FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, October 7, 1998

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[English]

The Vice-Chair (Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.): Good morning. We're resuming the public consultation hearings and the pre-budget consultations for the Minister of Finance. Today, as you know, is the third day of the eastern swing.

Our colleagues from the House of Commons are also consulting Canadians on the western swing. It'll be approximately a four-week process, during which we will hold hearings on the pre-budget consultation—the desires of Canadians to express themselves in these hearings to tell us as politicians what they would like to see as our priorities, what we should be concentrating on for the upcoming budget.

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At the same time, in the interest of expediency, we will combine these hearings with the hearings on the future of financial institutions, more commonly known as the MacKay task force report. Our committee will be combining all the hearings as well as the hearings that we've had in Ottawa dating back to June of this year. We've consulted Canadians for the fifth consecutive year, and I believe, as a member of the finance committee in the first two years, that the success of our budgets, if we can qualify them as a success... Why they qualify as a success is essentially because the response with which Canadians have accepted some of the very severe measures that we introduced in 1995 has been as a result of consultations such as this.

Our role is to make sure we report back to the Minister of Finance so that when they prepare their budget for the upcoming fiscal year he reflects Canadians' priorities and Canadians' values. And that's why I want to welcome you all here, on behalf of our party and on behalf of the government. I believe this is a very valuable process in order for us to stay in tune with the reality that Canadians share. I would like to invite each and every one of you to represent your organization with about a five- or ten-minute presentation, and we'd like to open it up for questions from my colleagues after that.

We have a very full agenda today, so I'd like to stick to the time schedule that we have in front of us. We are going to be holding hearings until 6 p.m. I would like to introduce the witnesses who are here. If anybody else walks in, we will welcome them also.

From the Canadian Association for University Continuing Education, we have Mr. Jim Sharpe, the past president; from the Canadian Pensioners Concerned, we have Joan Lay; from the Nova Scotia Government Employees Union, we have Joan Jessome as well as Ian Johnson, the policy analyst; we have Dr. Maureen MacDonald, MLA for the area; and we also have Stella Lord from the Nova Scotia Advisory Council on the Status of Women.

Normally I just pick somebody at random. If we have a volunteer, maybe they can break the ice. If not, I'll pick a volunteer.

Thank you, Jim. Go ahead.

Mr. Jim Sharpe (Past President, Canadian Association for University Continuing Education): Thanks so much, Mr. Chairman.

I'm very pleased to present on behalf of the Canadian Association for University Continuing Education. Our association represents the continuing education activity in Canadian universities right from Newfoundland to Victoria. This is the first time we have presented to this committee, and we're very keen to have input into the budget process because we feel there are certain issues that really haven't been addressed or have been half addressed in previous budgets.

We're speaking specifically of investment in education. Our specific interest is not just the investment in entry to the workforce but investment in retraining. What we see in our programs and across the country is declining numbers of part-time university students, and given all the rhetoric of lifelong learning and investment in education, we see this as a very, very serious trend. The number declined from 1990, which I think was the peak, to less than 1980 levels in the last five years, between 1992 and 1997. There were a lot of reasons for this. The one that's easiest to point to is the increasing tuition fees that universities have been forced to charge because of the lack of government support through the provincial governments and also the change in the established programs financing to the CHST, the social transfers.

But I just want to talk about some of the initiatives that were made last year in the budget that I think were very positive but I don't think have gone far enough to make an impact on this very serious problem.

Last year there were a number of tax changes put in place, a number of targeted special opportunities grants for high-need part-time students. I think those are excellent initiatives, but they don't go far enough in terms of addressing the problem.

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There are very many advantages to studying part time. The obvious advantage is that most part-time students are working; you're maintaining your workforce as it exists, rather than people leaving the workforce to obtain new skills and going back again. So they combine their educational program with employment, family responsibilities, community responsibilities. The cost is spread out over a longer period of time. There's less disruption in the workplace. Rather than someone being away for a one- to three-year period, they're combining their upgrading and their work. And you have a constant upgrading. I think the concept of lifelong learning is that there's a constant reflection on the work you're doing and trying to improve your skills.

Even with all these advantages, the major programs that support education in Canada penalize part-time students, the biggest one being the Canada student loan program, where if you're doing 60% of load, you're eligible for the full-time student loan. About half the students in the country make that eligibility. The interest is paid while you are studying. If you're less than 60%—and it would be very hard to be working full time and studying for more than 60% of a full-time load—the student loan program does not cover interest while you are studying; it requires immediate payback of the loan. The interest has to be paid while you are studying at university.

Because of the poor benefits of that program, it is very much underutilized. I think there was a national study done in which the statistics showed that only 6,000 of these loans have been given in the last 15 years since the program has existed. So it has been very ineffective in terms of encouraging part-time study.

The basic point I want to get across is let's not discriminate between part-time students and full-time students. The Department of Human Resources Development has tried to integrate the programs quite a bit—there is now one brochure describing both programs—but without an improvement in benefits and putting the programs on a similar basis, I don't think we're going to get much take-up in use of that program.

So the first thing is that if the Government of Canada, through the finance committee, feels that an investment in education is important, let's invest where we can get the most impact, which would be through the part-time program.

There are other means of investment too, Canada study grants being one of the most important. The millennium scholarship has just been announced. It's just been worked out how the scholarship is being given in two years. But both of those hinge on the assessment process used through the student loan. Both those are seen as needs-assessed programs, and the only mechanism we have for assessing needs right now is through the Canada student loan. So it's not much good that millennium scholarships are going to be offered to part-time students if part-time students aren't applying through the assessment mechanism. There's definitely a need to increase the benefits to part-time students to put those programs on an equal footing.

The other side of the equation is providing the programs that are necessary. With the cutback in provincial government grants to universities and other institutions of higher education, the programs that have been cut are the evening programs, the non-core programs at the universities. One of the reasons there may be a decline in the part-time numbers is that programs just aren't available as they were in the past.

Now, universities are adjusting. They're more enrolment sensitive than they have been in the past. There's much more interest in enrolment. But obviously the financial concerns affect enrolment as well.

So in terms of a combination of providing support to the students and providing support to the institutions through the provincial governments by reinstating the transfers for higher education, both are a necessity, and one of the important sources of this funding could be the employment insurance fund.

I understand that the reason for the change in name from unemployment insurance fund to employment insurance fund was to make it a more active fund. Rather than just passively providing income support while someone is out of work, the idea of an active fund is to make investment in education, so that the person has the skills that mean they won't be out of work for as long, and that's not just training them when they are out of work but also training them continually.

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Now, that's the philosophy behind it. We haven't seen any real mechanisms put in place, where the employment insurance fund can be accessed for active people who are working. That could be through general tax revenue in terms of improving the other programs, or it could be a specific link to the EI fund. I'll leave that up to the civil service to work out. I know there's quite a controversy over the best mechanism, but the important thing is to make that investment.

As for some of the other things that were introduced last year, the tax incentives were very important. There were tax incentives for child care for part-time students; they have instituted a tax credit for part-time students. There's a very important—although it hasn't been implemented yet, it'll be in perhaps in 1999—use of RRSP funds for employment.

One that was not implemented, though, was the RESP, registered educational savings plan, incentives for part-time mature students. The RESP incentive is only applicable to students under age 21. Again, why are investment funds not going to working adults, the mature students?

I think the easiest way to do that would be to make the RESP fund similar to the RRSP as a tax credit. If people are saving for their education, let's make that a priority, rather than making them take out RRSP funds, with the long-term implications for their retirement savings. If it could be a separate fund, that would give them a real tax incentive for saving for their own education.

The other thing that's important in continuing education is the development of learning infrastructure. There's been a lot of activity in business education, a lot of it focused now on using the World Wide Web for education. Industry Canada has been a very important partner in that through SchoolNet. They have an investment fund now in NoteMakers, helping universities put their courses on the Web. That type of infrastructure is critical for a learning society, providing access points throughout the country with...I think they call it CAP, the community access program, for the World Wide Web—I think there are 10,000 sites now—expanding that to all schools and universities, providing the backbone infrastructure.

What we're doing here is putting in place a learning infrastructure that will be critical for our adjustment. One place in which there hasn't been a lot of activity is in expanding that to employers, worksites, workplace learning, and making that acceptable. I know Industry Canada is very concerned about federal government employees, but a lot of work needs to be done to provide the infrastructure throughout the workplace, and then providing the programs that would drive that infrastructure in terms of workplace learning, with certificate, degree and diploma programs.

The other would be tax incentives for corporations to invest in education and training. We've heard a lot about that in the past, that there were no specific measures in the last budget on that. Again, I'll leave the specific measures up to the civil service, but I think that needs to be revisited so that if there's going to be an investment, there is the tax credit and support for the investment.

As for support for job-creating industries, education and training has become one of the most important industries in this country, and we have to recognize it as a critical industry for our future investment.

Thanks so much.

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

I'd like to now ask Mrs. Joan Lay to continue, please.

Ms. Joan Lay (Canadian Pensioners Concerned): Thank you, Mr. Chairman.

I want to say that Canadian Pensioners Concerned, Nova Scotia, is part of a national body, that we are a completely volunteer organization, not having any professionals attached to us except those who are retired. The information we give you has been researched by us and not by a professional person, and therefore you may not find it quite as professional a brief as some of the others. However, we will do our best.

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Thank you for the invitation to address the committee as a representative of the senior population in Nova Scotia. The older population is affected by the processes of government, both federal and provincial, so we are pleased to be present at this consult.

During the past few years and at present, many seniors have been carrying added burdens due to the unemployment of their sons, daughters and grandchildren, who have had to rely on the only stable income available: the senior's pension. We would like to see this change, and it can only change by job creation programs that actually make jobs available to the unemployed in every age bracket.

In answer to the questions posed, we would like to make these observations.

On question number one, with the budget balanced...although it is not quite clear to Canadians whether it is balanced or not, as each message from Ottawa seems to be a little different, leaving the ordinary citizen, especially the senior population, not sure of where they stand. If the budget is balanced, then certainly one of the main priorities is to increase the transfer payments to the provinces, especially our province of Nova Scotia. The social programs that affect the older population have been slashed due to the cuts in transfer dollars, or so we are told. Then obviously we need our health care system funded, and also education and senior maintenance programs. These are necessary for the well-being of the older population.

Canadians across the country have indicated to government that social programs are their number one priority. Therefore, it is time to listen to them. We ask that medicare and its principles as well as other social programs be your commitment.

In answer to the second question, very few seniors who are retired are privy to the information on strategic investments the government may want to make. However, here are our few suggestions from information we were able to obtain from the alternate budget:

Sustain economic growth at its present pace, 4% per year after inflation, for at least another four years through low interest rates and injection of federal program spending.

Rebuild federal program spending in the first year of the budget to its pre-cutback level, and increase spending by $8 billion in the second year.

Freeze aggregate federal taxes at their 1996-97 level in 1999 and beyond, while making significant measures to improve the fairness of the tax system.

The government will require the active cooperation of the Bank of Canada to make a shift in monetary policy, and to allow inflation to increase by 1% to between 2% and 4% per year. Simultaneously, there is a need to develop and introduce a range of institutional and regulatory reforms aimed at insulating our market from global pressures and protecting the made-in-Canada low interest regime.

There are many more ways to change the system, but this is a start. Canadians, to take advantage of the new era, would have to be assured that government has their interests at heart, not those of the multilateral corporations. This could be accomplished in two ways: avoid being drawn into MAI, and block the bank mergers that have been proposed. Canadians will not be able to take advantage of opportunities that will only be given to national consortiums.

If we put money into environmentally sensitive job creation initiatives, many hundreds of jobs could be created for Canadians. We need to redeem the forest and actively support initiatives to re-create a fishing industry and to continue to enhance our agriculture by increasing transfer payments and strengthening health, education and other programs. The government will ensure a wide range of jobs being available to Canadians by doing this. This will certainly help the community of seniors.

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I would also say that while we were not able to come up with the facts and figures, the percentages and so on, we do not presume to tell the federal government or the representatives of our area exactly what to do. We put them there because we trust them to do the best for us.

Senior Canadians at this time are in a trough. We're between the seniors who went before us—those who went to government and shook their fists at them in Ottawa when they wanted to do certain things to the pensions—and the baby boomers—the boom-and-bust who are coming up. Our seniors are caught between these two groups. The boomers are already making themselves felt, and there's no doubt they will continue to do so as they become more senior.

You will find that seniors are not saying much at the present time. They're just sort of drifting along. However, should the issues come up, we certainly will be saying something. At the present time, we are more concerned about seeing that our sons, daughters, grandsons and granddaughters are able to make their way in this country, and that some seniors do not have to continue to support them.

Thank you very much for your consideration.

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

I'd like to now turn to Dr. MacDonald, followed by Mrs. Lord.

Ms. Maureen MacDonald (Member of the Legislative Assembly of Nova Scotia (Halifax Needham, NDP)): Thank you.

First, I'd like to say how good it is to be here again. Last year, I came in quite a different capacity. I was still working at the Maritime School of Social Work, where I was on the faculty. Today, I'm in the official opposition in Nova Scotia. I'm the health critic, and I also chair the legislature's Standing Committee on Community Services. We've been conducting public hearings around Nova Scotia with respect to social assistance reform, so it's somewhat in the context of my work in the last four or five months that I'd like to speak today.

The Vice-Chair (Mr. Nick Discepola): Are you representing your party, then?

Ms. Maureen MacDonald: I'm representing the party, that's right. As well, I have had some opportunity to talk about the presentation today with the finance critic in our party.

I'm going to be making some reference to an article that I'll leave with you. It's sort of in its final draft form, and it's an article that I've written on the impact of a restructured Canadian welfare state on Atlantic Canada. It's an attempt to look at what has occurred in, let's say, the last fifteen years with respect to federal government policy, and what it has meant for the Atlantic region.

In some ways, we need to focus specifically on the CHST and what has occurred. I think we know that the cuts resulting from the CHST have been deep and dramatic, and they have had a profound impact on the Atlantic region. According to the Atlantic Provinces Economic Council, the net expenditures of the federal government in the four Atlantic provinces—that's the net of revenues collected—dropped from 38% to 19% of GDP between 1980 and 1995.

The programs that have been hardest hit in this region as a result of this dramatic reduction in federal presence in our region are in the areas of health care, education, social services and, more recently, those with respect to unemployment insurance benefits. In Nova Scotia alone, the federal transfer for health, education and social services will be reduced by $800 million by 1999. At the same time, according to the National Council of Welfare, poverty, for example, in this region has increased. There has thus been a correlation between the withdrawal of federal spending in the region, a reduction in household, family and personal income, and an increase in poverty.

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Nova Scotia now has the third-highest rate of poverty in the country, at 18%, with 168,000 people living below the poverty line. This is a climb down from its prior position in 1990, when we as a province had the third-lowest poverty rate of any province, at 13%. I put these figures in front of the committee as an indication of the trends that have been occurring, and of why we need to be concerned about federal public policy and the impact it's having on families and people in our region.

In terms of health care, it's clear to us that the results are increased waiting lists in emergency departments; a greater difficulty for our province in retaining physicians in terms of having a level playing field in competitive wage packages and conditions of work; an increasing tendency to see user fees sneaking into our system; and a greater pressure on caregivers to provide primary medical services—and when I say caregivers, I think we all are fairly clear that we primarily mean women in family units, women who are under more and more pressure to provide care.

I think the other feature is an increased tendency toward a two-tier health care system, one in which those with private insurance or private means have a greater likelihood of receiving health care services in a timely fashion, and one in which those who need to rely on public dollars are taken into a system in which there's a fair amount of rationing of public dollars going on, which means they get caught in a bureaucratic process. The concept of accessibility and universality of our health care system, then, is certainly eroded.

In terms of looking at the the fiscal position of the federal government, it's clear to us that there is an ability now to restore health care funding to its previous levels. We would urge members of Parliament to take this up in a very serious way because, as Mrs. Lay has laid out, medicare is fundamental to Canadians, to our identity, and to our needs in terms of the health of Canadians.

We also think there is the ability to improve the health care system—not just to restore program funding but in fact to take the initiative to improve the health care system and go further in terms of restoring health promotion programs. For example, here in the Atlantic region, health promotion has been a central part of assisting women's organizations to do community development and health promotion programs. There have also been some very innovative population health programs. Well, that department now has no ability to do these kinds of innovative pilot projects. They are down to essentially two programs, with some limited work in the HIV/AIDS area and around child poverty, so we really need to think about this.

I think we have the financial ability now to look at a national home care program, which would take some pressure off family members, off women who are trying to provide care, and primary care in many cases.

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Also, we need to seriously examine a national pharmacare program. As part of the hearings on welfare reform in Nova Scotia, we've been hearing from family doctors in various communities. They are telling us about the patients they're seeing who are poor and who are unable to get drugs required to help them overcome an illness or maintain their health in their homes. The impact of not having the medication that's required is that they have to be hospitalized over and over and over again, and often they'll have to have surgery. It seems to be a shortsighted way of dealing with the health of people. If we don't provide the kinds of programs and supports that people require to remain well, they end up in some other part of the health care system, so this is a serious concern that we have.

With respect to the bank mergers, I'd just like to speak briefly on behalf of my colleague, who couldn't be here today. I'm going to read some of what he prepared, and I'll leave this with you.

The Vice-Chair (Mr. Nick Discepola): Today is only for pre-budget consultation. Tomorrow is set aside for the bank mergers. If your colleague is available, maybe he can come back tomorrow.

Ms. Maureen MacDonald: He's not actually available tomorrow.

The Vice-Chair (Mr. Nick Discepola): All right, then go ahead.

Ms. Maureen MacDonald: We'd just like to put on the record that we're not in favour of the proposed bank mergers, and we're not satisfied that the MacKay task force report has satisfactorily explored the question of risk. What I will do is leave this part of what he has written for you for your consideration. He has expanded a bit on the issues of risk in the international market. And at this point, I think I will leave it at that.

Perhaps one more thing I should speak about is the EI fund, what has occurred there, and the need to improve and extend coverage of EI benefits. I think the research and the data have demonstrated that, prior to 1990, 75% of those in the labour force were eligible for EI benefits. Changes in 1990 reduced the numbers who were eligible to 66% of those in the labour force. The most recent changes in the EI program have reduced the workers eligible for EI to 30%, which is pretty shocking. The impact of that, of course, is that workers who don't qualify for EI any more are therefore more or less dependent on social assistance programs. With the surplus in the EI program, then, it seems reasonable that we could improve and extend coverage.

Thank you.

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

Let's now turn to the Nova Scotia Advisory Council on Status of Women. Go ahead, Ms. Lord.

Ms. Stella Lord (Researcher, Nova Scotia Advisory Council on Status of Women): Thank you. I'm here as the researcher and policy analyst with the advisory council. I don't have a separate presentation to give you other than our brief, so I will go through the main points of the brief. Unfortunately, our chair, Patricia Doyle-Bedwell, could not be here today because of other engagements and because of what I would say was relatively short notice about these hearings.

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You have copies of the brief in front of you. The main focus of the council's concerns is that we'd like to see the government begin to tackle the social deficit, which we feel has arisen in the last four or five years, especially since the cutbacks under the Canada health and social transfer.

Our brief covers seven issues that we think are the main priorities on which the government should be focusing if it wishes to address the social deficit.

One is, of course, to reduce poverty. Women bear a greater burden of poverty in this country. We'd like to see the government focus on women and low-income families. The NCB, the national child benefit, which we think is a good step forward, needs additional resources. We need stronger social security programs in general, especially the EI, employment benefits section. We need to restore funding to the CHST in terms of the transfers to the provinces if social services are to be maintained.

Low-income elderly women also bear a higher burden of poverty than elderly men. We're glad to see that the seniors benefit didn't go through, because there were some problems with it; on the other hand, the seniors benefit was going address, to some extent, low-income seniors, but not as much as we would have liked. So we do think there is a need to look again at the low-income seniors, elderly women. For first nations women and their families, we need to maintain employment equity programs and other programs that allow them to make an income.

The second area is to strengthen economic sustainability for individuals and communities. Several people here have referred to the impact of not only the deficit reduction and the cuts and so on but also the fisheries crisis on Atlantic Canada and Atlantic Canadians. We are seeing impacts on women and families in communities around Nova Scotia. We need to think about fisheries policies that promote sustainability of communities and that are fairer to small-scale fishing enterprises.

Although community economic development is one approach that has been used, we don't believe women are seen as legitimate participants through the government funding process around community economic development. Women have a very strong history in helping to sustain their communities, in working in their communities to make sure they survive, and we think it would be good if the government put more emphasis on women's involvement in community economic development projects and programs. The report of the RCAP, the Royal Commission on Aboriginal Peoples, also needs to be looked at in terms of strengthening aboriginal communities.

The third item is to ensure equal educational opportunities. We've seen some erosion of this in terms of the high level of student debt, and we need to make sure that women's entry into post-secondary education, which has increased in the last 10 or 20 years, is not affected by those changes. We need to look also at aboriginal education and make sure they have equal opportunities for post-secondary education.

The fourth area is to create better conditions for equality at work. We're particularly concerned about the number of low-income workers, which seems to be increasing, and to some extent the erosion of labour standards in some areas. We'd like to see more emphasis placed on working conditions and standards for low-income workers, and we believe the federal government could set that standard through the Canada Labour Code.

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We also think there is a need to begin to take seriously that there are numerous studies on this and very little action on the effects of combining work and family responsibilities for women. We believe there needs to be more emphasis on looking at more progressive workplace policies that promote the ability of women to do that.

The fifth area will come as no surprise, and that's the need for a national child care program or some program that allows the provinces to put more emphasis on child care, especially in the context of what we're seeing now in social assistance reform, which is trying to promote the employability of people on social assistance, including single mothers. It's imperative that the supports and services that will be necessary for women to make the transition from social assistance to the labour market are in place so women to be able to do that without affecting their own lives and the lives of their children.

We need to assist the provinces to renew confidence in the health care system, and the federal government needs to respect the terms of the Canada Health Act and put more money into the system.

The seventh item also relates to poverty and some of the other things we talked about, and that is to create a fairer tax system, especially for low-income people and the working poor. We recommend the committee look at some of the things that have been written by the Caledon Institute of Social Policy. Ken Battle has made a very strong argument about the problem already, called bracket creep, where tax brackets go up because of inflation, so the lower working poor are now paying more tax than they were in the past.

Those are our basic recommendations. I'd like to recommend that the committee read our brief and I'd be happy to answer any specific questions.

The Chairman: Thank you very much.

I'd like to now turn to Mr. Johnson and Ms. Jessome.

Ms. Joan Jessome (First Vice-President, Nova Scotia Government Employees Union): Good morning. My name is Joan Jessome. I'm first vice-president of NSGEU, which is the union of public sector workers here in Nova Scotia for about 20,000 people. Since 55% of those workers are women, before I go into my submission, we as workers have been hit more than once, not only as deliverers of a service but as the caregivers.

In my opening remarks I'll try to highlight the main points of our written submission that was faxed to you on July 31, 1998. In that submission and for today, we understand you are interested in public views and comments on four questions, which we think can be condensed into two.

What should the government priorities now be, in light of the new era with a so-called balanced budget? That was question one. The other three questions could be combined into asking what are the strategies or policies needed to fully implement or reach these priorities?

Turning to the question of government priorities, we felt and still feel there are many reasons to doubt that a balanced budget has been achieved federally or provincially. We suggest that our doubt is even stronger in light of more recent events about the very uncertain state of national economies and finances around the world, the slipping value of our dollar—at least against the U.S. dollar—and continuing high rates of unemployment, underemployment and poverty in this country, and at a time of supposed major economic growth and prosperity.

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As a result, we recommend that the most pressing priorities of the federal government should be achieving job creation and full employment. Our definition of full employment is not working three part-time jobs at 20 hours each a week; it's working at a full-time job with benefits. We recommend eradicating poverty and achieving a more equitable distribution of income; rebuilding social programs and public services—not only rebuilding them but enhancing them—setting up a fair tax system, which I don't think will be seen in my lifetime; and ending economic and social inequality and injustice between women and men, and between all ethnic, racial and cultural groups in communities. You could start with the federal employees in the pay equity issue. We recommend stopping environmental degradation and stressing environmental stewardship, creating a more just, sustainable and peaceful world order.

Consistent with these types of priorities, we also recommend that there be very clear and specific targets for each of these priorities, such as those proposed in the 1998 alternative federal budget for reducing unemployment and poverty.

We further urge all governments, including the federal government, to use a more appropriate measure of social and economic progress than the gross domestic product, namely the genuine progress index, or the GPI, for which there is a pilot project in Nova Scotia in collaboration with Statistics Canada. This project is aimed at developing a composite GPI on the basis of twenty sets of economic, social and environmental indicators by early 2000.

In our view, the federal government should set the example for addressing this broader set of priorities, starting with dropping its appeal of the Canadian Human Rights Tribunal pay equity ruling for thousands of women working with the federal civil service. As our sisters and brothers in the Public Service Alliance of Canada have said, don't delay, just pay.

Turning to the questions of what strategies or policies are needed to fully implement or reach these priorities, we recommend that the fiscal dividend be allocated in its entirety to rebuild the important and valuable public programs that have been so badly damaged by the budget cutting of the 1990s through a set of national social investment funds for health care, post-secondary education, income support, child care, housing, retirement and unemployment insurance.

We are very disappointed with the lack of action in this year's budget for health care. We recommend this committee call on the Chrétien government to convene a national summit on health care, as was publicly proposed by the Canadian Health Coalition on June 17 across this country, to preserve and strengthen our medicare system.

To help finance these types of policy initiatives, we recommend the following key changes. The share of the tax burden paid by corporations, especially the large multinationals, must be increased through such measures as a minimum corporate tax and a wealth transfer tax. A number of measures are also needed at an international level to control the unrestricted and devastating ebbs and flows of capital investment around the world at an increasingly rapid pace, such as a Tobin tax on international financial transactions and a global tax formula.

Different types of incomes, including dividends and capital gains, must be treated equally by the tax system, as was recommended as early as 1967 by the Royal Commission on Taxation. The GST, or BST/HST as it's called in Nova Scotia, New Brunswick and Newfoundland, and user fees whose burden disproportionately affects low- and middle-income earners, must be reduced if not eliminated altogether.

We strongly disagree with the possible plans of the government to use EI account surplus for any purpose other than assisting unemployed people. As the CLC has just recommended, there should be an independent EI commission to make sure contributions of employers and employees are used for this purpose only.

In our view, maintenance and enhancement of a strong and vibrant public sector is needed to restore hope and assist all Canadians to take advantage of any and all opportunities of the present period. In particular, we are referring to the need for a high-quality, acceptable, affordable, accountable public education system from early childhood education to post-graduate studies.

In this period of increasing globalization and massive changes, we recommend that the federal government reassert its leadership and presence in developing and implementing a national training employment strategy, instead of abdicating its responsibilities to provincial and territorial governments and the private for-profit sector.

To ensure that there is a wide range of job opportunities in the new economy for all Canadians, we recommend a strong and ongoing commitment to full employment by the federal government, as outlined in this year's alternative federal budget. This commitment could take such forms as rebuilding public services; a national capital investment fund; a community reinvestment act; investing in social, environmental and physical infrastructure; a national youth job strategy; and a reduction in average hours of work.

All in all, we face a very uncertain future, especially in the light of recent world events. At the same time, we believe the federal governments can still play a major role in addressing the priorities of job creation, full employment, eradicating poverty, inequality and injustice, and environmental degradation, rebuilding social programs for public services and a fairer tax system. We also believe the next federal budget will be a real opportunity for the government to show that it is genuinely committed to a solid set of initiatives and new directions that will address the real priorities of Canadians. We must never forget that the economy and government finances are to serve people, and not the other way around.

• 0905

I think I can speak for the people I represent. I know if a balanced budget means we don't have quality education, employment, a decent health care system, and social programs, then I don't think the members I represent will mind being in debt, if that's what we need to work on to leave to our kids a decent health care system, an education system, and public services for when people are down and out.

I would urge that all people who sit at this table and in the provincial and federal houses walk a day in the shoes of the people who are unemployed, the people who have nothing to eat, and the people who have no housing. Walk a day in their shoes. Thank you.

The Vice-Chair (Mr. Nick Discepola): Thank you very much, all of you, for your presentations.

We will now turn to members. We'll start with 10-minute rounds, and I'd ask Wendy Lill to commence, please.

Ms. Wendy Lill (Dartmouth, NDP): It's really wonderful to have you all here.

I hear the same themes coming up from everybody. I hear concerns about health care and education, and concerns from the seniors about their young people and their inability to get into education programs, being able to afford them. It's pretty sobering to take a snapshot of what's going on here, and I would say your concerns give us that.

I'd to talk about the whole issue of student debt, and I'd like to ask specifically Jim Sharpe—and I think maybe, Stella, you mentioned it in terms of women being able to get into educational programs—what are you finding in your work about student debt? What are the real obstacles facing young people, or women, or anybody trying to get back into the educational system?

Mr. Jim Sharpe: From the perspective of the full-time mature student, whom we deal with, there are a lot more programs out there, but they don't necessarily help.

The biggest issue has been the increase in fees. The fees have doubled in the last five years. So whereas in the past someone might be able to get some employee support or some family support, the bar has risen so much to get university education.

On the question of support for those fees or getting those fees down, I think universities want to have some control in setting them, obviously, and to look at differential fees or differential programs, all sorts of things that come in, although at a high cost...but that just increased the differential access. The focus needs to be on the acceptability and getting federal programs that reduce that debt. It's so large now that people are saying, well, if I get it and I can't get a job, I'll go bankrupt. But then the provisions are that bankruptcy won't clear it for seven years, anyway.

Ms. Wendy Lill: Ten years.

Mr. Jim Sharpe: Ten years? Okay.

Ms. Wendy Lill: Stella?

Ms. Stella Lord: I would like to draw attention to page 8 of our brief, and I'll read what has been written there:

Post-secondary education has also been an important vehicle for improving women's economic security.

In fact, for women, post-secondary education is actually essential if you are going to earn anywhere near what a man earns in our society.

Women value access to post-secondary education, perhaps even more than men do, because they know that without it their economic situation is likely to be bleak. But another problem for women arising from the cuts to the CHST has been the increase in university tuition fees and the resulting level of student debt for those attending universities. This has particularly affected women because of their high student participation rate (currently 63% [at the undergraduate level] in Atlantic Canada).

A recent study for the Maritime Provinces Higher Education Commission notes that the average student loan (in 1996 dollars) has more than doubled in the past fifteen years resulting in a 42% increase in undergraduate student indebtedness. The same report shows that tuition fees in the Maritimes rose by 35% between 1991 and 1996. This indebtedness has largely been driven by increases in tuition fees. The Report shows that lower income students are affected most by the increasing debt loads because they must rely more on student loans. While there is not a great deal of difference between average male and female indebtedness, women appear to have a harder time than men paying back their loans, probably because their average wage on graduation is still only 83% of men's and because this income gap will be exacerbated by the unpaid work demands of family life.

• 0910

Ms. Wendy Lill: Thank you.

Maureen, I'm wondering if you can talk a little bit about the impact of the BST or HST or whatever it's called now. I have certainly found that people in my constituency have come in with concerns, and I've found that we're looking at a lot more people at food banks now because of the impact of the HST. From your work in health and social services, can you quantify at all what impact that consumer tax is having on our communities?

Ms. Maureen MacDonald: I'm not sure I can quantify it numerically. A lot of the research that needs to be done around that would, I think, really have to rest on having access to the finance department information. In terms of anecdotal evidence, though, and particularly for seniors or other people on fixed incomes, the HST has certainly been horrible.

I think about what we've done here in Nova Scotia. I went to P.E.I. a week ago, and there's something like a 12¢ per litre difference for gasoline because they haven't harmonized in Prince Edward Island. Can you imagine what the implication of that is for consumers and for business people here, as well as for those who are travelling or what have you?

Certainly, people talk a lot about the difficulties they've had with respect to heating their homes, with respect to the tax on fuel. We've just had what I think is minimal relief in the latest provincial budget in Nova Scotia, so this is an area that requires study and alternatives, for sure. The tax burden has been pushed down onto people who cannot afford it, and it's on their basic needs and necessities of life.

Ms. Wendy Lill: Ian Johnson would like to speak.

Mr. Ian Johnson (Policy Analyst and Researcher, Nova Scotia Government Employees Union): If I could, Mr. Chairman, I would just mention as well that we see a—

The Vice-Chair (Mr. Nick Discepola): You've done a very good job of chairing the meeting so far, Wendy, so I'll let you continue.

Mr. Ian Johnson: I tried to get your attention.

We see a major impact coming. As you may know, there is supposedly a $229-million compensation package provided by the federal government for implementation of the BST in this province and, I think, in the other two provinces. We're going to see a major problem when that payment is finished, or when we have finished using it—and we call the HST a “huge service termination”. It was used to buttress provincial finances this year. Even with it, we're seeing a major problem provincially, and we fear an even worse situation once that money is spent.

So I think the answer still has to come on that, but I would certainly urge you to look at what the impact of that particular payment has been or will be—and likewise for the loss of it.

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

Ms. Wendy Lill: I would like to ask a question to Joan Lay.

I appreciate the fact that your members seem to be concerned most of all for the younger generation. It's wonderful to have our elders really continuing to have that focus, but what about your members' day-to-day life right now? What are the fears that seniors are facing and that you're hearing about?

Ms. Joan Lay: The fears that they're facing at the present time? I suppose Maureen has mentioned a number of them. The fact is that a great many are being hurt by the HST.

• 0915

It's health, basically; that's all we hear. The rural seniors are having a terrible time trying to get to health centres, because we have regionalized, and therefore you have somebody out in Isaacs Harbour, whose closest is Antigonish, which is x number of miles. If that person doesn't have transportation, how do they get from point A to point B?

That is a concern that is being talked about all around the province, because everything dovetails. Whether it's housing, transportation, health care, and so on, one reacts upon the other. Of course the economic situation reacts on all of them. I think we have a catch-22; we just keep going in circles.

Ms. Wendy Lill: Right.

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

I'll now turn to Mr. Paul Szabo, please.

Mr. Paul Szabo (Mississauga South, Lib.): Maureen, I want to ask you about the EI numbers you put out. They're pretty dramatic. I think it was that pre-1990, 75% of the labour force was eligible for benefits, and then you outlined how it has gone down to 66% and now it's only 30%. I don't understand it, and I think everybody should probably want to understand it.

Ms. Maureen MacDonald: My source on that is Dennis Guest, and the publication is The Emergence of Social Security in Canada. Dr. Guest has been writing for many years on the history of social security.

Mr. Paul Szabo: But what has changed?

Ms. Maureen MacDonald: What has changed is the provisions in the EI fund. To be eligible for EI, you have to work in a different way. You have to have more hours, or you have to not have drawn before. There are penalties now for people who are considered frequent users of EI, so they no longer qualify—

Mr. Paul Szabo: But they're still eligible.

The Vice-Chair (Mr. Nick Discepola): That's right. What Mr. Szabo is saying is that your comment said that only 76% of the labour force—and I'm quoting you correctly—was eligible, and now we're down to 33%.

Ms. Maureen MacDonald: That's right.

The Vice-Chair (Mr. Nick Discepola): In my opinion, 100% of the labour force is always eligible. Their benefits and the period may be reduced.

Ms. Maureen MacDonald: There's the reality, and there's the theory. You're saying theoretically everybody in the labour force, except for the self-employed, are covered.

The Vice-Chair (Mr. Nick Discepola): Not necessarily.

Ms. Maureen MacDonald: But the reality is that the new criteria for eligibility eliminates more and more people who are in the labour force.

Mr. Paul Szabo: I don't think we're going to resolve this here—

Ms. Maureen MacDonald: I'm sure we won't.

Mr. Paul Szabo: —but I can tell you that others will hear your statement and they're going to go away and repeat it. I think the point to be made is that there are semantics here.

