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37th PARLIAMENT, 2nd SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Thursday, November 7, 2002

0850

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

Mr. Dale Pulkinen (Executive Director, Canadian Dehydrators Association and Canadian Hay Association)

0855

Mr. Warren Pridham (President, Canadian Dehydrators Association and Canadian Hay Association)

0900

The Vice-Chair (Mr. Nick Discepola)

Mr. Marvin Shauf (Second Vice-President, Canadian Federation of Agriculture)

0905

The Vice-Chair (Mr. Nick Discepola)

Mr. Garth Moore (President, Potash Corporation of Saskatchewan Inc.; Canadian Fertilizer Institute)

0910

Mrs. Karen Rowbottom (Chair, Working Group, Canadian Fertilizer Institute)

0915

The Vice-Chair (Mr. Nick Discepola)

Mr. Norm Halldorson (Chair, Finance Committee, Saskatchewan Chamber of Commerce)

0920

The Vice-Chair (Mr. Nick Discepola)

Mr. Norm Halldorson

The Vice-Chair (Mr. Nick Discepola)

Mr. Norm Halldorson

The Vice-Chair (Mr. Nick Discepola)

Dr. Jim Tomkins (Vice-President, Administration, University of Regina)

0925

0930

The Vice-Chair (Mr. Nick Discepola)

Mr. C.M. Williams (President, Saskatchewan Agrivision Corporation)

Mr. Al Scholz (Executive Director, Saskatchewan Agrivision Corporation)

0935

Mr. C.M. Williams

0940

The Vice-Chair (Mr. Nick Discepola)

Mr. C.M. Williams

The Vice-Chair (Mr. Nick Discepola)

Mr. Al Scholz

The Vice-Chair (Mr. Nick Discepola)

Mr. Rick Casson (Lethbridge, Canadian Alliance)

Dr. Jim Tomkins

Mr. Rick Casson

Dr. Jim Tomkins

0945

Mr. Rick Casson

Mr. Warren Pridham

Mr. Dale Pulkinen

Mr. Rick Casson

Mr. Warren Pridham

Mr. Rick Casson

Mr. Marvin Shauf

0950

Mr. Rick Casson

Mr. Norm Halldorson

The Vice-Chair (Mr. Nick Discepola)

Mr. Roy Cullen (Etobicoke North, Lib.)

Mr. Marvin Shauf

0955

The Vice-Chair (Mr. Nick Discepola)

Mr. Marvin Shauf

The Vice-Chair (Mr. Nick Discepola)

Mr. Marvin Shauf

Mr. Roy Cullen

Mr. Marvin Shauf

Mr. Roy Cullen

Mr. Marvin Shauf

Mr. Roy Cullen

1000

Ms. Karen Rowbottom

Mr. Roy Cullen

Ms. Karen Rowbottom

Mr. Roy Cullen

Ms. Karen Rowbottom

The Vice-Chair (Mr. Nick Discepola)

Mr. Pat Martin (Winnipeg Centre, NDP)

Mr. Norm Halldorson

Mr. Pat Martin

Mr. Norm Halldorson

1005

Mr. Pat Martin

Mr. Norm Halldorson

Mr. Pat Martin

Mr. Norm Halldorson

Mr. Pat Martin

The Vice-Chair (Mr. Nick Discepola)

Mr. Pat Martin

The Vice-Chair (Mr. Nick Discepola)

Ms. Karen Rowbottom

Mr. Pat Martin

Mr. C.M. Williams

Mr. Marvin Shauf

The Vice-Chair (Mr. Nick Discepola)

Mr. Shawn Murphy (Hillsborough, Lib.)

1010

Mr. Warren Pridham

Mr. Shawn Murphy

Mr. Warren Pridham

Mr. Shawn Murphy

Mr. Warren Pridham

Mr. Shawn Murphy

Mr. Warren Pridham

Mr. Shawn Murphy

Mr. Warren Pridham

Mr. Shawn Murphy

Mr. Warren Pridham

Mr. Shawn Murphy

Mr. Warren Pridham

Mr. Shawn Murphy

Mr. Warren Pridham

The Vice-Chair (Mr. Nick Discepola)

Mr. Warren Pridham

The Vice-Chair (Mr. Nick Discepola)

Mr. Warren Pridham

Mr. Shawn Murphy

Mr. Warren Pridham

Mr. Dale Pulkinen

Mr. Shawn Murphy

1015

Mr. Norm Halldorson

Mr. Shawn Murphy

Mr. Norm Halldorson

Mr. Shawn Murphy

Mr. Norm Halldorson

Mr. Shawn Murphy

Mr. Al Scholz

Mr. Shawn Murphy

Mr. Al Scholz

Mr. Shawn Murphy

The Vice-Chair (Mr. Nick Discepola)

Mrs. Lynne Yelich (Blackstrap, Canadian Alliance)

1020

Mr. Al Scholz

Mr. C.M. Williams

Mrs. Lynne Yelich

Dr. Jim Tomkins

The Vice-Chair (Mr. Nick Discepola)

Mr. Roy Cullen

1025

The Vice-Chair (Mr. Nick Discepola)

Mr. Dale Pulkinen

Mr. Roy Cullen

Mr. Dale Pulkinen

Mr. Roy Cullen

Mr. Dale Pulkinen

The Vice-Chair (Mr. Nick Discepola)

Mr. Rick Casson

Ms. Karen Rowbottom

Mr. Rick Casson

Ms. Karen Rowbottom

Mr. Rick Casson

Mr. Al Scholz

The Vice-Chair (Mr. Nick Discepola)

1045

Mr. Gary Shaddock (President, Canadian School Boards Association)

1050

The Vice-Chair (Mr. Nick Discepola)

Dr. W.A. Sam Shaw (President, Northern Alberta Institute of Technology)

1055

The Vice-Chair (Mr. Nick Discepola)

Mr. John Nikolejsin (President, Saskatchewan School Trustees Association)

1100

The Vice-Chair (Mr. Nick Discepola)

Mr. Craig Melvin (Executive Director, Saskatchewan School Trustees Association)

1105

Mr. John Nikolejsin

The Vice-Chair (Mr. Nick Discepola)

Mr. Frank Abdou (Board Member, Trans-Canada #1 West Association)

1110

The Vice-Chair (Mr. Nick Discepola)

Mr. R. Peter MacKinnon (President, University of Saskatchewan)

1115

The Vice-Chair (Mr. Nick Discepola)

Mr. John McConnell (Individual Presentation)

1120

The Vice-Chair (Mr. Nick Discepola)

Mr. Rick Casson

Mr. Frank Abdou

The Vice-Chair (Mr. Nick Discepola)

Mr. Frank Abdou

Mr. Rick Casson

Mr. Frank Abdou

1125

Mr. Rick Casson

Mr. Frank Abdou

Mr. Rick Casson

Mr. Gary Shaddock

Mr. Rick Casson

Mr. Gary Shaddock

Ms. Monique Bélanger (Director, Policy and Projects, Canadian School Boards Association)

Mr. Gary Shaddock

1130

Mr. Rick Casson

Ms. Monique Bélanger

Mr. Rick Casson

Dr. Sam Shaw

Mr. Rick Casson

Dr. Sam Shaw

Mr. Rick Casson

Dr. Sam Shaw

The Vice-Chair (Mr. Nick Discepola)

Mr. Peter MacKinnon

The Vice-Chair (Mr. Nick Discepola)

Mr. Shawn Murphy

Mr. Peter MacKinnon

1135

Mr. Shawn Murphy

Dr. Sam Shaw

The Vice-Chair (Mr. Nick Discepola)

Mr. Gary Shaddock

1140

Mr. Shawn Murphy

Dr. Sam Shaw

The Vice-Chair (Mr. Nick Discepola)

Mr. Pat Martin

Mrs. Lynne Yelich

Mr. Pat Martin

The Vice-Chair (Mr. Nick Discepola)

Mr. Pat Martin

The Vice-Chair (Mr. Nick Discepola)

Mr. John McConnell

1145

The Vice-Chair (Mr. Nick Discepola)

Mr. John McConnell

Mr. Pat Martin

The Vice-Chair (Mr. Nick Discepola)

Mrs. Lynne Yelich

The Vice-Chair (Mr. Nick Discepola)

Mr. Pat Martin

Mr. Frank Abdou

Mr. Pat Martin

Mr. Frank Abdou

The Vice-Chair (Mr. Nick Discepola)

Mr. John Nikolejsin

Mr. Pat Martin

Dr. Sam Shaw

1150

Mr. Pat Martin

The Vice-Chair (Mr. Nick Discepola)

Dr. Sam Shaw

The Vice-Chair (Mr. Nick Discepola)

Mr. Craig Melvin

The Vice-Chair (Mr. Nick Discepola)

Mrs. Lynne Yelich

Mr. Peter MacKinnon

1155

The Vice-Chair (Mr. Nick Discepola)

Mr. Peter MacKinnon

The Vice-Chair (Mr. Nick Discepola)

Mrs. Lynne Yelich

Mr. Gary Shaddock

Mrs. Lynne Yelich

Mr. Gary Shaddock

1200

Mr. John Nikolejsin

The Vice-Chair (Mr. Nick Discepola)

Ms. Monique Bélanger

The Vice-Chair (Mr. Nick Discepola)

Mr. Shawn Murphy

Mr. Gary Shaddock

1205

The Vice-Chair (Mr. Nick Discepola)

Dr. Sam Shaw

The Vice-Chair (Mr. Nick Discepola)

Mr. Kebrom Haimanot (Individual Presentation)

The Vice-Chair (Mr. Nick Discepola)

Mr. Kebrom Haimanot

The Vice-Chair (Mr. Nick Discepola)

Mr. Kebrom Haimanot

1210

The Vice-Chair (Mr. Nick Discepola)

Mr. Kebrom Haimanot

The Vice-Chair (Mr. Nick Discepola)

Mr. Kebrom Haimanot

The Vice-Chair (Mr. Nick Discepola)

Mr. Kebrom Haimanot

The Vice-Chair (Mr. Nick Discepola)

Mr. Kebrom Haimanot

The Vice-Chair (Mr. Nick Discepola)

Mr. Frank Abdou

The Vice-Chair (Mr. Nick Discepola)

Mr. Frank Abdou

The Vice-Chair (Mr. Nick Discepola)

Mrs. Lynne Yelich

The Vice-Chair (Mr. Nick Discepola)

Mr. Craig Melvin

Mr. Frank Abdou

The Vice-Chair (Mr. Nick Discepola)

Mr. Frank Abdou

1215

The Vice-Chair (Mr. Nick Discepola)

Mrs. Lynne Yelich

The Vice-Chair (Mr. Nick Discepola)

CANADA

Standing Committee on Finance

NUMBER 022

2nd SESSION

37th PARLIAMENT

EVIDENCE

Thursday, November 7, 2002

[Recorded by Electronic Apparatus]

¾ (0850)

[English]

The Vice-Chair (Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.)): Pursuant to Standing Order 83(1), we continue our pre-budget consultations this morning. This is the third stop in our series. We have been in Vancouver for two days, Calgary yesterday. We are here until 3 o'clock, and then we move on to Winnipeg. My counterpart, Sue Barnes, the president of the committee, is heading a group of members of Parliament in Toronto and Montreal.

It's great to welcome you all. It's great for me to be back in Saskatchewan. I grew up in Outlook, a stone's throw away from here, so it's always good to renew acquaintances, as I did last night. I'm glad we can start a bit early, because we normally have an awful lot of questions and we've run out of time quite often. I will try to keep it to about seven minutes per group for presentations, so that we can leave ample room and time for members of Parliament to ask questions.

I'd like to start with the Canadian Dehydrators Association and Canadian Hay Association, represented today by Mr. Warren Pridham, the president, and Mr. Dale Pulkinen, its executive director. Welcome. I will introduce the other guests as we go along.

Mr. Dale Pulkinen (Executive Director, Canadian Dehydrators Association and Canadian Hay Association): Thank you, Mr. Chairman. Good morning.

I have been asked to make the initial remarks. I'm the executive director of the Saskatchewan Dehydrators Association, and Warren Pridham is a farmer. He is president of a alfalfa processing plant, and also president of the Saskatchewan Dehydrators Association. We're here on behalf of the Canadian Dehydrators Association and the Canadian Hay Association.

We're pleased to have an opportunity to tell you about some federal tax policy and how it's being used to undermine the forage processing industry in Western Canada. I know some members are familiar with the process forage industry. As a matter of fact, Mr. Chairman, you know one of our CDA directors, Diane Verdonk, who has since moved to another location. I had the fortune to visit her plant here about two months ago. Also, there are forage processing operations in the Peace River area. However, we note that there have been some closures in that area; at least three plants have closed in the last number of years.

For the benefit of those members who are not as familiar with our industry, I'd like to provide a brief overview. Typically, member dehydrating plants contract with landowners for the use of their land, often for a three-year period, and perhaps for as much as a five-year period. The plants undertake all the farming operations of the land for this lease period. They manage the crops, schedule and carry out the harvests, and transport the material to the plants for processing. Members of the Canadian Hay Association also are actively involved. They grow and manage a certain percentage of their own crops and purchase the balance on a spot basis.

Canadian Dehydrators Association members produce the best quality pellets and cubes in the world, and it's certainly recognized in the marketplace. Canadian Hay Association members produce compressed long-fibre products that are second to none. For over 30 years, the industry has been a significant contributor to agriculture, to regional rural economies in western Canada, and to Canada's exports. While the industry has plants in most provinces, the export component is predominantly in Saskatchewan and Alberta. We have a labour force of about 1,200 workers, with an annual payroll of about $25 million. Spinoff economic benefits in the rural communities run in the neighbourhood of $75 million annually. Over the past five years dehydration plants have processed an average of 380,000 tonnes of pellets and 197,000 tonnes of cubes, for a total value of approximately $90 million. Exports of compressed hay have grown in the past years to more than 300,000 tonnes, valued at over $100 million. In total, processed alfalfa and long-fibre are valued at close to $200 million annually.

Mr. Chairman, now I will ask Warren Pridham to outline the problem.

¾ (0855)

Mr. Warren Pridham (President, Canadian Dehydrators Association and Canadian Hay Association): Mr. Chairman, members of the committee, thank you for the opportunity to address you this morning. I'll begin by telling you a little more about our industry.

About 30 years ago farmers began to see opportunities in producing and marketing processed alfalfa. They took initiatives, they took risks. They pooled their resources and invested in building processing facilities. I'll use our own plant as an example. We have about 60 shareholders. At the time of the original investment all the shareholders were active farmers. My father was one of them. Many are still active today. Some have retired and turned their shares over to their children who are now farming in the area. These are not passive investors. They do not represent large corporate farms. They're rural Canadian farmers who have pooled their resources to create a world-class value-added industry. These farmers have built a strong export market and created employment opportunities within their communities.

Unfortunately, over the last few years we have suffered a series of serious challenges. The Asian economic meltdown seriously depressed prices in our major export market. European subsidies have been almost as high as the total price we get for our product. We are heavy users of natural gas, and when gas prices sky-rocketed, we sustained heavy losses. We've had problems with winter kill through the last two years, and this year the drought has seriously hurt us again. Many of our plants will sustain heavy losses because of the drought conditions in western Canada.

We have been a successful industry, and we understand that there are ups and downs when you're in business, but there are limits. Our plant has sustained over $3 million in losses over the last four years because of the things I've described to you. When our markets collapsed because of the Asian financial meltdown, we asked to be included in the agricultural income disaster program, AIDA, and its successor, CFIP. We have been asking to be included in the transitional funding program. In all cases, Mr. Chairman, the answer has been the same: we do not fit into the program chosen by the government to deliver this assistance because of our corporate structure. As I said, our plants typically have many shareholders, and the Department of Finance has a rule that applied to AIDA and CFIP and now is being applied to the transitional funding program, as it`s delivered through NISA, and restricts assistance to corporate entities whose shareholders hold at least 10 per cent of the voting shares. In other words, a plant should have no more than 10 shareholders to qualify for these risk management programs, programs that are very important when you're involved in the agriculture business and you have to compete with other countries that are exporting using massive subsidies.

The government created the rule to ensure that large corporate farms with passive investors did not qualify for assistance. And we understand this concern. We've expressed a willingness to work with the government to ensure that a narrow set of criteria is developed to exclude industries the programs were not designed to serve. Our industry, however, is unique, in that we are stewards of the land. We handle all aspects of field industry, husbandry, in growing and processing alfalfa. We accept the risks associated with growing it, harvesting it, delivering it to the plant like any other primary agricultural producer. We've been told the only way we'll qualify is if we restructure the corporate ownership of our plants. That means I would have to tell my shareholders, many of whom were there 30 years ago when that facility was built, they can no longer own common shares in that facility, so that we can qualify for a government program designed for risk management in agriculture. I refuse to do that.

We do not believe federal policy should respond to the needs of industry. It has to satisfy us. We don't think we should have to change to fit into that policy. If there's no will to fit us into current domestic agriculture programs, then we would ask for support outside those programs. Even today the government encourages value-added, but now this federal government policy is contributing to the demise of our industry. I am not exaggerating when I make that statement. When we first asked to be included in the AIDA program, we had 29 facilities, today we have 12. The largest, most efficient, alfalfa pelleting company in this country has closed its doors.

