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STANDING COMMITTEE ON FINANCE
COMITÉ PERMANENT DES FINANCES
[Recorded by Electronic Apparatus]
Tuesday, May 9, 2000
The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call the meeting to order and welcome everyone here this morning. As you know, the order of the day is a study on cost recovery.
We have the pleasure to have with us representatives from the Alliance of Manufacturers & Exporters Canada and from the Treasury Board Secretariat.
We're going to start with Jayson Myers, senior vice-president and chief economist of the Alliance of Manufacturers & Exporters Canada, and co-chair of the Business Coalition on Cost Recovery.
Mr. Jayson Myers (Senior Vice-President and Chief Economist, Alliance of Manufacturers & Exporters Canada; Co-Chair, Business Coalition on Cost Recovery): Thank you, Mr. Chairman, and good morning, everyone.
My name is Jay Myers. I'm the senior vice-president and chief economist of the Alliance of Manufacturers & Exporters Canada. I'm also the co-chair of the Business Coalition on Cost Recovery.
With me today is my fellow co-chair, Jean Szkotnicki, president of the Canadian Animal Health Institute; Garth Whyte, the senior vice-president of the Canadian Federation of Independent Business, a key member of our coalition; and Doug Blair, the author of the research and analysis we've been using at the Business Coalition on Cost Recovery.
To start, we'd like to commend the committee for undertaking this study of the federal government's cost-recovery policy and its implementation. We believe these hearings are really a logical extension of the committee's excellent work over the past few years.
Starting with your December 1998 prebudget report, and then continuing with your study on productivity last year, the committee has been at the leading edge of examining the impact of government regulation on the ability of the Canadian economy to generate research and development, jobs and growth. We think your productivity covenant, first proposed in your 1998 prebudget report, is characteristic of the solutions-oriented approach the committee has taken in addressing these issues.
Cost-recovery policy and its implementation is an area of federal government policy that has major implications for the Canadian economy in terms of productivity, employment, and access to innovation, access to products. Yet until these hearings, it has received very limited parliamentary scrutiny.
We look forward to working with the committee throughout these hearings to identify improvements that can be made to the policy and its implementation to ensure that it's not unduly affecting Canada's productivity and our ability to compete in the global market.
Before outlining our views, I'd like to talk very briefly about who we are, why we were formed, and what goals we have.
The Business Coalition on Cost Recovery, BCCR, was founded in 1998. So it has taken us a year and a half to appear before you today.
BCCR includes many of Canada's leading business organizations. I think the scope of business membership in the coalition shows the breadth of the concern about Canada's cost-recovery policy.
Together, we represent small, medium-sized, and large companies in every sector of the Canadian economy. Altogether, our members generate about $330 billion worth of economic activity every year and provide well over two million jobs for Canadians, in every community, neighbourhood, and constituency in this country.
The coalition understands and accepts the need to pay reasonable fees for federal services. However, when these fees were implemented, the government committed to making them fair, accountable, and transparent. Our experience with cost recovery has not reflected these basic commitments.
Our first act as a coalition was to commission a study to detail and quantify the problems with cost-recovery policy implementation and to provide a basis for cooperative solutions. In our view, the government itself should have taken the initiative to sponsor exactly this type of study. We decided to do it because of the importance that each of the members of our coalition attached to this issue.
A study entitled Where Does the Buck Stop? made some very alarming finds.
Between fiscal 1994-95 and fiscal 1996-97, regulatory fees charged to businesses increased by 47%. In fact, those fees charged to Canadian manufacturers increased by 153%. Fees charged to business are only a small part of the total fees recovered by the federal government. Altogether, the federal government was charging approximately $1.7 billion in fees to business by 1996-97. We think that figure is well over $2 billion now, although we can't tell because there are no figures available as to the total amount.
The effects of these fees on the economy are far-reaching. The $1.6 billion in regulatory fees charged to businesses in 1996-97, according to our analysis based on StatsCan's model, actually reduced Canada's GDP by nearly $1.4 billion and may have killed as many as 23,000 jobs. That was only the effect of fees charged in that year. It doesn't take into account the jobs not created by businesses not operating in Canada because of the impact of fees.
At the same time, the services received in return for these fees have not improved, and in many cases have actually gotten worse in spite of commitments that they would improve. In most cases, service performance lags significantly behind our international competitors and is far worse than what was promised when cost recovery was implemented in the first place. These delays stifle innovation and access to new technologies. They seriously undermine our competitiveness.
The cost estimates that I mentioned previously don't include the cost to the economy of the continued poor performance by cost-recovery programs. During these hearings, a number of coalition members will present their analysis of the economic cost that poor performance is having on their companies and on the economy in terms of lost sales and jobs and reduced research and development undertaken in Canada.
Most damning of all, our study suggests that because of the administrative costs incurred to charge these fees and other jurisdictional problems, the government receives only 20¢ of revenue for every $1 charged in user fees.
When we presented our findings to the Treasury Board in February 1999, we received a written promise from then Treasury Board President Marcel Massé that the board would conduct an official review of the cost-recovery policy with a view to improving it. That promise was made close to 18 months ago, and we have seen nothing happen yet.
Despite this inaction, business continues to pay substantial fees. Many of these fees are for mandatory regulatory services where the federal government is a sole service provider. As I've said before, if government were a monopoly, I could take this to the Competition Bureau, but if I took it to the Competition Bureau and asked for an opinion, they'd charge me $24,000 for the opinion.
Unlike most clients who are not satisfied, we can't take our business anywhere else. Our only options are either to pay the fees and accept the substandard performance or exit the Canadian market. Neither of these options are positive in terms of Canada's ability to compete in the international marketplace.
It's against this backdrop that we appear here today to seek your leadership as parliamentarians in bringing more consistency, efficiency, and accountability to federal cost-recovery policy. Without your leadership, we don't see much room for improvement.
Now that I've given you a very brief overview of our experience with cost recovery and some idea of what it means for the Canadian economy, I'd like to ask Jean Szkotnicki to provide a few examples of how cost recovery is hurting Canadian businesses.
Ms. Jean Szkotnicki (President, Canadian Animal Health Institute, and Co-Chair, Business Coalition on Cost Recovery; Alliance of Manufacturers & Exporters Canada): Thank you, Jay.
To prepare for these hearings, the BCCR put together a list of specific examples where the practical application of cost recovery has not lived up to what was promised by the federal government. These examples have been collected in a briefing paper entitled Promises Made Promises Broken which is part of our briefing package. The paper identifies four broad areas where the application of cost-recovery policy has deviated from what was promised.
The four areas where we found the most problems are, one, fees are becoming another form of taxation; two, the impacts of the fees on the Canadian economy and on specific businesses are not being considered; three, the government's commitment to improve performance levels is being ignored, and in many cases, performance has actually deteriorated since fees were introduced; four, there is no accountability or scrutiny of cost-recovery implementation, and despite the fact that fees to Canadian businesses are generating over $1.7 billion in revenues and decreasing our GDP by up to $1.4 billion per year, Parliament has no plan to monitor fees charged and performance delivered.
Let me give you a specific example of each type of problem. The briefing paper contains many more examples, and I encourage you to look at the examples we have prepared. I think you'll be surprised at some of the things you may read.
First, fees have become taxes. Unfortunately, there are far too many examples of fees being charged for services that are not being provided. Perhaps the best example of this comes from the drug and medical devices manufacturing industry. Health Canada requires drug and medical device manufacturers to pay an annual establishment licence fee. For medical device manufacturers, no service is being provided, no inspectors inspect the facility, and there are no identifiable service standards that must be met to obtain the establishment licence. The only transaction that takes place is that a fee is paid and a certificate is issued saying that the applicant can run a manufacturing facility. This is a tax, not a fee. There is no service being provided in this case.
Two, the impact of the fees on business and the economy has been ignored. Before a new government regulation or fee is introduced, its effect on the Canadian economy should be assessed. This is in line with the productivity covenant first proposed by this committee in your December 1998 pre-budget report. Frequently, however, the impact of cost-recovery fees on the economy and industry are not addressed or are simply ignored. Too often the focus of the fee-charging agency is on the need to generate revenues, rather than the need to provide value.
Industry Canada, for example, compiles a comprehensive inventory of Canadian bankruptcy data. Industry Canada now charges about $250,000 per year for this data. In one affected market, a single small Canadian company competes for business with three U.S. multinationals. The need to pay this fee places the Canadian economy at a serious competitive disadvantage with its customers.
Ironically, Industry Canada was an original sponsor of the business impact test, which is supposed to identify these needs, these types of concerns, before any fee is introduced. But in this case, no business impact test was carried out prior to the introduction of the fee.
Three, performances not living up to the standards that were promised. In its conception, the cost-recovery policy was supposed to bring a much more businesslike approach to the provision of services by the federal government. In exchange for implementing fees, departments promised to provide their services at a level consistent with the level of service provided by comparable agencies in other jurisdictions. Unfortunately, this has not happened. While there are many examples of agencies not providing the level of service they promise, I want to use my own industry as an example of the seriousness of this problem, and certainly this is an issue very important to our industry.
The Bureau of Veterinary Drugs has a stated performance target of 180 days for new drug submissions. This is in line with standards for new drug reviews in competitor countries like the United States.
In 1999 the average review time for new drug submissions was 926 days, or five times that of the stated standard. In 1995, when we were negotiating cost recovery, the average time was 472 days, and we were promised that efficiencies would be built into the system.
These delays have serious consequences for Canada's economy. They lead to delayed or lost sales for Canadian businesses, meaning less employment in R and D in Canada. They also result in Canadians being denied access to the advanced technologies available in the United States, where, incidentally, no fees are charged and the review standard is closer to the 180 days. These delays harm the ability of Canadian farmers to compete for businesses internationally.
As Jay has mentioned, many of the BCCR members, including the Canadian Animal Health Institute, will be presenting this committee with an analysis of the economic costs of these delays in terms of lost sales, jobs, and research and development in this country.
While I look forward to sharing this economic data with you at a later date, let me share with you just one example. Earlier this year, the U.S. Food and Drug Administration approved a new feed additive that helps produce hogs with more muscle or lean meat and less fat. This additive is not yet approved for use in Canada, and we have no idea when it will be approved. Not having access to this new technology places Canadian pork farmers at a serious competitive disadvantage to their U.S. counterparts.
In our view, the federal government should look for ways they can help farmers compete in tough foreign markets, but this program, with its delays, is creating barriers.
Four, no parliamentary accountability. Perhaps the most disturbing aspect of the implementation of cost recovery has been the complete lack of parliamentary accountability by government departments. Despite the fact that the federal government charges over $1 billion each year in cost-recovery fees, these fees, and the programs they support, receive little or no direct parliamentary oversight. New fees are routinely introduced by regulation with no parliamentary debate or examination. More importantly, once a fee is in place, there is no ongoing accountability to Parliament for the operation of the program.
