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37th PARLIAMENT, 2nd SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Tuesday, October 21, 2003

1530

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

Lieutenant-General (Retired) Richard Evraire (Chairman, Conference of Defence Associations)

1535

1540

The Chair

Mrs. Francesca Iacurto (Director, Public Affairs, Insurance Brokers Association of Canada)

Mr. Brian Gilbert (Chair of the Board, Insurance Brokers Association of Canada)

1545

The Chair

Mr. Gordon Peeling (President and Chief Executive Officer, Mining Association of Canada)

1550

The Chair

Mr. Gerry Barr (President and Chief Executive Officer, Canadian Council for International Co-operation)

1555

1600

The Chair

Mr. Robert Hornung (President, Canadian Wind Energy Association)

1605

The Chair

Mr. Ken Epp (Elk Island, Canadian Alliance)

LGen Richard Evraire

1610

Mr. Ken Epp

LGen Richard Evraire

Mr. Ken Epp

LGen Richard Evraire

Mr. Ken Epp

Mr. Brian Gilbert

Mr. Ken Epp

Mr. Gordon Peeling

Mr. Ken Epp

Mr. Gordon Peeling

Mr. Ken Epp

Mr. Gordon Peeling

1615

Mr. Ken Epp

The Chair

Mr. Pierre Paquette (Joliette, BQ)

Mr. Gordon Peeling

Mr. Dan Paszkowski (Vice-President, Economic Affairs, Mining Association of Canada)

Mr. Pierre Paquette

Mr. Gordon Peeling

1620

Mr. Pierre Paquette

Mr. Gerry Barr

The Chair

Mr. Roy Cullen (Etobicoke North, Lib.)

Mr. Gerry Barr

1625

Mr. Roy Cullen

Mr. Robert Hornung

Mr. Roy Cullen

Mr. Robert Hornung

The Chair

Mr. Bryon Wilfert (Oak Ridges, Lib.)

1630

The Chair

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

1635

Mr. Gerry Barr

The Chair

Mr. Gerry Barr

The Chair

Mr. Robert Hornung

The Chair

Ms. Sophia Leung (Vancouver Kingsway, Lib.)

LGen Richard Evraire

1640

Ms. Sophia Leung

The Chair

Mr. Brian Gilbert

The Chair

Mr. Gerry Barr

The Chair

Mr. Ken Epp

The Chair

Mr. Barry Pickford (Senior Vice-President, Tax, Bell Canada)

1650

1655

The Chair

Mr. Dave Caddey (President, Space Missions Group, MacDonald Dettwiller & Associates Inc.)

1700

The Chair

Dr. C. Robin Walker (President-Elect, Canadian Paediatric Society)

1705

1710

The Chair

Mr. Peter Helgason (President, Canadian Coalition for Health Freedom)

1715

Mr. Trueman Tuck (Secretary Treasurer, Canadian Coalition for Health Freedom)

The Chair

Mr. Ken Epp

1720

Mr. Barry Pickford

Mr. Ken Epp

Mr. Barry Pickford

Mr. Ken Epp

The Chair

Mr. Pierre Paquette

Mr. Trueman Tuck

Mr. Pierre Paquette

1725

Mr. Trueman Tuck

The Chair

Mr. Shawn Murphy (Hillsborough, Lib.)

Mr. Barry Pickford

Mr. Shawn Murphy

Mr. Barry Pickford

Mr. Shawn Murphy

Mr. Barry Pickford

1730

Mr. Shawn Murphy

Mr. Barry Pickford

The Chair

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

Mr. Barry Pickford

Mr. Nick Discepola

The Chair

Mr. Nick Discepola

Mr. Barry Pickford

1735

The Chair

Mr. Tony Valeri (Stoney Creek, Lib.)

Mr. Gerald Bush (Special Assistant to the CEO, EMS Technologies)

Mr. Paul Bush (Vice-President, Corporate Development, Telesat Canada)

Mr. Tony Valeri

Mr. Gerald Bush

Mr. Tony Valeri

Mr. Gerald Bush

The Chair

Mr. Gerald Bush

The Chair

Mr. Bryon Wilfert

Mr. John Keating (Chief Executive Officer, COM DEV International)

1740

Mr. Bryon Wilfert

Mr. John Keating

Mr. Bryon Wilfert

Dr. Robin Walker

Ms. Marie-Adèle Davis (Executive Director, Canadian Paediatric Society)

Mr. Bryon Wilfert

The Chair

CANADA

Standing Committee on Finance

NUMBER 083

2nd SESSION

37th PARLIAMENT

EVIDENCE

Tuesday, October 21, 2003

[Recorded by Electronic Apparatus]

¹ (1530)

[English]

The Chair (Mrs. Sue Barnes (London West, Lib.)): The orders of the day, pursuant to Standing Order 83(1), pre-budget consultations, will continue. We have two panels, and because of votes in the House that I'm aware of, we will start immediately in the order of the agenda.

First of all, let me welcome all of you and thank you for bringing your briefs, which have been circulated to all committee members.

From the Conference of Defence Associations, we have Richard Evraire, the chairman, and today, sir, you have Colonel Howard Marsh with you. Welcome to you.

From the Insurance Brokers Association of Canada, Francesca Iacurto, director of public relations, and Brian Gilbert, chair of the board. Welcome to you.

From the Mining Association of Canada, Dan Paszkowski, vice-president of economic affairs, and Gordon Peeling, president and chief executive officer. Welcome to you, sir.

With the Canadian Council for International Cooperation, we have Gerry Barr, president and CEO.

And from the Canadian Wind Energy Association, we have Robert Hornung, president.

Let's commence. You have seven minutes. We'll go with the Conference of Defence Associations. We're happy to hear your input today.

Go ahead.

[Translation]

Lieutenant-General (Retired) Richard Evraire (Chairman, Conference of Defence Associations):

Thank you, Madam Chairman.

[English]

Last year, my opening message to your committee and the message conveyed to Canadians through the CDA's study entitled A Nation at Risk: The Decline of the Canadian Forces was one of the linkage between prosperity and security. I emphasized the importance of the bilateral nature of security and prosperity with the United States and of international stability and Canada's prosperity. I then went on to describe the decline of the Canadian Forces' capabilities, thus corroborating findings detailed in a number of other credible studies.

That presentation may have been somewhat persuasive, as defence allocations were increased in budget 2003 by some $800 million for the next three years. In percentage terms, budget 2003 increased defence spending by 5%, but the increase did little to reverse the cumulative impacts of years of declining defence allocations. For example, the current fiscal year 2003-04 opened with an operations and maintenance shortfall of $1.26 billion.

DND was also required to seek additional funding for operational activities. The individual training and education systems are currently under-resourced by approximately $1 billion, and national procurement spending on maintenance equipment fleets is now occurring at twice the rate of new equipment purchases.

[Translation]

And yet the Canadian forces continue to serve with distinction. Yes, the perception of a viable relevant contribution to international peace and stability operations is sustained, but at what cost?

Statistics Canada gave us an unsettling insight into the sinews of the Canadian Forces (CF) with their release, in September 2003, of a study of depression in the CF. One particularly unnerving statistic is the 18% rate of clinical depression in junior leaders.

CDA was aware of the quantitative nature of over-tasking junior leaders by 80 days per year, but it had no instrument to measure the qualitative impact of this ten-year practice of over-tasking. This point leads directly to the first of the two messages CDA wishes to convey to your committee.

¹ (1535)

[English]

In June, the Chief of Maritime Staff announced that the navy would not be able to fulfill its standing NATO commitments and that, due to crew fatigue and deferred ship maintenance, the entire navy would need to recuperate in 2003-04. Since 1994, in the regular component of the army, the demand for combat capability has more than doubled, while in the same time frame the number of trained, effective service personnel has been reduced by almost 50%. This concurrent doubling of operational activity and reduction in capacity will hobble the Canadian Forces over the next several years.

To make matters worse, in order to generate the forces required for the international stability assistance force in Kabul and honour Canada's other commitments to NATO in Bosnia and to the United Nations, it has become necessary for the army to reduce its training capacity by 50%. This is particularly worrying, as the army is now mortgaging its future to pay today's bills. In effect, this deferment of leadership, advanced, and specialty courses until 2005 prevents the army from filling its authorized establishment with properly trained personnel before the next decade. The Canadian Forces in general and the army in particular do not have sufficient numbers of trained personnel to fulfill all their assigned tasks. The challenge now is that of restoring training and education capacity at a time of heightened operational activity.

What should take priority, the restoration of the Canadian Forces or international peace and stability operations? While acknowledging there are degrees to which each of these tasks can be accomplished, the reality for this decade is that the Canadian Forces cannot qualify its personnel without reducing operational activity or seeking significant out-of-service training at considerable financial cost. Currently the Canadian Forces has close to 10,000 personnel on or awaiting training.

This point leads to the CDA's second message. For a number of years, defence analysts have warned of an approaching equipment rust-out. The 1997 white paper alerted Canadians to this approaching crisis. The 1994 white paper addressed the issue by authorizing the use of capital moneys for major maintenance overhauls called “life extension” projects. The aging equipment of the 1980s was life-extended into the 1990s in the hope of replacement in that decade. The time to replace or park a number of major fleets is upon us.

The CDA is of the opinion the Canadian Forces will soon become, for the most part, minimally operationally relevant. This will render the 1994 defence white paper even less credible than it currently is, significantly affect the morale of those serving, and substantively limit the government's national security and foreign policy options.

The magnitude of the defence challenge facing the Government of Canada is enormous. It is such that Canada will have a much reduced defence capability this decade. Recovery in the next decade will be governed by the energy applied now to rectify shortfalls.

The CDA believes the long-term sustainment of the Canadian Forces is being sacrificed for the short-term sustainment of operational activities. Should the government wish to remain engaged in peace and stability operations at current or higher levels of activity, the Canadian Forces would need to be restored to pre-1994 personnel levels of 80,000 regular force personnel, thus requiring what the CDA believes is an annual budget approaching 2% of GDP.

The CDA therefore recommends, in keeping with your committee's recent recommendations, Madam Chair, that a defence policy review, made all the more credible by the allocation of the necessary funding for its implementation, be considered a high priority on the government's agenda and be aimed at revitalizing and modernizing the Canadian Forces. In the meantime, based on the government's existing defence policy, the 1994 defence white paper, the long-term sustainment of the Canadian Forces should take precedence over short-term sustainment of operational activities.

[Translation]

Thank you, Madam Chairman.

¹ (1540)

[English]

The Chair: Thank you very much.

You're absolutely and correctly on time. Thank you. I appreciate that.

We'll go to the Insurance Brokers Association.

Go ahead.

Mrs. Francesca Iacurto (Director, Public Affairs, Insurance Brokers Association of Canada): Good afternoon, Madam Chair and committee members.

On behalf of the Insurance Brokers Association of Canada, I thank you for the opportunity to present our recommendations on the next federal budget.

[Translation]

My name is Francesca Iacurto. I am the director of public affairs for the Insurance Brokers Association of Canada. Brian Gilbert, our Chairman of the Board is here with me today. He is also an Insurance Broker in damages from the region of Portage la Prairie in Manitoba.

IBAC is a national body of professionals that regroup 11 provincial and regional Canadian associations of insurance brokers in damages. These associations represent about 25,000 brokers from all over the country. The majority of insurance broking firms have around 10 employees.

Brokers constitute the principal sales network for damage insurance companies. Mainly, this type of insurance covers personal property, cars and various risks other than those covered by life insurance.

Brokers offer diverse risk management services to their clients. Among other things, they offer insurance policies from several companies. They help their clients interpret the complex aspects of the policies, they give them impartial advice and they help them with claims in case of a loss.

[English]

The client base of brokers is very diverse, ranging from individual clients to large commercial accounts. Approximately 80% of personal and commercial insurance policies in the country are purchased through brokers.

Brian will now continue our presentation.