¿ (0900)

We just cannot lose any more industry like that in agriculture. Value-added is very important. We have been a success story. We've been included in programs in the past. We were held up as a model of successful value-added. We would ask the committee that you take this issue back for us and consider it with Finance. We have to be included in the next round of the transitional funding, and we must be included in a long-term agricultural policy framework. We are an agricultural industry, we will suffer problems with the cyclical nature of our business, and we urge the committee, collectively and individually as members of Parliament, to use your influence to correct the situation.

Dale and I will be glad to answer any questions you may have. I thank you very much for your time.

The Vice-Chair (Mr. Nick Discepola): Thank you very much.

I would like to now move on to the Canadian Federation of Agriculture, represented today by its second vice-president Mr. Marvin Shauf. Welcome, Mr. Shauf.

Mr. Marvin Shauf (Second Vice-President, Canadian Federation of Agriculture): Thank you.

I farm in the southeast corner of this province. I very much want to say thank you for the opportunity to make this presentation this morning on behalf of our membership, who collectively represent approximately 200,000 farmers from coast to coast in Canada.

There are a number of topic areas I want to address. I understand that our brief sent to this committee was late in getting here, and I apologize for that. My intention this morning is to highlight some of the points that are in that brief, and afterwards we'll be able to discuss them, if you wish.

The Canadian Federation of Agriculture was encouraged by the announcement in June of five years of funding for agriculture under the agricultural policy framework and welcomes the long-term financial support to the industry. CFA has supported the policy framework since the beginning and continues to believe a healthy future for the agrifood industry is contingent upon the development of programs and policies across all government departments that work in harmony to provide support to the industry, rather than undermining it. Although CFA has strong concerns about some of the program proposals, particularly in the business risk management chapter and with the cost of implementation of other programs, it remains committed to the overarching principles of the APF and their potential to help Canadian agriculture move beyond crisis management.

We believe income stabilization is important, but farm income programs must also contribute to sustainable farm viability. In order to attract new people and investment to the sector, there must be an adequate return for investment in the sector, and there must be an adequate return for labour in the sector. Inadequate compensation within Canada and within the Canadian agriculture industry will not attract appropriate investment and will not attract competent people for the future. Farm income programs must be adequately funded and strategic. Safety net funding levels must be set to create a level playing field with our competitors globally. Any new business risk management programs under the agricultural policy framework must be demonstrably improvement for producers over the current programs. The current programs need to be continued until such time as adequate and effective programs are designed and implemented to replace them.

Cost recovery is another area I would like to address briefly. CFA believes there is room for significant improvement within the existing cost recovery program structure, and it recommends that government revisit these programs in order to ensure that user fees within the agriculture sector are well managed, financially reasonable for the service provided, and the service is in fact necessary in the first place and adds value to Canadian agriculture.

On taxation, the $500,000 lifetime capital gains exemption should be increased to reflect, on an ongoing basis, the evolution of the farming environment. The government should consider tax credits or tax incentives for environmental initiatives, including capital cost allowances.

On environment, producers are willing to take extra measures beyond their normal stewardship practices in order to minimize the environmental impact, but they can't work alone. Governments must view these efforts as a partnership with farmers and must provide proper tools to bring about change. These tools must be designed, once again, to keep our producers globally competitive.

¿ (0905)

Many of CFA's recommendations will be addressed through the agriculture policy framework. However, the federal government must commit appropriate funding to ensure the success of the agricultural policy framework in that environment.

The Meteorological Services Branch of Environment Canada needs to have increased funding so they can maintain and upgrade their capacity to provide weather services across Canada. Weather forecasting is incredibly important to Canadian agriculture.

The federal government must understand the implications of the Kyoto protocol for the agriculture sector and ensure that positive consequences substantially outweigh negative consequences in that arena.

The agriculture and agrifood policy framework provides a new opportunity for the federal government to continue, in its leadership role, to acknowledge that a shared responsibility means sharing costs. We must keep Canadian agriculture globally competitive. While funding has been allocated to the food safety chapter for the next five years, initial estimates of the cost to implement on-farm food safety programs far exceed national allocations under the APF. It is imperative that as we move to implementation and delivery of on-farm food safety programs, the government be prepared to provide the substantial funding needed to the on-farm sector.

Canadian agriculture is so important to the Canadian economy. It has so much to offer if we invest strategically and build the value of Canadian agriculture within the Canadian economy. That means that we have to respond appropriately to the value-plucking strategies and subsidies of our global competitors.

Thank you again for the opportunity to present this morning.

The Vice-Chair (Mr. Nick Discepola): Thank you Mr. Shauf.

I would like to now move on quickly to the Canadian Fertilizer Institute and welcome Mr. Garth Moore, its president, and Karen Rowbottom, chair of the CFI working group.

Mr. Garth Moore (President, Potash Corporation of Saskatchewan Inc.; Canadian Fertilizer Institute): Thank you, Mr. Chairman, and good morning, Honourable Members.

I would like to thank you for the opportunity to appear before you today. I am president of PCS Potash. Presenting with me today is Karen Rowbottom, manager, Canadian tax, Agrium, and current chair of the CFI business tax reform working group. Also in attendance today are Darrell Zwarych, IMC, Daphne Arnason, PCS, past chair of the CFI business tax reform working group, and Bud Knudsen of the Saskatchewan Potash Producers Association.

You may recall that we have been before this committee before. Indeed, we presented our issues and position to the group last year. I'm pleased to outline our concerns again and would answer, along with my colleagues, any questions you may have.

Canada's fertilizer industry is a medium-sized export-oriented industry. The industry exports $3.7 billion worth of product to nearly 60 countries around the world. These sales include over $2 billion in potash exports. Canada supplies 12% of the world's fertilizer materials. We are the largest potash producer and exporter in the world. Total sales for the industry are in excess of $5.5 billion annually. This generates roughly 6,000 high-paying manufacturing jobs and 6,000 jobs in the distribution and retail operations. Most of these jobs are in rural regions of the country. As illustrated in the map in your handout, there are 11 mines, 10 in Saskatchewan and one in New Brunswick. Those mines are all listed in the table below the map.

I would now like to turn it over to Karen to outline the specifics of our concerns.

¿ (0910)

Mrs. Karen Rowbottom (Chair, Working Group, Canadian Fertilizer Institute): Thanks, Garth.

I'm here to explain our income tax disadvantage. We are disadvantaged in comparison with the rest of the world. The resource sector is disadvantaged in comparison with the rest of the economy. Potash is disadvantaged in comparison with the rest of the resource sector. We ask that you recommend to the government two changes, first, that the seven point federal income tax rate reduction be extended to all sectors, the same tax change other Canadian industry has already received; second, as the resource sector does not receive full deductibility of provincial royalties, whereas other sectors do, that an amendment to the Income Tax Act be made allowing full deductibility of all royalties to help alleviate the unfair tax burden and help level the playing field. In general, this presentation will address two federal tax issues, to bring about tax fairness at a minimal cost to the federal treasury of $25 million.

Canada's potash industry is the world's lowest-cost producer before taxes, but is a high-cost producer after tax. While our statutory rate is 46%, when provincial and federal taxes are combined, our industry faces a marginal effective tax rate of 71%. This is illustrated in the map, which compares combined federal, provincial, or state statutory rates. As you can see, when you include the resource taxes, Canada is nearly 30 points higher than the rest, the next highest being Alaska and New Mexico.

This would be a good opportunity to point out that our main future growth potential is in China and the developing nations in the Pacific Rim. Russia is delivering inland to China and, through their Siberian port, to the coastal regions in China and the rest of Asia. Jordan and Israel are also significant competitors in these markets and have coastal locations that give them another huge advance. All three of these competitors also participate in the South American market, which is the other developing market.

Ultimately, this issue is about keeping Canadian industry competitive in global markets with a fair tax system. Tax treatment has an obvious impact on our competitiveness. Competition for investment occurs not just with other industries and other fertilizer producers, but also within the company itself for investment in the manufacture of other nutrients, nitrogen, phosphate, and sulphur fertilizers, or investment in other commercial opportunities. Investments will flow to projects providing the best after-tax return. The current tax disadvantage does not encourage further investment in Canada.

Canada's share of global markets was at 30% in the early 1990s, rose to 38% in 1995, and has since declined to the 32% to 35% range. In other words, Canada has not been able to continue to increase its volume alongside the recovery in world markets since 1995. International statistics illustrate that Canada has significant excess production capacity that could readily be used to capture competitive opportunities. However, capital has been attracted to expansions in competing regions, such as Israel, Jordan, and Russia. Clearly, Canada's high tax structure has played a significant role in the recent decline in our competitiveness. If we hope to see Canada regain its momentum for growth, future incremental investment must produce a higher return.

I return to our two specific issues. First, the resource sector is excluded from the seven point corporate rate reduction announced in the 2000 budget and economic statement. As this reduction is phased in each year, the potash industry is further disadvantaged.

The potash industry faces a second disadvantage, unlike the mining sector as a whole, due to the inadequacy of the resource allowance. In general, the mining sector benefits from the resource allowance and other fast write-off provisions. Potash royalties, however, far exceed the compensation provided by the resource allowance. Non-deductibility of provincial royalties results in double taxation on the amount of royalties that exceeds the resource allowance. This translates into double taxation on $66 million a year. Indeed, Canada is the only federal state in the world that does not provide for full deductibility of provincial royalties.

As the table on page 9 clearly indicates, our federal marginal rate is 33%, significantly higher than the rest of the mining sector. The exclusion from the seven point reduction, along with the inability to fully deduct provincial royalties, places the potash industry in a unique and unfair tax situation. Resolution of these two inequities is urgent. In the interest of tax fairness, a solution cannot be put off any longer.

We would like to indicate that CFI is a member of the multi-industry coalition on business tax reform. It is our understanding that this organization will be appearing before this committee, and we would like to emphasize that we support the position they outline.

¿ (0915)

Mr. Chairman, CFI realizes the complexities in reviewing and developing tax policies, particularly in the current political climate. We must, in closing, stress the significant impact of the 71% marginal tax rate. We are not an inefficient industry asking for concessions. We are a highly efficient, internationally respected industry harmed by a government-induced competitive disadvantage.

We thank you for the oppportunity to appear before your committee, and we would be pleased to answer any questions you and your colleagues may have.

The Vice-Chair (Mr. Nick Discepola): Thank you very much.

I would like now to ask the chair of the finance committee from the Saskatchewan Chamber of Commerce, Norm Halldorson, to make his presentation. Welcome, Mr Halldorson.

Mr. Norm Halldorson (Chair, Finance Committee, Saskatchewan Chamber of Commerce): Thank you, Mr. Chairman.

On behalf of the Saskatchewan Chamber of Commerce, I welcome the opportunity to appear here this morning. You do have the brief that was submitted to your committee. Because of the time constraints of this forum, I will speak to two of the topics contained in that brief.

The Saskatchewan Chamber of Commerce represents independent business here in Saskatchewan, and it represents businesses of all sizes, from small owner-managed business to large corporations. The two topics I would like to speak to this morning deal with federal tax legislation, and the first is the federal tax small business rate reduction.

We see, through our membership, that one of the principal sources of financing for independent business is through retained earnings of their operating profits. The federal legislation certainly has recognized this in the past. They introduced legislation quite some time ago, providing a 16% rate reduction on the first $200,000 per year of active business income to a corporation. That reduction in federal rate is matched by provincial legislation in the various provinces across Canada, which also reduces the rate on active business income, such that here in Saskatchewan the combined rate of federal and provincial tax on active business income on that first $200,000 is a little over 19%. That's very important, in that it provides 81-cent dollars that the entrepreneur operating his business through a corporation can accumulate and retain to finance his ongoing business expansion opportunities.

The particular area we want to focus on in requesting attention from the federal government is the fact that this bracket has been around a long time, and a couple of years ago a second, smaller rate reduction was extended on active business income from $200,000 a year to $300,000 a year. However, that rate reduction is only 7%, not the full 16%. What that does is put the federal government's legislation out of step with the provinces. The provinces recognize the need to adjust that $200,000 limit up to $300,000, and in their legislation Ontario, Alberta, Saskatchewan, Manitoba, and New Brunswick have all extended their full small business rate reduction for the third $100,000 on an basis equivalent to the first $200,000. The federal reduction, which is 9% lower, means that the combined federal and provincial tax on the third $100,000 of annual income is 9% higher, solely because of the smaller federal small business rate reduction. We're seeing this erode the ability for businesses to finance their ongoing operations out of retained earnings.

When you look at the design of our tax system, particularly the small business rate, the concept is that corporate taxation is really a prepayment of the final tax the shareholders pay when they distribute the earnings out to themselves. That takes the form of a dividend tax credit. So if you look at a business that earns $200,000 and pays the small business rate of just under 20%, when they pass a dividend out to the shareholders, they effectively get credit for that prepayment of 20% in the form of a dividend tax credit, and the tax they pay through their personal return is the balance of the tax up to their marginal personal rate.

¿ (0920)

We're seeing, in our business, that companies are not leaving that third $100,000 to be taxed in the corporation, because there is a double taxation of that 9%. If they let the company pay the tax at the higher rate, when they eventually make the distribution by dividend, they still only get credit for the dividend tax credit that compensates the first 20%, and so they choose instead to bonus out income in excess of $200,000 and then lend it back. But that means they have less capital in their business, because now they're paying the full personal tax rate on it.

So what we're urging your committee to do is request the Department of Finance federally to get in pace with the provinces by extending their small business rate reduction to the full 16% on the third $100,000 of active business income annually. We think that's very important to independent business, and I think it's well acknowledged that independent business is the primary source of job creation and growth in our economy.

The second point I'd like to comment on very briefly is capital tax.

The Vice-Chair (Mr. Nick Discepola): In order to help you, you`re preaching to the converted. If you have another point you want to elaborate on in your time allotment, go to that. The committee has recommended the abolition of the capital tax for many years in our reports, and this year we'll make it another pivotal recommendation. So to help you out, if you want to talk about something else, you're welcome to. But I don't want to take away from your punchline, if you want to continue.

Mr. Norm Halldorson: I'm very pleased to hear that comment, and I am quite happy to conclude my remarks. I commend you for taking that position and certainly encourage it.

The Vice-Chair (Mr. Nick Discepola): I didn't say that for you to conclude your remarks. I notice that in your presentation you have three other points. I just wanted you to be aware that you can continue if you want. You've got a few more minutes

Mr. Norm Halldorson: Well, the general thrust of the rest of our comments is to ensure that Canadian corporate taxation in all areas is fully competitive, so that we aren't at a disadvantage in attracting capital to this country. The focus was on the two areas of the small business rate, which I have already spoken to, and the capital taxes, because they seem to have the greatest impact, from what our members are telling us, on the discouragement of investment in this country. The rest of the comments are essentially on the general rates of taxation, where Canada is competitive in some areas and not in others.

We appreciate the balancing act governments must go through, trying to balance the revenue they raise through taxation with the needs of social programs for spending, and we would encourage continued monitoring of spending, so that there isn't a succumbing to the temptation of rapid increase in spending that forces taxation increase to fund it. There are some alarming trial balloons being floated out there in respect of additional taxes for health care. We think that is not the long-term solution. The only long-term solution to a sustainable social program is having increased economic activity, and the only way we are going to have increased economic activity is by having competitive taxation.

Thank you very much for the opportunity. I appreciate being able to make these remarks on behalf of the Saskatchewan Chamber of Commerce.

The Vice-Chair (Mr. Nick Discepola): Thank you very much.

I'd like to now turn to the University of Regina, represented today by the vice-president, administration, and welcome Dr. Jim Tomkins.

Dr. Jim Tomkins (Vice-President, Administration, University of Regina): Thank you very much, Mr. Chairman. Good morning everyone.

I'm vice-president of administration at the University of Regina, and I also hold a position as professor of mathematics and statistics. I appear before you this morning with a good news story, not just for my university, but for universities across Canada. It's a story that I think can have an even better ending with appropriate measures from the Government and Parliament of Canada.

On behalf of the university, I'm grateful for this opportunity to present some issues of critical importance to my university and to universities in general across the country, in the hope that they will be addressed in the next federal budget. My focus will be on research and scholarly work at universities and the golden opportunity Parliament has right now to help maintain and accelerate the current momentum on the research front, momentum with roots in federal programs in large part.

Allow me first a few words about the University of Regina. The University of Regina traces its roots to 1911 and has been an independent institution since 1974. Over 12,000 students are currently enrolled in a comprehensive array of undergraduate and graduate programs there. The university has long prided itself on the quality and effectiveness of its teaching, and in recent years has striven to raise the profile of research and scholarly work on campus. Research funding at the University of Regina has been rising at an exponential rate over the past decade. In fact, research funding has doubled over the past two years alone, and the university expects such funding to double again by 2006.

This rapid increase in research activity can be attributed to a number of factors, two of which stand out. One is the considerable new investment in university research and scholarly work by the Government of Canada over the past five years, especially through the Canada Foundation for Innovation, the Canada research chairs program, and significant new investments in the federal research councils. These federal investments have in turn levered additional funding from the private sector and from provincial governments and agencies.

The second key factor underlying research momentum at the University of Regina in particular is the formulation of a vision, goals, and academic planning framework for the institution. As it moves forward, the University of Regina is determined to heed its motto, “As one who serves”. With this in mind, the university has determined five areas of emphasis for its teaching and scholarly activity, culture and heritage, energy and environment, informatics, population health, and social justice. These five foci align well with the university's own strengths in the social, economic, and cultural priorities of Saskatchewan in particular and of Canada in general. These emphases are strongly supported by faculty and staff. In my experience at the university, which now runs to over 33 years, the excitement and enthusiasm pervading the campus right now are unprecedented.

