FINA Committee Meeting
Notices of Meeting include information about the subject matter to be examined by the committee and date, time and place of the meeting, as well as a list of any witnesses scheduled to appear. The Evidence is the edited and revised transcript of what is said before a committee. The Minutes of Proceedings are the official record of the business conducted by the committee at a sitting.
For an advanced search, use Publication Search tool.
If you have any questions or comments regarding the accessibility of this publication, please contact us at firstname.lastname@example.org.
STANDING COMMITTEE ON FINANCE
COMITÉ PERMANENT DES FINANCES
[Recorded by Electronic Apparatus]
Wednesday, November 17, 1999
The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call the meeting to order and welcome everyone here this afternoon.
As you know, in accordance with its mandate under Standing Order 83.1, the finance committee is holding prebudget consultation hearings. We've been travelling across the country seeking input, as have members of Parliament at the constituency level. This is a very interesting part of the budget making process, as we get ready to make recommendations to the Minister of Finance as he prepares budget 2000.
We have the pleasure to have witnesses with us today from the Canadian Steel Producers' Association, the Building and Construction Trades Department, the International Association of Fire Fighters, and the Federation of Canadian Municipalities.
Many of you, of course, have appeared before this committee for our prebudget consultations. You know you have approximately five to seven minutes to make your introductory remarks. We have already received your briefs and read them, so after you give us an overview, we will engage in a question and answer session.
We will begin with Jean Van Loon, the president of the Canadian Steel Producers' Association. Welcome.
Ms. Jean Van Loon (President, Canadian Steel Producers' Association): Mr. Chairman, on behalf of the association I want to thank you for the opportunity to come to speak to you today.
Our association represents all of Canada's primary steel producers, which operate in six provinces of Canada. We produce over $11 billion in sales every year and $3.5 billion to $4 billion in exports. We provide well-compensated employment to 33,500 employees.
During the 1990s our industry has made major strides in productivity. We were in deep trouble at the beginning of the nineties, and over the course of the decade we have been able to increase the output per employee by 44%, taking us from below the average for manufacturing to well above it. This is a process that we will have to continue in the future because we face intense competition, not only from other steelmakers, but from other materials as well.
What I'd like to concentrate on today, having submitted a general brief on productivity, is how the productivity requirement that faces our industry relates to the issue of taxes.
The industry has made productivity gains through innovation to reduce costs, and innovation to increase the value of the products we provide for our customers.
Our first priority, in terms of taxes, is to reduce taxes on personal income. Why are we arguing that? First of all, Canadians deserve to take home more of their pay. Canadian family income has been stagnating or growing very slowly during the 1990s, partly due to bracket creep. We think the economy will be better off if Canadians have more money to take home and spend.
We would like to see an end to all income surtaxes, full indexation of tax brackets, and the top income tax rates applying only to incomes over $100,000. We'd like to see priority given to further decreases in personal income tax, rather than reductions in Employment Insurance premiums.
In addition to thinking that Canadians generally deserve to take home more of their income, we're also concerned because there is disparity between Canadian and American tax rates. One of our member companies, IPSCO, which has plants on either side of the border, compared two identical jobs. They found that the U.S. worker kept 79% of his gross income, while the Canadian worker only got to keep 70%. That's a big difference.
When you put that together with the fact that Canadian and American steel producers are competing for top-skilled people and top-quality managers, it's a lot easier to attract a Canadian to the U.S. than to attract an American to Canada.
We would also like to see cuts to corporate income tax, with a 5% reduction in corporate taxes for all industries in the medium term, retention of the manufacturing and processing tax credit, and further improvements in the administration of R and D tax credits.
If you look at a number of recent reports, they all come to the conclusion that Canada's corporate tax rates are out of whack with those in the rest of the G-7. When we try to innovate, we have to invest in new technologies and equipment. The people who put their investment dollars in this are looking for a return. We need to have a tax base that allows a comparable return for a comparable investment.
Finally, with respect to Canada's debt burden, we're concerned that even though good progress has been made, Canada is still spending 27¢ out of every revenue dollar on interest payments. We support the idea of using unused contingencies and unused prudence reserves for debt reduction, but we're concerned that leaves debt reduction as a last priority. If everything else works out and there's money left over, we'll reduce the debt. We'd like to see some annual commitment to debt reduction, in addition to putting unused contingencies and prudence reserves for that purpose.
In conclusion, productivity is an essential driver for our success in the future, and a competitive tax regime is essential for us to continue improving our productivity.
The Chair: Thank you very much, Ms. Van Loon.
We'll now hear from the Building and Construction Trades: Mr. Joseph Maloney, director of Canadian affairs, national office; and Mr. Phil Benson.
Mr. Joseph Maloney (Director of Canadian Affairs, National Office, Building and Construction Trades Department, American Federation of Labour and Congress of Industrial Organizations): Thank you, Mr. Chairman.
We also have Mr. Robichaud with us from the national office. We didn't get his name in on time.
Mr. Chairman, members of the committee, good afternoon and thank you for the opportunity to appear before you.
Our organization represents 14 international construction unions, representing over 400,000 skilled workers in the construction and related industries. Our brief identifies four specific areas. I'd like to touch on each one of them very briefly, and then we can get into some questions. The first one is employment insurance.
During last year's consultation, we argued that eligibility and benefits had to be improved. The committee felt that much misunderstanding existed with respect to the EI program. The committee explained that the EI program was apparently working fine. Well, I'm here to tell you that it isn't.
Only four out of ten unemployed workers can collect benefits, and they collect less benefits for a shorter period of time. The committee also noted that premium cuts must be made, but in a way that is prudent and does not jeopardize the government's budgetary balance. The committee seems to agree with Minister Martin that there would be no surplus without the EI surplus. There is no misunderstanding with us. The government is using EI moneys for unintended purposes, while EI is not working for many of our members.
The media reported in July that the government was examining the creation of pilot projects to address three particular areas of concern: mainly the intensity rule, the clawback rule, and the re-entrant rule. These pilot projects, if they had gone through, would have responded to three of the harsher areas caused by the program reform in 1996.
The throne speech just a few weeks ago, however, only presented an extension of parental leave to 12 months. We don't oppose that in principle, however fewer than 50% of parents with newborns would qualify for benefits under the current rules. We ask, where's the concern for parents with two-year-olds, five-year-olds, and ten-year-olds?
The other three changes I mentioned, which were floated in the Globe and Mail on July 5, seem to be off the table. We support those changes. According to the article, they would cost about $320 million a year. With billions in EI surplus each year, surely money can be allocated for these modest changes.
We would also like to suggest a new formula for reinvesting in EI. Reinvest funds in an amount at least equal to the size of any premium cut. It's unfortunate at this time, but our members are telling us, “Give us our benefits or give us our money back.” If eligibility and benefits are not restored, premiums should fall to reflect the actual cost of running the program. You have to quit robbing Peter to pay Paul; it's as simple as that.
That's on the EI side of things. There are a couple of taxation issues we'd like to talk about in regard to the construction industry. The 1998 budget created a 30 kilometre and 40,000 rule to allow contractors to deduct the full cost of meal expenses. This allowed contractors 100% deduction of the cost of employee meals if the work was 30 kilometres away from a town with a population of fewer than 40,000 people. Though this change helped, contractors are facing problems, especially in Alberta and on pipelines. We believe this rule must be revisited. We suggest that contractors should receive the full tax deduction of the cost of employee meals when the employees fall under the special work site or remote location provisions of the Income Tax Act.
In the area of the underground economy, the KPMG study on the underground economy in the construction industry, which we have here, was a joint industry-government initiative. Eight specific recommendations came out of this study, and the federal government to date has acted on three of them.
We applaud the government for implementing a mandatory reporting system for subcontracting in the construction industry, a clearer definition of an independent contractor versus an employee, and the restoration of federal fair wage schedules. It is expected that Revenue Canada will recover many hundreds of millions of dollars in unpaid taxes because of these three initiatives. This committee played a major role in this effort, and we urge this committee to go the final step.
The KPMG study also recommended a publicity campaign to inform the public of the harm caused by participating in the underground economy. For our part, we've conducted an extensive information campaign with our members, including distribution of nearly 100,000 pamphlets to spread the message to stay out of the underground economy. I believe you have that in front of you.
Quebec has conducted a successful three-year campaign against the underground economy in the construction industry. Reported hours have increased 23% in residential and 13% in commercial and institutional work per million dollars of investment. While technology reduces the hours required to build homes, declared hours increased 31.4% per housing unit over this period. The Quebec government estimates that last year alone it recovered $200 million in revenue through this campaign.
Quebec has invested about $7 million a year in this campaign. We should repeat this success nationally by getting the message to the Canadian public. We are requesting that the federal government in this budget put up to $25 million over the next three years into a national media campaign to help us make engaging in the underground economy as much of a pariah as drinking and driving is now in our society.
Our final point, Mr. Chair, is to support a national highway infrastructure program. The case for funding a national highway infrastructure program has been made before this committee. It would create work and improve our nation's competitiveness. The program is sound policy. We wholeheartedly endorse a national highway infrastructure program and defer to the submission made earlier to the committee by the coalition to renew Canada's infrastructure.
Thank you. We look forward to any questions.
The Chair: Thank you very much, Mr. Maloney.
We'll now hear from the International Association of Fire Fighters, Mr. Sean McManus and Mr. Erik Leicht. Welcome.
Mr. Sean P. McManus (Canadian Director, International Association of Fire Fighters): Thank you. Good afternoon, Mr. Chair and members of the committee. It's an honour for the International Association of Fire Fighters to be with you this afternoon to provide our input on the prebudget consultation process.
I'm the Canadian Director for the International Association of Fire Fighters, the union representing more than 230,000 professional firefighters and emergency medical services personnel in North America, 17,000 of whom are here in Canada.
As you stated, with me is Erik Leicht, the pension chair for the Ontario Professional Fire Fighters Association, the IAFF affiliate here in the province of Ontario, with more than 9,800 members. Also with me is Bill Cole, the president of the Ottawa Professional Fire Fighters Association.
The most common image of the firefighter is that of the brave professional standing guard to protect life and property from the ravages of fire and other emergencies. In this submission, however, we must focus on what is the less glamorous side of firefighting, the one not as widely known but a tragic reality nonetheless.
The simple fact is that firefighters die younger than the rest of the Canadian population, the result of a career spent in the line of hazardous materials, toxic combustibles, and communicable diseases.