Mr. Brian Gilbert (Chair of the Board, Insurance Brokers Association of Canada): Thanks, Francesca.

I'll open my remarks by giving IBAC's views on the overall fiscal agenda before turning to specific matters of concern to insurance brokers.

At the outset, IBAC commends the federal government for soundly managing the economy in recent years. There is a great deal to rejoice about in the six consecutive budget surpluses, which have virtually eliminated the word “deficit” from our lexicon. To allow the federal government to continue delivering good economic news to Canadians over the next few years, we hereby offer the following two recommendations.

First, we believe high priority should continue to be accorded to debt reduction, both in absolute and relative terms.

Second, we think it's important to realize that the job is not done on addressing the high tax burden facing Canadians. In fact, improvement in this area is necessary to ensure the country's long-run economic prosperity. We therefore recommend that priority be accorded to further progress in personal and corporate income tax reductions.

I will now briefly turn to some of our specific issues of concern. The first is the GST and specifically our exempt status, which means that we are exempted from levying the tax on our sales. Like most other businesses in Canada, brokers are required to pay the GST on their inputs. Unlike them, though, our exempt status prevents us from claiming the offsetting input tax credits. As we have no control over pricing, we are therefore left with little choice but to absorb the cost of the tax ourselves, something that reduces our bottom line by the same amount. This is a sizeable reduction for all insurance brokers.

We understand that this issue is very complex and cannot be fully explored here. However, we believe the time has come for the federal government to seriously turn its attention to it, particularly in light of the considerable amount of publicity the issue of rising insurance premiums has garnered in recent months. In fact, Jack Mintz recently estimated that the combined effect of federal and provincial taxes on insurance has been to increase the cost of the product by 11.4%. We therefore recommend that the federal government undertake a study of the GST-exempt status on the insurance industry with a view to improving the cost of the product and its transparency for consumers as well as lessening the impact on brokers.

I'll now take this opportunity to make you aware of a growing concern for our industry, that being labour shortages. Currently, many insurance brokers are experiencing serious difficulties finding and retaining qualified staff. Many factors are responsible for this shortage, most of which cannot be addressed by the federal government. However, one federal program is increasingly contributing to this problem, and that's employment insurance. The growing use of EI to further the social policy objectives of the federal government is our greatest and most costly concern with the program. In particular, the recent increase in EI parental benefits has been quite taxing on the business operations and the bottom line of small businesses, including insurance brokerages.

While the loss of a key employee can result in hardship for any business, the effects on a small operation are often far greater. For example, a brokerage can rarely recruit from within to fill a vacant position and has very little flexibility to reorganize its internal operations to deal with a staff shortage. The licensing requirements of the profession add to the difficulty in finding replacement staff, especially for a position that isn't permanent. The problem is particularly acute in small towns, where many of our brokerages are located and where the pool of available labour is restricted from the outset.

We expect that the compassionate care family benefit, which will be implemented on January 1, will further exacerbate these difficulties.

We completely understand the federal government's wish to assist certain Canadians in need. However, we do not believe this help should be delivered through the EI program simply because the infrastructure already exists. We therefore recommend that the federal government return the EI program to its original roots, which is to provide income support for those who are temporarily unemployed through no fault of their own.

On a related matter, because there have been considerable changes to the types of benefits paid to claimants over the years, we would also like to see a reduction in the EI multiplier in order to reach a fifty-fifty split between employee and employer contributions.

Last, I'll take this opportunity to make you aware of an improvement to the Income Tax Act that would be beneficial--that is, a broadening of the qualifying criteria for the education tax credit. As it currently stands, only an individual who takes courses to become a broker can qualify for this credit. In contrast, a broker who is already employed in the field and takes related courses is not eligible for it. In other words, the Income Tax Act ceases to provide incentives to acquire knowledge or improve one's skills as soon as work-related employment is accepted. This is inconsistent with the federal government's own goal of encouraging lifelong learning. A change in this area would not only help all Canadians meet the challenges of the knowledge-based economy, but it would also help alleviate the shortage of labour that is prevalent in our industry.

¹ (1545)

We thank you for the opportunity to appear before you today. We would be pleased to answer any questions you may have.

The Chair: Thank you very much.

Now we'll hear from the Mining Association of Canada. It doesn't seem very long ago that we heard from you on some other bills, but go ahead, sir.

Mr. Gordon Peeling (President and Chief Executive Officer, Mining Association of Canada): Madame la présidente, honourable members, ladies and gentlemen.

[Translation]

I thank you for inviting me today to share my thoughts with you on the economy and the competitive state of Canada’s mining industry.

[English]

I would like to start by stating that we recently submitted to the clerk of the committee our pre-budget submission in both official languages. As well, we recently had the privilege of appearing before this committee to address Bill C-48. In the interests of time, we do not plan to repeat the details of those submissions, but rather, to focus your attention on the next steps we believe the federal government should take to strengthen the Canadian economy: bring down the public debt faster; implement measures to further enhance Canada's tax competitiveness and neutralize the negative impacts of Bill C-48 on segments of the mining industry; accelerate the elimination of the capital tax by 2005; reduce employment insurance premium rates; limit total expenditure growth; and provide fiscal measures to encourage implementation of new greenhouse gas reducing technologies.

I'll just touch on a few of these in a bit more detail.

The recent success in reducing Canada's debt-to-GDP ratio must not distract us from reducing further our sizable $508-billion debt. This is a debt load that is costing Canadians $37 billion in annual interest charges, or twenty cents of every revenue dollar collected. This is the largest single expenditure of the federal government.

MAC supports the need to continue to lower our debt-to-GDP ratio, bearing in mind that the debt-to-GDP ratio will decline with growth in the Canadian economy, even if there were no reduction in our national debt. We recommend, then, that the federal government publicly commit to achieving the lowest debt-to-GDP of all G-7 nations by 2005.

Moreover, we recommend that the government also set a target of debt service charges, as a proportion of total government revenues, of 15%. This will help fix in the mind the absolute need to reduce that debt load.

As noted last month, MAC strongly supports and supported reducing the corporate income tax rate from 28% to 21% for the resource sector. Nonetheless, we remain very concerned about the effects of Bill C-48 on individual commodities in some companies' existing operations and on proposed new projects—effects that will vary widely depending upon maturity of assets and jurisdiction of operation. While Bill C-48 attempted to compensate for this exception with the introduction of a 10% exploration tax credit, it does not go far enough to compensate those segments of the mining industry where tax competitiveness was negatively impacted.

Further, with the phase-out of the resource allowance, several provincial jurisdictions will benefit from a windfall revenue gain, resulting in higher taxes being paid by the industry. This problem was confirmed by the intergovernmental working group on the mineral industry in a September 2003 report prepared for federal, provincial, and territorial mines ministers.

I want to quote from the report, which concluded:

Unless these provinces and territories adjust their own corporate income tax regimes, the federal corporate income tax reduction for mining companies will be cancelled out and in some cases will result in higher tax burdens. Finance departments and ministries at the provincial/territorial level need to urgently address this issue, since the federal measures will soon be embedded in legislation.

I understand that C-48 is scheduled to be voted on today, Madam Chair.

This poses a serious challenge and, particularly if the decline in mineral exploration and mineral reserves continues, the gap between existing projects and new developments will significantly impact northern, rural, and aboriginal communities across Canada.

To help correct this unfortunate situation, MAC recommends that the federal government accelerate the reduction of the corporate income tax rate on resource income from 28% to 21% over the period 2003 to 2007; that you announce a reduction in the general corporate income tax rate to 17% by the end of the decade and immediately initiate consultations with the provinces and territories to offset the increase in revenues created by the new federal tax structure; that you increase the exploration tax credit from 10% to 20%, ensuring that it is no lower than what is currently provided for expenditures on qualified scientific research and development; and that you modernize the Income Tax Act definition of Canadian exploration expense to include current expenditures incurred.

These measures would play an important role in redressing the anomalies created by Bill C-48 while stimulating new investment, creating new jobs, and providing assistance to rural and regional Canada.

At a time when governments are competing to attract and retain jobs, business, and capital, countries that offer an attractive investment climate will reap the greatest dividends. As a capital-intensive industry, we fully support the government's decision to eliminate the capital tax. A tax on capital is particularly onerous, since it cuts the return on investment by increasing the cost of capital, impeding innovation, and is a serious disincentive to improving productivity. MAC encourages the government to accelerate the elimination of the capital tax by 2005.

¹ (1550)

Decisions to close mines or delay development are real issues facing our industry, particularly at a time when we are seeing the benefits of rising metal prices partially or completely offset by an appreciating Canadian dollar. Further, to reduce costs and remove impediments to innovation and investment, MAC recommends a speedy passage of Bill C-212 through the Senate. As well, we would encourage the government to continue reductions in employment insurance premiums to keep the cost of benefits actuarially sound, and we would certainly echo the comments of previous speakers to that point.

As an energy intensive industry, the metal mining and non-ferrous metal smelting and refining sector has worked hard to reduce our greenhouse gas emissions. We are committed to meeting the challenge of climate change and we believe we can do more to reduce emissions in the future. Canada's ratification of the Kyoto Protocol also poses a serious strategic business challenge for us, though. A competitive tax and regulatory system will help industry do more to reduce emissions, while the introduction of new fiscal measures will ensure investment in new greenhouse gas reducing technologies.

MAC recommends that the government invest in the development of new production methods and processes to improve energy efficiency and reduce greenhouse gas emissions, introduce tax credits to increase qualifying research and development to improve emissions intensity and accelerate capital cost allowances to encourage early adoption of new and innovative gas reducing technologies.

In conclusion, we urge you to carefully consider our recommendations as a platform for the economic success for both the Canadian economy and the domestic mining industry. Our recommendations will help drive productivity, innovation, and economic growth. They will increase the income of Canadian workers, boost government revenues, and help deliver a balanced approach towards reducing greenhouse gas emissions while continuing to provide the best quality of life and standard of living that Canadians have come to expect and enjoy.

I thank you for the opportunity to address you today and would be pleased to answer any questions.

The Chair: Thank you very much.

Now we'll hear from the Canadian Council for International Co-operation. Mr. Barr, go ahead, sir.

Mr. Gerry Barr (President and Chief Executive Officer, Canadian Council for International Co-operation): Thanks very much, and good afternoon.

I'm pleased to present this brief on behalf of the Canadian Council for International Co-operation, the CCIC. The CCIC is a coalition of about 100 organizations working to end global poverty and ensure sustainable human development worldwide. I have one message to bring here today: anything is possible with political will.

Over the past few weeks, and with astonishing speed, the Government of Canada has taken action on HIV/AIDS. It has committed to supplying developing countries, especially in sub-Saharan Africa, with affordable generic drugs to fight this devastating disease. However, when Canada introduces legislation to amend the Patent Act, it should, at a minimum, reflect the range of response accepted at the WTO by all countries and should not introduce restrictive lists of diseases, of drugs, or of countries covered.

Canada can become a leader in the international community in making access to medicines for the poorest developing countries a priority. To coin a slogan of the Canadian International Development Agency, Canada will be making a difference in the world. We really wish the government well on this effort and we hope you succeed in avoiding the pitfalls.

HIV/AIDS is one of the biggest challenges faced by developing countries, but it needs to be seen in the context of a world in the grips of an acute development crisis. Some 1.2 billion people in developing countries live in absolute poverty. More than 800 million people go to bed hungry. In many poor countries, especially in sub-Saharan Africa, social and economic conditions are getting worse, not better. But with political will, Canada can continue to make a difference in the world, not just on HIV/AIDS but on development efforts to eradicate global poverty. How can they do this? They can do it by increasing both the quantity and quality of Canada's foreign aid as a concrete sign of this country's commitment to the millennium development goals.

