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37th PARLIAMENT, 1st SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Thursday, May 9, 2002

0935

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

Mr. Pierre Laliberté (Senior Economist, Canadian Labour Congress)

0940

0945

The Chair

Mr. Pierre Laliberté

The Chair

Mr. Vincent Dagenais (Assistant to the Executive Committee, Confédération des syndicats nationaux (CSN))

The Chair

Mr. Vincent Dagenais

0950

0955

1000

The Chair

Ms. Jane Stinson (Director, Research Branch, Canadian Union of Public Employees)

1005

1010

1015

The Chair

Captain Dan Adamus (Chair, Government Affairs Committee, Air Line Pilots Association, International)

1020

1025

The Chair

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

Ms. Jane Stinson

Mr. Pierre Laliberté

1030

Mr. Vincent Dagenais

Mr. Rahim Jaffer

The Chair

Mr. Pierre Laliberté

Mr. Vincent Dagenais

1035

The Chair

Ms. Jane Stinson

The Chair

Captain Dan Adamus

The Chair

Mr. Yvan Loubier (Saint-Hyacinthe--Bagot, BQ)

1040

Mr. Vincent Dagenais

Mr. Yvan Loubier

Mr. Vincent Dagenais

Mr. Yvan Loubier

Mr. Vincent Dagenais

The Chair

Mr. Yvan Loubier

Mr. Pierre Laliberté

Mr. Yvan Loubier

Mr. Pierre Laliberté

Mr. Vincent Dagenais

1045

Mr. Yvan Loubier

Captain Dan Adamus

Mr. Yvan Loubier

Captain Dan Adamus

Ms. Gail Misra (Legal Counsel, Air Line Pilots Association, International)

Mr. Yvan Loubier

1050

Ms. Gail Misra

Mr. Yvan Loubier

The Chair

Mr. Cullen

Mr. Vincent Dagenais

Mr. Roy Cullen

1055

Mr. Vincent Dagenais

Mr. Roy Cullen

Ms. Jane Stinson

Mr. Roy Cullen

Ms. Jane Stinson

Mr. Roy Cullen

1100

Captain Dan Adamus

Mr. Roy Cullen

Captain Dan Adamus

The Chair

Ms. Gail Misra

Mr. Roy Cullen

The Chair

Mr. Shawn Murphy (Hillsborough, Lib.)

1105

Captain Dan Adamus

Mr. Shawn Murphy

Mr. Pierre Laliberté

1110

Mr. Shawn Murphy

Mr. Pierre Laliberté

The Chair

Ms. Jane Stinson

1115

The Chair

Mr. Shawn Murphy

The Chair

Mr. Rahim Jaffer

Captain Dan Adamus

Mr. Rahim Jaffer

Ms. Gail Misra

1120

The Chair

Ms. Carolyn Bennett (St. Paul's, Lib.)

Ms. Jane Stinson

Ms. Carolyn Bennett

Ms. Jane Stinson

Ms. Carolyn Bennett

1125

Ms. Jane Stinson

The Chair

Mr. Pierre Laliberté

The Chair

Mr. Vincent Dagenais

1130

The Chair

CANADA

Standing Committee on Finance

NUMBER 100

1st SESSION

37th PARLIAMENT

EVIDENCE

Thursday, May 9, 2002

[Recorded by Electronic Apparatus]

¿ (0935)

[English]

The Chair (Mrs. Sue Barnes (London West, Lib.)): Order, please. The order of the day is pursuant to Standing Order 108(2), pre-budget discussions.

We'd like to welcome to our panel today, Pierre Laliberté, senior economist, Canadian Labour Congress; François Bélanger, and Vincent Dagenais, assistant to the executive committee, Confederation of National Trade Unions; Jane Stinson, Canadian Union of Public Employees; and Captain Dan Adamus, chair of the government affairs committee, and Gail Misra, legal counsel, Air Line Pilots Association, International.

It's probably best to commence in the order you're listed on the agenda. Does everyone have an agenda before them?

From the Canadian Labour Congress, Mr. Laliberté. Commencez, s'il vous plaît.

[Translation]

Mr. Pierre Laliberté (Senior Economist, Canadian Labour Congress): Good morning. I would like to extend my greetings to all five members who took the trouble to attend this meeting this morning, as well as to brothers and sisters from the labour movement. I would also like to thank the committee for giving us this opportunity to present our views to Parliament.

For starters, we feel that the questions for this discussion are good: how can Canada assure not only economic prosperity, but prosperity that is widely shared by all, and help improve the quality of life for all Canadians?

[English]

The emphasis on standards of living and quality of life is not lost on us, as we have felt for some time that working people's concerns have been pushed to the sidelines. As we read documents from the finance department, which are full of talk about the economic success of the 1990s, we find many statistics on fiscal balances and debt levels, but hardly any on the actual situation of women and men who make up our economy.

As a point of fact, for the great majority of working people in this country, the 1990s were not a good decade. Average wages and salaries did not grow in relation to inflation and even failed to keep pace with the modest increase in productivity we experienced. For most, work has become more precarious, intense, and stressful. Moreover, we have witnessed growing wage and income inequalities, which have left many more Canadians in low-income situations, even at the height of economic expansion.

Incidentally, one modest but effective way to put Canadians' standard of living at the centre of the policy exercise would be for the Department of Finance to present an analysis of the impact of budget measures on job creation, income distribution, and poverty--not just revenues and expenditures.

To us, the most important change required is more philosophical than a policy or a program change. We sincerely hope the things proposed by the committee are a signal priorities might be changing. For many years now we have called for a reinvestment of the fiscal dividend and the social programs that make a difference in the lives of Canadians. Indeed, the priorities of our members are, not too surprisingly, reflective of those of the population at large. They have not changed much over the past decade. Health, education, unemployment, child poverty, and the environment have consistently topped opinion pollers' charts, but with the notable exception of child poverty, they have not made it to the top of the policy agenda in this country.

A cursory examination of the budget figures makes one realize how far we are from the promise of reallocating 50% of the fiscal dividend to social programs. But you don't need to take our word for it. Even the finance department brags about the fact that Canada has experienced the sharpest drop in program spending in all OECD countries, which means this spending now stands at its lowest level since the 1940s.

The high popularity of Canadian social programs speaks for the difference they make in people's lives. They are also a good economic reason to want to reinvest and innovate in this area. Indeed, looking ahead at the medium to long term, Canada will be facing an important challenge, as the aging of the population will be coupled with the slowing of population growth. As a result, virtually all economic growth will be accounted for by productivity increases and by ensuring all those able and willing to work can do so. In order for this to happen, we need to equip ourselves with a set of enabling policies and supported programs that will help to make the most out of our human resources. We can call it a comprehensive strategy to meet Canada's future social and economic needs.

First, we need a clear policy commitment to full employment and to policies aimed at increasing our rate of labour force participation. Likewise, if we want Canadians to embrace economic change, it is equally imperative that we repair the employment insurance system. As it is, only a minority of those who are unemployed are able to rely on the EI system. What's more, the EI program discriminates, de facto, against women and young people. This is wrong. In light of the surpluses that have piled up year after year in the EI account, it's also unnecessary.

Secondly, we need to ensure as many Canadians as possible are provided with the education and training needed to work to the best of their abilities. While there is much talk of the knowledge economy, public resources geared to education and training have been dropping since the early 1990s. It is worth pointing out here the dismal failure of the blank cheque policy to the business sector with regard to training.

When it comes to training, we advocate a two-pronged strategy, one of which is to use a grant levy on overall payroll costs, akin to what is done in Quebec, whereby corporations have to invest at least 1% of their payroll in training or have it taxed away.

¿ (0940)

My colleague here from the CSN might be able to speak more eloquently about that issue.

The second arm of the strategy would be to build into the EI program a training relief component, whereby contributors could accumulate five weeks' worth of training leave for each year of contribution to the system, up to a maximum of 50 weeks. Such a program would have the merit of portability and of creating an incentive for workers to get retrained. Employers would have the option of topping up the EI contribution, as currently happens under the parental and medical leave segments of the EI program.

Turning to post-secondary education, higher fees--a 100% increase over 10 years--have made it increasingly difficult for our young people to pursue a higher education. As the green paper on Canada's innovative strategy suggests, this has become an effective obstacle to less advantaged Canadians to pursue post-secondary education. If we are to reach the laudable goal, set in the green paper, to have 100% of high school graduates participate in some form of post-secondary education, some substantial reinvestment has to take place here.

Thirdly, the area that has topped the list of concern for Canadians is health. The CLC is a firm believer that health is a public good and government has a primary responsibility in nurturing it. We believe the federal government has a duty to uphold the principles of the Canada Health Act. But it also has responsibility to pay its fair share of the cost. This is why we call on the Government of Canada to replace the current CHST system by three dedicated national funds for health, post-secondary education, and social assistance. It should also fund the new national health fund, if you will, with an initial cash contribution equivalent to 25% of provincial health costs for health services, meeting the requirements of the Canada Health Act.

The fourth leg of a worker-friendly strategy would have the federal government support the establishment of affordable early childhood education and care in Canada. The absence of a national commitment to child care continues to act as a barrier to the labour force participation of parents, as well as to the full development of children. To us this is an essential component of both a forward-looking education strategy and high labour force participation.

