[Recorded by Electronic Apparatus]

Wednesday, November 6, 1996

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[English]

The Chairman: The finance committee is delighted to be presenting you with pre-budget hearings here in St. John's. Our first witness today will be Dave Denine, from the city council of Mount Pearl. Mayor Denine is accompanied by his clerk.

I'm going to suggest that each presenter limit his or her opening remarks to three minutes. You will find that if that's not enough to make your full point, there will be lots of opportunity either during the question and answer period or before we close. We look forward to hearing from each one of you.

Mayor Denine.

Mr. Dave Denine (Mayor of Mount Pearl): Thank you, Mr. Chairman. It's an honour to be here today. As mayor of the city of Mount Pearl, I wish to express to you my appreciation for the opportunity to participate in this public consultation process for the upcoming budget. I also wish to complement the federal government for this process, and I encourage that you maintain it in the future.

Prior to being elected, the Chrétien Liberal government committed to an infrastructure program in response to numerous requests from municipalities across Canada for help in repairing deteriorating municipal infrastructure. Your government lived up to this commitment when elected, and I wish to express our appreciation for this program. It has been a success throughout Canada. It has restored and upgraded deteriorating municipal infrastructure; however, a lot still needs to be done in this area. It has created jobs - in Newfoundland in particular, where job creation is an absolute necessity.

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The City of Mount Pearl - and other municipalities across the country - is requesting that your government build on the success of the infrastructure program by providing a phase two of this program. The continuing involvement of the three levels of government - federal, provincial and municipal - on the one-third cost-sharing basis, which was the basis of the success of the previous infrastructure program, is a necessity for the next phase of this program. We urge that the emphasis for the proposed infrastructure program be the continuation of the repair and restoration of municipal infrastructure, with particular emphasis on environmental projects and the creation of jobs.

In this particular area, considerable concern has been expressed for the clean-up of St. John's harbour. This project comes with a high capital cost but is a necessity to comply with existing environmental regulations. It is a deterrent to the tourism industry, which can be a significant job creator. In particular, as we prepare to participate in the Cabot 500 celebrations, it is a project that requires the participation of all levels of government, and of the municipalities and regions that are contributing to the current problem. The City of Mount Pearl has unanimously approved this project as the number one priority for 1997 and has committed its full share of the proposed infrastructure program to this project. I urge you to approve this program and to announce it at the earliest possible opportunity so that the project can begin in 1997 as we celebrate Cabot 500.

As an employer in the city of Mount Pearl, we are also concerned about the escalating cost of the payroll burden experienced over the past number of years as it relates to increased premiums on various benefits, such as UIC and the Canada Pension Plan. Increasing payroll costs to employers are not only a deterrent to job creation, in reality they are hidden job killers. Every effort must be made to decrease the escalating payroll costs. As the government reviews its plan to stabilize the Canada Pension Plan for future generations, which we view as a necessity, it should be improved with corresponding decreases in other payroll costs, including UI premiums. With the current low interest rates and the government's success in bringing down its deficit, the decrease in payroll costs to employers should now take a higher priority.

The recent agreement between the provincial government and the federal government creating a harmonization tax has created serious concerns for the city of Mount Pearl. A recent analysis of the impact of this change in this tax structure has indicated substantial negative impact on the city. The net impact on the city is an additional 2.5% increase on its operational and capital budget as it relates to the purchase of goods and capital infrastructure requirements. The major impact will be on capital infrastructure, which will now see increases of an additional 8% on all labour and engineering and consulting fees that went up previously, subject to provincial sales tax.

While the federal government must be complimented on maintaining the GST municipal rebate under the harmonization tax, consideration must be also given to providing a similar rebate system for the total harmonization tax for all municipalities. This effect of any change to the tax system must ensure that there are no greater tax burdens on municipalities after the changes than were present prior to the changes. This has not been the case with these changes. In the recent agreement, changes should have been implemented to correct this inequality.

We have taken these concerns to our provincial government through the Newfoundland and Labrador Federation of Municipalities, and we take this opportunity to in bring our concerns directly to you as a partner in this agreement. Without these changes municipalities will be significantly impacted in already difficult financial times, and the job creation and proposed stimulus to the economy will not be accomplished as envisaged by these changes in the tax system.

In concluding, as you are aware, this province has the highest unemployment rate in the country, Mr. Chairman. We have seen our economy devastated by the closure of the fishery, as well as a significant reduction in the province's economy as a whole. This has resulted in a significant outward migration of our citizens, and particularly our young people. As an educator, this gives me great personal concern, because I've seen many of our brightest younger people leaving for other parts of Canada. This situation requires new initiatives and must take priority if we are to secure the future economy of this province.

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We are recommending that the federal government establish a task force to study the problem, with a view to finding ways and means to slow down the rate of outward migration of young Newfoundlanders. Consideration should be given to the provision of special financial incentives to Newfoundland business owners who hire young Newfoundlanders. If we are to solve this problem, young people must be given hope for the future, and what better way is there than the provision of a job in their own province?

In closing, I would again like to take this opportunity to express our appreciation on behalf of the city of Mount Pearl for being able to bring our concerns to you as we prepare for the upcoming budget. It is important that serious consideration be given to the proposed outline in order to create jobs and to provide a stable economy as we look forward to the future.

Thank you.

The Chairman: Thank you, Your Worship.

From the Fish, Food and Allied Workers Union, Earle McCurdy, please.

Mr. Earle McCurdy (President, Fish, Food and Allied Workers Union): Thank you. I appreciate the opportunity to be here this morning. I'll be characteristically brief in my remarks.

The Chairman: That's wonderful.

Mr. McCurdy: The first thing I'd like to suggest is that the committee recommend that a working group be established to check the water in Ottawa. Perhaps that accounts for some of what we've had happen to us in recent months and indeed the last few years. It probably needs to extend beyond that to people who write headlines in newspapers. I saw one recently that really caught my eye: ``Massive cutbacks boost confidence''. I had to wonder just exactly whose confidence it was that was being boosted. My best guess was that it wasn't those who were on the receiving end of the massive cutbacks.

In any event, I think it's about time that we cut out the ideology in this country and try to be a little more practical in dealing with the problems. We have to try to re-establish even a little, tiny bit of what was once some sense of caring for other Canadians, which seems to be completely lost in the public debate. I'm not here to say it's fixed, I'm not an expert in that area, but certainly the situation with the deficit has obviously been significantly addressed. We should therefore start focusing on some of the other problems in the country.

The real crisis in Canada, of course, is a shortage of jobs. If people want to be satisfied with appealing to and looking after or seeing an ever-decreasing proportion of Canadians in a good position, and seeing marginalized an ever-increasing proportions of Canadians, then carry on as you're doing. That's what's happening. More and more people are being disenfranchised and marginalized every day.

I'll be specific on a couple of things. One thing I would suggest that the government do.... I know that if I, as a union leader, had reneged on signed commitments in the fashion that the Government of Canada has in recent months, I'd be held to account in the courts of the land. I'd probably be in jail. Through a gross error in estimating the number of eligible people, we have people on the TAGS program who arbitrarily had a year cut off their compensation program after being forced out of the groundfish industry. There's no agreement to that. They were given a written commitment as to what their duration would be, and then the government arbitrarily said it didn't budget enough money for it. It wasn't the fish plant workers who estimated the numbers, it was the federal government, and they've cut it out.

Just this week, I found out that brand-new rules were instituted behind closed doors. People who thought they had another year's duration of entitlement under the program got notice this week that they're cut off and left high and dry two weeks before Christmas. This is November 6. They were given notice that they are out of luck on December 14: Yes, we know we sent you a letter telling you that you were good until December 1997, but we've changed that now; there are new rules and you're out as of four or five weeks' time. PS, Merry Christmas.

