FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, April 2, 1998

• 0915

[English]

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

As you know, the order of reference this morning is the consideration of Bill C-36, An Act to implement certain provisions of the budget tabled in Parliament on February 24, 1998.

This morning we have the pleasure of having with us as a witness—

Yes, Mr. Loubier.

[Translation]

Mr. Yvan Loubier (Saint-Hyacinthe—Bagot, BQ): Mr. Chairman, I'm happy to see you again.

I would like to set the record straight before we begin hearing witnesses. In addition, in order to be very clear about the process we will be following as we study Bill C-36, if in fact this is the bill we received a briefing on yesterday, I would like to have some additional clarification.

We were told that we would have five to seven days to hear witnesses speak to basic issues pertaining to Bill C-36. Could you tell me whether or not this is accurate? It would appear that we will be proceeding with the clause-by-clause consideration of Bill C-36 starting on April 29. If this is true, this is extremely problematic and I will explain why.

[English]

The Chairman: We decided we would be reporting the bill to the House on May 1.

[Translation]

Mr. Yvan Loubier: So we do indeed have a problem. Who made this decision? Was it the Department of Finance or the government?

This is a problem, Mr. Chairman, because, first of all, we didn't discuss the matter. Secondly—

Please, you are the witness today, you're not a member of the committee. Don't get excited.

There's a problem, because there's nothing urgent about adopting Bill C-36 if there's goodwill on both sides, particularly on the government's and Prime Minister's side. After what we heard last week, namely that the government of Quebec and the federal government would be negotiating possible options pertaining to the Millenium Scholarship Fund, such as opting out, etc., it's not urgent to adopt Bill C-36.

At present, we have listed 25 potential Quebec witnesses who could appear to speak solely about the Millenium Scholarship Fund, not to mention those who are extremely interested in all the provisions of Bill C-36 regarding the child tax benefit.

I'm convinced that there will be many organizations, not only in Quebec but elsewhere as well, that are going to want to talk about tax benefits, child poverty, what is and what is not in Bill C-36. Elsewhere in Canada, there are organizations such as Campaign 2000, which have launched wonderful promotion campaigns to obtain a new policy to fight child poverty. Moreover, this was what your government said it wanted to do in its first mandate in 1993.

At the outset, I can tell you that I don't agree with the April 29 deadline for doing the clause-by-clause study. I don't want to set any deadline for reviewing the bill. By next week, we will have a more final list of witnesses to submit to you. However, it is clear that we won't have enough time to hear them all if we only have five to seven days to analyze the bill.

My colleague wanted to say something about the witnesses.

[English]

The Chairman: Just in response, Mr. Loubier, the decision was made by committee members. It wasn't made by the Minister of Finance. The Minister of Finance doesn't run this committee.

Secondly, so we can get started with our work, kindly forward your list to the clerk so she can do her job. It is your responsibility to forward the names. It's her responsibility to schedule them. There's no reason why, according to the proportionality rule we have in this committee, we cannot....

• 0920

I'll give it to you in a nutshell, and give you a little synopsis. The committee has decided that on May 1 we will report to the House. In keeping with the tradition of the workings of this committee, members of Parliament who are interested in having certain witnesses appear should forward the list to the clerk so she can do her job and start scheduling those individuals.

Your list will have to adhere, of course, to the proportionality rule, as is the tradition of this committee.

[Translation]

Mr. Yvan Loubier: Mr. Chairman, I'd like to stop you for a moment. You said that the committee decided to table the bill in the House on May 1.

[English]

The Chairman: That's right.

[Translation]

Mr. Yvan Loubier: I don't recall this decision. Secondly, we had a steering committee meeting before that.

[English]

Mr. David Iftody (Provencher, Lib.): There were no members there.

[Translation]

Mr. Yvan Loubier: Please, let's stay calm. This decision was made before the Quebec Premier and the Minister of Education, Ms. Marois, came to Ottawa to meet the Prime Minister. Since this meeting... If you would only listen, you would perhaps have a better understanding of what's happening in the real world. Since this meeting, the Prime Minister of Canada and the Premier of Quebec demonstrated some goodwill in order to reach some arrangements with Quebec on an issue that is a source of conflict, namely, the Millenium Scholarships.

Given this good will, this good faith—which I hope exists on the federal government side as well—it seems to me that we should deffer the decision to proceed with clause-by-clause consideration of the bill as quickly as possible, especially the decision to complete everything by April 29.

As I said, we have many witnesses. We will certainly be providing you with a list. We have already begun compiling this list. We have, for example, the Fédération des commissions scolaires du Québec...

[English]

The Chairman: Mr. Loubier, you shouldn't be doing your homework on everybody else's time. The reality is this. You need to forward a list. Do that part first, then we will discuss it at another meeting.

We have many witnesses who have to appear in front of us today. Forget about the ones who have to appear after today. Let's deal with these ones first. Then we'll discuss—

[Translation]

Mr. Yvan Loubier: If we start off on the wrong foot, Mr. Chairman, and if you don't commit to hearing all of the witnesses invited to talk about the Millennium Scholarships and the child tax benefits, we won't take all kinds of steps to contact them.

[English]

The Chairman: Okay. I think you made your point.

[Translation]

Mr. Yvan Loubier: Could I have a commitment from you that April 29 and May 1 will not be the final dates for tabling the bill in the House, and that we will be able to invite the number of witnesses that we feel is suitable and appropriate?

[English]

The Chairman: The decision was made by the committee that on May 1 the bill would be returned to the House.

The unfortunate reality is that we all have the responsibility to be present at these meetings. If you're not there and all of a sudden your point of view is not expressed....

[Translation]

Mr. Yvan Loubier: One moment, please. We had a delegate who was present. But I never received any report stating that a decision had been made about tabling the bill on May 1st.

[English]

Mr. David Iftody: There was no Bloc member at the meeting yesterday.

[Translation]

Mr. Yvan Loubier: Would you stop interrupting me? As I said to you, this was before the meeting between Premier Lucien Bouchard and Prime Minister Jean Chrétien.

[English]

The Chairman: Ms. Torsney.

Ms. Paddy Torsney (Burlington, Lib.): First, whether or not we want to have this discussion at some point is really irrelevant to the witnesses who are here right now. I suggest we proceed with the witnesses who are here right now and we can work this out later.

Second, we've had a steering committee meeting at which the Bloc members were present and they did not raise any of these objections.

Third, yesterday we had a meeting and decided as a committee what we will be doing. The dates were set. If Mr. Loubier did not empower his delegate yesterday to do that, that's his problem. We'll sort that out later. Get your lists in, as was suggested to everyone else, and let's proceed with this witness.

The Chairman: Exactly.

Mr. Valeri, thank you for your patience.

[Translation]

Mr. Bellehumeur.

Mr. Michel Bellehumeur (Berthier—Montcalm, BQ): There seems to be a problem, Mr. Chairman. It would seem, at any rate, that the Bloc Québécois members of this committee were not advised of this matter. If the decision was made yesterday...

Mr. Yvan Loubier: We were never notified of the meeting, yesterday.

Mr. Michel Bellehumeur: That's the first point. The other point, Mr. Chairman...

Mr. Yvan Loubier: No! We are right about that.

[English]

The Chairman: They were sent in the usual fashion. We all got them except for you.

[Translation]

Mr. Yvan Loubier: We never received it.

[English]

The Chairman: If you're saying you didn't receive it, that's fine, but the reality—

[Translation]

Mr. Yvan Loubier: I thought that this was the steering committee meeting held last week, explaining why I said that the decision must made before the meeting between the Premier and the Prime Minister. But if you are telling me that there was a steering committee meeting held yesterday to which we weren't even invited, that is even more serious than I thought. You are making decisions in our absence.

Mr. Michel Bellehumeur: One thing remains unchanged, Mr. Chairman. There is no urgent need to proceed with the clause-by-clause study of this bill within two months and to report it to the House, unless you are telling me...

• 0925

We in the Bloc Québécois are presuming that the government is acting in good faith in its negotiations and agreements with the Quebec Premier this week, particularly concerning the Millennium Scholarship Fund, Mr. Chairman. This week, the Premier of Quebec and the Prime Minister of Canada demonstrated good will on both sides and decided that this matter would be negotiated. Each of them even appointed a very important deputy minister in their respective governments to negotiate, to find the grounds for agreement and to report on the matter.

If we were to adopt the bill by May 1st, if everything were completed here and the negotiators were to agree on certain issues with respect to the delegation of powers and other matters—we could discuss this later on with our witnesses—this will all have to be referred back to us. How will this work? Are we going to have to move an amendment to a bill that won't even have been adopted yet?

Mr. Chairman, I don't think that there is any urgency, unless you are telling me that the federal government is not acting in good faith on the matter and will not be reaching an agreement with the government of Quebec. That's an entirely different kettle of fish. If that's the case, I would prefer to know today because we will get organized accordingly.

However, right now, according to the news I've heard and the papers I've read, both the federal and provincial governments appear to be demonstrating some openness. Each side is going to do its bit to reach an agreement, while we will be rushing this bill through. We will have witnesses and we won't have the time to question them thoroughly. We have witnesses, a very long list of witnesses—out 25, including the coalition and other very important groups—ho are to appear solely to discuss the Millennium scholarships.

I know that there are other groups throughout Canada who are going to want to be heard. And we are to rush the bill through in order to dispose of it once and for all and table it in the House of Commons by May 1st? That doesn't make good sense, Mr. Chairman. Where is the good faith?

At any rate, we are presuming that the government is acting in good faith. The law states that good faith is to be presumed. I think that the government is acting in good faith. But if you rush this through, I will conclude that you are not acting in good faith, Mr. Chairman, and that you are rushing this through, regardless of any agreement that the negotiators from two governments may be proposing. That doesn't make sense, Mr. Chairman! That does not make sense!

[English]

The Chairman: That's fine, but the point you have stated was also made by Mr. Loubier, so things are getting repeated. I have duly noted your points, but I would really like to move on with today's agenda if it's at all possible. Just to show a bit of respect to many people who are present here today, I think we'll go back to that point later.

[Translation]

Mr. Yvan Loubier: No, no. Mr. Chairman, listen, we are beginning work...

[English]

The Chairman: No, Mr. Loubier, what I'm saying is that I've listened to your point. Both of you are repeating the exact—

[Translation]

Mr. Yvan Loubier: ...pertaining to a bill. We are beginning our study of a bill. I want to get your commitment that if we attempt to invite witnesses, that we will be given an opportunity to hear them about all of the issues dealt with in Bill C-36, pertaining to the Millennium Scholarships and the child tax benefit.

