FINA Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Tuesday, October 7, 2003

¹

1530

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

Mr. Yves Ducharme (President, Federation of Canadian Municipalities)

¹

1535

¹

1540

The Chair

Ms. Shellie Bird (Member, Ottawa Child Care Action Network)

The Chair

Ms. Shellie Bird

The Chair

Ms. Shellie Bird

¹

1545

The Chair

Mrs. Diane O'Neill (Vice-President, Ottawa Child Care Association)

The Chair

Mr. Thor Bishopric (President, Alliance of Canadian Cinema, Television and Radio Artists)

¹

1550

Mr. Rick Mercer (Alliance of Canadian Cinema, Television and Radio Artists)

Ms. Sonja Smits (Alliance of Canadian Cinema, Television and Radio Artists)

¹

1555

Mr. Thor Bishopric

The Chair

Mr. Rick Casson (Lethbridge, Canadian Alliance)

Mr. Rick Mercer

Mr. Thor Bishopric

Mr. Rick Casson

Mr. Rick Mercer

Mr. Rick Casson

Mr. Rick Mercer

º

1600

Mr. Rick Casson

Mr. Rick Mercer

Mr. Rick Casson

Mr. Yves Ducharme

Mr. Rick Casson

Mr. Yves Ducharme

Mr. Rick Casson

Mr. Yves Ducharme

Mr. Rick Casson

Mr. Yves Ducharme

º

1605

The Chair

Mr. Pierre Paquette (Joliette, BQ)

The Chair

Mr. Pierre Paquette

Ms. Shellie Bird

Mr. Pierre Paquette

Mr. Yves Ducharme

Ms. Christiane Gagnon (Québec)

º

1610

The Chair

M. Thor Bishopric

Ms. Sonja Smits

Mr. Thor Bishopric

The Chair

Mr. Bryon Wilfert (Oak Ridges, Lib.)

º

1615

Mr. Thor Bishopric

Mr. Bryon Wilfert

Mr. Thor Bishopric

Mr. Bryon Wilfert

º

1620

The Chair

Mr. Shawn Murphy (Hillsborough, Lib.)

Mr. Yves Ducharme

Mr. Shawn Murphy

Mr. Yves Ducharme

º

1625

The Chair

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP)

Mr. Rick Mercer

º

1630

Ms. Sonja Smits

Mr. Rick Mercer

Mr. Thor Bishopric

Ms. Judy Wasylycia-Leis

Ms. Shellie Bird

º

1635

Ms. Judy Wasylycia-Leis

Mr. Yves Ducharme

The Chair

Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.)

º

1640

The Chair

Mr. James Knight (Chief Executive Officer, Federation of Canadian Municipalities)

Ms. Shellie Bird

Mr. Nick Discepola

Mr. Pierre Paquette

The Chair

Mr. Nick Discepola

Mr. Thor Bishopric

º

1645

Ms. Sonja Smits

Mr. Thor Bishopric

The Chair

Ms. Maria Minna (Beaches—East York, Lib.)

The Chair

Ms. Maria Minna

The Chair

Mr. James Knight

º

1650

The Chair

The Chair

Mr. Cam Dahl (Executive Director, Grain Growers of Canada)

º

1655

»

1700

The Chair

Ms. Monica Patten (President and Chief Executive Officer, Community Foundations of Canada)

»

1705

The Chair

Mr. Peter Broder (Legal Counsel & Policy Analyst, Canadian Centre for Philanthropy)

»

1710

The Chair

Mr. Peter Broder

»

1715

The Chair

Mr. William C. Ross (President, Canadian Vintners Association)

»

1720

»

1725

The Chair

Mr. Rick Casson

Mr. Cam Dahl

The Chair

»

1730

Ms. Pauline Picard (Drummond, BQ)

Ms. Monica Patten

Ms. Pauline Picard

The Chair

Mr. Shawn Murphy

Mr. Peter Broder

»

1735

Mr. Shawn Murphy

Ms. Monica Patten

The Chair

Mr. Nick Discepola

The Chair

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CANADA

Standing Committee on Finance

---

NUMBER 079

l

2nd SESSION

l

37th PARLIAMENT

---

EVIDENCE

Tuesday, October 7, 2003

[Recorded by Electronic Apparatus]

¹  (1530)  

[English]

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

    Pursuant to Standing Order 83(1), we will continue with pre-budget consultations.

    On our first panel this afternoon, from the Federation of Canadian Municipalities, we have Yves Ducharme, president, and James Knight, chief executive officer. Welcome to both of you. Welcome back.

    From the Ottawa Child Care Association we have Diane O'Neill, vice-president; and from the Ottawa Child Care Action Network, Shellie Bird. Welcome to both of you.

    From the Alliance of Canadian Cinema, Television and Radio Artists, we have Thor Bishopric, president. Welcome, sir. And we have Rick Mercer and Sonja Smits, artists. Welcome to you both.

    Bienvenu à tous. And without further ado, we're going to go in order of the agenda. You have up to seven minutes for your presentations. We'll hear from the complete panel before we start the rounds of questions.

    You know the procedure, so go ahead, Mr. Knight or Mr. Ducharme. Commencez, s'il vous plaît.

[Translation]

    Mr. Yves Ducharme (President, Federation of Canadian Municipalities): Thank you, Madam Chair. Good afternoon to the members of the Standing Committee on Finance.

    First of all, I would like to thank you, Madam Chair, and the members of this committee, for your excellent and, in view of our national budgetary situation, important work.

    For a number of years now, the Federation of Canadian Municipalities, which is the national voice of municipalities, has had many ties with the federal government, particularly with regard to the Green Municipal Funds, with its international centre and it its work in the context of the infrastructure program. Our ties have never been so solid.

    Before starting, I would like to say hello to the member for Oak Ridges, Mr. Bryon Wilfert, who was President of the Federation of Canadian Municipalities and who did an excellent job. We are in a period of major politic upheaval, as governments across the country and in Ottawa are beginning to make a change at the helm. But one thing that does not change is the solid and growing consensus for seeking a new fiscal agreement for the communities of Canada. I would like to cite the former president of our federation, Mr. Bryon Wilfert, who, in 1997 when he was president, said:

Despite the injection of $6 million into the Canada Infrastructure Works Program, it's no secret that local governments in the country are still facing an enormous infrastructure deficit. At least not for those who regularly attend municipal council meetings. The question is whether the infrastructure deficit is still a secret for those who hold the purse strings?

    Well, Madam Chair, thanks to the good work of Mr. Wilfert and his successors, I believe we can now say no. The consensus was shaped on the basis of facts and our conviction that our success as a country will be largely determined by the prosperity of our local communities and that, to attract talent and investment, our communities must compete directly with the best communities in the United States, Europe and Asia.

    The conviction that our ability to attract and keep human and financial capital is in fact the key ingredient for ensuring our international competitiveness requires that our municipalities be among the best places to live and work. The fact is that, despite our many natural advantages, we are lagging behind our competitors.

    While our cities face the challenges of growing populations and our small communities lose their inhabitants, we continue to operate in an intergovernmental framework that dates back to the period before the internal combustion engine, to the time when municipalities built sidewalks out of wood. Our major urban areas must struggle to cope with rapid growth without sufficient financial resources. Our small towns and remote communities watch their young people move away to look for jobs, while our economy shifts from resource extraction to service delivery.

    What then is the root of the problem? Allow me to give you a few figures. They are the numbers 8 and 55. Eight is the percentage of all income and sales taxes and charges paid by Canadians which are used to finance the municipalities. That represents 8¢ out of every dollar collected. With those funds, we must deliver a long list of essential services ranging from water treatment to waste management, not to mention roads, public transit, recreation and culture. That same 8¢ must cover the cost of affordable housing, services for the homeless and public safety, in addition to recreation and the integration of new Canadians.

¹  (1535)  

The municipalities do all that, and much more, with only 8¢ of every dollar collected in Canada.

    Now let's look at the other number, 55. That's the percentage of the municipalities' revenues that comes from property tax. It's even higher in Quebec: 82%. Why is this heavy dependence on property tax unhealthy, you ask? First, because it's a static tax that does not reflect local economic growth. In addition, since they rise with economic growth, federal and provincial/territorial government revenues have increased by 16% and 21% respectively over the past four years, and those of municipal governments by a meager 4%.

    Second, municipal governments clearly do not receive enough money from the other orders of government to do their job. I invite you to take note of the fact that, according to Statistics Canada, financial transfers from the federal and provincial governments have declined by nearly 50%, from 26% to 14.6% of municipal revenues, over the past 10 years. In addition, most municipal governments in Canada don't have the right to create their own revenue sources. They rely far too much on property tax. This is an arrangement that leads straight to stagnation and decline, Madam Chair, and there is a limit to what property owners are ready and able to pay.

    But there are solutions. Over the past 18 months, some federal leaders have begun talking about a new income sharing agreement for Canada's municipal governments. The municipalities clearly need assistance from the other orders of government. What is sometimes less clear, but nevertheless true, is that the federal government can achieve many of its own objectives by cooperating with us. Together we can fight poverty, help the homeless and attack the drug problem. Together we can offer healthier water and air and attenuate global warming, if we work community by community, neighbourhood by neighbourhood. Our slogan is: think nationally, act locally.

    To determine how to do that, we'll have to have a debate and negotiations, but we are ready to make recommendations right now. To start with, we ask the Government of Canada to join with the municipal, provincial and territorial governments in a new partnership, one that will offer the communities a new source of revenue and will enable them to take charge of their future.

    In concrete terms, Madam Chair, the Federation of Canadian Municipalities is asking the Government of Canada to adopt the following measures: first, to enter into federal-provincial/territorial agreements offering municipal governments a portion of the federal excise tax on fuel; second, to increase the GST rebate to the municipalities from 57.14% to 100%; and third, to reorganize expenditures scheduled in the context of the Municipal Rural Infrastructure Fund and the Canadian Strategic Infrastructure Fund within a two-year time limit or over the period permitted by the federal government's financial capability. As always, the devil is in the details, but time will not allow me to examine all those details with you.

    Madam Chair, I've already taken up a fair amount of your time. I've come to the conclusion, and I ask you to pay very special attention to the needs of the municipalities and to ensure that these new revenues can help the municipal governments address social issues such as affordable housing, recreation, infrastructure and services for Aboriginal people and immigrants.

    Having said that, Madam Chair, I propose that the new agreement be broadened and that the municipalities be able to expand their revenue sources.

    Thank you.

¹  (1540)  

    The Chair: Thank you, sir.

    Now it's your turn, Ms. O'Neill.

[English]

    You're going to do the presentation together? Okay.

    Ms. Shellie Bird (Member, Ottawa Child Care Action Network): Can we share our presentation? I will start it. We can take the questions at the end, after we both present it. Is that all right?

    The Chair: That's fine with me. Would you like to advise me whether you're taking seven minutes or fourteen?

    Ms. Shellie Bird: We'll probably take just slightly over seven.

    The Chair: Wonderful. Thank you very much.

    Go ahead, Ms. Bird.