It's really difficult dealing with the Mount Kilimanjaro of arrogance in HRD. It's the most frustrating thing in the world to have to try to deal with them. They just sit up there, are totally impervious to what's going on in the country, and just bring in these new rules.

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I'll just mention two more and cap off my frustration at that. If anyone listened to the radio this morning, there was a report of the parliamentary committee on HRD that was meeting yesterday in Ottawa, and apparently none of the Newfoundland MPs were in attendance, which is shocking.

Secondly, when asked why only about 20% of the estimated number of fishing licence holders had taken the buy-out program, they said to ask the fishermen. We don't need to ask the fishermen. There's a very straight answer they could have given: it's because 75% of the funding that was designated for that program was removed and hundreds of fishermen who had submitted very realistic bids - the board set up to evaluate the bids said they would have liked to accept them - were turned down because there was no money. They had the arrogance to say, in reply to a question, ``ask the fishermen'', as though somehow it was their fault.

I wrote the previous Minister of HRD, Mr. Young, on April 22 on the issue of labour force attachment for tax recipients. You can obtain labour force attachment through insurable work, HRD-sponsored training, and receipt of UI. If you maintain your labour force attachment that means, for the UI regulations, you're subject to the reclaimant rules, not the new-entrant rules, so they're less strict.

If you happen to be incarcerated in this country, your labour force attachment is put on hold, so to speak, during the period of your incarceration - and I have no problem with that. People serve their time, then at least they will get whatever chance they had when they get back out. We're just asking that tax recipients get equivalent treatment to those who are incarcerated.

To date, six months later, we have only received acknowledgement that our letter has been received and referred to the minister. That's the extent of it six months later, after numerous attempts to have the matter addressed. This is just not good enough.

I'll close on one more point. I don't know who we should appeal to on these things, by the way. That's why I'm here today - out of frustration. It's like pounding your head constantly against a concrete wall. If you see a different kind of wall - maybe a brick wall instead - we'll try that for a while and maybe it won't hurt quite as much.

The final point is on the UI changes. Without going into all of it, because I think everybody here is familiar with the two sides of that debate, I will only say that unfortunately, in putting together the program, apart from all the other problems, the government has made worse the disincentive to people to work in specific real-life situations.

At the end of a working year in a fish plant, or any other industry for that matter, when the work has dwindled down to only a day or two a week, if people go to work for one day, it could reduce their UI by $20 or $30 per week all winter. It's a clear-cut disincentive for people to work.

With all the high-priced help involved in putting together these kinds of programs, I don't know why they failed so miserably on that. It could not have been by oversight - it could only have been because there was a desire to really crack down on certain classes of people, because these kind of inconsistencies were brought to their attention and were not dealt with.

So people are told that if they go in to work for a relatively small number of hours, it will cost them money. If that's the kind of ethic we're putting out in the country, then God help us. I'm sorry if I'm highly negative here this morning, but it's a very frustrating time to be trying to represent the people who are on the receiving end of what passes for public policy in the mid-1990s.

The Chairman: Thank you, Mr. McCurdy.

From the National Cancer Institute, the Faculty of Medicine, Memorial University, we haveJon Church. Welcome.

Professor Jon Church (Faculty of Medicine, Memorial University of Newfoundland): Good morning. I'm also an associate professor in the Terry Fox cancer research labs in the faculty of medicine at Memorial. As well as the National Cancer Institute, I'm here representing the Council for Health Research in Canada. It's a coalition of health agencies and research institutions across Canada representing thousands of medical scientists, volunteers and donors committed to medical research aimed at treating and curing disease. In addition, I'm also here representing, in particular, hundreds of my colleagues across Canada who attempt to carry out important and necessary medical research in the so-called have-not provinces.

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When I first began thinking about what I was going to say this morning, I was initially struck by how ironic it was, and ultimately sad, that in the waning light of the 20th century we still have to lobby our government - men and women of power, influence and education - on the importance of biomedical research.

Over the last 50 years we have seen dramatic decreases in infant mortality, a steady increase in our life expectancy, and continued improvement in our standard of living. Many of these factors have contributed immensely to why the United Nations recently judged Canada the number one country in the world in which to live. I don't think we can argue that biomedical research and the advances that result have not played an insignificant role in this ranking. Do you think we can maintain this if cuts to research in basic medicine and other sciences continue?

I know dealing with government and politics is a pragmatic undertaking, but I can do that too. I'm not going to quote a long list of figures, however. I'm sure you will be and have been already inundated by lots of numbers and statistics. I'd like to argue that you know that basic research creates jobs. I know from my own experience as a career scientist that a very modest grant will allow me to hire a full-time research assistant and two or three students. This is direct employment, not taking into account indirect supporting jobs as well as potential spin-offs of any advances I may make.

I'll also argue that you know that basic research is education not only directed to my students, staff and me but ultimately, through the dissemination of our knowledge through both scholarly and popular press, to the entire populace. Is this not the definition of investing in the future, and what of these decreases in funding in provinces such as Newfoundland? If I cannot obtain national funding, this province, like others in this country, can offer precious little in alternatives. What then might be the impact on employment and education locally? I would suggest they would be much more profound than similar events in a province such as Ontario, and I have not spoken at all about the increases in productivity that result from a healthier workforce.

Do you want more pragmatism? I can do that again. My own field of research is breast cancer, and I work closely on the Internet on a daily basis with more than 1,000 survivors worldwide. Advances in early detection and treatment that have come largely from university-based biomedical research have resulted in the fact that today two-thirds of all those initially diagnosed with breast cancer will not die of their disease. Even those with recurrences and metastatic disease can have their lives extended and the quality of their lives improved thanks to basic research advances.

At this level, basic research and the hope it holds out for many breast cancer survivors has a very human face. These women and men know that their hope for the future lies in research.

On the first weekend of October of this year about 100 men and women who participate in my virtual on-line breast cancer community got together in a hotel in Chicago - men and women from all over the United States, Canada and Europe. They knew each other as on-line personalities, but they had never met in real life. Not only did they organize and finance this little get-together out of their own pockets, but they raised over $1,000 in cash in the process. And where did they want this money to go? To research.

Still, in the next year 17,000 women in Canada alone will be newly diagnosed with breast cancer. They will also be looking to research for answers. That's a lot of votes, ladies and gentlemen, and if funding for biomedical research continues to be cut, what do you and what do I say to them?

Finally, ladies and gentlemen, I know that pragmatism often leads our politicians to argue that they can't afford certain programs. My colleagues and I also know that when you say you can't afford something, it usually means you have chosen to spend your money elsewhere. In other words, by our government saying you can't, it really means you won't.

Ladies and gentlemen, we'll be paying attention. Thank you.

The Chairman: Thank you very much, Dr. Church.

From the Newfoundland and Labrador Federation of Labour, Elaine Price and Martin Saunders, please.

Ms Elaine Price (President, Newfoundland and Labrador Federation of Labour): Good morning. On behalf of the 50,000 members of the Newfoundland and Labrador Federation of Labour, I want to thank the committee for providing us with an opportunity to participate in this pre-budget consultation.

I want to start off by saying that we have become skeptical of consultative processes. It seems as though we are constantly being consulted solely for the purpose of creating the illusion that the views of the people are important, and then government continues with its right-wing, free market, corporate agenda regardless of the consequences. However, as a federation, we feel it is important for working people and their families to have a voice and an opportunity to register their dissent, and despite our skepticism, we come to the table for that reason.

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The Newfoundland and Labrador Federation of Labour firmly believes the federal government is moving in the wrong direction by continuing to focus solely on deficit reduction through cuts to government expenditures. Deficit reduction to the exclusion of other government responsibilities contradicts the red book commitment to create jobs and maintain our social programs. The victories of deficit reduction and balanced budgets become hollow when it results in the decline of the social and economic well-being of Canadian people and in increased disparity and inequality.