In consideration of the physical nature of the profession, Canada's income tax regulations currently recognize firefighting as a public safety occupation, thus permitting firefighters to retire at the age of 55. But those same regulations, by stipulating a maximum pension benefit accrual rate for years of credited service of 2% under a defined benefit pension plan, in effect penalizes firefighters for early retirement, a retirement born out of health and safety reasons and not out of the luxury of being able to do so.
Retirement at the age of 55 has long been accepted to be in the best interest of the firefighters and the communities they serve. In essence, the regulations presently identify a problem for firefighters in that they are required to retire earlier than the rest of the Canadian working public, but there is no solution provided through an increase in the accrual rate. At the current accrual rate, and with a higher mortality rate than other Canadians, firefighters are simply prevented from enjoying a pension plan they have paid into during their working careers.
This is a longstanding inequity in Canada's pension system, one that has robbed many a firefighter and his or her family of the right to retire in security and with dignity. There is no opportunity for firefighters to make up for this lost retirement income.
With a simple change to the Income Tax Act regulations, the government can correct this inequity and put retired firefighters on a more even footing with other Canadians in terms of pension benefits. Therefore, the IAFF advocates and encourages the implementation of an increase in the pension accrual rate for firefighters from 2%, which is the current rate, to 2.33% for years of credited service. Firefighters are not looking for a rewrite of the current tax assistance levels, but simply the ability to contribute more to their registered pension plans.
The IAFF's proposal would not only provide a fair and equitable retirement for this nation's firefighters, but it meets two of the primary themes of this consultative exercise, indeed of the government itself: increased productivity, of which we hear a great deal, and tax relief and reform.
By implementing this regulatory change and facilitating the retirement of firefighters in Canada, the government will grease the wheels of productivity, so to speak, within the profession as younger Canadians find an increased opportunity to enter the fire service. Job creation and economic growth will be the likely spinoffs in the wake of this regulatory change.
As the government projects growing fiscal surpluses in the next few years, many Canadians agree that it is time to look seriously at tax relief and reform. The government has hinted that this is an eventuality. The IAFF submits that when the government does take steps to provide tax relief, it should step first in the direction of those most deserving. Given their career-long dedication to the protection of life and property through public service and the shortened life span they experience because of it, firefighters are certainly in this category. They are deserving of tax relief in the form of an enhanced accrual rate for their pensions.
As we have stated, firefighting is inherently a demanding and dangerous occupation. Sadly, there is no shortage of anecdotal evidence. As we have stated in the past before this committee, in July 1997 more than 100 firefighters spent four days battling a blaze at the Plastimet recycling plant in Hamilton, Ontario. During that period they were exposed to more than 200 tonnes of burning polyvinyl chlorides, and many of the firefighters from IAFF Local 288 experienced health problems immediately after the fire.
The true human cost of this fire may not be known for a number of years, when cancers and heart conditions surface in the firefighters who fought to save the city from this toxic inferno. How do we know these latent diseases are a strong possibility? Sadly, a fire at a Saskatoon landfill site 17 years ago has served as a chilling example that the true effects of fighting a fire may not be known until years in the future.
From the mid-seventies until that fire in 1982, the University of Saskatchewan deposited about 30 kilograms of hot waste every year at a site in Saskatoon. The waste included small amounts of carbon-14 and other radioactive material, acids, and anti-cancer drugs. As it was an outdoor fire, none of the firefighters from IAFF Local 80 Saskatoon wore masks or other protective gear.
Of the dozen firefighters who attended the scene, at least half have already died of cancer, and two others have been diagnosed with leukemia. All but one of the WCB claims have been denied.
A proportionately high number of Saskatoon firefighters die of cancer. The average lifespan is 62.4 years, which is some 15 years less than the rest of the Canadian population.
Unfortunately, the Hamilton and Saskatoon fires are but two examples of the many toxic fires Canadian firefighters have fought over the decades. These types of fires will continue to happen in Canada, which will translate into more and more premature deaths of firefighters.
Since firefighters are routinely exposed to hazardous conditions, the mortality rates will continue to rise. Perhaps we need look no further than the city of Winnipeg, which in the last 12 months has seen five firefighter funerals. Four died of cancer and one of heart disease. They were all active firefighters, and the oldest among them was just 53.
Anecdotal evidence of the dangers of firefighting is backed up by statistical evidence that is compiled yearly by the IAFF. Within the brief, we've provided you with some of those statistics.
In 1997, one in every twenty-five firefighters was exposed to a communicable disease, with tuberculosis, meningitis, HIV/AIDS, and hepatitis B or C among the most common. More than 40% of firefighters suffered a job-related injury in 1997.
In September 1994 Ontario's Industrial Disease Standards Panel released a report after conducting a study of mortality among Toronto area firefighters between the years 1950 and 1989. The IDSP study confirmed what the IAFF has been saying about the mortality rate of firefighters over the years. The study concluded that there was a probable connection between the occupation of firefighting and cardiovascular disease, brain cancer, lymphatic cancer, colon cancer, bladder cancer, and kidney cancer.
If it had been adopted, the IDSP report would have paved the way for Workers' Compensation guidelines for the handling of these diseases among firefighters, but as we have reported to you in the past, the report was shelved by the Harris government after it was elected in 1995. Just this year the Ontario government did accept part of that report covering brain and lymphatic cancers among firefighters, but it stopped well short of recognizing what the report really said about firefighters and the diseases they are dying from.
In April 1999 firefighters from across Canada met with more than 150 members of Parliament during the IAFF annual legislative conference here in Ottawa to talk about pension reform and other issues. After meeting face to face with firefighters and listening to their account of personal experiences fighting fires, such as Plastimet and the Saskatoon landfill site, 89 of 156 members from all political parties indicated their support for the IAFF's position on the accrual rate increase.
In supporting this issue, MPs commented that it was “very fair”, that it “makes sense”, and that with no federal cost, there's no reason the government should not support it.
Another way the government can look to correct this inequity is by supporting a private member's bill, Bill C-395, which would allow firefighters to access reduced CPP benefits at age 55 and unreduced CPP benefits at age 60. That bill was introduced in the House of Commons by one of the committee members, MP Lorne Nystrom, in April of 1998. We are asking Canada's members of Parliament to support Bill C-395 because it is fair and equitable.
In conclusion, now is the time to finally correct a wrong that has existed for far too long. The IAFF has been advocating pension reform for firefighters since the 1970s and has appeared on a number of occasions before this committee to talk about the issue.
In a recent letter to the OPFFA, the finance minister himself acknowledges that firefighters have shortened careers. It is time something concrete is done to acknowledge that fact. Too many premature funerals of firefighters have already occurred without a more equitable accrual rate for their registered pension plans and without the necessary amendments to Canada's pension plan.
It is simply not enough for the government and individual MPs to praise firefighters who have given of themselves so unselfishly to protect their communities. It is time for a real acknowledgement of their sacrifices through pension reform. It is the least this government can do.
The Chair: Thank you very much, Mr. McManus.
We'll now hear from the Federation of Canadian Municipalities, Monsieur Gilles Vaillancourt and Monsieur Sam Synard. Welcome.
Mr. Sam Synard (President, Federation of Canadian Municipalities): Thank you, Mr. Chair.
My name is Sam Synard, and I'm both deputy mayor of Marystown, Newfoundland, and president of the Federation of Canadian Municipalities. With me is the mayor of Laval, Gilles Vaillancourt, chairperson of the standing committee on municipal finance on behalf of FCM.
We certainly thank you, Mr. Chair, and your colleagues for providing us with the opportunity to present and hopefully influence your deliberations as we move toward the new millennium budget.
I'll give you just a brief backgrounder. The Federation of Canadian Municipalities is the national voice of municipal government from coast to coast to coast. Our membership base is equal to 77% of the Canadian population, or the 23.5 million Canadians we represent as our constituents.
We are here today to talk to you about addressing Canada's deficit, not the budget deficit that Parliament has worked so hard to overcome but rather another deficit, one that poses a direct threat to this country's international competitiveness and to the quality of our life and our citizens'—Canada's large and growing deficit in the physical and social infrastructure.
Today we will give you a brief overview of the FCM proposal for a national quality of life infrastructure program and talk a little bit about why our proposal is so important for communities, the communities you represent. Before I get into the details of this particular plan, I think it is important to give you a sense of how serious Canada's infrastructure deficit has become.
In the area of sewage treatment, for example, today alone, as we sit here, nearly 3 billion litres of raw sewage will be dumped, untreated, into our environment. About 1.5 million Canadians live in communities with absolutely no waste-water treatment, and one in five Canadians live in communities with only primary treatment.
On the transportation front, the federal government's own National Research Council has determined that $9 billion must be invested in municipal and regional roads to maintain existing stock and meet growing demands. At the same time, the Canadian Urban Transit Association has said that we need $8 billion to be invested in public transit.
Certainly on the social infrastructure side, access to affordable housing is shockingly low. I guess it's appropriate that we do this type of presentation just a few hours after a fairly significant sign of protest outside this building.
In 1995, the year for which the most recent statistics are available, more than 800,000 Canadian households spent more than half their incomes on housing. That's a 43% increase since 1990. In 1996 more than 360,000 Canadian homes were in need of major repair. The fastest-growing group of homeless people are in fact our young people below the age of 18 years and families with children.
But infrastructure deficit is more than just statistics. It has real and serious consequences. It damages our environment, it reduces productivity, and it makes it more difficult for Canada to compete internationally.
Most importantly, a deteriorating infrastructure and a growing lack of affordable social housing poses both short-term and long-term risks to the health of our citizens. In short, eliminating our infrastructure deficit is just not an option to be considered. It is, rather, an economic and moral necessity.
The Federation of Canadian Municipalities was pleased to see the government commit itself to a new five-year infrastructure program in its throne speech just recently. Canada's municipal governments stand ready to make this proposal a reality. However, we understand that the government intends to have an agreement in place by the end of 2000 at the latest. Given the urgency of the situation, we strongly recommend that these negotiations be made an immediate priority.
I would like to offer a few suggestions for the proposed new infrastructure program, based on the experience of municipalities.
First, the program needs to target resources where they are most needed. In our view, this includes the following priorities: upgrading our core physical infrastructure, such as solid-waste management systems, waste diversion projects, and improving water and waste-water systems; modernizing and upgrading our municipal transportation infrastructure, including municipal and regional roads and public transit; and targeting infrastructure projects designed to promote healthy, productive, and positive activities for young Canadians.