    Ms. Shellie Bird: We would like to thank the House of Commons Standing Committee on Finance for the opportunity to talk to you about what children, families, and those working in the child care field need from the federal government in the 2004 budget.

    Our community, like thousands of others across Ontario, breathed a huge sigh of relief and gained a renewed sense of hope that we were closer to a pan-Canadian child care system with the announcement in 2000 of the federal-provincial-territorial national children's agenda and the early childhood development agreement, and then in 2002 the children's budget, the multilateral framework agreement on child care.

    On first blush, these were landmark occasions for children and families--almost too good to be true. These agreements reflect an understanding of the need for government funding for comprehensive, integrated, affordable, and accessible children's services with regulated high-quality child care as the cornerstone. They recognized the importance of investing in children and families to achieve broader social and economic objectives.

    Yet although approximately $450 million in new federal dollars has flowed into the province of Ontario, not one penny has been spent on regulated high-quality child care. In fact, since 1995 the Conservative provincial government has cut $160 million from the provincial child care budget. Chronic underfunding and wilful neglect have created a crisis in the regulated child care sector in Ontario. A system that took us forty years to nurture into existence has been brought to its knees in eight short years.

    Provincial cuts and downloading of greater funding and delivery responsibilities onto cash-strapped municipalities has led to greater fragmentation and vulnerability. Centre budgets have been cut to the bone, with little access to capital dollars to keep ahead of the needed repairs and upkeep. Programs are suffering as centres are forced to tighten food and programming budgets, eliminate special events and field trips, and restrict professional development opportunities for staff.

    Child care subsidies have been made so restrictive, fewer families are able to qualify despite their desperate need. On the one hand, we see increased demand in the province of Ontario, yet spaces sit empty and centres are forced to close their doors.

    Attracting and retaining a skilled and professional child care workforce is extremely difficult. Low wages and provincial funding caps on wage subsidies create real disparity among those staff working in the field. Funding cuts, caps, and restrictive policies leave existing centres extremely vulnerable and discourage expansion in the system.

    So while we were momentarily given hope with these agreements, they have proven hollow at the local level. In Ontario these agreements have meant little to thousands of families stuck on long waiting lists, often unable to work or study. These agreements have meant little to the over 90% of children that are unable to access the kind of care we all know is best for them, and they have meant little for those centres struggling to provide high-quality programs while trying to keep the wolves from the door.

    The original early childhood development agreement--the no strings attached version--and the second multilateral framework agreement in the few weak strings attached version have not moved us closer to a national child care system. These lofty agreements remain words on paper that ring hollow when the Ontario child care system, once the envy of this country, is gutted and undermined by a signatory to these agreements and left unchallenged by the other signatory, the federal government, because it has failed to give us the needed mechanisms to hold our province accountable for how new federal dollars are being spent.

    These agreements prove political will and stronger federal leadership are required. We need the federal government to make these agreements mean something to Canadian families, to Canadian children, and to the many people who work in the field.

¹  (1545)  

    The Chair: Thank you very much.

    Mrs. Diane O'Neill (Vice-President, Ottawa Child Care Association): We want to lend our voices to those of the Child Care Advocacy Association of Canada, the Canadian Union of Public Employees, the Ontario Coalition for Better Child Care, Campaign 2000, and many others calling for strong federal leadership.

    We urge this House of Commons Standing Committee on Finance to recommend that the upcoming federal budget (1) commit sufficient funds to develop a publicly funded pan-Canadian child care system for children from birth to 12 years that is fully inclusive and meets the needs of every child regardless of their family's income and employment status, where they live, their ability or culture; (2) provide leadership in developing a federal-provincial-territorial social policy framework with licensed and regulated child care as the cornerstone of Canada's family-friendly policies; (3) regulate provincial and territorial governments receiving designated federal funds to spend them directly on improving and increasing access to affordable, quality, regulated, not-for-profit, universal, and inclusive child care; (4) require all provincial and territorial governments receiving federal funds designated for child care to maintain or increase their spending on child care and use the federal funds to supplement, not replace, provincial and territorial child care funding; and (5) establish mechanisms to ensure monitoring and compliance with the terms of the federal-provincial-territorial agreements, develop obligations for public reporting that will ensure clear data detailing the improvements and the progress, and develop effective processes for dispute resolution.

    Thank you.

    The Chair: Thank you very much.

    Maintenant, c'est a votre tour, monsieur Bishopric.

    Mr. Thor Bishopric (President, Alliance of Canadian Cinema, Television and Radio Artists): Good afternoon, Madam Chairperson and honourable members of the committee.

    My name is Thor Bishopric and I am president of ACTRA, the Alliance of Canadian Cinema, Television and Radio Artists. ACTRA is a national organization that represents 21,000 professional performers who work in the English-language recorded media in Canada. With me today are Sonja Smits and Rick Mercer, two of Canada's leading performers, whose work I'm sure you are well acquainted with.

    This year ACTRA celebrates its 60th anniversary. ACTRA is a vocal advocate for preservation and strengthening of Canadian culture and Canadian creativity. ACTRA plays a leading role in coalitions for the advancement of Canadian cultural programs and in international bodies working for the protection of cultural diversity in a global economy.

    The issue on which we will focus today is the need to maintain and enhance government funding to encourage investment in film and television production in Canada. We are speaking about the government's contribution to the Canadian Television Fund, the CTF, which must be restored to the pre-2003 budget level of $100 million and enhanced by an additional 20%.

    With more on the CTF, I'm pleased to introduce Rick Mercer.

¹  (1550)  

    Mr. Rick Mercer (Alliance of Canadian Cinema, Television and Radio Artists): Thank you very much.

    The Canadian Television Fund, or the CTF, is a public-private partnership with an annual budget that was about $250 million. Since its creation in 1996, the CTF has supported over 2,600 projects, producing more than 13,700 hours of new Canadian television programming.

    On February 18, 2003, the federal government reduced its financial commitment to the CTF by $50 million over two years. The result: Canadian television drama production is in a free fall. In 1999 there were 12 English-language Canadian one-hour dramatic series on our television screens. In 2003 there are only four.

    We are asking your committee to recommend that the CTF not only be restored to the $100 million, but that it be enhanced to turn around this free fall in Canadian drama production.

    ACTRA's concern with the lack of stable funding for the CTF touches on three themes in the committee's call for comments. The first is in regard to economic growth and job creation. In 2001 and 2002, the CTF contributed approximately $241 million, which then generated well over $800 million in production activity. This activity in turn supports 16,500 direct and indirect jobs.

    Second, in regard to investing in and caring for all members of Canadian society, dramatic programs are a powerful cultural tool and the most watched genre of television production. Dramatic programs are a principal way in which Canadians can tell and share our stories with one another. They strengthen and they enrich the broadcasting system that links Canadians in a common medium.

    Third, and finally, to ensure that urban, rural, and remote communities are all desirable places in which to live and work in Canada, it should be noted that although the centres for television production are urban--specifically Montreal, Toronto, and Vancouver--Canadian television drama is shot on location throughout Canada and contributes to local economies through job creation and spending.

    Statistics Canada has reported that in 1996-97, which is the latest year for which such data is available, the cultural industries in Canada represented 3.1% of Canada's GDP, or $22.5 billion.

    Now I'd like to pass it over to Sonja Smits.

    Ms. Sonja Smits (Alliance of Canadian Cinema, Television and Radio Artists): Of late there have been some very positive endorsements for restoring and enhancing the CTF from both government agencies and members of Parliament.

    In the September issue of Canadian Communications Reports, CRTC chair Charles Dalfen said that Canadian drama is a priority for him not just from a national identity perspective, but also because it creates an infrastructure in the country for other production. Chairman Dalfen also points out that the CRTC does not control the amount of funding contributed by Heritage Canada.

    My own series, The Eleventh Hour, came very close to being cancelled last season despite its critical success, and I'd be happy to answer questions about the whys and wherefores of that later on.

    The CTF received specific attention in a recent report of the House of Commons Standing Committee on Canadian Heritage entitled “Our Cultural Sovereignty: The Second Century of Canadian Broadcasting”. The heritage committee noted that the CTF has become a key element in the financing of many Canadian productions. During the heritage committee's hearings witnesses often noted, however, that uncertainty over the government's intentions for the CTF discourages planning and investment. The heritage committee heard that Canadian creators are dealing with a funding system akin to a house of cards, where one funding source that has been awarded can be lost if another source is denied.

    The heritage committee recommended that the CTF be recognized by the government as an essential component of the Canadian broadcasting system. This recognition must include increased and stable long-term funding. In short, the recommendation of the heritage committee was very clear, and allow me to quote:

The Committee condemns the federal government's decision to reduce its contribution to the Canadian Television Fund and urges the government to reverse this decision.

¹  (1555)  

    Mr. Thor Bishopric: In summary, ACTRA is seeking a commitment from the government to restore and enhance the government's contribution to the CTF in the next budget. The CTF is clearly necessary if Canadian-produced programming, especially Canadian television drama productions with Canadian performing artists, are to be available to Canadian viewers.

    Some argue that market forces alone should determine which productions survive on the airwaves, but it's worth noting that the United States and India are probably the only countries in the world that do not directly fund domestic television productions because their own domestic and export markets are large enough to sustain new productions without government funding.

    Government assistance of television drama productions is not unique to the Canadian experience. The fact is that in many European countries, notably the United Kingdom, Germany, and France, as well as in Australia, where governments provide direct funding for domestic productions, most of the top ten television drama series are domestically produced. Sadly, in Canada there was not one English-Canadian dramatic series among our top ten in 2003.

    ACTRA recognizes that direct funding through the CTF alone will not magically solve the problem of ensuring a steady supply of domestic television drama productions. Fair and effective content and investment regulations must be imposed in lockstep with stable and sufficient direct government funding of the CTF. ACTRA is keen to see the CRTC move forward with appropriate regulatory measures to encourage Canadian television drama productions.

    ACTRA urges the finance committee to recommend in the next budget that the government restore the CTF to the $100 million point and enhance the contribution to the fund by an additional $20 million as a base amount for all future years.

    Thank you for providing us with this time to express our concerns and recommendations. We would be pleased to answer any questions.

    The Chair: Thank you for your recommendations. I will have the one report translated and distributed in both languages to all the committee members also.

    Now it's time for questions. We'll go seven minutes to Mr. Casson.

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

    It's good to see Rick Mercer here speaking into a microphone instead of carrying one and chasing us for comments. But certainly welcome to all of you, and thank you for your presentations.

    Rick, I'll start with you. You indicate that the CTF fund is a public-private partnership with government support. Was the government support a full $250 million and that's been cut back, or is that a combination of the two?

    Mr. Rick Mercer: That's a combination of the two. It's my understanding that the government commitment was $100 million.

    Is that correct, Thor?

    Mr. Thor Bishopric: Yes.

    Mr. Rick Casson: And that's been reduced too?

    Mr. Rick Mercer: The rest comes from the cable companies and the broadcasters.

    Mr. Rick Casson: I see.

    You also say that this would have something to do with the reduced number of Canadian productions. How much do you think the influx of cablevision and all the other types of media have affected how many shows are produced in Canada and how many are making it onto the screen?