[English]

The Chairman: Mr. Loubier, quite frankly, I started to tell you—

[Translation]

Mr. Yvan Loubier: If you don't make this commitment, we will not work on compiling a list of witnesses; we will not make any effort to find witnesses in Quebec and Canada.

[English]

The Chairman: Hold on. Order!

[Translation]

Mr. Yvan Loubier: That doesn't work. No, this is not a point of order. It is a question of privilege.

Mr. Michel Bellehumeur: I'm impressed.

Mr. Yvan Loubier: I raised a question of privilege, and your little gavel doesn't impress me very much. This is a matter of privilege and I'm entitled to raise a question of privilege.

[English]

The Chairman: Quite frankly, I'm not impressed by the fact that you're not doing your job by not forwarding the list to the clerk so that we can start inviting those people; nor am I impressed by the fact that you weren't present at the meeting yesterday, when the decision was taken; nor am I impressed with the fact that you said you didn't know about the meeting when there was a whip's representative from the Bloc Québécois there—

Mr. Yvan Loubier: No, I didn't know. I didn't receive the fax. If I submit my list to you—

The Chairman: —so don't talk to me about who is impressing who. I'm going to go on with the meeting.

Mr. Yvan Loubier: —and I have place only for 25 witnesses, are you kidding—

The Chairman: You just forward the list and do your job.

[Translation]

Mr. Yvan Loubier: No, no. I will provide you with a list, but I want to be assured that this list... Can I be assured...? I am raising a question of privilege.

[English]

The Chairman: Why don't you forward the list like you're supposed to? What is your problem? I don't understand. You have 25 names. Forward them to the clerk. We're going to invite those individuals, so what's your problem?

[Translation]

Mr. Yvan Loubier: My problem? I certainly do have a problem.

[English]

The Chairman: What is your problem?

[Translation]

Mr. Michel Bellehumeur: You're the problem!

Mr. Yvan Loubier: If I provide you with a list of 75 witnesses who want to speak on the Millennium Scholarships and the child tax benefit, or if we have other witnesses from somewhere else in Canada and we have only five days to hear them, we will not be able to hear more than 25, and we will have done all this work for nothing. We will have invited these people, and told them just how critical these provisions of the bill are. Working like this is like working backwards. Some people don't like that.

[English]

Ms. Paddy Torsney: Enough, already.

• 0930

The Chairman: Look, Mr. Loubier, the process is quite simple. Actually, I think it's very, very simple. If you want people to appear, you forward their names to the clerk. You're an experienced parliamentarian, so you know these things. I don't understand why you're harbouring this point, because you're really not making a point.

The point is quite—

[Translation]

Mr. Yvan Loubier: I will outline the problem to you once again. Yesterday, you held a steering committee meeting...

[English]

The Chairman: Just a second. Order.

[Translation]

Mr. Yvan Loubier: ...in the absence of the Bloc Québécois, secretly. You decided that you would table Bill C-36 in the House of Commons on May 1st and that you would be proceeding with the clause-by-clause analysis on April 29. We weren't aware of this.

[English]

The Chairman: Mr. Loubier, you're not being fair.

[Translation]

Mr. Yvan Loubier: We learn about this decision late in the afternoon and you're asking us to submit the number of witnesses that we want to hear. You couldn't care less. You've decided that the review will be conducted within five days and that it will be all over and done with after. The only thing left is to table it in the House on May 1st.

[English]

The Chairman: Where do you get five days from?

[Translation]

Mr. Yvan Loubier: You have absolutely no regard for the negotiations underway between the Quebec government and the federal government negotiators. There is, therefore, a problem. First there is a question of credibility about the process and then there is a problem about the transparency, because we were never notified of this meeting. Now we are being informed of the decision and you're telling us to provide witnesses and to act like idiots and work our heads off in order to invite witnesses. That doesn't make sense.

[English]

The Chairman: That's not true. Why would a representative of the whip's office....?

At any rate, Mr. Valeri, I would like to welcome you again. I look forward to your introductory remarks. I understand there are a number of officials—

[Translation]

Mr. Yvan Loubier: Mr. Chairman, I raised a question of privilege pertaining to my parliamentary right. I didn't get an answer to my question. If I provide you with a list of witnesses—and we have many—and the deadline decided upon in secret, in our absence, is clearly too short, what do we do with the witnesses that we will not have heard? What option do you have? Do you have any flexibility with respect to the deadline for doing the clause-by-clause study? Are April 29 and May 1st final dates? Are you making us work for nothing or are you acting in good faith?

[English]

The Chairman: First of all, I don't believe parliamentarians work for nothing. That may be your impression, but it's not my impression. I think we contribute to the process quite well, and given the various successes we have had, the results of this committee speak for themselves.

Secondly, the only thing I'm asking you to do is to do basically what you're supposed to do, which is provide us the list. Was a decision made that the bill be returned to the House on May 1? Yes, it was. Was it a committee decision? Yes, it was, so this is the work to be done.

Now, if you're asking to reconsider, we'll talk to the members of the committee yet again, and that's it. But as for your responsibility as a committee member, the only thing I'm asking you to do is the same thing that I, as chair, have asked every single other member of the committee to do, and that's to kindly—and I underline the word “kindly”—do what we as members of Parliament are supposed to do: forward a list to the clerk so that she can get on with her job, in order that we will be able to do ours.

You have a list of 25 members. The clerk will contact them and will make sure that, if at all possible, all of them can appear. It's the same thing with the Liberal side, the Conservatives, the NDP and the Reform Party. The process is pretty simple. It's not that difficult to comprehend.

But you've made your point, and it has been repeated by your colleague. I've taken note of it, but now I'd like to do my job as chair of the committee and give the floor to the individuals who are here today to explain to us important issues related to Bill C-36.

[Translation]

Mr. Yvan Loubier: Mr. Chairman, if I understood your argument correctly—and I will conclude with this question of privilege—, if we provide you with names of witnesses and if the other opposition parties provide you with witnesses as well, you will be prepared to consider the date of May 1st. That's what I understood.

[English]

The Chairman: What I'm saying is that if asking the committee to reconsider the date is something you would like to do, then it's up to the members of the committee to decide whether or not they would reconsider the date. That's the issue. That's the way it works. That's the way democracy works. That's how you got here. People voted for you. That's why you're here.

[Translation]

Mr. Yvan Loubier: And does democracy mean holding secret meetings and making decisions in the absence of representatives from the Bloc Québécois? Is that democracy as well?

[English]

The Chairman: No, that's not true.

[Translation]

Mr. Yvan Loubier: Continue, Mr. Chairman. I will provide you with my witness list.

[English]

The Chairman: I want to confirm that what you said is absolutely false.

[Translation]

Mr. Yvan Loubier: You said that that's not true. So that means that you're calling me a liar. Yesterday, I spent the entire afternoon in my office working on—

[English]

The Chairman: No, that's not what I'm saying.

[Translation]

Mr. Yvan Loubier: We never received a notice of meeting, but you provided us with the decision.

[English]

The Chairman: I'm saying you weren't present.

• 0935

[Translation]

Mr. Yvan Loubier: I would ask that you take back your words, Mr. Chairman, because you're making allegations, insinuations. Take back what you said.

[English]

The Chairman: I'm not making allegations. I'm just stating the fact that everybody—

[Translation]

Mr. Yvan Loubier: No, I did not receive notice of the meeting. So take back your words, please.

[English]

The Chairman: Mr. Valeri.

[Translation]

Mr. Michel Bellehumeur: What a chairman!

Mr. Yvan Loubier: He's not a real chairman! We're going to be asking for his head at one point. He's too clever by far. He thinks he's too clever.

Mr. Michel Bellehumeur: He doesn't make you feel very good, at any rate.

[English]

The Chairman: Mr. Valeri, you can begin.

Mr. Tony Valeri (Parliamentary Secretary to the Minister of Finance, Lib.): Thank you, Mr. Chairman.

I'd like to make some brief remarks about Bill C-36 and then move on to questions from the committee where in fact we will have a number of officials come to the table and deal with some of those technical issues.

Bill C-36 implements elements of the Canadian Opportunities Strategy along with measures that help to create an enriched and simplified Canada child tax benefit. It also deals with excise taxes on tobacco products, air transportation tax reductions, tax agreements with aboriginal governments, old age security changes, the Hibernia oil project, and measures to help Canada meet its international obligations.

Mr. Chairman, let me begin with the Canadian Opportunities Strategy.

Building on the previous two budgets, the 1998 budget proposes a comprehensive set of measures under the Canadian Opportunities Strategy to expand access to the knowledge and skills Canadians will need for better jobs and higher standards of living in the 21st century. Bill C-36 implements several of these measures.

First, in order to improve access to post-secondary education for low- and middle-income students, the bill establishes the Canada Millennium Scholarship Foundation to grant scholarships to students who are in financial need and who demonstrate merit. The foundation will operate at arm's length from government, and in consultation with provincial governments and the post-secondary educational community will determine how the scholarships are designed and delivered.

The government's initial $2.5 billion endowment will provide more than 100,000 scholarships annually for 10 years to full- and part-time students, beginning in the year 2000. Scholarships for full-time students will average $3,000 a year, with individuals potentially receiving up to $15,000 over four years. Student debt load could be reduced by over half.

The foundation will have the discretion to adjust the average and cumulative amount of scholarships over time, Mr. Chairman.

Secondly, there are provisions in this bill that stem from last December's first ministers' agreement that something must be done in the 1998 budget to reduce the financial burden on students.

Mr. Chairman, by amending the Canada Student Financial Assistance Act, the Canada Student Loans Act, and the Bankruptcy and Insolvency Act, assistance will be provided through: extending interest relief to more graduates; an extended repayment period for those who need it; an extended interest-relief period for borrowers who remain in financial difficulty; and a reduction in the loan principal for individuals still in financial difficulty after these relief measures. Together, these measures will help up to 100,000 additional borrowers.

Bill C-36 introduces a third component of the Canadian Opportunities Strategy, the Canada Education Savings Grant. This grant will provide for a 20% grant on the first $2,000 in annual registered education savings plan contributions made after 1997 for children up to the age of 17. This grant will make RESPs one of the most attractive savings vehicles available to parents saving for their children's education.

