FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, October 23, 2001

• 0901

[English]

The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I call the meeting to order and welcome everyone this morning for panel I of Tuesday, October 23, here in Vancouver. As everyone knows, the finance committee is undertaking, pursuant to Standing Order 83.1, pre-budget consultations, and we've been travelling across the country seeking public input. On behalf of the committee, I'd like to thank you very much for your presence here this morning.

The witnesses represent the following groups and organizations: the Coalition to Renew Canada's Infrastructure; the British Columbia and Yukon Territory Building and Construction Trades Council; the Greater Vancouver Regional District; the David Suzuki Foundation; and the Coalition of Leaky Condo Owners. From the University of British Columbia we have a professor who will also be making a presentation.

As you probably know, you have five to seven minutes to make your introductory remarks. Thereafter we'll engage in a question and answer session. We'll begin in the order that appears on the agenda, which means the Coalition to Renew Canada's Infrastructure will go first. We'll hear from the vice-chairman, Jeremy Kon. Welcome.

Mr. Jeremy Kon (Vice-Chairman, Coalition to Renew Canada's Infrastructure): Thank you very much, Mr. Chairman and members of the committee. I would like to present apologies for Jim Facette, president of CRCI, who is back in Ottawa in bed with a bad case of flu.

I would like to thank you for the opportunity today and go on to talk about the presentation here. Since its inception in 1991, the CRCI has participated in these pre-budget consultations. We're happy to participate again by providing a message on the need for a continued long-term plan to address Canada's physical infrastructure needs.

The members of the coalition are very aware, like everyone here, that life has now changed for all of us as a result of September 11. If decisions on government priorities were difficult before, they are perhaps much more difficult as a result of the war on terrorism.

The CRCI also acknowledges the need for increased security and attention to public safety in the new reality. With this in mind, our submission to this committee is focused on the need for a national highway program. It's no secret that the North American economy has slowed, consumer confidence is dropping, and there is increased attention being paid to what the federal government should or should not do during this time of war.

Federal revenues are expected to decrease, providing less room for governments to manoeuvre. However, this government has maintained that it is committed to providing Canadians with an economy that will encourage investment and as much certainty as possible. We believe that federal investment into Canada's national highway system is a critical part.

As the collective voice of a broad-based coalition representing all areas of the economy, we're greatly concerned about the deterioration of Canada's national highway system and its negative impact on Canada's economic growth, job creation, and productivity.

The evidence is clear. Investment into Canada's national highway system will net governments a tangible return on that investment, save lives, improve productivity, create jobs, and contribute to overall economic growth.

The National Highway System: Condition and Investment Needs Update, completed in 1998 by both the federal and provincial governments, reinforced these points. It also confirmed what the CRCI has been saying for years: that unless we address this problem now, the cost to rehabilitate Canada's national highway system will continue to escalate. The update report demonstrated that, despite investments made primarily by provincial governments, the state of the national highway system has gotten worse since 1988. Cost estimates have now escalated from $13 billion to $17 billion to bring the highways up to standard due to this neglect.

• 0905

What the Liberal task force said in 1992 is as valid today as it was then. That is, the economic consequences of poor roads are staggering. Studies reveal that the productivity of a region is very dependent upon its transportation system. Traffic congestion increases the cost of transporting materials, reducing industries' competitiveness. Bad roads also have a negative impact on tourism, an important sector of the Canadian economy, particularly in this part of Canada.

In 1997 the House of Commons Standing Committee on Transport came to a similar conclusion. The committee report said:

...an efficient, competitive highway system is one of the fundamental requirements of a healthy economy. It has been demonstrated beyond any doubt how important a safe and competitive highway transportation system is to trade and tourism.

Mr. Chairman, our full brief, which I believe has been provided to this committee, outlines the built-in returns on the investment, including tourism, lives saved, increased productivity, unity, and trade.

It would be unjust to proceed without mentioning the $600 million investment announced in the last federal budget of February 2000. It is our belief that the attention this committee gave to highways in your report at that time had a large role to play in the $600 million commitment.

In July of this year the Canada Transportation Act review panel dedicated a full chapter to this issue. In the end, it acknowledged that Ottawa must actively invest in an important piece of Canadian infrastructure—our national highway system.

In our full submission, you would have noticed that we refer to a 1999 national highway system stakeholder meeting co-chaired by then Liberal caucus chairman Joe Fontana and the CRCI. The appendix to our submission lists the participants, representing a broad width of support, as well as some action items. The level of commitment from the provinces and other stakeholders has not changed.

The CRCI has built an alliance of supporters on this issue that include the Canadian Chamber of Commerce, the Business Council on National Issues, the Alliance of Manufacturers and Exporters of Canada, the Canadian Automobile Association, the Van Horne Institute, the Tourism Industry Association of Canada, the Cement Association of Canada, the Canadian Construction Association, and the Association of Consulting Engineers of Canada.

The United States, our major trading partner, has made a major commitment to that country's transportation infrastructure. The Transportation and Equity Act for the 21st century, also known as TEA-21, will provide for the investment of $217 billion U.S. in transportation infrastructure. Of this total, $175 billion U.S. will be invested in highways alone.

Quoted in the Wall Street Journal of July 8, 1998, economists state that “the six-year plan could generate more than $450 billion U.S. in economic activity.” In addition, “the huge program's real impact could be more than double its price tag.... Public works tend to generate even more economic activity than other kinds of government” investments.

TEA-21 will need to be re-authorized no later than October 2003. Our colleagues in the United States will be seeking a comprehensive re-authorization package for highways and transit that could reach an annual federal investment of $50 billion U.S.

If we think we are behind now, Mr. Chairman, we will definitely be at the back of the line if we do not commit to increasing federal investment into Canada's national highway system.

Mr. Chairman, committee members, the CRCI is often asked how to pay for a national highway program and whether we think public-private partnerships are an option.

In June of 1998 the Liberal committee on gasoline pricing recommended that joint action between federal and provincial governments, aimed at restoring Canada's national highway system, be given top priority and that partnerships be established to undertake repairs at the earliest opportunity. In his grain-handling and transportation review, Hon. Willard Estey recommended that the federal and provincial governments collaborate to apply some part of the considerable fuel tax collections to the construction, maintenance, and repair of highways.

In regard to the question of private sector participation in rehabilitation of the existing 25,000-kilometre national highway system, we think it is possible, but expectations must be realistic. In a report to the Council of Ministers Responsible for Transportation and Highway Safety, a working group studied the applicability of public-private partnerships and found that many financial analysts are concerned about the unrealistic expectations proponents have with respect to the scope and applicability of the public-private partnership concept in Canada.

However, where feasible, we believe it should be looked at in cases where new highways are needed that offer a non-tolling alternative. That is why we made public in February of this year the concept of the “Canada Bridge and Highway Authority”.

The quality of Canada's highways influences corporate decisions regarding location, capital investment, production methods, relationships with suppliers and customers, location and availability of inventory, and access to labour. A long-term plan, such as the one laid out by the national highway review policy report and by Transport Canada, would carry out reconstruction of our national highway system with maximum efficiency and create a larger economy.

• 0910

Mr. Chairman, that concludes the remarks from the Coalition to Renew Canada's Infrastructure.

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

We'll now hear from the British Columbia and Yukon Territory Building and Construction Trades Council, Mr. Tom Sigurdson and Mr. Tony Tennessy. Welcome.

Mr. Tony Tennessy (President, Operating Engineers Local 115, British Columbia and Yukon Territory Building and Construction Trades Council): Good morning, Mr. Chairman. My name is Tony Tennessy. Unfortunately, Mr. Sigurdson couldn't be with us this morning, so it's my duty and responsibility to comment on the brief submitted to this committee back in August. Certainly, some circumstances have changed dramatically since then.

The British Columbia and Yukon Building and Construction Trades Council represents over 48,000 skilled construction and related industry workers in the province of British Columbia. There are currently 12 international unions affiliated with the BCYT. The Operating Engineers, who have 10,000 of those 43,000 members, are obviously a significant member of the council.

The brief we submitted, once again, commented on employment insurance. It's an area that's of enormous concern to the Building Trades Council, particularly as it pertains to apprentices. Earlier this year the government acknowledged the merit of our arguments and has largely addressed the construction industry's concerns. We're still waiting for the government to act on recommendations to remove the two-week waiting period for apprentices. It's anticipated that critical skill shortages will exist not only in this province but across the country. It's important to recognize that apprentices also work, pay taxes, and pay EI premiums.

The B.C. and Yukon building and construction trades unions have been particularly disappointed with the insignificant expenditures allocated in last year's budget for the building and repair of municipal, provincial, and national infrastructure projects. Ignoring the problem of disintegration of our national highway system is not an option.

To restore the 9,000 kilometres of crumbling highway and 790 bridges in need of strengthening and rehabilitation, and to permit the widening of the national highway system, of which only 25% is now a divided multi-lane highway, Transport Canada estimates a need of over $17 billion in expenditures. The five-year plan in the year 2000 budget projected annual allocations of $500 million for infrastructure works, of which $150 million will go to highways. The investment committed by the federal government for highways is modest, to say the least.

The Trans-Canada Highway, for those who have ever driven from Golden to the Alberta border, is an embarrassment. To have signs on that highway indicating that it's a trans-Canada highway should certainly be an embarrassment for all of us.

As the United States develops its oil and gas production from the north slope of Alaska, plans are being made to construct a new pipeline to deliver petroleum products to the lower 48 states. There are currently two proposals for a new pipeline to the Alaska Highway and the Mackenzie Valley routes. Gas producers say that ultimately both lines will be needed and that choosing the first pipeline to be built should not be an issue to divide the country.

These are big projects. It's estimated the Alaska Highway route, at 2,800 kilometres and traversing several mountain ranges, will cost between $8 billion and $10 billion. First nations right of way, environmental impact studies, and financing are some of the major and biggest challenges involved in the construction of a project of this size. Also, a shortage of skilled labour to build the project looms as another real obstacle to the project.

Building trades construction workers have vast experience in pipeline construction. The environmental sensibility and strategic importance of this project demands that the job be completed to the highest quality of standards. Project agreements on large projects such as this also contain guarantees against work stoppages and incentives to complete the project on time and on budget.

As we enter into serious negotiations regarding the development of our northern gas and oil, the Building and Construction Trades Council urges the federal government to require that the project be built by a fully unionized construction workforce.

B.C. shipyards received some good news earlier this year from Industry Minister Brian Tobin. In June 2001 the federal government announced measures to stimulate research and development and provide new financing and loan-insurance schemes, establishing greater benefits and support to Canadian firms involved in offshore oil and gas exploration and other changes that will contribute to the revitalization of the B.C. shipbuilding industry.

Currently, there are six industrial shipyards in B.C. employing about 1,200 workers. This compares with about 5,000 workers involved in the shipbuilding industry across the country.

• 0915

Smaller yards in B.C. are taking advantage of a growing niche market for luxury yachts. In spite of its problems, the development of the FastCat catamarans by the provincial government has left a legacy for industry. A skilled workforce and updated shipbuilding facilities make Vancouver and Victoria an attractive option for North American clients looking for economic and accessible shipyards. There is room for further federal involvement in rejuvenation of the B.C. industry, and we encourage the federal government to support the initiatives by the industry minister in this vein.

The most recent issue to arise in the province of British Columbia is the 2010 Vancouver-Whistler Olympic bid. The bid is being led by Jack Poole, who is an individual certainly of vision and integrity. The B.C. and Yukon Territory Building and Construction Trades Council will be fully supportive of this bid. We believe the Olympics will leave a legacy of transportation systems and facilities making B.C. a better place to live and visit. The Vancouver-Whistler bid will be a great venue to showcase Canada to the world.

In conclusion, we need federal support for trade to meet the skill shortages for major projects, and we need transportation infrastructure to make our economy competitive in the movement of goods and people. We need federal support for our marine industry, and we need and urge your support for the 2010 Vancouver-Whistler Olympic bid.

Thank you for this time.

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

We'll now hear from the Greater Vancouver Regional District: Bob Paddon, manager of communications; and Her Worship Helen Sparkes, Mayor of New Westminster. Welcome.

Ms. Helen Sparkes (Mayor of New Westminster, Greater Vancouver Regional District): Thank you, and good morning.

I'm the mayor of New Westminister and a director of the Greater Vancouver Regional District and the Greater Vancouver Transportation Authority, known as TransLink. I am also the chair of the Greater Vancouver Regional District administration and intergovernmental committee.

The Greater Vancouver Regional District is a municipal federation that provides water, sewer, solid waste, regional parks, housing, planting, and other services to 21 member municipalities. Its sister organization, the Greater Vancouver Transportation Authority, provides transit, supports regional roads, manages transportation demand, and administers the vehicle emission control program known locally as AirCare.

Protecting our region's outstanding liveability and environmental quality has been a central goal of local governments in the Greater Vancouver area for many years. The quality of the region you see around you is the testimony of that success.

But now we need help from you. The last ten years of budget balancing and downsizing has sapped the strength of Canadian cities. The impact on our quality of life can be seen in substance abuse, crime, congestion, homelessness, and loss of choice that you will find not only a few blocks away from here but throughout the region.

We seek your help not only as a way of helping us with our problems but as a way of helping the federal government meet some of its most important objectives. We suggest to you that the federal government can only achieve its vision of healthy Canadians if the cities in which eight out of ten Canadians live have clean air and clean water. The objective of an economically competitive Canada cannot be met if the movement of people and goods to gateways such as Greater Vancouver are clogged by urban traffic congestion due to the lack of appropriate transportation alternatives, while our neighbours to the south pour billions of dollars into the urban transportation infrastructure and services. I think I've already heard that from two previous speakers.

One of the most promising ways to meet Canada's Kyoto commitment to reduce greenhouse gas emissions is to support more efficient urban transportation strategies such as ours. The objective of a country that is prepared to fight terror with courage and optimism can only be met if Canadian cities are strong enough to face attack and defeat it with economic, social, and psychological resilience and recovery.

At this moment, the federal government has a historic opportunity to respond to the needs of Canadians through partnerships with urban regions that will meet our shared needs. These are outlined in a draft position paper on the role of the federal government in urban regions, which I am tabling with you here today. I am pleased to inform you that this proposal has the enthusiastic support of the British Columbia Minister of State for Intergovernmental Relations, the Honourable Greg Halsey-Brandt.

We also strongly support the Federation of Canadian Municipalities 2001 federal budget submission entitled A Better Quality of Life Through Sustainable Community Development: Priorities and Investment Plan. Of particular importance in this submission is the proposal for a program of federal support for a multi-modal integrated transportation system at a level of $1 billion per year, or the equivalent of 3¢ per litre of motive fuel burned in Canada each year. As the authors of this proposal with the Federation of Canadian Municipalities, we were encouraged to see the Canadian transportation review report supported by both the concept of federal involvement in urban transportation and the idea of conceiving fuel taxes as a road user charge.