The fifth component of the strategy would include a major reinvestment in housing as well as public infrastructure. I will spare you the details of this, seeing that my time is running out.

The final component of our suggested strategy would be to meet the United Nations goal of 0.7% of GDP for official development aid.

The Chair: Mr. Laliberté, you can take more time if you want. Take the time you need to make that point.

Mr. Pierre Laliberté: Okay. Thank you. Members can bring me back to that.

Canada, as a trading nation, has all to gain in the successful and harmonious development of the world's developing nations. But just as we've lived off our accumulated capital in the social realm over the past decade, we have done the same at the international level. We expect Canada to lead in the area of aid to development, not trail behind, as it is doing today. The recent commitment by the Prime Minister to small increases in ODA, of 8% per year, will bring us to half of the target by the end of the decade.

In view of dire needs in terms of health and education in developing countries, particularly the least developed nations, this is totally insufficient. If Canada is truly serious, it should seek to meet the 0.7% goal by the end of the decade.

With respect to the next budget, I guess....

¿ (0945)

[Translation]

Three points should be raised.

First of all, we, like the majority of observers, expect to see a substantial budget surplus that could be between $10 billion and $16 billion, based on estimates. To our mind, the government will therefore have an opportunity to reinvest part of this surplus to launch some of the initiatives we have mentioned.

Moreover, we feel that it will be important, over the course of the coming year, to send out a clear signal with respect to health care issues. We know that the Romanow commission is currently deliberating. We hope that the government will take its conclusions seriously and clearly indicate to people working in the Canadian health care system and those who are benefiting from treatment that health care is a priority for the Canadian government.

Finally, we feel that the economic prognosis is rather positive and encouraging. Having said that, we are, nevertheless, seeing some signs that the economy is weakening in the United States. We do know, however, that the American economy has served as an economic driver for several years over the past decade. So we think that it would be prudent, even in the "Martinesque" sense of the term, to establish an investment fund for infrastructure that could be used quickly if the economy were to weaken. If this slowdown does not occur, the funds will not be lost, because they will have been invested for something that will have to be done at any rate. For these reasons, we feel that we should not be prematurely over-optimistic.

Thank you very much.

[English]

The Chair: Thank you very much. You got everything in that you wanted to get in, in your presentation?

Mr. Pierre Laliberté: Not quite, but other people have to speak too.

The Chair: Fine. Thank you.

From the Confederation of National Trade Unions, who is going to start? Mr. Dagenais.

[Translation]

Mr. Vincent Dagenais (Assistant to the Executive Committee, Confédération des syndicats nationaux (CSN)): Thank you, Madam Chair.

I think that my colleague, Mr. Laliberté, was right in talking about a new expression that is in use in Canada: “to be as prudent as Martin”.

I would like to start by thanking you for inviting us to appear today. Given the deadline we faced, we were unable to prepare a complete document, and I apologize for that. However, we are happy to participate in your discussions on the next federal budget.

[English]

The Chair: Mr. Dagenais, any document you wish to send on to the clerk after the fact will be translated and circulated for you also. You have that opportunity.

[Translation]

Mr. Vincent Dagenais: Thank you, Madam Chair.

The economy seems to be doing well, if we look at the most recent indicators. I am not going to spend too much time on those issues, but I would simply like to point out that Canada continues to face a number of problems: poverty and inequity, problems that affect women and aboriginal peoples in particular, and problems in the area of education and health care, just to mention a few. These problems are well known.

Moreover, it seems to me that the federal government should, in preparing its budget, break with what has become more and more of a habit in recent years, and by that I mean simply congratulating itself for its accomplishments and presenting Canada as a country where there are no problems.

We must tackle the real problems facing all Canadians. In this short presentation, I would simply like to raise a number of points which, in our opinion, need to be resolved.

First of all, there is a structural problem that has already been mentioned and that I want to put on the agenda this morning: the issue of fiscal imbalance. Obviously, I will not be going back over all of the issues raised by the Séguin commission in Quebec. I simply want to tell you that, in our opinion, using the Government of Canada Internet site to react to this document and respond to all of the provinces is simply not good enough.

We feel that at the very least, without prejudging the outcome of the debate, the federal government could accept to discuss the matter openly, and recognize that a fiscal imbalance does exist. I do not want to start rattling off figures this morning, but I know that there has been a debate on the accuracy of the Conference Board of Canada's forecasts. However, if we look at previous years and if we completely set aside forecasts, we can see, by simply examining figures from the past, that a fiscal imbalance does exist.

It is not simply an accounting or a monetary problem, but it appears to us that this imbalance reflects the way the Canadian federation functions, or “dysfunctions”. The next federal budget should therefore directly tackle the issue rather than denying it exists.

The second issue, which is not new but which we much unfortunately raise again, is employment insurance. Instead of simply repeating something that sounds more like a slogan than a concrete answer—that there is no employment insurance fund nor is there a surplus—we feel that the federal government must recognize that all Canadian men and women are now paying more into employment insurance, with the employer's share, than they receive in terms of employment insurance benefits in one form or another.

In this regard, I feel that I must point out that there is currently an ongoing debate between the Quebec government and the federal government on funding for the Quebec Parental Insurance Plan; the issue has not yet been resolved. The matter could be resolved quickly, but it is still on the table. So unfortunately, a second issue is still dragging on, but it should be resolved, and I am referring here to re-establishing employment insurance and the funds for employment insurance that should be used for what they were truly intended.

¿ (0950)

In this regard, I want to point out that the Confédération des syndicats nationaux has launched proceedings that will be heard next year. We contend that this misuse of the employment insurance fund breaches the Canadian Constitution and other related acts. It is a bit unfortunate that we have had to go the courts to enforce what should have been done naturally and to think that money that was collected to help people who are employed is being redirected for other purposes.

I would also like to point out the fact that we are currently facing a system where the existence and level of the surplus remain a secret, despite the fact that it was clearly stated during the election campaign that Canadians should have a say in how the surplus is used. It is perhaps the most widespread guessing game in Ottawa, and elsewhere in the provincial capitals. The existence and use of the surplus remain a guessing game that Mr. Martin perhaps has a lot of fun playing. Essentially, he faces three choices: reducing the deficit, changing or cutting taxes or, and I was going to say this quite naively, doing some brainstorming with his colleagues to see where he could invest.

The last measure that was adopted all of a sudden was a grant or assistance for municipalities. It seems to us that, contrary to what we have been told, Canadians are kept in the dark, once again with respect to the existence and nature of the surplus and how it is used. That is why the expression my colleague Mr. Laliberté used earlier applied perfectly. Mr. Martin's prudence is no longer exemplary, because it is no longer transparent. The way the budget is prepared and how the surplus is used should be much more transparent and, above all, we should not be dealing with fait accompli, in other words the sudden appearance of a surplus at the last minute.

Finally, I would like to point out that after having achieved a kind of balanced budget, the federal government seems to have given up on introducing constructive economic and social policies in its budgets. I will not go back to what my colleague and brother said, because there are too many areas, be it, for example, housing, or training, which deserves support under federal programs. It nevertheless seems to us that the Canadian government has to some extent given up on making economic policies and that it is now sticking to maintaining a balanced budget.

I can tell you that my training as an economist does not lead me to idolize fiscal balance to that degree. This is a new vision of public finance and budgets that has been reduced to a single variable: fiscal balance. It seems to me that, without advocating an imbalance, the federal government should be pursuing other objectives.

In order of importance, the next area that the federal government is the most obsessed with is the use to be made of the surplus, and after that, the way in which the Bank of Canada fine-tunes the interest rates to adjust the Canadian economy. In each of these areas, we are under the impression that the Canadian government has given up on setting real, active policies that promote employment, women, and so on. I do not want to give you a list here of all of the areas in which government should take action.

¿ (0955)

Finally, like my colleague, I'd like to talk about international matters. There's a very precise question to which the government should find an answer: What is happening in the context of the present Free Trade Area of the Americas negotiations? According to some, nothing is happening. According to others, negotiations are clipping along. I would simply remind you that chapter 11 of NAFTA that might be reproduced in the Free Trade Area of the Americas Agreement directly challenges the capacity of parliaments, that of the Canadian Parliament among them, to pass legislation and especially legislation of a budgetary and fiscal nature. The government can be challenged by corporations and Canadian legislation and policies can be challenged by businesses that would question their legality under NAFTA and perhaps even under the Free Trade Area of the Americas Agreement. It seems to me the Finance Committee should be concerned about these ongoing negotiations.

I'd like to share one last thought on the matter of training. I'm not going to explain the Quebec program, but I'd simply like to remind you that some 10 days ago in Montreal there was a meeting of the Employment ministers of the G-8 countries that adopted a rather elaborate statement on the problem of on-the-job training that will last a whole lifetime. All the union organizations that were there would like to see that statement and action plan really taken into account during the G-8 meeting of the heads of state that will take place in Kananaskis next June.

Thank you, Madam Chair.

À (1000)

The Chair: Thank your very much.

[English]

Now I'll move to the Canadian Union of Public Employees, Jane Stinson. Please, go ahead.

Ms. Jane Stinson (Director, Research Branch, Canadian Union of Public Employees): Thank you.