    Mr. Rick Mercer: Obviously, Canadians have more choices now than they've ever had before, and that is a separate issue, I believe. It's just that in 1999 every one of the major networks in this country.... Global had Traders, which was a success; Paul Gross had Due South , which was a success, the CBC had The Road to Avonlea, which was a phenomenon all over the world, and an entire generation grew up watching that show. There was always the option to watch high-quality Canadian drama. That was always a possibility. You could always turn the dial and find it. Now it's less and less. We're down to four shows. I think that's the most telling statistic, when Canada's one-hour dramas come down to a handful of cop shows.

    That's how we're being represented around the world now, which is the other thing. Quite often the world determines what they think of a country by how they see that country presented on television. So much of what we know about the United Kingdom or India comes from what we see exported from their country, and unless Canada wants to sit back and say we will allow the world's vision of Canada to be created by an American view of Canada, then we have to support our hour-long drama. That's why it's so imperative that the hour-long drama be supported.

º  (1600)  

    Mr. Rick Casson: This summer there was a little flurry of activity in western Canada when there was a movie being filmed, I think it was Open Range. Robert Duvall commented that he didn't think there were any quality Canadian actors. And believe me, a lot of support for Canadian actors came out in the media after that, because we realize there are a lot here in Canada.

    Mr. Rick Mercer: Well, not all actors are so smart.

    Mr. Rick Casson: Yes, I suppose.

    I want to switch over to the FCM now, if I can. You indicated in your presentation that 55% of your revenue came through property taxes. What are the sources of the rest that the municipalities have?

    Mr. Yves Ducharme: We have access to some fines, as you are well aware. We have access to tariffs and licences. We have access, for some, to in lieu of taxes. But the main source still is fixed revenue income.

    Mr. Rick Casson: The user fees you charge for services rendered, do you count them in the global revenue for a city, or do hive off each division--each one takes care of itself? How do you do that?

    Mr. Yves Ducharme: That's correct.

    Mr. Rick Casson: So you're including in that 55% the user fees that--

    Mr. Yves Ducharme: No, the user fees are separate. But the fiscal base is calculated mainly on the assessments. We don't have that much revenue coming from user fees.

    Mr. Rick Casson: In your presentation you talk about the BSE issue in Canada and the fact that a lot of rural Canadian communities have declared themselves in states of emergency. Now, that doesn't trigger any government help; it just indicates, sends a message, I guess, about the dire straits a lot of these rural communities are in. A lot of them fear that the taxes that are owed to them from some of the producers are not going to get paid.

    I see you have a program here in which you'd like to see the government have a cash advance for beef producers, a repayable cash advance of 60% of the value of the animal. Is there anything else you're doing to deal with these taxes that may not get paid? Is there any strategy from the FCM?

    Mr. Yves Ducharme: There's very little we can do, because as far as some provinces are concerned, the tax bill they send to the citizen includes the school tax. The school tax sometimes represents about 53% of the property tax on the owners. The province will collect that school tax, even though the municipality didn't receive any revenue.

    This morning, in fact, we met with the U.S. ambassador, and yesterday I and some colleagues met with the Minister of Agriculture, the Honourable Vanclief. We showed them clearly that right now in Canada there are over 100 municipalities that are declaring an economic disaster. It doesn't touch only the rural communities in Canada, but also urban communities, because of the economic spinoff of that $4 billion trade we have with the United States.

    We have to take this crisis very seriously. Right now there are cattle that cannot be fed, and we are afraid something terrible could happen to them if we're not able to feed them properly. We'll have to discard them humanely.

º  (1605)  

    The Chair: Thank you very much.

    I understand the Bloc wishes to share their time. Mr. Paquette.

[Translation]

    Mr. Pierre Paquette (Joliette, BQ): My colleague from Québec will speak for three minutes.

[English]

    The Chair: Whatever you leave her, I will give to her, Mr. Paquette, so it's on your shoulders.

    Go ahead.

[Translation]

    Mr. Pierre Paquette: First I would like to thank you all for your presentations. I'll speak to Ms. Bird and Ms. O'Neill first.

    I'm always surprised at the tone used by social groups from “English” Canada to request federal government protection from their provincial governments.

    I know that Ontario has had an unfortunate experience, which ended last week, but it should nevertheless not be forgotten that the federal government cut the Canada Social Transfer by $24 billion from 1994 to 2001.

    Quebec wants to provide more generous parental leave than that offered through employment insurance, and the federal government refuses to negotiate with the Quebec government. In the past, 80%  of people who paid employment insurance premiums received benefits. The figure is now 40%, and many women are no longer entitled to benefits. If parents are poor, their children will obviously have problems as well. All that happened when the surpluses were very large. They were allocated to pay down the debt. The federal government has a very big, if not the biggest, responsibility with regard to child poverty.

    I ask you whether you agree on the priorities of the future Prime Minister of Canada, Paul Martin. He told the Board of Trade of Metropolitan Montreal that his first priority was to reduce the debt until it represented 25% of gross domestic product. In your view, should the Canadian government's priority be to reduce the debt?

    It's still good. I'll have a few others like it.

[English]

    Ms. Shellie Bird: I guess what we would like to see is the federal government making children and families a priority. That is what we would like to see. We believe governments do make choices. They make choices to pay down debt to private finance institutions or to fund tax breaks to corporations. Or they may make choices to care for young children. We believe it is a choice this federal government needs to take.

[Translation]

    Mr. Pierre Paquette: Thank you.

    Now I'll turn to the Federation of Canadian Municipalities. Mr. Ducharme, I would like to know whether your proposal concerning the infrastructure fund can be matched with the one the Coalition pour le renouvellement des infrastructures du Québec presented to us this morning. Can you tell us whether that's possible or whether the two proposals can't complement each other?

    Mr. Yves Ducharme: I must tell you quite humbly that I haven't read the proposal that was presented to you this morning. I had the opportunity to speak with Mr. Vaillancourt just before our presentation.

    To summarize, we're asking that the sum of $3 billion that was set aside for infrastructure works and allocated over a 10-year period be available over a two-year period, which would enable us to invest $1.5 billion a year.

    We know that the current deficit is $60 billion and is increasing by $2 billion a year. In Quebec alone, the Conference Board of Canada has estimated the deficit at $15 billion, and that doesn't include anticipated operating deficits.

    So it's important to invest in these infrastructures quickly so that we remain at the same level of competitiveness. We're currently regressing.

    Ms. Christiane Gagnon (Québec): Thank you, Madam Chair.

    I'm speaking to the representatives of ACTRA, whom I met at noon. As a permanent member of the Standing Committee on Canadian Heritage, I thought it important to be here today to attest to the urgent need to fund culture.

    We know there are major stakes in television production. We in the Bloc québécois conducted a fight over the $100 million in the Canadian Television Fund program.

    Today, you've come to help us understand the major challenges of the television industry in Quebec and Canada. You can count on us to support your demands.

    You referred to the CRTC regulations, investment regulations, based on the definition of the type of productions to be financed, and to the obligation for the television industry to finance production.

    I would like to get a better understanding of the financial impact on television production as a whole if those investments were to continue. That's my first question.

    My second question concerns stable funding for the Canadian Television Fund. This is a disaster. We're talking about a fragile industry, and that industry must be supported by the provincial and federal governments. This is another disaster in the day-to-day lives of producers and artists. We have to improve their fate. The program had a $100 million budget since 1996. That budget is roughly $75 million now. I believe the government shuffled the cards when it cut $50 million for the next two years.

    Can you explain the mechanism governing the loan which is designed to offset the shortfall this year and explain to us the extent of the disaster?

º  (1610)  

[English]

    The Chair: Perhaps we'll have some time for an answer now. Go ahead.

[Translation]

    M. Thor Bishopric: Thank you for your question.

[English]

    Yes, I'm happy to briefly go through the history of what's happened with the CTF funding.

    In the last budget, the CTF annual funding was reduced from $100 million to $75 million. That caused an outcry in our industry, since a number of programs, including Sonja's show, The Eleventh Hour, were at peril. It was believed that a number of high-quality shows would not be produced.

    Ms. Sonja Smits: I just want to interject.

    The reason for that is in order to fund a dramatic television production, the CTF is one part of the puzzle that a producer needs to put together. If they're missing that one part, the whole thing collapses. They need this part, that part, and without that CTF funding.... All the other funding was in place for a number of shows, and then when that got cut, the money we were counting on to go was no longer there.

    So even though everything else was in place, we were missing that part. Therefore, our show and a number of other shows would not have been able to be made, unless that was restored. It wasn't actually restored, because the money was taken from the next year. Now, rather than just having a $25 million reduction, we have a $50 million reduction.

    Mr. Thor Bishopric: Actually, $12.5 million were borrowed from next year's CTF envelope, and this means that the amount of money is significantly depleted for the coming budget year. As Sonja has described, projects simply will not be green-lit, they won't even go into the detailed budgeting process, unless the seed moneys are there that are essential to put together that intricate puzzle.

    And just to be clear, I'll remind the committee that ACTRA believes the proper funding for the CTF should be raised to $120 million. It is our position that given the pressures our industry endures, principally from the practice of American dumping of programming into our country, we really need to get serious about this. If we're going to have any cultural content on our television screens, we need to ensure that we can put together programming with adequate budgets so that the viewers and the market will develop a liking for it.

    Thank you.

    The Chair: Thank you very much.

    Mr. Wilfert, then Mr. Murphy.

    Mr. Bryon Wilfert (Oak Ridges, Lib.): Thank you very much, Madam Chair.

    First of all, I'd like to thank all the presenters.

    Your last comment, sir, with regard to the whole industry and the importance for Canadians, I would agree with. I think it's important to have a long-term capacity to produce Canadian programming in this country.

    I'm the parliamentary secretary to the finance minister, and we had a slight difference of opinion, it would seem, with the Department of Canadian Heritage. It is my understanding that since 1996, of the $200 million, $100 million comes from Heritage, $50 million from Telefilm, and the rest was supposed to come from the private sector--that is, cable, wireless, satellite, etc. In the June 5 press release from the Ministry of Finance, in which the Minister of Finance and the Minister of Heritage announced the additional moneys, which were mentioned, it said that the federal government's contribution was intended to provide stability in the early years and then be reduced as contributions from the private sector rose. I think that's where there seems to be a problem, because it was the Department of Finance's view that originally that $200 million was there and the $100 million was from Heritage, but it would decline as the private sector went up.

    Now, I realize, which I suppose is a good thing in one way, that this year there was an announcement that there were more funding applications for the CTF than could be accommodated, which was probably good to hear, that these programs are out there, but obviously they could be cancelled if the money wasn't there. Can you first of all address this issue about the supposed decline in government funding, which was to be then matched by the private sector, which was the understanding we had?

º  (1615)  

    Mr. Thor Bishopric: I'll do my best.

    The issue that the fund is oversubscribed is a two-edged sword. It indicates that there are a number of writers and producers who are endeavouring to get productions done. The reality is that the more producers who subscribe to the fund and who are sent away, the more discouragement occurs. And we do have a bad situation where a number of our creative talent, our stars, are leaving Canada because there's no opportunity for them to produce here in Canada.

