FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, September 25, 2001

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[English]

The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call this meeting to order and welcome everyone here this afternoon. This is our third session of the day related to pre-budget consultations.

It is our pleasure to have with us at this round table the following witnesses: the National Science Organization Working Group, the Canadian Resource Centre for Victims of Crime, the Business Tax Reform Coalition, the Union des producteurs agricoles du Québec, and the Canadian Federation for Promoting Family Values.

Many of you have actually appeared before the finance committee in the past, so you will probably know how this operates. We will have introductory remarks of five to seven minutes from all the panellists. Thereafter we will engage in a question and answer session.

We will begin with the National Science Organization Working Group. Dr. Howard Alper is past chair of the Partnership Group in Science and Engineering and is vice-rector of research at the University of Ottawa.

Welcome.

Dr. Howard Alper (Member, National Science Organization Working Group): Thanks so much, Mr. Chairman. It's a pleasure to be here this afternoon on behalf of the National Science Organization Working Group.

Last October the Honourable Gilbert Normand, Secretary of State for Science, Research and Development, organized a round table in Aylmer, Quebec, to look at the need, yes or no, for a national science organization, and if there was a demand for it, what its role, function, and mandate should be.

About 100 stakeholders from different sectors all across Canada were invited to participate. It was really an excellent event. I think it's fair to say the consensus was that there was a significant need to create a new organization to harness and complement roles and capabilities of existing bodies.

As a consequence of the recommendations from that round table, in February of this year a working group of 15 people was established to develop a proposal for an NSO, a national science organization. I'm here, really, to represent the group.

After considering various models and scenarios, we came up with the idea of creating what is called “The Canadian Academies”, which would serve as a federally incorporated, arm's length, not-for-profit, charitable national science organization. When I say “science”, it's not just science in the hard science sense, or engineering; it means social science, humanities, health science.

The mission of the Canadian academies organization would be to provide a source of credible, independent—that is a very important point—and expert assessment of sciences underlying pressing issues and matters of public interest. That's its principal role. The second is to provide a strong Canadian voice for the sciences, both nationally and internationally.

The major focus is on assessment. This is practised in nearly all of the other G-8 countries—for example, the U.S., Japan, France, Germany, and so on. Assessment establishes an understanding of what we know about the science underlying an issue, and more importantly what we don't know. It defines questions that need to be answered and establishes a holistic view of complex issues. It clarifies areas of concurrence, divergence, and uncertainty. Finally, it examines the validity of the sciences informing the issue.

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On the second point, as a voice for sciences in Canada, there the role would be to articulate Canada's interests on all issues where the collective voice of Canadian science needs to be heard and to participate in joint activities with national academies around the world. I think it's really with respect to that point that the secretary of state, early in his mandate, became aware of the need for such an organization. There was a governance gap in Canada.

The founding member organizations would include the Canadian Academy of Sciences and Humanities, the Canadian Academy of Engineering, and now a new health sciences academy. It would be run by a board of governors that would be inclusive, coming from all sectors of society, and diversified and balanced. It would consist of anywhere from 12 to 20 voting members. The members would be nominated by member organizations and stakeholders, and half of the board of governors would be drawn from the lay public.

The board of governors would approve and direct the programs and administrative operations of the Canadian academies. This is akin to, but not identical with, the national academies in the United States—I'm familiar with those, having actually served on a number of expert assessment panels—with regard to sciences, engineering, and the institute of medicine.

Assessment panels, therefore, will be composed of experts with knowledge and expertise relevant to the issue. You bring in the talent and the expertise irrespective of where it is. This may involve international members as well, just as I participated in the review panels in the United States. All reports are subject to peer review and very high standards.

In terms of funding, the ideal recommendation would be to have a funding model similar to that for the Canada Foundation for Innovation. Indeed, the board of governors model itself is similar to that of CFI, which has worked, I would argue, extremely well since its creation.

Following the draft proposal, which I think you should all have a copy of, there's been extensive consultation across the country and a good response from different sectors of the community. There's going to be a review by the working group next week. However, having asked staff members associated with the working group, I can tell you there's very strong support for the concept. One interesting suggestion was that the amount of money being asked for was insufficient. It should have been $5 million a year instead of $3 million. Other than that, the issue that people were very enthusiastic about was independent assessment.

I'll stop there. I would be pleased to answer any questions later on regarding that matter.

The Chair: Thank you very much, Dr. Alper.

We will now hear from the Canadian Resource Centre for Victims of Crime. Mr. Steve Sullivan is the president and executive director.

Welcome.

Mr. Steve Sullivan (President and Executive Director, Canadian Resource Centre for Victims of Crime): Thank you, Mr. Chair. I'd like to thank you and the committee for allowing me to come and take part in these pre-budget consultations.

The Canadian Resource Centre for Victims of Crime is a national non-profit victims advocacy group. We're funded by the Canadian Police Association. We work with victims of crime and their families from across the country.

We work a lot with families of homicide victims, sometimes with families whose loved ones have been murdered by someone on federal parole or release. As rare as those incidents are, they do take place. Those are the types of families who come to us for assistance.

Just as Parliament has been preoccupied with the recent events in the United States, I too, as I was preparing my remarks for today's hearing, found it difficult to prepare comments for the committee when everything seems so inconsequential. It seems so small in light of such actions that have taken place in the U.S. However, it is important that we go on and take care of those who are still with us, and in Canada there are victims of crime who are in desperate need of assistance.

My comments will focus mainly on the Correctional Service of Canada and the National Parole Board. I focus on those agencies because victims who go through the justice system are normally assisted by provincial bodies, the crown attorney, the police-based victim services—those are all provincial issues. When someone is sentenced to two years or more, the offender is dealt with through the federal agencies, the Correctional Service or National Parole Board, and therefore victims are serviced by those agencies, and it's appropriate that my remarks be focused on those agencies, as they are federal bodies.

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Currently victims do have some rights when it comes to the National Parole Board and Correctional Service in the way that the parole and corrections systems operate, mainly with regard to receiving certain information. Victims can be notified of the institution that a federal offender is in, when he or she is moved or is transferred. They can be notified of parole hearings. They are given the opportunity to attend those parole hearings. Recently the federal government has expanded the role of victims at those hearings to allow them to make oral impact statements. Those rights have basically been in place since 1992, when the Corrections and Conditional Release Act was passed, and not a whole lot has changed since then.

What my comments will focus on today—and I'll be brief in my opening remarks to allow for questions—is the fact that while we've made some progress with victims and the rights they have, the problem many victims face now is realizing those rights and getting the services they need. It's one thing to have the right to get information, it's quite another to have someone actually sit down and explain to you the information you receive, because often it can be very difficult to understand. I'll give you a very quick example.

The daughter of a family in a small town in Ontario was murdered, and it took seven years for the case to come to conclusion before the courts. The offender was sentenced to life without parole for ten years. The offender was in custody during that whole time. In our system the clock starts ticking when the person is arrested, so he's actually done seven years of that ten years. Also under our system an offender can apply for day parole three years before full parole when serving a life sentence for murder, so this individual has actually done his seven years. So the family applies to the National Parole Board to find out when in fact this person can apply for parole, having just heard the judge say, “Life without parole for ten years”, and they're told he can apply for parole in a couple of months.

Those are the types of things that are, for someone who's never been through the system, very difficult to understand. It's important that the information be given to them by people who are properly trained and understand the questions victims will have, because they have a great many.

Part of the Corrections and Conditional Release Act was a provision that within five years it would be reviewed. As you will know, the justice committee reviewed it last year and released their report last summer, and the government responded to it prior to the federal election last fall. As part of that process, the government has agreed to make several improvements with the type of information, the level of information the victims can get, also with a commitment to more coordinated services for victims of crime.

Some of the information the victims will now be able to get concerns new offences committed by someone on conditional release or reasons why someone is transferred—in our system, even though you might commit a crime in Ontario, you could be transferred to British Columbia. For many victims there's no understanding of why that is, that there are different levels of prison, why people are sentenced or moved down to one level from another. These are all very complicated issues, which victims have very little understanding of.

The federal government has also agreed that victims will be given the opportunity to listen to audio tapes of a parole hearing after it has been held if they choose not to attend that parole hearing. They've agreed to create a national victims unit within the Correctional Service and the National Parole Board, which, among its many duties, will be to better coordinate the delivery of services for victims and to be a complaints office for victims of crime.

One of the things we have yet to hear from the government is a commitment that new resources will be put into corrections and parole to allow for more services for victims. I can tell you right now many victims are not very well served by the Correctional Service and the National Parole Board. I say that not to criticize, because I know there are many people, and I know many, within those agencies who are very much dedicated to helping victims. But basically, particularly with Correctional Service, someone who is given the duty of assisting victims is given that duty on top of everything else they have. So their main duty is assisting the offender, getting treatment, helping him through his sentence, and on top of that is the issue of helping victims. That's something they do when and if they have time.

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Under the commitment made by the government we will actually be promising more to victims, we will expect that they get better services, when in fact there has been no commitment to improve the services they have now and to provide the resources to ensure that the promises the government is making are ones they can keep.

