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37th PARLIAMENT, 2nd SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Monday, November 4, 2002

1300

The Chair (Mrs. Sue Barnes (London West, Lib.))

1305

Mr. Joseph Polito (Individual Presentation)

1310

1315

The Chair

Ms. Kathy Kendall (General Counsel, The Nuance Group; Association of Canadian Airport Duty-Free Operators)

Mr. André Bergeron (Aer Rianta International; Executive Director, Association of Canadian Airport Duty-Free Operators)

Mr. Remo Mancini (Executive Vice-President, Canadian Transit Company)

Ms. Kathy Kendall

1320

The Chair

Ms. Laurel Rothman (National Coordinator, Campaign 2000)

1325

1330

The Chair

Mr. David Thibaudeau (President and Chief Executive Officer, Canadian Association of Insurance and Financial Advisors)

1335

The Chair

Mr. Charles Milne (Vice-President, Government Affairs, CropLife Canada)

1340

1345

The Chair

Ms. Elyse Allan (President and CEO, Toronto Board of Trade)

1350

The Chair

1355

Mr. Charlie Penson (Peace River, Canadian Alliance)

Ms. Elyse Allan

1400

Mr. Charlie Penson

Ms. Elyse Allan

The Chair

Mr. Joseph Polito

The Chair

Mr. Brian Masse (Windsor West, NDP)

1405

Mr. André Bergeron

Mr. Brian Masse

Ms. Terri Lohnes (Senior Economist/Policy Adviser, Toronto Board of Trade)

Mr. Brian Masse

Ms. Laurel Rothman

1410

The Chair

Mr. Bryon Wilfert (Oak Ridges, Lib.)

1415

The Chair

Ms. Elyse Allan

Ms. Terri Lohnes

The Chair

Mr. William Strain (Chair, Taxation, Conference for Advanced Life Underwriting, Canadian Association of Insurance and Financial Advisors)

The Chair

Ms. Laurel Rothman

1420

The Chair

Ms. Maria Minna (Beaches—East York, Lib.)

Ms. Laurel Rothman

Ms. Maria Minna

1425

Ms. Laurel Rothman

Ms. Maria Minna

Ms. Elyse Allan

1430

The Chair

Mr. Rahim Jaffer (Edmonton—Strathcona, Canadian Alliance)

Mr. Remo Mancini

Mr. André Bergeron

1435

Mr. Rahim Jaffer

Ms. Elyse Allan

1440

The Chair

Mr. Tony Valeri (Stoney Creek, Lib.)

Mr. William Strain (Chair, Taxation, Conference for Advanced Life Underwriting (CALU), Canadian Association of Insurance and Financial Advisors)

1445

Mr. Tony Valeri

Mr. William Strain

The Chair

Mr. Joseph Polito

The Chair

Mr. Charles Milne

1450

Ms. Elyse Allan

The Chair

Mr. Charlie Penson

Mr. William Strain

Mr. Charlie Penson

Mr. William Strain

1455

The Chair

Mr. Bryon Wilfert

Mr. David Thibaudeau

The Chair

1500

Ms. Maria Minna

Mr. David Thibaudeau

Ms. Maria Minna

Mr. William Strain

The Chair

Ms. Laurel Rothman

1505

The Chair

Ms. Laurel Rothman

The Chair

Ms. Laurel Rothman

The Chair

Ms. Laurel Rothman

The Chair

Mr. William Strain

1510

The Chair

Mr. Joseph Polito

The Chair

Ms. Terri Lohnes

The Chair

Mr. André Bergeron

The Chair

1525

Mr. Graham Hollings (Coordinator, Campaign for Stable Funding of Adult ESL Classes)

The Chair

Mr. Graham Hollings

1530

1535

Mr. Prasanna Hettiarachchi (Former Adult ESL Student, Campaign for Stable Funding of Adult ESL Classes)

The Chair

Mr. Gordon Floyd (Vice-President of Public Affairs, Canadian Centre for Philanthropy)

