. Janette Pantry

Mr. Nick Discepola

Ms. Janette Pantry

The Chair

Mr. Nick Discepola

The Chair

Ms. Janette Pantry

1125

Mr. Nick Discepola

The Chair

Mr. Rick Mahler

1130

Mr. Nick Discepola

The Chair

Mr. Nick Discepola

The Chair

Ms. Anne Roberts

Mr. Nick Discepola

Ms. Anne Roberts

Mr. Nick Discepola

Ms. Anne Roberts

The Chair

Ms. Sophia Leung

1135

The Chair

Ms. Anne Roberts

Ms. Sophia Leung

The Chair

Mr. Rick Mahler

1140

Ms. Janette Pantry

The Chair

Ms. Janette Pantry

The Chair

Mr. Rick Mahler

The Chair

Ms. Sophia Leung

Mr. Rick Mahler

The Chair

Prof. Rick Coe

1145

The Chair

Mr. Jim Reichert (Vice-President, Research and International, Association of Canadian Polytechnic Institutes)

The Chair

CANADA

Standing Committee on Finance

NUMBER 088

2nd SESSION

37th PARLIAMENT

EVIDENCE

Tuesday, October 28, 2003

[Recorded by Electronic Apparatus]

¿ (0900)

[English]

The Chair (Mrs. Sue Barnes (London West, Lib.)): Pursuant to Standing Order 83(1), we are in pre-budget consultations in Vancouver. I would like to welcome the witnesses on our first panel.

From the David Suzuki Foundation, we have Jim Fulton, the executive director. Bienvenue.

From the Canadian Federation for the Humanities and Social Sciences we have Donald Fisher, the vice-president of research dissemination. Welcome to you, sir.

From Fuel Cells Canada we have Ronald Britton, president and CEO. We're happy you're here. And we have Christopher Curtis, who is the vice-president of the same organization. Welcome.

We also have, as individuals, Thomas Calvert, professor and acting director of the information technology program at Simon Fraser University, and I think you have a graduate student who will join us shortly, Alain Deschenes, who is with the school of interactive arts and technology at Simon Fraser University.

I think this morning we'll go in the order on the agenda. This panel will go to 10:15, so seven to eight minutes is fine for your presentations, and then we'll go to a round of questioning afterwards.

We'll start with Mr. Fulton. Go ahead, sir.

Mr. Jim Fulton (Executive Director, David Suzuki Foundation): Thank you very much, Madam Chair.

Good morning, members of the committee. The David Suzuki Foundation welcomes this opportunity to address the House of Commons Standing Committee on Finance.

This has been a challenging year for the Canadian economy, with most notably the SARS outbreak, BSE, the Ontario power blackout, and the devastating forest fires and floods in British Columbia. Each of these events forces us to look at the vulnerability of our economy. The lesson derived from these disparate events is that our economic security is dependent on diversity. Like an ecosystem, the economy is strongest and most robust when a multiplicity of healthy interrelated sectors form the foundation and provide structural support.

The foundation would like to address two cornerstones to current and future Canadian prosperity: protecting our climate and conserving our water. To ensure that Canadian communities are desirable places in which to live and work and to allow Canada to care for members of the Canadian society, it is vital to provide safe water supplies, healthy ocean ecosystems, healthy fish stocks, and freshwater and saltwater environments for the enjoyment of all Canadians.

As a water- and coastline-rich nation, Canada has a responsibility both to ensure these benefits for our own citizens and to act as a leader on water-based issues in the global community. The program for implementing the Kyoto Protocol will help broaden and strengthen the Canadian economy. Implementation will open opportunities to increase energy efficiency and reduce Canada's dependence on carbon-intensive industries such as electric power generation and fossil fuel production.

Further, contributing to the international momentum for climate stabilization demonstrates to Canadians that as a nation we are taking leadership on this issue and that Canada and the world need to be protected from some of the most serious consequences of climate change. This submission complements the work of many other NGOs, notably the Green Budget Coalition, with whom we closely collaborate.

Madam Chair, I'll just give a few highlights from the document. I realize that at 25 pages it's not something that can just go on the record. Let me give you a few highlights.

On climate, the commitment of $2 billion in the last budget to support Canada's climate change action plan is praiseworthy and promising. Carbon dioxide in the atmosphere from fossil fuel combustion and land clearing is increasing at an alarming rate and has reached 372 parts per million. Since the beginning of the Industrial Revolution, atmospheric concentrations have increased by 33%. Scientists can say now with certainty that today's carbon dioxide levels are at a level that has not been exceeded in 420,000 years and in all likelihood at a level unseen in 20 million years.

Canada commendably ratified the Kyoto Protocol last year, and that commits us to reducing emissions by 25% from today's level. To get to a point that prevents dangerous interference with the climate system requires that these emissions now be reduced by 60% to 80% below today's level.

In 2002 we laid the groundwork for the transition to a low carbon future that protects the environment and enhances the economy. The means to achieving this transition are described in the publication Kyoto and Beyond, produced jointly by the David Suzuki Foundation and the Climate Action Network. We list some of the contents of that study that show how to get to 50% reductions with off-the-shelf technology opportunities and higher levels of job creation than we see from the existing energy systems.

The specific measures outlined in Kyoto and Beyond include programs aimed at doubling thermal efficiency, doubling fuel efficiency for freight trucks, tripling the fuel efficiency of vehicles, doubling the efficiency for electrical devices, a 1%-per-year improvement in the energy efficiency of industrial output, phasing out of coal-fired and nuclear-powered electrical generating plants.

The Prime Minister quite rightly said, and I quote—this is speaking about Kyoto:

The Plan proposes a national goal--for Canadians tobecome the most sophisticated and efficient consumers andproducers of energy in the world and leaders in the developmentof new, cleaner technologies.

Then I list countries that have made much stronger commitments than Canada.

Under specific measures, we touch on a number of things in terms of moving more from road to rail. On personal transportation, which is 18% of our emissions, we make some recommendations on HOV lanes. The U.S. budget just allocated $9.1 billion. We think this committee should make recommendations on that. For example, the B.C. Treasury Board found that a $1 million investment in transit creates 21.4 jobs, compared to 7.5 jobs created on the same expenditure on automobiles.

We believe in using the deficit reduction tax on gasoline to fund transit. That's about $600 million a year, and we lay out just exactly how we think that should be spent. Establish feebates to incent investment in energy-efficient automobiles. Again, that's being used in many areas of the world. Place a higher feebate on a less efficient vehicle and directly pass that feebate on to someone driving an energy-efficient vehicle.

¿ (0905)

On complementary personal transportation initiatives, if the federal government aims to achieve a 25% improvement in automobile efficiency by 2010, there are a number of steps we think should be looked at. And we remind members of this committee that in fact the maximum mileage of Ford's most fuel-efficient vehicle in 2003 is 36 miles per gallon. Ford's maximum mileage for its most fuel-efficient vehicle in 1912, the Model T, was the same—35 miles per gallon. We're not really going anywhere very fast after almost a century with Ford at the wheel.

On freight transportation, we again make a plea to this committee to take a much closer look. With six times the efficiency per mile of rail over road, we encourage you to look at how to move more, particularly our heavy materials, back onto steel. We have the lowest cost per tonne-kilometre of all railways in the industrial world, and there is lots of opportunity, particularly in relation to Kyoto, to take advantage of that.

Establish those incentives. We believe this committee has lots of opportunities there.

On residential and commercial buildings, we make recommendations regarding building efficiency for standards and financing. There's a 35% to 40% opportunity there for energy efficiency. This committee might well make those recommendations to the Minister of Finance.

On big building retrofit, clearly there is a lot of money to be made, but it's a matter of educating and getting the information out.

On complementary residential building initiatives, we make recommendations on the application of Energy Star, standards on multi-family buildings to use solar heat and waste heat from appliances and space hearing, energy efficiency standards on insulation, floors, windows, and so on.

We have a specific recommendation, and I realize my colleagues will be glad to hear this—incentives to bring fuel cell technology to the mass market. We believe that stationary fuel cells could produce electricity for space heating, water heating, air conditioning, and appliances in 20% of Canadian homes and 35% of apartments by 2030, but it requires some leadership by this committee and by the federal government to make that kind of entree.

More stuff on Energy Star: On large industrial emitters we think this committee is going to have to come back and revisit the price cap at $15 per tonne on reduction costs and at the same time look at strengthening the efficiency in Canadian industry, such as in steel and in the pulp and paper industry. There are efficiency gains that have been demonstrated by some companies of 90% and more, and this requires again some federal leadership.

On strengthening efficient decentralized energy systems, phasing out oil and gas preferential treatment, we refer you back to the Auditor General's report. Some areas of gas and oil continue to languish in gigantic federal subsidies, and I believe this committee should be at least moving towards some kind of a level playing field there, as the Auditor General does.

While some sectors of the economy have virtually stabilized emissions since 1990, the oil and gas sector has increased its emissions by 45%. This committee in particular can't simply turn a blind eye to what's going on in that sector, particularly in relation to tar sands. And we make recommendations on that.

I have just a minute or two on conserving Canada's water. Both last year's throne speech and more specifically Canada's Oceans Act have committed Canada to the sustainable use of our environment and particularly our freshwater and saltwater resources. We have three oceans, and we make specific recommendations on research and development, on enforcement staff and resources, and resources for a number of Department of Fisheries and Oceans initiatives. We believe that the resources have to be triggered now for recommendations of this committee for research into the clear definition of marine ecosystem-based management and marine use planning for integrated coastal zone management. With the longest coastline in the world, Canada has a gigantic opportunity there to really make some yardage on that.

As to funding for substantial research to understand the effects of global warming on ocean ecosystems and the effects of sea level rise, many Canadian federal scientists are now having to rely on foundation funding from the United States to do their research. This is crippling the kind of research we should be doing on these major issues.

On resources to prevent and reverse the problems created by shipping waste, here on the coast we now have more than a million passengers a year transiting from just a few feet west of this hotel. They go from here up into the Alaskan Panhandle. These cruise ships are not applying the same kind of care and caution in relation to their offloading of waste as occurs in Alaska or in California or in the Caribbean or in the Mediterranean or almost anywhere else. I think this committee should make a recommendation on that. It's a relatively low cost to clean up, and the industry doesn't appear likely to do it without some federal push.

¿ (0910)

Funding of protective measures for coastal and marine ecosystems is independent of the value of fisheries. I think if you look at the data we list in the footnotes you'll see that there are some very low-cost recommendations that the committee could make.

Just to spend one quick second on Canadian fresh water, our assessment is that the 1987 federal water policy has not been effective, particularly since Environment Canada dumped the inland waters directorate in 1993. If you look at the number of drinking water and water flow issues, as Dr. Schindler has pointed out, 40% of the flow on the prairies is now being evaporated, and river systems like the Bow, flowing out of Banff National Park, would be dry within our lifetime. There are some major issues that have to be addressed.

We believe there should be a renewed and comprehensive national water policy, and we lay that out, and there should be watershed-based planning--again something the federal government needs to lead on. We have recommended this to this committee before, and we hope you take it a little more seriously at this time.

There needs to be a national policy and standards on sewage treatment. There are still many towns in Canada that dump their sewage into water systems, upstream of other communities that take their drinking water out downstream. This is not smart.

I'll leave the fish habitat issues for you to have a look at.

I thank you for your time, and I hope you can wade through some of the wild-fish policy proposals as well. They are all relatively low cost and don't require a lot of regulations but have huge economic and biodiversity benefits for Canadians.

The Chair: Thank you very much.

Some of these briefs are so detailed and excellent. I hope you take advantage of all that work and send it to other ministers too.

Because we are one panellist short, I've actually added time, so you'll each get 11 minutes. So if you want to add something else, that's fine.

You got your 11 minutes, Mr. Fulton, so we'll go to our second panellist, the Canadian Federation for the Humanities and Social Sciences.

You have up to 11 minutes, but don't feel that you have to take it.

Mr. Donald Fisher (Vice-President, Research Dissemination, Canadian Federation for the Humanities and Social Sciences): Thank you.

First of all, let me thank the committee. The federation is really grateful for the report in 2002. We think it was a significant step forward, and I'm of course delighted to be here to represent the federation.

I thought I should say just a little bit about myself so you'll know who I am and where I'm coming from, and then just a few words about the federation to introduce that organization.

My name is Donald Fisher, as you know. The vice-presidency of the federation is a voluntary job. It's an elected position. So to put bread on the table, I have a real job at UBC. I'm a professor there. I'm a sociologist. I do historical work looking at post-secondary education, hence some of the interest I have in the work I do with the federation.

I help coordinate the Centre for Policy Studies--and that's quite significant, I want to suggest--in Higher Education and Training, at UBC.

Over the last decade, we've been trying to understand post-secondary education systems across Canada and how federal interventions have indeed had an impact on those systems. We've been looking at the development and changes in academic culture as we see an increasing partnership between industry, the state, and our universities.

So that's some of the work that I do. It's fortunate for me that the voluntary work with the federation overlaps very much with my own research.

You know about the federation, of course. You've had presentations before, and our brief says something about it. I'm not going to go over that material, but just to say this is a unique organization in the world. I am not exaggerating. There is nothing that comes anywhere close to this in any other country in the world, any other liberal democracy, where one has a national organization that represents all the human sciences, all these foundations, disciplines, and fields that are so central to social well-being in our society: the congress each year; the aid to scholarly publications; and of course this work that we do in trying to have some input into policy-making at the federal level.

Let me make three points. Of course, I know this is a work in progress. We thank you again for the excellent report last year. We see that while that report didn't lead to asymmetrical funding for the social sciences and humanities, as you recommended--thank you, and I'll come back to that in a moment--we think it did lead directly to this breakthrough. I'm referring, of course, to the graduate fellowships.