There's strong evidence to support a fundamental change in the federal government's approach to economic and social policies. A continuation of the deficit-budgeting approach to government will mean another year of unacceptably high levels of unemployment and poverty and another major step towards a level of inequality not seen in our country since the 1930s.

A monetary policy that requires zero or low inflation has been established as flawed economics. The federal government's policy of maintaining unemployment of at least 8% to 9% in order to keep inflation in check oversimplifies how the economy works, and it ignores the economic, social and human consequences of, in effect, setting a minimum unemployment target. In fact, some economists are arguing that this approach is more economically damaging than inflation itself.

According to this distorted view of the economy, unemployment is caused largely by labour market regulation and overgenerous social programs. However, our current high levels of unemployment are caused mainly by failed economic and social policies that focus on cutting government programs and laying off thousands of government employees. High interest rates also prevented economic growth due to reluctant consumer spending and economic investments.

Now that interest rates have dropped, the government must prioritize job creation. It's not enough just to presume that the economy will respond on its own to this change in interest rates. As Philip Cross, chief of current economic analysis at Statistics Canada, recently pointed out in the The Globe and Mail, the slow response to low interest rates so far probably reflects the ongoing dead weight of weak incomes and labour markets.

Unemployment rates have been very high at 9.5% in 1995 and 9.4% so far this year. And the real unemployment rate, taking into consideration the people who have given up looking for work and those who are working part-time because they cannot find full-time jobs, is in actual fact much higher.

Apart from the human suffering caused by high unemployment, tax revenues are lower, economic activity slows right down, and income security costs escalate at both provincial and federal levels. This is not sound economics. Putting people back to work is by far the most effective way of strengthening our economy.

Job creation was the linchpin of the alternative federal budget in 1996. The alternative federal budget in 1997 is now being finalized. I understand the Coalition for Equality will be commenting on the alternative federal budget, so I'll leave it at this and say that the Newfoundland and Labrador Federation of Labour endorses the alternative federal budget approach, especially its recommendations of a job creation plan that includes strengthening the public as well as the private sector.

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A well-funded, well-paid, organized public and community sector that is democratically accountable will provide greater social security to Canadians. It will also boost the economy and government revenues, reduce unemployment, particularly for women and young people, and help promote greater equality.

As a major plank in a job creation plan, strengthening our public services carries with it the benefit of stronger social programs for all Canadians, regardless of age, income or geographic location. The people of this country cannot absorb any further cuts in our social programs.

Draconian cuts in UI contained in the new employment insurance act will mean that by the time all of the changes come into effect, only 33% of unemployed workers in this country will be eligible for UI. This will translate into increased demands for social assistance across the country as more and more families fall into poverty.

Proposed cuts to the public pension plan being advocated by both the federal and provincial governments will only add to this suffering as more seniors slip into poverty.

Apart from the human aspects of these cuts to federal income security programs, the cuts are very short-sighted economically. If people are struggling to survive to provide the basic necessities such as food and shelter for themselves and their families on a daily basis, they're certainly not going to be participating in any discretionary spending to help stimulate the economy.

The federal government is responsible for providing adequate funding to ensure high-quality public health services, post-secondary education and social services. Federal responsibility for national standards must also be established, or, I should say, re-established, so that all Canadians can be assured of receiving consistently high quality programs.

We completely disagree with the federal government's devolution of responsibilities to the province, especially in view of the right-wing shift across the country, which will make further cuts in vital social programs more likely. The $7 billion cut in transfer funding caused by the CHST will result in offloading to the provinces and lead to further offloading to the municipalities, and eventually to individual Canadians, their families and communities.

The cumulative effect of this is, once again, higher levels of poverty -

The Chairman: Excuse me, Ms Price, I think every presenter here was asked to make their opening remarks in three minutes. It really doesn't matter to me, but I just want to be fair to all of the presenters we have here who have more or less stuck to that. I leave it entirely up to your discretion as to how we proceed. If you don't have enough time to make your comments in the opening round, I assured you earlier that you would have all sorts of opportunity during the question and answer period.

Ms Price: Okay. I certainly don't want to impinge on other people's time. I understood -

Mr. Grubel: How much longer is it?

Ms Price: A couple of minutes.

The Chairman: Is it in written form? Will it be given to us so that we can read it?

Ms Price: We didn't bring copies to circulate to the committee. The translator has one.

The Chairman: We are not here to impose our agenda on you, but simply to try to ensure that every individual has the opportunity to make as many points as possible.

Ms Price: Okay, but I will say this. Unfortunately, we are talking about a federal government budget that has mega-consequences for all people in this country. In this province, we have seen the fallout. We have seen the fallout from changes in unemployment insurance. We have seen the fallout of the Canada health and social transfer. I think these issues are impossible to summarize in two or three minutes.

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The Chairman: Then take as much time as you wish.

Ms Price: I will not impose on other people's time.

The Chairman: No, I'm not here to dictate. Please feel free, if you wish, to take as much time as you need.

Ms Price: I do feel free, because this is one of the few opportunities for the voice of working people can be heard.

The Chairman: Elaine Price, I'm offering you this time as far as we members are concerned.

Ms Price: Thank you.

As I was saying, the $7 billion cut in transferred funding caused by the CHST has caused massive devolution. This devolution to the provinces and to the communities, and eventually onto the backs of the people, will create higher levels of poverty, higher unemployment and eventually a two-tier system as gaps in public services are filled by private companies. This is a concept being advocated at both the federal and provincial levels. Unfortunately, it is also a concept municipalities are being forced to buy into.

When we look at the accounting procedures derived from deficit budgeting, we get a very distorted view of public finance. Deficit budgeting actually ignores the value of social infrastructure in generating and sustaining economic prosperity. Contrary to current arguments being put forward by both government and the media, there is no evidence showing social spending hampers economic growth.

In fact, social policy researchers have shown a higher level of social spending is an integral part of the successful economy. We think it is really important the federal government start paying attention to this.

In addition, the argument that we have to reduce our social spending to tackle the deficit just doesn't make sense when you look at the fact that only 7% of the total national debt over a 30-year period was attributable to government spending. The larger majority of the debt was caused by compound interest rates the government could have controlled.

As a federation of labour, we reject both the need and the desirability of cutting back on our social programs. We feel it is an issue of revenue rather than cost. We feel government should focus on increasing revenues. Government could start by introducing a fair tax system so everybody in the country pays their fair share.

In addition to dealing with the unfairness in the tax system, we feel it is critical that government focus on a job creation program and start living up to the mandate in their red book.

There are creative ways. There are progressive alternatives. We feel it is time government started listening to the people, started investing in our social infrastructure, started living up to the commitment of job creation and started ensuring all people in this country are able to have a decent quality of life.

The Chairman: Next we have Doug Meggison and Laurel Doucette from the Coalition for Equality.

We were informed by Ms Price that you would have the specifics of the job creation program.

Mr. Doug Meggison (Acting Co-ordinator, Coalition for Equality): Yes. This shouldn't take any longer than three or four hours to present to the committee.

The Chairman: We're pretty dumb. We don't get it very quickly. Go ahead.

Mr. Meggison: We do thank the committee for copying our cover letter submission.

The Coalition for Equality, like other popular organizations from coast to coast in Canada, is engaged in preparing a response to the federal government's next budget. What we wish to present to you today, and what has already been provided to the clerk, is the alternative federal budget from last year, from 1996-1997. We also want to make a few remarks about how we see the world unfolding from our station point on the far east coast.