    On the issue of the CTF being a temporary measure to attempt to stimulate the market and develop an industry here in Canada, that remains our long-term goal. I think it's appropriate that should be a long-term goal of the government, as well; however, the realities have to be taken into account.

    We live next to the United States, which is the most successful producer of audiovisual programming. It is a very significant trade issue in the United States, and it is their intention to continue to dominate our marketplace and control our distribution activities and dump their product here. Other nations, nations that have significant cultural interests, their own heritage, are seeking to protect and disseminate.... Nations such as Great Britain, Germany, and France have come to the conclusion that they need to make a long-term investment in this area, not simply a little bit of seed money to stimulate a market, which then will take off and generate rewards for everyone.

    Mr. Bryon Wilfert: Then I would say to you, sir, that what we have here is a whole different issue from what was before us originally, because the CTF was supposed to expire at the end of March, and the government extended it for two years. And I don't disagree with you, but as parliamentary secretary I have to tell you that what the Department of Heritage put forward was clearly this issue of extending the fund for two years. What you're talking about is a much stronger commitment and a much longer-term commitment, which is clearly not, in my view, what we heard from Heritage.

    I would suggest to you that if the heritage committee, or the Minister of Heritage, wants to make those presentations or those comments, that's fine, but that is not, with due respect, what the Department of Finance agreed to in terms of what we funded. I was surprised by the negative press we got when we extended it after knowing it was going to in fact terminate, and here we were extending it based on this being the right thing to do. But now we're talking about a much longer-term issue. So I appreciate that, and certainly we'll come back to it.

    Mr. Thor Bishopric: If I may respond, we are certainly continuing to engage with the Department of Heritage and we encourage them to take a long-term perspective on this as well and further build up this critical industry. But to the extent that you can look at it as a narrow finance issue, we believe, and we have it on good authority, Mr. Martin has told us directly that in his estimation there is no better way for the Government of Canada to spend their money. Setting aside all of the cultural benefits, which are numerous and well known, there is a wonderful multiplier effect. To invest in this industry creates wonderful jobs, builds up the industry, and provides a better bang for the Canadian tax dollar than any other program he's aware of.

    Mr. Bryon Wilfert: And that's why I think we also increased the tax cut for film producers, which will be increased up to 220 by 2003-04, the billion dollars for the CBC, there's no question. But there's a larger issue here than just the CTF that I wanted to address to you, and I thank you for that.

    As far as the FCM is concerned, I want to first of all thank the president of the FCM for his very kind words, and also to indicate to him that the government is prepared to look at all options, particularly in terms of strengthening our communities and the issue of infrastructure funding. And we've talked about the gasoline; I think I've debated this twice at length in the House in the last few months, and there's no question.... But the issue is the mechanism. We are not going to write a blank cheque to the provinces or give them three or four cents, or whatever it's going to be, and just have them say they know best, because honestly, as we know, they don't know best. And what we know is that we need to have true partnerships, and those partnerships have to obviously be with the municipal governments in this country.

    So certainly we'll look at that. I know the FCM wanted a ten-year program on infrastructure. They have a ten-year program, they got the initial down-payment, and we're going to continue to move in that direction. And as you both know, the Prime Minister's urban task force, which I was a member of, strongly recommended stable long-term funding for municipal governments. This government has been in the lead in this since it came into office in 1993, and I look forward to continuing to work in that regard, Madam Chairman.

º  (1620)  

    The Chair: Thank you very much.

    Now we'll go to Mr. Murphy for seven minutes. Thank you.

    Mr. Shawn Murphy (Hillsborough, Lib.): Thank you very much, Madam Chair.

    I want to follow up where Mr. Wilfert left off, and that's the whole area on the new deal, as you call it. Did you put that term on it, the new deal?

    A voice: It has a certain ring to it.

    Mr. Yves Ducharme: No, I think we are talking about a new partnership.

    Mr. Shawn Murphy: Anyway, I want to probe a little deeper this whole area of how we're going to.... And I agree with your submission on the need for more investments in our cities, towns, and communities, and the infrastructure deficit. There's no question about that.

    However, as you know, the cities are a creature of the provincial legislatures: they determine how you're constituted; they determine how you're managed; they determine how you're governed; and they determine how you raise your money. So we have to talk about how we're going to get around this whole issue. And in your case in your other life you're the mayor of Gatineau, and your government is clearly on record that they're not as enthusiastic about the new deal as you are yourself. I want to explore how you see this working.

    The infrastructure arrangement has worked reasonably well. We have a tripartite agreement with a committee and it works reasonably well. But this arrangement, I take it, is a direct federal-municipal deal, as you say. My first question is how do you see this working, because I can see a lot of obstacles in the way of it right now.

    And secondly, and perhaps more importantly, we've heard some excellent submissions from Diane O'Neill and Shellie Bird about where the federal government has moved into an area and put money on the table, and what has happened is the province has pulled it right off the table almost as quickly. It's almost invisible the way the money has come off the table, and you've seen it also in your lifetime. So if the provinces aren't involved, my suggestion is that once there is federal money on the table, you're going to find that while they can't directly take money off the table, they can cut your tax revenue down. How do you control that?

    My third issue I want to get an answer on is the concept that was developed by your federation. I really haven't read this, or haven't heard it in any of the public announcements. Does it involve the major cities, the medium cities, or does it go right down to the towns or the communities, this sharing of the excise tax revenue? I'd like a response in those three areas.

[Translation]

    Mr. Yves Ducharme: Thank you, Madam Chair.

    First I would like to congratulate Mr. Wilfert on his remarks and his deep understanding of the situation of the cities and towns.

    As to the question he asked us, a few weeks ago, I was with the ministers of municipal affairs in Charlottetown, at their national conference. I obviously tried to make the municipal affairs ministers from the various provinces understand that this was a good opportunity. There was a will clearly admitted by the federal government to enable the municipalities to receive new money, net revenues. In so doing, I told them that they had to respond to the invitation without feeling threatened at the constitutional level. Some reacted by saying that the Constitution clearly stated that the municipalities, as you said so well, came under provincial government jurisdiction.

    I believe that, where there is an express will, there are ways to make this work. Moreover, there are examples that prove that very well.

    You'll remember that, more than three years ago, the federal government twice transferred the sum of $125 million to the Federation of Canadian Municipalities, for a total of $250 million, so that those amounts would be invested in innovative environmental methods. The provinces were supposed to be involved, and they were. There were specific agreements signed with most of the provinces. More recently, I signed what was considered a historic agreement in Montreal with the new municipal affairs minister of the Government of Quebec. That agreement enabled Quebec municipalities to gain access to the Green Municipal Funds, which was impossible before the two governments came to power.

    To the extent that the governments are ready and agree to the assumptions that have been stated, that is to say that the cities, towns and municipalities of this country are suffocating and that access must be provided to the funds offered, and to the extent that we can agree on priorities, it is entirely possible to do so. The Federation of Canadian Municipalities in no way wants to question the constitutional reality of this country.

    In that regard, I think that everybody has to be on board. A national campaign was recently launched to increase the awareness of the Canadian communities. It talks about the federal government's will to extend assistance to the municipalities by expanding their revenue sources. I believe that the pressure put on the provincial governments will make it impossible for them to deny access to those federal funds over the coming months and years.

    As regards the cuts to the aid offered or amounts transferred to the cities and towns as a result of new monies that would be paid by the federal government, once again, I believe we have shown everywhere that the funds currently available to the cities and towns are inadequate to enable them to discharge all their responsibilities. We have proven that. In its last report, Statistics Canada was extremely clear on the cuts to assistance transfers to the municipalities. So we'll continue to make our demands.

    I believe that the federal government's position is excellent: there must be no reduction in aid to the cities and towns as a result of money available under new programs.

    This is a matter of good will. We may not agree on the details, but I believe everyone agrees we have to do something about our infrastructures, whether it be in transportation, the environment or the social field. There must simply be a display of good will to enable that money to pass directly through the municipalities.

º  (1625)  

[English]

    The Chair: Ms. Judy Wasylycia-Leis, seven minutes.

    Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP): I want to thank all the presenters. This has been a fascinating afternoon.

    I'm afraid I let Bryon Wilfert get to me again. He always does it. I want to start with his line of questioning to members of ACTRA, because I think what he's saying is that because you had a two-year funding agreement and it was coming to an end, it was okay to chop $37.5 million out of that agreement. It seems to me you were an easy target for the government that was looking for a billion dollars in cuts right after they put a budget on the table, so they were coming at it from the back end and cutting in the most egregious way possible, where it's most hurtful.

    I'd like the two actors to speak, because you know you are role models for our kids who want to go into acting. How do you make the case to the government and deal with this kind of nickel-and-diming?

    Mr. Rick Mercer: Well, Sonja and I are not television producers, for starters; we're performers. If anyone is looking at a subsidy or an investment by the government of that much money and the finance department wants to say “Oh, by the way, this is a one-shot deal”, I guess that's their prerogative. At the same time, it's not acceptable. We don't accept that it's an acceptable position.

    This is an industry that has to be supported and invested in. If we're going to compete on any level with the United States, and with foreign broadcasters on any level at all, there's going to have to be some level of subsidy there.

    It's fine for him to say “Well, it was a one-shot deal, and that's it. You should take your hat and go home and never produce Canadian drama again.” But we just don't find that an acceptable position. What we need is a commitment for ongoing funding, year after year after year.

º  (1630)  

    Ms. Sonja Smits: If you sometime, just out of interest, take a look at what's on this week on your TV—you see the time slots and the days—try to find a Canadian show during prime time. Count up how many hours.

    There are weeks such as during sweeps week in November when there are 22 hours of American programming and one and a quarter hours of Canadian programming—during prime time on our national airwaves. It really is a shameful situation, and it's something we need to do something about.

    Mr. Rick Mercer: These are heavily regulated airwaves. The private networks just want to compete. They say that producers should be able to make the shows on their own and fly them up the flagpole, and if people want to watch, they'll watch; if they don't, they won't. If they make money, they do; if they don't, they don't.

    Then deregulate the entire industry. Let CBS and all the major networks come in and compete with Global and CTV, and see who's left standing. I think they would rather go with the regulated industry as it is now. But they're going to have to also step up to the plate to produce more Canadian drama; that's all there is to it. And the Canadian government is going to have to do their part if in fact they want their culture to be represented on the prime-time airwaves.

    Mr. Thor Bishopric: Let me add to that.

    Indeed it's a question of the Canadian government doing its part. We think the Canadian government should think big in this area. We think the Canadian government should see culture and television programming as a critical aspect of what this country needs in order to be strengthened, in order to permit performers and other storytellers to communicate with the youth of this country and to send messages around the world about who we are.

    The Canadian Television Fund has been effective. It has stimulated production. We think we need more of a good thing. We believe that would be the right thing to do.

    Ms. Judy Wasylycia-Leis: Thank you. I appreciate the answer.