• 0920

There are also many actions within the direct mandate of this committee that could help. For example, the federal government could amend the Income Tax Act to permit employers to provide transit benefits to their employees on a tax-exempt basis. Parking benefits are taxable, but most employees who get employer-provided parking don't pay tax on those benefits.

Another example is that our West Coast Express commuter rail system is facing significant financial pressures because of the very high rent charged by a private company—CP Rail—for use of rail tracks paid for by the taxpayers of this country.

To sum up, the most pressing need for federal involvement is in urban transportation. An appropriately designed federal program will provide benefits in the form of improved transportation efficiency within Canadian cities, but also in the form of increased competitiveness, cleaner air, healthier Canadians, and cities that are better equipped to meet the challenges we will face in the coming years as a nation.

Thank you.

The Chair: Thank you very much.

We'll now hear from the David Suzuki Foundation, Mr. Jim Fulton.

Welcome. It's nice to see you again. You're on the other side now.

Mr. Jim Fulton (Executive Director, David Suzuki Foundation): That's right.

Thank you very much, Mr. Chairman. It's nice to be here and see some friends from a previous life.

We'd like first to congratulate the Prime Minister for the position he has taken post-Bonn that Canada will ratify the Kyoto protocol next May. We think that's a very appropriate step for the Prime Minister to take and for Canada to pursue.

In terms of the objectives of the standing committee, you have copies of our material. I'll just try to highlight it and lead to areas where you might want to ask some further questions.

We believe very strongly that, of the three areas you're looking at—one, to ensure that Canada remains a major player in the new economy; two, to provide Canadians with equal opportunity to succeed; and three, to create a socio-economic environment where Canadians can enjoy the best quality of life and standard of living. Those three objectives give the Government of Canada the grounds on which to commit to ratify and also to implement the Kyoto protocol.

Implementing the protocol can provide a foundation for the new economy, improve our standard of living, and provide equal opportunity for Canadians in all regions to succeed. We also believe our recommendations are even more relevant in light of the global instability arising from the horrific events of September 11.

In terms of Kyoto, the plan for implementation, today the old economy is being infused with significant investment. Right now in Canada massive expansion of fossil fuel projects is occurring in the areas of tar sands development, coal-fired electricity, and natural gas exploration and processing. At the same time, throughout the world, renewable energy sources such as wind power are growing at a rate of 40% per year.

The tar sands expansion, which involves some of the most energy-intensive petroleum production in the world, will only serve to hinder our transition into the new economy, while increasing our carbon dioxide liability and creating enormous economic risk. In fact, according to our projections, current plans to expand the traditional fossil fuel industry will see our national greenhouse gas emissions rise to 44% higher than the Kyoto target.

However, there is an alternative approach. This occurs by increasing our energy efficiency, encouraging energy conservation, and promoting sustainable, renewable energy production. By following this approach we can reduce energy demand, save consumers money and distribute the benefits throughout Canada, and reduce emissions.

Due to energy price increases in the 1970s, the energy intensity of Canada's economy actually decreased. Between 1973 and the present, economic productivity outpaced growth and energy consumption by 25%. More energy was saved over that period than all of the new energy supply from new oil, gas, coal, nuclear, and hydro resources combined.

If we look south of the 49th parallel, the U.S. Department of Energy estimates that the energy savings resulting from efficiency gains embedded in the United States economy during the same period are currently saving that country between $150 billion U.S and $200 billion U.S. per year.

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This is something we think the Minister of Finance should look very closely at, particularly in light of the all-party declaration Paul Martin signed in 1993, calling for 20% cuts from 1990 levels by 2005. That was signed by all parties in the House at that time. Keeping in mind that we've actually gone up 15% since 1990 and looking at the 6% reduction we are committing ourselves to next May, we have a significant shift that has to actually begin in this budget. Otherwise, the ratification and implementation will be much more difficult in the very near future.

History shows that in almost every instance, innovation and technological advances in energy-related fields have strengthened the economy, increased energy security through both price stability and supply access, and more importantly reduced air pollution in almost all its forms, including greenhouse gases. In an official 1998 submission to the United States Environmental Protection Agency, the Government of Canada stated that up to 16,000 Canadians die prematurely each year because of air pollution.

Environment Canada and other agencies estimate the annual medical costs are in the billions of dollars, and these health impacts and costs alone require a public policy response that by definition must alter our approach to energy production and use. More of the same, with the only variable being a constant increase in energy volumes, is simply not sustainable. It does not meet our international commitments or financial goals and directly threatens the health and quality of life to Canadians.

Let me turn to the question of economic instruments. As a means of promoting the efficient use of energy resources and in order to achieve the Kyoto protocol target in a cost-effective manner, the federal government should implement economy-wide economic instruments such as a carbon tax on coal-fired electricity and a domestic carbon trading system with an enforced national cap on overall emissions. In short, we believe the polluters must pay, not society as a whole, and we outline for you some revenue recycling features that we think the federal government, particularly at budget time, would find the most useful way to deal with many of these energy and pollution issues.

On transportation initiatives, we believe there are alternatives to automobile transportation, but they need government incentives. Approximately 30% of Canada's carbon dioxide emissions come from transportation. The federal government generates about $4 billion from vehicle fuel taxes, while expenditures on transportation are less than $400 million. Canada is the only OECD country that provides no federal support for public transit systems. We want to strongly support federal investment in sustainable urban transportation infrastructure. We reflect positively on what Minister Collenette has had to say, that expenditures on transportation have to be sustainable. We believe that the new initiative that's just been promoted by Premier Harris in Ontario is very much in that vein.

In terms of community transportation improvements, we believe that a community transportation improvement fund should be established by dedicating 25% or $1 billion of annual federal fuel tax revenues to be managed by provincial governments and collectively managed along with municipal and regional governments. The U.S. Transportation Equity Act for the 21st century is based on this theory as well as on broader pollution abatement strategies. The Canadian fund would be aimed at upgrading and expanding transit infrastructure.

We urge you to take a look at our case study on motor vehicles and the potential for efficiency and cost savings because there are many measures that have the proven potential to reduce the number of vehicles and trips and the distances of those trips. Public transit, cycling, and other alternatives such as car pooling, home-based work, and so on are very much worth this committee's having a look.

The most successful tool for promoting the development of more fuel-efficient vehicles is the adoption of updated corporate fuel efficiency standards. It would be a good challenge for you, Mr. Chairman. In 1981 I was present in the House and voted through the fleet efficiency legislation. It was passed by the House and passed by the Senate, yet it has languished for 20 years. It's never been given assent by the Governor in Council; it's just sitting over there at the Governor General's house. Maybe you could just hop in a cab, go over, and simply have her give it royal assent. It's there.

• 0930

It's widely and effectively used in the United States. It's used in every European country. I think Canada is being lax. It's one of the only pieces of legislation passed in the last 20 years that was never implemented—passed by the House, passed by the Senate, and never implemented.

I have a couple of other quick points on areas in which we think the budget could do some good work. One is moving more freight more efficiently by rail instead of by road. Rail already moves 60% of overland freight in Canada, yet accounts for less than 15% of greenhouse gas emissions in the overland freight sector.

This is because moving an item by truck over a given distance requires six times more energy than moving it by rail. It's good to look at Canada's rail system, because it has the lowest per tonne mile cost of all railways in the industrialized world.

Such a shift must be encouraged by pricing and taxation changes that include in the price of moving freight by truck all of the external costs such as those associated with highway damage, air pollution, public health, and climate change.

Current tax policies that are more advantageous to trucks than rail are encouraging the environmental subsidy of trucking at the expense of air quality and climate stability.

On improving the energy efficiency of residential and commercial buildings, we believe the Minister of Finance could implement this and it would have great, enduring job creation potential in every province and in the territories. It's something that really should be brought into this budget.

Canada's R-2000 and C-2000 programs for building efficiency should be adopted as residential and commercial building standards. This program could ensure Canada's housing and building stock becomes 35% to 40% more energy efficient than today's conventional buildings, resulting in major ongoing economic savings as well as environmental savings.

We're aware of buildings in cities right across this country that have done this. There's a very short period of payback. It's a high employment generator. It's very popular with people who are in the buildings because the buildings become more people friendly. So there are huge numbers of advantages to the federal government leading on this in every area of the country.

Given the current recession and overall economic instability, there is a need for federal leadership on a program such as this in order to maximize new job opportunities that fit with sustainable energy, climate goals, and the implementation of Kyoto.

I have a couple of more points, Mr. Chairman. On reviewing and updating standards for major appliances and industrial equipment, we believe that one speaks for itself. In the United States, for example, the $12 billion that the U.S. Department of Energy has invested in energy efficiency since 1978 is estimated to have saved U.S. consumers $100 billion in avoided energy expenditures. These are huge indirect gifts that can be provided back to taxpayers and consumers by government leading on intelligent, informed regulation.

On promoting and encouraging renewable energy sources, in order to create a level playing field for renewable energy, the federal government must provide incentives for the development of low-impact, renewable sources of electricity such as wind, solar, and micro hydro, as well as removing current fossil fuel subsidies and advantageous tax provisions.

We're sure you're aware of the billions of dollars in subsidies that were identified just last year by Canada's Commissioner of the Environment, who I think shocked a lot of Canadians with the depth of largesse handed over lock, stock, and barrel to the fossil fuel sector, which is simply no longer competitive, even against wind.

In conclusion, regarding Canada's energy choices and climate responsibilities, the current drive toward greater fossil fuel production and consumption is rapidly increasing Canada's greenhouse gas emissions and our economic dependence on fossil fuels. By so doing, we are allowing our economy to be entrenched in yesterday's energy technologies. As such, we are moving toward de facto violation of international treaties and commitments made by Canada as part of our responsibilities as global citizens, in line with the expectations of Canadian citizens.

In addition, we are moving away from opportunities to make significant gains in regard to the three budget-planning objectives outlined by your committee.

As a developed nation with the economic power to invest in energy efficiency and the technological capabilities to develop new and renewable sources of power, Canada has a major opportunity to be one of the leaders in the coming energy transition and its associated business opportunities, job creation, and quality-of-life benefits.

Following the successful UN climate negotiations in July, we recognized the positive contribution Canada made in reaching the compromise agreement and in committing to ratification of the Kyoto protocol next year. We are also encouraged by recent efforts by Prime Minister Blair and others to encourage more active U.S. participation in the Kyoto process.

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The next federal budget is a critical point in the transition process and must reflect both the positive climate and air quality commitments made by cabinet in recent months and the public's desire to see those commitments fully realized.

We've attached some recent materials that were published in Nature earlier this month indicating that compliance with the Kyoto protocol by countries like Canada will simply lower, not raise, overall costs, and I think that's a very important piece of work done by the Faculty of Applied Physics in the Netherlands. Also, we've provided some material from the Union of Concerned Scientists that comes to some very similar conclusions and includes the clean energy blueprint.

We hope that material provides you with a good push for Canada's Minister of Finance, who has been, and I think continues to be, a real potential leader on the issue of implementation of Kyoto. He understands it. He knows where we have to go. He knows a lot of the proposals on coal, tar sands, and natural gas are simply going to leave a lot of upstream frozen assets for those who invest in the wrong technology and the wrong energy source at the wrong time.

Thanks, Mr. Chairman.

The Chair: Thank you very much, Mr. Fulton. We will now hear from the Coalition of Leaky Condo Owners, Mr. James Balderson.

Welcome.

Mr. James Balderson (Coalition of Leaky Condo Owners): Thank you, Mr. Chairman. My name is James Balderson. I represent the Coalition of Leaky Condo Owners, and I appreciate your efforts to provide us with a slot at this meeting today.

I think it most important that you do travel the country and hear directly from areas such as Vancouver and others from coast to coast. I just returned last evening from a trip to Ottawa—one week of lobbying—and it was only while in Ottawa, meeting with MPs and Minister Gagliano face to face, that we were able to learn the federal government is willing, and we presume able, to provide the owners of leaky, rotten condos in British Columbia 25% of the repair bill. Our estimate of the repair bill for these defective, leaky, rotten, mouldy homes is $2 billion.

The provincial government to this day recognizes $1.6 billion. The provincial government has been laggard and has failed in recognizing the magnitude of this problem and providing any help whatsoever for the owners. Present moneys going into the Homeowner Protection Office program go to support a loan program. The $2 billion in repairs rest on the owners of these homes. We believe all Canadians, whether they be on reserves, whether they be first nations, whether they live in a downtrodden area of British Columbia, Quebec, or Newfoundland, should be able to live in leak-free, rat-free, mould-free, safe, warm, dry housing.

So with a commitment from Mr. Gagliano that we can have $500 million from the federal government, we think it would be wise for your budget consultation process to make certain arrangements so that money is immediately available to us. Then we ask you to overcome a hurdle, the hurdle being the provincial government, which apparently is refusing to ask for the money.

We ask Minister Martin, your committee, and everyone else to find a way to get this money over the Rocky Mountains to the owners of these leaky, rotten, mouldy homes.

I'm going to leave it to the economists and so on to determine the impacts, direct and indirect, negative and positive, of taking $2 billion from the owners of leaky, rotten, mouldy homes to repair the walls of their leaky, rotten homes rather than spend the money on something else, like an enjoyable retirement, a new car, a new house, or anything like that. These people are trapped in their leaky, rotten, mouldy homes. They need financial assistance in order to repair them and get on with their lives. We think only massive financial aid from the federal government and some way to move this provincial government to tap that money and get it to us.... This is our concern at this time.

• 0940

Because so many people just don't know what we're talking about until they live in a leaky, rotten, mouldy home, I have brought for you one chunk of condo rot that you are free to examine yourself to see what happens when a British Columbian buys a brand-new home and lives in it for three or four or five years and finds the water coming in the roof, the walls, and everywhere. And this is what happens to the timbers in this structure.

These homes are unsafe. They're unsafe physically, structurally. They're unsafe health-wise because of the high mould content. And the federal government has found a way to move first nations people from their leaky, rotten, mouldy homes and put them up in nice hotels, while their leaky, rotten, mouldy homes are demolished and/or repaired. We think such an arrangement should be found for all Canadians everywhere, coast to coast.

I'm talking about 100,000 residential units in British Columbia. It's a $2 billion repair bill.