These two key factors are tied together by the observation that there are few, if any, examples of significant social or economic progress in modern society without some form of three-way partnership among the public sector, the private sector, and universities.

In the time remaining to me I propose to address three issues briefly, the indirect costs of research, innovation, and funding for research in social sciences and humanities. You will be familiar with these issues, because they feature prominently in the agenda of the AUCC, the Association of Universities and Colleges of Canada.

As welcome and productive as the recent federal research initiatives are, they nonetheless put considerable pressure on universities' existing budgets and facilities. Workloads have risen in financial services, purchasing, and research services offices. The demands for already limited space and for funds to renovate space for research purposes have accelerated. Arguably, these pressures are felt more acutely at smaller universities. Like all other Canadian universities, the University of Regina was very pleased that the need for incremental funding to cover some of these indirect costs of research was recognized in the most recent federal budget through the one-time allocation of $200 million for that purpose. However, as grateful as we are for our share of these moneys, the University of Regina urges the Government of Canada to implement a base-budgeted permanent indirect cost program, and further, to recognize within that program the special needs of smaller institutions.

¿ (0925)

The federal innovation strategy sets aggressive targets. The University of Regina stands ready to do its part to meet those targets as new resources are made available. As noted above, our strategy is to play to our research strengths and work in collaboration with public and private sector partnerships to achieve desirable social and economic objectives. The University of Regina is proud of its record in this regard. Our Petroleum Technology Research Centre involves federal and provincial entities and private companies. The Saskatchewan Institute for Public Policy is a partnership of the provincial government and the University of Saskatchewan with the University of Regina. The Emerging Sustainable Communities Institute will have federal, provincial, municipal, and private sector contributions. I could extend this list. The point is that we are eager to build on the record of innovation and accomplishment we have.

A subtext here is the need to ensure that Canada has enough highly qualified personnel to reach the goals of the innovations strategy. Universities in particular are facing an unprecedented shortage of qualified faculty members to replace the retiring baby boomers and respond to enrolment increases over the next decade. The University of Regina urges the Government of Canada to move towards the target set in the innovation strategy for education, training, research, and development.

The sizable increases in federal research support in recent years are welcome investments in Canada's universities. However, to a great extent, these new funds have been directed towards research in the pure and applied sciences. Support for research in the social sciences and humanities has not kept pace. Canadian society today faces a multitude of complex social and ethical issues, including homelessness, poverty, controversial reproductive technologies, literacy, and the needs of aboriginal communities. These challenges, like many others on a more global scale, fall naturally into the domain of researchers in the social sciences and humanities. It is, therefore, good public policy to ensure a fairer balance between funding for social and cultural research and support for the sciences and engineering. The University of Regina urges the Government of Canada to give high priority to a disproportionately large increase in the funding of the Social Sciences and Humanities Research Council.

In summary, the University of Regina expresses its gratitude for the federal government's support for research and scholarly work and strongly encourages Parliament to stay the course, in order to maintain and accelerate the momentum engendered by existing federal initiatives.

Thank you for your attention and for this opportunity to address you.

¿ (0930)

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

I would like to conclude with the presentation from the Saskatchewan Agrivision Corporation, represented this morning by its president, Mr. Williams, as well as its executive director, Mr. Scholz.

Mr. C.M. Williams (President, Saskatchewan Agrivision Corporation): Thank you, Mr. Chairman. Mr. Scholz will present the body of the report, and if there is time, I will bring up a current hot file we are dealing with.

Mr. Al Scholz (Executive Director, Saskatchewan Agrivision Corporation): Thank you, Mr. Chairman, Honourable Members, fellow presenters.

There is a presentation we have handed out. What I would like to do is look at Saskatchewan from 30,000 feet on the agricultural sector. The agricultural sector could add $40 billion to the provincial economy by the year 2020, and it could largely come from the private sector.

Saskatchewan Agrivision is a coalition of farm, rural, and business leaders who are taking the initiative to work for rural renewal and revitalization, with a focus on increasing farm-gate income. We have the task of creating a vision for value-added and dealing with the challenge of roadblocks and barriers to achieving this very aggressive vision.

We want to address three points this morning. The first one is that agriculture has the ability to transform the Saskatchewan economy. Despite the fact that we are diversifying, we believe there is still a huge opportunity in this industry. If we had the same level of value-added Manitoba and Alberta currently have, we could add $10 billion to the provincial economy. At this point we have $7 billion in our agricultural economy, $5 billion from commodities and $2 billion from value-added processing. We could add $10 billion if we could simply move up the value chain.

Second, the solutions, we believe, to moving up the value chain are already evident in Saskatchewan, they've been identified by leading farmers. We're in the process now of quantifying and surveying the leading farmers across the prairies, starting in Saskatchewan, to document their management and marketing systems, the systems that keep them profitable, even in times like these, where there are market anomalies. We have created some publications that have already started this on an ad hoc basis. There is a book I wrote called Don't Turn Out the Lights: Entrepreneurship in Rural Saskatchewan, and we did a “Community Success Stories” last year that talked about rural communities that are growing in population in the province. So the solutions are here. That's the second point.

The third point is that in order to make this happen we need investment, we need mechanisms to attract equity investment into agri-value. The point I'd like to leave you with concerns the mechanisms for doing that. We believe we can attract equity from local people in Saskatchewan, external investors in Canada, and foreign direct investment. Saskatchewan Agrivision is developing a fund that we call the Saskatchewan Agrivision Investment Fund. It's a labour-sponsored fund. It's modelled after the Quebec Solidarity Fund, which I think a lot of you know has been the most effective mechanism in Canada for mobilizing local resources for reinvestment in the province. We've got a verbal commitment that the federal government would provide seed money for this fund, as they have done with other labour-sponsored and equity funds, so we're just wanting to underscore that point and offer encouragement on that, because this fund can lever massive amounts of private capital.

The attachments I have to this one page basically build the case for why we believe, from 30,000 feet, Saskatchewan can move ahead very rapidly. Our vision is to double Saskatchewan farm-gate receipts by the year 2005, and that's creeping us on us fast. We're going to dramatically increase livestock and value-added processing. We want to improve farmer participation up the value chain, so that farmers can grab some of that consumer dollar back to the farm-gate. There's lots of money in the food industry, and the farmer just needs to have a mechanism to draw it back. Our other vision is to increase rural population as our province grows to two million people by the year 2025, because that's what we believe we can be.

The next chart there says “Saskatchewan needs more value-add from the land base”. That's a diagram that shows the percentage we have of agricultural lands. The next chart there shows what we have in farm-gate receipts. The last one is the value-added sector. We have 47% of the land, about 15% of farm-gate receipts, and 2% of the value-added industry. If we were simply at the level of Manitoba and Alberta, we would more than double the agricultural contribution to the economy.

The next sheet looks at the export profiles of Canada, Saskatchewan, Alberta, and Manitoba. You can see that Saskatchewan is still primarily dependent on the export of commodities. The intermediate zone of processing is slowly growing from our pulse industry, but if you look at Manitoba and Alberta, you'll see that their food processing product going into the export market is similar to the national levels. If we were at the same level as our provincial partners, again, we would more than double our income.

The next sheet looks at gross revenue per acre. This again underscores the huge potential Saskatchewan has if we can simply move ahead. We have the lowest average per acre revenue in the country. If you compare it to that hotbed of agricultural productivity, the Atlantic region, you can see that they're four to five times per acre what we are.

One of the keys to moving to 2 million people is immigration, and there's a chart that looks at our ability to attract immigrant farmers, primarily from Europe, into Saskatchewan to buy our farmland and bring their expertise. We've been getting 3% of immigrants. This is information I got from HRDC this summer.

So there's a lot we need to do to develop the opportunities we have in Saskatchewan and to attract some of the expertise in livestock, as well as the capital from abroad.

In conclusion, my last overhead there is Charles Darwin's theory of evolution, of which we keep reminding ourselves. It's not the fastest or the strongest or the smartest that survive, it's those that are best able to adapt to change. That's the big thing we're pushing with Saskatchewan Agrivision.

I'll just turn it over to Red to pick up on another hot issue we're working with.

¿ (0935)

Mr. C.M. Williams: We are bringing this to your attention because it is a hot issue. I am suggesting to you that the country of origin labelling in the U.S. is likely, if it progresses as it appears to be, to be as devastating to prairie agriculture as the drought is this year. A good rain will fix the drought, but only a change in legislation in the U.S. will deal with the country of origin labelling.

I think they inadvertently stumbled into this, because of an election year. The election is over, the Republicans have won, and I think the Government of Canada has a significant responsibility to be back in there urging them to make whatever legislative changes have to occur to reverse that. The mood, as I understand it--I just returned from the States--is that they want to change it as well. It was one of these inadvertent things that virtually everybody recognizes was a serious error in their legislative process.

I am suggesting to you that we must have a contingency plan in place and begin to develop it now, because already the contracts on exports of wiener pigs out of Manitoba are backing up, and I want you to understand that we have no killing space in Canada, but our shackle spaces are absolutely full, and this will possibly back up in our swine industry five and a half million hogs. To give you some idea of what that is, it means we would require two and a half plants the size of the Maple Leaf plant in Brandon to kill the hogs that will back up into our system. You know what that will do to price. The beef industry is in virtually the same position. It is a very serious situation.

I am suggesting to you that we need a blue ribbon committee moving immediately on contingency plans and that some of the people who are deep in the marketing systems of both beef and pork be on that committee. We will need that immediate kind of advice from those people. This is a hot, hot item that must be moved on in days, not months.

¿ (0940)

The Vice-Chair (Mr. Nick Discepola): Have you made this presentation to the agriculture committee or written to the chair of the agriculture committee?

Mr. C.M. Williams: Yes, we're in contact with them, but it's just going to be a disaster if it doesn't get straightened out.

The Vice-Chair (Mr. Nick Discepola): Do you have any concluding remarks, Mr. Scholz?

Mr. Al Scholz: I would only go back to my earlier point. As we look at Saskatchewan from the 30,000 foot level, there are opportunities. The point we would like to leave is that they require investment capital. We have a mechanism in place to mobilize that, and we just want to remind the committee of the verbal commitment we've had from the federal government to seed our fund at the same level other funds have been seeded, because this can lever enormous amounts of private capital to help the industry move ahead.

Thank you.

The Vice-Chair (Mr. Nick Discepola): Thank you very much.

Colleagues, we have about 45 minutes, so maybe I'll give eight minutes each.

Rick.

Mr. Rick Casson (Lethbridge, Canadian Alliance): Thank you.

I want to thank you all for your presentations. They were excellent ones. This is my first stop on the finance committee tour, and I hope all the other presentations we receive are as well presented as these are. I don't know where to start, there are so many questions.

Mr. Williams, I appreciate your comments on the country of origin labelling. I'm from southern Alberta. If that goes through, it will be absolutely devastating to us. Hopefully, after the elections the other day some of the rhetoric will change down there.

I worked at the University of Lethbridge for 27 years, so I appreciate the VP of administration being a mathematician and statistician. You made a statement in your presentation I'd like you to expand on, because I believe educating our young people, no matter where we are, is important to the future of all aspects of our economy. You asked for “the Government of Canada to implement a base-budgeted permanent indirect costs program, and further, to recognize within the program the special needs of smaller institutitions”. Can you explain a little further to me what you mean by that?

Dr. Jim Tomkins: This year there was a one-time allocation of $200 million for indirect costs that was distributed to the universities across Canada. I don't know what the formula was, but it was done in such a way that the smaller universities got a little more than their share, depending on how you calculate share, and the bigger ones got a little less. So we are, in effect, saying, we think this is a great idea, but instead of doing it on a one-time basis, how about doing it as part of an ongoing program.

Mr. Rick Casson: Okay.

We hear lots of stories about increased enrolment, huge increases coming at us. How are our universities being prepared for that?

Dr. Jim Tomkins: Right now it's the calm before the storm. We're already having difficulty, I think right across the country, hiring faculty in almost every area. It's really tough in some of the ones you can predict, like computer science, finance, accounting, and some of the engineering professions, but we're starting to have difficulty even in some areas of arts and science where people were probably a dime a dozen 10 years ago.

On the enrolment side, the predictions are that we're looking at a 20% to 30% increase nationally over the next 10 years, and that will come partly because the echo of the baby boom is working its way through the system, partly just because it's predicted that the participation rates will continue to go up. If this happens, we're looking at large numbers of retirees in the faculty ranks on the one side, large numbers of new students coming in on the other side. There's going to be a crunch.

So there's no question we're going to be looking for funding, and typically, it has come from either governments or students.

¿ (0945)

Mr. Rick Casson: Most of you mentioned the capital tax implications for business, and the chairman's comments were well received by you all, I'm sure. Hopefully, there can be some movement on that.

I want to ask a question of the Dehydrators Association. A year or two ago, when a presentation was made to us, the issue of foreign subsidies came into this. I think it was Spain at that time and the subsidy was huge. The subsidy was more than you were getting per tonne for your product. How much of that is still going on? And I would maybe ask the CFA too, as we progress through this next round of WTO negotiations on agriculture, do you see any hope for reduction or elimination of these subsidies to get our producers back on an even playing field?

Mr. Warren Pridham: The European subsidy is certainly still an issue in the dehydration industry. Currently, because of the drought situation in Canada, supplies have tightened up somewhat, so we don't see it as much of an issue, but it will return as soon as supplies return to normal.

Dale, would you comment further on that?

Mr. Dale Pulkinen: As far as I know, the subsidy is still in existence and is significant. I think somewhere around $112 per tonne is the size of that subsidy in Europe, so it is significant.

Mr. Rick Casson: And what are you selling your product for, a ballpark figure?

Mr. Warren Pridham: We're at $150. That's gone up. We were below $112 back at the plant at one point.

Mr. Rick Casson: Mr. Chairman, maybe Marvin could comment on what he sees as anything beneficial coming of that in reducing foreign subsidy and how it affects our producers.

Mr. Marvin Shauf: All through my presentation I talked about being globally competitive, and I talked about the value-plucking subsidies and strategies other countries have employed. That, for producers, is a huge issue, a matter of being competitive with those subsidies. For the rest of the industry, it is also a huge issue, because a lot of the benefit of those subsidies in other countries flows through the producer into the processing and handling industry.

What I think is becoming more visible at this point for the future is more of a restructuring of subsidies than an actual reduction of subsidies. When I look at what the United States is talking about in international discussions, it is implementing more green programs or shifting their dollars more to green programs. Europe talks about multi-functionality, which is food safety, environment, and all of those issues. They talk about them as non-trade concerns, and at this point you can talk about them that way, and who would argue with you? Once you put standards in place, though, that you have to meet to be able to gain access to an international marketplace, they become a trade concern.

If the government is funding the implementation and the capital costs for producers in other countries and Canada isn't doing that for Canadians, you have a competitive disadvantage within Canada. That's why, throughout my presentation, I talked about strategy and appropriate levels of funding to keep Canadian agriculture globally competitive. While that's a huge issue, as I said, for producers, it's a huge issue in being able to add the value we need to add in the Canadian context, so it is an important component of the Canadian economy.

¿ (0950)

Mr. Rick Casson: I'd like to ask the chamber representative a question we get asked a lot when we say we need debt reduction and tax reduction. You even mention air travel security, capital gains tax, payroll tax reduction. Is there room for all of that?

Mr. Norm Halldorson: Yes, I believe there is. The comment I made earlier I will repeat. I think the only sustainable funding for a comprehensive social safety net is increased economic activity. We have a wealth of resources in this country, a wealth of human capital, we simply need to remove the impediments to achieve growth in our economy. All those points we're speaking about are areas where a little bit of fine-tuning can increase the competitiveness of Canadians in the global economy and provide the growth that will create a long-term stream of funding from increased economic activity. A smaller percentage of a larger pie is the solution, rather than extracting too much from the existing pie and causing it to shrink.

The Vice-Chair (Mr. Nick Discepola): I'll now turn to Mr. Cullen.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Mr. Chairman, and thank you to the presenters.

On that point, I don't think it does all fit. Maybe over time it does, but given the demands on the federal treasury with health care, Kyoto, etc., I'm not sure it all fits in the timeframe you'd like.

I'd like to go to Mr. Shauf. You'll be happy to know that I have a private member's bill on cost recovery and user fees, Bill C-212, which has now been deemed votable. So we'll have three hours debate in the House of Commons and it'll come to a vote. It talks about more transparency, more accountability, more linkage to performance, more benchmarking with international user fees, etc. My colleagues around this table will be asked at some time to vote on that. I hope you can encourage them to support it. If you'd like a copy of my bill, I'll be happy to send it to you.

I'd like to come to two of your comments, Mr. Shauf. The $500,000 lifetime capital gains exemption I presume you want increased. Does that mean farmers are being exposed to more capital gains? That seems to be inconsistent with some of the description of the difficulties farmers are exposed to.

Second, on Kyoto and climate change, you say the government should look at how the benefits and costs all shake down. I agree with you, but what are the benefits to farmers of dealing with climate change? We don't hear a lot about that. What about recognition of sinks? What is climate change doing to farmers? Is that something we should be worried about?

