FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, October 28, 1997

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[English]

The Chairman (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I would like to call the meeting to order and welcome everyone.

As you know, pursuant to Standing Order 83.1, the finance committee is holding hearings to get input from Canadians. You may also know that we have travelled across the country to seek input and have received some very insightful analysis as to what we should be doing with the fiscal dividend and how we should in fact create jobs in the new economy.

We have the pleasure this afternoon of having a number of people participate in this round table. We will begin with the representative from the Coalition for Biomedical and Health Research, Dr. Barry McLennan. Welcome.

Dr. Barry McLennan (Coalition for Biomedical and Health Research): Thank you, Mr. Chairman.

I would like to thank the committee for inviting the coalition to appear before you.

The Hon. Paul Martin, a few days ago, on October 15, clearly identified the task: to make Canada a leader in the modern knowledge-based economy as a national priority, to generate jobs and growth, and to support our cherished social programs, particularly our health care system, in the 21st century. He recognized clearly that government has a leadership role to play in promoting knowledge and innovation through basic research.

The Medical Research Council, the Natural Sciences and Engineering Research Council, the Social Sciences and Humanities Research Council, Mr. Chairman, are the three federal granting councils supporting the majority of basic research at universities, teaching hospitals, and research institutes across this country. They are the gatekeepers of Canada's standard of excellence in scientific research. Their external, independent peer review system is renowned internationally and respected at home.

However, they are more than granting agencies. They are the key to making Canada a leader in the modern knowledge-based economy now and in the 21st century. They are positioned well to address the task identified by the Hon. Paul Martin.

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The relationship between publicly funded research and economic performance has been studied in depth by others. This is important, because it's not a self-serving enterprise on our behalf. I refer you to page 2 of our brief, which lists the forms of economic benefit from basic research as identified by Her Majesty's Treasury in the United Kingdom.

As stated by the former Minister of Health, the Hon. Diane Marleau, and by our current Minister of Health, Canada must set priorities to address critical research funding gaps that threaten internationally our competitive health research capacity. The starting point for this exercise for applied research and the commercialization activities is basic research. Basic research is the fuel for the engine.

As illustrated on page 3 of our brief, every national government in the G-7 community except Canada is playing a dominant and increasing role. I refer you to the graph on page 3. Look at what's happening in Canada and look what our competition is doing.

As a fundamental economic tool in an industrialized society, intellectual property protection is essential to provide the financial incentive necessary to turn ideas into reality. The chart illustrating this is clearly shown in appendix I of the brief.

I want to give you a Canadian example of how this works. The University of British Columbia recently released a unique report tracing the 13-year history of local economic activity generated by companies created from initial basic research activity. The University of British Columbia reports that for every $1.25 million invested in basic research, they yielded one disclosure. That's even better than what's shown on the graph in our brief, which suggests that one disclosure arises from every $2 million of investment. UBC has done even better than that. They get one for every $1.25 million.

I don't think this competitive advantage is unique to UBC. It could happen everywhere across this great land. This is Canada's basic research advantage. The link between research and job creation is most evident in the life sciences, predominantly the health sector, which in 1996 employed 70,000 people compared with 60,000 in, for example, the aerospace sector.

There are other examples now coming to light in Canada showing the benefits that are reaped by investing in basic research. I refer briefly to BioChem Pharma in Quebec, TerraGen in B.C., and Vascular Therapeutics in Hamilton, only three examples of many that illustrate that initial basic investment research has now resulted in very significant economic activity. BioChem Pharma, for example, grew from a few people in a university lab to 1,000 employees in ten years. Over 700 of these are Canadians.

So without the federal government fulfilling its role as the principal supporter of basic research in Canada, none of this would have been possible. We must keep priming the pump; that is, keep funding basic research.

A few years ago Canada had strong basic research and weak commercialization activity. We've improved in that latter component. I commend the government for making permanent funding for the national centres of excellence. I applaud the work Dr. Friesen and others have done with the PMAC-MRC health program, the Technology Partnerships Canada program, and more recently, the government's Canada Foundation for Innovation program.

These are excellent activities. However, they focus more on tech transfer and updating infrastructure than they do with priming the knowledge-generating pump by investing in people, Canada's intellectual infrastructure.

Why is Canada the only G-7 country heading in the wrong direction? What is the point of having a sophisticated commercialization engine if we've no gas to run it? The impacts of MRC cuts are devastating. We are hemorrhaging. In the resulting exodus of Canadian scientists.... Appendix IV of our document, which demonstrates the scarcity of grants approved in the last couple of competitions, shows what's happened. Right now morale is so low among Canadian researchers it's absolutely depressing.

Recently, CBHR conducted a poll of our 16 academic health centres to survey the damage caused to basic research funding by successive budget cuts. The results are clear. Three examples are illustrated in the report. The same story is true at all sixteen academic health centres, but the report, on pages 8 and 9, identifies specifically the situation at Alberta, Dalhousie, and the University of Toronto.

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Internationally competitive investment targets must be set on the basis of an objective to determine the basic research. In Canada we're very fortunate. We have an excellent, highly regarded peer review system in place in all three granting councils. We need to make use of this mechanism to attract further investment and to increase our economic activity.

This brings me to our recommendation on page 10, Mr. Chairman. In order to solidify the scientific platform needed to make Canada a leader in the modern, knowledge-based economy and to build an enduring foundation for employment, it is recommended—as outlined in detail in the proposal—that the committee urge government to increase the budgetary allocation to the three federal granting councils, MRC, NSERC, and SSHRCC on a priority basis and to levels competitive with other G-7 countries. Specifically, we're asking for an increase of $240 million annually for the MRC, and since the life sciences health sector accounts for 54% of the total, that amount would need to be doubled to apply this proposal to the other two granting councils, NSERC and SSHRCC.

Finally, Mr. Chairman, I'd like to commend the government for the activities and measures that have been taken so far in reducing the deficit and in keeping interest rates low, and for beginning the process of the virtuous cycle of basic research, growth, and jobs. But the time is urgent. The academic health centres are hemorrhaging. We need investment now to be in place in the federal 1998 budget.

Thank you for the opportunity to present these comments, Mr. Chairman.

The Chairman: Thank you very much, Dr. McLennan.

I would like to express our gratitude to Dr. Clément Gauthier, who is also from the Coalition for Biomedical and Health Research.

We now move to the second presentation. Here from the Natural Science and Engineering Research Council of Canada is Dr. Tom Brzustowski. Welcome, sir.

Dr. Thomas A. Brzustowski (President, Natural Science and and Engineering Research Council of Canada): Thank you very much for the invitation to appear before the committee at this extraordinarily important time.

[Translation]

Mr. Chairman, I would like to thank you for this opportunity to appear before the committee. With your permission I will make my presentation in English.

[English]

Mr. Chairman, my brief presentation will address particularly the third question of those posed in the invitation that we received: What is the best way that government can help to ensure that there is a wide range of job opportunities in the new economy for all Canadians? That's a tremendously important question, and we have developed the answer in our short paper. That paper has been distributed, Mr. Chairman, and it's entitled, “A Focus on Young People”. That's a very deliberate choice of words, because our presentation will follow along those lines.

In brief, our answer to the question is this. Give our young people the opportunity to obtain the best skills and knowledge and the incentives to put them to productive use in Canada. We propose that as the answer to the question, but in light of our particular mandate to support research in the natural sciences and engineering in the universities, what we mean specifically is the following. Regardless of their economic means, regardless of their location in the country, regardless of their origin, make sure that all young Canadians who have the talents and aptitudes for science and technology have the opportunity to develop their skills and knowledge to the fullest, and in that way to develop the capability for world-class scientific and engineering work. They will then be able to engage in value-added activities in all sectors of our economy, including some that don't exist today or some that we perhaps would have difficulty predicting today. To sell the goods and services that they produce in Canada and around the world, we must make it possible for them to do this successfully in this country, to do it in Canada. This success will then create wealth and produce good jobs for many more Canadians with a great range of skills.