Perhaps the most egregious example of this lack of accountability is the inability of Parliament to determine how much is charged in cost-recovery fees. The most recent list of fees provided by Treasury Board is at least three years out of date and is impossible to reconcile with the revenues from fees reported to Parliament in the main estimates. Given the impact that cost recovery has on our economy in terms of productivity, access to new technology, and employment, parliamentarians have the right and duty to monitor the levels of these fees and the ways they affect Canadian business.
There are many more examples, but I think you have a sense of how cost recovery is affecting Canadians in ways never intended.
Mr. Jayson Myers: Thanks, Jean. You've heard quite a bit about the problems, and we'd like to work with you and with government departments in terms of coming up with some solutions. We have four recommendations for this committee.
First, the coalition has developed an implementation standard for federal cost recovery. This standard is a benchmark, a checklist against which we think old, new, and existing cost recoveries should be assessed. In our view, the standard is simply a codification of what was promised when cost recovery was implemented by this government in the first place. That is, number one, undertake a third-party assessment of cost-recovery program cost and use this assessment to help determine the level of fees relative to service.
Number two, conduct business impact test assessments before new fees are set or when existing fees are changed.
Number three, assess the effects of the fees on competitiveness and productivity and take steps to reduce any undue negative impacts on the economy.
Number four, set performance standards on par with comparable international organizations or competitors elsewhere around the world and implement appropriate and enforceable redress mechanisms where performance standards are not being met.
Number five, ensure the cost-recovery programs are run efficiently by minimizing fees and increasing cooperation with other regulatory bodies through harmonization or other mutual recognition agreements.
Number six, establish appropriate dispute resolution mechanisms. We provided you with a copy of these implementation standards in our handout, and we provided copies of the implementation standard to Treasury Board last fall.
The second recommendation is that central agencies need to show leadership in helping departments implement cost recovery to ensure consistency and adherence to the implementation standards. Quite simply, Treasury Board is not currently providing this leadership to departments.
Third, the importance of accountability and scrutiny within mandatory cost-recovery programs has to be enhanced. Too often, departments and agencies see their clients as a captive market that must simply accept their unilateral decisions about fees and performance.
Fourth, and most importantly, we believe there has to be more accountability, both to Parliament as well as to business clients, for the implementation of cost recovery to Canadians across the board. While we need a proper implementation standard, we must also ensure that someone is monitoring compliance with that standard. We believe that every department should provide an annual report to Parliament and business clients on their adherence to these standards. This report should be verified by a third-party auditor, and parliamentary committees should then be responsible for reviewing the report and suggesting areas of improvement.
I'd like to now call on Garth Whyte to provide a perspective from small businesses across Canada.
Mr. Garth Whyte (Senior Vice-President, National Affairs, Canadian Federation of Independent Business; Alliance of Manufacturers & Exporters Canada): Thanks, Jay. On behalf of the Canadian Federation of Independent Business and the 98,000 medium and small business owners across Canada who we represent, we want to thank the finance committee for inviting us to appear before it today.
As a member of the Business Coalition on Cost Recovery, CFIB endorses the positions put forth by Jayson and Jean, and as a spokesperson for CFIB, I'm here to tell you that government fees are a serious and growing concern among our members in the small business sector.
Many small business owners view federal fees as an unfair tax grab that does not reflect the value of the service provided. In fact, as Jean has stated, in some cases, services have actually deteriorated. Many small businesses have been hurt by huge fee increases while other businesses find themselves paying increasing fees for services they don't need or want.
It's like being forced to pay $100 for a ride on a bus you don't want to go on in the first place. The government's cost-recovery program is broken and it's time to fix it. If left unchecked, government fees will continue to disproportionately hurt small businesses, which in turn impedes job creation and hinders Canada's overall productivity.
Ultimately, Canadian consumers are also hurt because higher fees and poor service lead to higher product prices and fewer products on the market. Everyone loses in the end.
When CFIB last appeared before this committee, we stated in our pre-budget submission that government fees and penalties have become a major impediment to improving small business productivity. More than one out of four of our members identified this issue as a priority to improve their firm's productivity, and you can see it in figure 1 in the graph. There are over 8,000 responses. The 2000 budget announcement to lower payroll and income taxes and the debt has started to address our members' top three priorities. However, the next two top priorities—ease burdensome regulations and fixed fees and penalties, which 44% of our members identified—have not yet been addressed.
Based on the strong support from our members in figure 2, you see that 76% support the federal government setting up a red tape commission to reduce the regulatory burden on business. Perhaps this is another issue that the committee would like to look at in the future. I want to throw it in there because they're linked.
CFIB has been involved with both the regulatory reform and cost-recovery issues for several years. We co-chaired with Treasury Board the Joint Forum on Paper Burden Reduction in 1995, which found that small business was spending too much time, effort, and money interacting with government. In 1996, CFIB was a member of the federal advisory group on cost recovery and user fees that led to Treasury Board's current cost-recovery policy, which was announced April 16, 1997.
So we've been there. We supported these principles. And we think this is a good place to start when reviewing the policy.
At the risk of repeating the points previously mentioned by Jean and Jayson, it's useful to refer to the principles that were developed with the private sector to ensure a fair and efficient cost-recovery policy. These principles can be found on Treasury Board's website. I pulled them off, so what's there is actually what the principles are.
The first principle is equity. If, as this principle states, beneficiaries of service should contribute towards the cost, then why should business pay for services that benefit the public good? For example, is it right for government to impose fees to generate revenues or pay for mandatory regulatory services such as health inspections, environment safety regulations, and customs inspections? Should the same fee be applied to all firms regardless of the size or sales volume? Often fees at smaller firms represent a disproportionate amount of their pre-tax income. Fee structure should not distort the marketplace by imposing a higher burden on small or medium-sized enterprises versus large corporations.
The second principle is efficiency. CFIB's experience has found that government departments do a poor job of determining the cost of the services they deliver. The 1999 report of the Auditor General of Canada, when reviewing agriculture fees, found that “the three organizations we have audited have shown little improvement in the way they obtain and use cost information”.
The third principle is accountability and service standards, which Jean has talked about. This principle states that the government should be accountable for the delivery of services and set standards for improvement. We believe the lack of service standards is the rule, not the exception.
Again, the recent Auditor General audit of agriculture user charges, as an example, found that “service standards are not widely used in programs with user charges”. The lines of accountability are fuzzy at the ministerial level and at the managerial level. The department manager has no control over a very complex and lengthy process to add or reduce fees. As the Auditor General found:
The process of implementing new fees or fee
amendments is very slow. It is not uncommon for
regulatory changes to take more than two years.
So then you have enterprising government officials who want to do what's recommended and change the fee, and it's just as hard to reduce the fee as it is to introduce the fee. The service does not reward government officials to take risks to improve the system and there is no incentive for a government official to reduce his or her branch revenue stream.
The fourth principle is partnership. This principle states that there will be ongoing consultations with the stakeholders receiving the service. In many cases, we have found consultation to be poor or non-existent. CFIB has been told by some of its members that they will not publicly complain about high fees or the poor service they receive because of fear of negative repercussions from the government branch or agency delivering the service.
The fifth principle is cumulative impact. It's safe to say that the cumulative impact of fees on an individual business, a specific sector, or the economy as a whole has not nor is it being done by departments or Treasury Board. Although the business sector and parliamentarians have focused on this issue, there's very little timely and complete information. The Treasury Board Secretariat website is confusing and dated. The most current list of all government fees is for 1998-99. The budget documents do not list revenues generated by each fee, unlike revenue estimates of smaller provinces like Manitoba.
I thought you might want to look at this example. Manitoba has their revenue estimates and they list every fee and how much revenue it generates. Why doesn't the Department of Finance do this?
The Auditor General states, and I quote:
Planning documents such as
the department Report on Plans and Priorities and other
planning documents in the public domain contain little
information on user charges.
Finally, no one in government is studying the cumulative impact of federal, provincial, and municipal user fees on business and the Canadian economy.
We're going to be reappearing before the committee on May 30, and we're going to be releasing a report. We're going to look at the cumulative impacts on the agriculture sector, so we will give you something at least in that sector. We'll release it when we present to the committee.
The sixth principle that we agreed to when we did this joint private sector/public sector development of cost-recovery policy was a mediator. This principle states that Treasury Board is prepared to review complaints about the application of policy and report its findings to the responsible minister. The Business Coalition on Cost Recovery has been waiting for Treasury Board to respond to its concerns for 18 months, and we are still waiting. If the coalition is unable to get its complaints heard, what hope does an individual business or sector have to have its concerns quickly resolved?
I haven't put it in here, but we've been thinking about having an ombudsman or something that might be able to take these issues.
In conclusion, we're very supportive of the finance committee reviewing the federal government's cost-recovery policy. We agree with this committee's pre-budget recommendation that the implementation of the government's policy on cost recovery should be subject to program review, a productivity covenant, and a regulatory audit. It's clear that there is no easy solution or quick fix to this complex problem.
We're not here to point fingers. We have to start somewhere, and you're starting it and we really appreciate it.
There are many players that have an important role and must be involved: agencies and government departments, Treasury Board, business, parliamentarians, and the finance committee.
You can only do so much as this committee and we understand. Treasury Board will do its part when it does its review, and departments have to do their part.
We commend the finance committee for taking the first step to fix the government's cost-recovery policy.
The following are some recommendations that we think the finance committee should consider.
Backed up by figure 3, in support for our members, we think the federal government should publish a detailed list of all fees, licences, and revenues they generate in the budget documents.
We also think that the federal government should establish strict controls to ensure the principles for cost-recovery policy are adhered to.
We think that legislative approval should be required before government agencies and departments can increase fees.
We think all departments and agencies should annually report on cost-recovery fees, which should be reviewed by the relevant parliamentary committee.
The finance committee should recommend a multi-year plan to reduce the overall burden of the cost-recovery policy.
The finance committee is embarking on a very important task that we hope will benefit not only individual businesses but will also improve Canadian businesses' overall productivity and Canada's economic growth in the future.
Thank you, Mr. Chairman.
The Chair: Thank you, Mr. Whyte.
We will now hear from the Treasury Board Secretariat, Mr. Neville. Welcome.
Mr. Richard J. Neville (Deputy Comptroller General, Treasury Board Secretariat): Thank you, Mr. Chairman. It's a pleasure to be here this morning and to have the opportunity to address this committee.
I'd like to begin by introducing my colleagues. With me is Mr. Rod Monette, who is the assistant comptroller general and assistant secretary, financial management policy analysis sector, and Mr. Len Endemann, who is the director of the cost-recovery policy division.