The fourth element of the Canadian Opportunities Strategy helps address the problem of youth unemployment. Employers hiring additional young Canadians between the ages of 18 and 24 in 1999 and the year 2000 will be given an EI premium holiday. This will increase employment opportunities for youth and reduce payroll costs for employers by about $100 million over the next two years.

Bill C-36 also moves the government forward on its 1997 budget commitment to implement the Canada child tax benefit. The proposed approach is a national child benefit system, where the federal government will provide an enriched Canada child tax benefit while the provinces and territories redirect some money into better services and benefits for low-income families, especially the working poor.

The 1997 budget proposes a two-step enrichment of the current $5.1 billion child tax benefit that will add $850 million to create a new Canada child tax benefit by July 1998.

In the first step introduced last July, the working income supplement was enriched by $195 million, with benefits now provided for each child instead of per family. More than 1.4 million Canadian families, with 2.5 million children, will see an increase in the federal child benefit payments by July of this year.

• 0940

The Canada child tax benefit will provide benefits of $1,625 for the first child and $1,425 for each additional child to all families with income up to about $21,000.

Following discussions with the provinces, territories and Canadians, the government will introduce legislation to implement the 1998 budget commitment to enrich the Canada child tax benefit by an additional $850 million.

Mr. Chairman, I'd like to move to the remaining measures in this legislation. Bill C-36 amends the Excise Tax Act to reduce the air transportation tax and raise federal excise taxes on tobacco products.

Federal excise taxes on tobacco products are being increased to add $70 million more in federal revenues each year and as part of the government's efforts to discourage Canadians, particularly youth, from smoking.

The air transportation tax is being reduced and phased out this year as part of the government's program to commercialize air navigation services in Canada.

It also addresses first nations taxation. It enables the Kamloops Indian band to impose a value-added tax, at the rate of the federal goods and services tax, on all fuel, alcoholic beverages and tobacco products sold on its reserves. It expands the Westbank First Nation's existing taxation authority over tobacco products to include a similar tax on all sales of alcoholic beverages sold on its reserves. It also amends provisions of the Budget Implementation Act, 1997, dealing with the tobacco taxation authorities of the Cowichan tribes and the Westbank First Nation.

In addition, Mr. Chairman, it allows the Minister of Finance or the Minister of National Revenue, with the approval of the Governor in Council, to enter into tax administration agreements with aboriginal governments that want to tax, and to make advance payments from the Consolidated Revenue Fund on the same basis as similar tax administration agreements with provincial governments.

Changes to the guaranteed income supplement and the spouse's allowance in Bill C-36 will improve service to low-income seniors, eliminate government duplication, calculate benefits more precisely, and increase fairness. By beginning the payment year in July instead of April, GIS recipients will have three months to submit income statements to the government, thereby reducing the possibility of underpayments. The need for GIS recipients to report their income twice to the federal government will eventually be eliminated.

The payment period under the War Veterans Allowance Act will now be the same as the Old Age Security Act, from July in one year to June in the next.

Mr. Chairman, another measure in Bill C-36 provides authorization to sell the government's 8.5% interest in the Hibernia oil project that is held by the Canada Development Investment Corporation. Having this authority in place will allow the sale to proceed when in fact market conditions are favourable.

The bill also provides the authority to eventually wind up the CDIC once its two remaining principal assets, the Canada Hibernia Holding Corporation and Theratronics International Limited, have been sold.

Finally, Mr. Chairman, Bill C-36 deals with Canada's international obligations. Amendments to the Bretton Woods and Related Agreements Act will increase the International Monetary Fund's capacity to support a stable international financial system and facilitate the government's participation in internationally coordinated efforts to resolve short-term liquidity crises.

Recent developments such as the Asian crisis demonstrate the central role of the IMF in preserving monetary stability. To perform its role, however, the IMF must have adequate resources, and the amendments in Bill C-36 will help ensure this.

In addition, Bill C-36 requires the Minister of Foreign Affairs to consult with the Minister of Finance before agreeing to provide financial assistance to an institution covered under the International Development Assistance Act. This will certainly help improve control over the growth of contingent liabilities associated with Canada's participation in these institutions.

That is a very brief overview of measures in Bill C-36. Each is important to building a strong economy and a strong society, goals that this government has pursued since coming to office in 1993.

I would certainly be pleased to answer any questions, and I would also invite the respected officials to the table, Mr. Chairman, at your request.

The Chairman: Thank you very much, Mr. Valeri, for the overview.

We are now going to move to the question and answer section. We'll begin with Mr. Ritz.

• 0945

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

Thank you, Mr. Valeri, for your thoughtful presentation.

One thing that pops to mind here with Bill C-36 is the RESP situation the government is creating. We're seeing contributions recorded at all-time lows. We're down to 60¢ per $100 of income in RRSP contributions. People just don't have the cashflow to do it anymore. So how do you feel that the average Canadian out there will come up with the funding to support an RESP situation? It's good for their kids, basically, but how will they have the money to do it?

Mr. Tony Valeri: I think the officials can also speak to this issue.

Essentially, with respect to an RESP, I think the models that have actually been run will demonstrate that a contribution of as low as $25 a month will in fact provide an enormous amount of assistance. In fact, you will see the federal government provide 20% of that contribution, up to a maximum of $2,000 per year for child education savings. So we're not talking about vast sums of moneys that Canadians would actually have to put away in order to deal with RESPs. What we are doing is providing a vehicle where Canadians of modest income will be able to save for their children's future education.

At the same time, the other plank of this whole strategy is to help those Canadians who in fact cannot save by encouraging and providing access to higher education for those Canadians as well, through the millennium scholarship fund.

So we really can't look at these things in isolation. When you look at the entire strategy, you have the RESPs put in place for those Canadians who can in fact put some money away for their children's education and you have government participation in that with a 20% grant. At the other end of the spectrum, you have those Canadians who perhaps cannot put money away for their children's education. Those Canadians will certainly have access to the Canada Millennium Scholarship Endowment Fund.

But I'll allow Mr. Murphy, perhaps, to add something, if he'd like to.

Mr. Bill Murphy (Tax Policy Officer, Personal Income Tax Division, Tax Policy Branch, Department of Finance): I guess I could add a couple of things here.

It's recognized that people are saving through various savings vehicles now for education, and that some people will, if they take advantage of registered education savings plans, perhaps postpone some of their RRSP contributions for a period of time. It's also recognized that for people currently using registered education saving plans, there are a lot of people out there making fairly small contributions. These are people with low and middle incomes.

So the government will be providing extra assistance to these people by topping up their contributions by 20%. To the extent that people get their kids off to college, get the kids out of the way and get them into education, they can then go back to saving for their RRSPs. If the children do not go on to higher education, the income that has accumulated in the RESP can go over to the RRSP of the parent.

Mr. Gerry Ritz: How do you speak to trust managers and people like that who are making applications saying that a trust vehicle is a far better vehicle than an RESP because you then have options other than education? An RESP can only be directed towards education. If the child decides not to do that, the money is basically gone. It's taxed as it comes back out, so the people managing these trusts and so on are saying that their vehicle leaves more options open.

Mr. Bill Murphy: I guess there are a couple of points there. First of all, the government, in trying to encourage savings for higher education, if people are using trusts—and it's up to the particular parent or grandparent or whoever we're talking about here to make a decision as to what they want to save for; there is a range of various investment vehicles they can use—is saying, however, if they want to save for their children's education, then maybe they should look at registered education savings plans and the government will put some additional funds in to help make those savings more effective.

It's up to the parents and it's up to the people out there who want to make savings to choose the investment vehicle in question. At the same time, if the child does not go on to higher education for whatever purpose, the savings can go into the RRSP of the parent or they can come back into the income, subject to inclusion in the tax rate and a penalty tax.

But really, the government is trying to encourage saving for higher education. In trust accounts people can pay down their mortgage faster and they can use RRSPs, but the registered education savings plan is a very effective vehicle now, particularly with the top-up, for saving for higher education.

Mr. Gerry Ritz: It's definitely a noble cause. We certainly need to have more education stimulated in the country.

• 0950

Going on to the millennium scholarship fund, as it's stated in clause-by-clause here, the aim is to significantly increase access to post-secondary education everywhere in Canada for low and middle-income students. Then further on down, we seem to have a cross-purpose here in that the awards are to help recipients of scholarships study away from home, and particularly outside the province.

I see that as a cross-message there, because you certainly increase your costs when you go away from home to study. Are we not missing the target a little bit with that direction?

Mr. Tony Valeri: Essentially, the provision was put in place because you do have situations where students do enter another province in order to study. We wouldn't want to, in any way, limit the help they might receive through the millennium scholarship fund because they were going out of province. We didn't want to penalize them, in essence, because they were going out of province.

Mr. Gerry Ritz: Why would you target them with that statement? What is the percentage of those who want to travel outside the province, especially when you're targeting low- and middle-income?

Mr. Tony Valeri: I'll let Andrew speak to that, but first, I don't think it was actually targeting them, it was more a measure put in place not to penalize them if in fact they were going out of the province.

I'll have the official answer the question.

Mr. Andrew Treusch (General Director, Federal-Provincial Relations and Social Policy Branch, Department of Finance): The first explanation, to be clear, is that the intent is to support students wherever they choose to study in Canada. That may well be at an institution outside their home province. Sometimes many of the supports that are now available to students do not provide support in those circumstances. Yes, it can entail higher costs. It's typical that for a student studying outside their normal place of residence, their education costs, broadly speaking, would be about $3,000 higher. If we are looking at providing financial support to students that reflects their needs, that's one aspect of need.

Mr. Gerry Ritz: The $3,000 higher cost for studying outside the province negates the value of the millennium scholarship fund. Basically, if you're talking about $3,000 annually and it takes $3,000 a year to study in another province, then it's a wash.

Mr. Andrew Treusch: The millennium scholarships don't equal all of the costs of higher education. They don't mean free education, sir. Obviously, a $3,000 scholarship goes a long way towards defraying the costs of higher education, depending upon the tuition fees, the costs they incur in books and other living expenses. But one of the main expenses a student faces is the living costs, particularly if they reside away from home.

The Chairman: Mr. Bellehumeur.

[Translation]

Mr. Michel Bellehumeur: Mr. Valeri, I won't spend a great deal of time on my first question, even if it is quite important, given what happened this morning. Can you explain to me why this is so urgent? Why are we hurrying this bill through without waiting for the results of the negotiations?