The point is that if we allow our young people with these aptitudes the opportunity to develop to their fullest capabilities, they will be the lever, the catalyst, for a great deal of value-added economic activity and provide opportunities for others as well. This is a great example of a strategic investment of public funds, and I use the words “strategic investment” with great care. I think these are words that should be precisely defined. In our case, I would say they mean to invest now to enable our young people to acquire the knowledge and skills to create wealth and produce prosperity for all Canadians in the future. Invest now to give them the skills so they will create wealth in the future.

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If we're going to attract more talented young Canadians into careers in science and technology, we must remove the economic barriers that steer their choices in other directions. We've provided an example at the bottom of page 1 in our paper of the economic barriers faced by students contemplating post-graduate studies. Perhaps if you'd like me to expand on the details of that I can do so later. Let me just say it's there in one paragraph.

NSERC, the Natural Sciences and Engineering Research Council, supports university research and the advanced education of young people in research, and I stress the word “in”. This prepares some of them for research careers, but it is also a wonderful preparation for many others who will be solving the most challenging modern problems in many other areas of activity in our economy and our society in the sectors of business, industry, and government.

In our three-page paper for the committee we have traced the progress of young Canadians who have talent and aptitudes for science and technology. We start with their undergraduate studies, follow them through post-graduate studies into placement in industry or post-doctoral research, and for some, into a university career where they in turn will teach others and of course do research themselves. In that last case the challenge is to provide them with adequate support for getting started in research, and in this we happily acknowledge the infrastructure for research that will be provided by the Canada Foundation for Innovation. But there will still remain the cost of operating that infrastructure and all the direct costs of the research projects.

We've identified some pressing needs in our paper at all points in the progress of these young people toward expertise in science and technology, and we've proposed some realistic targets for improvement. In all cases we address two kinds of needs: the first is to provide our young people with more opportunities to develop their talents in science and technology; the second is to equip them with better tools. We think we need both if Canada is to compete successfully in the new economy in which modern, up-to-date knowledge is more important than ever.

We estimate it would take an addition of $160 million a year to the budget of the Natural Sciences and Engineering Research Council to meet the targets that we proposed to improve the opportunities for young Canadians in science and technology. The cost of meeting those needs, the ones we've identified in this paper, is a large part of the financial challenge faced by NSERC, but it's by no means the whole story.

Today we've chosen to emphasize the needs of our young people. Research in science and technology is an activity for young people. I'm not the first to say this; many others have said this, and a look around the laboratories of the most advanced high-technology companies will support that in spades.

We have chosen to emphasize the needs of young people because it is urgent that they receive encouragement at this time. They must come to believe that their country will not let them fall behind. Young Canadians must see that if they have the talents for science and technology they will be able to develop to their full potential and use their skills and knowledge for the benefit of their country, as their counterparts in other countries do. The nation too cannot afford to obtain less than the maximum return on its investment in their education.

We've also identified other pressing needs, and we would be pleased to discuss them if more time were available. I'd be happy to elaborate on any of these points for you, Mr. Chairman.

That is our presentation. Thank you.

The Chairman: Thank you very much, Mr. Brzustowski.

We'll now move to the Canadian Dental Association. Two representatives are here, Dr. Toby Gushue and Dr. Ray Wenn. Dr. Gushue will be making the presentation. Welcome.

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Dr. Toby Gushue (President, Canadian Dental Association): Thank you, Mr. Chairman.

Mr. Chairman, committee members and round table participants, I am the president of the Canadian Dental Association. I am a practising dentist from St. John's, Newfoundland. With me is Dr. Ray Wenn from P.E.I., who is our representative on the Health Benefits Coalition and the RRSP Alliance.

The Canadian Dental Association represents 16,000 dentists across Canada. It is on behalf of our membership and the health interests of Canadians that we are here today.

CDA is a participant in the Health Benefits Coalition, which is working on solutions to concerns about health and dental plans. You will be hearing from other participants on these same issues. We also participate in the Retirement Income Coalition and the RRSP Alliance.

The Canadian Dental Association is pleased to meet once again with members of the House of Commons finance committee as participants in the pre-budget round table. I'm sure it will be no surprise to either continuing members or to new members that in appearing here today CDA is once again presenting its recommendation of the past two years.

The Canadian Dental Association recommends the maintenance of the tax exemption on employer-sponsored health and dental plans and the extension of this provision to include plans for unincorporated self-employed Canadians.

We are grateful to this committee for again recommending at the conclusion of last year's pre-budget round table sessions, as it had done the year prior, that the government extend the tax exemption on employer-paid health and dental plans to unincorporated self-employed Canadians. These Canadians would certainly be more equitably treated by the tax system if this extension could be accomplished.

According to the Mercer study presented to your committee, this recommendation covers approximately 1,080,000 Canadians who do not have supplementary coverage and who cannot deduct the cost of coverage premiums as a business expense. According to the Canadian Life and Health Insurance Association, as cited in your committee report, the cost to the federal treasury in foregone revenue caused by allowing this deductibility would be about $35 million.

In Canada the quest for affordable and accessible health care historically has been a partnership of professionals, governments, business, and labour. This partnership has helped shape a private sector system that creates an incentive for prevention and oral health maintenance.

Provincial dental associations are hard at work in their own areas, and you will be hearing from them in your consultative travels throughout this country. However, they tell us that very limited public health care spending is allocated to dental care and that reductions in provincial government support have had damaging effects for many Canadians who are most vulnerable.

We trust that the recently demonstrated spirit of federal-provincial co-operation may see some improvements in the overall public sector responsibilities for ensuring adequate dental care support to Canada's needy, particularly children.

CDA sees the exemption status of employer-paid health and dental plans as a tax incentive to help Canadians take some private sector control of their own oral and general health. The government's decision to support the provision of tax exempt dental benefits to employees has proven to be among its most effective health measures. It has served to increase access to dental care, it has encouraged Canadians to seek necessary treatment on a timely basis, and it has resulted in dramatic improvements in the oral health of Canadians.

In your report for 1995 you asked CDA and the insurance industry to seek ways to help those beyond the reach of existing public and private programs. Other than our position on extending the tax incentive to the unincorporated self-employed, CDA has written to the Minister of Finance to signal its intent to begin exploring with the finance department and with Revenue Canada the possibilities for wider promotion and use of the tax code provisions for private health service plans. We have written to the minister on this topic. The letter is appended to our brief.

The Chairman: Dr. Wenn, please.

Dr. Ray Wenn (Member, Government Relations Committee, Canadian Dental Association): Thank you.

Our brief also touches on the need for a comprehensive review of Canada's system of public and private pensions. This has a particular interest for us in relation to our members' ability to use RRSPs to an optimal extent. We are actively involved with the Retirement Income Coalition, which concerns itself with all components of the retirement income system. We believe it's essential to look at the whole picture when considering future policy. We strongly oppose isolated and patchwork changes to individual components.

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The Canadian Dental Association is deeply concerned that inadequate income among seniors adversely affects proper dental care. Research definitely indicates there is a direct relationship between oral health and income. The pension and retirement income system is therefore an important determinant in assisting Canadians to maintain a healthy quality of life in their retirement years. We recognize the need for participating governments to take action on CPP and QPP funding stabilization, but we do seek some assurance that at the federal level this initiative will be made part of a truly comprehensive and public, open review of the whole retirement income picture.

On the private pension side of things, CDA's position remains that any future fundamental changes to the RRSP system should not be made before a formal process of inquiry and public debate has been undertaken. We seek your committee's endorsement of this approach and we trust we have seen the last of the government's tinkering with RRSP contribution levels.

Dr. Toby Gushue: CDA has expressed its strong support for the government's resolute campaign to deal with deficit and debt, and we congratulate you as parliamentarians on your valued leadership in this campaign. We know Canada still has considerable debt to buy down, but we also believe judicious and selective tax cuts in today's environment can have a salutary effect on Canadians in their everyday lives.

It is in this spirit that we seek your continued support to extend fair treatment in the tax system for the unincorporated self-employed. As things stand, they cannot deduct their own coverage costs as a business expense. The unfairness of this situation is magnified by the fact that these entrepreneurs characteristically represent not only the smallest of Canadian small business entities but the fastest-growing sector in the Canadian economy. It is time to correct this inequity.

