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37th PARLIAMENT, 2nd SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Wednesday, October 30, 2002

0830

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

0835

Mr. Paul O'Hara (Individual Presentation)

0840

0845

The Chair

Mr. Paul O'Hara

The Chair

Ms. Margie Vigneault (Nova Scotia Representative, Child Care Advocacy Association of Canada)

0850

0855

The Chair

Professor Barry Gorman (Member, Financial Executives International Canada)

0900

0905

The Chair

Mr. Robert Cook (President, Nova Scotia Association of Health Organizations)

Ms. Helen Patriquin (Chief Liaison Officer, Nova Scotia Association of Health Organizations)

0910

The Chair

0915

Mr. Jeff Somerville (Chief of the Board, Metropolitan Halifax Chamber of Commerce)

0920

The Chair

Mr. Charlie Penson (Peace River, Canadian Alliance)

Mr. Robert Cook

Mr. Charlie Penson

Mr. Robert Cook

0925

Mr. Charlie Penson

Mr. Jeff Somerville

Mr. Charlie Penson

Mr. Jeff Somerville

Mr. Charlie Penson

Mr. Jeff Somerville

Mr. Charlie Penson

Mr. Jeff Somerville

Mr. Charlie Penson

Mr. Jeff Somerville

Mr. Charlie Penson

0930

Mr. Jeff Somerville

The Chair

Mr. Pierre Paquette (Joliette, BQ)

The Chair

Mr. Robert Cook

Mr. Pierre Paquette

Mr. Jeff Somerville

0935

Mr. Pierre Paquette

The Chair

Mr. Bryon Wilfert (Oak Ridges, Lib.)

0940

The Chair

Mr. Bryon Wilfert

The Chair

Mr. Jeff Somerville

Mr. Bryon Wilfert

Prof. Barry Gorman

The Chair

Mr. Bryon Wilfert

The Chair

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

Ms. Margie Vigneault

Ms. Maria Minna

0945

Prof. Barry Gorman

Ms. Maria Minna

The Chair

Mr. Scott Brison (Kings—Hants, PC)

Mr. Jeff Somerville

0950

Mr. Scott Brison

Prof. Barry Gorman

The Chair

Mr. Shawn Murphy (Hillsborough, Lib.)

Mr. Jeff Somerville

0955

Mr. Shawn Murphy

Prof. Barry Gorman

The Chair

Ms. Alexa McDonough (Halifax, NDP)

1000

Mr. Jeff Somerville

Prof. Barry Gorman

Ms. Alexa McDonough

The Chair

Mr. Roy Cullen (Etobicoke North, Lib.)

1005

Mr. Robert Cook

Mr. Roy Cullen

Mr. Robert Cook

The Chair

1010

The Chair

1015

Dr. Chris Ferns (President, Association of Nova Scotia University Teachers)

1020

1025

The Chair

Mr. Desmond Morley (Executive Director, Federation of New Brunswick Faculty Associations)

1030

The Chair

Ms. Mary Jess MacDonald (President, Nova Scotia School Boards Association)

1035

1040

The Chair

Mr. John Fox (Regional Representative for the Atlantic Region, Union of Canadian Transportation Employees)

1045

1050

The Chair

Mr. Charlie Penson

Dr. Chris Ferns

Mr. Charlie Penson

Dr. Chris Ferns

1055

Mr. Charlie Penson

Dr. Chris Ferns

Mr. Charlie Penson

Dr. Chris Ferns

The Chair

Mr. Pierre Paquette

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

Mr. Pierre Paquette

Mr. Desmond Morley

1100

Mr. Pierre Paquette

The Vice-Chair (Mr. Nick Discepola)

Mr. Gary Pillitteri (Niagara Falls, Lib.)

The Chair

1105

Dr. Chris Ferns

The Chair

Mr. Desmond Morley

The Chair

Mr. Bryon Wilfert

1110

The Chair

Mr. John Fox

The Chair

Ms. Mary Jess MacDonald

The Chair

Ms. Alexa McDonough

Mr. Desmond Morley

1115

Ms. Alexa McDonough

Mr. John Fox

The Chair

Mr. Nick Discepola

1120

Mr. Desmond Morley

Dr. Chris Ferns

The Chair

Mr. Scott Brison

1125

Dr. Chris Ferns

Mr. Desmond Morley

1130

The Chair

Mr. Shawn Murphy

Mr. John Fox

Mr. Shawn Murphy

Mr. John Fox

Mr. Shawn Murphy

Mr. John Fox

Mr. Shawn Murphy

1135

Mr. John Fox

The Chair

CANADA

Standing Committee on Finance

NUMBER 009

2nd SESSION

37th PARLIAMENT

EVIDENCE

Wednesday, October 30, 2002

[Recorded by Electronic Apparatus]

¾ (0830)

[English]

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

Pursuant to Standing Order 83(1), we will continue this morning in Halifax the pre-budget discussions, and we're very pleased to have with us two panels.

The first panel has, as an individual, Mr. Paul O'Hara; from the Child Care Advocacy Association of Canada, Margie Vigneault; from the Financial Executives Institute Canada, Professor Barry Gorman and Michael Murphy; from the Metropolitan Halifax Chamber of Commerce, Jeff Somerville, who is chief of the board, and Peter Brown, chair of the federal finance committee; from the Nova Scotia Association of Health Organizations, Mr. Robert Cook and Helen Patriquin, who is the chief liaison officer. Welcome, everybody.

I will take seven-or eight-minute rounds. At around seven minutes, you'll see me move my pens. When I catch your attention, you can just wrap up then. We'll go for presentations in the order you're on the agenda.

We'll commence with Mr. Paul O'Hara.

¾ (0835)

Mr. Paul O'Hara (Individual Presentation): Good morning, everyone, and thank you for the opportunity to come before you today and present the views of the various organizations I'm associated with here in Halifax. As you can see from the front page of my presentation, the issue I wish to discuss today is housing, particularly the need for a national housing strategy.

I'm a member of the National Housing and Homelessness Network, which is made up of a lot of the larger communities across the country, with a focus on trying to promote a national housing strategy. This organization is suggesting that we need $2 billion a year to bring housing back onto the table, to provide housing for the homeless and to create affordable housing for low-income families. The report discusses the need for the supply of housing, the need for affordable housing, the need for supports for people who need housing, the need to rehabilitate a number of buildings, particularly in our community, and the need for emergency relief in the form of shelters. We also support the idea that non-profit housing associations are the delivery model for housing solutions.

It's interesting that some 13 years ago, almost to the day, I attended the national Liberal task force on housing here in Halifax. It was co-chaired by our former finance minister, Paul Martin. The report is often referred to as a housing solution document, because of the many recommendations to the then Conservative government by Paul Martin and Joe Fontana, which, unfortunately, Paul Martin did implement when he became a member of government.

At that time I co-presented with Father Peter McKenna, who was executive director of Hope Cottage, which is a soup kitchen here in Halifax. I want to just give a quote from Father Peter. He talked about homeless youth and he said:

They are regularly alone, vulnerable, powerless. They are nameless, voiceless. What you and I should imagine is what it would be like to lose absolutely everything, so that you do not even have someone to call up.

I want to use that quote because last Saturday a number of homeless youth squatted in the old Halifax Infirmary, a hospital not used now, and the kids use it as a place to sleep sometimes. So when you talk about improving the quality of life of Canadians, we need to consider these kids, who are really cast away. They're being supported by some university students and some housing activists. They squatted in the building overnight and were removed by police the next day. Things haven't changed much in 13 years.

Dorothy Patterson is an outreach worker with a local organization who took about 10 kids apple picking last week. They spent the day out of the city, and got to walk along the beach even, along the ocean. She described how good it was to be able to relate to kids at that level in that environment. It was a long day, and she was tired when she got back to Halifax. They went to a drop-in centre, had a meal, and Dorothy was quite anxious to go home and go to bed and get some rest. What she realized, though, was that of the 10 kids she had with her that day, five were going to be on the street that night.

The federal government's approach to homelessness has been through the supporting community partnerships initiative, and it has been helpful. We have a 20-bed shelter for youth that opened last December. It's been full every night since. I think the point is that we need housing for young people. We need housing for a lot of people. We don't need another shelter or a larger shelter; that's not the solution. In Halifax we have a low vacancy rate and the housing that is developed is all high end. We need social housing, we need it to be affordable for people of low income, and we need housing that has a supportive environment to help people who are less fortunate and need some support and development in their housing.

Shelters in the communities for women and women with children are often full to capacity. Some people are staying in them as much as a year. Some of the people there have issues with drug addiction. So there's not enough housing if people are staying in shelters for a year. What exists is not affordable. It needs to be supportive.

The supporting community partnerships initiative is beginning to address these problems on a very small scale. The problem is always sustainability, because supportive housing requires staffing and programs. Our provincial government is focused on debt reduction and a balanced budget. So the voice of the marginalized in our community is unheard in decisions on budgets. They are often affected the most severely by social and economic policy. So quality of life and economic prosperity for those on the margins is voiceless and silent.

It's the same with men's shelters, although they don't operate at full capacity. People are staying there longer periods of time and they can't find affordable housing. There is an increase in prescription drug use among people who are staying in shelters. Violence is a real concern. People in shelters are beginning to carry weapons for protection. So we need more social housing, we need more supply, and it has to be affordable. And a component of support, to help people, is also really necessary.

We have rooming houses in our community in which people are exploited and have met violent deaths. I could read you coroner's reports that you'd find appalling. The autopsy says natural causes, but the coroner's report really implies that something else has happened. These units are substandard, and landlords receive the maximum welfare rate. The landlords are known well to the community and to government agencies. To close down the rooming houses would mean the street would be the only option for the citizens living in these deplorable and dangerous conditions.

A local drop-in centre, the housing support centre, provides a bit of a community well for the homeless or those living in run-down rooming houses. They have about 100 people a day who drop in just for social contact, and more than half of these individuals are either living in substandard housing or what they call couch-serving, living in overcrowded conditions, or they're on the street. So again, we need more supply. It has to be affordable, supportive, and rehabilitative. We'd like to see these old buildings rehabilitated.

Again through the supporting community partnerships initiative of the federal government, we have had an 18-unit building developed most recently. We need more of these. There's a 300-person waiting list for that building.

¾ (0840)

If you look at the community lodge that I work in—located in the north end of Halifax—some people say there's enough social housing there and we need to stop putting social housing in. Others say we need to take these rundown rooming houses away from exploitive landlords and convert them into social housing for the people presently living in them.

Again, there's an example in St. John's, Newfoundland, of the Stella Burry Corporation, run by Jocelyne Greene and supported by SCPI. I have a 10-room rooming house, and she told me yesterday that hers has 14 rooms. They took over an old rooming house that was very negative in the community, with all kinds of negative activity. They purchased the building, they rehabilitated it, they moved the tenants all back in who were in there before, and it's working really well. Again, we need this type of housing on a much larger scale.

Citizens should not be pushed out of their communities or provinces and down the street. These types of developments, such as the Metro Non-Profit and Stella Burry ones don't decrease supply. They address the issue of affordability, they are supportive, and they do rehabilitate old buildings.

If you look at the appendix to my report, you will see housing facts that are taken from a number of government reports. Supply and affordability are very serious issues in our community, and they're outlined through the appendix. Too many working families are paying too much for rent and are forced to use food banks for their basic needs. In reality, I think we're starving the children of Nova Scotia. There's a very high incidence of young children living in poverty; it's at least one in five.

As the report states, by its own admission, the Province of Nova Scotia has stated that the need for decent and affordable housing in Nova Scotia is both urgent in nature and significant in quantity.

¾ (0845)

The Chair: Mr. O'Hara, I'll have to ask for your concluding sentence.

Mr. Paul O'Hara: Okay, thank you.

I have one last comment. There's one other area when we're talking about emergency relief and when I talk about rooming houses and the exploitive nature of things that are happening there. I have witnessed several deaths in these rooming houses. I took John Ralston Saul into one of these rooming houses when he was here with Adrienne Clarkson, and he was appalled at what he saw. His mouth dropped. He couldn't believe this was actually happening in any community. People are dying in these houses.

We have a plan for a harm-reduction facility, and we believe it will significantly shift things. A man died last December on our streets. There's a woman in the community right now who we believe will die in the streets this winter if something doesn't happen. We need the support and we need the sustainability. We need the federal government to institute a national housing strategy.

Thank you very much.

The Chair: Thank you very much.

We'll now move to the Child Care Advocacy Association of Canada. Ms. Vigneault, commencez, s'il vous plaît.

Ms. Margie Vigneault (Nova Scotia Representative, Child Care Advocacy Association of Canada): Thank you very much. I'm the Nova Scotia representative of the Child Care Advocacy Association of Canada, a group that advocates in favour of quality, affordable, accessible child care in Canada. I decided to start with the throne speech and first say what our organization's response to the throne speech is.

It was very encouraging to hear that the federal government is looking at child care in Canada and has already done so in the last two years. I think most people know that. Our organization wanted to make that specific in terms of what really is needed.

The Child Care Advocacy Association of Canada really welcomes the government's renewed commitment to work with its partners to increase access to quality child care and the early learning opportunities this system offers children.

We were pleased that this Speech from the Throne reflected an acknowledgment of our collective responsibility to Canada's children and families. Quality child care is the cornerstone of a comprehensive early childhood system, and one of several key components in a strategy to address family poverty. The vision articulated in the throne speech needs to be followed up with a long-term action plan and substantial funding. The Child Care Advocacy Association of Canada therefore calls for the federal government to, first of all, commit to a new five-year action plan to develop a comprehensive child care system, with a new expenditure of at least $2 billion a year starting in 2003, and with a commitment to maintain a cumulative level of funding after 2005.

Next, develop a consistent federal-provincial-territorial agreement on the components, structure, targets, and timeline for a child care system that ensures that all of Canada's children, regardless of their family income, geographical location, or employment status will have access to a range of regulated, high-quality, affordable, non-profit, financially sustainable child care programs in their communities.

Next is to require all provinces and territories to use the designated federal funds solely for building a comprehensive child care system.