Everybody is eligible. It may be—

Ms. Maureen MacDonald: No, I beg to differ with you. Everybody is not eligible.

Mr. Paul Szabo: Everybody is subject to a two-week waiting period. You could say at any point in time, if you want to argue it, that 100% of the people don't qualify for EI benefits today because nobody gets EI benefits, subject to a two-week waiting period. That's the nature of the argument.

I guess it's on the record what the source is. I'd like to look at it, and maybe if you have any other information...

Ms. Maureen MacDonald: There are many sources, actually, but that's—

Mr. Paul Szabo: I have only a little bit of time.

Mr. Johnson would like to add something to that.

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

Mr. Ian Johnson: There is also a major piece of work released through the Canadian Labour Congress by Kevin Hayes, who has done a lot of research in the whole area of unemployment insurance. I think the issue isn't just eligibility; it's actual receipt of benefits. That's the big change.

Mr. Paul Szabo: That's not what she said.

Mr. Ian Johnson: I'm not speaking for her.

The point is that you can say all you want about how many additional people; the reality is that the number of people, the proportion of unemployed people who are actually receiving it, has gone done dramatically, and it's because of the changes your government brought in in the last couple of years, and cutbacks initiated by the Conservatives prior to that.

You've destroyed, essentially, the unemployment insurance system as we had it. It's not serving people the way it should be and was originally intended. That's why we called for and support the congress's request yesterday for an independent commission, because the government is obviously not following what this program is supposed to be.

A voice: I accept that.

• 0920

The Vice-Chair (Mr. Nick Discepola): Mrs. Lord, please.

Ms. Stella Lord: As a comment, I think we're talking semantics here. Eligible in terms of paying premiums is one thing; eligibility in terms of receiving benefits is another thing.

The fact is that the EI system has changed in terms of who qualifies after they've been paying EI premiums. Whether you call it qualification or eligibility, that's semantics. But the fact is I quoted in our brief on page 5 an HRDC report that itself said that total income benefits declined by 8.1% in Nova Scotia and 11.5% in Canada between 1995-96 and 1996-97. This is even before all the EI changes have gone through the system. Only 40% of unemployed in Canada now receive EI benefits as opposed to 60% or 65%, I think it was, five years ago. So we're just talking semantics here.

The Vice-Chair (Mr. Nick Discepola): Mr. Szabo, please.

Mr. Paul Szabo: I'll look at the record.

Ms. Stella Lord: Look at the HRDC report.

Mr. Paul Szabo: No, that's fine. I wanted clarification, because if you use “eligibility” as opposed to “receive”... You've used the word “receive” benefits.

But I think the fact is that there's no question that the amount of benefits available to people has been adjusted to reflect certain conditions such as the number of times you may have collected and stuff. There will be probably an EI review task force going across Canada to ask Canadians what they want the act to be, and I think that would be an appropriate forum.

I want to get on to Stella. In your brief and in your comments, you referred quite a bit to national child care, and you also made the statement about “without affecting...the lives of their children” being the strategy that you want.

This past summer there was a study that came out of the University of North Carolina on infant mortality, which found that there was a 29% lower infant mortality where direct parental care had been given, where there had been parental leave for the first year. The Canadian Institute for Advanced Research and a number of other organizations have come out very strongly in support of investing in children with regard to particularly the first three years, but the first year being dynamite. I think most people who are involved in social services will understand the dynamics of neural development and early childhood development.

The University of North Carolina study, though, was very specific with regard to the risk factors and some of the other conditions. Certainly one was the whole issue of breast-feeding and the benefit, and the Canadian Paediatric Society came out in June of this year saying that they support the international and World Health Organization guidelines of one year as the minimum target for parents for breast-feeding.

The other aspect was exposure to environmental risks, and the fact that if you have institutionalized or third-party care, you have a lot of travelling going on and that exposes the child to a lot of accidents that they otherwise wouldn't get in another environment. They also have exposure to a lot more public places and a lot more people, and especially exposure during these other periods to other children, and it turns out children probably are the biggest carriers of all kinds of diseases, viruses, and so on.

The bottom line is that if the best interests of the children are important so that they get better physical, mental and social outcomes, and since parents today with preschool children can get a $7,000 deduction for child care expenses, based on the increase of the last budget, and yet someone who provides direct parental care and a safer level of care... Would you support a couple of things: first, a benefit for direct parental care equivalent to what parents get if they pay somebody else to care for the child; and secondly, something akin to what's involved in a number of European countries and that the U.S. is looking at right now, which is paid parental leave for mom or dad for a one-year period for the first year of a child's life, in terms of putting children first rather than somehow trying to get all objects of one's life? I'm curious about how strongly you feel that every child has to be cared for by...

• 0925

In Ontario the average wage for a daycare worker is $18,000 a year. I don't know how you're going to attract and keep good people at $18,000 a year. Concerning the ratio, it looks as if you've done some work here, and I would be interested in your view.

Ms. Stella Lord: In terms of our views, I think I would have to defer to the council on that. This is an issue that the council will be discussing, and we'll probably making some submissions on it.

I think your remarks actually support argument for a strong child care system, in addition to better workplace policies. My sense would be that the preference would be for better parental leave and maybe some benefits for women at home looking after their children. Those are things that would have to be part of another study. I'm concerned that we're quoting a North Carolina study here, because I don't know the conditions of child care in North Carolina. The fact is that there are risks if we don't have a good child care system. That's the bottom line.

In terms of the example of breast feeding, there again I think it speaks to parental leave in some ways. It perhaps also speaks to more flexible employment systems that allow women to be out of the office or to have child care on-site. There are all kinds of things, and all kinds of studies that have been done in Canada. There are very good research institutes that have done work on this, all of which point to the benefits of good child care.

Mr. Paul Szabo: I have one last question.

The Vice-Chair (Mr. Nick Discepola): Is it on the same subject? I apologize to colleagues for trying to accelerate through this first round, but Mr. Brison has to attend a funeral at eleven o'clock at CFB Greenwood.

Mr. Paul Szabo: Okay, it's a quick question.

Everybody has raised the issue of the CHST cuts. I've forgotten the numbers now, but they're over $10 billion. I think Maureen made a reference to about $800 million. I didn't think Nova Scotia was 10% of the population and therefore had that direct relation.

The question I want to ask is to whoever wants to answer it. If the government were to increase the CHST, would you be comfortable that the provincial government would actually use the money for what it was intended? As an example, the CHST cut to Ontario was $1.2 billion. The government turned around and gave a $4.3 billion tax cut, but then blamed the federal government for all its problems. So I ask you if this is the best way, or should the federal government look for opportunities to attach strings to dollars and/or go straight to some of the issues without leaving the dollars in the hands of the provinces. I think national home care is an example.

The Vice-Chair (Mr. Nick Discepola): Jim Sharpe.

Mr. Jim Sharpe: I'd like to speak initially on education. I'm very much in favour of the creation of the CHST, but let's have some national standards. Even with the EPF there was no accounting of national standards. There was in health, and there continues to be in health. The social service ones have been really cut back. There never was in education. Let's look at accessibility standards for higher education in this country.

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

Mr. Ian Johnson: Mr. Chairman, along with many others, we've supported the idea in the alternative budget that calls for scrapping the CHST and increasing the funding levels but establishing specific programs. We call them social investment funds, and they include care, education and child care, in which there would clearly be national standards. One of the problems with the CHST is that we've lost really effective national standards, even in health care, and certainly in the area of social assistance. So we would support that kind of initiative. I think it's pretty straightforward to do that.

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

• 0930

Ms. Maureen MacDonald: I just want to clarify the $800 million figure. The source of that is the ministries of health and community services here in Nova Scotia. It comes from those departments.

The Vice-Chair (Mr. Nick Discepola): Over how many years?

Ms. Maureen MacDonald: Until 1999. That's the impact of—

The Vice-Chair (Mr. Nick Discepola):

[Inaudible—Editor]

Ms. Maureen MacDonald: No, that's right.

Mr. Paul Szabo: On an annual basis?

Ms. Maureen MacDonald: Yes.

Mr. Paul Szabo: That's pretty important.

Ms. Maureen MacDonald: The brief is here for you to read, since it's really hard to say everything you've written in five minutes.

Anyway, I would say that if we were in government, our commitment would certainly be to put back in the money that has been lost. The impact this has had on people in our communities and constituencies is absolutely clear, and this is what people are asking for. They're asking for the health care system that they had, and they're asking for improvements in the health care system and in education and community services.

I would also like to say that when you're in the Atlantic region, it's important to listen to people from the Atlantic region. Don't impose a sort of Ontario frame on this region. Governments here have not necessarily made the choices that are being made in Ontario. For example, to their credit, and although labouring under really dramatic and devastating federal cuts in terms of what they have available for a service provision in this region, Community Services has not chosen to do what Mike Harris has done in Ontario. In spite of the fact that it has lost dollars, that department has maintained program spending, and that has been largely because it has been able to have access to equalization payments.

The Vice-Chair (Mr. Nick Discepola): I don't think Mr. Szabo was imposing Ontario standards. He was using what happened in Ontario as a direct, concrete example. From your intervention, I would estimate and assess that you'd be in favour of making sure that we negotiate with the provinces what Paul called “strings”. Others have used the words “national standards”. But we must make sure that any money transferred to the provinces is used for the purpose it was intended for and not for anything else.

Ms. Maureen MacDonald: Certainly.

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

Mr. Brison, please.

Mr. Scott Brison (Kings—Hants, PC): Thank you, Mr. Chair, and thank you, everybody, for your interventions this morning.

We speak about a central Canadian perspective or an Atlantic Canadian perspective. As a Nova Scotian, I'm the only permanent Atlantic Canada member of the Standing Committee on Finance, so it's terrific to be here in particularly my own province to hear your views on this.

While we may differ in some of the means of what direction government programs should take in the short term, I think we all agree on the type of society we'd like to achieve in the long term. I was particularly interested to hear your comments on seniors, Joan Lay, and particularly those related to health care. My riding has been hurt considerably by closures of hospitals and by what has happened in Berwick and Wolfville and Windsor. It's been devastating. I have two elderly parents who periodically need health care. We live in a rural community, so you're absolutely right that it's very important in rural communities.

While I agree with you in terms of health care and in terms of the increase in CHST to assist the provinces, particularly Atlantic provinces that do not have the local tax base, I have to differ with you—and again this is a means issue—in terms of the issue of isolationism, the issue of whether or not we grow in Atlantic Canada by engaging in increased levels of trade and productivity with the U.S. market, particularly since the implementation of the free trade agreement.

I know the Atlantic Provinces Economic Council has stated that the free trade agreement has been the only source of economic growth in Atlantic Canada over the past few years. It's difficult to compare where we are now to where we would have been without it, because there's been a change in fiscal policy that has hurt Atlantic Canada, too. I would offer that it's not all...you know, free trade has actually benefited Atlantic Canada. I'd appreciate your comments on that.

• 0935

The Vice-Chair (Mr. Nick Discepola): Ms. Lay, please.

Ms. Joan Lay: I think the problem we have is that there have been good things from free trade, but there also have been some bad things that have economically depressed the seniors. I'm not sure we're quite ready to go further from our source, ourselves, into the global market.

I'm also very concerned about people becoming numbers. Seniors were never numbers. Seniors were people. They had names. They weren't little dots on a computer. This is very difficult for seniors to accept. We therefore definitely do not accept something that's going to make us less than a dot.

Mr. Scott Brison: That's not purely globalization. That is also a transitional economy in which information technology is playing a greater role.

Ms. Joan Lay: It's a combination of everything. Then again, as it flows further and further away, we become less and less.

Ms. Maureen MacDonald: Could I respond as well?

Mr. Scott Brison: Certainly.

Ms. Maureen MacDonald: I think the Volvo workers, for example, would have a really hard time accepting your analysis that free trade hasn't had a negative impact on people in this region. That's the first thing I would say. We can point to a number of industries where there were good-paying, secure employment opportunities that are now disappearing from our region. That will have a dramatic impact on our tax base and on our economy in the long term. The latest is the Volvo plant going to Mexico.

In addition to that, I would tell you that I worked with a research team out of Dalhousie in the early nineties. We looked at this question of the impact that free trade was having on the Nova Scotia economy. Out of that, a book called Vanishing Jobs: Canada's Changing Workplaces was written.

At the time, our analysis suggested that free trade was having neither a profoundly negative nor a profoundly positive impact. The Atlantic region was continuing in more or less the same vein as it always had been. The resource-based industries were continuing to export into the American market. Their exports were a very important feature of our economy, and they continued at roughly the same proportion of economic activity as they had been prior to the free trade agreement.

The real problem is not assessing the value of exports in dollars. You have to look at what's occurring in terms of employment. Free trade hasn't had the impact of increasing employment in the region. For example, our unemployment has increased a lot in Nova Scotia.

The Vice-Chair (Mr. Nick Discepola): Can I interrupt for a second?

Ms. Maureen MacDonald: That's all I was going to say.

The Vice-Chair (Mr. Nick Discepola): It's your time, but this is pre-budget consultation, not a post-mortem on free trade that happened years ago.

Mr. Scott Brison: Certainly, but I still have to say, Maureen, that I differ with you completely on this issue. The weight of economic evidence suggests to the contrary, in that the free trade has been a net generator of jobs in both Atlantic Canada and across Canada. Again, there's been a particularly severe downward trend in fiscal commitment to Atlantic Canada over the past several years. But I do appreciate your comments.

Paul was speaking about early childhood intervention. One of the issues that I think are particularly important and need to be addressed, both at the provincial and federal levels, is the head start program and early intervention. Early intervention and head start, along with many of the studies that have been done—for instance, those in inner cities or ghetto communities—have demonstrated that $1 invested up to the age of three, in a high-risk situation particularly, will reward society with a return of, I think, about $7 by the time the child is in his or her late twenties.

• 0940

Both rural poverty and urban poverty have startlingly similar demographics and indicators in terms of things like substance abuse, spousal abuse, high school drop-out rates, and teen pregnancies. I would argue that all of these sorts of negative social indicators are as severe in many poor Nova Scotia rural communities as they are in larger centres.

I would be very interested to hear any of your interventions on that, because in the new entente that exists provincially in Nova Scotia, I would argue that this is the type of policy initiative on which we might be able to get some level of agreement among all parties. It would make a very interesting case for the feds in terms of a cooperative effort to address rural poverty in the long term. I'd be very interested to hear your feedback on early intervention and head start.

The Vice-Chair (Mr. Nick Discepola): Who would like to answer that? Anybody?

Mr. Scott Brison: I guess we're all in agreement.

The Vice-Chair (Mr. Nick Discepola): You can give your own personal opinion. You don't always have to represent your group.

Ms. Stella Lord: Okay, then, interestingly enough, I was reading a little piece on the head start program in New Brunswick—

Mr. Scott Brison: In Moncton, yes, and it's a good one.

Ms. Stella Lord: —which appears to have been quite successful, and it looks very interesting.

As I understand it, part of the national child benefit money is supposed to be going to parenting programs and so on. My concern about that is that there will be not much of anything, just small programs.

I do think there is a need to look more seriously at this. In Nova Scotia, we certainly ought to be looking at things like this in terms of what the research says. Then, if there is a federal initiative in that area, I'm sure it will be very welcome.

I do know that the CAP-C program, the family resource centres, seems to be very successful, so anything that builds on it would be appropriate. However, in the context of funding cuts at the provincial level, I do know of one family resource centre that used to have an outreach worker for black communities in Nova Scotia. That funding is gone now because they're having to cut back on those programs to fund other things under the Community Services budget, the things that Maureen had been talking about.

That's just one story, and there are others. I know there are single-parent centres that are really having problems keeping their services running too. People are working all hours to try to fund-raise and those kinds of things.

So there's a gap in services generally that funding could address, and anything that would help would be great.

Mr. Scott Brison: I'll tell you why this is a very important issue to me both on a personal level and for the community I grew up in. In Cheverie, in Hants County, there were 28 students in my grade 6 class in the local elementary school. Of those, only 8 graduated from high school. I'm not saying they graduated the same year as I graduated, but ever graduated from high school.

In the current context, in which we have an increasingly global environment in which knowledge-based industry is going to be the engine for job growth, 20 of those 28 people who were in grade 6 with me do not have a high school education. Some of them have returned and have gotten one, but I would argue that's a significant cost to society. It costs a lot to go back, and it takes a lot of time out of their lives. So I really think we have to take a look at this in Nova Scotia, and particularly in Nova Scotian rural communities. We need to have a more coordinated approach.

Mr. Jim Sharpe: If I can just speak on that, I think investment in education is critical.

Mr. Scott Brison: Especially post-secondary education.

Mr. Jim Sharpe: There is a parenting issue there, the support for students, but the problem is access. At our university there are a lot of parents, single mothers, and people on social assistance, with a wide variety of education. They provide tremendous role models. But there is a lack of support for those individuals. The Canada study grants have helped with $3,000, but we need a much more comprehensive program, with much more value being given to education.

• 0945

The Vice-Chair (Mr. Nick Discepola): Mrs. MacDonald, do you have anything to add?

Ms. Maureen MacDonald: I think you're correct, and the research does indicate that early intervention programs are extremely important in terms of outcomes for kids around their educational attainment in later life, but I think it would be really important to develop this kind of program in the context of a rural development plan. You can't do something like this in a piecemeal kind of way and think it will get results. You also have to have programs to develop rural economies, so there is something at the other end, so that when people go through the education system they know that, and there's that sense of hope and a planning and a walking to the future and that kind of stuff. I think that's the piece that's really important, the context that you situate this program in.

Mr. Scott Brison: Thank you very much.

I know this is a very difficult time, because part of what has happened in Atlantic Canada is that we've seen the changes in federal response to Atlantic Canada, and we've also seen a transitional economy, which is always going to be difficult. But as we enter the 21st century in a knowledge-based society, if we make the right decisions now, particularly in areas of education, we can maybe position Nova Scotia... Particularly with the quality of life that is attainable here and with the death of distance as a determinant in the cost of telecommunications, this could be one of the most prosperous places in Canada in a 10- or 15-year period if we make some of these correct decisions right now.

I have one question, and this is tied in with health care, but also in general with the whole volunteer sector. One of the best presentations we've had to the House of Commons finance committee was from the volunteer sector. They were promoting an increased engagement between the governments, both provincially and federally, and the volunteer sector first of all to identify need in society more effectively, and secondly to deliver services to people in need more cost-effectively.

I think of the VON, for instance, in terms of what they do for home care and health care in places like Nova Scotia. My sister's a VON nurse, so it's an organization I think of readily. She's in Kemptville.

I would like to hear your feedback in terms of how we can better engage the volunteer sector to identify needs and address those needs more cost-effectively.

Ms. Joan Jessome: When you're saying we should identify needs, are you talking about the volunteers going into the communities and just...?

Mr. Scott Brison: The United Way, for instance, is a huge organization across Canada, and their position, when they were presenting to us, was that they can effectively identify social needs in some ways better than government departments; they are less bureaucratized and they can target needs more directly.

Ms. Joan Jessome: Our community health boards are playing that role now. They're into the communities. Seven community health boards in the province would identify needs.

Mr. Scott Brison: Then I've also had constituents come to me complaining that the community health boards did not reflect the needs of the community and in fact were increasing the bureaucratization of health delivery. So I guess the jury is still out on the community health boards.

Ms. Joan Jessome: And the jury is still out on the regional health boards too.

Mr. Scott Brison: Yes.

Ms. Joan Jessome: I think volunteers play a very, very important role in society, but they shouldn't replace... I mean, these volunteers are women who've worked all day. They're mothers, daughters, sisters, neighbours, friends—they already have a full slate. To rely on volunteers again to identify... I think that's what's happened; we're relying on volunteers.

In Nova Scotia, the GPI study that I mentioned reported 80 million hours of volunteer service. That's phenomenal; those are 80,000 jobs. Volunteers are great, but they don't put food on the table, they don't keep houses, they don't continue education—they have a place, but they shouldn't be taking over the workforce.

The Vice-Chair (Mr. Nick Discepola): Mr. Johnson, please.

Mr. Ian Johnson: Yes, I'm just going to re-emphasize what Joan just mentioned, and you may want to look at it. The GPI Atlantic has done a major piece of work on the role of volunteers, and with the existing data that are available it's actually been able to show it accounts for 10% of the provincial GDP. If you put it in pure economic terms, it is actually the single largest contributor to the economy. That's why we argue to you that the federal government should look more broadly at the role of the GPI in the process.

• 0950

To answer your question, we certainly support volunteerism. The union and the labour movement are made up of volunteers, as are many other agencies that are represented here. But we see a problem in terms of support for the volunteers and for agencies that represent them as well. There certainly is a role for them, though.

Ms. Stella Lord: Could I address that a little bit?

I think it is true that voluntary organizations are in a better position to figure out what the needs are at the community level. What worries me, however—and I think it worries a lot of women I talk to who work at the community level—is that the government is beginning to rely on the voluntary sector merely as a cost-cutting measure. The problem is that many of these organizations do rely on some government funding to a certain extent, and they have seen funding cut back already. The infrastructure at the voluntary level is already strained to the limit in many cases, and I think the fear would be that more will be dumped on them, that they will be asked to do that without the resources.

Given the resources, though, I think they're probably in a better position to do it than government.

Ms. Joan Lay: May I respond to that, too?

Mr. Scott Brison: Certainly.

Ms. Joan Lay: As an older volunteer—and I have been one for forty or fifty years—I find that the volunteers at my level are people who also have put in many years of volunteering. Unfortunately, they're starting to give out. Their conception of being a volunteer is somewhat different from what is happening today.

These people have never had any money given to them. They've never been paid. They didn't do it for that. They volunteered because they believed in what they were volunteering for, regardless of what it was. Very few of them belong to paid agencies. They're hands-on volunteers. But these people seem to be disappearing. I may not find them in the organizations that I work with. They are staffed strictly by volunteer people who are now just disappearing from the scene, and I'm afraid these certain agencies are also disappearing.

I would like the federal and provincial governments to give a definition of the word “volunteer”, because it is not the same as it used to be.

Thank you.

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

Mr. Scott Brison: Thank you very much. Again, I apologize for having to leave early, but I'm going to a funeral in Greenwood this afternoon.

The Vice-Chair (Mr. Nick Discepola): On behalf of our colleagues here, Scott, please convey our condolences to the family members. I know the government is represented officially, but on behalf of the members here, please do so. Thank you.

I'd like to now turn to Mrs. Karen Redman, please.

Mrs. Karen Redman (Kitchener Centre, Lib.): Thank you, Mr. Chair.

I'd like to thank all of you for your presentations. I'll start by going to one of the comments that Ms. Jessome made at the very end of her presentation: if being out of debt was at this cost, it may be something we should really look at.

I would just like to point out that Canada is still very much in debt, as are all of the provinces. Our federal debt's about $587 billion. What this government has been able to achieve is a balance where we're no longer borrowing yearly to operate government. We've wrestled down the deficit, but we still have the debt monster out there in the shadows.

Most, or at least many, of the concerns that you've raised are ones that I've heard within the Liberal caucus, and certainly in the riding I represent. Although it's a southern Ontario riding, one of the neighbouring communities is officially being designated as being underserved by doctors, so some of the health concerns that you talk about are concerns that are pan-Canadian.

The reason the finance committee is going across Canada is to get that pan-Canadian view. It's wonderful to hear you articulate local concerns, but whatever solutions we come up with need to work for all Canadians regardless of whether they're in a territory or a province. I think that's one of the greatest challenges of serving at this level of government.

• 0955

Several of you talked about putting money back into the CHST, and about whether that is the best way to go for the federal government. I believe it was Ms. MacDonald who talked about pharmacare and home care specifically. Those are certainly services that this government has looked at in terms of ways to bring money back into the health care system. I've looked at a lot of issues, and specifically a lot of women's health issues. One of the things that I've found stunning is the lack of research.

I would just ask any or all of you to comment on the decisions that face this finance committee when it makes recommendations to the finance minister and to the government in regard to the balance that we're trying to achieve. If the decision is between putting money into the CHST or looking at specific programs like pharmacare or home care, where would you come down on deciding which is the right balance for the needs that you see in your community?

Given the fact that health care is a national concern whether we're in B.C. or Alberta, Newfoundland or Nova Scotia, one of the things we hear is that there need to be acceptable standards in health care. That demands investment in funds. Is that a good expenditure? Is that a way the government should look to go right now? Should it look at developing some kinds of standards so that they may become the sixth tenet of medicare?

The Vice-Chair (Mr. Nick Discepola): Who would like to tackle that?

Ms. Maureen MacDonald: I would like to respond to that.

For our caucus, the first priority is to restore stability to the health care system. It has been completely destabilized, so the first thing we need to do is very clear.

In terms of standards, we have standards. We have the Canada Health Act. It lays out the five principles of medicare. What we need to do is take them seriously and enforce them. We don't need new standards around health care. We have them.

Thank you.

The Vice-Chair (Mr. Nick Discepola): I would like to ask a question on that. Is it a question of just funding? If we take a look at some of the presentations that we heard in Ottawa, they're saying we should put back an additional $2.5 billion. If we take a look at the recommendations of the National Forum on Health, they recommended that the ceiling be at roughly $12.5 billion. One of the first things our government did after we had balanced the budget was put back $1 billion.

If I take a look at some of the delivery of the services in many provinces, for example, I compare things to my home province of Quebec. It has more per capita number of beds than Ontario does, while Ontario has 60% more population. If I take a look at those kinds of factors, as a politician at the federal level, I have to ask myself if it's really only a question of putting back money. Maybe there are some other things that could be done much better, including the delivery of the system.

I take a look at Alberta, or even Ontario, which Mr. Szabo referred to. By choice, Ontario decided to give reductions in taxes. In the case of Alberta, that province cut back hospital funding drastically and then ended up having a billion-dollar surplus. Is that the federal government's fault, or is that the governments at the provincial level deciding their own priorities for their own provinces?

Ms. Maureen MacDonald: Well, it's the historic dilemma of co-operative federalism in this country, isn't it? It's the question of who pays and who controls what happens. I think it's impossible for the federal government to control everything that happens at a provincial level, but there is an ability to have national standards. For health care, for example, we do have the Canada Health Act. There are principles laid out, and those principles should be enforced across the federal jurisdiction in the provinces. They're there, so let's use them. Let's make sure there aren't user fees and a two-tier system developing.

But we absolutely need the cash. The cash is the fundamental feature of what it is that we can provide, and we've lost a huge amount of money. We need to stabilize the health care system, and we need to put money that has been taken out back in. We then need to look at the surpluses that we actually have, and invest in improving the health care system. I think that's what we've been saying here.

The Vice-Chair (Mr. Nick Discepola): Mr. Johnson, please.

Mr. Ian Johnson: Thank you, Mr. Chair.

I just want to add that I think some of us are saying it is a question of balance, perhaps. The federal government isn't always to “blame”, if that's the right word. The problem, though, is that you launched unilaterally the CHST, which set a framework. The buzzword at the time was flexibility. Mr. Martin emphasized that over and over again when you first launched this initiative, and it set, unfortunately, a very damaging framework, not just in terms of the reduction of funds, which as Maureen said has been very bad, but also in terms of how the whole issue of standards and enforcement of standards is to take place.

• 1000

Now, one consequence of that has been this whole provincial initiative on the so-called social union talks to water down the federal role in the enforcement and monitoring of standards. So the federal government set forth a chain of events that have led to not just the reduction of funds but a watering down of standards to the point where now they're pushing you. You know probably better than I do, but from what I see from the outside, there should be joint interpretation of standards and joint management or monitoring of it. So we have a real problem with that kind of outcome.

But on the question of balance, I disagree with you to some extent. We think there are resources—the alternative federal budget has also showed this—both to restore funding and to launch new initiatives, in terms of a national home care and pharmacare program, and we would argue that you can't really deal with the present situation in health care without moving ahead on those areas. In fact, a national initiative promises to allow for economies of scale and a number of additional ways in which the system can be better organized to save money and provide better service to people.

I've seen personally, for example, that when the provincial pharmacare program was introduced—I used to live in Saskatchewan, which was one of the first provinces to introduce it—it resulted in major savings to drug costs in that province, at that time, anyway. I think there are particular advantages to that, and one of the issues this government hasn't really addressed in terms of cost is Bill C-91 and the whole issue of patent protection, which has added billions of dollars to the cost of drugs in this country, unfortunately.

So there are some issues there that need to be addressed at a national level as well as at a provincial level. But we would certainly argue that it's time to move forward in those areas. You sponsored the national home care, pharmacare, and information technology conferences. Let's move ahead. The National Conference on Home Care, in particular, said we have to move forward on that.

The Vice-Chair (Mr. Nick Discepola): We agree, but we need the provincial participation, just like in the child care, for example, so you put the pressure on the provinces—

Mr. Ian Johnson: Oh yes.

The Vice-Chair (Mr. Nick Discepola): Mrs. Redman, please.

Mrs. Karen Redman: If nobody else wants to respond, I will allow other people to ask questions. Thank you.

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

Mr. Pillitteri, do you want to go last?

Mr. Loubier, you have interpretation equipment in front of you.

[Translation]

Welcome aboard, Mr. Loubier.

Mr. Yvan Loubier (Saint-Hyacinthe—Bagot, BQ): Thank you very much, Mr. Discepola, and congratulations on your election to the chair for our swing through Eastern Canada.

The Vice-Chair (Mr. Nick Discepola): It was a unanimous decision.

Mr. Yvan Loubier: I apologize for arriving late this morning. I can't control the airline schedules, at least not yet.

The Vice-Chair (Mr. Nick Discepola): Is that something you'd like to do?

Mr. Yvan Loubier: As I was saying, I apologize for being late. Blame it on the airline schedules.

Earlier, mention was made of the Canadian Social Transfer. Mr. Johnson referred specifically to some of the decisions made by the federal government in its last four budgets and commented that Mr. Martin had consistently slashed funding for social services and for health care in particular.

Since 1994, the provinces have registered shortfalls in these areas in the order of $7 billion. There is no way that $7 billion can be taken out of the health-care sector through cuts to federal transfer payments to the provinces without some kind of fallout. If we compare the situation today with that four years ago—in Western Canada, people are even setting up shop in trailers along the US border to dispense health-care to Canadians—it is clear that the situation has deteriorated.

I'm asking everyone the same question. Wouldn't the best approach be for the federal government to restore the Canadian Social Transfer to 1993 levels and to re-invest the $7 billion it took out of the health-care sector into services nation-wide?

• 1005

I have another question for you. When the provincial premiers met in Saskatoon this past August and drew up a draft social contract, do you not agree that this was a positive initiative aimed at restoring some stability to the health-care sector? According to this contract, the provinces would continue to exercise exclusive jurisdiction over this area, while the federal government would continue to monitor to some extent the standards applied in each province.

The Vice-Chair (Mr. Nick Discepola): Who would like to field these questions? Mr. Johnson.

[English]

Mr. Ian Johnson: Thank you, Mr. Chairman. I'll try to answer that if I can.

I was trying to say in our submission to you that restoring funding is important. We're not convinced that the present Canada health and social transfer is the right mechanism for funding. In fact, we're against it. We would like to see a very specific new set of social investment funds, as the alternative federal budget has proposed, one of which would be health, which would clearly establish national standards and maybe go further in the area of monitoring.

At the same time, as to the point I think you're raising, we respect that there are differences across the country, particularly in the province of Quebec, that may not apply to the rest of Canada. So we understand that there is a difference there, but for most other provinces, we feel that the federal presence and role is important in operating particularly health care.

The initiative of the ministers of health and the first ministers, as we understand it, was raising some concern, or trying to, about the so-called social union approach. We see it at this point as a watering down of what has been, at least for most of Canada, the standards that have been in place. Even the suggestion that the federal government, the whole federal spending power and federal initiative, would not take place without necessarily agreement on the part of all provinces, might well have meant we wouldn't have medicare if that was in place earlier on. So we're quite concerned.

A number of groups, including ours earlier, were concerned that these talks are taking place without any public input. From what we can see, there is no opportunity for us to participate. Maybe in the province of Quebec it's different, but elsewhere we've not been invited to be part of that. That was certainly our concern when the CHST got launched in there, this whole discussion of establishing new standards or new guidelines and objectives. That has been a closed-door process, and we disagree fundamentally with that.

But I also want to reiterate a point you made in here. We feel that now is the time—and the Canadian Health Coalition called for this—for a national summit on health care, which would bring together government leaders, but also a kind of people summit as we had here in Halifax earlier, to restore and rethink where we're heading in health care and to help establish new directions. We think that's a very important thing that has to happen in the near future. In fact, it was proposed initially that it happen as early as this fall. So we would urge you to consider that again, as was proposed earlier by the Canadian Health Coalition.

The Vice-Chair (Mr. Nick Discepola): Are you saying we should duplicate the work of the National Forum on Health, which spent over 18 months making reports?

Mr. Ian Johnson: No, it's not the same thing. We certainly appreciate the work, and the National Forum on Health made a major contribution, no question. But I think the feeling that came out of a national conference that took place in Ottawa in April, particularly proposed by Shirley Douglas, who as you know is the daughter of Tommy Douglas but also an activist in her own right, is that we're at a time when we need to reassert national and people's leadership and understanding and direction for health care. The national forum provided an important research and policy direction, but we need to reassert the political will, if you will, and move forward in the kinds of directions that I was trying to say.

The Vice-Chair (Mr. Nick Discepola): By bringing people together.

Mr. Ian Johnson: Yes, that's right.

The Vice-Chair (Mr. Nick Discepola): Does anybody else want to respond?

Mr. Jim Sharpe: I would like to respond, not on health but to draw the analogy to education. I would like to talk in terms of national standards and national programs with the provinces, as opposed to unilateral decisions, my example being the millennium scholarships, on which I think the educational sector likes to have the support and the money, but again, they're looking at a whole new infrastructure or relying on negotiating its infrastucture.

It's really not enough to provide fundamental national standards and accessibility. They're adding a new complication to educational funding by adding a new scholarship program onto the tax incentives and the student loan issue, rather than trying to really look at the problem of accessibility. What does it cost for education? What is necessary for people to attend? It's to find the root problem rather than just throwing money at it after the fact.

• 1010

The Vice-Chair (Mr. Nick Discepola): Monsieur Loubier.

[Translation]

Mr. Yvan Loubier: Mr. Sharpe has reminded me of something Mr. Johnson said. The Canadian Constitution makes it very clear that health care, like education, is a provincial area of responsibility.

Moreover, the social contract drafted at the Saskatoon gathering this summer did not say that the provinces should reject all federal initiatives. It stated that provinces not wishing to go along with this initiative must demonstrate that they have comparable programs in place, in which case they would have the right to opt out with full compensation. If some provinces chose to exercise their legal right to opt out and to institute health care programs for which they would have exclusive responsibility, then they could go ahead and do so and still benefit from federal transfers, provided their programs were comparable in nature.

How is a possible to uphold the Constitution and go along with the wishes of the country's first ministers, who were unanimous on this score, provide reasonable health care, despite $7 billion in cuts over the past four years, and ask the federal government to get involved? As Mr. Sharpe mention, the provinces have already put in place infrastructures and programs to meet their health care needs, as set out in the Constitution. How can we reconcile these realities?

[English]

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

Mr. Ian Johnson: I'll try. I guess what we're talking about first of all is what we see as a failure of federal leadership in the last period, and a backing away and weakening of what we saw as an important role at the federal level. I think that's the first point.

Our organization is not against provincial initiatives. In fact, that's where medicare came from—from Saskatchewan as a provincial initiative without federal support at first. Certainly we want to support that, but we're commenting more on what we saw as a deterioration and a lapse of federal responsibility, both in funding terms and in monitoring. So that's been our focus. We want to strengthen that, but we think it's a very crucial and important part of the federal role, respecting as you said the constitutional responsibilities of the provinces.