1540

1545

1550

The Chair

Mr. Don Maunders (Vice-President, Canadian Restaurant and Foodservices Association)

1555

1600

The Chair

Mr. Malcolm Burrows (Director, Development and Gift Planning, Hospital for Sick Children Foundation)

1605

1610

The Chair

Mr. Rahim Jaffer

Mr. Graham Hollings

Mr. Rahim Jaffer

1615

Mr. Don Maunders

Ms. Joyce Reynolds (Senior Director, Government Affairs, Canadian Restaurant and Food Services Association)

Mr. Rahim Jaffer

Ms. Joyce Reynolds

Mr. Rahim Jaffer

Mr. Malcolm Burrows

1620

Mr. Gordon Floyd

The Chair

Mr. Brian Masse

Mr. Graham Hollings

1625

Mr. Brian Masse

Mr. Prasanna Hettiarachchi

Mr. Brian Masse

Mr. Prasanna Hettiarachchi

Mr. Brian Masse

Mr. Don Maunders

Ms. Joyce Reynolds

Mr. Don Maunders

Mr. Brian Masse

Mr. Don Maunders

1630

The Chair

Ms. Joyce Reynolds

Mr. Brian Masse

Mr. Gordon Floyd

Mr. Brian Masse

Mr. Gordon Floyd

Mr. Brian Masse

The Chair

Mr. Bryon Wilfert

Ms. Joyce Reynolds

Mr. Bryon Wilfert

Ms. Joyce Reynolds

Mr. Bryon Wilfert

1635

Ms. Joyce Reynolds

Mr. Bryon Wilfert

Mr. Gordon Floyd

Mr. Bryon Wilfert

Mr. Gordon Floyd

Mr. Bryon Wilfert

Mr. Gordon Floyd

Mr. Bryon Wilfert

Mr. Gordon Floyd

Mr. Bryon Wilfert

Mr. Gordon Floyd

Mr. Bryon Wilfert

1640

Mr. Prasanna Hettiarachchi

Mr. Bryon Wilfert

The Chair

Mr. Graham Hollings

The Chair

Mr. Gordon Floyd

1645

The Chair

Mr. Tony Valeri

The Chair

Mr. Graham Hollings

1650

Mr. Malcolm Burrows

Mr. Tony Valeri

Mr. Malcolm Burrows

Mr. Tony Valeri

The Chair

Mr. Don Maunders

Mr. Tony Valeri

Mr. Don Maunders

Mr. Tony Valeri

Ms. Joyce Reynolds

1655

Mr. Don Maunders

The Chair

Mr. Scott Brison (Kings—Hants, PC)

1700

Mr. Malcolm Burrows

Mr. Scott Brison

Mr. Malcolm Burrows

Mr. Scott Brison

1705

Mr. Don Maunders

Ms. Joyce Reynolds

The Chair

Mr. Scott Brison

The Chair

Ms. Maria Minna

Mr. Prasanna Hettiarachchi

1710

Ms. Maria Minna

Mr. Graham Hollings

Ms. Maria Minna

Mr. Graham Hollings

Ms. Maria Minna

Mr. Graham Hollings

Ms. Maria Minna

Mr. Graham Hollings

Ms. Maria Minna

Mr. Graham Hollings

Ms. Maria Minna

1715

Mr. Graham Hollings

Ms. Maria Minna

Mr. Graham Hollings

Ms. Maria Minna

Mr. Graham Hollings

Ms. Maria Minna

The Chair

Mr. Charlie Penson

1720

Mr. Don Maunders

Mr. Charlie Penson

Mr. Don Maunders

Mr. Charlie Penson

The Chair

Ms. Pat Steenberg (Executive Director, Canadian Ecumenical Justice Initiatives (Kairos))

1735

Mr. Dennis Howlett (Team Leader, Canadian Justice Cluster, Canadian Ecumenical Justice Initiatives (Kairos))