[English]

Mr. Tony Valeri: I think you did make reference to the discussion you were having this morning. I was in fact present at that meeting, and I think you can ask any individual who was at that meeting about how there was no pressure to put this bill through a report by May 1. In fact, there was a decision to invite committee members.

[Translation]

Mr. Michel Bellehumeur: No, no, no. Mr. Parliamentary Secretary—

An Hon. Member: That's not the question he's asking you.

Mr. Michel Bellehumeur: That wasn't my question. Regardless of whether or not we received the notice... We checked and we did not in fact receive this notice of meeting. This being said, I don't want to waste my time on the matter. However, there seems to be some type of urgency—

Are those people sitting in front ever going to stop talking? You don't want me to concentrate, or what? What is your problem?

[English]

What's the problem with you?

Mr. David Iftody: You didn't get the notice?

[Translation]

Mr. Yvan Loubier: Stop talking then. Wait for your turn to speak.

[English]

Mr. Michel Bellehumeur: What's the problem with you?

Mr. David Iftody: He's saying that he didn't get the notice.

[Translation]

Mr. Yvan Loubier: So, be quiet. Wait your turn, you'll talk then. Would you please call this gentleman to order?

Mr. Michel Bellehumeur: It is obvious that the people who are there and those representing the government do not appear to be acting in good faith. They appear to want to do things quickly. They appear to want to interrupt us, to prevent us from asking questions. I don't know what their problem is today.

Mr. Yvan Loubier: They're always like that.

Mr. Michel Bellehumeur: It is very clear that the government appears to want to adopt the bill quickly.

• 0955

I have a very political question that I would like to put to the politicians. Why is it so urgent that we adopt this bill without waiting for the results of the negotiations between the representatives of Mr. Bouchard and Mr. Chrétien: what's the rush? Why do we have to adopt this bill as quickly as possible, namely, on May 1st?

[English]

Mr. Tony Valeri: I could respond to you by saying, as has been said over and over again, that there will be extensive consultation with the various stakeholders, and that includes the provinces, on the definition and administration of the scholarships. It's been said over and over again.

If you perceive there to be, to use your words “an emergency here”, I think it's a figment of your imagination. I don't think in fact that it is an emergency. We're prepared to study this bill in committee, and certainly deal with the legislation to ensure that all the provinces, and certainly Canadians, ultimately benefit from what we are attempting to do in this piece of legislation.

[Translation]

Mr. Michel Bellehumeur: One of the things that you've talked about is the Millennium Scholarships. You want these scholarships to be made available in September 1999. If the bill were adopted in June 1998, 15 months should be enough time to allow the government to implement the management process for the Millennium Scholarships.

[English]

Mr. Andrew Treusch: There are a number of steps towards setting up the foundation. Much of this is necessitated to preserve the arm's-length nature of it.

There is an appointment process of members, and a small minority of members consult with provincial governments and the post-secondary education community to choose the majority of members, who in turn are responsible collectively for appointing the majority of the board, again, consulting the post-secondary education community as well as provincial governments.

So in establishing the foundation and preserving its arm's-length nature, these consultations will take some time, of course. The foundation is charged with ensuring that it avoid duplication, that it complements existing student aid programs.

[Translation]

Mr. Michel Bellehumeur: Fifteen months is not adequate! It's not adequate. If we were to adopt this bill in June 1998, 15 months would not be sufficient. That's what you're telling me. One year and three months, that would not be enough time?

[English]

Mr. Andrew Treusch: That, sir, speaks to all of the content of the legislation. The legislation of course covers many things.

[Translation]

Mr. Michel Bellehumeur: Apparently.

There must be a lawyer in the room. I would like to ask some very specific legal questions pertaining to clauses 25 and 29 among others. Who could answer this type of question?

Mr. Yvan Loubier: The lady is a lawyer.

Mr. Michel Bellehumeur: Good. May I begin? Do you need interpretation?

Ms. Kristina Knopp (Legal Counsel, Department of Justice, Finance, General Legal Services): No, I'm fine.

Mr. Michel Bellehumeur: Would it be accurate to say, Madam Counsellor...

Mr. Yvan Loubier: Ms. Knopp.

Mr. Michel Bellehumeur: ...Ms. Knopp, according to subclause 25(2), the Foundation would not, regardless of the results of the negotiations between the federal and provincial governments, be able to transfer any power authorizing the granting of scholarships.

Ms. Kristina Knopp: What do you mean by certain granting powers? The whole purpose of the Foundation is to grant scholarships. Consequently, I don't know what powers you are thinking of.

Mr. Michel Bellehumeur: Subclause 25(2) states:

(2) The Board shall not delegate any power or right of the Board

(b) to authorize the granting of scholarships;

If, for instance, the federal and provincial negotiators were to agree that the government of Quebec will be the one to authorize the granting of scholarships, do we need to amend the Act?

Ms. Kristina Knopp: Are you referring to an agreement under the clause...?

Mr. Michel Bellehumeur: We're talking about the political agreement.

Ms. Kristina Knopp: Between the Foundation and...

• 1000

Mr. Michel Bellehumeur: No. Perhaps you don't know—I know that the government officials don't get involved in politics and don't read the papers—but the Chrétien government and the Bouchard government...

Some Hon. Members: Oh, oh!

Mr. Michel Bellehumeur: Really, you're touchy today.

The Chrétien government and the Bouchard government, further to a meeting that they had with the Quebec Minister of Education, agreed to appoint two individuals: Mr. Mel Cappe and Mr. Boivin. Should their negotiations result in an agreement authorizing the granting of scholarships by the government of Quebec, will we have to, in this case, amend the legislation in order to comply with this agreement?

There is a principle in law known as delegatus non potest delegare, that you are no doubt familiar with, Ms. Knopp. This would mean that we would have to amend the legislation.

Ms. Kristina Knopp: I believe that this would be necessary, unless there's an agreement between the Foundation and the government. Here we are talking about a foundation that is not controlled by the government and which has been set up to grant scholarships. According to the current wording, and given the fact that the purpose of the Foundation, one of its primary powers, is to award scholarships, it was decided, given the present circumstances, that it was a power that could not be delegated.

Mr. Michel Bellehumeur: Even if the Foundation were faced with an agreement that had been reached with the representative of the Quebec government.

Ms. Kristina Knopp: If you're referring to an agreement about the criteria for financial requirements...

Mr. Yvan Loubier: No, but in the case of opting out, for instance, with compensation...

Mr. Michel Bellehumeur: Ms. Knopp, I will reword my question. Since you're talking about the Foundation, let's assume that it's going to be making the decisions. The negotiations with the official from Quebec come to an end and the Foundation itself decides that it is the Government of Quebec that is going to be awarding the scholarships. Would this be legal under the law?

Ms. Kristina Knopp: The legislation provides for an agreement respecting criteria for the determination of financial need and merit, and contains a provision by which it would receive the names of residents of a province who are determined under those criteria to be qualified to receive a scholarship. If you're talking about an agreement under those circumstances, the provincial government submits a list of individuals who would be eligible under the criteria for the determination of financial need and merit.

Mr. Michel Bellehumeur: Subclause 25(2) is quite clear:

(2) The Board shall not delegate any power or right of the Board

(b) to authorize the granting of scholarships;

Even if the Foundation were to enter into an agreement with the Government of Quebec with respect to the granting of scholarships, this would be illegal under this bill we are currently studying and which we will be voting on May 1st. This would be illegal. The Foundation is not authorized to negotiate the items listed in subclause 25(2) with the Government of Quebec. Am I mistaken or are we on the same wavelength?

Ms. Kristina Knopp: Yes, the Foundation may enter into agreements with the provinces, but it is the Foundation that is to award scholarships.

Mr. Michel Bellehumeur: Fine. This is a power that the Foundation has and it cannot delegate it to anyone else.

Ms. Kristina Knopp: As the bill is currently drafted, I think that that's the case.

Mr. Michel Bellehumeur: Clause 29 deals with eligibility, the criteria for the determination of financial need and merit; the provision of the names of residents, etc. Once again, it is the Foundation that awards the scholarships based on a list provided by the province. It's always the Foundation that is the main player in all of this.

Ms. Kristina Knopp: It's the Foundation that decides, yes.

Mr. Michel Bellehumeur: I'll go back to my first question. If for instance, during the negotiations between Mr. Boivin and Mr. Mel Cappe, it were decided that it should be the Government of Quebec that has this jurisdiction, we're going to have to amend both clause 29 and clause 25.

Ms. Kristina Knopp: Probably. We would probably have to make amendments. You could look at the law.

Mr. Michel Bellehumeur: Fine. I will now ask questions of the politicians.

Mr. Valeri, if we have to amend certain clauses in order to comply with a possible agreement between the Government of Quebec and the federal government, will the bill come back here for amendment?

[English]

Mr. Tony Valeri: If I could speak to what you're getting at—what Mr. Loubier mentioned while you were attempting to pose your question—I just want to reinforce the fact that the millennium scholarships will not be a federal program. The program will be designed and the scolarships distributed from a private arm's length organization that deals directly with students. That means the foundation and the scholarships will not be under the control of the federal government.

[Translation]

Mr. Michel Bellehumeur: Mr. Valeri, you're not answering my question.

• 1005

[English]

Mr. Tony Valeri: I'm trying to clarify for you what the facts are. It's not under the control of the federal government, nor will the government be able to dictate the parameters of the scholarships or their distribution to the foundation. When you ask whether—

[Translation]

Mr. Michel Bellehumeur: The Foundation will be naming the beneficiaries. It will say who gets these scholarships. It makes the rules, but that is not government interference.

[English]

Mr. Tony Valeri: To clarify it from a legal perspective, you're asking for an amendment to allow the Province of Quebec to distribute the scholarships. What I'm saying to you is this is not a government program, it's an arm's length foundation that will be set up to distribute the grants and scholarships for all provinces of this country for Canadian students.

[Translation]

Mr. Michel Bellehumeur: So do you mean then...

[English]

The Chairman: A final question.

[Translation]

Mr. Michel Bellehumeur: Yes, I will come back, because this is very interesting.

Here is my last question. Could you tell me why Mr. Mel Cappe and Mr. Boivin are negotiating? What are they negotiating at the moment? You should know, as parliamentary secretary. You should know what is going on with respect to this Bill.

[English]

Mr. Tony Valeri: I don't know exactly the terms of what they are negotiating, but I can tell you they are in discussion on how this program will work for the benefit of students in Quebec as well for as the benefit—and I'm sure there will be discussion with all the other provinces—of students in every other province.