I propose to take about 15 minutes, and I will speak with reference to the deck we have made available to this committee in advance.
I'd like to start with some general information about cost recovery in the federal context. I shall follow that with a discussion of the role of cost recovery and its recent history, notably program review and the development of the current cost-recovery and charging policy. Then I'd like to share with you our plans for the rather significant review of this policy, which will occupy most of this fiscal year. Finally, I'd like to reflect on our impressions from the Treasury Board Secretariat's perspective of how program managers in the federal government have fared in implementing the policy.
In overall fiscal terms, cost recovery is not large. Compared to the $156 billion of tax revenues collected in 1998-99, total external non-tax revenues comprise under $12 billion. Most of these non-tax revenues had nothing to do with user fees or cost recovery. About $8 billion were related to return on investment, including dividends from crown corporations, assets disposals, accountable advances, refunds, and other financial adjustments.
This, in turn, leaves us with $3.7 billion, or about 2%, which we have called in the deck “Other Revenue incl. Cost Recovery”. We have also provided the committee with some fairly detailed tables describing this $3.7 billion, broken down by department and by program category in each department and agency. However, as the next slide elaborates, not all of this $3.7 billion falls under the category we normally would consider to be user charges or cost recovery.
Of this $3.7 billion, the remaining external revenues, approximately 35% or $1.3 billion involves services to other governments, for example, RCMP policing, international organizations, and fee transfers to NAV CAN, which are being phased out, by the way.
Some 23% or $847 million involves non-regulatory services, quasi-commercial transactions, such as royalties, leases, and certain sales. Examples are lease royalty payments from local airport authorities, DND's lease of married quarters, sales of maps and charts by NRCan, and publications from Statistics Canada.
Some 25% or $940 million involves charges for rights and privileges. These would include licensing in telecommunications and broadcasting areas, licences pertaining to the fisheries, citizenship and immigration passports, etc.
The last category involves regulatory programs, which comprise 17% or $630 million. These would take in a large number of Health Canada fees, Agriculture and Agri-Food Canada, the Canadian Food Inspection Agency, Transport Canada, etc.
So it's really the last three categories, and, if we wanted to be more precise, the last two, that have caused the most controversy in the last three years. This is not surprising, because although the overall amounts are not large in the government-wide fiscal context, there definitely has been significant change in recent years.
This table shows the four-year growth in revenues from these three categories of charges. The time period would capture significantly what might be termed the program review implementation period. Growth in these four years across these three categories of fees amounted to $706 million. This represents an average annual growth of 9%. Under the rights and privileges category, notable increases across four years occurred in respect of radio licence fees and in the immigration area. With respect to regulatory programs, notable increases occurred in the areas of health and food inspection.
If I could turn to “Why Cost Recovery?”, few people would contest that there are incidences where government programs should be supported by recipients or users other than the general taxpayer. It is also generally accepted that where recipients or users enjoy direct benefits from a government service not generally available to others, user charges are appropriate. Others would also agree that where a government program is in place with the purpose of ensuring that the social costs attributable to, for example, a certain industry are managed or mitigated, user charges are also appropriate. Examples would be fees charged by Health Canada with respect to the testing of pharmaceuticals and Environment Canada's programs related to the monitoring of ocean dumping, to name but a few.
The reasoning here is that the consequences of the negative effects of certain activity should be borne by the originator of that activity, not by the general public. The counter-argument of some is that any government program whose purpose was to protect the health and safety of the general public should be financed entirely by the general public and no user charges should apply.
This latter point of view is not consistent with the government's cost-recovery and charging policy or its recent decisions. All, however, I think would agree that applying these principles to an individual case is difficult and subjective. There is no formula. Government and stakeholders alike must rely on consultation and common sense.
In 1995, the government instituted Program Review. This was an ambitious assessment of all programs government-wide against six fundamental questions which see on this slide. The results were far-reaching and affected all departments and agencies in some way. Some programs were eliminated, while some were redefined. Other programs were to be delivered in different ways.
And one of the other options for partnering was to alter the method of financing by introducing fees, sometimes where they had not occurred before.
It is important to emphasize that the impetus for Program Review was fiscal, but the approach was very much getting government right.
As a result of Program Review, an increased emphasis was placed on cost recovery as a financing tool, with a number of fees introduced in new areas. Fees were not introduced as a means of solving the deficit, as some parties have asserted. As the earlier slides demonstrated, the revenue to the government from fee changes since Program Review have not been of the magnitude to make much of a difference to the deficit challenge we faced at the time. Since Program Review, very few new fees have been established.
Naturally, many of the new fee proposals were controversial. The government decided that a refreshed policy framework for the implementation of fees and fee changes was needed.
Much of 1996 was devoted to the development of this new policy framework. Several rounds of consultations were held with stakeholders representing several industry sectors, other interested parties and also some government program managers. I would like to point out at this time that the Alliance of Manufacturers and Exporters participated in these consultations.
The results of these consultations and subsequent Treasury Board approval was the current Cost Recovery and Charging policy which came into being in April 1997.
The 1997 policy was formulated primarily to guide the implementation of program review fee decisions. Accordingly, it concentrates on how to implement the fee once a decision to introduce the fee has been made. So the principles embodied by this policy include promoting an efficient allocation of resources, promoting an equitable approach to financing programs, and earning a fair return for access to or exploitation of publicly owned or controlled resources.
Looking at the policy itself, the policy emphasizes the need for a meaningful consultation with stakeholders throughout the fee-setting process. It also requires that departments conduct economic impact assessments of the proposed fees, including the cumulative impact of other federal user charges. Representative clients, both large and small, are to be consulted and a dispute resolution process must also be established to address client complaints that reach an impasse stage.
Still continuing with the policy, these are not to exceed the cost of providing the service. Fees charged for rights and privileges, however, are to be based on market value. Where practical, fees should be set on the basis of service standards and performance measures. Such standards should be established and updated through ongoing collaboration between clients and departments.
Authority to spend user charge revenue is not automatic. About half of the user-fee revenue is net voted or available to the department or agency to re-spend. Such authority requires prior parliamentary and Treasury Board approval.
I'm trying to be specific in terms of some of the accountabilities. The role of Treasury Board as set out in this policy is to guide implementation of user charges by interpreting the policy and providing advice to departments once the decision to establish user charges has been made through the appropriate approval process and to monitor adherence to the policy through client feedback, audits and evaluations, and other studies and reviews.
Individual ministers are basically responsible for implementing or amending user charges within their areas of responsibility in accordance with their legal authorities and the cost-recovery policy principles. They also have a discretionary responsibility to propose fees or fee changes in the first place. The policy also identifies the president of the Treasury Board as a point of contact for clients who feel they have not been given a fair hearing.
The next issue is planned policy review. The 1997 cost-recovery policy contains a commitment to initiate a review of the policy within three years of its introduction. We are currently in the early stages of such a review. It will be a major undertaking and will probably occupy most of 2000-2001.
I see the review as having two basic components. The first is an evaluation of the past three years' experience with the policy. This is essentially a retrospective, lessons-learned exercise. The second is a forward-looking policy development exercise in which we would build on lessons learned and develop proposals for improving the policy framework that currently applies.
We are engaged now in launching this first component, the evaluation of the policy itself. It will have three parts. The first part is feedback from outside stakeholders, such as the Business Coalition on Cost Recovery and other industry and stakeholder groups affected by the policy that have provided their views and identified their acute interest in this process. The second part would entail direct input of government implementers of the policy. Those who have been working with it, direct stakeholders of these individual programs, would also be surveyed—for example, the users and payers with respect to such programs as the ACB or the Pest Management Regulatory Agency. The third part would comprise the views of the Office of the Auditor General and of elected officials. I should comment that the work of this committee will be invaluable to us and is very timely.
Carrying on with the planned policy review, information from the evaluation would be the basis for developing improvements to the existing policy framework. We would develop new policy proposals and test them through consultations with all affected stakeholder groups. This would follow the successful model of consultation that preceded a 1997 policy, where several rounds of consultation took place before the specific wording of the new policy was taken to Treasury Board ministers for final approval. It is expected that new policy proposals would be presented to Treasury Board ministers for final approval this winter.
Regarding performance to date, in the last three years, there have been several difficulties in the cost recovery area. The requirements of the policy have often not been well understood by government program managers. The guidance provided by the Treasury Board Secretariat has sometimes not met departments' needs fully.
In particular, we have collectively had difficulty at times and in some areas in consultation. It has not always been balanced, effective or representative enough.
In terms of economic impact analysis, the requirement to do this is clear; how to do it is not.
One of the most difficult areas has been program changes and service standards. The blending of discussions on fees, costing of programs, program efficiencies, and service standards has frankly been a difficult mixture to manage for most program managers.
However, I want to stress that from our vantage point in the Treasury Board Secretariat, tremendous improvements have been made in all of these areas in the three-year period. Our collective performance today is significantly better than it was, and I foresee this trend continuing.
Thank you, Mr. Chairman.
The Chair: Thank you very much, Mr. Neville.
We'll now proceed to the question and answer session. We'll each have a 10-minute round.
Mr. Ken Epp (Elk Island, Canadian Alliance): Thank you all for being here today.
I'd like to make a little announcement. I'm in charge of a bill on behalf of our party in the House this morning, so if I leave, please don't take that personally; it's because of other duties. I know my colleagues over there will all understand.
I found this presentation very interesting because of the apparent discrepancy between the two viewpoints. One is collecting it, where everything is fine, and the people who are paying it are saying it's not all fine. I think we need to somehow come to a reconciliation of this.
Perhaps by introduction, I can state a personal experience. I was on an airplane. I saw an ad in the in-flight magazine of something.... I guess that's what advertising does, it makes you want something you don't need. So I got on the Internet and ordered this high-tech clock radio I wanted that was listed for $69 and was on sale for $59. By the time I got it into Canada, it cost me $130. The thing that gnawed at me the most was that when I went to pick it up from Customs, there was a little statement that said, “We have assessed this import and there's GST payable on it”—on the Canadian value of it, of course, after it was converted to Canadian dollars, which they then collected. But the excise tax and the import tax—and there were a couple of others—were all assessed at zero. Then they said, “There's a $10 charge for this assessment.” So I had to pay $10 for them to tell me there was no assessment.
It boggles the mind. As I said, the final bill was $130. I still enjoy my fancy new clock radio. It gives me precise time to the nearest thousandth of a second without ever having to adjust it. So if you want to see me about it, you can....
Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.): Are you still on time?
Mr. Ken Epp: Yes, always.