The United Nations launched the eight millennium development goals, the MDGs, in December 2000. These goals, endorsed by the international community, set minimum targets to reduce poverty, hunger, illiteracy, discrimination against women, and environmental degradation by 2015. The MDGs are a positive expression of the obligations of governments in the international framework of economic, social, and cultural rights to which all governments are accountable.

Canada, on several occasions, has stated its strong commitment to achieving these millennium development goals and it has already agreed to increase foreign aid spending by 8% per year, doubling spending by 2009. It is also retooling aid policies to improve effectiveness and it's focusing aid on key sectors such as social development, agriculture, rural development, and the private sector, including small business.

In an April speech, Paul Martin said Canada has a duty and a tremendous opportunity to enhance our role in the world. We couldn't agree more. But there are steps that need to be taken now.

The World Bank estimates that to achieve the MDGs foreign aid globally must increase by at least $50 billion U.S. a year in and for the years leading to 2015. But current aid levels, including those in Canada, after factoring in the 8% increases, are far off this target. CCIC and its members call on the Government of Canada to recommit to the millennium development goals. We need to increase foreign aid levels in a way that will ensure that Canada contributes its proper share to the needed financing to reach these MDG targets and so that we can reach the UN target in ODA giving of 0.7% of gross national income by 2015.

And we can do it in a fiscally responsible manner. I won't bombard you with the numbers that are presented in our written brief, you'll find many there. I'll just give you three sets of figures.

¹ (1555)

As I said before, the government has already committed to 8% annual increases until 2009.

We can reach the UN target of 0.7% if we increase our aid level in stages from 12% to 15% annually to 2015, but it will take political will. Canada's current foreign aid commitments involve new aid investment of $230 million for 2004-05. CCIC is calling on the government to augment ODA by 12% instead and to invest $345 million for 2004-05.

Finally, over a period of three years, the government's current commitment to new investment in international development assistance is on the order of $746 million. CCIC is looking for the government to follow through on its commitment to the MDGs by increasing this figure to $1.2 billion over three years.

I want to stress also the need to improve the quality of our aid by maintaining a focus on poverty. CIDA's new policy statements give scant mention to the critical role played by civil society in promoting development and human rights, and it's a key piece of the anti-poverty puzzle. Greater partnership with civil society organizations in Canada and their overseas partners will enable aid to get closer to the people who need it. The new government has an opportunity to send a signal to the world that it's prepared to take a leadership role on the international stage by increasing the quality and the quantity of foreign aid by recommitting to the millennium development goals and by engaging civil society both here and overseas, and it takes political will.

Thanks very much. I'll look forward to answering some questions.

º (1600)

The Chair: Thank you.

From the Canadian Wind Energy Association, please go ahead, Mr. Hornung.

Mr. Robert Hornung (President, Canadian Wind Energy Association): Madam Chairperson and members of the committee, I am pleased to have the opportunity to present the views of the Canadian Wind Energy Association on items we would like to see included in the 2004 federal budget.

Wind energy is the fastest growing source of electricity in the world today. Over the last decade, global wind energy production has been increasing at a rate of more than 25% a year, and it is projected that the global wind energy market will be worth $37 billion by 2010. More than 20% of Denmark's electricity now comes from the wind, and wind energy provides more than 40% of the electricity in several regions of Germany.

From an environmental perspective, wind energy is a proven and commercially available technology that does not produce air and water pollution, destroy habitat, or generate solid, toxic, or nuclear waste. It also can play an important role in helping Canada implement the Kyoto Protocol.

From an economic perspective, wind energy can generate $1 billion to $2 billion in investment, and 8,000 to 16,000 jobs for each 1,000 megawatts of new installed capacity. It can facilitate electricity price stability and decline because the fuel is free and the cost of wind turbines continues to steadily decrease by 3% to 5% a year, as economies of scale and technology improvements occur.

It can diversify rural economies by providing lease income for farmers and land owners, and jobs and property tax revenues for hard-pressed areas of the country. It can substitute for natural gas as a new primary source of electricity generation, extending the length of time that Canada can continue to use and export limited natural gas resources for non-electricity applications like home heating.

With the world's second largest land area and longest coastline, Canada has a world-class wind energy resource. Wind energy is also an ideal complement and match for the large-scale hydro resources Canada has in abundance, because large hydro facilities can store energy by allowing reservoirs to grow when wind power is available and can fill the gap when the winds are not blowing. It is our view that wind energy can ultimately meet at least 20% of Canada's electricity needs.

Unfortunately, the reality is that we are far behind other countries with respect to wind energy. There are 12 countries that have more installed wind energy capacity than Canada, including Greece, Sweden, India, and the Netherlands. The four U.S. states of California, Texas, Iowa, and Minnesota each produce more wind energy than Canada. In fact, Canada's 317 megawatts of installed capacity represent less than 0.2% of Canada's electricity production.

Despite rapid and continuing declines in the cost of producing wind energy, there remains a gap of approximately 2¢ to 2.5¢ per kilowatt hour between the cost of wind energy and conventional forms of electricity generation. In part, this gap is a reflection of the fact that the environmental impacts of conventional forms of electricity generation are not reflected in their cost; because wind energy is often competing against depreciated assets that do not provide an accurate reflection of cost; and because the lack of a sustained and sizable market in Canada for wind energy means that manufacturers are not establishing facilities here, which is a lost economic opportunity that results in the costly importation of key components. While this cost gap is temporary, and continued advances in wind turbine technology are steadily narrowing the gap, it is a real and significant barrier to wind energy development in Canada.

Historically, Canadian governments have taken dramatic actions to address the cost gap between new and conventional energy technologies. Without significant investment by the federal government, Canada would not currently have competitive industries and their associated economic benefits in areas like nuclear power, offshore oil, and gas, or the oilsands. The federal government needs to take a similar proactive role if it hopes to capture the environmental and economic benefits of wind energy.

The federal government has taken two initial steps in this direction, but we would argue that they reflect small-scale thinking and are significantly less ambitious than the actions undertaken in other jurisdictions, including jurisdictions opposed to the Kyoto Protocol. For example, the federal government's wind power production incentive, established in the December 2001 federal budget, only covers about 50% of the cost gap between wind energy and conventional sources of electricity generation. It is also less than one-third the value of the similar U.S. production tax credit after tax and is far less than similar incentives in most other G-8 countries. Moreover, the program only seeks to develop 1,000 megawatts of wind power capacity in Canada by the end of 2007. The U.S. production tax credit has no such limit, and in 2002 alone, Germany installed more than 3,000 megawatts of new capacity.

º (1605)

Another example is the federal government's green power procurement program. While the federal government has pledged that 20% of its electricity will come from renewable sources, the Alberta government has made a 90% green power procurement commitment. The 2003 federal budget did increase the funds available for this initiative so that the federal government could enter into four-year power purchase agreements, but ten-year agreements are required to encourage investors to make these projects a reality. Long-term assets require long-term funding.

Nonetheless, these initial federal actions have led several provinces to explore wind energy and to implement some initial actions to support it. There is now an opportunity for greater federal leadership and commitment to bring provinces fully on board.

At this point the actions taken are not enough to ensure the development of a vibrant wind energy industry in Canada. As a result, we would like the 2004 federal budget to do the following:

First, strengthen the wind power production incentive program by increasing the value of the incentive to 2¢ a kilowatt hour from the current 1¢; increasing the program target to 4,000 megawatts as opposed to 1,000 megawatts; and eliminating project, proponent, and provincial caps under the program. The cost of such a proposal would be $146 million annually for 15 years.

Second, we'd like to see the federal government strengthen its green power procurement program by extending funding to 10 years as opposed to four and increasing the program target to 50% of government electricity demand as opposed to 20%. The cost of that initiative would be $24 million a year for 10 years.

We believe the inclusion of these two measures in the 2004 federal budget would represent the foundation upon which we could build a comprehensive wind energy strategy for Canada. The level of funding sought is small relative to the level of support other emerging energy sources received before they became the conventional energy sources of today. If we want Canada to be a leader in the development and use of the emerging energy technologies of the 21st century, such as wind energy, we need to make investments now.

Thank you very much.

The Chair: Thank you very much.

Thanks to all of you for your presentations.

Because we have votes today, we're going to deal with five-minute rounds this time. I am sorry about that, colleagues. Try to get in a couple of questions. If you make your answers brief, that would assist our members.

Mr. Epp.

Mr. Ken Epp (Elk Island, Canadian Alliance): Thank you very much, Madam Chair.

Thank you all for being here and giving us very interesting presentations.

I'm going to go in order of your presentations. First of all, to the Conference of Defence Associations, you raise a lot of alarm about the capacity of our armed forces. You made the statement that 20% of the personnel suffer from depression. Is that not very high?

LGen Richard Evraire: Madam Chair, the percentage is almost 20%. It's 18%. Yes, indeed, it is extremely high.

º (1610)

Mr. Ken Epp: Is money the factor? Remember, we're the finance committee, and basically what you're doing is making a plea to the finance committee to recommend to the Minister of Finance--whoever that will be at the time of the next budget--that we have an increased amount of money for defence. Will that solve it?

LGen Richard Evraire: What we are suggesting, Madam Chair, is an increase in the number of personnel. One of the major reasons for the problem of depression in such a large percentage of the members of the forces, particularly the junior leadership of the forces, is that they are being overtasked.

Mr. Ken Epp: I have one more question for you. You indicated that we're currently at about 50% of capacity. We don't have the ability to train additional people quickly enough. We're being overextended in terms of the missions our government is committing us to. Would you recommend that in the short term we should actually pull back on those missions?

LGen Richard Evraire: Madam Chair, of course this is a solution; however, Canada does have a role to play in the world. It has committed itself to contributing to peace and security in the world. We believe that the total commitment by the Canadian Forces to that particular undertaking is too small for our place in this world, our capacity, our status as a G-7 nation. Indeed, we believe that although one of the solutions could be a reduction in our attempts at contributing to these efforts, we don't think that is the correct way to go. We believe that an increase in capability, and therefore an increase in contributions to peace and security across the world as well as to security in Canada, is something the government should undertake in a very serious way.

Mr. Ken Epp: It's interesting that two spaces over from you there's been representation that we should basically eliminate spending on weapons and use it for other means. Boy, that's a good debate we need to have.

Francesca, of the Insurance Brokers Association, it's nice to see you again. I recognize you, having met you on many occasions at the finance committee.

You or your colleague Mr. Gilbert mentioned that EI should be reduced down to a one-to-one contribution of employer versus employee. That would reduce the amount of the fund by quite a bit. What would you do with all the money—reduce our premiums?

Mr. Brian Gilbert: We recommend reduction of the premiums, obviously. We feel that the program should be brought back to its roots, as a true insurance program to assist Canadians who have lost their jobs through no fault of their own.

Mr. Ken Epp: I happen to agree with you on that.

You and the Mining Association people will probably agree with my private member's bill, which says that when there's an overpayment on EI and CPP, when people change their jobs, the employee gets his or her money back, and so should the employer, in my view. It's easy to do with computers; you just touch a button and give these guys a rebate. They overpaid, so give it back to them. That's my view.

I'll have to hurry. I also want to ask the Mining Association about the capital tax. You indicated that it should be eliminated.

Is it not already scheduled to be eliminated?

Mr. Gordon Peeling: Yes, it is. We've asked for an acceleration of the date when it's eliminated. Instead of having it dragged out for five years, we would like to see it eliminated by 2005.

Mr. Ken Epp: So you're happy that it's coming, but it's not coming quickly enough.

Mr. Gordon Peeling: It's not coming quickly enough. We still need to work with several provincial jurisdictions as well on the elimination of that capital tax.

Mr. Ken Epp: Both you and the insurance brokers mentioned that we should get rid of our debt. You're aware of the fact, I'm sure, that the Liberals have done a great job in the last 10 years, and we are now down to about the same level of debt as we had when they took over. That's good progress, right?

Why do you think we should reduce the debt now? They keep saying it's being reduced as a function of the GDP. Should we worry about that? Interest rates are low. Why do you really think we should reduce the debt?