Minister Gagliano's commitment is for 25% of the repair costs. I don't know all the budget implications and how to get it through here, there, or wherever, but please find a way whereby Minister Gagliano has that money to send to us. And if it's this provincial Liberal government that won't ask for it and won't get it, then we'll dump the government and put somebody in there who will get it for us. Or we'll find some other way, and that other way we're pressing right now is this way.

Premier Ujjal Dosanjh, in the dying weeks of his premiership, wrote a letter as Premier of the Province of British Columbia to the Prime Minister of Canada on behalf of citizens of Canada living in the province of British Columbia, and he stated that this problem was of such a magnitude that it was beyond the resources of the Province of British Columbia to handle it. And he appealed for the disaster relief act to be invoked—or whatever the proper title is for that piece of legislation.

That act, if invoked, would provide the money we need. But this present government, when we met with Minister Abbott, didn't even know the former premier had written the letter. We have made sure he knows about that. We have made sure that the federal MPs know about it. This will have an impact on the budget. This will have an impact on the finances of Canada in a similar fashion as the ice storm and Red River floods had.

Any way you can take these matters into consideration, we will appreciate.

Thank you very much.

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

We'll now hear from Professor Martha Salcudean.

Welcome.

Professor Martha Salcudean (Emerita Professor, Department of Mechanical Engineering, University of British Columbia): Good morning, Mr. Chairman, members of the committee.

Thank you very much for the opportunity to participate in this hearing to address an issue that I feel is very important for Canada, namely research in Canadian universities.

I am an active researcher, a fellow of the Royal Society and of the Canadian Academy of Engineering, and recipient of the Order of B.C. I am a former head of the Department of Mechanical Engineering and a former associate vice-president. I have been a member of numerous national task forces and committees, which has given me the opportunity to become reasonably familiar with the research activities in Canadian universities.

My experience is mainly in engineering and physical sciences and therefore I'll stress issues related to these areas.

First, I would like to express my deepest appreciation to the government for what they have already done in support of research in Canadian universities. I can assure you that based on recent visits to several Canadian universities as a member of a Canadian Royal Society review panel, this feeling is widely shared.

I would like to make a plea that a stress on and support for the innovation agenda be continued, despite the current slowing economy as a consequence of the tragic events of September 11. If anything, the slowing economy makes the innovation agenda even more critical.

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Canadian universities play a proportionally larger role in the country's research enterprise than university systems in other countries. Therefore, it is critical to take advantage of the full research potential of Canadian academics. Canadian academic research is excellent, internationally competitive, and recognized.

The international panel members who were my colleagues in a recent review committee are experts of high international stature, for example, the former president of the French Académie des sciences and the president of the Academy of Medical Sciences of Great Britain. They have repeatedly praised the high calibre of Canadian research. It is worthwhile noting that graduates from all Canadian engineering schools do extremely well in the graduate programs of the top universities like MIT and Stanford. The same can be said of our graduates working in the most sophisticated industries, for instance, aircraft industries such as General Electric, where some of my own graduate students are working.

I would especially like to concentrate my remarks on the need to increase funding to NSERC, the Natural Sciences and Engineering Research Council, where I believe the need is urgent and very significant for the following reasons. A large number of new professors have been hired and are in the process of being hired in areas of high demand such as electrical engineering, computer engineering, and computer science. Many provinces, including B.C., are significantly increasing their intake of students to these programs.

The newly recruited professors are of excellent quality. They are all active researchers who are willing to choose academic careers rather than more lucrative business careers to a large extent because of the research opportunities that universities offer. Canada must keep these professors who educate students at undergraduate and graduate level because it is critical to provide Canada with the qualified human resources on which our very economic future depends.

Leaders of local companies, such as, for instance, Danny Gelbart, president of Creo, a very successful busy high technology company, have repeatedly stressed the need for highly qualified engineers and physical scientists. They're hiring our best graduates and their success depends on the quantity and quality of people we can provide.

Human resources are needed at all levels. There is no question that people educated to the graduate level are increasingly in demand. If you also consider the increasing speed at which technology is moving, we can understand that an increasingly advanced background is necessary to stay current with these advances. The fastest growing and most successful companies are very research intensive, with some being primarily research and development companies, such as, for instance, in Vancouver, Electronic Arts, PMC Sierra, Ballard, QLT, etc.

Canada is an excellent country in which to locate, start up, and grow such R and D companies because of our stability and quality of life. Most important, we are an excellent country for these industries of the future because of the high calibre of our workforce.

In order to compete in future in this highly desirable area of the new economy, we need to make sure that we will be able to provide human resources, which will be the main assets of this new industry. The people needed by employers in these diverse technical fields can be assured only through broad-based funding of the professors who educate them.

Needless to say, our resource-based industries will survive only by intensive use of the most sophisticated technologies, which of course also depend to a great extent on the talent they can hire. The Canadian chairs program introduced by the government recently is a wonderful program to retain and recruit the best talent to Canadian universities. It is imperative to use this research talent to its full potential by adequately funding the research.

Canada is an advanced country; nevertheless we have the population size of a medium country, and in consequence we are limited in the scope of our contribution to the worldwide progress of technologies. Therefore, it is imperative that we are part of the international scientific community, in contact with the best in the world, exchanging ideas and information, making sure that our Canadian presence is felt and that we bring back to Canada all important international scientific and technological advances. This cannot be achieved without adequate funding of the academic experts in their field.

Canadian universities are very successfully working with and attracting funding from industry. Indeed, we are the most successful country in the world in this area. Our universities also act as a major generator of technology. We generate ideas, we patent them, we commercialize them.

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An example of this is my own colleague, Dr. Philip Hill, who with a small NSERC research grant and a series of graduate students began work to address the problem of diesel emissions of nitrogen oxide and particulates. By 1994, with support from NSERC and the B.C. Science Council, the technology had reached sufficient maturity and the necessary steps were taken for patent protection. In 1995, they formed a new company, Westport, to bring the technology to market.

Today, this company has 200 employees, a very high proportion of them engineers. It has a joint venture with Cummins, the world's largest manufacturer of diesel engines. Therefore, the door is open, through Cummins manufacturing, marketing, and servicing to introduce the new technology worldwide for both trucking and power generation. The great goal is to provide engines that will meet the stringent emissions regulations already announced for the end of the decade, without sacrificing performance, which, over the past century, has brought the diesel engine to worldwide dominance in the industrial field. The company will grow very significantly in the future and will provide many well-paying jobs.

I choose this example because I was fortunate to witness Dr. Hill's assiduous work over many years, being in the same department of mechanical engineering. I can attest to the fact that he could not have achieved his discoveries, nor would he have commercialized them, without continuous NSERC funding. It was a small investment with a very large return.

I would like to conclude by assuring you that engineering and other professors in Canadian universities will make excellent use of your investment in NSERC. The students they educate and the discoveries they make will contribute very substantially to Canadian prosperity and quality of life in the future. Thank you.

The Chair: Thank you very much, Professor.

We'll now move to the question and answer session. We'll have a five-minute round for all members.

Mr. Epp.

Mr. Ken Epp (Elk Island, Canadian Alliance): Thank you very much, Mr. Chairman, and thank you all for being here today. I enjoyed your presentations. They gave us something to think about.

Let me begin with highways. Canada has probably one of the most difficult situations with respect to a country in terms of trading between our own areas, our own provinces, because of the lack of a proper transportation system east-west. Some of you talked about rail. The David Suzuki Foundation said let's have more rail freight, and yet we find that what has happened in the country is that a lot of the railroad spurs have been shut down and the farmers, for example, in the prairies and some of the industrial producers are forced to use trucks because there isn't a rail there.

Would you promote that the government should actually put federal money into a national highway program, or should we rather use that money to promote and to build a better railroad structure? Or should we do both? What's your suggestion here? How do you balance that?

Mr. Jeremy Kon: It's certainly an extremely good question. I think when you look at the national highway system, it's some 25,000 kilometres of existing highways, and these are the major trade highways across Canada and also linking down into the United States. The important thing would certainly appear to be to make sure those highways are in good, safe, usable condition. That's the number one priority. Where the volumes are such that twinning would assist dramatically in reducing accidents, then that is an obvious thing to do. In a sense, this is not an alternative to something else; it's a deficit, a deficiency that needs to be put right.

As a brief illustration, I will tell you that when I moved from Ontario to B.C., I quizzed the driver of a huge moving truck just as it left the driveway of our house in Oakville and I asked him which route he was going to take. He said he was going to take the southern route, the U.S. route. I asked why he would do that. He said he wouldn't trust this load on the Trans-Canada Highway. That is illustrative of the condition we have got those highways into.

So, with respect, I think the question is more one of dealing with a significant deficit that we currently have. It's costing us money, it's costing us fuel, it's costing us further pollution from that additional fuel being burned to travel on inefficient and poor highways.

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The question of trying to re-enhance the railway system is perhaps a very different question that relates to volumes and traffic generation and the economies that go with that in the rail structure.

Mr. Gerry Scott (Climate Change Director, David Suzuki Foundation): Thank you for that question.

First of all, we would certainly agree with the previous contributor in terms of safety and maintenance. Whatever one's position on rail, road, and so on, there's no question we have to have improvements for safety and maintenance, and discouraging the growth in freight traffic on the road isn't best done by having unsafe or unmaintained highways. We have not taken that position.

We also recognize there is a role for trucking. However, what we have seen in the last two and three decades is a rate of increase in emissions from truck traffic that simply is not sustainable. That's part of a trend of the external costs of trucking being pushed out and off of the folks who are either using that freight service or delivering that freight service. It's the way the world is working when we're not measuring the external costs.

Those external costs include road damage. There have been many studies by fairly unbiased institutions that would say the various fees, licences, and taxes carried by the trucking industry do not cover the costs of the infrastructure. So there is a subsidy there by the general community, by the crown.

Secondly, when we look at the health impacts of air pollution, we are in the billions of dollars. The OMA, the Ontario Medical Association, has probably had the most sophisticated look on a provincial level, and they're in the billions of dollars in Ontario alone.

All of that pollution isn't derived from trucking, but a growing and substantial portion is. So that is, again, a cost that's unloaded onto various classes of taxpayers who don't have anything to do with the trucking industry.

The area of climate change is another one where we're already seeing public institutions spend money on infrastructure necessitated by climate change. We're seeing resource industries such as B.C. fisheries and forestry impacted in very dramatic ways by climate change, whether it's the pine beetle or impacts on Pacific salmon.

Those kinds of costs have to be factored into the costs of trucking—and rail, for that matter, and other forms of transport.

On the tax system, historically, we welcome some of the changes on things like capital cost depreciation in the last budget that changed how rail and road were treated in relative terms. But we have to go further in that direction. When we talk about rail-line abandonment we have to look at a number of areas, from tax policy to transport legislation, rail legislation, to see what's happening there.

Just last week there was an announcement in the prairies of a major takeover of branch lines by a community rail consortium. I would call upon this committee and other arms of the federal government to try to facilitate that. We saw regional governments, local municipalities, the trade unions involved take ownership and run on a non-profit basis lines that otherwise would have been abandoned, and I believe in this case by CN. We need more of that.

So there are a lot of alternatives, and we're seeing the rail industry become more innovative. They have to have those signals that there will be a level financial playing field, and that must include the internalization of those costs imposed on society at large today.

We have seen industry get out of warehousing and inventory completely. We now have mobile warehouses called freight trucks. They're destroying the climate, they're destroying air quality, and we are literally paying the freight.

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The Chair: Thank you, Mr. Epp.

Mr. Nystrom.

Mr. Lorne Nystrom (Regina—Qu'Appelle, NDP): I would like to welcome everybody here this morning, and particularly my old colleague, Jim Fulton, who sat for many years as member of Parliament from Skeena.

To begin with, you talk about external costs, Mr. Scott. In Saskatchewan a number of years ago the federal government made a decision to facilitate the abandonment of rail lines. What's happened, of course, is the rail lines have gone. You've had a concentration of inland terminals so farmers are now trucking their grain to market.

The province a number of years ago had a fine road network of thin membrane highways. Now you put the trucks on these highways and in some cases it's almost like the highways are bombed. There are all kinds of holes in the highways. It's a terrible situation. Now the province is spending millions of dollars on thicker membrane highways to facilitate the trucks. This is a vicious circle in terms of the external cost.

I don't know if there's any other comment Mr. Fulton wants to make on that or not. If so, he can go ahead. The question I also wanted to ask Mr. Fulton is what about research into alternatives like hydrogen and ethanol? There's some of that now going on in the prairies—ethanol, particularly in Saskatchewan.

Do you have any advice in that area? Perhaps you have some more comments on the highways.

Mr. Jim Fulton: I'll ask Mr. Foley to comment on that.

Mr. Dermot Foley (Energy Director, David Suzuki Foundation): We welcome any effort made to support the renewable energy industry, and that includes whether it's renewable fuels like ethanol or whether it's the purchase of wind power. We're seeing some new research on the development of tidal power on the west coast of B.C. Basically, any initiatives that help move that industry into the marketplace are important. One of the key elements of the new economy is the non-fossil fuel economy.

We stated earlier in our brief some of the statistics around energy consumption, and I'd like to put it in a context people might understand. In the 1970s we used about a half a litre of gasoline per dollar of GDP. Over the period of the energy crisis we've dropped that to about one-third of a litre per dollar of GDP. So, in a sense, if you think of the economy as an engine, it's running much more efficiently now.

One of the aspects of those statistics, which we haven't looked into but which we think is worth looking into, is how much of our economic growth over a 20-year period can actually be attributed to the increase in efficiency. We've looked at it from the other perspective, in terms of how much fuel we've saved, but, in essence, some of that growth can be directly attributed to that increase. So any research, any development on non-fossil fuel, on energy efficiency, on clean renewables, we believe will actually help that growth.

Mr. Gerry Scott: In terms of alternate fuels, the attachment provided in the material we gave to committee members includes a summary of a new study by the Union of Concerned Scientists based in Massachusetts. It points out that if these renewable energy policies and energy efficiency policies were put in place in the United States—and their economy is very similar in energy use to ours, as we know—the consumers in America would save $440 billion between the years 2002 and 2020. And that is $350 a year in energy costs.

So when we look at the application of renewables in new technology, it is stimulating the new industries in ethanol, in wind, which can be very important in the prairie provinces, as they are in the American midwest. Also, individual consumers can put that money in their pocket. Somehow in our society we have failed to recognize the weirdness where GDP expenditures on energy waste end up registering as a positive in the large economic bookkeeping. If we can cut waste, as every business person wants to do, as every homeowner and household manager want to do, we're putting money in our pocket. What a better way to do it than with clean energy and energy efficiency.