I have had discussions with the Commissioner of Correctional Service, Miss Lucie McClung. I can tell you she is committed to doing her best to make sure that the Correctional Service serves victims as well as they can. But again, without additional resources, that's not going to be very much.

The contact victims have with the National Parole Board and the Correctional Service of Canada increases every year. One of the main complaints from victims has been that they didn't have much of a role in the process. The government has agreed to what is actually in place now, expanding that role. Victims can provide oral impact statements at parole hearings.

As I mentioned, an offender can commit a crime in New Brunswick and serve his sentence in British Columbia. For most people attending the parole hearing is simply not cost-effective, when someone's been transferred across the country. Victims are given no assistance to attend those parole hearings, although they're told they have the right to attend and participate in them. It's like telling an accused, you have a right to a lawyer, but only if you can afford it. We have advocated a special fund to be set up to assist the victims of crime in those instances where they want to attend the parole hearing, but cannot.

Since we submitted our written brief, the federal government released this document National Consultation with Victims of Crime, which was done to get a sense of how victims felt about where the government was heading. If you haven't seen the report, I recommend it to you. In here victims talk about the issue of training for people who deal with victim services. They often feel the people they're dealing with don't understand the issues they face—frankly, some of them are very fearful of victims. There are other issues about coordinated victim services, better information, people who are dedicated to work with victims and don't just do it as part of working with the offender. There are issues about what the victims unit can and should do to better assist victims. Finally, there is the issue of the financial assistance to attend parole board hearings. These are all issues that victims of crime themselves identified to the government as needing to be addressed. They appreciate the commitments the government has made. All they're asking is that the resources be put behind them to make sure they can actually be realized.

Thank you.

The Chair: Thank you very much, Mr. Sullivan.

We'll now hear from the Business Tax Reform Coalition, Mr. Barry Lacombe, president of the Canadian Steel Producers' Association, and Fiona Cook, Forest Products Association of Canada. Welcome.

Mr. Barry Lacombe (President, Canadian Steel Producers' Association; Business Tax Reform Coalition): Thank you very much, Mr. Chairman. It's a pleasure to be here in front of the committee to share our views on business tax reform. We very much appreciate this opportunity.

As Mr. Sullivan has said, these are difficult times. There is a lot of fiscal, economic uncertainty, and we realize that this uncertainty will mean difficult choices for the government, growing spending pressures, deficit issues, things of that nature. At the same time, we believe it's important to focus on the tax system, to ensure that we have a tax system that promotes investment, growth, competitiveness, and productivity and improves the living standard of Canadians. That's what we'd like to talk to you about today. What I intend to do is tell you a little about who we are, explain our priority issues, explain to you why we think these are priority issues and why they need to be addressed, and then respond to such questions as might arise.

The Business Tax Reform Coalition represents manufacturers with production of $267 billion a year, exports of $179 billion a year, and direct employment of about 1.5 million Canadians. As you can see from the list in the submission, we represent the Canadian Association of Petroleum Producers, the Canadian Chemical Producers' Association, the Canadian Fertilizer Institute, the Canadian Petroleum Products Institute, the Canadian Plastics Industry, the Canadian Steel Producers, Conseil du patronat du Québec, the Forest Products Association of Canada, the Information Technology Association of Canada, the Railway Association of Canada, the Rubber Association of Canada, and the Mining Association of Canada. So there's broad-based support for the coalition.

Our priority issues are the following. Clearly number one is lowering the corporate tax burden. We believe that if there's a fiscal opportunity for advancing the reductions to 21% between now and 2004, the government should take advantage of that opportunity and do so for all industries. We believe that in the medium term it's also important to keep an eye on tax competitiveness. This would mean reducing the federal rate further to 17% to open up a clear Canadian advantage. Provinces need to take action as well; and as you know, many of them have.

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Lastly, we believe that it's important to eliminate capital taxes. These profit-insensitive taxes are job killers. The federal government would also be encouraged to work with the provinces to eliminate all capital taxes.

We also believe it's important to avoid inappropriate ecological taxes. We are working with the national round table on ecological fiscal reform. We believe that work needs to be concluded before there is any movement on ecological taxes.

Finally, we believe that R and D is important to Canada's productivity and economic performance. The current R and D tax credit should be maintained. We think there has been significant improvement in administration of that program, and that improvement needs to continue.

You may ask why we are concerned about these matters. In our presentation you will see a chart showing Canada's share of inward foreign direct investment stock in North America. From 1985 to 1998 Canada's share has declined from roughly 25% to about 13% to 14%. We think in part this is attributable to the state of the tax system, and in particular to capital taxes, which have been growing significantly during this period.

The next chart simply shows the shares between Canada and the U.S. of North American inbound foreign direct investment. There is nothing surprising here. The Canadian share is going down, and the American share is going up. It is something we must address, because as we attract less and less investment, as we have impediments to investment, it means that our capital stock is older than it should be. It means that we are not applying enough capital in our economy compared to other economies and therefore we're less productive and standards of living are lower than they otherwise might be. We believe it is important to address these.

The next chart simply shows Canada's federal and provincial corporate income tax and capital tax. It stops in 1995. Let me just give you a few numbers. In 1991 capital taxes took in $1.9 billion. They now take in $4.8 billion. As you will note, federal capital tax has been growing. And provinces account for the largest share of capital taxes, which is why we believe there is an opportunity for the federal government to take a leadership role with provinces to address capital taxes and the negative economic implications of capital taxes.

The next chart simply shows the effective tax rate on capital investment for manufacturing. The only point we'd note is to draw the comparison between Canada and the U.S. You can see that there is a significant differential with us, Canada facing a much higher effective tax rate on capital investment for manufacturing than is the case in the U.S. Of course, this is another factor helping to explain why Canada's share of foreign direct investment is declining.

The next chart shows a breakdown of federal and provincial corporate tax revenues. I would simply focus your attention on the first two columns, income taxes and capital taxes. As you will see, and as I said earlier, provinces also make great use of capital taxes. In fact, there is a lot of mixed messaging going on when people talk about cutting statutory tax rates or cutting the corporate tax rate. They may indeed be doing that, but at the same time, capital taxes, which the OECD has found to be far more damaging economically than the corporate tax, continue to grow. This needs to be addressed. We have a fundamental problem in the tax mix and this really needs immediate attention.

The next section is a capital tax primer. I won't take you through it. It will show individual rates. The only thing I would point out is that the federal rate in 1989 was 0.175% and in 1995 it was increased to 0.225%. We believe that this tax should be eliminated, as I have said.

You will also see provincial tax rates. These rates continue to grow except for B.C. and Ontario, which have taken recent action to move them in the opposite direction.

We have talked about the potential distortions caused by capital taxes. There are investment consequences, job consequences. These have a tremendous impact on cashflow. You pay these taxes whether you are making money or not. And right now, in terms of the Canadian economy, this is an awfully difficult load for business, particularly the manufacturing sector, to bear. Times are difficult, yet we have to continue to pay this capital tax whether we make a cent or whether we lose $10 million. It is a tax that has a very, very high level of distortion.

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It also affects investment. The hurdle rate for new investments is driven up. We believe that as a consequence, there's less investment in Canada than would otherwise be the case.

The last section is the case against capital taxes. Let me also say that this is a very complex tax to administer. It may sound simple, but it's comparatively complex and costly. Capital tax dependency is growing, not declining. It's out of phase, out of step with what one is trying to do to improve productivity and competitiveness, to increase investment. It's a tax that's simply out of phase. So you can read it.

In sum, Mr. Chair and members of the committee, we urge the elimination of the federal capital tax, and we would urge the federal government to work with provinces for the elimination of their capital taxes. We would also ask that the federal government, as opportunities arise, take a look at corporate taxes and try to move more quickly with announced reductions and make further reductions.

The essential message is the government has committed itself to ensuring a competitive tax system for Canada. We absolutely support and applaud that, but it's not a static thing. The world is changing, and tax rates change, so it's something we have to continually keep our eye on. In that regard, we believe that as room would permit, moving to a 17% corporate tax rate is essential to maintaining that competitive position.

Thank you very much, Mr. Chairman.

The Chair: Thank you very much, Mr. Lacombe and Mrs. Cook.

We'll now hear from the Canadian Federation for Promoting Family Values, Mr. Michael Gorman.

Mr. Michael Gorman (President, Canadian Federation for Promoting Family Values): Good afternoon. Thank you very much for the invitation to be here.

My name is Michael Gorman, and I represent the Canadian Federation for Promoting Family Values. Don't be embarrassed if you've never heard of us. Very few people have. We're rather new. This is our first time here, our first time to make a major presentation. We've been incorporated as a non-profit organization for the last 12 years, and here we are. We are not full-time people at it; we're just beginning to get at this thing very seriously. It's taken us a long time to get our marketing plans together. They are together and we're rolling it out from here.

I believe you have our presentation in front of you. If you notice, we have something called “high-priority issues”. We ask our members to let us know every year what is the highest priority they may have on a particular issue, and we go down the list. The first one is not particularly surprising; we call it “debt surplus”: 82% of the people have voted that as the number one issue, and that's what we look at accordingly. As we go down the list, we go through health care, environment, and so on, right down to something called child poverty. You might see the percentage there: it's 26%. Now, that doesn't mean that only 26% think that this is a major issue—not at all. That means it is simply regarded as a low issue or it belongs outside of the federal government, toward the provincial or municipal. So please don't think that might be a true value of the importance of that issue. They simply don't regard it as a major issue, or it could be someplace else.