Require each province, territory, and government to work with the municipalities and community-based organizations to plan and implement regionally responsive and accountable child care services.

There is a quote from Deputy Prime Minister John Manley, the Minister of Finance. He stated:

We are committed to ensuring that they all get the best possible start in life and have continued support as they grow.

Another quote by the Global Movement for Children says:

The citizens of the world care about children and expect governments to keep the promises they make to them.

So we are really urging the federal government to keep their promise for children.

The next phase of my brief just takes a look at Nova Scotia. Here in Nova Scotia we are actually very pleased to report that there have been valuable improvements in our ability to provide quality child care services for children and families, because of the additional dollars provided in the past two years by the federal government. Because of that, we have been able to raise child care providers' salaries. This enables us to keep and attract trained early childhood teachers, and it will enhance the quality of child care programs.

There is more financial support for low-income families. There is more funding available for early intervention program support, and there will be more affordable training opportunities available for those who are employed in child care programs.

However, there is much more still to be done in Nova Scotia. Those who work in child care programs are still actually earning low salaries. Although they have improved, they are nonetheless low salaries, considering the responsibility and the skill required. There are certainly inadequate benefits for people who work in early childhood education, in spite of the fact that salaries have improved in the last two years.

At this time, the new federal funding is a five-year commitment, so what will happen in year six? A drop in salaries to the previous woefully low levels will have a disastrous impact on the child care sector here in Nova Scotia.

Also, many children still fall through the cracks for various reasons. Some children live in underserved areas of the province, so the services are not there for them. Some children continue to have hit-and-miss child care because there is less affordable child care available for certain age groups, such as infants and toddlers. Nonetheless, parents have to work to support their families, and they sometimes have to accept child care options they don't feel all that comfortable with. I think that is a very sad situation.

Some children are in situations of uncertain care. They are in trouble and not getting what they need. They're just being missed by everyone, and therefore fall through the cracks.

For some children with special needs, it's difficult to find affordable placements. Although the funding is increasing, there are still a lot of children who need special care. There are still not really enough places that parents can afford for these children so they can get the interaction with their peers and the kind of support they need.

¾ (0850)

Also, in the area of training, it's still very difficult for people who work in the early childhood profession to further their training. It's becoming more and more expensive to pay for training. Some people are already in the field and would like to continue with their education, and it's very prohibitive to be able to afford that financially.

Another point I think important is that child care program administrators have difficulty getting the revenue needed to cover the basic operating costs of a child care program. Funding is usually targeted. I'm not saying this is necessarily a bad thing, but basic operating tends to be overlooked.

Funding is usually targeted. Some examples are for equipment, for salaries, and for individual special needs children. If an organization is fundraising, people are much more willing to help if they're raising money for something specifically appealing. But the basic costs are increasing for such things as workers' compensation, insurance, electricity, rent, food service, and now it's pretty important to be able to have e-mail and Internet service, and these things are expensive. The extra money is not coming in to cover that.

Whenever that happens, that we have expenses but we don't have the revenue to balance, that raises the dilemma of keeping the service affordable to families while staying on the black side of the ledger, because the thing is, families have limited incomes. You can't just keep raising your fees more and more, otherwise it's just not affordable.

As you see, I've kept my brief, brief. There's a great deal of detailed statistics and information on child care. I didn't bring all that with me today, but that's very readily accessible for people.

Thank you very much.

¾ (0855)

The Chair: Okay, we'll move on to the next presenter, from Financial Executives International Canada, Mr. Murphy or Professor Gorman.

Go ahead, sir.

Professor Barry Gorman (Member, Financial Executives International Canada): Thank you.

My name is Barry Gorman. I'm a member of FEI Canada, Financial Executives International Canada. Mike Murphy is the incoming president and chief executive officer. We also have with us two Halifax members, Stephanie Coldwell, who's the national vice-chair, and Jim Power, who's the president of the Atlantic chapter.

I understand the brief we prepared was submitted to the committee some time ago, so I'm really not going to go over it. It's a rather lengthy document. I'll just summarize some of the issues in that document.

The brief focuses on three areas. One is a proposal for a corporate group reporting system in Canada. Canada happens to be the only country in the western world that doesn't have some kind of formal, direct access to group reporting. Every other country in the world has some kind of system.

We talk about a tax deduction for stock option awards, which the accounting people are going to require companies to report, I believe sometime in 2003, but I'm not sure.

We also talk about the establishment of a centre for continuing education and training. One of the issues we have discovered from a lot of our conversations with members is that when people in their organizations are looking for job training courses and continuing education for their employees, they actually have difficulty finding off-the-shelf programs for their particular employees. We also discovered that a tremendous number of people in my business, which is the university business, do not invest a great deal of time and effort in developing work-related courses, because they typically find them to be one-off type of courses and it's prohibitively expensive for a university to develop one course for one group; hence a lot of providers of these courses don't provide courses.

With regard to the group reporting proposal, which is what I intend to spend most of my time on, we believe it's the duty of government to eliminate impediments, anomalies, and inconsistencies in the tax system, especially those that don't perform a tax policy function.

The group reporting proposal is in fact an old finance department proposal that we've resurrected; that's why we've used the term “an old chestnut” in the paper's title. The Department of Finance published a paper on the topic in 1985. So although I'd love to take credit for a brilliant, original idea, it's actually not ours.

The inconsistency in the tax system with regard to both corporate reporting and stock options is an underlying theme in that report. We're asking that this committee consider removing those kinds of inconsistencies.

With regard to corporate reports, of course in this country each corporation has to file its own tax return, and cannot directly transfer losses, unclaimed deductions, or tax credits to other members of the corporate group. We did a considerable number of interviews and questionnaires with our members. At the time there were about 1,300 members in the organization. We discovered that 71% of the membership had at one point in time incurred losses in their corporate group. In fact, 16% of the corporations could never use the losses, credits, or deductions that they were entitled to, because the rules didn't provide a sufficient length of time.

Now, the 71% of corporations that incurred losses did get their tax relief, but the problem is, tax relief comes several years later. For competitive reasons, cashflow reasons, and these types of reasons it would simply make far more sense for a corporate group to get relief this year for losses incurred or deductions earned and tax credits received this year. The problem with our tax system is that in order to access those amounts, corporations have to sometimes do end-arounds, to be quite frank. If you look at one of the tables, some of the corporations that we surveyed are spending $500,000 to $1 million trying to do an end-around with something that should be available to them through the front door. This seems to us to be a tremendous waste of valuable time and effort.

From a cashflow perspective, the government has always been concerned about the size of tax losses and the hit that the tax yield would take. In fact, the only hit to the federal yield would be bringing on stream losses that now expire. And if our survey is any indication, 16% of the membership would be able to use those losses, whereas formerly they would not.

The tax yield issue is a timing issue, it's not a cost to the government. The corporations get their tax losses over seven years, or investment tax credits, in some cases, over ten years. So it's not a tax loss, really, but a timing issue.

The tax department is always concerned about abusive and aggressive tax planning, which is obviously of concern. On this issue I might note that the tax department has lost a number of spectacular cases at the Supreme Court, so they haven't been terribly good at rooting out the really smelly cases that have come up. However, fear of tax abuse is always an issue, and the tax department does have the general anti-avoidance rule at its disposal, so these kinds of issues are probably not significant.

The amount of tax loss is incredible; it's about $9.1 billion, according to the most recent survey. If all of that came home in the next year, it would knock a bit of a hole in the surplus, or cause a deficit.

¿ (0900)

The real concern we have about this issue is that corporations spend a tremendous amount of time, effort, and money doing things indirectly that, quite frankly, the tax system should allow them to do directly.

The bulk of that report is a framework for a corporate group reporting system. It doesn't answer every question, but this committee, if you are interested in the issue, has a starting point to take to the department in order to get back on track with something they took off the rolls in 1985.

Thank you.

¿ (0905)

The Chair: Thank you very much.

I'm going to go out of order here to accommodate one of our presenters. We'll go to the Nova Scotia Association of Health Organizations.

Mr. Robert Cook (President, Nova Scotia Association of Health Organizations): Thank you very much.

I am accompanied by Helen Patriquin, who was instrumental in both polling our members and preparing the brief, which was submitted to you some time ago.

I'm suffering from a bit of a cold and I have a short-duration voice, so Ms. Patriquin is going to present the brief. We're both available to answer questions.

Ms. Helen Patriquin (Chief Liaison Officer, Nova Scotia Association of Health Organizations): On behalf of the board of the Nova Scotia Association of Health Organizations, thank you for the opportunity to present to this committee again this year, and thank you for moving these hearings to various parts of Canada. It allows organizations such as ours to participate in our democratic process.

NSAHO is an organization of health service providers. Our membership includes the nine district health authorities here in Nova Scotia, the IWK Health Centre here in Halifax, nursing homes, residential care facilities, home care agencies, and community-based providers. Nationally, we are a member of the Canadian Healthcare Association, which appeared before you last week.

Just days ago the report of the Standing Committee on Social Affairs, Science and Technology was released, commonly known as the Kirby report. Within the month the report of the Romanow commission will be made public as well. These are two exhaustive studies of the Canadian health care system, and while there will no doubt be different recommendations emanating from each, we anticipate that there will be a common theme. That theme will be one that acknowledges that an increase in federal health funding is imperative if we are to maintain a national health system that provides Canadians with appropriate, comparable, and quality health services.

Your focus this year is on assuring greater levels of economic prosperity for all Canadians and the highest quality of life for all. Let NSAHO begin by saying that a sustainable publicly funded health system is central to the federal government realizing both of these objectives. Business leaders have for a long time acknowledged the economic benefits of a publicly funded health system in terms of a healthy and productive workforce and increased global competitiveness and as an incentive to locate businesses here in Canada. Certainly, no one can dispute that access to appropriate health services is a fundamental component of quality of life for Canadians. Therefore, we urge you to consider the federal government's ongoing contribution to the health system as an investment, not a drain, in the personal health of Canadians and the economic health of our country.

We believe it is imperative that the federal government view health as its foremost funding priority. To do otherwise would be to ignore the values and priorities of its citizens and the advice of commissions and committees mandated to advise the federal government on this matter. You may well ask, should this be a blank cheque? We say absolutely not. Both governments and providers need to be publicly accountable for their health funding decisions and the results for the population that are achieved from those decisions.

Our second point to you this morning is that the federal government must adopt a more rational funding approach and implement a needs-based formula for CHST transfers. Under current federal policy the CHST program transfers funding to the provinces on an equal per capita basis.

The amount each province receives is determined by the size of its population, and this does not consider the difference in need for health services among populations. Let me quickly try to explain the impact of this.

It's well known that there's a correlation between age and the use of health services. According to Health Canada, seniors over the age of 65, who comprise about 13% of the Canadian population, consume about half of all health services. Saskatchewan, which currently has the highest percentage of its population over the age of 65, receives the same federal funding per capita as does Alberta, which has the lowest percentage. The current approach also does not take into account the strong economic base provinces such as Alberta have to fund their own programs. Nor does the current funding model take into consideration that populations with a lower health status, such as here in Nova Scotia, will have a higher demand for health services. Our poor health status was demonstrated in spades last month in a health indicator report to Nova Scotians.

It is provinces such as ours that have the lowest level of economic growth and prosperity, so we get a double hit. We have an increased demand for services, but we have more limited opportunity to raise revenues to pay for this demand. As a result, the basket of insured services in this province is more narrowly defined than it is in most. It often comes as a shock to upper and western Canada to hear that long-term care is not an insured service in this province. And while you'll hear from the wealthier and younger provinces, which will argue strenuously for per capita funding, it is important to note that no province in Canada allocates its funding on a strictly per capita model.

So we believe that you, the federal government, must move this way as well. We urge you to take a leadership role on the development of a needs-based funding model, one that incorporates both the prevalence of conditions that generate demand for service and the need for investments to improve the health of our populations.

Investments to improve health are extremely important. We believe new federal funding should not be used to prop up the status quo, but to support appropriate systems change, in primary health care for example. Yes, our system needs redesign and quality improvement. We know more emphasis needs to be placed on improving workplace processes, on health human resource issues, and on the identification and dissemination of best practices. But these incentives, we know, will not occur without adequate funding.

Health infrastructure is another critical area in need of reinvestment. The underfunding of our health care system for the past decade has resulted in aging equipment and deferred maintenance or replacement of facilities. We need health information systems, so that the efficiency and increased effectiveness of integrated health systems can truly be realized. Processes such as the electronic health record and technology like telehealth hold much promise for improving both quality and access for provinces, such as Nova Scotia, with a large rural population.

The federal presence in the above area is critical from both a leadership and funding perspective. As was stated by the Canadian Healthcare Association when they appeared before you last week, it is only the federal government that is accountable to all Canadians for achieving access to comparable services, no matter where we live in this country. We need your leadership now in actions that affirm the role our Canadian health care system plays in assuring economic prosperity for Canadians and the highest quality of life for all, actions that include increasing the federal funding contributions to a funding model that recognizes the unique circumstances of individual provinces and promoting innovation and system rebuilding by targeting federal funding for system improvements, quality enhancement, research, and health infrastructure.

We recognize the competing demands for federal resources, such as we've heard here today. We need a decision-making environment that supports both health and other social investment, particularly those related to the broader determinants of health. Health care is the number one priority for Nova Scotians, just as it is for all Canadians, and Canadians have spoken about their strong desire for a publicly funded health system, one in which access is based on need, not ability.

¿ (0910)

The Chair: Thank you very much.

Our final presenters this morning are Mr. Peter Brown and Mr. Jeff Somerville from the Metropolitan Halifax Chamber of Commerce. Go ahead, please.

¿ (0915)

Mr. Jeff Somerville (Chief of the Board, Metropolitan Halifax Chamber of Commerce): Thank you very much.

I'm chair of the board of the Metropolitan Halifax Chamber of Commerce, and with me today is Peter Brown of Deloitte & Touche, who's chair of the chamber's federal finance committee. Thank you for the opportunity to share with you our views as you begin your budget preparations.