The program also needs to be flexible enough to allow local communities to identify infrastructure projects that will be of most direct benefit to them and their citizens. Where projects will be approved by all three orders of government, municipalities should be responsible for identifying possible projects.
Finally, given the urgency of the situation, the federal government could show leadership on this problem by making some strategic infrastructure investments as part of its 2000 budget.
While the municipalities are pleased that the federal government is committed to the physical infrastructure part of our proposal, we are concerned about our other key partnership proposal, a plan to address Canada's mounting crisis in homelessness and affordable housing.
In a meeting in Winnipeg last November, our Big City Mayors' Caucus declared homelessness a national emergency, a view strongly endorsed by 2,000 municipal delegates who attended our national conference in Halifax this past June.
Homelessness is a national tragedy that transcends pointless discussion on whose jurisdiction responsibility lies in. Frankly, all Canadians and their governments have a moral responsibility to deal with this problem. Canada will never realize its full potential as a nation if we continue to allow our fellow citizens to live on streets or in substandard housing.
The FCM has identified a three-pronged approach to address Canada's housing shortage. First, our national stock of affordable housing units must be increased. Secondly, the existing RRAP, the residential rehabilitation assistance program, should be expanded. Thirdly, all orders of government must work to stimulate the production of private rental housing, for example by reducing the GST chargeable on new rental housing developments.
Canada is on the edge of a period of unprecedented fiscal surpluses, and there is no shortage of worthwhile uses for these funds. The FCM quality of life infrastructure proposal calls for a genuine partnership where the three orders of government work together in cooperation with the private sector to address Canada's physical and social infrastructure deficit.
Some have suggested that the problem, however worthwhile, is not a federal issue. In response, let me leave you with two very brief points.
First, it would be impractical and inequitable to renew this country's infrastructure solely on the basis of property tax. Even if raising taxes were an option for any government, which clearly it's not in the current environment, property taxes, being regressive, are an inappropriate source to redress social equity issues.
More importantly, we firmly believe that maintaining a sustainable and healthy environment, a productive economy, and adequate housing for all Canadians is the responsibility of all governments and will best be solved through partnerships. Better than blaming other governments for being the real source of the problem or arguing about whose jurisdiction it is to find a solution, we ask all governments to take a share of the responsibility and to pool their resources and efforts together. This is the leadership Canadians want and expect from their elected officials, and this is the leadership you can help provide.
Again, thank you for your time. We'd be more than pleased to answer any questions that are forthcoming.
The Chair: Thank you very much, and they're coming right up, because now we're going to the question-and-answer session. It will be a 10-minute round. We'll begin with Mr. Epp, followed by Monsieur Loubier, and then we'll go to the Liberal side.
Mr. Ken Epp (Elk Island, Ref.): Thank you very much, Mr. Chairman.
I thank you all for your presentations today. I have just a few questions of several of you.
First of all, Ms. Van Loon, I took note of the fact that you indicated you would rather have personal income tax reductions than reductions in EI. Could you tell us why, since the EI Act says it should be an insurance program, it is currently vastly over-funded, and the chief actuary of the plan says the premiums should be reduced in order to keep it sustainable? It's a very specific tax on a specific part of our economy, namely employers and employees, which I would think you would represent. So I'm really surprised that you're saying we should keep those EI premiums unreasonably high, as they are now.
Ms. Jean Van Loon: That's an interesting way to describe our position, but it's not entirely accurate.
We're looking at this from a very pragmatic point of view at this point. Canadians should have more money in their pockets, and if you reduce EI premiums, you're reducing payments by both individuals and corporations. If you reduce personal income tax, you're getting more money directly into the hands of individuals.
Mr. Ken Epp: In other words, you feel okay with this being then an indirect and illegal tax on corporations, taking their money into general revenue.
Ms. Jean Van Loon: I won't agree with that formulation of the statement, but our concern is to get money into the pockets of Canadian taxpayers.
Mr. Ken Epp: Well, we share that view. It's just that we feel the contribution made to EI, whether it's the employer's portion or the employee's, comes from the business. One just happens to be funnelled through the wages of the employee and is taken as a deduction, and the other one goes directly. So I would think if you left more money in the hands of the corporations, perhaps they could hire more people and help reduce our unemployment rate and maybe give their people a raise.
Anyway, I understand your position, and my job here is not to debate you, but rather to try to find out where you're coming from.
I then turn to the Building and Construction Trades Department of AFL-CIO. They said just the opposite. They said use EI in order to fund a better payback system. I think that's what they said.
How do you feel about the EI premium rate? Is that not a factor to you at all?
Mr. Joseph Maloney: Yes, it is a factor to us. What I said was that EI moneys should be used for EI purposes. We don't agree with the existing structure right now, that EI money should be used for everything the government deems they want to use it for. Right now, I think $22 billion a year is coming in from EI premiums, and $15 billion is going out in benefits. What we're saying is restore some of those benefits that were cut in 1996 by Bill C-12.
Mr. Ken Epp: Okay, so you're actually looking, then, at a combination of reducing the premiums and increasing the benefits. That's what you're saying.
Mr. Joseph Maloney: That would be fine with us.
Mr. Ken Epp: Okay.
Then speeding right along to the firefighters, I remember your presentation last year. You made the same case last year, if I remember correctly.
Mr. Sean McManus: That's correct.
Mr. Ken Epp: I guess I should apologize on behalf of the Minister of Finance that he didn't hear you. So I will do that and simply say it sounds very reasonable to me to increase it. But I would like to ask you a question. Why do you really think you need more than a 2% accrual rate, when MPs only get 4%?
Mr. Sean McManus: If I remember correctly, you asked that same question last year.
Mr. Ken Epp: I did; I did.
Mr. Sean McManus: And we had an interesting debate on whether that was sarcasm or not. But I take note of what you're saying there, and as a serious response, we've done the calculations, and 2.33% would allow a firefighter to retire after 30 years of service. That would allow a retirement age of 55.
Mr. Ken Epp: It seems to me your number is very low in terms of the additional amount of money. I personally, having opted out of the MP pension plan, have computed that I would have to contribute $3,000 a month, present value, to get the same benefit as my other colleagues. But we won't get into that.
Now I would like to go to the Federation of Canadian Municipalities. I have a couple of big questions for you. One, you want tripartite funding. You're saying you would like to have three governments ganging up on the taxpayers, taking money from them, and then all of them getting together with all of the bureaucracies involved and all of the costs and putting the money back into the roads and the sewers that serve the people who paid the bill in the first place. I want to challenge you to defend that position. Why should you put the taxpayers in your individual municipalities to that kind of stress and have them taxed to death, and then have them fighting over how they're going to divide the money?
The reason I say this is I've had a number of municipalities tell me they didn't particularly like the intrusion of the federal and the provincial governments into the process of deciding what to do, what is going to be approved and what isn't. Some municipalities felt they should have had money that was entitled to them and they weren't approved by their province, and of course subsequently then not by the federal government. If they could have just kept the money and used it the way they wanted to, there wouldn't have been all this cost of getting the approval denied.
Mr. Sam Synard: I'd like to answer your second question first. I agree with you wholeheartedly on your second point. Municipalities should be able to decide where they wish to spend infrastructure dollars, because the more local the decision is, the better the decision will ultimately be. History will prove that to be right. So I agree with you on that point.
On your first point, that investment in municipal infrastructure is somehow a great burden on the taxpayers of Canada, I take an opposing view.
This lady spoke about our need to become more competitive or productive as a country, and that not spending but rather investing in infrastructure, transportation, environmental and social infrastructure is very much an investment and not an expenditure. If the city of Toronto, for example, is going to compete against the city of Chicago in the global marketplace, then it needs to be as well equipped vis-à-vis infrastructure, urban transit, road, environmental standards, and so on.
For example, in the city of Boston alone over the last decade, there has been over $10 billion spent to refurbish and keep up with the demand of growing municipal infrastructure. Of that $10 billion, 90% came from the federal government in Washington. Almost 10% came from the state government in Massachusetts. Very little of that amount of money came from the local government.
So if we're going to sit here and talk about productivity and being competitive in the international marketplace—and of course our main competitor is our neighbours to the south—there has to be a similar acknowledgement of the role that municipal infrastructure plays with our American counterparts vis-à-vis productivity and competition.
We don't look at it as a cap in hand. We're coming here talking about a fairly substantive infrastructure program, and we're very prepared to put a 33-cent dollar or even a 40-cent dollar on the table. We're not lined up behind a hundred other special interest groups with cap in hand wanting all your money. We want to partner with the federal and provincial governments to make Canada simply a better place to live and more productive.
Mr. Ken Epp: That's the whole point. If you were not cap-in-hand, then you would say simply, “I'm willing to spend the money that people in my own municipality are paying in taxes, however they get it”.
Perhaps you're talking about getting into the income tax system as opposed to being restricted to property tax, and that's a whole other debate. Maybe this is your way of getting into it, to say that you want to broaden your tax base by getting in, and that's really what is happening through this: you get to tax your people. But obviously, unless you are not getting as much as you're paying in, you are asking somebody else to pay the bills in your municipality.
Mr. Sam Synard: I think there are two points. We're not trying to get into the game of putting our hands into the income tax dollar, although there are many national examples where municipal governments do share in the income tax dollar. In Scandinavia it is quite common. In Iceland, a very small country, they receive.
Mr. Ken Epp: It's something that maybe should be debated in this country.
Mr. Sam Synard: Maybe so. I think a lot of things need to be debated, and that might be one of them.
But we look at it as an investment from a federal government perspective. The federal government would be a great beneficiary. The coffers of the federal government would benefit greatly from a large national infrastructure program, because you have the ability to collect a source of taxes that would emanate from that expenditure: GST, income tax, and so on and so forth. In fact, our independent analysis shows it is almost a complete wash for the federal government to invest in municipal infrastructure. Your money will come back to you through direct and indirect taxation.
Mr. Ken Epp: I understand, and that's not the debate.
Apparently my time is up, but I'd like to be on the list for the next round because I have more questions.
The Chair: Thank you, Mr. Epp.
Mr. Yvan Loubier (Saint-Hyacinthe—Bagot, BQ): Thank you, Mr. Chairman. Perhaps Mr. Epp should grasp the fact that each taxpayer is an individual entitled to services. At present, the federal government is stocking surpluses and Canadian citizens have no services.
I have found your presentation very interesting. It is very concrete and mirrors the experience of individual citizens. These are services provided to citizens, and they are also infrastructures.