The most important thing for us to do is to try to determine where we feel the budget or our government should be going on those issues.

“Observations” is another heading we have. For example, we think that about 50% of the surplus this year should go toward debt reduction, and so on down the list again. We make a number of other observations. Again, this is not a great scientific study. We're looking for people's values, not for some great mathematical or precise tool here in order to come to our judgments. So you could go through, if you wish, education, pensions, employment, defence, and so on.

I'd like to take you into the next part of the presentation that I've left with you, and that is simply “Conclusions”. From those observations, we could now start making some values from some judgments.

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I'd like to read to you one of the conclusions we've come to. One thing we do is compare the importance of one issue with another, and we're saying that defence, employment, and environment have gained in importance—and they certainly have—while debt surplus, unity, and human rights are weaker. That doesn't mean there's a great difference, just that there is a trend in the working there. We can go through most of the other ones, if you wish, but I've come here today to talk to you about recommendations.

In recommendation 1, the most important thing identified by our members, we are saying that $10 billion should be paid directly to the debt. The debt is quite a thing right now. In the letter the minister sent me, dated September 3, 2001, he is saying, gee, we're going to do well, because we're going to put $15 billion towards the debt. Then three days later he came out and said, well, he doesn't think there's going to be a surplus now. So again, we know this is difficult, but if we can get that debt down by anything, it will be good, particularly, as was mentioned earlier, given the importance of what happened in New York 10 days ago, which could drastically affect our ability to pay down our debt this year, or perhaps next.

We're also saying that we should accelerate corporate and personal tax reduction proposals, if at all possible. I think it's important. As someone said earlier on, if we can get more tax dollars into the economy, perhaps we can solve some of the employment problems we have out there. I know again it's difficult, it's sensitive, we don't know exactly where we're going right now, but if at all we can get those tax reductions, corporately and personally...

We also believe we should continue the trend of eliminating taxes for lower-income families. Again, as you might have known, only 26% of the people felt that child poverty is an issue, yet we're coming out and saying, yes, let's lower taxation to lower-income families. The tax-free zone should be around $10,000. We've moved in the last few years from something in the vicinity of $6,000 to, I believe, around $8,000. We think it should be $10,000 a year, and we should also increase the trend to allow higher child benefits.

One thing we often wonder in the world in which I live is why we don't take more people off the tax rolls altogether. They pay very little in taxes. We have something called Revenue Canada. They have to keep all these records on people. I know we all like to keep records on everybody, but if someone is consistently bringing in $8,000, or $9,000, or $10,000 worth of taxable income, why jam up our computers? Most of us in the business community are realizing the simpler we can make our lives, the better it is for everybody. It would be a lot cheaper for them to just get these lower-income people off the thing altogether, get rid of it. Why charge a person $25 a year to fill out an income tax form? To me it's a bit silly.

Recommendation number 4 is that civil servants and educators should have free enterprise experience before they assume senior responsibilities. I married a school principal, and her family are all educators. Having gone through the educational system myself and having known many civil servants, living here in Ottawa all my life, I know exactly how much they know about free enterprise. I'd like to leave it right there. I think you understand my judgment in that regard. How they can go out and teach what free enterprise is, when most of us end up in free enterprise to begin with—we're having a little difficulty with that.

I'd like to go back for a moment and tell you where the membership is coming from, because I just realized I may have made a mistake here. These are the people who fix your car, drive the cement trucks, serve you a hamburger at lunchtime down on the corner here. This is the guy who sells you some pottery or whatever from the boutique. These are the kinds of people we're aiming at at this point. It will change dramatically as time rolls on, but those people are basically the heart of the 1,500 who are reporting this kind of information.

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I'm a little leery about this one, and so are the other 1,500 people who have brought these numbers together—it's the Canada Foundation for Innovation. We're just saying that family businesses, family enterprises, families in general should have some input into this. If we're going to go out and spend $6 billion—that's a lot of money—developing this thing, we are a little afraid it's going to become too academic and too science-oriented. We'd like to have our voice in this as well, if it happens at all.

Also when it comes to the issue of defence, we're saying we should apply about an additional $1 billion to defence. I'd like to cross that out and just keep it open, particularly with the events that have happened in New York City recently. We may have to jack this up very quickly.

We at CFV favour a smaller, well-trained and well-equipped military. We must have the heavy duty machinery if we're going in there. We know we can't be in the business of aircraft carriers or these great big bombers and the like, that's not our role, that's not our business. Let's make it a little smaller, but go with the best equipment that's available out there, as well as the best training. I'm not sure if we in Canada have the best training, but it is available to us if it's not here, and I'm sure we could get it here if we wanted to.

I have to be very careful here. We prefer a much larger emphasis on a younger and a bigger, much bigger, military reserve force, the reason being that in the event of a real big armed conflict, we have to get people together very quickly. We have a lot of young people, an immense number of them, well educated, well trained, well intentioned. We could be training these people on the weekends, during the evenings. In my day we'd call them sea cadets and air cadets and so on, but we could be doing a much better job there. I leave that one for whatever discussions that may take place on it.

In the area of environmental issues, we seem in Canada to have a great image internationally, as well as in the U.S., as being this great big beautiful country called Canada, where the water is pure and everything's great. I don't think they realize the kinds of problems we are having, particularly with the water situation in the country that has transpired in the past year, but I believe there's a great marketing opportunity for industry, science, and so on to get involved with. We could become at least the image leaders as manufacturers of environmental and perhaps even environmental kinds of products that could be sold internationally. There's a market here. I don't think we're tapping into that market.

Here's a dandy: accelerate the long-term strategy to increase tourism in Canada, aimed at a global market. I'm sure the situation will change and we'll get back into our airspace quickly and efficiently. However, it seems to me and to most of the members out there that we just do not know how to sell Canada to the rest of the world when it comes to developing our tourism industry. There's something missing, and in this city alone I can't figure out, with the value of the dollar, why we don't have tourists crawling, begging to get in here to spend their dollars. I know there'll be many hotel vacancies this year. We know very well what has happened. It hasn't been up to snuff—at least that's the impression I get from the street; others may think otherwise.

We'd also like to continue the privatization of government-funded organizations. There are corporations that would love to get into our government funds, do some advertising, whatever. I think there's something there.

My favourite one is the tenth recommendation. We're saying that Canadians are becoming increasingly uninterested in the issue of unity. Canadians require increased information on the impact of secession. One thing I found out through the last years I've been doing surveys is that Canadian unity has fallen from the second highest priority to something like the eighth now. It's significant; there's something here. I don't think we all understand how our families will be affected if secession is realized.

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We also suggest that dollars be allocated to a revised bilingual policy, developing both official languages and cultures and aimed at preschool and primary education levels. We feel that this definitely should be implemented. I see a change throughout Canada, particularly in Quebec and western Canada. We don't hear the remarks we used to hear, one culture to another, one language to another. We feel that if you really want to become...

[Translation]

I would like to say a few words in French, if I may. We believe we should develop a mental attitude that would make it possible for our youth to learn another language while they are young, not when they are 20, 30 or 50. At that age, it is not the time to learn another language or another culture. The right time is in childhood, in the kindergartens of our schools.

Thank you, ladies and gentlemen.

[English]

The Chair: Thank you very much.

[Translation]

The next witness is Serge Lebeau, Deputy Director, Agricultural Research and Policy, Union des producteurs agricoles du Québec.

Mr. Serge Lebeau (Deputy Director, Agricultural Research and Policy, Union des producteurs agricoles du Québec): Thank you, Mr. Chairman.

Ladies and gentlemen, I would first like to thank the Standing Committee on Finance of the House of Commons for giving us the chance to make representations on the preparation of the next federal budget.

I was supposed to be accompanied today, for this occasion, by the second vice-president of the UPA, Mr. Gratien D'Amours. Unfortunately, owing to the death of his mother last night, Mr. D'Amours cannot be here with us today.

I will say a few words about the Union des producteurs agricoles. We are an organization that represents Quebec farm producers. We represent about 45,000 Quebec farm producers. I will now come to the heart of the matter, in light of the time we are given.

Need I begin by telling you that life has been rough in the Canadian agricultural sector for the last decade?. All farmers in Canada will tell you the same thing, whether they are from the east or west of the country, or like us, from Quebec. So I will come straight to the point. The UPA considers these problems to be largely due to the government's withdrawal from agriculture.

In 10 years, the federal government's funding of agriculture has dropped by 57%. That funding has gone from $6.1 billion to $2.6 billion, and as a result, the Canadian government's support for the agricultural sector is currently among the lowest in the world, far behind our main competitors, the Americans and the Europeans.

In fact, while Canada was lowering its contribution, our competitors were maintaining or even increasing theirs. The gap between us and them has consequently grown wider. In the United States, for example, agricultural aid amounts to $350 per capita. In the European Union, it is $336. Canada brings up the rear with half that amount, or nearly $163 per capita.