    I think we have enough flexibility today in terms of surplus revenue to be able to support cultural industries in Canada, to be able to support child care needs, and to support the infrastructure requirements at the city level.

    Time permitting, let me ask each of the other two groups a quick question.

    I really appreciated the way in which you have put child care and the needs of children at the top of the agenda, and the fact that you frankly show your frustration with previous promises and hollow commitments. It looks as though—and you'd know—from the last budget there was another $1.2 billion in new tax cuts that benefit a small group of individual, wealthy people and corporations. That expenditure was, just for the capital tax alone, seven times what they promised for child care, which isn't even being spent.

    How are we going to make this government see that there is the flexibility if there is the political will, and that children are a higher priority than tax breaks for a few large corporations?

    Ms. Shellie Bird: That's what we're here today hopefully doing. There have been more than 30 years of research that demonstrates unequivocally that high-quality early learning and care benefits children for the long term. It benefits them in better long-term life outcomes involving education, health, and social costs. We know that. There is no disputing it any more. That's why we are looking for leadership from the federal government. We know we cannot have a federal government that has put together.... The multilateral framework agreement was a wonderful document—and we really mean it: we breathed a huge sigh of relief when we saw that document.

    We know those agreements have to have teeth if they are going to be felt at the local level. Right now, in the province of Ontario, with all of this money—$450 million has flowed into the province—we're seeing centres close down. We're seeing that the highest standard of care we've been able to set in this country is being destroyed by a signatory to this agreement. We need the federal government to take leadership, because without that leadership we can have all these wonderful-sounding agreements but not address the needs of children and families in Canada.

    Just to answer the fellow's question earlier, I think we come to the federal government frustrated because we have been told by our local and provincial governments that there is nothing more they can do; that they need more money from the federal government. We know that since the scrapping of the Canada Assistance Plan, we are dying out here in the provinces. Our programs, our cities are being destroyed because we have no strong federal leadership. We want that. That's why we come here frustrated.

º  (1635)  

    Ms. Judy Wasylycia-Leis: Do I have time for a quick question?

    This is to the FCM, whose work is really important to our budget deliberations. From the point of view of municipalities, last year's budget was a major disappointment. We hear Paul Martin talking now about addressing the shortfall. But given Paul Martin's record in the past in terms of the cuts that happened and that impacted upon cities, and given his recent economic address where he has put so much emphasis on debt reduction—in an unreasonable way, I think—how do you expect things will be any different under Paul Martin?

    Mr. Yves Ducharme: That's a political question, and I don't know if I should give a political answer.

    That being said, I think never before have we seen in Canada so much interest in the view that we need to address the infrastructure issue in trying to find some solution to the problem faced by all communities in Canada.

    I was in Vancouver addressing the UBCM, the Union of British Columbia Municipalities, the day before Mr. Martin was to address it, and I had an opportunity of reading his speech. I was very pleased by what I read. I was not present in the room, but I believe it gives us a sense that now there is a strong will to address the problem we face. We are very optimistic.

    The Chair: I'll go now to Mr. Discepola for seven minutes, followed by a final question from Ms. Minna.

    Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.): Thank you, Madam Chair.

    I would like to address my first question to Ms. Bird, because I take your criticism very strongly—and I accept it also. I'm equally as frustrated as you are when you say we don't give you the tools to hold the provinces accountable. Damn it all, when we try to give the tools to hold the provinces accountable—and it's not really to appear as the big feds, or the big brother watching, but rather to get at some of your concerns when you say.... I was shocked to find out that there is no data-sharing among the provinces--for example, no best practices shared among provinces. It's pitiful to see that we have probably 10 or 12 different health care systems in this country. It's frustrating when you say we have to implement those tools, because when we increased the national child care benefit, my home province—and I think Mr. Paquette is here now—clawed it back the very next day; they just simply clawed it back.

    When they cried foul because health care was cut, then the Minister of Finance at the time, who went on to be the now former premier of the province, took $800 million and invested it in a bank account in Ontario. If he needed the money, why wasn't he using it? We had a billion-dollar fund established last year for special acquisition of machine equipment—MRIs, etc.—that we desperately needed. It's only been tapped into to the tune of 20%, I believe. Yes, we're hearing—and we hear this frustration constantly within Canada—that they want accountability, but it's not there at the political level, whether it's provincial or.... We are trying, but I don't see any premiers coming forward and saying yes, sure. All of them are saying “Give us the money; let us administer it.”

    That brings me to your suggestion from the FCM. As a former mayor, I know your resources are limited. And being from Quebec, I also notice that the provincial government has been trying to sign

[Translation]

a new tax treaty with the City of Montreal. For how many years now in fact?

[English]

    How do we go about getting more cooperation at the different levels so we can address the real needs?

    What I'd like to hear from both of you--without getting into my colleague's concern, and I think everybody around this table shares it--is on internal bickering at the constitutional level, because Canadians are fed up with anybody saying it's another person's problem, another level's problem. What suggestions do you have for us?

º  (1640)  

    The Chair: Mr. Knight, do you want to start, and then I'll take Ms. Bird, if she'd like to add something.

    Mr. James Knight (Chief Executive Officer, Federation of Canadian Municipalities): Clearly, in Mayor Ducharme's remarks, we talked about a new intergovernmental partnership; that's our fundamental theme. We really do have to find ways whereby governments cooperate better than they have in the past. Canadians expect it of governments at all levels.

    We sense an opportunity here. We've already, as Mayor Ducharme mentioned, met with provincial ministers on this. We sense a certain opportunity that hasn't been there in the past. The mechanism is key; the devil is in the details. We are working with senior federal and provincial officials now to examine and explore possible mechanisms. There are three or four options that seem to work.

    So we're optimistic we can find a way. We can do better in the future than we did in the past. We believe that fundamentally.

    Ms. Shellie Bird: In the province of Ontario we've recently had, under the multilateral framework agreement, the provincial Conservatives dragging their feet saying they were not going to be held accountable to the federal government. Our community mobilized across the province, saying we weren't asking them to be accountable to the federal government; we're asking them to be accountable to the people of the province of Ontario, who want to hold our federal government accountable.

    So there are political things we can do to ensure our elected representatives at both the local and provincial levels are being held accountable. I think we have to work together to help citizens hold all levels of government accountable. We did attempt to do that when we forced Harris to the table on the multilateral agreement.

    I'll tell you what some of our frustration is. If we can't get our provincial government to work in the interest of the people and the interest of families and children in the province of Ontario, but we have municipal governments that are willing to work in the interest of the people and children in their communities, well then, let's not talk to the province. If they cannot be accountable to their electorate, then maybe we need to start developing agreements with municipal governments that will address the needs of the people in their community.

    We have spent the last eight years in the province of Ontario trying to make that government accountable to us, to no avail, until we finally had to kick them out.

    So that's what we did for you guys.

    Mr. Nick Discepola: I wish I could share your optimism.

[Translation]

But I remember that, two years ago, when the Millennium Program was implemented, the municipalities in my riding had to request an exemption in Quebec City in order to deal with the federal government directly.

[English]

    I was astonished. If I wanted to start a new national park.... In our last budget we had the creation of ten parks. I went to the mayor of Rigaud, where we have a beautiful mountain, to see if he wanted to start discussing creating a new national park. He said he couldn't even start discussing it with me.

    So I think you have a long way to go to convince some of the provincial governments. I hope we do it quickly, because I think the tolerance level of Canadians is about up to here. We're all going to suffer the consequences if we don't act quickly.

[Translation]

    Mr. Pierre Paquette: It's the Constitution of Canada that...

    The Chair: It's not your turn.

[English]

    Mr. Nick Discepola: For ACTRA, I don't want to defend my colleague Bryon--he can do that for himself--but I think we heard the message very loud and clear: it's stable, permanent funding you're after. And I think as a government, as a country, we'd better decide if we want to support our cultural endeavours or not. That's the debate. I understand it very clearly, and I support it.

    One question I do have is you indicate also that you want fair and effective content and investment regulations. Can you give this committee a bit more precise information on what areas we should be looking at, what recommendations we could be putting forth?

    Mr. Thor Bishopric: Absolutely.

    In 1999 there was a CRTC regulation that came down that effectively changed the rules for Canada's private broadcasters. We've commissioned a study through one of our coalitions called CCAU, the Canadian Coalition of Audiovisual Unions, which clearly demonstrates there was a direct impact from that decision. As we mentioned earlier, we went through a dramatic decline at that time, from twelve dramatic series on television to four. That happened over a very brief period of time. It's clear from that experience that unless we have strong regulatory rules in place—

º  (1645)  

    Ms. Sonja Smits: Sorry, I'm going to interrupt you for a second. Thank you.

    Essentially, the definition of what constituted Canadian dramatic programming, the content, changed. So all of a sudden, instead of spending real money on a drama series, which costs up to $1 million an hour, of which then the broadcaster has to pay a decent or a bigger chunk of broadcast fee, they could do an information show where there's one person with a microphone, or a fishing show, and that could count as Canadian content. They were able to substitute, basically, a different kind of programming, and it was on a trust basis, to say “Drop these and trust us to step up to the plate with good programming, dramatic programming.”

    So the definition was opened up, and the broadcasters used that opening to basically create less-expensive programming for themselves.

    Mr. Thor Bishopric: Also relaxed were the minimum expenditure requirements, so as the broadcasters looked to program cheaper forms of programming they no longer had to spend a minimum amount of the money they make by virtue of the fact that they've been given a licence to market Canada's airwaves. They don't have to spend a minimum amount on true original dramatic Canadian programming.

    The Chair: I'll now allow Ms. Minna one question.

    Ms. Maria Minna (Beaches—East York, Lib.): One?

    The Chair: Yes, one question. We're out of time. This meeting was supposed to be over five minutes ago, but I'm giving discretion.

    Ms. Maria Minna: Okay, then I'll try to go very quickly across my areas of interest.

    First, with respect to ACTRA, basically all I'm going to say--since I'm not going to ask questions--is that I agree: I think a country that doesn't have a culture and doesn't support its culture doesn't have a soul, as far as where I come from and my own background are concerned. So you have my full support, and I think we need to look at long-term funding.

    I'll go from there, since I'm using up my minute fast.

    With respect to child care, I spent ten years of my work here in Ottawa basically pushing and fighting for early learning and child care. As you know, it culminated initially in the $2.2-billion agreement, but we made the mistake of allowing the provinces to cherry-pick. It was an awful mistake. We should revisit and look at ways we can get out of that and redirect those funds into child care infrastructure, as it should have been in the first place.

    In the last agreement in the last budget, it was supposed to be strictly for child care. I'm not sure, and maybe you could tell me when I'm finished, but because now we have a health transfer that we're looking at, maybe under the social transfers is where we can begin to hold the provinces' feet to the fire in terms of their not being able to take stuff off the table that they already have, just because we've put some stuff on the table. So that might be something you would want to look at.

    Very quickly, to the FCM, I know we're looking at sustainable funding for municipalities in infrastructure--no question; I don't think anybody is arguing. There are a number of things, though.