Our complete submission to the alternative federal budget of 1997-98 will be worked up over the next few weeks leading into the new year.

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So again, the complete file of last year's alternative budget has been presented to the clerk, and we urge you to look at it.

The Chairman: We've already studied it.

Mr. Meggison: Thank you. We are from St. John's, Newfoundland, and we figured it wouldn't hurt to show we're engaged in this from coast to coast.

The Chairman: We welcome this public airing of these issues and the alternatives. This is why we make this venue available.

Mr. Meggison: Okay, so I'll continue.

The Coalition for Equality is an advocate of strong economic and social planning. However, we don't have staff. We only have volunteers like Laurel and myself. Consequently, our submission today is going to consist of remarks of a general nature.

As things fall apart in Newfoundland and Labrador, the Coalition for Equity sees banks on every corner. There are three types and all have line-ups. This is the new trinity for our times. The Coalition for Equality names these as food banks, job banks and financial banks. We think there is a strong relationships among these three.

Something like one out of every seven of us on the Avalon Peninsula uses a food bank at least once a month. Even Memorial University here has a food bank, obviously because of inadequate grant and student loan levels. In the Metropolitan Toronto area, we understand four out of five food bank recipients report going hungry in spite of all the food banks.

Why are people using food banks? The first modern food bank was established in Edmonton in 1981, but soup kitchens have been with us since capitalism got going. The main reason for the line-ups has been the same. Food bank users are unemployed or underemployed. They need jobs, jobs, jobs.

This is even more true in Newfoundland and Labrador, where our labour force participation rate is only 43%. Meanwhile, the HRDC job banks have become quite sophisticated. The federal government plans to close down most Canada Employment Centres and place computer job banks and libraries in other public spaces.

I'm an unemployed worker, laid off because of social cutbacks. Almost every day I go up to the Bowring Building, where our local Canada Employment Centre is. Since September, when my lay-off notice became effective, the job bank has been showing a national total of around 680 jobs. That's right. For an official 1,400,000 unemployed workers, there are 680 jobs available on any given day.

Each day - I've observed this myself - about 16 new jobs are added and about 16 delisted and presumably filled. Now, if one listed job equaled one second of time, it would take about 10 minutes to count off all those 680 jobs. If each unemployed worker in Canada and Quebec was counted off at one a second, and the counter kept at this for eight hours a day, it would take about 50 days to complete the count.

This is the scale of things in this country.

Ms Laurel Doucette (Coalition for Equality): The Coalition for Equality believes the federal and provincial governments have failed miserably in providing what people want most, which is worthwhile jobs for decent pay.

The alternative federal budget addresses this ghastly inequality in our society. The Coalition for Equality believes job creation will help enormously in raising the self-esteem of the nation and providing the tax revenue multiplier effect to pay for our cherished social programs.

Meanwhile, big business has led in gross waste of human potential. Rather than providing jobs, they are in a mad race for money. Like the story of Sambo's tiger, they are chasing the tiger's tail faster and faster around and around the profit pole until a meltdown is certain.

Who is in the driver's seat for this out-of-control race? The financial banks are, of course. The big six banks in Canada are likely to break the $6 billion level for profit by year-end. Seeing no plans for hiring more workers or for building new towers here, the Coalition for Equality figures all of Newfoundland's share of these financial bank profits will be going to shareholders mainly in Toronto and elsewhere. Newfoundland's share, about 2% based on our population, could be about $120 million. If a sustainable job could be created for about $50,000 then, used for this purpose, financial bank profits could create 12,000 jobs here. Just imagine how much shorter the line-ups would be at our food banks and job banks.

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The Coalition for Equality, a non-partisan association of trade unions, social-justice-seeking organizations and individuals, urges the Standing Committee on Finance to reflect on these homespun statistics, and to carefully examine the alternative federal budget if you have not already done so. Thank you.

The Chairman: Thank you very much.

Elaine Price said she would be presenting to us the exact program for job creation. I take it that will be coming when you bring out your alternative budget in ten days or so.

Mr. Meggison: The alternative federal budget, which we have submitted to the clerk, contains a complete overview -

The Chairman: That was last year's. I understand you're bringing out a new one within about ten days.

Mr. Meggison: No, not ten days. The Coalition for Equality and the other groups, such as the Federation of Labour -

The Chairman: I'm aware of that. I am just asking you when will -

Mr. Meggison: You'll see it early in the new year.

The Chairman: Okay, thank you very much.

Mr. Meggison: Further, since the federal government -

The Chairman: No, I understand that -

Mr. Meggison: - didn't listen to the alternative federal budget last year, there's likely to be similar content this year.

The Chairman: Fine. That's all I wanted to know. What I was asking was when we were going to see it. Thank you very much.

We now have His Worship Mayor Lewis Rose, from the town of Glovertown.

Welcome, Mr. Mayor.

Mr. Lewis Rose (Mayor of Glovertown): Thank you, Chairman.

Good afternoon, Chairman, committee members, and others present. Glovertown is a small rural town on our northeast coast, with a population of approximately 2,200. Our industrial base primarily consists of lumbering, boat building, fish, fish processing and metal fabrication, all of which have suffered severely because of the economic times.

Mr. Chairman, I've condensed my brief probably more so than I would hope to see the federal budget slashed. However, there are some points that I would like to make. Thanks to my colleague from Mount Pearl, though, I find that several of the issues that I would have liked to deal with have already been covered. My thanks to him.

Chairman, approximately one year ago I sat here as a strong advocate of deficit reduction and a balanced budget. I've had reason in that interim period to reconsider my stand. I still favour deficit reduction and an eventually balanced budget, but one that will evolve with moderation. To the unemployed breadwinner, the crash effort to balance the federal budget can only mean less help in such things as EI, social assistance, health care and, above all, job creation.

In past years, Mr. Chairman, financial and economic planners used the term ``bullets or butter''. They had to decide whether to provide more food and less bullets or vice versa. We have now reached an era where we must decide between butter or a balanced budget. I feel there is room for both, but the scales must be tipped in favour of butter. Through economic development, savings and job creation, we can attain both.

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Chairman, the municipality I represent has suffered severely from financial restrains in the recent past. This is partially because of an outflow of our workforce. However, the greater financial loss is in the form of a reduction in transfer payments from the province. In 1995 alone our municipal operating grant was reduced by approximately 22%.

We hear our Prime Minister say there will be no tax increase. We hear our premiers say there will be no tax increase. But we hear our mayors say there will be a tax increase. What has occurred is simply this. The increased tax burden has shifted from other levels of government to the municipalities.

The senator from Mount Pearl alluded to the infrastructure program, and I agree with him. It is a worthy program. However, my experience with it was somewhat disappointing. I found with the type of project we engaged in the municipality had to cover up to two-thirds of the cost.

By the way, it generated three jobs locally. There were other jobs, of course, beneficial to the province and to the nation as a whole. To my town it meant three jobs and a few gallons of fuel.

I want to go on to address a problem that is of great concern to our province as a whole. It does trickle down to the municipalities.

Approximately two years ago the province introduced the EDGE program, a program designed to encourage new, innovative business. I might add that our town went along with the program; in fact, we introduced our own tax concessions based on the same principles. I feel confident such a program would bolster our economy in a significant way. I now find the Government of Canada takes back in equalization payments an amount equal to what is not collected by the province. In my opinion this is ludicrous. Why claw back the profits from an area that is still growing?

The equalization format may be carved in stone. If so, I strongly suggest we break that stone and carve a new one that is rational and responsible, one that will allow have-not provinces to become have provinces.

There is one bright spot in our economic star, and that is the current nearly all-time low of interest rates. Mortgage rates now run between 5% and 7%. It offers an opportunity to low- and middle-income people to invest in new homes and businesses. I can only hope that trend will carry on into the spring, when we can take full advantage of it. However, the slogan ``don't wait till spring, do it now'' bears repeating.