Mr. Chairman, I'd like to put my question to the people from the Treasury Board, and Mr. Neville probably. This is called cost recovery, and yet we see in the budget documents that there are around $2 billion in the category that includes cost recovery. How much money does the government actually take in from cost recovery? In other words, what's the excess of the cost recovery that you...?
Mr. Richard Neville: I'm not sure I understand your question, Mr. Epp.
Mr. Ken Epp: In your presentation, you had the different charts and you said this amount, $3.7 billion, is other revenue and it includes cost recovery. If you can find a bunch of numbers that add up to $3.7 billion, you must know what those individual numbers are. So I want to know how much of it is cost recovery.
Mr. Richard Neville: Fine. It's because I believe you used the word “net” cost recovery. I wasn't sure whether you meant net of the expenses that we incur to recover it. That's the point of clarification. You were not asking for that part of it?
Mr. Ken Epp: No, I just want to know the cost recovery.
Mr. Richard Neville: Fine. The break-out of the $3.7 billion, Mr. Chairman, is as follows: sales, leases, and non-regulatory represents 23% of that amount or $847 million; rights and privileges represents 25% of that amount or $940 million; regulatory represents 17% of that amount or $630 million; intergovernmental, and we use NAV CAN components, represents 35% of that amount, which is $1.289 billion, and that is $1,289,000,000. Those are the major components.
Mr. Ken Epp: The government then makes a profit, though, from these cost recoveries, right?
Mr. Richard Neville: Yes.
Mr. Ken Epp: And the amount of profit, as I see it, is about $1.3 billion.
Mr. Richard Neville: No. That's why I asked for a point of clarification. These are the revenues that come in for cost-recovery operations. There are expenditures that are in the estimates that are part of each department's programs. We have not offset the expenditures against the revenues. That's exactly the question I was wondering if you were asking initially. Is this net of those amounts? However—
Mr. Ken Epp: Do you have that net number or don't you?
Mr. Richard Neville: No, but if you recall from our preliminary opening comments, we mentioned that the costs cannot exceed the revenues and the revenues cannot exceed the costs. So we're not in a position where the costs would exceed this amount of revenue.
Mr. Ken Epp: How do you know that, though?
Mr. Richard Neville: Because that's one of the principles.
Mr. Ken Epp: That's one of the principles, but are you doing anything to test whether or not this is actually being implemented?
Mr. Richard Neville: We haven't had any indications at this point that there is an inordinate imbalance between the two.
Mr. Ken Epp: You indicated in your presentation that parliamentary accountability is on the spending side of it. I agree with that, in the sense that about 25% of government spending is non-statutory. That's dealt with in the estimates and we have some control over it, although it's nominal. However, having control of Parliament on the spending part of it does not in any way imply that Parliament is in control of the fees that are levied.
If a certain department decides they're going to levy a fee, what's the process they have to go through before they can actually say, “Well, you know we used to provide this import duty service for nothing and now it's going to be $10 when a guy imports a radio”? What's the process for that fee to come forward?
Mr. Richard Neville: Mr. Chairman, that requires a lengthy response, but I would like to take the time. I'll try to be brief and share that information with everyone.
There are several mechanisms for establishing fees. Some are subject to regulatory process and regulatory principles, and/or Treasury Board scrutiny, while others are not. We break them out into four general authorities for introducing fees. The first is Parliament itself. Fees have been introduced from time to time by direct legislation. An example of that is the right of landing fee applicable to immigrants, which was established in the budget legislation.
A second category is through the Financial Administration Act. Under the Financial Administration Act, the approval of the Treasury Board and the governor in council is required. Basically, in that case, the full regulatory process is also entailed, and an example is medical devices in Health Canada.
The third category is constituent or departmental legislation. These are individual acts that may grant the authority to set fees in several different ways, for example, the Parks Canada Agency.
The fourth is a minister's authority to enter into contracts. Every minister has the authority to enter into contracts in his own area of responsibility mandated by Parliament. This authority can be used to establish fees in cases where a willing purchaser enters into a contract per se. So no regulatory oversight exists for this category of fees, and it may be delegated to officials.
Because of its voluntary nature, the client does not have to enter into a contract, so it seldom gives rise to complaint or controversy. An example of that is the use of laboratory facilities and equipment, where a third party is interested in using laboratory equipment the federal government has, an agreement is reached between the client and the department concerned, and as a result a fee is set for the use of the equipment and the laboratory.
Those are the four categories. The authority to set fees under various pieces of departmental legislation gives rise, I would say, to a number of processes. Sometimes it gets problematic in how it's interpreted, but all in all there is a regulatory process and there are various means of setting fees within the federal government today.
Mr. Ken Epp: Okay. So basically parliamentarians and the public don't really have a say in it.
Mr. Richard Neville: I made it quite clear that there were specific processes to follow. Parliament approves specific fees. When we talk about the Treasury Board, we're talking of a subcommittee of cabinet made up of Treasury Board ministers. When we're talking about departmental ministerial authority or acts that have been legislated, again that's through Parliament. With a minister's personal authority, that's a member of Parliament. So I would say there certainly is parliamentary and member of Parliament involvement.
Mr. Ken Epp: Okay, but I suppose I should just put on the record that it is indirect and adds to the frustration of the Canadian general public, who is hit with these fees.
I've had a number of people talk to me about things such as park fees. It used to be that an ordinary family could afford to actually go into one of our national parks. Now there's a whole new industry in Alberta of setting up park areas just outside our national parks, because people can no longer afford to go into them. I think that type of thing is a problem. But it's political and doesn't necessarily apply here.
I have one more question for you. One of your policy requirements—and the other group made mention of this—is the need for economic impact assessments. Is there any formal mechanism that actually requires that these be done? What's the reporting line? Do they report back to you?
Mr. Richard Neville: No. In the policy we have stated there should be an economic impact assessment prior to a change in fee or a new fee being recommended. One has to put that in the perspective of the issue at hand. That is basically carried out by the department concerned. There are examples of that taking place.
We're not required to look at those assessments. We take it that the department concerned is carrying them out in a viable manner and sharing that information with the parties concerned.
Mr. Ken Epp: So you just take it on trust then that the departments are doing that.
Mr. Richard Neville: We have discussions with departments on an ongoing basis. We have feedback from departments and from a number of users. I would say we're aware of a good majority of what's being done, but we can't be aware of what's being done in 103 departments and agencies all the time.
Mr. Ken Epp: Okay. Do you have a specific example of where a department proposed to increase a fee, actually implemented these different policies, had a meaningful consultation with stakeholders, did an economic assessment, and went through all of this work properly? Do you have an example of a report that actually came to you that said where it was done? I want one example.
Mr. Richard Neville: Yes. I would like to ask Mr. Len Endemann to share that with you.
Mr. Len Endemann (Director, Cost Recovery, Treasury Board Secretariat): I would like to refer to the Canadian Coast Guard and the introduction of marine navigational aid fees and ice-breaking fees, both very controversial fee proposals.
The coast guard commissioned a study, which was done by a consulting firm called Hickling. They came to the conclusion that these fees would not have an adverse economic impact on industry.
I chose this as an example because industry didn't accept the economic analysis, although it was quite an elaborate, detailed, and expensive study. In recognition of reservations that were felt about that analysis, we in the Treasury Board Secretariat are now, in collaboration with the commercial shipping industry, conducting yet another analysis of the impact of fees in this area in a very collaborative and systematic way. That's one example.
The Department of Agriculture and Agri-Food has done some extensive economic analyses of the impacts of their fees on the farming community. This was again a very large study. There's no question that the analysis of economic impact is a difficult area. You sort of have to create the methodology in each case. Departments have at times struggled with this. It's one of those areas where we think there has been considerable improvement.
The Chair: Thank you. Thank you, Mr. Epp.
Mr. Ken Epp: Is my time up?
The Chair: It's up. I wish your clock were here.
Some hon. members: Oh, oh!
The Chair: We'll go to Mr. Gallaway, then Ms. Leung, Mrs. Redman, and then Mr. Brison.
Mr. Roger Gallaway (Sarnia—Lambton, Lib.): Thank you, Mr. Chairman.
Mr. Neville, if I follow the rationale of cost recovery, it's that certain government services are actually purchased. Having said that, purchasers or those who are required to pay these fees—often there's no choice—can demand a certain level of service. Yet we've heard from the other side here this morning that the level of service in many cases has actually declined, I think in an abysmal fashion.
Do you have any information regarding the overall impact that user charges have in this sense, in terms of the performance of departments? Do you have any studies that would show, in terms of time or quality of delivery of service, what effect these charges have had on the economy and perhaps even on employment levels? What sort of information do you have within the department?
Mr. Richard Neville: I think that's an excellent question.
Let me go back to the policy. I think that's fundamental. We should always start from the policy. The policy requires that service standards and performance measurement be part of the discussion of fees unless it's not practical or for some reason it's not reasonable. Our experience has been that this is a very difficult area. It's sometimes hard to have an agreement with clients, but still, it's a fundamental requirement of the policy.
A discussion on service standards can easily become a discussion on the fundamental design of a program and touch on the public policy basis for the program itself, which makes it that much more complicated.
That being said, I should stress that the commitment of the government to service standards is very strong and goes well beyond the boundaries of cost recovery. It's not just in cost recovery that we put an emphasis on service standards. In all programs, no matter how they're financed, the government is moving towards clear performance measures and service standards.
I recommend, if you have the opportunity, that you make reference to and read a recent document tabled in the House of Commons by the president of the Treasury Board, entitled Results for Canadians, which stresses the service standards issue.
There's no doubt we can do better. We are committed to doing better. A number of departments have taken this as a major initiative. It's a question, I think, of working it through with the client community and trying to arrive at a mutually agreeable service standard.
Mr. Roger Gallaway: I'll rephrase my question, then: Do you have any studies, any documents?
Mr. Richard Neville: We don't generate studies of that nature on the service standards component, per se. In terms of impacts, if you want to get into an impact study, we could discuss the economic impact on cost recovery.
Mr. Roger Gallaway: Let me give you another question. I'd like to know what the Treasury Board Secretariat does to ensure that the amount of the fee being assessed or charged is reflective of the actual level of the service, not the promised level of service.
We've heard from the other side, if I may refer to it as such, that in one case—and I'm sure they have others they're willing to offer—the time of approval for veterinary medicine has gone from something like 450 days to 900 days, or something in the magnitude of 100%.
That has to be a concern to you. What are you doing to monitor the promised level of service?
Mr. Richard Neville: On an ongoing basis we have discussions with departments about a number of issues as concerns cost recovery. If we're getting a request for a new cost-recovery program, we obviously look very carefully as to whether it meets the policy. For instance, does it meet each component of the policy? What is their action plan, and what is their proposed implementation plan? Only then would we proceed to make a recommendation to the Treasury Board minister.