1740

Ms. Pat Steenberg

The Chair

Mr. Robert Barnett (Executive Director, Escarpment Biosphere Foundation; Ontario Land Trust Alliance)

1745

1750

The Chair

Mr. Mel Norton (Member, Board of Directors, Multi-Employer Benefit Plan Council of Canada)

1755

The Chair

Mr. Geoff Fortier (Representative, Union of Canadian Transportation Employees)

1800

1805

The Chair

Mr. David Cross (Individual Presentation)

1810

The Chair

1815

Professor Carolyn Tuohy (Interim Vice-President, Research and International Relations; Vice-President, Policy Development and Associate Provost, University of Toronto)

1820

1825

The Chair

Mr. Charlie Penson

Prof. Carolyn Tuohy

Professor Peter Munsche (Assistant Vice-President, Technology Transfer Research and International Relations, University of Toronto)

Mr. Charlie Penson

Prof. Peter Munsche

Mr. Charlie Penson

1830

Prof. Peter Munsche

Mr. Charlie Penson

Mr. Robert Barnett

Mr. Charlie Penson

Mr. Robert Barnett

The Chair

Mr. Brian Masse

Mr. Robert Barnett

1835

Mr. Brian Masse

Mr. Robert Barnett

Mr. Brian Masse

Mr. Geoff Fortier

Mr. Brian Masse

Mr. Geoff Fortier

Mr. Brian Masse

Prof. Carolyn Tuohy

Prof. Peter Munsche

The Chair

1840

Mr. Bryon Wilfert

Prof. Carolyn Tuohy

The Chair

Mr. Mel Norton

The Chair

Mr. Bryon Wilfert

The Chair

Mr. Tony Valeri

1845

Prof. Peter Munsche

Mr. Tony Valeri

Prof. Peter Munsche

The Chair

Mr. Scott Brison

1850

Prof. Peter Munsche

1855

Mr. Scott Brison

The Chair

Ms. Maria Minna

Ms. Pat Steenberg

Ms. Maria Minna

1900

Ms. Pat Steenberg

Ms. Maria Minna

The Chair

CANADA

Standing Committee on Finance

NUMBER 013

2nd SESSION

37th PARLIAMENT

EVIDENCE

Monday, November 4, 2002

[Recorded by Electronic Apparatus]

· (1300)

[English]

The Chair (Mrs. Sue Barnes (London West, Lib.)): Good afternoon, everybody.

Pursuant to Standing Order 83(1), today we are continuing our pre-budget discussions.

We have three panels this afternoon. The first one from 1 to 3 o'clock has as witnesses Mr. Joseph Polito, as an individual; from the Association of Canadian Airport Duty Free Operators, André Bergeron, Remo Mancini, and Kathy Kendall; from Campaign 2000, Laurel Rothman, the national coordinator; from the Canadian Association of Insurance and Financial Advisors, David Thibaudeau, president and chief executive officer, and William Strain, chair, taxation, Conference for Advanced Life Underwriting; from CropLife Canada, Charles Milne, vice-president, government affairs; and from the Toronto Board of Trade, Elyse Allan, president and CEO, and Terri Lohnes, senior economist/policy adviser.

Welcome to all of you.

We'll go in the order that you're down on the agenda, and it will be for eight minutes. At seven minutes I'll put up my pen, and you'll know that you have time for about five or six sentences. After that we'll have some questioning. I'll allocate the time evenly among everyone here.

Mr. Polito, the floor is yours.

· (1305)

Mr. Joseph Polito (Individual Presentation): Thank you very much.

Why on earth would anyone go through the gauntlet of a nomination contest and a gruelling election for a job that is far from home and that involves far too many hours in the workday and abuse by opposing parties and perhaps the electorate and even their own caucus? It can only be for the sake of making a difference, to be able to look back and say, I contributed to reducing child poverty, unemployment, crime, regional disparity, and the income gap. I improved the environment; the quality of life; human rights; productivity and competitiveness; access to post-secondary education; and the quality, breadth, and efficiency of our government services.