Mr. Gordon Peeling: The reduction in the debt is important, particularly because of the interest charges for carrying the debt, at about $37 billion annually. That's $3 billion a month we're paying simply in interest charges. That is the biggest expenditure of the federal government, and that's money we do not have to put into education, health care, or other types of social and public policies that we might all prefer as a priority choice. So until we get it lower, it does limit our capacity to address other needs in the Canadian economy.

We think it does need to be given a priority. We need some targets, because we simply can't rely on leaving it as it is and allowing the economy to grow. Sure, the debt-to-GDP ratio goes down, but we're still going to be paying huge interest charges for that debt.

º (1615)

Mr. Ken Epp: Thank you.

Madam Chair, can I be put on the list for the next round? I have more questions.

The Chair: You'll get to ask those in the next round, but it won't be with this panel.

[Translation]

Mr. Paquette, it’s your turn now.

Mr. Pierre Paquette (Joliette, BQ): Thank you, Madam Chairman.

Thank you to all that presented papers today. They are many items to be discussed. I will first address myself to the Mining Association of Canada.

The passage of Bill C-48 will probably happen tonight. You came to present to the committee a few weeks ago. I had proposed an amendment to the Bill regarding an increase of 10 to 20% of the credit for exploration and development costs. People from the Department of Finance told me that it would cost too much.

You had evaluated the increase of the credit to be 10 to 20%. However, I would like you to tell me how much you think this measure that reestablishes fairness—as you know— would cost.

[English]

Mr. Gordon Peeling: Yes, thank you.

Indeed, we did agree with the amendment you had proposed at that time. I'll let Dan give you the exact numbers, but on the cost of increasing it from 10% to 20%, we use numbers derived from the finance department's own analysis, because they have what the cost of the 10% would be.

The rationale for giving a 10% exploration tax credit was to partially offset what would be the negative impact, particularly on the base metals and a portion of the gold mining sector, of the removal of the resource allowance. That also gives you some sort of measure of the impact, but it is not a complete offset. That's why we've argued for upping it to 20%, which also has the benefit of increasing activity in rural and remote Canada.

Dan, maybe you have the numbers.

Mr. Dan Paszkowski (Vice-President, Economic Affairs, Mining Association of Canada): The numbers the Department of Finance provided was that a 10% tax credit on exploration would cost roughly $39 million. If we double that from 10% to 20%, we're looking at a $78 million expenditure per year.

The reason we took a look at an increase from 10% to 20% was that in the mining industry, exploration is our research and development; the land mass is basically our laboratory. The investment tax credit that's provided for scientific research and development is roughly 20%, so we feel we should receive a rate that is commensurate with exploration in other parts of the Canadian economy.

[Translation]

Mr. Pierre Paquette: Thank you very much.

You had suggested an increase of the tax credit spread over three years. I can assure you that I will reiterate this request to the committee with respect to the report we are to submit to the Minister. Besides, your report as well as another one presented talks about the fact that unemployment insurance funds are used for all sorts of things. I agree with you in opposing the idea of taking $45 billion and using the money for things other than what it was initially projected for.

In fact the Auditor General herself stated that the use of unemployment funds made by the Liberals is against the spirit of the law. Would it not make more sense for these funds to be separate and distinct from the rest of the budget of the government such that the contributions could be used as planned to provide funds in case of temporary job loss? Should the committee not recommend that the government revert to the old way of management of the funds in an autonomous fashion by those who contribute: employers and workers’ representatives?

[English]

Mr. Gordon Peeling: Merci.

I guess we would go back to fundamentals. It should first of all be an actuarially sound fund, clearly, and it does need to go back to the principles of insurance for those who unfortunately, through no fault of their own, lose their jobs. The problem, as we see it, is that when the fund accrues amounts much in excess of what is required for the adjustments that are taking place in the Canadian economy, that really represents a tax on industry. It's a disincentive to employment, and we do not believe it helps anyone. In that sense, we would like to see this brought into a much more actuarially sound position, a position balanced between its real needs and its real cost. We would agree that those costs should be more evenly shared between business and employee.

º (1620)

[Translation]

Mr. Pierre Paquette: Madam Chairman, I have another question I would like to address to Mr. Gerry Barr.

If I look at the figures that you have provided us, I am surprised that regardless of the recent investments made by the Liberal Government we are still below the amount that Canada used to pledge to foreign development at the time the Liberals came to power. For instance, in 1994-1995 the funds represented 42% of GDP while now we are at 29% even with the recent investments.

I would like you to tell me why you are so optimistic to believe that the government can be convinced to make the reasonable and realistic investments that you have suggested? What do you think would make the government adopt the proposal you put forward today?

Mr. Gerry Barr: Thank you for the question. I will answer in English as it is easier for me.

[English]

In fact, there was a precipitate drop in aid spending subsequent to 1994, and that greatly aggravated the deficit, if you will, against the pledges Canada had made as an international aid donor. I think you're right to say there is a steep uphill climb. However, the last budget commitment of 8% annually for the years going forward to 2009 was in fact the first significant attempt to reinvest in international aid spending in the decade previous, so it was very welcome.

Does it get to the goal? It doesn't. What we've tried to do here is to provide a plan that is quite realistic and that is fiscally responsible.

In answer to the question as to whether it can be done, we would make the point that it already has been done. In fact, in 2001-02 Canada's own commitments after supplementary estimates were in the order of a 12% increase. Can we do it? The answer is that we have done it, so the proposal is that we need to continue in that fashion.

The Chair: Mr. Cullen.

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

Mr. Barr, how do you recommend that we, the government, deal with corruption in the developing world? Look at a country like Zimbabwe, where they have a corrupt and bad government. Right now, I gather from the newspaper, they're running short of gasoline. They used to produce food for a good part of southern Africa. How do you deal with situations like that, where the need is great but there's no insurance that the money will go to the recipients you intend it to go to?

Mr. Gerry Barr: I'll be brief about it; I know the chair wants that.

If there are circumstances of instability and corruption, if you can't be confident that the resources you spend in a particular country will actually be applied by way of government channels for the purposes you want to designate, then you can go through civil society channels. The experience has been that this is not bad with respect to achieving efficacy in aid delivery, and I would recommend that as an alternative.

There are great steps being made on this corruption thing worldwide. There's the work of Transparency International, of course, and it's important. We could do things here in Canada by setting rules for the performance of Canadian corporations abroad that would ensure Canadian corporations abroad would act in ways that were appropriate. You'll know that some Canadian corporations have been involved in circumstances involving bribery, and this was not too long ago. I think it's important for us to work on this from both ends.

º (1625)

Mr. Roy Cullen: In fact, Canada has adopted legislation to implement the OECD bribery and corruption convention. Of course, there will always be companies that will try to break the rules. The tragedy is that if a Canadian company pulled out of a situation like that, there might be another company from another country that had not made that kind of commitment. It's a complex problem.

I've been told that some of the NGOs are not exactly lily-white all the time either. They take a little piece of the action here and a little piece of the action there. I assume some of them operate very ethically, but perhaps not all of them.

Mr. Hornung, are there any factors that would limit the use of wind power in Canada? Do we have as much potential in Canada to use wind power as any other country does? How does that vary?

Mr. Robert Hornung: We probably have more than most other countries. Ten years ago Natural Resources Canada did a study that said they estimated Canada had about 28,000 megawatts of economically effective potential for wind power. That would be about 15% of Canada's electricity supply.

Wind energy technology is evolving very rapidly. Ten years ago there was no discussion of offshore wind farms, and that's where most of the development is now occurring in Europe. Ten years ago towers for wind turbines were only about sixty metres tall, now they're a hundred metres tall. They have bigger turbines and they produce more electricity. We've actually estimated that the production potential now in Canada is probably in the order of 100,000 megawatts, which would be about half of Canada's electricity supply.

There's no reason why we'd go that way; we have tremendous amounts of other resources, but there's a lot of potential here.

Mr. Roy Cullen: Most of the turbine technology is imported. Is there any way to get that technology implemented with equipment manufactured here in Canada? What would we have to do?

Mr. Robert Hornung: We'd have to create a market for it, essentially. What turbine manufacturers will tell you is that if they're looking at a marketplace where you have about 450 megawatts going up a year, then it makes sense to put a facility in place.

Canada actually has a tremendous opportunity, because one area where we have an advantage vis-à-vis the United States is that even though the incentives associated with wind power production are too small to drive a lot of investment, the design of the program with its long-term commitment makes a lot of sense. The U.S. incentive works much more on a boom and bust cycle. It has to be reauthorized by Congress on a regular basis, and therefore manufacturers have been very hesitant to set up in the U.S market. If we provide the incentive, manufacturers will be interested in Canada not only for the market here but because it could provide a platform for entering the U.S market when they're in the boom part of their cycle.

The Chair: Mr. Wilfert, please.

Mr. Bryon Wilfert (Oak Ridges, Lib.): Thank you, Madam Chair, and thank you all for the presentations.

All of you who commented on the EI rate should know, if you don't already, that the minister is committed to a new EI regime by 2005, much of it based on the recommendations on transparency, etc., made by this committee back in 1999. Hopefully many of the issues you've raised will be dealt with by then. So stay tuned. If you haven't been involved in the process, you should have been.

To the Mining Association, I don't intend to relive Bill C-48. I'm going to relive it next week before the banking committee at the Senate. I could take you to task in a number of areas there, but I won't. I'll just put it this way: hopefully some of these parties will be supporting this bill tonight, which is in your best interests, suffice to say.

You talk about debt reduction, which I'm all for. I'd like to be very aggressive on debt reduction. At the same time, you're looking to enrich the industry, for certain reasons, obviously, in terms of accelerating tax credits. They can make the recommendations if they want, but the reality is that we have to balance that with the resources we have, and clearly we're not going back into deficit to do that.

But I do think it's important that Bill C-48 move ahead, particularly for the reasons that even you admitted before the committee need to be dealt with.

On the issue of the military, I couldn't agree with you more. The difficulty is that there's no road map on how to fund up to $18.5 billion. We're now in excess of about $13 billion. Clearly, that's a lot of money. In terms of issues of interoperability, how do we bring in 20,000 more troops? How are we going to allocate in terms of the cost of living issues, the quality of life issues that we have been continually pushing for as a government?

On replacements, there have been some. Even you admit that some major capital replacements have gone on, which is very important. But I'm not sure how we can do that in the speed with which.... It may be that we'll have to cut back on a number of these commitments and be more strategic in how we do them.

On the insurance, I certainly would support the notion of a study on the impact of the GST. It doesn't cost us anything to do that, in a sense. I think that's fine. Hopefully I've answered your EI issues. Continue to deal with the national debt; we save about $3 billion a year in interest.

On wind energy, I'm a great proponent of wind energy. I visited Sweden and the Netherlands. I certainly agree. For the amount of money you're proposing...and I commend you for that, because many come before us and don't tell us how much it's going to cost, which I hate. I do appreciate that. I think it's very helpful that we look at that aggressively. But we also have to look aggressively at the overall package of energy self-sufficiency in this country and how we get there, not just at certain scenarios. In my area particularly, I am interested in community or district energy issues.

I would suggest to all of the presenters that on the one hand, it's an interesting panel, because we have those who want us to spend, and for valid reasons; we have those who want us to continue to pay down the debt; and we have those who want us to get money back for their associations or their industries. I think last year we had 437 presenters, and they were all worthwhile. The fact is that we can't fund them all. We have to be responsible. We have to continue to look at reallocation issues, at our social spending. We have to invest in children, in people. At the same time, if we're going to take an international role, we'd better have the tools to do it; otherwise, I suggest we not.

I would agree with my friend Mr. Cullen on the issue of foreign assistance. I agree we should be looking, but how do we do that, through the third parties or through NGOs or whatever it happens to be? At the international conferences I've attended, it's also often a concern of how we evaluate the moneys, the value for the dollar. Canadians are very generous, but they're not stupid, and clearly we have to be careful about where we're allocating.