I have a final comment on the railroad question you brought up. A lot of the studies have shown that the typical road basket of taxes and fees covers about 60% of the costs imposed on the road system. This is referenced in one of our reports called Climate Crisis: Energy Solutions for B.C.. The typical road basket of taxes and fees covers about 60% of the costs imposed on the road system. We can certainly provide this study to you as well.

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But your Saskatchewan example is well taken and not untypical. I think we have to look at every fiscal and policy instrument to keep those rail lines functioning. I think we need a lot more imagination in the regulatory area as well.

Thank you.

Mr. Lorne Nystrom: The rail lines have been abandoned and now the highways have gone to hell. The provincial government is in trouble, because we have more highways per capita in your part of the country because of our geography. Yet there's no federal cost-sharing of those highways, which are necessary until there are more rail lines there to haul the commodities to market. So it's a case of the dog chasing its tail.

My last question is to Mr. Fulton. Is the Bush administration softening a bit in terms of Kyoto? The Americans, of course, are very important, as the economy there is so large. I often hear people saying that if the Americans don't sign, it will discriminate against us in terms of our industry competing with their industry, particularly in the oil and fossil fuel sectors. Is there any opening in the United States? Is there any advice you can provide to the committee in terms of what we may do?

Mr. Jim Fulton: Obviously, that's a very important question. I just spent most of last week in the United States attending a very large meeting involving foundations from across the United States. About 600 of us gathered at Gull Lake in Minnesota.

It's quite clear from the work they do with the White House and the U.S. administration on a range of energy issues that the pressure is growing from within the United States but also from Europe. We understand that Prime Minister Blair has made personal representations to President Bush because of the extreme concern in Europe. As you know, even though global ratification hasn't taken place, a lot of European nations are moving very rapidly down the road of conservation, efficiency, and renewables. Some countries, including Germany, Denmark, and Great Britain, are well on their way to achieving the targets that were set in Kyoto. So the pressure is certainly growing from a wide range of partners.

Certainly, in the post-September 11 world, much more attention is being paid in the United States by foundations and by people who are in the energy sector as to how you actually obtain security.

A lot of Canadians forget that we are the largest provisioner of fossil fuel energy to the United States. It's not Saudi Arabia or any of the other countries that immediately come to mind. So Canada plays a very important role. I think the Prime Minister, in leading on this, is sending President Bush a very good signal from their largest provider of fossil fuel energy, that if we're going to have continental security and global security, it's not going to come from the fossil fuel sector. Most studies now indicate declining reserves of all kinds worldwide somewhere between 2005 and 2015.

Of all the countries in the world, we're the second largest per capita contributor to the greenhouse gas emissions on earth. We have to go to renewables and to conservation, and we have to get to efficiency. That's where smart money has to go.

This committee needs to make a very strong representation to Minister Martin that we should not see a whole lot of frozen, grounded, and dangerously abandoned upstream asset investments. Going into tar sands is a foolish investment. Anyone who studies where the world is going would know that. Yet most of the federal fiscal incentives, as the Commissioner of the Environment pointed out, are still encouraging investment in coal, tar sands, and areas that are not in Canada's national interest. Premier Klein understands this. But because of incentive structures, long-lasting, multibillion dollar, hidden subsidies, the Commissioner of the Environment and Canada's Auditor General to this day have not been able to identify all of the subsidies that are provided to the fossil fuel sector.

A real challenge for Minister Martin is to at least level the playing field. In Alberta today wind energy is cost competitive per kilowatt hour of production with natural gas. This is in Canada. These are Canadian technologies. We have to level the playing field. They're struggling against an incredibly lethargic regulatory and fiscal instrument regime at the federal level. This is really the challenge to Minister Martin. He understands climate change and how subsidies are being off-loaded on to taxpayers in the wrong way.

Gerry talked about trucking. You brought up a very good example in terms of what's happening to Saskatchewan farmers. They have no choice. They have to take it by truck. But they're destroying their neighbour's highways. The province can't pay for it.

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We've heard other concerns. We think this committee has a huge challenge to remind the Minister of Finance to start putting things through a sustainability and a Kyoto filter. These are very important things for the committee to recommend to the minister to do for the next budget.

The Chair: Thank you, Mr. Fulton.

Thank you, Mr. Nystrom.

Ms. Barnes.

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

Thank you for bringing your various viewpoints to the table. It's interesting that all of you, and yesterday's witnesses also, are all talking about spending initiatives, either through a tax system or through direct cash to whatever your interest is. No one has talked about tax cuts. No one has talked about debt reduction tools. That's a major shift from our side of the table. Our job is to sift through this and come up with a report.

Canada, as a federal government, wants to remain fiscally credible. As I read through your reports, we're getting the whole spectrum here. I read some of the reports, and it's not necessary to identify you individually, but some are saying the new economy is not good for people. Some of you are saying the only way to go is the new economy. I'm going to say to you that I think in all likelihood both economies are going to coexist and they're both going to have to be supported. Now the ways you support them come differently.

With that in mind...I will hopefully have a second question, because I do want to ask and you can be thinking about it. Where would you go if what was necessary to accomplish the majority of what you're saying you want would put this country into a potential deficit on a short term in a business cycle? Would you go there, or would you say, oh no, spend all this money, but no deficit?

First of all, let's go to a couple of things that you have pointed out. First to our scientists, I'll say to you that I don't think the federal government is at all looking to be so short-termed and so shortsighted to stop research moneys flowing. I don't see that. I've not heard it. I would be surprised. I'm also grateful, because I think you do have to maintain that type of forward thinking without interruption.

To our person from the building trades, one of the things that I found interesting in your submission, and you did say it orally, is that you need skills and learning. Now that happens to be an HRDC agenda item—a large agenda item of a much maligned department over the last years. But here you are on the table asking for the skills and learning agenda, just as the scientist beside you is asking for the industry minister's innovation agenda. Both of those, I can tell you, are big-ticket items.

Let's first of all hear from Mr. Tennessy—I hope I've said that correctly—on why you think your industry needs the skills and learning agenda.

Mr. Tony Tennessy: It's become very obvious that the current demographics of the country not only affect our occupations but they affect a lot of occupations. We're losing or going to lose a large number of our trades people in the next four to five years. We have that group of baby boomers who are moving through our system and are taking retirement. As we look at the types and the large number of projects and the smaller projects that are on the table, if we're going to build for the new economy, we have to have somebody who can build the physical assets.

Mrs. Sue Barnes: That is old economy.

Mr. Tony Tennessy: That is the old economy. We obviously need the tradespeople who can do that, and we've lagged behind. We're behind on that, and it's an area where we have to catch up.

I don't think it's as expensive as you may suggest. Apprenticeship, which is primarily job-based training, is much more inexpensive than a university education. Our apprentices work while they learn. They in effect pay taxes. They pay employment insurance premiums. So the cost of training people in the apprentice trades is not near what the additional costs are for those who are in the university professions. This is not to downplay that they're needed. We think our training is considerably less and we think the support needed may not be as expensive as everyone thinks.

Mrs. Sue Barnes: I'm going to go on to touch a little bit on the highways agenda and also bring in the environment.

With regard to the highways agenda, I come from a geography in southwest Ontario where I can tell you the truckers from other countries gladly cut across from Detroit over to Buffalo. They're not looking at loads and the safety factor; they're looking at their time factor. I think a lot of these highway arguments could be better linked to the economic needs of this country, because there really is a north-south relationship to the cost of doing business with the United States. I think that would be a much more compelling argument. Safety can't be discounted, but there's a real economic issue here.

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For Jim, as to your point on an internal trading system that is enforceable, I take that to mean non-voluntary. How has this been advanced to the federal government? I'd like to hear more about this and I've not heard very much.

Mr. Jim Fulton: Two years ago we presented a complete briefing, both in person—we spent a little over an hour with Minister Martin running through exactly how to implement many of these instruments as well as regulations—and also in briefing materials to him, which we'll make available to all members of this committee. I think that's probably the best way to do it. Dermot can add directly to your question on internal trading.

Mr. Dermot Foley: Right now a committee appointed by the joint ministers of environment and energy across the country, including the federal, provincial, and territorial governments, is developing working models for how domestic emissions trading would work in terms of both allocation across provinces and across sectors, as well as how much you'd actually use the market as opposed to regulation to allow the reductions to take place, and also to provide incentives to renewable energy producers and energy service companies that help with energy efficiency. In a sense, it's the opposite of a tax-based system where you're spending money on programs. You're actually trying to harness some of those market forces to get reductions.

Mrs. Sue Barnes: I would be interested in receiving that material, as I'm sure my colleagues would.

Mr. Jim Fulton: I'll provide copies to the chair.

Mrs. Sue Barnes: Because of time restrictions, I'm not going to be able to get to all my questions for all of you. I would like you to comment on what I was saying about deficit, Bob Paddon.

Mr. Bob Paddon (Manager, Communications, Greater Vancouver Regional District and Transportation Authority): Our submission today is not about increasing taxation. It's about using the taxes that are already collected. Here in this region three years ago we were able to create a transportation authority. We received from the provincial government a tax room. We now have access to some of the provincial fuel tax. We have a number of ways of raising revenue.

We know in Canada that municipalities through their property tax now carry over 50% of the cost of our urban regions. So they're carrying a lot of the expenses to make things happen. Over the last three years we've been struggling to find ways to raise money to make the investments this region needs. We looked very hard at a vehicle levy, trying to apply the whole concept of user pay. It has failed.

We're now back to looking at property tax, looking at more fuel tax increase at the provincial level. But as we make the rounds, what we hear over and over again—and just last night at Burnaby City Council we heard this at length—is the fact that $300 million of fuel tax leaves Greater Vancouver every year. It is not coming back in any tangible way to the transportation system. Transportation is—what we have found—the number two issue in this region. When we asked people of this region, what are your top issues, they answered health and transportation. Crime is third, and it's a long way behind the first two.

What we're really trying to look at in this submission today is to acknowledge some of the issues we're facing and try to find some way to redirect these taxes in a way that people acknowledge. What they keep telling us is, we're already paying. It all comes out of one pocket, whether it's local, provincial, or federal. We don't see our money coming back. That's one of the things we're hearing.

The other thing is, and I have some comments on the other questions, even though the United States has wavered and changed its perspective on Kyoto, the United States still continues to invest in transportation. This coming year $6.3 billion in U.S. federal funds will go into urban transit. In the United States 80% of every bus purchased by a city is paid for by the federal government.

We're now looking at a situation in this region where a bicycle trail to connect from Point Roberts into Blaine, going mostly through Canada, will be funded by U.S. federal funding, because we can't access Canadian funds for this type of transportation investment.

We have a situation where Amtrak is spending hundreds of millions to move Americans up the west coast. We'd like to see some investment in the small stretch from White Rock into Vancouver. We hear from the Americans constantly that they want to move in. The president of Amtrak was here two months ago to say, “We can make this work.”

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We're really hopeful that we'll see taxes already collected being put into those areas people in this region think are the real priorities.

Mrs. Sue Barnes: You're not talking about dedicated taxes?

Mr. Bob Paddon: We have in the past talked about dedicated taxes. We're not sure that's going to be viable, but we'd like to see the direction of taxes to transportation.

Mrs. Sue Barnes: Does somebody else want to comment on the issue? Do I have time?

The Chair: Yes.

Mr. James Balderson: On the matter of taxes, the owners of leaky, rotten, mouldy condos who bought brand-new homes paid taxes. Many of them paid GST as well. On the repair bill, the government is still sucking money from us via the GST. We call it a tax on our misery. The provincial government came up with a scheme to provide a provincial sales tax relief grant.

We think it atrocious that governments want to move forward without cleaning up the mess they've left behind. I refer you to hepatitis C, the bad blood situation, all the struggles, etc., those people had before they got some sort of compensation. We, the owners of leaky, rotten condos, are in the same situation. We are in a negative equity, deficit situation. We think the provincial and federal governments can help bail us out of a problem that should never have landed in our laps.

We think it atrocious and idiotic that CMHC can send task forces to Europe and Japan to tell those people how to build houses that are safe, warm, and dry, and yet when I requested that the task force come to British Columbia, it never even replied.

Although it's essential for you to have budgets and visions of a future, you also need to look after the messes that have been created in the past. This is what the environmentalists are telling you as well.

Thank you.

The Chair: Thank you.

There is time for a last comment.

Prof. Martha Salcudean: Yes, you are absolutely right. It's a difficult dilemma of deficits versus the other parts of the question.

The way in which we can help this the most is to assure that growth in the economy takes place. I believe this growth in the economy can be had to an enormous extent by a relatively small infusion of tens of millions of dollars into NSERC, because it aids in a very rapid input of our graduate students to the economy and that produces significant growth. This is the raw material of these industries—the people we are producing. It's an expenditure with a very quick return.

The Chair: Now to Mr. Cullen. We are in a five-minute round.

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

A lot has been covered here today. Frankly, I don't know what Mr. Gagliano said, but I'm sure the owners of leaky, rotten, mouldy condos would also.... I'm sure you're not saying it's a federal government problem exclusively, but I'm sure he'd be looking for some participation from the provincial government as well.

We talk a lot about externalities, external costs. I'm always amazed at how municipalities and the environmental movement don't talk much about the external costs of landfills spewing methane gas into the environment. I'm not an environmentalist, but I understand that methane is 20 times more damaging to the environment in terms of greenhouse gases than carbon, CO₂. When we have technologies in Canada that will convert municipal solid waste—forgetting recyclables, just the rest—into methane and electricity, obviating the need for landfills, we need to get on with this job big time.

If we converted major centres using these technologies—obviating landfills, going right into methane and electricity closed-loop systems—we could get to about 30% of our greenhouse gas reduction targets. So maybe in a moment...I just wanted to cover off a couple of things.

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Perhaps you'd like to comment on this, Ms. Sparkes and Mr. Fulton.

Lorne and Sue were touching on a point I'd like to pick up. Because of our major trading partner, the United States, when we talk about external costs—yes, we could scope in all the external costs of trucking, but the reality is that unless the Americans were also doing it, we'd price ourselves right out of the market. As you pointed out, Mr. Scott, warehouses are on the roads right now, and maybe that's a wrong-footed thing to happen, but the reality is, that's what's happening in North America. So if we fully cost in those externalities, and if the Americans don't do it, then there will be an external cost of non-competitiveness.

It's the same with Kyoto. I was totally disappointed, as I'm sure most of us were, when President Bush pulled the plug, and I hope we can get back on track. But the point is, if we get too far ahead of the Americans, there's an external cost of losing competitiveness. We need to be mindful of that as well.

I'm not proposing we go to the lowest common denominator, but if we're not mindful of our huge trading relationship with the United States, then we're all headed for trouble. I'll leave it at that, and maybe, Ms. Sparkes, Mr. Fulton, and Mr. Scott, you'd like to chirp in.