But how? With the increases to the health care, military, and environmental budgets, the cupboard is nearly bare. How frustrating it must be to listen to financial requests from the business community seeking global competitiveness through tax cuts and about compelling and heartbreaking worthy causes and social problems and not have any funds for them. Worse, the requests are mutually exclusive and divisive. Please one and disappoint the other. If more money is spent on health, there may be nothing for business or social needs. It's like having several children and one indivisible gift.

The solution is an altered version of last year's committee recommendation. It has been proposed for several years through the sponsorship of the philanthropic Atkinson foundation. Last year it was also proposed by the Canadian Restaurant and Foodservices Association, with the support of other major groups. The proposal is best characterized in the publication of the economic think-tank, the C.D. Howe Institute, entitled A Job-Creation Strategy for Governments with No Money. Their proposal is to triple last year's proposed exemption while reducing the cost to zero. Last year the committee recommended a $3,000 exemption at a cost of $2.3 billion. The details are below, and I'll skip that.

The key ingredient of this proposal is expert management. We all know what major breakthroughs have meant to wealth creation and the quality of life in the past centuries, such as steam, railways, electricity, piston engines, penicillin, and computers, but we forget about the impact of good management. A remarkable example is bricking a wall. Management science discovered that the same two men with the same bricklaying knowledge could triple their output by simply modifying the process a little without any breakthroughs.

The same could be said for taxes and tax cuts. Some of Canada's finest economists have been promoting a market-oriented tax strategy to create a powerful bias to full employment in good times and, more importantly, in bad. It's a tax strategy that directly addresses the mandate of this committee: the quality of life and widely shared prosperity.

The current structure of our payroll premium system creates a major impediment to full employment. It is a market incentive for employers to increase unemployment.

The question marks there are supposed to be bullets. I apologize. It came back from the printer that way.

To reduce payroll premium costs, employers rely on overtime and longer work weeks rather than new hires in good times. In slowdowns employers lay off employees rather than reduce everyone's hours a little. To reduce premium costs employers resist family-friendly, flexible practices such as reduced hours, job-sharing, and educational leave, which reduce stress and unemployment. Consequently, we have gotten ourselves into the ludicrous situation of overworking to transfer income through taxes to the unemployed, who wish to work for themselves. Worse, they've created a bias against the best social program, a job. Who are the first to lose their job and the last to be hired? It is our youth, our immigrants, and our young parents.

The payroll premium structure increases child poverty. Sweden has a 4% unemployment rate and 2.6% child poverty, and the Dutch a 2.3% unemployment rate and 3% poverty.

Your constituency offices deal with the devastation and social pathology of unemployment everyday. People lose their homes, their cars, and their marriages as a result.

Crime is highly correlated to unemployment. Black leaders are blaming high unemployment in their communities for a high black-on-black crime rate.

Your budgets are also victims. In the last recession half a million jobs were destroyed. The past two recessions left us with $42 billion a year in interest payments, as welfare and EI expenditures skyrocketed.

Finally, it should be noted that the proposed exemption would be the carrot side of the reforms to unemployment insurance. The previous reforms have been primarily the stick side, to remove inadvertent disincentives to work, retrain, or relocate. This proposal creates a full employment incentive for employers and employees.

To create a bias of full employment, to radically diminish the impact of recessions on government finances, and to facilitate Canada's priorities, the recommendations are to restructure payroll taxes as follows:

One, raise the current rate to the 1994 high of $3.07. This provides about $6.8 billion for a basic exemption. This has no cost to the budget. Extrapolating from last year's figures, if a $3,000 YBE cost $2.3 billion, $6.8 billion would create an exemption of almost $9,000.

Two, dedicate all future cuts to EI to the exemption. The maximum contribution of $877.50 will be reduced each year because the exemption grows, and the rate of $3.07 would be paid on less and less of the employee's earned income as each year goes by.

Those first two are no-brainers, and we have to do this.