I have more comment than questions, because I know I only have five minutes. I wanted to get the comments in because I didn't in the last round.

Thank you.

º (1630)

The Chair: Thank you very much.

Judy Wasylycia-Leis.

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP): Thank you, Madam Chairperson.

I think it would be worthwhile to have comments from all the panellists about the choices we face. I'd like to start by hearing from Gerry Barr, then Robert Hornung, and then the others about the kinds of choices that are needed to ensure there is a way for Canada to fulfill its international obligations and share our wealth with the world and that there is a way for us to do what so many other nations have done and develop our wind energy possibilities for the sake of our planet in the future.

I think the choice has to do with taking on some of these groups that suggest we have to worry about the debt again. We've gone through a decade of deficit reduction, of tax cuts. Now the whole focus is on reducing the debt-to-GDP ratio, when over the decade none of the benefit of all those cuts and all those changes has gone to human resource development.

So I would like to hear your comments on that dilemma and dichotomy. Should we not find a way to take on this fetish around the debt and say, look, Canada is top of the G-7 on that front; we have an appropriate debt-to-GDP ratio; so for goodness' sake, once and for all, let's start to bring some of our resources, the surplus and so on, into human resource development?

I'll ask Gerry and then Robert, and then have the others jump in.

º (1635)

Mr. Gerry Barr: Mr. Chairman, let me start with an echo.

I know the chair will signal me when I've taken more than my share.

The Chair: Well, it depends. If you want three people to comment, then you have about a minute and a half.

Mr. Gerry Barr: Thanks.

It's true, Canada has put in a dazzling performance on deficit reduction and paying down the debt. I don't think there's anyone who would argue that. There are people who would argue--I'm among them--that we have paid a heavy price. One of those prices has been that we have defaulted on our commitments internationally. I wouldn't also--if I may just take a second for this--want it to be put in my mouth that we are arguing for less spending on the defence side. We are not. I agree that if we're going to play the role we need to play internationally we have to have the tools, and those tools include competency on the defence side. For what purposes is, I think, another matter. Many in my community would argue that Canada is especially well positioned to play a niche role in peacekeeping and peacebuilding and that we ought to carve that out for ourselves. I would argue that. We ought to use our defence spending to choose peace.

However, we also need to ensure that we deal with the other elements of global security, and those involve the important aid commitments that Canada has made, and made repeatedly. Now, there are realistic ways to get at this, and I think that's the exciting thing about the proposal we've put before you today. With very modest, and in fact precedented, levels of increase we can continue to, number one, meet our share of the obligation associated with these millennium goals and finally hit the 0.7% target. It really can be done, but it takes political will.

The Chair: Thank you.

Mr. Hornung.

Mr. Robert Hornung: I would say that regardless of one's views on what constitutes an appropriate level of debt or deficit, governments are in the position of having to make choices and assign priorities, because at the end of the day, whatever level you're concerned about, the money pot is not endless.

It seems to me, though, that in making those choices, what governments need to be reflecting on, first of all, are win-win opportunities. What opportunities provide you with the potential to deal with more than one issue at one time? I would argue, frankly, that wind energy is one of those, because it can help you deal with meeting environmental commitments, with security of energy supply, and with public health issues associated with more conventional forms of power generation. So you need to find opportunities and solutions that help you address a number of concerns.

The other thing is that there is a need to consider to what extent choices and investments made by government really represent investments as opposed to expenditures, because at the end of the day.... There may be some things you would want to do now that, yes, would have an impact on your budget this year, but they may actually bring in much bigger returns over the longer term. And if you look at it in that sense, as an investment, it might cast it in a little bit different light than simply as an expenditure.

The Chair: Thank you very much, both of you, and thank you for being on time.

Ms. Leung is next, please, for the last five minutes. Then we'll go to the next panel.

Ms. Sophia Leung (Vancouver Kingsway, Lib.): Thank you, Madam Chair. Thank you for all your very fine presentations.

My first question is to the CDA, and I'm very interested in all the points. You said you anticipated the replacement of some major fleets. I remember not too long Canada replaced a group of submarines. In question period there were many questions from the opposition. How did we select them? The selection process puzzles me. Why did we buy second-hand when they required so much repair? The cost is quite dear for Canada. Can you answer that?

LGen Richard Evraire: I would find it difficult to delve into the very intricate and complex procurement process, but I would simply suggest to you that in terms of procurement generally, everything depends entirely on the missions that are given to the Canadian Forces by the government, all of which essentially devolve from Canada's foreign policy.

How we end up purchasing that equipment is truly out of the hands of the Department of National Defence, because of the procedure set by the Department of Public Works. The specific final choices on items of equipment, for which recommendations are made by members of the Canadian Forces and the department, are something we don't necessarily wish to comment upon. It is truly outside the purview of our mandate to suggest there ought to be a Defence review to arrive at what pieces of equipment are required.

On the manner of their procurement, I would resist answering.

º (1640)

Ms. Sophia Leung: Thank you.

The Insurance Brokers Association and the Mining Association, as well as others, touched on a suggestion to pay off more on the national debt, tax reduction, and all that. I think we all wonder...a couple of my colleagues also mentioned this. We have so many other priorities, such as health care, which we need to reform. That requires a great deal of funding. There are also many other social programs, such early childhood development and aboriginal.... I don't want to keep on. How do you find the priorities? The government has already demonstrated how to reduce the national debt and cut down the taxes. We need to find our priorities--what we can do.

I'm very interested in CCIC's comments. CIDA is very well known. I've visited some of the projects in other parts of the world. They are doing very well. On the other hand, we still feel we have not given enough support and foreign aid for projects.

Do you want to comment? I'd like to hear first from the Insurance Brokers.

The Chair: Mr. Gilbert, and then Mr. Barr.

Mr. Brian Gilbert: Maybe the best analogy I can give you is from a small business standpoint. I'm a small businessman from rural Manitoba. We carry significant amounts of debt on our balance sheet through acquisitions we've made. We're very sensitive to the cost of maintaining that debt or paying the interest on that debt, and I'm always concerned about a rise in the cost of doing that--a rise in the interest rate.

Right now, I think the cost of maintaining the national debt is something like $37 billion a year. If we saw a spike in that, it would put other program spending in jeopardy.

The Chair: Thank you.

Mr. Barr.

Mr. Gerry Barr: Of course, CIDA spends the money Canada gives it, so it is about the Government of Canada's decisions. When we are critical of CIDA's failure to deliver sufficient aid into the field, it is because we have a bone to pick with those who make the decisions about the level and the quantity of Canadian aid generally.

On the quality side, that's where I think we may find ourselves in a more energetic discussion with CIDA. For example, its recent policies favour government-to-government transfers, which raises serious accountability issues and diminishes the opportunity for civil society organizations to do development--aid agencies and those kinds of groups.

Development has dropped in the last two years by about 10%, although aid contributions overall have gone up. This is as far as Canadian non-governmental groups and aid agencies are concerned. That, by itself, is not a reason for concern; however, it is a reason for concern if civil society organizations in the field are not getting funding. We're worried that may be the case.

The Chair: Thank you very much, everyone.

I'm sorry that we have to vote--well, it's part of our job to have votes--in less than a hour's time, so I'm going to thank you.

Mr. Epp, you wanted to say one brief thing.

Mr. Ken Epp: Just really quickly, Mr. Barr, my apologies. I think I attributed motivation to you that is not accurate, and I apologize. I'm sorry.

The Chair: Thank you very much. And thank you, everybody.

I'm going to suspend for just two minutes while you leave the room, and then we will go directly into the testimony of our next group.

The meeting is suspended.

º (1644)

º (1647)

The Chair: Pursuant to Standing Order 83(1), we are continuing with our second panel on pre-budget consultations.

Ladies and gentlemen, I am advised that we will have bells starting to ring at 5:30, with a vote starting at 5:45, so we are going to give you your full time to present, and our members will cut back the minutes they have for questioning.

I would like to welcome all of you from Bell Canada. We have with us today Barry Pickford, who is the senior vice-president in the tax area. Welcome to you, sir.

There's been a change to your agenda, colleagues. Where it says COM DEV International, we actually have with us the CEOs of Canada's space industry. Today, we have Dave Caddey, executive vice-president of MDA; John Keating, chief executive officer with COM DEV International; Garry Bush, senior vice-president, EMS Technologies Canada;and Paul Bush, vice-president, Telesat Canada. Welcome to all of you. I understand Mr. Caddey will do the presentation.

Next, from the Canadian Paediatric Society, Marie-Adèle Davis, executive director, with Mr. C. Robin Walker, who is the president-elect of your organization.Welcome, bienvenue.

From the Canadian Coalition for Health Freedom, we have Peter Helgason, president, and Trueman Tuck, who is the secretary-treasurer. Welcome to you, gentlemen.

We will go in the order of the agenda, so I will commence with Bell Canada for seven minutes.

Mr. Pickford, commencez, s'il vous plaît.

Mr. Barry Pickford (Senior Vice-President, Tax, Bell Canada): Thank you, Madam Chairman.

I'm here today not just on behalf of Bell Canada or BCE, but rather on behalf of a coalition of the major telecommunication companies in Canada and the major cable companies in Canada. I guess the message we have is a very simple one; it's really to look at the CCA rates that apply for broadband and Internet equipment.

The coalition has on an annual basis some $30 billion of revenue, employs over 90,000 people with payrolls of $5.5 billion per year, and has about 4.5 million Internet subscribers at this time. As you are aware, the coalition members are a very important segment of the information and communications technology sector, which continues to be a really critical growth driver within Canada. In the years 1997 through 2001 the sector produced an annual growth rate of something like 14%. That just gives you an indication of the size of the group.

I think it's appropriate to state on behalf of all the coalition members that we recognize the importance of the federal government's action to make Canada's tax environment much more internationally competitive over the last few years. We think it is extremely important to see reduced corporate tax rates and the ultimate elimination, we hope, of the federal capital tax. We believe this is good for the economy. We believe it will attract new investment into the country. We compliment this committee's work for those changes in the past.

Today Canada is a world leader in broadband and Internet services, through the public Internet, through corporate intranets, and through specialty networks—specialty networks, for example, that can be used to shoot a film in Vancouver, transmit the material electronically to Toronto for editing, and then on to Hollywood at that time. That's just an example of how specialty networks might be used.

Access to high-speed Internet services has increased dramatically in recent years as a result of what we believe is a vibrant, competitive market that exists between the telephone companies, the cable companies, and the independent Internet service providers. Canadians today have a wide range of services available to them at, on a worldwide basis, very low prices.

However, smaller communities in Canada are often still without high-speed Internet service, as the roll-out to small communities is often a difficult business case—even though access to broadband Internet services is at least as important, if not more important, for people in those communities. We think the development of high-speed Internet access in these smaller areas permits all businesses, and particularly the small to medium-size enterprises, to compete on a level playing field not only within Canada but on an international basis. We feel it also ensures that health care and education in those communities have all the access and the benefits of larger communities.

It's clear that the Internet is to the 21st century what the telephone was to the 20th century. Connectivity today for Canadians is unmatched, beyond what it's ever been in the past.

Our coalition believes Canada has an important role to play in maintaining our country's leadership in the broadband and Internet area. By effectively enacting more equitable capital cost allowance rates for broadband and Internet equipment, the government can effectively help build a platform for innovation, favourably change the cost of developing advanced Internet services, and stimulate Canadian manufacture of the equipment that's necessary to provide innovative broadband and Internet services.

In the presentation we provided earlier, we had a listing in the appendix of a number of companies and what they do in the production of broadband and Internet equipment. Many of those, if not Canadian-based, certainly have operations in Canada and benefit this country.