By way of background, the Metropolitan Halifax Chamber of Commerce is a best practice business advocacy organization representing the interests of more than 2,000 businesses and members within the HRM. These businesses employ more than 60,000 labourers, representing more than a quarter of the total working force of metropolitan Halifax. Our objective is to continuously strive to make metro Halifax an even better place to live, work, and play.

Halifax is, and has been for the past five years, experiencing unprecedented growth. There has not been a more exciting time to live and work in Halifax than now. Our economy is expanding, our unemployment rate is low, our malls are busy, and our business community is globally competitive.

Halifax International Airport continues to expand, though the one outstanding issue we continue to face is that of U.S. customs pre-clearance. We believe pre-clearance in Halifax for passengers travelling to the U.S. makes even more sense now than before.

The offshore sector in Halifax is proving to be a key driver of growth, and companies that were once only located in Calgary and Houston are now present in Halifax. Halifax is the newest member of the organization of world energy cities, and we're proud to be hosting that group's annual general meeting in 2003.

The point of all this is to demonstrate that, increasingly, the problems we face in Halifax are those associated with growth and prosperity. Our challenge now is to seize the opportunities that have come our way and leverage them, so that more of our citizens can live more fulfilling lives in a community that preserves its values and protects its lifestyle. We need strong leadership. We need leaders with wisdom and courage. We need leaders with a vision of tomorrow and the capability to deploy plans that will see the opportunities and promises of today fulfilled.

Three key issues remain the priorities of our members, fiscal restraint, debt reduction, and tax reduction. Given the current political climate, with leadership reviews under way in three parties, we feel it is imperative to have policy stability, especially in these three areas, over the next several months to ensure sustainable business growth.

Fiscal responsibility continues to be necessary today. We've said it before, and we'll continue to say it: any new spending must come from within existing spending envelopes. The chamber was disappointed with the additional spending initiatives contained in the 2001 budget and again this year. We're concerned by the indications of the throne speech that further spending increases will come with this year's budget.

Another example comes from the recently released Senate report. The chamber is concerned, after hearing the recommendations of the Senate committee on health reform, that an extra $5 billion per year needs to be raised through an additional tax to fund health care. We remain firm that any new spending must come from within the existing envelope. We recognize that incremental growth in spending based on population growth and inflation is inevitable, but rather than further spending beyond this incremental growth, we believe government must prioritize spending and exercise restraint.

We are pleased that the 2002 surplus was paid to debt and congratulate government on this action. However, we still believe a clear strategy that outlines specific debt reduction plans and targets is necessary. Last year's budget did not contain such a plan, and we would strongly encourage the inclusion of one this year. With less debt, more money is available for strategic investment and program spending, and we would all like to see our nation realize the advantages of increased fiscal flexibility. These are difficult decisions, but it's time to make them. I would liken the level of debt we are carrying to playing the game shorthanded. In fact, in Nova Scotia perhaps we're two men short right now. The ability to free up the debt servicing costs to program spending will enable us to take the strain off our penalty killers in the health care sector and the education sector.

Our members have told us many times that after spending is under control and the debt is reduced, personal tax cuts are necessary, but not before. Tax cuts provide the stimulus we need to place our economy in a strong competitive position; however, we believe sustainable tax cuts can only be maintained if government controls new spending and reduces debt.

The chamber is pleased with the current tax reduction initiatives undertaken by the government and the subsequent positive economic benefits this has had. However, it is still imperative that debt reduction and fiscal restraint remain the key focus of policy initiatives.

That's not to say there are not certain target areas where tax reform should be applied. We would like to add our voice to the work of the Canadian chamber in support of their federal policy paper, “The Challenge: Ensuring Competitiveness and Future Economic Prosperity”.

We agree that reducing EI premiums, eliminating the high-income surtax, reducing corporate taxes, eliminating the capital tax, ensuring regulatory policies that promote financial and market efficiency, and immigration policies that attract individuals with the necessary skills are all necessary initiatives to grow the economy of our nation. We strongly believe the continued buildup of a massive EI surplus undermines the intent and integrity of the EI system. The surplus in the EI account should be capped and EI premiums should be reduced in order to promote job growth. We have many times what is required in the EI surplus to ride out a severe recession.

We also believe high corporate taxation policies, such as the capital tax, are a major disincentive to investment in Canadian companies. As well, regulatory policies with excessive red tape to wade through are detrimental to our nation's economy.

We realize our priorities may differ from those of some other regional communities in Atlantic Canada, but we believe innovative policy that supports economic growth is imperative to support our already strong economy. We encourage policies that focus on employment, labour mobility, and skill building, as opposed to policies that encourage underemployed Canadians to remain in their positions.

Another example is infrastructure funding. We have a major concern in our decaying infrastructure. Infrastructure investment is required to place our economy in a strong competitive position for the future. A critical issue that must be addressed is the cleanup of the Halifax harbour.

In conclusion, government needs to provide leadership and to make decisions based on sound economic policy. Government must determine priority areas and exercise spending restraint. It is imperative that we control public sector spending, stay focused on commitments to balanced budgets, and reduce our national debt.

Thank you for the opportunity to present the chamber's submission.

¿ (0920)

The Chair: Thank you very much.

Now we'll go to the eight questioners I have. We're going to give them six minutes each, including the questions and answers, so that we can have a fairly good exchange.

We'll start with Mr. Penson.

Mr. Charlie Penson (Peace River, Canadian Alliance): Thank you, Madam Chair. I'd like to thank the witnesses for coming today and making presentations to our committee. I thought they were very thoughtful, and I value their input into our committee process on the pre-budget side.

To the Nova Scotia Association of Health Organizations, you mentioned the CHST, and I'm just wondering, in regard to the transfers from the federal government to the provinces, what your position would be if the health component were broken out of that and identified separately from the block funding. Would you support that approach?

Mr. Robert Cook: Yes, we would. The fact that the CHST incorporates both education and health funding has given difficulties to notionally determining what the health envelope has been in the past, and I think it would certainly clarify what the federal government contribution is.

Mr. Charlie Penson: Would that also serve to help in terms of accountability on how that money is spent, then? Would there be some way of tracking it, if it were identified separately from the block transfers?

Mr. Robert Cook: Yes, I think it would. We would very much support improved accountability at all levels: the federal government; the provincial governments; and providers, who are members, of course. I think defining funding for specific purposes and setting forth outcomes expected are part of that framework. I think that's an area where the federal government needs to take some leadership.

¿ (0925)

Mr. Charlie Penson: Thank you.

I'd like to ask a question of Mr. Somerville from the chamber of commerce. You made reference to a need for fiscal restraint. We see that the economy of the United States is not recovering very quickly. Would that be one of the reasons you also urge that we be restrained in terms of increased spending, considering that over 40% of our GDP comes from exports mainly to the United States? Are you concerned about the recovery in the United States and our apparent growth in spite of that? Are you concerned that it might catch up to us?

Mr. Jeff Somerville: Yes, I would agree that continued economic expansion in Canada will be severely strained by the difficulties the U.S. economy suffers. We are so intricately tied with the U.S. given the high degree of exports to that country.

However, be that as it may, our position would be that irrespective of the economic activity in the U.S., we need to address our own fiscal situation first and foremost. I believe we still have a hand tied behind our back because of the high debt level that has been built up at both the federal and provincial levels, and we need to address that. We need to continue to apply surpluses to the debt and ultimately to free up resources so that we have greater flexibility and fiscal independence in the future.

Mr. Charlie Penson: I noticed that you also said that for any new expenditures in this current year the funds should be found within the existing budgetary framework. I gather you're saying no new taxes. That's really where you're at.

Mr. Jeff Somerville: That's exactly right.

Mr. Charlie Penson: Would that also include any funding for health care? Would your position be that whatever amount of money the federal government is going to be required to put into the national system should be found within the existing framework?

Mr. Jeff Somerville: We believe that health care and education are the number one and two priorities in public spending, but our position is that those choices should be made within the existing envelope.

Mr. Charlie Penson: Mr. Somerville, a lot of different sources--the latest one I'm reading is from Gordon Nixon, the president of the Royal Bank--talk about how our standard of living has fallen to about 70% of that of the United States and our productivity is 80% of that country's, and the fact that we don't seem to be closing that gap. I think the concern of a lot of people in this country is that it represents a problem for us because the United States is not only a place for us to do business but they are also a competitor of Canada in other third markets. If our businesses are not competitive, it makes it difficult for us to maintain that standard of living. Have you read his remarks? Are you following that productivity debate, and would you have anything to say about it?

Mr. Jeff Somerville: I can't reference the specific remarks. But I would agree wholeheartedly that we have masked a decline in our productivity by a decline in the Canadian dollar. While that has enabled us to remain competitive internationally, it has in actual fact reduced the total net worth of Canadians as individuals. That is not sustainable. We cannot continue that. We must close that productivity gap through natural productivity gains as opposed to relying on a weak dollar.

Mr. Charlie Penson: Does it not also express itself in a lack of investment in Canada as people see that they're not going to get a return?

Mr. Jeff Somerville: I'm sorry, would you repeat that, please?

Mr. Charlie Penson: Does it not also show up in lower investment in Canada because businesses have difficulty getting a good rate of return and therefore won't make the kinds of investments we need?

¿ (0930)

Mr. Jeff Somerville: I suggest that to improve our productivity, we will require increased investment in Canada.

The Chair: Thank you very much.

[Translation]

Mr. Paquette, you have six minutes.

Mr. Pierre Paquette (Joliette, BQ): Thank you, Madam Chair. I would like to thank you all for your very interesting presentations.

First of all, I would like to ask a question, because I obviously agree with his assessment when he says that the federal government made drastic cuts to the Canada Health and Social Transfer. For example, in the mid-80s, the federal government assumed the cost of 22% of all social programs. Currently, it pays for 14%, which means that for every $100 spent by the provinces, the federal government contributes only $14. This year, for example, the transfer will amount to about $18.6 billion, exactly the same amount that it was in 1994-95, when the Liberals came into power. So there is indeed a significant shortfall and, since these cutbacks have been made unilaterally, that has made health care planning difficult for the provinces.

I would like to know if you agree with the provinces' demands, namely, that the federal government increase the Canada health and social transfer by an additional $5 billion so that the provinces will have the money they require to fulfill their responsibilities in health and post-secondary education, in particular.

[English]

The Chair: Mr. Cook.

Mr. Robert Cook: It's an interesting question you raise. There's a lot hidden in the dispute between the provinces and the federal government about what's happened to funding. In fairness, one of the things that gets masked is that a number of years ago the federal government transferred tax points to the province. This was done in lieu of cash transfers and of course no longer appears on the balance sheet of funding that goes to the province. I have some sympathy with the federal government when they claim a higher rate of contribution overall.

That said, they have still fallen away from the level of contribution that was their responsibility in the past. Indeed, they have balanced the budget, but they have done so at the expense of the financial picture of this province. The costs of health care have really been borne by the province as the payer of last resort, if I can call it that. The federal government has certainly come up short in its responsibility. So I would absolutely agree that the federal government needs to put more money into health care.

But I also want to stress that they have to make cash transfers; they can't simply transfer tax points, as they have in the past, because they will lose their voice at the health table. There is a moral authority that belongs with the federal government to ensure common health care services right across this country. If you deal off tax points, then you deal off the leverage you have to create a national health system.

I hope this committee will stress very strongly that's not the way to go.

[Translation]

Mr. Pierre Paquette: I agree with you, but the federal government must stop being hypocritical. Under the Canada Health Act, it dictates standards, but it does not transfer the resources required by the provinces so that they can fulfil their responsibilities. If you don't contribute financially, you can't have a voice at the table, and it is the federal government that has unilaterally opted out.

That being said, I see that you agree that we should be recommending additional money for health and I would like to thank you for your support.

I would now like to ask Mr. Sommerville if he finds it acceptable for the federal government, since 1997-98, with Paul Martin as Minister of Finance, to have erred in its forecasts by 500%. The surplus has exceeded the federal government's forecast by $65 billion, and 40 of this $65-billion dollar amount was used to pay down the debt directly.

I see from your brief that you are concerned about a plan to pay down the debt and I agree with this idea, although I do not think that we will necessarily agree on the percentages. But I do agree with you that there is a problem of transparency because this $65 billion was used and was never the subject of a public debate, and we have not debated or agreed to any plan for paying back the debt. I wanted to ask you a very specific question on this issue.

What is the position of the Chamber of Commerce with respect to employment insurance contributions?

Yesterday the Auditor General denounced the fact that the federal government had practically violated the Employment Insurance Act by diverting money from the employment insurance fund. According to the fund actuarian, in order to meet the obligations of the employment insurance fund and have a reserve of $15 billion on hand, we would need a contribution rate of $1.75 per every $100 for employees, whereas right now, employees are paying $2.20 and employers are paying $3.08.

Are you not concerned about the way that the federal government is using the employment insurance fund, namely, that it is currently using the fund in a way that is completely out of line with its purpose?

[English]

Mr. Jeff Somerville: Yes, we do. We believe the EI premiums should be reduced and the EI surplus should be capped, as you suggest, at $15 billion, which, as we understand, is the actuarial number that is sufficient to ride through a severe recession. The current surplus is at $44 billion, I believe, and it is far too high. Those funds being deployed into general program spending is not correct. It should be returned to employers and employees who were making those contributions.

¿ (0935)

[Translation]

Mr. Pierre Paquette: Thank you.

[English]

The Chair: That's fine. C'est tout.

Mr. Wilfert.

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

I want to thank our presenters for coming here today.

There are a couple of issues that I want to raise. First of all, with regard to the comments of the Chamber of Commerce, I certainly agree with you that we need to have strong fiscal anchors. Clearly the government is the only G-7 state paying off the national debt. We continue to do so at, I think, a fairly aggressive rate. In comparison, our debt-to-GDP ratio is now below 50%. Countries like Japan are at 135%.

But one of the issues that we haven't touched on and I would be curious about, particularly from a business standpoint and maybe from an accounting standpoint, and I wonder if anyone could comment on this, is the transfer pricing system. We talk about taxes. One of the greatest sources of untapped taxes in Canada is the untaxed process to leave this country. Foreign-owned companies load up their Canadian operations with expenses so the profits don't show up in their Canadian books. Billions of dollars are untaxed. This is demonstrated at Revenue Canada, which started to look at this, you may remember, with a case of foreign drug companies, a $157-million issue, a number of them, in terms of avoidance. Excessive foreign ownership in Canada has led to diminishing tax revenue. As the past president of the Canadian Institute of Chartered Accountants said, transfer pricing is probably the fastest growing taxation specialty in this country. I'd be interested in your comments on that.