So in the first instance, we would have monitoring, if you want to use that word, although it's more than monitoring; it's an actual assessment of the proposal as it comes in prior to the actual recommendation being made to the Treasury Board minister.
Once the approval has been given, it subsequently falls into the departmental arena, where it's a departmental responsibility. Accountability then obviously shifts to the minister concerned. It becomes his or her responsibility to put in play the implementation plan as originally approved and to do the regular monitoring. Whether that be through internal audit, whether that be through discussions with clients, or whether that be through special studies, evaluations, or program reviews, that's really a departmental perspective. Our role in that context is to keep a watching brief over the numerous departmental applications.
Keep in mind that when we're doing a review of the policy, as we are this year, we gather as much information as we can. Therefore, if we have to change a policy or if we have to make subsequent recommendations, we do so in a knowledgeable manner.
Mr. Roger Gallaway: Mr. Chairman, I think Mr. Whyte would like to add to that.
The Chair: Mr. Whyte.
Mr. Garth Whyte: If we sound frustrated, I think you might get an indication as to why. I mean, this is a great opportunity, when the stakeholders have come together, to say, hey, let's work together to fix the policy. But what I'm hearing—and I may be wrong—is that there's no problem.
You know, if you have $2.4 billion—and that's 15% of the government's operating budget, as we just quickly did it here—plus the cost of doing the paper burden, plus the lost time for businesses that are not all large, plus fees from other jurisdictions.... And this is just the beginning of the policy. This is not the end of a long-standing policy. This is the first three-year review. It's the tip of an iceberg.
There's no assessment of the total cost to collect the fees. There are cases where the service is deteriorating. There's a costly, vague appeal process. Don't just take our word for it; read the AG's report about what's going on. This is where we're frustrated.
Finally, on May 30 when I come to the meeting I'll bring in a letter we got back from one agency, which said, basically, let the member eat cake; if he doesn't like it, too bad.
Where do we go to appeal, how much does that cost, and how much time does that take? You know, it's kind of frustrating to hear, hey, we can all go home, because there's really no problem here; there's going to be a review, and things are fine. I was hoping I would hear, hey, what a great opportunity; let's work together to deal with these things.
For example, let's list the fees so that we can discuss it. Let's look at how much it costs to collect versus how much revenue we're generating. There are things we have good opportunities to discuss—for instance, what do we do for the appeal process? We also have other issues, no question. We have other bigger issues that all of us in this room can work on collectively.
The Chair: Is that a fair request, that the costs be published, and a list be published?
Mr. Richard Neville: We have provided, Mr. Chairman, a list of the programs that are on cost recovery by department. They're available. They've been distributed this morning. So that's there.
Obviously, to do a detailed listing is.... It's interesting; I was going to pick up on this a little later on, but I keep hearing this morning that we should be doing more studies, more reviews, more assessments, more consultation, and then I hear the terms “efficiency” and “effectiveness”. They don't resonate with me. If you do one, you don't necessarily have the other without having a cost implication.
Basically, though, they're available to each department. There's no problem with asking a department for their listing of their fees based on the hundreds of programs we've identified this morning and provided to you.
The Chair: Mr. Gallaway.
Mr. Roger Gallaway: There's been an interesting point raised here.
Mr. Neville, I understood you to say that part of your policy was that there would be a dispute resolution mechanism, and yet Mr. Whyte is expressing the idea that in fact he's not aware of one, and he represents a large group.
I'd like to refer to the example that Mr. Endemann made of the marine fee. In that case, groups such as the Chamber of Maritime Commerce suggested—in fact, they stated unequivocally—that the department policy from coast guard was double what the actual cost was. They maintain that to this day.
Now, in terms of studies I understand that there can be variances of 10%, 15%, 20%, and 25%, but don't you wonder when it's 100%? Wouldn't you want to sit up and pay attention when a group is saying you're charging them double the cost? Yet you've come here to say that you've had a study done. I understand that. But the actual users have no choice. They're saying there is no dispute resolution mechanism. You're stating that you're going to do a study of it.
So where is the dispute resolution mechanism for the Chamber of Maritime Commerce, or indeed for any of these people here today?
Mr. Richard Neville: A couple of points. First of all, with respect to dispute resolution, it is a requirement in the policy that there be dispute resolution within the entity. So that should be there, and it's for the department to work through how they propose to put that in place and to have discussions accordingly with the client.
There is a second safety valve, if you wish. That is, the president of the Treasury Board could act as a point of contact if the dispute reaches an impasse. So we do have that safety valve, and that is in the policy.
Mr. Garth Whyte: Right.
Mr. Richard Neville: Good, I'm glad you said that.
That being said, we're still willing, we have the intention of carrying out a full review of the existing policy this year.
Mr. Roger Gallaway: You're telling me, if I understood your answer, that the policy says there ought to be a dispute resolution mechanism, yet nobody is aware of one, and the only one you're aware of...at least, I'm hearing from this group and from others that there is no dispute resolution mechanism, and the solution you offer is to go to the president of the Treasury Board.
Mr. Richard Neville: Mr. Chairman, each program that is on cost recovery is required to follow the Treasury Board policy. The policy is quite clear: there is to be a dispute resolution component to the overall program. That should be in place. There are in excess of 400 programs that are on cost recovery, or components thereof. Therefore, we don't monitor each and every one to see if there is a dispute resolution process. We hear from time to time that there isn't, and that's because of the fallback mechanism of having the president of the Treasury Board intercede where there is an impasse.
So I would have to take it, Mr. Chairman, that based on our knowledge, our assessment, there is a dispute resolution mechanism in place in the majority of the programs.
Mr. Roger Gallaway: I have one question then, Mr. Neville.
I wonder if you would provide this committee with a list of those cases where there is a dispute resolution. You are referring to 400-some-odd cases. Do those dispute resolution mechanisms exist in 100, 200, 300? We'd like to know something about the scope of this, because what you're suggesting to us is the policy and what we're hearing don't coincide.
Mr. Richard Neville: Mr. Chairman, I think in a situation like that it would be appropriate for the department concerned to provide the information if and when requested by this committee. That's really a departmental responsibility based on the individual programs they have.
The Chair: So we would have to go to the various departments.
Mr. Richard Neville: That would be very appropriate under the circumstances, Mr. Chairman.
Mr. Roger Gallaway: I think Mr. Whyte wanted to say something.
Mr. Garth Whyte: The only question I have is if the person collecting the tax is also the department doing the dispute resolution, it's very difficult. And there are going to be cases, unless this is a unique area, because in every other area where there is dispute resolution—NAFTA, internal trade barriers, whatever—you need another sort of neutral body.
Where does that business owner go if they have a problem? If we have a coalition of 20 different business associations saying they have a problem, and we're going to Treasury Board saying “Here are some things we'd like to talk about”, what does it take to deal with it?
If the department is supposed to have...where we think there is concern and there are problems within some departments, which you're going to hear about subsequently, if there is a problem, where do we go?
The Chair: Do you want to respond to that?
Mr. Richard Neville: Yes. I wouldn't mind, if I could, Mr. Chair.
The Chair: Sure. Absolutely.
Mr. Richard Neville: If I were someone transacting business with a department and I was not satisfied with the level of service I was receiving, I think I would try to move it up in terms of the organization to a higher level, whether it be at a director, a director general, or an assistant deputy minister level, or even bring it up to the deputy minister. The last resort in that particular department would be at the minister's level.
So I think there are a number of areas to try to get this resolved within the department concerned. Who has responsibility for that particular program?
Ms. Jean Szkotnicki: Mr. Chairman, I would just like to say we've followed that route, and we've had two different results.
Certainly, in working with the Canadian Food Inspection Agency relative to the approval program for veterinary biologics, we have found that by taking it up the ladder to senior bureaucrats and to Minister Vanclief, there is indeed concern, and they're going to look at developing measures to bring us back to performance standards.
But we followed the same route on the veterinary drug program, and frankly, it's like the black hole. We keep going back. There's no sign of any relief relative to the veterinary drug program. There's no game plan of how to improve the situation in that agency—and it is an agency with great problems. All you have to do is look at the Price Waterhouse report and the KPMG report that were done in 1996 and 1998 and you can see that these aren't solutions. We haven't found any solutions and we haven't found anyone to work with. My experience is that there's no oversight there.
The Chair: Mr. Neville.
Mr. Richard Neville: I'll come back to the policy. The policy does have, as I said, two specific references. One is that it's a departmental responsibility for the program, and second, if a point of impasse is reached, the president of the Treasury Board is a point of contact.
The Chair: Mr. Whyte.
Mr. Garth Whyte: I would like to say to the committee members that if this happens to us, going up the ladder means that we go to our local MP and to the minister. In other words, what's happening now is that you're ultimately going to be accountable, and if I were you, I'd want to make sure things are in place and this policy is running well, because you're going to have a debacle on your hands.
That's what basically I'm hearing here. Let's make it political. If the agency doesn't reply to what I want, if the department doesn't, then we have to go to our local member of Parliament and we have to go to the minister to get this resolved. And that's not fair, because parliamentarians in all parties have said they are interested in working together to deal with this policy, yet you're going to end up wearing the policy.
The Chair: Mr. Myers.
Mr. Jayson Myers: Mr. Chairman, I have two very simple points. The need to take it up the ladder indicates to me that there is no dispute settlement process in programs, and that should be there right from the very beginning.
Secondly, I think in the discussions today I see some of the difficulties that are coming out here when you say to go to the departments. What we found is that the implementation of these programs is very much at the discretion of certain departments. Some agencies and departments consult well; they've implemented these things well. Others do not. And that's part of the problem here. There's no overall oversight monitoring or overall requirement of performance, and there's no one to enforce that.
Mr. Garth Whyte: We have gone to some departments and they want to make changes to their fees. It's a very onerous process, and they've been told they had better make sure they don't lose any revenue by lowering fees. I mean, there's another directive that seems to be coming out of central agencies that I think should be tested. There are some examples where departments have said yes, let's work together and we'll lower some fees, but they've been told they have to make sure they maintain their revenue base.
The Chair: Ms. Leung, Ms. Redman, and Mr. Brison.
Ms. Sophia Leung (Vancouver Kingsway, Lib.): Thank you all for your very interesting and informative presentations.
I'm pleased to hear, Mr. Neville, that you're in the process of reviewing the policy. I'd like to know a little bit more about what kinds of consultations you have, who you seek advice from, and the process. Do you have direct communication with the business sector or the other different sectors involved with the fees?
Mr. Richard Neville: Well, as I said earlier—maybe I could spend a moment or two—the review will have two parts to it. One will be a retrospective evaluation of the performance of the policy over the last three years. We have been gathering information behind the scenes and through documentation that's been provided.