I had the good fortune to go to talk to our associations at the meeting in Dalhousie, our annual congress, where many of the 70 professional associations met. My first words were “It's great to be here, because I have good news, great news. For the first time, we have fellowships in the social sciences and humanities that match those in the natural applied sciences, and, for the first time, fellowships for masters students”--a real breakthrough, and we want to thank you and the government for doing that.

Here are my three points.

It is a work in progress, and the first point is that we urge you, and through you, the federal government, to continue the interventions that you have made in the last five years or more. We want you to maintain those, and we want you to increase them. I'm referring here particularly to recommendations 3 through 6 in our brief.

It is important to maintain indirect cost. It's important to increase that support to the universities. It's absolutely essential, we believe.

It is important to make every effort to increase and to separate the transfers that go to education, we believe, and we're one step towards that. We say, with the recent announcement, let's go the next step. We need an education transfer separated from the social transfer.

We need to build on this wonderful work that has been going on. I think it's unprecedented--well, I know it is, when I talk to colleagues. I was at a conference in Portugal on higher education in September, and I was talking about the changes in federal policy in Canada and had many conversations afterwards about these unique programs.

¿ (0915)

The network of the centres of excellence goes back, of course, but was renewed and extended by the Liberal government. The millennium fellowships, the CFI, the increased funding to CIHR, and the increased funding across all of the councils are tremendously important to the system.

So our first point is that we urge your committee to continue to support the interventions in post-secondary education, and to increase that support, because we believe that without that, we may well fall back to those years in the early nineties when things were not going so well.

I didn't mention the Canada research chair program, of course, which is an excellent intervention.

The second point I want to make refers to our recommendation number two, which goes back to asymmetrical funding. You've heard the arguments, and I think this committee, perhaps as much as any group on the Hill, has accepted them and endorsed them, which is wonderful. Let me just add my twist to this, if I may.

It seems to me there are three levels for thinking about this. One level is the general level, and it's about the discussion of how important it is for us in this current society, which focuses on knowledge and information technology, with all of the discussion we have around those issues, to support the human sciences in the same way we support the other sciences, the applied, the natural, and health sciences, because of the direct contribution education and research in these fields makes to our democracy, to the very social fabric of our society. In a sense, it seems to us there is no better way to contribute to the public good, the general good, than to provide asymmetrical support to these disciplines and fields.

A second level, it seems to me, is the direct impact of research in our fields on some of the major social problems we face. On the environment, of course, we have just had a wonderful.... I have learned a couple of things that I am going to take with me; the Ford example is fabulous. We know, of course, that the environment is an essential problem facing every society throughout the world—but there are so many others. Research on those is essential. In our cities, the problem of poverty and homelessness confronts us daily in our local newspapers, but it's a problem that cuts across our society and one we have to face up to and deal with.

The general issue historically and currently of aboriginal affairs is one that is crying out for research, good policy advice, and good programs, and the list goes on. Again, there is a list in the brief, which I won't continue with. I think it's essential that we focus on those social problem issues where research in the human sciences can have a direct impact on our society and, through that research, an impact on innovation, creativity, and of course the economic well-being of our society.

The third level is somewhat esoteric. It often seems to me, particularly in the humanities, and sometimes in the smaller groupings in the social sciences, that this work is regarded as being fine insofar as it extends knowledge, but it doesn't really contribute or has no utility in a sense. That's the argument that's often made. We can't say strongly enough that it seems to us that all of our work has utility; it may not be obvious at the beginning or at the moment, but sometimes the most esoteric “pure” research has tremendous utility.

As I was driving, I was reminded of the fact that just a year or so ago, sitting at a meeting in Ottawa, we were looking at an application to join the federation from the Canadian Society for Mesopotamian Studies. Now, whoever imagined that would have any utility at all? Of course, we are in the middle of this tremendous conflagration, and knowing about the history of Iraq and where that society has come from is tremendously important. To me, that's just a lovely example of how esoteric knowledge sometimes has tremendous utility, and we can't ignore that.

¿ (0920)

We're not saying reduce the funding to CIHR, or not reduce the funding to NSERC, but merely that we want to bring our funding up to a level that is comparable, for the reasons I just stated.

Some of the work that I do, as I said, is historical. In the thirties there were lots of arguments about the lag between the developments in the natural sciences and in the social sciences. At the time it was called “cultural lag”. We cannot afford a lag between the natural and applied sciences, health, and social sciences and humanities.

The third and final point--and I'll make it very brief, because it's all in our document--is yes, please support the transformation of SSHRC. Our community is prepared, is willing, and is indeed enthusiastic about being accountable in the way that health research is accountable. We believe we can make a contribution, and we believe the transformation of SSHRC will allow us to do so.

Thank you, Madam Chair.

¿ (0925)

The Chair: Thank you very much.

And now we'll hear from Fuel Cells Canada. Go ahead, Mr. Britton.

Mr. Ronald W. Britton (President and CEO, Fuel Cells Canada): Thank you very much, and good morning, ladies and gentlemen.

I want to start out by setting the scene for those of you who aren't as familiar as we'd like you to be with the whole fuel cell and hydrogen industry development, and spend a little bit of time actually congratulating the government on some of its recent major steps forward to support this industry.

Our last two submissions, in 2002 and 2001, focused on the need for strong government support in Canada, and we're pleased to say today that we've had the first major step in receiving that. This means that these kinds of processes actually work. That's one of the key feedbacks to your committee: please keep doing this, because it's important to us to have the opportunity to speak.

Canada remains a recognized global leader in the development and commercialization of hydrogen and fuel cell technology. Companies such as Ballard, Hydrogenics, Stuart Energy, Dynetek, Methanex, and B.C. Hydro are now recognized global leaders in their fields of expertise within this technology area.

The industry directly employs over 1,800 people in Canada and spends approximately $100,000 a year per employee on research and development. It's a critical part of Canada's innovation capacity, and already as large as the total effort of the Canadian automobile industry. That's what the industry is doing for Canada from an innovation point of view.

The major industry cluster, and arguably the world's largest fuel cell and hydrogen cluster, remains here in B.C. In the lower mainland there are now more than 35 companies contributing directly or indirectly to the progress of the technology. There are, as well, growing clusters in Calgary, Winnipeg, Toronto, Kingston, and historical strength in hydrogen technology in Montreal and Trois-Rivières.

We're very pleased that the Government of Canada has recently recognized the importance of the hydrogen and fuel cell technology to the future of Canada. On October 9, 2003, Ministers Rock and Dhaliwal announced contributions of $215 million over the next five years to support research and development, demonstration projects, and early adoption of the technology.

Industry, especially Fuel Cells Canada, is collaborating with government officials to ensure that this support produces the maximum benefit for Canadian taxpayers. Ease of access to federal programs and funding flexibility are key targets for further collaboration.

For its part, the private sector is now investing approximately $200 million per year in Canada. We expect this will double over the next few years.

Turning for a moment to demonstration and early adopters, I would like to mention two particular projects that characterize that the industry is now developing and will not only provide a lasting legacy for Canadians but will also provide a microcosm of the new hydrogen economy in B.C. and Ontario. The first of these is called the hydrogen highway, and the second one is the hydrogen village.

The hydrogen highway project is both a physical infrastructure of hydrogen availability and at the same time a metaphor for the pathway we need to follow from today's energy milieu to the hydrogen economy of tomorrow. The physical assets will focus on projects that underline the government's commitment to the 2010 Olympic Games. Stretching from the U.S. border and the Vancouver International Airport with extensions to Whistler and Victoria, the highway will remind visitors of, and acquaint them with, the world of tomorrow at each turn. Here visitors will see demonstrations of both hydrogen and fuel cell technology, including cars and buses, as well as stationary and portable applications.

At the same time, the proponents will be comparing different approaches to the production, storage, and distribution of hydrogen, and gathering the necessary data to continue the development of codes and standards. The projects will also provide major opportunities to initiate outreach programs for the general public and to involve first adopters as early markets develop.

The hydrogen village is a similar consortium-based demonstration focused at the CNE and the University of Toronto at Mississauga. Including the City of Toronto, the university, and the CNE corporation, over 30 proponents will cooperate over the coming years to demonstrate the length and breadth of technology options of the hydrogen economy. Over 50% of the population of North America lives within 500 miles of Toronto, and the project will be a major international showpiece of Canadian leadership.

Both of these projects are being funded by the public and private sectors and illustrate the broad base of collaboration at the national, regional, and local levels of government as well as by industry, academia, and research organizations. We think they're key examples of how government funding can actually support the development and commercialization of a technology. It's not directed at any one company. It's not directed at any one technology. It's designed to begin the process and create a legacy that will go on benefiting Canadians for decades into the future.

¿ (0930)

Our other major topic for today is access to capital, and I'm sure you've heard about this from all technology sectors across Canada. As you are aware, continued investment by the private sector is to a large degree dependent on the state of financial markets. The already announced government support in our sector will provide some much needed comfort to private investors, and we expect to see more availability of venture capital in particular as a result.

However, today's investment markets still represent difficulties for those seeking new capital for technology development. To assist companies, a clear national strategy for the fuel cell and hydrogen sector is required. In addition, more needs to be done to stimulate growth of venture capital pools in our country. We are pleased that this also seems to be a priority for Mr. Martin as he considers future policy alternatives to grow the Canadian economy.

The fuel cell and hydrogen industry encourages the government to collaborate with provinces and the private sector to create a national strategy that establishes clear direction, priorities, and commitments for all stakeholders in this sector. Such a strategy should also establish a platform for the development of complementary international activities, in collaboration with major trading partners. Most major economies in the world have recognized that this technology will not be delivered solely by the private sector, nor can it be delivered by one jurisdiction. Energy is an international commodity. It has to flow across borders. It has to be interrelated. And the technology required to make a major change in that energy base is probably best developed by international cooperation, where nations with particular strengths will focus on those strengths and other nations will focus on their strengths, and they will trade back and forth the intellectual property that will come out of this.

This will be one of the major recommendations we make to the International Partnership for the Hydrogen Economy Conference late in November, which will be attended by Ministers Rock and Dhaliwal.

Furthermore, there is a need to consult with stakeholders on revisions to the tax system that will enhance the investment climate for technology developers. Particularly important will be the focus of the creation of enlarged venture capital pools. For Canada to achieve its innovation targets there is a compelling need to access the capacity of all Canadians to participate in the economic results of such successes. This means that even small investors should be encouraged to find a way to fully participate. Our view today is that this whole area of development is neither well designed nor well operated in Canada, and our venture capital pools are far too small to achieve the kinds of objectives our government has set for us, not just in our sector but broadly across technology industries.

Turning for a minute to the state of the industry today, our industry and our membership continue to grow. Fuel Cell Canada now has over 60 members in Canada. Last year we reported 45. We believe that this is a tribute to all of our partners in government, industry, and the research community. It's also a clear indication of the level of commitment stakeholders have in ensuring that all Canadians benefit from the investments being made by all parties.

In closing, I'd like to emphasize the benefit for our country in ongoing collaboration to develop the fuel cells and hydrogen industry: the creation of an international leadership position in a new global industry. The scope of this opportunity has not been seen since the development of the computer. The economics of this industry will be based on reduced costs and the jobs will be knowledge-based. It will lead to an enhanced innovation capacity for the nation and growth in value-added exports.

One of the reasons we need particularly to focus on international cooperation is if we are successful in this country we'll have an impact directly on urban pollution in Canada and Canada's contribution to greenhouse gases. But for us to be most successful we'll rely probably to the extent of 90% to 95% on exports to other parts of the world, and, as in many other industries in Canada, that means international cooperation is absolutely essential.

On reduced urban pollution and the reduced health care costs as a result, there are a growing number of studies that are suggesting very strongly that urban air pollution is one of the major causes of early childhood diseases, and particularly respiratory diseases. The costs of those diseases are not reckoned into today's cost of energy. Fuel cells and hydrogen is one of the only ways that actually effectively addresses both of those issues.

Canadian leadership in sustainable development and climate change solutions, as I said earlier, will not only have an impact in the long term on Canada's greenhouse emissions, but we hope through effective international trade and international technology transfer to have a much larger impact on growing economies like China, India, and other developing economies in the world. It also leads to enhanced energy efficiency and energy diversity. Those of you who live in Ontario will realize how perilously close we are to the limit on the existing grid-based electricity transportation systems. In short, it's an opportunity too good to miss.

We thank you for allowing us to present today. We thank you on behalf of our industry, and we would once again like to thank the Canadian government for its strong support.

¿ (0935)

The Chair: Thank you very much.

Professor Thomas Calvert, the floor is yours. And we welcome your graduate student, Alain Deschenes, to our committee meeting also.

Go ahead, sir.

Professor Thomas Calvert (Acting Director of Information Technology Program, Simon Fraser University, As Individual): Thank you very much, Madam Chair and members of the committee.

We are here not representing any one specific organization but we are here to support the continued, and hopefully growing, federal support for research and development in Canada. I think what we are saying is totally compatible with the other presenters here this morning.

You will have had multiple presentations along these lines. I don't think we have anything too novel to say, except perhaps we can bring a little first-hand grassroots evidence of the arguments in favour of this.

I think it's reasonably self-evident that a healthy economy depends on innovation and on a good supply of highly qualified people. Those are the two ingredients. We believe the Government of Canada has a number of programs that support these, and we would like to see them continued and expanded.

If indeed the government's target is to move Canada from fifteenth to fifth in the OECD rankings for research and development--and I know this gets trotted around all over the place--it's an incredible change that's needed. If by some way we could get the investment and support for that kind of increase in R and D, we don't have the people to staff it. So we need not only to increase investment, and that has to come from the private sector as well as from government, but we do need to increase the supply of people if we're going to come close to meeting that target.

In terms of the different agencies of the government that support this, NSERC, the organization supporting natural sciences and engineering, I believe, and they believe, need an increase over the next years of about 10% a year, compounded, if they are to increase their research grants, the collaborative grants, and the scholarships to a level.... Now, 10% a year doesn't sound like very much. On the other hand, NSERC's budget is around $600 million, so we're talking in the order of $60 million a year.