In conclusion, I want to restate our recommendation. The Canadian Dental Association recommends the maintenance of the tax exemption on employer-sponsored health and dental plans and the extension of this provision to include plans for unincorporated self-employed Canadians.

Mr. Chairman, I thank you for the opportunity to present here today.

The Chairman: Thank you very much, Dr. Gushue and Dr. Wenn, for your presentation.

We will now move to the Council for Health Research in Canada.

Welcome.

Ms. Audrey Vandewater (Executive Committee Member, Council for Health Research in Canada): Good afternoon. It's a pleasure to be here today on behalf of the Council for Health Research in Canada. I'm Audrey Vandewater, and I'm the volunteer president of the Heart and Stroke Foundation of Canada. We are a founding member of the council and one of Canada's largest health charities.

We and the other members of the council represent literally hundreds of thousands of volunteers across Canada who believe in the future of Canada and its potential to lead the world in health research. Our objective is to grow Canadian health research funding through the promotion of excellence in health research and the enhancement of health research funding.

We appeared before the committee last year and at this time would certainly like to commend the government for having taken three important steps last year: first of all, stabilizing federal-provincial cash transfers under the Canada health and social transfer; second, helping to level the playing field between provincial crown corporations and charities in terms of large donations; and finally, the establishment of the $800 million Canada Foundation for Innovation, under the chair of Dr. John Evans.

These are very important early initiatives towards realizing Canada's true health research potential for the next millennium, but they are first steps. There is certainly more to do. We would like to bring forward today a series of three specific strategic initiatives and recommendations based on the belief that health research saves lives, saves money, and creates jobs.

That health research saves lives should be abundantly clear. We have only to think about the discovery of insulin and the discovery of vaccines for polio and smallpox, vaccines that have virtually obliterated those fatal diseases.

The evidence that health research saves Canadian tax dollars is somewhat more complicated but equally persuasive. For example, our understanding of and the ability to control factors such as high blood pressure, elevated blood cholesterol, smoking, and other established risk factors in heart disease saves the Canadian health care system $3 billion each year, and this represents only the direct cost to the system.

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Finally, our cadre of world-class health researchers has already helped promote growth in three critical sectors of the economy: biotechnology, pharmaceutical, and medical devices.

Relative to others, however, we are underachieving. In the U.S., for example, recent developments in the biotechnology sector alone have created a $25 billion industry, employing 150,000 skilled people last year, and with sales growing at a rate in excess of 25% per year over the last six years. There's extensive documentation that the basis of this industrial explosion lies in the research sponsored in American academic institutions by the National Institutes of Health in the U.S., which are comparable in function, if not size, to our modest efforts via the Medical Research Council.

The recent success of the Canadian Medical Discoveries Fund, a venture capital fund, gives us a strong indication of our untapped potential. The CMDF was created for the specific purpose of developing a health-related industry in our country and has now made strategic investments in 25 companies, with a total dollar amount invested in excess of $200 million over the past 12 months. Indeed, the federal granting councils constitute the discovery pipeline for industrial development in Canada. This pipeline is being seriously threatened by the cumulative cutbacks to the granting councils over the past four years.

This brings us to the first of the three initiatives we wish to present today. As Dr. McLennan mentioned earlier, Canada now lags well behind its major trading partners in overall health research efforts. Indeed, relative to our G-7 peers, we're barely in the health research race.

I don't think I need to remind everyone around this table just how fragile our position is. Venture capital can shift from one country to another with lightning speed. While people are somewhat less mobile, there are already worrisome trends in, for example, the number of clinical scientists engaged in research. We submit there is time—just enough time now if the government acts—to reverse these worrisome trends and indeed begin to repatriate some top health scientists back to Canada.

Therefore, as part of a concerted intersectoral effort to achieve a minimum international standard of investing 1.5% of output in research, it is respectfully recommended that the federal government increase the Medical Research Council base budget by $60 million per annum over the next four years, resulting in a doubling of the current core budget by the year 2002.

Let me now turn to matters more specifically affecting Canada's health charities and our role in building a stronger Canadian health research effort.

In a recent speech to the Coalition of National Voluntary Organizations here in Ottawa, the Minister of Finance called upon charities to speak up or lose funds. This admonishment was couched in terms of demonstrating the value of what we do in support of the longer-term economic viability of Canada internationally. This challenge requires some clarification. Since many health charities such as the Heart and Stroke Foundation don't currently receive any direct funding from government, it's impossible for them to lose funds. From the standpoint of some of our smaller sister charities, however, many have already had the support grants reduced to one-third of the previous levels. The remaining $3.1 million annually seems to hang precariously by a bureaucratic thread.

Mr. Martin's remarks also seem to suggest that some of the good thinking on tax policy changes recommended last year to this committee but not incorporated into the budget could still be acted upon. I'm thinking in particular about the discussion surrounding the so-called stretch proposal that was put forward by the Coalition of National Voluntary Organizations, which our council continues to support in principle. Therefore, in the interest of fairness and equity, and with a view to encouraging the average Canadian to give, or give more to registered charities, the council respectfully recommends that the federal government consider ways and means, including building on the principles set out in last year's stretch proposal, to give those with more modest means more reason to give.

Turning now to our third and final area of concern, the one we touched on last year, the council believes that Canada is in dire need of an overarching health research vision. We seem to be moving headlong into the next millennium with many good ideas but no coherent health research plan.

If such a plan exists, it has been developed without having input from the wider health research community, but I don't believe there's a plan in place at this time.

We've seen a series of positive federal initiatives over the past two years aimed at strengthening our overall research efforts, such as the Canada Foundation for Innovation and the $65 million Health Services Research Fund. Many if not all of those initiatives depend on the ability to effectively partner to achieve ultimate success. They are also fundamentally dependent on the broad-based and shared vision of our role in the global efforts to harness science in the service of health.

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We recommend an immediate improvement in the long-term base budgets for the granting councils and a corresponding change in tax policy to help recapture the basic critical mass of Canadian health research efforts. At the same time, we need to have all the significant players from government, the private sector, and the so-called third sector pulling in the same direction. This will require a hard-nosed assessment of where our comparative strengths and weaknesses lie in an increasingly competitive global health research effort.

Therefore, to fulfil Canada's potential as a world leader in health research, the council respectfully recommends that the Medical Research Council of Canada and Health Canada work with the national voluntary health agencies on a priority basis to hold a first ever Canadian health research summit. Its purpose would be to take stock of the full range of current strategic health research initiatives being undertaken across Canada, to clarify the terms of health research partnering, to identify further ways in which tax policy and expenditure policies might be harmonized, and to develop a viable five-year health research plan for Canada.

To conclude, this committee has an early opportunity in this Parliament to help strengthen and clarify our health research platform for the next century. The Council for Health Research in Canada believes that the committee has demonstrated an ongoing and strong interest in the health of Canadians and the integrity of our collective health research effort.

The clerk of your committee asked me to consider ways for strategic reinvestment in Canada. We believe we've responded to this challenge and the challenge of Mr. Martin to speak out. We're at a critical crossroads in terms of reinvesting in Canadian health research and know that this committee will carefully consider our specific recommendations for building on one of our real strengths: health research.

Thank you, Mr. Chairman. Dr. Poznansky and I would be happy to answer questions at any time.

The Chairman: Thank you very much.

We'll now move to the next presentation. From the Canadian Academy of Engineering, Mr. Pierre Franche, welcome.

[Translation]

Mr. Pierre Franche (Executive director, Canadian Academy of Engineering): Thank you very much, Mr. Chairman. To begin I would like to thank the members of your committee for inviting us once again.

Some of you may be wondering what is the Canadian Academy of Engineering. Created in 1987 to serve the country in all issues regarding engineering, the Academy is an independent, self-managed and non-profit organization.

Our 223 members—one of them is here today—are imminent engineers working in all fields who were elected by their peers because of their distinguished career and their contribution to society, to the country and to the profession. The total number must never exceed 250.

The Academy mandate is to improve the well-being of Canadians and generate wealth in Canada by applying and adapting engineering and scientific principles.