In fact, since 1991-92, agriculture's share of federal spending has dropped from 3.9% to 1.6% today, while overall spending by the federal government went up by 6%. This situation is the result, intended or not, of management that favours the free market over government intervention.

This way of doing things could arguably be justified in a deficit situation, but we do not believe that it makes sense in a time of surpluses. And yet in spite of low government support, the farm producers of Quebec and Canada have greatly contributed to keeping retail food prices among the lowest in the world, which goes to show how well their sector is performing.

However, at this rate and without fresh government support, the Canadian agricultural sector will be irreparably weakened and will not be able to compete much longer with its competitors nor keep food basket prices among the best in the world.

We feel that agriculture has done more than its share to help the government put its fiscal house in order. So it is time the government reassessed its intervention in agriculture and recognized agriculture's special place and contribution to the Canadian economy. There are a number of reasons for such a change of course, or return to reality.

First, agriculture has no control over the vagaries of the weather and the market; this makes it a high-risk sector. In addition, the competition is tough, and the markets are not competitive.

• 1620

Second, food security is to Canada, as it is to all countries of the world, a fundamental objective. With one crisis after another shaking Europe in recent years, we have seen how important this independence and food security are.

Third, agriculture is at the heart of Canada's economic development. A great many communities in Canada are heavily dependent on agriculture. It is therefore essential for the federal government to reinvest in agriculture. We at the UPA, together with our partners, have given a lot of thought to what forms this new intervention could take.

We have a number of recommendations to make about that. For now, I will just give you the bare bones. For greater detail, I would refer you to our brief. I will be pleased, when the time comes, to answer your questions.

The UPA urges the federal government to re-target its policies by taking into account four main strategic objectives: price and income stabilization; ensuring food security; ensuring the survival of rural communities; and reinvesting in agriculture to the level of support in OECD countries. We would remind those who claim the government is hemmed in by WTO rules that Canada can invest in its agricultural sector without risk of trade penalty because its support level is far below the limits allowed by the WTO.

It is also important to enhance the income security program and to make NISA contributions tax deductible; to enhance advance payments for young farming operations; to reinvest in green programs, namely the environment, farm business management and consulting services, the adaptation fund, regional development and research, NISA, the workforce, and traceability of agricultural products.

With respect to taxation, the UPA asks the federal government to maintain the 500,000-dollar capital gains deduction and to increase it to $750,000 in cases where farming will continue; to clarify the application of the capital gains deduction for the sale of quotas; to give farm organizations access to scientific research and experimental development credits; to improve eligibility under the Home Buyers' Plan for young people; to lift restrictions on tax amortization and input tax credits for commercial trucks and other vans; to exempt farmers from excise tax on fuel; to amend tax legislation for private woodlot owners hit by a natural disaster; and to abolish the logging tax.

To conclude, the UPA would like to say once again to members of the Standing Committee on Finance that the agricultural community feels it has done more than its share to get public finances back on track, that the economic climate has on the whole significantly improved since the early 1990s and that it is therefore essential that part of the budget surpluses be redirected toward agriculture.

Thank you.

The Chair: Thank you, Mr. Lebeau.

[English]

We'll now proceed to the question and answer section. We'll begin with Mr. Epp. It's going to be a five-minute round, and then we'll go to Madame Tremblay.

Mr. Ken Epp (Elk Island, Canadian Alliance): Thank you very much, Mr. Chairman, and thank you to all the presenters. I found all of your presentations interesting. You all give us good food for thought, and that's what I'm saying while I'm trying to get organized here.

The Chair: Everybody notices.

Mr. Ken Epp: Well, I'm the privileged member of the committee who gets to ask the first question, and so I have to work harder than everybody else.

A voice: Don't take in too much food for thought.

Mr. Ken Epp: First, I'd like to ask a question of Dr. Alper. You're proposing a new independent organization for helping the government produce reports, I suppose, on assessments of various things. I'm wondering what kinds of studies you think you'd be involved in. Just give us some examples, if you could.

Dr. Howard Alper: Thanks a lot for the question.

As for topics, possible subjects, let me pick several that I think you can identify with in respect of recent or current issues. For instance, stem cell research is a very important issue from medical and other perspectives, ethical and so on. The same applies to food biotechnology and genetically modified foods and organisms. There are climate change issues and so on.

• 1625

In the past the Canadian Academy of Sciences and Humanities has carried out a few studies, but we can do maybe only one a year. We have no budget, frankly. We did one on transmission wire impact on health, if there is any; on cell phones; on a monkey colony and where to put it. That received a lot of press and I think action by government.

I would think the first several examples I gave are really important to our society.

Mr. Ken Epp: Okay.

First I had better express a concern here. How do you propose to remain immune from political pressure if you are going to the finance minister for funding for your organization? It's very commonly known, I think, that politicians have agendas, that media people have agendas. How can you be immune from that pressure?

For example, if you gave a report that said global warming is a hoax—let's say you guys studied it and found that out—then that would be the end of your contract.

Dr. Howard Alper: I sympathize with what you have to say. However, if you set this up at arm's length, as a foundation like CFI, then that is not the case, because you're providing funds that go on in perpetuity and living off the interest from those funds. That is the ideal solution, so that there is no danger such as the one you raise.

I should tell you that in other countries—for example, in the U.K., the Royal Society, or in France, the Académie des sciences—they get annual funding from the government. Despite that, the Royal Society receives approximately $60 million to $80 million Canadian a year. I don't remember the figure for France. Those are just examples. Those are annual funds. Despite some very controversial reports and recommendations, in the history of the Royal Society and Académie des sciences, over 250 years each, I am not aware of any issues of government withdrawing or playing with allocations of resources.

Mr. Ken Epp: I have one more question for you, and that is the question of how you would actually organize. I believe most good scientific research is done in our country through such organizations as universities, the Canada Research Council, and in some cases some of the provincial research councils. I'm just wondering how you would organize to do specific research so that you would maintain your independence.

Dr. Howard Alper: These assessments would be done by groups appointed by the board. These people would add value because of the skill sets they have, irrespective of whether they are members of organization A or organization B. They could come from the university, they could come from government, or they could come from the corporate sector.

That has worked extremely well in other countries. Do you know, the national academy in the United States does one study a day? That's an enormous amount of output. Those really impact policy creation and policy modification as well as implementation issues.

Very recently, I think two and a half weeks ago, I was present at a general meeting on challenges to society and saw a letter from the President of the United States to the president of the national academies asking for a study on particular points with respect to climate change, and you well know the position of the United States on the Kyoto accord and so on.

• 1630

These questions that are being raised are very important in terms of informing decision-makers and others on particular issues related to climate change. So I think the board plays a very important role. By being inclusive the board represents different sectors of society and is not bound to one particular organization or group.

Mr. Ken Epp: I'd also like to ask Mr. Sullivan a quick question. I was curious to note in your report that your number of contacts with victims of crime is up some 88% since 1995-96, yet the statisticians from Statistics Canada tell us that crime in Canada is down. Is this because your organization did not exist before or was doing nothing? How do you explain that variance in the statistics?

Mr. Steve Sullivan: The statistics I mentioned are the contact with the National Parole Board, which is the government agency, not our agency itself. The National Parole Board says the increase is because more and more groups are talking about victims' rights and victims are becoming more aware that they can actually access these rights. There are still very many people who don't know that victims have any rights at all. In recent years the issue of victims' rights has become a topic of discussion publicly, and more and more people have taken advantage of the fact that they can access these rights.

Mr. Ken Epp: Would it not make a great deal of sense to have available a mini-booklet, maybe a 16-page one, in which you outline for people their rights? If anybody is a victim, you could give them this book. It would take almost no time and no resources for your people to describe it to them. But they could sit down in the middle of their grief or woe, whatever they have, and read this and say, we can go and get some help.

Mr. Steve Sullivan: In fact there are several little booklets like that. The National Parole Board and the Correctional Service put those out. One of the difficulties is that because the trial process is handled by the provincial governments—the crown—and the National Parole Board and the Correctional Service are federal agencies, there's often a break in the communications. The crown and provincial victim services don't often tell victims what their rights are and don't often give them those booklets. But you're right, it certainly would give victims an understanding of what their rights are.

We still have to deal, though, with the ability of victims to understand the information pertaining to their offender, such as that he's moved here, or how they get to the parole hearing—those types of issues.

Mr. Ken Epp: That leads me directly to my last question to you and that is with regard to funding. You're here before the finance committee and you're asking us to recommend to the Minister of Finance that he give you more funding so that your organization can do its work. By the way, it is an organization and a function that I highly support. But the fact of the matter is that most crimes are committed in cities—I believe that's a statistical fact—and most city police organizations are employees of the respective cities. So how do you propose to get that funding from the federal government down to the municipalities, which are actually paying for the policing services?

Mr. Steve Sullivan: I should clarify that the funding is not actually for us. We're a national non-profit organization. We're privately funded by the Canadian Police Association.

What I'm asking is that you recommend more funding be given to Correctional Service Canada and the National Parole Board, both of whom offer services to victims if an offender is sentenced to more than two years. It is a federal responsibility to provide those services to victims. It's not money for us; it's money for the federal agencies to enable them to better serve victims.