We feel the federal part of that has fallen down, and we need to see that rebuilt, along with maybe—and that's maybe one of the strengths of a national home care and pharmacare program—allowing support for provincial initiatives, more than has been the case in the past.

I don't know if that answers your question, but I think we're commenting on one thing we see.

[Translation]

Mr. Yvan Loubier: How can you possibly say that these initiatives are consistent with provincial jurisdictions and the Canadian Constitution, when you have just given us two good examples of areas that come under provincial jurisdiction? You maintain that the federal government has not shown strong leadership in the health field. The problem is not weak leadership, but rather persistent cuts to transfer payments over the past four years. Health care funding has been slashed, along with education and social assistance funding. Is it any surprise then that health care has suffered. As both of you noted, maybe it isn't only a question of funding, but it's clear that $7 billion in cuts to health care over the past four years haven't done much to make the system more efficient.

You haven't answer my question. There's a gray area in your interpretation. I agree that the level of health care should be comparable from coast to coast. Quebec is no different in this respect from Nova Scotia or Western Canada. We have also felt the brunt of federal cuts. We'd like a break. We'd like to see the federal government use some of the massive surplus it will record on March 31—word has it that it will be in the neighbourhood of $12 to $15 billion—and restore some funding to health care, but always in keeping with the Canadian Constitution. If it fails to do that, it is merely fuelling the fire and we will find ourselves once again arguing at length over the federal government's involvement in fields of provincial jurisdiction. The Constitution states very clearly that health care is a provincial responsibility. The federal government should invest in this sector and ensure that the social contract drafted in Saskatoon specifies the parameters of programs it wishes to implement with the support of some of the provinces, but that's all.

• 1015

The Vice-Chair (Mr. Nick Discepola): I'm not interested in getting into a constitutional debate with you, Mr. Loubier, but I think you have your own way of interpreting the Constitution.

I agree that the provinces have sole responsibility for managing education and health care. However, there is nothing in the Constitution barring the government from getting involved in these areas as well.

What's more, the Quebec Premier said himself that he was quite prepared to accept conditions being placed on new transfers.

Mr. Yvan Loubier: Listen, Mr. Chairman...

The Vice-Chair (Mr. Nick Discepola):

[Editor's Note: Inaudible]

Mr. Yvan Loubier: Basically, I've just explained what you said. For starters, I think you should stick to your role of chairman if you don't wish to start a debate. That's exactly what I said: the draft social contract concluded this summer stipulated that those provinces willing to go along with a federal health care initiative could do so. However, with respect to those provinces that might reject this initiative, the Quebec Premier stated that if such an initiative were already in place in Quebec or if the Quebec government wished to institute a comparable program in the province, he would accept this condition, but first he would wait until the province received some funding from the federal government. What we are want, basically, is the right to opt out with compensation.

Let me remind you, Mr. Discepola, that you are the chairman and that you must the show some degree of flexibility. I urge you to listen to me when I explain things and then you won't get your facts all mixed up.

The Vice-Chair (Mr. Nick Discepola): If I've got the facts all wrong, how is it then that you agree with me? I also have some idea of how a meeting should be conducted.

Mr. Sharpe.

[English]

Mr. Jim Sharpe: I'd like to reply in terms of education. I totally agree the federal government should provide funding to the provinces, and the provinces should implement that. But I think that has to come with some sense of a national system in education.

One of the important things in education is accessibility. In the province of Nova Scotia, although we get funding on a per capita basis on CHST and the EPF, we do get a large number of students from out of province, the highest percentage anywhere, and we're not funded for those students. We're only funded for our own population.

Universities in Nova Scotia are not putting on differential fees for students from other provinces. The province of Quebec, which doesn't have a large percentage from other provinces... And again, I support the province of Quebec in keeping tuition fees low and regulating them, but one way they have to try to raise funds is to put in differential fees for students outside Quebec, from other provinces. I see these types of issues not supporting accessibility in a national sense across the country.

The Vice-Chair (Mr. Nick Discepola): Mrs. Joan Lay, please.

Ms. Joan Lay: I would like to say that when we meet with seniors from Quebec at a national level, they have the same concerns as we have. They have the same concerns about federal funding. They also would like to see it back. We do not find we have any differences with them on health and funding. They also would like to see the federal government take the initiative in standards, keep up the standards for medicare, and that's an across-the-board thing as far as seniors are concerned. We don't have this problem of where you're from. It's what's happening to us.

Thank you.

The Vice-Chair (Mr. Nick Discepola): Monsieur Pilliterri, s'il vous plaît.

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

I have comments more than questions, but if anybody would like to respond to them, certainly do. I want to go back to the reason we're here and that's the pre-budget consultation.

• 1020

I want to make a remark, a post mortem, on what has happened. Let's not forget that we were at a $42-billion deficit in 1992-93 and that the budget has been balanced for 1997-98, and of course there was some reduction to the debt, and some programs that were cut before were enhanced, specifically in medicare, putting back the $1 billion there. As we understand it, the transfer payments will increase in the year 1999-2000, as per past budgets, going back to the 1995 budget.

It seems to me that we're forgetting the fact that when we tackle those balanced budgets, we don't talk about it in just one year. I think we have to talk about balanced budgets from the date that the budget was balanced, to the future and future budgets.

In the presentations that were made this morning were some specific studies...you know, to suit one political will. I'm not saying that all of them were politically motivated, but certainly I see quite a repetition among the presenters so it could be more politically motivated.

There again, I see also the factor of the alternate budget. Certainly from some of the numbers that I see, it was not the alternate budget from the Reform Party, which is the official opposition. It was maybe a specific alternate budget they were referring to, and I think that should have been made clear. Certainly it was not the specific alternate budget from the Bloc members, nor the alternate budget from the Conservative Party, so I think we have to be motivated to a point in saying this is the alternate budget that was presented.

Would anybody like to respond to that? As I see it, going back to this alternate budget would put the government back again. I have been here maybe the longest of all the members, and seeing some of this and talking to economists, I think there would be anywhere between a $30-billion to $50-billion deficit this coming year if we implemented some of these recommendations.

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

Mr. Ian Johnson: What I think some of us are referring to is the alternative federal budget, which has been put together for four years under the leadership of the Canadian Centre for Policy Alternatives and Cho!ces from Manitoba. We're talking about that, which I think has become fairly well known to you as parliamentarians and certainly to us in community groups and the labour movement. I can't speak about other alternatives, the Reform, or the Bloc, or other what you called alternative budgets, but I think it has been well established among those of us in the popular movement sector that the alternative federal budget is under those two auspices.

By the way, it's being reviewed by economic groups as well as brought forward. It's not just an overnight process; it has actually become a year-round process, where there are working groups in a number of key sectors putting it together. There is a lot of work done on assumptions and projections, and that's why we're citing it, because we think there is more than the kind of direction your government has pursued that can actually add to and improve the kinds of programs and services that we think are important and, at the same time, deal with the deficit and debt, as you pointed out.

If you look at this year's alternative federal budget, it very clearly sets out a path for deficit and debt reduction, not as high as your projections but it certainly makes progress. But it also deals with what Stella was talking about, the social deficit. I think you cannot consider that in isolation.

That's also our position in terms of why. You're taking a very narrow view if you deal only with the deficit and debt in strict fiscal terms. As our first vice-president said, there's no point in having a balanced budget if you don't deal with real-life problems and issues, and problems that people are facing on a day-to-day basis. It should not be at the expense of ordinary people.

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

• 1025

Ms. Maureen MacDonald: I think there are a couple of things we need to keep in mind as well. Debt and deficit problems in Canada aren't new, you know. We've had debts and deficits before, and we have a very good history of being able to move ourselves out of debt and deficit through economic growth and pursuit of economic strategies, rather than through the slash and burn kinds of strategies.

I think we also need to go back and look at the reports of the federal Auditor General over the last few years. In particular, in the April 1998 report, in some correspondence between the Auditor General and Treasury Board, the Auditor General indicated that there was more than $2.5 billion available for reinvestment if basic and proper accounting procedures had been used. The budget in that year, according to the Auditor General's correspondence, attempted to hide an additional surplus.

So I think we have to be clear about what the financial circumstances actually are, and acknowledge the fact that there is money in the current budget for reinvestment.

The Vice-Chair (Mr. Nick Discepola): Mr. Sharpe, please.

Mr. Jim Sharpe: I think we have to look not just at deficits but at quality of life as well. I mentioned the decline in numbers of part-time students. When you look into the issues, the tuition fees are an obvious one.

There are more fundamental things going on in the economy. The deficit was partially caused by the high interest rates in the 1990s that resulted from the fiscal situation in which the Bank of Canada looked at inflation as the number one target to hit. That has led to great increases in unemployment. We're still not back to where we were, and we're probably at the top of the employment cycle. There has been a great decrease in job security, and I think that's really affected everyone.

There was mention of the quality of life index. I guess there's a major conference going on in Ottawa at the end of this month to look at ways of working out that index. From what I've heard about that index, it has been going down over the nineties. It's partially due to environmental degradation and it's partially due to loss of family income—I think those are well documented—but one of greatest things is the lack of employment security and income security. That's affecting all areas of life.

In terms of universities, we've benefited somewhat because there has been an increase in the number of full-time students. However, it hasn't really brought about the learning society that we keep talking about—the need to integrate education and the workforce. I think the government needs to take a much longer-term view than a very short-term balanced budget, in terms of what the nature of our society is and what direction we are going in.

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

Mr. Pillitteri.

Mr. Gary Pillitteri: Mr. Chairman, there is a lot of wishful thinking in this alternate budget, too. They're talking about 4% growth. That's also a vision in technicolour, because we're only experiencing somewhere around 2.5% growth in Canada. We're talking about 2% to 4% inflation. If we take a look at the world economy today, and at what's happening out there in the Asia-Pacific region, I think countries are trying to stave off a world recession rather than trying to do what an alternate budget would want.

For me, in looking at those figures, I think society and governments in the past have done so much. I'd like to echo the comments of my colleague Paul Szabo, who was talking about children and the future of children. I think we've done enough damage, and I don't want to induce any more pain in the future for our children, and surely not our grandchildren, in terms of paying our debt. With some of these recommendations in this alternate budget, surely that's the strain we're going to be putting on future generations. It has been our generation that has accumulated that debt, and I certainly don't want to pass it on to my kids and my grandchildren. I think we've left enough for them to pay back.

The Vice-Chair (Mr. Nick Discepola): Is that a comment, or do you want a response?

• 1030

Mr. Gary Pillitteri: That's a comment, but certainly the one I would make on an alternate budget with 4% growth and inflation from 2% to 4%. That 2% to 4% inflation also includes 12% to 14% interest rates. I was not born yesterday. That's what the alternate budget means.

Ms. Joan Lay: Since that was in line, I will make some comments that may not necessarily be correct.

The Vice-Chair (Mr. Nick Discepola): I don't think he made the remarks to you, Ms. Lay.

Ms. Joan Lay: Pardon me?

The Vice-Chair (Mr. Nick Discepola): You weren't targeted by his remarks.

Ms. Joan Lay: That's all right. I recognize the 2% and 4%.

One thing I wanted to make clear was that the alternate budget from which I took this had been drawn up before we suddenly heard on TV last week that we might be in for a world recession. Before that, all I heard was that things are going great and everything is going up, up, up. This was in spite of the fact that Japan and the east were going down, down, down.

So I just want to say that you can't take these figures out of context. In other words, things have happened since they came into being. As Ian said, there have probably been a number of changes as the people who do this alternate budget are following what is happening in the world. However, I do not have access to that at the present time.

The Vice-Chair (Mr. Nick Discepola): But Canada hasn't experienced 4% growth levels in years. Mr. Johnson might want to clarify that.

Mr. Ian Johnson: Sorry, I didn't bring a copy of the budget document, which maybe you should see. Just to be clear, though, I don't think it projected 4% growth.

Ms. Joan Lay: Between 2% and 4%.

Mr. Ian Johnson: And it's not wishful thinking. The work that was done was a very definitive type of work that did solid economic forecasting as well.

The point is that any budget is a set of deliberate choices. You've made one choice with the budget that happened this year. We feel there's another way to address both people's needs and the financial situation of the government.

The Vice-Chair (Mr. Nick Discepola): But I can't choose the economic level of growth that I want. If so, I would choose 8%.

Mr. Ian Johnson: Maybe you missed the point, Mr. Chairman.

Mr. Jim Sharpe: Maybe 8% growth will not increase our quality of life.

The Vice-Chair (Mr. Nick Discepola): I understand what you're saying.

Ms. Lill, please.

Ms. Wendy Lill: I'd like to address the process here for a minute.

I'm kind of amazed. I've never been on a pre-budget consultation, but I'm assuming the point of it is to allow for people in the communities to speak out about what they are seeing. As far as I'm concerned, it is simply not a place for us to listen to one another. We can yatter away all the time in committee and in the House of Commons, and we do that. We're not here to badger these people and try them on their opinions. Their opinions are from a very broad base of information. We have a member of a provincial legislature, presidents and vice-presidents of local unions, and people from the university and from seniors groups. These are important groups that have come before us, and I don't like the fact that we are just listening to them long enough so that we can downgrade them. And to assume that they are some sort of cabal who have come here together—there was an interest expressed that somehow they're all together here in their—

The Vice-Chair (Mr. Nick Discepola): If that's the feeling you have, then I've failed as chair.

Ms. Wendy Lill: There was a comment, and I just wanted to address it. The fact is that these people are making some pretty strong remarks about the fact that they don't like the choices that have been made. That's certainly something we should all be hearing. It's an important thing for the finance committee to hear. I just wonder whether we should be maybe listening more and not talking as much.

On that basis, I would like to ask one more question. I'd like to address it to anyone who wants to take it, but it is certainly directed to Jim Sharpe.

As a critic for persons with disabilities, I'm very concerned about what is happening to people with disabilities in this time of financial restraint. We talk about accessibility. What is the accessibility for disabled students in the education system? And please express any other comments you may have concerns about in regard to the situations around disabilities in terms of the federal supports that are now available.

Mr. Jim Sharpe: I must say there have been some marginal improvements there, at least in terms of the Canada study grants being eligible for disabled students studying part-time. I think it's too early to say how they've worked out in terms of where the numbers are. There was an arbitrary number of 25,000 Canada study grants for both students with dependants and disabled students. Anyone who knows the national numbers of a million post-secondary students will know that the number of students with dependants is probably much larger than that figure, so there's going to be a lot to work out in terms of seeing how they access that fund.

• 1035

There's still the issue of working through the provincial jurisdictions. It's one thing to support these students, but another thing to provide real long-term support not just for post-secondary education but for employment for people with disabilities. I think there's an awful lot more to be done on those issues.

The Vice-Chair (Mr. Nick Discepola): Mrs. Lay, please.

Ms. Joan Lay: In discussing disability, I'd like to say that some of the problems have arisen for elderly caregivers looking after younger people with disabilities. This happens across Canada. One of the things we have found is that there are no policies in place at the federal level, or even at the provincial level, to more or less help these people.

At the present time, we are looking hopefully at a project whereby we can talk with these people to find out exactly what type of government policy would help them to look after people with disabilities, whether they're old or young. Somebody has to look after them, and they're being looked after in the home basically by elderly female nurses.

Thank you.

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

[Translation]

Go ahead, Mr. Loubier.

Mr. Yvan Loubier: I trust you did not feel that you were under attack earlier. I think we've had a rather interesting discussion this morning. I don't see this as a confrontation, any more than Mr. Pillitteri does. The Chair and I may have disagreed, but we go back a long way. I don't think I offended him.

As I said, I find this morning's debate quite interesting. Sometimes, the discussion can get rather lively and I think that's good because it helps to shed light on an issue.

I'd like to clarify something regarding figures. Mr. Pillitteri talked about economic growth. It's true that the projected rate of growth of the economy was revised two or three weeks ago. The government is now talking about a rate of growth of 2 or 2.5 per cent of GDP. Yet, it continues to project a surplus of between $12 and $15 billion for this fiscal year. We are no longer talking deficit, but rather forecasting a surplus of $12 to $15 billion, conservatively speaking.

I checked with the forecasters from the Conference Board, the Desjardins group in Quebec, the Caisse de dépôt and even the C.D. Howe Institute and all agree that a surplus of between $12 billion and $15 billion can be expected, all that is except those forecasters with ties to the government or some other party.

For the first four months of the current fiscal year alone, that is April, May, June and July, the government recorded a surplus in revenues of $7 billion. As someone said earlier, July and August were bad months because of the Asian crisis.

In view of the economic downturn, instead of the projected $22 billion surplus in March 1999, we are anticipating a surplus more in the neighbourhood of $12 billion to $15 billion. Nevertheless, it's still a surplus and there are ways it can be put to good use.

With respect to health care and education, if funding was restored to 1994 levels, we would still have a surplus of between $1 billion and $3 billion as a cushion.

Ms. McDonald, you mentioned the Auditor General. You are right to bring up his name because every year for the past three years, the Auditor General has complained that the government is tampering with the budget numbers. The figures in the budget make no sense. For instance, last March the government indicated that the surplus for the current year would be zero and said that similar results could be expected for next year and for the year after that. This makes no sense. As I said, for the first four months of the current fiscal year alone, the government has recorded a surplus of $7 billion.

• 1040

If we wanted to make a rather silly projection, we could multiply this number by three and say that the surplus will be $21 billion. However, if we take into account the economic slowdown, we still end up with a surplus of between $12 billion and $15 billion. Any discussion that takes place here today should not be about the deficit, but rather about how the government should use the surplus. It would be preferable by far to use this surplus to help the underfunded health care and education sectors, instead of using any monthly surplus to pay down part of the debt. I don't think anyone here is opposed to paying down part of the debt, but given the prevailing uncertainty resulting from the Asian crisis and the pressing needs in the health care and education sectors, in my estimation, we need to set some priorities. If you let the government know what your priorities are in terms of spending this surplus, you will be on the right track and a lively, friendly discussion can take place.

[English]

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

Mr. Jim Sharpe: Thanks so much for re-focusing the discussion.

My understanding was that this was the original question—what to do with the fiscal surplus. I suggest that we need to reinvest it in communities, specifically looking at quality of life issues. It's also important to have not necessarily national programs but national standards or ways of monitoring health and education. The key is how things are going to impact people in communities, whether they are in the rural areas, urban areas, ghettos, or wherever.

I also think there's need for some new, bold initiative, either through the EI fund or whatever. Take some of the surplus and reinvest it. Obviously health and education are important reinvestments, but some more global type of reinvestment in a fund to support community economic development on a local level is required, either on an experimental or a national basis. I think that would be a very bold step for the government.

The Vice-Chair (Mr. Nick Discepola): Don't you have ACOA?

Mr. Jim Sharpe: Yes, but ACOA tends to be fairly politicized in terms of who gets the money. There are regional development associations that have a network focusing on community economic development, but past initiatives like the Community Futures fund, which was a community-based fund, have gone by the wayside. I therefore wouldn't say we've gone ahead in terms of really investing in communities in Atlantic Canada.

[Translation]

The Vice-Chair (Mr. Nick Discepola): Would anyone else care to comment? Ms. Lay.

[English]

Ms. Joan Lay: Perhaps I would mention some of the investments. What seniors have missed most was the New Horizons program. I think you probably have heard that from every senior group across Canada. When the government invested in the new health-wide programs—I've forgotten the name of them; I forget things now—

The Vice-Chair (Mr. Nick Discepola): You're not alone.

Ms. Joan Lay: —that have been dominated by health, and that's not bad, but it also took away from seniors the community programs that were available across Canada. A number of these are still carrying on on their own. They're raising their own money to keep on with the programs, but some of them unfortunately needed help from the New Horizons fund.

There are a lot of new things happening. There are many new initiatives that we could look at from the seniors' point of view, such as the one I mentioned. We're having to scrounge various places to get moneys to do these studies, which I think are important and are not being done. So that's where I feel some of the moneys could go. Reinstate something that would pertain to seniors' studies.

Thank you.

The Vice-Chair (Mr. Nick Discepola): Ms. Lord, please.

Ms. Stella Lord: In terms of priorities, these are identified in our brief. It was written in the context of understanding that there would be a surplus.

In the context of the earlier discussion that we had about federal initiatives around health care and so on, I think our council's position is that we really have to restore funding to existing provincial services first before we start talking about new federal initiatives.

• 1045

Many people around the table talked about the cuts in health care, education and social services that have been sustained by the provinces. It's all very well to talk about new programs like pharmacare and home care, and it would be wonderful to have those programs. The fact is that the provinces already do home care, though. We have a home care kind of program in Nova Scotia, under which people are being cared for in their homes. Part of that has to do with the reductions in funding to hospitals and so on, but that program is really stretched and could do with more resources. So we already have provincial programs that need support before we start talking about new programs.

I think I would like to reiterate the issue of restoring funding to the provinces, because it's not just the provinces that get affected. The municipalities are also affected. We've had municipal amalgamation in this area, and it was partly in response to funding issues. This municipality now has an $83-million deficit—I think that's what it is—as a result of that. So there has been a downloading of the debt through cuts to the municipalities and then to community organizations.

I know of community organizations that no longer exist because they can't get funding to support them. The community infrastructure has been damaged—and most of these things are really in provincial jurisdiction. That needs to be addressed first, and then let's look at home care.

Home care, of course, is a women's issue. It is women who do most of the home care, and the expansion of home care without additional resources is affecting them.

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

Mr. Ian Johnson: I have maybe one final comment on what we tried to set out earlier, Mr. Chair, particularly in our written submission in July. Remember that this is the 50th anniversary of the signing of the Universal Declaration of Human Rights. We think your exercise and others provide an opportunity to assess where we're heading in the directions of human rights and of addressing needs.

So maybe to answer Monsieur Loubier's question, we suggest to you a broadening of priorities in the sense of the government. Look at the broader context. That's why we also proposed the GPI as a tool. We think it more effectively provides a way to assess needs and the impacts of budgets and government programs. Within that context, as I've said, we clearly have a job to do to restore what has been affected, but also maybe to move forward in a number of new areas as well. I think that's what we were trying to propose.

By the way, we don't mind a debate by any means. We welcome it at any time, so we appreciate the opportunity to be here for this.

The Vice-Chair (Mr. Nick Discepola): Well, we thank you. I think it was a very healthy debate. You obviously understand our difficulties. We may differ on the percentage growth, and we differ on the amount of the surplus. Notwithstanding that, we have made severe, very difficult decisions over the past four or five years, in my opinion. To reverse some of those decisions that we've made would again impose new conditions, new restrictions, and would tie the hands of future governments.

The debate is about what we do now. We are projecting a surplus. We can debate what that amount might be. What do we do with that surplus? There are suggestions here that maybe we should invest it in retraining programs. Other suggestions are that our priorities should be in health, for example. The fact of the matter is that regardless of whatever amount we invest in those areas, we'd better make damn sure we have that amount first of all. There was some skepticism as to whether we even had a potential surplus. If we invest $2 million, $3 million, $4 million or $5 million in new, additional spending, those moneys are going to have to come every year. Otherwise, we're going to risk another deficit situation.

We have to be very prudent in our assumptions, and that's the policy that our government has always adopted. We take prudent assumptions in economic growth, and even more stringent assumptions in interest rates. That way, we retain credibility worldwide at the end of the day, and more importantly, credibility and confidence will be restored for Canadians.

I do want to thank you for your participation. It is important for us, as politicians, to come back to the regions and the grassroots to hear your opinions, as opposed to always staying in our supposed ivory tower. We have to listen to you, and our commitment is that we will listen to you. We will report all the findings from coast to coast to coast, and ultimately the government and the Minister of Finance will make their decisions. Again, hopefully we will have a very balanced approach that reflects the wishes and priorities of Canadians. So thank you once again.

• 1050

I would like to remind colleagues that we will reconvene at 1 p.m. Eastern Standard Time, in the same room.

• 1051

• 1210

The Vice-Chair (Mr. Nick Discepola): Good afternoon, colleges, and good afternoon to our witnesses. We are going to resume the hearings on the pre-budget consultation process.

We have a very heavy agenda this afternoon, so I would like to start right away by welcoming everyone and introducing Susan LeFort and Ian Tay Landry from the Anti-Poverty Network. Welcome.

We have Margaret Tusz and Juan Telez from the Atlantic Popular Education Network.

From the Canadian Federation of Students, Nova Scotia component, we have Jessica Squires and Penny McCall-Howard. Welcome to both of you.

From the Nova Scotia Federation of Labour, we have Les Holloway, vice-president. Welcome.

From the Nova Scotia School Boards Association, we have Mary Jess MacDonald and Margaret Forbes. Welcome.

From the National Cancer Institute of Canada, we have Gerry Johnston.

Welcome to all of you.

The format is well known. We hear roughly a ten-minute presentation from everyone, and then we open it up for questions from the members. Mrs. Forbes has a very important meeting afterwards; therefore, she has asked to be the first speaker, and I will grant her that wish if she would like to start, please.

Ms. Marg Forbes (Nova Scotia School Boards Association, Chair): Thank you very much, Chairman, fellow committee members, and fellow presenters. I assume we all have a common view, at least those of us who are presenting.

My name is Marg Forbes and I am chair of the Nova Scotia School Boards Association. On my left is Mary Jess MacDonald, who is the second vice-chair of our association, and in the audience is Mr. Frank Barteaux, who is our executive director.

First of all, I'd like to say we'd really like to thank you for the opportunity to present our views to the Standing Committee on Finance. We will keep our views brief. We do have copies of our brief, which I'm assuming the clerk is distributing.

As a non-profit organization relying on the membership dues from Nova Scotia's seven school boards, we certainly realize the challenge of the wise use of finances. We can only begin to imagine the enormous challenge of preparing a budget for the entire country that will meet the varied needs of the populations. We would, however, like to speak to the committee on what our association sees as a top priority for Canada. We feel it needs to be reflected in the budget deliberations.

For several years, the Nova Scotia School Boards Association and our parent body, the Canadian School Boards Association, have become increasingly concerned—I should say alarmed—with the escalating rate of child poverty in our country.

Recently, the United Nations released its Human Development Report, which indicated a disturbing dichotomy for Canada. While recognized as the best place in the world to live, Canada ranked tenth for its record of spreading the wealth. Based on the 1995 figures, the report contained some very alarming statistics showing almost 12% of Canadians do live in poverty.

Seventeen percent are functionally illiterate. Nine percent will likely die before the age of 60. And 1.3% of the workforce suffers long-term unemployment. The Canadian Council on Social Development, which is a lobby group working on poverty issues, estimates 20% of Canadian children live in poverty.

Studies show time and again that when children are hungry, they have a short attention span and don't learn or solve problems as well as classmates who eat nutritious meals. This means that for many children their future hopes for a happy, productive, and successful life are extremely limited by the financial conditions in which they live.

As an organization that exists for the benefit of Nova Scotia's students, the Nova Scotia School Boards Association has always felt strongly that the future of our province and our country depends on the young people of today. We all need to make a concerted effort to stem the tide of child poverty so these children have the opportunities they deserve, and the country has a chance for future success.

• 1215

Last fall, a national survey found that nearly 70% of Canadians believe that child hunger is more important than both national unity and the deficit. We urge the federal government to assign the very highest priority to issues affecting children and youth and to make the elimination of child poverty a major focus of the 1999 federal budget. We recommend an acceleration of the national child benefit investment timetable so that the amount be doubled to meet the very urgent need of children in poverty; we would suggest $850 million in 1999 and another $1,850 million in the year 2000.

In addition, this commitment should provide the resources to implement a comprehensive plan of action involving research, policy and program components. For example, I'm just coming from a meeting of the board chairs and superintendents from this province; it was a Minister of Education meeting. One of the boards, not knowing I was coming here this afternoon, had asked why our organization was not pressing, for example, for the federal government to assign a certain amount of the EI surplus to accelerating meeting the needs of the child poverty situation, which is absolutely critical in our country.

As school board members, we've always known that certainly our responsibility is not necessarily to address the needs of children from primary to five, or even before birth, but we've also recognized that we receive those problems when the children enter school. So we have made a concerted effort as an association and, as a matter of fact, with other educational partners in this province and this country to try to bring the discussion around this whole area.

So we humbly ask for your support. Even if I can't hear the other offerings, I would certainly like to receive copies of those in the next few days.

Again, we want to thank you very much for the opportunity to submit this brief. If you have any questions around our presentation, we'd be most happy to try to answer them. I'm going to also insist that Mary Jess be able to answer one or two things, so I hope you do put something to us.

The Vice-Chair (Mr. Nick Discepola): Thank you very much. Mostly certainly, we probably will.

I would like to now ask Mr. Johnston, who also is under time constraints, I believe, to make his presentation.

Dr. Gerry Johnston (Terry Fox Cancer Research Scientist, National Cancer Institute of Canada): Thank you very much.

I welcome the opportunity to come and address the standing committee. I'm a bit of a hybrid in the sense that I actually was asked to come on behalf of an organization in which I'm involved, which is the National Cancer Institute of Canada. For those of you who don't know what that institution is, it is a funding body that funds basic biomedical research in the area of cancer. It's privately funded.

I am a research scientist, and so you may view much of what I say as being self-interest. I hope it's not taken that way. I think I have a rather national perspective on issues of biomedical research in this country. I'm also the head of a department in the medical school at Dalhousie University, as well as being a research scientist.

What I wanted to do, really, was take the opportunity to perhaps alert the committee, or at least engage in a bit of dialogue with the committee, about the current state of biomedical research in this country—research in general and how it is funded and supported. I view research activities of all kinds—but I'm just going to speak to biomedical research—really as the underpinning for a broad range of activities, not the least of which is the support of the health care system and our education system. Increasingly, it's becoming, I think, a magnet for economic issues as well, because a strong research community is a real resource for growing industries—pharmaceutical industries and industries of that sort.

To give the government credit, I should point out that Canada does have a research community with, I think, an internationally well deserved reputation, and much of that is due to the kind of research support that is provided by institutions such as the Medical Research Council of Canada, which is a government-funded agency. I would make the point that even though that's been very successful, it's been somewhat inadequate, and I think the government has recognized that.

Canada is unusual in the sense that it has had a declining amount of resources going to the research community over the last few years compared to other industrialized countries, and indeed many developing countries. That's been somewhat reversed in the last year, and there are growing initiatives within the government to try to see increased resources put to this basic societal activity, which is to engage in the generation of new knowledge. I would urge that it be continued and accelerated.

• 1220

Again, I see the research community as being a pivotal part of many of the things we value as central to Canadian society, that is, our health care system and high-quality health care delivery and our educational system. But let's be crass; it also can have a very great economic impact.

I appreciate most of you don't understand or necessarily know what goes on inside a research lab, and I guess that's really our fault as researchers in not informing you well enough. But a research operation runs generally on people, so probably 70% of $100,000 to support a research operation goes to jobs, and these are high-end knowledge-based jobs that are attractive to all kinds of sectors.

So it makes economic good sense to support this as an activity within the country, and that's really what I wanted to stress. I see that the industry enterprise within Canada risks being marginalized. As a department head, and as someone who sees students at both the undergraduate and graduate levels, I have become increasingly alarmed about the steady decline we see for the support of research activities. That has led, in general, to a demoralization on the part of new faculty members and new researchers coming into the system. They see that it is increasingly difficult to fulfil their full potential, and that means they go to other countries.

The other thing that's happened is that increasingly I see our very best and brightest young minds actively decide not to go into this activity because they see that there maybe isn't as much future in it as there could be. We're sometimes losing those people to other endeavours, which means they're at least within the country, but more often than not we see them leaving the country, and I think that's a tragedy. It's a lost opportunity that we should be aware of.

So I really see that there's an opportunity in Canada to build on what we already have, which is a pretty high-quality cadre of researchers and a research infrastructure that is in need of some attention. It can provide a number of things for us on a number of fronts. It's no coincidence that high-quality health care is in areas where there's a high-quality, well-resourced research community, because physicians and health care professionals aren't different from anyone else—they want to be on the cutting edge; they want to be where knowledge is being generated; they want to be where the action is, if you will.

So we have to see this as part of a large picture, and I realize I'm only talking to a very small portion of that picture. But I want to make sure everybody appreciates that there are implications for supporting our research community that go far beyond the support of actual research activities. Of course, I think our educational system depends very much on the kinds of activities and the researchers that are present in our universities, and the fact that they are at the cutting edge of their discipline.

As I say, I don't want to underestimate the economic impact the research community can provide. We are, as a community, an incredible resource to create jobs and training opportunities and be a magnet for the kinds of knowledge-based industries we hope this country will continue to attract in the future, because clearly that's where I think the world is moving.

I thank you very much for the opportunity to put that viewpoint forward.

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

I'd like to call on Susan LeFort and Ian Landry, please, to make a presentation.

Mr. Ian Tay Landry (Anti-Poverty Network): Thank you for this opportunity to address this community.

The Anti-Poverty Network is a group of persons who live or have lived in poverty, as well as support persons from the community who have concerns for poverty issues. The Anti-Poverty Network has grave and major concerns surrounding the whole central budget. However, in consideration of the time limit imposed, we have chosen to focus the presentation on the national child tax benefit program. We are requesting a review of the national child tax benefit program.

Money is being shifted from one level of government to another, without any true benefits to those at the lowest levels of income and individuals in receipt of social assistance, which is not recognized as income. Children are being used and exploited in order to justify and promote such a program, which has a corporate agenda and provides direct support only for those who are attached to the workforce.

• 1225

The national child benefit program has a flawed foundation in suggesting attachment to the workforce. The reality is that it makes a separation between working poor families and families in receipt of social assistance, with the latter being deemed less worthy. This artificially created stigma promotes a derogatory view of persons in receipt of social assistance, therefore further driving down their living situation.

Ms. Susan LeFort (Anti-Poverty Network): The child poverty initiatives imply that those in receipt of social assistance are not capable of taking care of their children on their own and cannot be trusted to use that money self-directed for their children's own benefit. This we find truly offensive.

The literature on the Web page and the literature that's been promoted through the national child benefit program nationally sets up the working poor versus people on income assistance and social assistance. It sets it up to be the worthy poor versus the unworthy poor, and it's poor-bashing.

We are also very concerned because we've done a lot of lobbying of our local government and the provincial government with the Minister of Community Services, and have been told that the federal government has tied the provincial government's hands behind their back and has told them they cannot use this money directly to improve their social programs and give social assistance people more money to live on. They must take it away from social assistance recipients. This is what I was told in a letter I received from Francene Cosman. She said if provinces wanted to receive this money, they were required to take it away from social assistance recipients dollar for dollar and then reinvest it.

This reinvestment fund is something that people who are on social assistance get little access to. The whole benefit program is supposed to be supporting poor families and reinforcing family unity, so why have a program that's designed to help poor children with a corporate agenda attachment to the workforce? It's a flawed foundation.

The Vice-Chair (Mr. Nick Discepola): Now we'll turn to Mr. Juan Telez and Margaret Tusz from the Atlantic Popular Education Network.

Ms. Margaret Tusz (Atlantic Popular Education Network): Popular educators work as facilitators and consultants to people and communities, working from the needs and experiences of the people toward improving their understanding of society, and helping people be more capable in the various aspects of their lives. So our work is community capacity-building. This includes human resource development, work around cultural and racial identity, economic development, addressing health and security issues, and the empowerment of communities.

The foundation for this work is the community as a whole, across gender, class and race boundaries, and it is based on the community needs as a whole. We expect that the government is the means for society as a whole to share the resources and allocate them justly for society, as a whole, to meet basic needs.

It is disappointing and unsustainable that, for instance, charities such as food banks or shelters are carrying out this collective responsibility of the government, funded only by the select few who accept responsibility and support these charities.

The government is our agent for social security, and this includes adequate employment, secure housing, and access to education and growth. The fact that more than 5% of food bank users here in the Halifax area have university degrees makes me question the government's focus on educational scholarships, for instance, alone without other counter programs going along with it. The government needs to help increase our communities' abilities to support all people in meaningful lives. The government needs to improve our communities' capacity to offer full lives to all citizens.