I'll summarize very briefly. I would like to see this process of consultation with the public continued.

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Consider the impact that transfer payment reduction has on municipalities. Deficit reduction, yes, and a balanced budget, yes, but with moderation. And I'd like to repeat this from last year: be lean, not mean.

Programs such as the infrastructure must be carefully orchestrated so that the maximum possible employment is generated at a fair cost to all concerned.

I would ask, too, that the policy that inhibits the provinces from offering incentives to new businesses be reviewed.

Thank you, Mr. Chairman.

The Chairman: Thank you, Your Worship.

Our next witness is Dr. Doug May, from the Gardiner Institute of Memorial University.

Dr. Doug May (P.J. Gardiner Institute for Small Business Studies, Memorial University): Thank you very much, Mr. Chairman. Wayne King, the director of the institute, and Professor Pauline Downer, an international tax expert, were to be with me today, but Professor King is having a minor operation and Professor Downer is covering for him, so I'll try to go it alone.

Copies of my presentation are on the table, if any of my fellow presenters want one. Furthermore, you'll see that I'm going to put this on the World Wide Web, since that seems to be the in thing to do these days. I'll try to keep my remarks brief, Mr. Chairman, because I know you want to get on to a general discussion.

I acknowledge that the times are not particularly good for people like Doug Meggison, and that on an individual level there is a lot of human suffering. I agree with that, and I think we have to be cognizant of it. At the same time, looking at the prospects for the economy, I see that the fundamentals we've managed to arrange for ourselves are fairly good. That's not to say there still isn't a lot of pain to be undergone, particularly as some provincial governments downsize.

However, as bright as the prospects are and as fair as some people believe our social network is, I'd like to suggest four areas for the committee's consideration today in which the prospects could be even brighter and where the social network could be fairer - and all that at the same time, I might add, as we are trying to reduce the deficit.

First of all, let me talk about economic growth through the investment in human capital. I think most of us would agree that some of the 19th century paradigm that seemed to dominate our thinking - that is, that we could grow solely through infrastructure, through canal building, through railroad building, through spur building.... Certainly in this province we realize that infrastructure is important but that we have to judge it on a project-by-project basis. I talk about this province because in 1932, having undertaken a lot of infrastructure, we got ourselves into a great deal of difficulty and lost responsible government.

Furthermore, I think most economists are tending to move away from the paradigms of the 1960s and 1970s where all technology was embodied in human capital and we therefore had to give out business subsidies and engage in R and D. We don't know the exact causes of growth - I think Dr. Grubel would agree with me - but most of us would tend to look at the areas of human capital. What we really need to meet global competition is an educated, flexible and adaptable labour force.

However, on page 2 we're suggesting that in spite of - most of us would agree with this - the way we treat people...the treatment of students under our tax system is not in fact as liberal as the way we treat machines. In fact, tongue in cheek, if we could get our students classified as the class of '97 - the class that will graduate next year - they might be better treated. For example, they get some money for tuition expenses, but the expenses are deductible only in the year in which they undertake those expenses. Machinery expenses, however, can be carried forward. If you have no income, you can't deduct it. Again, the carry-forward provisions prevail here, so I'd like the committee to have a look at that.

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We're trying to move to an ICL - income-contingent loan - system. However, if you borrow money to buy a piece of capital equipment - a machine - the interest is tax-deductible. It's not tax-deductible for a student who borrows to pay for educational expenses.

There are certain legitimate business expenses, and there are certain legitimate educational expenses that can be deducted. But the amounts reflect the time, perhaps, when some of my colleagues in the senior bureaucracy in the Department of Finance went to university. That was in the mid-1960s. For my students, the costs are certainly far greater.

Furthermore, Mr. Chairman, as we go through this difficult adjustment period, I would argue for a careful look at the treatment of some of our students. More and more my students are moving out of Glovertown because the job-entry ports aren't there.

The truth of the matter is that a student who comes to Memorial University from Glovertown faces far higher expenses than does a student from Mount Pearl or St. John's. I think we all agree with that. Yet, when some workers go off site, then can get northern allowances and special concessions. The students of Glovertown don't get that.

So they're going through an adjustment. Their traditional job-entry ports are closed down. Some people stay at home, but they're faced with large loans that they somehow have to finance. It's basically unfair. I'd like the committee to have a look at that.

Secondly, let me talk about tax fairness. Here my heading is ``Subsidizing some well-off families while taxing some poor''. This work was undertaken by Professor Morley Gunderson, director of the Centre for Industrial Relations at the University of Toronto, and me. I'd like to point out to the committee why in fact some of Earle McCurdy's people are becoming upset and why they marched in New Brunswick.

In exhibit one - and you can look at this at your leisure - let's look at the bottom line. I'll try to explain it. If we look at census family taxable incomes as $70,000 or more - and even in Ontario I think that would be considered a well-off family - we see that the total amount going to them is about $1.4 billion. There were 318,000 families that got an average benefit of $4,345, Mr. Chairman, and many of these families were repeaters. The question is...as repeaters they received a supplement year after year.

The EI legislation tried to reduce this. Exhibit two shows how successful they were in terms of the absolute change in disposable income. How much money did the changes in EI really mean? As I say in my notes, this is preliminary, and these estimates use the same economic model, SPSM of Statistics Canada, which HRDC itself uses.

If you look at the category of $65,000 to $67,500, you'll see that the change in income was a decrease of about 0.6%, less than 1%. If you look at the category for families whose taxable income is $15,000 to $17,500, you'll see that the change in take-home income is 4%. In other words, when we look at them on paper the changes look very good, but when you actually run through the models, ugly little facts suddenly destroy the wonderful and perhaps academic models of HRDC. In fact, it hits the lower group harder than the upper group. It's regressive.

So why are we doing this? Why are we having a payroll tax on some families, which in fact may be single-parent families working at the minimum wage...but supplementing annually year after year? I think once we could agree with, but year after year.... Are we sure we want to do that? I leave that as an open question.

I'd like to talk about economic adjustment and job creation, which are important to all of us in this particular province. I don't think that most people - and most of us here - realize how much the landscape of job creation in this province was affected by job creation projects. By 1990 and 1989 - this is buried in these reports that you can find in Memorial's library - 30,000 jobs a year were created. That's a fair number of annual jobs.

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At the time they were called job-creation projects by Employment and Immigration. Locally they were called make-work jobs. These jobs were often seen as having little value either in training or in what was produced. In fact, they seemed to be the constant butt of jokes by well-known national media groups in newsprint or in television and radio. There is a lot of soul-destroying there.

HRDC, in its job-creation partnerships and active re-employment benefits, has talked about coming up with just such a thing once again. Quite often what happens here is that they look good; we treat the symptoms rather than the cause. Furthermore, we don't look at the dynamics here.

What we see is that yes, there are people who need these job-creation partnerships, but what we also have to look at is that some students coming out of high school don't find a job. They've hung on until grade 11, and what do they do? They begin to see this as a way of life; this is a good job. For those people who are older workers I have no problem, but I think we have to tie these job-creation projects in with something that is of value for the community in the way of economic development.

The next area is tax competition. It comes down to the EDGE programs and other competitions. I'm sure you'll hear more about this when Professor Jack Mintz, from the University of Toronto, makes his submissions to the Minister of Finance. I would like to talk about indirect tax externalities.

We're really concerned about regional development. We have - and this really goes back to the beginning of the 20th century - what was called at the time ``bonusing'' for municipalities, where they gave away free land, tax grants, tax holidays, free electricity, and so on. It was stopped at the time of World War I because it just became counter-productive.