Similar things apply to SSHRC, the Social Sciences and Humanities Research Council. The medical area has its own issues. The Canadian Foundation for Innovation is, again, absolutely essential to support the infrastructure for R and D in Canada. The Canada research chairs program and the Canada research fellowships are wonderful initiatives, but they need to be supported and they need to grow.

I wanted to leave it to my colleague, Alain Deschenes here, who is a recipient, as it happens, of an NSERC post-graduate fellowship, to say a few words about the impact that kind of support means to him and what it allows him to do.

Before asking Alain to speak, I would like to back up what Dr. Fisher said about the really very large increase in level of doctoral support that was provided in new Canada research fellowships. We lose a lot of our very best graduate students largely to the United States, and once they go they don't always come back. By offering a new graduate doctoral fellowship of about $35,000 a year, that was a major breakthrough. It means that you don't need to be a pauper at the same time that you're a graduate student.

Alain may argue with me on that.

The Chair: Go ahead, sir.

Mr. Alain Deschenes (Graduate Student, School of Interactive Arts and Technology - Simon Fraser University, As Individual): Thank you for letting me speak.

The Chair: Perhaps we'll turn that mike a little bit towards you also. Thank you.

Mr. Alain Deschenes: I can only speak on behalf of graduate students and the realities we face entering graduate school. As I was planning on going to graduate school, I applied to many universities, and many supervisors were very interested in having me join their research groups, but many of them weren't able to take me on due to lack of funding. Usually the discussions fizzled from that point on, because in this day and age, without proper funding we have to find other means of remuneration. This makes going to graduate school quite difficult and usually extends it quite a lot.

I agree with Dr. Calvert that it's very important that organizations such as NSERC and CFI and other granting organizations do maintain their budgets and increase them in order for students like me to go to graduate school. Otherwise, had I not been able to find a supervisor who was willing to fund me from his personal grant, I may not have chosen to go to graduate school. I may have chosen to go to work in the industry and not have had the chance of becoming a highly qualified person.

It's quite important that these granting agencies be maintained and increase their budgets to allow students like me to go on to graduate school. What it means to me is that, for instance, becoming an NSERC PGSA recipient, which is a fairly large scholarship, allows me to concentrate on my research solely, without looking for other means of funding. So I was able to publish some academic papers very recently, and there are more coming. It really lets me focus on my school and research. I think it's a great initiative.

¿ (0940)

The Chair: Thank you very much.

We thank all of you for that testimony.

I'm now going to call upon the vice-chair of this committee for the official opposition. Mr. Solberg, you have ten minutes.

Mr. Monte Solberg (Medicine Hat, Canadian Alliance): Thank you very much, Madam Chair.

Thank you for the presentations. They were very interesting. I learn a lot by sitting here.

I'd like to start with Mr. Fulton. You mention the Auditor General. The Auditor General always talks about clear, measurable objectives and things like that. It occurs to me that when we talk about cleaning the air, removing particulate from the air, that's something that's fairly easy to measure. The same thing would apply to the water.

I'm wondering if you could tell us whether or not in five years, when we put in place the Kyoto initiatives that the government has proposed, we would be able in that time to have some sense of whether or not greenhouse gas emissions, or overall emissions, are being reduced in the atmosphere. How easy will it be to measure whether or not we're being successful?

Mr. Jim Fulton: That's a very good question, and I thank the member for it.

It's relatively easy on a daily, weekly, monthly, or annual basis to determine the amount of different fuels that are used in Canada. Partly because there's tax on gas and things like that, we have a very accurate idea of what's being utilized.

We also have a pretty good idea of what technology is under the hood. If we are talking motor vehicles, just as an example for the moment, we know that 18% of the emissions are coming from those vehicles. I don't think we should overlook—there is a bit of humour in what I said earlier that a Model T built in 1912 got the same amount of fuel efficiency as the most efficient vehicle produced now by Ford. If you can get into the Explorer and some of the Yukons and these monstrosities that are on the road, you're talking about a huge amount of particulate matter, a huge amount of greenhouse gas per kilometre of movement for those vehicles.

So there needs to be more encouragement for the hybrid vehicles. I know that Toyota is coming out next year with the first potential fuel-cell-ready platform, the 300-volt platform. There isn't enough encouragement. You can go from here down to Seattle and pick up a Toyota Prius and get $2,000 thanks to George Bush, but if you want to do that here in Vancouver you don't get that, because the feds take the GST. Here in B.C., one of the few places where there's actually a bit of a rebate for buying an energy-friendly vehicle, it's quickly snapped back. You get it from the province on one hand and it's taken away on the other.

It's in this area that I think this committee can make some very good recommendations. Ron Britton mentioned some studies that have been done by Health Canada. About 16,000 Canadians a year die prematurely as a result of particulate matter. We worked on this years ago between Ontario with the Ontario Medical Association. We now have the QMA, the OMA, doctors in Alberta and in B.C. who are putting up material about parts per million in their offices that allow them to go to both the medical website and our website, encouraging people to actually do the sorts of things we are talking about here, to start reducing the amount of particulate matter by having more people per vehicle, high occupancy in vehicles.

But it's really the shifting of technologies and the shifting of fuel that's really going to see things start to clean up, unless one wants to go to what's been done in London, which is to put cameras in around the perimeter of your city and highly tax each vehicle that's coming in. I'm going to London next month, and I understand traffic there now is like it was in about 1965. It's terrific, but it's a 10-pound head tax.

Some of our cities may have to do that. I was gridlocked coming here this morning for about 40 minutes, because the lights were out on 41st—all blinking red all the way here.

The solutions are here. A huge solution is coming down the track, and it is hydrogen and fuel cells. There is good support from the Government of Canada. But as we point out in our brief, if you look at tar sands and you look at the gas and oil sector, I think the revisions Minister Dhaliwal and others have made in the last couple of years have been wrong-headed, and I think the Auditor General will find that in the next audit of the energy sector. I think this committee should take this one on. Why are we allowing tar sands and gas and oil to increase emissions by 45%, while many cities, if you look at the FCM, if you look at a lot of other industries, are already at our Kyoto target?

If we are going to get to where we have to go, which is an 80% reduction over the next generation, there's a lot that we have to do in shifting energy, in shifting technologies, in cleaning up our cities. I agree very much with Ron on that point, that if we start to include the health costs, not just of children, but the generalized health costs in relation to energy use, I think we'd see a much faster transition to using smart technology.

¿ (0945)

Mr. Monte Solberg: I appreciate that, and I think it is important to take all the costs into account when we do our accounting for the impact of various technologies. I appreciate that point.

I want to follow up with a question to Mr. Britton. My understanding is--and it's not a very good understanding--that one of the big problems the fuel cell industry faces is where do we get the hydrogen from, and how do we produce it? I'm wondering where we're at with respect to that.

I know some people said maybe nuclear energy is the answer. I'm sure Mr. Fulton wouldn't care to hear that. It sounds to me like it is a real problem, and I don't know where we're at in terms of solving it. Do you want to elaborate on that?

Mr. Ronald W. Britton: I'll try to make my answer sub-critical so we can get through the morning at least.

I guess our view is that the processes for making hydrogen are really pretty well understood already. Hydrogen is a commodity. It's been around for a long, long, long, long time, and it's been produced for probably 100 years. Re-forming of hydrocarbons and fossil fuels is one route. Electrolysis of water is another one. And there aren't many others, actually. That's kind of 99.9% of all hydrogen production today. There may be some very high thermal cracking of water, which is one of the nuclear approaches people are advocating, but we don't want to tie this industry start to something that hasn't even been developed yet that will take 30 or 40 years to come, if it ever comes.

Looking at conventional sources of hydrogen--and Canada is one of the leaders in the world in producing hydrogen--the same tar sands Mr. Fulton was talking about consume an enormous amount of hydrogen today. The only thing different is that it's not being purified, it's not being stored, and it's not being distributed, particularly to consumers.

So there's a lot of work to be done around consumer safety and handling, and there's a lot of technology to be developed around how to store hydrogen. Conventional storage at high pressure is probably the leading technology today, and that requires some further development.

Turning just for a minute to source, it's okay to source by electrolysis if your electricity is coming from a green source. Everybody is familiar with the pattern of wind power, and you use some of that power to make hydrogen so that when the wind's not blowing you can make electricity with a fuel cell. There will be a lot of parts of the world or particular niches where that's the very appropriate way to do it--or run other river power or any other truly renewable power source.

Really, you're trying to get to grips with the issue of efficiency--efficient use of fossil fuels in the early stage of this technology. Most of the wells-to-wheels analyses that have been done around the use of fuel cells predict somewhere around a 40% improvement in efficiency, all the way from the ground through to the tailpipe, even if you use fossil fuels like natural gas or oil, typical gasoline precursors.

I guess we like to make sure that we're also a glass half full and not a glass half empty. The elimination of fossil fuels in the next two decades is just simply not possible. It's a laudable objective, and over time we should be aiming there, but using less fossil fuel to achieve the same result, particularly along with conventional and not so conventional conservation efforts, could mean that within 20 years we're in a world that uses far less fossil fuel than it does today.

As some people say, the end of the Stone Age wasn't because of a lack of stones; it was because of a change in technology. I don't think the end of the fossil fuel age will be because we run out of fossil fuels. There are thousands of years of coal around. Going back to coal from even natural gas, I think Mr. Fulton would also accept, would not be a directionally correct move.

¿ (0950)

Mr. Jim Fulton: Even though I was born in Canmore.

Voices: Oh, oh!

Mr. Ronald W. Britton: In the interim, as long as most of us are going to be around, fossil fuels will remain, and we should be doing our utmost to use them as efficiently as possible and to reduce the most harmful effects, which are particulate emissions and NOx, SOx, and the urban pollutants, and reduce greenhouse gases at the same time.

Mr. Monte Solberg: How much time do I have, Mr. Chairman?

The Vice-Chair (Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.)): It's dead on ten, but if you want one last question---

Mr. Monte Solberg: Yes, if I could.

Mr. Fisher, you mention in your brief that you don't have enough graduate students. Perhaps this was tied to something that was just said a minute ago by a graduate student over here, but I'm just curious to know.... You suggest that it has a lot to do with funding. I'm wondering, is this also something that is happening simply because the humanities and social sciences aren't held in as high regard as the natural sciences, or is this a problem across the board with natural sciences too?

Mr. Donald Fisher: Thank you.

It's a general question across the systems of higher education. It will, as we know, be exacerbated by the retirements that will happen between now and the end of this decade.

There's a general need, a massive need. The figure that has floated around for a while now is 30,000 faculty positions, and 20,000 of those would be in the humanities and social sciences. The demand factor is clear, even if all those folk aren't replaced.

It's also clear--and I'll speak more about the social sciences and humanities than I will about the other areas--that unless we ramp up significantly, and we have to do it now.... The average career of a graduate student through to the end of a doctorate, if they're beginning with a master's, is five to six years, and that's exactly when all the retirements peak. So 2003-2004--the math is obvious.

We have to ramp up now, I think, take the initiative we have with the new graduate fellowships, and expand it. We might even look back into the senior undergraduate years. And it's essential, because without doing that the people simply will not be there.

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

Sophia Leung, please.

Ms. Sophia Leung (Vancouver Kingsway, Lib.): Thank you, Mr. Chair.

I want to thank you all for a very fine presentation.

I want to start with Mr. Fulton. It's always nice to see you, Jim.

Mr. Jim Fulton: It's nice to see you too.

Ms. Sophia Leung: We all know our government really committed for the implementation of the Kyoto Protocol. We know we need the support from the other countries in the world, and we're trying hard to listen to you.

I was very interested in your comment on the energy efficiency for buildings. That's really actually very basic. We know that in the western world we release a lot of waste energy. I think it's time--and I just want your reaction--that we should have a sort of campaign for public awareness, especially with the waste, even in households. It's very basic. Do you feel that's one thing we should do jointly--from the private sector, government, and everybody? That could be very effective.

Second, I want to ask you about the water policy for sewage treatment. I guess we didn't give you too much time to elaborate, if you could do that.

I'm going to ask you other questions. That usually is my pattern, so I can use my time efficiently, and you can answer.

On the second one, I want to go to Dr. Fisher and Dr. Calvert. We have had a lot of presentations about your SSHRC in Ottawa. We have given you a lot of support on the increased indirect costs of health. I think we committed $225 million for the next three years. Now you ask for 40%. Can you answer me what the figure is, the 40%, if you can convert numbers there freely?

Also, congratulations, Alain. That's good. It's time we should support more bright young PhD students so we can keep you in Canada.

Now I want to go to Fuel Cells. Welcome. I'm from Vancouver, and I'm very proud. As a matter of fact, yesterday a group of MPs from the European Union said they were really very impressed, actually very proud of what we have showcased.

I was interested in what you said about the growth in value-added exports. That's an area I don't know very much about. I heard you say that more than 80% of the products of Canadian companies occur in the sector of export. Maybe you can elaborate a little bit more, give me some examples.

Okay. Jim, do you want to start?

¿ (0955)

Mr. Jim Fulton: Thanks for the question. I'll try to be quick, because there are others who need to add answers to the questions you put to them.

First on the program that NRCan has out there, I think it's starting to catch on, but it needs to have a slightly higher profile. We've been talking to people who have had NRCan come in. For example, I spoke to Parks Canada at their conference in Winnipeg last week and to some of the people who live in Winnipeg who have had NRCan come by and actually do the energy audit of their home. I think people find it very instructive, because they realize there are some very low-cost things they can do: they can tape their windows; they can do certain kinds of insulation.

But it's with the larger-ticket items that I would encourage a greater federal thrust. A lot of people don't know that the middle-aged fridge sitting in their kitchen is taking about 10% of their energy bill a month, and depending how badly it's insulated and how bad the rimming is on the door, it could be much higher than that.