We welcome the opportunity to appear before you here today. I must say, we didn't feel we had ample advance notice of these hearings beginning, and we very quickly put together a submission. We may wish to elaborate on this submission later, and we might provide more information to you.

CUPE, as you may know, is Canada's largest trade union. We represent about 500,000 workers in communities everywhere across this country. We're employed at a range of levels of government, including municipalities, and by hospitals, long-term care facilities, libraries, universities, social service agencies, public utilities, airlines, and others. As a result of the nature of the work our members do, CUPE has a long history of being very concerned about public services and the quality of life within communities across this country. We're particularly alarmed at what's going on right now.

Our submission touches on themes we have raised with you before, through our union and the coalition we participate in, which develops the alternative federal budget. So if you find it somewhat familiar and repetitive, it is. This is because the government simply refuses to acknowledge the concerns we consistently raise, and take action to address them.

Right now we're noticing a tremendous decline in the quality of life in our cities and towns due to a huge downloading of responsibilities to local government without adequate funds to provide these services. It's shocking what's happening. I think the FCM and the big cities have been making their case quite effectively. These problems are certainly experienced by rural communities.

It's true this decline in service and quality in our communities is not inevitable. It does rest, in part, with the federal government, which is responsible for making serious investments--in public services, public infrastructure, the Canada health and social transfer, housing, and unemployment insurance--to turn the situation around.

CUPE is particularly concerned that the absence of public funds means there's far more pressure on all levels of government to privatize and commercialize their operations. I just want to talk a little bit about why we're so concerned about it and what the consequences of it are. It means there's less accessibility for a range of public services. As the private sector moves in, we see a shocking increase in user fees. With higher user fees, it is clear poorer people can't get access to the services they did previously, when these services were provided more as a public service without user fees attached. It's also more expensive to governments and to citizens to allow privatization.

We're seeing a huge increase or interest in public-private partnerships as the latest form of privatization. This especially happens where levels of public government are forced to turn to the private sector to finance the capital investment they require for the infrastructure. We've done a lot of analysis of these. There is no question, it's more expensive for the private sector to float the bonds in the market than it is for the governments. We urge this government to take advantage of the AAA rating we now have from Moody's for our bonds. We should take advantage of the huge surplus we now have and really invest directly in public services, so that levels of government are not forced to turn to private partners through public-private partnership for this needed investment.

The other concern about privatization is it means there's far less accountability. When the private sector begins to own or control the operations of public services and public assets, like water filtration plants or schools, we lose accountability over those services. Citizens have less opportunity to make changes through their governments. We even lose information about what's happening because we lose access through freedom of information or other means of transparency. They become privatized and are moved into a private, for profit, competitive realm.

It's clear privatization benefits business. There is no question, it doesn't benefit people. We also share the concerns that were raised by Vincent Dagenais about the international trade implications of privatization. That's something not addressed in this paper.

À (1005)

But something I really want to emphasize again is that we've done a lot of research, a lot of work, and have commissioned legal opinions on the impact of privatization, including through public-private partnerships, under international trade regimes. Our conclusion is that it will help to lock in privatization. It will make it more difficult for us as citizens or governments, who decide that this is not the right way to go, to get out of it. Chapter 11 of NAFTA, or the rules under GATS, or what we expect will come through the FTAA will provide corporations strong rights to sue governments for “expropriation”--the decision to end a contract and their corporate loss of future profits.

So the costs of privatizing are tremendous in so many ways, and this is one of the main reasons we urge this government to ensure that there is more direct investment in public services, and to use the surplus, to use our better financial situation, to try to change this.

In our submission we call attention to what's happening in communities. We clarify once again our opposition to tax cuts. We think this ties the hands of government so that there's less fiscal room to move, to invest. Tax cuts as well are disproportionately benefiting the rich and corporations. So we're moving away from government, from the federal government in particular, as an important means of redistribution of income between rich and poor to one that is simply aggravating the growing gap between rich and poor in this country.

Again, direct investment in social programs plays a really important role in being a social equalizer between the rich and the poor. I'm sure you know that and I don't need to elaborate that point.

The Canada health and social transfer is also an area of concern that my confreres have spoken to. We've seen billions of dollars cut from the CHST, and the even greater bundling of these transfers through the CHST has made it harder to know what's going on, where the money's going to, and whether in fact all three areas that are to be funded through the CHST are getting that money.

We suspect, although it's really hard to determine, that in fact health care is getting the lion's share of this funding and that social services and social assistance are suffering the most. So once again it's the poor of this country who are paying.

Infrastructure is another important area of concern for us. We were very disappointed in what this government did in the last federal budget around infrastructure. Essentially there was little new investment allocated for this, and it's a huge area of concern, as I'm sure you are aware. As well, what was troubling to us in the last budget is that this government very clearly opened the door and encouraged public-private partnerships in this area. This is not the way to go, in our view, for the reasons I mentioned. So clearly we need much more money going into infrastructure investment.

Health care, of course, is another major area of concern for us, as with most Canadians. Again, the actions that were taken to restore the funding earlier are helpful but don't go far enough, and in fact the last budget did little, it seems, other than recycle the earlier commitments that were made. There wasn't additional money put into health care.

We know the problems exist. We know that again there's tremendous pressure to privatize health care, and we've very concerned about that direction for the reasons I mentioned earlier. We've been watching, we've been involved in, we've been attempting to mobilize and influence the presentations being made to the Romanow commission. We've been watching and analysing the Kirby Senate committee report, and we're very troubled by the recommendations there to increase privatization and health facilities services and insurance.

I would also note that Senator Kirby has some personal interests in long-term care facilities that may benefit from privatization.

It's clear that there need to be significant reinvestments in health care, and if the federal government is to continue to play the important role that it has in terms of its leadership and vision for health care, in terms of enforcing the Canada Health Act, dollars have to be there. In order for the federal government to lead in policy, it also has to ensure that there are sufficient dollars to sometimes force the provinces to come into line.

À (1010)

It's clear that Alberta, B.C., and Ontario are really pushing the envelope in terms of privatizing health care. There's been the introduction of Bill 11 in Alberta, opening up private facilities for surgical procedures. We're very concerned about the moves to establish public-private partnership hospitals in British Columbia and Ontario.

We fear that social services are suffering the most because of the lack of earmarked funds through the CHST. We also support and think it's very important to introduce a national child care act, and ensure there's sufficient funding to make it a public program.

Poverty is a major concern, as I'm sure you are aware. We feel there's important action to be taken to address this.

Affordable housing is another area of concern.

Money should also be provided to support advocacy by equity-seeking groups through what we have called an equity participation foundation. That is another important area the federal government could address.

Employment insurance, as my brothers have mentioned, is also a huge area of concern for us. The government seems to syphon off money from the EI surplus, and it is not even sort of redirected to benefit people much. There are many people who should be getting employment insurance who aren't. We have made some specific recommendations about the changes we think should be made to the Employment Insurance Act, to help improve coverage and eligibility for those who pay into it and deserve it.

In closing, I'd just like to emphasize that our union feels very strongly that this government needs to accept its responsibilities as guardian of the public interest. It needs to help meet people's needs, not just corporate or rich people's needs, and try to take measures that will stop privatization and the destruction of public services.

We are just completing our fourth annual report on privatization. This one focuses on what's happening in our communities, because communities are where people live. That's where the rubber hits the road. That's where we experience all of these concerns we're talking about. We intend to send that to you when it's published, which should be soon, so you will have more evidence of some of the concerns we're raising.

Thank you.

À (1015)

The Chair: Thank you very much.

Captain Adamus, please go ahead.

Captain Dan Adamus (Chair, Government Affairs Committee, Air Line Pilots Association, International): Thank you, Madam Chair.

I am Captain Dan Adamus. I'm here representing the Air Line Pilots Association, International. I am a government affairs chairman on ALPA's Canada board. As well, I am a pilot for Air Canada Jazz.

With me today from our Toronto office is Gail Misra, legal counsel for ALPA.

I'd like to thank you for the opportunity to speak to the committee today. Our presentation will take a slightly different tone from that of our colleagues. We will be focusing strictly on aviation issues.

ALPA represents more than 62,000 professional pilots who fly for 42 airlines in Canada and the United States. As a representative of employees in the airline industry, ALPA has a significant interest in the economic health and well-being of this industry.

In the aftermath of the September 11 tragedies, it became more clear than ever before that aviation is integral to the Canadian economy. It is the most reliable and cost-effective means of moving goods and people around our vast country. This is especially true in respect of remote northern territories.

With that interest in mind, ALPA would like to draw your attention today to three particular areas of concern that we hope you will consider in fashioning the next budget. They include the air travellers security charge, war-risk insurance, and finally, stabilization of the airline industry.

On the air travellers security charge, as you may recall from an earlier submission that ALPA made to this committee, we were strongly opposed to the imposition of the air travellers security charge in the prevailing economic climate. The events since September 11 have illustrated the critical importance of the aviation system to the overall functioning of the national economy. We suggested that the surcharge was a punitive levy on the Canadian domestic airline industry imposed at a time when it could least withstand it.

ALPA indicated to you that, in its view, the security charge would be a regressive levy, as the $24 fee is the same no matter what distance the passenger is travelling. This means a person flying between Ottawa and Toronto or Edmonton and Calgary has to pay the same as the person flying between Vancouver and Halifax.