    We're talking about gas dollar transfer for financial stability for municipalities. There are some people saying actually what they want is a dedicated fund for specific infrastructure. There are two ways of coming at it. And then, of course, there's the issue of accountability with municipalities. For instance, in the large municipalities, like Toronto or Montreal, with the amalgamation, I don't think we have the checks and balances in place that I would like to see for transferring tax dollars such as the gas tax transfer. In a smaller municipality, it's probably different.

    So maybe you can guide us a little bit on a number of those issues, which I think have to be resolved as we move in that direction. It's tax transfer versus dedicated funds, and accountability issues and governance issues that I have some major interest in.

    The Chair: A very brief comment from FCM, Mr. Knight.

    I apologize. I know we have votes in the House at six o'clock, and I want to give the next panel adequate time. I'm cutting your session a little bit shorter in fairness to them--so please, a very brief comment.

    Mr. James Knight: Certainly accountability mechanisms are critical, and we are looking at models and frameworks for that. There are a variety of ideas on how we can achieve that. And there is a debate about whether this is a dedicated fund or for all municipal purposes.

    In general, we see a connection between gas tax and transportation infrastructure. I think the public understands that. Provinces have a gas tax, in part because they support provincial highways. Municipal governments also support substantial transportation infrastructure, not just roads but transit as well, and I think the public see a connection between taxes on motor fuels and those investments. But the discussion is lively, currently, and I think we're going to enter into a process of negotiation in which different partners will propose different solutions.

    So we're very excited about this negotiation. We're gratified that our agenda is getting so much attention. We are optimistic, and we think the world is going to change a bit in the next short while.

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    The Chair: With that optimism, I'm going to thank all of you for participating today. Thank you for giving us your briefs and making yourselves available for our questions.

    Now I will suspend as we change panels here.

    Thank you.

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º  (1654)  

    The Chair: We are with the second panel of pre-budget consultations.

    From the Grain Growers of Canada we have Cam Dahl, executive director. Welcome, sir.

    From Community Foundations of Canada, we have Monica Patten, president and chief executive officer. Welcome to you.

    From the Canadian Centre for Philanthropy, we have Peter Broder, legal counsel and policy analyst. Welcome, sir.

    And from the Canadian Vintners Association, we have William Ross, the president.

    Welcome to all of you. I'm going to go in the order you are in on the agenda, so we will start with the Grain Growers of Canada.

    Go ahead, sir.

    Mr. Cam Dahl (Executive Director, Grain Growers of Canada): Madam Chair, members of the committee, it is a real privilege for me to be here today to represent the Grain Growers of Canada.

    I do want to start off by saying that Mr. Bee, our president, sends his regrets, but it's a beautiful day to harvest soybeans in Ontario, and those responsibilities prevented him from travelling here today.

    I'm not going to go into a great deal of background detail on who exactly the Grain Growers of Canada are. A brief has been circulated, which will give you that detail. I will say that we are the only national organization that solely represents grains and oilseed farmers. In total, our members represent about 80,000 grain and oilseed farm families from coast to coast.

    I also feel it's important for me to emphasize that the Grain Growers of Canada only represents farmers. We do not represent corporate interests, and corporations are not members of the Grain Growers.

    Our brief was divided into four key areas. First, I want to talk a little bit about farm safety net programs that will mitigate the impact of foreign interference in the world market. We'll follow this briefly by discussion on the importance of trade liberalization and how these two topics are linked.

    We'd also like to outline a number of additional policy changes, most of which do not require monetary expenditures from the government but would significantly help improve the lot of grains and oilseed farmers across Canada.

    Finally, I would like to review briefly some upcoming changes that we are expecting to environmental policies, and the impact these changes will have on the way farmers in Canada conduct their business.

    I'd like to start off talking a little bit about the impact of foreign market interference. As you know, it hasn't been a good few years for the grains and oilseed sector in Canada. The principal cause of declining incomes in this sector is foreign interference in international markets. Using Agriculture and Agri-Food Canada's data, the Grain Growers of Canada have calculated that production- and trade-distorting subsidies in our competitors' markets are costing our farm families at least $1.3 billion every year. This estimate was completed before the most recent U.S. farm bill increased those subsidies in the United States.

    The impact of depressed world prices caused by foreign market interference is having a secondary impact in Canada. The grains and oilseed producers' farm safety net programs are directly tied to world prices; therefore, the support received by Canadian farmers will actually fall as foreign interference in the world market rises. This is somewhat the reverse of what is needed.

    Our farmers cannot fight against foreign treasuries by themselves. Therefore, we continue to request that the government adopt safety net programs that will mitigate the negative effects of foreign trade policies and subsidies. This program should be in place until the burden of artificial world prices is eliminated through world trade negotiations.

    I want to really emphasize that these concerns are ongoing, and have not been addressed in the design of the new business risk management programs under the agricultural policy framework. The fundamental needs of grains and oilseeds farmers will not be addressed until this is corrected.

    I want to talk a little bit about the importance of trade and the trade negotiations, because this is a key link with the impact of foreign interference. We continue to maintain that trade must be made the sixth, or additional, pillar in the agricultural policy framework. In order to really move agriculture past crisis management, we must see real gains at the negotiating table. Many of the concerns regarding the current safety net program would be addressed by significant gains at the World Trade Organization. I want to emphasize that the best way to close the subsidy gap between Canada and our competitors is through negotiation.

    Briefly, to provide an overview, there are also a number of other policy changes that would improve the outlook for grains and oilseeds farmers, and which would not require government expenditures. Our farmers must be able to move into new, high-value areas of production, if Canada is going to compete. This is especially true if you consider the growing importance of bulk grain production in other countries. In order to do this, we are going to need maximum marketing flexibility, which does not currently exist.

    The Grain Growers of Canada are specifically asking for increased marketing choice for wheat and barley producers covered by the Canadian Wheat Board. We believe the current system is limiting farmers' niche market opportunities, as well as providing a disincentive for investment in value-added processing—especially processing owned by farmers.

º  (1655)  

    We are also concerned that unnecessary or inflexible regulations are limiting the profitability of farmers. For example, we strongly believe that changes to the operation of the Pest Management Regulatory Agency are needed. And I note that the environment commissioner echoed these very concerns today in the environment committee.

    Moving forward, the environment is another area of concern for grains and oilseed farmers. A significant number of grains and oilseed producers are concerned that new and unknown regulatory regimes, designed to accomplish environmental goals, will sharply curtail their ability to carry out their operations and negatively impact their incomes.

    Farmers do not view all environmental policy changes in the negative light. Indeed, grains and oilseed producers are looking towards opportunities that may spring from environmental initiatives, such as the increased use of ethanol, biofuels, and other bioproducts. We look forward to working with the government and industry to bring about these positive developments.

    In closing, I want to note that grain growers are not calling for support to prop up inefficient producers, or to reduce the incentive to operate financially sound farm operations. Grain growers are adopting the latest technology to gain new efficiency, to reduce input costs, and to contribute to environmental sustainability.

    What we need is a regulatory environment in Canada that promotes investment, and an international trading field that is fair and not distorted by the actions of foreign governments.

    Thank you, Madam Chair.

»  (1700)  

    The Chair: Thank you very much.

    Now we'll go to the Community Foundations of Canada. Ms. Patten.

    Ms. Monica Patten (President and Chief Executive Officer, Community Foundations of Canada): It's a pleasure to be here, and thank you for the invitation to make a very brief presentation to you again this year.

    I think you have all received the material that briefly describes Community Foundations, so I don't really want to spend a lot of time on that. I will simply emphasize to you the important role that Community Foundations is playing right across this country in putting money back into our communities, making grants to very important issues, causes, and priorities in our local communities. There are 132 of them, and several more coming on stream.

    The work that we do in our granting has never been as important as it is now, nor has it ever been as challenged as it is now. The voluntary sector in our country, in my view, would be the organizations that receive the grants; 180,000 of them are voluntary sector or not-for-profits and about 85,000 are registered charities. It is that group to whom we make grants. That sector is in dire straits for a variety of reasons. I have outlined several of them in the paper you have before you.

    This is not simply anecdotal information or stories that we hear, although we do hear those stories. The situation of the voluntary charitable sector in this country has been well documented through research and is referenced in the paper. It is a situation to which others have spoken and about which we'll speak to you.

    The comments I want to make, speaking to each of the four recommendations that my organization and my membership have made, are recommendations that come to you following discussion and agreement with a large number of colleague organizations in the voluntary sector. I am speaking here, of course, about the Canadian Association of Gift Planners, the Association of Fundraising Professionals, my colleagues at the Philanthropic Foundations Canada and the Canadian Centre for Philanthropy, Council for Business and the Arts in Canada, the Canadian Bar Association, and other organizations. We are absolutely together on these recommendations.

    I really wanted to make that point, because one of the pieces of feedback that we have had, not so much from this committee but from other places within government, is that the sector is not together. We are together. I assure you of that. We are very clear about what the priorities are in this sector.

    Let me tell you what we think in the Community Foundations world, what we hope, what we recommend to be in place to make some changes that will allow us to carry out our potential to be more effective in terms of putting money into the hands of local community organizations, which, as I said, are experiencing incredible duress.

    Our potential is really limited because of some very complex rules that are found in the Income Tax Act. One specific recommendation that we want to make is that there be some flexibility offered to Community Foundations and to other public foundations so that the conflict between the ten-year gift rule and prudent investing is eliminated.

    Let me tell you of the dilemma in which we find ourselves. On the one hand, we must invest prudently. That's because of our governance. That's because of what our donors have asked us and expect us to do, but it's also because the trustee acts in various parts of the country require prudent investment. At the same time, there is a requirement that we must include capital gains for ten years as part of capital in a gift we receive, meaning that we are not able to access that amount of money for disbursement. At the same time, we have to meet a 4.5% disbursement quota. So we have a set of conflicting requirements that are a real barrier to our doing our work effectively, particularly in times when the markets have been down.

    We're all hoping that the markets are going to rebound. They are rebounding, but it will take us quite a bit of time to catch up. So what we are asking for is some flexibility, perhaps an agreed upon formula under which we could use capital gains as part of disbursement before the ten-year period is up. That is simply one idea.

    We are asking that the Department of Finance make recommendations to CCRA to enter into discussions about what could be considered to be more flexible.

»  (1705)  

    The second recommendation we have made--and we have had a conversation about this before at this very table--relates to disbursement quota. We understand that there is considerable research going on in the Department of Finance about disbursement quota. It is not entirely clear what that research looks like, what it's all about, and where in fact it is going.

    My organization wants to urge that this research be moved along quickly, the findings be made broadly available, and that there be some broad discussion, perhaps throughout the sector, about the disbursement quota issue.

    We've put ideas in front of you and in front of the Department of Finance and CCRA before around some flexible ways whereby this could be handled, perhaps a floating rate. There are some other suggestions we have made, and we would be happy to make those again, but we must move on this rather than holding the research too closely, too tightly. Let's get it out there and move on this issue of disbursement quota, which frankly is hurting every single foundation in the country at the moment.

    The third recommendation we want to make, because we obviously believe that philanthropy can make a very important contribution to the resourcing of organizations in our country, is the complete elimination of the capital gains tax on gifts of publicly traded securities. You have recommended that in prior years. You have also recommended that it be extended to private foundations. We support that.