Mr. Marvin Shauf: We're all concerned about the environment. Producers have done a great deal through the years to look for ways to be more environmentally friendly. The ratio of summer fallow to continuous cropping in the prairie region has changed dramatically over the last number of years, which apparently has the ability to sequester more carbon. Something that could be explored is some kind of a mechanism for producers to share economically in the ability to sequester carbon. There are probably a number of things that need to be explored as to what may be of benefit to Canada by looking at the Kyoto situation, but we need to be very very careful on how we implement it in Canadian agriculture, because Canadian agriculture is extremely fragile economically at this point.

To back up to your first question about the capital gains, $500,000 used to be a pretty significant operation. With the consolidation of the industry and the fact that margins have been thinning and producers have been required to work larger and larger operations to remain viable, the value of those operations has increased. There are some severe tax implications in that.

¿ (0955)

The Vice-Chair (Mr. Nick Discepola): Can you put a number on that?

Mr. Marvin Shauf: No, I haven't a number, but it should be looked at on an ongoing basis to recognize the evolution.

The Vice-Chair (Mr. Nick Discepola): Would it also apply to all small businesses?

Mr. Marvin Shauf: I wouldn't have any argument against that, but I'm not knowledgeable in that arena.

Can I just make a comment on your initial discussion?

Mr. Roy Cullen: I'd like you to come back to Kyoto and climate change. This is a difficult issue for all of us. I think there's a lot of work to do still on Kyoto. One of the arguments we hear, but mutedly, is that there are some benefits to farmers. We look at the drought, we look at the way the climate is affecting a lot of people, especially farmers. We don't hear a lot of it, but this is a benefit.

Mr. Marvin Shauf: That's what our point is. In discussing it in a lot of arenas, there are a lot of questions, and a lot of people will make relatively strong statements about it until you start to get into the questions, and then there don't appear to be answers. From an agricultural point of view, that causes a great deal of concern, because of the financial fragility of the industry and the fact that we can't take something that adds costs and doesn't have an offsetting or positive revenue element.

Mr. Roy Cullen: I'm still puzzled by that, because it seems to me that if we deal with climate change, it should be a relatively simple issue. Forget how it all stacks up in the old Kyoto deal, if we deal with climate change, there should be some benefits to farmers. I'm not hearing that very clearly.

Mr. Marvin Shauf: I think they are difficult to quantify. The economics of it are difficult, and our statement is that there needs to be a very positive outcome from the Kyoto for agriculture if, in fact, it's going to be implemented. And I think it relates to your initial comment about the competing demands for capital in Canada. We do have competing demands, but we need to look after the economics in order to implement them.

Mr. Roy Cullen: Okay. Thank you.

I'd like to get to the CFI and this whole question of the resource allowance and so on. There's been a lot of discussion. Hopefully, the government will come down on this with the mining industry and the oil and gas sector, because it's been hanging around for some time. We had a presentation in Ottawa from the Canadian Mining Association, and I do know it affects potash differently from other sectors of the mining industry, and that's one of the challenges they have to deal with it.

The reason it's still up at 28% is that the government argues, with some logic, that there are other tax incentives that apply to the mining and oil and gas industry, accelerated CCA investment tax credit etc. They are trying to move in a direction to get to the 21%, but there's a bit of horse trading going on to get there, as you know. The Mining Association in Ottawa said, if they brought it to 21% and threw out the resource allowance completely--presumably, if you throw out the resource allowance, you've allowed deductibility of royalties--the mining industry as a whole would end up actually paying more tax. So they're playing around with a bunch of different scenarios.

Could you clarify for us how that affects you in the potash sector, the differentiation, if you like?

À (1000)

Ms. Karen Rowbottom: We're quite different from the rest of mining, as you've commented. They're winners with the resource allowance, the way the allowance is calculated. They sometimes even get more than 25%. So they get more than the 7% credit on their federal tax. They typically pay very low crown royalties. So they end up gaining a bit. We're at the opposite end of the spectrum. Our resource allowance only covers two-thirds of the royalties we pay. That's why our marginal rate is 33%, whereas they are sometimes below the 21%.

Mr. Roy Cullen: So how does the government deal with that? If there's a deal in the making, I'm going to the 21%, but the way the Mining Association talked, they were maybe looking at doing something on the resource allowance, but not fully. How does the potash sector fit into all that?

Ms. Karen Rowbottom: We should be where everyone else is in the country. Sometimes we get unfairly lumped in with the rest of mining, because they're are at an advantage. We've been at a disadvantage for years, and I think they have to do something that will help our situation. Obviously, mining doesn't want to go below where it is now, and maybe they have some special incentives to keep them where they are.

Mr. Roy Cullen: Does the potash sector get the advantage of some of the other tax incentives the mining industry gets?

Ms. Karen Rowbottom: Not to the level of mining, because we are a mature industry. Most of us have had mines in production for several years, so we don't have the benefit of doing new mining from the ground up, where the benefits of accelerated CCA are very important. We're not in the same type of industry. We get some benefit, but to a much smaller extent.

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

I'd like to welcome Mr. Martin from the N.D.P., the New Rural Democratic Party, to the committee.

Mr. Pat Martin (Winnipeg Centre, NDP): Thank you, Mr. Chair, and thanks to you all for very interesting briefs. Coming from Manitoba, I can relate to many of the issues all of you have raised.

I would like to spend my time asking you for your views on a matter of taxation policy that I think crosses over into broad public policy even.

In 1969 the U.S. amended their revenue code to specifically deny the tax deduction of business fines and penalties, but in this country any business that incurs a fine or a penalty in the course of earning income has a tax-deductible business expense. Some people view it as bad public policy, as a wrongdoer should never benefit from doing wrong, and also it undermines the very purpose of a fine if a person can have it automatically reduced by writing it off on their income taxes. So I'd like to start by asking you, Mr. Halldorson, with the chamber--you seemed very knowledgeable about all issues to do with taxation, and much of your brief dealt with taxation--whether you could briefly give me your reaction. Should Canada continue to allow business fines as tax deductions?

Mr. Norm Halldorson: I'll give you my thoughts on it as an individual. It probably isn't a chamber position, because that's not an issue we've addressed through our committee. I'm a practising chartered accountant working with independent business and have been for many years, and there are fines and penalties that are not deductible under current legislation.

Mr. Pat Martin: In 1999, though, seeing there is no difference between levies and penalties, they had no choice but to say all penalties would be allowed, at least after appeal.

Mr. Norm Halldorson: It's still my understanding that there isn't a broad brush that says all penalties are deductible. For example, the most common penalty we come across is interest for late or deficient instalments on income taxes. That is not deductible.

À (1005)

Mr. Pat Martin: That is the exception, you're right.

Mr. Norm Halldorson: And it continues to be not deductible. So I'm assuming the area you're looking at is where a business is found in violation of some legislation that attracts a penalty or a fine. My personal feeling is that if it is a consequence of some unethical or inappropriate act on behalf of the business, it should not be deductible.

Mr. Pat Martin: Breaking the law, in other words, shouldn't be tax-deductible.

Mr. Norm Halldorson: I would think not.

Mr. Pat Martin: Does anybody else have a view? I'm trying to get a straw poll.

The Vice-Chair (Mr. Nick Discepola): You're taking over my job. You're supposed to ask the question, I'll direct the traffic, no problem.

Mr. Pat Martin: Mr. Chair, can I redirect the question to anybody else who would like to respond?

The Vice-Chair (Mr. Nick Discepola): Of course.

Ms. Karen Rowbottom: I think you're referring to the change in the Canadian policy as a result of a court case that happened in B.C. with egg quotas. As part of doing business, there are some fines or penalties levied that are proper deductions. For example, you have a polluting emission, you've done everything right, but you get fined. I think those sorts of things are a normal part of doing business and should be deductible. I tend to follow the reasoning in the court. I thought it was a welcome change that Canada brought in, because some of them are unavoidable and are just part of doing business, they happen.

Mr. Pat Martin: With the egg marketing violation in B.C., you're right, that was viewed as a levy. It was a business choice the farmer made. There was an increased demand, so he measured and said, it was worth my overproducing and paying the levy to meet that market. Levies, I think, may be a little different from fines and penalties, but it's a good point. Thank you.

I'm interested in your comments, Mr. Williams, about the American Farm Bill. We are all hoping now that those five farm states they were tryng to appeal to did swing Bush's way, and maybe they'll back off this outrageous Farm Bill. You mentioned the impact of the labelling. Could you fill us in on the impact of adding pulse crops under the Farm Bill in respect of subsidies? I know they drastically increased their grain subsidies, but have they not now folded in pulse crops for the first time under their subsidy package?

Mr. C.M. Williams: That's true. It's apparently not going to be effective for a while, but I would turn that over to Mr. Shauf, because that's his field of expertise.

Mr. Marvin Shauf: Thank you.

If implemented and given levels similar to those they've had in the rest of grains and oilseed, it has all the ability to be as damaging, and maybe more damaging, because a lot of the crops they've targeted are very small crops. So if they increase production through subsidies in a small crop with a very inelastic demand, they could be very damaging.

The Farm Bill and the strategies related to it are very comprehensive. They had the cheap feed grain to pull livestock production out of Canada and promoted milling, exporting, malting, all the other things within the U.S. economy, but they still didn't have something that effectively dealt with exports of beef and pork out of Canada, and the country of origin labelling has all the ability to damage the value of Canadian exports in that arena. They've implemented some things that are very strategic, I think, in building their own industry at the expense of the value of the Canadian industry. It needs to be responded to from a Canadian perspective as strategically and as appropriately.

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

Shawn Murphy.

Mr. Shawn Murphy (Hillsborough, Lib.): Thank you very much, Mr. Chairman, and like my colleagues, I want to thank everyone for their presentation.

Mr. Pridham, I want to explore this issue you're talking about, and first I have to confess a little bit of ignorance. I come from a province where agriculture is the primary industry, but I'm not totally familiar with the corporate structure you describe. Where I come from, Prince Edward Island, potatoes are the primary industry, and we have a lot of companies that are owned by the potato farmers. In all those cases the husbandry of the land is what the farmers do, and they sell the crops to the company, which they, in turn, own, so whether they make a profit or loss is their responsibility. In the situation you described--and I'm just not clear in my own mind--the land husbandry is taken over totally by the company. Is that correct?

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Mr. Warren Pridham: That is correct. For all intents and purposes, we handle all aspects.

Mr. Shawn Murphy: Are all these shareholders active farmers living on the land?

Mr. Warren Pridham: The vast majority are.

Mr. Shawn Murphy: And they're involved in day-to-day farming operations?

Mr. Warren Pridham: That is correct, on the balance of their land. We also take land from non-shareholders by contract for alfalfa production.

Mr. Shawn Murphy: Of course, they would not be eligible for CFIP.

Mr. Warren Pridham: That's correct, they're not shareholders.

Mr. Shawn Murphy: Is there any reason for this? I'm just going by what I'm familiar with. They rotate their crops differently. They use the company for certain crops and their own operations for other rotating crops, is that correct?

Mr. Warren Pridham: That is correct. For example, on my own farm I have a percentage of my acres that are in alfalfa production, where the dehydration plant handles all aspects of field husbandry. On the balance of my farm I handle all aspects of seeding and harvesting other crops.

Mr. Shawn Murphy: But if you changed your corporate structure so that the farmers themselves were responsible for the husbandry of the land and sold to the company, the problem you describe would be corrected.

Mr. Warren Pridham: No, it would not, because the value of the product at that stage is so low in its life cycle. The plant itself still has all costs of harvesting and transportation to the facility. So the in-field value of the product is relatively small compared to the overall value of the product.

Mr. Shawn Murphy: In one of your normal companies, would the vast majority of the shareholders be what I call active farmers operating farms?

Mr. Warren Pridham: Yes, they would. Our particular company is over 30 years old, so one of our most active shareholders is 82.

Mr. Shawn Murphy: But he's not living in Toronto in some apartment building.

Mr. Warren Pridham: No. That is correct, and we stress that.

The Vice-Chair (Mr. Nick Discepola): Do you change classes of shares to accommodate the restriction?

Mr. Warren Pridham: As I said in my opening statement, I would be telling my shareholders that they could not be common shareholders and participate in that company.

The Vice-Chair (Mr. Nick Discepola): They could still participate through preferred shares, for example, in the profits.

Mr. Warren Pridham: As the rules stand right now, it has to be a voting common share that qualifies. Again, I would argue that should not be the right approach to correcting the situation. I am also a chartered accountant, and we live to reorganize things, but I do not think that is the proper policy.

Mr. Shawn Murphy: Is this problem experienced in any other sector or any other province?

Mr. Warren Pridham: In Saskatchewan it's a very large problem for the hog barns as well, where, again, individual farmers have pooled their resources and you have a primary agricultural producer in the form of a hog barn. Again they would not qualify, because of that constraint.

Mr. Dale Pulkinen: If I could maybe comment, there is a problem with that, I believe, in the cultural industry in B.C. as well.

Mr. Shawn Murphy: Okay.

Mr. Halldorson, I reiterate the remarks of our chairman on the capital taxes. We've recommended that for a number of years, and I agree totally with your arguments, also on the air security fee, which has to be reviewed by this government. I don't want to spend a lot of time on it here today. We've talked about that all week.

But there are a couple of things I want to raise. On your point about increasing the limit from $200,000 to $300,000, do you have any idea how much that would cost on a global basis?

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Mr. Norm Halldorson: No, I don't have a figure on what that is. There's not a simple identification of what that would be, because of the practice that is followed. What we see with the vast majority of privately owned businesses, the small entrepreneurs, is that they leave in the first $200,000 that's taxed at the low rate, and then they bonus out the excess so they don't get that double tax on the 9%. As to how many private corporations have that third $100,000 of income that they would otherwise leave in there, that is not a bit of information I know how to get in order to quantify it. But it's forcing the taxpayer to pay their full personal rate on it and lend it back, so they don't pay twice. They don't want to pay that 9% as a second tax. So it simply accelerates the timing of payment of the tax.

Unquestionably, there would be some deferral cost to the federal and provincial treasuries in extending that. The finance ministers in a large number of provinces have looked at that issue and have said, in their considered opinion, it is worthwhile to extend the full small business reduction to that third $100,000. The federal Department of Finance has not done the same. They have come part way, and by doing that, they have essentially frustrated the objectives of the provinces, because they'd like to see that third $100,00 left in to build stronger retained earnings in the companies. That's the best way for them to have some resources and flexibility against economic circumstances that turn against them. That's not happening, because it's being bonused out instead.

So our point is that the halfway rate is not accomplishing anything for anybody, and we would encourage the federal government to get onside with the provinces and extend the full reduction to that third $100,000.

Mr. Shawn Murphy: My second point to you, Mr. Halldorson, relates to your recommendation of further decreases in corporate tax. I assume what you're recommending here is over and above the reductions that have already been announced?

Mr. Norm Halldorson: No. I would say it's more making sure some of these trial balloons that are being floated don't overtake the agenda. If there is the continuation of the reduction in federal tax that has been outlined, I think that will go a long way to satisfying our members.

Mr. Shawn Murphy: That's what you're looking for. There have been what I consider reasonably aggressive corporate tax reductions. Mind, it's over the next three or four years, but it's there. it's been announced, and we certainly hope and think it's going to be implemented. But you're not advocating corporate tax reductions over and above those, are you?

Mr. Norm Halldorson: No. We're re-emphasizing the importance of it and that you should stay the course. Don't backtrack and abandon it.

Mr. Shawn Murphy: My last question is to Mr. Scholz. I certainly appreciate your presentation. The undertaking you have, is it from Agriculture or from Western Diversification? You say you have an undertaking from the department that this will be looked after?

Mr. Al Scholz: With the feed capital, we've been talking both with Finance and with the Minister of Agriculture. Our understanding is that the feed capital provision would come through Agriculture, likely through Farm Credit Canada, because they have a mechanism to allocate equity.

Mr. Shawn Murphy: That was my next question, are you dealing with the Farm Credit Corporation?

Mr. Al Scholz: Yes, we are.

Mr. Shawn Murphy: Thank you.

The Vice-Chair (Mr. Nick Discepola): Colleagues, we have eight minutes left, so I'll split it, four minutes for Ms. Yelich and two minutes each to Mr. Cullen and Mr. Casson.

Mrs. Lynne Yelich (Blackstrap, Canadian Alliance): I represent part of Saskatoon. I am from Saskatchewan, and I wanted to be here today, because you are the people in the driver's seat for giving this province any hope. It's a very pessimistic view out there, as we know. With the past drought, farming seems so down and everything seems so depressed, so I really wanted to meet you all and see where our hope is. You made very good presentations. In fact, I will leave here having a little more hope.

I'm particularly interested in immigration. I think that is very important for our province, so I would like to hear some comments on what we should do about that, whether, if you think this would be a real benefit to our province, we should set up an accord. We definitely need more cooperation with our province. I think there has to be more, maybe even some sort of interparliamentary group working with the province on all sectors. I'm wondering if that isn't something we should all be looking at. I'm interested in hearing each one of you say, if you could leave us with one message today to take back to Ottawa, what that message would be.

Let's start with immigration. Mr. Scholz, you addressed it. I'd like to know if you've got anything started on that.

À (1020)

Mr. Al Scholz: We've certainly been looking at immigration as a mechanism to bring in the expertise that's required in management and marketing in livestock in Saskatchewan, as well as investment capital and finding people who are interested in farming and moving into rural communities. We've looked into that, we've tracked the methods, and we have some strategies on how we might do that.