What we have here is tax competitions between provinces with business giveaways. All I can say is that our province, being a smaller province, will lose to Nova Scotia. Nova Scotia will lose to Quebec. Quebec will probably lose to Ontario or it will lose to Massachusetts. We give away these tax dollars.

The other part of this is that when we reduce the burden on these corporations, we raise the personal income taxes, of which we have some of the highest in the country. And what do our young people do? Well, they say, my gosh, I could be a lot better off if I were elsewhere, anywhere but here. Therefore it's really a tax on education. It's not a good recipe for growth.

Mr. Chairman, that's all I would like to say. I think the prospects are good, but we can make them even better and save ourselves money at the same time.

The Chairman: Thank you, Dr. May.

Now, from the Newfoundland Home Builders' Association, Mike Lee and Rose Marie Woods, please.

Mr. Mike Lee (Newfoundland Home Builders' Association): Thank you, sir, for giving us the opportunity to speak here today.

I represent Newfoundland and Labrador home builders today. We are the voice of residential construction, an industry that produces $600 million annually in new homes and renovations.

Without question, the number one concern of our industry at this time is tax harmonization. Although we support the federal government's objective to reduce administrative costs in the tax system, as provided by tax harmonization, we encourage you to be mindful of the events that will be caused to our industry.

As you know, when the GST was first implemented there was a commitment to tax neutrality. The rebate was implemented on new houses to achieve this objective. With a 36% rebate on the GST charged on new homes, history has proven that tax neutrality was not achieved. The results of this are well known: a marked decrease in new housing starts, reduced margins for builders, a growing problem with the underground economy. The problem has become so serious that Revenue Canada is now working closely with the home builders association to combat it. We are actively working to secure a rebate on the harmonized tax on new homes in this province. We enlist your support to legitimize the very real concerns of our industry.

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Renovations were even more severely affected by the implementation of the GST. They will suffer the most with harmonization. This is because they contain a greater content of elements heretofore untaxed, primarily the labour.

The good news is there are ways to support the legitimate renovation business.

A redefinition of the types of jobs qualifying for the rebate should be undertaken. The current ``substantial renovation'' definition excludes virtually all renovation jobs, meaning the house has to be basically gutted. It's never been defined. This has resulted in a mushrooming of work performed by the underground.

We encourage you to work with the provinces to design a rebate structure that will support legitimate renovators in this business community.

We also encourage you to work with the provinces to ensure that all businesses are registered with Revenue Canada. This would help in policing activities and would assist the consumer to identify legitimate small business owners.

Although housing starts have shown a modest recovery in this province - that is, only after 1995, when we had a dismal year - we encourage you to cautiously look at our industry. We remain in a very fragile state, with starts well below the identified demand, even with record low interest rates.

In our province, consumer confidence is a key element of the decisions of home buyers. Their current level of participation in the market gives a clear message that their confidence has not yet been secured.

We support the federal government's deficit reduction measures while cautioning sensitivity to the real needs of the individual sectors in our economy. Residential construction represents a key source of job creation, and job creation right in our province. It deserves careful consideration when a tax policy is being developed.

As the federal government pursues its goals in deficit reduction, we encourage you to be mindful of the very useful and productive services that you know now are offered and treat them carefully.

In this province Canada Mortgage and Housing has been a very important contributor to the residential construction industry. As it is your role to redefine them, we encourage you to respect their valuable role. Their physical presence in the communities serves as a key element in their success and should be guarded in the restructuring process.

We applaud you for the aggressive approach that has been taken by the Minister of Revenue, the Hon. Jane Stewart, to combat the underground economy. We are committed to supporting these attempts and to addressing these most serious problems.

We also applaud the Bank of Canada for substantial progress in lowering the interest rates and encouraging the continuation of this policy.

We are told every place we go all over the world, not only in Canada, that we produce some of the best housing systems in the world. Our housing stock is a major provincial asset. Our industry is a major job producer. We encourage you to support our industry to the benefit of the housing consumers and the small business sector, and to continue to support the public-private partnerships we have created over the years to serve this vital industry.

Thank you again, Mr. Chairman.

The Chairman: Thank you to the witnesses who appeared before us.

We have half an hour left.

[Translation]

I suggest that we give

[English]

a maximum of five minutes for each question and answer from each member of Parliament so we can respect our time limit.

[Translation]

Mr. Laurin, please go on.

M. Laurin (Joliette): Mr. Chairman, it will be very difficult to respect that time limit, but I shall do my best. I think that we just heard a large number of well-articulated and well-documented presentations and that we should give them the attention they deserve.

I have questions for all our witnesses, but it will not be easy, Mr. Chairman. I shall start with two of them.

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I was impressed by Ms Price's comments because we have denounced the government's policies almost on the same basis as she did today. As you said, the reduction of the federal deficit is essentially due to two main factors including a $7 billion cut in transfers to provinces which the government has used to reduce its own deficit.

The other is the amount taken by the government from the Employment Insurance Fund surplus. That surplus of $5 billion was paid in the fund by employers and workers. The government has not contributed a cent in it. Those $5 billion have been used by the government to paint a better picture and say that its deficit had been reduced from $40 to $25 billion this year. However,$12 billion are coming from the sources I just mentioned.

Of course, I entirely agree with you when you say that the government is fighting the deficit on the back of the people. When you reduce transfers to provinces, they have no other choice but to cut in education, health and social services in order to compensate for the transfer of responsibilities from the federal to the provinces.

I totally agree with you and you can count on the Bloc Québécois to ensure a follow-up to your recommendations. We shall remind the government of his responsibilities towards that class of our society.

My second comment is both a comment and a question to Mr. Denine, the mayor of Mount Pearl.

Mr. Denine, you spoke in favour of a renewal of the infrastructure program. However, we know that this program had some very negative consequences or that it was not accessible to several small municipalities that did not have the funds required. It is all very well to ask them to spend $1 million, of which you will pay two-thirds, but if the municipality does not have the means to spend $350,000, it will not be able to benefit from the $650,000 contribution.

The Quebec government made a proposal to the federal government in support of the second phase of the infrastructure program, but only if the federal share is raised from a third to 50 per cent and if provinces are allowed to use the amounts already budgeted for job creation projects. Some projects have been set aside because we do not have the money for their implementation. Rather than starting new projects or injecting new monies, the province of Quebec would like to use the amounts already budgeted.

We realize that job creation was not always done as we had hoped. The first infrastructure program has mostly created temporary jobs for a few thousand workers during four, five or six months. Those people had then to rely on unemployment insurance, and only if the new reform of Mr. Axworthy entitles them to benefit from the first day. But surprisingly, there are more unemployment insurance claimants, more unemployed and the government has less to pay in UI benefits. Something is not working in the system.

Mr. Denine, would you be in favour of a proposal such as the one made by Quebec concerning the infrastructure program?

[English]

The Chairman: Yes or no?

[Translation]

We have already taken more than five minutes.

[English]

Mr. Denine: Well, if you're going to recommend that the federal government pay 50%, I'll certainly recommend that. There's no doubt about that.

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I agree with your comments about the smaller municipalities in our country that could not avail of many of the infrastructure programs. As my colleague over there from Glovertown mentioned, it created some jobs in the community. It didn't create permanent jobs, but I think it created a lot of infrastructure in municipalities, and this infrastructure couldn't have been put there any other way. Often we're looking at infrastructure because when a municipality is putting this into its community it has sources of revenue. One source is the people and the other is the federal and provincial governments. In our cases, prior to the infrastructure program it was the provincial government.

So I agree, I would like to see the programs completed. Yes, if at all possible, a much more significant contribution from the federal government would certainly be appreciated, looking at it from our level. There is no doubt about that.