I don't think there is enough education of either salespeople or the public about the whole Energy Star rating. Plus, we think very strongly that there needs to be much more work by the federal government put into bumping up everything on water heaters, on fridges—on all of these appliances—because appliance standards are significantly higher in the U.S., and we get a lot of junk technology offloaded onto consumers in Canada. As the appliance regulations rise in the U. S., we end up with stuff we shouldn't be encouraging consumers to buy. The federal government has a real role to play there.

So the NRCan “toes in the water” is good. What we are hearing back from Canadians out there is that they like it, but it needs to be expanded to include more people who are in apartments. Quite often that means getting to the owner as opposed to the renter, and it gets into the big building retrofits. We have participated in those here in Vancouver and in Toronto. They are very significant. We did one with a large building corporation in Toronto. They did a $5 million retrofit and got a complete payback over 24 months.

These are things that need to be talked about more. It should be a revolving fund. Establishment of more of these revolving funds is something I think all members in the House would support, where if you are going to do a big building retrofit and it doesn't fit into your capitalization plan or whatever your plans might be, there is a fund that can be tapped. If you do the windows, it increases the output of your workforce as well—getting better lighting, better air, and so on.

So there is a lot to be done there, Sophia, and anything you can do to push it would be great.

Just flipping quickly over to the water issue, we think there is a real need for the federal government to get back into something like the inland water directorate to look at watershed issues in terms of ecosystem-based management, so that we can actually deal with where tertiary treatment is required for certain cities that are dumping their sewage raw into freshwater systems in Canada. Again, a revolving fund can help some of the smaller municipalities pick up some of the costs of moving to better treatment. Canada's freshwater is really being badly treated when you compare us with anybody else in the OECD.

If some of the recommendations on energy could be implemented and expanded, and similarly somebody is going to pick up the water issue..... Our assessment is that it has to be the federal government, because almost all of these freshwater issues—these creeks and rivers and lakes—go across all the borders in Canada. It's a natural, and it's not as if we have to use POGG power or anything like that. The federal government can, at low cost, with high integrity, and with great public support, wade back into bringing in a new national water act, because the 1987 legislation is worthless.

À (1000)

The Chair: Go ahead, Dr. Fisher.

Mr. Donald Fisher: This question is interesting. I talked just last week with our administration, and as you know, our current president, Martha Piper, has been at the forefront of campaigning for indirect costs. We were having a conversation directly about this.

I think the first point to make is that everyone is very grateful that the 25% has come, and that's fabulous. But the real cost, certainly according to the president of my own university and other presidents across the country—the major ten research universities endorse this—is around 40%. If we extrapolate, then, we would be looking at probably $360 million, to put on some sort of general figure.

Ms. Sophia Leung: A year?

Mr. Donald Fisher: Yes.

The Chair: Ms. Leung, did you have another question?

Ms. Sophia Leung: I think I asked Dr. Britton one.

Mr. Ronald W. Britton: I'm going to say 95%, off the top of my head. Last year, we estimate, the industry had total revenues of around $100 million, and over $90 million of that was in exports. Revenues today are primarily developmental products that are being shipped.

There are a few crystalline examples around. There's a company in Kingston, Ontario, called Fuel Cell Technologies. They have 19 demonstration projects going on in the world, and none of those is in Canada. In part that is due to the lack of support there was in place for Canadian industry during the past few years compared with access to demonstration money in other parts of the world, and in part it was because of partners who operate in other parts of the world.

Another characteristic for the long term is that the world creates or produces somewhere around 60 million vehicles a year of all types, and that's expected to grow to close to 100 million within the next 20 years. Canada produces two million, so currently around 3% of the world's vehicles are produced in Canada. As the conversion of vehicles from internal combustion engines to fuel cells happens, you can see automatically that those operating in Canada—this particularly applies to Hydrogenics and Ballard—will have to be looking at 97% of the market being outside of Canada.

We think that's a tremendous advantage for Canada. A country with very strong positive export earnings is a strong country. But it means all of our companies have to be globally focused and export oriented. Not to deny Canada, because this is our showpiece, but the predominant markets will be in China and India and the rest of the world—just by numbers, not to disadvantage Canada.

Ms. Sophia Leung: You also suggested that the government should give consideration to incentives such as tax shelters to encourage....

Mr. Ronald W. Britton: I didn't specifically mean incentives, but I think it's time for the government to take a really hard look at how venture capital is created. The pool in Canada is about 1% of the venture capital pool in the U.S. That's not our normal 10% relationship, and it means we must have policies in Canada that dissuade people from investing their money in venture capital.

It's not anybody's malevolent attitude. It just means there must be policies there that don't encourage me as an individual to put my money into a venture capital firm; rather, I put it into something like government-guaranteed investment certificates. Those don't help me if I'm somebody who's looking for venture capital.

All we're saying is, take a really hard look at what other nations do to stimulate venture capital pools. Emulate the good pieces of that, because we need something different.

À (1005)

The Chair: Thank you, and thank you to Ms. Leung, who is one of your local MPs who help keep us abreast of all these things. I think that's great.

Now we'll go to the government vice-chair of our committee, Mr. Discepola, who comes from Quebec.

Mr. Nick Discepola: Thank you, Chair.

I'd like to thank the presenters, because I've learned quite a bit this morning.

I'd like to get into the subject matter very quickly with Dr. Fisher. Your recommendation number four intrigues me immensely. I've been racking my brain for the past year or so, because I've been hearing everyone across the country saying with one voice that federal transfers to the provinces should be contingent on accountability and other factors. However, in my home province of Quebec it's a dreaded concept, not because of the PQ government, the separatist government, in the past.... They just wanted to take the money and do whatever they wanted with it, without any accountability.

But I'm intrigued by your idea, because right now we're into the discussion of rearranging the CHST and you've come up with what may be a workable idea, which is not to break it up only into two, as we've been thinking about--I don't know why we'd want to limit ourselves to two--but that it only seems to make sense that we do it in three. If we were to agree with the provinces on maybe four or five standards, whether it's national standards accountability, transferability--the same conditions as those in the health care act--and apply them to education and social programs, then if the provinces were to buy into those minimal conditions, an awful lot of the concerns that were expressed even here this week could be alleviated.

So from the government's perspective, we give them the money, they adhere to the four or five minimal conditions, and through the accountability mechanism, they will be accountable to their electorate. I think that solves a huge provincial-federal relations nightmare.

I'm wondering if you could elaborate a little bit more.

The Chair: Go ahead, Dr. Fisher.

Mr. Donald Fisher: Yes, we've talked about this a good deal. Of course, the recommendation came last year to divide into two. It does seem to us the right thing to go to the next step now. Why divide into two? Why not divide into three? It has been a thorn in the side of federal-provincial relations almost from the beginning, it seems to me, and it is exacerbated through the EPF and the current CHST transfer in the sense that it's not clear where the money goes. It gets lost in the provincial coffers, or it did at one time more than it does now. So we fully support that recommendation, and I know those discussions are ongoing, as we speak.

I think you're right, we have to work very carefully through the accountability mechanisms or standards that would mean that all the provinces.... I think CMEC, in a way, has moved in this direction in the last two or three years, and it's very encouraging. We see all sorts of pan-Canadian initiatives at the CMEC. So I think the groundwork has already been laid there as well--pan-Canadian standards, mechanisms for accountability--so that both levels of government become accountable to their electorates about how we are supporting post-secondary education.

Mr. Nick Discepola: Do you have any minimal criteria that we should be demanding or focusing on initially?

Mr. Donald Fisher: It's interesting, because I'm going to be at a telephone conference this afternoon where the executive of the federation will be talking about exactly that--how we will put in these criteria, which criteria will be the most important.

The federal funding of our universities began as a very simple mechanism in the 1950s--no more students. It was straightforward. They used an intermediary body at that time, but it was a straightforward proposal.

Exactly which criteria will become the most important ones, I would have to say we're still discussing.

À (1010)

Mr. Nick Discepola: Well, I would appreciate it if you could supply that to the clerk over the next few weeks if it's available.

Mr. Donald Fisher: I will indeed.

Mr. Nick Discepola: I'm very interested in it. Thank you very much.

Mr. Donald Fisher: Thank you.

Mr. Nick Discepola: Dr. Calvert, I think what's important for me as we enter the 21st century is that Canada position itself very well. The R and D and innovation agenda to me is the first and foremost priority for any government.

One of the areas where I do think we could play a key role--you alluded to this, and having been a small-business person myself, I was never motivated to do it--is in the area of encouraging small and medium-sized businesses to do more R and D. They probably do it indirectly anyway, but they never account for it. I'm wondering if you have any ideas or precise recommendations we could make to help small businesses do more R and D.

Prof. Thomas Calvert: Thank you.

Well, there are federal programs that are very helpful. I think people are quite familiar with the NRC's IRAP program, which works exclusively with small companies and provides advice at a very grass roots level.

The NSERC partnership program means that if a company has some research needs, they can get help--in essence, NSERC will match their money. If a company comes up with $50,000 for a decent research problem, generally speaking they can get matching funds. These things work very well.

The trouble we have in British Columbia--and it's not unique to British Columbia--is that when we talk about small companies, we mean really small. Last night in the Hotel Vancouver, NSERC had their synergy awards for industries and universities that work together. They have a category for small companies. Their category is for anyone with fewer than 500 employees. In B.C., that's pretty big. When you're talking about companies in the fuel cell area, I'm sure there are a number that have a dozen employees, or six, eight, ten. I've seen the statistics; it's dramatically biased to the lower end.

Taking advantage of some of the programs is hard, because the staffing is so tight anyway, and even in the most friendly government programs there's a certain amount of bureaucracy and paperwork. The really small companies, which are often extremely innovative, seem to have trouble taking advantage of these.

Mr. Nick Discepola: Do you know why that's the case? Are the reporting mechanisms burdensome? What prevents them from taking advantage of the programs?

Prof. Thomas Calvert: I don't think it is anything specific; it's just dealing with a bureaucracy or whatever.

I would have to say that people like the NRC's IRAP people, or the ITAs, as they are called, are excellent. They go out and sit and have coffee with people, and they help you fill in the application, which is a very real help for some technically oriented business people.

I think it's an attitudinal thing, and it's not all bad, but it is a roadblock.

Mr. Nick Discepola: Thank you.

I'd like to concentrate on Mr. Fulton and Mr. Britton.

In my opinion, Kyoto provides a wealth of opportunity for Canada. I'm just wondering if you have any ideas as to what areas we should really focus on and target.

It seems to me that fuel cells have tremendous potential, as you've outlined in your briefs, but am I wrong to assume that they, as well as other forms of energy like solar power or wind power, are probably still in their real infancy?

When you allude to the lack of interest in venture capital, the figures are very alarming: 1% versus 10% in the United States. Is that due to the fact that it's perceived to be a higher-risk sector?

So what areas should we be focusing on as a government? Do we take your idea of maybe giving a rebate for fuel-efficient cars? I'm not sure those kinds of things will provide a huge immediate payoff. How far are we away from fuel cell technology really reaching market commercialization, so that it's viable?

À (1015)

Mr. Ronald W. Britton: - I think in reality we've made the case that fuel cells and hydrogen are not a “Kyoto one” solution, or even a major contributor. The major impact of fuel cells and hydrogen will be a decade from now; that'll be the start of a very steep curve.

However, in my view, those in our industry who are focused on the auto sector, for example, face the very, very demanding targets for the automobile. The cost has to be down to somewhere around $50 a kilowatt equivalent to make it competitive with the internal combustion engine. The service reliability or durability has to be at least as good as today's internal combustion engine, which is 2,500 operating hours and so on.

If companies are able to make that target, along the way they will have ten times lower capital costs than a conventional thermal power plant. So the notion of distributed power generation as a major contributor to power generation in the future becomes obvious from a capital point of view; you've got ten times less investment to get the same amount of power, because you've been successful with the automobile activity.

So I think the curve will be very, very steep. The question is, does it start in 2010, 2012, or 2013? So it's certainly a “Kyoto two” timeframe and beyond.

Mr. Nick Discepola: Is there nothing the government can do to accelerate that and bring it up a few years?

Mr. Ronald W. Britton: I think what governments are now doing around the world will inevitably accelerate, because around the world there's now about $8 billion being applied to this technology that wasn't being applied two years ago. It's not a given that more money makes things go faster, but it certainly is a major step forward.

That's globally. In Canada, we are spending another $215 million over the next five years, and that's critically important.

But the solutions are to some extent inside the technology, and to some extent outside, because it's what you as consumers, or you as industry, or you as businessmen choose, what choices you make around your energy supply in the future that will drive it. We believe it has to be economically beneficial to you or you won't make the choice. No matter how good-hearted you are, no matter how much you'd like to be a member of the David Suzuki Foundation and all the rest of it, nobody has ever seen that consumers will make that choice voluntarily. They'll make it for economic or fashion reasons. So we're really excited about some of the concepts that people will be using to deliver fuel cells, as well.

There are tremendous opportunities. We think of distributed power in terms of generating power in a building in the middle of town, and so on, but the guys who are looking at ships, aircraft, and cars are looking at being able to produce the power almost anywhere in the vehicle. It doesn't have to be sitting up in front of you any more, and once you remove that design impediment, the engineer's mind can go wild about what he or she puts in the car.

You have probably seen the GM Hy-Wire, as an example of this, the fly-by-wire car that will be electrically powered in the future, and there are a number of other concept cars starting to come out. Toyota has one because they didn't want to be left behind by GM.

I'm always very happy with the competitive power of major automobile companies to try to get ahead of each other once they think the problem is solved. So I'm not worrying about “if”; I'm still concerned about “when”.

Mr. Nick Discepola: I guess what worries me is a flashback to 1957, when a previous government made the tremendous decision to cancel the Avro program and the impact that had and could have had on Canada. So I want to make sure we don't make the same mistake.