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Mr. Juan Telez (Atlantic Popular Education Network): Thanks, Margaret, for paving the road for me because I want to suggest something we consider significant.

We believe that along with environmental degradation, the other highest concern is community disintegration in a physical and spiritual way. We are suggesting, as the Atlantic Popular Education Network, the government consider the creation or establishment of a community capacity-building fund.

As the employment insurance surplus has been a contribution of Canadian citizens, including employees, employers and government, it should be reinvested in developing citizens' competence through community capacity-building. We strongly suggest that part of the surplus coming from human resources should be directed to the creation of this community capacity-building fund.

Over the last couple of years, HRDC has adopted community capacity-building as part of its mandate. The experience in Nova Scotian communities has been that the HRDC has put enormous effort into carrying these mandates out with insufficient financial resources to respond to community-based organizations' requests. The creation of the community capacity-building fund would support community-based initiatives, including the training and education in community-based development for building the skills required in the context of globalization and high competition.

We also support community-based initiatives directed to improve their economy and human resources; leadership and communities' competence development; and the provincial community capacity-building resource centre, so many communities would have a chance to have access to information as well as share their successes. Finally, we support the community-based initiatives focused on entrepreneurship development and enhancement of the labour force.

In Nova Scotia, the community capacity-building fund could benefit the efforts of the regional development authorities, the capacity-building training program offered by several institutions across the province such as colleges and universities and private institutions, the province's numerous community-based organizations, and the establishment of a community capacity-building resource centre for the province.

Nova Scotia and each province in Canada should be able to identify the programs and initiatives that are required to make sure communities have better access to resources. This initiative is required to move away from project-based and short-term basis funding toward a long-term community-driven process with holistic goals, where economic aspects are just part of the complex community-based development activities.

The Atlantic Popular Education Network would like to suggest that a strong partnership should be formed between HRDC and the CED division at the Nova Scotia Department of Economic Development and Tourism to administer these funds under the advice of community development-minded citizens in the province.

In this current decade, among other organizations, HRDC and the CED division of the Department of Economic Development have played a relevant role in encouraging and supporting community-based organizations in their development initiatives. Their work deserves the support and encouragement of organizations like ours. Let's allow government resources and citizens to assist Nova Scotia in their effort to build their own future.

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

I'd like to now call upon the Canadian Federation of Students, Jessica Squires and Penny McCall-Howard.

Ms. Jessica Squires (Graduate Representative, National Graduate Council, Canadian Federation of Students): Thank you. I'm actually here in a sort of dual role. I'm making a presentation on behalf of the National Graduate Council, which is the caucus of graduate students within the Canadian Federation of Students. Penny will be presenting for the Nova Scotia component of the Canadian Federation of Students.

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The National Graduate Council of the Canadian Federation of Students is comprised of over 45,000 graduate students attending 22 Canadian post-secondary institutions. In Nova Scotia, there are graduate student members at Mount St. Vincent University and the Nova Scotia College of Art and Design. These students have issues in common with graduate students across the province, as well as with their co-members in the rest of Canada.

Graduate students believe immediate action is needed on some key items of priority. We understand you have heard already from the National Graduate Council in Ottawa, as well as in British Columbia. This presentation will emphasize items of high priority for graduate students in Nova Scotia, some of which will necessarily overlap with the national issues.

On the subject of transfer payments, graduate students in Nova Scotia believe it is necessary for this committee and the finance minister to recognize in the short term that immediate action is necessary on transfer payments to the provinces. Since 1995, billions of dollars have been cut from social programs, ostensibly to bring down the deficit. Now that the deficit is eliminated, the focus has shifted to the debt. Last year the question was asked whether we should spend the so-called dividend on tax cuts or on programs. The immediate answer to that question was, and still should be, that social spending was cut to bring down the deficit. Now that the deficit is gone, it's time to restore the funding.

It is widely recognized that the deficit was not a result of social spending, but rather a result of a combination of tax cuts and high interest rates. It should therefore be clear that not only are tax cuts not a strong policy, but the scapegoating of social programs was misplaced, and the resulting crisis situation should be addressed. Funding should therefore be immediately restored to the transfer of payments.

Restored social spending is only part of equation. In addition, the unique situation in Nova Scotia should be recognized. Last year, 4,000 more students came to Nova Scotia to study from other provinces than left the province to study in other provinces. This inequity results in a system-wide underfunding, because the transfer formula is based partly on population of the province. A formula is needed that addresses student enrolment levels, not population of the province.

A third component of the problem thus becomes clear. The federal government currently has no idea how the transfers will be spent at the provincial level. The federal government should immediately rededicate transfers to specific social programs, and should negotiate with the provinces on methods to ensure that the money goes where it is supposed to go.

Funding cuts therefore adversely affect graduate students. By and large, graduate students experience higher tuition fees, higher debt loads and more financial commitments than other students. As well, funding cuts have resulted in some skewing of priorities at the institutional level away from social science funding.

On the subject of research granting council funding, last year an infusion of money into the granting councils was welcome news, but funding still lags behind other developed countries, and funding for the social sciences and humanities is still behind other types of funding.

The National Graduate Council believes the federal government has a large role to play in ensuring a vital and dynamic research atmosphere in Canada. Its role is, and should be, funding of research through the granting councils.

The councils exist partly in order to ensure that research does not follow the winds of a fickle profit-based market. All research is important to the vitality of Canada, but not all research will result in profitability. All forms of research should exist on an equal footing. It is therefore necessary for the federal government to play a large role in the sustaining of less so-called profitable fields of research.

Restoration of funds in the 1998 federal budget to 1994 levels was a welcome start, but should not be seen as sufficient by this committee. Graduate students recommend, therefore, that funding be restored to all the granting councils, but even more importantly, that badly needed increased funds be made available to the more than 50% of graduate students and faculty in the social sciences and humanities, whose granting council, the Social Sciences and Humanities Research Council, received only 12.27% of the funds to the councils last year, and this year the percentage has fallen to 11.57%.

The importance of the humanities cannot be overstated. The importance of innovations in fields such as education, art, culture, economics, and business administration, for instance, are undeniable. Overall, funding to all the councils needs increasing, since it is often only because of grants received from the council that graduate students can continue their studies.

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On the subject of the recently enacted legislation banning student bankruptcy until 10 years after graduation, from the inception of the Canada student loans program in 1964 to March 1996, $12.1 billion in loans have been negotiated by 2.7 billion full-time students. The figures for 1995-96 show that 88% of the loans have been repaid since 1964, only 7% of student borrowers eventually default on their loans, and many more have other kinds of problems repaying the loan. For example, in 1990-91, 29,000 students defaulted on their student loans. By 1995-96, 10,000 of those original defaulters had repaid the loans in full and another 6,500 had resumed payments. Of the remaining 7% who default, not all seek bankruptcy protection.

Recent figures from Industry Canada indicate that bankruptcies for both business and consumer loans are on the increase. A study done by Schwartz and Anderson in 1998 for Industry Canada indicates that over the last 20 years, the number of personal bankruptcies has risen by a factor of eight. Yet the reasons for seeking bankruptcy have remained unchanged. Individuals seeking personal protection are in severe economic straits and have low incomes and poor job prospects. The study concluded that current debtors “do not seem to be exploiting bankruptcy laws in order to relieve themselves of legitimate debt”.

The Canada student loans program was created because financial institutions refused to loan students money, and needy students were unable to finance their education. The legislation jeopardizes that principle. Bankruptcy is not a fun process to enter into. People, including students, do not enter it frivolously.

A person has no need to declare bankruptcy unless they acquire a debt. They will and are obligated by legislation to repay a debt if they have the financial ability to do so. Students have debt loads because of inadequate student assistance programs, a lack of federal and provincial funding, user fees for education, and a lack of national and comprehensive universal need-based grants for students. Students are unable to repay their debts for a variety of reasons, including unemployment, high bank interest rates, and a lack of suitable federal and provincial interest in debt relief programs.

The decision to declare bankruptcy is not made lightly. The process costs a minimum of $1,600, takes at least nine months and is not kept secret. All the student's creditors are notified of the application and given notice that they can oppose the discharge of debts. In order to declare bankruptcy, a person must complete a lengthy and stressful process and, as I've said, the usual fee is about $1,600.

The consequences of bankruptcy include a record of the bankruptcy retained at credit bureaus for approximately six years, and for those who declare more than once, this record will be posted permanently. The issue of a permanent record is especially important for students seeking bankruptcy protection. Consequences of declaring bankruptcy also include difficulty getting a line of credit from a financial institution.

The members of the House of Commons and the Senate justify the 10-year bankruptcy prohibition on the grounds that the availability of student loan interest relief and debt reduction mitigates the problems student loan debt creates for individuals. However, if the government had adequate measures to assist students in repaying their student loans or funding their education, they would not need to impose any restrictions on bankruptcy. Moreover, the new interest relief and debt reduction programs announced in the 1998 budget are far too rigid and will be useful for only a small number of students.

In its present configuration, debtors can access the debt relief program only after five years have passed since leaving school. Framing the discussion in terms of the timing of debt relief ignores entirely the fact that most repayment difficulties are experienced in the first two years after students leave studies.

While the incidence of consumer bankruptcies outnumbers corporate bankruptcies four to one, the total dollar value of corporate bankruptcies is high in comparison to student loans. In 1995, consumer bankruptcies totalled $3.6 billion. Corporations racked up $5.3 billion in unpaid debts. Of the $3.6 billion in consumer debt only $70 million, or less than 2%, involved student loan debt.

Bankruptcy provides financial protection for individuals and corporations when all other measures and every reasonable means of repayment have been exhausted. To deny any one group access to bankruptcy protection delegitimizes the entire bankruptcy process. Trustees in bankruptcy, and ultimately the courts, already have the ability to deny an application for bankruptcy on a variety of grounds. Given these mechanisms, the 10-year prohibition on discharging student loan debt is discriminatory and reinforces incorrect stereotypes about students' track record on loan repayment.

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The changes to the act were implemented without any empirical evidence to suggest that students have misrepresented their financial need. Instead, the new legislation served as a deterrent to those who need loans to take part in post-secondary education.

As a brief word on the millennium scholarship fund, the Canadian Federation of Students has made very public its criticisms of the millennium scholarship fund, having to do with its being administered by a private board, and being awarded partly on the basis of merit as opposed to need. In addition, for graduate students, the way the current fund is being proposed does not include eligibility for the fund by graduate students, and this is seen as a very big problem.

Therefore our recommendations are: that the 10-year prohibition for the discharge of student loan debt be revoked; that the millennium scholarship fund be administered by Human Resources Development Canada, not by a private foundation, and that it be transformed into a system of needs-based grants for which graduate students are eligible; that the federal government increase the federal cash transfers to their 1993 levels, taking into account increases in population, student population and inflation; that federal cash transfers be earmarked specifically for post-secondary education and other social programs, in the form of a dedicated, enforced fund enshrined in legislation similar to the Canada Health Act; that SSHRCC funding be increased to levels comparable to the other two granting councils and that overall granting council funding be increased.

Thank you very much.

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

Penny, do you have anything to add?

Ms. Penny McCall-Howard (Nova Scotia Component, Canadian Federation of Students): You have our formal brief.

The Vice-Chair (Mr. Nick Discepola): Do we have a copy of it?

Ms. Penny McCall-Howard: I believe so. We submitted it on August 6.

The Vice-Chair (Mr. Nick Discepola): We don't have a copy, but maybe you can leave your copy for the members after.

Ms. Penny McCall-Howard: I apologize.

To give a little bit of introduction, the Nova Scotia component of the Canadian Federation of Students is comprised of 7,500 post-secondary students attending four institutions in this province. We take part in a wide variety of programs and disciplines, including graduate, professional, undergraduate, full-time, part-time, mature or international. Our members come from a diversity of backgrounds, including different socio-economic environments and different family structures, and we also fully support and endorse the views expressed in the Canadian Federation of Students' national brief, submitted to you earlier in Ottawa, which was entitled “Reinvesting in Post-Secondary Education”.

Now is a particularly interesting time to be a student commenting on the federal budget process, because of course we're doing this in the wake of the last federal budget, which was called the education budget.

The analysis that the Canadian Federation of Students has of the education budget is that it made some very major steps in the direction of effectively privatizing the post-secondary education system in Canada. I'd very much like to echo the comments made by Marg Forbes from the school board, and also the Anti-Poverty Network, that we very much see this as ways of redistributing income so that the top gets more and those at the bottom, who need the loans and are seeking bankruptcy protection, are getting less and less.

To continue on with the circumstances of students in Nova Scotia, undergraduate and graduate tuition fees in Nova Scotia are the highest in the country. Undergraduate fees are about $3,900, and for graduate students they are about $5,200.

To compare with that, the minimum wage in Nova Scotia is also one of the lowest. In addition, unemployment rates in this province are among the highest for youth. And finally, the changes to the transfer payment formula from the established programs funding to the Canada health and social transfer have resulted in an exacerbated funding crisis in Nova Scotia's institutions, for reasons Jessica has mentioned, especially that the formula is based on population and not on the number of students, and we have a very high number of out-of-province students in Nova Scotia. This has resulted in an additional downloading of education costs onto individuals, the public deficit being transferred into private student debt.

Cash transfers, which were originally intended to serve as an equalizer between the so-called have and have-not provinces, are doing that less, for Nova Scotia students certainly.

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Finally, because the Canada health and social transfer decreases the cash portion and leaves mostly tax points in terms of the transfers, the have-not provinces such as Nova Scotia have seen their ability to properly fund education, health care and social assistance programs decrease even further.

Students across the country believe that the federal government has failed to address the most pressing dilemmas that students face, and Nova Scotia students have especially expressed disappointment in what the government has dubbed the 1998 federal education budget, and hope that the 1999 federal budget will provide sufficient measures especially to address student debt and its corollary, student poverty.

As a little bit on the increase in student debt loads, the federal financial assistance program has been built around loans to low-income students and to providing income tax credits to upper-middle-income and high-income students and their families.

Half of the all the post-secondary education students must borrow through the Canada student loans program in order to meet the costs of tuition fees, ancillary fees, books, equipment and living expenses. At some Nova Scotia institutions, for example the University College of Cape Breton, participation rates in student loan programs are over 90%; that is, 90% or 9 out of 10 students rely on loans to be able to finance their education.

A shift to increasingly higher debt loads means that more students are leaving college and university with unmanageable liabilities, and this is before they've even begun to look for increasingly scarce jobs—and Jessica went through some of the consequences of that for students.

I'd like to speak about student poverty. The student experiences on our campuses are a graphic illustration of how poverty in our midst is expanding at alarming rates. The globalization trends of the past few years have meant a race to the bottom line, often at the expense of social programs that have taken years to construct. Many Canadians would be hard-pressed to identify any improvements to our social programs in the last six years; these are the same people who can recite a litany of cuts to those programs. One interesting thing to note is that the majority of student unions in Canada now operate food banks.

So cuts in federal transfer payments and the hesitancy of provincial governments to commit themselves to high-quality, accessible post-secondary education has set the groundwork for university administrations across this country and in the province to pass the burden of revenue shortfalls on to students. It is no surprise, then, that students have seen the debt loads balloon as they struggle to survive, and anecdotally, we are beginning to see a move to more and more high-school graduates questioning their own preconceptions that higher education is necessary.

Additionally, there is an increasing number of mature and part-time students, many of whom have parental responsibilities, for whom a debt burden of $25,000 or more—and that is the average graduating debt for students in Canada, one of the highest in the world—could easily put an education out of reach for these people. It's important to look at this in the context of what we hear every day on the news, that we are now entering a global era of knowledge and everybody needs to run out and get a university degree or college education.

If those students are returning to school, they're also making a decision to live in poverty while they earn a degree, and the job market they face upon graduation amounts also to a long struggle against poverty.

Students who choose to forgo income for several years while they pursue an education often emerge from middle- or higher-income brackets and expect to return to that same quality of life after graduation. Anecdotal evidence suggests that this model is being severely tested as graduates try to grapple with debt burden that exceeds the national per capita debt, and increasing numbers of student loan recipients cannot bring off the chains of debt to which they are welded because of their education.

Students from low-income brackets often pursue a higher education in hopes of breaking a cycle of poverty. For some, this venture is successful; for others, the economic, political and social structure that they encounter within the education system is little different from that outside the structure, and the cycle of poverty continues.

For example, I know many students who are forced through the weekly decision of whether to buy textbooks or to buy groceries. If we are actually wanting people to be able to get an education, this is not necessarily a helpful way to do it.

Students who are unwilling or unable to assume the kind of debt necessary to begin or to continue studies have become numerous. Among those particularly affected are mature and non-traditional students. The current regime of student financial assistance is doing little to nurture, protect or support students with special study needs, students with parental responsibilities, or students from historically disadvantaged groups. It will probably be several years before we see the full effect of the high cost of education on participation rates.

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The Maritime Provinces Higher Education Commission study on accessibility to post-secondary education in the maritimes, an empirical study published in 1997, last fall, raised serious concerns about debt aversion. It indicates that neither increased loan remission nor increased loan allowances will address the accessibility problems.

Individuals for whom $25,000 amounts to the annual family income are understandably discouraged at the prospect of incurring such a debt, and only upfront grants can address debt aversion adequately.

Increasingly, the face of poverty is becoming more recognizable to Nova Scotia's students. All they have to do is look in the mirror. Although we are not yet aware of specific demographic statistics on the actual levels of students living in poverty, it seems clear upon analysis of the anecdotal evidence that the experience of poverty in the 1990s is widespread and is increasing.

There is a section in the brief about the calculation of low-income cutoffs. These are calculated from the family expenditure surveys from Statistics Canada. The major conclusion of this section is that the low-income cutoff, including a tuition assumption, leaves a single person needing $13,173. The maximum Canada student loan contribution is $10,500, putting a single independent person at 80% of the poverty line. For a family of two this decreases to 67%, a family of three, 57%, and so on.

These statistics are taken from the government's own figures and the low limits for the Canada student loans program, which is another government department, so we are left with only one conclusion—that there is an active policy that, while completing their education, students should be living in poverty.

The Vice-Chair (Mr. Nick Discepola): Could you maybe summarize your conclusion? We still have one more presenter.

Ms. Penny McCall-Howard: Just to continue, there are obvious corollaries between poverty and health. The condition that social assistance benefits in Nova Scotia not be extended to those who are on student loans also exacerbates this problem.

On the need for grants, student debt is a barrier to accessibility, and student financial assistance levels amount to a sentence of poverty for students in Canada. The only possible conclusion is that in order to address the needs of all Canadians, the Canada student loans program should be replaced by a system of needs-based grants. The federal government should move immediately to replace the current Canada student loans program with a comprehensive, federally planned and publicly administered system of upfront grants. Current levels of student financial assistance are not adequate, nor should more resources be supplied in the form of loans. Loans and higher debt loads are not the answer.

A pan-Canadian grants program for students should be based on an expansion of the existing Canada study grants and the Millennium Scholarship Endowment Fund. Awards should be made as grants based on need and not merit. Graduate students should be made eligible for the awards, and the fund should be fully administered by Human Resources Development Canada as part of the existing student financial assistance system, and not by a private board of directors.

Just to summarize our recommendations for financial assistance, the Canadian Millennium Scholarship Endowment Fund should be replaced or made into a national system of grants based solely on need, which should be publicly administered through an integrated system of student financial assistance.

The ten-year ineligibility rule for student loans bankruptcies should be repealed. The provision that now allows the Governor in Council to make decisions regarding a student's eligibility for the Canada student loans program should be repealed, and a student's eligibility for the Canada student loans program should only be based on their assessment of income.

We need a comprehensive package to assist student loan debt holders who experience difficulty repaying their loans, including debt reduction in the first two years of their payments. The risk-sharing agreements between the Canada student loans program and the lending institutions should be repealed and the lending institutions should be disallowed from their current practice of charging prime plus 5% on student loans.

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There are additional problems with the current youth unemployment, and we have a few recommendations for that. The income clawback for those students who work throughout the year—you're only given 80% of your assessed need in your loan and any income you earn to try to make that back is then taken from the loan you're allotted the next year—should be eliminated. It should be acknowledged that there is an active role for all levels of government to play in indirect and direct job creation measures. There should be a reinvestment in public sector jobs, and targets should be set for reducing unemployment and creating a comprehensive consultative job creation standard.

Our final conclusion is the immediate necessity for pan-Canadian standards to stop what we see as the erosion of the public post-secondary education system in Canada. The dramatic erosion of transfer payments to the provinces has contributed directly to unmanageable student debt loads. The burden of higher student debt has also been exacerbated by levels of youth unemployment, and students are particularly vulnerable to the human costs of federal cutbacks.

The federal government must commit to the establishment of pan-Canadian principles guaranteeing the five basic standards of public administration, accessibility, comprehensiveness, transferability and mobility. These standards will not constitute interference in provincial affairs, but rather will be a guarantee that services paid for by all Canadians are accessible to all Canadians.

The final recommendations for the establishment of pan-Canadian standards would be to increase the transfer payments to the provinces to 1993-94 levels or better and make those payments such that the provinces are bound to spend on specific programs; to repeal the Canada health and social transfer and its practice of a block transfer of funding and replace it with separate, dedicated cash payments to the provinces for all social programs including post-secondary education; and to negotiate with the provinces and territories to establish clear, enforceable criteria for the receipt of transfers, including any opt-out provisions. These criteria should be enshrined in legislation similar to the Canada Health Act.

Pan-Canadian standards for public administration, accessibility, comprehensiveness, transferability and mobility of the post-secondary education system in Canada should be established. These standards should ensure that every Canadian, no matter their origin or place of residence, will have access to those services and protections that allow us all to contribute to Canadian society.

Thank you.

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

Last but not least, and I apologize for the delay, from the Nova Scotia Federation of Labour, Mr. Holloway, please.

Mr. Les Holloway (General Vice-President, Nova Scotia Federation of Labour): There's no need to apologize. I found it very interesting. As a matter of fact, as I was listening to the last two presenters I was saying that I think there's more youth needed at the table and less age, myself included in that, so I quite enjoyed the bulk of their presentations as well as some of the others.

The Vice-Chair (Mr. Nick Discepola): Don't let the grey hairs—

Mr. Les Holloway: I hope I don't do anything either to pull Paul away from his video game over there. I know there were a couple of things said that pulled him away from it. I know, you can switch it back—mine too—you can go back and forth to video. Anyway, don't be too offended.

I would first like to say that on behalf of the Nova Scotia Federation of Labour I'm pleased to be able to present before this Standing Committee on Finance in these pre-budget consultations.

It is unfortunate we received such late notice that we could appear before this committee. I truly believe that a consultation process is about more than just being able to appear; it's about being able to be informed, being able to appear and being able to present with some time provided. We got notice on September 24, and that is inadequate. So I'd like to table that, and that is in our brief.

I'll just briefly go through the brief and try to stay away from too many comments on the side, but I won't guarantee that.

There will likely be a large fiscal surplus allocated in the 1999-2000 federal budget. This will be because of deliberately conservative assumptions that the Minister of Finance has used in fiscal planning, combined with continuing economic expansion and the increase in jobs, even though most are inadequate with low wages and there is not enough employment.

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In this budget, the government will be able to allocate significant new resources to priority areas, and there should be major public debate on what these should be. We believe that the most pressing priorities of the federal government should be: job creation, full employment, eradicating poverty and inequality, rebuilding social programs and public services, and fair taxes. To address these priorities, we suggest that the federal government invest the surplus in public programs that promote our long-term social and economic goals and sustain the momentum of job creation.

In the past, the federation has made presentations to this committee and argued that the federal government should set clear job creation targets, along with deficit, debt and inflation targets set by the Minister of Finance.

In the past few years, we have wholeheartedly supported the approach as outlined in the alternative federal budget. A document produced by the Canadian Centre for Policy Alternatives, the alternative federal budget offers a commitment to full employment.

It also proposes a wide range of policies to achieve job targets, notably low interest rates, increased public investment, green job creation programs, and support for higher rates of private investment through support for community economic development, a public investment bank, and other initiatives. These proposals remain very relevant to the forthcoming budget.

On the issue of jobs, if I could take it to a side issue, a major issue in Atlantic Canada is the issue of the need for a shipbuilding policy. The Atlantic premiers in all four provinces in Atlantic Canada called on the need for the federal government to act on this issue; the federal government has taken no action on it. In their meetings earlier this year, the Canadian premiers conference supported the need for the federal government to act on the issue of a national shipbuilding policy. If you want to deal with your financial situation, the creation of jobs—good, sound, solid economic policies that create jobs—is one way to do that.

If you've been reading the papers, you will see that the provincial government has taken a step in that direction, but without federal government support it's going to be impossible for that to develop into the kind of policy that would really mean a lot to Atlantic Canada, B.C., Quebec, and parts of Ontario. When we talk about a shipbuilding policy, there's one example of something that can be done on the issue of job creation.

The underemployment rate is at double-digit levels in Atlantic Canada. In many regions across the country, the youth unemployment rate is still 15.7%. Many workers, particularly women workers, visible minority workers, workers with disabilities, and aboriginal Canadians are still unable to find full-time, permanent, reasonably paying jobs.

Levels of underemployment are shown by high rates of involuntary part-time employment, and the rapid growth of low-income self-employment remains very high. In short, the jobs crisis is still very much a reality for working people. Again, we recommend a strong and ongoing commitment by the federal government to full employment.

As well as targets to reducing unemployment, there must be targets for eradicating poverty and inequality in Canada. We feel that a good step towards this would be for the federal government to drop its appeal of the Canadian Human Rights Tribunal pay equity ruling, and pay the thousands of women working with the federal civil service money they are owed.

We were very disappointed with the lack of action in this year's budget for health care. We urge this committee to call on the Chrétien government to convene a national summit on health care, as was publicly proposed by the Canadian Health Coalition on June 17.

We feel that another priority in the next budget should be to restore and increase federal spending on health care. The major cuts to federal transfers to the provinces have led to destructive provincial government cuts to health care services, notably hospital care, and have significantly undermined the capacity of the federal government to enforce national standards as set out in the Canada Health Act. The ground has been laid for privatization and dismantlement of medicare. It is imperative that the CHST be scrapped and that a separate transfer for health care be reintroduced so as to maintain the federal role, and the cash transfer for health care must be significantly increased.

The next budget should also lay the basis for a national publicly delivered home care program for the elderly. Such a program should be designed and financed jointly with the provinces, with national standards attached to federal funding. The government has already committed itself in principle to such a program, recognizing that elder care will be a crucial challenge in coming decades with the aging of the population. If a public program is not put in place, the growing costs of elder care will fall on families, particularly women, and the quality of needed care will not be achieved. A national program is also needed to reduce total health care costs by providing a real alternative to institutional care.

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In the health care area, another priority must be to restore funding to the Health Protection Branch.

Another budget priority for this government should be to address the issues related to unemployment insurance and the UI surplus. Use of the $20-billion UI surplus, which has accumulated over the past five years, to pay off the deficit has imposed enormous hardship on hundreds of thousands of workers and their families. And as if job losses were not enough, because of recent changes to UI, nearly two-thirds of the unemployed do not get the protection they paid for. There is more money in the UI surplus than what is paid to the unemployed in regular benefits.

In the previous presentation it was suggested that the EI surplus could be used for child poverty. I would suggest, where do poor children come from? They come from poor families, and there are a lot of poor families created by the present Liberal government, and before them by the Conservative government, by the huge cuts to the unemployment insurance program.

So to say that we now deal with it that way, maybe restoring the program to what it used to be and paying appropriate benefits where that money was initially put in and paid by employers and employees, would be the sensible thing to do.

But in recognition of where poor children come from...I always find it an amazing conversation. It's like these poor children are out there someplace and there's no poor family attached to them. It's like we just have to deal with this poverty with children in Canada, and it makes no sense, because they're coming from poor families, and those poor families have been created by poor economic policies and by cuts such as those to the unemployment insurance program.

The Federation of Labour is opposed to the federal government's plan to use the unemployment insurance money to pay for a tax cut, for spending on government programs, or for payments on the federal deficit. Again, as proposed in the alternative federal budget, the next budget should introduce major improvements to the EI system, to rebuild it as an effective income security program for workers who are unemployed through no fault of their own. Income support for training under EI, cut by almost two-thirds or $700 million under this government, should be restored and increased. Cuts to premiums should not be a consideration until after the program is rebuilt.

The federation continues to strongly believe that workers and employers should continue to be closely involved in the direction of the UI program.

While the government has spoken a great deal of the importance of investment in education and skills and has made some gestures in support of post-secondary education in the last budget, direct federal spending on training has been eliminated, and total federal spending on training under EI has been cut almost in half.

Transfer of most major responsibilities for training to the provinces has been associated with a major increase in privatization and significantly reduced resources for public educational institutions. While it is appropriate that the provinces should play a key role in the design and delivery of training, it is also important that the federal government continue to provide financial support and set broad national standards. Federal support for sectorial training programs, designed jointly by employers and trade unions, is also important.

With respect to post-secondary education, crippling increases in tuition fees, which will undermine broad access for working people, must be stopped by increasing federal transfers to the provinces, made under the terms of new legislation that would set out national standards. Federal government interest in the role of education and skills in the building of a new economy must be broadened through the development of a clear federal education and training strategy in the next budget, backed up with real resources.

To help finance the types of policy initiatives we have outlined here, we suggest key changes to the tax system. The share of the tax burden paid by the corporations, especially the large multinationals, must be increased through such measures as a minimum corporate tax and a wealth transfer tax. The different types of income, including dividends and capital gains, must be treated equally by the tax system, as recommended as early as 1967 by the Royal Commission on Taxation. Consumption taxes, such as the GST and user fees whose burden unfairly affects low- and middle-income earners, must be reduced if not eliminated altogether.

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If I may digress for one or two seconds on the issue of tax, we consistently hear the debate about the cutting of payroll taxes. At the same time, we see an acceleration of consumption taxes. The GST is a glaring example of that. The most unfair form of taxation you can have in the country is a consumption tax, because it affects the lower-income people the most. And then they say no new taxes, to use an old cliché coined by the right-wing friends of someone here. Well, there are no new taxes, yet we continually see an increase in user fees, so there is therefore an increase in taxes. Those taxes are affecting the lower-income families to a much greater extent.

So when we talk about tax reductions, maybe we should talk about getting rid of unfair taxes like consumption taxes, the GST. We should create a fairer taxation system.

To conclude, the federation again draws the attention of the committee to the recommendations and priorities of the alternative federal budget, which itself represents a broad consensus among a wide range of popular organizations. The central priorities of the next budget should be job creation, health care, education, the improvement of income security programs, and training. In all of these areas, the federal government can and must play a real leadership role. The large surplus now emerging should be directed to backing up that leadership with major new investments.

I thank you, and that's our presentation.

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

We'll now turn it over to the members for questions. I'd like to ask the Reform Party's Mr. Forseth to begin, please.

Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, Ref.): Thank you very much.

Did Margaret Forbes of the Nova Scotia School Boards Association leave already?

The Vice-Chair (Mr. Nick Discepola): Yes, she had to leave.

Mr. Paul Forseth: Then I'll ask a question to Ms. MacDonald.

Looking at your brief, there was one sentence on the back page that said, “Last fall, a national survey found that nearly 70% of Canadians believe that child hunger is more important than both national unity and the deficit.” I'm wondering if you have a reference as to which national survey that was. If you don't immediately have it, maybe you can get it to me.

Ms. Mary Jess MacDonald (Second Vice-President, Nova Scotia School Boards Association): No, I don't have it immediately, but I can get it.

Mr. Paul Forseth: Yes, if you would, please provide that footnote for us.

It appears the major recommendation in your brief is that you really like the national child benefit. You're very positive and feel it's good, but there are always some inequities and downsides to implementation of every program. I'm wondering if you're aware of any problems that the national child benefit brings. Secondly, are you aware of any study of anything such as a value audit of the efficacious nature of how the national child benefit is working out?

Ms. Mary Jess MacDonald: First of all, on the national tax benefit, we feel it should be accelerated to be more assertive and more aggressive in its approach to addressing the problem. We feel it does not address children whose families cannot find work, and we feel that's quite a flaw in it. As far as getting a reference for that is concerned, probably I can get back to you on it, too.

Mr. Paul Forseth: The other part of the question was whether or not you were aware of any study that looked at what I would call a value audit, really the utility of the national child benefit. Is it delivering broadly what its stated objectives are? Are you aware of any study?

Ms. Mary Jess MacDonald: No, I'm not.

Mr. Paul Forseth: All right. Are you aware of some of the difficulties in separating and dissolving families who are disputing over custody and primary residence of children and how the benefit is tangled up in that particular system?

Ms. Mary Jess MacDonald: Yes, we did have some discussions about that, but we didn't address it in this brief.

Mr. Paul Forseth: Okay, thank you.

Ms. Mary Jess MacDonald: Just on that, in reference to the national tax benefit and the province's reinvestment strategy, we also find that people, including ourselves, are not clear on them. They don't know what the reinvestment that happens is, specifically in our province.

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Mr. Paul Forseth: Okay, thank you very much.

I just wanted to turn to the presentations of the students. Certainly the request is very clear, but I would like to hear from you what you feel the role is for personal responsibility in terms of providing for fees and living expenses directly from employment. Historically, in the Canadian context, in the development of universities in Canada—and we have some very old universities—the story has always been the same for students since before Confederation in terms of being able to have funds to go to university. It is not a new Canadian problem. But increasingly governments have provided supports to students, both directly and indirectly. I'm just wondering what philosophically you feel students' responsibilities are to provide their own resources from employment or other sources.

Then, looking more directly at your recommendation about grants or an improved loan situation, have you looked at the issue of the income tax return itself? You recommended the issue of need rather than merit for scholarships. The income tax return itself is used as a tool for generating the criteria for need. It's also used as a tool for repayment so that repayment is based on ability to pay, particularly through that instrument of the income tax form.

I'll leave you with those points, and you can try to address them.

The Vice-Chair (Mr. Nick Discepola): Jessica Squires, would you like to address those questions?

Ms. Jessica Squires: Yes.

On your first question about what we feel the student's responsibility to bear some of the burden of the cost of education is, it's the same as everyone else's in Canada. Canada needs to be able to pay for its post-secondary education system, and students want to help pay for it, but they want to do it through the tax system. The tax system exists to fund social programs, and that would be the realm of that aspect of the cost of education.

Mr. Paul Forseth: Could you clarify that a little bit for me? What do you mean by the tax system? Are you saying that universities should be free?

Ms. Jessica Squires: In the long term, that's something the country should look at. I don't expect it will be able to happen overnight or in any kind of short-term perspective, but there are numerous international examples of countries that provide free post-secondary education and grants. Canada is unique in the OECD for not having either, so I think that's something the country should take a serious look at.

What's clear in the short term is that students are paying a disproportionate amount of the burden at this point. Tuition fee increases have made the cost of education unsustainable, and statistics bear that out. In the short term, what the committee needs to recommend to the finance minister is that immediate action be taken to decrease the cost of education through grants and those sorts of things.

Mr. Paul Forseth: I'm going to make one little interjection before you go to the next part of the question. Do you have any data as to what percentage of the annual cost of education is provided for the full load for a university student, on average? What do the student fees actually cover? Historically, it's been something around 10% to 15% of the cost.

Ms. Jessica Squires: Currently, the average is around 30% or 35%, and it's as high as 55% or 60% at some post-secondary institutions. There are a couple in Nova Scotia at which the tuition fees now make up that percentage of the revenue to the institutions. Increases have gone from that historic average of 10% or 15% to 35%.

Mr. Paul Forseth: Okay, you can carry on and finish the other part of your answer.

Ms. Jessica Squires: Okay, the other question was about considering using the device of the income tax return as a method for determining need. There are two problems with that. The initial one is that we already pay for part of our post-secondary education through taxes. I don't see the value of paying twice or splitting that up. I think we should simply use the tax system to better fund our existing post-secondary education system.