Just as a comment about foreign investment in Canada, I'm all for foreign investment; I have a problem with foreign ownership. There was a comment made about the lack or the question of whether or not we're attracting foreign investment. In the 1970s, foreign investment reached $32 billion; in the 1980s, it was $66 billion; in the 1990s, it was $126 billion; and in 2000, it was $44.7 billion. So that seems to have an impact, because clearly in terms of not only profits but R and D, and so on, a lot of that is not being developed in this country; it's south of the border. I'd be interested in any comments from any of you on that.

On the issue of health care, I certainly concur with the comment made about a designated dollar for health in terms of a dismantling or unbundling of the CHST. Too many provinces hide behind that.

For example, last year the Province of Ontario announced $1.2 billion in new health care funding. Regrettably, they failed to address the fact that $1.1 billion of the $1.2 billion was federal transfers. We all like to get credit where credit is due.

Obviously I think it's premature to talk about new health care dollars until the Romanow commission has reported. I think Canadians want to know what kind of health care system we need to carry us on for the next 20 or 30 years, and then decide how much we're going to attach to it.

We all know that without more accountability and transparency, which I think are two key elements, it doesn't matter how much money you give the provinces to spend on the system. As we know, in many cases they have a way of spending it in areas that I think Canadians have some difficulty with.

I'd be interested in any comments with regard to the tax pricing system and the issue of health care.

¿ (0940)

The Chair: There are only two minutes for answers, so let's start with some answers.

Mr. Bryon Wilfert: I'm sure there will be good two-minute answers.

The Chair: I'm sorry. You tried hard, Mr. Wilfert.

Let's go, Mr. Somerville.

Mr. Jeff Somerville: In terms of the taxation situation, which you referred to first, Mr. Wilfert, I would suggest that the critical issue there is competitive tax policy. If we had a tax regime that was as competitive as or more competitive than the foreign country where the funds are being repatriated to, those funds would be reinvested in Canada.

In terms of foreign ownership of Canadian companies or investment in Canada, unfortunately for us, one of the issues we're faced with these days is the fact that our low Canadian dollar has made our companies very attractive to foreign investors. This comes back to the productivity issue we spoke of before and our need to improve our productivity, to see an increase ultimately in the Canadian dollar to put us in an acquirer position as opposed to an acquiree position.

Mr. Bryon Wilfert: Thank you.

Prof. Barry Gorman: I'll just make two comments on your points. With regard to transfer pricing, it is a significant tax issue internationally. The OECD has a model convention on tax transfer pricing. It is an issue that is extremely difficult to do anything about, unless somehow this government gives us extradition rights to go around the world. It is simply a matter of fact. You can try to curtail it, but it's not an issue that can be easily solved.

With regard to foreign ownership, I find it interesting that Canadians brag about the amount of foreign investment Canadians have elsewhere. But foreign investment in this country doesn't seem to be a good idea. It is a two-way street. Capital flows left and right or north and south. These are realities, not rhetorical positions.

The Chair: Thank you.

Mr. Bryon Wilfert: Just one quick comment, which is that Canadian investment--

The Chair: No. Thank you.

Ms. Minna.

Ms. Maria Minna (Beaches—East York, Lib.): Thank you, Madam Chair.

I'll try to be quick because I want to ask a few questions.

The first issue is child care. Firstly, I want to say that I support and would like to see a universal child care system in this country. I worked very hard on the early childhood development program, which was introduced a couple of years ago. I think that needs to be extended to a child care system that is integrated.

Could you give me an idea of how you came up with the figure of $2 billion a year? What would that cover, in your estimation?

Ms. Margie Vigneault: It was based on looking at what resulted from the first $2 billion. With the first $2 billion there actually was quite a problem. Provinces had the opportunity to pick from a menu of options, and sometimes child care was not picked. It probably has to do with the way our Constitution is now. It's very difficult to make sure we have a consistent child care system across the country. So we didn't get that. That means that people are still looking for that to happen, because all the same issues continue to apply, and families continue to need affordable, reliable, quality child care services. The delivery of that is very uneven. It varies a great deal across the country. I believe the $2 billion was picked to accomplish that goal.

Ms. Maria Minna: Thank you.

I agree with you that child care goes to the heart of addressing the issue of poverty, and the current system is a bit of a hodgepodge. In my riding we've replicated infrastructure with early child care, but programs have lost some spaces in the city of Toronto. So that needs to be addressed, I agree with you 100%.

I want to go to Mr. Gorman for a moment. On continuing education, I find your suggestion quite interesting on establishing a national program. Are the existing sector councils not addressing any of the issues you raise, with respect to identifying training areas and needs and providing supportive systems to specific sectors at this time?

¿ (0945)

Prof. Barry Gorman: We didn't actually have time to do a rather extensive survey of what is available in this area. We talked to a lot of people and mostly asked them what kinds of problems they had. A number of corporations and businesses, for instance, have come to our university asking if we have courses on--fill in the blank. We spent most of our time, in preparing this issue, talking to people, so we didn't actually go out and survey what was available.

Some of the continuing education people from the universities made me aware of the fact that certain groups, both government and non-government, do this kind of thing. The comment we kept hearing was that they wanted to protect their territory or turf. So it didn't seem as if corporations could easily access groups of that nature.

I actually experienced that myself. I'm doing a program in December up in Nunavut, and I tried to find material for it. Everyone I approached had a price tag attached to it, and it's a fairly common area. We thought a central clearing-house type of situation would be beneficial to providers and users.

Ms. Maria Minna: Thank you. That's an interesting concept. I believe we need a national strategy on apprenticeship and skills in this country, but we also need the corporations to participate. Canadian corporations don't stack up as well with those in other countries, when it comes to training and upgrading their own labour forces.

The Chair: Mr. Brison.

Mr. Scott Brison (Kings—Hants, PC): Thank you, Madam Chairman.

It's a pleasure to be here with fellow Nova Scotians today, and it's nice to be home in Nova Scotia.

Mr. Somerville, you referred to a number of points on the importance of a competitive corporate tax rate, particularly the competitive nature of the global economy today and the degree to which both capital and highly skilled people are very mobile.

One idea I've devoted some time to, and that has received some attention, is the importance of competitive corporate tax rates in Atlantic Canada and how to attain them.

ACOA's budget in Atlantic Canada is currently around $450 million per year, and federal corporate taxes for Atlantic Canada are $380 million per year. So the possibility is to actually utilize $380 million per year out of ACOA's budget to eliminate federal corporate taxes in the region. That would leave corporate tax rates on the provincial level between 12% and 14%. That would be competitive with those of Ireland--Ireland is 12.5% now--without costing the federal treasury any money, and still leave $70 million for key infrastructure investments throughout Atlantic Canada.

I'd appreciate your feedback, or feedback from any of the other witnesses today.

Mr. Jeff Somerville: Directionally, we are obviously in favour of and support such a concept. The Ireland example is a good one that has proven to be very interesting and successful. We also believe that investment through subsidization of unsustainable economic activity is not correct. It has proven to be an ill-founded policy in the past in our region, creating seemingly competitive advantages for unsustainable businesses.

I must be frank. We haven't, at the chamber level, analysed the proposal you suggest. I know it was proposed recently. Peter Brown, who is chair of our finance committee, is with me today, and it's something we'll take back to that finance committee for further analysis.

Thank you.

¿ (0950)

Mr. Scott Brison: Thank you.

Mr. Gorman.

Prof. Barry Gorman: Scott, before I answer that, I think I'll mentally move about two seats to the right, so I'm square in the middle here.

The question really is what kind of federal assistance would increase job creation, economic activity, these kinds of things. Tax rates do all kinds of things, and that's one of the things they do. ACOA does all kinds of things, and that's one of the things they do. You're really talking about a direct expenditure program versus a tax cut. The question is which of those approaches hits the mark most sharply. On the one hand, a program like ACOA, since it's apparently a direct spending program for job creation, should be creating jobs. The evidence indicates that's not a terribly accurate statement. Corporate tax cuts or any kind of tax cuts leave more dollars in the hands of the taxpayer, so you have to implicitly believe that a successful corporation that has more tax dollars in its bank account is going to invest it in more people. That's an intuitively logical assumption.

Which approach is better? It's hard to say. I have enough anecdotal evidence to be highly dubious of ACOA, quite frankly, and any of those kinds of spending programs. On the other hand, whether corporations would turn around and reinvest the lower taxes is another matter as well. Let's say you scrapped ACOA and cut rates to zero. There would have to be some kind of tie-in to job creation. If you get lower taxes, figure out something so there's going to be a quid pro quo.

The problem with lower taxes is that they also only benefit the taxable corporations. All the corporations that don't make profits, which is by far the vast majority of corporations, wouldn't actually benefit from a tax cut.

The Chair: Thank you.

Mr. Murphy, five minutes.

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

I, like the other members, want to thank everyone for coming here today and for your presentations.

Like Mr. Brison, as a fellow landed Canadian, I want to say what a pleasure it is to be on the east coast. I think everyone around here will agree with me that the east coast is more reasonable, more rational than Toronto and Ottawa. Right, Scott?

Mr. Scott Brison: Now you only have three minutes.

Mr. Shawn Murphy: I want to continue the discussion we're having on this area of regional economic development. I am aware of Mr. Brison's proposal, but it seems to me that in Atlantic Canada we have two economies going on. We have the urban economy, which we see in metro Halifax and isn't that bad. It's taking place in St. John's and Moncton, to a lesser extent in Fredericton and Saint John. We have single-digit unemployment, reasonably good growth, productivity is not too bad. Then we have the rural economy. You have it in Nova Scotia, you certainly have it in northern New Brunswick, everything in Newfoundland outside St. John's. We have extreme challenges, and again, there has to be some instrument to try. I agree with you, sir, that some of the initiatives of ACOA over the years haven't been all that effective or productive.

Are there any comments on how we in Atlantic Canada might address this whole area of the economies outside the three or four urban economies I mentioned?

Mr. Jeff Somerville: I don't believe this is a problem isolated to Atlantic Canada. I would suggest that through the urbanization of the country, we're seeing this problem arise in the prairies and elsewhere, even Ontario.

The difficulty we're faced with here is a large rural population that has relied on a lifestyle that has been sustainable for generations, and it is now changing dramatically. As we said during our presentation and in our brief, we're in favour of creating an environment that enables the population to move towards employment opportunities, rather than trying to invest in what are, in the long term, unsustainable economic activities that would further the current situation of encouraging individuals to stay in the rural communities where there is not a sustainable economic environment.

¿ (0955)

Mr. Shawn Murphy: Professor Gorman, do you have anything to add?

Prof. Barry Gorman: With regard to this area specifically--and I think the comments could probably apply right across the country--it seems to me, to be grossly unfair to predecessors of this group and others in the political arena, the real problem in this area is that there's one hell of a lot of politicking going on and not a hell of a lot of thinking about what the objective is. Any tax incentive has to be targeted exactly at the action you want. If you look at the rural economy, the economy of Atlantic Canada, we have small businesses, we have farmers, we have tourist industries. These folks need a lot of help getting started, they need a lot of assistance once they get going, and for far too many years all we've heard from politicians are grandiose schemes to employ tens of thousands of people. Do you folks know that the number of jobs politicians have said they have created in Atlantic Canada in the last thirty years would probably employ everybody in Canada? It never comes to reality, because they are grandiose schemes to do all kinds of wonderful things. Other than Michelin and a couple of other success stories, that's not Nova Scotia, that's not Newfoundland or New Brunswick. So the tax policies, the government policies, have got to be down on the street level, and far too many of them are not. Where ACOA floats in is another matter, but you've got to hit the action on the street if you want some kind of reaction.

The Chair: Okay.

Ms. McDonough, welcome to the committee. Please go ahead.

Ms. Alexa McDonough (Halifax, NDP): Thank you.

As the member of Parliament for Halifax, I'd like to not only welcome our witnesses this morning, but also welcome members of the committee to this riding, and that includes the chair, even though she bumped me to the end of the questioning line. But in a spirit of generosity, I do welcome Scott Brison's speaking ahead of me.

I'd like to ask two questions, one to the representative of the Chamber of Commerce, and the other to the representative of Financial Executives International, and then invite our other witnesses, in what time there is, to comment on the questions as well.

Mr. Somerville, we heard you argue that fiscal restraints should remain the number one priority, but we've also heard witnesses here this morning, on behalf of the anti-poverty and housing movement, on behalf of child care advocates, and on behalf of health advocates in the country, give evidence of the enormous social deficit that has been accumulated over the last seven years as a result of the total preoccupation with fiscal restraint. You will know, I'm sure, as it's a matter of record, a matter of facts and figures, this government has reduced program spending to the lowest level in 50 years. In view of that, what would you have to say to those who have struggled to deal with the damage done to our health, housing, child care, and social infrastructure, with your position that we should continue on that path of further fiscal restraint, recognizing that we have generated, just in the last three years, $40 billion in surplus?

I would ask my second question, and then turn the time over to the witnesses. Mr. Gorman, you spoke about existing Canadian tax rules that do not permit a certain practice, namely, deducting the cost of stock option awards. I'd just like to ask you, taking your advice about how specific we need to be about the impact of tax measures, about something the tax rules do now permit companies to do, which I regard as obscene: deduct as a business expense the cost of fines that are imposed on corporations for breaking a law, for example, with respect to polluting the environment or violating health and safety regulations. Do you agree that this obscene tax provision should continue, and if so, what is the specific purpose of that?

Second, I wonder if you could comment on that in relation to the parallel activity of the federal government at the moment, which is to take dead aim at recipients of a meagre--less than $80 a month--disability tax credit that is in place to allow persons living with disabilities a tiny measure of comfort and compensation for the actual costs associated with living with a disability.