Mr. Ronald W. Britton: Well, we need a lot of staying power, and that's not wise politically sometimes. We're talking about governments making bets today on which they're not going to get a major payback from the voters for 10 years.

So I think with the efforts that have been made around the world, governments deserve a lot of credit for making those bets.

Mr. Nick Discepola: There's just one other alarming comment that you made--and I'm not sure if I should be alarmed. You said that technically 97% of the world market will be outside Canada.

Mr. Ronald W. Britton: No, I was just talking about the auto sector.

Mr. Nick Discepola: Right.

So should we be alarmed that, as Canadians, we won't be able to compete? If the Ballard Power Systems or other start-ups are as successful as they are, will they not be compelled to move outside Canada to meet the markets where they're most in need?

Mr. Ronald W. Britton: I think they would if we didn't have an environment conducive to their staying here. But I make the example to people, when they ask that question, of Microsoft in Redmond, Washington. I don't think anybody in Washington state would rather that Microsoft were headquartered somewhere else. They like the fact that the second largest corporation in the world is headquartered in Washington.

But they don't produce anything in Washington. They just bring money to Washington. They have a lot of value-added jobs. They do their R and D in Washington, but when you buy a copy of Windows 2003, it was probably produced in China, Taiwan, or Malaysia. So the low-value-added production jobs are going to the low-cost parts of the world to be produced, but the IP transfer payments, the profits that are being returned home, are all coming to Redmond, Washington, I assume, and rewarding American and Canadian investors.

A strong economy needs that. We can't pretend that we can manufacture all the cars in the world in Canada. It just won't happen. But if we're the home to the key technologies that are used in those cars, Canadians still get the biggest benefit, which is high-value-added jobs and a large positive service cashflow.

À (1020)

The Chair: Thank you, Mr. Discepola.

Mr. Deschenes, I think you added something different and valuable to our discussion today, so thank you for taking your time.

Mr. Fulton, I heard what was said about people not making choices, but you know, lots of people go to buy new cars. Has the David Suzuki Foundation or anybody else from an environmental point of view made a list from all the vehicle manufacturers we have, that these cars are the most beneficial for the environment? Is that easy to find? If I went on the Internet tomorrow, would I find that list?

Mr. Jim Fulton: We don't do it, but there's lots of material up there on the web. People are looking for the most energy-efficient vehicles. It's quite readily available through consumer guides.

We certainly would encourage.... I mean, we've put 40 different recommendations in here on energy related to Kyoto, but it's things like the feebate that allow consumers to connect a lot of dots. If they're trying to decide between two vehicles and there's an additional $2,000 feebate on one, they're going to ask the question why, and if they're going to get $2,000 back on another, they're going to ask why.

We work with thousands of doctors on the health side of this paradigm, and there are a lot of doctors across the country who are very keen to see ways of putting medical association fingerprints on this issue too. How are we going to clean up the air in Montreal, Toronto, Windsor, and Vancouver? We have terrible air quality issues here in Vancouver. Most people don't think about it, but a very significant chunk of it is related to motor vehicles. There are solutions to it, but it requires determination.

I have just one final point. I was in the House in 1985 when the fleet efficiency standards were passed. We took a vote in the House and they were passed. They went to the Senate and they were passed. We've been through five prime ministers since then, and it has never been given royal assent. No one has ever taken it over to the Governor General and had it implemented after it was duly, legally passed through the House. That fleet efficiency standard would have changed the kinds of motors that were put in the fleet in Canada for 17 years. So it requires a very diligent House.

I raised this every year from 1985 to when I quit in 1993, and I've raised it every year since, whenever a standing committee comes by. It's the kind of thing we shouldn't allow to occur in a democracy. It was virtually a unanimous vote in the House to have fleet efficiency in Canada, and it has never been implemented. Those sorts of things--the energy savings and the cost savings to consumers--are back. We're talking tens of billions of dollars that would still be in people's pockets if that bill that was passed by the House had been implemented.

The Chair: Thank you, and Dr. Fisher, very much. Thank you for coming today.

To Mr. Britton and Mr. Curtis, maybe at some point when we're not sitting and hearing testimony, we can actually get up here to take a look at some of this technology. I personally would be interested, and I know other people around this table would be too.

So with that, on behalf of the people who are allowed to be here today in our committee--and a majority of them have to be in Ottawa to pass those supply bills tonight--I thank you very much for taking the time to come to us, giving us your expertise, and taking the extra step of answering out questions.

We'll suspend for a couple of minutes, put our next panel before us in five minutes, and continue.

Thank you very much.

À (1024)

À (1032)

The Chair: We are back in session, pursuant to Standing Order 83(1), on pre-budget consultations in the morning in Vancouver.

Among those on the panel this morning are the Vancouver Board of Trade, Janette Pantry and Rick Mahler, who is the director. Welcome to you both. We're very happy you could join us.

The Confederation of University Faculty Associations of British Columbia is this morning represented by its president, Rick Coe. Welcome to you, sir.

From the City of Vancouver, Anne Roberts, councillor, and Carol Ann Young, coordinator of child development. Welcome.

From the Association of Canadian Polytechnic Institutes, Jim Reichert, research and international vice-president, and John Watson, executive director. Thank you very much for joining us.

There is one group that is not yet here, and I understand traffic is a little tied up. Hopefully, they'll join us before our panel presentations are over.

We will go in the order of the agenda, with seven to eight minutes for presentations, and then we will have a round of questioning at the end.

First is the Vancouver Board of Trade. We're looking forward to your presentation. Commencez s'il vous plaît.

À (1035)

Mr. Rick Mahler (Director, Vancouver Board of Trade): Thank you very much, Madam Chair, for allowing us to make this presentation this morning.

We represent the Vancouver Board of Trade, which is 4,400 members strong, 80% of which are small businesses with less than 50 employees.

You may recall that each year the board issues a report card that grades the federal budget. Last year, the board assigned the federal budget a grade of D on the basis of a $15 billion spending increase announced in the budget, along with minimal tax and debt reduction. Recently the federal government was doing cartwheels over a $7 billion surplus in the last fiscal year, yet little was said that this surplus was what was left over from record-high tax revenues and record-high spending--spending, I might add, with a distinct lack of accountability, as has been mentioned time after time by the Auditor General.

These facts have not escaped the attention of our members. The board consistently surveys its members to determine what is important to them. The latest survey shows that economic growth, government performance, and taxation are the top three most important issues. Health care and education, while important, are well down the list of priorities. Our members want policies that will stimulate economic growth, ensure that our tax dollars are spent wisely, and reduce the overall tax burden.

It is in this context that the board makes its submission to you today.

Ms. Janette Pantry (Vice-Chair, Vancouver Board of Trade): On August 22, 2000, we submitted a formal letter with our recommendations for the upcoming federal budget. Today we wish to speak to some of the highlights from that letter, and I have with me a package of charts that I'd like to speak to and distribute.

The Chair: It's being distributed.

Ms. Janette Pantry: The theme of our letter is that the board of trade's vision for Canada is for Canada to have the highest standard of living of all G-7 nations. Currently, Canada is second. We're only slightly ahead of five other countries, and those five other countries do not have the same trading relationship as we do with the U.S.

Our standard of living is approximately 20% lower than the United States. This is of concern to us. I think that generally, as Canadians, we like to think that our standard of living is comparable to that of the United States, and that our standard of living is roughly equivalent to our American neighbours. To achieve the higher standard of living of G-7 nations, Canada will have to have its standard of living grow faster and, for an extended period of time, faster than that of the United States. As a result, the federal government must implement policies that lead to economic growth and job creation.

What types of policies are these? Moving to the third chart in the package, these types of policies are policies that reduce taxes on income and profit. If you look at page 3, you will see that Canada has the highest taxes on income and profit of all G-7 nations. This is disturbing because these are the types of taxes that discourage working, saving, and investing.

The federal government is proud of its $100 billion tax reduction package that has been announced. However, our concern is that approximately 40% of this amount goes to reindexing tax brackets. It's not a tax reduction; it's ensuring that tax rates do not rise simply because people's wages have increased by inflation.

We are looking for continued tax reduction. The board's priorities are in the area of personal taxes. We are calling for a decrease in personal income tax rates by 1% across the board, and an increase in the income level where the top marginal rate applies to an internationally competitive level.

You may be asking yourselves, are these tax reductions affordable? I ask you to turn to page 4 of the package. Many people believe that the surplus budget in Canada is as a result of spending restraint on the part of the federal government. The board has been recommending that spending increases be limited to population growth and inflation. The federal government's spending has in fact increased dramatically. The chart on page 4 shows that the annual program spending will grow, over a five-year period, from approximately $110 billion per year to $150 billion per year--an increase, over five years, of $40 billion, an increase of approximately 36%.

Most Canadian families have not had the luxury of increasing their own spending by 36%, and in fact, most have seen their standard of living decline over the same period. This level of spending increase is unsustainable.

We are calling on the federal government to implement a comprehensive program review to ensure that its program spending is productive and focused on high-priority areas. We would like this program review to be a continual program that would select departments each year as being the subject of that year's core review, but Treasury Board would be responsible for administering this core review.

The objective would be to prioritize government spending and create a culture of continuous improvement that ensures value for tax dollars spent. The board has identified defence, security, and infrastructure as priority spending areas. In the area of defence, Canada is the third lowest of OECD nations. In the area of security, it is critical that we maintain our trading relationship with the United States. In the area of infrastructure, it is critical that our cities have the funding to keep functioning.

We've seen talk in the newspaper recently that there may be a deficit in the upcoming year. We are calling on the government to maintain a balanced or surplus budget and to continue its debt reduction.

The government has made tremendous progress in reducing Canada's debt-to-GDP ratio. However, you can see from the chart that this reduction has come largely from growth in the economy rather than reductions in the absolute level of debt. The debt is still high compared to historical levels. We continue to spend $38 billion per year, or approximately 20¢ of each tax dollar collected, on interest payments.

We encourage the federal government to maintain its balanced budgets and to continue its practice of repaying the federal debt, and we are recommending that the government target a debt-to-GDP ratio of below 30%.

À (1040)

In summary, our vision is for Canada to have the highest standard of living of G-7 nations. This will require a continual core review of program spending to ensure that spending is focused on high-priority areas, and this will require continued tax reduction and debt reduction.

Thank you.

The Chair: Thank you very much.

Now we will move to the Confederation of University Faculty Associations of British Columbia. Mr. Coe, go ahead.

Professor Rick Coe (President, Confederation of University Faculty Associations of British Columbia): Thank you.

I'd like to be so specific and narrow compared with the last presentation that this may be a bit of a contrast.

I'm here today on behalf of the 3,700 university faculty members and librarians of British Columbia, and what I want to propose also serves the interest of students, the economy, and, ultimately, the public.

Generally, we support the brief submitted to you by the Canadian Association of University Teachers, especially the CAUT's call for increasing the transfers to provinces for post-secondary education, with an appropriate mechanism to make sure the funds are actually spent on post-secondary education. Specifically, I want to propose a particular approach for federal funding of post-secondary education, which we think would resolve a number of problems.

For two decades, going back to the Socred restraint program of 1984—so it has really been two decades—B.C.'s universities have undergone repeated cutbacks. B.C. government grants to universities, counted per student, will hit an historic low next year. Universities across Canada, of course, have suffered similarly. Again and again, we have been told to cut the fat and to do more with less.

The reality, of course, after the first time or two, is that doing more with less actually means making do with less, which translates into doing less with less. What gets cut at the universities is quality. Because the universities, and the colleges as well, are awarded primarily for the number of students they enrol, anything the universities might do to help improve the quality of the learning and courses for those students, but which doesn't actually produce credit hours itself, gets cut because there's a reward for more students. There is no reward for higher quality. Because of the intense pressure to provide access to post-secondary education, we have the greatest number of students ever attending our universities for the least amount of government money each.

Post-secondary educational institutions have been sacrificing necessary and well-used student services, such as writing centres; mathematics tutorials; study skills programs; English as a second language labs; and counselling, both academic and otherwise. These sorts of things produce no credit hours and are being cut way back. It isn't even efficient, because these are the programs that increase the number of students who graduate from a particular cohort. In other words, these services mean that someone who might have dropped out or flunked out is going to succeed, and the money we have started spending on them will not be wasted.

As for the solution, which I trust it is fairly clear that I'm framing, it is to modify the financial realities that reward universities for increasing the number of students while reducing the quality of their learning.

We would like to suggest that the federal government set up programs, to some degree comparable to the federal government's research program, that reward universities for improving the quality of learning. We believe that the federal government has an opportunity to achieve this with a relatively small amount of focused spending, and to do so without impinging on a province's primary jurisdiction over education.

À (1045)

You could fund a peer tutoring program in more or less the same way as work study grants have been set up. This is a rather inexpensive approach to helping students, and it is quite effective. There would be minimum standards. It wouldn't be that everybody who runs peer tutoring automatically gets this. There could even be some sort of competition. There would certainly be competition in other areas that could support services that undertake innovative projects and expansions, especially writing centres, ESL labs, mathematical tutoring, and study skills programs.

You could create special teaching assistance for graduate students working in such sites. This would also provide support for graduate students. I think only about half the graduate students in this province are actually funded.

You could support university-run programs that help faculty members improve their teaching. Indeed, you could fund a program that offered competitive grants for pilot programs aimed at improving human teaching. I say “human teaching” because there seems to already be plenty of money for high-tech innovation that replaces human teachers or that supplements them with computers.

I think jurisdictional audits of issues could be resolved in the same way as they're resolved in the area of research, because these would be competitive grants. They would certainly have minimum criteria.

Canada does not currently support its universities as well as some of our competitors do. According to the latest figures available to us, that includes the United States, which funds the teaching part, in particular, better than we do.