ALPA had predicted that the surcharge would be particularly crippling to short-haul domestic carriers such as Air Canada Jazz and WestJet. These carriers have worked hard to create markets in which they hoped to get people out of their cars and into airplanes. As anticipated, WestJet is already reporting that since the imposition of the $24 surcharge, it has seen a sharp decline in utilization of its short-haul domestic routes, and it has therefore had to cut back on some such services.

Even in the United States, where the security tax was far lower than in Canada, analysts have predicted it is the low-cost carriers like Southwest Airlines that will be the most negatively impacted in the airline industry. The user-pay concept is entirely inapplicable in the current circumstances.

It is important to recall that on September 11 the terrorists were not--and I repeat not--targeting the air transport system, but were utilizing it to turn aircraft into weapons of mass destruction against the general public and government institutions.

We understand there will be a review of the security charge in November of this year. ALPA again encourages the government to abandon this levy in its entirety. The application of the user-pay concept in the context of security of Canada is both unfair and detrimental to the already ailing health of the Canadian airline industry.

If the decision is ultimately made to continue with the imposition of the security charge, ALPA would encourage you to provide for a graduated fee reflective of the length of the trip and reflective of whether the airport in question will benefit from the security enhancements. However, it remains our view that the security at airports is in the broader public interest and as such should be funded through general tax revenues and not solely by the travelling public.

On the second point, war-risk insurance, in the aftermath of September 11, commercial insurance underwriters cancelled war-risk coverage for airlines and reinstated it at much higher premiums for reduced coverage.

On September 22 of last year, Transport Minister David Collenette announced that the Government of Canada would provide some indemnity for third-party war and terrorism liability for essential aviation service operators in Canada for a 90-day period. The government took this action in order to ensure aviation services would not be interrupted after the international insurers of airlines had indicated they would no longer provide the level of war-risk insurance in place at that juncture.The government undertook to support the airline industry in this respect for a limited time only, in order to give the airlines and insurers time to reassess the global insurance situation and to develop more long-term solutions. Since that time, the government has extended the coverage three times, but it is due to expire on May 20 of this year.

À (1020)

The issue of war-risk insurance is not unique to Canada. Governments in the United States and Europe are also providing war-risk insurance to airlines in their respective countries. To date, there has been no resolution of this issue between governments, insurers, and airlines. This type of insurance continues to be essentially unavailable commercially at a price that may be borne solely by the airlines.

There are presently discussions ongoing in the United States and in Europe to create regional mutual insurance schemes in order to attempt to mitigate the gap that has been left by international insurers. However, at this time it is difficult to see how such a solution could work in Canada, which has very few airlines, most of which are very small. It is therefore imperative that the Government of Canada continue to work with the Canadian airline industry to mitigate the impact of the events of September 11 and to provide war-risk insurance until a longer-term commercial solution can be reached.

In the Canadian context, it appears that a strictly market-based product is not going to be viable. ALPA therefore calls on the government to provide long-term support for the provision of this critical insurance coverage, without which Canadian airlines would be unable to continue operations.

The third and final point is stabilization of the airline industry. In July 2000, when Bill C-26 was passed to ensure the orderly restructuring of Canada's airline industry, one of the basic tenets of the bill was to foster competition and to maintain Canadian ownership and control of the domestic airline industry. The government has made a commitment to having a made-in-Canada airline industry, on the sound basis that we have a relatively small population and a very large land mass and therefore cannot rely on foreign carriers to serve Canada adequately. However, ALPA is concerned that if the government does not have a plan and policy in place soon to sustain and support the domestic Canadian airline industry, we may be faced with an industry on the brink of disaster.

You will recall that at this time last year Canada 3000 was a thriving airline. However, in the aftermath of September 11 and the ensuing economic downturn in the airline industry, Canada 3000 lost momentum very quickly and ultimately went bankrupt, putting out of work almost 5,000 employees and leaving thousands of travellers stranded around the world or with worthless tickets.

The federal government had announced in the fall of 2001 that it would provide financial aid to airlines affected by the events of September 11. However, when Canada 3000 was obviously in financially dire straits, the government could not move quickly enough to provide much needed assistance. The demise of Canada 3000 has further enhanced the dominance of Air Canada, now the single major player in the airline industry. The effect of the reduced competition has been felt by passengers and businesses as the level of service has declined, ticket prices have gone up, and there are fewer flights available.

Airlines operate on a slim margin in the best of economic conditions. In order to smooth out the cycles in the industry and in order to sustain a vibrant Canadian airline industry, it is necessary for the government to put in place a stabilization fund that may be drawn upon by Canadian airlines in emergency or exigent circumstances. Access to this fund would involve clearly articulated eligibility guidelines, which themselves cannot be so onerous that the fund is in fact inaccessible. In particular, performance conditions attached to the receipt of financial assistance cannot require that the applicants' airline employees bear the bulk of the economic burden through wage and benefit concessions. It would be simply unfair for workers to be forced to pay the price for their employers' survival and growth.

À (1025)

Further, when an application for moneys from the fund is made, there would need to be a quick government response mechanism. The very nature of an emergency or exigent circumstance is that there is a great urgency to the need. If it takes a government weeks or months to respond, a precarious situation can spiral out of control and go beyond redemption before any meaningful measures can be taken. The Canada 3000 example is a case in point.

We suggest, in order for the Canadian airline industry to be more stable and to ensure there is airline competition, it is necessary for some level of government stabilization assistance to be available. Without such assistance, we can envisage further losses of consumer choice in air travel and the growing dominance of only one airline in this country. We therefore recommend the government set up an ongoing airline industry stabilization fund.

In conclusion, the airline industry has made significant efforts to address the current downturn in air traffic and in the economy. Workers have suffered, as in the case of Canada 3000, or have rallied to assist airline employers in meeting the present challenges. We are here today asking the federal government to commit itself to getting the airline industry back on its feet and to ensure there is fair competition in this vital segment of the Canadian economy.

The events of the last few months have illustrated the critical importance of the aviation system to the overall functioning of the national economy. Support of this industry, especially at this time, is clearly in the broader public interest. The government should not abandon its responsibility over a critical part of Canada's infrastructure.

ALPA thanks you again for the opportunity to appear before you today to make our views known to the committee. I'd be pleased to respond to any questions you may have.

The Chair: Thank you very much.

We're going to commence our ten-minute round of questions.

Mr. Jaffer, go ahead, please.

Mr. Rahim Jaffer (Edmonton—Strathcona, Canadian Alliance): Thanks, Madam Chair.

Thank you to all the people here this morning making presentations. I found them very useful. In certain areas, I have some questions that weren't necessarily addressed in your briefs, but are things that popped into my head in listening to your presentations.

I think, first of all, I'd like to put the question I have mainly to our presenters representing labour backgrounds. However, if you have a comment from the airline industry as well, I'd be happy to hear it.

In looking over some of the briefs and hearing some of your comments, there's obviously a call for reinvestment in certain areas in Canadian life. Clearly, there are some areas I think I would agree with as well.

The call for investment seems to be a significant call in many areas. I haven't added up what the totals would be in the presentations you made. Clearly, some of the money could be attributed from the surplus of government surpluses. There may even be, in many cases to fund many of these areas, more funds required.

In light of some of the challenges the government has been facing in areas of security, and other areas that governments may not have had to fund in the past, would your organizations be in favour of governments re-evaluating spending to reallocate resources? Should they almost “go down the line” of looking at deficit financing, once again, seeing that we're out of that era? What would you suggest governments look at heading into this next budget?

The Chair: Go ahead, Ms. Stinson.

Ms. Jane Stinson: I think both are important. I think it's always important to examine government spending and look at whether or not it should be reallocated.

We also believe, in some cases, deficit financing is appropriate, but we have to be conscious as to what the level should be. Certainly, our view is, if we have a fairly robust economy and it's counter-balanced by the assets we hold, it is possible to do some deficit financing if required.

I'll let the others elaborate.

Mr. Pierre Laliberté: While I concur with what my colleague said, I do believe, for ongoing programs, we need to budget for these things. We cannot go with the allocation of a controlled surplus saying we're now going to take a billion dollars and put it into a million-dollar scholarship fund. This is not serious policy. It's gimmickry.

I think your question is right. We need to look at what it is we need and then find the resources to pay for it. If it so happens that once in a while because of the economy we go into a deficit, it's something that is not inherently catastrophic. We can go through it.

The Chair: Mr. Dagenais.

À (1030)

[Translation]

Mr. Vincent Dagenais: Your question touches one of the major problems having to do with the drawing up of budgets at the federal level. The levels are kept low voluntarily, thus creating a surplus, and then we see to the needs, not within the framework of ongoing programs—even though their implementation can be negotiated with the provinces, because we shouldn't forget that there are shared jurisdictions— but on an ad hoc basis, as thought these were gifts coming from the federal government with a limited shelf live. That is related to the criticism concerning the way the present budget works, as it is being presented as balanced and transparent, while in practice, it is fundamentally unbalanced because a surplus is being systematically created, and it is not transparent. The needs that the federal government is aware of just like everybody else are treated on an ad hoc basis with limited budgets that are also limited in time. So it seems to us that the present programs should be reviewed and needs should be covered on an ongoing basis while maintaining negotiations with the provinces in all areas of shared jurisdiction.