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An additional problem with such an idea would be the fact that at the moment the tax system is not as progressive as it should be. At the moment, it does disproportionately burden certain sectors of society.

Mr. Paul Forseth: Okay, that was the front half. The other half of the question was about debt. Where we have a situation of high student debt from government sources, could the income tax return itself be used as the method of payment strictly based on ability to pay, maybe stretched over a twelve-year period or something like that?

Ms. Jessica Squires: The bottom line is that what we need is not more loan repayment mechanisms. We need to address the problem of student debt itself. As Penny indicated in her brief, there are studies that have been done in the maritimes—there's one by the Maritime Provinces Higher Education Commission—that show that students from low-income backgrounds are experiencing debt aversion or what is sometimes known as sticker shock. They're deciding not to go on to post-secondary education specifically because they're afraid they won't be able to pay off their loans. And when loans are as high as they are now, at $25,000—or even at something like $10,000 or $15,000—just the thought of entering into that much debt is having an effect on accessibility.

I think the possibility of using the tax system to repay the loan is just another potential tinkering with the system. It's just something along the lines of some of the measures that have been introduced but won't address the real problem, which is that accessibility is being reduced. Also, because of the transfer payment problem, quality is being reduced because funding has been cut so much at the provincial level.

Mr. Paul Forseth: I'm wondering if your partner presenter had any additional comments to make.

Ms. Penny McCall-Howard: I would certainly echo the necessity of the transfer payments in terms of reinforcing quality, and there is one example that I'd like to give. At Dalhousie University over the last ten years, there has been a 15% decrease in the number of faculty and a 15% increase in the number of students. Additionally, as I mentioned, there has certainly been an increase in the use of food banks by students and in the inability of students to actually study while they're in school. If you're putting students in a situation in which they can't afford to go to school while they're in school—that is the viscous circle that many students are caught in—spending any money on their education is basically a waste. You're putting people in a situation in which they can't actually take advantage of what little they are given.

As for your question about the income tax rebate, there certainly is a danger with that. I'm not exactly clearly on the specifics of what you're proposing. I can certainly see a system in which loans are repaid through tax credits as making it much easier for those with higher incomes to be able to pay off their loans. They would be able to pay them off more quickly because they would be paying more taxes. On the other hand, those who had the largest debts in the first place and were having the most difficulty repaying their loans would be penalized the most by a system like that.

Again, not having the specifics of what you're proposing in front of me, it's a little difficult to comment. Those would, however, be the first things I would check in order to see what's happening.

Mr. Paul Forseth: The proposal was directly opposite to that. It was intended to provide compassion and advantage to those who had a limited ability to earn, rather than to those who had a good ability to earn and were able to collect credits. It was a system working the other way. But I appreciate your comments.

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

Mrs. Redman, please.

Mrs. Karen Redman: Thank you, Mr. Chair.

I'd like to ask a question of Dr. Johnston. I understand that you may be scooting out soon, so I'll get you before you leave.

I have two universities very close to my riding in southern Ontario. They really have embraced an investment in research and development with open arms. They were really pleased.

I zeroed in on the second-last paragraph of your submission, which talked about not using government money merely to leverage private money. The question I would have to ask you is this: if we're not going to do that, and if we're to have the courage to make the investment, how do we determine what the proper balance is? What is it if, in your estimation, you've already determined that?

Dr. Gerry Johnston: Do you mean the issue of what the private-public mix should be?

Mrs. Karen Redman: Yes.

Dr. Gerry Johnston: That's a difficult question. Someone here—I'm not sure if it was Jessica or Penny—said something to the effect that we cannot do research based on its profitability. That's something we really have to bear in mind. Research as an activity often gives you answers from very unexpected quarters, so if you can predict where you should put your money or where you should put your efforts, it's likely you already know the answer, so you're really not advancing things.

• 1330

I'm hedging on how to answer that question. My concern is that many of the programs... For instance, the Medical Research Council of Canada has endeavoured, through Henry Friesen, to expand the amount of resources it already has through leveraging and partnerships. I must admit I'm beginning to react to those terms rather negatively. I think it's a misguided way of doing things. First of all, it disadvantages some areas of the country, such as this one. By the same token, the Canada Foundation for Innovation program, which has a significant amount of money and a laudable raison d'être with the right motives, in practice requires that 60% of any moneys given have to come from other sources.

So if you're in large institutions with large amounts of funds available and private sector relationships already, you're okay, perhaps. But if we really want to ensure that we have a national fabric for these kinds of academic activities... I'll take the example here that Nova Scotia does not have a lot of resources, so we are relatively disadvantaged in taking advantage of things like these partnership programs.

I think the government really has to—I can't give you the right mix; you're going to have to deal with a broader range of opinion than my own—look at being able to provide the foundation or basic platform that will, in turn, support these kinds of industry, university or research institute relationships.

Quite frankly, researchers—and I say this more for the people doing science than the social and humanities—are really very good at being able to make linkages with private companies and so forth, once they have sufficient resources to carry the enterprise forward. In fact, there aren't many places where you can get probably 100% or 200% return on your dollar, and certainly academic endeavours, more in the biomedical research environment, are one example of those.

Some universities have been very successful, but they've been very successful because they've already had a good amount of resources to begin the process. That's fine, but I think we have to view this on a more national scale. I think someone down here pointed out that the job of government is really to support the needs of society—the social safety nets and things of that nature. I don't mean to sound very narrow, but the academic scholarship that goes on in a society is certainly one of those things that needs to be supported at the level of the government.

It has spinoffs in all kinds of things, but I'd rather look at it from the viewpoint that as a society we have to be doing this to see ourselves advance as a society and be able to develop.

Mrs. Karen Redman: I'm wondering if you would agree with one of the arguments that was put forward. The research and development sector did a really fine job last year of telling of us it was a sector that wasn't bleeding but hemorrhaging, and we needed to be attentive. I think the last budget demonstrated that we heard them.

We also hear a lot about brain drain and the fact that we probably cannot compete head-to-head with the large institutions in the United States and the salaries they offer. A part of the draw to the United States also is the milieu within which they do their research, and that is something that, as a nation, we can be attentive to.

Dr. Gerry Johnston: Absolutely.

I'll speak about the biomedical community because it's something I'm more familiar with. The reason the very best and most cutting-edge health care delivery is perhaps in downtown Toronto or Montreal is not a coincidence. It's not because people really want to live in downtown Toronto; it's because that's where the larger community of support is—the people generating the knowledge and accessing the knowledge that is all part of that milieu. By the same token, perhaps the reason health care delivery is not as cutting-edge and vibrant as it might be in smaller places is in large part because there isn't that community there to support those activities, and people go elsewhere.

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So the brain drain is a real issue, but I disagree with you and think we can compete head-to-head as a country. In fact, in areas where we've had the resources we've done very well, thank you. We have a cadre of minds and resources that we should never underestimate. This country has some real resources but...

Mrs. Karen Redman: By “head-to-head”, I meant competing financially with the salaries it was offering.

Dr. Gerry Johnston: I don't think that's an issue. If I were in it for the money I wouldn't be here, because there's no money in research. We do it because we love to do it. I'm passionate about what I do and I'll do it come hell or high water, in spite of the resources that are not there.

We have to recognize as a country that at some point we're going to fall below a critical mass of activity that will sustain any of us. Once that happens we'll be in big trouble, because dismantling these kinds of activities is simple to do—you can do it in a year. But putting it back together again will take forever. Then we will find ourselves competing head-to-head with resources that we just can't match. That also goes for the students, the educational processes they have, and the capacity to function after they go through that educational process. We really have to watch it as a country, because I think we're going on the edge and there are enough people I've talked to in politics who recognize you have to start putting your money where your mouth is.

Mrs. Karen Redman: Yesterday in St. John's, somebody talking about the health field was also talking about doing virtual medical research. I'm wondering if you see those kinds of strides in technology as a real leg up for research in general.

Dr. Gerry Johnston: I'm not really sure what that means—virtual research.

Mrs. Karen Redman: I think it's hooking up to remote areas and inputting the data.

Dr. Gerry Johnston: You can carry that too far. Certainly that does stretch the resources, but there's no substitute for interactions and feeling part of a community that's active. We can only go so far with virtual enterprises of any sort. I think you have to recognize that research—the generation of knowledge and all that sort of thing—is a very cultural activity. It's not just technology. Those kinds of developments certainly aid, but there's no substitute for having a vibrant critical mass within the community in any one location.

Mrs. Karen Redman: Thank you.

The Vice-Chair (Mr. Nick Discepola): You have two minutes left, if you'd like to continue.

Mrs. Karen Redman: I feel like I have the wind on my back.

The Vice-Chair (Mr. Nick Discepola): No, no. Go ahead. You're on your own.

Mrs. Karen Redman: Thank you.

Ms. LeFort, I would be really interested in seeing the letter. My interpretation of what you said when you talked about the child tax benefit was that provinces were obligated to withdraw that funding.

Ms. Susan LeFort: Yes. That's exactly what we received in a letter from the Minister of Community Services. She said that in order to receive this money we had to enter into an agreement to take it out of the pockets—she didn't say the pockets—but take it away from social assistant recipients.

Mrs. Karen Redman: Was there any point in that conversation that those moneys had to be redirected for services for that same group of people?

Ms. Susan LeFort: It did say the money needed to be reinvested in social programs. There's one small Nova Scotia benefit program, but that's just a fraction of the money and there hasn't been any designation as to where the rest of the funds will be going. The whole thing about making poor families pay for social programs is really an outrageous request from the federal government, if that's in fact what happened.

Mrs. Karen Redman: I would be really interested to see that letter. My understanding was that provinces had that ability but were not obligated, so if you could supply us with that letter I would find that very edifying.

Ms. Susan LeFort: I will.

The Vice-Chair (Mr. Nick Discepola): Thank you. Address the letter to the clerk of the House finance committee.

Ms. Susan LeFort: Okay.

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

Monsieur Loubier.

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[Translation]

Mr. Yvan Loubier: Ms. Lefort, I'm going to ask you the same thing that I asked Ms. Redman. I'd also like a copy of the letter, because I find it rather odd you were told the Government of Nova Scotia was forced to withdraw because of federal policy. I am not aware of any such provision and therefore, I'm interested in reading that letter.

The Vice-Chair (Mr. Nick Discepola): Could you forward the letter to the clerk who will see to it that all members receive a copy?

Mr. Yvan Loubier: That's the first I've heard of it. I was astounded to hear you say that.

[English]

Ms. Susan LeFort: Thank you very much. Tomorrow I have a meeting with the Minister of Community Services, so I'm very glad to be getting this information.

[Translation]

Mr. Yvan Loubier: It will be our pleasure, Ms. Lefort.

I'd like to come back to something Mr. Holloway said. He pointed out that in 1999-2000, there would likely be budget surpluses. However, for the first four months of fiscal year 1998- 1999, the federal government has already recorded a surplus in excess of $7 billion. Already this year, we have a budget surplus. The problem here—and it's not your fault or that of the people seated here around this table—is that over the past four years, Mr. Martin's budgets have given us a distorted impression of actual revenues and expenditures.

For instance, if you look at the budget brought down last March, you will see that it makes no sense. It projects no surplus for 1998-1999, no surplus for 1999-2000 and no surplus for 2000- 2001. Anyone with one iota of common sense can see that this is crazy. According to Finance Department figures, not ours, during the first four months of this fiscal year, the federal government took in $7 billion more than it spent.

Therefore, in terms of setting priorities, we must start with the premise that there will be a surplus and that while it may be modest given the downturn in economy as a result of the Asian crisis, it will still amount to anywhere from $12 billion to $15 billion as of March 31, 1999.

Having said this, I would have liked to speak to Ms. Forbes, but Ms. McDonald is on hand to answer questions. In view of the fact that there will be a surplus and given that the government has cut funding year after year to health care, social assistance and post-secondary education, shouldn't these programs be our first priority? On this point, I agree with Mr. Holloway, Ms. Squires and Ms. McCall. The first priority should be to take this money and plow it back into existing programs, rather than introduce new initiatives or launch a direct assault on child poverty. As Mr. Holloway said, if there are children living in poverty in this country, it's because their parents have become impoverished over the past four or five years.

[English]

Ms. Mary Jess MacDonald: It's true. We acknowledge that. In fact, according to research we have done, since 1989 full-time-employed families have decreased from 82% to 77%, and we see that as a factor. We see it increasing more and more with the children we are serving in the schools. We're very concerned about the ensuing problems such as food and the use of food banks, which is increasing. We are also concerned about nutrition in children from birth to five years, before we get them in school where we are seeing the problem more first-hand. We think there should be more support in addressing some of the needs.

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One of the things we keep seeing is the need for a comprehensive approach to the problem through health, community services, social services and education. They should be married instead of everybody getting funding or approaching the problem from different perspectives in their own separate places. There should be a more comprehensive approach. If there was more full-time employment instead of it moving more to part-time employment, it would help our problem also.

It is very interesting to hear from the students, and I'm very close to that problem. You come out of school and you are debt-loaded and shortly you start a family and you still have this debt. It can take two or three years to get a job and many problems ensue that add to the problem we're talking about here.

I don't know if that answers your question completely, but I agree with what I'm hearing around the table. That becomes very prominent in the school system and how we address it.

Some of the programs that have been put in place have helped. We feel it would probably have increased beyond that if we didn't have those programs. As I pointed out, we think the child tax credit should be accelerated and it should be helpful to people who cannot find work.

[Translation]

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

Would you care to add to that, Mr. Holloway?

[English]

Mr. Les Holloway: I'd like to make a couple of brief comments.

First, the labour movement is on record as not agreeing. Social programs were never the problem in this country with regard to the deficit situation; poor economic policies and poor trade policies were. Trade policies that didn't recognize human rights or certain social standards before we entered into trading with countries that exposed our country to competing on very unlevel playing fields have been our problem. For the record, I would like to make that clear on behalf of our federation.

I would agree with most of the comments made by Yvan Loubier, but what we are talking about now is truly unfortunate. Canada as a country became great because we had a social conscience, and now we have to step over people. Even in Halifax, Nova Scotia, when you walk down Spring Garden Road, people are begging for money to be able to feed themselves. Food banks are cropping up all over the place, and as we heard from the student presenters here today, there are food banks in universities. So you really must wonder where we're going.

Our position is that all of our social programs, now that there is a surplus—even though the reasons by which our social programs were cut were not legitimate reasons—should be reinvested in to that level and be improved upon.

There's another point I would like to make, and I always find this issue amazing. I can remember when the Conservative government brought in some massive cuts to the unemployment insurance program and Lloyd Axworthy was speaking in the House of Commons as a critic, condemning the Conservative government for the cuts they made to the unemployment insurance program. CBC actually ran the clip so we could all be reminded, for those who had short memories, and there were a lot of Liberals who had very short memories. Then Lloyd Axworthy defended the largest cuts to the unemployment insurance program in the history of the program.

I can only say very clearly that besides being a vice-president of the Nova Scotia Federation of Labour, I represent shipyard workers in my job. Shipyard workers face a lot of unemployment, because there is no economic initiative by this federal government to put in place a policy that gives us the same playing field as the international world we're expected to compete in. But instead of taking a progressive step in dealing with that issue and putting in place a policy that would have dealt with that level playing field, they cut the benefits to the workers who were affected by their lack of action on a policy. I say to myself, if that doesn't have the horse behind the cart, nothing does.

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I'll leave my comments at that. I don't know if anybody wants to...

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

[Translation]

You have two minutes, Mr. Loubier.

Mr. Yvan Loubier: I've two comments in response to Mr. Holloway. First of all, you mentioned the GST. I am surprised to hear you say that you would like the GST to be scrapped, because when Mr. Chrétien and Mr. Martin stand in the Commons, they maintain that last year, the three Maritime provinces received $961 million to harmonize the GST with provincial taxes and that everyone is happy in Nova Scotia, New Brunswick and Newfoundland. I'd like to hear your views on the subject.

Secondly, regarding a national shipbuilding policy, I support you 100 percent on this and Quebec will back Nova Scotia because it too would like the federal government to develop a national shipbuilding policy. I find it somewhat ludicrous that we are just about the only industrialized country in the world not to have a shipbuilding policy. That's unfortunate and we will support you on this.

I have one final brief comment. You talked about the employment insurance policy. On behalf of my colleagues, I'd like to thank you for doing Doug Young's job in the Maritimes. Everyone has benefited.

[English]

The Vice-Chair (Mr. Nick Discepola): Mr. Holloway, would you like to comment on any one of those remarks?

Mr. Les Holloway: I would. I just came back from Quebec a couple of weeks ago.

The policy document we placed in front of the federal government, on which they've yet to respond, doesn't cost any of that.

Actually, Russell MacLellan, who comes from the Liberal government, who is the premier in this province, just announced a policy of guaranteeing loans for the building of vessels. That doesn't go to the shipyards; it goes to the purchaser of the vessel. It's the same program as we'd love to move towards, like they have in the United States of America under title XI, where they guarantee 87.5% of the cost of the vessel, and they do it over a 25-year period.

We just moved into one with a 15-year period. So it isn't as lucrative, but it doesn't cost anything, and it's actually a colleague of the present government who is touting that as not costing anything.

By the way, that's not only called for by our federation and by the union movement; it's also called for by the Shipbuilding Association of Canada. Their position is the same. There has to be something on that issue.

Before I get off the subject of shipbuilding, I'd like to make a brief comment on the GST and the HST, the BST, as we call it down here. We just met with our colleagues in Quebec in the Davie yard, who are presently faced with the situation—and I don't have an update on where that situation is at present—of a huge problem financially, where they have gone into bankruptcy. We hope they exist. We don't want to see another shipyard close in this country. Our federation stands in support of those workers up there in that Quebec shipyard. But again, it's completely and directly the result of a lack of initiative and vision by this federal government and the previous federal government.

On the GST—the BST, as we call it, which probably needs no further explanation as to why we term it that—you should not be surprised, but there hasn't been one poll done here that shows there is support for that initiative, where it increased costs on a lot of the very necessary things, on fuel oils and such. It is, again, another consumption tax, another tax grab, the most unfair form of taxation there is. So there is not a lot of support for that in Atlantic Canada.

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

[Translation]

Thank you, Mr. Loubier.

[English]

I'll ask Mr. Szabo to ask his questions, please.

Mr. Paul Szabo: Thank you.

I want to thank the students for making their positions. I think it's clear, and in fact there were a couple of things in there. I'll talk to you later about maybe how to improve on the number side, because the strength of the argument shouldn't be masked by some confusion on numbers.

I want to ask your opinion with regard to need and the definition of need. I think this is very important for the committee to hear.

• 1355

We have about a 30% high school drop-out rate in Canada, on average. It's a little more in some provinces and less in others. But there are an awful lot of students who don't even make it through high school, never mind get a chance at university.

The millennium scholarship fund is a small program, quite small. In fact I think most of the student groups are using the figure that only 6% or 7% of all students would ever get a chance to benefit.

My opinion is that I hope that no university students get to benefit. I hope it all goes to those students who don't have an opportunity to go to university at all.

So for those kids who can't afford even to get into the game of funding and education, where they can't even afford a place to live and the books and all the other stuff, I wonder whether you would have an opinion as to the scope of the millennium scholarship fund and whether the need should include those who in fact otherwise will not go to university.

Ms. Jessica Squires: Do you mean community college students?

Mr. Paul Szabo: I'm talking about somebody who wants to go to university but they can't afford it.

Ms. Jessica Squires: Right. So you're talking about community college—

Mr. Paul Szabo: No, I'm saying they don't go to school; they don't continue their education.

Ms. Jessica Squires: Are you asking my opinion on whether the money that went into the millennium scholarship fund should be allocated to something else?

Mr. Paul Szabo: To students who would like to go to university.

Ms. Jessica Squires: To students who would like to go to university.

To introduce these remarks a bit, the assessment of need at the moment in the student assistance program is very rigid and does not take into account certain aspects of resources or lack of resources on the part of the students who are applying for student assistance. For instance, in the opinion of the federation, the assessment of parental contributions is too high at the moment.

As well, the assessment of need does not do an adequate job of taking into account things like additional expenses due to disabilities—

Mr. Paul Szabo: The question I'm asking is do you think the full amount of the millennium scholarship fund should go to current university students, or should it maybe be available for those who aren't in university but would like to go?

Ms. Jessica Squires: I think student assistance should be available to everyone who wants to go to university or college—that's the answer to your question—and that would include graduate students, community college, new graduates.

Mr. Paul Szabo: The reason is, the unemployment rate for university graduates from Canada, pulled straight from statistics, age 25 and under, is 6.5%, compared to 8.3% of national average; for community college and equivalent, it's 10% unemployment; for high school graduates only, 14%; and for high school drop-outs, it's an unemployment rate of over 20%.

So when it turns out to all of the people who have raised issues about poverty and about social services needs and about basic jobs and all those other things, if you're not up that education scale, the opportunities for you are not there.

So I think there are two ways to deal with the problem: do something after you have the problem—throw money at it to try to make it better; or prevent it. There has to be a balance. I think you bring the balance, because you're saying don't forget that a good start, just like with early childhood development, means get the education you need to pursue the things, but you need some help to do it.

I support it wholeheartedly. The millennium scholarship fund got an awful lot of criticism from the opposition, because it's provincial jurisdiction—don't go there, and all that other stuff. I think the federal government, in a lot of respects, is trying to find ways in which it can get money to help people without having to have to give the money to the provinces and tell them to do it. We'll work together on it.

But it's a start, and I think we should continue to ask for more funding for young people who want to be as good as they can be. I think that's where we're ultimately trying to go.

• 1400

There are all kinds of discussions on debt, but you know, the average debt of a student is about the cost of a new car. A car is for six years, and an education is for the rest of your life, so it's still a great investment.

Ms. Jessica Squires: Yes, it's a good investment if you consider that amount of debt to be something you can even enter into.

Mr. Paul Szabo: But if 95% of students repay their loan, it's not—

Ms. Jessica Squires: But those are people who can already get into university. I think we're probably on the same wavelength here. What we need to do is provide student assistance at the beginning of the university or college experience.

Mr. Paul Szabo: I think we agree.

Ms. Jessica Squires: Generally speaking—

The Vice-Chair (Mr. Nick Discepola): Did you have something to add, Susan?

Mr. Paul Szabo: I'm actually going to ask you a question.

Ms. Susan LeFort: I actually want to answer to support Jessica.

The faces of university students are changing. There are a lot of people who are re-educating themselves because of new technology and training. Because of the reshuffling and the redesign of our social programs and our Department of Community Services, everybody is being pushed through to employability.

People have to go to school, have to go to university, have to get an education and get training. These students are adult learners, and especially adult learners who are receiving social assistance or actually family benefits. They receive a fraction of a student loan and they continue to live in poverty. They already have a lifetime of debt when they get to university. The chances of them getting good employment are improved by going to university, yes; however, they are not totally increased. They face that major barrier of poverty, coming to school with children and other costs that a traditional student wouldn't encounter. That is the changing face of university.

Mr. Paul Szabo: I don't disagree with you.

I did want to ask you about the Canada child tax benefit. Many groups have come before us and have said we have to increase it. There are all kinds of different ways to continue to put money at the front end. My concern would be that if you continue on the road that continues to put money into the hands of lower-income people, eventually it becomes an amount that effectively brings you up to almost a guaranteed annual income. My fear would be that if you worked out the economics you would probably find that with all of the benefits paid by all levels of government put together, you probably would be just as well off giving everybody $25,000 a year in salary. You could just say here it is, and there are no social benefits. However, in addition to the disincentive to actually work, the problem with that is that there are a host of agencies and groups and organizations and advocacy groups that employ jillions of people who would be out of work. There's the balance.

I want your opinion on whether or not there is a point at which we can help with certain things that could deal not with the political issue of child poverty, but the real term of family poverty. How do we deal with that without simply continuing to move forward to a guaranteed annual income?

Ms. Susan LeFort: I think we have to look at the reasons behind why people are in poverty: there aren't enough jobs and people are underemployed. We need job creation; however, we can't stigmatize people simply because they live on welfare. If we do that, we're going to set ourselves up for something in the long run. We're going to end up paying more money in health care and in justice down the road if we stigmatize a whole section of our population by creating a situation in which there is a worthy versus unworthy class.

Job creation should be our priority goal, along with those things that support job creation, such as helping people get transportation and coming up with real strategies to help them get out of poverty. It's not just throwing money at them, that's true. We need effective programs, not make-work programs. It's not supporting corporate agendas, but supporting our humanity and supporting our population. That's what's vital.

If we have a healthy, strong, educated, well-fed population, then we have a strong workforce, then we have people who can generate ideas. When you're starving and when you feel you are less worthy than someone else, you're not going to be out there generating ideas for businesses and are not going to be a productive member of society.

• 1405

We have to do something to fortify our population, to fortify our humanity. I think that should be the focus of our social programs.

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

Mr. Ian Tay Landry: Yes, it's not just the creation of jobs, it's the creation of viable jobs that pay a salary a family can live on. I agree with the statistic you gave about university graduates having less unemployment right now than they did before. But when you break it down, you realize that more of it is part-time employment, not full-time employment, and it's also low-income employment. Yes, there are more university graduates being employed right now, but they're working in bottom-end jobs and are not making a liveable wage. Once again, the job creation has to be there to help the people, not to benefit the corporations.

The Vice-Chair (Mr. Nick Discepola): Ms. Tusz.

Ms. Margaret Tusz: I just wanted to make a link to when we talked about the community capacity building around the quality of employment that we're looking at. We're not looking at giving $70 million to the Irvings or some other multinational corporation. Even though the Irvings were born down the road, since they take the money that we would like to tax outside of Canada, I don't consider them to be Canadian.

We want to create employment that's in communities so that the people who are working in the communities are keeping the money there and are creating wholesome lives and lifestyles for each other. If we're continually creating service industry jobs, creating gambling jobs, or trying to get those selling-our-souls kinds of jobs, McJobs or post-it note jobs or whatever people are calling them, that's not going to sustain families. They're not the kinds of employment that come out of building that capacity within communities to do that together. It's integration of social services with community economic development and health and all those other issues so that, as Susan said, we're not dealing with having written off a whole group of our society right now. If we do that, in ten years that group is going to end up being in our jails, which will end up creating more and more problems.

The Vice-Chair (Mr. Nick Discepola): Mrs. MacDonald, please.

Ms. Mary Jess MacDonald: I just want to add that in the school system we feel education is very important to improving the social situation for everyone, and indeed the status of the country in general. What happens in the schools is that we get low achievement because students probably are hungry, they feel they are not dressed appropriately, or they're not ready to take part in activities. We find less participation among the students in extracurricular activities. Someone referred already to high school drop-outs. I think this is directly related also, so I just wanted to add that comment.

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

Penny, I'll recognize you, and then we'll have a brief intervention from Mr. Telez.

Ms. Penny McCall-Howard: Just briefly on Mr. Szabo's questions about the millennium fund, I think we certainly agree on the necessity for upfront grants for students in terms of being able to access education. That's why we, along with the Association of Universities and Colleges of Canada and the Canadian Association of University Teachers, are advocating admission on the basis of your academic record, etc., as the only merit criterion for the millennium scholarship fund.

There is also a structural problem with that whole fund, in that it's not being administered through the student assistance program. A whole other layer of bureaucracy that students have to apply to is being created, and the needs assessment is not being done as part of that program. That's a fairly serious flaw that we see with the fund.

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

You've encouraged an awful lot of participation here, Paul.

Mr. Howard and Mr. Telez, if you keep your interventions brief, we'll be able to advance.

Mr. Juan Telez: I do agree with a number of the comments that have been presented around the table: issues related to poverty, issues related to distribution of resources, issues related to taxation, and so forth. We could keep complaining and screaming about the living conditions and the conditions of anxiety we are in in the current reality, but I would encourage you to look at it the other way around. We need to look at what assets and what capacities we have; at how we could be building our communities, our hopes and our people; and at how to organize our resources so that we can turn this reality all the way around. I don't see that as impossible to do.

• 1410

Perhaps what we need to do, as we suggested, is allocate some money to create a community capacity-building reserve so that each province with this capacity-building fund could help communities, volunteers, and people concerned with healthy communities to take charge of investing it.

What I think it is important to recognize is that because of the downsizing process we have been part of in the last ten years or so, and because of the decentralization process we were a part of, there is an emergence of what is now called the third sector, the voluntary sector. We know its importance, relevance, and contribution, but I didn't hear any contribution around the table recognizing the relevant role that is played out in organizations such as the non-governmental organizations, the charity organizations, and volunteers who are dedicated to building communities from the ground up.

The Vice-Chair (Mr. Nick Discepola): They have been recognized this morning, yesterday, and even the day before.

Mr. Juan Telez: I meant around this table.

The Vice-Chair (Mr. Nick Discepola): Maybe just around that half of the table.

Mr. Juan Telez: I wasn't here this morning and I wasn't here yesterday, so I'm just referring to the discussions here.

In the Globe and Mail there's an article by Silver Donald Cameron referring to the Isle Madame experiment. To me, it is one of the most wonderful examples of how a community that is devastated and is facing a tremendous crisis can come together to look and search for its own future. If communities, and particularly rural communities, can have access to financial resources, they can build the future and take their destiny into their own hands.

I would like to invite you to take a look at what we propose in this brief.

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

Mr. Holloway, very briefly.

Mr. Les Holloway: I just wanted to mention that in Atlantic Canada, for instance, we've just faced another substantial closure of a plant, the Volvo plant. Those workers make $22 an hour. To do some math, if you sit down and look at the tax base that will be lost in Nova Scotia because of this, you'll find it will take about seven or eight of those present jobs that involve sitting around making telephone calls in those phone banks to create the same tax base. The disposable income is less, obviously, so the loss to the local economy is substantial.

The other thing I would like to mention is that I too don't agree with large handouts to corporations, especially those that have lots of money. There was a figure of $70 million mentioned. I would agree with the statement that the Irvings wouldn't need that money. I don't know if it was in relation to that, but I do feel it's important to at least mention that there was an agreement reached to give a loan guarantee.

To give you the flip side of doing that, I think the Government of the Province of Nova Scotia was very responsible with Secunda Marine, which presently operates vessels off our coast. Not too far back, they built two vessels in Mississippi under a title XI. They got the same deal, but only for 25 years. They brought the ships in duty-free, and are presently working at servicing our offshore. I think that's a much more positive thing if we have in fact created some jobs here.

There's one last point that I'd like to make on the ships, and then I will stop. Our federal finance minister, Paul Martin, leads by fine example with his company, CSL. His company is building ships in China—a really great deal for Canadians—and flies every kind of flag it can to avoid having to ensure certain safety standards and quality-of-work levels for the workers who have to work those ships. He's a fine example of somebody who actually campaigned on the promise of jobs when he first got elected.

The Vice-Chair (Mr. Nick Discepola): I won't go along that line.

Mrs. Lill, please.

• 1415

Ms. Wendy Lill: I would just like to address the whole issue of community capacity building, because I think it's an excellent idea. I'd like to try to look at the criticism that will come your way on that. We've had many community development funds—I think ACOA was mentioned earlier—and there is a lot of cynicism around community developments. They have been given a pretty bad name. The question is how your model would be different from the many different funds that have come about before and that exist right now.

Ms. Margaret Tusz: A community capacity involves more than just economics. Right now, I think we have a lot of things that are geared toward community and economic development, but they aren't linked to the broader issues in the community.

My understanding of how things are going these days is that individuals are trying to get hold of those funds. They tend to be at least middle-class, moderately educated individuals, and they are trying to begin businesses with them. People who are really struggling have been written out. To begin with, they don't have the skills to even think of a business plan or anything like that, so there are only a limited number of people who are accessing those funds.

As I said, they are limited to economic development. The broader issues—for instance, whether we need another chip wagon in town, or whatever—are not necessarily brought into the equation when these funds are being looked at. They're very individual. If it's a community capacity, the community is involved.

We see communities getting together all the time. For instance, there's the Sable Island gas issue and the environmental effects of it. There are communities getting together saying it might have great economic ramifications, but they also want to look at all these others issues before they decide whether they're behind it.

Communities need to get together to look at broader issues with all of those things. We have to increase communities' capacities to look at them, so that we don't have people coming in and imposing things that might leave tar ponds that have long-term health effects or whatever on our communities.

For people to be able to do that, they also need a lot of skills. We don't know how to do that. We have to learn how to do that as communities. We have to learn how to get together and talk about these issues and hash them out. We need to develop leadership skills in communities. Many communities don't have natural leaders. They're used to being employed, but they're not used to speaking up. For instance, we wouldn't find them around this table. It would be quite intimidating for most people in a community. There are all sorts of leadership developments that we need to do for communities that have been marginalized because of economic conditions and other things.

Would you like to add to that, Juan?

Mr. Juan Telez: I'd just like to mention a couple of things on the question.

In the past year, people were participating in training programs for community economic development. As a result of these training programs, there were a number of community-based development experiences that came about.

The reality is that when community leaders generate ideas and generate hopes and alternatives, there is no way to get funding to continue with these initiatives. We wrote to HRDC. Despite its goodwill, HRDC obviously couldn't find any money in its account. So by the time a community group council finds financial resources, it is two or three years down the road. Community people get terribly discouraged because they can't find the financial resources.

For instance, the smart rural communities in the Tatamagouche area, in the northern region, provide an example of one of the most wonderful experiments in community-based development using information technology and high-tech. To set up the smart rural communities in Tatamagouche, it took three years of going in and knocking on the doors of the provincial and federal governments and so forth.

These kinds of initiatives are job-generating. They are quite sustainable on a long-term basis, and we see that as a positive sign. What we are suggesting is that if the federal government could allocate some funding to create a fund that is specifically directed to community capacity building, a lot of community leaders would have a better chance to build their communities from the ground up.

• 1420

Ms. Wendy Lill: I think I hear what you are saying, but one of my concerns is that for many years we have seen money thrown into communities. It's been spent, certainly. There has been something thrown up and we all move on, but community leaders have not been been developed. The question is, from this point that we're presently at, where our infrastructure has disintegrated in all of our communities in terms of social services, health, and education because of the cuts—it's a very fragile place to start in some ways—how do we get this money? Where does the money best live at this point in time to try to start that process?

I don't know. Maybe I'm just lecturing now, Paul.

Mr. Juan Telez: I would like to respond to that. For four years I have been following the intermediary agency that had the original development authority. There are fourteen RDAs in the region, and I believe community participation through these RDAs is quite significant. Provincially, there is a large voluntary sector participating around regional development, for instance.

I would also like to mention something about your suggestion. We would like to have more done between the federal government and HRDC and the CED division of the provincial government. Under the advice or the direction of the community citizens who are community-minded, this funding should be allowed too.

Ms. Margaret Tusz: As well, I'd like to add that inherent in any community, there are a lot of people doing volunteer work, but there isn't any support for people to do volunteer work. It's a real luxury to be able to do anything without pay these days, because most people need the bucks. We need to support that work if we're going to expect anything from looking after senior citizens to running food banks, from being crossing guards to whatever, just doing anything.

We need to recognize that volunteer labour is valued, and that is something people can do with tax laws federally. We can make more of an effort to show that we value community-based development over multinational corporations coming in to put little bits of jobs here or there. There are all sorts of things you can do around policy that will reflect community values.

Ms. Wendy Lill: I'd like to ask Susan and Ian a couple of questions.

What is the impact of the proposed bank merger on a community of people with very little money in this country?

Mr. Ian Tay Landry: It's going to be fairly dramatic. Right now, even pre-merger, we have a large amount of banks closing. They pretty well all close or reduce services in low-income areas.

I'll point to the example of the Gottingen Street and Spryfield areas of Halifax. Two years ago we had three banks in the Spryfield area, but now we have what we term half a bank. There are no teller services, except for seniors for six hours a week. What's happening there as a result is that people who have to cash cheques have to travel five kilometres into the city to do so because there is no teller service—either that or they pay service fees to the bank, and those add up to $5 or $10 a month. For a family of three people, that basically adds up to a meal.