There are two barriers that result in only 3% of European farmers coming to Saskatchewan. The first one is farmland ownership, which is perceived as a barrier in Saskatchewan. The second is the attitude and the perception of the trade commissioners and the high commissions and embassies in Europe. When people come and want to immigrate as farmers, there is a tendency to say, well, Saskatchewan's a basket case, don't go there. Those are the two things we need to address. The farmlands ownership issue we have taken steps on, the attitude issue we're continuing to work on.

Mr. C.M. Williams: Another item that comes into play is the quota. There is a quota on immigrants, as you know, with seasonal workers and so forth. That one hits Saskatchewan very hard, because it's based on some sort of formula of available part-time workers. We have a plethora of part-time workers on the books, but they are not accessible to the horticultural industry particularly. That one has hit us hard. Manitoba has managed to get its quota up, Alberta's got its up, but we can't get ours up. It's fixed, I think, at about 300 a year or something like that. Those are federal rules.

Mrs. Lynne Yelich: That's why we need an accord of some kind, and I think we have to work on that. I guess we have to keep going.

Do you have any comments on immigration, Dr. Tomkins?

Dr. Jim Tomkins: From a university perspective, we've kind of gone back to the sixties, where we were hiring a lot of people from outside the country. The rules changed, and we basically weren't allowed to hire non-Canadians, except under very strict conditions. Now I think most of the rules have been waived again, just because of the shortage.

The only thing I would say as a citizen, I guess, is that we have to be careful. You'd just have massive immigration without the economy there to support them. Maybe it's a chicken and egg thing. Maybe the thought is, if they come, they'll create jobs, but we're hearing here about people coming with particular expertise, the same as with universities. Sure, we'd like to see the province grow, but I think we have to be careful, in fairness to the immigrants, as opposed to the economy.

The Vice-Chair (Mr. Nick Discepola): Thank you very much.

Mr. Cullen.

Mr. Roy Cullen: Thank you, Mr. Chair.

I just have a question for Mr. Pulkinen. I was not aware previously of this particular issue, coming from Toronto. I hope you will understand that. I'm trying to understand better why the Department of Finance, where they are normally compassionate, loving, caring people, would be opposed to what you're suggesting. I'm going to put three ideas out on the table, and maybe you could comment.

First, in a corporate set-up, some would argue that it's a way of dealing with risk. We all know, of course, that with bankers, you just sign your life away. I think limited liability has, to some extent, gone out the window. AIDA and CFIP, as I understand them, are to help farmers with risk, but in a corporate structure, one could argue, I suppose, that's a way of limiting risk.

Second, you said at the outset the government objective is really not so much to help the big corporate farms. We certainly hear that politically: let's save and work with the family farms, but we're not so much interested in the big corporations, they can look after themselves.

Third, how does the Department of Finance differentiate the kind of set-up you have from a big corporate farm? Is it a matter of expediency? It might be a very burdensome thing to try to differentiate corporations.

I just throw those on the table. Maybe you could comment, or follow up in writing.

À (1025)

The Vice-Chair (Mr. Nick Discepola): The committee members always ask all their questions, they never leave any time for answers.

Go ahead, Mr. Pulkinen.

Mr. Dale Pulkinen: I think they put in the 10% shareholder rule because they did not want the large corporations, the McCains and so forth, to take advantage of the programs. They use this 10% shareholder rule to prevent them coming in. And of course, it prevented us from being eligible for it. That's one of the things we felt to be a roadblock.

What was the second question?

Mr. Roy Cullen: It was on the corporate structure as a way to deal with risk. And how does the department differentiate all these corporations--this is a good corporation, this one is a nasty one?

Mr. Dale Pulkinen: They just use the 10% rule to determine which are eligible, and there's no differentiation--

Mr. Roy Cullen: I'm saying, if the government were going to change the policy, they would say to the Department of Finance, these corporations are nice corporations, we like them, so you can extend the rules to them, but not to these others. So they're going to have to go through the shareholder lists and all this stuff.

Mr. Dale Pulkinen: I guess we're unique as an industry. As Warren indicated, we are a value-added farming activity. The farmers have come together and pooled their resources, and it's really a company owned by the farmers. We are basically stewards of the land in being involved in animal husbandry. I think that's what differentiates us from the others.

The Vice-Chair (Mr. Nick Discepola): If you have any concrete suggestions following up on Mr. Cullen's comments, I'd encourage you to send them to the clerk of the committee. I think he is looking for assistance there to help you.

Mr. Casson.

Mr. Rick Casson: Thank you.

I want to go back, Karen, to your comment that the resource sector was put at a disadvantage because some of the tax breaks that were announced recently didn't apply to them, and you are further disadvantaged, as part of that resource sector, because of the tax structure, where you pay tax on the royalties twice. Can you expand on that?

Ms. Karen Rowbottom: Royalties are not deductible for income tax purposes. As a result, some time ago the federal government brought in this resource allowance to compensate for the non-deductibility of the Crown royalties. In our case, because our Crown royalties are so much higher than what we get back in resource allowance, we are, in effect, paying tax twice on that non-deductible portion.

Mr. Rick Casson: So provincial and federal?

Ms. Karen Rowbottom: Yes.

Mr. Rick Casson: Thank you.

Mr. Scholz, one of your charts shows the value-added in comparison to the land base, can you say why Ontario, with 9% of the base, has 51% of the value-added? Is it because of population, have they done a better job?

Mr. Al Scholz: Part of it's due to our history. The policy and the infrastructure were set up for Saskatchewan basically to be a producer and exporter of a raw commodity. In the post-1995 era that's changed. Now we have opportunities to move into the value-added, and there are market opportunities and incentives to do that. But in order to move into value-added, we do require investment capital. That was the point. That's the barrier right now in helping Saskatchewan move ahead into that sector.

The Vice-Chair (Mr. Nick Discepola): I'd like to thank all the presenters. This is the ninth year that we've been consulting Canadians in preparing our recommendations for the Minister of Finance for his budget. If you have any suggestion on how we can improve ourselves, if you felt you didn't get a chance to put a point across, you can always do it in writing to the clerk. I would like to thank you for a very good session. I think we're off to a good start today. I wish you the best of luck in your deliberations, as you should wish us luck in ours. Thank you very much again.

We'll suspend while we set up for the next group.

À (1030)

À (1044)

The Vice-Chair (Mr. Nick Discepola): Pursuant to Standing Order 83(1), we now resume our public hearings.

I would like to welcome our second panel of this morning: from the Canadian School Boards Association, Gary Shaddock, president, and Madame Monique Bélanger, director, policy and projects; from the Northern Alberta Institute of Technology, Dr. Sam Shaw, president, and David Janzen, vice-president, finance and administration; from the Saskatchewan School Trustees Association, John Nikolejsin, president, and Craig Melvin, executive director; from Trans-Canada #1 West Association, Frank Abdou, board member; and from the University of Saskatchewan, Peter MacKinnon, president.

The format allows seven to eight minutes for presentations to allow ample time for interaction within the members of Parliament. Our colleague Roy Cullen had to leave to attend a function this evening in Toronto, and he will be joining us in Winnipeg tomorrow morning. I apologize for his absence.

We'll turn right away to Mr. Shaddock.

À (1045)

Mr. Gary Shaddock (President, Canadian School Boards Association): Good morning, and thank you, Mr. Chairman and members of the committee, for this opportunity to speak to you today on behalf of the Canadian School Boards Association. My association is a national voice of school boards. Together, the ten provincial associations that make up CSBA represent over 350 school boards serving approximately 4 million elementary and secondary students across Canada.

Canada is currently enjoying a comfortable level of economic prosperity. Although the world is still facing uncertainty, Canada has weathered the storm thus far. The prudent policies of the federal government have helped us to pay down the debt, top up the contingency reserve, and deliver a modest tax cut package while still running a surplus. We must realize, however, that the federal government's plan for sound fiscal management must also entail the wise expenditure of tax dollars in order to meet the needs of Canadians. If the goal of the government is indeed to improve the standard of living for all Canadians, then we must begin with the children and youth who will carry our country forward.

This view happens to be shared by the Hon. John Manley, who stated in his recent fiscal update that our future depends on providing the best possible opportunities for our children. As a society, we must strive to ensure that all Canadian children, no matter where they live, have the best possible start in life and the best chance to achieve their full potential. Governor General Adrienne Clarkson echoed this opinion in the Speech from the Throne on September 30. No investments have greater payoffs. No investments do more to break the cycle of poverty and dependency and maximize the potential of every Canadian.

We support the government in its renewed focus on children, but change will not take place unless these promises are backed up with budgetary commitments. Unfortunately, both the 2000 and 2001 budgets did little to respond in specific ways to issues that have a lasting impact on children. This represents a problem of implementation rather than one of policy.

The Canadian School Boards Association commends the government's renewed commitment to a national child benefit with an increased contribution, but the federal government needs to ensure that it works closely with the provinces in order to ensure that these increases reach those children who remain in need. It is now time to put actions behind the words in order to actualize the national children's agenda by setting clear targets, corresponding accountability guidelines and procedures, and appropriate levels of funding. To that end, we recommend the appointment of a commissioner for Canada's children. A commissioner would be able to coordinate functions, direct the accountability and reporting measures for funding of initiatives pertaining to a national children's agenda, and coordinate issues at the national level.

In the Speech from the Throne in September 2002, the federal government highlighted the need to engage Canadians in every part of the country on how to ensure that all Canadian children have a good start in life. Such a statement recognizes that not everyone is enjoying Canada's current economic prosperity. While we can be cautiously optimistic about the economic outlook, a staggering number of Canadian children continue to live in poverty, and that number has increased exponentially over the last decade.

CSBA also welcomes the government's move to address the gap in life chances that exists between aboriginal and non-aboriginal children. The programs slated for expansion in the Speech from the Throne are a good start, but we note with some concern that these initiatives are aimed solely at on-reserve children. The fact that education is key to improving life chances is well established. The federal government must ensure, however, that its initiatives close the gap in life chances for all first nations children, both off reserve as well as on reserve.

CSBA thinks highly of the federal government's renewed emphasis on bilingualism and linguistic proficiency in both of Canada's official languages. CSBA is very pleased to see that this goal has finally been extended to include new immigrants to Canada, and the government is indeed correct in identifying language proficiency as a barrier to the realization of opportunities. CSBA therefore urges the federal government to ensure that appropriate levels of funding are available to school boards through transfers to the provinces and territories, in order to address language training for the increasing numbers of immigrant students. While this issue is of particular concern in urban centres, we must recognize that it touches school boards all across the country.

CSBA also approves of the federal government's efforts in helping to make Canada one of the most connected countries in the world. The federal government has shown strong leadership with Industry Canada's SchoolNet program. The National Broadband Task Force has provided the government with some options for achieving the critical goal of making broadband access widely available to all communities by 2004.

À (1050)

CSBA is pleased to see that the federal government is beginning to implement some of the task force's recommendations with respect to the needs of rural communities. However, the rapid pace of technological change makes it difficult to provide all students with high-speed broadband access at an affordable price using current equipment and up-to-date software. CSBA recommends that the federal government work closely with the provinces, territories, and school boards, as well as with the private sector, to develop a coherent strategy for making broadband access widely available to all communities, including public educational institutions, by 2004.

Furthermore, providing quality Canadian multimedia content on the Internet—content that reflects Canadian values and culture—remains a challenge.

Finally, there is a grave inconsistency in federal policy. While one arm promotes the use of technology in education and increased connectivity, the Copyright Act currently makes what students and teachers do on the Internet illegal.

While students in Canada continue to improve their skills in science and math, as evidenced by performance in national and international tests, there is still a problem if the literacy skills of one in four high school graduates falls below accepted minimum. Opportunities need to be available to all young people in order to improve everyone's chances of success. To that end, CSBA urges the federal government to work with the provinces, territories, and school boards to establish a Canada-wide program on technological and vocational education, in order to provide all students with the skills and knowledge necessary to compete in the global economy.

In closing, CSBA strongly urges the committee making recommendations to the federal government for the upcoming budget to recognize that children and youths are a high priority. Canada cannot be a player in the global economy without providing a well-developed social infrastructure to ensure that prosperity is not limited to the few but is shared by all, one in which every child and youth gets the right start in life, and one in which all Canadians have the chance to realize their full potential.

Thank you for your attention.

The Vice-Chair (Mr. Nick Discepola): Thank you very much, Mr. Shaddock.

We'll turn to Dr. W.A. Shaw, who is presenting on behalf of the Northern Alberta Institute of Technology.

Dr. W.A. Sam Shaw (President, Northern Alberta Institute of Technology): Thank you very much for the opportunity to present today and for accommodating our schedules.

First, let me start by commending the government on two significant documents coming from Industry Canada and HRDC, Knowledge Matters and Achieving Excellence. In both of those reports, skill development is the key link between the two ideas.

The national reports also call for the development and delivery of innovative apprenticeship training. To quote a Conference Board of Canada comment contained in Knowledge Matters,

We need to have a serious examination of how to improve apprenticeship programs. There is a shortage of tradespeople in Canada, and it will worsen in the next few years.

After having been in Asia for the last two weeks and in the U.K. this summer, I can honestly say this is a national and global problem.

In terms of the report, the report calls for 37,000 new apprentices over the next decade. When you start looking at the number of high school students opting for or considering careers in trades, the numbers have not grown, they have shrunken. Again, when we start referencing the number of high school students going on to post-secondary, that has not grown. It has been at 30%, so we need to do more. If you look at the Alberta situation, we only have 9% of Canada's population, yet we train 20% of Canada's apprentices. In terms of looking at the actual numbers, we have 41,700, and the numbers and the demand keep on growing. As the manufacturing sector and other parts of our economy start growing, we need to ensure that there are able tradespeople for those particular sectors.

At NAIT, we have 9,073 this year. That number will grow to 9,400 with some additional accommodations that we have been making in the last couple of weeks. We had estimated that we would only grow to 7,900 by 2009 when we did our campus development plan two years ago, so, again, the demand is coming upon us quickly and furiously. We must respond in order to look at the economic development that this entails.

In terms of looking at technical institutes and innovation, Stephen Owen has been put on record as saying the productivity gap between Canada and the U.S. is in fact increasing. Again, that is being looked at in terms of skills development. We think technical education is primed for that and, again, for supporting lifelong learning.

In terms of innovation, part of the response comes with applied research. It's not the contribution of pure research that occurs in the universities, but solving today's problems with business and industry is the role of colleges and technical institutes across Canada. We've been working hard with HRDC and Industry Canada to help to prepare the agenda for applied research. We think it's a very important component. We've been working hard with the National Research Council's industrial research assistance program.

We've also been looking at doing innovative programs and projects that are in fact only happening here in Canada. To cite one, there's mobile learning. We have had an investment from McGraw-Hill, out of New York, on that particular project. We are taking on some of the innovative ideas of having equipment anywhere at any time, and we are doing some work in gas chromotography.

We also see a tremendous opportunity with aboriginal people. Again, when you start looking at population growth and so forth, we think aboriginal people need the opportunity to participate in apprenticeship-type programs, again by increasing access and improving retention rates and successful completion rates. There are a number of things that we do at NAIT in regard to aboriginal students' success. We think student success is number one, and completion is very important.

In terms of innovation and productivity, when we start looking at linking innovation, productivity, and skills development, those are three trends that need to be looked at within the upcoming budget, again supporting the two key documents, Knowledge Matters and Achieving Excellence.

One of the things we have been working on with HRDC and our counterpart in Alberta is something called the NAIT Centre for Apprenticeship Technologies. We have a view that it's important to look at contributing to infrastructure, and we have six recommendations.

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The first is to fund infrastructure maintenance and renewal for technical education institutions, commensurate with the infrastructure program. We think this is vital in order to respond to the question of how we are going to train 37,000 new apprentices without infrastructure.

Enhance applied research funding earmarked specifically for colleges and technical institutes. Again, we think this is an important linkage with innovation, and we think an important link with business and industry can be made by the colleges and technical institutes.

Third, support funding solutions to the national skills shortage, such as the proposed NAIT Centre for Apprenticeship Technologies, where we can deliver training anywhere at any time.

Fourth, increase and enhance support for our colleges' and technical institutes' aboriginal outreach programs.

Fifth, enhance tax incentives for business and industry to make in-kind donations for modern technology in educational institutions.

Lastly, create matching funding programs to leverage private donations.

I'd entertain any questions at the appropriate time.

The Vice-Chair (Mr. Nick Discepola): Thank you very much, Dr. Shaw.

I'd now like to turn to the Saskatchewan School Trustees Association, and Mr. John Nikolejsin.

Mr. John Nikolejsin (President, Saskatchewan School Trustees Association): Thank you. I'll start the presentation and will turn it over to Mr. Melvin after my opening remarks.

Good morning, and thank you for this opportunity to address the Standing Committee on Finance. Your presence here today is valued. We are hopeful that what we have to say today will be reflected in the upcoming federal budget.

Saskatchewan citizens are proud. We have strong traditions that support our communities and the children and adults who live in them. We believe in helping others, and we willingly share what we have in order to improve the lives of our neighbours. Today, however, some of our needs as a provincial community have outstripped our ability to respond. Family and child poverty is a significant problem. We have made improvements, but still a very large number of families in cities, villages, and towns in the north, on farms, and in our first nations, live in poverty. These families love their children, but they cannot provide the essential supports to ensure their children's well-being. In our schools, we are losing our ability to keep our promise of ensuring success for all.