Following that we'll do the policy development exercise, which will include substantial consultations with stakeholders, followed by the submission of a proposal to our minister and to the Treasury Board. The evaluation is the first step, and we plan to complete it this summer. It will include a report on the views of interested stakeholders in the community who have identified themselves by active comment—as an example, the Business Coalition on Cost Recovery.
Incidentally, Mr. Chairman, we have not received—and let's just work on a number of in excess of 400 different cost-recovery programs—anything close to that in terms of comments, letters, reports, analyses, or positions from the stakeholders. If I had to give you a number, it would probably be fewer than 5 out of 400 plus. That's just a comment.
We reported on the experience of program managers in government and their stakeholders in dealing with cost recovery over the last three years. I think we've seen what has occurred. We've had a lot of documentation put forward, so we'll use that experience of program managers, again, using the office of the Auditor General, who has provided us with comments, as well as interested elected officials. There has not been that significant a number, by the way, but there have been some.
Following this report, and building on it, we will engage in the development of draft amendments and improvements to the existing policy framework. By the fall, we'll again begin extensive consultations with the stakeholders, much as was done in 1996 before the current policy was approved. But now, with the benefit of the evaluation and our combined experience....
Maybe I should have stressed earlier—and I apologize if I haven't expressed it enough—that we are taking this opportunity to take the time between now and the fall to gather all the information, to have discussions, to start even more meaningful discussions, before we finalize the policy.
This is an excellent opportunity for us to be working together to try to look at the policy. I'm not so sure, though, that it's in the policy that we have the problem. I think it's in the implementation of the policy, but we'll do it right. We'll look at the policy, make sure we all agree on the policy, move that forward and get it approved, and then we'll have to spend more time on the implementation. What I'm hearing time and time again, not only this morning and not only from the members but from stakeholders and even the office of the Auditor General, is that the policy stands the test of reasonableness. What is not there is the follow-on by the individual departments in the actual implementation of the policy.
In that sense, let's do it right. Let's work together in terms of getting the policy as best we can, even though it may be very good right now. We're willing to tweak it, to change it, to come up with new recommendations—it's with an open spirit of cooperation that we offer that—and I really think the work will begin once we get that approved and are into an implementation mode of making sure it's carried out in the way it should be.
Ms. Sophia Leung: Can I ask another question? When you say, for example, the landing fee for the immigrants, that's part of your 25%, your revenue. From the MPs' point of view, we have a lot of complaints. They say this is too much. That's why we've already changed, eliminated that for the refugees. This is becoming a financial burden for a lot of immigrants, so we get complaints. Do you have any communication with MPs? I don't see that sort of dialogue with us or with business, and I just want you to be more specific. Do you develop that kind of communication?
Mr. Richard Neville: Maybe I could answer. It's an excellent question.
I'd like to share with the members a number that I have looked at myself and obviously found interesting. For the right-of-landing fee, in 1994-95, the government had $5 million as revenues. In 1994-95, it was $5 million. In 1998-99, we're up to $117 million. That is a significant increase in terms of what was there four years ago and what we had for the 1998-99 fiscal year. In other programs we've had decreases going the other way. So it's not as if they're all going up. As a matter of fact, the overall total is coming down by $400 million.
That being said, what happens in a lot of instances where there's an increase and it's significant and there are stakeholder concerns, behind the scenes we do get involved. We work with the department concerned. We try to iron it out. We try to get the parties to sit down together. If it has to be tripartite, it will be tripartite, but we try as best we can to let the stakeholders or the client and the department concerned work it out.
Ms. Sophia Leung: My last question. Mr. Whyte suggests the finance committee should play a role in this. I'd like you to be more specific as to what way we can work on this.
Mr. Garth Whyte: First, there have been articles about committees and whether they make a difference. We think this committee makes a difference. We really do.
You've asked about productivity. I like that question because I want to get away from the defensive posturing that's going on here. We needed a referee, and I'm glad we're looking at it. When you look at the policy, if the overall policy has a major impact on the economy and costs as much to collect as it does to generate the revenue, you might have to reconsider the policy, even if it's an excellent policy. Who's doing that? If it's difficult to deliver, you might want to look at it, even though it's an excellent policy. Who is the watchdog for implementing this policy? Is it Treasury Board? I'm hearing Treasury Board saying “Hey, it's within the department”. I believe there's a parliamentary committee watchdog role here that could be very good.
It's not good enough for us, as stakeholders, to be told, “If you go to the department, you can find the list of what the fees are”. So we go to each department, and you're going to be doing that too. I think the finance committee can recommend that we have a list of fees and how much revenue they generate, so we can do this—rather than just a graph—and say what it is. I think that's a good recommendation, because it is becoming a major revenue generator and it's going to grow. The other thing is the potential in this policy for growth. So I think there's a very good role there.
That watchdog role, in terms of ultimate accountability in particular, I think is a good function. Then I guess in the little thing I put together, we asked our members.... We know there's a watchdog role in terms of new fees, but what about increased fees? How does that work?
Also, this committee was good at setting targets. Generally, there was a goal linking tax burden to the GDP. You had targets. What about targets for fees? That could set policy parameters, because on one hand, yes, fees are going down, but as we've heard, I guess at NAV CANADA, it might be that for one particular entity it has gone down, but if it's revenue neutral it means fees are going up somewhere else. What are the impacts of that on the economy?
I think there's a couple of things there.... I'm just throwing some things on the table, but I really do think there's a role, because you've been the leaders on the productivity side looking at the big picture. Also, it's a major revenue item that really isn't listed in the budget.
Ms. Sophia Leung: Thank you, Mr. Chair.
The Chair: I have four more questioners and we have 20 minutes, so keep that in mind: Redman, Brison, Szabo, Harris.
Mrs. Karen Redman (Kitchener Centre, Lib.): Thank you, Mr. Chairperson. I have two questions and a point of clarification.
Mr. Neville, in your response to Ms. Leung, I believe you talked about a $400 million decrease in revenue. What accounts for that decrease?
Mr. Richard Neville: Just give me a moment to make sure I'm clear. I just wanted to make sure before I gave you the answer. The bulk of the decrease is as a result of NAV CANADA having now transferred to the private sector and the revenues they were generating before. There was some transition period. That transition period is over. As well, in the Department of Transport there are a number of programs dealing with the airports that have no longer generated the revenues.
Could you just give me another minute?
Mrs. Karen Redman: I'm sure the chair would allow you another minute.
Mr. Richard Neville: National Defence have come down from $445 million in 1994-95 to $343 million in 1998-99, so there's a significant decrease there. It won't take me that long because I highlighted them previously. They should be here.
In health, under “hospitalization”, in 1994-95 we went from $15.8 million to $6.3 million on that specific program. I believe there are one or two others. Just to make the specific point, airport landing fees in 1994-95 went from $85 million down to $22 million, and airport general terminal fees in 1994-95 went from $45 million down to $16 million.
So you can see there have been a number of items. Then specifically for 1997-98, $3.9 billion down to $3.7 billion for 1998-99.
Mrs. Karen Redman: But if we can be very precise about this, these fees are still being paid; they're being paid to airport authorities as opposed to the route they were going before. So fees are still being charged. It's just that they're being accounted for and paid to a different.... Rather than to government, they're paid to airport authorities. Is that right?
Mr. Richard Neville: Well, yes. We're talking about the revenues within the federal government, so our revenues have gone down as a result of those decisions.
Mrs. Karen Redman: Okay. But we are looking at cost recovery and the burden that is borne by business—
Mr. Richard Neville: Or individuals in the case of airlines.
Mrs. Karen Redman: Can you define for me public good versus private good? There seems to be a diversion in this policy.
Mr. Richard Neville: How much time do I have, Mr. Chairman? That's a very difficult question.
The Chair: Do you want the answer to that, or are you just going to keep going on?
Mr. Richard Neville: Public good versus private good. I'm more comfortable with the public good aspect. That's where we deem that the general public of Canada would be at risk if a particular decision weren't taken. In several programs the criterion is that the safety of Canadians comes first and foremost. In order to ensure the safety of Canadians, certain decisions have to be taken; certain inspections have to be made. In that context, we use that as the public good.
If I had to define the private good, that's when we look at the right of an individual, a specific instance where someone's rights would not necessarily be protected, and we would then put the emphasis on that part of it as being the private good.
That's a short answer. But there are books on that. There are a number of texts that have been prepared.
I'd like to ask—
The Chair: I just want to make a point here before you do that.
Some questions members are asking are quite specific and would require very lengthy answers. Mr. Neville, if you feel you haven't been given enough time, could you give the answer in writing to the committee? Send it to the clerk so that we can get those answers, because in some instances—
Mr. Richard Neville: That's a very good one. I wouldn't mind coming back, if you don't mind.
The Chair: Absolutely not. I'm sure we have a lot of questions.
Mr. Richard Neville: I think it's important to have a clear understanding and that it be shared with everyone. I have no problem with that being shared with our colleagues in terms of having the same information.
But, Len, you were going to....
Mr. Len Endemann: My addition was going to be very short. I think one of the clearest pieces in the policy itself is a reference note. The first one addresses exactly that question—the definitional difficulties—and gives some quite useful examples.
The Chair: Could you table that with us?
Mr. Len Endemann: Yes.
The Chair: Thanks.
Mrs. Karen Redman: I don't know, Mr. Myers, if you wanted to respond.
Mr. Jayson Myers: Only to say that I think it is one of the key issues, but I don't think it should distract attention from the implementation of the policy. It's a public good, it seems to me, to introduce a new drug or a therapeutic product onto the market to improve the health of Canadians just as much as it is to ensure the health and safety of Canadians. I think we all agree with that. We need good regulatory services provided. The key question is, how are those services provided? Perhaps they should be provided out of tax revenue rather than cost recovery.
Going back to what Mr. Neville has said before—and I think we all agree with him 100%—it's in the implementation of the policy where the problems exist. It's in the difficulties of defining what is the public good and what is the private good where a lot of the problems arise on a department by department basis.
Mrs. Karen Redman: I don't know if Mr. Neville is going to find this question easier to answer than my earlier one, but what constitutes cost?
Mr. Richard Neville: That is a good question.
Again, how much time do we have, Mr. Chairman? I'm not being facetious, because that is a serious issue with us as much as the revenue side is.
In regard to the cost, we have what's called activity-based costing. It's a well-known methodology that's used in the private sector, as it is in the public sector. We have certainly embraced it more recently in departments such as National Defence, as an example. We want to use activity-based costing to determine all the costs that are associated with a product. So you have many costs in a department, but what we're trying to do is isolate the costs that are particular to that product, and then we want to use that total cost thing that has taken place to derive your revenues accordingly. Again, the revenue should not exceed the cost, and that's a principle we have espoused in our policy.