À (1000)

Mr. Jeff Somerville: You have posed the most difficult question this committee will deal with and the federal finance department ever deals with: having to make tough decisions. The decisions we make in our businesses, the decisions we make in our home life with our families, the decisions you will have to make in establishing priorities are extremely difficult. I understand that. But what we are trying to do is build a sustainable country, not for the next year or the next five years, but for generations, decades, and centuries to come. To do so, we need to place the maximum amount of fiscal flexibility in our own hands, not in foreign hands or in the hands of our debtors, whether they be domestic or international.

So we are strong in our belief that fiscal restraint must come first. Within that context, difficult decisions will be made. We agree that the social issues you speak of, health care, social housing, education, must be a priority for Canadians. In fact, those are the things that make us Canadian and we strongly believe in. But it must be done in the context of the restraint we speak of.

Prof. Barry Gorman: I'll just focus on the two specific issues. In order to deduct anything in our tax system in a business context, it has to be incurred to earn income, as a general principle. For many years, fines, penalties, and these kinds of things were considered a matter of public policy. There have been all kinds of cases of people who were fined for speeding getting to a meeting and they couldn't get it deducted, or whatever the case may be. In the last couple of years the courts have interpreted the context of “in the pursuit of business” a bit more liberally, whether it's with this issue or a number of other larger ones.

A number of court cases have actually ruled that fines for things you were mentioning are legitimate deductions. There is a very good case in B.C. of an egg producer that was fined for exceeding its quota. The courts were very liberal in their interpretation of “incurred in the pursuit of earning income”. It's quite clear that if a business has some kind of fine, assessment, whatever the case may be, if it's incurred in the pursuit of earning income, it's deductible. If it's not in the pursuit of earning income, it's not deductible. Those are the interpretations the good people--

Ms. Alexa McDonough: My question isn't how the courts interpret, but whether it should be permitted.

The Chair: We are into the final five minutes. We have our next panel to get to. Thank you.

Mr. Cullen.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Madam Chair.

Thank you to all the presenters. I found the briefs very interesting. I'd like to speak off-line with Mr. Gorman, who is a fellow CA, on some of his recommendations, but I won't have time. I'd like to focus on health care.

Mr. Cook and Ms. Patriquin, I think you are right, Canadians are fed up with the federal government and provinces having this bun war on who's paying what. The reality is, the contribution by the federal government is about 40% of total health care. It was never 50% of health care, it was 50% of insured services, which is hospitals and doctors. It is true, Mr. Cook, that we have fallen off somewhat, and I'm sure our government will be seized of that when the Romanow report comes in, and now we have Senator Kirby's report. It focuses to some extent on prescribed drugs, home care, and very important matters like that.

I'd like to come to your proposal for a needs-based resource allocation model, which I have some difficulty with in respect of measurement. If we look at Nova Scotia, equalization in 2002 is about $1.26 billion. Equalization is meant to supplement CHST and create more of a level playing field. Total transfers to Nova Scotia are $2.2 billion, which represents about $2,300 per person in Nova Scotia, 60% above the national average, and 39% of Nova Scotia revenues in total. I'm not here to say that's good enough or to minimize the problems and challenges you're facing, but coming back to the point of a needs-based resource allocation model, do you envisage that there will be measurement problems? Is not the current system designed to deal with some of those inequities?

À (1005)

Mr. Robert Cook: I think the CHST and equalization are really two different items directed at two different social issues that are important in this country. Equalization I believe has been around for 50 years, from well before there was any insured health care at all. It was instituted to make up for the discrepancy in taxing power various provincial governments had. It recognized different levels of economic activity. So it is there, really, to try to provide a level playing field in revenue generation for the provinces. What we're talking about is on the expenditure side of the ledger. We're saying there's a huge imbalance, and it's based on the needs of the various populations. So in that sense, I don't think equalization does address the problems of the higher burden of illness Nova Scotia carries.

Is it difficult to measure? You bet it's difficult to measure. It would not be simple, but it's these kinds of issues I think we need the federal government to show some leadership on. At the very start we can look at the issues of age, and we know how the age distribution falls out across this country. Nova Scotia has one of the highest average ages of seniors, and we know the cost of health care increases almost sevenfold for that sector of the population. So that is a start at how we can try to provide resources based on need.

Mr. Roy Cullen: Thank you. I'm sure we could debate and discuss it for hours. I take your point, but it seems to me equalization is meant to create a relatively consistent level of services province by province. As for its being a perfect mousetrap, I'd have to agree it probably isn't.

Senator Kirby, in his recommendations--I don't know if you've had a chance to look at his report--with his dedicated tax or some fee-based process, talks about relating it also to the age profile of provinces. Is that something you've looked at and would support?

Mr. Robert Cook: Notionally, I think that's getting to matching resources with need, and that's exactly what we're talking about. I'm not sure age is the only determinant. I think there are other components that are more difficult to measure, and it's really the burden of illness. To us, it's fairly straightforward. When every province in this country allocates its funding, it does so on the basis of need, either officially or by funding through historical patterns of providing services where they're most needed. So the federal government is the only source that really hasn't yet made that kind of adjustment.

The Chair: Thank you very much.

On behalf of all the members of this committee, thank you very much for putting the time into your briefs. I appreciate those who sent them ahead of time, so they could go through translation and be distributed. But all of your input today was very valued. Thank you also for taking our questions.

We'll suspend for a minute to set up the next panel.

Thank you. We are suspended.

À (1005)

À (1010)

The Chair We will resume with our second panel of the morning in Halifax.

I would like to welcome, from the Association of Nova Scotia University Teachers, Dr. Chris Ferns; from the Federation of New Brunswick Faculty Associations, Desmond Morley, executive director; from the Nova Scotia School Boards Association, Mary Jess MacDonald, first vice-president, and accompanying her, Jeanne Doucette, also first vice-president; and from the Union of Canadian Transport Employees, John Fox.

The presentations will go in the order in which they are on the agenda. After seven minutes, if you just watch my pen, I will give you a one-minute warning, and at eight minutes you can finalize, please. Then there will be rounds of questioning from the members.

Let's commence with Dr. Ferns.

À (1015)

Dr. Chris Ferns (President, Association of Nova Scotia University Teachers): Thank you. We're very grateful for the invitation to share our concerns with the committee.

I should just mention that while we're labelled the Association of Nova Scotia University Teachers, we in fact represent the faculty of all degree-granting institutions in the province, with the exception of Dalhousie University and the Nova Scotia Agricultural College.

ANSUT shares the Prime Minister's view that the role of government must be to assure the highest quality of life for all Canadians. We believe an affordable, accessible, high-quality system of post-secondary education is an essential component in achieving that. Studies have repeatedly shown that those who complete post-secondary education have access to a greater variety of work opportunities, earn higher incomes, and enjoy better health. We would see all those as being integral to the highest quality of life.

Nevertheless, we do share the concern expressed in the statement submitted to the committee by the Canadian Association of University Teachers. We share their view that in some respects, federal policy since the mid-1990s has seriously compromised the capacity of post-secondary education in this country to contribute to the quality of life of Canadian citizens.

Due to the financial difficulties of the mid-1990s, the federal government was obliged to make drastic cuts in transfer payments for post-secondary education, health, and social assistance. As far as post-secondary education is concerned, it's estimated that since 1993-94 this has amounted to a decrease of over 17% in per capita funding.

The results are pretty easy to see. Over the last nine years, tuition fees have skyrocketed, increasing by 135%. The result is that Canadian students have the highest debt load in the world. Faculty numbers have been going down, faculty-student ratios have been worsening, and the problem is only likely to get worse still, with a third of the professorate scheduled to retire in the next ten years.

Rankings of university libraries in Canada and the United States indicate that since the early 1990s, all but two Canadian university libraries ranked have declined relative to their U.S. counterparts.

Due to the lack of funds for necessary maintenance, universities across Canada face alarming problems with their infrastructure. Without adequate core funding to maintain, let alone update, laboratory and computing facilities, it's proving harder and harder. On some campuses, buildings themselves are literally on the verge of collapse.

Since the cutbacks earlier in the decade had as their rationale the fiscal constraints operating at that time, it's hard to see how they can continue to be justified in the face of the budget surplus the federal government continues to enjoy.

We see post-secondary education as being a crucial engine of economic growth. It provides the educated workforce required for prosperity in the knowledge economy of the future.

For that reason, we endorse the recommendation of the Canadian Association of University Teachers that the government establish a dedicated post-secondary education fund, to ensure that Canadian universities are financed at a level that will enable them to remain competitive in both teaching and research. We believe that should be governed by a post-secondary education act, to ensure accountability and to ensure that provinces direct the money for the purpose to which it's intended.

But I'd also like to draw the committee's attention to some of the peculiar problems suffered in Nova Scotia, where I think the kinds of problems experienced nationally are still more acute. A recent study of post-secondary education in North America revealed that while expenditure on post-secondary education in the United States increased by over 24% during the 1990s, in Nova Scotia it went down over the same period by over 30%; and out of 10 Canadian provinces and 50 American states, Nova Scotia finished dead last.

The results are pretty alarming. We have the highest tuition fees in Canada, by a long way. Faculty salaries remain far below the national average, and it's hard to know which is more worrying. This situation, where students in one of the country's poorest provinces continue to pay the highest fees, has seriously compromised access to Nova Scotian students, and at the same time as the hiring market grows more and more competitive, Nova Scotian universities are finding it harder and harder to hire qualified faculties.

Now our universities do have an excellent track record. Despite all this, we remain a net importer of students, but we do have a system that's in serious danger of collapse. The irony is that the situation is essentially made worse by one federal government initiative that is designed to improve the situation. While we welcome the recognition of the importance of research, signalled by the government's 21st century research chairs program, we believe the way in which this has been implemented actually serves to further increase the disparity in resources between provinces and renders it imperative that this program be reassessed.

The vast majority of research chairs have been allotted to large institutions in the wealthier provinces. There are single institutions in British Columbia, Alberta, Ontario, and Quebec that receive more chairs than all the institutions in Nova Scotia combined. As a result, I think there's a real danger that the best faculty in poorer provinces will be poached by wealthier institutions elsewhere and that the effect will create a two-tier system of have universities and have-not universities. The evidence so far is that many universities are in fact using these awards to retain existing faculty, rather than to actually attract the new blood that the program was designed to encourage.

I also think Atlantic provinces in general suffer from another federal research initiative, namely the Canada Foundation for Innovation, whose formula requires matching funding from private partners of the provincial government. That again works to the benefit of wealthier provinces. The Atlantic provinces have more than 12% of all full-time faculty in Canada, but so far they've only received 3.5% of all CFI grants.

Further to this--and this is an area where we perhaps differ from the national association--it's clear to us that some of the problems facing post-secondary education in Nova Scotia are the result of an inequity in the distribution of federal funding--not just the amount, but the actual way it's distributed.

Since this is based on a province's population rather than the number of students actually educated, this discriminates against provinces such as Nova Scotia that are net importers of students. In effect, like the Canada research chairs program and the Canada Foundation for Innovation, this actually acts as the reverse of equalization payments. It serves to concentrate money in the hands of those who already have it.

We believe the actual movement of students between provinces is a very good thing nationally and it helps national understanding. We believe that given Nova Scotia's contribution to the education of students from across Canada, it is only fair that contribution be rewarded, rather than penalized by policies that oblige our universities to do more with less.

We therefore urge on the committee the desirability of adopting the fair and equitable policy of providing funding on a per student rather than a per capita basis, so federal funding will follow the student to the province in which she or he chooses to study.

À (1020)

But above all, I think we'd like to draw the committee's attention to the extent of the damage done to the quality of life for our children by this aspect of federal policy. The result of the massive increase in tuition fees over the last decade and the inadequacies of the financial support available to students is that our students, our children, have the highest debt loads in the world.

It needs to be borne in mind that the imposition of any tuition fees is the exception rather than the rule in the developed world, so it's hard to see how this can be justified, and for a government to provide tax breaks that principally benefit those who had access to much cheaper education in earlier years, while funding them in part by imposing crippling debt loads on our children, seems to be simply morally unjustifiable.

I would just draw your attention to the experience of Great Britain, which introduced tuition fees in the 1990s and which has created many of the same problems our students face--they're not yet as acute--and which also prompted the newly created Scottish assembly to abolish them once it had the power to do so. The result is that in Scotland post-secondary institutions have now met the government's stated target for access, while those in England still remain far from achieving that goal. I hope we can learn from that lesson.

Thank you very much.

À (1025)

The Chair: Thank you very much.

Now, from the Federation of New Brunswick Faculty Associations, Mr. Morley. Commence, please.

Mr. Desmond Morley (Executive Director, Federation of New Brunswick Faculty Associations): Thank you, Madam Chair.

One of the problems of appearing with your counterpart from the adjacent province is, if you go second, you take the very big chance that somebody is going to make your presentation right before you make it. But that's great, because that gives me a little bit of opportunity to ad lib, and I'm far more comfortable doing that than I am making a prepared presentation. So if you will indulge me with a few little comments to support what Chris Ferns has just very eloquently said....

We presented a brief, as you know, and I guess you all have it--and this year we were that brief; it's only three or four pages--plus the gist of a pamphlet that we distributed. I'm not going to send this around now, because everybody will start reading it and they won't listen to what I'm saying, but I will distribute these. It's a public relations, public information pamphlet, and the contents of it are reproduced just about verbatim at the back of our brief.

My father once said to me, Desmond, the only problem with you is, when I ask you the time, you tell me how to make a watch. My long-windedness is legendary, so the committee is going to be greatly privileged today by my brevity, believe me.

I can only underscore what Chris Ferns has just said, and I would point out as well--and this might be surprising--that we're not over-endowed with resources either at ANSUT or FNBFA. I have a secretary; that's me and her, and we're the full-time staff. I don't even think ANSUT is in the same position as we are. Consequently, I assure the members of the committee we have not collaborated on the preparation of our briefs, because we don't have the facilities or resources to do that. Therefore, I want to underscore the coincidence between what is in our brief and what is in their brief. We are both completely concerned with the same things, and yet I swear on a stack of bibles, we didn't talk to each other. We didn't say, what are you going to put in your brief, and yes, we said the same thing, so let's support each other; you scratch my back. We didn't do that. You will get the same presentation made to you by the Canadian Association of University Teachers, if you haven't already.