The third one is a little more controversial: redirect the tax relief scheduled for corporate income taxes to the employer's share of EI and CPP.

Mr. Manley is committed to corporate income tax cuts, but he also insists on the biggest bang for the buck, and this tax cut is far superior for business. Unlike corporate income taxes, it helps during unprofitable downturns--think Nortel. By reducing initial costs and risks, it attracts more investment than corporate tax cuts. It unites the employer and the employee, giving each money and an incentive for good family-friendly human resource practices. It's also better for all Canadian institutions. It affects Canadian priorities directly, rather than through the trickle-down path, and all the items that are really the things you want to make a difference with. It's a tax cut--and this is unusual--for the tax-strapped hospitals, universities, municipalities, and school boards. Finally, it's better for all governments because this proposal would greatly reduce the $30 billion to $90 billion experts say is spent directly and indirectly by the three levels of government to relieve unemployment and its pathology.

Other cuts are win-lose, which cause divisive debates, but this is a win-win cut that would get unprecedented support from the following groups: millions of harried supermoms to whom employers won't grant reduced work hours or job-sharing; millions of low-income workers and students who benefit disproportionately; millions of young people and immigrants who have much higher unemployment rates; millions of baby boomers who want more time for family, community, and grandchildren; all firms, particularly new economy ventures, which won't make profits for years; essential industries such as housing, whose costs would be reduced; all taxpayers--we may disagree about flat versus progressive taxes, but we all agree that there should be a substantial basic exemption to protect low-income people--millions of Canadians concerned about the environment, since in a reduced unemployment environment there's more investment in labour-saving, energy-efficient technology; millions of students suffering tuition shock, who have no taxable income but pay CPP and EI; and countless public sector workers.

· (1310)

It will help to reduce the negative impacts of the unforeseeable events of September 11, of NAFTA, or of Kyoto. It permits employers to focus more on retaining skilled employees in downturns, saving payroll premium costs, severance cuts, and costly training of new hires. It reduces our NAIRU. It does so much, and it will meet your needs.

If there's one thing you do in this next budget offering, do this. You'll help everyone, from the social justice activist to the social Darwinist.

Thank you very much.

· (1315)

The Chair: Thanks very much.

We'll now hear from the Association of Canadian Airport Duty-Free Operators.

Ms. Kathy Kendall (General Counsel, The Nuance Group; Association of Canadian Airport Duty-Free Operators): Thank you. We're very pleased to appear before your committee on behalf of Canada's duty-free industry. My name is Cathy Kendall. I'm general counsel for The Nuance Group, which operates 29 duty-free shops at Canadian airports. We have approximately— [Editor's Note: Technical Difficulty]—

Mr. André Bergeron (Aer Rianta International; Executive Director, Association of Canadian Airport Duty-Free Operators): My name is André Bergeron. I am the executive director of the Association of Canadian Airport Duty-Free Operators. I also work with Aer Rianta International, which operates 13 stores in airports across the country. We have 200 employees across the country.

Mr. Remo Mancini (Executive Vice-President, Canadian Transit Company): Good afternoon. My name is Remo Mancini, and I represent the Canadian Transit Company, as its executive vice-president. The Canadian Transit Company is based in Windsor, Ontario, and owns and operates the Canadian half of the Ambassador Bridge crossing between Windsor, Ontario, and Detroit, Michigan.

In a public-private initiative with the University of Windsor, we operate a duty-free outlet that, on a regular basis, employs 70 staff members, 75% of whom are University of Windsor students. This is a fair-sized enterprise that contributes to the local economy through employment, use of local suppliers like insurance brokers, cleaners, and stationery suppliers, and also from purchases made from Canadian manufacturers. We are here today because we have significant interests in the future of the Canadian duty-free industry that we feel have been placed in jeopardy.

Ms. Kathy Kendall: Our main intent today is to express our concern about the federal government's sudden decision to tax duty- and tax-free products in the spring of 2001. Our industry has been suffering the negative effects ever since, but it's not too late to restore the principle of keeping duty-free items duty-free. It's our hope that the committee will accept our request and in turn recommend to the federal government that our status be restored.