At CAUT, we support creating what used to be transfers dedicated specifically to public post-secondary education, not folded into the CST.

As has been our primary message here today, we also urge you to look into targeted federal programs and grants to support the quality of learning at our universities. Should you decide to move in that direction, we of course would be happy to give you more detail about how we think it might be done.

The Chair: Thank you very much. We did get a very detailed brief from the association in our original presentation in Ottawa. So we all have that.

Now we'll move to the City of Vancouver. Who would like to start? Ms. Roberts, go ahead.

Ms. Anne Roberts (Councillor, City of Vancouver): Honourable chair and committee members, thank you for the opportunity to speak today on behalf of the City of Vancouver.

The brief you have been sent deals specifically with child care. However, I would like to take this opportunity to reinforce that the City of Vancouver believes that federal investments are also required in affordable housing and infrastructure at the municipal level. I will be speaking to the child care issue today.

The United Nations Committee on the Rights of the Child, in its report this year, expressed concern at the high costs of child care, at the paucity of space, and at the lack of national child care standards in Canada.

The UN Committee on the Elimination of Discrimination Against Women also this year recommended that affordable child care facilities be expanded under all governments and that the government report with nationwide figures on availability and affordability of child care for its next report.

We as a municipality strongly support these recommendations.

The Vancouver city council has had a long-standing commitment to youth and children and to quality, affordable, accessible child care. We believe that all levels of government must take a leadership role in ensuring healthy child development and learning, in supporting labour-force participation, and in building economically strong and healthy communities.

We use a development cost levy to capture money to help build quality child care facilities. We've also provided operating and capital grants of over $1 million. We provide child care facilities or land at nominal lease rates and we offer maintenance and in-kind supports to non-profit child care programs.

We're trying to offset the high costs of delivering affordable quality child care to our citizens. As a council we feel we are doing as much as we can to create quality affordable child care in our city. We are, however, very concerned at the erosion of regulated child care in British Columbia and the overall lack of adequate funding, federally and provincially, for child care.

While we applaud the federal government for recognizing that child care is a cornerstone of early childhood development, we need national policies that support this direction. We need you to ensure that there are strong measures of accountability for federal funds allocated for child care to the provincial government so that we can increase child care spaces and affordability. We do not want federal funds to replace dollars cut from provincial budgets.

I am here today to emphasize the need for stronger federal-municipal linkages on child care and the need for a significant federal allocation of funds to regulated child care in the next budget, along with national standards. We need to ensure that we build child care across the country, based on high standards of quality, so that children, regardless of where they live, regardless of their income, have equitable access to licensed, quality child care. We owe this to the next generation.

It's time for you to take a leadership role in setting the stage for building a national child care system.

Thank you.

I'll now ask Carol Anne Young, who is the City of Vancouver's coordinator of childhood development, to take over with some of the details.

À (1050)

The Chair: Ms. Young, go ahead, please.

Ms. Carol Ann Young (Coordinator, Child Development, City of Vancouver): Thank you.

I'd like you to imagine for a moment a three-year-old living in a single-parent low-income family in the poorest part of downtown Vancouver. The mother struggles emotionally and financially, but is doing the best to care for her child. The child's early learning opportunities and nutritional meals are primarily met at her licensed child care centre. The child loves going there and is cared for by trained and loving staff. It is a lifeline for her mother, who is trying to improve her skills. Recently the mother's subsidy was cut due to provincial policy changes, and she can no longer afford the cost of child care. The child has been withdrawn from her program.

Or imagine for a moment an early childhood educator with a university degree and 25 years experience being told that his salary will be reduced by more than $3.50 an hour as a result of recent provincial changes. In 1998 he made $16.32 per hour, and now he will make $12.26 per hour.

One of the key characteristics of quality child care is staff training and staff turnover.

Or imagine two professional working parents with two children in child care. They live in a city where the cost of housing exceeds 40% of their income, and they pay $1,500 a month for regulated child care. They volunteer on the board of the child care centre and have recently been notified that the provincial government will be turning over to the society the operation and upkeep of the portable in which their child care is housed. Within the next eight months, the child care centre's expenses will be increased by $15,000 for operating costs, and the ongoing structural repairs will be added to the child care budget.

These are only a few of the realities facing child care in Vancouver. There are approximately 63,000 children age birth to 12 years in Vancouver. There is enough licensed child care to serve approximately 15% of the need. Yet a national survey reports that 90% of Canadians think we should have a coordinated child care plan that gives all children access to child care.

The cost of child care in Vancouver is the second highest in the country, yet the median income of families in Vancouver declined by 3.9% between 1990 and 2000. Vancouver is home to some of the poorest children in the country. In fact, for the first time we have programs reporting low enrolments or decreases in the number of low-income families accessing licensed child care because of reductions in funding.

Vancouver is home to some of the highest populations of children from families whose mother tongue is other than English. We know that early childhood opportunities increase school readiness for many children and prepare them for kindergarten. Yet a recent study done by the City of Vancouver found that the number of children on subsidy in pre-school on the east side decreased 84% in a one-year period.

We know that child care provides early intervention opportunities for children at risk, yet with children who have special needs we have a new policy that will require parents to make a choice between swimming lessons and child care as the program for supported child care is refocused.

We know that 70% of women 15 years and older with children under the age of six are in the workforce, and that the period of birth to six is critical to brain development. Yet families are being forced to choose unregulated child care options due to cost or the lack of availability of quality child care.

During the past three years we have experienced an approximately $50 million reduction in the provincial child care budget, either in direct operating dollars, staff wages, subsidies to low-income families, or as a result of weakening social policy. This is alarming at a time when the federal government has announced its commitment to early childhood development and child care as a cornerstone of child development.

I would like to reinforce the need for our federal partners to immediately implement stringent measures of accountability for the existing federal funds designated to licensed child care so that new dollars are tied to the promotion of increasing affordable, accessible, high-quality child care, not replacing provincial cuts.

I would like to reinforce the need for them to begin the task of developing national standards and to strengthen the dialogue between federal and municipal partners on child care issues and to make a significant increase in the allocation of federal dollars to child care in order to build a national, publicly funded child care system.

À (1055)

On behalf of Vancouver's children and families, we ask you to take a strong leadership role in making a publicly funded child care system a reality, because children can't wait.

Thank you.

The Chair: Thank you very much.

You're well aware, I'm sure, that this committee made that recommendation last year in its report for the very first time.

I'd now like to ask the vice-chair of this committee, from the opposition, Monte Solberg, to begin the first round of questioning. Monte, I will give you 11 to 12 minutes, if you'd like.

Oh, I'm sorry. I nearly shut out somebody. I'm going to take away your time and go back here, because I'll never be forgiven if I don't.

The Association of Canadian Polytechnic Institutes, please go ahead. I am sorry, Mr. Watson.

Mr. John Watson (Executive Director, Association of Canadian Polytechnic Institutes): Madam Chair, thank you very much for the opportunity.

The Chair: Nearly.

Mr. John Watson: Good morning, ladies and gentlemen. Bonjour, mesdames et messieurs. Je m'appelle John Watson et mon collègue s'appelle Dr. Jim Reichert.

I'm afraid that's as good as my French gets these days.

We represent the Association of Canadian Public Polytechnic Institutes. That's a title change from the way in which we registered and resulted from our recent incorporation.

We are a new organization currently composed of eight large, public, post-secondary institutions from British Columbia, Alberta, and Ontario. We have left you with a handout that contains the details of the proposal and the names of our institutions. In the short time that we have available, we will be able to cover only the highlights of that handout.

I should note that we are not asking for any new money. We are only proposing some ideas on how the government might get better results from the money it is currently spending or plans to spend.

We believe that we can play a role as a catalyst to help Canada join Sweden, Finland, and the U.S.A. in the ranks of the world's most innovative countries, and thereby produce a much greater return on the innovation expenditures than is currently achieved. We believe that improving Canada's performance and innovation will strengthen industry in our communities and provide more and better jobs for the graduates of our institutions.

If you turn to slide one in the handout that we have given you, you'll see that I am using a funnel metaphor throughout this to describe the current innovation process in Canada. That's not intended to fully represent the process, but it does help me to describe our current strategy.

Basically, we are pouring more and more money into the top of the funnel, where basic research is carried out, in the belief that it will eventually result in greater output of commercially successful products and services at the bottom of the funnel. This strategy equates basic research with innovation, and it appears to assume that the main thing constraining innovation in Canada is a lack of financial resources for researchers in universities and in government labs. We don't think that is the optimum strategy.

If you turn to slide three in the presentation, I have numbered the slide, and my points will follow those numbers. I'm not going to make all of the points, so as to save some time.

First, with its focus on funding for basic research, the current strategy ignores the 80% of ideas that come from sources other than basic research. Business must be engaged in the innovation process to ensure that the best new ideas are prioritized, developed, and incorporated into products and services. Canada's focus appears to be on basic research, not the engagement of business and the commercialization of the innovation ideas.

Secondly, in this presentation we don't mean at all to criticize universities. While the UILOs, university industry liaison officers, work hard to build links with industries, this is not a priority activity of a university. One result is that the links between universities and industry are far from optimal. Presently, most basic research ideas are generated with universities. They must look for users and applications, rather than being sponsored by industry at the outset.

Third, much of Canadian business, particularly the small and medium enterprise sector, lack the infrastructure and other resources to carry out significant industrial resource research.

Fourth, there is weak communication between researchers and those involved in commercialization.

Fifth, commercialization is not an explicit priority of the process.

Sixth, there is a high rate of leakage. That means that a significant proportion of the money put into the top of the funnel does nothing to generate innovation at the bottom of the funnel.

Seventh, Canada derives a relatively low output from its innovation process compared to that achieved in the most innovative countries. Reports from the U.S. Council on Competitiveness show that the gross expenditure on R and D contributes only marginally, perhaps less than 10%, to innovation output. More R and D spending alone will not solve Canada's lack of innovative competitiveness.

What can governments do to help? First, they can foster more engagement by industry in order to capture and commercialize the 80% of innovation ideas coming from outside the basic research realm. Secondly, they can foster much stronger, deeper connections with the innovation chain so that ideas created or adapted at one level are not lost before they reach the next level. Third, in the most innovative countries, industry drives the research agenda to a much greater extent than it does in Canada. Make the changes necessary to encourage this in Canada. Fourth, help to improve communication and partnerships between researchers and industry. Fifth, support efforts to increase the focus on commercialization within the innovation process. Sixth, reduce leakage by targeting research funds to those projects at the highest probability of commercialization.

Á (1100)

How can Canada's polytechnic institutions help? We believe that our members can play a useful catalytic role in improving innovation in Canada. We can partner with companies and provide them with turnkey access to our facilities, faculty, and resources to assist with industry-driven research and development, proof of concept, and prototype development. We have the labs, the intellectual resources, and the facilities that allow us to do machining, to do electronics, to build circuits, etc.

We think we can greatly expand the ability of small and medium enterprises to participate in, contribute to, and drive the innovation process. We are also well connected in our communities. We can develop and nurture networks and collaborative arrangements to assist industry to identify community needs and innovative solutions to those needs.

We can strengthen connections between the various stages of the innovation process through our strong links to players at all levels, including the universities.

What are we asking for? We propose a partnership program wherein our institutions, Canada's polytechnic institutes, work with private business on developmental research. The physical and intellectual resources of the polytechnics are made available to businesses that, on their own, would not be able to undertake research and development.

We have other proposals for programs in support of communications and networking. Overall, we believe that an investment of 1% of the current expenditures on R and D is a reasonable first step to try to move Canada further on the path to improving its innovation outcome. That is not new money. That is finding ways to reallocate the existing money or money that is intended for growth in innovation expenditures.

Ladies and gentlemen, by providing the means for industry to become more involved with innovation decision-making, we believe we can help improve Canada's return on investments and innovation by up to 15 times, which is the kind of finding that the U.S. Council on Competitiveness found when industry drives research decisions. We would like your help to get access so that we can share our ideas in detail with the officials who are considering innovation policy and financing in the upcoming budget.

Thank you for listening to us.

Á (1105)

The Chair: Thank you very much, and I appreciate receiving that brief. It's a little different from some of the ones we received, so that will help towards the mix.

Now we'll go to Mr. Solberg.

Mr. Monte Solberg: Thank you very much, Madam Chair. I appreciate the presentations.

I would like to start with the Vancouver Board of Trade. I liked what you had to say. I like the idea of Canada outstripping the G-7 in terms of standard of living. That would be a wonderful thing. I would just note that I think we should shoot even higher.

I mentioned at an earlier panel that there was a very good article by Professor Jack Mintz in the National Post a while ago about the fact that the Swiss, the Dutch, the Irish, the Danes, Icelanders, and everyone else had outstripped us in the last number of years in terms of standard of living. To me, it underlined that Canada had to do a lot more. So I appreciate what you're trying to do, and I think Canadians need to aspire to that.

One question, though, that I want to ask you about your presentation has to do with the issue of paying down debt. Every year over the last number of years, Canada has run a surplus, and typically some of that ends up going to pay down debt. But when you look at the degree to which that helps our debt-to-GDP ratio, it's actually a pretty small amount. Primarily, it's economic growth that has caused the debt-to-GDP ratio to fall.

A lot of people argue that this is the important number. If you have an economy that's quite large and it's growing, then what's really important is your ability to pay to service that debt. Rather obviously, as our economy grows, we can do that more easily.

So I wonder if it's really wise to use surpluses to pay down debt. There is an argument to be made that that money can be used in better ways, whether it's in certain very targeted spending--we've touched on spending issues--or in my mind, a better idea is targeted tax cuts that have the biggest bang for the buck in terms of spurring innovation, in terms of encouraging people who face high marginal rates of tax to keep their investment in Canada, or to stay here themselves, because a lot of them are driven out. I wonder if you would comment on that.

The Chair: Who would like to start?

Mr. Rick Mahler: Let me just take a stab at that.