A growing proportion of Saskatchewan children are of aboriginal ancestry. Many children are in conflict with the law, and more and more come to school with severe learning disabilities, including fetal alcohol syndrome. Hundreds of urban children are hidden. They live in our cities but are out of our sight. Few of these children are achieving success. We are here today to seek your partnership in supporting our children's success. We believe we must achieve both equity and excellence for our children. They deserve to grow up in supportive communities and healthy families. They deserve academic success.

The cost of our failure to achieve these ends is evidenced every time a child comes to school hungry or leaves school before she or he has completed the program of studies. Every time a child comes before the courts and every time a child is born with AFS, we have broken our promise. But we believe we can and we must keep our promise to our children.

We can keep our promise by providing support for families, by building on the steps the federal government has taken to provide the child tax credit and create the national children's agenda. We can keep our promise by directing resources to new partnerships that support children's learning, to development of their workplace skills, and toward their post-secondary education. The promise of Saskatchewan school boards is to ensure that every child succeeds. Without your support, we cannot keep our promise.

Thank you.

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

Mr. Craig Melvin (Executive Director, Saskatchewan School Trustees Association): If I may go on with a few remarks, Mr. Chairman, our view is that we should begin to keep our promise by focusing on equity. Excellence is important to us, but we think we need to begin with equity. We need to sort through how we can better respond to the challenges that so many children bring to school.

In Saskatchewan, virtually every school and school division has in place at least one program that goes beyond education to reach children in their social, physical, and emotional needs, and to reach their families in a manner well beyond what we would traditionally see as the role of the school. It's interesting that, in Saskatchewan, over the past number of years of looking at this issue, the province, the school boards, and the teachers, have together made a public policy choice that our schools serve two aims. The first is excellence, and that's the educational program. The second, and no less important, is to serve equity and to provide the school as a means to reach children and their social, health, and justice needs, and to reach the families. In Saskatchewan, we call this SchoolPLUS. It's a program that we're tremendously proud of. We believe it can be successful, but it needs your support.

We lack the financial and human resources to meet the demand of the needs that children bring to school. We know the Government of Canada is supportive of this. In the Speech from the Throne in January 2001, the government talked about a more inclusive society in which children get the right start in life. The throne speech stated the government's commitment very clearly.

Another program that we're proud of in Saskatchewan is Kids First. This program is funded in large measure by resources from Canada—$73 million over five years, or about $10.5 million a year—that are directed to school boards and other agencies within the community to provide supports for children. This is a program that needs increased support; it certainly already has the support on the ground, in communities, with school boards, and from municipal councils and others.

Another area that we're proud of in Saskatchewan, and a direction in which we think we have a long way to go, is the development of partnerships with first nations. Many children come off reserves to schools in cities and in rural school divisions. We are beginning to develop very positive partnerships, and we need the support of Indian and Northern Affairs Canada, of the Government of Canada, to do a good job of that. Both the first nations and school boards need your financial support.

We think we can keep our promise with respect to equity by continuing and by improving the Canada child tax credit, which others have referred to.

In terms of addressing the question of excellence, like others here, we respect and appreciate Knowledge Matters and Achieving Excellence as two important documents that the government has provided. We think we can develop the citizenship that the Government of Canada is seeking. We think we can develop the academic skills and the workplace skills that the Government of Canada is seeking, but we need your support. We also believe we can develop the love of learning, so providing additional support for post-secondary institutions—the universities and so on—is important because we are doing our very best to ensure that as many children as possible go on.

So in terms of achieving excellence in our schools, we'd encourage you to ensure that there's increased support provided for partnerships between first nations and school boards. We'd encourage you to continue to enhance and support SchoolNet and technological development. We believe it's possible to target resources from Canada to help K-to-12 schools to develop workplace skills. We also think it's important for the Government of Canada to continue to expand affordable access to post-secondary education.

John.

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Mr. John Nikolejsin: In conclusion, I'd like to thank you again for this opportunity for the Saskatchewan School Trustees Association to meet with the Standing Committee on Finance. It is very highly valued.

The importance of ensuring equity and excellence for Saskatchewan children and youth is shared by us all. The steps taken by the federal government to achieve these goals are noted and appreciated, but we have much to achieve. We strongly urge the standing committee to make recommendations that will help us to keep our promise to our children and youths.

Thank you.

The Vice-Chair (Mr. Nick Discepola): Thank you very much.

I'd now like to turn to the Trans-Canada #1 West Association, and I ask Mr. Abdou to make his presentation, please.

Mr. Frank Abdou (Board Member, Trans-Canada #1 West Association): Mr. Chairman, committee members, thank you for the opportunity to appear before this hearing.

Our association represents municipalities, businesses, attractions, and tourist organizations in the three prairie provinces. I am an elected councillor with one of those members, the City of Moose Jaw. Moose Jaw is situated on the Trans-Canada Highway 1, a highway that is referred to as “Canada's Main Street”. Due to its importance to all the communities it connects, the Trans-Canada Highway 1 is one of the key highways that comprise 25,000 kilometres of the national highway system.

Our purpose today is to request that the federal government make a long-term commitment—an investment, really—to our national highway system. Specifically, we are calling for an investment of $500 million annually from the federal government to improve our national highways. With matching funds from the provincial governments, these funds would go a long way toward improving the state of our national highway.

As you know from your Canadian history, the railways were what brought this country together from sea to sea. The impact was particularly significant in the west, where the railways led to the creation of communities and the building of provinces. However, this has changed. The railways' importance has been surpassed by Canada's national highways. Statistics Canada has indicated that 70% of all manufactured goods are transferred via the highways. Also, the national highways move Canadians and tourists between our communities and provinces. The national highway system has become the most important component of Canada's transportation system.

Efficient and safe highways are critical to Canada's future competitiveness. In our competitive world, small differences in cost structures mean the difference between being in business or not. Our highways are costing Canadian businesses millions of dollars in extra fuel and travel time due to congestion and unsafe conditions. The national study shows that the investment in a national highway system would generate tangible benefits of 100% to 200% of the investment. Fewer accidents, less travel time, less vehicle wear and tear, and less fuel usage are benefits from an improved highway system.

Meanwhile, our competitors, and primarily the U.S.A., are benefiting from their national governments' investments in improving their highways. The U.S. government is investing $217 billion in improving the U.S. highway system. In fact, all western governments are doing a better job of improving their highways. Canada is the only member country of the Organisation for Economic Co-operation and Development without a national highway program. Those federal governments don't evade responsibility behind a debate over local and national responsibilities. They recognize their role and they invest in their national highways.

Some people have suggested private-public partnerships for funding highways. These partnerships may work. The fundamental problem is that we have a national highway system without our national government's participation. We request that the Standing Committee on Finance recommend to the Minister of Finance the creation of a national highway program with a $500-million annual investment, funded from the $4.5 billion in fuel taxes collected by the federal government.

An efficient highway system is critical to Canada's economic competitiveness and prosperity. Secondly, an effective highway system levels the playing field for all Canadians and Canadian businesses, whether you are in southern Ontario, rural Saskatchewan, or elsewhere. We need a national highway strategy now, and the federal government has the lead role in creating the funding and the strategy.

Thank you for your interest.

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

I would like to now ask to hear from the University of Saskatchewan, in the form of its president, Mr. Peter MacKinnon.

Welcome, and please make your presentation.

Mr. R. Peter MacKinnon (President, University of Saskatchewan): Thank you very much, Mr. Chairman.

I echo the words of my colleagues. Again, members of the committee and other guests, welcome to Saskatoon and to Saskatchewan. Thank you very much for the opportunity to spend some time with you. I think this engagement with communities and institutions across the country is extremely important, and it's much appreciated, of course.

There are three things I want to say to the committee this morning. I will say them briefly, because I suspect questions are more important than the presentations. Those three things are as follows.

One, there is an evolution underway in our country, an evolution that is gradually seeing post-secondary education move from the realm of being a public good to the realm of being a private good. If you look at the package of funding that goes into post-secondary education, I think this is an observable trend in our country.

There is now, and there will be in the next months, a great deal of discussion about health and about the needs of the health system. Some will point to the fact that we are spending no more of the GDP on health this year than we did 10 years ago. Entirely apart from the merits of that argument, it is important to note that we are spending significantly less of the GDP on post-secondary education today than we were 10 years ago. That highlights a trend that is taking place virtually without public debate. Nobody is standing up in the provincial legislature in this province to talk about the trade-offs involved in this area of public policy, and there's not too much debate going on across the country about it. It's a trend, and it's a serious trend.

The second thing that I want to say, I say because it seems curious to me that this trend is taking place at a time when the country celebrates—and justly so—an innovation agenda. I think the ambition that has been announced that would see our country move from fourteenth or fifteenth in the world to fourth or fifth—into the top five in the world—in innovation and in research is a wonderful goal. It's a noble dream, and one to be pursued with vigour. But it is curious that this dream and ambition are set out at a time when we are seeing this trend in post-secondary education moving from the realm of public good to private good. The innovation agenda is thoroughly supported by universities across the country.

The “indirect costs of research” program, which was begun last year, should continue. It's vitally important if the innovation agenda is to be pursued with vigour. And on the tri-council funding of graduate students, we face the task—and all universities across the country face it—more or less at the same time when we are replacing the past generation of academics with the next generation of academics.

The indirect costs of research, the tri-council funding, the graduate student support, and, of course, the Canada Foundation for Innovation, are vital pillars of the innovation agenda. There will be more pillars needed, but we support the agenda, endorse it, and celebrate it with you.

The third matter I wanted to mention to you in my brief remarks this morning is the need to put these ideas into the context of my own university very quickly. The University of Saskatchewan has 19,000 students in 13 colleges, including 2,000 aboriginal students. One of the great public policy imperatives not only at the primary and secondary school levels, but at the technical and university levels, is to educate the aboriginal population of this province, of this region, of this country. Yet, again, we struggle in doing that with accessibility and with rising tuition. At my own university, for example, tuition has gone up markedly in each of the last two years. If the trend I described at the outset continues, it will go up again.

We know we do not have student assistance in Canada generally, by the way. Certainly at my own university, we don't have the same capacity to provide the amounts of required student assistance in the form of scholarships, in the form of bursaries, and we're expecting enrolment to increase, which will further test the available resources.

Once again, to shift to the innovation agenda, we are seeing a tremendous emphasis on research and on demands, properly made, that universities be vigorous and that they be leaders in research. At our university, we have agriculture and agricultural biotechnology, vaccines and infectious diseases, and the Canadian light source. The latter is the country's largest science project in a generation, and it's under construction on our campus. We also have a very large and successful research park.

All of these things are important. We want to rally them to the innovation agenda and to the work that needs to be done, but it's very important for the government to take account of this debate on public goods and private goods and of the inconsistency of the trends with the innovation agenda, and to perhaps allow us to align the country's needs with the resources that are available more effectively than we are doing right now.

Thank you very much, Mr. Chairman and members of the committee.

Á (1115)

The Vice-Chair (Mr. Nick Discepola): Thank you very much, Mr. MacKinnon.

Colleagues, I've made an executive decision to allow our next guest to make a presentation even though he was not registered to do so. I feel it's important to allow an awful lot of dialogue to go on, and I think he has something to say. Unless there's any objection, I'll welcome Mr. John McConnell to make a presentation.

Mr. John McConnell (Individual Presentation): Thank you, Mr. Chairman and members of the committee. I am certainly pleased to have the opportunity to say something in a verbal way. I didn't find out about your important committee until this morning. I did phone the Star-Phoenix on Tuesday, but they did not know about it. I asked them to let me know if they found out anything, and I was very pleased that one of their reporters called me this morning and informed me that it was here in the beautiful Centennial Auditorium. So here I am.

President MacKinnon has certainly made some of the points I was planning to make, but I do want to say first how much I appreciate it that you have taken the time to come across Canada to listen to citizens.

One of my concerns is the fact that I believe we are, as Canadians, losing the middle class. In other words, I am primarily concerned about the welfare of Canada and where we are heading as a society. We are getting a smaller and smaller group who are more and more powerful, with more and more concentration in terms of economics and political influence. On the other end of the continuum, we are seeing a larger and larger group of citizens who are really not able to get the necessities of life. Perhaps the poor will always be with us, but I suggest that you, your colleagues, your senior public servants, and your various other groups, take a look at how there could be more equity created in the long-term interests of Canada.

I come now to the importance of the university and the importance of any institution doing educational work. We have a very impressive track record here at the University of Saskatchewan. Here is a university started by the pioneers way back in 1908 and 1909 and through there. It's a university for the people. By definition, education was and is perhaps slightly reduced now; the emphasis is more on research, which is very important. But here is a university that certainly needs—as the province of Saskatchewan needs—your understanding for the needs of the people. That is something I would emphasize.

We talk about the public good and the private good. This is a very basic part of the whole issue. Look at public good. Look at the synchrotron. What was the role of the public good? There was over $170 million in public funding. What about the role of private funding? There was not very much. Depending on whose figures you look at, there was maybe $1 million or $2 million maximum, and perhaps a little more just recently. That's not to say private interests will not come forward when they see the light, shall I say. The synchrotron has tremendous potential.

I'm a retired federal public servant. I'm a professional agrologist. I worked in economics with the federal Department of Agriculture. I worked in research. Before that, I worked in extension with the Province of Saskatchewan. I have spent most of my life in editing and writing, with some work published. But I come back to the importance of education of the members of society. I urge you to see if it's possible to strengthen the public role for more funding for education across Canada.

Á (1120)

Again, I thank you very much for this opportunity on such very short notice, but perhaps more of these kinds of invitations are in the interests of Canada's wealth.

The Vice-Chair (Mr. Nick Discepola): Mr. McConnell, if you do want to present a brief, I would just invite you to do so. You are welcome to present it to the clerk of committee. If you have anything else to add, please feel free to do so.

This is the ninth year that we are consulting Canadians. Consultations always occur in the month of November. I apologize if you weren't advised before. We have heard a few comments to that end, in that some people didn't know about this. We try to reach Canadians as best we can. We use the Internet as best we can. It was on the Internet, but we will try to do a better job of advising next year. We have had great participation from Saskatchewan especially. In some other cities, we were scrounging for people to come to testify before us.

I won't take up any more time, because I do think it's important to start the dialogue. Colleagues, we will allow ten minutes per session, please.

Mr. Casson.

Mr. Rick Casson: Thank you, Mr. Chairman.

Thank you for the presentations, ladies and gentlemen. They were very well done. I would like to address my first question to Frank Abdou.

You suggested improvements to our national highway system. The way to do that, in your estimation, is with $500 million a year raised through the 15¢-per-litre excise tax that was added in 1995. Some of these benefits that you point out that would come from improving the highway system are amazing. It looks like that came out of a national highways policy report.

Have you done any background on exactly what $500 million...? That sounds like a lot of money if it's matched by the provinces at $1 billion a year. What would that do as far as improvements are concerned? How many miles is that, or whatever?

Mr. Frank Abdou: I'm actually not quite sure—

The Vice-Chair (Mr. Nick Discepola): Could you clarify that? Is that $500 million just for Saskatchewan's requirements?

Mr. Frank Abdou: No, that's federally. What our association is asking for is a national highway program. We really don't have one right now. The association feels that, with a national program, it would leverage provincial dollars and would connect this country as the railroads once did. Again, I don't want to repeat that, but I believe it's 1.5¢ per litre of the excise tax that—

Mr. Rick Casson: Yes, 1.5¢. I'm sorry.

Mr. Frank Abdou: Yes, 1.5¢. I know that, on the Prairies, our goal with this fund would be to have a twinned highway from the Ontario border to the B.C. border.

Our association is limited to the member communities of the prairie provinces. Of course, we are an unpopulated part of the country, but we feel it's very important that our highways that connect Ontario to British Columbia are well-maintained and safe. In our minds, that means twinning. Twinning is a high priority. Through the years, we have moved ahead some of the projected dates for twinning the Trans-Canada Highway, due to some serious accidents and some provincial funding. But not only are we trying to twin, we're also trying to upgrade the quality of the highway.

We feel we're affected here on the Prairies not only by the highway between the Ontario border and the B.C. border, but also by the highway in other parts of the country, particularly in northwestern Ontario. Some other statistics—I don't have them in front of me right now—are on the amount of commerce we are losing in Canada because of the route people and businesses choose to take from Vancouver to Toronto, Winnipeg to Toronto, or Winnipeg to Vancouver. They choose the southern route through the United States, and the spinoff effects are in the billions. The mayor of Winnipeg was gracious enough to collect the data from a study to let us know what we are losing in that regard, and it is staggering.

From Saskatchewan's point of view, our access to the U.S. interstates is not as efficient as access from Winnipeg, Vancouver, and Toronto, but we are affected through the loss of the transportation across our province.

I hope that answers your question. It was kind of roundabout, but I don't have the exact stats for you.

Á (1125)

Mr. Rick Casson: That's good, sir. I think $500 million out of $4.5 billion is a little light. You should be asking for a little more.

Mr. Frank Abdou: I'll relay that.

Mr. Rick Casson: In one of the presentations—I think it was the one from NAIT—you estimated that 20% of youth in Alberta will be aboriginal by 2015. Does anybody from Saskatchewan know what that percentage is in Saskatchewan? Is it about the same, or a little higher?