The Chairman: Thank you, Mr. Valeri.

Mr. Brison.

Mr. Scott Brison (Kings—Hants, PC): Thank you, Mr. Chairman, and thank you, Mr. Valeri.

I have some concerns relative to the RESP as well, further to Mr. Ritz's questions. With the changes to the seniors' benefit, there's a consensus that there's actually less incentive now to invest and save for the future than there was previous to those changes. The RESP with its 20% top-up will create further disincentive for retirement savings, given there is only a limited pool of funds and the degree of take-up is on the decline due to the 6% decrease in personal disposable income in recent years.

Do you agree with me that this represents a redistributive process that may leave a lot of Canadians vulnerable at the time of retirement?

Mr. Tony Valeri: If we did not encourage Canadians to put some money aside for education, I think you might see the vulnerability when Canadians are a little older and their kids are attempting to attend university. This is a proactive measure that will allow Canadians, with a a modest amount of money set aside, with government participation, in the amount of 20% up to the maximum of $2,000 per year, to provide for education down the road. If the child does not then continue on to higher education, that money can be transferred to an RRSP for that contributor.

Mr. Scott Brison: Recognizing as well that it's not just higher education that is having difficulties in terms of funding across Canada, that in fact primary and secondary education are also having funding difficulties, and recognizing that there is a limited pot of money, this does represent a redistributive process even from primary and secondary education ultimately to higher education, when statistically, investments in primary and secondary education ultimately reap a higher benefit to society. That's a concern we have.

On the 20% top-up, again, if, for instance, I were to name one of my nieces or nephews as a beneficiary for an RESP and in 20 years he or she chose not to go to university, I would have to pay back the 20% but I would not have to return the earnings made on that 20% over that period of time.

I spoke to several tax accountants this week about this, and they are very happy with this program because it's a huge make-work program for Canadian professional accountants. It will ultimately create a significant loophole where Canadians are going to benefit from the earnings on the 20% top-up over that period of time.

How would you respond to that?

• 1010

Mr. Bill Murphy: You're referring, I guess, to the investment income associated with the Canada Education Savings Grant. I guess in the first instance, roughly 90% of beneficiaries named to an RESP will be going on to higher education, based upon what's happened in the past, and I suppose that's likely to increase as a percentage, so the vast majority of the investment income associated with the Canada Education Savings Grant will go for a student's education.

If the named beneficiary does not choose to go to higher education, most RESPs will allow a new beneficiary to be named. For example, if your niece or nephew does not go on, you have the choice of naming another niece or nephew or somebody else. If you have a family plan, then you have the option of naming somebody else in your family to take advantage of this.

If the investment income is not used for higher education, the options are to transfer that into an RRSP or to take it back into income. If it comes back into income, it's going to be taxed at the marginal tax rate of the subscriber, and there's going to be a 20% penalty tax, which was put in with the previous budget, to recognize that we want to avoid a lot of tax planning taking place with this sort of measure.

I think you pointed out, Mr. Chairman...or the question was raised in the way that I guess indicated that there is a fixed amount of savings out there, and where are people going to come up with the money? A lot of people who are saving for higher education, and doing so in various ways now, are holding back on some of their RRSP contributions, perhaps. We want to recognize that if their child does not go on to higher education, they should be allowed to take advantage of investment income and to put money into their RRSP to save for their retirement. The amount of investment income that's going to be going into RRSPs or back to the individual directly is going to be pretty small.

Mr. Scott Brison: I have some more questions on that, but I'm going to move on to another area.

Mr. Valeri, do you feel broad-based reductions to EI premiums would significantly stimulate job growth?

Mr. Tony Valeri: I think broad-based reduction to EI would not in fact stimulate an overwhelming amount of job growth. I would only point to some of the comments made by some private sector individuals that indicated that in fact they hire individuals when they need individuals due to market conditions, growth and production.

The EI reduction in this bill that is targeted at youth will certainly be of assistance to those employers who are hiring young people at the lower end of the wage scale, but a broad-based reduction wouldn't be the only factor that would be considered, I believe, in somebody's hiring decision.

Would it be of assistance? As one of the factors, probably yes. As the only factor, I would say no.

Mr. Scott Brison: Would you agree that there's a huge logic gap in effectively saying that reducing EI premiums won't stimulate job growth, but targeted EI premium reduction will stimulate job growth within that targeted area?

Mr. Tony Valeri: Again, I don't think it's going to be the only factor, but in a targeted sense I think it would certainly be of assistance for smaller businesses such as retail shops. Again, I don't believe that would be the only factor, but I believe it will be of assistance.

Mr. Manson might want to add something.

Mr. John Manson (Senior Policy Analyst, Social Policy Division, Department of Finance): I think it's fair to say there's a lot controversy about the impact of a premium rate reduction. Some say it would have a profound effect, and others say it would have not so much effect.

Part of the idea of targeting this is to recognize a particular group that is widely taken to be disadvantaged and to be having some labour market difficulty. It's also a matter of challenging some of the private sector employers who have argued that a reduction in EI premiums would induce them to increase their workforce. We will see how that works over the next couple of years.

• 1015

The Chairman: Final question, Mr. Brison.

Mr. Scott Brison: Okay.

On the EI premiums' reduction for a targeted group, that represents a form of employment eugenics. What will you do, or what will be the action of this government, when there is a redistribution of workforce for a particular company? For instance, seasonal employers who hire at particular high seasons will hire youths as opposed to perhaps the over-25-year-olds they were hiring previously.

Will there be a human rights tribunal intervention if there seems to be an overall redistributive process that discriminates against people over 25?

Mr. John Manson: I would have to say that to some degree, at least, the question of giving encouragement for the hiring of one group as opposed to another group is a matter of policy decision that the government has taken—that this is a particular group that needs help and is therefore going to be assisted.

If there is some particular egregious behaviour on the part of employers, the bill does provide that should a “competent body”, as it is called—and this could encompass a human rights tribunal—find that an employer has acted in a way that is inappropriate, then that finding can be given to the responsible minister, who can then withhold this benefit.

The Chairman: Thank you, Mr. Manson.

We'll to move to Mr. Szabo and come back to Mr. Brison in the second round.

Mr. Paul Szabo (Mississauga South, Lib.): Thank you, Mr. Chairman.

I want to make sure I'm clear about the assessment of the value of RESPs versus RRSPs. Maybe the witness can confirm the fact that contributions to an RRSP are deductions for income tax purposes, and they represent pre-tax dollars, whereas RESP contributions are tax-paid dollars. In fact, RESPs, probably in the majority of cases, would only be of financial attractiveness to those who already have exhausted RRSPs and other sheltered opportunities, in the main. Is that right?

Mr. Bill Murphy: I'm not sure I understand your question. Are you saying, in essence, that RESPs would only be attractive if you've already used up all your RRSP room?

Mr. Paul Szabo: In terms of the financial tax deferral opportunities.

Mr. Bill Murphy: This is if an individual were saving for a child's education; or were they were planning to use it for some other purpose?

Mr. Paul Szabo: Under any circumstances.

Mr. Bill Murphy: With the Canada Education Savings Grant an RESP will be a very attractive vehicle for saving for a child's education. The majority of people out there are not maximizing their RRSP room now. If they want to save for a child's education and the child does not go on to higher education, then they will have the flexibility and the ability in those cases to use the investment income for purposes of retirement. That's a secondary objective, as it were, of the RESP provisions.

I'm not sure I'm answering your question.

Mr. Paul Szabo: It's an interesting.... As an accountant, I've sat down to try to figure it out. Of course, with an RRSP, you're getting, at the highest marginal rate, effectively a 50¢-on-the-dollar deferral of taxes. With the RESP, you're getting the 20% one-time grant. Your deferral is only on the taxation of the interest. Streaming it all out...and also understanding that RESPs can be deregistered at any time to suit another purpose.

Mr. Brison suggested that accountants are going to be tied up on RESPs. Quite frankly, accountants don't have anything to do with RESPs until they're acted upon, so I'm not sure exactly what the point was.

I wanted to spend my last couple of moments asking the witnesses about the child tax benefit. This is an extremely important issue.

I want to know whether or not we have crunched the numbers on who gets the benefit, in fact, if we were to paint a picture of where this is being directed. Ostensibly because there is a clawback based on the income of the family, any amount of benefit...I'm not sure of the number. I think it tops out, or there is no benefit whatsoever, after $30,000. Is that right?

• 1020

Mr. Keith Horner (Senior Chief, Social Tax Policy, Department of Finance): It's $25,921 for families with up to three children, a little bit higher for larger families.

Could I stop for one second? I'd like to add something to your question about RRSPs versus RESPs before we go on to the child tax benefit.

Two things. First, in a RESP, when the money comes out it will normally go into the hands of a student who won't be paying tax on it, because he or she will have no other income, whereas an RRSP, as you point out, is a tax deferral at a high rate, but it comes back into the income of the retiree, who will have to pay tax on it. That has to be taken into account.

Second, somebody who is taking advantage of the RESP in order to get the top-up and satisfy the demands of financing a child's education, for example, can defer contributing to an RRSP and make up that RRSP contribution in a subsequent year.

Those two things will encourage the use of RESPs.

Mr. Paul Szabo: I think I heard you correctly, and I think you're wrong in terms of the analogy. You said that if the RESP is used for education, the moneys go into the child's hands for the purpose of funding the education. I understand it's not taxable. If the money is not used and it goes back to the contributor, it's also not taxable.

You started to talk about RRSPs, saying that if they're deregistered they're taxable. Let's talk about apples or let's talk about oranges, but don't mix the two.

Mr. Keith Horner: You asked if people would only use an RESP when they had exhausted their RRSP limit, and I'm saying that partly because you can defer the use of the RRSP and still use it later with the carry-forward of the unused limits, that's one reason why people would use the RESP. But also, in the RRSP, when you're looking at the value of the deduction, you have to take into account that—-

Mr. Paul Szabo: The value of the...?

Mr. Keith Horner: The deduction on an RRSP contribution. You have to also take into account—

Mr. Paul Szabo: These two plans are very similar and sound...let's talk about education or retirement.

Mr. Keith Horner: On the retirement savings plan my point was simply that when you look at the value of the deduction to the contributor you also have to take into account the fact that he will pay tax on that, on both the principal and the interest, when he withdraws the money. That was simply my point.