Let me focus on the specific issue of capital cost allowance, or tax depreciation, for broadband and Internet equipment. The last major revisions to the tax regulations for CCA occurred 27 years ago, at a time when today's advanced technology did not exist. In fact, probably few advanced technologies have existed in those past 27 years. An update to these CCA classifications is badly needed.

This committee recommended in 2002 that the federal government, as a priority, undertake a comprehensive review of CCA rates, and the federal budget tabled in February 2003 included a commitment from the Minister of Finance that CCA rates would be reviewed to ensure that, as a general rule, the prescribed rates reflect the useful life of the asset involved. It's really this tax depreciation based on useful life that's the heart of the matter here.

º (1650)

Today there is no specific CCA classification for broadband and Internet equipment. They simply fall into a specific class, class 8, by default and as a result get a 20% rate of depreciation, something that demands about ten years to depreciate 90% of the cost of the asset. We've been working with other coalition members, together with Finance, to find a solution to this, to bring about more appropriate CCA rates. But we've been at this now for three years. Changes have not yet occurred.

It's the coalition's view that we really have for this particular type of equipment an estimated useful life of only six years, and that is the basis that is used for accounting purposes throughout the country. This does not include the cable itself; this is only the equipment. Accordingly, we recommend the creation of a new CCA class for broadband and Internet equipment with a depreciation rate of 40%, which will allow recovery of approximately 94% of the capital cost of this equipment over six years. We believe this proposal is appropriate, as the rate allows for the recovery of the original capital cost over the useful life of the asset.

We believe this is in line with the objectives of the Canadian tax depreciation system and with the statements made by the Minister of Finance in the 2003 budget. The coalition is not asking for an incentive CCA rate; it is simply asking for a rate that fairly reflects the useful life of the asset.

As a result, Madam Chairman, I'd like to recommend that this committee, if it sees fit, make a recommendation itself that there be a new CCA class for broadband and Internet equipment with a CCA rate of 40%.

Thank you.

º (1655)

The Chair: Thank you.

Now I'd like to move to Canada's space industry and Mr. Caddey. Go ahead, sir.

Mr. Dave Caddey (President, Space Missions Group, MacDonald Dettwiller & Associates Inc.): Madam Chair and members of the House of Commons Standing Committee on Finance, it is indeed a privilege to have the opportunity to bring to your committee a matter that I believe is of critical importance to the future of the economic and social development of this country, namely, the current crisis in Canada's space sector.

I am Dave Caddey, president of the Space Missions Group of MacDonald Dettwiler & Associates in Vancouver, Canada, Canada's largest space company. I am joined today by Mr. John Keating, chief executive officer of COM DEV in Cambridge, Ontario; Mr. Paul Bush, vice-president, corporate development, at Telesat Canada, headquartered in Ottawa; and Mr. Gerry Bush, senior adviser to the president of the Space and Technology Group of EMS Technologies in Montreal and Ottawa. Together, our companies account for over 60% of the sales of the space manufacturing industry located in all regions across Canada and the major share of the satellite operations industry.

Canada has a long and proud history of significant accomplishments in space, dating back more than 40 years. The demography and geography of Canada demand the use of space technologies to meet many of the challenges of today's modern world.

On a per capita basis, Canada has become one of the largest users of space systems in the world. We have a space program of which all Canadians are justifiably proud. This program, managed by the Canadian Space Agency, ensures that space technology and systems are available to meet the needs of the nation. By all measures, the program has been very successful. It is indeed the envy of most nations, because we have accomplished so much with a government investment in space that is the lowest of the G-8.

A defining feature of the Canadian space program is the unique government-industry partnership that has guided the program for more than 40 years. This partnership has enabled Canada to develop a space industry capable of producing and operating the space infrastructure needed to meet our national needs well, at the same nurturing the most export-oriented space industry in the world. For example, in 2001 more than 40% of the industry sales of close to $2 billion were exported. It is this export sales success that generates a return of at least three to one on the government's investment in space.

The government's role in this partnership has been twofold: first, to purchase space systems to meet national needs; and second, to support the R and D in industry. On average, the government's investment in the space industry amounts to less than 15% of the annual revenues of the industry, but this investment is critical to the competitiveness of the industry.

Most nations consider their space industries as strategic national assets. This is formally recognized in trade agreements like NAFTA and the WTO, where space is specifically exempted. As a result, other governments undertake special measures to develop and protect their national space industries. For a small nation like Canada, it is the close partnership between the government and industry that helps level the playing field for our industry.

This partnership has been working well until quite recently. However, two things have occurred that seriously undermine the effectiveness of this partnership and threaten the very viability of our national space industry.

First, over the past three years, the government has reduced the budget for the Canadian Space Agency by 15%. In addition to this, when the U.S. withdrew from the RADARSAT-2 program for national security reasons, the agency was requested by the government to reallocate more than $155 million away from programs in Canadian industry in order to purchase equipment and services offshore that were to be provided by the U.S. The net result of these two actions on the part of the government has been a 30% reduction in the government's investment in the Canadian space industry.

The second event to affect the viability of the space industry has been the sudden and dramatic meltdown of the international market for space systems since 9/11. Orders for new satellite systems have fallen more than 90% from a normal procurement rate of 37 new systems in 2000 to a low of three new systems in 2002. While this meltdown is considered to be a temporary situation, it is a serious blow to an industry that is heavily dependent upon the export market.

The combination of significant reductions in government investment in space and the loss of the export market has had its fundamental impact on the Canadian space industry. Revenues are down 25% to 50%, and employment in the four companies represented here today is down 30% from 2000.

The reduction in the capability of our space industry is so severe that Canada is on the verge of losing its capacity to be a spacefaring nation. Highly skilled and mobile personnel are pursuing opportunities in other countries. Shareholders and owners are questioning the viability of the industry in a climate where government support in Canada is in decline, while in other countries it is increasing. Already one company, EMS in Atlanta, has made the decision to exit Canada and has placed its Canadian space assets, EMS Technologies in Montreal, up for sale. If this facility were to be lost to Canada, our capability to manufacture space systems would be materially reduced.

» (1700)

Major programs to meet national needs are the raison d'être of the Canadian space program. However, there has not been a major program start in Canada since 1994. Nine years later, all of these programs are now coming to successful completion, and there are no new major programs approved to take their place. This is particularly worrisome given the five or more years it takes to implement a major program.

Considerable work has been done by the Space Agency and its stakeholders to identify potential new space programs aimed at meeting critical needs of the nation. A survey last year by the CSA identified 19 government departments with specific requirements where space capabilities would enable them to deliver their programs more efficiently and effectively.

In preparation for budget 2003, the CSA proposed to the government several new initiatives to meet critical national needs. Unfortunately none of these were approved, and there was no new funding for the CSA.

This summer the companies represented here today submitted to the CSA 10 proposals for major programs that we are confident would make a significant contribution to meeting critical and urgent needs of the country in the following areas: national security, environment, safety of Canadians, and international cooperation. Madam Chair, descriptions of these program proposals are included in our written brief, and I would be pleased to elaborate on any of these during the question period.

Each of these program proposals is ready for implementation immediately; however, the CSA's declining budget does not permit implementing any of them. We understand the CSA is once again bringing forward for the government's consideration specific proposals for additional funds for space program initiatives to meet critical and urgent government needs.

As leaders of Canada's space industry, we respectfully request that the government give serious consideration to these proposals and provide the CSA with the additional funds needed to ensure that Canada can continue to benefit from the development and use of space technology to meet critical national needs. Approval of these programs would, at the same time, go a long way to ensuring the survival of our indigenous space industry.

We firmly believe that Canada is at a crossroads in terms of its space program. We have one of the most successful space programs in the world. We have critical and urgent problems in this country where space systems can assist the government in providing cost-effective solutions. But action is needed now to implement these programs before our capability to do so evaporates.

Thank you for your time.

The Chair: Now we'll go to the Canadian Paediatric Society.

Go ahead, Mr. Walker.

Dr. C. Robin Walker (President-Elect, Canadian Paediatric Society): Thank you, Madam Chair.

I am Dr. Robin Walker. I am in real life a professor of pediatrics at the University of Ottawa, and I head the neo-natal intensive care program at CHEO. I'm here today in my volunteer capacity as president-elect of the Canadian Paediatric Society. With me is Marie-Adèle Davis, who is the executive director of the Canadian Paediatric Society.

First of all, committee members, thank you for inviting the Canadian Paediatric Society to present to the Standing Committee on Finance. We do appreciate this opportunity to address you on some of the key child and youth health issues, which the federal government has the opportunity to influence in a positive way.

We are pleased that time and time again government reports prominently mention how children and youth are the future of Canada. Sometimes, however, we are disappointed that few of the proposed programs designed to improve the health of Canadians specifically address the needs of children and youth.

Our society is dedicated to improving the health and well-being of children and youth and has been dedicated to this aim for the past 80 years. We hope you will each agree with us that the four issues and solutions we will present to you today will actually help to ensure that children and youth are indeed that future of which we hear so often.

First, I'd like to speak to a national agency for public health. The Canadian Paediatric Society believes that the improvement and protection of public health, including infectious and chronic disease prevention, clean water, and emergency preparedness are top priorities for Canadians. Unfortunately, children and youth, because of their developing immune systems, are among those most hurt by poor levels of public health.

The Canadian Paediatric Society agrees with the Canadian Medical Association and the recently released Naylor report, Learning from SARS, that a major and sustained investment is needed immediately to protect the health of people in this country, and that we need a centralized agency to establish standards and provide coordination. As was further pointed out by Dr. Naylor in that report, it is essential to have pediatric involvement in any response to a public health issue.

Such an agency must be a joint initiative among federal, provincial, and territorial governments, as well as non-governmental organizations. The agency needs to build on current successes and strengths, such as the existing Canadian pediatric surveillance program, which monitors childhood disorders and diseases, rather than starting from scratch. The Canadian Paediatric Society believes there will be a need for $1.5 billion to be invested incrementally over the next five years if this agency is to be effectively put into place.

Secondly, I'd like to speak to a national immunization strategy. Immunization has been one of the most effective public health advances of the last 100 years. Cost-effective and safe, it has saved millions of lives and millions and billions of dollars in health care resources. While Canada can be proud of its past successes in vaccinations, we cannot be proud of the fact that we are one of the few developed countries without a fully functional national immunization strategy to coordinate vaccine programs across the country and to ensure that all children, regardless of where they live, have equal access to safe and proven immunizations.

The Canadian Paediatric Society recommends that $100 million be invested annually to support immunization by providing for a coordinated national program, encouraging federal, provincial, and territorial planning, research, professional education, public education, and surveillance. Again, such a strategy needs to be a joint initiative, not only of governments but also non-governmental organizations such as our society, which for 10 years has administered IMPACT, a national surveillance system for children and youth that collects and disseminates information on adverse reactions to vaccines. As a result of IMPACT, the Canadian Paediatric Society is truly able to reassure Canadians that vaccines are not only effective but safe.

Third, let me speak to national injury prevention. Injuries are the leading cause of hospitalization for children over the age of one year, and yet they are largely preventable. It is estimated that the direct and indirect cost of injuries amounted to almost $9 billion in 1995 and is much higher today. We have all profited from advancements in injury prevention such as safer cars, seat belts, and baby car seats, but there is much work still to be done in preventing the majority of injuries.

Some examples will be compulsory car booster seats for toddlers--I have a four-year-old who is just moving into that age group--bike helmet legislation in all provinces and territories, and better fall prevention programs for seniors.

» (1705)

Canada needs a national injury prevention strategy, as pointed out by Dr. David Naylor in his call for a national agency for public health. We concur with Dr. Naylor's suggestion that such a strategy needs to be part of a renewed commitment to public health. The strategy should include a coordinated system of educational and communications programs, design and engineering strategies, and legislative initiatives at all government levels; secondly, a national injury surveillance system; and third, research into how we can prevent injuries and evaluate the cost-benefit of programs.