Ms. Helen Sparkes: To respond to the comment on methane, the GVRD has already met our 50% reduction in waste going to the landfills. We met it a few years back. We have very little methane, and what we have we burn off. Also, we attempt to sell even the exhaust steam and so on from our Burnaby incinerator, so we've been going in that direction for some time.

Mr. Roy Cullen: Good.

Mr. Gerry Scott: Yes, there is real potential here.

We wouldn't meet 30% of our target with methane treatment, but I will provide you with this report, which we published a couple of years ago, for federal consideration. Certainly we've been advocates of the various methane treatment possibilities, including the production of electricity. Recycling has tremendous potential for greenhouse gas reduction, of course, because of the embedded energy questions. So if we're reusing everything from beer bottles to resmelting aluminum cans and so on, there are great energy savings there as well.

On the question of competitiveness with the United States, I would urge the committee members to look at many of the compliance actions for Kyoto not as costs but as benefits. We must all challenge the idea that energy waste is somehow good for competitiveness. In fact, if we reduce energy waste, and therefore reduce air pollution and climate pollution, we're having an economy that is more competitive, not less so.

In the materials we've provided to you, the top-drawer analysis from the U.S. government—from some of the best think tanks in the United States and Canada and Europe—demonstrates time after time that as you cut energy waste, you get more efficiency. So if we can have policies that get freight back onto Canadian railroads, that is efficiency.

We're seeing the major railroads now have eight-hour turnaround from Montreal to Toronto in freight. They weren't doing this five years ago; that's why the truckers took over. They're doing it now, but to do more of it, you have to look at the external costs and the tax policies that have assisted trucking. The efficiency question is how we get at competitiveness.

Secondly, the United States is taking action on these emission levels. It is not saying it's going to meet Kyoto. It's not saying it's going to ratify Kyoto, but it's moving. We run certain risks in not keeping up with innovations in areas such as wind power and many, many others. Savings from cutting energy waste are really how we meet Kyoto, put money in consumers pockets, reduce federal expenditures in many cases through the wrong subsidies, and at the same time stimulate some innovation.

• 1030

Mr. Roy Cullen: I have another question for the professor, if I might cap that off; the time is so limited.

I'm glad you mentioned the CCA adjustments the government made on the rail. Maybe you're more confident about this than I am, but I think the market share rail can take—given that our inventories are in trucks and just in time—is limited in scope. They are pushing the envelope; they can push it more and we should encourage them. When a truck outside your warehouse can be loaded up and in Boston in 12 hours, no matter how good the rails get, it will be tough to take a lot of market share beyond what they have.

Flaring methane is better than letting it go up in the air, but if you're converting it to electricity, you're getting additional benefit.

Professor, we've had a lot of presentations about the indirect costs of research. Our federal government has responded in a sense with the chairs, with the Canadian Foundation for Innovation, with more money for the granting councils, etc. But they keep coming back and saying, yes, but what about the indirect costs of research?

What would your advice to the committee be? Should we be taking out of the money we give to the granting councils? Maybe we can top them up, but there's no room for accompanying a 41% overhead cost and topping up research grant moneys as well. Would you favour including something for the indirect costs of research, or just keeping on track with our increases to the granting councils?

Prof. Martha Salcudean: Your question raises a difficult issue. It would be too big a responsibility for me to be able to rank the priorities, as I don't have the knowledge of the whole that the university presidents retain.

The Canadian government has very strongly said that its decision is to bring us to a level that is among the five most competitive and best funded R and D countries in the world. For that the CFI and the chairs have done wonders. I can attest to you that universities have changed around, and I have never seen anything as dramatic in my rather long career as I have seen over the last few years.

When I was a vice-president of research, I remember the paradox was that somehow basically the more successful you were, the poorer you became, because there was no funding of the huge indirect costs of the research. I understand it and I know it is a huge problem.

I would like to suggest that we shouldn't take an either/or approach with the increases to the granting councils. We should go, within the limits of the fiscal possibilities, towards achieving some funding of indirect costs and some increases to the granting councils, so the wonderful people we bring in as the chairs and the new faculty we hire can produce what this government expects the academic community to produce.

I am not in a position to rank, but I don't think it's rankable. There should be an approach in between. Of course you are in the position to judge what your fiscal possibilities are, but within this approach you should address both issues to the limits to which you can address them.

The Chair: Thank you, Mr. Cullen.

Ms. Sparkes.

Ms. Helen Sparkes: I wanted to say a few more things about what I've heard.

The lower mainland's transportation plan is quite comprehensive. It's the only one in North America that includes all modes of travel and transportation. We are trying to give people choices. Our transportation plan is geared to our “Liveable Region Strategic Plan”, where we're trying to preserve the farmland and get people living in a compact metropolitan area where they can use alternate transportation other than the car.

Just for your information, we've had to cut our bus service because we don't have the finances. I came on SkyTrain this morning and there were people being left at every station because they couldn't get on SkyTrain. I was listening to the conversation and people were saying, well, they cut the buses because they're saying they don't have any money. People have to get around our region and if they don't have cars.... Now they're all trying to get on SkyTrain and so on. We already put a lot of money into our transportation through a variety of sources, whether it's property tax, user-pay, or whatever.

• 1035

We're asking for some help from the federal government, because I know you've indicated recently that the cities are very important to Canada's economy, and so on, and without that money and infrastructure to move goods, services, and people around our region, our cities are going to suffer. Maybe people will start moving out, and our farmland will not be safe and we'll get these greenhouse gases again. We have people travelling all the way from Abbotsford, or even Chilliwack, which is a long way up the valley.

So we need some help. In the lower mainland, I think we've gone in the right direction—and rail is important. In my comments I said we're looking at multi-modal. We're looking at the whole transportation system.

I think it has been estimated that $300 million goes out in gas taxes to the feds. We're only asking for $100 million back—sustainable, though; we have to have that annually. From the people we've heard, from around the region, people don't mind even paying a little more, possibly, in a gas tax, to provide that money to get our transportation system functioning once again, because if we don't get some kind of money, we're going to be cutting even more and there are going to be more cars on the road.

Going home now, the lineups are even longer. It's not just the trucks; those single-occupancy vehicles are also having a huge effect on our region. I'm sure it's happening in other parts of Canada as well.

So we're looking for help. We'll do what we can, but we want to make our city safe and reliable.

The Chair: Thank you.

Mr. Tennessy.

Mr. Tony Tennessy: I have a couple of comments on some of the issues raised, particularly on road versus rail. Certainly as a representative of thousands of workers who are involved in road construction in this province, we have fairly good knowledge of the conditions of the highways.

We have found that the railroads tend to dominate in the movement of bulk commodities, and there is difficulty with railroads competing with trucking on the non-bulk commodities, particularly as you get into problems going north and south. We think there is a balance between both truck and rail.

Also, we should keep in mind that the travelling public are also using these highways, and so it gets back to the safety issue once again.

We think there is and will be a strong economic price to pay by not having an efficient transportation system, particularly as we view the lower mainland, as mentioned by Mayor Sparkes. The lower mainland does have a transportation plan, but that's all we have. You can go out at any time of the day, particularly in the area of New Westminister, where my office is located, and you'll be tied up in truck traffic pretty well all day. So we do have a plan, but the plan is not being carried out efficiently.

We would certainly support a higher tax on trucks that use the public system. There's no doubt that the wear and tear on the highway system by trucks is substantially more than that of the travelling public, and the trucks should pay.

We would also support a stricter emission control on trucks. It seems strange to me that, in this province, where every time we license our vehicles we're required to take our cars through an emission check system to ensure we're not emitting inappropriate amounts of emissions into the air, we see trucks and buses running around belching black smoke all day. It just doesn't make a lot of sense.

The Chair: Thank you, Mr. Tennessy.

Ms. Barnes.

Mrs. Sue Barnes: Thank you, Mr Chair. I have a very quick question.

When I travel by car through major U.S. cities, there's always a commuter lane. Essentially, that is a fast-track lane. If you have one person in the car, it's very illegal to be in that lane. It essentially pulls at least two vehicles off the other lanes and moves them forward. Have you looked at something like that?

Ms. Helen Sparkes: We have high-occupancy vehicle lanes on the freeways.

Mrs. Sue Barnes: Okay.

Ms. Helen Sparkes: I know we've been thinking about it in our municipality also.

Mrs. Sue Barnes: It's amazing how that speeds things up.

Ms. Helen Sparkes: Yes.

Mrs. Sue Barnes: I was going through some major centres, like Atlanta, but I would never have been in a single vehicle in that city. It just wouldn't make sense. I would have found my neighbours.

Ms. Helen Sparkes: Yes.

Mrs. Sue Barnes: Thank you.

The Chair: I see Mr. Pankiw has a question.

Mr. Jim Pankiw (Saskatoon—Humboldt, PC/DR): Thank you, Mr. Chair. I have a question for Mr. Balderson.

Let me preface my question by saying that I don't think anybody would question or doubt how people were victimized by this leaky condo fiasco. But you're obviously here on behalf of the Coalition of Leaky Condo Owners requesting that the federal government participate financially in the compensation.

• 1040

The enforcement of building codes is a municipal responsibility, so why is your coalition asking that the federal government participate in compensation, as opposed to just going after the municipalities? Where is their liability in this?

Mr. James Balderson: Let me address your question this way. The building code starts at the national level with the development of a model code, which is then adopted in the provinces and territories and modified as the provinces and territories so wish.

In the province of British Columbia, the enforcement of the building code is the responsibility of the municipalities via the Municipal Act, except for Vancouver, which has a special situation, its own charter and its own building code, which is based on the national model, the model that's adopted by the province, and in some ways made more effective at the City of Vancouver level.

In terms of liability, we have a recent case, RiverWest Condominium versus the Municipality of Delta, where it was found that the design or the architect function for the condo was faulty and negligent, the construction was faulty and negligent, and the inspection service, which was supposed to be provided by the Municipality of Delta, was missing entirely. So the Municipality of Delta was found negligent, and the judge ruled in favour of the owners of the leaky, rotten condo and in essence awarded them 100% compensation. Because more or less everybody else is broke, the award will have to be paid by the Municipality of Delta. That decision is presently under appeal.

There are hundreds of lawsuits in process now. It has been estimated that the cost of litigation will far exceed the cost to repair the leaky, rotten condos. So what we have in British Columbia is, and I agree with you on this point, a failure at the provincial government level that permitted a legislative framework that allowed developers, builders, and architects to put on the market homes that are supposed to be safe, warm, and dry, but were full of holes—they leaked, they rotted, and they became mouldy—without a balancing system of accountability such as they have in many of the states in the United States.

That's a provincial responsibility, but we have a provincial government that has failed the citizens of Canada in the province of British Columbia, failed to provide compensation, failed to chase the developers, failed to help, except with a loan program that assists the banks and protects a government crown agency, CMHC, from multiple foreclosures.

Another way to look at it is that it's wild speculation in the real estate industry. By propping up the housing market—leaky, rotten condos—with a loan program financed in part now by the federal government, the provincial government, in order to prevent foreclosures, it's as if you're pouring margin money into a Nortel stock that is headed towards the tubes.

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So one of the things we're saying is there has to be a way in Canada that citizens who buy a house or condo that is supposed to be safe, warm, and dry and find it leaks, rots, and fills with mould, to the point of uninhabitability, can receive compensation.

We have the participation of the federal government in the housing industry big time. They make money in this industry. The CMHC mortgage insurance unit charges fees to owners who want to buy homes. So they're earning money on this. Other people are saying, send us back the gas tax; we're saying, send us money.

Now, if I may just conclude, please—

The Chair: Yes, you may conclude.

Mr. James Balderson: It was only last week that we found out, face to face with Minister Gagliano, that he is prepared to recommend to the caucus a 25% compensation plan, but the provinces must come asking for it. The provinces have never asked for it, so we have been misled and deceived at the provincial level, because at the provincial level we have been told the problem was with the federal government.

We're very happy now that there's $500 million there waiting for us. We're asking you people to help find a way to get it over the Rockies to the owners of these homes.

The Chair: Thank you.

Your Worship.

Ms. Helen Sparkes: I would like to respond to that. Municipalities will be getting out of inspections fairly quickly because of this. We don't mind paying our share of the responsibility. I know in New Westminster we've had lots of leaky condos and we settled out of court. We paid our 20% or whatever.

But what Mr. Balderson has just said is very unfair to municipalities. When the architects and developers go broke and you can't find them because they've changed their businesses to numbered companies and so on, who has the deep pockets but municipalities? If this goes on it could break small municipalities.

The only place we can go for our funds is to the property tax base, so you'll see municipalities.... Even in this case now with the repairs, our staff do not inspect them. They have to hire a consultant to make sure the repairs are being done right. Even though it's the building code they're inspecting, if we were going to inspect every building and watch every nail, we would have to have a supervisor on every site. There's just no way we can hire that kind of staff to do that.

Again, it goes back to what he says. There are national and provincial building codes and then we adopt them as bylaws and move them from there. But I'm sure you'll see municipalities, in the very near future, insist that these developers hire their own consultants to check out the building codes.

The Chair: Thank you.

I have a final question. As you probably noticed, many of the things people are proposing to the finance committee to recommend to the Minister of Finance have pretty hefty prices. Everything's pretty costly, and I think you all understand that the resources are limited. So we have to look for creative solutions to funding.

Particularly as it relates to the issue of transportation, what are your feelings about public-private initiatives?

Secondly, I was struck by a comment I think Mr. Paddon made, in reference to Amtrak and the whole issue of transportation in the United States. As this North American economy takes hold and a North American community actually evolves from it, I wonder if it's time to start thinking—not just tomorrow, but down the road in the future—about getting our heads around a North American transportation system. What type of joint U.S.-Canada efforts do you think might alleviate some of the challenges we face as a country?

Mr. Bob Paddon: Mr. Chair, you've touched on a few very key points. I have a few observations.

First, in this region we're certainly looking at public-private partnerships. Just as an example, we're looking at a new crossing of the Fraser River farther up the valley. To our minds, that will lend itself to tolling systems, and when you move to tolls, you very much look at the concept of bringing in private partners. There certainly are issues around how you do that, how you manage it, but we're going to have a look at it.

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Furthermore, there's been a lot of discussion in the public meetings we've attended over the last month. People are interested, for example, in the toll highway system in Toronto. That's certainly one thing the transportation authority will be looking at.

In addition to that, rapid transit has become very expensive. There are possibilities of looking at public-private partnerships. The gateway council we have in this region is a collection of the agencies and organizations that are very interested in the movement of goods and services by marine, rail, and highway.