Mr. Paul Szabo: But retirement savings plans are for tax deferral. That's the benefit. The benefit of an RESP, in addition to having the 20% grant, is the deferral of tax on the interest on the contributions, the accumulated contributions.

Mr. Keith Horner: Well, in fact—

Mr. Paul Szabo: The difference in the amount of tax deferral is greater with RRSPs—

Mr. Keith Horner: It's not just a deferral.

Mr. Paul Szabo: —depending on the marginal tax break.

Mr. Keith Horner: Typically you never pay tax on the interest with an RESP, because it's the student who brings—

Mr. Paul Szabo: Provided the student has no other income.

Mr. Keith Horner: Exactly.

Mr. Paul Szabo: Okay.

On the child tax benefit, which is going to be called the Canada Child Tax Benefit, although the language continues to talk about low- and modest-income Canadians, this effectively tops out at $25,000 of family income. Similarly, the working income supplement, I believe, is all gone, and you get zero if your family income is over $30,000, because of the 4% clawback. Is that right?

Mr. Keith Horner: The Canada Child Tax Benefit comes into effect in July. Under that benefit the working income supplement does not exist anymore. The phase-out of the low-income top-up, the national child benefit supplement, as it's called, is exactly the same as the phase-out was for the working income supplement.

Mr. Paul Szabo: We're really targeting these benefits ostensibly to people with incomes under $25,000, spouses with children.

The other benefit also available to them is the child care expense deduction, which we increased in the budget from $5,000 to $7,000 for pre-school children. It's $7,000, which is worth about $1,750 of the tax credit, federal and provincial, assuming a 50% tax rate. As well, there is a $400 tax credit in Ontario, and I assume that other provinces may have something similar. I'm just trying to get the dimensions of how much somebody could get.

• 1025

I guess the point I'm trying to get to is that it appears to me that the childcare expense deduction, because it's a deduction, is a higher benefit to higher-income earners simply because they have a higher marginal tax rate than low-income earners, and the child tax benefit is only for the very low-income-earning families of some $25,000.

Who's left out, it appears—and I'd like your comment on this—is the middle class, the vast majority of the middle class who don't qualify for the child tax benefit simply because of their family income, or who, for instance, chose to provide care in the home rather than pay somebody else, and have a modest income or a middle-income base. The benefits under the childcare expense deduction would be relatively nominal anyway.

Mr. Keith Horner: Just one comment. The childcare expense deduction measure is a relatively small measure. It costs, if I recall correctly, in the order of $40 million, as opposed to a total of $850 million being put into the child tax benefit. The childcare expense deduction is focused on those families of middle income or whatever who have high childcare expenses, who have no subsidies for childcare, and who are paying full-time expenses at full rates.

With regard to your larger question about higher- or middle-income families with children, and putting aside the childcare expenses issue, it's true that this measure doesn't help them. It becomes more of a political question, but I think the government has stated that the first priority—and this is true in terms of child benefits and also in terms of the other budget measures, such as the supplement to the basic credit and the phased surtax reduction—is to aim these at lower-income Canadians. As fiscal resources permit, there will be more measures to assist middle-income Canadians.

Mr. Paul Szabo: Thank you.

The Chairman: Thank you, Mr. Szabo.

Thank you to all the officials who have participated thus far.

We'll go back to Mr. Ritz for the second round.

Mr. Gerry Ritz: Thank you, Mr. Chairman.

I have a quick question on the EI holiday, the premium holiday that will implemented for employers hiring young Canadians between 18 years and 24 years. Are we talking about both portions—the employer and the employee?

Mr. Tony Valeri: No, it's just the employer portion.

Mr. Gerry Ritz: Okay. How does this affect the employer-sponsored training programs through EI, where that's the age group generally that's sent back to a technical institute or something like that for upgrades and so on? How will that portion then be funded?

Mr. John Manson: I'm not quite sure I understand the import of the question, but in refunding the premium, it should have no impact on the employer's training decisions. In fact, by encouraging the employers to hire these people, implicitly we're also encouraging them to train them.

Mr. Gerry Ritz: But you're going to have a money shortfall, because you no longer have the employee portion going in to help fund that training portion. Is that going to come out of the surplus that's sitting in the EI fund now? Where will that be?

Mr. John Manson: I understand your question now. Yes, the measure is expected to cost somewhere in the neighbourhood of $100 million a year, and that's accounted for in the overall accounting of the EI program. It's not going to cause a shortfall in the part II expenditures. That is budgeted separately.

Mr. Gerry Ritz: One other short point. In talking about the taxation that's going to be allowed on the Kamloops band, Westbank and so on, are their transfers then going to be reduced accordingly, as is done with other provincial jurisdictions, where it's based on their ability to tax? Will the transfers to those aboriginal bands then be shortened that amount of money?

• 1030

Mr. Stephen Gagnon (Senior Tax Policy Officer, Intergovernmental Tax Policy Division, Tax Policy Branch, Department of Finance): That's a question for the Minister of Indian Affairs and Northern Development, really, and the department. They control funding like that to the first nations.

Theoretically, that's possible, although my understanding is that there aren't any immediate plans for that to happen.

Mr. Gerry Ritz: It kind of opens a whole can of worms, doesn't it?

Maybe we'll have them before the committee before these hearings are finished, then, so they can address that.

Thank you.

The Chairman: Thank you, Mr. Ritz.

Madame Gagnon.

[Translation]

Ms. Christiane Gagnon (Québec, BQ): I am pleased to be here this morning, particularly since a number of aspects of the bill are of interest to the Human Resources Development Committee, of which I am a member. I think it is difficult to do our job if we cannot hear from witnesses. This morning, in fact, we did not have much time to ask all our questions on all the subjects covered in Bill C-36.

I would therefore like to come back to what Ms. Knopp, the lawyer...

The Chairman: Excuse me, Ms. Gagnon.

[English]

On that point, if you would like to meet at 3:30 p.m., we can extend the hearings this afternoon. It's a decision committee members will have to make later on.

Go ahead.

[Translation]

Ms. Christiane Gagnon: Could I ask some more questions of the lawyer who came to the table earlier, Ms. Knopp?

Following up on what Mr. Bellehumeur was saying, I would like to come back to the negotiations that are underway. We know that there has been some openness on the part of the Prime Minister and the Premier, but the provisions of the bill may not allow for an agreement between the federal government and the provincial government.

I will read the amendment to Ms. Knopp, if she has not already read it, and ask her whether it is possible to agree on this amendment, and even whether it could be included in the bill. Finally, I wonder why are we wasting time to negotiate something that cannot be done under the bill. How can an agreement be reached between the Premier and Prime Minister?

This then is the amendment we would like to move to the bill:

When a province has established and is administering a student financial assistance program to provide them equal opportunity for post-secondary education, the ministers must, at the request of this province, negotiate with it and conclude an agreement to provide the province fair financial compensation to replace the activities of the Foundation in that province.

Is it possible, under the bill we have before us, to reach an agreement that would respect Quebec's desire to have its input?

Ms. Kristina Knopp: I think that is a political question, not a legal one. First of all, a political decision must be made. The bill may always be drafted accordingly, but only once a decision is made or once an agreement is reached. I think that we are putting the cart before the horse here. We are talking about legal drafting here. A political decision must be made first.

Ms. Christiane Gagnon: Let's say they agree.

Ms. Kristina Knopp: Personally, I'm not accustomed to this type of thing.

Ms. Christiane Gagnon: It seems to me that because of clause 29 and subclause 25(2), an agreement of this type between the Quebec government and the federal government regarding the Millennium Scholarships could not be accepted.

Ms. Kristina Knopp: In my view, if an agreement is reached, the bill will be examined to determine what amendments may be required. But first there must be an agreement. Then we would look at the legislation and decide what changes, if any, are necessary.

[English]

Mr. Tony Valeri: Mr. Chairman, I want to reiterate, because I believe Madame Gagnon was asking about compensation and opting out, that Quebec has opted out of federal programs and has received compensation when opting out of federal programs.

The millennium scholarship fund is not a federal program. I want to make that perfectly clear. The millennium scholarship fund is an arm's length, independent foundation. There is a difference. The federal government does not control the fund.

So the answer to your question is exactly that.

[Translation]

Ms. Christiane Gagnon: But you know very well how the Foundation was established. It was designed precisely to get around Quebec, so that Quebec would not be entitled to that compensation. As far as the Millennium Scholarships go, it was clear there was little that could be done to get Quebec's agreement. The federal government is using the Foundation to impose these Millennium Scholarships on Quebec.

• 1035

I find that most upsetting, because here, in the committee, it would have been desirable, not only for the Bloc Québécois, but also for a whole coalition of organizations from Quebec, to have the money from the Millennium Scholarships administered by Quebec. It is also up to the province to maintain an education system. The student federations agree on this point. I don't think it is advisable to pass this bill too quickly because of the negotiations that are underway at the moment.

I think we should hear from people who want to come and talk about Quebec's objectives in the area of education. Some proposals have been made by Mr. Bouchard, and the province knows very well what it would like to do with this money. We know there are problems for the provinces with the Canada Health and Social Transfer, and that Quebec already has its own infrastructure.

I don't know why they are laughing. We are talking about serious matters here. We were democratically elected. I am very very frank. It is not often that I raise my voice. I am a member of other committees, and I think the attitude here this morning is rather cavalier. I am rather angry, and that does not happen to me very often at committees. I don't think we are being taken seriously.

There is a broad coalition in Quebec. If people want to understand Quebec and its distinct society, that won't be accomplished by passing some poor little bill in the House of Commons. You will be judged on the basis of attitudes like this. There is a consensus in Quebec on the issue of the Millennium Scholarships within the federation. When something originates in Quebec, people don't listen. There's a good reason why the Liberals were defeated at the last election. We have been voted into office twice, because people do not trust you. We speak for Quebec. Even the students say that the Millennium Scholarships should not be administered in this way. We have an infrastructure and programs, and we have to pay our people.

I'm going to conclude by talking about the costs of duplication and overlap. There are administrative costs involved—salaries and so on. We have an infrastructure in place in Quebec. Stop laughing, sir. I think you are displaying a very cavalier attitude. I don't like your attitude about this. We reflect the realities we are asked to reflect. How much will this duplication and overlap cost?

[English]

The Chairman: Excuse me, Ms. Gagnon, as I recall you said you had a number of questions.

[Translation]

Ms. Christiane Gagnon: Yes. I got an answer to the first one.

[English]

The Chairman: I would like to give you all the time possible, so please forward the question to the panel.