A witness: [Editor's Note: Inaudible]

Mr. Rick Casson: You talked a bit about connectivity and the Internet. Somebody mentioned McGraw-Hill. Well, I was a printer in my other life, and I believe there was a system in place whereby if you pulled something off the Internet and copied it, you could pay a royalty. Is this the copyright issue that you're getting at? Yes? You indicated that, almost every day, your teachers and students are breaking the law by pulling stuff off the Internet.

Mr. Gary Shaddock: That's correct.

Mr. Rick Casson: How do we ever get a handle on that? What do you suggest needs to be done with the copyright laws to control that?

Mr. Gary Shaddock: Maybe I'll let Madame Bélanger answer that. She's our staff person dealing with the copyright issue.

Ms. Monique Bélanger (Director, Policy and Projects, Canadian School Boards Association): In terms of copyrights on a broader scale, a number of systems are being developed for rights management. For the education system, those kinds of agreements and such would price the use of technology and the use of content from the Internet out of the range of what schools could afford.

What we are proposing in the new amendments that will be coming down on copyright is an “educational use of the Internet” exception. It's an exception that would allow educational institutions to use material that is freely accessible on the World Wide Web. We're not asking to go beyond firewalls or password-protected material. It's simply for the material that is up there on the Web and freely accessible, such as material on some of the Canadian government sites. You still have to ask for permission, and sometimes you still have to pay for some of the images. So we're asking for access to that for educational institutions. That's what we were referring to.

At the moment the Copyright Act, as it exists, is not technologically neutral. Whenever students and teachers pick material up off the Web, they are in effect breaking the law.

Mr. Gary Shaddock: Just as a minor point of interest, they provide this to the educational community free of charge in the U.S. If this copyright law isn't changed and schools are going to be charged across Canada for this, I can see a lot of our schools accessing material through the U.S., because it's free there and we'd be charged here.

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Mr. Rick Casson: When I was at the University of Lethbridge, one of the big and growing parts of the business of providing printing to the university was in coursepacks designed by the professor. A lot of that information...well, not a lot, but some of it came off the Internet and some of it came from publications, and there was a place to reimburse. Is that an expanding thing, or is that going to decrease because of the Internet and connectivity?

Ms. Monique Bélanger: Coursepacks are a particular breed apart. For example, with the licence with CANCOPY, the coursepacks at the post-secondary level are treated very differently—and this is just for photocopied material. For the Internet material, of course, coursepacks would be treated differently because they are a compilation of material not necessarily off the Web, because much of that material is in journals that are behind locked walls. That's not part of the educational use of the Internet. They're different.

Mr. Rick Casson: It's a different situation, yes.

Dr. Sam Shaw: If I can just make a further comment on that, one of the things that is occurring is a lot of good work with publishing companies. Again, McGraw-Hill is one, but we're also working with Pearson. There are also a number of other things we're doing in terms of looking at the Internet. In fact, we get the clearances for our faculty on a number of publications so that they can use them. It's interesting in terms of what we're doing. We're creating a virtual teaching-learning centre for our faculty, in order to give them the clearances needed for using materials from the Internet.

Mr. Rick Casson: So you're covering off the legality aspect of it.

Dr. Sam Shaw: That's right.

Mr. Rick Casson: On infrastructure funding and the University of Saskatchewan, I've heard deferred maintenance mentioned before, particularly in Alberta. I'm sure it's the same here in terms of some of the things that need to be done in regard to the physical structure of several institutions. The dollar amount is huge, plus you talked about new money for new buildings. Where are we on that? Is there any indication that any funds are going to be coming forward to address that deferred maintenance issue?

Dr. Sam Shaw: You referred to Alberta. On the post-secondary side, it's estimated that there is approximately $1.3 billion in deferred maintenance. You're right, that's a huge figure. The Alberta government has been chipping away at it, but in terms of the capacity issue that I spoke about, we have now exceeded demand in terms of the number of students in our institution. We serve 60,000 students in a year, with 16,500 full-time and another 45,000 part-time. The structure is critical for us, and the deferred maintenance plus the capacity building are a critical element.

We have been working with business and industry. We have just created a new ICT centre with the help of Hewlett-Packard, so we do see business coming forward. But we see that the issues have to be multi-government, looking at provincial and federal, as well as the contributions of business and industry. It's still not enough.

The Vice-Chair (Mr. Nick Discepola): Mr. MacKinnon, would you like to add something?

Mr. Peter MacKinnon: It's a problem across the country. The figures are astronomical. In the last two or three years, we have begun to chip away at the problem, but that's about all. Really, for the ten or fifteen years before that, there was no significant investment in the capital or in the infrastructure that we had, and we're paying the price for that now.

The Vice-Chair (Mr. Nick Discepola): Thank you very much.

Mr. Murphy, please, for ten minutes.

Mr. Shawn Murphy: Thank you very much, Mr. Chairman. I want to thank all the presenters for the excellent presentations we've heard this morning.

First, Mr. MacKinnon, in your remarks, you mentioned that there has been a decrease in the level of funding as a percentage of GDP over the last number of years. I don't want to be seen to be questioning you on that, because education is too important to our society. I think everyone here knows that from a societal point of view, from the point of view of our economy, our health, etc., it's our whole future.

From an international point of view, where do we stand in relation to spending on education as a percentage of GDP?

Mr. Peter MacKinnon: If you look back over the last twenty years, there is no doubt that, in comparison to our nearest neighbour and most important trading partner, the Canadian investment in post-secondary education has been substantially below that of the American investment, even in its largely public system. There are the great private universities in the United States, for example.

The trend lines indicate that the investment has increased in the United States. Some have perhaps dipped in the last year or so, but it has been an increasing trend line overall in the last twenty years, whereas the trend line is in exactly the opposite direction in Canada. It's down.

You could say we should compare ourselves perhaps to the Europeans or to the Australians, but I frankly don't know what that precise comparison would yield. The United States, though, are our nearest neighbour and most important trading partner, so I think the comparison to what they are doing is particularly important in this context. If we are going to lose people, we're more likely to lose them to the United States than to Europe or to Australia, so we should pay particular attention to what's going on there.

Á (1135)

Mr. Shawn Murphy: The next issue I want to touch on, Mr. Chairman, is for Dr. Shaw of the Northern Alberta Institute of Technology.

This whole issue of the shortage of tradespeople comes up every where you go. It's not an Alberta situation, it's Canada-wide. Even in areas of the country where the unemployment rate is in the teens, there is an acute shortage of a lot of tradespeople.

I have a very important community college in my riding, Holland College. Again, what's the answer here? I sense that it's a stigma issue. Is it a lack of funding, or is it a cultural issue when we cannot get the younger people to get into the trades?

The shortage is really affecting us economically. When you talk to business people, it goes beyond the...a lot of these are high-tech trades, like refrigeration, high-tech welding, and you name it. You know them exactly. But there is an acute shortage, and it is affecting us from an economic point of view. It's not all fun either. There's more to it than that. Do you have any comment?

Dr. Sam Shaw: Certainly. And Holland College has been outstanding in its training in some of the trades areas, by the way.

You've hit upon culture. Certainly, cultural aspects are a key issue. Creating options for secondary students is an important agenda item. In fact, there is an initiative underway in Alberta called “Careers: The Next Generation”. Corporations like Syncrude and Suncor have been working with communities and parents to create the options for secondary students to go into the trades. It has been very successful, and that model should be duplicated in other provinces.

Clearly, giving options to secondary students is very important, and it certainly is another component in terms of getting the information out there. You can no longer get into the trades without a good math and science background. In some of the Alberta papers, there were some great articles about mechanics never getting their hands dirty. The technology underneath the hood of a Mercedes is vastly superior even to that of some of the first missions to the moon.

Again, I think one of the things we need to take a look at is how we create the capacity. We do not have the capacity to respond to the growing number of shortages, so these things have to go hand in hand. As we create more secondary students going into the trades areas, we need to build the capacity as well.

One of the issues that has arisen in the past—you can look at the up and down components of some industries like oil and gas in Alberta—has been that you have a number of individuals not opting for the trades because of that downward trend sometimes. But just look at the high-tech sector. You just have to look at the 55,000 to 60,000 employees of Nortel who were let go. No sector is protected from the up-and-down cycle. Now more than ever, then, what we need to do is create the opportunities for entrepreneurship within the trades areas, so that a welder, for example, can start their own business—and many do. That kind of role modelling needs to go on hand in hand as we look at skill training in the trades areas.

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

Mr. Shaddock, did you wish to add something?

Mr. Gary Shaddock: I'd just like to add a quick comment to that.

You question why there are not very many tradesmen available across Canada. I think some of that stems from the K-to-12 system as well. We're having a very large difficulty across Canada in attracting teachers to the applied sciences area, so schools aren't able to provide that option for students to see the trades. That becomes a loss as far as their exposure is concerned, and maybe it affects their desire to look at the trades down the road.

While I know the province has jurisdiction over the K-to-12 system, there needs to be some work done so that the schools can have the infrastructure to provide the welders, mechanics, or whatever the case may be, in order to give the children and students exposure to trades. In turn, they can then go on to the NAITs and vocational schools across Canada to go into a trade.

So I think there's a real need in the K-to-12 system as well.

Á (1140)

Mr. Shawn Murphy: Thank you.

Getting back to you, Dr. Shaw, again on the whole area that you touched on remarks on research, I believe strongly that community colleges have a large role in rural Canada. The whole economic development of rural Canada is important. You talked about applied research. Have you been able to touch into any of the granting councils, like CFI, NSERC, or any of those?

Dr. Sam Shaw: No, not with a lot of success. First, there's a stigma around colleges and technical institutes applying for research funding, so that has been a barrier culturally in terms of where we have been going.

In terms of looking at working with business and industry, we've been very successful with projects that I've named and some of the other things that we've done in the forestry sector. So that is now starting to change.

We're only 40 years old at NAIT. With the leadership that we're seeing out of Industry Canada that is highlighting the fact that colleges and technical institutes do have a role to play in applied research, that is now changing. What we're really asking for, though, is a look at some special kind of funding that would allow us to work with business and industries in the over 900 communities in which colleges and technical institutes are represented. I think that's very powerful. You had mentioned economic development. Well, that would be a tremendous component in terms of enhancing both the economic development of Canada and the innovation and productivity agenda.

The Vice-Chair (Mr. Nick Discepola): Mr. Martin.

Mr. Pat Martin: Thank you, Mr. Chair.

I noticed one theme throughout most of your presentations, and I find it heartening. You actually used the word “equity” as a goal or objective. It should be. Maybe it's my political bias, but I note that after 15 years of neo-con governments, as our late-comer Mr. McConnell pointed out, the rich seem to be getting richer and the poor are getting poorer, and we have the huge social deficit left over that many of you have alluded to. In my riding, 52% of all the children live below the poverty line. That's a staggering statistic.

The first question I would like to ask you is a question I asked the previous panel. Even in light of this social deficit, we still keep hearing people clamouring for further tax cuts. There are $100 billion worth of tax cuts scheduled for the next five years. We're willing to forego tax revenue in one example that I'd like you to comment on, and that is that business fines are deductible from your income taxes. As long as you got them in the course of earning income, you can actually get a tax deduction for breaking the law. From your point of view, do you view that as bad public policy? Do you think we should plug that tax loophole allowing businesses to deduct fines and penalties from their taxes?

That's directed to anybody.

Mrs. Lynne Yelich: Like parking tickets.

Mr. Pat Martin: Yes, like parking tickets, dumping PCBs into the Red River, or injuring a worker on the job. Those are all tax-deductible.

The Vice-Chair (Mr. Nick Discepola): Do you want to take a page from...[Editor's Note: Inaudible]...book and publicize your private member's bill?

Mr. Pat Martin: I did have a private member's bill that I wasn't allowed to introduce, because they said it would be tantamount to raising taxes if we stopped allowing businesses to deduct their fines. That's why I'm interested in getting input from across the country.

From a public policy point of view, do any of you have even a personal opinion? Do you believe fines should be tax-deductible? Do you believe breaking the law should be tax-deductible?

The Vice-Chair (Mr. Nick Discepola): Mr. McConnell, you're shaking your head. Maybe you want to put it on record.

Mr. John McConnell: I might even expand on this, ladies and gentlemen and members of the committee.

You know, taxes are the fountain. Was it in AD 1214 that King John had some problems with citizens in the Commons? I may be wrong on the date, but there comes a point whenever we have to take a look at how we really finance things. On taxes, fair taxes, progressive taxes, I think we're overlooking things far too much. I come from a business background. My cousins are some fairly large operators. They don't want more taxes, but I tell them they are the benefactors of the trained labour force that is publicly financed through SIAST, through the community colleges, through the universities, and so on.

Á (1145)

The Vice-Chair (Mr. Nick Discepola): Could you comment on Mr. Martin's direct question, though? I don't want to—

Mr. John McConnell: I'm 100% against the idea of being able to get a tax deduction for that kind of a charge.

Mr. Pat Martin: Thank you. I'll make a note of that. I hope to use that somewhere.

The Vice-Chair (Mr. Nick Discepola): You might want to get him to vote for your party.

Mrs. Lynne Yelich: Don't forget the potash industry.

The Vice-Chair (Mr. Nick Discepola): Go ahead, Mr. Martin.

Mr. Pat Martin: Did anyone else want to make a quick comment on that?

Mr. Frank Abdou: I would like to respond just briefly.

The way I understand it, if the corporation is being fined, it would be a corporation expense to pay the fine. There are a number of very large corporations in the country that are not profitable. They don't make money, they're losing money. They wouldn't be paying taxes anyway, so they couldn't use it. If you implemented a system in which fines were non-deductible, you'd virtually only be penalizing successful corporations. It wouldn't affect not-so-successful corporations. Let's face it, one of our largest corporations in Canada hasn't made money yet, so they haven't paid taxes.

I think it's a business expense. If you want to get into environmental protection and those kind of issues, then it could be specific. But if someone gets a fine as a business expense, I just don't think that's a big issue. To keep everything fair, I would think it would be like—

Mr. Pat Martin: I don't want to use my whole ten minutes on it either. It isn't that big an issue.

Mr. Frank Abdou: That's what I'm saying. It isn't.

The Vice-Chair (Mr. Nick Discepola): Mr. Nikolejsin wanted to add a comment.

Mr. John Nikolejsin: I don't know how we're defining the fine or how it was created or whatever. Here in Saskatchewan, though—and we're very fortunate—we feel our education system is dependent on taxation. We have the ability to up the mills, which creates more taxes. If it's a loophole or whatever for somebody, it creates a burden on somebody else. Equity, as you stated, is very important to us, and I think everybody should be treated equally.

Mr. Pat Martin: If I could move on to another issue, on the skilled trades issue that Mr. Murphy dwelt on, I'm a journeyman carpenter myself. That's my background. I used to run the carpenters' union, so we had a lot of dealing with apprenticeships, etc.

I now sit on the executive of the Canadian Labour Congress, and they have an idea that they're going to government with. Given that the UIC fund is showing a surplus of $750 million more a month being paid in than is being paid out—that's an $8-billion-per-year surplus—they are asking that the designated uses of EI money be broadened to include labour market training. In other words, it's not just income maintenance, it would also hive off some of that money, if you will, and dedicate it to labour market training, even though that has been devolved to the provinces. Could I ask for your views?

Would you support that idea? It would really constitute a training levy that every employer and every employee pays into through their UIC contributions. It would then be used to meet some of the skill shortages that we have.

Dr. Sam Shaw: Let me make a couple of comments.

First of all, in terms of business and industry contributing to employee training, if you look at some of the stats on that, we lag behind even Australia . To come back to the agenda in Achieving Excellence and Knowledge Matters, we have to do a better job. There have to be a number of strategies, and looking at the UIC aspect might be one of those strategies.

However, I would not like to say that we shouldn't put the burdens back onto business and industry to ensure that their employees are skilled in meeting tomorrow's challenges. For us to be competitive globally, we must see that skill development is a priority. Even at our own institution, we have something called InService. We have over a hundred workshops, and our participation rate is 79% right now. I want 100%. That's how you get creativity and innovation in an organization. We must do that in every business to be innovative.

Á (1150)

Mr. Pat Martin: In skilled trades, though, how do you stop the idea that one company is dedicated to upgrading the skills of their employees and then they get other employers making a better offer and winning those skilled workers over? The idea of this contribution to a fund is that everybody would be paying in so that you couldn't borrow from the other guy's trained workforce, back and forth, as much. That's the idea of taking it off the EI contribution. All employers are paying into it anyway, and employees would be making a contribution to their own lifelong learning. Do people view that as a viable way to get buy-in from industry on the shortage of skilled trades?

The Vice-Chair (Mr. Nick Discepola): No comment?

Dr. Sam Shaw: The one issue, the fly in the ointment on that one, is that most of the businesses are SMEs and there is a tremendous fluidity in the workforce, in that you may go from one company to another. My challenge to you would be how we could encourage that kind of system that not only allows that fluidity—because with that fluidity comes the promotion concept within the different portfolios in the trades—but also does something in terms of looking at the small and medium-sized businesses not having the capability of recruitment and so forth.

Again, I think one of the aspects is the SMEs and how we deal with those. In Alberta alone, 63% of all businesses are SMEs. Of those, 83% have less than twenty employees.

The Vice-Chair (Mr. Nick Discepola): Go ahead, Mr. Melvin.

Mr. Craig Melvin: If I might comment, I'd just make two points.

When it comes to the recruitment and retention of employees, as you suggest, they may be encouraged to leave an employer who has provided training. I'd suggest to the government that they should leave that in the hands of the employers. This is something employers should manage appropriately within their corporations. In my view, that's their job.