Mr. Ken Epp: Thank you.

Mr. Chairman, I'm sure my five minutes are up. I'd like to be put on the list for the second round, if I could, unless you want me to go on now.

The Chair: No, you can't, sorry.

Madame Tremblay.

[Translation]

Ms. Suzanne Tremblay (Rimouski-Neigette-et-la Mitis, BQ): Thank you, Mr. Chairman.

I apologize to those whose testimony I did not hear and whose documents I have not seen. Unfortunately, I will be unable to ask them any questions. I am going to address my questions to the UPA spokesperson, Mr. Lebeau.

• 1635

Mr. Lebeau, do you have any data on the consequences of government withdrawal from agriculture, for example? Land use is extremely important for regional development in a country as large as ours. That development stems mainly from farmers working the land.

As the federal government is spending considerably less in the area of agriculture, the provinces have also reduced their spending in this area, as they have across the board. What are the consequences of this today in terms of the number of farmers that we have lost, of lost production capacity and the loss of land, consequences that mean Canada risks becoming a country of large urban centres because we failed to continue to work the land?

Mr. Serge Lebeau: We have undertaken a study on the impact of the lack of government involvement on rural communities. The study is incomplete, but I suspect that the fact that there is less agricultural activity in certain regions surely has an impact on the economic activity of that region. We are in the process of assessing that impact specifically.

Regarding the consequences, if you take a series of statistics on the net income of farmers in Canada, you will see that there are very significant fluctuations. Net income dropped in some Canadian provinces, which must be related to the withdrawal of government. There are provinces, particularly in the West, who are seriously affected today by the crisis and prices in the grain sector. This is a real problem for these provinces.

Quebec has a particular agricultural base that is a little different from what might exist in the other provinces. A great deal of our agricultural production is subject to supply management. Supply management does not require as much government funding as in free market sectors. Both the dairy and poultry sectors are supply managed. The consumer pays directly.

The fact remains, as I was explaining earlier, that the food basket in Canada remains one of the cheapest in the world in spite of supply management. Canadian dairy producers undertake a study every year and they tell us that Canada still has the least expensive dairy products. This production is subject to quotas. I would say that in Quebec, the withdrawal of government funding has perhaps been felt less in this area.

On the other hand, I would add that the Quebec government has continued to support agriculture, unlike other provincial governments. I am thinking of the western provinces and of British Columbia, who reduced their assistance to the agricultural sector. This clearly had an impact. In Quebec, the reduction in federal money was made up, perhaps not 100%, but in part by the Quebec government, which means that the impact was perhaps not as keenly felt in Quebec as it may have been in the other provinces, taking our agricultural sector into account and the presence of the Quebec government.

Ms. Suzanne Tremblay: There was a program, which still exists, that the federal government paid into. Ottawa's contribution no longer exists. I am referring to the Dairy Herd Analysis Service. Unfortunately, I was told that the federal government's contribution towards this program, which was $3 million—given the size of the federal budget, it is not very much—was halted, even though Quebec provides expertise to all Canadian dairy producers. Are you in a position to enlighten us on this issue?

Mr. Serge Lebeau: It is true that the federal government withdrew from the Dairy Herd Analysis Service. I believe it was the ROP at the federal level. I do not know about the other provinces, but I know that Quebec still supports this program to the tune of—

Ms. Suzanne Tremblay: One million two hundred thousand dollars.

Mr. Serge Lebeau: One million two hundred thousand dollars per year, approximately.

Ms. Suzanne Tremblay: More or less.

• 1640

Mr. Serge Lebeau: Of course there was a withdrawal there as well, but I would say that in Quebec, there is still some support on the part of the government. Quebec is responsible, amongst other things, for the inspection of dairy herds in Manitoba. In the other provinces, I cannot tell you if it is the producers who pay directly or if it is the province that contributes.

There is one thing I did not mention. This type of subsidy is clearly in the green box category, which is allowed by the WTO. I believe it is the sort of action that the federal government should continue to take, because no trade complaints can be filed against us, given that this type of program is in the green box category.

Ms. Suzanne Tremblay: I have one more question.

We have heard a lot about GMOs and the traceability of agricultural products. We are told that if we emphasized traceability, we would worry far less about GMOs because we would be able to track them and know exactly what we are eating. Therefore, we could do things differently, which seems difficult concerning GMOs.

Do you have any idea what it could cost to set up a real traceability program for all of the provinces? And over what period of time would this have to be phased in? It is all well and good to go on and on about it, but is there any way to find out what this could really cost?

Mr. Serge Lebeau: I have not done an assessment. However, the Quebec government is presently funding a traceability or quality program. I believe it is costing 21 million dollars over three years, or 7 million dollars per year. We know that it is not nearly enough, and that it deals only with the cattle sector for the moment, which is not Quebec's biggest business. Therefore, we know it is clearly insufficient. I would say that it could cost almost half a billion dollars over five years, but I say this trying to imagine what it could be on a national level, taking into account Quebec's contribution. These are quite substantial figures of course, but you are quite right. Given what we know the situation to be in Europe, I think we have to be extremely careful on this side of the ocean if we do not want to find ourselves dealing with problems like mad cow disease, etc.

There is also the whole issue of GMOs. I believe consumers want to know what they are eating more and more. Therefore, I think there is something to be done in this area. Once again, these are green box programs from the perspective of international trade.

[English]

The Chair: Thank you. Merci, Madame Tremblay.

We'll now proceed to the following individuals. I have Mrs. Barnes, Mr. McCallum, Mr. Cullen, Mr. Pillitteri, Mr. Nystrom, and Mr. Brison.

Mrs. Sue Barnes (London West, Lib.): Thank you, Mr. Chair.

Thank you for your presentations today.

I'll just make a couple of comments to Mr. Gorman.

Even though I think we would all like to take many low-income people off the tax rolls as far as payments go, there is an incredible benefit to people filing a return. Some of the examples I could give you would be GST refunds, the information that comes from the tax returns, the child tax credit, the fuel rebates. There are other myriad provincial and federal levels... the information is found at the most reliable source, which is voluntarily complied with by the individuals themselves when they file their tax return. So even though there may be some frustration in filling out a form, there certainly is some benefit to having this information on an accurate basis and in one place.

I would also like to say that the Foundation for Innovation is one of those newer institutions in Canada that I think does incredible work. Coming from a city like London, Ontario, where we have university and medical research centres... It's been a tremendous boon for the R and D community across Canada.

Dr. Alper, I'd like to get some idea of the realistic time lines for having this newest organization you're proposing to the government up and running. I'd also like your comment on the feedback you're getting about putting up an immediate $30 million and taking it down over a 10-year amortization, as opposed to $3 million per annum.

Dr. Howard Alper: Thank you.

• 1645

If I could add an editorial comment on CFI, I think the fantastic benefits of CFI have to be recognized, not just to the university community but to all sectors. It's a partnership involving the corporate sector, provincial governments, the federal government, universities, etc. The spinoffs that have resulted, just in the last three and a half years, have been really outstanding.

On the issue of creating Canadian academies, we would like to see that done in the coming year; that is, in the next budget cycle.

In terms of the protocol for funding, yes, the vast majority would favour a CFI-type solution because that, as I mentioned in response to an earlier question, does assure, I think, complete independence. Aside from that, it also guarantees to the academies sustained funding for at least ten years. If done in the CFI mode, it would be in perpetuity, although over a specified period—not perpetuity, but for a defined period.

That seems to be the general, I wouldn't say consensus, but a large majority of the opinion up to now.

Mrs. Sue Barnes: Thank you very much.

Mr. Sullivan, are you a full-time employee of the centre you represent?

Mr. Steve Sullivan: Yes.

Mrs. Sue Barnes: Okay. And your funding, you've said, comes from the Canadian Police Association—you've said that twice. Is it 100% of the funding, or what is the involvement of Canadian Badge In Uniform—

Mr. Steve Sullivan: Currently it's only to the Canadian Police Association. We no longer receive funding from Canadian Badge In Uniform.

Mrs. Sue Barnes: So that's just incorrect...

Mr. Steve Sullivan: We previously did. In the last couple of years it's only been from the Canadian Police Association.

Mrs. Sue Barnes: The Canadian Police Association itself really isn't a national organization because it doesn't operate in every province. Yet you're saying you are a national organization. I'd like to know how you get your memberships and how you solicit them.

Mr. Steve Sullivan: We are a very small organization. There are two employees, including myself. When I say we're a national organization, what I mean is we assist victims from across the country. We don't have memberships. We don't have dues. People don't pay to belong to our organization. We just simply assist victims who come to us. I'm the first to admit that being the size we are, there are probably more victims who don't know about us than do. We don't go out and ask victims for money. No one belongs to us.

Mrs. Sue Barnes: So you don't have a board of directors or anything like that?

Mr. Steve Sullivan: We have a board. We have representatives from the police association, obviously, because they provide funding, and also from other victims groups like Victims of Violence and CAVEAT—well, previously CAVEAT.

Mrs. Sue Barnes: All right. A lot of your brief talks about parole board hearings. From reading this brief I see that's one of your focuses. Are you asking that there be funding from the federal government so that every victim can attend a parole board hearing?