[English]

On the question of the process of deficit reduction we were requested to address, the progress achieved to date has been satisfactory; however, it is timely to consider a new strategy. Canada needs a fresh stimulus to adapt to what we call the new economy. While deficit reduction has made excellent progress, it remains that the overall debt is still too high and consequently must be reduced.

To free up funds for the priority programs required for stimulating the adaptation to the new economy, the government must further reduce its expenses by instructing all departments and agencies to align their core staff with their basic mandates and responsibilities. Their non-core staff with unique expertise should be available to assist the private sector on a full cost-recovery basis through public-private partnerships or other means but where the private sector is in the lead. This should apply to initiatives in both our domestic and international markets.

On fiscal priorities, the first priority remains the reduction of the present national debt, which is too high. The next priority for the academy is the reduction of traditional expenses in order to free funds for the promising innovative sectors of this new economy.

Beyond the reduction, some part of the forthcoming fiscal surplus must be used to enhance the climate for technological entrepreneurship in Canada. The most important measures in this respect would be tax incentives. To achieve a major shift in goals and attitudes toward this new economy, we must not only rethink our priorities but also establish a more inventive, innovative, and entrepreneurial culture in Canada. Canada has long benefited from its vast wealth in natural resources. This should continue. Every attempt must be made to maintain that privileged position. This calls for sustained infusions of vision, talent, skills, experience, capital, and especially investment in and effective use of new technologies.

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The challenge now is to refocus our creative talents and energy on developing high-value-added products and services and to make full use of the country's human resources and engineering and related fields.

As I will mention at the end of this presentation, the academy will be able to follow up further on the issue of priorities for the new economy through a series of recommendations that will be included in a report to be published in the first week in March.

Let me now speak more on this issue of the new economy. The new economy I refer to is the result of the massive introduction of the new information and communication technologies that are now shaping the world. It is characterized by the almost instantaneous flow and exchange of information, capital, and cultural communication. It is also characterized by the accelerating pace of innovation and applications.

In this vein, the academy welcomes the creation of the Canada Foundation for Innovation as a step in support of the new economy. However, it is only one step. Despite its name, the foundation's declared purpose is to increase research capability rather than innovation in a direct sense. New research infrastructure of and by itself will not increase wealth creation. New programs are needed to facilitate the efficient transfer of research discoveries to innovative applications on an ongoing basis.

Research must lead to discoveries, but research discoveries are not sufficient by themselves. They must lead to innovations by technological entrepreneurs through the development of new firms' SMEs or through new business endeavours within larger firms. The benefits of scientific, and most particularly, engineering research, depend on the effective transfer and innovative application of new scientific knowledge and technology to the Canadian new economy.

In this new economy, international competitiveness can only be achieved through productivity growth by: developing new technology more efficiently and making full use of technology transfers; being more innovative in management, marketing, and finance; being more innovative in technology, shortening the innovation cycle, and especially, nurturing technological entrepreneurship; continuously improving labour skills and promoting lifelong learning; and increasing financial government incentives to encourage industry to be more innovative and to develop new technology.

According to an OECD report of 1995, Canada is afflicted with a serious innovation gap. This gap is rooted in a number of major deficiencies compared with other major industrialized countries. These deficiencies include: a lower overall rate of adoption of high technology; a lower level of high- and medium-technology goods and services exports; an annual deficit of about $20 billion in our international balance of payments for high- and medium-technology manufactured goods; SMEs that are technically understaffed; a proportionately much smaller number of engineers compared with other advanced countries, but proportionately more scientists; a lower share of research and development financed by industry; a smaller number of researchers per capita; a smaller number of inventions per capita; proportionately fewer entrepreneurship education programs in our universities as compared with the U.S.; also compared with the U.S., a financial community less prone to investing in technological innovation; a venture capital industry must less deployed than in the U.S.; a lack of knowledge of the global environment; and finally, too small a number of global alliances by Canadian industry.

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[Translation]

In order to maximize for all Canadians the benefits derived from the new economy, the government must be responsive to the needs of Canadian technological entrepreneurs. The Canadian Academy of Engineering offers its assistance in this regard. During National Engineering Week, March 1-8, 1998, the Academy will be presenting to governments and other stakeholders recommendations to further develop technological entrepreneurship in this country.

It will also publish next month a report on lifelong learning. Meanwhile, with your permission Mr. Chairman, I would like to table here the academy's background report entitled Technological Entrepreneurship and Engineering in Canada which was published this month. I brought 39 copies with me.

The objectives of the report are to explain how the process of technological change has laid new economic foundations in industrialized countries leading them toward the new economy; to explain the nature and the importance of technological entrepreneurship and, finally, to encourage constructive thought and debate on the subject of technological entrepreneurship. This document will also be a basis for consultation with members of the academy and other stakeholders.

I must emphasize the fact that this report was produced by volunteers in the academy. I must also mention the support received from Industry Canada, the National Research Council of Canada, and the Natural Sciences and Engineering Research Council of Canada.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Franche.

[English]

The next presentation will be made by Dr. Victor Dirnfeld of the Canadian Medical Association.

Welcome.

Dr. Victor Dirnfeld (President, Canadian Medical Association): Thank you, Mr. Chairman.

[Translation]

The Canadian Medical Association is pleased to be here today.

[English]

I'm proud to say that the CMA is in its 130th year as the voice of organized medicine in Canada.

The CMA is committed to a strong, publicly funded health care system. The CMA is pleased that the federal government has pledged to reinvest in health care. We are encouraged by measures introduced in recent federal budgets, such as the Health Transition Fund and the Health Services Research Fund, which recognize the need to maintain quality health care services.

Nevertheless, Mr. Chairman and members of the committee, Canadian physicians today find it increasingly difficult to access health care services for their patients—and I can give personal testimony to that. Individual Canadians also perceive that access to services has further deteriorated over the past year. CMA surveys undertaken by the Angus Reid Group clearly demonstrate that Canadians perceive a decline in many critical areas of the health care system.

If one looks at indicators such as waiting times over the past two years, it is quite clear that Canadians have felt the cutbacks in the health care sector in this past year: 65% reported that waiting times in emergency departments had worsened, and that was up from 54% in 1996; 63% reported that waiting times for surgery had worsened, up from 53%; 64% reported that availability of nurses in hospitals had worsened, up from 58% a year earlier; and 50% reported that waiting times for tests had worsened, up from 43%.

In the CMA's dialogue sessions with the public this summer we consistently heard this message from Canadians: Will the health care system be there for me, for my family, for my loved ones, if needed?

The deterioration of our health care system continues due to a lack of commitment and the withdrawal of funding on the part of the federal government. In January of this year, the provincial and territorial ministers of health stated:

Federal reductions in transfer payments have created a critical revenue shortfall for the provinces and territories which has accelerated the need for system adjustments and has seriously challenged the ability of provinces and territories to maintain current services.

CHST cash entitlements are currently at $12.5 billion, which is a drop of 33% from the $18.5 billion it was at in 1995-96. This represents a cumulative withdrawal of $15.5 billion of funding over the three-year period from 1996 to 1998. According to government plans, these cash entitlements will remain at $12.5 billion for the next six years until 2002-2003. However, factors such as technology change, aging, population growth, and inflation will cause further erosion in the federal government's funding commitment—erosion of this $12.5 billion in the absence of an escalator mechanism to preserve the real value of that cash entitlement, and to date we have heard no language, no commitment by the federal government to build in such an escalator.

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Health research, as you have heard and I will emphasize, is a critical component of the health care system. According to the OECD, the United States, France, and yes, even the United Kingdom invest three or more times as much as Canada does on a per capita basis in health research and development. The Canadian Medical Association supports increased investment in this area. It is crucial.

Program funding should be made available for the development of clinical tobacco intervention programs. Research has shown that physician-led smoking prevention and secession programs are indeed very successful, and there must be co-operation between the federal, provincial, and territorial governments on the meaning and application of national standards and principles. Canadians look to you, our government, our members of Parliament, to protect our health care system and not to destroy it.