The banks are admitting that the reason they're closing these branches is that they're not making enough profits in these areas. The closures are having their effects mostly on lower-income people, though.

Ms. Susan LeFort: I was at a meeting about the banks closing in Spryfield. A man by the name of Rick Johnson got up and spoke. He said that when you go to a lot of those instant tellers, you can't get anything under $20, and from some you can't get $5 and under. If you can't get $4.95 out of your bank account, that's milk, that's bread, that's food to feed your family. That's essential. Then to have to spend that money on transportation or take out an entire day if you don't have the money, if you don't even have that $4.95, to walk down the Herring Cove Road all the way in to go to the bank, which has maybe one teller or the teller service, that's really putting people who are living in poverty at a major disadvantage.

• 1425

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

For the information of colleagues, tomorrow's hearings will be uniquely on the MacKay task force, and today's hearings are scheduled for pre-consultation. So I welcome you to pose those kinds of questions tomorrow also. You might make better use of your time today, though, concentrating on—

Ms. Wendy Lill: Fine, thank you.

It was very useful to hear what they had to say.

The Vice-Chair (Mr. Nick Discepola): You have a couple of minutes more.

Ms. Wendy Lill: I'd ask you, Les, to address the fundamental strategy of restructuring that we're seeing now federally, and in terms of downsizing, the alternate service delivery model and privatization of a lot of public service functions. I'd like your opinion on that in terms of the wisdom of it, whether you find, in fact, that does create a more efficient, effective work environment. I'm curious as to your perspective.

Mr. Les Holloway: The short answer would be no, it doesn't.

I'm not from the public sector, but I've had a lot of discussions with those. You're talking about the move from public to private and this whole privatization mentality, which is basically a low-wage, no-benefit move touted as cost-saving, shovelled from the federal government to the provincial governments, and from provincial to municipal, who do the serious cutting on behalf of the federal, who are doing the cuts to the payments.

The other major problem was the CHST, which really creates a competition envelope for what a province has to have, versus what realities require in other different envelopes, be it competing between education and health care, and that. That was a major concern we had when they moved to the CHST, and of course the abandoning of the national standards.

It's a hodgepodge of issues, and all done in the name of so-called deficit reduction, but all done on the backs of the people who can least afford it.

Ms. Wendy Lill: Fine.

The Vice-Chair (Mr. Nick Discepola): Thank you, Mr. Holloway, and thank you, Ms. Lill.

I'd like to turn now to Mr. Pillitteri. Today Mr. Pillitteri has sort of acted as clean-up hitter, but don't let that intimidate you; he strikes out often.

Mr. Gary Pillitteri: Thank you, Mr. Chairman.

First of all, I'd like to make a comment for the benefit of Mr. Holloway and Mr. Loubier. That is, Mr. Martin's name was once mentioned here, about the finance minister having ships built elsewhere. I'd like to give some information from the top of my head.

I don't have to live in Halifax to know something about shipbuilding. I have one right in my backyard, Port Weller dry docks. I grew up there, and I have been there for most of my life.

At one time there were a lot more dry docks in the St. Lawrence Seaway Authority. As a matter of fact, there was Thunder Bay, which was in shipbuilding; Collingwood, which was shipbuilding; and of course Port Weller dry docks. At one time they all were flourishing because of the subsidies of federal and provincial governments. But the government did start to cut down on those subsidies. And Davie is one that has been included in provincial subsidies too. The only one left in the Great Lakes is Port Weller dry docks.

As I understand it, Mr. Martin has a controlling interest in those Port Weller dry docks. And of course if some subsidy would have been there, Mr. Loubier would have been the first one asking to have subsidies to benefit his own industry.

But let me also say that a lot of the work that Port Weller dry docks is doing right now is totally repairs and rebuilding, one being the self-unloaders, which have been done in Port Weller dry docks. It is my understanding that it has no ocean-going ship, and most of the ships that were built were built on the Great Lakes.

• 1430

If you take a look at the merchandise moving on the Great Lakes and the St. Lawrence Seaway, the amount has gone down some 40% to 50% in the last ten years. There are a lot of ships sitting in the docks and not even working. They're not even going at full capacity. So if we're saying that's what he is doing, I don't think it's contrary to what has been said here.

You will have a chance to respond to that, but that's not my question. My question is an open one, and it has to do with a press conference that I saw a couple of days ago in Ottawa. Four opposition parties—I don't have to mention them—got together, and the resolution on their part was that the EI fund belongs to the employees and employers. A lot of presentations have been made here today, but there really haven't been any answers to that.

Let me also state another point: all taxes have some form of what you call some redistribution of wealth in them, meaning corporate tax, income tax, and the GST. And if we want to call it a tax, too, then so does EI. Some people call it a tax and some people call it a premium. Let's just call it a tax and have a redistribution of wealth.

If the EI surplus belongs to the workers and employers, there will not be any surplus. On the other hand, we could put that money to better use for such things as those that you presenters have mentioned here today—to enhance medicare, to enhance education, to enhance job creation, all of those things that are in need.

Would you rather see this EI fund returned to the employees and employers, only those who are working and those who are paying into it—because the employer pays 60% and the employee pays 40%—or would you like to see this used? This I haven't seen in here, but that's the question I want answered. Would you want to see this put into raising the personal exemption, that of the person and family, so that every Canadian would benefit from it? Or would you like to see this go directly back to the payers? The four parties got together and they said not to touch it. Since there would then be no surplus, we would not be addressing other issues.

Thank you, Mr. Chairman.

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

Mr. Holloway, please.

Mr. Les Holloway: I would first like to briefly comment on my friend's comment on the UI.

Taking that money equates to stealing it. The money was paid by employers and workers to provide a program of income supplement when a worker in fact loses his or her job.

Mr. Gary Pillitteri: No, it's not an income supplement.

Mr. Les Holloway: Well, call it income insurance or whatever you want to do with it.

Your video game must be getting boring.

Mr. Paul Szabo: Construction workers take $4 out for every dollar they put in.

Mr. Les Holloway: Anyway, it's a fund that was created by the government to provide a fund whereby when workers lost their jobs they would have an income to fall back on. There was no mandate for the last Liberal government—and you sound like a Liberal, so I'll presume that maybe you are—when they ran their first four-year term, to in fact touch the unemployment insurance program. In fact I told you—

Mr. Gary Pillitteri: As a point of information, Mr. Chairman, it's gone to general revenues since 1986. That was a known fact.

Mr. Les Holloway: As matter of fact, if anything, your party criticized the Conservative government for that. To then get in power and just accelerate the process is hypocritical in and of itself.

Anyway, I would like to maybe educate you a bit on some of the shipbuilding from my side, from my understanding of it. You make it sound like the industry is dying. You should be interested to know that over 75% of the goods that are moved in the world move in ships.

Mr. Gary Pillitteri: I just said the St. Lawrence Seaway and Great Lakes.

Mr. Les Holloway: One second, let me finish. I bit my lip a couple of times when you were speaking.

• 1435

You mentioned Port Weller is a service yard, a repair yard. I'm glad you mentioned it was a repair yard. It's hard to take your ships in to get them maintained and painted. It isn't very cost-effective, so you need a facility in and on the Great Lakes to take care of the lakers, I would agree. But you didn't deny, and I don't think you are denying, that Paul Martin has built three vessels. I think one is still to be delivered to that great country of China.

The Vice-Chair (Mr. Nick Discepola): I'll jump in here and just close this issue.

Mr. Martin's assets are in a blind trust, and the corporation and traders of that corporation make those decisions, not Mr. Martin. To insinuate that Mr. Martin has a direct role in every decision his corporations make is not founded.

Mr. Les Holloway: I wasn't there to hear the telephone conversation, I guess.

I think in the direction the board would have in taking care of Canada Steamship Lines Inc. they'd have a good understanding of where the Minister of Finance is.

The other thing I'd like to add is it's no wonder we don't get a shipbuilding policy. Port Weller doesn't build ships; they repair them.

I'll close on this comment, without wanting to get too confrontational. My friend, as I was speaking earlier, was looking over at his colleague here and going like that when I was talking about the shipbuilding policy issue. It obviously isn't that, because his whole case was that there just isn't enough work because there aren't enough ships, and that's not the case. There are a lot of ships being built for Canada, most of them outside this country now, thanks to the inaction of your government.

The Vice-Chair (Mr. Nick Discepola): Mr. Pillitteri, please.

Mr. Gary Pillitteri: Then the ships I saw being built in Port Weller... They weren't my eyes that were watching them.

Mr. Les Holloway: There were ships built. Are there some being built now? Are there any tankers or container ships?

Mr. Gary Pillitteri: I just heard you say none were built.

The answer I wanted was on what to do with EI surplus, because that's where the only surplus is. Should it go back to the employers and employees or be spent on social programs? Also, raising the deductions in personal income tax for singles and families would benefit every Canadian.

The Vice-Chair (Mr. Nick Discepola): Do you have a question, Jessica?

Ms. Jessica Squires: Speaking somewhat off the cuff, not having the figures in front of me, the so-called reformation of the unemployment insurance program several years ago in some part led to the current surplus in the EI fund. I would suggest there's a third option. The money in the EI fund should not simply be used to send cheques to employers and employees, nor should it be spent on social programs. The EI fund currently is being used as a double tax on employers and employees, and the EI needs to be reformed so the unemployed, who can't currently access the fund, can actually access it.

This issue is of some concern to students, because youth unemployment is at record levels and has been for several years.

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

Mr. Gary Pillitteri: Maybe that's a discussion we'll have in a later round, but we're addressing this year's budget.

The Vice-Chair (Mr. Nick Discepola): But she has given you an answer, and I think those are the kinds of answers we'd like to hear. She's given you a concrete answer and said you should take a portion of it and use it to invest in social programs, etc.

Mr. Landry, please.

Mr. Paul Forseth: We should expand benefits of the program.

Mr. Ian Tay Landry: I want to echo Jessica's comments that the fund should go back into EI. It should be used to adapt the program to help people who otherwise don't qualify because of the recent cutbacks. I'm rather offended by the standard divide-and-conquer attitude of the question—between trying to help the workers or helping those less deserving who are not in receipt of any benefits.

• 1440

The Vice-Chair (Mr. Nick Discepola): If we take a look at some of the recommendations around the table, though, the fact is there's a general surplus of roughly about $7 billion generated by the EI fund. There are some recommendations that we eliminate the GST totally. That would be, again, another $18 billion less in revenues. If we then pay all the money that's due to the public service employees under pay equity, that's probably another $5 or $7 billion. If you add those numbers up, there's nothing left for us to be able to deal with some of the priority items.

The choice we have as committee members is to hear your views and to try to make heads or tails out of them in terms of what our priorities should be. If everyone is saying that money should go back to the employers and employees, then we have roughly $5 billion less to play with because that's the wish of Canadians.

We're trying to address issues of fighting child poverty, for example, or job retraining and other issues. Those are the kinds of priorities we want to hear about in terms of what you feel should be the guiding priorities for our government for the next budget.

Margaret.

Ms. Margaret Tusz: If you're going to be using that money for social programs and things like that, which we normally pay for out of our tax revenues, then EI is basically just another tax that we're calling something else.

I'm all for trying to redeem our social safety net in any way we can; however, if you're going to be using those funds, my guess is that you have a surplus there because of the more stringent rules we've had around who actually can benefit from the insurance.

I would suggest that there is some room for opening the safety net around people who are losing their jobs, in conjunction with putting the money towards helping people with economic issues or social issues or whatever. But hand in hand, if we're actually making money on this—and I didn't know it was supposed to be a money-making venture, I thought it was supposed to be break-even so that there's enough in the pot to help people who have lost their jobs—then obviously we're taking in too much, and perhaps we need to change the rules so that people are going to benefit more. We're seeing a lot of people in the food banks who are not eligible for employment insurance—they might have paid into it for too little a time or whatever. I would guess that a lot of the surplus is due to that.

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

Mr. Holloway.

Mr. Les Holloway: That's exactly what I was going to say.

Mr. Juan Telez: Could I supplement that comment?

The Vice-Chair (Mr. Nick Discepola): No. Ms. LeFort has the floor, please.

Ms. Susan LeFort: I just have a brief question. I want to know how much federally is being spent on social programs. What percentage of the federal budget goes to social programs?

The Vice-Chair (Mr. Nick Discepola): It depends on what you take into account. A little while ago, the figure was roughly $39 billion.

Ms. Susan LeFort: What's that as a percentage of the entire federal budget?

The Vice-Chair (Mr. Nick Discepola): Including debt payments? If you take the interest payments on the debt—

Ms. Susan LeFort: I'm talking about social programs, so I'm talking about education—

The Vice-Chair (Mr. Nick Discepola): Right, but as a percentage of which budget? Are you including the 40-some-odd billion dollars in interest payments, or excluding that?

Ms. Susan LeFort: I'm just talking about the federal budget.

The Vice-Chair (Mr. Nick Discepola): The figure used to be about $39 billion. What is it now?

It's a difficult question to address. If we take seniors' benefits, for example, it's $22.9 billion. If we take employment insurance programs, it's $12.6 billion. So we're referring to roughly $35 billion that we pay out.

Mr. Yvan Loubier: Not UI contributions. The federal government doesn't pay for them.

Ms. Susan LeFort: But what is the percentage?

The Vice-Chair (Mr. Nick Discepola): Do you want to include the equalization payments to the provinces?

Mr. Ian Tay Landry: They're part of our spending.

Ms. Margaret Dusz: The whole budget.

The Vice-Chair (Mr. Nick Discepola): I'm going to qualify the response, since it's on the record: it's roughly $34.7 billion in program spending on total program spending of $105 billion, roughly.

Ms. Susan LeFort: Which would be what percentage?

The Vice-Chair (Mr. Nick Discepola): That's about 33% or something like that.

• 1445

I haven't been on finance for two years, but the numbers haven't changed that much since my first two years, about four years ago.

I think Mr. Holloway has the floor next.

Mr. Les Holloway: No, I had a few comments, but the comments have—

Mr. Juan Telez: I just wanted to respond to your question on what to do with this.

The fact is that there is going to be a surplus. We know that by the end of the year it might be at $20 billion or $27 billion or whatever.

The Vice-Chair (Mr. Nick Discepola): Even Mr. Loubier has revised his estimate.

Mr. Yvan Loubier: It will be $12 billion to $15 billion.

Mr. Juan Telez: Well, my response to your question is that instead of giving back this money, why don't we make some of these funds available to community groups that are able to set up community-based enterprises or community-based training programs so that they can increase the labour force, the human resources?

I think the human resources development association experience here in Halifax is a prime example for your question. What they basically did was get social assistance money from the municipality. They created an enterprise initiative and employed people who were under the social assistance program. They provided employment on a long-term basis, with all the benefits attached.

The other solution to that would be to give that money back to people who were under the social assistance program.

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

We have a few minutes left, and I would like to get two more questions in.

[Translation]

I will allow one question from Mr. Loubier and one final question from Mr. Szabo. Please keep your questions and answers brief.

Mr. Yvan Loubier: I'd simply like to clarify something Mr. Pillitteri said earlier. If the Finance Minister unveiled a national shipbuilding policy, we would be the first ones to support it. Let me say here and now on behalf of my party that we would be first in line to endorse such a policy. If the Finance Minister is reluctant to develop a shipbuilding policy for fear of finding himself in a conflict-of-interest situation, he has nothing to be concerned about. Since he owns no shares in any maritime companies or in MIL Davie, he shouldn't have any problems.

Secondly, with respect to employment insurance, the issue is not deciding whether or not we can access these reserves, because these funds do not belong to the federal government. However, as one witness stated earlier, as things now stand, only 42 per cent of those who become unemployed are eligible to receive EI benefits, even though everyone must pay premiums. From the youngest to the oldest worker, everyone must pay. However, according to Human Resources Development Canada statistics, only 42 per cent of unemployed workers receive EI benefits.

Those who don't receive these benefits must rely on social assistance. However, with the cuts to federal transfers to the provinces earmarked for social assistance, the criteria are being restricted here as well. Consequently, some people are shut out completely. How then should the EI surplus be used? First of all, transfers to the provinces should be increased and , for those who have lost out in the past two years, access to EI benefits should be restored. Secondly, premiums should be lowered. Both of these initiatives should be possible, given the projected surplus of $7 billion this year.

The Vice-Chairman (Mr. Nick Discepola): Please put your question.

Mr. Yvan Loubier: How would you feel about taking $3 billion of the $7 billion surplus in the EI fund and using this money to boost transfers and widen accessibility to employment insurance, and about taking a further $3 billion to reduce premiums? We mustn't forget that when people talk about rising poverty, they're talking about middle-income earners who are slowly losing ground because of the ever higher direct and indirect taxes they pay. With a $7 billion surplus to play around with, what's to prevent the government from using $3 billion to lower premiums and a further $3 billion to increase benefits. There will still be a $1 billion cushion in the fund.

The Vice-Chairman (Mr. Nick Discepola): You should have voted liberal because that was a plank in our election platform.

Mr. Yvan Loubier: I know, but you should stick with your program. You say one thing on the campaign trail, but do the opposite once you're in office.

The Vice-Chairman (Mr. Nick Discepola): Who would like to respond?

[English]

Nobody? I guess everybody is in general agreement then, and you'll all vote Liberal.

Penny.

• 1450

Ms. Penny McCall-Howard: Maybe.

One thing that I find it's really important to remember when we're talking about the employment insurance program is that the people who are paying into that program and the people who are or could be the beneficiaries of that program are not like a population of people who are isolated somewhere else. They're people who are members of all the different groups that all of us sitting around the table are representing here—students, women, workers, people in communities, people of colour, people all over the place.

I find it to be really a false dichotomy when we start saying that we should take money out of this surplus and put it specifically into education or put it specifically into social programs. Coming from this side of the table, as Mr. Landry was saying, it feels like a divide and conquer strategy: we're going to take from you and give to you. In reality, as you were saying, poor children are often the products of poor families. If families are getting unemployment insurance benefits, maybe the stress on the student assistance program might be less. There's a whole interconnected network there.

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

Ms. LeFort, please.

Ms. Susan LeFort: I think we're also forgetting that there are people who are on social assistance but who also work. It's simply that they are underemployed, so they need social assistance. They don't receive any benefit from the EI system, so to reinvest that money for those social programs would benefit them, because they wouldn't have access to it otherwise.

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

You see what happens when you go through a second round? You open up a can of worms.

Mr. Pillitteri, be very brief.

Mr. Gary Pillitteri: It's very short, but he was allowed to make comments, Mr. Chairman.

The Vice-Chair (Mr. Nick Discepola): I'm not going to debate you. Be brief.

Mr. Gary Pillitteri: EI is a tax. I used to be an employer, and I'm still an employer. I pay 60% of that dollar. That's 60% versus 40%, but I'm never eligible. It's not for the workers only. I do not qualify as an employer. Any corporation or any individual employing people does not qualify, so it is a tax.

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

Mr. Szabo, please.

Mr. Paul Szabo: There is probably going to be an across-Canada consultation on EI. In listening to all the comments, though, Mr. Chairman, it is unfortunate that we didn't clarify this for everybody at the beginning: there is no EI surplus account, no bank account in which this money is sitting and waiting while we're deciding what to do with it. The Government of Canada has one bank account, called consolidated revenue. Included in there since 1986 have been the premiums collected on EI, offset by the claims paid out and all the other stuff.

The so-called EI fund is an analysis. It is not a fund in the way you would understand a fund and would say let's spend part of it here. That's very important. There isn't cash. When the government reports on the surplus or deficit for the end of the year, it's reporting on everything, including the analysis of the EI fund.

The Vice-Chair (Mr. Nick Discepola): Was that a presentation, or are you going to come to a question?

Mr. Paul Szabo: No, I have a question.

In the running analysis of the EI program, if there has been more money come in than has been paid out for claims, for administration, for training, etc., that can reverse. In fact, I think the estimates on how much could go out are at about $12 billion or $13 billion if we had a recession and unemployment went up. That's how much more would go out than would come in in a year. So there is a reserve requirement as well.

I want an answer from everyone here on this question: If you understand the real cash situation, knowing how the government has to operate and account for it, would you support the Business Council on National Issues, which is a very powerful group that came out yesterday in front of our counterparts who are travelling out west to hear people? The BCNI said we should go gradually on the EI premium and reduce it slowly per year, but not in a big chunk. The balance of any benefit back to Canadians would then be in real tax savings, tax reductions.

• 1455

I would be very interested just to get short answers from the respective groups on whether they would prefer tax cuts or prefer—

The Vice-Chair (Mr. Nick Discepola): Thank you, Paul. Let's give them a chance to answer, please.

Margaret, Jessica, and Mr. Holloway.

Ms. Margaret Tusz: I would prefer that the EI be restructured so that people who work are eligible for it. Increase the breadth of EI benefits so that more people are eligible for them.

Ms. Jessica Squires: I would agree with that. In addition, I would say we need to keep something in reserve, of course, considering the global economic crisis. That's part of how the fund has traditionally been set up, but now the surplus is higher than it's supposed to be, basically. It just depends on who you ask about what the estimate of that figure is and what should be kept in reserve. But I certainly don't think it should be turned into tax cuts, and I also certainly don't think we should reduce contributions on the part of employers.

The Vice-Chair (Mr. Nick Discepola): Mr. Holloway, please.

Mr. Les Holloway: I would agree with that. I guess what Paul was trying to say, if I get it right, is that you've already spent the money.

Mr. Paul Szabo: That's true.

Mr. Les Holloway: Yes, so if it has already been spent, this is only an envelope-shuffling kind of process, and obviously our position would be in line with that of the previous speakers.

I would like to expand on that just a little bit, in that the benefit levels should be restored to where they were prior to the cuts having been taken. They should be broadened. The labour movement always took the position that it should be inclusive of part-time workers. That's something that has been fought by employers, not by unions. We have taken the position of wanting to broaden it so that it's a more inclusive program before there is any consideration of doing anything else with surpluses.

The final note—and Margaret also made this comment—is to understand that the significant, major reason for why there is such a surplus is that there have been some massive cuts to EI. I don't think you can credit the majority to job creation at all. There is a greater inability to even access it, and it drops off fast and you end up with much less of a benefit when you do get it.

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

Just for the record, I'd like to clarify an answer to Susan's previous question, and give you the exact figures as we've been able to verify them.

On old age security and the guaranteed income supplement, it's $22.9 billion. On unemployment insurance pay-outs, it's $12.6 billion. Those are transfers to individuals. On the CHST, which goes to the provinces, it's $26 billion. Equalization payments, which also would go to provinces, are $8.5 billion. The total spending on social programs is $69.5 billion out of a total budget of $104.5 billion, which does not include the interest payments on the debt.

[Translation]

Mr. Yvan Loubier: Mr. Chairman, for statistical purposes, there is no need to include EI benefits, because the federal government doesn't pay a cent there. It's simply a matter of taking money from one pocket and putting it into another.

[English]

The Vice-Chair (Mr. Nick Discepola): She has some points, and she can use whichever ones she wants to out of those. That's why we debate as politicians, you see. We never agree on anything. As you can see, the difficult decision that our committee has is to try to make heads or tails of everyone's interpretation on certain issues.

I personally thank all of you for taking the time to make your viewpoints known. We have a very significant challenge, which is to make sure that we reflect the viewpoints of Canadians as we've heard them throughout the country, so that Mr. Martin and the government, indirectly, will be able to better reflect your priorities in the preparation of our budget. And from my perspective, I'm always glad to be a Liberal, because we always come in with a balanced approach instead of one extreme or another.

We have a five-minute break while we wait for our next guests.

• 1459

• 1512

The Vice-Chair (Mr. Nick Discepola): Colleagues, we have a bit of a misunderstanding.

[Translation]

Mr. Boudreau has travelled three hours to be here to discuss bank mergers with us, as he was under the impression that that was the topic on our agenda today. Unfortunately, we were only planning to get to that tomorrow. With your permission, I would like to give Mr. Boudreau 30 minutes, because he still has three hours of travel ahead of him to get home this evening. I realize that we do not as a rule modify our agenda, but I'd like us to make an exception for this witness since he has made an effort to be here. Furthermore, he has prepared a statement in French, something that we don't very often see. Therefore, if you have no objections, I'd like us to hear from him now.

[English]

Christine, do we have to adopt a motion changing the terms of reference, or do we just go right into it? All right. Thank you.

[Translation]

Are there any objections?

[English]

Mr. Paul Forseth: It's been agreed.

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

[Translation]

Mr. Boudreau, as is customary, you will have 10 minutes to make your presentation, following which members will have between 15 and 20 minutes to ask you questions. Thank you for appearing before this committee and welcome. We apologize for the misunderstanding.

Mr. Gérald C. Boudreau (individual witness): Mr. Chairman, thank you for your kind words of welcome.

Ladies and gentlemen, the purpose of my brief today is to share with you my ideas on the planned bank mergers in Canada. First of all, allow me to say that I am appearing before you more as a layman and a loyal customer of the Royal Bank of Canada then as an economic and financial expert.

Second, I would like to offer a few observations I have made of the economic and financial world. The first concerns the globalization of markets and finance. National borders are becoming less and less important when you consider such examples as the North American Free Trade Agreement, the European Common Market and no doubt others of which I am currently unaware.

On a number of occasions, the Government of Canada has attempted to convince the Canadian public that we must be more competitive and open Canada's borders to the North American market. I assume a similar reason has led the Europeans to do the same. It seems to me one plausible conclusion is that our Canadian market on its own was too small and that, to grow and develop, we had to embrace a much broader and significant market.

• 1515

Another observation concerns the virtual domino effect that financial markets in countries around the world have on North American markets, particularly the Canadian market, not to mention the considerable effect of the US dollar on Canada's economy. Whether as a result of Japan's banking problems, for example, or the value of the Russian rouble, the Canadian market is at the mercy of random monetary fluctuations in these jurisdictions over which we have very little or no control.

As can also be seen, department stores such as Wal-Mart's and communications companies such as AT&T and Sprint are now allowed to do business in Canada. The presence of these business giants forces Canadian firms to compete with foreign concerns, and, if they are unable to do so, they disappear. However, I am willing to bet that when these large foreign companies enter the market, consumers benefit, precisely because of this often merciless competition.

Lastly, going back to the origins of our country, it seems to me that economics was one of the main contributing factors of Confederation in 1867. During the debate on union in 1865, the Minister of Finance for the United Canada, Alexander T. Galt, argued, and I quote:

One of the greatest and most immediate benefits of this union will be the reversal of prohibitive tariffs and the opening of the markets of each of the colonies to the industrial products of all the others.”

Here again, opening up a larger scale market and a higher degree of competitiveness appears to be the watchword. It seems to me these observations have some bearing on the scenario currently facing Canadian banks. If the banks are to withstand increased competition from big foreign banks, particularly those from our neighbour to the South, they must be larger and more powerful. In my view, we must involve the same principle that was used to open up and extend the free market to include North America as a whole. Otherwise, Canada's banks, which are too small in international terms, will suffer the same fate has certain Canadian companies that have been unable to compete on an equal footing with the multinationals that have spread across Canada.

To play the same game or to compete on a level playing field, teams must be of the same caliber. Let us relegate the story of David and Goliath to the Bible where it belongs. Taken individually in their present state, Canadian banks will be unable to measure up to the mega-banks of other countries, and, if they cannot face international competition, I believe foreign banking interests will definitely prevail and predominate; as a result, Canadian banks will be swallowed up.

However, this does not mean that Canada's banks should shirk their responsibilities to their customers. On the contrary, whether they merge or not, they must continue their mission to provide good service to their clientele, as the Royal Bank of Canada, in particular my own branch in Church Point, is doing. And our legislators must see to this. With good legislation and regulations, I am sure Canadian banks can become larger and more internationally competitive, while maintaining good customer service. In any case, customer service will necessarily become increasingly automated and computerized as the years go by. And personally, I far prefer to be served by a giant Canadian bank than by a giant foreign bank, which might well be the case if Canada's banks are unable to stay competitive under the assault by foreign mega-banks and are absorbed by them.

• 1520

In conclusion, judging from the current talk of mergers and mega-mergers in our society, I can see the phenomenon is currently somewhat in fashion. The governments of our great country constantly attempt to convince us that our society's various services and organizations must be consolidated. Consider, for example, the merging of municipalities to form urban mega- municipalities, the merging of school boards to reduce their number and form very large boards, and the merging of health services centred in much larger urban areas. Can we honestly believe that all this organizational restructuring imposed by legislators is intended to provide better customer service? I doubt it, and I conclude that this is being done for reasons of competitiveness and economy. Why then should it be different for Canada's banks, which operate in large part in the same society?

We Canadians are not less ingenious than the citizens of other countries; I even dare believe we are more astute. If legislators grant Canadian banks the necessary tools and means to compete, I am convinced they will survive and succeed in the international marketplace.

Thank you.

The Vice-Chairman (Mr. Nick Discepola): Thank you, Mr. Boudreau.

The Chair recognizes Mr. Forseth.

[English]

We're going to take about 15 or 20 minutes for questions for Mr. Boudreau. We'll try to get everyone in if we cooperate.

Mr. Paul Forseth: Thank you.

So it is your clear recommendation that the current mergers as proposed should go ahead.

[Translation]

Mr. Gérald Boudreau: Yes.

[English]

Mr. Paul Forseth: We understand that's certainly the attitude of the government. Our party, in opposition, feels that at least if the merger question is going to be discussed, then all the rules should be on the table. It's not just mergers of institutions, but mergers of whatever; it's what banks are allowed to do and perhaps the basic rewriting of the rules.

That's why the insurance people are concerned—auto leasing and technological issues, the issues of bank employees and so on, and just how pervasive the banks could be. Do you have a qualifier list to say the mergers should go ahead, but under a list of a particular set of conditions?

[Translation]

Mr. Gérald Boudreau: I don't have any special conditions, except that I agree with you that by opening up this merger issue, we are indeed opening up many other things. We will need rules and legislation to control the services that will be provided by these mega-banks. I repeat that I'm not an expert in this area, only a customer, but I've observed nevertheless that the big banks that already do business in Canada or that are making plans to do so already provide a wide range of services to their clientele.

In my view, if we don't allow Canadian banks to compete on an equal footing with these institutions, ultimately, they will be swallowed up. Therefore, some agreement has to be reached. The legislators will need to institute some controls, but in my opinion, these mergers are necessary in today's world.

[English]

The Vice-Chair (Mr. Nick Discepola): Do you understand that because of the rules, banks are quite highly protected? Maybe you can just express, from your consumer point of view, what practical difference it will make to you, as a consumer of bank services, whether the Royal Bank is merged or not. Other than projecting about its international strength or whatever, what will be different for you that you see as an advantage?

• 1525

[Translation]

Mr. Gérald Boudreau: I prefer to do business with a Canadian bank rather than with a foreign bank. I wouldn't want to see existing services provided by Canadian banks disappear, either in the short or long term, whether the mergers take place or not. I don't want to see foreign banks set up operations in our country unless Canadian banks have an opportunity to compete with them. As things now stand, they can't compete, in my view.

[English]

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

Mr. Pillitteri, please.

Mr. Gary Pillitteri: Thank you very much, Mr. Chairman.

Mr. Boudreau, in Ottawa the finance committee has already had three chairmen from the banks come in before it. I was privy to being on another committee, and that was the Liberal task force on the bank mergers, and now we're doing the MacKay task force.

All of the chairmen of the large banks have admitted they are farther advanced technologically than anyone else in the world, meaning south of the border from us—that's actually where the competition is. They have not said they are now large enough. They have sold them off for, as you say, cherry-picking. They've given custody of payroll to south of the border, except the 10% rule is in place and they're not about to change that. No one can own more than 10% of our six chartered banks.

We've had the other banks come in, the competitors as they call them, starting with Wells Fargo, Capital One Bank, and Capital Investment Component—I could go on naming them all. They are not prepared to come into Canada and function the same way as the deposit takers—to be deposit takers to the insurance deposit takers.

Two or three of the chairmen said there's never been a field in the world where they had to walk away because it was too large for them to handle. So having heard all of those reasons—and the Canadian government has given those six franchises—and how well they're protected, why do they need to get larger?

We're not about to change the rules that... We're going to dismantle them. As far as opening up the competition, the insurance companies since 1992 have had the ability to open up branch banking and they have not gone ahead, so what is it about getting big that will provide the consumer with better service?

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

[Translation]

Mr. Boudreau, would you care to respond?

Mr. Gérald Boudreau: That's a rather technical area.

[English]

You're more or less on a technical plane here, and I'm not sure I want to comment, because I am not qualified to speak on that.

[Translation]

Getting back to some of the observations I made, if mergers are bad and detrimental to customers, why then was free trade expanded to include all of North America? Was it that Canada wasn't able to stand on its own? Why was free trade expanded? Why have municipalities like Metro Toronto and others merged? That's what I don't understand.

The feeling seems to be that in some areas, bigger is better and means more efficient operations, greater savings and more competitiveness. But here, people want to see our banks remain as they are.

• 1530

Why are banks in other countries merging? Why are the large automobile manufacturers merging? There must be some advantage to this exercise.

[English]

Mr. Gary Pillitteri: They're not in a protected environment. The other banks that want to come into Canada are not willing to do the same things our banks are doing. It's a totally different thing if businesses want to get together for a better purpose, but these banks are large enough to compete worldwide.

We have one of the most concentrated banking regimes in the world—only Netherlands, I think, is larger—and they provide an excellent service here in Canada compared to south of the border, Europe, or whatever. I can't see for the love of me why we ought to change it for the service they provide—they could go on. Admittedly, the banks that want to come in, such as Wells Fargo and so on, have no bricks and mortar here in Canada. We're not forcing them; there's no reason for them to merge. No valid reason has been given yet.

[Translation]

The Vice-Chairman (Mr. Nick Discepola): Would you like to comment, Mr. Boudreau?

Fine.

Mr. Loubier.

Mr. Yvan Loubier: Good afternoon, Mr. Boudreau. I enjoyed your presentation. You put your finger on something that is undeniable. You constantly referred to markets that are changing and opening up. What people don't understand today is that in the very near future, that is in seven, eight or ten years at most, banking activities and indeed the entire financial services sector will have changed dramatically and may indeed be virtually unrecognizable. The pace of change will be even more rapid than it is today.

Even though futurists were predicting this a decade ago, no one believed that people would have home computers that they could use to pay their bills and transfer funds from one account to another. And yet, this prediction has come true. In the past twelve years, we have moved closer to a cashless society. No one ever imagined that would happen. Then how can we think that in seven or eight years, the financial sector will not have undergone dramatic changes? This is inevitable.

As you mentioned, if so many automobile manufacturers, insurance companies and leasing institutions—GM is one example—have felt it was the wise thing to do to merge their operations, then someone must be benefiting. The other day, I heard a Royal Bank representative saying that his bank and the Bank of Montreal were currently spending $1.4 billion a year to maintain their electronic network, whereas the two networks were identical. By merging, they could probably save on that expense. That's what I was getting at.

Now, for my question. We've talked about banks merging and about the appearance on the market of banks or other financial services companies before our own banks are in a position to compete with them. However, does the decision rest solely with us? In light of the North American Free Trade Agreement and the GATT and WT0 accords, there are other trade partners involved and ultimately, negotiations will result in a more open market than we have today.

Under the circumstances, and given that Canadian banks seek nearly 40 per cent of their revenues abroad, don't you think markets will open up a little sooner than anticipated? It will be difficult for Canada to say: “wait a minute, we need the next ten years to prepare ourselves so that our banks can be truly competitive”, since Canadian banks already draw 40 per cent of their revenues from foreign sources. They did not ask their foreign competitors to allow them a transition period.