[Translation]

Ms. Christiane Gagnon: I got an answer to my first question: the bill is not compatible with the negotiations underway at the moment, because it does not allow for an amendment on opting out. I did understand that.

I would ask the committee whether it would be impossible to include the amendment in the bill before it is passed. Could there be a recommendation from the committee to this effect? That is my question, but I got an answer. The fact is that the two are not compatible. The negotiations between the Prime Minister and the Quebec Premier are not compatible with the bill.

Second, I understood that the Foundation was not a program, and that there would therefore be no compensation given to Quebec. I understood that answer.

Third, I want to know how much all of this is going to cost. How much does it cost? How many cases will be analyzed once you set everything up, pay the salaries, pay the rent and so on? We are trying to determine that. The administrative costs are going to be very high. What percentage of the Foundation's money will go to administration?

[English]

The Chairman: Mr. Valeri.

Mr. Tony Valeri: I'll leave the officials to speak to the actual numbers, but I want to reiterate that the independent foundation will manage the millennium fund and consult with provinces to establish the criteria. The intent is to avoid duplication—which is a concern Madam Gagnon has—in any of the provinces, build on existing provincial needs assessment processes, and complement existing provincial programs.

The federal government isn't thrusting a program on the provinces. The federal government is trying to complement what the provinces are doing, since we all know the Government of Canada has a role in providing Canadians with equal access to education and access to knowledge. But as far as the actual numbers, specifically to answer your question, I'll ask an official to speak to that.

• 1040

Mr. Andrew Treusch: With respect to cost, it's difficult to quantify right now. The fact that there are existing need assessment processes and the foundation can piggy-back them suggests that the administrative costs there would be quite minimal. The foundation's purposes and objects, though, also include assessing merit.

Of course, there are a number of scholarship foundations. You can look to the administrative costs they have. In this case, it's certain they would be considerably smaller, since this would be such a large foundation relative to the many hundreds of smaller ones that exist now.

I should point out that the legislation directs the foundation to minimize its costs.

[Translation]

Ms. Christiane Gagnon: I would like to ask how they can expect that there will be 100,000 scholarships if they don't know what the administrative costs are. You say you don't know how much this will cost each year. How many cases are you going to study? How many applications will you receive? The number could be quite high. The administrative costs could use up a significant portion of the $2.5 billion. I would like to point out that we already have structures in place in Quebec. So why pay more wages and rents, pay directors and agents, and pay expenses without even mentioning any follow-up? Will there be any officials to follow up on this Millennium Scholarship policy, once it is put in place?

[English]

Mr. Andrew Treusch: The numbers that are in the budget in terms of the annual disbursement from the scholarship fund of $325 million, and so on, are on the basis of very prudent, very conservative assumptions about the investment policy and the rate of return.

Similarly, when we refer to the figure of about 100,000 scholarships provided annually, this is a little less than the amount of moneys available to the foundation. So we've tacitly recognized, of course, administrative costs will be incurred and they will be offset. There's no exact figure—

[Translation]

Ms. Christiane Gagnon: Let us assume, for example, that you get more applications than you expect. At that point, you will increase the budget in order to increase your staff to deal with all the applications at the same time.

[English]

Mr. Andrew Treusch: It's a supposition. There's no question that the administrative costs are part of the costs of the foundation.

[Translation]

Ms. Christiane Gagnon: When you have a budget to work with and you have to break it down into various items, it's preferable to know how many scholarships you have to give out and analyze the figures. That cannot be done using suppositions, without knowing what the figures are.

[English]

Mr. Andrew Treusch: Any organization that will be putting 100,000 scholarships into the hands of students will incur administrative costs, there's no question about that. It's not clear to me why the foundation's costs would be greater than another organization's.

The Chairman: Do you have any further questions, Ms. Gagnon?

[Translation]

Ms. Christiane Gagnon: Mr. Bellehumeur would like to come back to an issue.

[English]

The Chairman: But you're done with yours?

[Translation]

Ms. Christiane Gagnon: Yes.

Mr. Michel Bellehumeur: You plan to provide 100,000 scholarships under this bill. There are some 800,000 students in Canada who could apply to the Foundation. How many students do you think will apply for a $3,000 Millennium Scholarship? If I were a student, I would send in my application right away. Not many students in the law faculty where I was a student would not have done so. I don't know many students who would not apply.

Let us make a conservative assumption that only 50% of students apply—that is 400,000. You have not forecast how many analysts, information officers or receptionists you will require. However, we see from the bill that there will be a chairperson appointed by the Governor-in-Council on the recommendation of the ministers, namely the Minister of Finance and the Minister of Human Resources Development.

We know the board will also be made up of five persons, one of whom will be a student. There is some provision already for staff, but there are some staff requirements that you cannot anticipate, because, as you say yourself, you do not know how many students are going to apply for the scholarship. Consequently, you do not know how much work the Foundation will have to do. Is that in fact what we are to understand?

• 1045

[English]

Mr. Andrew Treusch: With respect to applications, one benchmark we could use, perhaps, is the Canada student loans program. Currently, there are 380,000. Since the scholarships would be similarly based on need—and there would be Quebec numbers to take into account as well, if these are based on need—that would be the maximum, one would guess, pool of applications.

The scholarships as well will reflect merit, so presumably a student undertaking the time to apply to a scholarship would do so in the expectation they would have a reasonable chance of succeeding. They would know, based on their need and their merit, whether they felt.... So I would guess it would be less than that amount.

[Translation]

Mr. Michel Bellehumeur: How many analysts will you require if roughly 300,000 students apply? How many people will you need to provide information? How much will this cost? I cannot imagine that you have not looked at the problem, even if you tell us that the costs will be minimal. How much will they be? One dollar spent unnecessarily is too much, sir. In a period of recession, particularly since it a well-known fact that governments, particularly the Quebec government, have all the infrastructure they need to do these analyses.

I would like to know what percentage of the budget you expect will be required for administrative, analytical and reception services, rent, the chairperson's salary and expenses related to the Millennium Scholarships. How much will the administrative costs be?

[English]

Mr. Andrew Treusch: Again, sir, I have to repeat that this is not a government program that we're designing and delivering. It's something we're endowing a foundation to do.

With respect to administrative costs, when earlier I was returning to the planning assumptions, we're assuming about a 5% administrative cost.

[Translation]

Mr. Michel Bellehumeur: Let's say 5%. That is a figure you have mentioned. You say 5%, but that is based on how many applications?

[English]

Mr. Andrew Treusch: It doesn't assume any particular number of applications.

[Translation]

Mr. Michel Bellehumeur: So 5% a year of $2.5 billion. Is that correct?

[English]

Mr. Andrew Treusch: Of the annual disbursement.

[Translation]

Mr. Michel Bellehumeur: So, 5% of $350 million?

Is it accurate that under the bill, the chairperson and the five persons, one of whom is a student, are appointed directly by the Governor-in-Council on the recommendation of the ministers? Can you confirm that, Mr. Valeri? The two ministers will appoint the chairperson and the five members, one of whom is to be a student? It is up to the minister to decide? If you answer yes because that it what is written down, I imagine you have read the bill. What selection criteria will the ministers use?

Ms. Kristina Knopp: Clause 6, I believe, sets out certain criteria, namely, the directors must come from the various regions of Canada and must be chosen to ensure that the board has the necessary knowledge regarding post-secondary education.

Mr. Michel Bellehumeur: Are there any other criteria from a political point of view, Mr. Valeri?

[English]

Mr. Tony Valeri: Actually, we took the position that in fact this issue is so very important to Canadians, especially students who will benefit from this, that we decided to allow experts to sit on this board rather than deal with any political appointments, which I guess is what you're insinuating.

So if your question is whether there will be any political appointments here, what I'm saying to you is we will appoint experts to this board who will be able to participate and provide direction in how the fund is managed and Canadian students receive those grants.

[Translation]

Mr. Michel Bellehumeur: In that case, Mr. Valeri, why does clause 8 of the bill, which is about appointments, not provide that they will proceed after review by a panel of experts, or something of that sort? For example, we could submit a list to the Finance Committee, which would decide who would be on the board: the chairperson and the five individuals to be appointed by the minister. If you say that the appointments are not partisan or political, if you say that you are going to consult experts, why not provide for a panel of experts in the bill, in order to make the process as transparent as possible?

• 1050

[English]

Mr. Tony Valeri: I'll read from the bill. It says:

10. The appointment of directors shall be made so as to ensure that the board is knowledgeable about post-secondary education and learning in Canada and the needs of the Canadian economy; and the directors are drawn from various regions of Canada.

I don't think we can be much clearer than that.

[Translation]

Mr. Michel Bellehumeur: Those are fairly broad criteria. I would like to know whether the department has any other criteria. There would probably be at least 10 million people in Canada who could meet those requirements.

[English]

Mr. Tony Valeri: I would only say to you that in consultation with various experts and individuals who are knowledgeable about post-secondary education, I think that you will find the board will be held to the scrutiny of the public. It's quite transparent.

In fact, it would also be open to scrutiny by your party and any province.

I submit to you that what you will have on this board are individuals who are knowledgeable about the post-secondary education system in Canada. They will also be very learned of the Canadian economy.

The whole intention of establishing this arm's-length foundation was to ensure that there was no politics being played with this particular foundation and that you have an arm's-length board set up independent of government and that you would have experts managing this fund to the best interests of paying students.

The Chairman: Excuse me, Mr. Bellehumeur, your half hour out of one hour of questions is up.

Mr. Ritz.

Mr. Gerry Ritz: Thank you, Mr. Chairman.

One quick point I'm wondering about. You're talking about 100,000 students, but we have no idea how many are going to apply. Will there be an appeals process? Will someone be able to find out why they were rejected?

Mr. Andrew Treusch: I don't know if I'd use the term “appeals process”, but when you have an application there will have to surely be a reason given for why you qualify or do not. It would be either on grounds of need or grounds of merit.

Mr. Gerry Ritz: One other point.

Further on in Mr. Valeri's opening statements, he spoke of the Bretton Woods and Related Agreements Act and the International Monetary Fund's capacity to stabilize other economies. Canada recently committed itself to a billion dollars for the Korean crisis, and we see economists now saying that in loaning them that dollar, it's going to allow them to bump up their exports, which may create some mayhem here at home.

I'm wondering about this. We now have two Korean automakers that are looking at the Canadian market in a very strong way. There's significant pressure out there to lower the tariff on imports.