In order to determine the full cost of a national injury prevention strategy, we recommend that $50 million be allocated in the coming fiscal year to initiate the development of a program with increased funding in coming years.

Finally, healthy, active living. As we're beginning to learn, the lack of physical activity, poor nutrition, and sedentary lifestyles are leading to a national epidemic of obesity and all its associated health problems--diabetes and heart disease, to name but two. It is now estimated that over 30% of Canadian children are clinically overweight--30%, one-third. Organizations such as the Canadian Paediatric Society have been working with Health Canada to reverse this trend by providing our physicians with skills and information they can use in counselling children and families.

Our society recommends that a further $20 million be dedicated to promoting a pan-Canadian healthy, active living strategy, and to encourage joint federal, provincial, and territorial programs aimed at reducing levels of inactivity and obesity among Canadians. Again, we recommend NGO involvement in both the strategy and the programming, because of their credibility at the local level and their cost-effective methods of delivering programs.

To conclude, the Canadian Paediatric Society truly believes that children and youth are the future of this country. We believe the investments outlined in these remarks will make that future healthier and ensure that our children and youth have the best opportunities possible. An investment today in health promotion and in disease prevention will lead to a population less reliant on the health care system.

Thank you.

» (1710)

The Chair: To clarify, there was no written brief, colleagues. This was just the presentation today, so don't go thinking you've lost something that wasn't there.

From our Canadian Coalition for Health Freedom, Peter Helgason. Go ahead, sir.

Mr. Peter Helgason (President, Canadian Coalition for Health Freedom): Good evening, everybody, and thank you very much for allowing us to present our information to you here tonight.

The Canadian Coalition for Health Freedom is basically a group of groups that aren't always in agreement with medical doctors. Generally speaking, we represent various treatment modalities that in some cases go back thousands of years, including traditional Chinese medicine, homeopathy, naturopathy, and herbalism.

There is the old expression that one definition of insanity is to keep doing the same thing and expect different results. Every year we pump more money into the system, and every year waiting lists get longer and the general situation doesn't seem to get any better. That's what we'd like to talk to you about. There are better ways to deal with our health services than simply waiting for something to break and then paying to repair it. After it's broken, we use only 40% of the tools in the toolkit. The rest are illegal to use. With about a third of our tax dollars being consumed by the delivery of health services in our country and with the costs going up at an annual rate roughly five times that of inflation, we'd like to provide you with some solutions.

Our stated goal in the delivery of health care in Canada is that we're going to have the best system in the world. But we don't, by a long shot. It continues to get worse. People are fighting over funding. It doesn't seem to get any better. This is in the face of overwhelming evidence of the potential benefits of natural health care treatments. The company I work for is being criminalized for selling a product that makes people who take it get better. They spend their own money on it.

There is a reason the system is set up the way it is. It's built not so much to serve the interests of the Canadians who fund it, but rather the business interests of the corporate bodies that profit from it. You can debate it from one side or the other, but there is a whole body of evidence that's very much available to look at. Part of the problem is that system.

In our system we can't have patents on any natural or botanical products. If you try to get a patent on a natural or botanical product, you're looking at five to ten years and several hundred million dollars. Then you have no protection, because anybody else can just bottle your process.

So we would like orthodox medicine to get back to the basics of science, and that's systemic observation, where you look at something and you see what happens. If you have a positive result, you can make inferences from that result. We have thousands of years of history for many of the products the natural health industry uses, and we can't get any validation. One of the things we're asking for is funding to do research.

Modern medicine is in a crisis financially and functionally. There are some exhibits in our presentation package you can have a look at. The fact is that adverse reactions to drugs and medical errors are costing our system billions of dollars every year, and it's easy to avoid them.

Natural health products are highly regulated and becoming more highly regulated. In Canada you're actually far more likely to be killed by lightning than to be harmed by a natural health product, but a whole new section has been set up at Health Canada to regulate them.

It doesn't take a brain surgeon to figure out that currently modern medicine is more about serving the monopoly interests of the practitioners and industries that are behind it than patient interests, and this needs to change. With modern communications technology, the federal government needs to encourage self-medication and the use of natural health care preventive approaches and traditional systems of health care.

As legislators, in allowing or disallowing, encouraging or discouraging any medical intervention or treatment, from nutritional to radiotherapy, there has to be an unbiased and objective risk-benefit cost analysis done, with a clear understanding of the cost implications of the legislative and regulatory structuring that discriminates against natural health care products and its participants.

Mr. Tuck, our secretary treasurer, will lay out some of the details we'd like you to consider.

» (1715)

Mr. Trueman Tuck (Secretary Treasurer, Canadian Coalition for Health Freedom): Very briefly, I'll go down the checklist. We're asking that under the Income Tax Act naturopathic doctors, chiropractic doctors, and homeopathic doctors be given the same rights as medical doctors and that people doing self-medication have the same rights of writing off things that are prescribed by alternative practitioners, so prescriptions are not necessarily tied to a pharmacist.

We're also asking that the Excise Act be amended to exclude any GST on functional foods. To encourage functional foods to be used for medication is absolutely essential to stabilizing and reducing health care costs.

There is, in our opinion, an illegal and unsupportable attempt to turn some 60,000 natural health products into new drugs on January 1. We're asking that the publication in the Canada Gazette part II be immediately stopped, that a recommendation to the Standing Committee on Health be made, and that a transition report be implemented to create a unique third category to put these products into effect to try to stabilize the costs.

We're also asking that subsections 3(1) and 3(2) and schedule A of the Food and Drugs Act be eliminated. They prevent our telling the people here and citizens in Canada about treatments and cures. And yes, I will use that word. There are treatments and cures for most modern diseases available through traditional medicines and natural health care practices, and we'd be pleased to bring the experts to these meetings to educate and inform you.

We believe we have a way you could reduce health care costs by 10%, $150 billion a year, I think, if we could use natural health care and preventive techniques. We could reduce them by 10% while improving the outcomes by 20% or 30%. There's a recent study in the U.S. that indicates the U.S. spends $1 trillion a year now on health care, which is the equivalent gross domestic product of 124 nations of the 190 on this planet. So we have something wrong with where we're going, throwing money into the system and increasing the regulatory interference with natural health products.

We would also ask, as over 50% of Canadians now use natural health care products, that at least 50% of research dollars be allotted to support the proof society needs for the treatment and cures of the natural health care disciplines. There is too much bias and prejudice in the system. We would ask that everybody think for their loved ones and for themselves that if you have a cancer crisis, diabetes, or heart disease, you want to have the choice of all the possible options. Every Canadian should have that right.

Thank you very much.

The Chair: Thank you very much, and thanks to all of you for your presentations.

Now, because the bells will ring, we will work through the ringing of the bells until we go to the House to vote. I'm going to propose--I have six people wanting to ask questions--to give you up to three minutes for each question and answer, so you're going to have to keep your answers a little brief. Then, rather than keeping you and making you miss planes and whatever during our voting, I would ask that if members want to do follow-up, they do it directly with you later.

Mr. Epp, we'll start with you for three minutes, please.

Mr. Ken Epp: That isn't very much time, so I won't take my time to be nice to you. I appreciate your being here.

First of all, Bell Canada, you want to get rid of the capital tax and you want to get rid of it faster than they propose now. I think we understand that, and thanks for saying that.

I have a question with respect to the classification of equipment, your capital cost allowance. If the rate were increased--and you're asking for 40% per annum, so basically you write the stuff off in a little less than three years--if that were done, what happens, then, to your bottom line when you dispose of this equipment that has become obsolete? What happens to it? Do you just give it away? Do you junk it? Is it in fact worthless, or can you sell it to third world countries or others? Are you ready, then, to pay recouped value on it?

» (1720)

Mr. Barry Pickford: Well, first of all, on the first point you made on capital tax, we are happy with the way the federal government has gone in bringing about the ultimate phase-out of capital tax. We have no questions about that.

On the capital cost allowance question, as equipment does become obsolete, it very often is scrapped, unfortunately. If there are opportunities to sell it to other places, yes, that happens. To the extent that there is recovery of proceeds from that sale, then that amount is effectively credited against the pool, and it means you can take less capital cost allowance in the future. If you were selling everything that was in the class and you were recovering capital cost allowance previously claimed, you would pay tax on that difference.

Mr. Ken Epp: Do you have any idea what the total cost to the federal government would be, or what the loss of revenue would be, if this were implemented?

Mr. Barry Pickford: This is really just a timing difference. The cost, if you like, is an interest cost. For every $100 million that was spent on Internet and broadband equipment, we would be accelerating the depreciation, and the tax implications of that would be relatively minor—$20 million over a three-year period. It's really the interest cost on that $20 million, which would then be recovered because the asset would be depreciated either on this fast basis we're now asking for or on the present basis, which is only 20%. You always depreciate fully; it just takes longer to do. That's why I say it's simply a timing difference.

Mr. Ken Epp: Okay.

Thank you, Madam Chair.

[Translation]

The Chair: Mr. Paquette, you have three minutes.

Mr. Pierre Paquette: Thank you, Madam Chairman. Thank you to everyone who presented. Unfortunately we are short for time. I will therefore focus on the paper presented by the Canadian Coalition for Health Freedom.

First I will share with you that I look upon it favorably. The domain of Natural Medicine has evolved significantly. Quebec for example offers a variety of college training resulting in a diploma granted by the Department of Education. Besides, some associations are now officially recognized by the Government. Several group insurance policies now reimburse natural medicine expenses. There has been important change but there remains significant resistance from the traditional medicine lobby. The Collège des médecins du Québec has opposed every initiative in this respect.

We are looking at helping promote natural medicine as part of the overall health system. With respect to this goal I would like to know what you recommend the Finance Committee treat as priorities from your proposals.

[English]

Mr. Trueman Tuck: One of the aspects we're introducing is that every citizen and every doctor—medical doctors, for instance—need to be trained in the basic disciplines. The problem we have is that we have a system that has evolved with so much focus on the medical doctor as the top professional—the sole professional—and that really isn't reality. Homeopathic doctors in hospitals were the dominant care system in the 19th century. The medical doctors evolved into a more significant power position in the 20th century. They're not really trained in homeopathic medicine, acupuncture, or nutrition. One of our proposals that we're taking to medical associations and colleges stems from our having developed training programs to train medical doctors so that they are aware. Whereas a person goes to a medical doctor today who will send them to a medical specialist, that same medical doctor has to be in a position to be able to work closely with a homeopathic doctor where their treatment is more appropriate for the specific needs of the patient. This type of team work across all disciplines, not just focused on what we call modern medicine, is totally missing in the Canadian system today.

Does that answer the basic question?

[Translation]

Mr. Pierre Paquette: I don’t have any problems with your suggestions but many of them deal with provincial jurisdictions: professional denominations, education and training for example. I see here the proposal that all health related activities be exempt of GST. Is this a recommendation that the committee should put forth? Especially since we now have a notice of ways and means motion which targets greater GST exemptions including several health related professions, such as nutritionists. Today GST applies to their services. Yet the notice suggests that their clients be exempt from paying GST. Is that a recommendation the Finance Committee should put forth?

» (1725)

[English]

Mr. Trueman Tuck: Yes, definitely. One of the reasons is that the GST on the natural health products is a new development that has been done bureaucratically, not legislatively or by committee. It was added about three years ago and began to be enforced.

There's been a study done in Australia that indicates that the $200 million to $250 million of new revenue that is now being taken out of what were traditionally food products that were exempt has a four-to-one magnifying effect. When you increase the regulatory or tax costs on self-medicated products, you actually have a 400% impact, so $250 million of new revenue from GST creates $1 billion in added cost.

Part of what we're trying to bring forward here is the idea of putting more focus on the support to self care. Yes, eliminate the regulatory interference and eliminate any punitive, regulatory, or tax matters such as the ones you're referring to, because the people making a choice to hire a naturopathic doctor largely have to pay for it themselves. They have to pay for the products themselves. Making them affordable has about a four-to-one impact on savings.