When it comes to taxation, regardless of the source of revenue from which the province or the country may derive the tax, it doesn't really matter. It goes into a pool. On behalf of the public, in terms of the public policy choices that the government makes, the government will allocate that resource.

Getting into this business of tying a particular tax to a particular outcome doesn't make an awful lot of sense to me. Frankly, what you need to do is you need to look at the total of resources. Should Canada make an investment in the training of the workforce? Of course. What resource is used for that? Leave it to government to use the broad base of resources that it has.

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

Mrs. Yelich, please.

Mrs. Lynne Yelich: Thank you, all, for your presentations, but I particularly am interested in Peter MacKinnon's comments.

Peter, if I read this right, I think you take everything back maybe to when the transfers were put together—the health and social transfer—when education therefore got left out on a limb. Is there anything we can do to bring education back to the presence it has here today? Should there be a commission like the Romanow commission, studying the different ways of...?

Education obviously is very important. You brought aboriginals up as a very big part of education. We also brought in our immigrant ESL in your part. It almost seems like we have to bring education back to the forefront, and it goes smack back to the social transfers.

I would like you to comment on what you would like to see us do. We could probably take a great big bunch of that surplus and put it into education.

Mr. Peter MacKinnon: Thank you very much.

This is a public issue, it's a national issue, and it's a very important issue. I'm well aware of the constitutional niceties here, but I think it's important for the federal government to take the lead and say this is a critical issue that we have to address. Whether it's through the vehicle of a commission à la Romanow or some other way, though, I really don't have any strong views on that.

Certainly, as I said in my presentation, I would like to see the innovation initiatives continue. In the event that the federal government was moved to restore something in the nature of transfer payments here or to increase them, I would hope they would be in envelopes that would give us the assurance that the money transferred on account of education in fact will find its way into education and not be funnelled off into other areas seen locally to be of perhaps greater urgency. Whatever the appropriate measures—and I suspect there will be more than one or two of them; certainly there's the innovation initiative, but there's secondly something in support of operations and perhaps the deferred maintenance issue—I would hope they would be very targeted.

Á (1155)

The Vice-Chair (Mr. Nick Discepola): Would there also be accountability and transparency in that?

Mr. Peter MacKinnon: Very much so.

The Vice-Chair (Mr. Nick Discepola): I have to get my little, five-second jabs in here and there. He has to leave, so that's why I'm trying to get him on the record.

Mrs. Lynne Yelich: Actually, this is a very detailed question, particularly to you, on English as a second language. You said we're a bilingual country, but now we're down to dollars and cents. How do you fund ESL?

I'll start from my final statement. I think language training should probably be coming not from the federal level—I don't think we should be dictating it—it should come from the municipal level. Would you agree with something like that? I get so frustrated when I get so much in the French language but have nothing to give to my Croatian people or my Ukrainian people. I don't think there's enough emphasis on language training for ESL, yet we're overburdened with stuff on our second official language where it doesn't apply. I think it should be a provincial matter and that it should probably even go to the municipal level because of the multicultural country that we're becoming.

Specifically, my school, Kenaston School, has only 300 students. A little while ago, we got two great big, beautiful, red, bound books that are in French only. We didn't get any English ones. They are in French only, and we have nobody to use them.

I'm wondering if you could see, down the road, that education shouldn't specifically address language funding in the education system, because we get quite a bit of money here in Saskatchewan. I think we should have our immersion. I'm not going against immersion schools, because I think immersion is great and I wish we had it available in our school. We don't have it because we don't have the teachers, but we do have other languages.

So when it comes to that, I'm just wondering specifically how you would address that.

Mr. Gary Shaddock: That's a difficult situation, with the provinces being responsible for K to 12 and being able to funnel the money down to the school divisions and school boards across Canada in order to ensure where the money goes. I guess we need some sort of accountability and transparent process so that we know that if the money is being targeted at something specific, it does actually arrive at that point.

At the same time, I think school boards in general are there to reflect their communities' desires. If your community wishes to have Ukrainian, Croatian, or whatever languages taught if there's enough demand, then the school boards should look at it. All too often, though, a limiting factor is the dollars available, so when it comes down to making decisions, unfortunately—

Mrs. Lynne Yelich: A decision should be made at our level, though. Those big, beautiful, red, bound books went to every school in this province, when in fact they only may be of service in Gravelbourg and its immersion program. We could use some Chinese...[Inaudible—Editor]. I could use it there quite a bit.

Anyhow, I'm just wondering if that's one specific place in which we should.... I read our Saskatchewan budget and I think what we get is in the millions, specifically to encourage our second official language. That's all right, but what happens? Where does that put our ESL students? Shouldn't we revisit something like this at our school boards and try to lobby some sort of—

Mr. Gary Shaddock: Craig and John could probably answer a bit better at the Saskatchewan level, but I know of an example from a few years ago. The federal government had a language policy promoting French programs. Money was put in place for four or five years and the schools developed their French-designated programs, immersion programs, or whatever, but then the money disappeared all of a sudden. The school divisions were left with the programs on their own and had to find the money, so the programs then gradually disappeared over time.

I don't know if Craig and John have something more relative to Saskatchewan, but it's a concern.

Â (1200)

Mr. John Nikolejsin: Gary described it very well. Those programs were established, and I can speak from experience in saying the funding was greatly appreciated. Everything was in place and was rolling along. It was accepted in the community and expected in the community. When the funding ended, they tried to keep the programs in place, but as is the case in every province, the resources are limited. The pie just gets cut into more pieces, and in terms of affordability, to maintain all levels was very difficult. That may not have been done rightfully, but if some of the programs were cut, it might have been the French programs. That was done because there weren't many choices left for us as school boards.

The Vice-Chair (Mr. Nick Discepola): Madame Bélanger.

Ms. Monique Bélanger: Official languages are a federal program, and the funding that comes to the schools via the provinces is devolved from the federal money. There is an agreement negotiated with each province, according to the specific protocol negotiated at the national level. The moneys are divided into two parts. One is for minority language—English in Quebec, and French elsewhere in the country—and then for a second language. That is negotiated at the provincial level in terms of how the money is then spent, and the provinces have to provide a plan. What you would want to do in Saskatchewan and in any other province, is to have input into the development of that plan, because that's what happens with the moneys transferred down to the provincial level.

It is a provincial decision, but that doesn't mean you wouldn't want to increase the amount of funding that you would give to official languages, especially in terms of second-language instruction. It is becoming a particular problem in urban centres, but it's there all over the country when it comes to providing ESL and FSL instruction in the schools to immigrant students. That kind of money is just lacking, and John was right when he said decisions have to be made at the board level. Some of the decisions that are made are to cut that kind of a program, for a lack of funding. We see that particularly in Toronto, Vancouver, and Montreal.

The Vice-Chair (Mr. Nick Discepola): Thank you very much.

I have a very difficult problem here. I know some people have to leave already, and I'm going to grant you a few minutes afterwards. Maybe you can make interventions then, please. She has run out of time, and we're very strict on time.

Mr. Murphy, please.

Mr. Shawn Murphy: For me as a panellist, an issue that has been on and off the public agenda is broadband access, and that's a very important educational issue. It's also a very important economic development issue, especially for rural Canada. I don't know the situation in Saskatchewan, but I assume the providers are here in some of the major centres but that they're not in the smaller communities.

I just throw this question out to you in your hats as educators. How important is this issue to the educational system in rural communities? Should this be a high priority for the federal government, knowing full well that it's not cheap? This is not an item that's going to come cheap, but do you consider it to be part of the educational envelope?

Mr. Gary Shaddock: It's something very important for the K-to-12 system across Canada, Saskatchewan included. In particular, while I'll concentrate on the rural and remote areas, it's still important in the urban areas as well, what with the teacher shortage that we're facing.

In the rural and remote areas, distance becomes a problem in terms of being able to bring the children to the schools in order to have a sufficient body to provide instruction. With broadband, we are able to provide instruction over the airwaves and bring the instruction to the students, as opposed to having the students travel too far to the schools. We therefore see this as a huge issue.

A little bit earlier on, somebody was talking about a task force across Canada. I think that's important as long as it doesn't concentrate on universities, because I think our K-to-12 system has had the same classroom structure for a hundred years. It hasn't changed to any great extent, but with technology, we should be looking at some major changes to how programs are offered to our students.

I could go into a long spiel on this, but broadband access is very important to a lot of the rural and remote communities in order to be able to provide the students with the education. More and more, with the shortage of teachers in some of the specialized areas, we're having to look at technology in order to provide physics, math, or whatever the case may be, to students in general.

Â (1205)

The Vice-Chair (Mr. Nick Discepola): Dr. Shaw.

Dr. Sam Shaw: Access is one thing, but you have to have the programs to run on the highway. Alberta is spending about $300 million to connect every school, every hospital, and every community in Alberta. However, I think one of the key things is whether or not the programs will be there to run on that highway. That kind of funding is important and it cannot come from within. In terms of looking at new moneys, that would have to be part of that agenda to create the broadband.

Let's also not just limit it to education. We could upscale some of the health delivery and save a lot of dollars on transportation if we had broadband. We're doing some things on X-ray and MedLab and so forth. Again, then, when you create that access, a whole bunch of services could be provided.

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

I'd like to now turn the floor over to Mr. Kebrom Haimanot for three minutes.

Mr. Kebrom Haimanot (Individual Presentation): I want to comment on the education question.

The Vice-Chair (Mr. Nick Discepola): They're your three minutes, but I'm not going to go over three minutes. You can use them whichever way you wish. If you want to comment on what they said, then go ahead.

Mr. Kebrom Haimanot: When we talk about heritage languages or English as a second language, what is important here is that all of you are white people. You're the same group, but we are the ones who are affected, the other group. So when you limit me to three minutes, it really frustrates a person, because we experience it. We go through it.

I am a member of the Saskatchewan Organization for Heritage Languages and the multicultural community of Saskatchewan. We are the people out here, but none of our people are here at this meeting that I can see. There are other white people here, though. I'm sorry to put it so bluntly, but—

The Vice-Chair (Mr. Nick Discepola): We weren't screening the invitations.

Mr. Kebrom Haimanot: What I'm trying to say is that when there are topics of this nature, I think the Organization for Heritage Languages should be invited. Mrs. Yelich put it eloquently. There are other groups. People assume, for example, that the Chinese are just educated by immigrants. That's not true. Go and check in the York area in Ontario. The majority of students are non-Chinese and are studying Chinese. It's the same thing here. There's some misunderstanding there, and we just want to bring it to your attention.

The main reason I came here has to do with EI. The EI bill, Bill C-49, allows a mother... By the way, today is the anniversary for allowing mothers to stay home for 50 days. That date was covered in the media today, so it becomes appropriate to this committee. The government has passed Bill C-49, which says that if a mother is sick before she has the baby, she can take those days off. We did that, the EI people refused it, it was appealed, and that appeal was granted.

The people who hear the grant are nominated by the local Liberal member of Parliament, or by the government. If these three people on the panel at least give you a say and hear you and the mother's EI is granted, shouldn't that be enough? She now has to go from the board of referees to what you call the umpire. This mother is suffering because of all this, worse than what she was suffering to begin with. We think what's going on is inappropriate. One level of government appoints people to see that things are done on an even keel. That might not be a bad idea. That's my concern. It affects money, and that's why I bring it to your attention.

The other one is concerning RRSPs. RRSPs keep the jobs here, but the levels say 30% of your income going to RRSPs could be invested outside of the country or any company. I think it's meant for the employees, though, and they should be allowed to invest in whatever they feel really would make money. The money eventually is going to come to Canada from other places. So that's another one.

Another thing I have a beef about is the capital gains tax. On the capital gains issue, I personally have invested through TD Waterhouse. I have up to half a million dollars in options and stocks, but when it comes to income tax, I'm told I cannot do that, that capital losses can be only deducted from a capital gain. Any other business can deduct for meals. They do this, they do that, and it can amount to $50,000 a year. Yet they have those deductions. To keep it on an even keel, I think any loss on capital should be allowed to be deducted from your business losses. To me, it could be my business to do that.

Â (1210)

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

We've heard the suggestion on increasing the RRSP limit, and I think it's going to be a recommendation of the committee.

In regard to the capital tax, our committee recommended last year to reduce it from 75% to 50%. We will look at it again, but I'm not sure we're going to go below the 50% mark.

And I wasn't aware that there was a Liberal member of Parliament here—

Mr. Kebrom Haimanot: Excuse me, sir. I'm not talking about the amount of deductions. What I'm saying is that I should be able to use it as a capital loss for that year and be able to deduct it.

The Vice-Chair (Mr. Nick Discepola): But you can carry it forward and backward seven years. I'm not an accountant, but I'm quite sure you can.

And who is the Liberal member of Parliament here? I wasn't aware there was one.

Mr. Kebrom Haimanot: I beg your pardon?

The Vice-Chair (Mr. Nick Discepola): You said there was a Liberal member of Parliament here who appointed—

Mr. Kebrom Haimanot: For Saskatchewan. We are in Saskatchewan. Did you realize that?

The Vice-Chair (Mr. Nick Discepola): Who is that?

Mr. Kebrom Haimanot: Ralph Goodale.

The Vice-Chair (Mr. Nick Discepola): I have just a few clarifications for Mr. Abdou.

In last year's budget, we injected $600 million into a national highway program, if you weren't aware of that. I've sat on a caucus committee on national highways for the past five years, and I agree with you that the money is a shortfall from the $217 billion spent by the United States. If we're not careful and if we don't invest more, we're going to see a tremendous disadvantage because the United States...[Inaudible—Editor]...issues are all going to go down to Mexico as opposed to here. I think you're dead on, but I wouldn't like to see a targeted fuel tax percentage go to that. I think the need is there, but let's take it out of general revenues.

Mr. Frank Abdou: What we're looking for, Mr. Chairman, is a long-term commitment. I was aware of the funds that were already going there. We wanted an additional commitment, plus a longer-term commitment, so we thought we would identify just one source.

The Vice-Chair (Mr. Nick Discepola): We also put in $2.15 billion in our Canada infrastructure program.

Mr. Frank Abdou: I'm quite aware of that, too, but they're not related.

The Vice-Chair (Mr. Nick Discepola): With regard to the CHST, if we have a case in which we're going increase health funding, I'd like a comment on the general consensus across Canada that we have to have and demand accountability from the provinces. What happens if a province doesn't want to be accountable for it? What do we do then?

Mrs. Lynne Yelich: We can take care of that by telling them not to...[Inaudible—Editor].

The Vice-Chair (Mr. Nick Discepola): Well, I come from the province of Quebec, where their attitude is that we should give them the money and shut up as the federal government. What do you do if more of an injection is required in health care and education and the provinces balk at the concept of accountability? As a federal government, what do we do? Are there any comments?

Mr. Craig Melvin: The provinces are quite used to this in dealing with school boards and municipalities. For any grants, similar patterns of accountability are required there. I don't know that the provinces should necessarily be exempt from that.

Mr. Frank Abdou: We feel the infrastructure program is very valuable. We certainly use it as a municipality, and the provincial government matches some funds. That's very important; however, what we're looking for are specifically earmarked funds for a national highway system.

The Vice-Chair (Mr. Nick Discepola): That's where I have a hard time. It's with earmarking funds. You heard Mr. Melvin mention that he's against earmarking. I think the ministers of finance past and present are probably against earmarking, because you might as well then earmark everything for health care and for education. You soon run into the condition in which you don't have any general revenues to expend.

Mr. Frank Abdou: We feel that if funds aren't earmarked for the national highway, we just won't get the funds. I'm sympathetic to all the other demands, too. I'm a city councillor, and I'm supportive of the school system and supportive of the health care system. But we feel that if the federal government does not earmark funds to connect this country together, we will suffer economically. That's the bottom line.

Â (1215)

The Vice-Chair (Mr. Nick Discepola): I'd like to close on one important message. The temptation is that there are all kinds of “great big surpluses” around, and that we should see how we can spend them. There ain't any great big surpluses around, folks, okay? The Minister of Finance has been very clear that, notwithstanding what has happened over the past few years and few months especially, next year's projection is at $1 billion. That does not take into account the needs for Kyoto and it does not take into account the future needs that Romanow is going to give us over the next few weeks.

The temptation is that we should start spending all over the place, but I caution members—members of our government, anyway—not to give in to that temptation. Because of the sacrifices we've made over the past five or six years especially, we're reaping tremendous benefits now, and we must not go back to deficit funding.

I would like to thank you for your tremendous input. It's very valuable. For some colleagues, for some members here, it is the ninth time we've been here in Saskatchewan. I think we split it up very evenly between Regina and Saskatoon. We're here every November, so if you want to make presentations, we are looking for people and organizations to make presentations. It's not a question of screening anybody, believe me. All right?

Mrs. Lynne Yelich: Are there opportunities for each city to have our presence, both Regina and Saskatoon?

The Vice-Chair (Mr. Nick Discepola): No, we alternate between Regina and Saskatoon very often, and we normally do the big cities. Last year, as a matter of fact, we went to two extra cities. One was up north, I believe. We went to Iqaluit.

We're here to listen to Canadians. In other words, we value your input, and I guarantee you that the report will be studied by the Minister of Finance very minutely. And we've had a pretty good batting average over the nine years, I think.

So once again, thank you very much.

We're adjourned.