I would appreciate having two additional items of information. You talk of participation, of a tripartite program. Would this fall within the context of the infrastructure program put forward as early as 1984, funded at three levels of government, or are you considering other types of distribution?
Mr. Gilles Vaillancourt (Chairman, Standing Committee on Municipal Finance, Federation of Canadian Municipalities): We are asking for a program that would be one-third funded by the federal government, another third by the provincial government and the final third by the municipality.
Mr. Yvan Loubier: And what would be the annual cost of the priorities you have defined? You mentioned specific priorities.
Mr. Gilles Vaillancourt: I will tell you that the real need greatly exceeds what we have seen, for example in the recent Speech from the Throne. It will be necessary to spend a great deal more money than the amount mentioned and develop a program covering far longer than five years. We do react favourably to the five-year program proposal, as a first step. At the current pace at which water mains are being replaced, it would take four centuries to renew the infrastructures.
It is impossible to ignore the fact that there is a serious problem and that we must develop a permanent solution. In our opinion, we need a long-term program, a little like the water purification equipment installation program, which took twenty years to complete.
Over the next five years, it will be virtually impossible to say that the mission has been accomplished, that everything is done. On the contrary, the next five years, while allowing us to move forward, will simply correct the deficit curve, not erase it. A lot more money is needed.
Mr. Yvan Loubier: One final question, Mr. Vaillancourt. Is it not correct to think - and this might provide an answer to Mr. Epp - that, over the last four years, the municipalities have had the cost of the cutbacks dumped on them?
Mr. Gilles Vaillancourt: What the municipalities used to have to manage the infrastructure was completely eliminated by the tax transfers carried out by the federal and provincial governments. In Quebec municipalities for example, investment programs went down dramatically as the tax transfers went forward.
The truth is that Canadians don't want to pay more taxes. From that starting point, we were obliged to reduce our investment because of the increasingly large tax presence of government. Thus we contributed to making the problem worse.
On the matter of a number of concerns that may have been those of the Member who preceded you, about the opinion of individuals on infrastructure investment, a scientific survey was done in Quebec involving 1,200 respondents. Ninety-five percent of these individuals said they would like us to invest in infrastructure renewal and that they believed this to be a priority, one we should make all levels of government aware of. When they were asked whether, for example, we should invest in sports clubs or businesses, 75% said “No”.
The reaction of these individuals was logical. When we invest in infrastructure, we invest in ourselves and our children. When we invest in a hockey or baseball team, there is no certainty that the team will not move somewhere else in a few years.
The citizens know very well that their infrastructure is essential. We provide no extended services. We provide essential services that create quality of life in the real world, services that must always be maintained, especially as we are competing with American urban areas, which receive sizeable grants from federal and state government to rehabilitate infrastructures and maintain quality of life.
Mr. Yvan Loubier: A final question, Mr. Chairman.
For the past six years, the Bloc Québécois has been rising in the House to demand that the federal government reinvest in social housing. In 1994, the federal government decided to stop investing in new projects and simply maintain the existing supply of social housing.
You tell us today that some priority must be given to social housing and the whole problem of homelessness in large metropolitan areas. Today there was a demonstration, a violent demonstration, of people demanding investment in social housing.
Every time we rise in the House, the federal government answers that it is doing its duty and investing in social housing. And we are given figures. How can we reconcile these different points of view, especially after today's demonstration?
Mr. Gilles Vaillancourt: There is certainly a real problem when people go to the streets because they have nowhere to live. Someone must find a solution. I know that, at one time, the federal government, under an agreement with the provinces, made the latter responsible for social housing, but the provinces invested far less. Some provinces, Ontario for example, transferred virtually full responsibility to the municipalities. Thus, construction of such dwellings is now a municipal responsibility.
Municipalities do not have the financial capability to take over from the provinces and invest in social housing. It would be impossible: rich communities could take in the poor, but history tells us they never have. This is a national responsibility, one that must be assumed by the federal government as well as provincial governments.
Mr. Yvan Loubier: Thank you.
The Chair: Thank you, Mr. Loubier.
Mrs. Karen Redman (Kitchener Centre, Lib.): Thank you, Mr. Chairman.
I'd like to ask a question of Mr. Maloney. I've read your brief over and I've studied EI, and I've certainly heard your concerns. Has your organization looked at the issue FCM was talking about, the issue of homelessness?
Mr. Joseph Maloney: Yes. We're all for social housing, because we build the houses, but the funding of it, no. We said in our last brief before this committee last year that any future surplus should be done with a 33-33-33 split. The first one would be targeted toward existing social programs, a third for tax relief, and the last third for the operation of government. If there's a surplus there, we would support the federal government putting money to social housing, obviously.
Mrs. Karen Redman: Thank you.
The Chair: Mr. Gallaway, followed by Mr. Pillitteri.
Mr. Roger Gallaway (Sarnia—Lambton, Lib.): Thank you, Mr. Chair.
Mr. Maloney, you certainly made a convincing argument to me that a program called EI, which is mandatory, there's no choice, removes a lot of money in this country for a reason, but the payback is becoming the problem. It's not an insurance program, it's a tangential form of government taxation. I'm assuming you've done studies on what it would cost to fix it. In other words, we hear about things such as the clawback, such as the intensity rule, such as the problem with apprenticeships. Do you have any idea what it would cost to put this back into a position where it would be much more palatable to the 400,000 people you represent and to others in this country who are suffering at the hands of this system as it exists now?
I'm reminded that Truman made the point that it's the responsibility of government to make decisions, but when they realize they've made a bad one they have to tinker with it and make it right again. I think we have a system that had certain objectives but has gone too far the other way. I'd like to hear your comments on what you think needs to be put back into the system in terms of dollars and cents to get it back to a position where it's fair or fairer.
Mr. Joseph Maloney: I agree with you, I think governments, like anybody in society, when they make a mistake should be able to correct it. That's why you put rubbers on pencils. In the EI program, for instance, the three harsh areas that affect our membership directly are the intensity rule, the clawback threshold, and the re-entrant rule. The Globe and Mail on July 5 said to fix those specific areas it would cost about $320 million a year. If you take that $320 million a year over an annual approximate surplus of about $7 billion coming in, we have to ask, where's the political will to fix this? So it's pretty lopsided. We've had a seven-point proposal before this government since 1996 to fix some of the inequities in EI, and we've been knocking on every door we can to get some support for it. There are lots of niceties out there, but there's no action.
Our seven points would cost approximately $1 billion a year to fix the programs as we see they should be fixed in many areas. At this point we're willing to settle for those three areas. If you look at the clawback level right now, prior to 1996 the clawback threshold was at $63,000: if you collected unemployment insurance and worked and earned over $63,000, you had to pay 30% of your unemployment insurance back. The government said that was way too high, the $63,000 threshold, so overnight with one shot that threshold dropped to $48,750. Maybe $63,000 was too high. Then after you collect 20 weeks of employment insurance from July 1, 1996, your threshold drops to $39,000 and stays there.
What we're seeing out there right now in the construction industry is people are saying just don't earn $39,000. They earn up to $38,000 and they get themselves laid off. They can normally qualify for some sort of small EI benefit because they don't have that many hours, then they collect EI and they go into the underground economy.
On one side we're working with the government to try to solve the underground economy, and on the other side, through the inequities in the EI program, the underground economy is alive and well. So our frustration is that we wouldn't have an argument if the EI account were in a deficit situation. It is not. The government, back in 1996, said they had to have a rainy day fund, anywhere form $5 billion to $10 billion to sustain that EI account when it hit another recession. We agree with that. We don't have a problem with that. But since 1996 they've accumulated almost $30 billion from EI premiums. They paid down the deficit with it. Fair enough; we have to live with that, and maybe we have to put a little water in our wine. But this can't continue. It can't continue. You can't keep taking EI premiums and using it for every other purpose but EI.
All we're saying is we're asking them to restore some benefits so that it will help people entitled to what they're paying for. Then, if we have to have a debate on the other parts of the surplus, let's have that debate. But let's fix some of the inequities of the program now. And, as I said, for $320 million a year, when you have an annual surplus of $67 billion, the argument is a little lopsided.
Mr. Roger Gallaway: With respect to the clawback, if I'm an iron worker, as an example, who lives in Toronto, my cost of living is obviously higher than an iron worker in Sarnia. The end result, it would appear to me on the surface, is that this is patently unfair. We all know about national programs, but if we at the same time look at the qualifying rule, if I'm an iron worker in Toronto and I'm laid off, my qualifying time might be much greater than it is if I'm an iron worker in Newfoundland. I wonder if you could comment on that aspect of the clawback.
Mr. Joseph Maloney: The clawback is applied nationally. The entrance rules to EI right now are applied on a regional basis. Anywhere from 420 to 700 hours is required. But the penalties and the intensity, and specifically the clawback area, are of national application. They just have that one threshold and that's it. We're prepared to sit down and discuss maybe having regional thresholds if that's a requirement, because, as you say, in some parts of the country maybe the $39,000 threshold is applicable, but certainly in areas like Toronto and Sarnia or wherever, you can't qualify for a mortgage at $39,000. So that threshold is way too off. It has to be adjusted somewhere. And like I said, maybe the $63,000 was too high, but the $39,000 in a lot of areas is way too low.
Mr. Roger Gallaway: We talk a lot in this place about the importance of training, about the importance of education, but I wonder if you could tell committee members what the effect of the changes was on apprentices in terms of steel trades.
Mr. Joseph Maloney: I can tell you that prior to April 30, 1996, when any apprentice in any industry went to trade school on block release—that's when they go for eight or ten weeks at a time for their academic portion—they did not have a two-week waiting period for EI. On April 30, 1996, that changed. Everybody has a two-week waiting period right now. Right now we're seeing apprentices who are dropping out of apprenticeships due to the fact that the two-week waiting period is just the amount of money they need that's going to affect their rent in the next month and these areas. And they're just saying “I can't go there; I'm going to have to take another job now.”
To fix that particular problem, it would cost approximately $10 million for all apprentices in every industry. When you think of the huge surplus coming out of there, and a $10 million problem, something's way out of whack here. The government tells us this is not a federal matter, it's a provincial matter, because they're responsible for apprenticeship and training. That's not true. The federal government collects the EI premium and they pay out the EI benefit. It is a federal matter. That wasn't even in the Globe and Mail's thing. That's in one of our seven points agenda. We'd still like to see that, but every time we ask the federal government about it they say that's a provincial matter and they're not talking about it. And that's wrong.