[English]

Mr. Rahim Jaffer: The other question I have, which is related specifically to the labour groups, is one I've thought about before. We've had a slowdown in the economy. Hopefully, there will be an increase and it will result in lower unemployment in the future. With all the changes in the economy, what sorts of challenges are your organizations facing, especially in the area of industry where there might be an oversupply of workers? What areas currently have an undersupply? As federal legislators, what role should we be looking at in trying to help address some of these skilled labour shortages? That's something that tends to come up from time to time. You're closest to the ground on that. It would be interesting to hear your opinions on that front.

The Chair: Mr. Laliberté.

Mr. Pierre Laliberté: We see the same things you see. One of the areas where we're having notorious problems is the nursing field.To us this is not very surprising because we have a burnout rate in that industry that is absolutely astounding. This is a consequence of what has happened over the past ten years. It will take some time, I think, to rebuild our human resources there. Now we have to go into all these incentive schemes to try to alleviate a problem that shouldn't have existed in the first place.

Over the next few years, some of the boomers are going to retire, and in many trades this will create across-the-board shortages. We don't think the situation is particularly bad now, but it probably will become increasingly bad, say, five years from now when we'll be hitting that situation. In many cases, what makes it a bit more difficult is that the shortages will probably happen in our regions, not necessarily in the metropolitan areas. That will compound the problem of trying to get skilled labour into the right spots. Fortunately, the business sector is starting to wake up to that situation.

[Translation]

Mr. Vincent Dagenais: I'd just like to remind you of the last meeting of the G-8 Employment ministers. The Canadian initiative actually centred on those manpower problems you are raising. I repeat that the unions which were present did state they were generally rather satisfied with the orientation that was taken. Actually, a workforce adaptation problem was identified, either because of the graying of it or technological change. So programs and an ongoing training approach must be found.

In that context, the CSN, as a union organization, stated that we had to be careful of all the trends leading to deregulation and more flexible labour markets that are being put forth on the pretext of adapting the labour market to change. The best way to face change is for workers to accept training and re-skilling. Adaptation means maintaining a consistent mix of protection, guarantees and accompaniment which means that you can develop training and adaptation programs for the labour force keeping in view those two very current problems which are the graying of the labour force and technological change.

Without insisting on that too much, I will still remind you that both those areas, training and labour market regulation, are quite clearly areas of provincial jurisdiction. I can't overstress the fact that there must be agreements and cooperation at those levels.

À (1035)

[English]

The Chair: Ms. Stinson, for a brief comment.

Ms. Jane Stinson: Thank you.

There are a few points I'd like to make. One is that cuts to public spending, and increased privatization, contribute to labour shortages. They create conditions that force workers, who have options, to look elsewhere for employment. I think we're probably most familiar with this for nurses.

The cuts to public spending mean that nurses and others in health care are run off their feet trying to do their jobs. We've been doing a lot of surveys that have identified that our members in all sectors are working well beyond their paid hours of work. They are trying to hold things together and provide the services they feel they have to, even if they're not paid for those hours.

Privatization also usually contributes to the lowering of wages and more part-time work, which are again conditions that encourage those who have other options to get out of work in that area. I think those are important things to consider.

Another one, of course, is the importance of having a human resources plan to identify needs and provide training. But we also need to create the conditions of work that will encourage workers to stay in those areas.

In closing, there should be recognition of the importance of human services, both as a source of employment and to meet needs. It must be funded appropriately. We focus much more on that, given the nature of our membership. But we also recognize that the government needs to play an important role in an economic development strategy, which also speaks to future employment needs.

The Chair: Thank you.

Captain, I'll just take one brief comment, and then your time will be up, Mr. Jaffer.

Captain Dan Adamus: On the supply of workers, speaking directly to aviation issues, the supply of pilots is starting to dwindle, strictly because of the state of the airline industry. There are not many young people in flying schools these days, and we're looking at a real shortage of pilots in the next five to ten years.

The Chair: Thank you very much.

[Translation]

Mr. Loubier, please.

Mr. Yvan Loubier (Saint-Hyacinthe--Bagot, BQ): Thank you, Madam Chair.

Good day and welcome to the Finance Committee.

Mr. Laliberté and Mr. Dagenais, this morning you gave me an idea, which was to suggest a new expression to the Petit Larousse dictionary, and that's your expression “as cautious as Martin”. I'll give you a definition and you can tell me what you think about it: Popular Canadian expression meaning a person who while saying cynically he is showing elementary caution tells absolutely any old kind of story with the utmost seriousness. Would you agree on that kind of suggestion? You don't have to answer me. In any case, I'll rework it and send it to them.

À (1040)

Mr. Vincent Dagenais: For the purposes of the House.

Mr. Yvan Loubier: Yes, actually. You're right in pointing out that important problem. Since 1997, the matter of fiscal imbalance and unannounced surpluses that pop up like a rabbit out of a hat when they could have been forecast at the outset make a travesty of democratic debate or any debate that we could have on allocating the surplus.

I ran a few figures. Since 1997, since we've been running a surplus, the systematic underevaluations represent about $40 billion. That means that since 1997, we've shielded from public debate $40 billion in financial resources that do not belong to Paul Martin even though he's been boasting about them year after year attributing all these surpluses to the government's management. Finally, when we add up those $40 billion accumulated since 1997, we can see that generally speaking they represent the surplus accumulated in the employment insurance fund.

What more could we do? We've been fighting this fight since 1997 and the Bloc even suggested a bill on fiscal clarity and accountability. Every time we tried to make the minister accountable to the House for his decisions and forecasts, our suggestions were thrown out. What else can we do but turn to the courts as the CSN is doing right now to refocus our fiscal resources towards the needs and priorities of our people? I find that the way we're operating doesn't make any sense any more.

Mr. Vincent Dagenais: What can we do about it? Well, we have to have a public and systematic debate, in other words...

Mr. Yvan Loubier: But they don't even want that. They don't even recognize that there is an imbalance. What must we do? We have a problem.

Mr. Vincent Dagenais: Even if Mr. Martin doesn't recognize it, we have to put the question to him again. I'm not going to tell you what to do in the House, but in the field, our concerns are still there and we'll continue pushing Mr. Martin or anybody else. Whether its employment insurance or the surplus, this money does actually belong to all Canadians and we can't accept that, year after year, they continue playing that hide-and-go-seek game that means that any budgetary decisions are totally beyond our control. There's a matter of accountability and it's fundamental in a parliamentary system and there's also a matter of transparency. At the end of the day, the problems and needs of the people must be acted upon for what they are.

The employment insurance fight is perhaps a fight about the cash, but it's essentially a fight we've undertaken for those people who are unemployed and also for the workers, as they are the ones who are the losers in this.

The matter of fiscal imbalance, of course, is a federal-provincial matter, but ultimately all citizens from all provinces of Canada suffer because their needs are not being met.

I suppose that the members of Parliament will do the work that they usually do. Those of us who work in the field, meanwhile, won't let go.

The Chair: Mr. Laliberté, please.

Mr. Pierre Laliberté: I think Mr. Dagenais has summarized the question very well. It's an eminently political matter, and as he was saying, it's also a matter of accountability. I think it is the prerogative of the Finance Committee to call the Minister of Finance to order on these matters.

Mr. Yvan Loubier: We have to call him back to order.

Mr. Pierre Laliberté: Yes.

Mr. Yvan Loubier: I'm just repeating in case they didn't understand.

Mr. Pierre Laliberté: Of course, we're not talking so much about the management of public finances here as the management of perceptions. So you want to manage the perception to make people believe that situations are always worse than they are and thus decrease the expectations people might have. When you do that once or twice, that's fine, but when you do it systematically you can see the results. I don't want to presume anything but at some point you have to get figures that make a bit more sense. Generally we agree with you on that.

Mr. Vincent Dagenais: If I can be allowed to add a couple of words, I would say that when the Canadian government can find consensus between the different provinces that's a very important opportunity. I'm repeating here that we don't want to engage in a Quebec-Ottawa quarrel. That's not what is at issue here.

When the ministers of Finance get together, come to a consensus and order studies involving all the provinces, it seems to me that the federal government should be very receptive. They have a good opportunity there to engage in open debate without second-guessing the outcome.

À (1045)

Mr. Yvan Loubier: Absolutely.

I have a question for Captain Adamus. We were in total disagreement on the introduction of a new security fee. Actually, you cooperated in a coalition that we set up with the opposition parties, more particularly with the Canadian Alliance. What are your expectations concerning the review in November? You continued making representations after denouncing the situation. You talked about the effects that could have on activity in the air transportation sector and regional development. Do you think that in November this government will show a better disposition and more consistency between what it says is being done to help the air carrier industry since September 11, in particular, and the fact that it is hurting it badly with this new security tariff? Do you think that tax might disappear?

[English]

Captain Dan Adamus: Well, we're hopeful. Is it probable? Probably not.