Mr. Gérald Boudreau: I agree with you. I think the time has come to take a serious look at having players who are on an equal footing in order to compete on this market. We're talking about a global market, not merely a North American one. The Russian rouble and financial problems in Japan, Asia and elsewhere all have an impact on our current economy. We're dealing with a global, rather than North American, economy. Global markets, a global economy and global trade, that's the reality.

• 1535

Mr. Yvan Loubier: Supposing you were a client of another bank or financial institution with no plans to merge its operations rather than a Royal Bank customer, would you have liked to see the MacKay Report contain recommendations along the lines of those sought by merger opponents, such as the possibility of forging strategic alliances? Along with the mergers, wouldn't you have liked to see those not in favour of mergers given all the tools they need to create consortiums or to forge strategic alliances in order to consolidate their positions?

Mr. Gérald Boudreau: Whether I did business with the Royal Bank or with another financial institution, it wouldn't make any difference. I would still support the merger proposals. As it happens, I live in a rural area and the Royal Bank operates a branch in my community. Even if I were a Scotiabank customer, I'd still feel the same about bank mergers.

Mr. Yvan Loubier: As a consumer, aren't you scared by the prospect of even more concentration in the banking sector?

Mr. Gérald Boudreau: No.

Mr. Yvan Loubier: Aren't you concerned that services, or access to them, will become more costly?

Mr. Gérald Boudreau: In some respects, the price of services will be dictated by competition as well as by certain rules that the legislators and the banks themselves will put in place. Not all banks want to merge at the present time. Four banks have expressed an interest in merging with another institution, but in my opinion, the other banks will follow suit one day.

Mr. Yvan Loubier: Are you satisfied when the Royal Bank says that it has no plans to close the branch in your community?

Mr. Gérald Boudreau: Earlier, someone spoke about technology. I do almost all my banking transactions by computer.

Mr. Yvan Loubier: The fact of having no human contact then...

Mr. Gérald Boudreau: Human contact can be had other ways. I don't need any human contact to write a check or pay a bill. A computer suits me fine and I'm certain that almost all of you do your banking that way is well.

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

Go ahead, Ms. Redman.

[English]

Mrs. Karen Redman: Thank you.

I really appreciated your presentation and the fact that you talked about the Minister of Finance, Alexander Galt. It shows us the only thing that's consistent is change.

The MacKay task force looks at a lot of issues, one of which is whether or not we should allow banks to merge, and that's the one you've zeroed in on. You said not all banks want to merge. We have two proposed mergers and we also have other banks, like Scotiabank, on record saying they don't think mergers are a good financial decision for their businesses.

One of the things that's been pointed out is we've gone from being a nation of depositors in our bank accounts to buyers in the stock markets of stocks and bonds. We're busily buying RRSPs and all other kinds of investments. You said you're here as a consumer, and I wonder, if you look for a minute at your own patterns of saving and where you invest your finances, is it not really important that we look at a broader spectrum of financial services and not just deal with these bank mergers in isolation?

Dr. Gerald Boudreau: I understood that's what was going to happen. It's not just a question of bank mergers, but the whole question of banking in Canada. I haven't read the MacKay report. Maybe I should have.

Mrs. Karen Redman: You're forgiven.

Dr. Gerald Boudreau: I understand it's the broader scope that's going to be looked at, and one of the issues in this affair is bank mergers.

Mrs. Karen Redman: Monsieur Loubier touched a little bit on what I wanted to ask, which was are there other concessions you would look to having?

I represent Kitchener, and we have seven insurance head offices in my riding. The people who sell insurance... We've certainly heard from the automobile leasing people that some of the other suggestions of the MacKay task force, which would strengthen credit unions and allow a lot more merging of the kinds of financial institutions that were seen as being very separate previously, are now going to all look, smell, and taste very much the same.

• 1540

I just wonder, as a consumer, do you think that's a good thing or a bad thing for Canadians?

Dr. Gerald Boudreau: I think it's a good thing. We've been told so many times in the last few years that competition is good for the consumer. If it's so good, let's establish competition. If insurance companies are doubtful about sharing their market with banks, they should organize in order to compete more.

Competition in most cases has been good for the consumer. That's what we've been told so many times, especially since the debate on free trade. This is what we hear constantly. So more competition normally should be better for the consumer.

[Translation]

The Vice-Chair (Mr. Nick Discepola): As a result of what's being proposed, there would be less competition because instead of being able to choose between six institutions, consumers would have a choice of only three, or perhaps even only two, institutions.

Mr. Gérald Boudreau: There might be less competition within Canada, but there would be more on international markets.

The Vice-Chair (Mr. Nick Discepola): How do you figure that?

Mr. Gérald Boudreau: Newly merged banks will be better positioned to compete with the other big banks of the world.

The Vice-Chair (Mr. Nick Discepola): You and the banks would have us believe that banks must be bigger in order to compete. Is that what you're telling us? Notwithstanding other factors such as market concentration, even if your bank and the Bank of Montreal were to merge, wouldn't the newly formed institution still be a small bank, from a global standpoint? I really have to wonder if banks need to merge in order to compete.

As the President of Scotiabank and Ms. Redman testified, this financial institution is indeed positioned to compete, even though, internationally, it is a small institution. I'm not convinced that the bigger, the better.

Mr. Gérald Boudreau: Perhaps you should talk to the legislators who have passed laws to merge various services in your community. Why is a bigger municipality better than a small one? Why is a bigger school board better than a small one?

The Vice-Chair (Mr. Nick Discepola): Because there are savings to be realized. However, if banks save money, I'm not convinced that consumers will be better served.

Banks have a unique legal status. First of all, they can borrow money. They take deposits on which they pay interest of about 3 per cent. Conversely, they lend money to consumers and charge 7 per cent or 8 per cent interest. Other financial institutions are not authorized to carry out the same operations.

In terms of placing institutions on an equal footing, that's something we can't really address as legislators, unless other financial institutions are granted the same privileges, that is the right to take deposits and so forth in, something that they are not prepared to do. As you can see, we are on the horns of a dilemma.

Banks are also unique in that deposits are protected. If the banks were to merge, I believe that indirectly, if ever an economic crisis like the one in Asia were to erupt, taxpayers would be the ones to rescue these large institutions.

We must consider all of these issues. It's not simply a matter of saying that we will allow these mergers to go ahead because of globalization, but that banks would be treated differently. What are your views on the subject?

Mr. Gérald Boudreau: No, I don't believe the banks are necessarily different on that score. In my view, sooner or later, those banks not planning to merge today will find themselves in exactly the same situation as the banks that are planning to merge. They won't be able to survive unless they position themselves to be competitive.

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Mr. Yvan Loubier: Mergers are only one option. While institutions can merge in order to grow, small banks, insurance companies and mutual fund companies can form a consortium and forge strategic alliances, which can be as beneficial as a merger. This is one interesting option proposed in the MacKay Report .

Mr. Gérald Boudreau: Yes, I suppose it is interesting.

The Vice-Chair (Mr. Nick Discepola): Thank you very much, Mr. Boudreau. Thank you as well to all of our other witnesses and colleagues.

[English]

Thank you for being patient with us and allowing Mr. Boudreau to go ahead.

[Translation]

We realize that you have a three-hour drive ahead of you. We greatly appreciate your coming here to testify. Have a safe trip home.

Mr. Gérald Boudreau: Thank you very much, Mr. Chairman.

[English]

The Vice-Chair (Mr. Nick Discepola): The committee will now revert to today's orders pursuant to Standing Orders 108(2) and 83.1. We will resume our pre-budget consultation process.

We have witnesses with us, and again I want reiterate and thank you for your cooperation and understanding. We have Mr. Paul Black from the Acadia Students' Union, Mr. Breckenridge from Dalhousie, and Mr. Wilde as an individual. Mr. Doig and Mr. Schmid are from the Metropolitan Halifax Chamber of Commerce.

Welcome, and thank you again. We will begin with Mr. Black.

Mr. Paul Black (Vice-President (Academic), Acadia Students' Union): I would like to thank the members of the committee very much for the opportunity to appear before you once again.

There has been much said of the educational expenditures in the 1998 federal budget, and it has even been labelled the education budget. However, this should not preclude the continuing need for meaningful investment in the post-secondary education sector. Education is a constant expense, and not one that any leading industrialized national can afford to overlook or underestimate the value of. Every budget needs to be an education budget.

The Vice-Chair (Mr. Nick Discepola): Excuse me, Mr. Black. Would you kindly speak a little bit slower? The interpreters have to translate, and it's a bit too hard for them.

Mr. Paul Black: No problem.

The Vice-Chair (Mr. Nick Discepola): We have lots of time.

Mr. Paul Black: Thank you.

It is apparent that a post-secondary education is a prerequisite to the achievement of even a minimal standard of living. It is more important now than at any other time in our history that we ensure equal access for all Canadians to the highest standards of post-secondary education.

Cuts to the Canada health and social transfer payments over the past four years have resulted in dramatic reductions in funding. Nova Scotian post-secondary institutions, which already receive the lowest per capita student support in the country, have seen a reduction of more than 20%. In the last five years, tuition has been raised by 50% in most institutions. The average student debt upon graduation has more than tripled in the last four years and is projected to increase by another 75% over the next seven.

The average cost of one year of post-secondary education is $8,101 in Saskatchewan, being the lowest in Canada. It is predicted that by 2016, the average for one year of post-secondary education in Canada will be at least $27,000. Programs have been downsized, restructured, and cut. Class sizes have increased en masse and faculty complements have decreased simultaneously.

Canadians who actually have the financial means to pursue a post-secondary education wonder if the watered-down quality is worth being indebted for. To avoid the high financial burden associated with a post-secondary education, many students are working to offset the overwhelming costs. In Atlantic Canada, 62% of graduating students of the class of 1996 worked during the summer months and the school year to help finance the cost of a university education. As a student, I can assure you this eats heavily into the time one can put into the completion of academic responsibilities.

Saddled with high debts and working more hours than many full-time employees, students often find themselves with nowhere to turn. As their government, you have a responsibility to be here for them and to ease their situations. The health of the future of the nation depends on it.

With this preamble in mind, I will address the questions that were sent to me in the letter of May 28. At that time it was Mr. Bevilacqua, but now it's Mr. Discepola.

With the budget now balanced, what message do you wish to send to the government as to the priorities it should set for the fiscal dividend? The primary message I wish to send to the government would be to invest primarily in a most abundant and important resource, and that's our people.

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As noted by the Prime Minister in the March-April newsletter of 1998, there is an ever-increasing disparity in opportunities for employment between those with a grade 12 level of education and those with some level of post-secondary education.

Employment opportunities for those with a post-secondary education have only increased minimally, and corresponding opportunities for those with secondary education have decreased exponentially. The deregulation of tuition fees in provinces such as Ontario has augmented financial barriers for those who were previously disadvantaged in accessing PSE.

This is forcing students with marginal financial means to seek employment rather to further their education. However, as noted above, opportunities for employment are minimal without a post-secondary education.

Canada's Millennium Scholarship Endowment Fund cannot be seen as the remedy to this problem. Although the fund will help an average of 100,000 students up to a level of $3,000 a year, there are currently more than 1.8 million students in this country's post-secondary educational system. Only a small minority of students will receive a contribution from this fund to help offset the overbearing costs of education.

It is for these reasons that the government should continue to invest in people. Otherwise, opportunities will continue to decrease.

Without an educated citizenry, there is great potential for this country to become financially crippled, supporting those without a post-secondary education through social programs, such as employment insurance. The investment the government needs to make today in post-secondary education pales in comparison to the potentially staggering social cross in the future. Whatever other priorities may dominate the government's agenda, few are more consequential than post-secondary education.

So I would suggest the following appropriate strategic investments and changes to the tax system to help effect these changes.

A Millennium Scholarship Endowment Fund based on the principle of financial need is indeed a step in the right direction. As noted before, this fund will only help 100,000 students annually; it will exclude 1.7 million others.

There should be a bursary, scholarship, grant, or program—whichever word you wish to choose—that would be aimed specifically at non-traditional post-secondary students, those who have traditionally not been able to access the system, as a means of broadening and ensuring accessibility. This would be a very strategic investment worthy of consideration.

There is a disconcerting anomaly within the Canada student loans program. The government pays the interest on loans taken out by full-time students until six months after graduation. Part-time students, however, must pay interest on government loans while studying.

Many part-time students are marginalized in some way to begin with, such as single parents, students with disabilities, and the extremely impoverished, hence the reason for their part-time status. For the government to treat them differently from a full-time student presupposes that they are part-time students because they work the rest of the time. The government must recognize this dichotomy in the financial aid system and remove this further barrier to post-secondary education.

I would therefore suggest that the government pay the interest on part-time student loans while they continue to study at a minimum of 20% of a full course load and until six months after graduation.

On January 1, 1997, Revenue Canada mandated that employment insurance will be collected as of the first of dollar earned. Before this, most on-campus jobs, such as student assistanceships, were not called taxable earnings. But since that point in time, 2.7¢ of every dollar earned by students goes to the government. This situation is further exacerbated by the fact that very few students are eligible to receive employment insurance if the need exists.

Government officials have decided that students can receive this money back when they file their income tax return if they earn less than $2,000 yearly. The reality is that most, if not all, students need to earn more than 2,000 yearly in order to receive an education.

As educational costs spiral upward and the Canada student loans program does not change to reflect these realities, students must make up these added costs somewhere.

Not only has this change negatively affected students directly, but it has indirectly affected them in other ways as well. For example, where there are employee contributions to the EI fund, there must also be accompanying employer contributions. For every 2.7¢ contributed by students, the employer at our university contributes an additional 3.78¢, which in this case is the university. This is a new expense added into the already strained budgets of our universities.

The expected surplus of more than $5 billion in the EI fund this year alone calls into question the rationale of taxing those who are largely ineligible to receive the moneys from this fund.

Realizing the added strain that this has placed on students' financial situation and taking steps toward the exemption of on-campus employment from contributions to the EI fund would be a strategically wise investment in Canada's youth.

How can we help Canadians prepare to take advantage of these opportunities? We can ensure that all Canadians will have an equal opportunity to take advantage of this new era by having a publicly funded, accessible, standardized, and high-quality education system. To ensure that Canadians are at the very least prepared to take advantage of opportunities in our own country, there must be open access, from kindergarten to every level of post-secondary education, for all citizens.

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The best way the government can help to ensure the wide range of job opportunities in the new economy is by giving students jobs, because they need experience to get a job and a job to gain experience. The vicious cycle has become a major problem, both socially and economically speaking.

Youth unemployment has been at 20% in the maritime provinces for the past number of years. Upon graduation, it takes an average of three years for students to find work in their field of study. The focus of post-secondary education has shifted from the traditional pursuit of truth and knowledge to preparation for the workplace. Although this may not seem entirely palatable to most academics, it is a reality and therefore it must be dealt with.

Students are looking for work experience for a variety of reasons: to fund their education; to gain the necessary practical experience enabling them to be employed upon graduation; and to gain valuable life skills. All of these reasons should be recognized as valid, and encouraged.

I suggest the following as means to achieving these ends:

—Sustain the Nova Scotia Links program and initiate this program in all regions of the country.

—Combine under one federal ministry all internship programs and return the savings achieved into creating more internship positions.

—Create in every region of the country academies for the instruction and pursuit of interdisciplinary entrepreneurship.

To conclude, I would like to once again thank the members of the Standing Committee on Finance for their time and attention. It is no easy task to ascertain the financial priorities of the nation and to manifest those through the federal budget. However, it's extremely important that you recognize that all citizens of this country need to be treated with equality. Equality of opportunity is one of the most important things you as members of Parliament must strive to protect.

The system of post-secondary education in Canada must be accessible to all citizens, and to be accessible it needs an infusion of funds from both the federal and provincial governments.

Thank you.

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

I'd like to now go to the Metropolitan Halifax Chamber of Commerce, Mr. Doig or Mr. Schmid, whoever is going to be presenting.

Mr. Peter Doig (Chair, Federal Finance Task Force, Metropolitan Halifax Chamber of Commerce): Welcome to Halifax. It's a cool but clear day out there, and I hope you have a chance to get out there and enjoy it during your brief stay here.

Mr. Chairman, with your indulgence, we'd like to tag-team our presentation. I'll be presenting some initial overview remarks about the chamber, and Mr. Schmid, my colleague, would then present more substantive comments in response to Mr. Bevilacqua's letter of earlier this year.

The Metropolitan Halifax Chamber of Commerce was formed in 1995 as a result of the merger of the Halifax Board of Trade, the Bedford Board of Trade, the Sackville Chamber of Commerce, and the Dartmouth Chamber of Commerce. With its roots in the Halifax Board of Trade formed in 1750, the Metropolitan Halifax Chamber of Commerce is the longest-standing board of trade or chamber of commerce in North America.

Serving as the voice of business in Halifax, the Metropolitan Halifax Chamber of Commerce is comprised of 1,500 corporate members, which employ nearly 50,000 people in the Halifax area. Our membership is representative of the diverse business community in Metropolitan Halifax. Seventy-eight per cent of chamber members are small or medium-sized businesses with 25 or fewer employees.

The chamber's role in the community is best expressed by our mandate. Through business leadership and the principles of partnership, the Metropolitan Halifax Chamber of Commerce ensures sustainable economic prosperity for its members and for the community.

Some recent initiatives for the chamber include very active support for both the Halifax International Airport Authority in its negotiations to privatize Halifax airport and also support for the Halifax Port Corporation in their bid for the super-port to handle post-Panamax, which would really be Canada's only opportunity on the eastern seaboard to take advantage of these exciting new opportunities. And I know there were a lot of discussions with federal officials as part of those discussions.

The positions expressed today are the result of an extensive consultation process with our members, including polls, committee work, and meeting with interested stakeholders. The position for development of volunteer members of the federal finance task force is chaired by my colleague, Mr. Michael Schmid, who I'll now turn things over to.

Thank you.

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

Mr. Michael A. Schmid (Chair, Federal Finance Task Force, Metropolitan Halifax Chamber of Commerce): Good afternoon.

I would also like to thank you for the opportunity to appear before you in these pre-budget consultations today to offer comments from the Metropolitan Halifax Chamber of Commerce as you gather public input in the concerns and issues from across the country.

Copies of the chamber's submission have been forwarded to you earlier. We did bring some extra copies, if anybody would like to see one.

While we've addressed a number of issues in our written submission to you today, I will focus on the clear message we hear from our members. Members of the Metropolitan Halifax Chamber of Commerce have been clear and focused on debt reduction. They have strongly indicated that it is still early for the government to move away from a strategy of fiscal prudence and financial responsibility. We've balanced the books. Now we need to get our house in order.

• 1600

The chamber recognizes than an increase in the historical methods of service delivery related to the priorities of health, education, and infrastructure investment is not consistent with the commitment to reduce debt, and it is a continued commitment to debt reduction that must remain the focus of any federal fiscal strategy. We believe, however, that more innovative methods of delivery, of reduction of the level of government, and increased incentives for consumer spending can satisfy all of our list of priorities in the short term, while savings from reduced debt service costs and government restructuring will most certainly do so in the long term.

As we have stated, our members' priority is for the implementation of a strategy identifying a firm commitment to debt reduction. The strategy would stipulate specific rather than contingent debt reduction amounts, combined with specific debt reduction targets. Accepting that there were references in the 1998 budget speech to a reduction of the debt-to-GDP ratio, we feel that they were not specific enough, nor were they aggressive enough. We feel that an aggressive debt reduction strategy, if implemented now, would allow the federal government to address the balance of our members' concerns in the future. Lower debt means lower debt service costs. Reduced debt service costs means more money is available for debt reduction, tax decreases, education, health expenditures and investment in needed infrastructure.

With the falling debt, increased consumer spending and a healthy and skilled workforce, Canada will be well positioned to take advantage of new economic opportunities. To ensure that these opportunities are accessible, we must continue to build and maintain our national communications and transportation infrastructure.

With regard to the secondary use of any surplus, in order of priority, our members identified tax reductions, initially focused on personal rather than corporate, investments in health and education, and infrastructure investment. These investments would support continued economic growth and support our efforts to pay down our national debt, thereby creating needed fiscal flexibility for the new millennium.

Canadians are now being given a second chance. It's up to government to provide leadership and to avoid the popular choices in favour of those that make economic sense. We must work together to prepare the country to better cope with the inevitable swings in the global marketplace.

Before completing this presentation, we prepared an addendum to our original submission to deal with the recent discussion regarding the EI surplus. For the past two years the chamber has taken the position that the surplus in the employment insurance account should be capped and that EI premiums should be reduced in order to promote job growth. We continue to hold this position.

The government's own EI actuary has stated that a surplus from $10 billion to $15 billion would be sufficient to ride out a severe recession and the fund surplus should be kept at that level. We are gravely concerned about recent suggestions that the accumulated EI surplus will be rolled over into general revenues and used to fund increased program spending. Our members have told us that the priorities for the federal government must be debt reduction and tax cuts. They do not support increased program expenditures at this time.

The EI fund is money that belongs to the employees and employers who have paid into the fund as an insurance policy to support workers in transition. It should not be treated as general revenue by the government. Certainly if the government were facing a deficit in the EI account, they would quickly turn to employers and employees to make up current or projected losses with increased premiums. Such a reduction would have real and immediate benefits for small and medium-sized businesses across Canada. It is only fair that these companies and their employees, who are the source of the EI surplus, benefit from the surplus through decreased EI premiums. By putting their own money back into the hands of working consumers and small-business people, the government would be strengthening two key drivers of economic growth. Only through real sustained economic growth will we be able to bring taxes down and address over the long term Canada's health, education, and infrastructure needs.

Again I would like to thank the committee and others for taking the time to listen to your submission.

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

Mr. Breckenridge, would you like to continue?

Mr. W. Carl Breckenridge (Associate Dean, Research and Planning, Medical Research Services, Dalhousie University): I'd like to thank the House of Commons Standing Committee on Finance for allowing me to make a presentation.

As associate dean of research and planning at the Faculty of Medicine, Dalhousie University, I'm here to encourage you to support or vigorously recommend increased funding for health research. I've provided you with a fairly extensive submission, which you can refer to. We'll refer to a couple of tables as I go through my presentation.

In particular, I want to encourage you to make positive recommendations for support of the forthcoming initiative entitled “Canadian Institutes for Health Research”, now under development by a task force representative of all stakeholders in health research. This initiative is desperately needed to improve the funding environment for health and biomedical research and to increase funding for basic fundamental research as an indispensable component of improved health care and also for innovation and wealth and job creation.

• 1605

If you want to look at my brief, on page 3 I've prepared a rather simple concept. Some might say it's corny. I would encourage you to consider the innovation tree as a simple means of understanding the importance of fundamental research in the overall process of wealth and job creation.

Researchers exploring basic fundamental issues, which I will define as the roots of the tree, develop new ideas and concepts. Much of society may not be very aware of basic science research, just as we're not always very aware of the size of the roots of a tree. The soil, or nourishment, of the innovation tree is the Medical Research Council of Canada, NSERC, voluntary agencies, and the private sector, which support basic research. The trunk is the infrastructure of laboratories, universities, and equipment to support research. I view the limbs and leaves as the results of research, additional contracts, clinical trials required for applying basic science knowledge to developing new products, and new ways of diagnosing and treating disease. Finally, the fruits of the tree are the new ideas and inventions, the new products, and jobs created by these inventions or treatments. If there's no basic science funding or infrastructure, there will be less in the way of innovation, wealth, or creation of jobs.

This is one tree we don't want to cut down and ship abroad for lumber.

I would like to point out that there is both good and bad news in research funding. The good news is that the Medical Research Council and NSERC funding was restored to earlier levels, thereby alleviating further cuts to research grants.

We have an MRC regional partnership program at Dalhousie. It is partnering with the provincial government and private industry to develop new research programs at the faculty.

The funding for the Canadian Foundation for Innovation is now under consideration and will be of considerable benefit to research lab infrastructure at universities and research institutes and for the purchase of equipment. Dalhousie has funding for four of six applications for support of new faculty members, which has been announced very recently.

We have legislation introduced and a promise to build a Nova Scotia health research foundation by the provincial government.

A real success story is Clinical Trials Atlantic Corporation, a non-profit organization developed by the medical schools in the Atlantic provinces, which in 1997 has facilitated $15 million in clinical trial research in Atlantic Canada, up over the last three or four years from about $3 million or $4 million. This initiative has created many skilled jobs for research nurse coordinators and other researchers in the region.

Finally, the Nova Scotia biotechnology industry is growing rapidly, with a total of 52 companies created—eight created in the last year—growth and skilled jobs for university graduates, and increased collaboration with researchers. However, many problems remain. Many researchers continue not to be funded by the granting agencies, particularly junior faculty who are less competitive than highly successful productive researchers.

If you care to turn to page 8 of my submission, you'll see the success rates for new applications to the Medical Research Council as opposed to the success rate for renewal applications to the Medical Research Council. This shows you that our new faculty, our junior scientists, are having an extremely difficult problem receiving grants from the council because they are less competitive than senior, well-established researchers. You see at the bottom of the page that even those individuals have some difficulty being funded.

Mr. Paul Forseth: Which particular chart?

Mr. Carl Breckenridge: This one here on page 8.

The Vice-Chair (Mr. Nick Discepola): Some of us can find it, but others need numbers to guide them.

Mr. Carl Breckenridge: Young scientists are the lifeblood for the future research enterprise. Many very successful researchers are funded inadequately to remain competitive in their research field with investigators in the United States and elsewhere. We continue to lose some of our most outstanding young scientists to the United States, after we have successfully recruited them here and have spent considerable funds in doing so. This is primarily due to inadequate resources. I must stress that I do not consider this to be a major serious problem in this community, but we do lose a few.

• 1610

Finally, in contrast to 20 years ago, many of our brightest young scholars are not pursuing research careers and innovation because they currently do not perceive a future in research because of the dismal funding. The research community will have a major exodus of senior scientists over the next ten years due to the retirement of the baby boomers. These two trends will have a very negative effect on our economy in the long run. I feel we must put in place long-term plans to provide a vision for the future for our research stars.

So my recommendations with regard to the fiscal dividend as a result of balancing the budget are as follows.

First of all, I believe the fiscal surplus should be used in a balanced fashion to reduce debt to provide some tax relief and to fund limited new initiatives.

With regard to new initiatives in my particular area of interest, I would strongly propose that the federal government, in dealing with issues related to health care, should spend the equivalent of 1% of the budget for health care on health research. A major initiative is under organization by stakeholders in the health research area and is developing a proposal for the Canadian institutes of health research, which will be presented to the Minister of Health at the end of October. I believe this is an important initiative and, if funded ultimately at 1% of the health budget, will allow the health research community to deal with many of the issues of underfunding. It will also allow our stars to compete with the international community and it will improve innovation.

We must also develop stable research funding and long-term budget projections for funding. Short-term rapid changes have a drastic and somewhat random effect on funding for specific research. The granting councils operate with grants in a three- to five-year window. Short-term changes have drastic consequences for any particular competition.

Finally, the research community is making substantial strides in technology transfer and in commercialization of research results. However, obtaining funding for commercialization of ideas remains difficult for the following reasons. There is a dearth of funds for projects that are in the early stages of commercialization. Although there are many venture capital companies, they often do not want to fund very early-stage projects that may still be too high risk for them. However, grant and aid sources may view the research—grant and aid is MRC—as more appropriate for venture capital companies. There needs to be more attention to this area, either through hybrids of grants and industrial support or through tax changes or consequences.

Thank you.

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

To conclude the presentations, Mr. Wilde. And thank you for your patience.

Mr. Peter Wilde (Individual Presentation): Thank you for letting me come here to speak.

I'm a chartered accountant in small business public practice. I've been lucky enough to live here in Canada, Nova Scotia, for almost 25 years now. My dealings with the members of the community are mostly with small businesses, home-based businesses, some of them very successful, some of them not so successful. We have trouble keeping our clients going, and we see them through the whole cycle.

I have also been described as a community activist. I'm involved in community organizations and I help at the high school level. In our office we work with the co-op program, with students from both Dalhousie and Mount Saint Vincent universities.

I think the elimination of the deficit is a tremendous achievement on the part of the Canadian government. It will yield significant long-term benefits to all Canadians. It would be irresponsible folly to allow the situation to deteriorate by relaxing too soon and overspending any anticipated surplus.

In terms of the fiscal dividend, in my opinion, and those of most of the people I've talked to—clients and others—the most important priority must be a significant reduction of federal debt. We can't lose sight of the fact that over one-third of all the taxes collected is used to pay interest on the debt. This doesn't do anybody any good. It's Canada's good fortune that low interest rates have kept interest costs down. It's been estimated that a rate increase of 1% will add $6 billion a year to the cost of interest on the federal debt.

I would suggest the government continue its pessimistic forecasting of interest rates and use any savings of actual interest dollars to reduce the debt. Debt reduction is the only effective way to reduce interest costs so that taxes can be used more effectively for the benefit of Canadians.

• 1615

However, debt reduction can't be the only thing we've got to do. It's critical to remember that the elimination of the deficit has been achieved at considerable cost in additional taxation. These tax increases have significantly eroded the standard of living of ordinary Canadians. Indeed, for every dollar of expenditure cuts since 1993, it has been shown that the government has collected $3 in extra taxes. So the deficit has been beat on the back of the taxpayers more than on the back of expenditure cuts.

Something's got to be done, some gesture made that will permit Canadians to believe that next year is going to be better.

The most insidious increase in levels of personal taxation over the years has been bracket creep. A lot more competent people than I have described how that has had a really significant adverse impact on people's lives. In fact, I've attached an article here from the Globe and Mail entitled “Inflating Canadians into Higher Taxes”.

I would suggest the government re-introduce indexation of personal exemptions, give back a sensible portion of the amounts eroded over the last two or three years, and maybe raise the income level at which the 26% marginal tax rate cuts in, say by $1,000.

Another thing that really irks me and most people I deal with is that people who live in Canada with income below the poverty level still have to pay tax. To me, as an individual, and I believe to most people around this table, that's totally unacceptable. Something must be done for people whose income is below the poverty level to alleviate the tax burden.

I think the measures I've talked about probably will have a positive impact on people—the morale of Canadian taxpayers—without significantly impacting on revenue levels.

There's another article in here called “Tax Cuts Fuel the Irish Miracle”. Apparently, if you believe it, the Irish people have done wonderful things by cutting taxes.

I too want to add to what I originally submitted to the committee regarding the proposed changes to the employment insurance fund. As far as we are concerned, we as employers and contributors to the fund are repeatedly told by government that this is a trust fund. These are moneys that are put aside to ensure that there will be money there for a rainy day, for those people who, due to a downturn in the economy, lose their jobs. It's a sad thing that only 40% of people who are currently unemployed in Canada actually receive employment insurance benefits. I think there's something seriously wrong with a system that pays to such a low percentage of unemployed people.

I would say it's immoral for the government to take the EI surplus and put it into general revenue. This money should be invested in the same way the Canada Pension contributions are being invested. Maybe that way we can significantly reduce the cost in the economy of the burden of employment insurance. It's a job killer.

Most of my clients who are involved in employing people would like to pay their people more. They can't because of the cost to the employer of EI and CPP. Probably 15% of an individual's earnings are going to be taken in Canada Pension and employment insurance contributions. That's way too high. Even at 10% it's too high, and that's before taxation kicks in. I think it would be a real shot in the arm for the Canadian economy, both for small employers and for employees, if the employment insurance premiums could be significantly reduced, certainly by 1999.

It's all well and good to talk about debt reduction and tax cuts, but there are other things that have to be done too. We have to improve social support programs. As a country we have to try as hard as we can to restore as much and as quickly as possible funding that has been cut from program spending. But I think the government has a responsibility to insist on better management of social spending programs, particularly in the areas of education and medical services.

• 1620

Studies have shown that Canada spends a relatively high amount per student on education, yet our students don't always compare favourably with those of other countries spending less per capita. My personal experience with the education system over the years is that the money is not wisely managed and spent, certainly at grade school and high school levels. You'd get a lot more bang for your buck if you did it right.

So we need to develop a balanced approach to distributing the fiscal dividend. Future benefits should be allocated bearing in mind the past relationship between tax increases and expenditure cuts in the cause of deficit elimination, so all Canadians feel they will obtain some advantage for past sacrifices.

In terms of challenges and opportunities, we have a major challenge, particularly in fishery and natural resource sectors. People are afraid of change, and when they have been many years in a particular set of circumstances it's hard for somebody who's an experienced expert to be moved over, because the jobs aren't there any more, to become an inexperienced novice. This is a major challenge, and some way or other we have to find means to retrain and relocate these valuable people into new occupations.

We also have to learn from the past. Throwing money at problems doesn't work. It's been shown not to work over many years. In fact Canada's throwing money at problems has contributed to the debt and deficit situation that we're just about to start to get to grips with now.

Canada needs to encourage people to think positively about the future and look for innovative ways to apply knowledge. We need to develop and attract more knowledge-based businesses, which are leading the way into the next century. Canada is ideally situated to be a link between the world's major trading blocs—the EEC, NAFTA, and the Pacific Rim—and with modern communication technology and excellent transportation links can play a major role in future world trade. Our reputation as a solid, reliable country is without peer. There's no reason our business people can't follow the example of our peacekeepers throughout the world. We have an education system that with effort can become the best. We have a stable social system, low crime rates, and quality of life acknowledged to be the best.

What I feel we lack is leadership. I think we lack faith in ourselves to achieve what we are capable of as individuals and collectively as a nation. We need to be less inward-looking and more aware of the opportunities out there waiting to be developed. Government can achieve this by working to develop and encourage the self-esteem necessary for Canadians to boldly go forth and take our rightful places as successful contributors to the future.

Thanks again for letting me come here and spout. I appreciate the opportunity.

The Vice-Chair (Mr. Nick Discepola): I don't consider you as an activist at all. I just think you're a visionary. Thank you very much.

Ms. Wendy Lill: I just wanted to say that I can only stay another five minutes or so.

The Vice-Chair (Mr. Nick Discepola): Then with the cooperation of Paul, who has relinquished his traditional spot, and the cooperation of others, we'll let you go ahead first.

Ms. Wendy Lill: Thank you.

I want to thank all of you for coming in. It's great to hear what you have to say. I'm interested.

I'd like to ask Peter and Michael to elaborate on the concerns of small business around EI and CPP. Those are two areas in terms of bankrolling that can be a killer, as you say. I'm interested in how you would see otherwise. I mean, you want reductions in those areas, but how would you then see that money being...?

Mr. Michael Schmid: The chamber has always supported reduction in EI premiums. We've always thought they were job-killers. I guess there is a lot of talk about creating employment and so on, but we feel that, as I think Peter alluded to, reductions in these premiums would create jobs, because for every number that are reduced, it leaves a little bit more for another salary. And these jobs are real jobs; these are market-driven jobs. These are driven by employers saying “I need this person and I'm going to employ him”. We have a high unemployment rate here, and we need to address it, so let's develop a program. Market-driven jobs are self-sustaining, whereas make-work programs are not necessarily self-sustaining.

• 1625

Mr. Peter Wilde: On payroll deductions or EI, the employer's share of EI and the Canada Pension Plan is going to exceed 10% of total payroll cost. We accept that these things have to be there, but we don't like the way the government has mismanaged the Canada Pension Plan scheme so that we are faced with these horrendous increases. It won't be very long before everybody is paying 10% of their wages just to the Canada Pension Plan, and then another 3% or 4% on top of that for employment insurance.

In our small firm we have eight people working for us. We'd like to have a ninth, but our employer contributions to these programs inhibits our willingness to go forward and do this. Speaking, I think, on behalf of a lot of small-business people, if there are ways in which... For instance, I think the government has helped a lot in the last 12 months with the new employer EI forgiveness arrangement. I think that has contributed to a certain amount of additional employment. Perhaps some continuation of that could be rather than just 25%, 100% better. The first go-round was better than the current one.