For our entire history in Canada, we've operated as a retail industry providing a valuable service to travellers by making a whole range of products available free of duties and taxes. As a quick snapshot of our industry, it generates about $400 million in sales annually. Airport duty-free operators pay more than $55 million a year in rent to airport authorities. The industry employs more than 1,500 Canadians directly, and many more indirectly through the purchase of local and national goods and services. On average 40% of the products sold at Canadian duty-free airports are of Canadian origin. We've contributed significantly to many Canadian industries, including the Canadian wine industry.

One point I would like to make clear is that when I say “duty-free”, I mean duty- and tax-free. Obviously there are no duties on domestic products, but this is an important part of the contribution that the duty-free industry makes to Canadian industry.

How did we reach this point? Without warning the federal government announced on April 5, 2001, that there would be a tax on duty-free shopping. It began as a $10-per-carton cigarette tax, and that has now increased to $15 per carton. This tax caused immediate and very significant concern in Canada and internationally about the duty-free industry. This concern would have been the same whether it was tobacco, alcohol, perfume, confectionery foodstuffs, or any of the merchandise carried by duty-free shops, because the principle of duty-free was abandoned by the government. It was abandoned without the benefit of any analysis to see whether or not duty-free was part of the problem that the government sought to solve.

It's important to remember that one of the main aims of this tax was to curb smuggling, yet our retail shops were somehow caught in this tax policy that was targeted at very large-scale exports, and presumably products shipped in the millions. Our customers , however, may buy one carton of cigarettes.

We're under very strict federal regulation. We may be one of the most regulated retail industries in Canada. Any purchases above the one-carton limit are subject to full duties and taxes, so duty-free retail has never been a vehicle for purchasing quantities of tobacco large enough to facilitate smuggling. Government officials have attested to this before the Senate. I'd like to quote Mr. Brian Willis, senior chief for the Excise Act at the sales tax division of the Tax Policy Branch, who on June 6, 2001, was asked by Senator Tommy Banks to explain the current situation on duty-free and smuggling. He replied, “The Canadian duty-free industry has not been a source of contraband. They are tightly controlled.”

Let me now turn to tobacco consumption. Obviously, the policy of reducing tobacco consumption is something we support, but we don't believe this tax will reduce Canadian tobacco consumption. While this tax has a significant effect on our business, it has no real overall effect on the problem. Airport and land border duty-free together account for less than 2% of tobacco sales in Canada.

Secondly, there's no evidence that a sale lost at any one of our shops disappears, as opposed to being redirected to another retail channel. What we do know is that the related sales in our stores disappear, and the principal purpose of our business is lost in the process.

Thirdly, the export tax will have no effect on youth consumption. Very few travellers are unaccompanied minors in the airport. Of course, we don't sell tobacco to anyone under 19 in any event, because it's illegal.

We believe the export tax will have no discernable effect on tobacco consumption, but it does have significant effects on the tax- and duty-free stores, on our suppliers, and on the communities in which we operate. Tobacco products are a major part of the duty-free industry. When visitors come in to buy tobacco, they purchase other items—what we call “add-on” sales—including fragrances, liquor, cosmetics, Canadian souvenirs, and Canadian wine. The new tax on tobacco products would just encourage less frequent visits to our stores and would reduce the viability of tax and duty-free outlets. With this comes negative impacts on employment and on local and federal tax revenues, as well as on any rents that are paid based on a percentage of revenues.

Another negative aspect of the export tax is the effect on contributions to tourists in general. Our tourists say we promise tax- and duty-free, but that statement is no longer true. Unhappy tourists are not good for tourism. Tourists who spend less money in Canada are not good for tourism.