Certainly when you take a look at our debt-to-GDP ratio, it does look quite good. One of the issues Canada has compared with other G-7 countries is that you have to add in the debt of the provinces as well, to get a whole country picture; so the picture for the country isn't quite as good as what you see for the federal government.

The other issue is, what has generated the debt? Has the debt been going into infrastructure? Has the debt been going into programs that are basically giving a high return, or has it been basically going in to try to fund a lot of social programs? The debt, as you know, is basically just a future tax increase, because at some point in time that debt's going to have to be repaid.

We would like to see the $38 billion a year we spend in interest payments be reduced, so that a portion of that money could then go into more productive uses.

That would be my first comment.

Janette.

Ms. Janette Pantry: I think the other factor, as well, is that the economy has been doing very, very well over the last few years, which has resulted in the drop in the debt-to-GDP ratio. If you're not going to repay your debt in good time, when are you?

Part of our recommendation in repaying the debt is to increase the fiscal flexibility of Canada and to get those interest rates to a lower level, so that in the years our economy doesn't perform so well, we have more flexibility in being able to have more dollars for the programs we want to see.

Á (1110)

Mr. Monte Solberg: One of the things you also touched on in your presentation was spending. Of course we have some groups here who are arguing for increased spending in certain areas. But on the other hand, as you point out, spending has gone up pretty dramatically, or 36% in the period you referred to in your presentation. So something's got to give.

I'm wondering if you've come up with any specific formula—though “formula” is maybe the wrong way of putting it—for how to characterize what constitutes good and what constitutes bad spending. Pretty obviously, when you're spending $177 billion a year, some of it doesn't lead to greater well-being and better outcomes for Canadians, but do you have a priority list where you'd like to see spending increased and where you'd like to see it cut?

The Chair: Go ahead, Ms. Pantry.

Ms. Janette Pantry: We've identified three priority areas for this year: defence, security, and infrastructure.

In terms of areas for cutbacks, what we would like to see is a comprehensive program review to ensure that any cutbacks, if there are any, are made based on an analysis of where the spending goes and an identification of what the priorities are. One of our concerns has always been the employment insurance program and the seasonal benefits that are provided within that program. But what we would really like to see is a comprehensive program review.

Mr. Rick Mahler: Just to add to that, there's a rich amount of material in the Auditor General's reports over the last three or four years, which certainly provides some direction as to where some of the spending improvements can be made.

Mr. Monte Solberg: To just switch gears here, Mr. Watson, I appreciated your report, and I share your assessment of what I think has happened with respect to R and D, that we have poured more and more resources into it but we're not getting the benefit out the other end.

I certainly don't have the level of understanding you do of why it's gone wrong. Are you basing your analysis on what's gone wrong in Canada on what's happened in the U.S.? Although you have mentioned Finland, Sweden, and other countries who have been able to turn this around. I guess what I'm looking for is whether this is a real world model you're talking about here that actually works, because we've been to the well many times with R and D in Canada, and we're just not getting anywhere. It's very, very frustrating.

The Chair: Mr. Watson.

Mr. John Watson: Thank you for the question.

The reference to Sweden, Finland, and the U.S.A. comes from a report on the Council on Competitiveness in the U.S., which is basically run by Michael Porter and one of his senior colleagues, but it is also reflected in reports from the Conference Board of Canada and from others.

There's a wide variety of sources and general agreement that if you look at various surrogates for innovation output, such as commercializable patents, the countries that are leading the pack--Sweden, Finland, U.S.A., Japan, Germany--have some characteristics in common.

In general, the ones that are pertinent here are the extent to which their R and D decisions are driven by business rather than by the public sector. If you look at those countries, their ratio of private-directed spending versus public-directed spending is about four to one on R and D, whereas ours in Canada at best is two to one in Ontario and Quebec. In the Maritimes it's one to two, and in western Canada it's one to one.

So there's not enough influence of the private sector over the kinds of decisions, and that's why you get the leakage out of the funnel. You can't solve all that at once. Our approach to it is how do we get more business engaged in the process? In Canada we don't have a lot of huge businesses, so how do we get small businesses to invest in developmental research?

Our approach is we have some infrastructure here in our institutions that is being used at some level, because we do have links, but we could really increase the engagement of business in R and D by cutting the cost to them of start-up. There are facilities, there are faculties, there are libraries. They could be using that stuff and get into the R and D game much earlier and therefore start to influence the kinds of decisions about what ideas are captured out of the innovation pool, like the basic research and the 80% that comes from competition and from reading other people's research, and pull that into a useful product that comes out the bottom and improves our standard of living.

So engaging business is really our game, and finding a way to give them access to facilities that they don't have to pay the full price for because we already have them.

Á (1115)

Mr. Monte Solberg: Do I have a little bit of time?

The Chair: Yes, I'm going to give you an extra two minutes.

Mr. Monte Solberg: Thank you.

I have a question for Ms. Roberts and Ms. Young, and it has to do with your proposal. You are basically proposing dedicated funding from the federal government for child care, and I'm wondering, are you proposing a net increase in overall spending that would come then for child care?

In other words, you are not proposing that money be taken currently from the transfers that go to the provincial government of British Columbia and it be dedicated to this? You are proposing that this be added on top of funding that goes to the Province of British Columbia--is that correct?

Ms. Anne Roberts: I'll start here. I think our first request is that the money from the federal government actually go to child care. This is now being distributed by the provincial government in other areas of child development, to family places and other kinds of institutions, but not to the creation of child care spaces. They have pulled many out of actually supporting regulated licensed child care, and then in this year we actually, in the city budget, scrambled to put some money in to save the spaces for the particularly low-income children.

What we're asking is that this money be dedicated and there be a standard that the federal government set up so that the federal money is not going in and making up for what the province has pulled out.

Over and above that, we do think there should be a national child care strategy that is funded across the country. I don't know if Carol Ann is--

The Chair: Ms. Young, go ahead if you'd like to add something.

Ms. Carol Ann Young: I think that in addition to that we are asking for increased dollars in the child care system.

Currently the allocation the federal government has put into the early childhood development initiative of $291 million and the child care initiative of $121 million is a start, but nowhere near an adequate amount of money to look at a reasonable cost-sharing arrangement with the province and the contributions the municipality makes to move toward a publicly funded system.

Mr. Monte Solberg: One of the concerns I have with this is that when you have both levels of government funding child care, with the complexity then comes a lack of accountability. It's very easy for both levels of government to point fingers at the other, like we have now with health care. As you remember, when the federal government cut health care transfers there was a lot of finger-pointing going both ways with respect to who was responsible.

Although I appreciate your concern right now, at least you know who the villain is. If you want to hold one level of government to account, you can, because pretty obviously in this case the provincial government is the one that withdrew the funding. I'm wondering if you share concerns about accountability between the two levels of government if they're both funding child care in British Columbia.

Ms. Anne Roberts: I think the concern here is not to point fingers but to actually provide an affordable child care system, and I actually do think the different levels of government can work together.

Child care is complex. There are a number of ways to provide good child care, but I think the backbone of it is licensed, regulated child care with national standards.

So I think there is room for coordination and that it doesn't have to be just one government that is responsible, because as I said, the City of Vancouver can provide land or some of our buildings to subsidize child care. We can work with the provincial government. Also, we can work with the federal government. I think those areas of coordination are, in the end, more creative and do create more spaces.

Á (1120)

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

Now we'll go to the government vice-chair, Mr. Discepola. I'm going to give you the same amount of time, 13 minutes.

Mr. Nick Discepola: Thank you very much.

Thirteen minutes...not a lucky number.

The bulk of my questions will be for the board of trade, only because I find it frustrating that I've been on this committee for ten years, and I think nothing has changed. I probably could have told you what you were going to talk about when I walked out of the room and crossed paths with you, because I find that over the past ten years the chambers of commerce across the country and the boards of trade have been preaching and singing from the same song sheet.

Quite frankly, I am taken aback by some of your slides, because I find them, in parliamentary terms, “misleading”--I think that's the word we can use.

If you turn to slide 3, you seem to give the impression that Canada's corporate tax rates or income tax rates are very high. Am I correct in looking at that slide? That's the way you presented them, anyway.

I would argue that the heading of that should be “Revenues from taxes on income and corporate taxes are roughly 17% in Canada”. That's not bad in itself, is it, if revenues from corporate taxes are high?

Ms. Janette Pantry: This slide shows taxes on income and profit. So it shows both personal income taxes and corporate income taxes.

Mr. Nick Discepola: But the revenues for the government--

Ms. Janette Pantry: And it shows the revenues as a proportion of the GDP.

Mr. Nick Discepola: That's right, of the GDP.

Ms. Janette Pantry: It shows that Canada is collecting the highest proportion--

Mr. Nick Discepola: --of its revenue from corporate tax and personal taxes.

Ms. Janette Pantry: Personal and corporate income taxes in Canada as a percentage of GDP are the highest of any G-7 nation.

Mr. Nick Discepola: No. That's where I disagree. The revenues from corporate taxes mean corporations are making more profit. So obviously their revenues are going to increase, but it doesn't mean that corporate taxation in our country is out of whack.

Ms. Janette Pantry: No, I agree that corporate taxation isn't out of whack in this country.

Mr. Nick Discepola: So right now, when you call for reduced corporate income taxes, for example, my argument is that--

Ms. Janette Pantry: We're not calling for reduced corporate income taxes.

The Chair: Ms. Pantry, can we have one at a time?

Mr. Nick Discepola: First, to dispel the fact that corporate taxation in Canada is higher than in the United States, I think if you clearly do the numbers, with the full implementation of our tax measures in the last budget, corporate taxation in Canada will be roughly 33.4% versus 40% in the United States. So I don't think we have to do very much more in the way of corporate taxation.

Your other comment was on the debt-to-GDP ratio. Again, when we compare, we normally have a tendency to compare ourselves in terms of how we're performing compared to the other OECD countries. Whereas I supported both the chamber and the boards of trade in our endeavour to get our debt-to-GDP ratio down, I find that right now we are well in the ballpark. Of all G-7 countries, Canada has achieved the largest decline of debt-to-GDP. We're right smack in the middle of the group.

I feel that we're going to get to the 30%, as Mr. Solberg stated, by just allowing economic growth to do the job. So I wonder why you are fixated still on reducing the debt-to-GDP ratio.

The Chair: Ms. Pantry.

Ms. Janette Pantry: There are a number of comments there. The first has to do with the level of personal income taxes and corporate income taxes in Canada. And I agree with your point that Canada's corporate income taxes, when reductions are fully in place, will be competitive with corporate income taxes in the U.S. I think that's a message that hasn't got out as well as it should have, and I agree with your point.

The board of trade's priorities in the area of income tax reductions are not corporate income tax reductions at this point. Our priorities are for reduced personal income taxes, and those are an across-the-board decrease, as well as increasing the income level where the top marginal rate applies. That would be to make us competitive with the U.S.

The reason we are focused on these types of taxes is that they are the types of taxes that discourage working and saving and investing. The slide shows that Canada is collecting, compared to other G-7 nations, more of these types of taxes than other nations. That's because other nations rely on other types of taxes that aren't as harmful to the economy. So we are focusing on personal income tax for that reason.

Your second comment was on the debt-to-GDP ratio. The federal government has done a good job, and we are supportive of the job the federal government has done in reducing the debt-to-GDP ratio. Certainly we are at a level we thought we wouldn't get to for many, many years. We are continuing to call on the government, though, to continue to reduce that debt-to-GDP ratio. I don't think it has reached a level that we are all satisfied with yet. And I think most of the statements by the current government have indicated that most of the members are also supportive of reducing the debt-to-GDP ratio. Our primary concern is program spending.

Á (1125)

Mr. Nick Discepola: Okay, let me get to that then. That's the one where I find you're most inconsistent.

Whereas I agree with you that our government spending--and I've been on this hobby horse for two years now--is getting out of line, I fully support total program review and line by line item justification of our expenditures. It has to be done that way because I believe we have competing priorities.

Whereas the board and yourselves have given some indication of where you'd like to see spending, I think we have other priorities also. I find that once again your criticism is unjustified because of your recommendations.

If you simply add it up, you said you want defence spending to go up from $11.5 billion to $20 billion. That's $8.5 billion. You want a $2 billion dedicated infrastructure program. You want additional spending in security. You want continued reduction of the EI rate. And the big one, which I don't think you've costed, is 1% reduction in all the marginal tax rates.

To give you an example of that impact, when we introduced last year's budgetary measures where we reduced the marginal tax rates by 1% across the board, when fully implemented, it had an impact of $10 billion.

I find that you can criticize us for overspending, but then be consistent with your recommendations. With all the spending requirements and priorities that you have, we're never going to be able to justify it alone, because budget surpluses, as you know, aren't that high.

I guess the other alarming thing is that you've said we might toe the line on transfer to provinces, irrespective of the fact that we know we need $2 billion more in health care and we have to have continued investment in social programs.

So do you see where I think your membership is skewed? It's all skewed toward personal tax rates, corporate tax rates, and with your spending priorities, I don't think they can be justified. So could you give a guideline to us as to where you would see realistic spending initiatives targeted?

The Chair: Maybe we'll go to Mr. Mahler then, and give Ms. Pantry a break here.

Mr. Rick Mahler: Well, I think your criticism of our criticism is not justified.

Seriously, we've seen program spending increased by $40 billion--that is, after the tax cuts--over the last five years. From $110 billion to $150 billion is projected for next year.

There is a lot of room in just the spending increase alone to have put more of an emphasis on security, infrastructure, and defence. Some of that has been done. I don't know if Janette mentioned it--and I'm sorry I had to leave the room for a second.

They're doing that right now in the Department of National Defence. Minister McCallum is looking at a mini program review, where they basically make cuts in some areas, but can increase in some other areas. I think that has to be done right across the board, and I think you agree with me. We can't be so smug as to sit here and say here's where it should be reduced.