To restore access to quality health care for Canadians, the Canadian Medical Association recommends these four points: first, at a minimum, that the federal government restore CHST cash entitlements to the 1996-97 levels, that is, back to the $18.5 billion from the current $12.5 billion; second, beginning April 1, 1998, that the federal government fully index CHST cash payments through the use of a combination of factors that would take into account technology, economic growth, population growth, and demographics such as aging; third, that the federal government establish a national target, either in per capita terms or as a proportion of total health spending, and an implementation plan for health research and development spending, including the full spectrum of basic biomedical to applied health services research, with the objective of improving Canada's position relative to the other G-7 countries, where we now rank a shameful last among the five recent G-7 countries for which recent data is available; and finally, the Canadian Medical Association calls upon the federal government to fulfil its promise to invest $100 million over the coming five years into the tobacco demand reduction strategy, and as well, to increase excise and export taxes to their previous level to decrease tobacco consumption in the most price-sensitive segments of the market: our children, teens, and pre-teens, who are most sensitive to price.

[Translation]

We thank you, Mr. Chairman and members of the committee, for allowing us to participate in this pre-budget consultation.

[English]

I remind you that health cuts have hurt, and they truly hurt everyone, either directly or indirectly, sooner or later. None of us is immune. I implore you to take action now to prevent further damage to our system. Thank you.

The Chairman: Thank you very much, Dr. Dirnfeld.

We will now move to the next presentation. From the Social Sciences and Humanities Research Council of Canada, Mr. Marc Renaud.

[Translation]

Mr. Marc Renaud (President, Social Sciences and Humanities Research Council of Canada): Mr. Chairman, ladies and gentlemen, I am the new president of SSHRC, the Social Sciences and Humanities Research Council of Canada. I have been in Ottawa two months only but I felt that although I don't know every detail about my organization it was still important for me to come and tell you what has been accomplished and what our priorities are for the future.

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[English]

As I'm sure you know, SSHRCC is one of the three granting councils. We allocate money to the best research projects and to the best graduate students in Canadian universities. It's important to recall why Canada has created granting councils. Since the Second World War Canada has muscled an enormous amount of energy to provide the country with a university system that would be the equal of the systems created over centuries in England, France, and Germany. We've tried to develop universities—what some people call knowledge factories—that we could all be proud of and that would bring some of Canada's unique experience and perspective to bear. We've tried to develop what others call an intellectual army that we could draw on not only to build better computers or better submarines, but also to help deal with problems such as crime, poverty, economic stagnation or citizens' disenfranchisement.

University research is one of the key engines driving the creation of knowledge. This knowledge is then passed on via teaching though all levels of our education system. One of the tools the federal government has developed to help the universities is the granting councils.

SSHRCC, as you probably know, is the smallest among the three granting councils. It receives 12% of the total funds devoted to the councils, yet it covers 55% of the total number of full-time professors and graduate students in Canadian universities. Specifically, SSHRCC's clients are 20,000 university professors and 40,000 graduate students in the social sciences and humanities.

The social sciences and humanities community in Canada is one of the most dynamic and competent in the entire world. In my previous work at the Université de Montréal, at the Canadian Institute for Advanced Research, and at the National Forum on Health, I had occasion to travel the planet. I have always been extremely proud of my Canadian colleagues, what they were doing and their reputation.

The social sciences and humanities community covers an extremely wide range of fields, including economics, business, ethics, education, law, history, literature, philosophy, anthropology, psychology, sociology, environmental studies, religious studies, etc.

[Translation]

If I have to summarize in a few sentences what social sciences specialists do, I would say that in someway or other they all work on those great transformations that are affecting human beings and societies at the end of our century. Some say that we are living through the third greatest change of the millennium—not of the century but of the millennium. In fact, the transformation will be such that our great-great-grandchildren might not have the slightest notion of what our world is like.

After the Renaissance and the Industrial Revolution we are now living the Communications Revolution. Beyond technological tools such as the World Wide Web, for example, and beyond the abolition of distance and of geographical borders, this revolution has resulted in an absolutely incredible phenomenon, i.e. the globalization of financial markets, business, technologies, immigration, employment, ideas, viral diseases, etc.

This globalization has now given rise to a series of extremely important social phenomena: dissociation between the creation of wealth and job creation, a restructuring of the manufacturing sector, a weakening of the middle class, a loss of solidarity in communities, a reduction in power of nation-states, the rise of nationalisms, the resurgence of authoritarian regimes, etc. In fact the 90s are reminiscent of the 1860s when people in the western hemisphere tried to adapt to the Industrial Revolution.

We are confronted by a series of problems that force us to reexamine our needs, our values and our expectations. Look at the enormous economic gaps between regions of Canada. Look at the increasing income gaps between the richest and the poorest: look at the enormous difficulties young people encounter in entering the labour market. Look at immigration. Look at the poor and the destitute in many of our cities. Look at the violence surrounding us.

[English]

The key challenge addressed by social science and humanities alike is to develop the knowledge base to maintain a cohesive society in the context of an increasingly diversified cultural fabric and in the face of enormous competitive pressures brought about by globalization. In a way we need new knowledge to reinvent society and its institutions. We need to do so in order to survive the tremendous pace and breadth of change now taking place on a global scale.

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It is in part because of the knowledge developed by social sciences and humanities researchers in Canada that we've been able to move forward in several areas. For example, it's partly owing to research in these fields that reinvesting in our children has been recognized as a national priority, that all provinces have now undertaken the challenge of restructuring the hospital sector, and that various provinces are undertaking a major overhaul of their school curriculum.

Research has given us knowledge that is enabling us to fine-tune our immigration policies, to develop new tools for community empowerment, and to give our sons and daughters the tools to bond with each other through the information highway while staying in their own local schools.

I'm basically trying to say that Canada benefits a lot from having top-notch universities and world-class social scientists and humanists within them. As a developed country we're now moving into an economy—everybody has said it before—that is not based on our natural resources as much as it was in the past. We're moving into a knowledge-based economy. We need new ideas incorporated into new products so as to capture market share and maintain our standard of living. But at the same time we need to invest in those tools that will help people adjust to this technological progress. We need not only a knowledge-based economy, we need a knowledge society.

While much of the current debate focuses on hardware, wires, and fibre, there is more to becoming smart than just plugging in the machine. We have to focus on the people behind these machines and on the institutions in which they live.

Now let's talk about money.

[Translation]

In the last few years, the government of Canada has tried, with a certain degree of success, to put its fiscal house in order. SSHRC, like others, has done its share to reduce public spending. We feel that the time has come to take a new direction in order to motivate the intellectual army working in our universities. Last year, Parliament decided to make a major investment in the Canadian Foundation for Innovation. We welcome this initiative, although it will fund mainly infrastructure in natural sciences, engineering and biomedicine, and do very little in the end for the social sciences and the humanities.

The Throne Speech this year announced a millennium foundation to help Canadian youths. We welcome that initiative also because we really believe that the new generation is threatened. We hope, in fact, that the government will call upon SSHRC to help it ensure it invests in the most talented students, those who will complete their academic studies.

Presently the Social Sciences and Humanities Research Council funds only 5% of graduate students in those areas of study, while NSERC funds 20% in theirs; we fund only 15% of university professors in our areas while NSERC funds 60%.

With such a low level of support for academic endeavours, we run the risk that the new generation will be dispirited and we will miss the boat when it comes to those social innovations that are necessary today and we may not obtain good returns on the massive investment we have made so far in our academic institution.

[English]

Mr. Chairman, the demand out there for social research is tremendous, much higher than the government is capable of or ready to subsidize. This is why we do not expect a spectacular budget increase tomorrow morning. We're fully aware that the cleaning up of public finances is not yet finished and that there are several competing priorities for funding. Further, we don't expect the government to do everything for us. Our written brief has many more details about this.

But as for next year, we do believe at SSHRC that the proposal put forward by the AUCC and several others makes a lot of sense. We really, desperately need new money to accomplish our mission. This money would be invested in areas that I and the board of SSHRC feel are the most pressing.

First is investing in the next generation. Again, we finance only 5% of the 40,000 graduate students in Canada in social sciences and humanities. First we want to invest in the next generation of researchers and highly qualified personnel to ensure the renewal of excellence in universities and to bring a high level of expertise to our communities and to our workplaces.