Mr. Steve Sullivan: For many victims it's not a financial burden. For example, as you know, there are a number of prisons in Kingston, Ontario, so for victims to attend parole hearings it's often not a financial issue. But if an offender is transferred to a different part of the country, it becomes cost prohibitive. We're asking for a fund for those cases where victims are in need of assistance. There is a similar fund set up for families to attend section 745 hearings. It's not available to everybody. It's for those families who can show a need to get assistance. It's aimed more at families where there are extreme situations, where someone's been transferred across the country and it's simply cost prohibitive for those people to attend.

Mrs. Sue Barnes: Just to be clear, even though you have a board you do not have a membership role?

Mr. Steve Sullivan: We don't have memberships, no.

Mrs. Sue Barnes: Those are all of my questions. Thank you.

The Chair: Thank you.

Mr. McCallum.

Mr. John McCallum (Markham, Lib.): Thank you.

I have two questions. One is for Dr. Alper. I've spent much of my career in the academic world, so naturally I favour research. But I have trouble understanding the rationale for your proposal, because it says the objectives are to provide a source of credible independent expert assessments on the sciences and to provide a strong Canadian voice for the sciences. But we already have the Royal Society; we already have a whole lot of organizations representing various academic disciplines who, presumably, are doing all that already. I don't quite understand. This would seem to be another layer, and I wonder whether it would add a great deal to the total effort. Maybe I'm missing the point.

• 1650

Dr. Howard Alper: What this does is transform the initial societies or founding groups. The Royal Society, the Canadian Academy of the Humanities and Social Sciences, the Canadian Academy of Engineering, and what is the Canadian Academy of Health Sciences, would together become the National Academies. The National Academies is the umbrella organization. What that does is bring together the skill sets, the expertise, from these diverse groups, which by themselves don't cover those, unless in a highly focused way. That's the reason the National Academies were created in the United States. That happened only five years ago—even though the National Academy of Sciences is very old, the engineering one is about 40 years old, and medicine is about the same.

So I think to have access to a talent pool that is so diverse, that can tackle the issues of the day, whatever they may be, really does add value and is important.

Mr. John McCallum: A supplementary question. If this new organization would be the result of putting together three existing organizations, why does it need an extra $10 million a year?

Dr. Howard Alper: Because right now it can't do any expert assessments other than on a very rare occasion. It has no resources to do anything. That's the reality.

Mr. John McCallum: You mean the three existing organizations don't?

Dr. Howard Alper: Yes, that's right. The Royal Society has no support from government. It operates right now in a deficit, I can tell you that. It's the same with the Canadian Academy of Engineering. It's a totally different situation. As I mentioned earlier, the Royal Society of the U.K. gets $60 million or $65 million a year from government.

Mr. John McCallum: Thank you. That's a clear answer. I had not understood that.

My second question is for Mr. Lacombe. First of all, just as kind of a technical point, I was looking at your charts, and I was under the impression that by the time our corporate tax cuts were fully implemented, we'd be lower than the U.S. Your chart shows otherwise.

Mr. Barry Lacombe: I think you have to distinguish between statutory rates and effective rates. You know this better than I do, probably. Yes, we're levelling down statutory rates, but, for example, in the steel sector, even after all the reductions are in, we are still in an uncompetitive position relative to the steel sector in the U.S. So you have to take into account, as you know, all the things that affect the effective tax rate. When you do that, particularly sector by sector, you end up with the manufacturing sector not in that situation.

Mr. John McCallum: That would include things like capital tax.

Mr. Barry Lacombe: Capital tax, the way in which capital cost allowance works in different areas, and so on. It's the effective rates we're talking about.

Mr. John McCallum: Okay. My final question is this. I am very sympathetic to a lower corporate tax rate. I think it would get a big bang for the buck, in terms of stimulating growth and productivity and all of those good things. I agree with you on capital tax being a bad tax. But I guess what I'd like to hear from you is some sense of priority. Right now is not a time when we have oodles of money out there waiting to be spent on something. If you had to choose between, let's say, a capital tax reduction or a corporate tax reduction sped up, which would you choose? Or would you want a capital tax reduction or elimination even if it meant the government going into a deficit?

Mr. Barry Lacombe: I'll give you my response to this, Mr. McCallum. I would favour, obviously, for a number of reasons, the reduction in the capital tax or the elimination of the capital tax, not the least consideration being the current pressures on the fisc and the amount of revenue that would be apparently lost if the capital tax were eliminated. I also believe that the revenue generated through increased investment that would be generated by removing the capital tax would in fact offset any of that revenue loss. So if you look at it in a dynamic sense, I don't see it as costing the government money, if you will.

• 1655

The Chair: Thank you, Mr. McCallum.

We have Roy Cullen, Albina Guarnieri, Gary Pillitteri, Lorne Nystrom, and Scott Brison.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Mr. Chairman, and thank you, presenters.

I had a couple of questions for Mr. Lacombe and Ms. Cook. There doesn't seem to be a lot of rationale for the capital tax in policy terms, but the federal government capital tax is about $1.23 billion, the provincial is about three times that, and I understand, for example, in the province of Quebec it's up there at about $1.2 billion or $1.3 billion. How are your discussions going with the provinces, particularly the province of Quebec? Maybe you could report on that. And are you suggesting that if we can't get the provinces onside, the federal government should act unilaterally on capital taxes?

Ms. Fiona Cook (Vice-President, International Trade and Government Relations, Forest Products Association of Canada; Business Tax Reform Coalition): On the question of Quebec, you may have noticed that the coalition membership includes le Conseil du patronat du Québec. And we are scheduling meetings with Quebec finance officials within the upcoming months to talk about this issue.

We feel very much that the federal government has an opportunity to demonstrate leadership on the capital tax. B.C. has already moved, and Ontario has made some movements towards it as well, but we feel that even if Quebec doesn't move right away, the federal government does have an opportunity to demonstrate leadership here and send a message.

Mr. Roy Cullen: Thank you.

I was looking at your charts as well, and with the one entitled “North American Inbound Foreign Direct Investment”, I was a little confused, until I read that it excludes intra-North American foreign direct investment. Of course, there have been a number of acquisitions recently by U.S. firms, West Coast Transmission, Anderson Exploration, and going back a number of months, MacMillan Bloedel, and I know there are some who are quite concerned about that. That isn't reflected here, but you could almost argue that it demonstrates the opposite, that American investors are showing confidence in Canada. There are many different sides to this debate. Others argue that it's foreign investors, U.S. investors, buying assets at bargain-basement prices and basically robbing us of some of our Canadian gems of enterprise. What is behind it? Is it something we should be concerned about? Are there any policy interventions, other than a FIRA or something of that nature—I'll put my preferences on the table—that the government should be looking at or be concerned about?

Ms. Fiona Cook: I think we do need to be concerned as more and more American firms do buy up assets in Canada. It means that decisions are no longer made in Canada. A lot of the corporate offices are located in the U.S., most of the decisions do get made in the U.S. So I think from a policy point of view, there is definitely a concern there. I don't quite know what a prescribed solution would be.

I think too your point about this being almost counter-intuitive, going against the argument that we do not have competitive assets, is a good point, but I think we have to recognize that it is very much driven by the exchange rate, and that's another issue.

Mr. Roy Cullen: But if I'm a U.S. company... I know when I was in the private sector, if you looked at a deal, you looked at the business case over the medium to long term. So if you're buying and if there are government goodies, if I can put it that way, that are thrown in to boot, that enhances your business case, but your business case should be there from day one. By the same token, if you're buying assets more cheaply today because of the Canada-U.S. dollar exchange rate, surely you must be looking forward and saying that the U.S. dollar is probably overvalued and one day that imbalance will change. I appreciate that just on a discounted cashflow, based on your investment, the numbers make more sense when you're buying assets at that price. Are these more in the line of strategic investments or are they people looking at short-term advantage? What's actually happening here in the business sense?

Mr. Barry Lacombe: I think both things are happening in the business sense. I agree with you that it would be the business case, but quite honestly, I think you're raising an interesting set of issues as to what is happening with foreign direct investment in some detail, almost sector by sector. I would suspect a fair bit of foreign direct investment is buying things in Canada that one may not be able to get in the U.S., in the natural resource area in particular, which I think we should keep an eye on, and I think we need to do that kind of analysis. I think the exchange rate makes it particularly attractive to do that, but clearly, as you point out, there are other phenomena as well. There is proximity to markets, the ease of transporting. Let's face it, Canada has a very stable environment from the point of view of international investment flows, particularly investment flows coming up from the U.S. A lot of our policy contexts are similar.

• 1700

So I think there is a need for a major analysis of foreign direct investment, what's happening, where it's happening, and what's driving those decisions. I would suspect that a fair bit of it is buying natural resources. I would argue that not very much of it is coming in here with what I might call new investments that are going to improve Canada's “capital stock”, productivity performance, and things like that. I think it would be interesting to do what you suggest, Mr. Cullen, and we would think that a worthwhile exercise to undertake.