I'll keep sounding like a broken record. The Auditor General's reports over the last five years contain a rich array of areas that should be looked at. I think that's where the government should start.

Again, with a $40 billion increase in program spending, I think there would have been enough for these other initiatives. And obviously we're not saying that this happens in one year, sir. We're saying that's our objective, certainly, as it can be afforded.

We think that the government has taken a wonderful opportunity of having been able to do something with the $40 billion increase and to put it in some of these areas that we think are priorities to our memberships, and now it's gone into other areas. This is going to make it much more difficult to take that away now and redirect it.

To sum up, this year the government was looking at redirecting $1 billion out of $140 billion, and, to be frank, even through your own admissions, they had trouble redirecting a billion dollars.

I think there needs to be a program review. I think it needs to go quite deep within the government.

Á (1130)

Mr. Nick Discepola: I would argue that if you're going to go line by line by item, there wouldn't be that latitude afterwards to do a program review and readjust.

You're calling for, I think, a 2%...program spending. If you're going to do the proper job in the first place, you're going to be spending the minimal amount you can. I think there's always room for a realignment of certain areas, and part of your recommendations you could do through just re-prioritorizing program spending.

I find that there's competing demand, and I don't think we can do all the things you're suggesting. Some of them are very expensive, as I've outlined.

The Chair: You have more time.

Mr. Nick Discepola: You didn't mention it, but I want to take advantage of asking you this while you're here.

For the City of Vancouver, there has been a lot of talk on dedicating a certain amount of the fuel tax for infrastructure spending. I know your presentation is on child care, and we have had many presentations, and we agree with you, by the way. On the infrastructure spending and a dedicated tax portion, I'm wondering if you have any comments, in particular, on how the previous programs have worked in your city and what recommendations you should give it. Should it be permanent, stable funding, etc.?

The Chair: Ms. Roberts.

Ms. Anne Roberts: I'll take a little stab at it, but I have to tell you that I'm not as much up to speed on this as I should be as a new councillor.

I think what we are concerned about is that there be dedicated funding to transit, and that would be our main priority. I think we are worried about federal funding coming in and then opening up the door, then other kinds of funding not taking place. We are worried that there would be some sort of downloading in that process. So what we would like to see is primarily a commitment towards transit money.

Mr. Nick Discepola: What about the actual overall targeted areas of infrastructure programs? Should it just be dedicated to transit? Should it be dedicated to sewers? Should it be dedicated to water purification systems, etc.?

We've had some people saying forget the old days of spending it on museums or arenas or any other things of that nature, which compete against the private sector. So I'm just wondering if you had any viewpoint on what we should include in a permanent infrastructure program?

Ms. Anne Roberts: Are you saying this as far as the gas tax is concerned, or just a federal infrastructure program?

Mr. Nick Discepola: Both, though I've switched to the infrastructure program.

Ms. Anne Roberts: I think we've been eyeing very much that potential future money, and in fact beginning to practically count on it in our budget calculations, especially as far as the expansion of transit is concerned, which is such a critical need.

I personally can't answer for the others, and I'm really not informed enough to know what our council's position would be, but transit is certainly a priority in this region. I think your previous panel talked about the amount of air pollution and congestion we're facing, and how to fund that locally is a major issue.

The Chair: Thank you very much.

They actually talked about gridlock in getting here today.

I'm very pleased to turn over the final 13 minutes to one of the MPs you've sent from Vancouver to Ottawa, and a permanent member of the finance committee.

Ms. Leung, go ahead.

Ms. Sophia Leung: Thank you, Madam Chair.

I want to thank you all for very thoughtful presentations. Each one has a very good foundation.

I would like to start with Anne and Carol Ann.

Child care has a very high priority in my mind, and also for number of my colleagues. As a matter of fact, to give you some good news, last week we had a very good discussion with our future leader. It's something that we think is necessary and needed.

In the meantime, I think actually in 2001 the board of trade produced a very good report on child care. We had a discussion. I'm on the social policy committee. I think that it's really something you did hit on. We also heard many presentations, yesterday and today, on a nationally funded child care system. We need a little more time to design one. In the meantime, that's why we like to ask you.

I think that you hit right on the topic. In the meantime, though, we would like to perhaps work closely with B.C. and all the western provinces to hear more. We're heading to Edmonton.

I want to switch to the board of trade. Janette, I think you already did a good job on the child care. We're not going to talk about that. You did talk about spending restraints. Again, I think we recognize that we have to produce more financial resources and reduce spending.

I'm a little bit puzzled. You presented priorities of defence, security, and infrastructure, but we all know, throughout the whole country, that health care is so important. It's really high. Social programs, child care, and education are all future investments. I'm surprised that you didn't say anything. I'd like you to comment on that.

My pattern is usually to ask questions first, and then you can answer and make comments.

I want to ask Mr. Coe about another area. Secondary education is important to me. I'm on the secondary education committee, and there is a lot of discussion on that. As a matter of fact, there are suggestions and the idea that we may have a Canadian post-secondary fund. In other words, the transfer would be separate because it would make it more accountable and more transparent. Right now, you know that there is a condition where we're not able to take from the funding that is actually aimed toward post-secondary funds. Then we get a lot of queries as to why you're not getting it.

What you suggested, we touched on many times in the post-secondary committee. Also, the students come to us, not just the faculty. We really strongly would like to see if we could invest in post-secondary, post-graduate internships. Those are very good examples that you suggested.

I only want you to comment on the idea that maybe we will have a separate Canadian post-secondary fund. How would that strike you?

Then, we come to the Association of Polytechnic Institutes. I enjoyed your report. It was very innovative and good. You did say that we will have to suggest an investment of 1% of current R and D to expenditure as a kind of first step. I'm not quite clear on what you mean. We already commit so much to R and D. Are you not getting any? What is the situation?

Á (1135)

We think that we have really committed to innovation in the last few years with this government. For the 1%, do you also have a practical number? What is it? Sometimes it was 1% or 2%. It's so easy to break with that number. What is the application?

Now, you could answer.

The Chair: We have about eight minutes to share here.

Ms. Roberts, go ahead.

Ms. Anne Roberts: Given such a positive response about the child care, I wanted to thank you and other members of the committee for that support. I'm really looking forward to going back to my council and bringing such an optimistic assessment. I do thank you.

I'll look forward to you carrying that ball to Ottawa, and coming up with both the funds and the strategy that we need in place. Thank you.

Ms. Sophia Leung: You know that you have my support on that.

The Chair: We'll go to Mr. Mahler or Ms. Pantry.

Before you start, Sophia has told us about a report that you did on child care. We would be pleased to receive a copy of that for our background research. If you have one still available, you can get it to our researchers or our clerk, and then we can distribute it. I think that is quite innovative.

Mr. Mahler.

Mr. Rick Mahler: Thank you, Madam Chair.

Actually, we were one of the first groups out of the blocks on that, so we will send you a copy. I appreciate that.

Ms. Leung, you noted that we had not mentioned health. Health is important to our members, but what we were reflecting was a survey of our membership. Health actually came in fourth on the list, and we would have received more criticism from Nick, had we put that on the list as well. Basically, we were reflecting the top three priorities from our membership.

Janette.

Á (1140)

Ms. Janette Pantry: Our other concern with respect to health care is the lack of a plan for health care spending. For health care, federal government funding has gone up by about $50 billion, and yet we're not seeing the outcomes associated with that. So prior to the board of trade supporting additional health care spending, we would like to know there's a plan for that spending, and that it would be measured to ensure it's achieving the outcomes it was intended to achieve.

The Chair: Ms. Leung, I just want to follow up on that.

Ms. Pantry, are you also including a contingency in your recommendation for the $2 billion, or do you not want to go that far out?

Ms. Janette Pantry: I'm sorry, it's not clear to me....

The Chair: There's $2 billion contingent upon there being sufficient dollars. We're going to have an economic update next week, and some of the provinces who have been hoping that money would come forward were not certain it was a for-sure allocation but a contingent allocation.

When you say the board of trade doesn't want to see further moneys going into health care, are you also talking about that $2 billion? Literally, some provinces have relied on that in their numbers.

Mr. Rick Mahler: I think what we're saying, Madam Chair, is that the dollars going into health care over the last 20 years have increased 7% annually, which is much higher than any other program. The fact of the matter is that the outcomes aren't consistent with the level of spending. So what we are saying is let's ensure we're getting the proper bang for the buck. We're not sure that just pouring more money into health care is going to improve health care.

The Chair: Thank you.

Ms. Leung, sorry for taking your time. I give it back to you now, with that time attached.

Ms. Sophia Leung: I think the discussion here is very important, for this city and for many provinces. Would you comment on that? I think they are a high priority.

Mr. Rick Mahler: I think we have, with our child care initiative--our zero to six program. There are some recommendations in there that we do stand behind. I will deliver that to the committee, and you can take a look at those recommendations. But we are very supportive of that particular program, and we have done it in conjunction with the United Way. The United Way just received, I think, a $20 million grant from the province to continue with that program.

So we are making strides in that area.

The Chair: Thank you.

Mr. Coe, I think Ms. Leung had some questions for you, and then Mr. Reichert.

Prof. Rick Coe: Thank you.

I actually wanted to make two comments, the first one directly.

Yes, we would be in favour of a Canada post-secondary fund. Our difficulty with funding, whether it be in the form of transfers or in some other form, is that in the past it's often been hard to tell whether it was actually spent in our sector or not. We're less concerned with the shape of it than with the accountability of it in order to make sure it really ends up being spent where it should be spent and in the best possible ways. If this fund took into account the kinds of quality issues I was raising, it would be even better.

The other thing I feel I just have to comment on is the proposal of my new acquaintances to my right. Obviously, we come from different sectors of post-secondary education. The assumption that underlies their entire proposal is the notion that you can judge the return on research dollars by the number of products that come out at the end of the funnel. Behind that is the more general assumption that if you get industry more involved in things and if you in effect give more money to industry it will turn out to be good for everybody, because what's good for business is good for the economy, and what's good for the economy eventually trickles down to the rest of us, including the government.

I just want to point out that these are the assumptions. I would particularly challenge the notion that product development.... I've been to these innovation summits, I've read the materials there, and all those entrepreneurs talk about research and development. But if you listen carefully, they're talking about product development. They say things like “Don't come to me until you already have a prototype”. Well, most of the applied research is done by the time you have a prototype.

The distinction between research and product development and figuring out how much of this money goes where is an important distinction to make, because in years past...and I would say, it should continue to the present that product development should be the responsibility of private industry. If they want to pay for our resources to help them do that--if the public isn't paying for it--that's fine with us. In fact, there's a great deal of that going on already, and I assume the innovation program is providing some funding for that sort of thing.

So I'm not speaking against their proposal. I don't have a problem with the notion that some small amounts of money out of the research funds should be dedicated to the sorts of research that will lead to products. What we do have a problem with--and it's not surprising that the universities would--is the notion that our research program should be evaluated...that we should see it as a problem that 80% of our research doesn't turn into products in short order. I don't see that as a problem.

I've probably taken my two minutes.

Á (1145)

The Chair: I'm going to give time to Mr. Reichert.

Mr. Jim Reichert (Vice-President, Research and International, Association of Canadian Polytechnic Institutes): Thank you. I can't resist.

By the way, I'm Jim Reichert, I'm the vice-president responsible for research at the British Columbia Institute of Technology, which is in fact British Columbia's largest post-secondary institution if we count full-time and part-time students.

We're very strong supporters of the polytechnic association because of the kind of research and the kinds of unique characteristics of members that are part of the polytechnic association. They're not universities, and they're not colleges. They're very uniquely positioned to work very effectively in helping Canada achieve the wealth generation objectives of its innovation strategy.

The innovation strategy, from our perspective, very much depends upon creating jobs, creating wealth, creating successful companies creating jobs, creating opportunities, creating wealth that will help to pay for some of the social benefits we're hearing we need more spending on. So we are very much focused on pragmatic wealth generation types of activities.

Our message is really very simple. Our message is that we think the federal government can get a more optimal return on its investments in innovation than it's getting now. It can get an optimal return by allocating more funding from the existing expenditures to support the kinds of activities that polytechnics are very good at, do very well, and are uniquely positioned to do. This is research that is very focused on commercial opportunities, product development in many cases, but essentially business development and business success.

The kinds of money we're talking about are relatively small, and we've said a 1% allocation of the existing federal expenditures on innovation.

Right now, the federal government--if we count all forms of innovation spending, including things like the SRED tax credits--spends roughly $8 billion on its innovation program. We're talking about a 1% allocation of that, which would be roughly around $80 million.

That $80 million spread across eight institutions we think can produce a 15 times greater return on those dollars of expenditure than if those dollars are in fact spent in the way we're spending them now in the innovation process. It's a substantial return. It's a relatively small decision, but it's very much focused on the kinds of outcomes that I think the innovation agenda is looking for.

Essentially, what we're saying is focusing on inputs is important, but if you really want to assure the outcomes from the innovation strategy, focus on the outcomes and the kinds of mechanisms that can get those outcomes for you.

We think the polytechnic institutions are uniquely positioned, with a very pragmatic approach to dealing with companies and industries and solving their problems for real commercial benefits.

The Chair: Thank you very much. And perhaps it's not an either/or situation, but sometimes it can be a bit of both. I know most of the members on this committee have universities in their riding, and a lot of us have seen the development of industry-university partnerships through on-site research parks in collaboration with the university. I think that's been very beneficial across this land in many instances.

All of you have contributed a great deal to our discussion. We appreciate the fact that you have taken the time to give the input, not only in your briefs, but taking your time to come here voluntarily today to testify, to answer our questions. Part of our job is to challenge each other. I think in a democracy by doing this type of interaction we do it best.

Thank you very much.

We will adjourn, colleagues, until after a short break for lunch. The meeting is adjourned.