Second, we want to develop new partnership initiatives to generate policy-relevant knowledge in several critical areas. Discussions, for instance, are under way to create chairs in social entrepreneurship in our universities, to develop requests for proposals on social cohesion and community development, more evaluation projects on our social programs, targeted research on the social and economic determinants of health, on the changing nature of work and our cultural heritage, and on Canada's place in the changing world order, etc.

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Thirdly, we need to increase our support for world class so-called curiosity-driven research. The number of projects we were able to fund has gone down by more than 35% over the last 10 years, with an extremely devastating impact on university professors' capacity and will to do ground-breaking research.

Ladies and gentlemen, we're living in a unique period of human history. It's a changing epoch, and for many of our fellow citizens it's also a very tough period of history. Knowledge is the key to adjust to this changing environment. SSHRC, and beyond SSHRC, the universities and their students, are key tools to help Canada respond to these changes effectively. We need your help to preserve what we have accomplished with our universities. We also need your help to provide our best and brightest the tools to innovate and contribute to the fullest extent possible to shaping Canada's future. Thank you very much for your attention.

The Chairman: Thank you, Mr. Renaud.

We will begin this time with Mrs. Redman.

Mrs. Karen Redman (Kitchener Centre, Lib.): Thank you, Mr. Chairman. My question is to Dr. Dirnfeld.

One of the things we heard when we went across the country was that wrestling down the deficit has had human costs, and you mention that in your brief. One of the things Mr. Martin mentioned in his pre-budget discussions was the fact that partnerships are the way of the future.

You talked about the CHST grant being lowered. My statistics say that it was $1.2 billion and that equated to a $4.9 billion tax cut in Ontario. In certain provinces we heard a real skepticism and a real disquiet with the kind of partnership we've had in health care between the federal and provincial governments. In other provinces we heard testimony for a similar kind of standard being set for both social and welfare—different aspects of the social safety net.

I represent Kitchener, which is in Ontario, so I can speak to the trials and tribulations that my community is going through. We've seen the amalgamation of our district health council for Waterloo region as well as with Wellington county. I would tell you that I think we're going through a massive restructuring of how health care is delivered. We're redefining the role of professionals in delivering that kind of health care. Cambridge, which is part of Waterloo region, has been officially declared as being an underserviced area despite the fact that we are a very attractive, economically vibrant area.

My question to you is, in view of the fact that partnerships are the way of the future and an acknowledgement that these issues aren't just about money, although money is part of it, has the Canadian Medical Association discussed its role in forging out with the government, as one of the partners, a new reality for health care in Canada?

Dr. Victor Dirnfeld: Thank you for the opportunity to address that issue. In fact, as you are probably aware, Allan Rock, in his first speech as health minister, spoke to the annual meeting of the Canadian Medical Association in August in Victoria. He formed it in the manner of a challenge to meet with him and to work with him to try to indicate areas of need, areas of shortfall, and methods of improving the allocation of funding for those areas in health care in particular. We were most pleased to hear that invitation. We accepted.

I personally, as well as other individuals from the Canadian Medical Association, have met with Mr. Rock. We had been in communication prior to that, and we are in the process of ongoing discussions to develop precisely that, areas of need and how allocation can be made to meet those needs for decreased access and diminished quality of care.

The Canadian Medical Association, however, is forming alliances with other groups in the delivery of health care. We have formed alliances with the Canadian Nurses Association with respect to the treatment of HIV/AIDS for the complementary and co-operative management of this disorder. We have formed an alliance with the Canadian Pharmaceutical Association with respect to the respective roles, the complementary and reinforcing roles, in pharmacotherapy between physicians and pharmacists.

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At provincial and community levels we continue this dialogue and form bridge-building alliances. I agree with you that in this new environment and new reality it's important that there be a co-operative venturing forth in the delivery of health care.

But that must not diminish the reality, as expressed by Health Minister Allan Rock, and the perception by Canadians that there has been an incredible impact on the accessibility and the quality of health care as a result not only of the restructuring and downsizing but also because of funding shortfalls in large part because of the transfer payment decrease from the federal government to its provincial counterparts.

How the provincial governments choose to allocate their resources, of course, is up to them. What we plea for, though, is adequate funding in total to meet the health care needs of Canadians.

Mrs. Karen Redman: I do appreciate that. I guess I would again point out the fact that we're looking at a $1.2 billion reduction that translated, in the province of Ontario, to a $4.9 billion tax cut. That's a huge magnification of the kind of reductions you're referring to.

Dr. Victor Dirnfeld: I understand your point, and I understand that each province will keep its own fiscal house in order and use its own approaches to how it deals with its finances and the finances of its population. Far be it for me to say that reducing taxes generates business and generates purchasing power by the citizens of a province, and that's why, perhaps, the province of Ontario did that.

I am here only to point out, and to plead against, the decrease in availability of funds to do the critical things Canadians need—that is, to get their health care needs met.

Mrs. Karen Redman: Thank you.

The Chairman: Mr. Szabo.

Mr. Paul Szabo (Mississauga South, Lib.): I would like to pursue this a little bit further.

Dr. Dirnfeld, you're quite right, but as we go around the country and talk to Canadians, to groups coming here before us, there seems to be a lot of discussion about the CHST with regard to the cash component, isolated from the tax points associated with the transfers.

Mrs. Redman raises a very important point, that last year the reduction in the CHST value to the province of Ontario was only $1.2 billion. In the same period, the Ontario government reduced taxes at a cost of $4.9 billion. So out of the $6.1 billion decrease in provincial revenue, only $1.2 billion was the CHST.

I think you've made an excellent presentation on behalf of the CMA. I think you've said exactly what you should say on behalf of the health care of Canadians, particularly with regard to tobacco.

Dr. Gushue, I have a very quick question for you. It wouldn't be a budget if we didn't get our fax machines overloaded and overheated from faxes sent by dentists across the country telling us not to touch the tax...but you and I both know there is an inequity here because of the taxation of employer-paid benefits.

You also have made it very clear as an association that roughly 80% of Canadians are directly or indirectly covered by plans. So to the extent that you tinker with this, you may in fact inadvertently have the adverse effect of reducing Canadians' motivation to maintain good dental health.

In view of your acknowledgement of the inequity of the current system, you have asked for the dentists to have the same, or similar, or an equivalent, tax treatment with regard to your own costs.

So I don't blame you wanting to share in that nice little pie that insured or covered employees have. Would you think it would be equally important to extend that fairness and equity to the rest of the 20% of Canadians who have no insurance and who have only the non-refundable tax credit, subject to a 3% deductible of income? They should receive possibly some sort of equivalency break, for instance, by waiving the deductible and allowing them to have the full amount eligible for a non-refundable tax credit?

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Dr. Toby Gushue: I'll ask Dr. Wenn to reply to that because he has been more active on the health and benefits coalition, the group that has been studying this.

Dr. Ray Wenn: Well, let's see if I can answer that in ten minutes or less.

First of all, according to our studies—the Mercer study we did about a year and a half or two years ago—almost 88% of Canadians have some form of health and dental benefit coverage, so it's considerably higher than 80%.

It seems to us that the inequity falls in the tax system more than in trying to extend the coverage. If only about one million Canadians have no access to the deduction, those who are self-employed and unincorporated—and that's the key word, “unincorporated”—are seen by us as being penalized. They have to pay up front out of after-tax dollars to provide the same health and dental benefits.

We have to realize in this country today—and I certainly wouldn't argue with the CMA about the cost of health care—that dentistry is part of health care, and there are many other things outside of health care that take the dollar out of the health care pool, if you look at it all. About 28% of the health care dollar is outside of medicare, and it's very important that whatever happens to medicare that affects the 72% will affect the 28%. The more people have to pay on one side, the less they can afford to pay on the other.

So we're trying to develop a system where more and more people can afford those things that they have to pay for out of their pocket, which not only includes dental care. It's health and dental benefits; it's both.