I'm wondering how we safeguard our industry at home without using tariffs that again would create that Korean crisis by not allowing their exports in. We're kind of walking on a tightrope there.

Mr. Tony Valeri: I'm not sure if I follow your question, but I guess as a general comment, I would say that certainly the tariff issue is one that will be discussed in terms of the review of the automotive sector, which I believe the Minister of Industry has undertaken.

With respect to how we ensure a share of the market for domestic manufacturers, I guess I would submit to you that I would think that they certainly have to ensure that their productivity and products meet market demand. Also, on a competitive basis, I think domestic manufacturers will continue to hold their share of the market.

I'm not sure whether you're asking government to intervene in some way to ensure that protection.

Mr. Gerry Ritz: I'm asking what recourse Canadian industry would have. The only thing that Korean manufacturers can do is export like crazy in order to bring their economy back up again. In doing so, they're lowering their prices significantly. When we start seeing those exports landing in Canadian markets and so on it creates an unfair pricing structure, if you will, to domestic production.

If we impose tariffs, again, we're building that wall against Korea, in this case, and slowing down their economy, which we helped to buoy up.

How do we get out of that vicious circle?

Mr. Bruce Rayfuse (Senior Chief, International Finance and Economic Analysis Division, Department of Finance): You're right that to the extent that these countries, including Korea, have had pretty significant exchange rate depreciations, their products are going to be cheaper.

We don't expect this to be a flood to the Canadian economy because these countries represent a very small share of our total imports.

Mr. Gerry Ritz: They may expand that.

• 1055

Mr. Bruce Rayfuse: Well, they're going to expand, but again, about 6% or 7%—and I'd have to check the exact figure—of our total imports come from the affected countries in this region.

So it's difficult to foresee a flood of imports coming from this region. There will almost certainly be some more—that's for sure—but these countries have to export more to get out of the current crisis.

Mr. Gerry Ritz: Definitely.

Mr. Bruce Rayfuse: As they do that, of course, they will become better markets for our exports.

Mr. Gerry Ritz: Thank you.

The Chairman: Mr. Brison, a final question.

Mr. Scott Brison: Two questions?

The Chairman: Go ahead.

Mr. Paul Szabo: If they're good questions.

Mr. Scott Brison: They're always good questions, Paul. The answers may vary, but the questions are consistently good.

Voices: Oh, oh.

Mr. Scott Brison: We were talking about the potential for using, for instance, a human rights tribunal. I believe the official said if a Canadian company engaged in egregious behaviour...for instance, in hiring practices.

Would it be considered by the government to be egregious behaviour for a Canadian company to effectively exercise an incentive placed by the government to pursue a particular course of action—i.e, to hire people between the ages of 18 to 25, in this case? Would that be considered egregious behaviour, for employers to effectively exercise a government incentive to pursue that course of action?

Mr. John Manson: To avail themselves of the incentive, by itself, would not by any stretch be considered egregious. We're talking here, at the margin, where an employer is faced with two individuals and there was an incentive for hiring one as opposed to the other. It would be entirely rational and in keeping with the policy that he'd hire the one for which the incentive was given.

The kinds of things we're talking about as being egregious are if he were to discharge his entire workforce of people outside of the target group in order to hire those in the target group, the sole purpose of which would be to avail himself of the refund.

I'm sure in that case that the competent bodies would find that this had been done in an undue and inappropriate fashion.

Mr. Scott Brison: Philosophically, I'm not comfortable with that. It's still a Pavlovian tax policy. The government at one end effectively puts out a carrot for people to do a particular thing and then threatens them with a stick if they in fact exercise that.

With regard to the millennium scholarship board, and the board appointing its own auditor, it seems to contradict, at least on the surface, a general principle where the shareholders, not necessarily the management, appoint an auditor. I recognize that this is an arm's length foundation, but by the same token, $2.5 billion in Canadian taxpayers' money is being committed to it.

Would the minister entertain, or be amenable to, amending the legislation to provide that the auditor would be appointed by the government to oversee the $2.5 billion in taxpayers' money being committed?

Ms. Kristina Knopp: It's not actually the board that appoints the auditor; it's the members, who are in fact, in a for-profit corporation, the shareholders. In section 40 of the legislation you'll see that it's the members who actually appoint the auditor.

Again, the members are the equivalent, so to speak, of the shareholders in a for-profit corporation. There are two levels here, the membership and the board.

Mr. Scott Brison: The members are appointed. How many members are there?

Ms. Kristina Knopp: There are 15 members.

Mr. Scott Brison: Of which the government appoints how many?

Ms. Kristina Knopp: Six.

Mr. Scott Brison: So the government's appointing six. Effectively, at this point, the Canadian taxpayer owns 100% of the shares, or is contributing 100% of the funds at this point, yet the Canadian taxpayer, in terms of membership on this board, represents less than half of the members of the board in terms of the government appointment. Is that right? The members will be selecting the auditor.

• 1100

Mr. Tony Valeri: Which could be, in effect—to clarify; maybe the officials could comment—the Auditor General.

Mr. Scott Brison: The reason I ask is that I asked the question in the House to the minister about this. He said it could be the Auditor General, and it could be arranged that the Auditor General would have access to the books as an auditor. Later, one of my colleagues asked a similarly worded question, and he was told that effectively that would not be the case. When I asked officials last week, I was told that in fact there would be no reason for that to be the case, because it's at arm's length.

The difficulty with such a huge commitment of taxpayers' money, with very little control, even in terms of the need and merit criteria.... It's very nebulous when you say the scholarships will be based on need and merit. That could even vacillate, depending on the make-up of the board—you know, is it going to be need? Is it going to be merit? At least a government-appointed auditor could maintain some level of integrity from even that perspective.

Mr. Andrew Treusch: Can I make a comment, just by way of explaining what's in the bill in front of us?

Clause 36 of the bill requires that the foundation provide an annual report each year in both official languages. That report would include its financial statements for the year and the report of the auditor respecting its financial statements, a detailed statement of investment activities, a statement of the foundation's plans for fulfilling its objectives and purposes, and an evaluation of the results achieved that year.

Clause 37 requires the foundation to have a review of its activities and organization after the fifth year.

Clause 38 requires that these reports be made public, be sent to provinces, and as well, be tabled in the Parliament of Canada by the Minister of Human Resources Development.

So in terms of accountability, there's that.

Clause 40 stipulates the qualifications of the auditor.

The auditor shall be...a member in good standing of an institute or association of accountants...have at least five years experience at a senior level in carrying out audits...and is independent of the Board, the directors and the officers, and so on.

It's true that because of its arm's-length nature, there is an effort in the legislation, as reflecting the policy, to balance the arm's length nature of the institution, but also to embody in the legislation, to the extent possible, the highest level of accountability and the reporting of that to the Parliament of Canada.

The Chairman: Thank you very much.

Sorry, but we have to vacate this room. There's another committee hearing occurring right after this.

It is my understanding that members of the committee do not want to meet this afternoon. Is that correct?

Some hon. members: Agreed.

The Chairman: Okay.

On behalf of the committee, I'd like to thank Mr. Tony Valeri, the parliamentary secretary to the Minister of Finance, for his intervention, and all the officials from the various departments who have really helped us understand better this bill.

We'll have final comments from Mr. Bellehumeur.

[Translation]

Mr. Michel Bellehumeur: Mr. Chairman, we have barely scratched the surface of the Millennium Scholarship issue. I have other questions to ask. There are three departments involved in this bill, and it is extremely important that we have all these officials back before us as quickly as possible, Mr. Chairman.

[English]

The Chairman: That's a given.

I also want to very quickly address one issue that was raised earlier by Mr. Loubier this morning. I am going to propose this, and it's up to the committee to accept it or reject it. It was unfortunate that Bloc representatives were not present at the meeting. Everybody knows—

[Translation]

Mr. Michel Bellehumeur: On that point, Mr. Chairman—

[English]

The Chairman: Just one second. Let me finish.

[Translation]

Mr. Michel Bellehumeur: No, no, no; you are making certain statements.

[English]

The Chairman: Let me finish. Just one second. You might like the news.

I would like, with your permission, to propose to extend the hearings, and report the bill instead of May 1, on May 8.

I've calculated the number of meetings we would require to accommodate all the 25 witnesses that the Bloc would like to have present. That would take approximately one week. Therefore, I think that would be a fair resolution to the issue at hand.

• 1105

But let me be very clear: I think it's the responsibility of every member of Parliament to know when meetings are being held.

Is that agreed?

Ms. Paddy Torsney: I'll put forward the motion.

[Translation]

Mr. Michel Bellehumeur: I would like to mention something, Mr. Chairman. We need some clarification, because for a little while now you seem to be saying that we have not been acting in good faith or I don't know what.

[English]

The Chairman: I am not saying that.

[Translation]

Mr. Michel Bellehumeur: No, no, but I want this to be clear: the notice of meeting that you sent out referred only to the provisions on tied selling in the Bank Act. There was no mention of Bill C-36. It was only once everyone arrived that you took the initiative, perhaps because the Bloc Québécois was absent, to include Bill C-36 on the agenda and settle your business on the quiet, as Mr. Loubier was saying.

Ms. Christiane Gagnon: That's true.

Mr. Michel Bellehumeur: I want this to be clear: you did not send out an agenda that indicated you were planning to discuss Bill C-36. I have it here in front of me, Mr. Chairman.

Earlier, we were wondering who was lying. Now we have the answer in writing.

[English]

The Chairman: The steering committee report was part of that as well.

I'd like to resolve this issue. The motion will read—

Ms. Paddy Torsney: That we'll report this bill to the House on May 8.

Mr. Michel Bellehumeur: Monsieur le président—

Ms. Paddy Torsney: Are we voting on it?

[Translation]

Mr. Michel Bellehumeur: Mr. Chairman, we will be submitting a list of witnesses. The 25 witnesses that we have for the time being are coming to speak about the Millennium Scholarships only.

[English]

The Chairman: That would take a week.

[Translation]

Mr. Michel Bellehumeur: We will give you a list. If there are 50 witnesses, you will find that out in due course. Don't make any decision right away. I don't see why we are in such a rush.

[English]

The Chairman: We're going to vote on the motion.

[Translation]

Mr. Michel Bellehumeur: I don't understand your rush.

[English]

(Motion agreed to—See Minutes of Proceedings )

The Chairman: The meeting's adjourned. Thank you very much. Have a wonderful Easter break.