From where we sit, we're concerned. Members of the coalition are looking at where investment occurs. Clearly, from the point of view of a number of members of the coalition, Canada is not getting the share of investment it once would have received in those industries. I hate to use this term, but when you buy out something, that has one set of consequences, when you are investing into something new, that has a different set of consequences. I would suspect the balance is more on the merger and acquisition side, as opposed to generating new economic activity, if I can use that, in Canada.

Mr. Roy Cullen: Yes. Thank you.

The Chair: I will go to Ms. Guarnieri, then Mr. Pillitteri.

Ms. Albina Guarnieri (Mississauga East, Lib.): Thank you, Mr. Chair

Mr. Sullivan, first let me commend you for the difficult but much needed work that you do on a daily basis in the struggle for justice and belief for victims in this country. It's often said that first someone becomes a victim of crime, then a victim of injustice, and finally a victim of poverty. I'm sure you've seen first hand the impact on families when they are struck by tragedy. They become unable to continue their careers, their businesses, and have fallen into unemployment and later into poverty.

The focus of your presentation was on resources for access to information. I wonder if you would give us some insight. Is there federal funding getting through to these families? If not, where do you see such programs perhaps being established or enhanced, if there are existing programs?

Mr. Steve Sullivan: The programs that provide assistance to victims of crime in other respects, such as psychological assistance, are carried on through the provinces. Almost every province has a criminal injuries compensation board, where victims of violent crime can apply for and receive funding for assistance with burying a loved one or psychological counselling. Women, for example, who are impregnated by a sexual assault can get assistance to raise the child, if they choose to keep it. There used to be federal assistance to those programs, but that was stopped a number of years ago, I believe in the early nineties. To date there is no funding that I'm aware of provided directly from the federal government or federal initiatives to victims of crime.

Ms. Albina Guarnieri: With the tragedy of September 11, which is ever present on our minds today, we're left to wonder what support beyond charities exists for families of victims. We've all heard the horror stories of people who couldn't pay their mortgages and are suffering financial hardship due to the shockingly sudden tragic events. It struck me that Canada may be no more prepared than the United States appeared to be when it came to providing assistance. Can you give us any insights on what programs you think the federal government could even contemplate establishing as a safety net for families that are struck by tragedy?

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Mr. Steve Sullivan: The incidents in the States are quite unique.

I should mention that for offences that take place in Canada there's what is called a victim fine surcharge. The federal government has put a provision in the Criminal Code that if a fine is paid, a percentage of that can go to the provinces to fund their victim services.

Obviously, with this type of crime we're not going to have someone pay a victim fine surcharge.

I believe Ontario has set aside $3 million to assist the families from Ontario. It's unclear how many there are from Canada. But those families will definitely need financial assistance. Depending on the circumstances, some will have to bring their loved ones back to Canada for burial. Some have families to raise. There will be a definite need for some kind of financial assistance for many people. Again, it's unclear what numbers we're talking about. Because it's such a unique type of crime, there will be no other types of programs available to these people. It's unclear even if they could apply under the criminal injuries compensation plan because the offences didn't take place in Canada. They are of such a unique nature that it remains to be seen what families will be able to access.

Ms. Albina Guarnieri: I have one last quick question. You mentioned earlier that some programs ceased to have any funding in the early 1990s. Are you familiar with any of those programs, and are there some that we should contemplate revisiting in order to assist victims of crime?

Mr. Steve Sullivan: What I referred to was that there used to be funding from the federal government to assist with the provincial Criminal Injuries Compensation Board. For example, in Ontario they would get some money from the federal government to assist with their program. That funding was stopped in the early 1990s. I believe at least one province on the east coast has completely stopped giving victims any kind of funding.

The more victims become aware and, as we talked about earlier, the more victims' rights becomes an issue, more and more victims are accessing these programs. But to be blunt, victims don't get very much money from them. I don't mean that in the sense that they're trying to make money. But as far as accessing psychological services, for example, you're not looking at a whole lot of money, and therefore the psychological services are for a limited amount of time.

Ms. Albina Guarnieri: Thank you for your insight.

The Chair: Thank you.

Next is Mr. Pillitteri and then Ms. Bennett.

Mr. Gary Pillitteri (Niagara Falls, Lib.): Thank you, Mr. Chairman, and welcome to the presenters.

One specific item caught my interest, and that is agriculture. Agriculture is supported by the Canadian government through subsidies. They are minimal compared with the support in the United States and the support they're receiving in Europe. Moreover, there are provinces that do have added support, specifically the Province of Quebec.

I don't know if it was due to their foresight years ago specifically in dairy products, but today some 48% of the total dairy products of Canada are in the province of Quebec. They enjoy the envy of the rest of Canada. They enjoy the best of the agriculture that we know today in Canada, because that is the only sector that is really guaranteed and has a good quality of life within the farming and agriculture community.

Having said that, why would you have made the remark that the subsidy of Quebec is so high in the province of Quebec that possibly it's because it's responsible for some agricultural component outside of Quebec? I assure you, I don't know of any agriculture that would want provinces responsible from outside of Quebec. That was a remark made to Suzanne Tremblay. Would you want to explain why you would say that they could be responsible from outside? I don't know of anyone who is responsible outside of any province. Or did I miss the point that you're trying to say that they receive so much subsidy because of a response from other parts of Canada?

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Mr. Serge Lebeau: No, I didn't say that.

[Translation]

I said that the Quebec government, over the last decade, has made up for the drop in federal subsidies. I was saying that total subsidies in Quebec, taking into account Quebec's contributions and the federal government's contributions, had dropped less than in the other provinces, but that the government of Quebec had to top up the reduced federal government subsidies, which was not necessarily the case in the other provinces. I gave the example of British Columbia.

The dairy sector is not very heavily subsidized, as I explained, given that the price is not fixed under an income security program such as NISA or another such program. It is done according to production cost. Therefore, the consumer pays for what he consumes. There is no subsidy at that level. Therefore, Quebec does not support the other provinces in this regard.

What I said was, that the decline was perhaps less significant in Quebec compared to the other provinces because the Quebec government has made up the subsidy shortfall. But there again, the total subsidy in Quebec is considerably less than the American subsidies or the European ones. Quebec has not been able to fully compensate for the reduction in federal government subsidies.

[English]

Mr. Gary Pillitteri: I do know that, but the federal government has a subsidy, little as it may be, and it's right across the country. It's not lower or higher in any one part of the country. Yes, it withdrew, but the province of Quebec itself does have the highest support for their own people in agriculture in Canada. I just want to make that point.

Thank you.

The Chair: Ms. Bennett, you're next.

Just so we all know, there's going to be a vote at 5:30, with the bells at 5:15, so keep that in mind when asking questions.

Ms. Bennett.

Ms. Carolyn Bennett (St. Paul's, Lib.): My question, Mr. Chair, is for Mr. Sullivan. In the wake of what happened on September 11, a lot of people are worried about the therapeutic approach in terms of post-traumatic stress disorder and the kinds of things people have witnessed. How does your organization deal with the therapeutic needs of victims of crime?

Mr. Steve Sullivan: We're not counsellors or therapists. Where we come in is usually when victims are having a problem with the justice system at different levels, parole or crowns, that kind of thing. We will help them get information and that kind of thing. As you may know, information has been identified as one of the most consistent needs of many victims of crime. They need to understand things. For example, the Correctional Service is getting more into the issue of restorative justice and victim-offender reconciliation programs, which many victims find address their need for information. The offender is the only person who can answer personal questions about “why you picked me”. When it comes to counsellors and therapists, there are other organizations that are much more hands on. We really act as a referral service for families.

Ms. Carolyn Bennett: What is the methodology of your referral service? Is that available on the website? Do you have the local ability of doing that? My experience is that if people aren't getting therapeutic help, then their need for all of these other things is obviously much greater. How is your organization organized to make sure they are getting the best possible psychological help?

Mr. Steve Sullivan: We work with both police-based and crown-based victim services in communities across the country. We can contact them and ask what's available in their community. There is also the Canadian Criminal Justice Association, which puts together a booklet every year of available services across the country. So we have other groups on the ground who can assist us in finding what's available in that community. Very often what we find when it comes to families of homicide victims, for example, is that they will go to bereavement groups. But it's a very different dynamic when someone has taken your loved one as opposed to your loved one dying by accident, not that one is a greater or worse tragedy, but the dynamics are very different. What many people find beneficial is contact with other people who have experienced the same thing. Through the list of victims we've dealt with, we can help facilitate those as well.

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Ms. Carolyn Bennett: Are your intake procedures such that asking whether they are getting psychological support is a routine part of the intake?

Mr. Steve Sullivan: Yes. When victims call they will usually tell us what they are calling us for, but we ask them if they have accessed the services in the community, if they have had contact with the crown service or the police service, and if they have made referrals. Very often we find that victims don't even know that there's a crown-based victims service, for example. So the communication between police and crowns with victims about what is available at the very beginning is seriously lacking. To be honest, I wish we could do a lot more. As I mentioned, we have two people. That's why we try to access the services that exist across the country, provided by the provincial governments.

The Chair: Thank you, Mr. Sullivan.

The final two questioners are Mr. Nystrom, followed by Mr. Brison.