One of the points they make is that in the United States there's an opportunity for public systems to be financed through public-private partnerships with tax-free bonds. They point to an example in Las Vegas, where I think Bombardier is the Canadian company that's involved. That's being funded to a significant degree by these tax-free bonds. I think there's some real potential and opportunity in Canada to look at public-private partnerships and move in that direction.

On a last point, and perhaps Mayor Sparkes may want to comment further, here in this region we have worked very closely with our neighbours. There's a concept we call Cascadia, which essentially reaches from Portland through to the Vancouver-Victoria area. We have worked very closely with state and local governments and other officials in the United States to try to find ways to connect our economies and our environments in a way that has the least impact on the land, but maximizes the efficiencies of our systems.

One of the discussions that has come up recently is this idea, with Amtrak's interest, of moving people and using the corridor with other goods and services movement. So we see a lot of potential to do the integration.

The last point surfaces from some earlier questions we had on the issues of rail versus road. Certainly in the long haul, fundamental issues have been raised on some key points. But one of the ways we're moving in this region is to try to look not so much at the competition between the various modes of transportation, but at the integration and efficiencies.

We've been very pleased with the discussions we've been having with all parties, including the Suzuki Foundation and others, on how we can pull together and maximize the infrastructure. Clearly there are places where rail is the best way to go, in some cases road, in other cases marine, but we're trying pull together systems.

In closing, we haven't moved to advocate for new big highway systems in Greater Vancouver. In fact, we'd like to limit them because of the very impacts the automobile and vehicles can have on the environment. But we've looked at the issue that we certainly haven't been able to maintain the system of connected roads that would lead us to be able to move goods faster and in a way that would have less of an environmental impact.

We've been working with the community, and they've recently come up with a commercial road system. In none of that are they advocating new big highways, but they are looking at other ways of connecting all of these systems together.

I think there's a lot of merit in looking at transportation planning that is completely integrated, looking at all of the modes, trying to find where we can best spend our tax dollars that are being collected to serve the objectives of all levels of government in Canada. We're very hopeful about seeing more of that.

For example, in the fund system that was talked about earlier where the Federation of Canadian Municipalities is moving, we're starting to recognize that pulling this all together, working toward common objectives across all levels of government, may be the way to really have some benefits for Canada.

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

On behalf of the committee, I want to thank you. This has been a very good panel, and you have given us a lot of insight on a number of issues. We need it as we get ready to write the report to the Minister of Finance and to the House of Commons.

Thanks again.

I'm going to take a 10-minute break.

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• 1104

The Chair: I'd like to call the meeting to order and welcome everyone here this morning.

We have the following representatives: from the Canadian Association of Gift Planners, Janice Loomer Margolis; from the Coalition of Child Care Advocates of B.C., Susan Harney, chairperson; from Parents for Child Care, Heather Northrup, member; and from the Canadian Health Food Association, Donna Herringer, president and CEO.

I believe some of you have appeared in front of a committee before. You have five to seven minutes to make your introductory remarks, and then we'll engage in a question and answer session.

We'll begin with Susan Harney.

Ms. Susan Harney (Chairperson, Coalition of Child Care Advocates of B.C.): Thanks for having me.

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The Coalition of Child Care Advocates of B.C., the organization I'm here representing today, has been advocating for over twenty years for a child care system that is high quality, affordable, accessible, publicly funded, and accountable. We are a voluntary organization of parents, child care providers, community organizations, unions, and other interested citizens. The coalition is also a founding and participating member of the Child Care Advocacy Forum, which brings together six provincial child care organizations in B.C. and represents over four thousand members.

Two years ago the people of British Columbia responded in unprecedented numbers to a provincial child care discussion paper, “Building a Better Future for British Columbia's Kids”. More than 10,000 responses from the public indicated that over 94% of respondents supported an increase in public funding for child care programs. Indeed, as you know, the vast majority of Canadians believe that investing in the early-years development of children is necessary for the good of our country.

Since the change of government in our province in the spring of 2001, British Columbians have again been asked to contribute to yet another child care survey. To date, the Minister of State for Women's Equality has received more than 3,400 surveys, and more continue to arrive every day. There is no reason to believe that these respondents will not once again urge the government to spend more money on child care.

Child care advocates are saying enough to surveys. Time and time again, Canadians have responded with overwhelming support for a coordinated range of services for children and their families. Recent polls indicate that 90% of Canadians believe high-quality child care is important to help ensure Canada's social and economic well-being; 81% of those polled think governments should develop a plan for a comprehensive child care system; another poll found that 76% of Canadians believe child care should be available to all families with costs shared by governments and families; and 65% of Canadians are willing to pay more taxes in order to ensure that children can access high-quality child care programs.

If those statistics don't convince you, let me point out a few more. More than three-quarters of mothers of children aged 6 to 14 are in the workforce, as are 7 out of 10 mothers of children under the age of 6. Economists from Statistics Canada project that the labour participation of women aged 15 to 44 will rise from the current rate of approximately 71% to about 80% by the year 2011.

Almost 400,000 children are born each year, and 86% of their mothers end up back in the workplace within a year. The Vanier Institute of the Family estimates that women in the labour force contribute approximately $25.5 billion a year in federal and provincial taxes. There has been a 400% increase in the use of paid child care services by pre-school children of families since 1967. I get tired of saying the same things over and over, but we know that for every dollar spent on child care there is a two-dollar economic benefit to the country.

In 1998 the cost of raising a child from birth to 18 was estimated to be $160,000, up by $4,000 from 1995. I think it's really interesting to note that the largest proportion of this cost, 33%, was spent on child care. Shelter was next at 23%, so there was 10% less for shelter.

Between 1991 and 1998 the proportion of workers with dependents who reported excess tension due to family and work conflicts increased from 38% to 44%. A child's brain development in the first six years of life sets the foundation for lifelong learning, behaviour, and health.

I really want to emphasize this last point. Children's well-being and development suffer when they have poor-quality child care. When Canada says that we have child care, much of that child care is of poor quality. Even the child coming from an advantaged family can't make up the damage done by poor-quality child care.

The message from the Coalition of Child Care Advocates of B.C. and the Child Care Advocacy Forum is quite simple and straightforward. The forecasted federal surpluses far exceed the relatively small investment the federal government has committed to the agreement on early childhood development services signed by federal, provincial, and territorial governments in September of last year. To date, action stemming from this agreement clearly demonstrates that the level of funding is inadequate to meet the needs of Canada's children and families. As a result, children and families across Canada still do not have equitable access to child care services.

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We therefore recommend that the next federal budget include an allocation of $2 billion for early childhood development initiatives in each of the next five years. This will still leave the federal government with sufficient budgetary surpluses to meet its other objectives and will make a real difference in meeting the objectives of the agreement on early childhood development.

We call for the dedication of two-thirds of these funds to support provincial and territorial development of quality child care systems, front line, within a mutually negotiated child care strategy for all the children of Canada.

The time for action is long overdue. The fragile child care program that exists in Canada has resulted in child care workers being paid poor wages, parents being forced to settle for poor-quality child care because they can't afford high quality, and other parents scrambling to piece together ad hoc child care arrangements because no spaces are available at any price in their community.

Amidst it all, our children, who count on us to protect and cherish them, are the losers. All Canada's children deserve the very best start in life. Their parents deserve the right to go to work or school knowing that their children are safe and receiving high-quality early childhood education and care. The future of Canada depends on the right decisions being made today.

Thank you.

The Chair: Thank you very much, Ms. Harney.

We'll now hear from Janice Loomer Margolis.

Ms. Janice Loomer Margolis (Canadian Association of Gift Planners): Mr. Chairman and members of the committee, thank you for providing the Canadian Association of Gift Planners with the opportunity to make these recommendations today.

I've provided an overview of my proposal, so I think you should all have a copy of that.

First of all, I'll just describe the Canadian Association of Gift Planners. I think we have presented to you before.

We're an organization of over 1,200 members from across Canada. We're people who are directly involved with charities, and also we're a group of professional advisers and people in sectors of law, trusts, accounting, life underwriting, and financial planning.

I'm first of all going to thank you very much for the recent decision and consequent announcement made by the minister on October 12, which made permanent the incentive for publicly listed securities. You're probably all aware there's a reduced capital gain. This has been a phenomenal vehicle, and we really thank you so much for the success of it because it certainly does increase and enhance charitable gifts.

However, we're still concerned about the fact that this vehicle and the incentives are not available to private foundations. Private foundations are extremely important in terms of philanthropy in this country. They support smaller organizations and large organizations and are probably the largest supporters of community services in the country. We really urge you to recommend to the minister that the rules that discriminate against private foundations be adjusted and that the private foundations come onto the same footing as other public foundations and public charities.

In addition, we have a recommendation with regard to charitable remainder trusts. As you may know, there is a committee, a volunteer task force, that is chaired by CAGP. It is made up of people from various sectors, including people from the Department of Finance and from CCRA, and it is dealing with making a framework for charitable remainder trusts. This is a vehicle that is extremely popular in the United States but has not been as popular in Canada because there's so much uncertainty around it. We recommend that this committee monitor the progress of this project and be supportive of it because we clearly need the support in order to put some legislation in effect.

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We have three recommendations with regard to tax credits for gifts made by estates. This is all in number 4. Briefly, there are many examples where taxes payable by an estate can't be offset by the tax receipt for the gift the individual actually makes.

This occurs when there's a redemption of private shares, when a spousal trust is created, or when administering an estate takes a long time. Those of us who have been involved in estates know that in many cases it can take three years or more to actually finalize the administration of an estate.

So we recommend that a rule be adopted whereby the estate executor can elect what taxable entity will use the tax receipt, whether it's the individual in the terminal year or the estate tax return. We also recommend a three-year carry-back opportunity and a rule allowing the tax receipt to be used by a spousal trust, if it hasn't been used otherwise.

An example of such a situation of creating a spousal trust might be if an individual provides that when the spouse dies, the gift should to go to charity. Because there's a power of encroachment, there can be no tax receipt at the inception of the trust, but then when the spouse does die, the tax receipt can't be used then either. I don't think that's the intention. The intention is clearly that when a significant charitable gift is made, the receipt can be used. There just need to be some proper rules on how it can be used.

We have another recommendation with regard to reinsured gift annuities. These are a very popular vehicle: a person commits a large capital outlay and then they get lifetime income; income is generated through an annuity. This is not available, or rather it's very unclear whether it's available, to foundations. There's a prohibition against foundations holding debt, and so this vehicle is not allowed to foundations because it's perceived as a debt, for some bizarre reason—even when the annuity is reinsured by a commercial entity. We recommend that an annuity not count as debt, and it should be allowed to foundations.

Just for clarification, by the way, a lot of these things we're talking about are just cleaning up. They're matters we believe the government really intends to have in place and just hasn't thought about.

We also have a recommendation with regard to disbursement quotas—provisions that require foundations to disburse 4.5% of their capital. This is to ensure that foundations actually distribute their funds and make gifts as they operate. As you can well imagine, this fixed rate of disbursement does not really reflect the reality of today's low-interest-rate market. To actually distribute 4.5% of invested assets requires charities to invest in things that may not be conservative—and most foundations do want to invest conservatively.

If they have to encroach on their capital to meet the 4.5% disbursement quota, it could mean they're actually encroaching on their endowment funds, which by law they're not allowed to do because the provision for endowment funds is that the capital must not be touched, only the income. So it's a real conundrum for foundations to meet the disbursement quotas but not encroach on capital. We recommend that the disbursement quota rate be allowed to float within a range, and we should discuss what that range should be.

We have one last recommendation, on advocacy for charities. Basically, registered charities are not able to get involved in public policy debates because of administrative restrictions. In fact, the Income Tax Act only prohibits charitable organizations and registered charities from engaging in partisan political activities. But CCRA—though not Parliament—has imposed other existing restrictions and doesn't allow advocacy by charities.

We suggest that this committee recommend to the Minister of Finance that the Income Tax Act be amended to include a definition of prohibited partisan political activities by registered charities. We have a definition in our submission.

That is a summary of our recommendations, and we thank you very much for your consideration.

The Chair: Thank you very much.

We'll now hear from the Parents for Child Care, Heather Northrup, member. Welcome.

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Ms. Heather Northrup (Parents for Child Care): Thank you, first of all, for coming and listening to us. My goodness, you have an awful lot to listen to in one day. Kudos to you. You have a lot of hard decisions to make.

I'm here to echo my colleague Susan Harney's submissions on behalf of the B.C. Coalition of Child Care Advocacy. If I can just draw your memories back to what she said, our submissions dovetail quite well.

Who are the Parents for Child Care? We are parents and grandparents, we work in offices and at home, we're employers and employees, business people and professionals, and we are taxpayers. We believe in a child care system that provides all Canadian children with access to affordable, high-quality child care spaces.

Parents for Child Care believes that all levels of government must take action now to foster financial sustainability in the child care sector in order to eliminate current waiting lists and the critical shortage of quality child care spaces, and also to keep up with the increasing demand for quality child care spaces.

We also believe it is time for public policy in Canada to catch up with the increasing demand for quality child care. The business community is increasingly recognizing the importance of family, child rearing, and early childhood education. Government must take a leadership role in making child care a public policy priority.

Most of what I'm going to tell you today will be not statistics but stories from a distinctly parental perspective.

What is business doing? Leading Canadian businesses provide flexible work arrangements that accommodate their employees' child-rearing responsibilities while allowing them to maintain an income to support their families. Businesses provide child care referral services to assist their employees in searching for and identifying quality child care. Some businesses provide annual corporate donations to fund non-profit after-school child care programs.

Other businesses go even further and provide on-site child care for their employees. For example, IBM is investing $50 million worldwide in employee child care. Of that, $5 million is allocated for Canada. Trade organizations have gone on record as supporting the need for comprehensive child care systems for all families in B.C.—the Vancouver Board of Trade did so in its Task Force on Early Childhood Education in 1999. Clearly, business sees child care as giving a competitive advantage.

But all the flex-time, job-sharing arrangements, and child care referral services I just described are useless if parents cannot find or afford a high-quality child care arrangement for their child. If parents are forced to choose between their jobs or careers and a poor child care arrangement for their children, those who can afford it will leave the workforce, and those who can't afford it will be forced to make sometimes unimaginable child care choices.

All of business' efforts to keep their qualified employees working are for naught. The issue of employee retention will become increasingly critical for businesses as the workforce ages and we face the increasing labour shortages predicted by the Conference Board of Canada.

What is government not doing? I'm going to illustrate that by bringing you down to a parent's perspective and trying to give you a sense of what it's like for a working parent to find child care.