We really think what happened on September 11 was an attack on human life, on government agencies that had nothing to do with the airline industry, and we don't feel it's pertinent to tax the air traveller in light of what has happened. Again, we have said that if the tax has to stay, it has to stay as a graduated fee. In other words, the longer the trip, maybe the more the fee could be. But certainly on short hauls, it's very detrimental to the aviation industry.

I just might add that if this attack had been, say, in the subway system of New York, would the governments be looking at adding a tax to each subway ticket? It doesn't really make sense to us. Defence is of national interest. It should be shared by all citizens of Canada.

[Translation]

Mr. Yvan Loubier: You said something that I question here. You said that air carriers operating in Canada should absolutely be Canadian because such carriers are in the best position to serve outlying areas with low population densities and small communities. How do you reconcile that affirmation and the fact that during the last 10 years almost all the low population density routes were let go. Recently, the Gaspé--Îles-de-la-Madeleine route was let go and many others were let go before that. How do you reconcile that statement with the fact that the Canadian air carriers now serving outlying regions are abandoning more and more of the routes that are found to be less profitable, even though they still remain profitable to a degree?

[English]

Captain Dan Adamus: I'll let Ms. Misra take this question.

Ms. Gail Misra (Legal Counsel, Air Line Pilots Association, International): Thank you. I think it's a very good question that you have asked with respect to service to small communities.

As you may know, in the U.S. there is considerable federal support for service to small communities that otherwise would not be served. Our view is that in a country like ours, where there are communities that really cannot be served well by rail and certainly are not being served properly by air, it is imperative that government provide some assistance to those communities. Obviously, it's on a needs basis. If in fact it's not a viable line that could otherwise be commercially served, then I think it is incumbent on the government to ensure that people who are living in far-flung areas of this country should be served. The model would be through specific subsidies for specific communities that might need the service.

If you have a follow-up question, I'd be happy to try to answer it.

[Translation]

Mr. Yvan Loubier: What kind of program exists in the U.S.A. to support small communities? How does it work? What is the amount? Do you have any documents to that effect? I find all that very interesting.

À (1050)

[English]

Ms. Gail Misra: I don't have significant documentation, but I would be able to provide you some, because the Air Line Pilots Association is, of course, an international union, and we do have information we can provide to you.

I have read the material that has most recently been provided, and my understanding is that the municipal government of a community would make an application to the federal government. There is an assessment of the need and why it is that it cannot be commercially served, and if the federal transportation agency is of the view that there should be some subsidy provided, I understand they will then look for commercial airlines to tender for that line, given that there will now be a subsidy. Then someone wins that kind of contract and for some period of time undertakes to provide service.

We are happy to try to provide you with further documentation on that.

Mr. Yvan Loubier: Merci.

The Chair: Thank you.

Mr. Cullen.

[Translation]

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you very much, Madam Chair. I also thank the witnesses for their presentations.

I'll have a question for each one of the witnesses if I have enough time. I don't remember which witness talked about chapter 11 of NAFTA. Was it Mr. Laliberté or Mr. Dagenais?

A voice: Everybody mentioned it.

Mr. Roy Cullen: Everybody.

[English]

I've had similar concerns about chapter 11, but are you aware of the fact that very recently there are some very large forestry companies--Canfor and Tembec--who have launched suits under chapter 11 charging that the United States government, by its very precipitous and off-the-wall action on softwood lumber, has prejudiced their corporate interests? That has caused me to think, secondly, about chapter 11 of NAFTA. I'm wondering if you've had similar thoughts.

[Translation]

Mr. Vincent Dagenais: With the court challenge that Tembec has just launched concerning the extraordinary penalty on softwood lumber, we have a perfect illustration of the fact that, without approving any part of the American policy, this chapter does allow a business to question the policies put forth by governments. It's in that sense that the chapter is bad. In practice, most challenges brought under chapter 11 concerning the implementation of NAFTA were launched against legislative or regulatory provisions having to do with the environment or the possibility for Canada to offer a public service. I'm thinking more particularly about the challenge launched by UPS against Canada Post.

I quite agree with my colleague in the following way: if you put together a trend to privatization of public services and the NAFTA provisions, especially those in chapter 11, you get a perfectly explosive mix that threatens to lead us to total deconstruction of public services in ways we can barely imagine. Just take the example of UPS versus Canada Post. UPS, under chapter 11, is not only asking to be compensated for the profit they thought they'd be making, but also to have access to the Canadian public network. If ever UPS were to win its suit, nothing tells us that this same reasoning couldn't be brought to bear in all our other public sector areas, such as education or health.

So that chapter gives business the power to challenge government provisions. There you have all the ingredients necessary to totally deconstruct public service and encroach upon the jurisdictions of the different parliaments.

[English]

Mr. Roy Cullen: We could get into a large debate about that. I think some of this precipitous and irrational action in the United States against softwood lumber is giving some of these companies a vehicle that might be quite effective in the end.

But I need to move on now. Merci beaucoup. There's some good food for thought.

[Translation]

As for the Séguin commission, Mr. Dagenais, you said that at the federal level considering the fiscal imbalance doesn't really lead to very much.

À (1055)

[English]

But you say that, and yet you also say there is fiscal disequilibrium, especially in the context of Quebec. I'd just like to come back to that point, because I'm not sure I would agree with that.

I must say, I was particularly surprised in the context of Quebec, where the Province of Quebec receives more than half of all the equalization payments, for starters. But if you just look at the tax bases that the various provincial governments have, they have access to corporate taxes, personal income taxes, commodity taxes, and payroll taxes. They're able to set their own rates.

I guess not so much in Quebec, perhaps, but in Ontario, which is the province I live in, and in other provinces, provincial governments have been cutting taxes by huge amounts. So when we start to talk about fiscal imbalance, I must say, personally, I'm much more sympathetic to municipal fiscal imbalance than to provincial.

You could spend a lot of time talking about the Séguin commission, but the Conference Board's fiscal projections have pretty well demonstrated that if the projections were perhaps a little pessimistic, a small change could have changed the dynamics of the Séguin commission report. So I would just like to say, for the record, that I'm not sure I'm convinced by the Séguin report.

Maybe it's not fair just to say that, and maybe, Mr. Dagenais, if we have time, you could comment again later. But I'd like to move to Ms. Stinson, if I might...or would you like to comment?

[Translation]

Mr. Vincent Dagenais: In a sentence or two, I'd simply like to say that I'm not asking you to agree with Séguin today. In any case, Conference Board studies are also used by the Canadian government in other circumstances. What I expect from the Canadian government is a public debate, and a very open one, with the provinces. The ministers of Finance of all provinces met recently and saw... Maybe they're all wrong, maybe all the provinces are wrong, I'm not asking you to decide anything here, but it seems to me that at least... What you are quoting is what we find on the Canadian Government Internet site. We can read what you've just said on the Canadian Government Internet site. It seems to me it shouldn't only be on the web; we should be able to debate this tax question, this fiscal problem, around the table, between Canadians.

[English]

Mr. Roy Cullen: Facts also are interesting to me, in any kind of debate.

Ms. Stinson, you mention this in your brief, and while I think it's a legitimate point to make, why the federal government would be cutting taxes at all, and I think that's a fair debate, when you say to stop tax cuts to rich Canadians and business interests, I'm wondering if you're mindful of the fact that in all the tax cuts that the federal government has delivered, fully 70% have been targeted to modest-income and low-income Canadians. I'm wondering if you're also aware of the fact that, of the $100 billion tax package, something like $3 billion to $4 billion related to corporate tax cuts.

If I might say, it seems to me to take away from your point, which may be a valid one, when you make these kinds of rhetorical statements. I wonder if you could respond to that.

Ms. Jane Stinson: I do think they're more than rhetorical. You yourself pointed out the value of the corporate tax cuts, and our assessment of the personal tax cuts is that those with a higher income derive a greater benefit. So that's what we meant by benefiting the rich.

Mr. Roy Cullen: I didn't say that at all. In fact, I said it's the opposite; 70% of our personal income tax cuts have gone to modest- and low-income Canadians.

Ms. Jane Stinson: Right. Our perspective is that it's those with a higher income who actually derive a greater value. You may be correct in terms of how it's distributed among those, but those who have a higher income get more back than those with a lower income. So on an individual basis, that's how it breaks down.

Mr. Roy Cullen: Well, I'm not convinced of that, but I'll study it more fully after your comments.

Captain Adamus, on the whole question of the airline industry, just give me your reaction. My wife flew into Ottawa yesterday, and she said she couldn't get a parking spot in Terminal 2. I talked to the limo drivers and taxi drivers, and there are no cars in the compounds. The planes seem to be full.

Can you give us a bit of a snapshot? Are people coming back and flying again, or are we still way below the numbers before September 11?

Á (1100)

Captain Dan Adamus: I truly believe that question should probably be asked of the management of the airlines. From our perspective, the planes are filling up. But it's my understanding the fares have been reduced. So we may have fuller airplanes, but the money that's being made by the airlines is still reduced. Also, capacity has been reduced on a lot of the routes. Where you had ten flights at one point, you may now have only six.

Mr. Roy Cullen: Could I come back, if I have enough time, Madam Chair, just to ask a question on the airport security fee?

It seems to me there is a strong argument that if you have a fixed fee, there's a certain rationale to that. If you have to go through security, it doesn't matter if you're going through in Kelowna, in Sept-Îles, or in Toronto, the cost of going through security is the same. That's why the government has elected to go with a fixed charge.