You mentioned there were part-time and temporary jobs created. This is true in a lot of areas. But also, the point from the municipal perspective is that it gave us the avenue to create infrastructure that never would have been available otherwise.

[Translation]

The Chairman: Thank you very much, Mr. Laurin. Mr. Grubel please.

[English]

Mr. Grubel (Capilano - Howe Sound): Thank you very much, Mr. May, for providing me with this enlightening table. I knew about it vaguely, but I hadn't seen the numbers. It is really startling that $3 billion in 1995 went in the form of unemployment insurance assistance to families having incomes of over $50,000. This was at a time when a women's shelter - we heard from the witnesses before - received $40,000 to do its valuable work.

I wonder whether you can make any comment about the fact that, as you demonstrated, the reform hardly cut back or cut back those high-income earners less than the low-income earners. Can you also make a comment about what seems to me to be the almost inconsistent levels? What about the priorities here with respect to UI families with such high incomes when unmet needs are everywhere on the social program level?

Dr. May: I really don't know whether HRDC actually ran these tables. They are more concerned over other things. I was talking to a colleague of mine in Alberta last week, who said it's incredible so much of the discussion on UI reform has been dominated by colleagues who are labour economists, but we've never looked at the equity issue. Basically, when we do look at the tax transfer fairness of the system, the bottom line is that EI, UI, whatever you want to call it, is a lousy way and a very inefficient way of redistributing incomes. That's it.

Another colleague of ours, Alice Nakamura, has said this is part of the procedural reform process. Alice, although she has written for the C.D. Howe Institute, is fairly up on these things. She is very socially conscious. But why can't we begin now? I am afraid the process will not continue on.

Mr. Grubel: May I just ask the representative from the labour unions and from the fairness coalition what your views are on this? They are spending $12 billion and a quarter of this is going to families earning over $50,000 a year.

Ms Price: I'd like to comment. First of all, the intent behind the UI program is not really to redistribute income. It is to provide temporary earnings to workers who become unemployed because they've lost their jobs. I think this is a very valid point and one that seems to be missed more and more often.

The other comment I will make is that all workers and employers pay into the unemployment insurance fund. Should they become unemployed, workers who pay into the fund are entitled to benefits based on the formula provided in the EI Act.

One of the difficulties I have with this sort of question and the direction you're coming from is that it is part and parcel of the attack on universality. It is part and parcel of the targeting going on. I think this is also part and parcel of the dismantling of our social programs and an attack on some of the fundamental values and principles Canadian society was built on.

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If somebody who is working and earning $50,000 becomes unemployed, then labour's response is that they are workers and they are unemployed. The unemployment insurance program is intended to provide those workers and their families with temporary earnings in the same way as other workers would be entitled to it.

In terms of the low wage income, my suggestion would be that perhaps it is time for some sort of tax relief for low-income earners and we can balance this off with taxing the rich. In addition to this, I would also suggest improving minimum wages and ensuring that people who are working earn a decent standard of living would probably address the equality issue in a much better, much more effective and much broader way.

Mr. Grubel: May I just say something quickly, Mr. Chairman?

I appreciate everything you say. But the hard reality is that the premiums being paid come from low-income workers. As you well know, they discourage the hiring of workers. It is ironic to me that your organization would encourage or at least condone a program that reduces employment, creates unemployment for the low-income worker, at heavy incidence on income.... So much of this money is being taken and given to other people. I have never heard any labour union people shy away from using the concept of fairness. Is it fair to take it away from those people at the bottom, creating more of them, and then give it to people who earn $50,000 and are by all standards in the top 10% of income distribution? Why is this acceptable to you? In fact, you condone it.

The Chairman: Thank you, Mr. Grubel. If we have time, we'll get back to you.

Mr. St. Denis, please.

A witness: Excuse me, sir -

Mr. St. Denis (Algoma): [Inaudible - Editor]

The Chairman: I know a witness wants to respond. I am sorry, my hands are tied. I'm just the referee put on the ice to attempt to give equal time to as many people here as possible.

Mr. St. Denis.

A witness: [Inaudible - Editor] ...time for a response.

The Chairman: Maybe you'll get an opportunity. I'll see if there is time left.

Mr. St. Denis: Thank you, Mr. Chairman. My point was that I'm asking a similar question.

The Chairman: And I have great confidence in you that you'll ask a good one, too.

Mr. St. Denis: And a very short one.

On the same subject, I think there was a point made by Ms Price. The previous UI program and EI programs are attempts - you could fault them, but they are attempts - to provide a universal insurance program for workers. But until such time as we have a guaranteed annual income program, if we ever do, I think the argument Professor May would probably be more appropriate in the context of a guaranteed annual income.

Professor May, I was wondering about something in these tables. At the lower levels of income, I'm assuming there is no provision for payments made to lower-income individuals through, for example, social services and welfare payments. As well, is there provision in this table for the clawback of UI on the higher-income families?

Dr. May: No, there isn't in the first table. Yes, there is in the second table.

The Chairman: Thank you, Mr. St. Denis.

We can return to you, Mr. Grubel, if you want.

Mr. Grubel: No, I have asked my questions. I'd like to hear what the coalition has to say.

The Chairman: Okay. I'm delighted.

Mr. Meggison: Mr. Grubel from the Reform Party, I dare say the Coalition for Equality would think there are many contra-factual components to the allegations you made regarding the structure of the employment insurance system. The Coalition for Equality echoes exactly what the Newfoundland and Labrador Federation of Labour has to say about the nature of the plan. If a worker qualifies for unemployment insurance, then a worker should get unemployment insurance. It's simple.

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We'd also like to echo what René Laurin pointed out. There is currently something like a$6 billion or $7 billion surplus in what we used to call the unemployment insurance account, and there's no crisis, there's no problem.

Mr. Grubel: I'm very glad to note that you're on record that money should be taken away from lower-income earners who pay unemployment insurance premiums and should be given to the upper middle class. Thank you very much.

The Chairman: Mr. Earle McCurdy would like to go on record on it too, I see.

Mr. McCurdy: First of all, I wonder how long we're going to continue to hang on to this shibboleth that takes it as gospel that payroll taxes are job destroyers. In fact, after some changes in the payroll tax on the UI, the comment from people who are the advocates of that point of view was that they were disappointed in the failure of the changes to achieve the kind of job improvements that had been hoped for - and you need look no further than the granddaddy of employers in Canada: General Motors made more money than any corporation in the history of our country last year, and then really set about trying to shed an additional 5,000 jobs because they wanted to make more money again. So the reality is that handing more money back to the corporations does not provide or create jobs in the way some advocates have claimed it does. So neither I nor anyone I know advocates it in the pejorative way that you put it, although I'm aware of the views of your party in that regard.

On the basis of the table, I'm really puzzled if I correctly understand what this thing is putting forward. I've done the calculation on people at various levels of income under the new act. My understanding of the new clawback rules is that by the time the program is fully mature - that is, there has been the cycle of years where the repeater clause would become operative - at the figure of $73,000 a year you entirely lose benefits. So how, in the category of $70,000 and up, only about 11%.... If I read this right, there are roughly $1.4 billion in before-tax benefits and only $150 million of that is saved. Yet I look at repeaters that start at $39,000 getting clawed back at a rate of 30%, and the clawback is 100% by the time you get just over $70,000. I'm really puzzled by the table.

Dr. May: No, you're not, Earle. There's a difference between a family and an individual. We're doing this on a family basis, right? Most transfers to individuals under the old Canada Assistance Plan, transfers under the child tax benefit, transfers under the new proposed seniors benefits, or on the GIS, are done on a family basis. So while we tend to tax on the individual basis, we transfer on the family basis. This is family.