This becomes a major part of the committee's work: how do we make the tremendous number of dollars going into the system work more effectively? We're saying you don't have to keep increasing them; you can remove the barriers and stimulate the self-medication.

The Chair: Thank you.

Now we'll go to Mr. Murphy.

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

This is a question for you, Mr. Pickford. I've been on this committee for three years now. It seems to me this year we have a lot of submissions dealing with CCA rates and specific classes. The intent of the tax system is that the prescribed rate reflect the economic or useful life of the asset. Obviously a lot of associations feel that's not the case. However, I don't think this committee really is geared to deal with each class of assets and delve into that question.

You're saying your association is dealing with the finance department, but you're not making any headway. Is there a mechanism out there? Maybe the system would work better with a third-party mechanism, such that if you're not satisfied you can appeal it or get a decision. We have about ten submissions dealing with specific asset classes, which we quite honestly can't delve into. We don't know what the economic life of a cable or a locomotive is.

If the system's not working, is there any way the system itself could be corrected?

Mr. Barry Pickford: One of the biggest issues is that there has been no substantial correction of the system for over 25 years. You're getting assets today that weren't even considered 27 years ago that are asking to be categorized in a certain fashion. Very often they're falling into categories that are not representative of what they really are.

I think, as a first step, somebody in Finance needs to sit down to look at this bigger issue of the classification of assets. If it is agreed that useful life, or economic life, is the way to go, then that decision should be made and people should get on with it. But certainly as a first step the categorizations we have today need to be broadened and perhaps new classifications brought in.

Mr. Shawn Murphy: Do you have recourse to a third-party tribunal or decision?

Mr. Barry Pickford: No.

Mr. Shawn Murphy: Would that not help, if you had?

Mr. Barry Pickford: It likely would. This is not a situation where you can go to court, other than in situations where you might seriously believe there's a legal argument that a particular asset belonged to one class and CCRA is putting it in another class.

» (1730)

Mr. Shawn Murphy: But that's not what you're talking about here. That's not really the issue.

Mr. Barry Pickford: No, the issue is really having potentially a third party look at these and advise Finance Canada on what the proper classification of these assets is. I think that would be very helpful.

The Chair: Mr. Discepola.

Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.): What you're really asking for, Mr. Pickford, is parity with the United States, I gather. I'm trying to get my head around this, and I think we have to do a more in-depth study on the whole category, the classifications of CCA.

But I don't understand what the advantage is to any industry if you're able to write off an asset three years sooner than you normally would. In the event that the asset has outlived its life expectancy, in the year of disposition you can take the total write-off of the unused portion of the depreciation anyway. Second, it seems to me that if you accelerate it to six years versus nine years, all you're really doing is affecting your financial statements so that you have an extra expense, which means you generate less revenue.

What competitive disadvantage are you experiencing with the CCRA, then?

Mr. Barry Pickford: The first thing to say is that there is a difference between accounting for book purposes, financial statement purposes, and for tax purposes, and really what we're suggesting here is that for accounting purposes there has been a determination of the useful life of a number of assets, and that's how they're being depreciated for book purposes and that's what shows on your financial statements.

The problem is that for tax purposes these assets are not being depreciated nearly as quickly, and so the cash impact, if you like, the lack of tax deductibility of this depreciation on these assets is much slower than it is for book purposes.

So it really isn't a book versus tax concern. It's really a fair treatment of these assets and getting, from something being written off over three years as opposed to six, the tax value of the depreciation much more quickly than you would otherwise receive it.

When you do dispose of an asset or an asset becomes obsolete, it doesn't necessarily have any value to you, because most assets go into very large classes and you can only take a loss on that particular classification of assets when every single asset in that class is disposed of. So it becomes a very meaningful period of time and a very meaningful part of the number of assets that have to be dealt with in that case.

Mr. Nick Discepola: Do I have time for another small question?

The Chair: Yes.

Mr. Nick Discepola: Thank you.

I know that you, Mr. Pickford, wear another hat, and one area of comment that I'd like to get your opinion on would be.... I don't necessarily agree with how President Bush did it, because I think he borrowed money and increased the debt to achieve certain goals, and we'll have to see if he was right or not, but in the area of preferential rates for dividends, I'm wondering if you have any comments or any experiences in your field. I think that from the outset, as an investor, I'd be more tempted to invest in U.S. firms because I'm given preferential dividend rates.

Do you think that is having a negative impact on Canadian firms?

Mr. Barry Pickford: I think there's a real risk of it, and if I could elaborate on your question a little bit, I'd note that in President Bush's most recent initiative, which was called the Jobs and Growth Tax Relief Reconciliation Act, they permit dividends from U.S. companies to be taxed at a flat 15% rate, except for the lower two brackets, which would be taxed only at a 5% rate. Dividends that are paid by Canadian companies to U.S. residents will also have the benefit of that low rate, except that they have adjusted the foreign tax credit system, which means effectively, because of the 15% withholding tax, that when a dividend is paid from Canada to the U.S., the U.S. resident will not fully benefit from his foreign tax credit and as a result will generally have a higher rate of tax on his Canadian-source dividends than he would on his U.S.-source dividends.

Our concern is that U.S. residents particularly may now start to look at their investment portfolio and say they have a preference really for a U.S. company. In our case, my preference may be to invest in Bell South, or Verizon, or SPC as opposed to BCE. We think that may have an impact on the value of our shares and, accordingly, an impact on our ability to raise new capital.

So it could cost us in the long run, yes. I'm not sure I agree with President Bush's tactics either.

I would say one other thing. We have found that the U.S. has recently entered into new protocols with Mexico and Australia where they have eliminated withholding taxes on dividends altogether. So there's now a zero rate of withholding taxes, and I think it is something that Canada, as the U.S.'s closest trading partner, should really be considering as well.

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The Chair: Thank you very much.

Mr. Valeri.

Mr. Tony Valeri (Stoney Creek, Lib.): Thank you, Madam Chair. I'll be very brief.

To Mr. Caddey, with respect to your presentation, on page 8 you make reference to a total of 19 government departments and agencies that identified specific requirements wherein space technology would either enable them to do things they are currently unable to do or enable them to do them better. Can you identify what some of these agencies and departments are? I'm trying to understand how additional moneys going to the Space Agency would translate into better government services through these departments.

Mr. Gerald Bush (Special Assistant to the CEO, EMS Technologies):

Mac Evans, the previous president of the Canadian Space Agency, was asked to meet with government departments. He went to, I believe, NRCan, Fisheries, and many of the large federal government departments and discussed with them the programs they were trying to deliver, and he talked about how space resources could help to deliver that--things such as RADARSAT, which is able to provide radar images of the country. It helps with ice management, it helps with crop management, it helps with disaster management. So different types of space assets can provide services that we currently need to procure in some fashion today, but in a more economical way.

We believe that some of the programs we proposed to the Space Agency can be used to provide services to Canadians at lower costs in an aggregate over time.

Mr. Paul Bush (Vice-President, Corporate Development, Telesat Canada): The other thing I would add to this is the issue of basic communications. There are almost 6,000 communities in Canada and a large percentage of them still do not have broadband access, so from a government perspective providing a broadband pipe into the health care centre, or into the school, or into the federal departments would be an impetus. What we're saying is that governments should be a first user of some of these technologies, and then it will broaden the capabilities within a particular community.

Mr. Tony Valeri: How much additional funding are we talking about?

Mr. Gerald Bush: The 10 programs we proposed to the Space Agency have a total price tag of $2 billion, but we would expect that--

Mr. Tony Valeri: Is that over one year, two years, five years?

Mr. Gerald Bush: We would expect that to be over a 7- or 10-year period. Marc Garneau would probably select a number of those programs, not all 10.

The Chair: Just to clarify, that's also over several departments. Over time and over--

Mr. Gerald Bush: And over departments, that's right.

The Chair: That's right.

Mr. Wilfert, please.

Mr. Bryon Wilfert: Thank you, Madam Chair.

On the Space Agency, on page 3 you talk about the fact that 15% of the annual revenues come to the industry from the government. You talk about export success. I know you don't have time to go into this now, but you talk about the government receiving a three-to-one return and you talk about the Canadarm getting a six times return. You give us a list, which I've added up, of probably about $1.6 billion in costs that you'd like to see.

What is the priority on that list? Clearly, we don't have $1.6 billion, even though I'm sure they're all very worthy. I have my own, but I'd like to know what is it you see as critical to you in terms of advancing many of the objectives you've outlined?

Mr. John Keating (Chief Executive Officer, COM DEV International): Actually, we're in the fortunate position that we don't need to determine what the priorities are. The Canadian Space Agency, which is representing the citizens of Canada, can make those choices on our behalf.

What we're doing is saying that we can offer a series of technologies and a series of programs, all of which are wonderful. As you in the finance committee know, lots of people offer ideas in terms of government spending that are valuable and important and useful. We're doing the same thing. We're saying to the Canadian Space Agency that we can help in terms of security, we can help in terms of access to information, we can help in terms of health, and we can help in terms of disaster management. There are a number of things we can do that would help the lives of Canadian citizens. We look to the Canadian Space Agency, in terms of its relationships with the departments, to select from those things and say these are the things the Government of Canada wants, things that represent the needs of Canadians.

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Mr. Bryon Wilfert: Given the number of partners here, where do these numbers come from?

Mr. John Keating: All of us spent a lot of time in terms of assessing the particular programs that are possible for us, and it's very easy for us to do because we've been engaged in this business for a very long time. My company has been involved in this business for 30 years, so it's relatively easy for us, with these other organizations, to sit down and say what it would take to launch and operate a satellite that would provide these particular services. We have a pretty good idea of what those things are and we can provide those numbers. Clearly, we go through a process with PWGSC to make sure there's an appropriate bidding process, that they are properly financed, and they're right.

Mr. Bryon Wilfert: Doctor, on the issue of wellness and injury prevention, I concur with you completely, particularly on the issue of injury prevention, having been involved for many years with playground and safety issues as a former president of the Canadian Parks and Recreation Association. We put a whole strategy together. The difficulty is that these strategies are presented and there never seems to be a real lead agency in the government to really fulfill them.

You talked about NGOs and the important role they play. I would certainly think, for the benefit of the committee, if we had something in writing, it would be helpful to follow up. Certainly there are wellness programs out there. The Department of Health certainly has been supportive, but again, it's really getting to the next stage.

I've just received something today on literacy--which of course is brilliant to get, because Literacy Action Day is on Thursday, so naturally it will be a lot of help to me to get it today when I could have used it a month ago. The problem is that there's a lot of information out there that we don't seem to disseminate in an effective manner.

So with the appropriate partners such as CPRA and other NGOs, perhaps you could provide something and also maybe quantify some of the costs you see. You did mention a figure there, but how that would actually be applied might be helpful for the committee.

Dr. Robin Walker: Right. Marie might wish to speak to this.

Ms. Marie-Adèle Davis (Executive Director, Canadian Paediatric Society): We can certainly do that. We missed the boat on getting invited early so we didn't have time to present a written brief, but we certainly can do that. We already have a good relationship with the Canadian Parks and Recreation Association around healthy, active living and injury prevention, so we can certainly follow up.

Mr. Bryon Wilfert: Thank you very much.

The Chair: Thank you very much.

Colleagues, you're about three minutes from the vote, so I will excuse you.

To our presenters today, thank you very much. I am sorry and I apologize that your question and answer time was abbreviated, but I think it's a more efficient use of your time not to have to wait through our voting and then return here to perhaps a lesser participation.

We certainly appreciate everything you've done today. If a further brief is coming, if you distribute one copy to us, we can translate and distribute it to all members of the committee for you. Thank you very much.

We have the Governor of the Bank of Canada tomorrow afternoon at 3:30, in this room. We are adjourned.