I and many of my colleagues do have concerns about some of the short hauls in some of the small communities, but if you were going to a fee-based...well, I suppose you're promoting no fee at all. I suppose I agree with you, but don't hold your breath. It could conceivably come down, maybe come down a lot, I don't know. But if you make it on the basis of the dollar value of the airline fee, then you're basically asking people who are flying from Toronto to Vancouver and back to subsidize those people who are flying from, let's say, Vancouver to Prince George. I wonder if you'd comment on that. Is there any logic in that point of view?

Captain Dan Adamus: I think it's a perception thing. If somebody's paying $2,000 for a flight and there's an extra $24 attached to it, percentage-wise it's not a big increase. But $24 on a $110 ticket from point A to point B, 40 miles, is where I think there's a problem. That's why we're advocating a sort of progressive fee.

The Chair: Ms. Misra.

Ms. Gail Misra: Thank you.

There is another aspect of the security fee. You mentioned that perhaps Prince George or other airports of that ilk are not actually going to benefit at all from the increased security. The security measures are not simply the checking through of people. There will also be increased security measures within larger airports or larger hub areas where there is more risk involved. That is where the costly items are happening.

But with the person who is flying from Prince George to another smaller community, the airport in their local area is not going to benefit. The suggestion is that's why it's also unfair to have airports that are smaller and will not benefit have to charge the same kind of fee as the larger airports have to charge.

Mr. Roy Cullen: That's somewhat at variance with my understanding. My understanding is that--maybe Prince George is not one of the 90 major airports--all of those airports are going to get some security enhancements. So if Prince George is one of the 90, they're going to get better equipment, I suspect, over time. Plus, once you get into the system, if you get on in Prince George and you're a connecting passenger heading through to Toronto, then you don't have to go through it in Vancouver.

The Chair: Mr. Murphy.

Mr. Shawn Murphy (Hillsborough, Lib.): Thank you very much, Madam Chairman. Like my colleague, I want to thank everyone for their excellent presentations.

I want to follow up briefly with you, Captain Adamus. First of all, I've spoken publicly on the $24 fee. I don't agree with the ad valorem fee, and I certainly think the fee should be reduced very, very substantially. Hopefully, that will happen in November. I support your concept of war insurance too, because once you get outside the industry, it's for governments to step in.

I want to question you on the stabilization fund. We have a situation where Air Canada now is at 80% of the capacity and 90% of the revenue in Canada, and as a parliamentarian, I can't visualize how that would work. With that company, you can never figure out if they are making or losing money, or how they would tap into the fund. If the fund were there, they would end up getting 90% of it.

What I support, as Madam Misra indicated before, is the essential services program in the United States. But I think the budget for that is only $50 million, so it is very, very minute.

Do you people have any sort of models? It's an important issue. It's sort of a federation issue for Canada to get...these airports in northern Ontario, Atlantic Canada, some of the smaller communities such as Wabush, are economic generators. The town or the city can't survive in the long run without air travel. Business won't establish there; people won't go there. Have you people done any modelling as to how something could work to not only develop but to make air service sustainable in small towns and communities right across Canada? That would not give any funding to Pearson, Vancouver, Calgary, or Dorval; I'm talking about rural Canada.

Á (1105)

Captain Dan Adamus: I'll start off and maybe Ms. Misra can add to it. I think you have two questions here.

First, on the stabilization fund, I think what we're looking at here is something to help the airlines in the dip of the aviation cycle. For example, Canada 3000--it was very bad timing for them. They had recently purchased two other airlines, and with September 11, that was enough to put them over the edge. So we're looking at something that would sort of bide some time to get over the hump and then continue on. We're not asking for full-fledged bailouts; we're only putting something there to get them over the tough times.

As far as small-town service goes, again, as Ms. Misra put it, in the United States they have this system in place whereby if a town is so many miles away from a major centre, I believe, they can qualify for the subsidy. We'll get more information for you on that, but there are hundreds of examples where airlines have tried to serve smaller communities and the money simply is not there. So maybe we do have to subsidize some of those routes.

Mr. Shawn Murphy: I have another general question to, I suppose, everyone.

I've listened to your presentation, and you're quite right, Madam Stinson, the comments you make in your brief aren't new. I think the government has made some improvements in some areas but hasn't gone as far and as deep as your group would like. Dealing with the general economy over the last five years, we have a situation now where we came through the recession relatively unscathed when compared with other countries. Inflation is low, employment is good--you could argue that--interest rates are low, the tradespeople you represent are generally working, I believe, certainly in the major centres, and it's my proposition that this is a result of good, sound economic policies that have been adopted by Minister Martin, and everyone benefits. I agree with you that there has been pain that's been borne by a lot of Canadians, and perhaps it hasn't been shared equally. That's an argument we could debate.

I think, right now, a lot of people are benefiting, but aren't we throwing the baby out with the bathwater if we're advocating throwing caution to the winds by going back into deficit financing, losing our triple A rating, letting interest rates go up, letting unemployment go up? There's a balancing act that we have to follow in the economy. I know everyone has their vested interests, and a lot of them are legitimate, especially in the area of child poverty, but do you not think we're on the right track?

I know that's a pretty general question.

Mr. Pierre Laliberté: You're half-way there. Frankly, when we look back at the 1990s, we feel that we were on the right track in what we were saying as organizations back then. What we advocated at the time was to not engage in the intense cutback exercise that took place, and essentially take a more moderate approach to all of this. That is, maybe freeze spending to get us back in the black, but not depress public spending to the extent that it would actually depress the domestic economy, and frankly, this is what happened. For many years, fortunately, the U.S. economy was booming and provided us a cushion, but the domestic economy was, in some part because of the fiscal policies and in some part also because of the monetary policies, not all it could have been.

If you read the IMF or the OECD documents, they'll tell you there was an output cap throughout that period. This means that the economy was perpetually producing less than it was capable of producing. In fact, we probably were one of the worst cases on the OECD map in terms of that.

Now it's easy to say that things are back in order, but they could have been done differently, with less pain. You can find this in the KPMG report comparing business costs in North America, Europe, and Japan, in which we come up number one. And this has been part of the stealth agenda in some respects. It's not that we have something inherently against reducing business costs and making our economy more competitive, but I think that has been too much of an obsession and has not been counterbalanced with some of the social priorities. We've depleted our capital. This is really what we feel we have to go back to.

When foreign investors come to Canada, the first factor in them doing so is our educated workforce, besides all the other tech considerations. This, in and of itself, speaks volumes. In terms of health, not only are we losing very qualified people to the U.S., for instance, or to just plain burnout, but I was looking at the health indicators released yesterday and, wouldn't you know it, they're getting worse. We have more people who have functional disabilities, and this is not just because of the aging of the population; even people in their thirties now are significantly less healthy. Of course, this has to do with many other factors than the health--

Á (1110)

Mr. Shawn Murphy: It's not totally a money issue.

Mr. Pierre Laliberté: That's correct. Some of it has to be the lifestyles, the environment, the work environment, etc., but nonetheless, we see some sliding back, and we feel now is the time to look seriously at changing that.

Thank you.

The Chair: Ms. Stinson.

Ms. Jane Stinson: I want to emphasize that we are not advocating throwing caution to the wind. We believe it is possible to have a sound public investment strategy, which is not throwing caution to the wind. We're not advocating that we get into some of the debt and debt problems we experienced in the past. However, we also believe there has been a massive campaign over the past 20 years to basically suggest that government should not have any debt, and we don't agree with that position. We don't think that is sound economics either.

As well, there have been significant surpluses over the last number of years under Finance Minister Martin, and they've not been reinvested. We think it is really time...and in fact we're seeing the consequences of not having done that.

I don't know if you saw an article that was published in the Globe and Mail last week by a colleague, Jim Standford, who's an economist for the Auto Workers union. I thought it was a very interesting article, because his argument was that in fact the state of the economy these days has more to do with stimulation from consumer spending and a huge increase in personal debt than it has to do with stimulation from government spending, because of this fear, this terror, of incurring debt. He was arguing that the government has to step in and play more of a stimulative role in spending, and that we can sustain a certain level of debt, given that we've improved our finances.

The other thing is that in fact allowing the privatization of public capital assets through public-private partnerships that hand over ownership and control for periods of 20 to 30 years is throwing caution to the wind. I think the government that allows that to happen is locking in privatization, and we don't fully understand the impacts under the trade agreements. I think that is a very serious and troubling direction of this government.

In closing, I'd urge you to take a look at the alternative federal budget that's been put together for a number of years. It attempts, and I think succeeds, to be a sound and credible alternative direction. There's a great effort made to ensure that it's not all blue sky, that this is what we want and there is no consideration to what is actually financially feasible or viable for the federal government. It's a process that involves a number of coalition partners, ourselves and others. It's interesting. Some of the people who've been involved in developing the alternative federal budget are now finance ministers.

So it has a credibility, and I really encourage you to pay close attention to it.

Á (1115)

The Chair: Mr. Murphy, I'm going to give you five more minutes because Mr. Jaffer's also going to get five more minutes. Perhaps you'd like to take it, or I can go to Mr. Jaffer first, if you like.