Mr. Lorne Nystrom (Regina—Qu'Appelle, NDP): I'll go very quickly to two of our witnesses today.

[Translation]

Mr. Lebeau, I remember Jacques Proulx very well. He came here often 10 or 15 years ago. I have a great deal of admiration for the Union des producteurs agricoles. I am aware of your situation, even though I come from Saskatchewan.

[English]

I wanted to ask you for advice to the committee. We have quite a crisis in the grain industry, as you said, out on the prairies, compounded by the fact that we have a great drought this year. What is your advice to the committee in terms of how much money should be budgeted for agricultural provinces, Canada-wide? Obviously, you're an expert on Quebec, but you have, I am sure, a good relationship with farm organizations across the country. We have quite a problem competing with the American subsidies in the grain industry, the European subsidies in the grain industry, let alone some of the problems you mentioned. What is the rough global figure you would recommend to us to recommend to the Minister of Finance?

[Translation]

It is a simple question.

Mr. Serge Lebeau: This will be short and sweet: a good income security program. The existing program is not as operational as it should be. It is very difficult for producers to get full compensation for the losses they have incurred. It takes time and there are two levels: one program in the event of catastrophe and a primary program for income security. There are few links between the two. There are gaps between the two levels. I think we have to work on this and that perhaps we should stop comparing the present situation to the situation of the last two or three years, which was in fact very bad. How can you start up a program when you are comparing the average of the last three years, which is very bad, to a year which is still bad?

The best advice I can give you, and this is in fact what I said in my brief where you will find the details, is to work on the income security program. There is an advisory committee working on this that reports to the federal Minister of Agriculture. There are recommendations, and I think that if the federal Minister of Agriculture followed the committee's recommendations, we would see light at the end of the tunnel.

[English]

Mr. Lorne Nystrom: I have one question for Mr. Gorman, who is the president of the Canadian Federation for Promoting Family Values. I want to ask you similar questions that Mrs. Barnes asked Mr. Sullivan. Who funds your organization? How many members belong to it? I suppose I'll ask my last question at the same time: what is your definition of family values? By your definition, I mean your organization's definition of family values.

Mr. Michael Gorman: The main revenue for the Canadian Federation for Promoting Family Values is gathered through voluntary memberships. As we go around gathering our data, people are invited to participate financially if they wish to. That is how it's done.

We have 1,500 members.

I think you had a third question.

Mr. Lorne Nystrom: What is your federation's definition of family values?

Mr. Michael Gorman: I wish I knew. It has to be that abstract. It's there because it's almost a generic name that takes in anything a family wants to be, from the family farm, to a family enterprise, to someone who is retired and has his family and his concerns. It's those values that are inside you when you are outside your business, in your particular case. It's what you believe in within your own family unit without considering corporate values. Sometimes there are a number of us around who have double or triple standards. These are your singular standards, the real ones.

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Mr. Lorne Nystrom: It could be quite a diverse family. It doesn't have to be just the man, woman, two kids, and the dog.

Mr. Michael Gorman: No, it could be anything. Today? The strange relationships?

The Chair: And you thought you didn't have a definition.

Mr. Brison.

Mr. Scott Brison (Kings—Hants, PC/DR): Could you help us define “coalition” and “party”? Sorry, it's just a joke.

My first question is to Mr. Lacombe. We're in agreement on the issue of capital taxes. Have you looked at the impact of capital gains taxes and the locking up of capital that occurs and has occurred with capital gains taxes denying a lot of particularly merging companies and opportunities to access the capital if they need to grow? I'd like you to comment on that, but also on a movement towards a greater consumption tax base in Canada, away from taxing income towards taxing consumption, because many economists are in agreement that probably from an impact economically there would be positive growth out of that.

Relative to the concern of a U.S. takeover of Canadian corporate interests—Mr. Cullen was discussing this earlier—I would assert that a lot of that comes from our low dollar. Of course the low dollar reflects productivity, and probably one of the greatest ways to improve productivity would be to improve or increase investment, which would result from your notion of reducing capital taxes. If you could comment on that, it would be helpful, and then I have one more question.

Mr. Barry Lacombe: Let me do my best, Mr. Brison. Some of these I'm going to have to duck because I'm here representing a coalition. I hope you understand that.

Mr. Scott Brison: Or a party.

Mr. Barry Lacombe: Exactly. I hope you'll understand that.

First of all, we obviously agree that anything that increases investment will lead to higher productivity and improvements in the standard of living.

In terms of the capital gains tax, the coalition has not considered that issue. Our focus has really been on the corporate tax and the capital tax. So we have not gotten into that. Similarly in terms of greater attention to consumption taxes versus other forms of taxation, those are all terrific questions, but speaking for the coalition, as a coalition we have also not really gotten into those issues.

As we discussed, in responding to Mr. Cullen, we think that obviously U.S. investment in Canada is influenced by the Canadian dollar. The exchange rate plays a significant role in that. Obviously anything we can do to increase productivity and increase the performance of our economy will have a positive impact on the exchange rate.

Sorry about not being able to answer a couple of questions.

Mr. Scott Brison: That's fine.

A quick question for Mr. Gorman. Your fourth recommendation is that civil servants and educators should have free enterprise experience before they assume senior responsibilities. Would you be suggesting that—although this isn't really the federal jurisdiction anyway—a principal of a school should have some time in free enterprise prior to assuming those responsibilities?

Mr. Michael Gorman: You bet I do. You just happened to hit the... I happen to be married to a school principal whose brothers and sisters are all principals.

Mr. Scott Brison: Does she know you made this recommendation?

Mr. Michael Gorman: Yes, she does, and she said I was nuts.

That's exactly what I'm saying. It's the same thing for civil servants. I come from this town. I've been around here a long time, so I've known a lot of civil servants. I just happened to hit the education field. This is not only my feeling, but this is the feeling of most of the members. We've got people making policies that are affecting free enterprise who don't know what they're talking about when they talk about free enterprise—if they talk about it, if they know, if they even have any concept of what free enterprise is about or the principles within it.

Mr. Scott Brison: Just from a self-reference perspective, my background is in free enterprise. I do think there is a problem in terms of lack of communication between the two solitudes of, for instance, business and free enterprise in corporate Canada and public service. I guess I'm not quite in agreement with you that everyone in public service needs to spend time in free enterprise, because if you're going to make that assertion, I think we could also assert that people in business would benefit from some time—

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Mr. Michael Gorman: They probably would, wouldn't they?

Mr. Scott Brison: Maybe that would be a helpful and constructive way to look—

Mr. Michael Gorman: You betcha.

Mr. Scott Brison: We should have an understanding both ways. There are people drawn to public service who may not be good in business, and there are people in business who might be better off in public service. There's a difference between a public ethic and a private ethic. I just wanted to make that point, but I understand your point.

One last question relative to the agriculture policy, Mr. Lebeau, and that is the nature of the design of farm aid packages. Many of the farm aid packages are, just by design, very difficult to access. Some of them—I think it was NISA, and it may have been AIDA as well—were based on 70% of the last three years' production. For a farmer in my riding, in the Annapolis Valley in Nova Scotia, who may have had three years of drought, which was in fact the case, 70% of nothing is exactly that.

I'd like your feedback on the design of some of the farm programs. Sometimes it seems as if they want to say they've put many billions of dollars into a program, but they almost design it to make it impossible to access, or it's difficult to access. I'd appreciate your feedback on that.

[Translation]

Mr. Serge Lebeau: This is exactly what I was explaining earlier. The NISA is presently based on the business' gross revenue. This is actually the average of the last five years. We take out the best and the worst years. That is the NISA. As for the AIDA, which is the disaster program, it is based on 70% of gross profit. It is the second level that is at 70%.

The problem is that we look only at the average and gross profit, whereas in Quebec, we have what you might call a two-step program. The first is a NISA type of program, and the second is the Farm Income Stabilization Insurance Program, which bases itself more on production cost.

This program was not set up according to what happened in the past, but rather according to the present situation. When the first level is insufficient, the second level kicks in. I think our producers come out far ahead of western producers, who for now are obliged to deal with the program that was designed for the past and that does not respond to their present needs, given that the past few years were bad.

I believe we must study this. It may sound pretentious to say so, but perhaps Quebec's program should be used as a model: the NISA for the first stage and the Farm Income Stabilization Insurance Program for the second. I think it is a program that stays more on track and is more easily activated in a time of crisis such as the present.

[English]

Mr. Scott Brison: One final question. Was the GRIP program in some ways more effective in terms of getting aid into the hands of farmers?

[Translation]

Mr. Serge Lebeau: I believe so. I think that it is a program that took the true business activity more into account than the NISA or the present AIDA.

[English]

Mr. Scott Brison: Thank you.

The Chair: Thank you very much.

Unfortunately, we must leave to go and vote. However, on behalf of the committee, I do want to express our sincerest gratitude for your input.

You have probably gathered that the panel today came from all different points of view. Just to give you an example of what we have to deal with, we'll probably hear over 700 groups during this period, and this is the type of diversity we have to deal with. This is also an illustration for you of the kinds of trade-offs that sometimes we as parliamentarians must make to make the right decisions.

Once again, thank you very much.

The meeting is adjourned.