If you want me to give you the components of the cost, they would include basically your direct salaries, and you can take into consideration indirect salaries. You have direct costs, indirect costs, and some overhead components. I think those would be the major categories. Again, activity-based costing is a very formal, approved process, or methodology if you wish, of arriving at a cost. It's vetted and audited and proven to be effective.
The Chair: Thank you.
We have Messrs. Brison, Szabo, and Harris.
Mr. Scott Brison (Kings—Hants, PC): Thank you, Mr. Chairman, and thank you to all of you for providing us with some of your insights on the issue of cost recovery and regulation today.
Mr. Neville, when a new regulation is introduced, does the government, or the department, know the full cost—certainly, the government-borne cost, implementation and enforcement, but beyond that, the greater cost, the compliance cost—of implementing this regulation at that time? Does the government know from the outset? Is that set out?
Mr. Richard Neville: I'd like to think that when a department is contemplating putting in play a new program with cost-recovery implications, they, again, have followed the policy, but in so doing they have consulted with the stakeholders, the clients, to determine what the total impact is. We did say that you need an impact analysis. So that impact analysis study, if you wish, should be picking up those kinds of costs outside of the federal intensity.
Mr. Scott Brison: Is it quantified?
Mr. Richard Neville: It should be. I would expect that it would be.
Mr. Rodney Monette (Assistant Secretary, Assistant Comptroller General, Treasury Board Secretariat): According to our policy, it should be.
Mr. Chairman and Mr. Brison, I have to admit that I'm only three weeks into my new job. I come from a department. I was previously with Environment Canada, and perhaps I could give a bit of the departmental perspective on Mr. Brison's question.
I was the chief financial officer at the department, and I wasn't responsible for the weather service, but I know a bit about it. Certain parts of the weather service charge for specialized information, and a challenge we always had as a department was to figure out how much it really cost to provide specialized weather information.
We had an asset base. Our weather monitoring network cost about $400 million to put into place. When you're charging somebody for the specialized information, do you charge a portion of the depreciation on that asset base to the client who is requesting information? It's a tough question to deal with, and I must say we weren't always sure we had it just right. But there are initiatives that departments are working on. For instance, in regard to the one Mr. Neville mentioned, the activity-based costing, we are currently undertaking a pilot to satisfy ourselves that our costing information was better. Also, the government is putting in place a new financial information system, which will require that as well.
I think it's an area where we had some level of assurance, but we knew there were things we could do to improve.
Mr. Scott Brison: Thank you. I suppose a good forecast would cost more than a bad forecast.
Mr. Rodney Monette: Specialized information.
Mr. Scott Brison: So we've established that within the policy there should be a quantification of any costs—
Mr. Richard Neville: There should be an impact analysis.
Mr. Scott Brison: Okay, but it should be quantified. What about quantifying the benefit to the new regulation because risk analysis, for instance, that exists for insurance companies now is very sophisticated, the methodologies are very sophisticated? There's no reason why there should not be a quantifiable benefit to any new regulation. I'm not speaking as much in this case of a service provided, but I'm talking about a regulation. Shouldn't there be a quantifiable benefit to risk analysis of every new regulation, to compare? Certainly if we're going to do a cost-benefit analysis, we're going to need the benefit quantified as well.
Mr. Richard Neville: Mr. Chairman, it's a good question. When the minister decides to put forward a proposal for a new program that has a cost-recovery implication, I would expect that the minister would have factored in all aspects of the issue, both the cost and the benefits, and weighed the two from the parliamentary perspective on the benefits as well, and then proceeded to make the proposal. So I would take that as a given, but I'm not sure we have that as a requirement per se in the policy.
Mr. Scott Brison: I'll go back to that in a moment, but there's also the issue of international comparisons. Taxes are clearly on the radar screen in terms of global competitiveness issues, and we can say our personal income taxes are the highest, say, within the G-7, or our corporate taxes are the second highest in the OECD. We can say that, and there's been some comparative information. Does the government take a serious look at the international comparative data relative to regulatory burden? I would think that in some of the emerging industries that are going to be the most significant industries in the future, particularly I'm thinking of biotech and life sciences where the regulatory burden is of significant competitiveness impact, we should be looking at the international comparisons. Does that come into play? Do we look at what other jurisdictions are doing relative to specific areas of regulation?
Mr. Richard Neville: Yes, Mr. Chairman, there are a number of meetings every year that are internationally focused, and several partners and colleagues attend those. In that context, there are always ongoing discussions about various proposals and various trends in the department. But on this specific part, I'll ask Mr. Endemann if he would like to comment.
Mr. Len Endemann: The question was framed in the general regulation-making context, and certainly it is part of our regulatory policy that we should do an assessment of the impacts of a proposed new regulation. That includes, of course, all economic impacts, including competitiveness impacts, and leads one, inevitably—depending of course on the particular regulation proposed—to make internal comparisons. We do certainly, in our own analysis of individual cases, both in terms of regulation, if it comes before the board, but also in terms of regulations that set fees, look very seriously at international comparisons for the very reason that is adduced, because it would speak very powerfully to the issue of competitiveness.
Ms. Jean Szkotnicki: Excuse me, Mr. Chairman and Mr. Brison, but in response, while the policy may be right, the competitiveness issue for the vet drug program was looked at, and indeed, with our major trading partner, the United States, there are no fees for service for the vet drug program or the vet biologics program. Indeed, they have higher performance standards, so review times are better. It's a more competitive agency for me to submit my submission, and while it was looked at, it wasn't accounted for in delivery of the program in managing the implementation of cost recovery, which comes back to our response where we need some oversight in the policy and the implementation of the policy.
Mr. Scott Brison: There was an example of this I'm aware of. In recent weeks, there was one university I'm very familiar with whose tech-transfer department is working on a technology, an animal sterilization vaccine, that has significant commercializable benefit. The venture capitalists in the U.S. told them they would be more amenable to funding them if they were to develop or commercialize that in the U.S. Part of the issue was one of regulatory burden. So I'm bringing that forward as an example of where we have to be very careful in these new industries.
As one idea, I had a private member's motion a few months ago on establishing a regulatory budget to bring a greater level of transparency to the whole regulatory system we have in Canada. Mr. Neville mentioned that some regulations emanate from Parliament already, but a lot of them emanate directly from the public service and from less accountable areas. If we had a regulatory budget where every new regulation had to be vetted once a year, through the regulatory budget in the new regulations, the cost of implementation and enforcement, government-borne costs, and the cost of compliance, citizenry-borne or business-borne costs, would have to be in there, and the benefit has to be quantified.
I know you say you assume that the ministers or the political individuals behind the legislation are thinking of the benefits. I would argue that it is not being done, the benefits are not being quantified, because while the methodologies are very sophisticated, I don't think we as individual members of Parliament, for instance, have access to them. But this could be done through fairly sophisticated cost-benefit analysis methodologies that insurance companies are using, or risk assessment. We could actually have a debate in Parliament parallel to but not linked directly to the fiscal budget, where we could discuss and debate the efficacy of individual regulations or new regulations. Furthermore, we could have sunset clauses with regulations that would actually make this a necessary part of any new....
Periodically, all regulations would have to go through this—and please don't respond that you don't want to burden Parliament with undue work. We are already put on a treadmill when we arrive in Ottawa. This would be something that would be important as opposed to much of the other activity we're currently doing that is less so. But I'd appreciate your feedback on some of that, or whether or not we could actually work to achieve that kind of—
The Chair: Thank you, Mr. Brison.
Who would like to answer that question? Mr. Whyte.
Mr. Garth Whyte: I won't speak on behalf of Treasury Board, but again, maybe a recommendation could be doing what some provinces have done, which is to set up a red tape commission that would look at ways of rolling back fees or the paper burden, and then make recommendations like a regulatory budget. You could have something like that.
For example, why should we be charging for information from Statistics Canada when they don't in the United States? A couple of people, reporters, were quite upset, saying there's a lot of research that's being done using U.S. data, not Canadian data, because Canadian data is hard to access.
So that makes me wonder. When you look at the overall impact, it seems to me the driving force is revenue. It's nothing other than generating revenue. So who's looking at those types of big picture issues other than just competitiveness, just information?
Anyway, I think it's a good idea and something you might want to consider—a red tape commission.
Mr. Scott Brison: One thing about opening it up, bringing it into Parliament, for instance, is if we're debating a regulatory budget, representatives of particular industries would make it clear to parliamentarians how they felt about some of these specific areas, so at least some of those might be flagged. Even though I'm certain that the public service is trying to flag these, it's awfully difficult to flag them without this type of accountability.
The Chair: I guess it's striking the right balance between efficiency and implementation, and we have to....
Mr. Richard Neville: When the statement was made that this is done to generate revenue, I'm glad you added that, that's fine, because, in effect, the major principle was not to generate revenue but to get government right. We had already basically made the program review cuts. They were identified. The plan was to reduce expenditures overall, but when we looked at each program with the six questions, one of them was obviously, is this the right way to manage this particular program?
So in getting government right, we made some calls, some decisions, putting in play cost recovery. But it wasn't to generate revenues. We had already cut the expenditures we needed to cut. So it wasn't in that sense; it was getting government right.
The Chair: Thank you.
Mr. Paul Szabo (Mississauga South, Lib.): Thank you, Mr. Chairman. I guess our time has quickly run out.
Mr. Neville, there were quite a few specific examples and some pretty substantive allegations made by the other witnesses, but it seems we come to a consensus that the policy seems to be okay; it's just not being implemented, or it's not working. Would you agree that this is a fair assessment? And is there anything the other groups said that you would suggest is incorrect?
Mr. Richard Neville: I want to pick up on the positive things, if I could.
One, I'm glad a number of individuals have said that the policy is fair, that it has the right principles in play, but it doesn't take away the fact that we should be looking at it again. I think that's a fair statement.
But I want to deal with the real issues. The real issues to me are implementation.... It's not consistent across all departments and all programs, and we're talking of several hundred programs or components thereof.
Mr. Paul Szabo: Sorry, my time is just minutes and you're not answering the question. I think this is part of the problem.
Maybe you could help me. On page 6 in your deck it says:
User charges appropriate in
- Programs that protect public from
social costs of users.
I'm sorry, but I don't understand what that means.
Mr. Richard Neville: Mr. Endemann could answer that.
Mr. Len Endemann: There are a number of reasons one could justify introducing fees, direct fees, to users. An obvious one, the first one, would be where there's a very direct and clear sort of—
Mr. Paul Szabo: Could you give me an example of a social cost of a user?