If the government could see their way clear to extend that benefit to the self-employed, the unincorporated, who are very quickly growing in number...that's where the small business people are and that's what's happening in today's society. People are being put out of work by big companies and are going to work for themselves. So we can see that expanding. I think it's a very good opportunity for government to show compassion for the ordinary Canadian and take this under advisement.

The Chairman: Thank you very much.

Are there further questions? Mr. Ritz?

Mr. Gerry Ritz (Battlefords—Lloydminster, Ref.): Thank you, Mr. Chairman.

I'd like to thank the ladies and gentlemen for their very interesting presentations. There's one subject on which I'll kind of throw a red flag out there.

As we see our medical services being harder to come by and waiting lists getting longer and longer...in my area of the country we see alternative and preventative medicine coming to the fore. Is there a place in Canada's overall health package for that type of venue?

They're privately funded. They're readily available. There seem to be enough success stories out there, whether you believe them or not, to fuel that demand.

I'd like your thoughts or your comments, please.

Dr. Victor Dirnfeld: With respect to alternative therapies, the medical profession, the Canadian Medical Association, is well aware of these. Our patients sometimes access these for various reasons. The greatest reason, I think, is because conventional or traditional medicine hasn't served their needs, either because they have a disorder that just isn't amenable to conventional therapy, is beyond our capacity to treat, or because there's a disorder that we don't have a therapy for or they just want a greater control over their lives, and that's their choice. The doctors of Canada have no objection to that.

We do have several concerns, however, and several fundamental requirements, we think, for alternative care. Those are that they be based on evidence, that they be shown to do something good, something beneficial, and that this evidence be at the same standard that the practice of medicine today is held to: good science with good evidence at a standard. The second is, above all, that they, as we say as physicians, primarily do no harm, that the therapy is safe.

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With those two fundamental standards, there's one correlative, which is that the use of such alternative therapy should be done in an informed manner so the individual is not denied potentially beneficial therapy that we know works. But with those considerations, we would have no difficulty with alternative medicine.

In fact I spoke at the opening ceremonies of the Tzu Chi Institute in Vancouver, which was funded—perhaps Mr. Riis will remember—to the tune of $6 million by the Buddhist association for just that: alternative medicine with the understanding that we would support it on the basis of evidence and safety. Those sentiments certainly were accepted by the principals of Tzu Chi.

The Chairman: Dr. McLennan.

Dr. Barry McLennan: I'd like to echo the remarks Dr. Dirnfeld made, but add one other.

The 16 medical schools in Canada constantly are looking at their undergraduate curriculum. I can tell you from the recent ACMC annual meetings that increased emphasis is being put in the curriculum on training our undergraduate medical students in these areas.

However, you hit it right on the head when you said we need the evidence. We need the research to be done so we know whether these alternative therapies are useful or not. This is the missing equation in this whole issue. We know many Canadians are spending as much money out of their own pocket on alternative therapies as the conventional system is spending on health care. This is an alarming number, and it underscores the desperate need for more money to be put into health research.

I have one other point on that. The MRC, the NCIC—that is, the National Cancer Institute of Canada—and I believe the Heart and Stroke Foundation have recently broadened their mandate to expand their traditional areas of research into a broader definition of health: health outcomes, population health, and things such as alternative therapies. They've done this somewhat at their peril, because their base budget has been cut in the meantime. So they've essentially been kneecapped for their efforts, but their intentions are valid, and I applaud them for doing that, because we need to look at this additional area of health research, and alternative therapies are just one area.

The Chairman: Thank you, Doctor.

[Translation]

Mr. Perron.

Mr. Gilles-A. Perron (Saint-Eustache—Sainte-Thérèse, BQ): Dr. Dirnfeld, I am glad you set the record straight. You are one of the few people who have dared to talk about the cumulative cuts in social transfers to the provinces that did so much harm to every provincial government in the areas of health and social services. Your numbers are exactly the same as mine so we are on the same wavelength.

I would like to add that the cumulative cuts to the provinces by the year 2000 will reach a total of $42.4 billion. That's a lot of money.

I'm not prepared to pass judgement and to say who, of the provinces or the federal government is in the right or in the wrong, but I can say that $42.4 billion is a lot of money.

What is your view on the idea that instead of constantly cutting back on social transfers and targeting healthcare, we could look at how we tax businesses and individuals? It hasn't been done since 1962. We might also better manage our business and stop wasting taxpayers money, whether those taxpayers are Canadians, Quebeckers or Ontarians.

I would like you to give us your views. How should the government fight the deficit without imposing too heavy a tax burden on Canadians?

[English]

The Chairman: Merci, Monsieur Perron.

Dr. Dirnfeld.

Dr. Victor Dirnfeld: I agree it's important that in the management of our health care system we be as efficient as possible, that we be using only effective therapies, and that the therapies we choose be based on evidence. It's hard to be sure, but there are estimates that between 15% and 25%, some say 30%, of the treatments we administer are not based on evidence. To the extent that this is true, we are continually, always, trying to find evidence to see that whatever treatment we're using, whatever investigation, is based on evidence. Until that evidence is available, we do the best we can on anecdotal experience from our senior physicians and from younger physicians who are trying new therapies and new investigations.

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For the most part, however, I think the health care system has become very efficient through these very dramatic cuts, these lean years, these downsizing and budgetary constraints on us. We have used innovations in many fields, and I could give you many examples, like ambulatory surgery, like laparoscopic surgeries instead of the traditional opening up of the abdomen—which has cut down the hospital stay from two weeks to 24 hours. There have been dramatic improvements in all areas of medical care, and it has become more efficient and cost-effective. I'm proud of that, and I think we will continue to find efficiencies, but I think we've gone a long distance. Now the cuts are not cutting the fat, they're cutting the muscle and bone, and I fear for that.

With respect to your question about the tax system and how it could be addressed, I share your concern about the massive decrease in transfer payments. As you say, some have estimated that decrease to be of the order of $42 billion over the six- or seven-year financial cycle, the fiscal framework of the government. That is not just in the province of Ontario, where they have done their own taxation manipulation, changes and alteration, but right across the country. As I travel this country, patients, doctors, other health care providers, nurses and physiotherapists in every province are consumed with the magnitude and degree of change and the difficulty in accessing quality care, and I hear very serious stories right across the country about patient-poor outcomes because of this.

I wouldn't want to venture into how to change the tax system to remedy the situation because it's not an area of my expertise. I have personal thoughts, but they're just that—personal.

The Chairman: Thank you, Doctor.

Mr. Riis.

Mr. Nelson Riis (Kamloops, NDP): Thank you, Mr. Chairman. I have just two quick questions.

The first is to Mr. Renaud in regard to the 5% funding now for the social sciences and humanities area. You mentioned in your report that you are working hard to leverage new sources of funding for research. I appreciate that it's probably much easier in some other fields to leverage private sector support and so on. How successful do you think that will be?

I'll just say the other question right off. Dr. Dirnfeld, in regard to what you called the alarming trend in federal government funding for basic biomedical clinical and health research, you presented some graphs. We've seen these before, and the difference between our country and the United States is appalling. Is one of the reasons for that the fact that over the years those working in the research areas involved haven't been lobbying as well as others in other sectors? In other words, there seems to be such an appalling gap here, whereas in other areas the gap is much less—and I'm thinking of comparing Canada and the United States in, say, the financial industries. Is it because you haven't put in enough effort—I'm not sure how to say this, but I don't mean it in a negative way—into lobbying people like members of Parliament, MLAs, MNAs, and so on?

The Chairman: Whose response do you want, first?

Mr. Nelson Riis: Monsieur Renaud.

[Translation]

Mr. Marc Renaud: There are several funding sources that we can try to leverage.

[English]

There are several sources of funds. There are basically three sectors: other governmental agencies, community foundations, and the private sector.

SSHRCC has been quite successful in the recent past in leveraging the funds from other governmental agencies—Immigration, Archives. They're basically coming to us and saying they would like this thing looked at and that we should join forces in order to get there, in order to develop post-doctorate programs, particular fellowships or research projects or chairs, all kinds of things. On that front, it goes pretty well, but what we still have to explore is a better collaboration with provincial bodies.

The foundation world has practically not been explored thus far, and that has to be looked into.