Mr. Shawn Murphy: Perhaps you can go to Mr. Jaffer first.

The Chair: Okay, go ahead.

Mr. Rahim Jaffer: I do have to make one comment on something you said, Jane. You talk about the fact that government should have some debt. I guess it's tough to estimate exactly what that optimum debt would be, seeing that currently we do have a debt of almost $600 billion in this country. Some would argue that's fairly significant considering the interest payments on that debt and how that money could go in fact toward social programs. It's being sucked up into a black hole, in essence. If we reduce the debt to some extent, that would free up more money for social programs. That's a debate that can go on for days, I'm sure.

In any case, my question is strictly to the airline industry. On the issue of that stabilization fund, I'm not as close to transportation as you, so this is the first time I've heard about that idea of this fund. I'm sure it's been out there and it's been talked about. I'm curious. Does this type of a fund exist elsewhere, in other countries where airline industries are facing similar challenges as we are here in Canada? And are all the industries that are currently players in the market, WestJet Airlines and some of the other smaller carriers, in favour of something like this? Are you aware of what their positions might be on something like this?

Captain Dan Adamus: It does not exist right now. In the United States, since September 11, the U.S. government has put this fund in place. I think only one airline has drawn from it.

In Canada the idea has just started floating around in the last three or four months. Ms. Debra Ward was tasked to take an independent look at the airline industry, and today we have her third draft, her third interim report. She talks about this fund. She spent months and months talking to the players in the airline industry. One of the things that was a common topic that kept coming up was that something like this might indeed help us over the humps in the road.

I don't think there has been a real plan drawn up to date. It's something new, but I think a place to start would be the finance committee. We certainly plan on taking it a little bit further down the road and talking to others as well.

Mr. Rahim Jaffer: You said something like this does currently exist in the U.S. There is a form of stabilization fund that you're aware of?

Ms. Gail Misra: May I speak to the question?

The Chair: Yes.

Ms. Gail Misra: Thank you.

Mr. Jaffer, yes. In fact, Canada has a stabilization fund too, but this is only in the post-September 11 era, when there have obviously been significant concerns about airlines going under. That is the stabilization fund that Captain Adamus referred to in the U.S. There are other European countries that have similar support programs for airlines, and they take various forms. In some cases it would be more the type of thing we are advocating.

Just so you know where I'm getting some of this, it's from Debra Ward's report. You could have a look at it if you wanted to.

The other area in which it's very helpful is providing some alternate financing for very small regional airlines, which themselves cannot go to banks or to financial institutions that can lend because they don't have enough equity, presumably. This kind of fund helps them to buy newer airplanes, to upgrade their services, and therefore to be more competitive. That is a model that is already established elsewhere.

We haven't talked about that today because we knew we had limited time, but of course that is another idea for a country like ours. Perhaps a way of meeting needs and creating some competition is to actually provide some level of support. You should understand that it's not strictly financial support; it is helping to underwrite loans that will then buy aircraft. That's the kind of thing that is out there presently.

Á (1120)

The Chair: Dr. Bennett, go ahead.

Ms. Carolyn Bennett (St. Paul's, Lib.): Thank you.

My question is mainly for Ms. Stinson, but anybody can answer.

In your brief you talked about health care, which obviously is a huge interest of yours and mine. There is a sentence that says “More money without substantive policy leadership does not produce effective programs”, and then the three bullets are all about money.

I think one of the most pressing things in this country, whether it's to women or to whatever, is that everything we care about is in four levels of government and crosses at least three government departments. We're in a gridlock. We need a policy framework for how to know that the money we transfer goes to health care and doesn't go to tax cuts. How can you help us get up above...?

In terms of the accountability piece you were worried about in the privatization, I don't think we have it in the public sector either at the moment. How can we get beyond...? Every time there's some free money, it ends up in salary negotiations and we sometimes don't get one more nurse. How can you help us develop an accountability-based, incentive-based approach that would lead us to a sustainable system on the things we all care about, as opposed to just everybody fighting for what they can get right now, whether that's medical equipment or whatever? I just want to know what you think is the policy leadership or the kinds of things that we, as the federal government, should be doing to incent better behaviour and a sustainable system.

I was interested in the equity participation foundation as well. I was interested that women were not listed there, in terms of women's organizations. I think our friends at NAC would hope that maybe they'd get some money from the foundation. I was wondering why they were left out. Do you think women's groups are already getting advocacy dollars in sufficient numbers?

Ms. Jane Stinson: I don't think they are getting them in sufficient numbers. This is probably an important oversight that you've identified.

There probably is a bit more money around for women's advocacy groups than for other groups. I think this is what it was attempting to address, to call attention to the need for others to also have an opportunity.

But I would agree with you that there's not sufficient money going to women's groups for advocacy purposes. There's still a need to be promoting greater gender equality in this country.

Ms. Carolyn Bennett: And does CUPE have a view in terms of the voluntary sector initiative? Is the 10% rule or core funding to groups for advocacy the best way to do it, or do you think this is a better way of going about that same policy objective?

Ms. Jane Stinson: I really don't feel familiar enough with the voluntary sector initiative proposal to be able to answer your question.

Ms. Carolyn Bennett: Well, it completely avoids talking about the 10% rule or core funding, but we hope at some point they will try to address it.

But do you think this is a safer way of going about this sort of advocacy, so that if I was running a volunteer organization or an advocacy organization, I would apply to this foundation for my advocacy money and then to a government department for the rest of the funding for the service delivery work I would do?

Á (1125)

Ms. Jane Stinson: That's what we are suggesting.

In terms of your question about health care, I think you've again addressed some important points. One we have advocated and have encouraged in the past is that there be more earmarked transfer of funds for particular programs such as health through the CHST. Right now, the fact that it's all bundled together is part of what contributes to not really knowing how it is spent.

I think more reporting by the provincial governments to make clear how they're spending that money would be helpful.

The other point we are trying to make here is yes, our emphasis is on money, because we feel the federal government has to have sufficient cash at the table to try to get the provincial governments to comply with the Canada Health Act, to try to provide some policy leadership even around implementation of the Canada Health Act.

I encourage my colleagues to add to this.

The Chair: Next we have Mr. Laliberté, followed by Mr. Dagenais.

Mr. Pierre Laliberté: Yes. I think what Jane has said is right on. It used to be, if you can recall the pre-CHST era, that there were some guidelines and some sharing of funding; that is, the federal government would fund a target percentage of the provincial contribution, for NDPF programs and similar things.

Frankly, I think your concern is absolutely correct. We feel as frustrated with the current situation as everyone else does, where governments are really engaging in this in bad faith. It turns out that those are the richest provinces who can actually afford to shirk on this. I don't think accountability is too much to ask for.

However, the point that has also been made about the significant amount of resources that need to be added in order for this to be credible is also key. I think there's no question that you would have the public with you on this.

I'd also like to flag the issue of tax credits because this government has used them as the roundabout way to deal with just about everything under the sun. And frankly, this has had a very perverse impact. For instance--and my colleagues from Quebec can speak to this--in Quebec there is a direct child care subsidy program. Basically, in-kind services are provided at a discount. Well, if I send my child to one of those--and I happen to live across the river--I get less of the tax credit that the federal government gives.

Likewise, you have the same phenomenon with post-secondary education. Provinces such as B.C. and Quebec, which have maintained lower tuition fees and have--I know for Quebec at least--a more generous grant system than some provinces, wind up getting fewer of the perks that go with it because the tax credits are given on the basis of the interest on the debt you are repaying, as well as the tuition costs.

There is a certain perversity to this system. And in a way, I think we should encourage exactly the opposite, that is, in-kind services and systems that actually maintain and prioritize accessibility, over this kind of giveaway through the tax credits.

Thanks.

The Chair: Mr. Dagenais.

[Translation]

Mr. Vincent Dagenais: I'd like simply like to say a few words about this accountability question. It seems to me that the present system is the worst one, exactly because it allows provincial governments to claim that they are not responsible for the problems in the area of education or health because the money is at the federal level, and they can then turn the problem into a federal-provincial quarrel. It also allows the federal government to pretend that these things are not its responsibility. Under the Constitution, for example, health is in the domain of the provinces. So, if there's a problem, we have to turn to the provinces.

So the present situation, in terms of accountability, is without a doubt one of the worst situations, and solving the question of fiscal imbalance should lead us to partially settle the problem of accountability which is a serious problem in a democracy. The question of the level of care or funding is something the population should decide, if you get right down to it. So the population should be able to decide, by addressing the proper level of government, what care it wants and make sure that those governments have the resources necessary to fund the care they want.

All that to say that the CSN thinks that one way of solving the accountability problem is to make sure that the provinces, who are responsible for health, have enough resources to fund it. So whether it's through the transfer of tax points or any other method, the ordinary citizen must know clearly which level of government to complain to, if need be, and demand accountability for the services received or not received. What we have to grapple with is a problem of democracy.

Á (1130)

[English]

The Chair: Thanks to all of you for your contribution today. As I said, if you wish, you may send more material to the clerk at a later date. If you could translate that ahead of time, that would be wonderful. If not, we'll do that, and we'll distribute it to the members. Thank you very much. We enjoyed your participation today.

We are adjourned.