Again, I've given an anecdote of what my father said to me. My mother, God bless her and God rest her soul, was living in what they call a council house in England. She was a lady with elementary school education, which didn't militate against the fact she was the finest mother who ever lived, and I will go to my grave saying that. But she made me laugh one day, because the door was coming off its hinges on this municipally owned place that she and my father lived in, and she proudly announced to me that she had written to the Prime Minister about this. I was amused because I had two university degrees at the time and my mother was not a sophisticated woman, but she wanted action, so she went right to the Prime Minister about the door falling off the house on this government-owned thing. To her, government was government.

The reason I'm saying that is because some members of this committee may wonder why people like Chris Ferns and I come before you to plead our case, because it's a federal problem. It's not a federal problem. You are federal people and we are provincial people, and surely education is a problem of the provinces, which it is.

The difficulty is that in places like New Brunswick, Prince Edward Island, who because of a lack of resources don't even have anybody here today.... I don't know if anybody would be coming from there, but I can speak on their behalf because they've got one university that has the same problems we have. In smaller, traditionally referred to as “have-not” provinces, we are immeasurably reliant on federal transfer payments, and that is the most important thing. The federal government hugely funds the cost of post-secondary education in New Brunswick. I think the last figure was about 63% of all the costs of post-secondary education come from federal sources rather than provincial sources.

We just don't have the tax base, but we have to compete in the same environment as the University of Toronto and the Government of Ontario, as the Government of Alberta, as the Government of British Columbia. They're crying hard times and saying that they don't have enough resources to put into their universities. If that is true, then you can imagine how it is for us in Newfoundland and P.E.I. and Nova Scotia. This is why we're here before you: we desperately need those transfer payments of the social transfer type.

It didn't help any when the CHST was introduced to replace the Established Programs Financing Act. In net terms, there is less money coming into the provinces, into the Atlantic provinces for sure, than there was in 1992-93. I'll be brief and I won't go through it; it's in the brief we presented. We've had tremendous increases in enrolment and we've had tremendous decreases in the number of faculty to teach them. Yet we're supposed to be able to compete in an international competitive market. We can't even compete with Toronto and British Columbia for faculty because we can't afford to pay them the kinds of salaries that are being given to attract good faculty to the centres.

We're not looking for subsidies, but we are looking for as much as we can get from the federal government, because we don't have the tax base in these provinces to be able to pay our own freight to be in a competitive post-secondary education system. It's as simple as that. And that's why our brief is brief and my presentation is over, because the bottom line is it all comes down to we need more money transferred from the federal government to the provinces and which is earmarked for post-secondary education.

I'll conclude by again supporting CAUT and what Chris Ferns has said. We need a national post-secondary education act that parallels the national health care provisions in legislation to ensure that there is a uniformity. It doesn't have to be exactly equal, but there has to be a uniformity across Canada so that each Canadian citizen has equal access to university education, at least a minimum standard.

That's it. Thank you, Madam Chair.

À (1030)

The Chair: Thank you very much.

Now we'll go to the Nova Scotia School Boards Association. Who will start? Ms. MacDonald? Go ahead, please.

Ms. Mary Jess MacDonald (President, Nova Scotia School Boards Association): Yes. I'm Mary Jess MacDonald, and I'm the president of the Nova School Boards Association. The agenda said that I'm the first vice-president of that organization.

The Nova Scotia School Boards Association is very pleased that we are able to make this presentation today. We want to thank the committee for providing the opportunity for us to state the organization's priorities and specific recommendations in action.

I probably should point out that the Nova Scotia School Boards Association--NSSBA is the acronym--was founded in 1954, and it is a non-profit organization dedicated to excellence in public school education.

The association provides leadership and services for eight school boards in the province, who serve approximately 156,000 students. The NSSBA is funded by its member school boards and promotes their objectives through advocacy, partnerships with other agencies, board member training, and cost-saving programs.

The member school boards have a voice in deciding how this association will represent their views to the public, municipal, provincial, and federal governments, education partners, and other groups.

In our presentation we are addressing the two objectives that came to us on May 24 for the committee's pre-budget report. That is how Canada can best assure greater levels of economic prosperity widely shared by all Canadians and how the government can best assure the highest quality of life for all.

I'm just going to quickly go through some of the highlights because you already have the report.

Child poverty and the issues it presents for children in the learning environment of the classroom and the school community is one of the priorities that we've addressed through the Nova Scotia School Boards Association. Of course we recognize that the federal government has made a commitment to the national child benefit program. Canadian children, though, still remain in need. It is now time, we feel, to put actions and budgets behind the words we have been hearing, in order to actualize the national children's agenda, which we strongly support.

Another item we want to highlight here is to point out the staggering number of Canadian children who are living in poverty. That number has increased exponentially in the last decade. It's becoming more and more noticeable in our classrooms.

The elements so far have been addressing children at an early age. However, interventions targeted at the 6 to 18 age group also have an impact, and it is therefore important to conduct research and document the importance of later interventions to ensure that the national children's agenda is not restricted to the early years.

I just want to point out that in February 1999 the school principals across Nova Scotia were asked to respond to a survey developed by the association in cooperation with the Nova Scotia Teachers Union and the Nova Scotia Council for the Family, in order to compile information regarding the extent of poverty among our province's public education students and measures that schools had taken to address that problem.

The responses are summarized by the NSSBA member boards, which formed the basis of a provincial report at that time, “Child Poverty Report: Results of the NSSBA Child Poverty Survey”. The report was released in May of that year and widely distributed to individuals within the public education system, our partners, the media, members of the Nova Scotia legislative assembly, and others.

The results from that survey were consistent with the statistics in the Campaign 2000's 1998 report card, which stated that the child poverty rate in Nova Scotia is 23%. The Nova Scotia School Board's report also identified many programs and services, which are currently provided by schools to help alleviate the disadvantages children from families living in poverty experience.

À (1035)

Recently our association submitted a resolution to the Canadian School Boards Association's annual general meeting, which was approved as follows:

Be it resolved that CSBA lobby to seek for the Government of Canada, in cooperation with the provincial governments, to initiate measures to put in place a fully subsidized school breakfast program that may be available to all students in all grades in every public school in Canada.

We strongly urge interdepartmental collaboration among all levels of government in this important endeavour.

The results of the NSSBA child poverty report have proven beneficial to the NSSBA in assisting with other child poverty issues, including the national children's agenda, with which, along with our parent organization, the CSBA, we have been involved over the past years.

I'll briefly address the second objective. The Nova Scotia School Boards Association would like to point out that a multitude of needs could be addressed with funds from a federal-provincial-municipal infrastructure program. The infrastructure program could address the need for new roofs and other improvements to our old buildings and so forth. We would like to be included in that. We weren't the last time.

To move to recommendations, the first would be to commit to reduce the depth of child poverty by 50% over the next five years. In order to achieve this, child benefits must provide a maximum benefit of $4,200 per child, available to all low-, modest-, and middle-income families.

The second would be to commit to a new investment in quality early childhood education and care services that are universal, inclusive, and accessible to all communities. The federal government should take leadership through substantial funding and policy mechanisms in partnership with other levels of government.

The third recommendation would be to commit to resolving the national housing crisis through the creation of a national affordable housing strategy, leading to the construction of 20,000 new affordable units each year for ten years, and the rehabilitation of a further 10,000 units next year.

Finally, we recommend a commitment to national investments, through the provinces and territories, to freeze and lower tuition fees for post-secondary students across Canada. This government should also introduce a national system of needs-based grants.

À (1040)

The Chair: Thank you, Ms. MacDonald.

We'll now go to our final presenter, Mr. John Fox, with the Union of Canadian Transport Employees.

Mr. John Fox (Regional Representative for the Atlantic Region, Union of Canadian Transportation Employees): Thank you very much.

I'm with the Union of Canadian Transport Employees, representing Canadian Coast Guard employees in Atlantic Canada, and I'm here today to talk to you about the ongoing financial plight of the coast guard and how services are being affected.

First, to update you on what's happened with the coast guard, it was merged with the Department of Fisheries and Oceans in 1995. We went through program review and a number of other reorganizations within the department. That led to basically a 30% reduction in fiscal budgets and a 40% reduction in human resources.

The department is now basically in a process of risk management when it comes to search and rescue, marine aids maintenance, and pollution control. Some vessels do not carry enough search and rescue equipment as specified. Some vessels do not have appropriately trained rescue specialists on board. As well, vessels are often tied to the wharf when they're supposed to be in offshore search and rescue status. We're not fulfilling our obligations to the Safety of Life at Sea Convention.

The coast guard needs over $350 million to renew its aging fleet and $160 million in increased spending just to bring it up to current program needs and operational efficiency. Right now, all large vessels in the coast guard have to go through a mandatory three-month lay-up to help defray costs. The Auditor General has recognized that this is a poor use of the resources. It costs significant amounts of money to bring these ships back on-line when they've been laid up. Not only that, but you're not getting full value from a ship if it's not working all the time during its 30-year life cycle.

Previous reports have identified that the coast guard has had difficulty in responding to things such as Swissair, the sinking of the Flare or the Gold Bond Conveyor, and, most recently, the Cap Rouge II incident in B.C., in which we had a tragic loss of life with an overturned fishing vessel. We've also become more dependent on the United States Coast Guard to step into situations that we no longer can handle. That means calling on them for air and surface resources for vessels that are in distress within our areas of responsibility.

Currently, there is no coast guard presence in our coastal waters to deal with criminal activity or the smuggling of illegal immigrants. The RCMP estimates that they catch less than 5% of all illegal drugs entering through our coasts. Just this last summer, we found illegal immigrants on an island down east. Part of the reason for this situation is that within our 12-mile international limit, there is currently a volunteer process of reporting when you come into our waters. There's no mandatory reporting, so if you don't report, we don't know you're there. Nobody's out there patrolling and looking for suspicious vessels, boarding them, checking them, etc.

We also believe that, since September 11, the coast guard has a significant role to play in the security of this perimeter. One of the things we're asking for is that the mandate of the coast guard be reviewed.

The navigational aid system is a mess. Basically, the coast guard cannot get enough of its own ship time to manage the program. Ships are allotted program use throughout the year. All of them go into a three-month lay-up. What happens is that we can't get enough of our own ship time to do aids maintenance, so they get left out in the ice in the wintertime. Over the last two winters, we've lost hundreds of thousands of dollars worth of buoys and aids. And in this system, we have a lot of outages, and that presents a major safety concern for mariners.

The rescue, safety, and environmental response sector is severely underfunded and cannot effectively respond should Canada have a major incident such as the Exxon Valdez. The coast guard used to maintain a significant inventory of pollution gear and of trained personnel at strategic locations across the country. We no longer have that. As an example, we recently closed a facility down in Canso Canal. We have large, single-hulled supertankers coming in there to offload oil for vessels to go into the United States, because these single-hulled tankers are not allowed into the United States. We have no presence down there to make sure a minor or major spill is dealt with, should there be one.

The Canadian Coast Guard Auxiliary, which is a significant part of the safety net for mariners, has also had its budget significantly slashed in the last year. We had closures of bases in Saint John and Dartmouth, or they are due to be closed. This decision basically was made without a cost-benefit analysis, without looking at what the economic impact is on the community or at how the services are going to be presented. It was made as a matter of cost savings, and strictly of cost savings.

One of the other problems that we have is that the cultures of DFO and the coast guard are entirely different. We went through a shotgun marriage in 1995. We used to be with Transport Canada. We believe we've suffered significantly in program cuts, with moneys being diverted from the coast guard to DFO to manage their programs. We think we've been abused enough, and we're looking for a divorce. That's another recommendation we'd like to make. We'd like a serious look at the mandate of the coast guard: where it should be, what its future role is, and where it's best served. Connecting us with an enforcement agency was not the best role for an organization like the coast guard, since safety was its main operational service. Our reputation has suffered significantly with the marine community and with fishers as a result of that.

To further complicate matters, there's a problem of what we believe is fiscal mismanagement. DFO has lapsed major sums of money for several years. In the Maritimes region in the last fiscal year, we believe $5 million was returned to DFO from the coast guard in O and M moneys—this at a time when the coast guard is significantly strapped. Loosely based, here are the figures that we heard: in 2000, over $100 million was lapsed by the department nationally, while the amount was $80 million in 2001. We believe the money can be better spent within the departments, with regard to effective use and how it's used.

À (1045)

So what we're basically asking for is your support in three areas. We'd like to see an independent audit review of the financial management of the coast guard; an investigation of the current and expected mandate of the coast guard to ensure that it meets its regulatory requirements; and a review of the separation of coast guard from DFO.

You have one document there that we're using in a press campaign. Other documents that I've left with your clerk are from a public accounts committee meeting at which the coast guard was brought forward to present evidence. The parliamentary committee on fisheries has also looked into this. And I've also left you with the Auditor General's report on fleet management. We're asking if you could take a look at those documents and give us some support.

Thank you.

À (1050)

The Chair: Thank you very much, all of you, for keeping your presentations to the point.

We'll now have eight five-minute rounds to complete this panel, and we'll start with Mr. Penson, please.

Mr. Charlie Penson: Thank you, Madam Chair. There are so many questions but so little time, unfortunately. But I do want to ask something of Dr. Ferns and Mr. Morley.

You raised the issue of a decline in our Canadian universities relative to those of the United States. I suggest to you that it's similar to labour productivity. Rated versus the United States' jurisdictions, Ontario now sits in 32nd place, while Alberta is 23rd in terms of U.S. and Canadian jurisdictions, and Quebec is 49th.

It seems to me that we've seen a decline generally against the U.S. in terms of standard of living, but one of the things that has served us well in the past has been the fact that we've had a highly educated workforce. If I'm hearing you correctly, I'm hearing you say education needs to be a top priority, that we need to look at the total package and set our priorities or get them straight.