    I want to tell you that I am aware that there has been considerable discussion around the benefit of this particular tax measure. I can speak for Community Foundations and tell you that somewhere between $150 million and $200 million in new gifts were given to Community Foundations. Those gifts did not stay in Community Foundations; they went back to community organizations. That's what Community Foundations is all about. So boys and girls clubs, and local services for women and children, the environment, all benefited from that stream of gifts that came to us in the period before the market tanked.

    Finally, I want to make a strong recommendation that the Government of Canada show real leadership in its relationship with the voluntary sector, the charitable sector, that it examine with great care the accord and the codes of good funding practice and policy dialogue that have been signed by the Prime Minister and are well known within government, so that in fact good core levels of funding can be reinstated to the voluntary sector. I know that there are responsibilities in provinces and municipal responsibilities, but I think this is the opportunity for the Government of Canada to take some leadership.

    That's my final recommendation.

    The Chair: Thank you very much.

    Now we'll go Mr. Broder, from the Canadian Centre for Philanthropy.

    Mr. Peter Broder (Legal Counsel & Policy Analyst, Canadian Centre for Philanthropy): I'll start with a minor correction for the record. My current title is actually acting vice-president of public affairs.

    Madam Chair and members of the standing committee, thank you for providing me with the opportunity to speak to you today about the Canadian Centre for Philanthropy's submission on next year's federal budget.

    The crux of the centre's position is that with better public and private funding, and with legislative changes that address key regulatory issues, the charities and not-for-profit organizations that make up the voluntary sector can and will make an even greater contribution to improving the quality of life in Canadian communities than the already significant role they play.

    Better public funding entails a commitment to strategic funding of voluntary sector organizations that ensures that their capacity to effectively and efficiently deliver services is not compromised because they lack the resources to plan beyond their day-to-day work.

    Better private funding involves enhancing tax measures currently available to encourage donations. Specifically, we suggest improvements in the treatment of donations of capital assets to charities so that these assets can be put to use in delivering public goods.

    Addressing regulatory concerns requires amending the Income Tax Act to improve the appeal, compliance, and other processes to which registered charities are currently subject and to clarify the treatment of charities in non-partisan political activity.

    Briefly, the Canadian Centre for Philanthropy is a national organization with a membership of more than 1200 organizations, primarily charities and not-for-profit groups. We are mandated to strengthen the charitable and voluntary sectors for the benefit of Canadian communities.

    The centre's recommendation on enhanced public funding for voluntary sector organizations flows from recent research in this area. In The Capacity to Serve , a consortium of groups led by the centre examined various aspects of organizational competence in the sector and found that unpredictable and inadequate funding is leading to an erosion of the capacity of these organizations and raises questions about their long-term sustainability. These findings are corroborated by a similar Canadian Council on Social Development study released earlier this year.

    While the Capacity to Serve study found there was a need for more money, the more frequent call was actually for “better money”. Current funding practices often preclude long-term planning that could lead to greater effectiveness and encourage decision-making that may not be in the best interests of organizations over time.

    The centre recommends that the federal government more systematically commit to a funding of voluntary sector organizations that recognizes the need to help fund the infrastructure costs and defray the indirect expenses associated with programs and projects.

    This is in keeping with the measures in last year's budget to enhance the funding of organizational costs related to research in post-secondary institutions and hospitals. As a means to achieve this commitment we suggest the adoption of the funding methods described in the code of good practice on funding, to which Monica referred earlier.

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    The Chair: Mr. Broder, the translators have asked me if you could slow down a little bit, seeing as they don't have a text to follow with you. Thank you.

    Mr. Peter Broder: In particular, the committee should endorse the strategic investment approach referenced in the code of good practice on funding, which mandates investment in building an organization's capacity in various areas based on a business case with measurable performance objectives over the long term.

    Second, we recommend that the availability of preferential treatment on capital gains on donations of appreciated assets to registered charities be broadened. This would include private philanthropy and better align the Canadian approach to donation of such assets to that taken in the U.S. Recently released data show a decline in total receipted donations for 2001 of almost $200 million over 2000. Research has shown a correlation both between donations and overall economic performance and between donations and tax policy.

    Tax changes since 1997 have afforded donors of charitable gifts of certain securities increasingly preferential treatment of the capital gains component of the gift and led to an increase in both the amount and value of donations of securities. This new data is consistent with the decrease in the number and size of donations of securities concurrent with the decline in the stock market.

    In response to this decrease, an expansion of the previously narrow scope of these measures is warranted. We need to continue to encourage the use of such assets on public goods. Present rules preclude donors of publicly traded securities to private foundations from receiving the reduced capital gains inclusion available to donors from other charities. This discrimination against private foundations should be eliminated. As it did last year, the committee should endorse the elimination of this distinction.

    Tax incentives ought to be structured to encourage all forms of charitable giving without constraining the donor's selection of charity. Major voluntary sector umbrella and leadership organizations widely endorse the extension of this measure to private foundations.

    Additionally, to afford charities with funding certainty and consistency, the availability of this measure could be broadened on a trial basis to allow for preferential treatment of capital gains on assets other than publicly traded securities such as real estate. Such a move could lead to more sustainability in funding during an economic downturn by encouraging donations of assets whose value was less eroded by the slowdown.

    In regard to statutory provisions, the centre recommends several regulatory reform measures with respect to registered charities, including enacting legislative amendments on appeals, intermediate sanctions, and advocacy. After extensive study, the joint regulatory table of the voluntary sector initiative has proposed a series of changes in how registered charities are regulated. We fully support these recommendations. Measures we'd highlight include making the de novo hearings in the Tax Court of Canada the initial appeal proceeding with respect to federal regulatory decisions on charities, and, predicated on this appeal reform, the adoption of a series of intermediate sanctions available for use against registered charities not complying with their legal requirements under the Income Tax Act.

    Not addressed in the table's recommendations, as outside its mandate, was the question of legislative reform to clarify registered charities' ability to engage in non-partisan policy work, public education and awareness initiatives, and reasoned policy advocacy in furtherance of their recognized charitable purposes. The centre submits that subsection 149.1(6) of the Income Tax should be amended to unambiguously state that while charities must not have a political purpose or engage in any partisan political activity, it is permissible for them to undertake non-partisan and fact-based advocacy work that is incidental and ancillary to their charitable work, as they've been allowed to do under the common law for more than a century.

    Canadians and their communities depend on a healthy voluntary sector. Charities and not-for-profits currently make a huge contribution to Canada's social, cultural, and economic well-being. That contribution cannot be sustained over the long term without prudent investment, innovative tax policy, and regulatory reform. At the same time, the voluntary sector holds untold potential to do even more to promote prosperous Canadian communities and enhance the quality of life of all Canadians.

    Thank you for your time.

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    The Chair: Thank you very much.

    And now we'll close with the case for our excise duty relief for Canada's wine industry, presented by Mr. Ross.

    Go ahead, please.

    Mr. William C. Ross (President, Canadian Vintners Association): Thank you, Madam Chairman.

    On behalf of the board and members of the Canadian Vintners Association, I'd like to thank you, Madam Chair, and the members of the committee for allowing the Canadian Vintners Association to make a presentation to you. It's the first time that our association has appeared before your committee.

    The Canadian Vintners Association is Canada's national association of grape-based vintners. Its membership includes 24 direct members and three regional wine associations representing over 100 Canadian wineries, which produce over 90% of Canada's wine. There's a powerpoint presentation, which I understand has been, or will be, distributed to you, and it covers the key elements of our brief.

    The essence of the presentation is that the Canadian tax regime for wine, when combined with the favourable tax environment in many other wine-producing countries, as well as the lack of import protection or extensive Canadian government support, places Canada's nascent 100% Canadian quality wine industry at a commercial and economic disadvantage. The sector, in short, requires a more level playing field.

    Our specific request to the committee is that it recommend that the Government of Canada provide excise duty relief for wineries producing 100% Canadian wine up to a level of 500,000 litres and a phasing in of excise in the second stage, not reaching 100% excise payment until sales reach 900,000 litres.

    This proposal would place Canadian wine producers on a similar footing to their U.S. counterparts. The current Canadian excise tax on wine, I should mention, is 51.2¢ per litre. The excise rate in the U.S.A., after the threshold of 250,000 gallons is reached, is 28¢ a litre.

    This request is based on economic and policy factors and the uneven playing field domestically and internationally.

    On the domestic environment, of the $1.1 billion in retail sales of Canadian wine, including blends thereof, in 2002, $600 million went to the provinces and $120 million to the federal government. The federal share included $50 million in excise duty paid by the wineries directly and $70 million or so in GST paid by consumers.

    The government provides no import protection or subsidies to the wine sector. The government provides considerable import protection and subsidies to other food sectors. When you sit down at home tonight at dinner, chances are that the only product at the table subject to excise will be the wine, unless you prefer beer or spirits with your meal. Most other products will also be GST-free and others will enjoy substantial import protection. The domestic policy environment is not supportive of the wine industry relative to other food and beverage sectors.

    Turning to the international environment, many foreign wine-producing countries have no excise tax on wine. Among these are Italy, Germany, Portugal, Spain, Austria, and Greece, all of them major exporters to Canada. This provides their home wine industries with a fundamental economic and business advantage.

    Other countries, such as the U.S.A. and Australia, that do have an excise tax provide excise relief for their domestic wineries only at lower production levels. The European Union alone subsidizes its grape and wine sector by about $2 billion annually. And Canadian wines hold about 33% of the domestic market, with 100% Canadian quality wine holding only about 10%, about 3.5% of the domestic market. So as we see, nor is the international environment a friendly one.

    There are a few considerations and implications about our request. In terms of the agriculture policy framework, Canada's wine industry may be considered a poster child for the government's agriculture policy framework, the APF. The industry produces a high value-added, environmentally friendly, safe, increasingly branded, quality Canadian product using increasingly advanced technology, and does so without import protection or any significant subsidies. It begins with the planting of a grapevine and ends with a high-quality VQA Canadian wine at the dinner table.

    Mr. Dahl, our members are farmers as well. I don't have a single vintner member who doesn't plant and grow his own grapes. It is closely associated as well with Canada's tourism industry, contributing I understand $325 million to that sector last year.

    From a GATT-WTO perspective, Canada would be no different from such countries as the U.S.A. or Australia in providing excise relief for small production levels of wine. The EU allows excise relief for microbrewers in several member states. Smaller brewers in Canada receive tax relief from eight provinces, and this committee has itself recommended excise tax relief for smaller brewers. Our proposal is based on the U.S.A. wine model.

»  (1720)  

    With regard to wine prices, there is an argument that the excise duty on wine is a deterrent to drinking. I'm not going to enter into that debate. Our request for a reduction in the excise tax would not reduce the price of wine. The 51¢ a litre would stay within the industry and with the companies.