Mr. Roger Gallaway: I have one very brief question. I wonder if you could also make a comment on the average age of skilled tradesmen in this country.
Mr. Joseph Maloney: Right now the average age of a skilled tradesperson in this country is about 45 years. It's getting higher, because we have problems in different areas of this country in attracting youth to the construction industry. The more barriers you put up through this EI program, the harder it's going to be to attract youth to the construction industry.
We know we use the EI program, but we don't abuse it. We use it as a bridge from one job to the next, because in construction the harder you work, the faster you're out of a job. It's as simple as that. You have to have a highly skilled, qualified construction workforce ready to go in this country when you need jobs done or you're going to end up in an immigration system or something like that.
With regard to the training initiatives, there are barriers there. Younger students do not want to enter the construction industry. It's feast or famine at the best of times. If they can't depend on an employment insurance program to assist them in their times of layoff, then they're going to leave the industry.
The Chair: Do you have any other last question?
Mr. Roger Gallaway: No, that's it.
The Chair: Mr. Pillitteri.
Mr. Gary Pillitteri (Niagara Falls, Lib.): Thank you very much, Mr. Chairman.
Mr. Maloney, you made a remark, and I could not let it go by. I don't think a pun was intended when you said we might have to have a little bit of water, not wine. But let me remind you that there was too much water in the wine when you mentioned from a $21 billion surplus to a $30 billion surplus. I just wanted to remind you that knowing the business of wine, there was a little bit too much water in there.
Now, my question—
An hon. member: We'll correct the record quick.
Mr. Gary Pillitteri: Yes. Just wine in general, Mr. Chairman. So I don't think I'll want to water it down.
The Chair: I'll take note of that. Thank you.
A voice: Talk to your lawyer.
Some hon. members: Oh, oh.
Mr. Gary Pillitteri: My question is to Ms. Van Loon. In your presentation you stated that there should be comparable tax cuts, and you mentioned some statistics, including that the average take-home pay for steelworkers here in Canada is 70% versus 79% in the United States. You also stated that the corporate tax here in Canada is out of whack. The last I recall is that only two countries from the G-7 are lower than Canada, and Canada is about in the middle there. Would you explain what you mean by out of whack? That's one part.
The other part is that in the take-home pay of 70% here in Canada, did you take into consideration that workers benefit from the medicare system and other systems, the social safety net, which is not the case in the United States, and also if the industry was in the United States, what the cost factor per hour would be for you in the steel industry because of medicare? I understand it's around $7.
What you're saying by that statement is that there's a difference of more than 9% in the total tax system between Canada and the United States. Would you elaborate on that?
Ms. Jean Van Loon: What I was referring to was one case study that was done by one company of employees it has in both countries. The employee in neither case has to pay for their medical care because it's covered through insurance or by the employer.
What IPSCO is looking at is what the employee gets to take home. One thing they noted in doing this study was that the employee in the States paid less consumption tax than in Canada, so the employee is better off in the States with the same salary. That was the point that was being made.
With regard to the business taxes, the world has been changing around Canada. A recent study put out by the BCNI suggests that even for the manufacturing sector, Canada is going to be second highest of the G-7 countries in taxation by next year
Mr. Gary Pillitteri: This was just one study, though. But actually it was never taken into account how much it cost that individual to live there. It did not include property taxes or any other tax. So we're being specific with percentages. That's what you're saying to me.
Ms. Jean Van Loon: That's looking at what the employee gets to take home.
Mr. Gary Pillitteri: But not what it costs for an employee to live there.
Ms. Jean Van Loon: That's right.
Mr. Gary Pillitteri: Thanks, Mr. Chairman.
The Chair: Is that a comment or a question?
Mr. Gary Pillitteri: Well, it's a comment.
The Chair: It's a comment. Okay.
Mr. Lorne Nystrom (Regina—Qu'Appelle, NDP): Thank you very much, Mr. Chair.
I think we've had a number of very good suggestions today from all of the people at the table that are not that costly in terms of what we could do about the next federal budget.
I just want to ask a couple of questions in terms of getting some more information. I'll start with Sean McManus. He made reference to the private member's bill I had the honour to introduce on behalf of the firefighters that reduces the qualifying age for CPP to age 60 and to age 55 for reduced benefits.
I just wonder if you could bring us up to date as to what progress you've made in terms of lobbying not just members of Parliament but also government officials, people in the Minister of Finance's office, and so on. Is there anything we should be made aware of?
This is something we could do that would be very helpful to a lot of people in this country and yet not be a great cost item for the Government of Canada.
Mr. Sean McManus: Since the bill was introduced by yourself, Mr. Nystrom, we have had the opportunity to speak with MPs on the Hill. We have advised them that this bill is now before the House. We have also advised MPs that now that the rules have been changed for private members' bills, if they would contact your office and sign a petition, that would allow the private member's bill to move ahead in the pool.
What we have found with regard to both of our pension issues is that when we talk to individual MPs from all political parties, they're always very sympathetic, but in terms of concrete action, it's slow in coming.
There is one point I do want to make with regard to the 2.33%. I did mention in my remarks that it would be of no cost to the federal government, and that is exactly the case. But before we can even have those discussions at a provincial level with regard to pension plans, we need that regulatory change to be made by the finance minister. That would allow us, then, to go to the OMERS in Ontario, the local authority's pension plan in Alberta, and the like, because they mirror what the Income Tax Act regulations presently say about pensions and would be able to make those changes there.
That is still not the end of the battle. It is then subject to collective bargaining with the individual cities.
So this is a long process, but it's one we are not going to give up on. This is only the first step. But we can't go any farther on that issue until we have the finance minister giving that kind of relief under the regulations.
Mr. Lorne Nystrom: I think, Mr. Chairman, these are a couple of ideas we can take very seriously, and we should consider making a recommendation to the Minister of Finance about them.
I'd like now to switch to Mr. Maloney. You mentioned the need for a national highways program. I wonder if you could elaborate on that. We are one of the few countries in the world that puts very little into the highway system in terms of our federal government. It seems to me that we're going to have to do more of this in the future in terms of tying our country together and having a better transportations system and the like. You made a reference to that in your brief. I just want to know if you could elaborate on that.
I've had the mayor of Regina, Mayor Archer, talk to me about this particular issue. I'm sure you know Mayor Archer in Saskatchewan and other mayors across the country. It's a very important issue.
In the main our roads are deteriorating in this country. The federal government share has been going down over the years. The provincial share has been going up. I think it's something we have to change now that we have a federal surplus. I wonder if you could elaborate on that.
Mr. Joseph Maloney: Yes, we agree with that 100%. We participate on the committee for the national highway infrastructure program. I think it was started by Joe Fontana and some other members of Parliament. We support that 100%.
The only thing we've suggested in that area is that if and when a national highway infrastructure program starts, they start putting it in place in the higher unemployment areas first. For instance, right now in the province of Alberta there's a huge construction boom going on where there are skill shortages. But in different parts of the country there are construction workers who are still out of work and can't qualify for employment insurance. So what we're recommending in there is that any infrastructure program of that nature be started in higher unemployment areas. We do endorse it.
I know the United States just passed a bill this year that allows somewhere between $15 billion and $20 billion a year for the next five years for a highway infrastructure program, and we're nowhere near that. We have to dedicate moneys to this on an annual basis because our roads are deteriorating in many towns and cities across the country.
Mr. Lorne Nystrom: Maybe while we're on the topic, I'll switch to the FCM.
First of all, your brief was very comprehensive and covered many topics. It's one of the better briefs we've seen here, in terms of covering many areas. Do you have any additional advice to give to the minister of finance and the committee on a national highways program, which may be useful? I've heard this issue raised by many mayors across the country in the last two or three years.
Mr. Sam Synard: Of course, we're very supportive of a national highway program. We're good friends with Mayor Archer and we understand his strong convictions for a national highway program—and those of other mayors across the country. But we find ourselves in somewhat of a dilemma. It would be very difficult to justify to our municipal constituents our support for a national highway program, with a 33¢ on the dollar investment, when we have a $9 billion deficit in infrastructure needs within our own municipal boundaries. So I can assure you that when and if we rectify all the infrastructure deficiencies within our own municipal boundaries, we will be more than pleased to support a national highway program.
Right now, municipalities have been downloaded upon by the federal and provincial governments, and it would be a lot to expect us to also carry the burden of funding a national highway program. We might be very supportive of it morally, but not financially at this time.
Mr. Lorne Nystrom: One reason I raise it is because I come from Saskatchewan, and we probably have far and away more highways per person because of our vast geography than any other part of this country. Therefore the cost per person, if there isn't a federal cost-share program, is astronomical compared to more heavily populated parts of the country, like Mr. Pillitteri's.
Mr. Gilles Vaillancourt: I would like to explain.
Mr. Lorne Nystrom: Yes.
Mr. Gilles Vaillancourt: We have established that, for Quebec alone, it would be necessary to have a program costing approximately one billion dollars per year, five hundred million for water supply and sewers and five hundred million for the road system. Of this five hundred million dollars, at least two hundred million must be allocated to the highway system. We are aware that this requirement is not one that should fall under tripartite responsibility, or whose costs should be shared by the federal and provincial governments. However, the federal government must also be the subject of our attention.
Mr. Lorne Nystrom: You mentioned, Mr. Vaillancourt and Mr. Synard, the matter of homeless persons.
the homeless situation in the country. I wonder if you can give us some advice. Where is this the worst in the country, and what could we recommend, as a federal committee, in addition to social housing, to alleviate the problem of homelessness?
Mr. Sam Synard: From a sheer number perspective, of course, the city of Toronto has the most homeless people, just because of their sheer population. What's chronic is that the homeless people are not, obviously, the people we see in the streets quite often. In Toronto, about 7,500 people may be defined as being homeless, but they may not often fit your stereotypical image of a homeless person. Many people are homeless for various reasons, such as psychological problems, mental health problems and so on. Providing a house in isolation might not be sufficient to define them as not being homeless. But the most startling statistic is there are literally thousands of children living in motel units on the outskirts of the city of Toronto.
I'm a parent, and many of us here are parents, no doubt. It is terrible to have to raise your family, your children, in a motel unit on the outskirts of an urban centre because you simply cannot access affordable social housing. In most cases, of course, most of the costs of the motel units on the outskirts are provided almost exclusively by the City of Toronto. But it's a national problem.
I live in Newfoundland. Social housing is a serious problem in many of our communities. We're not impacted as much by the stereotypical homeless person, but social housing is very prevalent. The problems of social housing exist in British Columbia, the north and so on. It is really a national phenomenon.