I can give you an example. Someone is earning $70,000 a year and somebody else in the family is earning maybe $20,000 a year, or they could be earning $100,000. That family wouldn't be clawed back at all because the clawbacks are on an individual basis. Our UI-EI system is almost unique, along with the American system - I guess that doesn't make ours unique in the world - in that it is not means-tested and is not family-based. We're different from elsewhere in the world.

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

Ms Chamberlain.

Mrs. Chamberlain (Guelph - Wellington): Thank you, Mr. Chairman. I have a couple of comments first, and then I have a question for Mr. Lee.

First of all, I wanted to thank Mayor Denine for making comments on the infrastructure program. It is important that we hear it in people's opinions if we do something right, rather than ``wrong, wrong, wrong''. So I'm pleased that you did comment on that.

Just for clarification, you did think that another project would be a good thing if it was targeted properly.

Mr. Denine: Yes.

Mrs. Chamberlain: Were you comfortable with the split of one-third, one-third, one-third?

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Mr. Denine: Yes, we were very comfortable with that, but phase one came in and it was left up to the individual provincial governments to do their own deals. It didn't come down that way - one-third, one-third, one-third. But I'm advocating that there be no differentials between provinces. It will come down straight one-third, one-third and one-third.

Mrs. Chamberlain: Okay, very good. Thank you, I appreciate that clarification.

I have a comment to Doug Meggison. I say most sincerely that I am sorry you are unemployed. It has to be awful for people who are having difficulty finding work. I want to let you know something. Whether you believe this or not, I worked for a long time in job placement and I don't dispute the statistics you were using about the jobs that were available and showing up on a job board. You're probably 100% accurate.

What I will add to that is that most jobs - in fact, as high as 85% of jobs - are found before they ever hit that job board. They are found through networking - from knowing people. People are hired long before the ad ever goes out. That isn't favouritism, it's just the fact that you know somebody. I've hired many people I've known because I knew they were in a field and were good, or I put them on a contract when I was in the private sector.

So just for your information, the figures you use are right, but there are a lot more jobs out there than the figures you're using indicate. They are quite a bit higher.

Mr. Meggison: Even if there are 10 times as many jobs as listed on the job board or in the job bank, that's roughly 7,000 jobs posted or available in this country at any given time for 1.4 million unemployed workers.

Mrs. Chamberlain: Well, you can figure it out. It's 85% of whatever shows up there in addition to that. I can tell you that statistically.

The Chairman: I'll have to cut you off very quickly. We have very little time for any more.

Mrs. Chamberlain: May I ask one more question?

The Chairman: Yes.

Mrs. Chamberlain: Mr. Lee, tell me a little more about your rebate program. Two years ago I tried to institute one for a renovation, so could you tell me where you're coming from on that, please?

Mr. Lee: Right now, you have to have substantial renovation in order to qualify. The definition of substantial renovation hasn't been determined unless, with this area here for example, you take it all out and that's what it means. I think 3% of all the renovations done in Canada received a rebate. Rose Marie is familiar with the numbers on that, but a very low number qualified on the renovations. Our own company this past summer did renovations in the range of $150,000, and if you can't claim that as substantial, I don't know what is. But these people still have problems claiming, unless they take a video of what happened. It's not a dollar figure.

Mrs. Chamberlain: Thank you.

Mr. Rose: I wanted to comment on the infrastructure program one more time. I don't want the committee to leave here with the understanding it was delivered at one-third, one-third and one-third. It's not true. In my case it was one-third and two-thirds, which is a far cry from the previous provincial program of 60-40. It created a hardship in the community I'm concerned with, and it reduced us to a level we don't like. Should there be a repeat of the infrastructure program, as I alluded to earlier, I would like to see it delivered on a more equitable basis. If not, let's just go back to the former provincial program.

I'd like to go on for just another very brief second. In regard to infrastructure and other make-work programs, they are temporary jobs. We think of jobs as the bottom line in a solid economy, but they're not. Production, and only production, is the bottom line in a solid economy. Look to the farmers, the lumbermen and the fishermen for true production.

The Chairman: Thank you, Your Worship.

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[Translation]

Mr. Laurin, you have the floor.

Mr. Laurin: Mr. May, I would like your view on the attitude of a government which has not intervened in the monetary policy, which means that we have continued to fight inflation at the expense of job creation. While the United States have accepted an inflation rate of 3 or 4 per cent, Canada has always maintained its rate under 2 per cent. Do you think that this monetary policy should be reviewed in order to better promote job creation?

[English]

Dr. May: When I addressed this committee last year, I pointed out to the committee the work of my colleague Pierre Fortin, who I thought had done an excellent job of being critical of the policies of the Bank of Canada. This year I would like to talk to Pierre on this again, because I've become more agnostic, in the sense that - and again I should consult with someone such as Dr. Grubel - although we're in pain now, the bank seems to have got interest rates down very low, and the policies of the executive of the central bank.... I would not have believed this a year ago.

So I can't answer you. I apologize for that. But I wouldn't let it go. If I were the committee, I would talk to Pierre Fortin to see what his response would be.

An hon. member: We have.

The Chairman: Thank you very much.

I'm sorry, our time has come to an end. This is a fascinating group of witnesses, representing a true cross-section, in many ways, of not only this province but the spectrum of issues we as a committee feel compelled to deal with. Your Worships have talked to us about another infrastructure program, the EDGE program to help create jobs, and you know directly what unemployment and welfare are like, because you see them on a daily basis. You are close to them, you know the impact, and you've talked to us about what we could do to get people back to work. The phrase ``be lean, not mean'' sticks in my mind.

Dr. McCurdy, I know you're very upset and angry with us. I'll take those messages back to the appropriate people.

Dr. Church, we have heard across Canada how the future has to lie in basic research. You've put a human face on that in terms of an individual who is dealing with an issue that is very dear to and has probably directly or indirectly touched everyone in this room, the issue of breast cancer. I know R and D basic research, along with education, has to be part of the strategy for creating those jobs for which we now compete globally and which will become ever more competitive in the future. I congratulate you on the work you're doing. If there are specific programs we should be aware of, then please let us know afterwards.

Doug May, you had some fascinating research, and I look forward to studying it further. Specific things we could do on just the student tuition deductibility, allowing a carry-over, and the interesting issue you've raised about where the EI benefits go, give us food for thought.

Home builders, we know how important you are in job creation. Particularly in the area of renovation you've given us a couple of the problems, the continuing problem with what is a substantial renovation under the GST. We owe it to you to work with you to clear up those ambiguities, because we know what you can do in terms of jobs and what good housing can do for Canadians.

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Elaine Price and Martin Saunders, I heard your frustration. My only regret is that we didn't have an opportunity to debate the actual solutions that are contained in the alternative budget before this group. We have seen that. We had it presented to us again on this trip, and we had another opportunity, in front of other people in New Brunswick, to go through the alternative budget.

For example, on the first two aspects of the monetary policy it calls for lower interest rates. The second heading was that the Bank of Canada has to purchase Government of Canada bonds, which means printing more money, which means more inflation, which means higher interest rates.

I would have wanted us to have the opportunity to debate some of these issues. I'm sorry we didn't, but we will consider them, without the benefit of the other people who are around this table being able to make that input.

This province is really so important to Canada, being the latest entrant. I think to many Canadians how Canadian policies play out in Newfoundland will be a touchstone for whether they are working. We know you're suffering, and we know you're suffering more than anybody else in this country right now, in unemployment, and you haven't been favoured with all the good things maybe some other areas have. but you have these incredible resource potentials that have not yet come to fruition, Churchill Falls being one of them.

I think everyone around this table, as we go back and try to make laws that affect all Canadians fairly, will reflect very deeply on the testimony we've heard from you here today. I want to thank you all very much.

We're adjourned.

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