My concern, though—and I'm going to ask you if you agree with this—is that because we are currently raising about $180 billion federally from taxpayers, we are taxed pretty heavily in rankings in the OECD and the G-7. Should that priority be established within the existing framework that's already there in terms of budget? Can money be found? Should they be looking to find money within the existing framework to rank health care and education in a higher priority? Should they go back to the drawing board and say that some of these others, such as business grants to Bombardier, Pratt & Whitney, and General Electric, should rank lower? I'm asking for your opinion on that.

Dr. Chris Ferns: As we see it, the issue is one of investment. Basically, in the long term, the better educated a population you have, the higher their chances of employment, the better the incomes they will earn, and the more they themselves will contribute to the economy by their payment of taxes.

My personal take on this is that I'm in a relatively good economic position. I have a professional income and my partner has a professional income. But every penny of tax breaks that we've received has gone toward ensuring that our daughter does not graduate from university with a $30,000 debt load.

If I had to pay more taxes to ensure that somebody in the lowest fifth quintile—someone who would have to devote 23% of their household income to actually paying for their student. If we could actually secure that by doing so, then I would regard that as a price worth paying. I believe taxes are the price you pay for living in a civilized society, and I don't see that a society that actually has our children graduating from universities with $30,000 in debt is one that can be very proud of itself.

That would be my personal response, as well as kind of the official one.

Mr. Charlie Penson: But, Dr. Ferns, given that Canadians are already pretty heavily taxed—and the latest Ipsos-Reid survey suggests that they feel they are too heavily taxed—given that we see the productivity gap between Canada and the United States, and given that we see a standard-of-living gap between Canada and the United States—in fact, in terms of the G-7, we're now in about eighth place in terms of standard of living, behind Norway, Switzerland, Iceland, Denmark, and the United States—isn't there a limited amount that Canadians are willing to pay in taxes? Shouldn't we be looking for some efficiencies within the total budgetary framework? Would you not support a program review to look at what should be the top priorities and what should be the lowest priorities?

Dr. Chris Ferns: I would certainly agree with that. I think one of the problems is that a lot of the money is actually inefficiently directed. For example, going back to the Canada research chairs program, I think a lot of the universities are now using that money to avoid losing faculty. So you're actually spending more money to keep the same person in the same job.

One of the things we need to look at is actually having some mechanism to ensure the money is spent properly and there is accountability. We believe a post-secondary education act would secure that.

I think currently the kind of division between province and federal government results in a lot of money being misdirected. There could certainly be a great deal of--

À (1055)

Mr. Charlie Penson: Your point is that the funds should follow the student, rather than a per capita grant.

Dr. Chris Ferns: That is our recommendation.

Mr. Charlie Penson: And that would address that issue, so that a university that had a good ranking, that attracted a lot of students, would be better funded regardless of what the population is in the general area or province.

Dr. Chris Ferns: I think what we're doing is not simply a provincial responsibility, it's also a national one. It seems to me that the universities that are actually attracting in more students than leave the province, if they are being penalized, if they actually have to educate more students with scantier resources.... That's the reason for that recommendation.

The Chair: Thank you very much.

[Translation]

Mr. Paquette, please begin.

Mr. Pierre Paquette: Thank you, Madam Chair.

First of all, I would like to tell Mr. Fox that I will read his brief carefully as my brother is in the Coast Guard. I will check with him as to the relevance of your comments.

I would have liked it had you spoken more about the relationship between the Coast Guard and the Department of Fisheries and Oceans, and told us how the culture is so different and why the government should re-establish an independent agency.

I will ask all of my questions at once, and then you can answer them.

I would now like to address my questions to the people representing education. Obviously, I fully agree with your criticism of the federal government. When the federal government is paying no more than 8 cents for every dollar spent on health care in the provinces, it points to a serious problem of disengagement. I am even more concerned about the financial stranglehold currently experienced by the provinces, which we in Quebec refer to as the tax imbalance, which is forcing the provinces to make some agonizing choices. I am concerned about the future of education when such choices have to be made, given that we are experiencing an aging population and health care concerns have become a high priority for a good portion of the population. I fear that if the federal government does not make a significant reinvestment, we will see that choices are based on numbers; namely, the additional investments made by the provinces will be made to the detriment of other needs, such as education.

In the Atlantic provinces, is there, in your opinion, any concern in academic circles, amongst the professors, of course, but also in the institutions and amongst students, about the choices that provinces will be called upon to make or may have to make to the detriment of this priority, which is education, or should the federal government not reinvest?

The Vice-Chair (Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.)): You have taken 4 minutes and 45 seconds to put your questions.

Mr. Pierre Paquette: Well, if we had 10 minutes, as we do at the Foreign Affairs Committee...

Mr. Desmond Morley: Thank you.

I need a lot of practice in French. I will try to reply in French for two reasons. First of all, because today I am representing a bilingual organization and also because I am an Englishman from England who arrived here at the age of 26 with no education. I obtained two BAs here, in Canada, and I learned French. I will say that education is very, very important. I am a living example of this.

As for the issue you raised, the provinces are concerned by health matters, which may lessen the attention that they should be paying to education.

However, the people with the highest level of education also have the highest level of health. We did not deal with this topic in our brief, but this is true. I spoke with the Deputy Minister of Education for New Brunswick, who has just retired, and he told me about an informal poll that revealed that most of the patients in the emergency rooms of New Brunswick hospitals were people with the lowest level of education.

[English]

What I am struggling to say is that one of the very big things about health care and education is with governments, both federal and provincial, because the federal government takes a tremendous amount of interest in health care issues and there is a national health care legislation system, which doesn't apply to post-secondary education. There is a tremendous correlation between the level of education and the amounts of money the provinces spend on health. We were talking a little bit earlier about redistribution of money, and perhaps smarter spending is basically what we're talking about. That's one of the things neither the federal government nor the provincial government, I believe, has really carefully looked into, how we can correlate what money we could save by improving people's education level, thereby improving their level of health, with less reliance on that part of the social safety net.

Á (1100)

Mr. Pierre Paquette: That's a good point.

[Translation]

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

Mr. Pilliterri, please, you have five minutes.

[English]

Mr. Gary Pillitteri (Niagara Falls, Lib.): Thank you, Mr. Chairman.

Thank you for your presentations this morning. I did live in Nova Scotia for three years very early in my life--I think it was some 44 years ago. I still have a feeling that we always were really deprived to be living in the Atlantic provinces. I don't think that should be the case.

My question is going to be a little odd, a little bit different from what most of my colleagues here say. Do you get enough? You don't get enough. If I recall, prior to the Social Union Agreement earmarked moneys were not spent properly, specifically in education, or even health care. As a matter of fact, if we go back and check it, the only one that did its job better was the Province of Quebec, specifically in education. All the other provinces, as long as they got the money, didn't care where they were spending it. Nobody was really held accountable, so the idea was much better to give this social transfer.

Having nine years on the finance committee now, I've seen a lot of presentations. Often it's repeat stuff. A couple of years ago we had in Canada what you call a social union. I was talking about this to Dr. Giroux yesterday. It is to be held accountable. The provincial and federal governments are to be accountable for the money they have and dispense. In the last two years we've had increases of 6% a year in program spending. They say there's not enough money. And if we see another year or two of the same way, we'll be going back to 1993 and 1994. I did ask Dr. Giroux about that yesterday. Whose responsibility is it to be holding us accountable for it? It's the federal government and the provincial government where they spend the money, and those increases already are there. And nobody is talking about it. If we do it one more year, two more years, we'll be back into deficit spending. Here we've increased program spending with no accountability.

Maybe it's not you, because you cannot afford it, but do you think it's within your mandate to hold governments accountable for what they do?

The Chair: You have a couple of minutes. Go ahead.

Á (1105)

Dr. Chris Ferns: I would agree with that, and I think in Nova Scotia the provincial government's record is dismal. For example, the millennium scholarship money that came to the province to supplement existing funding for students was used as an excuse to actually cut student funding by an amount greater than that given. Basically, one might not want to use the word “embezzlement”, but it comes pretty close to that. Very little of the increase in the Canada health and social transfer has actually been translated into funding for post-secondary education.

It's for that reason that we support legislation that would restore to the federal government the ability to require accountability. I think institutions should be accountable, and if the federal government is providing the funding, they should be able to have a say in where it goes. I think part of the problem that has risen is because of the failure of some provinces to act responsibly in the face of that, and the kind of recommendation of the Canadian Association of University Teachers would go a long way to addressing that problem.

The Chair: Mr. Morley, did you have a point to add?

Mr. Desmond Morley: Yes, thank you, Madam Chair, just a brief intervention.

I want to juxtapose the experience in New Brunswick with that in Nova Scotia, of which I'm completely aware. It has been abysmal the way post-secondary education has been treated in this province.

In New Brunswick, quite the contrary has happened. To the best of our knowledge, all of the money that came from the federal government that has been nominally earmarked for post-secondary education and health care has in fact gone into that. They've not just been put into general revenues and then used to tar the roads when there's an election coming. You know what I mean? That's the biggest accusation across the provinces, and whether that's true or not, it certainly isn't true in New Brunswick. In both the Liberal and Conservative governments, there has been absolutely no fear of favour as far as giving the money to where it was intended to go. I'm saying that simply to underscore that, in our case, there's just not enough money coming in.

Thank you, Madam Chair.

The Chair: Thank you.

Mr. Wilfert, please, for five minutes.

Mr. Bryon Wilfert: Thank you, Madam Chairman, and I thank everyone for coming.

Mr. Fox, I heartily endorse your comments on the coast guard. I think the national interest is not well served presently. You've outlined a number of very important points, and I would hope that both this committee and Fisheries and Oceans and others look at this issue very seriously.

You want a divorce. I'm not sure what the cost will be. It may be something that we should also be looking at in terms of the impact, which maybe you could talk about, and what period of time we'd be looking at. There might also be liabilities that you'd have to assume, and what would they cost? In any divorce, that often happens, so I'd like you to respond to what that would be.

Also, on the issue of post-secondary educational funding, I'm glad to hear this continually being stated about the unbundling of the CHST: there's no accountability. I think the comment that was made with regard to the millennium scholarship is also very true in the province of Ontario with the clawback that occurred there.

One of the difficulties in transferring federal funds to provinces is the total lack of management, at times, and lack of accountability and transparency in health care, post-secondary education, and so on. Provinces, like the federal government, have to make difficult decisions and choices. Sometimes we make the right decision; sometimes we don't. Nevertheless, if your priority is tax cuts, which I'm all for, but you don't deal with your deficit first, but then you scream for money for post-secondary education and health care, your priorities are pretty screwed up, in my humble opinion. On the other hand, I think what you're telling us is, if we are going to be able to send the dollars, we want to make sure they're applied in the proper fashion. So I certainly agree with that.

On the housing front, we announced $680 million over four years for affordable rental housing, and again we have provinces like Ontario that don't want to put any money down but talk about “in kind” and dealing with municipalities.

I'm a great believer that we should deal directly with municipal governments, in any event, on some of these programs, simply because the provinces put up too many barriers and the cities really know many of the key problems. But again, we cannot fill the vacuum alone.

So I'd be interested in any comments, Madam Chair, on those comments.

Á (1110)

The Chair: Mr. Fox.

Mr. John Fox: Yes. I guess the first comment is, if not a divorce, maybe a restraining order would be helpful, at least.

I'll just give you a quick example of how the coast guard is managed within DFO. We basically brought 50% of current DFO when we merged with the coast guard. A commissioner of the coast guard oversees the operation. The commissioner currently is practically less than an ADM, and he has no direct control over the coast guard in any of the five regions. The assets in each region are controlled by the DFO regional director general.

The other day, my national president had a national UMC with the commissioner of the coast guard, who was the management chair, and he said they're so strapped right now they're making a special submission to Treasury Board to try to get more funds. But he says DFO's current attitude toward the coast guard is that it's just one of 17 programs they have to administer. That's how bad it is.

We need to see a change. This reporting structure was identified in the fleet management by the Auditor General, and also in the public accounts committee, I believe, so that's how bad it is.

The Chair: Does anybody else wish to comment?

Ms. MacDonald.

Ms. Mary Jess MacDonald: We're talking a lot about post-secondary education, and I agree. We even addressed some of that in our report.

I want to point out the very short number of years we have from the primary grades to grade 12, or during the public school education of the students. That is a priority area because it's the time when we set the young person up to be a lifelong learner, to continue his or her learning into post-secondary institutions, and be a contributor to society.

We really believe an education, as some of our fellow presenters here have pointed out, is the key to improving the economy. It's the key to a better life and a better distribution of resources in the country.

The Chair: Thank you very much.

This time I'll go to Ms. McDonough, and then over to Mr. Discepola, Mr. Brison, and Mr. Murphy.

Ms. Alexa McDonough: Thank you, Madam Chair.

Just very briefly, I want to congratulate the Nova Scotia School Boards Association, not only for their comprehensive brief this morning, but for the excellent work they've been doing in conjunction with their counterparts across the country and the national organization, in emphasizing child poverty as a severe impediment to early childhood development and learning.

It seems like a no-brainer, but it is also clear that we have to keep reinforcing this point with the federal government. If our kids don't get the best possible start in life nutritionally, environmentally, and in every other way, then even if you increase the spending to adequate levels, our kids are not going to be able to take advantage of the educational opportunities that are being offered to them. So I want to congratulate them sincerely on that.

Moving to post-secondary education, I note that you have reiterated today a position that has been taken on behalf of both the Nova Scotia and New Brunswick university teachers and faculty associations, and the Canadian Association: the call for a counterpart to the Canada Health Act, in terms of national legislation that guarantees accessibility, affordability, and quality education.

It's very important that there's a partnership between the students and the learners, and in that coalition one hopes it will be possible to reinforce the problems that have been caused by post-secondary education becoming basically secondary, and a sort of orphan, in the CHST context.

At this point, has work been done by CAUT and provincial counterpart organizations specifically around what that act needs to look like? Is there anything like a model act that could be brought forward and perhaps circulated to the committee?

Mr. Desmond Morley: I am embarrassed by the fact that I don't have a copy of the proposed act with me. I can only excuse myself by saying that it was presented by CAUT. In fact, if you've already heard from CAUT, you probably have a copy of it somewhere. I hope the MP for Halifax will be given a copy if she hasn't already got it.