Mr. Lorne Nystrom: Are there any other solutions, besides social housing, you'd recommend to the committee, from a fiscal point of view?
Mr. Sam Synard: Certainly. That famous American philosopher—
Mr. Lorne Nystrom: Will Rogers.
Mr. Sam Synard: —Will Rogers once said that money is not the root of all evil; lack of money is the root of all evil. I think it's very applicable when you look at the issue of social housing and homelessness.
I think the federal government could look at some of the initiatives fairly quickly. An investment of money is important. Changes to the Central Mortgage and Housing Corporation insurance on mortgages held by charter banks is an important issue. Rejigging the GST payments on social housing construction is an issue.
In this country, we've lost a fair number of units that were dedicated to social housing because they reached such a state of disrepair they were simply demolished. Some were taken over and converted into high-end condominiums, but most Canadians simply can't afford to pay $2,000 per month to rent a condominium in downtown Vancouver. That's the reality. So there are fewer units available for social housing now than there were even ten years ago.
We need to construct more units fairly quickly. We need money from the federal and provincial governments primarily. The municipal sector can certainly be involved, if not to a large degree financially, certainly from a regulatory perspective. They can free up land use. Many of our municipal governments across the country own large tracts of land. We can work in partnership, from those perspectives.
I don't mean to be philosophical, but there is something really unCanadian about seeing homeless people, when I walk through the streets of Toronto, Montreal or Vancouver. I don't see that as being part of the Canadian psyche. It's really hard to accept homeless people in our own country.
Mr. Lorne Nystrom: My last question is to whomever wants to answer it—maybe the two people from the trade union movement.
Yesterday, in Quebec City, we had some advise from the big business community that half of the surplus should be spent on across-the-board tax cuts, and another 25% on reducing the debt. They seemed to forget about social spending and things you're talking about here today.
I suspect you wouldn't really agree with spending that much on tax cuts and reducing the debt. You'd probably want more social spending, in terms of the health care system, education, housing, the EI problems and so on. Perhaps you can give us some advice on that, Mr. McManus, or whomever.
Mr. Sean McManus: Mr. Maloney will comment as well, but I would agree with him with respect to the balanced approach he talked about. You can't put it all into tax relief or any of those issues, simply because it then becomes an unbalanced approach to the problem and you create more issues. So I would echo what Mr. Maloney had to say.
Mr. Joseph Maloney: First of all, we have to realize that the only surplus we have here is an EI surplus. So for everybody who wants tax cuts, it's a wonderful thing to say, but you're taking it off the backs of workers, right off the bat. There is no surplus out there if there's no EI surplus; let's be clear on that.
We're prepared to recommend that we fix the EI program first, because that's where the money should be going. Once that program is fixed, if we want to maintain a surplus out of there, fair enough. Then we can go in on the balanced approach. But if we just give tax cuts right off the bat, what happens if we go into another recession? You will have to either cut programs or increase taxes again. So you can't go into this thing holus-bolus overnight and drop taxes. You have to go in on a prudent—I don't like to say conservative—approach.
The Chair: Mr. Maloney, you commented that it's done on the backs of workers. As we know, employers also pay premiums. Is there any reason why you excluded them?
Mr. Joseph Maloney: It's our opinion, in the trade labour movement, that if there were no EI account at all, that would just be wages. So it's all workers' money, even though we concede it is paid for by employers and employees.
The Chair: Some countries just tell you that in order to do business in their country this is the price. They have payroll taxes of x amount, and both employers and employees pay that amount, but that's just the price of doing business in their country. By the way, you probably know we're very competitive when it comes to payroll taxes.
There's a lot of confusion about this EI account. Some people say it exists; other people say it doesn't exist. Some people say it goes straight to general revenues, which is, by the way, the case. How would you feel if we just said “To do business in Canada, this is how much it costs and these are the benefits you get”?
Mr. Joseph Maloney: Let's do that then. If that is the cost of doing business, then that's the cost of doing business. But you can't tax people for a specific thing and then use that tax income for other things. If we want to be specific, let's be specific.
You can't take in $22 billion a year in EI premiums, only pay out $15 billion, and use that other $7 billion for whatever you think it should be spent on. That has to stop.
The Chair: So you would be okay with a system that basically said “This is the price of doing business in Canada. It's a payroll tax. That's all there is to it.”
Mr. Joseph Maloney: Sure.
The Chair: Okay. That's pretty consistent with what Ms. Van Loon was saying. We're pretty competitive on payroll tax; we're not competitive on corporate tax or personal income tax.
Mr. Yvan Loubier: I would like to add a small detail, Mr. Chairman, as I have the impression that you have completely overlooked a fairly important fact. It is said that this is what it costs to do business in Canada and that we have payroll taxes. However, we must not forget that employment insurance premiums are paid by workers who earn up to $39,000. There is a $39,000 ceiling. If you happen to have a large number of people earning $39,000, and give tax reductions to people who earn $150,000 and over, this means that it is no longer everyone who pays to do business in Canada. Some workers pay so that the richest people can have a tax break.
That is what happened in the last budget. Remember the 3% surtax that Mr. Martin abolished. This was good news, except for workers who earned $39,000, most of whom had contributed to the employment insurance surplus and saved $164 in taxes for the year. Those who earned $150,000 and over saved between $1,500 and $3,000 in taxes. There is a flaw in your reasoning.
If you have to pay to do business in Canada, let everyone pay. Don't tell me this is the price to be paid by a group of workers who make up about 25% of taxpayers in Canada, but contribute approximately half the tax revenue in Canada. There is a limit after all.
The Chair: I was just asking questions as to what alternatives were available and what your thoughts were on that particular issue, having heard what Ms. Van Loon had said.
I think I described what you said correctly, did I not?
Ms. Jean Van Loon: I guess where we're coming from is that the tax system traditionally does a number of things. One is that it does a certain amount of redistribution, and that's a legitimate goal. But there are also other goals of maintaining sufficient incentive for people to try to make more effort and to invest in innovations that have some risk with them. You have to strike a balance between those objectives.
The Chair: Mr. Discepola.
Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.): Thank you, Chair.
Mr. Maloney, I become very cynical when I hear people say that the money belongs to just the workers. I want to pick up on what the chair has just said, because two-thirds of it belongs to the business community out there, and they're not clamouring at our doorstep saying give us back the $3.5 billion, or whatever number you want to use. It's true that it's generating $5 billion to $6 billion to $7 billion in annual revenue in addition, because more people are working, more people are paying. Fewer people are claiming unemployment insurance, therefore there is less pressure on us to pay out.
But don't forget that for 11 out of the last 17 years that fund was in a deficit position, and I didn't hear anybody from your industry come out and say you're willing to contribute more. So if you want to be consistent, then I think what we have to do is maybe, as the chair said, stop referring to it as an insurance fund, because it isn't.
In your own words, you said many of your members use it to bridge from one job to the next. I know employers such as GM used it in their hiring policies for individuals. Once they reach their maximum, they don't pay any more employer contribution. So it's a philosophical debate at that time and an important one that we should have.
But then when you add in the fact that we use that fund for job training, apprenticeship programs, even maternity leave, for example, you sort of say to yourself that maybe what we should do is just include it as a payroll tax and leave it at that. Then people wouldn't feel compelled to have to ask for it back.
You say you want it back, but if it's an insurance, then you have to use it as an insurance. I never go back to my insurance company for the years I didn't have a fire or an accident in my home. So it's a very fundamental debate, but I don't want to get into it because I think I want to see the debate focus on the priorities we have.
I agree with you on a certain issue, that maybe the rules were too restricted back when we had difficult decisions to make. We didn't have the latitude back in 1995 to have a crystal ball and see how well our economy would be performing. We had to make the difficult decisions back then. Maybe we can correct some things right now. Perhaps you want to make a comment.
I have another question. Maybe I'll ask it right now also. I'd like to clarify something Mr. Epp said. I had the privilege of sitting on the Prime Minister's task force on the western provinces, and without exception, there was not one municipal councillor and not one mayor who didn't come up to us and say they agreed wholeheartedly with the infrastructure program.
What they were saying, and the hesitation they had, is that in some provinces they were excluded from the decision-making process. They felt that they should set the priorities for their communities, and not that the province should unilaterally decide, on the basis of whatever mechanism they wanted to put in place, to exclude a municipality.
I would like to ask Mr. Vaillancourt a question. In Quebec, the first phase, which I believe was administered in 1994 by Mr. Ryan, Minister of Municipal Affairs at the time, worked well. In my riding, the small municipalities of Sainte-Justine-de-Newton and Saint-Clet received their share. In the second phase, nobody got anything at all.
What worries me is that we will transfer the money to the provinces and... No mayor, Mr. Epp, will fail to take this opportunity to invest one dollar and get two back. I don't teach math like you, but I imagine this is why the mayors are overwhelmingly in support of the program, because they can invest one dollar and get two back.
My other area of concern, also as an MP, is that we will invest one or two billion dollars, depending on what we have, with no assurance that the provinces will actually allow the prioritizing of projects, and especially no assurance that the money goes to all municipalities whatever their priorities or size.
Mr. Gilles Vaillancourt: In the first phase of the program, there was an agreement between the municipal and provincial players: the projects submitted came from the municipalities. In the second phase, which had other commendable features, some fully acceptable at the municipal level, the municipalities were not in charge, did not initiate all the measures taken.
At present, all our provincial governments hope to leave to us the choice of the elements we will submit under the program. They will be obliged to tell us why they reject them, but the suggestions must come from us. There is strong consensus, among all municipal unions in Quebec and everyone else involved, that the approved projects be initially submitted by the municipalities.
The Chair: Mr. Maloney.
Mr. Joseph Maloney: If I could respond briefly, you mentioned that in the past when the EI account was in deficit, the government had to bail it out. That's quite true, they did. But everything that was bailed out for the EI account was paid back with interest.
You mentioned your insurance company, that you go for years without a claim. But when you do file a claim, you get something done. Our concern right now is that less than 40% of people who apply for a claim get it.
Mr. Nick Discepola: Your industry above all should be very supportive of each dollar that your industry puts in. I don't have the figures at hand, but when we studied this over a year ago there were certain sectors that benefited immensely. The construction sector gets one or two dollars more than they ever even put in.
Mr. Joseph Maloney: We disagree with those numbers. You're referring to 1988 numbers.
Mr. Yvan Loubier: No.