Ms. Wendy Lill: I have talked with many people in small businesses who don't find that government-funded jobs, assistance, HRD programs are worth bothering with. They don't bother with them because they're too much paperwork, too much hassle. I'd like your opinions on that, because obviously HRD is trying to help small businesses with these kinds of things. What's the deal? Why is this not useful to you?

Mr. Peter Wilde: Do you want to go first?

Mr. Michael Schmid: I just looked at one recently, and there is less paperwork than there was. I'm a small-business person also, and when I first opened my business I went after one. It was an horrendous amount of paperwork. I was originally told the program would cover up to 52 weeks, and I was told by the people delivering the program it would only last 12.

I have looked, and I have seen that they're attempting to streamline the paperwork, but it's still a fair amount of paperwork. There's a lot of upfront paperwork developing proposals and training programs and schemes and so on. That's why I think people...

I don't see a lot of it, Peter. I'm not sure about you, but I think it's still a lot of paperwork for a small amount of money.

Mr. Peter Wilde: I tend to agree. If it's a worthwhile job you don't need a wage subsidy to make it happen.

Part of the problem, as I see it, is a psychological one, where the employee knows the job is being funded, so on occasion there's an attitude problem: “The government's paying my wages, so why should I worry about working too hard for you?” I don't know how you deal with that aspect of things.

I was involved in the Nova Scotia Links program for a while, and eventually decided that it was better to resign because I felt the money was being put into wrong areas.

CA firms don't need wage subsidies to hire temporary students. I know that from my own experience, because I do it myself. So the administration of some of these things needs to be tightened up, so it's actually being put in areas where it really is useful.

Ms. Wendy Lill: Mr. Breckenridge, we had somebody come in here earlier from the university—

Mr. Carl Breckenridge: Dr. Johnson.

Ms. Wendy Lill: He had some pretty interesting things to say about health research as well. I was just wondering about the whole issue of... You made the point that the problem is probably not as extensive at Dalhousie as it may be at some other centres. Are we looking at different—

Mr. Carl Breckenridge: This is the brain drain, you mean, or the loss—

Ms. Wendy Lill: Well, the brain drain, but also the moneys coming in for research. Is it sort of the big players get the money and the little players don't, and the junior researchers again fall by the wayside so we're looking at generations of new people who are not getting into the game?

Mr. Carl Breckenridge: I wouldn't want you to go away with the idea that it's not a problem at Dalhousie.

Ms. Wendy Lill: You sort of said that.

Mr. Carl Breckenridge: Well, the secretary who spoke with me when I called up to make a presentation asked me if I had any good news, so I felt I should provide you with some good news. We have had some successes, but there are many problems that remain. Certainly we are less competitive than say the very large universities, where there are many other sources of funding. Most provinces have provincial research foundations. We do not have that. We have a promise of it, but it has not yet arrived.

• 1630

Our senior researchers are still doing quite well. We're on the edge, if the funding continues. If you look at some of the tables I provided you with, we're maintaining our research funding, but that's in actual dollars, not inflation-adjusted dollars. So what's happening is fewer and fewer researchers are being funded. The total dollar value looks the same. So our top competitive researchers are surviving, but the young researchers are having a very difficult time.

Ms. Wendy Lill: I guess I can't resist asking you a question our party is very concerned about, and that is the interference of private pharmaceutical companies into the research process. Apparently we're moving a lot of the research dollars that are in universities. What about that? Is our research being compromised now by the people who are actually going to make profits from the drugs or whatever that is being researched?

Mr. Carl Breckenridge: I think the universities need to work with the pharmaceutical industry. I think that can be done quite effectively as long as the proper controls and the appropriate clauses are entered in contracts to ensure academic freedom in terms of presenting the data and dealing with the intellectual property of that data.

I don't think we can stop the interaction. It's important for the development of clinical trials. I think we just have to be careful as to how we work this interaction.

Ms. Wendy Lill: Mr. Black, we had the Canadian Federation of Students and some of your graduate students here and they put forth some very critical areas around student funding. I don't have any questions for you at this point.

I'm going to now leave. Thank you very much.

The Vice-Chair (Mr. Nick Discepola): Thank you. Don't forget, nine o'clock tomorrow morning.

Mr. Szabo, would you like to continue?

Mr. Paul Szabo: I wanted to speak with Mr. Wilde about taxing.

You made the statement that balancing the budget was on the backs of the taxpayer, not tax revenue. That was kind of interesting. You didn't mention anything about where those taxes came from. Could you explain where these additional taxes the government got over the previous year came from?

Mr. Peter Wilde: It's my understanding that most of the additional taxes had been raised through personal tax increases. The government says there have been no tax increases, but there have.

Mr. Paul Szabo: There have.

Mr. Peter Wilde: Yes.

Mr. Paul Szabo: Such as?

Mr. Peter Wilde: It's partly bracket creep, partly surtaxes, although surtaxes are not as severe as they were. Income has risen.

I did a statistical analysis of one of my clients and looked at the income in 1990 and how much tax he paid and took the same income in dollars in 1996 and how much tax he paid. The difference on an income of about $60,000 was about $1,000 extra.

Mr. Paul Szabo: Yes. Do you think it has anything to do with the fact that there are actually more people working?

Mr. Peter Wilde: I think it's probable that this is true.

Mr. Paul Szabo: And of course increased income that people have got also attracts more taxes.

Mr. Peter Wilde: Most certainly, there's been a sense here in Nova Scotia.

Mr. Paul Szabo: I was curious, because you didn't mention that fact that we've actually had some pretty good growth in Canada in recent years and unemployment has gone down significantly. That does add to tax revenue.

Mr. Peter Wilde: Surely.

Mr. Paul Szabo: Do you, just for an individual...? You're a chartered accountant, so you'd probably know this. What was the bracket creep worth to an individual last year on an annual basis? What did it cost?

Mr. Peter Wilde: Let's just take the basic personal exemption, which is $6,456.

Mr. Paul Szabo: Yes.

Mr. Peter Wilde: And that's stayed the same since when—1994?

Mr. Paul Szabo: Let's take last year, one full year. Inflation was about 1%.

Mr. Peter Wilde: Yes.

• 1635

Mr. Paul Szabo: So in the absence of an increase in the indexation of the personal non-refundable tax credit, it's worth $64 a year that it should have been increased, and the credit is worth 17%. So if you assume a 50% average provincial rate, it's about 25%—that's $16 for an individual.

Mr. Peter Wilde: Yes.

Mr. Paul Szabo: You would agree with that.

Mr. Peter Wilde: But it's not just the $16 on the $6,456 personal exemption. You can add another $12 off those personal exemptions for those who are lucky enough not to have...

Mr. Paul Szabo: But for an individual...

Mr. Peter Wilde: If a person making $30,000 a year gets a 10% raise, his tax on that raise will not be at the low rate of 27%; it will be on the middle rate of 43%.

Mr. Paul Szabo: It's his marginal tax rate.

Mr. Peter Wilde: Yes. He's going to pay 43¢ of income tax on every dollar of the raise, and his cost of living will go the same way.

Mr. Paul Szabo: I understand that. I notice you have included this article from the Globe and Mail on it. It refers to people being thrust from the lower bracket to the middle bracket, and the middle bracket to the high bracket. But that was only with regard to the—

Mr. Peter Wilde: It's only on the incremental earnings.

Mr. Paul Szabo: —effective rate of tax for somebody getting $1,000 raise and going from $29,000 to $30,000. They may be in the 26% bracket with regard to the last dollar earned, but their effective tax rate is only about 17.1%. It's playing with numbers. It's kind of interesting.

I wanted to ask the board of trade something. I thought it was kind of interesting that you disagree with Thomas d'Aquino with regard to the disposition of the EI fund. We're going to have some discussions on this. I think it'd be really fascinating if you would share your opinion with regard to whether the EI system needs to be reformed. You know all the examples—for instance, the construction industry. The union here is constantly referring to it as our income supplement. It's not an insurance fund; it's “I work so much and I'm going to get employment insurance”.

In the construction industry there's $4 out for every dollar they take in—I think the fisheries, the forestry, the seasonal work, etc. There comes a point at which all workers, the entire labour force, is basically subsidizing a lifestyle choice, as it were. Do you think there will come a time when the EI mechanics will have to be rethought in terms of what it's really for, or are you suggesting maybe we should just carry on and maintain a reasonable reserve, whatever that might be—somebody suggested $12 billion is a reasonable reserve to keep in place—and simply adjust the premiums to a level that would just sustain that reserve for a rainy day, the recession when unemployment goes through the roof?

Mr. Michael Schmid: We looked at this issue specifically with the discussion around the surplus and what to do with the surplus. We were aware there were some differing opinions on it, and we looked at our position and felt it was still defensible. I guess we haven't really considered...

Mr. Peter Doig: Perhaps I might add that what Mr. Martin, Mr. d'Aquino, and we are talking about is a short-term solution to a surplus that has arisen because of premiums being higher perhaps than they ought to have been over the last couple of years. Nobody is talking about long-term solutions right now. It's a discussion about whether or not the EI system is the appropriate system going forward to provide income supplements to people across the country.

Should that discussion happen? The more we get disagreement on the future of the EI system, the more that suggests perhaps that is the way go. But I think all we're really talking about right now are very short-term solutions. A lot of business groups—and I would include the Business Council on National Issues and our group in the same boat—disagree with Mr. Martin that those funds ought to be made available, and it should be legislated to have them made available, on a longer-term basis for program spending.

• 1640

Mr. d'Aquino and his group have suggested that you ought to segregate those surplus funds and dedicate them to debt reduction and personal tax reductions. We differ with Mr. d'Aquino on this issue, as do most business groups in the country. In order to protect the integrity of the EI system as it is today, we think you should return any surplus through premium reductions to the people who paid into it.

Mr. Paul Szabo: There would be no reserve.

Mr. Peter Doig: You would have a reserve. You would rely on what an actuary tells you is the appropriate reserve. I think the government's actuary has said it would be somewhere in the range of $10 billion to $15 billion. We've talked about $12 billion. Once you establish that reserve, then you go forward on a break-even basis.

Mr. Paul Szabo: If you agree there has to be a reserve of maybe $12 billion, then under the current scenario we're not there yet.

Mr. Peter Doig: I think we are.

Mr. Michael Schmid: I think the surplus you're referring to is the excess over the estimated reserve.

Mr. Peter Doig: We're talking about a surplus hitting $20 billion by the end of the year, over and above—

The Vice-Chair (Mr. Nick Discepola): If we have to build up another reserve of $13 billion, we have to let the surplus accumulate for a few years.

Mr. Peter Doig: I guess so. Part of the surplus I think has been loaned back to the government.

The Vice-Chair (Mr. Nick Discepola): No. It has been in general funds since 1986, as per the Auditor General's request.

Mr. Peter Doig: If there is no surplus, then what's the issue?

Mr. Paul Szabo: It's not a matter of whether there's an issue. It's just an analysis.

Mr. Peter Doig: I agree. Perhaps part of the problem is that there is no fund; it's just notional money out there.

The Vice-Chair (Mr. Nick Discepola): The EI fund is generating annually roughly $5 billion to $6 billion towards our overall surplus.

Mr. Peter Doig: That's right.

The Vice-Chair (Mr. Nick Discepola): So there is a surplus that's being generated.

Mr. Peter Doig: Exactly. I think conventional wisdom is that a premium in the range of $1.80 to $1.85 per $100 of assessment is what you need to break even, without contributing excess funds for Mr. Martin's program spending. We just think the appropriate thing to do is to reduce the premiums to a level that funds the program for which they're intended. If the government wants to increase taxes for program spending, then they should take responsibility for that if they think that's the right thing to do. But I don't think it's the right thing to do.

The Vice-Chair (Mr. Nick Discepola): Is your membership asking for 60% of the refund?

Mr. Peter Doig: What do you mean?

The Vice-Chair (Mr. Nick Discepola): Is your membership asking for 60% of that refund?

Mr. Paul Szabo: Business pays 60% of the premium.

Mr. Peter Doig: What our membership is saying is that the premiums ought to be reduced by whatever their share is. If you want to say 60%, that's fine. What we're saying is that going forward the premiums ought to reflect the actual cost of the program and not be used to contribute to program spending that is not part of the EI system.

Mr. Michael Schmid: I think everybody agrees it would be fair to give it back to the people who put it in there.

Mr. Szabo asked about reforms. Maybe the first reform would be that a surplus shouldn't go into general revenues.

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

[Translation]

Go ahead, Mr. Loubier.

Mr. Yvan Loubier: I have a comment and two questions, Mr. Chairman.

In the past four years, the surplus in the EI fund has grown to $19 billion. That's the amount that's been posted and Mr. Martin has used some of this to pay down part of the debt. Over a period of 15 months, he has paid down $20 billion of the debt, which in passing should make Mr. Wilde happy. However, it's as if the federal government or Paul Martin borrowed this money from taxpayers.

Moreover, the chief actuary, the person responsible for managing the EI fund, said just last week that premium levels could be reduced to 80 cents without affecting the future health of the fund. This person knows what he's talking about. He's the chief actuary, the person in charge.

I'm pleased to see that you have not taken the same position as Thomas d'Aquino, a member in good standing of the Liberal Party, a person who represents 125 large companies in Canada. In relative terms, these companies contribute less to the EI fund then small businesses in Canada. It's ludicrous for him to come and tell us that we must use these premiums, plus those of the workers, in order to realize an across-the-board tax cut.

• 1645

Under the current system, middle-income workers and SMEs are the biggest contributors to the EI fund. It's ludicrous for someone representing 125 of the largest companies in Canada to say to SMEs: “you're going to subsidize us through a general tax cut.” He's telling middle-income earners: “you're going to finance a hax cut across the board, including a tax cut for the wealthy, even though the wealthy haven't contributed.” That's doubly unfair and doubly ludicrous of him to make such a suggestion.

I'm pleased that the chambers of commerce and the Canadian Federation of Independent Business responded in the following manner: “we want premiums to be lowered and accessibility to the fund increased”. All workers must contribute, but only 42 per cent of unemployed workers receive benefits. This makes no sense at all.

My first question concerns the tax structure and is directed to Mr. Wilde, an accountant and self-proclaimed community activist. I believe this is the third year that you have appeared before the Finance Committee. Each time I've travelled to the Maritimes, we've been able to exchange views.

Last year, the OECD suggested that Canada reinstate full indexation of tax tables. The contention was that for the past ten years, owing to partial indexation of tax tables, 1.4 million low income Canadians who previously did not pay any taxes at all had now started to pay taxes because of the lack of full indexation. A total of 1.9 million Canadians went from a marginal tax rate of 17 per cent to a marginal tax rate of 26 per cent.

I would like to hear your views on this OECD study, which ties in somewhat with the one you did earlier and which found that low and middle-income earners have contributed the most in terms of tax increases over the past four or five years.

My next question will be directed to all of the witnesses.

The Vice-Chair (Mr. Nick Discepola): Who would like to answer that question?

[English]

It could be Mr. Wilde maybe, or Mr. Doig, whichever one of you feels comfortable.

Mr. Peter Wilde: I think Mr. Loubier has just reinforced some of the things I said. I'm sure the OECD knows a lot more about it than I do. In my opinion, it's a wrong thing, especially for low-income Canadians whose income is below the poverty level, to be paying the amount of tax they do pay.

I read an article recently that said 10% of Canadians who earn $60,000 a year or more pay 23% of the total tax burden. There are also a fair number of Canadians who are below the poverty line, and they paid something like 1.3% of the total tax burden.

To me, that's an area we should address. I'm sure those of us who are lucky enough to be in sort of the middle range, or even those of us who are very successful and make $60,000 or more, wouldn't mind paying a couple of extra dollars so that people living below the poverty level don't have to pay tax.

This is something to reinforce the question Mr. Szabo asked: there are people we have hurt significantly. So $64 isn't a lot of money. And $16 isn't a lot of money, but it is if you don't have any to start with. That's all I can say.

[Translation]

Mr. Yvan Loubier: I see.

My second question concerns the debt. You seem to attach a great deal of importance to the government retiring the debt quickly. The Chamber of Commerce also focused on this issue.

While I am not opposed to debt reduction, in light of the crisis in Asia and its impact on the global economy and in view of the volatility of the Canadian dollar which is being hammered on currency markets, don't you think we should act cautiously when it comes to paying down the debt? By definition, the process of retiring the debt involves flooding the currency market with Canadian dollars and lowering the value of the Canadian dollar at a time when it is already under pressure because of the Asian crisis and speculation on currency markets.

My question is for either Mr. Schmid, Mr. Doig or Mr. Wilde.

• 1650

[English]

Mr. Michael Schmid: I just have one comment to make on that. We address it in our submission.

Certainly the Canadian dollar was subject to some reductions or some problems in the last couple of months, but I believe that with lower debt we would be seen as a higher-quality borrower. And as a higher-quality borrower, if we freed up more dollars to be available perhaps people would be prepared to use them, because we would be a better risk than we would have been before that.

Mr. Peter Doig: Certainly no one would suggest that the government, in looking towards debt reduction and setting more tangible debt reduction targets, should act in an imprudent manner.

We always kept in mind both the world situation and the impact that any sort of debt retirement or debt reduction program has on the dollar, but I don't think we should use that as an excuse for not doing it. It just means that we may have to perhaps be a bit more prudent than we might have been six months ago in moving forward.

[Translation]

Mr. Yvan Loubier: However, short of not doing anything, we can take a look at the structure of the federal debt. Approximately 25 per cent of our debt is in foreign hands, particularly in US hands. If you pay back part of the amount owing to them in Canadian dollars, their initial reflex, when they get these Canadian dollars, will be to exchange them for US dollars. In the process, they will flood the market with Canadian dollars. By definition, the more Canadian dollars on the market, the more downward pressure there is on the dollar.

If my memory serves me correctly, 26 per cent of Canadian debt securities are held by pension funds and insurance funds. If you were to buy back these debt securities, what do you think the instinctive reaction of these funds would be, given the present market instability? It would be to take these Canadian dollars and convert them into safer currencies. And in the past two months, that safe currency has been the US dollar. They would use Canadian dollars to buy up US dollars. Once again, billions of Canadian dollars would flood the market, resulting in downward pressure on our dollar.

Chartered banks hold 21 per cent of Canadian debt securities. The same phenomenon would occur here is well. In the past month, the Royal Bank has had to defend itself for taking Canadian dollars to purchase US dollars, flooding the market in the process with Canadian dollars.

As Mr. Martin indicated—and this is reported in Finance Department figures released to date—and so did the Prime Minister Chrétien this summer, over the past fifteen months, $20 billion have been spent to buy up Canadian securities on the market. During this same time, the Finance Minister asked the Bank of Canada to intervene on its behalf to buy up these debt securities, that is to use its reserves of US dollars to buy Canadian dollars to prop up our currency which had been seriously buffeted by the crisis on Asian markets.

There appears to be a contradiction here: the right hand knew what the left hand was doing, but the right hand and the left hand nevertheless did two completely different things.

Under the circumstances, I have to wonder if it might not be better for us to proceed cautiously on the debt reduction front and use the month to month accumulated surpluses—we're talking about a $7 billion surplus for the first four months of this year—to further stimulate the economy. Lowering EI premiums would be one good way of helping employers hire a ninth worker, as Mr. Wilde said earlier, and of giving our economy, which has been battered over the past four months, a much-needed boost.

I would be interested in hearing your views on the subject.

[English]

Mr. Peter Doig: Certainly, again, your point is very well taken. We have to be very cautious about disturbing the rather fragile position that our dollar is in right now. But I think that whatever we do has to be done within a longer term.

In the short term, yes, it is probably prudent to be paid on a month by month basis, but I think what we're suggesting is that you have to have an eye to longer term and you have to have an objective in mind. Otherwise, you are dragging down a street and you don't know where the end is. That is far more disturbing to me than the possibility of dumping a couple of extra dollars on the U.S. market, which isn't, I don't think, going to have a tremendous impact, although I'm not an economist, so I'm not going to guess what the result might be. But if you're only taking short-terms solutions to your problems and not looking at the longer view, then all you're doing is putting at risk the value of the dollar going forward.

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I think the comments you have made really point to the fact that there's an underlying lack of confidence in the Canadian economy, which causes a run. Yes, there are many external factors that are driving that as well, but I simply can't believe that it's all due to the Asian crisis or the Russian bear or whatever the flavour of the week is for blaming the global financial crisis. If the chartered banks are selling Canadian dollars and buying U.S. dollars, that means they don't have confidence in the value of the Canadian dollar. If other financial institutions are doing the same thing, it's the message that's being sent out, and I think it's the message the government has to receive.

[Translation]

The Vice-Chair (Mr. Nick Discepola): Thank you very much, Mr. Loubier. Go ahead, Ms. Redman.

[English]

Mrs. Karen Redman: Thank you, Mr. Chair. I would like to ask two questions if I could.

Mr. Black, I really appreciate your presentation and your concrete examples. One of the things we heard last year and we hear time and time again is the fact that student debt in Canada is too high in some people's estimation, and it's estimated to be $25,000 for an undergraduate degree. You raised some good issues around the tax system and the granting of scholarships. Have you ever looked at or have you turned your mind at all to what is an appropriate level of debt for students?

Mr. Paul Black: So you're asking me to tell you what I think students should come out of university with in terms of a debt?

Mrs. Karen Redman: I guess my first question is do you think $25,000 is too high? And if the answer is yes, then how do we determine what is appropriate?

Mr. Paul Black: I think there are many moves in universities to tier the system of what degree you get in relation to what your expected income will be in relation to what is an acceptable debt in that program. That scares me in some ways, in that the differential tuition fees are linked to differential debts. For example, because the University of Western Ontario has increased some of their tuitions by 100% and 200% in the last year, the dentistry and medical students will come out with enormously high debts in the $100,000 and $200,000 ranges, as was said on CBC on Rex Murphy's Cross Country Checkup on Sunday. For them that may seem to be manageable debt.

I think we can look in a general sense and see warning signs that our default rates show us. If our default rates continue to be high under a system that gives a good needs assessment, a smart needs assessment, and gives them the appropriate amount they will need to survive on each year to cover the costs they will incur, then when they emerge from their education, if we continue to have a default rate that is anywhere above the 15% to 20% range or the average for personal debt defaults, I would say that any debt above that is obviously too high, with people having to default on it. Or else people are just simply not aware of the government programs that exist for them, such as debt reduction and interest relief and some of the programs put in the 1998 federal budget. But if students are making use of those programs and still defaulting or still making strides towards not being able to pay off their loans, then...

What I'm saying is there is not a magic number that I can give you right now. One way to look at it is to associate it by the degree and the expected income, but again in some ways you can't predict a market that... If the market is flooded with lawyers and a student's expected income as a lawyer is $250,000, for example, you can't say that their debt should be $100,000, because whenever they do get into the market there just may be no clients for them. So I'm not in favour of differential debts for programs.

Mrs. Karen Redman: Deregulation is happening right now in Ontario, and it's a huge issue. I have two universities right next to my riding, and I know it's tremendously controversial.

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Your illustration of the lawyers is a good one. My husband and I have this debate all the time. I believe that we're creating the next generation through post-secondary education. I have a daughter in classical studies. It gets a little rougher, when you're not looking at professional faculties, to look at debt ratios and what's appropriate.

I don't hear you saying that you think education should be free. I find that interesting. Again, my personal reflection is that I don't believe education should be free; I believe there needs to be an investment on the part of the participants.

Mr. Paul Black: This is to receive a return that they're getting. I would agree with you. I'm not going to set a level at which I think they should pay for the degree, but I would agree that you have to make an investment in your education to be the recipient of what you're going to receive.

Consider one thing. In your riding specifically, especially with the University of Waterloo, you have a lot of co-op programs there. Waterloo is the “king of co-op”. I think that's the definite way to go without compromising the academic integrity of the university. You give people work placements in their field of study, which gives them the experience beforehand, the ability to get jobs afterward, and the ability to make some money while they go through. I think one of the best things the government could strive to achieve would be to help subsidize co-op centres at every university or give money through transfer payments with that intention.

Mrs. Karen Redman: Thank you very much.

My other question, if I still have time, is to Mr. Wilde. I really like the way your presentation ended, although it sounded very much like Star Trek when it talked about going boldly where no one has trod before.

Mr. Peter Wilde: Canadians don't have enough confidence in themselves.

Mrs. Karen Redman: I want to touch on that point, because I find that inspirational and I really like that. I would tell you that this government was very bold in how it handled the Canada Pension Plan. The reason we're going to the 9.9% eventually is so that Canadians today, baby-boomers and post-baby-boomers, can have faith that pension will be there for them. That's my comment.

Here's my question. I hate to drag my whole family into this conversation. My husband is a small-businessman, and I've talked to other small-businessmen. I have to tell you that I reject the belief that the premiums, whether they're for CPP or EI, drive whether or not small businesses hire people. You may hire them for part-time work, and you may pay the current employees less as a result of your payroll payments, but I can't believe there's a short, straight line between lowering that and seeing more people getting jobs.

The reality is that small businesses should not be hiring people. I think the representative of the chamber of commerce talked about real jobs. If it's a real job, there's got to be an economic reason to hire that person.

So I guess I still struggle with that piece of it. It's obviously something you believe: it's in your brief.

Mr. Peter Wilde: A small-business person frequently will work almost as many hours as a member of Parliament. They would very much like to not have to do as much work. They would very much like to hire somebody to help them, but they're frequently reluctant to make that commitment when they add up all of the costs of hiring somebody, because it's very difficult for them to justify it.

Small business, particularly, is one area in which you're never really sure what's going to happen next month. Hiring an employee is a really serious commitment to somebody. You don't just hire someone and say you'll keep him for a month and let him go, because you've got to have someone for three months before they're worth anything, as they have to learn the job.

There's always that. It's a contributory factor. Whether to hire somebody is not the only factor in making the decision. It just adds to the difficulty of making that commitment to hire that extra body.

Mrs. Karen Redman: I don't know if the representatives of the chamber of commerce want to comment on that.

Mr. Michael Schmid: I can comment as a representative of the chamber and also as a small-business person. You're looking, I would guess, at $2,500 per employee. So five employees is $12,500. That's a lot of money. For ten employees it's $25,000. That's easily another job.

So in very small businesses, yes, for one or two employees, the extra $2,500 isn't going to create a job, although it might in 10 very small firms. But when you talk about a small business of thirty or fewer employees at $2,500 an employee, it's a significant amount of money.

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Mrs. Karen Redman: I didn't mean to infer that it is insignificant, but if the business is there so that you can justify the salary of another employee, it seems to me that would be the driving factor, not whether you can afford the payroll.

Mr. Peter Wilde: It's sometimes cheaper, though, to pay existing employees overtime, where there are no additional contributions, rather than to hire another person and to make those additional contributions.

Mr. Michael Schmid: I usually go in for 6 a.m., and this is not a late night yet.

Mrs. Karen Redman: So you do keep the hours of parliamentarians. Thank you.

The Vice-Chair (Mr. Nick Discepola): Thank you, Mrs. Redman. Now I'll turn to Mr. Forseth.

Mr. Paul Forseth: Thank you very much.

Mr. Breckenridge, you've advocated for ongoing support. I was just wondering if you could tell us how we're doing in Canada compared to the United States, the European Union, and Great Britain with regard to our ratios of funding and support. Are we in the middle of the pack? Just how are we doing?

Mr. Carl Breckenridge: No, we're at the bottom of the pack in per capita funding for researchers. I'm sure you will hear this in other places, probably accompanied by graphs, which I didn't bring along today, but in terms of the Medical Research Council, I think it works out to around $10 per capita for health research funding in Canada. It's around $70 per capita at NIH, so it's about seven times our amount, and they are looking at probably doubling the NIH budget in the next couple of years.

What they've discovered is that the biotechnology community and the innovation around that is driven by basic research, and the government in the States has clearly decided to fund the NIH to generate the basic research that can be developed in biotechnology. So they are a long way ahead of us. The MRC budget right now is about $250 million. The initiative for Canadian institutes of health research, which I'm sure you're going to hear quite a bit about over the next month or two, is proposing that budget be increased to $750 million. That would bring us about halfway of the NIH funding in that area.

Mr. Paul Forseth: Thank you.

The testimony we heard today from many of the witnesses is that premiums are at acceptable levels now, but the benefits should be broadened to a larger population base or worker base and the inherent package should be enriched with more fully funded training programs and so on. That is the option that is preferred, getting more to qualify and giving them more. Now, you have not recommended that, so I would like to hear from you what's wrong with that particular option. What are the dangers and problems, and why is that not a good choice?

Mr. Michael Schmid: You made a comment earlier about real jobs. I think Mr. Loubier said the people who bore the brunt of the payments to the EI were working-class Canadians and small business. If you return that money to working-class Canadians and small business, which are not big savers in the economy, they're going to spend that money. Hopefully, that money will be spent to create more employment, whether it's through more investment in the business, creating more jobs, or hiring new people.

By paying it out as increased benefits, you are not really creating anything sustaining. Again, it's a short-term measure. Certainly we'll provide some short-term help. I feel for the other 58% that aren't receiving the benefits. But from an economic point of view, it's not going to create any long-lasting benefit. It is going to be a temporary, short-term measure, and then the money will be gone.

Mr. Paul Forseth: Are there any other additions to that comment?

Mr. Peter Wilde: My personal feeling is I would support the use of some of this “already spent” surplus in effective upgrading of individual skills. More attention needs to be focused on training people for jobs that are available rather than for things they might like to do.

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Mr. Paul Forseth: As you know, EI has been studied more than any other program of government. How many students have done their masters or PhDs...? Government shelves, historically, are just full of the analysis of every kind of permutation possible. One of the permutations that has been suggested is to make it truly an insurance program in that you introduce experience rates, “the more you claim, the less you get”, changes to premiums—all that kind of thing—to really make it look like an insurance program. Take away from that program anything to do with training. Reassign that to educational institutions. So it's a very narrow insurance program of providing money only, and very efficient to administer. Then you don't have all the problems, such as whether they are still in the program or not, or if they still qualify for the training program—all the administrative hassle of sorting all this stuff.

Have you read some of those options, and do you have any comment on them?

Mr. Peter Doig: I guess the obvious concern with running it as a strict insurance program is that it's very difficult sometimes to figure out how, for example, seasonal jobs are going to fit into that, such as the construction industry. I'm sure it can be done and I'm sure somewhere in the raft of PhD dissertations they've worked out a means for it to work effectively. But I don't understand—

Mr. Paul Forseth: I hear they're doing it now in Maine, where, in effect, employee and employer groups get together and run it.

Mr. Peter Doig: I guess the question this raises is, what is it we're trying to achieve with the EI program? Are we simply trying to provide an acceptable level of income for people who are between jobs? Are we trying to provide some sort of transition program for people who have left a job in an industry where that job is not going to reappear? Or are we simply trying to do a wealth allocation model and ensure that everybody in society has some basic means of subsistence while they are not gainfully employed? I think that's the very basic question we have to address as a country before we start tinkering with experience rating and that sort of thing. I think we have to sit back and really understand what it is we're trying to achieve with EI, with welfare, and with other forms of assistance.

Mr. Paul Forseth: Thank you.

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

Mr. Paul Black: If the EI premiums are to be kept at the same level, I would suggest that youth unemployment, which is at 20% in the Maritimes and as high as it is...that a proportional amount of the contributions of youth and university students, who are largely ineligible for the program, be contributed to youth employment programs and therefore risk reduction on the insurance. A good insurance company will put money into reducing the risk their clients will have so they'll pay out less in insurance. I think it just makes sense as a smart policy for the government to be doing the same, especially in youth employment.

Mr. Paul Forseth: Like a prevention program.

Thank you.

The Vice-Chair (Mr. Nick Discepola): Does anybody want to add anything? Mr. Wilde.

Mr. Peter Wilde: One comment. What has struck me since I've lived in Canada is that Canadian business and employers don't seem to devote anywhere near enough of their own resources to training their own people for their own future. They've been very happy over the years to import skills from other parts of the world. It may well be that if employers could be arm-twisted, if not encouraged, to provide more training for the future of their own businesses, some of the youth unemployment problems at least might be alleviated.

Mr. Paul Forseth: Then that provides a role for your groups to do a comparative analysis as to what is the incentive system that is set up, why we are not doing as well here—the overall landscape or the shape of the landscape—to make those economic choices. Perhaps it's not as competitive.

The Vice-Chair (Mr. Nick Discepola): Just a point of information, Mr. Wilde, on the question of indexation. The finance committee report last year recommended that we go a step further and that the government reintroduce indexation. But they had a condition: when the fiscal situation permits. So it was recommended last year. Maybe this is the time, maybe not, but that's part of the debate that goes on.

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Mr. Peter Wilde: It's good to keep reminding the government that they should do that.

The Vice-Chair (Mr. Nick Discepola): I would like to conclude by asking you one question. You represent a business community that is dear to my heart, which is small and medium-sized businesses, having gone into that field at the tender age of 26, with all the vinegar and other things I have.

Did I hear you correctly that your business clientele is asking that any potential UI surplus be refunded to them as a priority?

Mr. Peter Wilde: No. Everybody accepts that that money is gone. It would be nice not to build it. Employment insurance shouldn't be a tax.

The Vice-Chair (Mr. Nick Discepola): But if we take that analysis, in order not to continue building it, we would have to reduce the UI rates.

Mr. Peter Wilde: Yes, sir.

The Vice-Chair (Mr. Nick Discepola): And the tradition is by about 60¢. I have from $2.70 to $2.10. Are you saying we should keep the flexibility by reducing it, as we have in the past three or four years, maybe ten-tenths, gradually, over the next little while, or—

Mr. Peter Wilde: Yes. You don't have to give them everything they might want, but give them something.

The Vice-Chair (Mr. Nick Discepola): I agree with you, and I also agree with Mr. Forseth.

But I find the position of the chamber inconsistent with your claims that that money should go back to those who contributed to that surplus. In response to Mr. Forseth, you said something that I didn't think...and I will give you an opportunity to correct it. Obviously the contribution to that surplus was because of the rates, was because of the employers' contribution, but a large percentage of that was also because fewer people received fewer benefits because of the cutbacks.

So when Mr. Forseth and others make the argument that maybe we should extend that coverage, why is your group against that? Did I misunderstand that? It seemed to me that you were against that.

Mr. Michael Schmid: I'm not sure we're against it. What we said was we felt it would better benefit the economy if it was used to pay for market-generated jobs rather than temporary interim benefits to more people. That was our concern.

Mr. Peter Doig: I guess the other basic point here is that we are saying the integrity of the EI system should be maintained. Our view is that that money ought to be returned through future premiums being reduced to a break-even basis.

The view that's been expressed by the Minister of Finance is not that the money ought to stay within the EI system, but he ought to be able to scoop that money and use it for other priorities he might have. We just think that is wrong. The money ought to stay within the EI system. Our view is that it should be reflected in decreased premiums.

Mr. Forseth and others suggest that it ought to be some sort of balance between increasing the benefits, increasing the scope of persons entitled to the benefits, and perhaps premium rate decreases. Those are all variations on a theme.

The Vice-Chair (Mr. Nick Discepola): The last word goes to Mr. Forseth.

Mr. Paul Forseth: I'm not recommending that, but I posed that as the question based on a lot of the testimony we've heard, to give you an opportunity to perhaps knock that straw man down. I probably agree with you that the integrity of this system and the major effort should be in reducing premiums. That's where I'm coming from.

The Vice-Chair (Mr. Nick Discepola): Thank you, colleagues. More importantly, thank you to the witnesses, especially for your understanding at the beginning. We appreciate that. We also appreciate your contribution to the very difficult task we have at hand, but our task is really to report what we find and what we hear from coast to coast to coast. You can rest assured that your comments and your opinions will be reflected in the report that we will then give to the minister, hopefully in December, so he can take note of an awful lot of the comments and reflect that in the budget for February. So you're contributing to a very valuable process, I feel, and we want to thank you again.

Colleagues, tomorrow morning at nine we resume the hearings on the financial institutions.

The meeting is adjourned.