    I should point out that we're dealing here with 100% Canadian wine only. The reduction would apply equally to all Canadian wine producers, but only on their 100% Canadian grape-base wine--you see VQA wine, but there are a few members that make 100% Canadian wine that's not VQA. This represents 10% to 15% of Canadian wine sales. This committee may want to look at fruit wine, but I don't represent fruit wine. Wines blended in Canada using imported product, which represent over 85% of Canadian wines, would not be eligible.

    From a regulatory perspective, the tracking of 100% Canadian wine for excise purposes should not be difficult, and will be assisted by the fact that the provincial and territorial liquor jurisdictions, as well as the industry, track wine sales by brand and type, including whether a product is 100% Canadian.

    On September 15, the Canadian Chamber of Commerce at its national meeting resolved in favour of such relief for Canada's wine sector. A copy of that resolution has been provided to the clerk.

    To conclude, Madam Chair and members, the Canadian Vintners Association, on behalf of Canada's producers of 100% Canadian wine, request that this committee recommend that the Canadian government exempt 100% Canadian wine from excise duty, up to sales of 500,000 litres annually; permit a reduced excise duty rate for annual production levels from 500,000 through to 900,000 litres, where it would be capped at 51.2¢ a litre; or provide a tax rebate system equal to the above.

    Our estimated gross cost to the treasury of this tax relief is in the order of $6 million to $8 million annually, Madam Chair, less any increased federal taxes due to the enhanced prosperity of the industry, such as increased corporate, personal, GST, and other taxes. We are working on these numbers now. The increased tax revenues could even be higher than the modest excise reduction.

    Let me be very clear in concluding. We are not seeking import protection. Indeed, we think our little bit of import protection, 3.74¢ a litre, will be negotiated away in the current trade round. Nor are we seeking any subsidies. We are merely asking that the federal government take a little less from the sector than it currently does.

    Thank you, Madam Chair and members.

»  (1725)  

    The Chair: Thank you very much.

    Now we'll start our round of questioning, for five-minute rounds.

    Mr. Casson, please.

    Mr. Rick Casson: Thank you, Madam Chair.

    Thank you all very much for being here. It's interesting we have our philanthropists surrounded by farmers. I'm sure much of what you deal with comes from the agriculture sector too, so that's probably appropriate.

    I just want to comment that I know the Lethbridge foundation is very active and does a tremendous job. Mr. Manning and others have been to Ottawa--and members of your organization--and without them our communities would be far poorer. So I encourage you to keep up the work, keep up the lobby effort, and get some of these tax changes you need to make things work smoother for you.

    I want to address my comments to Mr. Dahl. You mentioned the Canadian Wheat Board, and of course it's no secret that some of us, particularly those in western Canada.... Because the Canadian Wheat Board only applies to the grain growers in western Canada; it doesn't apply to growers anywhere else in the country. You mentioned they are a hindrance to developing niche markets to secondary processing. Could you explain why that is, and maybe get into a little bit of the process a western Canadian grain farmer has to go through if he wants to use a board grain in his own niche market or in a secondary process?

    Mr. Cam Dahl: I'll use a couple of examples, Madam Chair. One is Mr. Smith. He has appeared before a parliamentary agriculture committee, so I'll have no trouble using him as an example.

    Mr. Smith is an organic wheat producer. He found markets for organic flour in California. He processed that flour on his farm, but he was not able to go down and directly sell the flour he made on his farm from his own grain into the market he developed himself. Before he could do that, he needed to purchase his own grain back from the Canadian Wheat Board--sell it first to the Canadian Wheat Board and then purchase it back.

    The catch is that in addition to the paperwork you need to go through to do that, the price Mr. Smith was paid for his wheat from the Canadian Wheat Board was actually less than he was receiving. He was actually paying a fee to process his own grain and sell it in a market he had developed himself.

    A catch in this example is that the Canadian Wheat Board doesn't sell organic grain and doesn't sell flour. This is a case where we have an entrepreneur who could be providing more jobs, who could be expanding, who has plenty of opportunity, and he's being inhibited by that system in place.

    Another example is the government has very correctly decided that to encourage ethanol production is a direction we want to go in, and we're very supportive of ethanol and all bio-fuels production. Unfortunately, one of the catches, and this is especially in western Canada, is if you want to sell the products--that dry distiller grain--that are the products of ethanol production, especially from wheat production. There's a lucrative North American market, especially in the dairy industry, for these dry distiller grains in the feed market. There are also some developing niche markets for specialty micronutrients in the food market.

    Unfortunately, those ethanol producers have to go through the same process. If they want to export that dry distiller grain to the United States or if they want to sell onto the food market, again they have to go through this process of purchasing this equal amount of grain from the Canadian Wheat Board.

    What this is doing is putting in a layer of bureaucracy and cost that is making it much less attractive to proceed with ethanol production in western Canada. While on the one hand we are encouraging this type of expansion and value-added processing, on the other hand there are some fairly significant inhibitors to its development.

    The Chair: Ms. Picard.

»  (1730)  

[Translation]

    Ms. Pauline Picard (Drummond, BQ): Thank you, Madam Chair.

    First I would like to tell Mr. Ross that this isn't the first time we've defended Canada's vineyards and microbreweries, with regard to beer.

    So I can assure you that, once again, our report will convey your demands and, once again, that we'll insist that the government reduce your taxes so that you can manage to live and be competitive in the international market. You can rely on us this year; in our report, we'll press the government to ensure that your products are recognized in the same way as those from the United States or other countries.

    I'd like to ask the representatives of the Community Foundations of Canada a question. The fourth recommendation in your brief reads as follows:

Encourage all departments in the Government of Canada to restore long-term funding to voluntary sector organizations, building on processes that have been introduced in, for example, CIDA.

    What do you mean by that?

[English]

    Ms. Monica Patten: Thank you for the question.

    If I can refer back to what my colleague Peter had said earlier, the pattern of funding that has come to voluntary sector organizations from most departments of government has been short-term, project-oriented, and often the organization has had to wait endlessly for the signing of a contribution agreement, or for the grant, or the contract--usually the contribution agreement--much to its detriment. Those would be a few examples of how this sector has really been challenged by the current overall funding procedures from, in effect, many departments within the government.

    CIDA would be an example of one government department that still absolutely requires the accountability, the planning, all of the things that need to be in place to secure funding, but in fact have made it possible for some organizations to be able to count on funding for more than one year at a time or more than several months at a time.

    That is what we're looking for, is the security that organizations can have, even if certainly not forever. But as important as the security, it's the process and the procedure through which organizations are forced to go in order to acquire funds. So it's two things: the procedures need to be simplified, and there needs to be some more security.

[Translation]

    Ms. Pauline Picard: Thank you.

[English]

    The Chair: Mr. Murphy, please.

    Mr. Shawn Murphy: Thank you, Madam Chair.

    I just have one area I want to pursue, and it's with Ms. Patten and Mr. Broder. I want to get your comments on the debate within the taxation community on the effectiveness of the capital gains exemption for publicly traded securities. This has been discussed in other panels. In the forum that was held in Toronto, in which Professors Philipps, Duff, and Innes participated, two of the professors, I believe it was Duff and Philipps, were critical of this policy. They basically said it was ineffective, that it developed a certain amount of philanthropic paternalism, benefited the rich, and the rich could indirectly direct government policy by using indirectly taxpayers' money through exemptions.

    These are technical documents, and I don't want to get into a raging debate on them. Of course, if we pursued your recommendation to extend this exemption to private foundations we're basically into the very same area, if not to a greater extent.

    Do you have any opinions on these issues? Secondly, are your opinions backed up with any kind of concrete research, rather than anecdotal evidence? Thirdly, do you agree that this, perhaps before we go any further in this whole issue, requires government to step back and have a very extensive independent analysis on the whole issue?

    Mr. Peter Broder: I think I can bring some concrete research to bear on this. Analysis from the data in the 2000 nationalsurvey of giving, volunteering, and participating shows that there continues to be a high correlation between household income and percentage of households making donations, with the highest-income households most likely to make donations. It also shows that the average annual donations from donors with household incomes of more than $100,000 were at least twice as large as the average annual donations of those with a household income of less than $80,000.

    In the context of these figures, I think measures targeted at those in these higher tax brackets are quite reasonable. These measures allow people in those higher brackets to contribute assets toward public goods.

»  (1735)  

    Mr. Shawn Murphy: I don't believe you've refuted the analysis or the propositions made by Professors Duff and Philipps, or where they're coming from and why they view this as being ineffective. We all know the numbers, but I don't believe the research that you're talking about has refuted in any way the propositions advanced by Professors Duff and Philipps.

    Ms. Monica Patten: Maybe I can jump in with a little bit of Community Foundations' research. I can't speak to the wider body of research.

    During the years when the capital gains benefit was introduced we tracked that very carefully within our movement. Whether we call that research or not--it was more than anecdotal--we followed and tracked the numbers. We saw a significant rise in gifts as a result of that tax measure, the earnings of which went to a variety of organizations, so it obviously did not just benefit the large organizations. That has been one point that has been made.

    To the point around whether this is philanthropic fraternalism, I think that's a very legitimate question around various forms of giving, not just this one, I might add. In the world in which I work, of Community Foundations, we have something called donor advised funds, and anybody can set up a donor advised fund, regardless of the particular tax benefit. Let me clarify that donor advised funds mean that a donor can indeed advise the foundation about how the earnings are going to be disbursed in the community.

    Our goal in Community Foundations is to work with donors so that they understand from the community's perspective the most pressing, urgent, and important needs, whether it's in arts and culture, children who live in poverty, or a whole range. That is not always successful. In the interest of bringing the gift in and working with a donor over a period of time, we are sometimes caught a little bit in what the donor advises. Always advice, never direction.

    I will give you one example, if I may. One of our community foundations in Manitoba had a very significant gift, which was made possible through this particular tax benefit. Half of that gift was given to the community foundation as discretionary, so that means that the donor in fact has stepped away and allowed the community foundation, on the advice of the community, to determine how that philanthropic gift was going to be used. There are numerous examples of that.

    The Chair: Mr. Murphy, that's your time.

    Mr. Discepola.

    Mr. Nick Discepola: I really don't have any questions, Madame Chair. I just wanted to welcome Mr. Ross; he said it was his first time here.

    I want to remind you also, Mr. Ross, that you have a tremendous ambassador on this committee in the form of Mr. Gary Pillitteri, who is a tremendous ambassador for your wine regions. I don't think you've been left out in the lurch, so to speak, with his representations. He regrets not being here. He told me he tried to be here, but he can't.

    Your request is very similar to the microbreweries'. We've recommended that also in the past, so I don't have any personal hang-up about recommending it also for the wine industry. We haven't been successful in the microbrewery industry yet, so hopefully we'll succeed in doing both, maybe at the same time.

    That's all I have to say, Madame Chair.

    The Chair: Are there any other questions? No?

    On behalf of all of the committee members, those here and also those who have your briefs, we thank you for taking the time to submit them and being available to us for your testimony and in answering our questions. I'm very glad you're not going to be disturbed by the bells, as we've completed this panel.

    We'll see everybody tomorrow. I understand there may be a room change tomorrow, so check your notices; it may be across the hall.

    Thank you.

    The meeting is adjourned.