Mr. Joseph Maloney: They're nowhere near the current numbers.
All we're saying is the past is the past, but right now let's fix some problems in the EI program before we go on funding new programs.
The Chair: Mr. Szabo, and then we'll go to Mr. Epp.
Mr. Paul Szabo (Mississauga South, Lib.): Mr. Chairman, I want to congratulate the International Association of Fire Fighters for again coming before the committee. As I think all members know, they have taken the time to come to the Hill for a number of years, not just to introduce themselves but also to present us with some facts on a number of issues, the CPP and the public safety officers compensation fund, to name a couple.
I really do want to put on the record that when you consider the risk firefighters put themselves at on behalf of all Canadians in the discharge of their day-to-day business, we do have incidents where some of them do lose their lives in the line of duty. It characterizes them therefore as public safety officers.
I think the most compelling fact is the lifespan of a firefighter; it is so much lower than the national average. As the presentation laid out, it's a direct result of the risks and the environment in which our firefighters across the land, including our volunteers, have to put themselves in protecting Canadians.
So I would, for one, like to endorse their recommendation for consideration of moving the age at which a reduced pension could be taken. It's the right thing to do, and this committee can help this process by mentioning it in its report. I suspect the provinces would have to be involved in approving such changes, but we need to have a starting point, and after all these years, this is the time.
So I want to thank Sean and Erik for again coming and reminding us of the facts. Thank you, gentlemen.
Mr. Maloney, it's interesting; you've been here before, and we've had this discussion before with regard to employment insurance. I guess it's a good problem to have. It's better to have a surplus than a deficit, as we've had. But there really are segments within Canadian life that rely on employment insurance benefits, not as income replacement, but rather as income supplement. You know what I'm talking about.
Do you have any advice for us on making some modifications to the EI system? How do we address those particularly seasonal industries, and to some extent the construction industry, where in fact more dollars are taken out than put in? That means the rest of the contributors are subsidizing others, for better or for worse. Do you have any words of wisdom for us? How do we address the reality that some in fact rely on it as income supplement?
Mr. Phil Benson (Staff Representative, Building and Construction Trades Department, Canadian Office, American Federation of Labour and Congress of Industrial Organizations): During the 1996 review, they went to an hourly system. We strongly support that hourly system. One of the things it did was remove the inequity that said you had to cap paying premiums at $750 a week. There is no cap now.
We're confident that when you look at the numbers two, three, and four years down the road, you're not going to see a two-to-one or three-to-one ratio for industry. That's simply because we're mature. We understand that we have to pay our way.
We're a cyclical industry. We're not seasonal very much any more. People build all year round, even at 40 degrees below zero. Look at the Hibernia platform. It didn't stop. The tar sands are not going to stop because winter is coming.
We pay into the program; we use the program. If you want to get into that, prior to the 1995 review, they had an entire study on seasonal work. It was undertaken by the government. I'll get you a copy so that you can read it. It deals with a lot of the issues about how people live.
Part of the reason is that it's the way society has structured lives. On Cape Breton Island, for example, they took people out of the coal mines and said “Go into the construction industry”. We trained them and they went to work. They've worked and built all across Canada. Those gentlemen right now, because of the structure, because the government said “Get them out of this industry and into another industry”, are stuck without too large a pension plan.
What I'm saying is it's not just our fault or industry's fault. All of us have to come together.
Mr. Paul Szabo: I think everybody is doing what they can to get out of that cycle.
Mr. Phil Benson: To survive.
Mr. Paul Szabo: Okay, but that says to me you understand that there are others who in fact are going to take out more than they put in. That flies in the face of the statement Mr. Maloney made: “Either give me the benefits or give me my premiums back”, because you have to share that premium not only with those who take out more than they put in but also with employers. The employees cannot get it back just as simply as you put it. There is an inefficiency in terms of getting the money back into the hands of employees.
Mr. Phil Benson: First, it's settled economics that there are no employer contributions. It is all workers' wages. Over time, all increases in premiums and any employer-based contribution will be passed on in the form of reduced wages. That's settled economics. It's our money. The Fraser Institute came here and said that to you several years ago.
Secondly, we're not arguing that there shouldn't be cuts. Employers get cuts; we get cuts. It's just that when we look at the amount of money in that account and we look at the deficit of people who need the money and aren't getting it, who are scared to take a job because of the small-week problem, who at the end of the year have to cut a cheque back to the government and start to lose faith in the program—people who can't make ends meet, and to say to them we have all this money, and we can't find $320 million to make it better.... To tell them $1 billion out of $7 billion....
If you look at the Auditor General's report, volume 3, table 9—I'll get you a copy if you want—you'll see a reference to consolidating a special purpose account, which is an account that is earmarked for specific purposes by legislation. You'll see a reference to the employment insurance account—this year over $20 billion—and the government had to cut a cheque back for $766 million. By the end of next year, it's going to hit $30 billion, because there is going to be $7 billion more, plus $1 billion in interest the government will have to cut back to the account.
Our changes are $1 billion, which is the interest the government is going to pay back to the account on money it has borrowed, just as when we borrow the money from the government to maintain the benefits—which are a good thing for business, for homes, for families, for children—every single cent is paid back.
Explain that to the public. Explain that to the person from Newfoundland who can't collect, the people in Quebec, or the people in Toronto.
Mr. Paul Szabo: I think maybe other colleagues want to pick up the thread.
The Chair: Ms. Guarnieri, then we'll go to Mr. Epp.
Ms. Albina Guarnieri (Mississauga East, Lib.): Well, I'm a labourer's daughter, so your arguments about putting more money into the workers' hands certainly resonates well with me. Hopefully that's one of the challenges this committee will be addressing.
I want to get back to a point.... Mr. Benson, you talked about taking people from one industry and putting them in another industry and retaining them, which brings me to my question. The United States Congress has put out a study that says they will have to retrain 90 million people in the next five to seven years. Those are significant numbers. And I open this question to people in the other industries. Are you seeing similar trends here in Canada? Have you any studies that have been conducted to reflect the trends in the United States?
Mr. Phil Benson: I can't answer that question per se. I can tell you, though, that the construction industry is the largest trainer of apprentices in the country. With 6% of the labour force, we train 50% of apprentices.
Our Alberta council just did a major study, and it discovered, much to its surprise, it was the second-largest trainer in the province of Alberta, second only to the government. We contribute a great deal of our time to training. Our members pay directly from their cheques. We have an education and training culture. It is our responsibility as tradespeople to train the next generation.
Mr. Joseph Maloney: You'll also note that you'll see ads in the paper on the weekend and during the week that say “qualified skilled millwright required” or “electrician required—must be qualified.” You have to think back a little bit. Where did that person get their training? Normally, that training would come out of the construction industry, paid for by our employers and ourselves. Then what happens, unfortunately enough, is that other industries poach those people. They've been trained by us, and they go to full-time jobs in the factories. You can't blame them, because when a recession hits the construction industry, people want to work. And with the construction industry as transient as it is, people would rather work at home if they could. So in a lot of cases we train them, and then they go to work in the factories and other industries at the expense of the construction industry.
Ms. Albina Guarnieri: Is there anyone else who would like to answer?
I'm sorry, Jean Van Loon.
Ms. Jean Van Loon: I'd like to comment on that point.
The need for lifelong training has been recognized for a number of years in our industry, and the industry has doubled its expenses on internal training over the last few years. There's a new program being developed through the Canadian Steel Trade and Employment Congress with the labour movement and the industry to develop new core training materials to help people to keep renewing their skills and also to train new people, because there will be a big turnover in skilled trades and management in the next five to ten years.
Ms. Albina Guarnieri: Thank you.
What would you say to a workers' fund, a training fund, the concept being that a worker, while on the job, could be retraining for the next job, as his job may become obsolete as time goes by? Have you given any thought to that concept of a workers' training fund, and would you be amenable to such a fund?
Mr. Joseph Maloney: We haven't given it that much thought, but in the construction industry, people normally start off through an apprenticeship system. That's usually a formal four-year program where they learn all aspects of their particular trade. After that is done, through the unionized sector we have training trust funds already established for new technologies and different things that come along. People can go back to these training centres and do lifelong learning and lifelong training.
So we already have that in place, and have not given any consideration to what you just mentioned.
Ms. Jean Van Loon: We haven't given any thought to a fund as such, but certainly having employees acquire new skills on the go is part of the job these days.
Ms. Albina Guarnieri: Ms. Van Loon, you mentioned earlier that it's easier to attract people to the United States than to Canada. Do you have any evidence to support that there may be a brain drain within your industry here in this country?
Ms. Jean Van Loon: We haven't done any studies of this. I hear anecdotal evidence that while we are attracting people as required for specific tasks, the price you have to pay is so high to compensate an American for coming to Canada and having to pay the higher taxes that it creates distortions and tensions within the company.
All this has to be seen in the context of an integrated North American industry. We're not saying that all the smart people are in the States and you have to get them to come here to solve the problems. We're saying there needs to be the possibility of a flow back and forth, because the industry is integrated. The fact that there's such a difference makes it difficult.
Ms. Albina Guarnieri: Thank you very much.
Would anyone else like to add a comment?
Thank you, Mr. Chair.
The Chair: Thank you, Ms. Guarnieri.
Mr. Ken Epp: Thank you, Mr. Chairman.
I have a few more questions. First of all, let me just continue with the Federation of Canadian Municipalities. I see your numbers have been decimated, being cut in half there, but I'm sure you'll have the answer to this.
I was interested in your statement that “We should use policy for more private injection of funds.” At least that's what I wrote down from what you said. You are suggesting, I think, that not only in the budget should we have direct federal infusion of money into public housing but there should also be some policy that would promote private enterprise to invest their funds. What policies do you have in mind?
Mr. Sam Synard: Currently with the Central Mortgage and Housing Corporation, if a developer wants to go out and build housing for social housing purposes it costs a fair amount of money. A percentage of the overall mortgage has to go towards the Central Mortgage and Housing Corporation to insure that loan at a chartered bank. They'd be looking at a reduction in the net insurance premium.
Secondly, the GST that's paid on building construction generally probably should be modified to reflect a lesser amount of GST or a greater rebate to be applied to housing for social housing purposes—those types of government policy changes.
From the social housing perspective, we talked about a tripartite arrangement between the three orders of government, but certainly the private sector will play a large part in building social housing units. Certainly the private sector will invest most of the money. Our analysis shows that the private sector will invest on a yearly basis if we can ramp up the funds over $2.5 billion per year in social housing development.