Why are there not enough quality child care spaces to meet demand? Quite simply, government has dropped the ball. Here are the options. You can find licensed, high-quality child care spaces in centres with highly trained staff and little staff turnover, which is critical in providing good-quality care, except that the waiting lists for these places already have a thousand names on them. We have two non-profit centres in the lower mainland, where some of the largest child care providers are, and both their waiting lists are approaching 1,000. There's not much sense in putting your name on a waiting list if you're number 1,001.

There are also babysitting alternatives. Parents use relatives, aging grandparents, brothers and sisters, university students. There is also nanny care, but at $2,000 a month for a well-trained caregiver, or $800 for a housekeeper who might look after your child during the day, that can be prohibitively expensive.

For the less fortunate in our economy, other options are no child care at all. Children are left at home to be cared for by an older sibling, or simply left alone.

There are also many preschool programs offered, but they're usually only offered every other day, for two hours between 9 a.m. and 11 a.m.

Each of those options can provide excellent care and can give parents the flexibility to make choices. However, parents know their chances of getting excellent care for their children increase when highly trained and well-paid child care workers nurture their children in a safe environment that must meet licensing standards designed to enhance child care quality. As a result, parents increasingly prefer a licensed child care environment. This is demonstrated by the lengthy waiting lists for child care space. However, the chances of getting such care are, as one Vancouver Sun columnist recently noted, about as good as winning the lottery.

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Lengthy waiting lists at centres recognized for providing high-quality care in Vancouver demonstrate this. The most recent statistics for the Vancouver Society of Children's Centres is 940 on the waiting list.

In the provision of quality care to children from all socio-economic backgrounds, child care costs at what I will refer to hereafter as VSOCC, the Vancouver Society of Children's Centres, are barely affordable for most families, including those low-income families who receive a subsidy. The monthly cost of infant-toddler child care at the Vancouver Society of Children's Centres is $875 a month. For children aged three to five, it goes down to $575. The only way this non-profit organization can afford to charge the fees it does is through tax-dollar funded grants, operating and capital funds, and low-wage redress programs that keep the cost of child care affordable for most Canadian families.

These commitments at present come from the municipal and provincial governments. Some federal dollars are available for child care too, but with no accountability as to how these funds are spent by the province, there is too great a chance that, as in Ontario, none of these federal dollars will be spent on creating or maintaining child care space availability.

In B.C. right now there are 73,000 licensed child care spaces and they are all at risk of disappearing as this provincial government performs a core review of government service and delivery. Strangely enough, child care and early childhood education did not merit the protection of a funding freeze, as the public education system did.

Parents are strongly opposed to the federal government putting child care dollars at risk by allowing the province's complete discretion to use federal dollars for something that will not advance the children's agenda and maintain and increase quality child care spaces for all B.C. children.

The future for parents at child care centres like VSOCC in the current political environment.... An increase in fees for infant-toddler care from $875 a month to $1,300 a month will clearly make it unaffordable for the average Canadian family of four earning an income of $40,000 a year. Keep in mind that many parents with young children are still paying off their student loans and have no room in their family budgets for such an increase.

Another point of frustration for parents is, as it stands right now, that there are 1,000-odd children on the waiting lists for centres like the VSOCC. Many of the parents on that list are working parents, and they're wondering why their hard-earned tax dollars, which go to support VSOCC, buy them nothing more than a spot on a waiting list, a waiting-list spot that will likely never turn into a child care space.

Quite simply, the system of child care delivery in this country is unfair and inequitable, and it's just bad business. Parents for Child Care is currently running a campaign to gather child care stories from the front lines. Here are some illustrative examples of what all of the statistics you have heard today may not convey.

The waiting list for one aboriginal child care centre in northern British Columbia is two years. Few children on the list ever get into the preschool and infant-toddler program there before they start kindergarten.

One parent writes of how her child of 30 months has been through no less than five different child care providers. Why? Two of them have moved away, two of them went back to school, and one became ill.

This is what was offered to one parent who contacted a private, unlicensed child care referral service: a babysitter with a one-bedroom apartment with no toys, a TV, and a VCR.

One parent commutes four hours a day from Kitsilano to Coquitlam and back, twice, at rush hour, to keep her child in a high-quality child care environment.

Another parent, a woman lawyer running her own downtown firm, faced only one option earlier this year for her kindergarten-aged daughter. She had no child care space available in her north Vancouver community. Her only option was to send her child out to Abbotsford, two hours away from here, to live with her 70-year-old grandparents and enroll her in a kindergarten out there so she could have child care. Thankfully, a few days prior to her daughter starting, a spot on the waiting list came free and her child got access to child care.

The stress these parents go through on a day-to-day basis, when their jobs are at stake, their livelihoods are at stake, and more importantly, their children's education and care is at stake, is unimaginable.

The above are a few stories that have come in from parents around B.C., but here's my last and most important story. It's about the first-time parents of a very young child at a child care centre in Vancouver and their child's caregivers. Thanks to the caregiver's training, she spotted early signs of autism in the child's behaviour. The parents were able to get appropriate treatment and care for their child at an early age, which is critical for treatment in autism. The parents had no inkling their child's behaviour and development showed such signs, and without their caregiver's intervention, their child would have gone undiagnosed until much later.

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Parents and child care professionals work together in partnership to meet a child's early development and educational needs. In this day and age, when more and more families are living far away from extended families, young parents are learning more and more critical parenting skills from early childhood education professionals. This is another significant benefit of quality child care. Unfortunately, it is a benefit available only to those few who find quality child care and win the child care lottery.

What must government do? My query to government is: we accept collective responsibility for our children's well-being and education once they turn five by providing them with public education, so why do we abandon them before that, at a time in their lives that early-years academic research indicates is critical for children's development? It simply defies common sense. Parents and taxpayers demand leadership from the federal government and urge you to give early childhood education and care the priority it deserves on the public policy agenda.

Thank you.

The Chair: Thank you very much.

We'll now hear from Donna Herringer from the Canadian Health Food Association, president and CEO.

Welcome.

Ms. Donna Herringer (President and Chief Executive Officer, Canadian Health Food Association): Thank you very much.

The Canadian Health Food Association is a non-profit organization. We are Canada's largest trade association, representing 1,200 retailers, manufacturers, wholesalers, and importers of natural health food products.

You're asking, what are natural health food products? They include foods and beverages, traditional herbal products, vitamins, minerals, traditional Chinese medicines, and homoeopathic preparations.

I'm very pleased to have the opportunity to speak to you because of the vital role natural health food products play in the health of Canadians and in our economy. Over 60% of Canadians consume natural health food products. Conservative estimates place annual sales of this category at about $950 million per year in Canada. With an 80% growth in the use of these products during the 1990s, there has been massive investment in natural health food product manufacturing facilities, sales forces, and retail outlets. Market stimulation has also meant important job creation among thousands of businesses, many of them located in smaller cities and rural areas.

The growing importance of this sector in the late 1990s gave rise to a full-scale review of these products by the Standing Committee on Health. In a 1998 report, the committee called for a new regulatory framework and a governmental body dedicated exclusively to natural health products. In response, the government established the natural health products directorate, a move that formally recognized the important role these products play in promoting and maintaining the health and well-being of Canadians.

Natural health products help Canadians take responsibility for their own health, which in turn takes the burden off our already overburdened health care system. The issue I bring for you this morning involves the GST classification of natural health products. It is an issue that will need to be resolved by the finance department and the Canada Customs and Revenue Agency within the next six months.

Historically, natural health products have been regulated as either a food or a drug under the Food and Drugs Act. That means that under the current zero-rated provisions for the Excise Tax Act, more than half of all natural health food products are considered to be zero-rated foods and/or beverages. However, next spring Health Canada will introduce the new regulations for natural health products. Under the proposed framework, these products will no longer be regulated as foods or drugs, but as a separate category.

Our association is really deeply concerned that the proposed regulations may have a negative impact on the GST status of the many natural health food products that are currently zero-rated. Any extension of this tax to the whole category would be inappropriate and would be contrary to the Canadian government's objective in establishing the new natural health products directorate and regulations. In setting up the directorate, the government has been clearly committed to differentiating natural health food products from over-the-counter drugs, which are GST-taxable.

Along with the new product licensing system, regulations will also require natural health products to disclose the health benefits of consuming the product. This requirement is to meet consumer demands for more information about the product, so they will be able to make more informed choices.

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As an industry, we welcome these changes. However, given the current administrative practices of the Canada Customs and Revenue Agency, these new requirements could result in most natural health products becoming GST-taxable. Currently, the tax status of various natural health products is often uncertain and subject to debate.

CCRA interprets the food provisions primarily according to the manner in which the product is marketed. It looks at where the product is sold—for example, a grocery store versus a health food store—and if there is a claim or a health benefit on the label, the agency classes the product as a drug, which is considered to be GST-taxable.

Were the CCRA to continue this interpretation, then all natural health food products presenting a label claim of health benefits could be subject to GST. At worst, we could end up with the same confusion that currently exists where some products are subject to tax and some are not.

The possibility of this runs contrary to what the government intended when it established the new Natural Health Products Directorate. It seeks to provide clear definition and more appropriate regulations to the sector and to ensure that all Canadians have ready access to natural health products that are safe, effective, and of high quality.

Under current zero-rated provisions of the Excise Tax Act, it is a generally accepted premise that food and pharmaceutical prescription products should not be taxed. Natural health food products fall between these categories, and indeed many continue to be zero-rated. As products intended for the nourishment and health benefit of Canadians, this characterization should be maintained from a public policy standpoint.

Many Canadians, including our Asian and first nations people, consume natural health food products as a natural part of their diet. Why? A major reason is that foods that are conventionally grown and purchased no longer have the nutritional content they once had because of soil and mineral depletion. Natural health food products supplement the foods we eat. They are a low-cost means for millions of Canadians to take firmer control of their health.

Natural health products provide Canadians with the means to help prevent disease and promote wellness and self care. In doing so they reduce their reliance on Canada's already strained health care system.

In summary, the new regulations expected next spring should not in any way negatively impact the GST status of natural health products, irrespective of whether they provide health benefits. Therefore, our association is requesting this committee to recommend that all natural health food products under the new regulations be zero-rated for GST and that schedule 6 of the Excise Tax Act be amended accordingly.

Thank you very much.

The Chair: Thank you very much.

We'll now proceed quickly to the question and answer session. We have time for a five-minute round for all four members.

Mr. Epp.

Mr. Ken Epp: Thank you very much, Mr. Chairman. I'd like to begin my questioning with the Gift Planners. Your presentation was very methodical, and you have made some recommendations.

The question I had is with respect to the annuities and the debt conflict. If you're holding in trust an annuity, or you have a donation and you're paying out an annuity—that's how I understand it; am I right?—well, it is a financial obligation.

Ms. Janice Loomer Margolis: The kind of case where we're not saying to apply it is when it's independently done by the charity. In those cases we think it should not be available to the foundations. We're saying it should apply when they're reinsured by a commercial company, where the charity actually purchases a commercial annuity with a commercial entity that then extends annuity payments to the individual.

Mr. Ken Epp: Okay. Then it really isn't a debt.

Ms. Janice Loomer Margolis: That's what we're saying: it isn't a debt.

Mr. Ken Epp: But it's being treated as one.

Ms. Janice Loomer Margolis: It's being treated as a debt.

Mr. Ken Epp: Okay. That was the one question I had with respect to clarifying your situation.

Ms. Janice Loomer Margolis: Thank you.

Mr. Ken Epp: Now, with these child care advocacy groups I have a huge question. A recent survey done about four or five years ago said that, given a choice, two-thirds of mothers would actually choose to be at home with their toddlers until they reach school age—it was around two-thirds; I don't have the exact numbers here. Yet in both your presentations, you don't mention a thing about the value of having a mother look after her own child, or a father look after his own child, and that perhaps there should be a level playing field for that.

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Is that deliberate, or is it just because it's not part of your advocacy plan?

Ms. Susan Harney: I would just ask the question back: what would happen to Canada's economy if two-thirds of the mothers and two-thirds of the fathers stayed home with their children? Our economy would collapse.

If you ask me.... I'm a grandmother. Would I rather go to work tomorrow or play with my grandchild? I would absolutely rather spend the day with my grandchild, but my family can't afford that.

I think the question that's sometimes put to parents is a loaded question: would you rather stay home? The answer is, sure, if we had the family income to support that.

The coalitions I'm here to represent are not opposed to any parent or grandparent staying home with a child. Family resources are really important. But the truth is Canada's economy depends on mothers and fathers going to work.

Mr. Ken Epp: What you are asking me to do is to get my head around the fact that things have changed in my lifetime.

Ms. Susan Harney: They have. They've changed in mine.

Mr. Ken Epp: I accept that. Why do you think primarily that has happened? For example, when I was a young guy graduating from university in 1961.... That was before the days of the technological on/off switch on having babies, so our babies came right away. It was right about that time this little switch was invented.

So we had babies, we decided my wife would be a full-time mom, and we did fine, thank you, until about twenty years later when the taxes started going up so high because the federal and provincial governments wanted to fund this and that and everything. Then it was really difficult to make ends meet.

But we stayed the course. We said: “We won't go on a vacation, because we can't afford it; we'll do things that are relatively inexpensive”—that type of thing. We worked as volunteers at a camp, where basically we got free room and board for a month for our family in return for our work there.

So there were ways of doing this. And yet it seems to me that the taxes increasing is what caused families to no longer be able to live on a single income.

Ms. Susan Harney: Oh, no, I think you're wrong.

Mr. Ken Epp: Okay, tell me how I'm wrong.

Ms. Susan Harney: Well, the price of housing has gone up disproportionately to the difference in wages. I remember my father, when I was a young girl, telling me he made $10,000 a year. Our home cost $12,000. That is not proportionate to what people make now and what they have to spend on a house.

It's not about the rise in taxes. A loaf of bread used to cost 25¢. It doesn't any more.

Most of the parents we're talking about who are going to work are not going to work for a luxury car or a wonderful vacation in Mexico or Disneyland. They're paying their bills; they're just paying their monthly bills.

Times have changed, and those of us who are grandparents need to step up and move up to the changing times. Maybe we wish things could be the way they were. They aren't.

Mr. Ken Epp: I recognize the fact that there are a lot of single parents—which, by the way, is a biological anomaly. I wish the guys who fathered these children would step up to the plate and provide for them; if they have enough energy to do that, they should have enough energy to go out and make some money and buy some food and shelter and clothing for those youngsters.

Unfortunately, our society has done a real flip on that, and now suddenly it has become the government's prerogative to fund that—I think very negative—activity: that we have children having children.

I noticed in one of your presentations you said women from age 14 onward are working. That is true. Fourteen-year-old women are not women; they're children. I think in a way our society has enabled this behaviour, and I would like to see us—and maybe I'm too old-fashioned, but I'd like to see us go back to the old days.