Á (1115)

Ms. Alexa McDonough: Thank you for your answer. I'm not a permanent member of the committee, and it may in fact have already been circulated to committee members.

I turn finally to the coast guard presentation, an excellent detailed documentation of deficiencies, 19 of them. Peter Stoffer, as you know, my colleague, is an inveterate champion of the coast guard and has been trying to point out the reasons there is a need for a divorce and a reconfiguration. I noticed that among the 19 deficiencies you identified, truly alarming concerns that we need to be focusing on, there's no specific reference to the need for some kind of orderly vessel replacement program. I'm wondering if you could just comment on whether you see that as a priority, and if so, whether you have any suggestion as to what dollars are needed to meet that priority, especially given the fact that our shipbuilding industry is on its knees and the coast guard system is already so weakened by the concerns you've outlined.

Mr. John Fox: As you know, designing and construction of a ship, depending on what you want it to do, takes time. I did say in my second paragraph that the coast guard needs over $350 million to renew its aging fleet. Information was presented to the public accounts committee. Currently, there is no plan. My understanding is that there's not even a start into this, and many of our vessels have exceeded their lives. The Hudson is working well beyond its life, our eleven hundred series vessels are into their half life. It takes years to put this stuff forward and to financially manage it, but it is a critical issue.

The Chair: Thank you.

I'll just take the opportunity to say I received a copy of the act, but I do not recall whether I received it as a member of this committee or as an individual member of Parliament. So I'll ask our researcher to obtain a copy of the act and circulate it to all members again.

We'll go now to Mr. Discepola.

Mr. Nick Discepola: Thank you, Chair, and thank you to our presenters.

One thing I really appreciate is your candour, Mr. Morley, when you say you're probably in front of the wrong committee. I do share an awful lot of your concerns, especially when you talk about national standards and accountability. However, when we use those words in my home province--I'm a bit puzzled why Mr. Paquette was in agreement with your presentation--they send shivers down the premier's spine, because they don't like to be accountable for anything. All they want is, give us the money and let us administer it the way we want. I concur that if we're going to give any money, we must have accountability, but I'm not sure we're going to be able to get those national standards. So I'd appeal to you to make the same kind of presentation for those requirements any time you're dealing at the provincial level.

You stated quite correctly that we're getting less money than we would have through EPF, but you conveniently--or maybe not--left out the fact that we did transfer tax points to the provinces, which they are now getting additional revenues from.

I'm intrigued with your proposal for a needs-based program. It's the second time it's come up today, and I think it's an ideal way we could solve it. However, I'm concerned that it probably would discourage the search for excellence if we did that. It might be very subjective in nature to measure. I'll give you the opportunity to possibly enhance your recommendations on that.

Also, the big dilemma I have, as a federal politician, is that we have to respect provincial jurisdictions. We get pounced upon, even if it's a simple thing like introducing the millennium scholarship, which I think was a fantastic innovation. We get pounced upon every time we even try to help in areas of health care or education. If I have time, I'll ask another question, but I'd like you to elaborate on how you would address these regional inequities. And if we went to a student-based rather than a provincial population-based scheme, would that not affect the funding also? I think the bottom line is that to keep it simple, maybe we should just determine how much money is needed and inject that back into the CHST, target it for health and education, separate the two--I think that is a good idea--but demand accountability. Maybe that's the simplest solution.

Á (1120)

Mr. Desmond Morley: I think you're drawing more from Chris Ferns' recommendations, and so I'll pass it on to him. However, as I say, I'm an immigrant to Canada, and I've been privileged to be here under governments of different political stripes, each of which says the other one doesn't know how to govern the country. But as an immigrant, seeing what I've benefited from, quite honestly, Liberal, Conservative, NDP, Rhinoceros Party, I don't really mind. My experience of Canada says it looks after its citizens as well as it can. I can honestly say that although maybe individual politicians are looking forward to the next election rather than the next generation, by and large, Canadian politicians do look to the next generation rather than the next election--and I say that very sincerely.

That said, there was a recent poll--and I don't like relying on polls; I usually go with Statistics Canada data, really solid data--by Maclean's, which has some very good research. The most important thing in the minds of parents these days, only in the last few months, is the education of their children. All education is the most important priority they have in mind for their children. Among the five top things, 39% of parents said education is the most important worry they had for their children. The next highest was perhaps safety, but there was nothing higher than about 9%. So that's the way the world is shaping up. The parents, the voters of this country, want whatever government is in power to take care of the education of their children first and foremost.

I'll pass it on to Chris.

Dr. Chris Ferns: I think you're right that a lot of the problems stem from the tensions between the provincial government and the federal government. When you have a system where the federal government is ultimately the provider of the funding, but the responsibility lies with the provinces, you end up with the situation we have now, where one side blames the other. Fed bashing is a very popular way of trying to get elected at the provincial level. What we try to do when we make representations to the provincial government is suggest to them that the whole approach, which is confrontational, is counterproductive, that campaigns for fairness and indications that the federal government is somehow holding out on you get you absolutely nowhere. What we would like to see at the provincial level is a preparedness to work with the federal government.

The problem we have with something like the millennium scholarship program is that the federal government is almost forced into it by the irresponsibility of the provinces. As we've seen, safeguards for making that money go where it's supposed to go are inadequate, as is shown in the case of Nova Scotia. That's why we see the essential solution as being to try to restore core funding, with the provisions for accountability and the assurance that money will actually go where it's intended. We believe more power should be restored to the federal government to make those decisions. Certainly, my own experience living in Nova Scotia for the past 15 years is that we see the federal government as something of a civilizing influence, when we see the kind of benighted policies often followed by the provincial government.

The Chair: Thank you very much.

Mr. Brison.

Mr. Scott Brison: My first question is on research granting. I think you were referring to the Canadian Foundation for Innovation specifically. You didn't mention the partnering aspect of it and the degree to which those grants are provided based on matching funds from the provinces.

My feeling, which has been expressed to this committee, is that that in fact discriminates against some of the less-well-off provinces, because there clearly is not as much fiscal capacity in a province like Nova Scotia as there might be in a province like Alberta. I'd appreciate your feedback on the degree to which the matching fund aspect of it can actually further increase the gap between the research capacities of less-well-off provinces and those of richer provinces.

There's a second policy I'd appreciate feedback on. A few months ago there was a private member's motion by a New Brunswick Progressive Conservative member, John Herron, on the tax deductibility of student loan principal repayments. It came within eight votes of passing, which is quite remarkable for an opposition private member's motion. It would do two things: it would make student loan repayment less onerous, and it would encourage them to stay in Canada. That would address some of the brain drain issues because you don't benefit from that if you have moved to another part of the world.

The last issue is fiscal imbalance. Dr. Ferns, your faith in the federal government is touching, but I'm not certain it is completely accurate. Respectfully, I'd suggest the Conference Board of Canada's report on fiscal imbalance. Maybe you have already taken a look at it. It's an excellent report. It demonstrates clearly that federal revenue-generating capacity, particularly after the GST and over the last 10 years, has grown significantly. Provincial costs have grown significantly. The fiscal imbalance between the feds and the provinces, even including the tax point transfer--and you're right to note that--has grown, and the gap between the capacity of the provinces and the tax revenue going to the feds has grown.

I'd appreciate your feedback on those three points.

Á (1125)

Dr. Chris Ferns: With regard to the first question about regional inequities, I think we're dealing with initiatives such as the research chairs at the Canada Foundation for Innovation, which I think are well intentioned and can produce good results under certain circumstances.

The effect for a province like Nova Scotia, in fact for all the Atlantic provinces, is that essentially there is a kind of centralization. There's a kind of sucking of resources toward the wealthier provinces and institutions. Basically, if you are a researcher, especially in a technologically centred discipline or a hard science, after a while the only place you can go to do your work is somewhere with the finances to sustain that. The problem we're already encountering is seeing some of our best faculty leaving to go to Alberta or Ontario. This well-intentioned initiative is making a bad situation worse in certain parts of the country, and what we have is something that actually creates, as I say, reverse equalization.

Mr. Desmond Morley: I just wanted to add something that I haven't quoted from our brief. As I pointed out, our presentations are so similar, yet we didn't collaborate on them. On the first page we say:

The old adage “you can't sell from an empty wagon” is, it seems, the basis for an infinite number of adaptations. ...one of those adaptations could be “you can't conduct world-class research in a run-down environment”.

That gives me an opportunity to underscore again why we're looking for more core funding--and that's an expression that came from the ANSUT brief more than our own--rather than the research funding.

There is an emphasis on research funding. The federal government seems to have fallen in love with research, which is not a bad thing. We're not ungrateful. In fact, our brief says we're not ungrateful for the intervention in providing research funds, long overdue. The problem is, you cannot conduct world-class research in a very 19th century environment, which is very often the case in all universities, but certainly here in Atlantic Canada. We just haven't had the infrastructure availability. So it's all right to give us a lot of money to do research, but if you don't have any more than a shed in the backyard to do the research, it's not going to compete with Johns Hopkins.

We perhaps can never compete with the bigger American places like Stanford and Harvard; that's ridiculous. But to do anything beneficial with the money we're getting for research, and the Canada Foundation for Innovation fund and things like that, there has to be money targeted to the actual bricks and mortar, the desks, the computers, the pens, the paper, the ink, and the test tubes. That's the kind of thing that's not being paid for, and those are the things we're losing out on.

Á (1130)

The Chair: Thank you very much.

The final questioner this morning will be Mr. Murphy, please.

Mr. Shawn Murphy: Thank you, Madam Chairperson.

I have just a few questions to Mr. Fox on the coast guard issue. First of all, I should tell you, I represent the area that has the coast guard base in Charlottetown, so I'm aware of the cutbacks, the management problems, and staff morale. It seems to be caused a lot by the whole uncertainty that the coast guard operations face, and that the employees in particular face.

Regarding my first question, you indicated in point 6 in your presentation that Saint John and Dartmouth coast guard bases are being closed for political reasons. I'm aware of the situation in Saint John and that being phased out or whatever, but Dartmouth, I didn't know anything about. Is that being closed? I didn't think it was.

Mr. John Fox: Yes, Dartmouth base is scheduled to be closed. I believe there has been interest by the ports corporation and also the south end of the base for a possible sewage plant or whatever. But, yes, it is scheduled to close and move up to the Bedford Institute of Oceanography.

Mr. Shawn Murphy: So the operations that are being done at Dartmouth now are just being moved to Bedford?

Mr. John Fox: Yes. The problem is, they're also planning to try to contract out some of the programs that are offered out of there, like the nav aids program, and so far, it's not working. They've put out expressions of interest, but the bids have all come back too high. But they are committed to moving down there. I'm not sure what year it is, whether it's 2005 now. I think it has been put back a year, but it's due to close.

Mr. Shawn Murphy: What seems to have taken place in Charlottetown over the last five, six, or seven years is that the operations gradually have been moved to Dartmouth. A lot of the jobs, a lot of the provisioning, a lot of the ship storage has gone from Charlottetown to Dartmouth.

Mr. John Fox: Not actually. Some of the services were actually deleted or contracted out, which seems to be another flavour of the day regardless of the cost. But Charlottetown was looked at as being a prime facility to do buoy work from Cape Breton and other areas. We suggested sitting down with management on how best to reduce cost and strategically deliver the program.

We also put in things like “truck and go”. Our heaviest expense in the navigational aids program is ships. They're expensive to operate per hour. We suggested things like “truck and go”; drop them off at a key port and have them trucked to Charlottetown or wherever.

The department wouldn't entertain any of those ideas. It was even brought up by the Auditor General's group in the last audit: Why aren't you looking at some of these options? We don't know why. We believe more work could be done at the Charlottetown base.

At Saint John, there's no backup facility. We don't know where they're going to go there yet. Again, it's all pending on getting rid of certain programs, getting out of programs--which doesn't make sense. It's being poorly managed, and there are no off-ramps for where they intend to go with some of this contracting out and service delivery. There are no off-ramps. We're going this way, and if it doesn't work, too bad; we're out of Dartmouth base and we're out of Saint John base, and that's it.

Mr. Shawn Murphy: My last question, Mr. Fox, has to do with the merger that took place in 1995 between the coast guard and DFO. I understand the problems this resulted in. Looking at it as a whole, we have a very serious foreign fishing problem off Newfoundland and in other parts of Atlantic Canada. Of course, your primary mandate was rescue and surveillance. Aren't there ways that the coast guard could fulfill that mandate around this very serious foreign fishing issue? What I'm trying to say is that I can see some synergy between the coast guard and Fisheries.

Á (1135)

Mr. John Fox: We've become fish and chips. That's basically what we are.

The vessel at the top of the handout I gave you, the Cygnus, is the DFO coastal patrol boat. It was one of the DFO ships that came with it. That vessel has been taken out of service. That's the vessel that covers the foreign overfishing and looks at the poaching. Fishermen are complaining about the amount of poaching that's going on. Those very assets are being taken out of service.

The use of vessels by DFO and the coast guard is for different purposes. The coast guard was multi-tasked. If we were doing buoy work and we got called to a rescue mission, we dropped the buoys and headed for where we had to go. DFO is more single-task oriented. That's where they want to go. They've changed their whole way of doing surveillance and monitoring. Forensic auditing on the buyers/suppliers is a big feature now at DFO.

I think DFO can deliver that service on its own, the way it used to deliver it, without tying up the coast guard.

Mr. Shawn Murphy: Thank you.

The Chair: On behalf of all the members of the committee, we welcomed your briefs. Thank you for getting them in early to us so that we could translate them and distribute them and you could speak to them this morning. Thank you for taking our questions and contributing to this process. All of us would love to spend an hour with each individual witness, but our mandate is to talk to as many Canadians as we can across this country. We welcome the fact that we've been able to see you this morning and that you've taken your time to accommodate our schedules and come to see us. Thank you very much.

For my colleagues, I appreciate the fact that you cooperated in keeping to our schedule so that we can do all of our meetings today. Thank you very much.

We will resume at one o'clock this afternoon.

We are adjourned.