The private sector is a very touchy issue. For six years I was the president of the Quebec board of social research, and I will always remember an experience I had there. The Quebec government had organized a conference on consumption of drugs amongst the elderly, and there were several drug companies there, as well as researchers. The basic conclusion was that we had a problem on our hands because the elderly were taking three or four times more pills than 10 years ago, without the pills having changed.

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After the meeting I talked with the drug people and said we had a problem on our hands. I suggested we find a means with government money and their money to look at psycho-social behaviour around drugs or pharmaceutical vigilance or pharmaceutical economics. The drug companies agreed with me it was a priority but they wanted a tax exemption.

There's no possibility of any kind of tax exemption for social research, and that doesn't help to leverage funds from the private sector. That's very different from the biomedical world or the engineering world.

Dr. Victor Dirnfeld: If we have to lobby more—and I take your point—then we'll do it. There has been strong, consistent, and long-term lobbying by the bioscience industry and the academic and research communities for research funds and adequate funding.

I point out again that we're at the bottom of the heap. In front of us are Japan, France, and the United States—not just the United States. It's too easy to dismiss our position by comparing it to the Americans because they're very rich. But even the United Kingdom surpasses the United States and Canada in per capita contribution and investment in research.

I take your point, and we'll redouble our efforts if that's what it takes. Hopefully, it will fall on ears that will listen to us.

The Chairman: As always, Doctor.

Mr. Jones.

Mr. Jim Jones (Markham, PC): Thank you very much, Mr. Chairman.

First of all, I think the health care industry is an excellent industry. I used it a couple of years ago and the doctors and nurses...the whole experience was outstanding.

To Ms. Redman and Mr. Szabo, I suggest if we want to attack Mr. Harris and Mr. Eves on what they have done, maybe we should have them appear in front of this committee to justify what they have done, because I think they've done a good job.

Have you folks done any research on the preventative side to show that if you did outbound programs to the schools and educated people on proper health care and diet, we could probably get by with considerably less than what we spend on health care today?

I was at a function on Friday night and one of the doctors—I can't think of his name but he was a leading physician—said if we spent more time educating people on diet and controlled obesity we could save one-third of our health care costs. Do you have any comments in this area?

Dr. Victor Dirnfeld: I've been practising for over three and a half decades. Much of my practice time, both in my office, with patients directly as well as in the communities where I practice, and neighbouring ones has been dedicated to talking about that, lifestyle modification. My colleagues, medical organizations, and other health care professionals have also done that for 20 or 30 years.

We agree with you on the basis of the evidence that with lifestyle change such as proper diet, lipid fat reduction, and salt reduction we can control and diminish significantly the incidence of heart attack and stroke. In fact, the incidence of deaths from heart attacks in the last 20 to 25 years has decreased by about 40% to 45%, and deaths from strokes have decreased even better than that by about 50% to 60%. That's in large part because of behaviour modification, lifestyle alteration, diet, exercise, cessation of smoking, but also due to intervention with medications and other treatments.

There is a problem I find with the prediction that if you prevent enough and pour enough resources into prevention you're going to ultimately, down the road, end up with very little disease.

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First of all, compliance is very difficult with patients. As you know, getting patients to stick to diets is very hard. In fact, there is a burgeoning diet industry in the world, particularly in North America, which wouldn't be alive and economically so healthy today if people simply stuck to the diets we gave them and lost their weight. People have great difficulty doing that; in addition to which, there are many disorders for which lifestyle changes can't produce improvement: degenerative diseases, certain cancers, trauma, accidents, and those sorts of things.

To the extent that we can do it—and we follow the trends and we look for the evidence—we invest a great deal of time and resources in doing just what you're speaking about, but there are limits to what that will deliver in the future.

Dr. Barry McLennan: I would like to address Mr. Riis' question on the lobbying issue. I'd like to refer you to page 10 of our document. I believe you have a copy.

You can see that we weren't doing too badly until 1994. We were the bottom line on the graph, but at least we were headed in a positive direction.

In response to our recommendations for the last two or three years, this committee—and I applaud you and your predecessors for doing so—has recommended to cabinet that there be substantial increases in health research funding, so the lobbying has been effective up to that point. However, the increase has not come at the cabinet level and as a consequence we're falling off the graph.

Now with respect to your comment about other countries, it's always a bit difficult to compare what we're doing here with other countries because the systems aren't exactly the same. For example, in the United States, the NIH—the National Institutes of Health—is the major funding agency, and at first blush you might want to compare that with the Medical Research Council of Canada. There's one very important difference. They're funded differently.

Secondly, the NIH pays the salaries of the researchers, which in Canada is not permitted; that is, the MRC does not pay the salaries of the primary investigators. So there are differences. I would point out, though, that many of these other countries shown on this graph have gone through recessions, just as Canada has, so I submit to you that it's really a question of priorities. Where do we want to put our investment and where do we want to spend on things that matter to Canadians?

As I said in my remarks, and I'll elaborate on it if you wish, there is a lot of evidence in Canada now as well to show that if we invest in health research we get a double win. We get not only the health research benefits that will help the situations my colleague on the right here has been talking about, but we also get the economic return. The CMDF activity is very admirable. It's fantastic. But let me remind you that it's at one end of the continuum. We are now reaping the benefit of investments in health research made in this country 15 and 20 years ago. We have to keep priming that pump or there won't be any venture capital investments in Canada in the next decade. That's why it's so important to keep the cycle running.

Dr. Mark J. Poznansky (Chairman, Council for Health Research in Canada): We have an expression that the plural of anecdotes is not data, and one of the problems we have in the prevention area, quite frankly, is that there's no level of government in this country, either provincial or federal, that is expending a significant amount of money on doing research on how to prevent and whether we've prevented. That's one fundamental point.

The second deals with the issue of lobbying. Barry and I and others spend ten days and more in Ottawa lobbying. I've been back in Canada now for 20 years, and I can name you 20 or 30 American senators and 20 or 30 members of the House of Representatives of the United States who are continuously strong and vocal supporters for medical research in the news media and in Congress. I'm sorry to say that I can name barely a single member of our Parliament over the last 20 years who has been a strong and vocal supporter of our endeavour. So it's really a two-way issue here.

Dr. Toby Gushue: I'd just like to respond to the questions regarding prevention. For at least the last quarter of a century the dental profession in Canada has been a leader in prevention. We have been able to educate our patients in routine oral hygiene. We have been able to educate our communities in the use of fluorides. We have been part of the support for tobacco legislation over the last number of years because of the effect of tobacco on gum disease.

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As far as prevention is concerned, the dental profession is proud of its contribution to the health of Canadians, and we will continue on with that emphasis.

Thank you, Mr. Chairman.

Dr. Ray Wenn: I would like to add a couple of comments to help drive that point home.

Over the past 20 years the rate of decay in this country has dropped by 50%. That's dramatic. Just imagine how much money would have to be spent on dentistry today if that rate hadn't gone down by 50%. There'd be an awful lot more dollars being looked for to fix kids' teeth.

About 70% of children who hit 17 and 18 years of age now have no decay, and the ones who do have very little. So their outlook on life, when they're the same age as the group sitting around this table, is going to be entirely different. They will not fear the dentist the way most of you probably do.

The Chairman: Thank you, Dr. Wenn.

Ms. Vandewater, do you have a final comment?

Ms. Audrey Vandewater: I do, Mr. Chairman, although I know time is running out.

In the area of prevention, I want to say that the health charities have a very major role to play in the area of prevention. I can talk primarily from the perspective of the Heart and Stroke Foundation. Through research we have identified a number of risk factors that contribute to heart disease and stroke. Part of our mission is to educate the public and to promote healthy lifestyles. We have a great deal of literature and information that we continually strive to get out to the public to help them identify risk factors, look at their own lifestyle, and modify that lifestyle in order to be healthier and to stay away from some of these very debilitating diseases.

The Chairman: Thank you very much.

This concludes this round table. On behalf of the committee, I would like to thank you. You provided us with thoughtful, insightful presentations and provided us with important information about ways to establish priorities as we write our report and make recommendations to the Minister of Finance.

Thank you very much.