Mr. Len Endemann: The social cost of a user would be if an industry is operating in a manner that could impose costs on other people, like on the general public—pollution, for example. We have regulations in many areas where the way in which an industry conducts its own business is governed by regulation, which affects its production costs. This is one very common activity of government.
A number of government programs do much the same thing by trying to mitigate the risk—
Mr. Paul Szabo: Okay, now that you've explained it—
Mr. Richard Neville: Monitoring of ocean dumping is another example.
Mr. Paul Szabo: Monitoring of ocean dumping is the social cost of a user?
Mr. Richard Neville: Yes, because you would be picking up the cost. If you weren't monitoring that, the general public would be picking up the cost, in general, to clean up the oceans.
Mr. Len Endemann: The dump sites.
Mr. Richard Neville: The dump sites.
Mr. Paul Szabo: I'm not sure describing that as a social cost—
Mr. Richard Neville: It's a social cost. Otherwise it would be a cost borne by—
Mr. Paul Szabo: It's as a consequence of an activity.
Mr. Richard Neville: Yes, that is a social cost.
Mr. Paul Szabo: A social cost in the context of the public may not be as—
Mr. Richard Neville: I'll give you one more example, then, that might be a little easier for you: pharmaceuticals. If we weren't doing the testing of pharmaceuticals, we'd be putting the public at risk, whether through diseases or whatever. So again, we're doing monitoring in the context of putting the safeguards in place to ensure the public is protected overall. That, to us, is the social cost of users.
Mr. Paul Szabo: I'm sorry, Mr. Chairman, I can understand that pharmaceutical products may have some consequences to people, but I don't view an adverse effect to a drug, for instance, to be a social cost to a user. I see it as a social cost to society.
Mr. Len Endemann: Well, that is the intention.
Mr. Richard Neville: That's the same.
Mr. Paul Szabo: The reason I want to pursue this is because the word “obfuscation” comes to mind. I really have had a great deal of difficulty following a lot of what has been said today.
I have to tell you, every time you looked down at your three-ring binder and started reading to me about something, I knew it was just going to give a lot of language rather than address what I thought was some fairly pointed argument raised by the other witnesses.
Finally, you reacted, interestingly enough, very strongly to the suggestion about more reports, more this, in contrast to the demand for increased productivity, efficiency, blah, blah, blah. I took from your statement.... Maybe you can just give me an idea of whether or not you believe the need to report, analyse, or assess a situation where a policy is not working is contrary to efficient government.
Mr. Richard Neville: My point is if you're going to improve on something, find out what your problems are and focus on the problems. If I hear today—and I've heard it over the last several years—that our problem is mainly in the implementation, then the focus should be, at the end of the day—i.e. most of the time we spend on all of this—on rectifying the implementation issues. We'll do the policy review because that's a commitment we've made. We'll do that right, and we'll get all the documentation we need. But I think we have problems in the areas of implementation, consultation, and mediation. Those are the three areas. That's where we should be spending our time.
Let's get the implementation right and consistent. Let's get the consultation in such a way that it's meaningful and it occurs. Let's have some mediation in the various programs, so points of impasse are dealt with in a credible way, and if we have to move it up, then we will move it up, but that should be the exception as opposed to the rule.
The Chair: Thank you, Mr. Szabo.
Is there a general agreement that implementation is the key issue, Mr. Whyte?
Mr. Garth Whyte: Yes, but if we can't monitor the holistic impact.... If the policy is causing more damage collectively than benefits, you have to reconsider the policy, yet we don't have that information. Everyone's asked several times, “What are the major impacts on the economy?” We need that impact assessment.
Secondly, if it's difficult to deliver it.... We've done this with the GST and a bunch of other things, where it becomes so onerous.... You may have written the policy well, but the implementation is so hard because they can't get the right cost information, or they don't have the right mediation information, and there isn't a dispute resolution mechanism in place. Half of policy is implementation. The principles are right. We signed on to the principles, but the principles are not being delivered.
The final thing is, who is the watchdog for when the overall policy is not being delivered? Treasury Board has been your ally in putting this together, but we don't see it as an ally now in looking at the whole policy and asking, “What are their concerns?” I was kind of dismayed really. I thought we'd be sitting down saying, “Hey, how can we work together?”
You have a role, we have a role, and the committee has a role in dealing with this policy, which seems to be handled on a kind of individual department basis, which is a recipe for disaster. It really is. I really think people have given up their responsibility by saying it's at the department level. That's where we're running into problems. It'll come back at us politically. It'll come back at you in a whole bunch of different ways. That's the observation I'd like to make.
The Chair: Mr. Harris.
Mr. Richard M. Harris (Prince George—Bulkley Valley, Canadian Alliance): Thank you. I'm pleased to be able to ask some questions here today. I came in late, of course.
Mr. Neville, I think there's a common understanding that there is certainly a problem. You stated yourself, “implementation, consistency, and the fact that there is a wide range of different regulations through different departments”. But what puzzles me is that this is not the first time your department has known there were concerns out there, as evidenced by the other witnesses. The government, of course, has been charging user fees for years and years.
So I guess I'm wondering, why today, after years of concerns that have been expressed...? What has the problem been in addressing the concerns over the years? Has there been political reluctance? Is it a matter of not having people who can address the problem and get the answers out to the people who are asking what's going on?
I always wonder about government departments when we have days like this, when the witnesses say they've been asking for years for them to give an explanation, to be accountable, to fill them in on what they're doing, and it's not getting done. I always wonder why it's not getting done. Is it political reluctance? Is it the fact that you don't have people in your department who can address the problems? Why?
Mr. Richard Neville: Mr. Chairman, I'm not sure when the member arrived, but we had this discussion, I believe, earlier on. We have ongoing discussions with departments. Every day we're in contact with departments, stakeholders, or program line managers who have day-to-day delivery responsibilities. That's what the division that looks after this particular policy does.
So I would have to say, Mr. Chairman, that there are issues that are dealt with; there are resolutions to problems. They're done behind the scenes in a lot of instances, and it isn't evident to those who are not in the know or not in those particular discussions. But it has been going on. Issues have been dealt with. Obviously not all of them have come to successful fruition, but I would say the majority have, from what my understanding is and based on the departments that have these programs.
Again, we're talking about in excess of 400 programs, and if you were to see the documentation that comes in, it doesn't in any way, shape, or form give us the sense that the 400 programs are all being managed—
Mr. Richard Harris: I understand that. But whether it's 400 programs, 4,000 programs, or 40 programs, if the government is collecting user fees from business, the general public, or wherever, I think the people paying the money have the right to accountability from the government as to the cost-effectiveness of the user fees, how the money is spent, whether you're collecting more or less than what's needed, and just a general accountability of the regulations that guide the user fees being assessed.
User fees are something that some people pay voluntarily because they have to use a government service, but the bulk of user fees are really an imposition; there's no way around them. Those who operate in the business world of Canada who are paying these user fees on an ongoing basis simply want to know the rationale behind the user fees and how the money is being spent, whether it's cost-effective, whether they're paying too much, too little, and just some general accountability.
Are you familiar with Bill C-286, put forward by the chief financial critic for the official opposition, otherwise known as a user-fee act? It basically asked for some very fundamental things: service, use, authorization, permit, the user fees charged, the reason for a change in any user fee, the total amount the regulatory authority estimates will be collected in the first three fiscal years, etc. It talks about accountability and about maybe setting up the Standing Committee on Finance to be a scrutineer or watchdog over your department's activities. Basically, it seems to answer most of the concerns we've heard from this group, from Mr. Whyte in a previous presentation, and from Mr. Myers and his organization.
I'm wondering if you've looked through Bill C-286, which is basically an accountability bill. Do you have any problems with the accountability that would be requested in that bill?
Mr. Richard Neville: Mr. Chairman, I'm familiar with the bill, but I believe that bill is being discussed in the House and it's for the House to decide its resolution.
Mr. Richard Harris: Well, let me simplify it then. Would you have any problems with a bill that would be passed through the House, whether it comes from the government side or the opposition, that in fact would set up the Standing Committee on Finance as an overall watchdog and demand complete accountability from from your department, which oversees all the regulatory user fees that are in place?
Mr. Richard Neville: Mr. Chairman, the Treasury Board Secretariat would follow whatever government policy is approved by legislation.
Mr. Richard Harris: This is my last question. I think we agree the policy that has been worked on is okay. That's the general agreement I get.
Mr. Richard Neville: It could be improved, but....
Mr. Richard Harris: They always can be.
I don't think you've answered the question as to what the problem with the implementation of it is, so that we can address the concerns. Why has it taken so long?
Mr. Richard Neville: Mr. Chairman, I thought we had discussed this at length. The problem with the implementation is the inconsistency across the departments, across the programs, in how the policy is actually being carried out. I think if the policy were being carried out to the letter, we wouldn't be having these discussions today. The reality is, different organizations see their roles differently. And I think we have a responsibility to get more engaged and work with stakeholders. That, I think, will come as soon as we get this policy looked at one more time.
Mr. Richard Harris: Who is responsible for the consistency, then?
Mr. Richard Neville: At the end of the day, the government is responsible for the consistency, obviously. Do we have a role to play in that? Absolutely.
Mr. Richard Harris: Have you been actively petitioning the government to let you take a higher role in improving the consistency then?
Mr. Richard Neville: I'm doing the best I can under the circumstances.
Mr. Richard Harris: Okay. Thank you, Mr. Chairman.
The Chair: Thank you, Mr. Harris.
I'm very happy with the round table discussion today, because I think it raised some very important points. One thing is certain. If we're going to look at this particular issue, we're going to require a lot more information. There's no question about it. The administration of the program is, of course, a concern, when some of what I consider to be very basic questions were asked and answers weren't available because of a lack of information or because you don't know how other departments administer this particular program.
There's a lot of work to do, so I'm going to take this opportunity to request as much cooperation as possible from Treasury Board and other departments.
Right now, I'm just thinking, if I want to get the answer to those 400 that you were referring to, does that mean I have to make 400 different requests? It won't be 400; it'll probably be 30 or 40. But I think there has to be a better way to do that than to go after each single department.
In an era where people are accessing the web, pushing one button and getting a lot of information, it's pretty ridiculous that we have to go through all these various departments to access what I think is really basic information. We're not asking to explain the theory of relativity; we're basically saying how much does it cost, what are the implementations, what are the benefits, what are the impacts on the economy—some very basic, fundamental questions.
This is going to be, I think, a study that's going to take a little bit longer than we predicted, just judging from this first meeting. But it's a study that I think will serve Canadians well, and that's why we're going to go full steam ahead with it. I think governments, businesses, and other groups need to answer some very basic, fundamental questions about how this economy should work, how it functions, and how we can improve it. So there will be exciting times ahead.
The meeting is adjourned.