Moreover, what is to stop other jurisdictions from making a similar health argument about perfume, alcohol, or any other product? Let's think about who would be injured. Being from Ontario, one of the first things that springs to mind is the Ontario wine industry. Many of our stores carry a vast selection of Ontario wines, like Pelee Island, Inniskillin, Henry of Pelham, Pillitteri, Kittling Ridge, etc. A tax on these home-grown products would discourage their sales.

Duty-free operators have made significant long-term commitments and financial investments since the government encouraged the creation of this sector. Those investments are in jeopardy, as are the funds provided to local airport authorities. We take a strong stand in favour of keeping duty-free items duty-free. We believe it's important to remove this tax so that consumers are once again clear on the nature of our industry. As an interim measure, we recommend and urge your committee to have the federal government at least restore for travellers the personal allowance of one carton of tobacco free of duties and taxes.

Thank you.

· (1320)

The Chair: Thanks very much.

We'll now hear from Laurel Rothman, from Campaign 2000.

Ms. Laurel Rothman (National Coordinator, Campaign 2000): Thank you.

As many of you may know, we're a broad coalition of more than 85 groups across the country. I always like to say we're one of the few tables at which the auto workers, the psychiatrists, the faith leaders, women's groups, child care workers, and, of course, teachers and social workers all sit, along with representatives of the business community.

Twelve years ago, the House of Commons unanimously resolved to achieve the goal of eliminating child poverty among Canadian children by the year 2000. Unfortunately, we're still here. In fact, we're probably going to change our name to “Campaign 2000 Continued”.

Unfortunately, our rate of child poverty remains one of the highest and most persistent in the world. We're 17th out of the 23 industrialized countries that UNICEF most recently studied in one of its reports. The most recent child poverty rate—and I should say we use before-tax rates, because we see them as the most consistent over time—was only down slightly from 19% last year. The 1999 rate was 18.5%, so we're still close to one in five children living in poverty. It's a particular cause of concern for us at this point, because job growth indeed is having far less of an impact on child and family poverty than many of us realize.

As one of the other panellists said, while good jobs are indeed key to an anti-poverty strategy, economic growth in recent years has not yet produced a level of sufficiently good jobs for families. Full-time jobs increased 13% between 1990 and 2000, while part-time employment grew 21%. While permanent jobs during the recovery years of 1997 through 2000 grew 8%, temporary employment grew by 21%.

Many of those 1.298—almost 1.3—children still living in poverty in our country include many whose parents are in the labour force full-time but are still living below the poverty line and are still struggling to provide adequate food, clothing, shelter, goods, and services that they need to participate in community life. Specifically, more than 579,000 children live in those families in which their parents are employed but are still poor.

We also have growing inequality, which is probably no surprise to any of you. Between 1984 and 1999, the richest 10% of households saw their net worth grow by 35%, but the situation for the poorest 10% went from bad to worse. In 1984, they had a negative net worth; that is, they indeed owed more than they owned. By 1999, that situation had worsened by over 200%.

Let me go on to be more specific about what we're proposing. Of course, we have supported the national child benefit, albeit with the caveat that we need to review how it's going to significantly increase the life chances for children whose families must rely on social assistance. But if we're going to make more significant progress over the long term in reducing both the overall depth and rate of child and family poverty, we need a further multi-year plan, which we were indeed pleased to see announced in the Speech from the Throne and the Prime Minister's response. We'll be looking quite closely at the budget to see what commitments are made.

I should say we're heartily expecting that, in the next budget, we will see a speeding up of the announced increases to the Canada child tax benefit—the increases that were announced in 2000—and an intent to make that completion of what we see as the downpayment on the child benefit, the first phase. That would mean that, for first children in eligible families at a maximum, that family would receive $2,514.

We're recommending that you need to go to the next phase—along with many other organizations that are recommending this—in which the maximum benefit comes closer to approximating assisting families in raising children. We're proposing $4,200 per child as a maximum, and obviously that would be on a sliding scale.

Let me also go on to talk briefly about early childhood education and care in Canada and about housing.