So it's very easy to do public-private partnering and even stimulate the economy from a construction worker's perspective and so on.
Mr. Ken Epp: This is probably beyond the role of the finance committee, but I was in conversation with a person just a couple of weeks ago who had just got out of housing. She's a lady who, with her husband when he was alive, developed a number of homes and rented them out. She was really very kind; she hadn't increased the rent a great deal. Actually, one of her places was as cheap a place in town as you could get.
But she got out of it because of all the regulations and all the rules and all the hassles—a lot of them from government—and the difficulty she found, when the renter didn't pay the rent, of actually getting some redress for it, either to replace the renter or to have somebody pick up the tab and give the money directly to her instead of to the renter, who turned around and spent it, in this particular case—and I'm not making this a generalization, but in this particular case—on things that were really not worthy of a mother trying to look after her children.
Mr. Sam Synard: I think what needs to happen to fill the void of social housing is that the municipal government can play a large part in streamlining the regulations, expediting fast-tracking regulations.
In the city of Vancouver, for example, the municipal government has been really proactive. If I as a developer wanted to go into Vancouver and build a condominium complex, for example, on a large tract of land, I would be obligated to carve out a section of that land—10%, 15%, 20%—that I would turn over for one dollar to the City of Vancouver, who in turn would roll it back into their contribution to social housing development. So there are very different innovative ideas out there.
I don't think any one order of government should be solely responsible for it, but we need to come to the table and have a mature conversation about it, as opposed to pointing fingers and saying “It's your fault”—“No, it's my fault”—“No, it's her fault”. That's a very juvenile way to deal with such a chronic social problem.
Mr. Ken Epp: Thank you very much. I would like to discuss it more, but I have one question for the firefighters association.
My brain is wired for stereo, so while I was listening in one channel to what the people here were saying I did a few little calculations as well. I'm wondering whether you have given thought to the additional costs of the program you're proposing in allowing your pension to accrue at the rate of 2 1/3% a year, instead of 2%. How would you cover those rather considerable increases in costs? What are your suggestions?
Mr. Sean McManus: As I said earlier, this is just the first step. This just allows the discussion to take place at the provincial pension level, and then again it is subject to collective bargaining with the individual municipalities. It depends on how a local of firefighters in that particular city determine how those contributions should be made. Either they will be made all by the city, which would be a preferable route, or it should be 50-50, or all employee contributions. But it would be subject to collective bargaining.
I have to reiterate that what we're looking for, in terms of a change to the regulations, is of no cost to the current tax assistant level. So there is no cost right now to the federal government to make that change. It just allows us to follow through with the next step, to the provincial pension plan, and then down to the municipal level.
Mr. Ken Epp: But you are acknowledging and recognizing that the input costs into the pension plan, the contributions, are going to have to be increased rather substantially.
I don't have access here to mortality tables, and I don't know the actual values that you would use in your computations, since you claim that firefighters die earlier, so there would be an adjustment there. But I did an estimate. It would take between 60% and 70% more in contributions in order to cover the fact that the contributions are being made for five years less, and therefore would be required for five years more.
Mr. Sean McManus: As I stated, it would be subject to collective bargaining, and again it might be all on the backs of the firefighters themselves in terms of that extra contribution.
The Chair: Thank you very much.
I want to go back to a question that was already answered by Mr. Maloney.
As you know, in the economic and fiscal update he presented in London, Ontario, the Minister of Finance laid out a five-year plan, rather than a two-year plan. You may also know, and I'm sure you do, that the present federal government is committed to a 50-50 split for at least the next two years. And I think you also understand the 50-50 split is a debt and tax reduction on the one half, and the other half is strategic economic and social investments.
I know that Mr. Maloney stated he wants a third, a third, a third, which is a departure from the 50-50. I'm wondering how the other panelists feel about the 50-50 plan. Should it apply to years beyond the next two?
Ms. Van Loon.
Ms. Jean Van Loon: Our general position is that we would like to see a little more emphasis on debt reduction and a little less emphasis on new expenditures.
I'd also like to make it clear, in relation to earlier discussions about employment insurance, that we would not be supportive of a general employment tax for revenue-generating purposes. If there's going to be a general review of employment insurance, our preference would be to see it used as an insurance against unemployment, with premiums according to the risk, and if there are other social purposes that have to be served, they should be financed through general tax revenues.
The Chair: So you think there should be a departure from the 50-50, more toward tax reduction and debt, rather than special....
Ms. Jean Van Loon: Yes.
The Chair: Okay. Mr. Synard.
Mr. Sam Synard: We are very supportive of Minister Martin's vision, the Prime Minister's vision, and I guess government's vision, to some degree, on a 50-50 split.
We realize the debt has to come down, of course. I think, as I understand it, 27 cents on every dollar collected in federal revenues goes toward paying the long-term debt, and that's a crippling amount of money. If the debt could be paid down over a long period of time, it would free up a lot of extra revenue. So there's a lot of sense in paying down the debt.
What I don't agree with is the terminology that's used often about spending. It's not really spending on infrastructure needs; it's an investment. If we're going to produce a vibrant economy that presents back to the federal government huge amounts of income tax dollars and even a surplus in the EI budget, because there are more people working, then we need to keep investing to ensure we maintain that level of productivity and competitiveness.
So I think we really should refrain from using the word “spending”, because it carries with it all kinds of negative connotations. It's a throwback to the seventies and eighties, when we were going around with wheelbarrows full of money. Instead, we should start using the terminology “new investments”, I believe.
To answer your question quite succinctly—
The Chair: I thought I used the words “strategic investments”.
Mr. Sam Synard: The word here today that has been used quite often is “spending” on social programs.
The Chair: We must use the same communication firm.
Mr. Sam Synard: Probably so. But we've had opportunities to meet with the Prime Minister several times in the last number of months, as well as various federal cabinet ministers and provincial premiers and so on, and we've always been very complimentary in the division of doing the 50-50 split.
The Chair: Okay.
Mr. Sean McManus: Mr. Chairman, I would reiterate what we said earlier about the balanced approach. We can enter into a debate on whether it's 50-50, or a third, a third, a third. But I think what's important is what the building trades were talking about earlier in terms of clarifying the surplus—where it actually is, how big it is, and where it's coming from—before we enter into that debate. I do think the balanced approach is the way to go, because if we advocate on the side of tax relief only, we're only going to buy ourselves more problems.
The Chair: Okay. Ms. Redman.
Mrs. Karen Redman: Thank you, Mr. Chairman. This is probably a good segue to the question you just asked.
One of the members of my community, when I had my prebudget consultation, held the view that there actually is no surplus as long as we have a debt, and he felt very strongly that by paying down that debt more quickly during times of good economic growth we would free up funds for strategic investment. That was going to be part of my question.
My other question is for Ms. Van Loon. You zeroed in on productivity, and it was a fascinating process to look at productivity and how Canada stacked up to other countries last year. We are lagging behind the United States, but the United States lags behind a lot of countries. Ireland is one of the success stories we can look at if we want to look at OECD countries for countries that have good productivity.
In the study you referenced about the difference between the 70% disposable income for Canadians versus the 79% in the United States, there was also a comment made about higher consumption taxes being paid in Canada compared to the U.S. I don't know if it was part of that study. What we found when we looked at Ireland was that they looked much more to value-added taxes in their economy, as opposed to the tax structure we have here. I'm wondering if your organization has looked at that at all and whether that's maybe a way we could go to increase our productivity—change how we tax Canadians.
Ms. Jean Van Loon: We haven't done any analysis of that.
I think one of the stories in the Irish experience is that they've lowered their taxes substantially overall, and managed to get higher revenues even though their tax rates were lower.
Mrs. Karen Redman: I don't know if anyone would care to comment on whether or not there is a surplus. Obviously the building trades feel very strongly about that, if you'd care to comment.
Mr. Phil Benson: Obviously the chairman is correct. At the end of the day, on the consolidated revenue accounts it shows a surplus.
It's our position, looking at where it's from, that the consolidated special-purpose account is supposed to be earmarked for the purposes set out in legislation. I've looked, and I can't find in the Employment Insurance Act any reference to debt reduction and income tax cuts.
We worked quite heavily with this chairman and the previous one and the minister, and as Brother Maloney said quite clearly, when times are tough, you all have to put your shoulder to the wheel and pay a bit of a price. I was glad to hear the member opposite saying that maybe it went too far on some of the employment insurance.
We're asking for pretty modest stuff here. A lot of people are hurting. There has been a lot of recognition that on some of those changes we didn't have a crystal ball and mistakes were made. It's not blame here. At the end of the day, when we're looking at $7 billion in annual surpluses coming into the EI account, it just so happens we have a $7 billion surplus. We can add it and count it together.
Over time, premium cuts will end. But in the meantime, when the money is there, before premium cuts take it down to the actual cost of the program—at which point people will say there's no money, so you can't improve it—now is the time to look at it and say let's ameliorate it; let's make it a little bit better for these people.
There's a lot of concern in the country, among our members, a lot of members. Around here we talk about the honourable thing to do. We regard it as a breach of trust to take money earmarked for a special purpose and use it for other purposes. They're laudable, they're important, and we can applaud them, but at the end of the day it's a breach of trust to premium holders and the unemployed.
We would like to see it fixed in this budget, not next budget and not the budget after that. We've been coming here for four years now working with the government, with the opposition, talking about our seven points. Our small-week problem was addressed partially. Other things we've raised have been adopted by the government, and it's just time to get on with it.
Tell our members at the end of the day, with all that money in the account, with the billion dollars at the end of next year, you're going to have to cut back on interest to the account. When they can't collect, when they're clawed back, you tell them to their face at the door during the next election that it's working the way it's supposed to work.
We would like it to be working the way it's supposed to work. It covers people who are unemployed, it pays them reasonable benefits, and it doesn't punish them or make them scared to take a job. We want an incentive-driven program, which is what our seven points talk about. We want to put employment into employment insurance. I urge you to fix it.
The Chair: Thank you.
On behalf of the committee, I would like to thank the panellists for a very interesting panel.
I think there is a common thread for all your presentations—and also judging from the questions asked by the members of Parliament—that indeed the ultimate goal of this committee and the government is essentially to improve the standard of living for Canadians. Of course different people come at it from a different point of view, but that should be the ultimate goal.
You can rest assured that the thoughts expressed by you will be reflected in our report, which will be tabled the week of December 10. So thank you very much.
The meeting is adjourned.