Interestingly, with respect to the mathematics of this, in comparison to my salary over the years—and I'm talking as if I had stayed in my profession, not as an MP—gasoline has gone down in terms of how many hours I would have to work to earn a litre or a gallon of gasoline. When I was young, we bought it by the gallon. Bread has gone down; so have most groceries. Electricity and natural gas have gone up in the last couple of years, but until then they were down. Communications has gone down. The only thing that's gone up disproportional to my income is income tax. When I was a young guy making $6,500 a year and paying a mortgage on a $20,000 house, my tax rate at that time was 15% of my total income. Now it's closer to 25%, so that's gone up disproportionately.

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Is my time up already?

The Chair: It is, yes.

Mr. Ken Epp: Oh, I'm sorry. Anyway, I hear what you're saying. I'm just frustrated with it.

The Chair: Thank you.

Mr. Pankiw.

Mr. Jim Pankiw: Thank you, Mr. Chairman.

I do have a question on this issue of child care. I think you're missing the ball a little bit, and the point is some parents do choose to stay at home and care for their children. Increasingly we see the father staying home. I've seen much more of that than I'm sure happened in the past.

In any event, for parents who are in that circumstance, for whatever reason, to have to pay taxes to subsidize parents who work is unfair and inequitable, in your own words, Heather. To come to the federal government and say, give us a bunch of money, is the same as saying to parents who care for their own children at home, not only should you forego a second income, but you should help me care for my kids so I can have a second income.

What you people should be doing is saying to the federal government—think of the savings in administration too—just provide a tax credit per child. Done. We all have the goal of assisting parents' care for their children, however that's done. But that's not a role of government. Parents are responsible to care for their own children. You shouldn't be advocating a discriminatory policy, and that's what you're doing. I don't know if you'd care to comment on that or not.

Ms. Heather Northrup: I would like to comment on it, actually.

First of all, you assume that the parents who are at home and choose to be at home to look after their children don't actually want to send their children to a child care centre. There are parents who belong to our group who are stay-at-home parents and they want to send their child to a high-quality licensed child care environment so that their child can learn, can learn self-esteem and socialization, can be ready for kindergarten—all kinds of things. Child care is not just the purview of those parents who work outside the home. Parents of all kinds want access to high-quality child care.

As far as your response with respect to those who stay at home—clearly a minority in this population, as the statistic Ms. Harney used in her presentation. Seventy percent of parents of children under the age of six are in the workforce; 30% are not. Does this mean that government policy is driven by 30% of the population, so that 70% of the population doesn't benefit? I'm having a bit of difficulty with that discriminatory aspect when you look at it that way.

Mr. Jim Pankiw: It's the 30% who are discriminated against, though.

Ms. Heather Northrup: Yes, but if we take your route and leave it all up to stay-at-home parents, how many of these parents would have to put their—

Mr. Jim Pankiw: I'm not saying that. I'm saying that instead of funding it through taxes and administering it through a bureaucracy, give a tax credit to every—

Ms. Heather Northrup: Why do you not have that same opinion for the education system or the health system? If you use the same argument and you have your children and you're responsible for them, when your child breaks his leg, are you saying you should be responsible for the full cost of that? Are you going to provide the capital to create the space in the medical facility?

Mr. Jim Pankiw: First of all, there's not a comparison there. Certainly I would say I should have—

Ms. Heather Northrup: There certainly is. The research shows that the most brain development happens between zero and six years of age. We learn things as human beings between those ages that you cannot learn after.

Mr. Jim Pankiw: You said even some parents who don't work would choose to send their child to a day care centre because they can learn social skills or other things. Is that any different from saying, I think I'm going to buy a computer for my home so my child is exposed to computers? Should the government pay for computers for homes? I think you people are ridiculous.

The Chair: We're going to have to move along here because your time is up.

Mrs. Barnes.

Mrs. Sue Barnes: Thank you.

You don't have to justify your positions to me. I actually agree with you.

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Society has many indications. For instance, childless parents in our country support education for everyone; they don't support it just when their kids get to go to school. So it's not even worth wasting your breath on that aspect.

I will tell you, though, when you do these presentations...I've been around. I remember seeing a letter from Lloyd Axworthy sent to all the provincial premiers when he was HRDC minister saying we'd like to implement a national child care program. When you come to the table, I think we all have to acknowledge that the federal government did offer that to every province, and we had no take-up. It was offered again under Doug Young when he was HRDC minister—again, no take-up.

The reality of politics in a federal-provincial system is that we have a social union agreement that says we cannot go into new social programming without a percentage of the provinces buying in—not complete assent but a percentage. What they did agree to over a year ago at the same time as they signed the health accord was the early childhood development agreement. In my home province that would have allocated $800 million. We're having real problems on the accountability.

I understood that B.C., along with some other territories and provinces, was actually reallocating more spaces into day care. The emphasis now has to go more towards that accountability and flow-through, because that is the mechanism we have and because twice, through two ministers, the national day care policy did get put on the table. Unfortunately, it was probably bad timing, because many of the provincial governments at the time were sourcing their own deficit problems.

But I'm telling you, I've been through this. I was self-employed, had three kids, and trucked them off to the day care. Quite frankly, it wasn't because I needed the paycheque at the time. It was because I chose to work. That was a choice I feel very comfortable with having made, and I believe other women have the option of making. It might not work.

I really feel you have a valid point with respect to trying to get the flow-through and the accountability so you get more allocated spaces. I think there are ways to help that.

I also want to say that the extended paternity-maternity benefits were done to assist. I think that has to be acknowledged, because again that did do a lot of social engineering—if I can use that term—and created some change in our system that is very important to parents, because it did give flexibility that no longer existed. That was something we could do as a unilateral measure of the federal government. It has been done and was received very well—by my constituents anyway. If anything, I had complaints that we couldn't implement it fast enough for some pregnancies. Those were my letters then.

So as to the accountability, I really don't think there are answers to that. I'm just putting it on the table to say the pressure has to be on both the federal and the provincial governments to have the accountability mechanisms to see the deliverables on these funds and potentially in future to have increased dollars flowing through in this manner.

Ms. Susan Harney: May I make a very short comment about that?

Granted we are working with a new government right now in British Columbia, so we often get a line back that they're new in the position and they're just learning. Certainly some time has to be allowed for that. But when we ask our provincial ministers where the ECDI dollars were spent last year, they don't seem to know. There hasn't been good tracking—at least within our province. The intentions perhaps were good. They'd throw it back on the fact that there is no needed accountability through the funds from the federal government. The way they describe it is that when the funds come federally, as long as it's spent on something to do with young children, that's okay.

I will say that our organizations have for years called for increased maternity-paternity leave and do applaud that step. What we're saying is that if we can make child care the cornerstone of these new ECDI dollars, if two-thirds was set aside, we could build other family and child supports within the child care community.

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Clearly, there are not enough dollars. I suppose everyone who comes to the table will tell you that for each of their areas of interest. So we do feel that we need to have more federal dollars.

But if we could see some federal leadership around the accountability of those dollars and if the idea were to create child care as the cornerstone, then I think we could create a system. And it would force the provinces into creating a system. I think we're going to see some of that money tossed around in ways so that children and their families are not going to benefit, and that's a crying shame.

Mrs. Sue Barnes: I agree with you there. I have had an experience in another province where it went that way.

I think the emphasis should now be placed on looking at that framework agreement, which did call for accountability mechanisms and report cards. That's the type of thing we have to be talking about.

Ms Susan Harney: Yes.

The Chair: Thank you, Mrs. Barnes and Ms. Harney.

Mr. Cullen will be our final questioner on a five-minute round.

Mr. Roy Cullen: Thank you, Mr. Chairman.

I have some questions on the natural health products.

But with regard to the early childhood development agreement—

Ms. Donna Herringer: Couldn't you start with me? I feel as if there's not a level playing field.

Mr. Roy Cullen: No, I just want to complete my comments—

Ms. Donna Herringer: That's what he was going to do and then he got cut off.

Mr. Roy Cullen: —on the early childhood development agreement. It's a $2.2 billion agreement. I don't know what the proportion is for British Columbia. It seems to me that under that agreement there is an opportunity for child care. I'm not sure that all of the professionals like yourselves are really doing a good job of convincing the provinces that child care should be a priority. There are other programs, such as prenatal, nutrition, and breakfast, that kind of thing, but somehow you haven't done your job of convincing the provinces that child care should be a priority. Why are you coming to us? We've said that if the provinces come forward and say that child care is a priority, then that agreement will accommodate it.

Ms. Heather Northrop: I think we've done a very good job of convincing the provinces that child care is a priority. The previous government in this province brought in Child Care BC, thanks to 10,000 responses from parents around the province. That's an excellent job, in my estimation.

Unfortunately, there was a change in government, and that government does not see child care the way it is. Thus all of those dollars in the federal agreement that you're talking about have a very substantial risk of not going to increasing, much less maintaining, child care spaces. What is going to happen to 73,000 licensed child care spaces when the provincial government decides it's going to take your money and put it into other programs and general revenue to make up—

Mr. Roy Cullen: No. The early childhood development agreement is targeted for early childhood development programs, and it has to go into those kinds of programs. It's your job to convince the provinces that child care is a priority. If you're not doing that, then you're coming to the wrong people, with respect.

I'd like to get to natural health products because I can see that Ms. Herringer is getting very frustrated.

Ms. Donna Herringer: I'd just like a level playing field, that's all.

Mr. Roy Cullen: Actually, we can direct questions to anybody we wish. There's no kind of protocol.

Ms. Donna Herringer: No, I'm not—

Mr. Roy Cullen: I would like to clarify something.

Ms. Donna Herringer: It's just that the other gentleman got cut off.

Mr. Roy Cullen: If I were to go to a grocery store right now and buy some vitamins, let's say, will I pay GST on those?

Ms. Donna Herringer: Yes, you will.

Mr. Roy Cullen: If I wanted something to help me sleep, I could go to a drug store and buy some Sleep-Eze or go to a store carrying the natural food product—my wife has bought this stuff—that helps you to relax and sleep. Will I pay GST on both of those or on neither of them?

Ms. Donna Herringer: It's a very confusing situation. I know exactly what the regulation is, but I also know what's going on in the field. The inspectors are also having difficulties, and that's why we're really looking for clarification with the new regulation.

The product called Sleep-Eze probably contains valerian or camomile. If you buy a product containing valerian and camomile that doesn't have the name Sleep-Eze on it, you will not pay GST. It just says valerian and camomile. Then you have a brochure that tells you what those herbs are good for.

If you buy a product that has Sleep-Eze on it and if the manufacturers are keeping to the current law of the land, then they would have a drug identification number to allow them to make that claim. However, because we're changing the regulation right now, nine-tenths of the products you see out there do not contain drug identification numbers because most people are waiting for the system.

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A Sleep-Eze product that has been made in the U.S.A. is classified as a dietary supplement under their regulation. So when it comes into Canada, it's classified as a food.

The straight answer is if your wife buys that product and it says camomile and valerian on the package, which she knows will help her sleep, because it is a natural product, you will not pay GST. If you buy exactly the same product and it says Sleep-Eze on it, you should be paying GST. But you may or may not, depending on whether the retailer knows what the current regulation is.

Mr. Roy Cullen: But right now if it lists a health benefit on the label, it's GST-HST taxable—

Ms. Donna Herringer: It should be.

Mr. Roy Cullen: —irrespective of whether it's a natural....

With regard to this process that's underway to try to put them in a separate category, are you concerned, just by the way the discussions are going or by what you see as the natural evolution of going in that direction, that some of these items will become GST-taxable? Has the revenue agency or the Department of Finance actually indicated that to you?

Ms. Donna Herringer: No. That's a really good question, Mr. Cullen.

Since 1997 I've been working with the Department of Health. We really wanted new regulation because Canadians wanted to buy natural products and they also wanted to know what they're good for. They wanted to have clear labelling, and the government regulation didn't allow for clear labelling. We've been fighting for new regulation. So we're really on side with that.

However, it's a matter of “be careful what you wish for”. During the process of working on committees with the government, we realized that as soon as we do that.... Foods are over here and drugs are over there. What they're doing is creating a new category that comes somewhere in the middle. It is now called natural health products. It'll be out in the spring.

Those products that are currently classified as a food under the food regulation, such as the popular green products, which might be in a powder form, or any herbal product that doesn't have a claim on it, which involves the majority of herb products.... You go in and buy a herb, such as feverfew or St. John's wort. If they don't have a claim on them, and that's true for the majority of them on the shelf, they're sold as a food. So the majority of the herbs, the natural products, and the green products, now become a natural health product, and they are forced by the new regulation to put a claim on them because it's what Canadians want. Now they become subject to the GST. No, I shouldn't say that because there has been no regulation on what's going to happen to natural health products.

We went to the finance committee and to the Department of Finance and said this is....

Nobody brought that to our attention. We just know that it's a very confusing situation right now. We have CFIG people in our stores saying this product is taxable and this is not. It's really confusing. Retailers are suddenly phoning us in massive panic because they haven't been paying GST on products because there was no DIN number, which clearly identifies the products on which they should be paying GST. But the manufacturers haven't been applying for a DIN because of the changing regulation. DIN numbers will no longer be applied.

I'm sure I'm completely confusing you. But it's a very difficult scenario that we're in right now.

I just met with Mr. Karl Littler in Ottawa, and I brought this to his attention. I said this is what's going on. We would like some clarification. Of course, we would like the recommendation to be...because we believe Canadians are wanting to take more responsibility for their health. More and more Canadians are helping themselves through a variety of ways to stay healthier longer and not to get into a disease state, and the use of natural products is one of them. They also use these products for disease states, which helps the health care system.

I'm not sure if I've answered your question or made you more confused.

Mr. Roy Cullen: No, it helped put it in context. So it's a moving target.

Ms. Donna Herringer: It is.

I just had a meeting at BCIT with Dr. Phil Waddington, who is the director general of the Natural Health Products Directorate, before I came here. It was a recommendation of both the standing committee and the transition team, which I was on, that natural health products should have a tax incentive on them to encourage Canadians to buy products in order to be healthy or to stay healthy, and so that people use fewer pharmaceutical drugs.

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There certainly is a place for pharmaceutical drugs. We just would like some recommendations made to help take the confusion out of this whole scenario.

The Chair: Mr. Cullen and other members of the committee, thank you very much for your questions.

On behalf of the committee, I want to thank you very much. It has been a very interesting panel. We look forward to reviewing the evidence you've presented to us and to making recommendations accordingly. Thank you very much.

The meeting is adjourned.