In all of Canada save Quebec, the most glaring missing link from the mix of income assistance and community services for families is affordable early childhood education and care. I hope the clerk will pass out a new report of ours that I just brought this afternoon. It came out last week, and in it we look at diversity or disparity and what the picture looks like across our country.

There's a real paradox. We have increasing, evidence-based research demonstrating the value of early childhood education for all children, and particularly the benefits for children in low- and modest-income families. Unlike most continental European countries that have fully developed systems of services, however, Canada has no national strategy. We're proposing that you develop one. Indeed, we know there are some key partners—namely Manitoba and other partners—that are interested in moving forward.

· (1325)

We see ECEC very much as part of the urban agenda. It was certainly the basis for lifelong learning that was discussed in the skills and innovation agenda, as well as part of the social inclusion agenda that will help us welcome newcomer families in the fullest way.

In addition to all the other rationales we often give for investing in early childhood education and care, there is actually a good economic argument that two University of Toronto economists have crafted as a result of an econometric study. There's a two-to-one benefit for every dollar invested in quality early childhood education, and we're pleased that Charles Coffey and Margaret McCain, in their recent report, also commented on the importance of ECEC in building a healthy society.

In addition to interim assistance in early childhood education and care, we are urging the federal government to build on the 2001 agenda with the provinces and territories on housing, the capital grants program. As you know, the rate of building of rental housing has plummeted in the last nine to ten years, with very few rental units built across the country. That leaves most low- and modest-income families, sometimes literally, out in the cold. We're recommending that you extend that program so that it's able to develop more toward the 25,000 units annually that are needed to ensure that parents don't have to worry about paying the rent or feeding the children.

I'll stop. Thank you.

· (1330)

The Chair: Thank you very much.

We'll now go to the Canadian Association of Insurance and Financial Advisors. Mr. Thibaudeau, go ahead, sir.

Mr. David Thibaudeau (President and Chief Executive Officer, Canadian Association of Insurance and Financial Advisors): Thank you, Madam Chair.

With me today is Bill Strain, chair, taxation, of the Conference for Advanced Life Underwriting.

I appear before you today as president of Advocis, the new name of the organization representing professional insurance advisers and financial planners. Advocis was created when CAIFA and the Canadian Association of Financial Planners voted in September of this year to merge our two groups. CAIFA will continue to perform its role as a conference of Advocis. As a single organization, Advocis will represent thousands of professional advisers from coast to coast. Our members can often be found in towns and smaller communities where there are few other financial services to fill the need. This has helped to shape our recommendations to you today. The merger of CAIFA and CAFP, as well as the new Advocis name, will become official in January 2003, so for the purposes of our appearance before you today, I'll be referring to CAIFA and CALU's recommendations.

Our submission offers specific recommendations relating to the second objective for the committee's pre-budget report, assuring the highest quality of life for all. In the interest of brevity, I won't go into our submission in any great detail, but I'd like to draw the committee's attention to our major recommendations.

I would first like to address the quality of life Canadians enjoy. Perhaps the greatest threat to the quality of life and standard of living for all Canadians is the impending impact of Canada's rapidly aging population. Longer life expectancies will mean Canadians will face the prospects of outliving their savings and of needing health care that may not be fully funded by the public system. We believe privately purchased life and health insurance is a fundamental component of Canada's social infrastructure. We urge the government to continue to maintain a tax environment that encourages Canadians to be self-reliant and to protect themselves from the financial risks associated with death, disability, illness, and retirement.

Turning to debt reduction, we commend the government for retiring more than $46.7 billion in debt since 1996-97, of which almost $38 billion was retired in the last three years. This amounts to a saving of almost $3 billion a year in interest payments. The amount saved in interest payments is an annual saving. This amount can be reallocated to other priorities. With an aging population, it is necessary for the government to remain committed to debt reduction in order to ensure that funds that would otherwise be used to pay interest on the debt may be available to meet the growing health care needs of Canada's aging population.

By 2011, according to Statistics Canada population estimates, the number of seniors aged 65 and over will increase from 13% of the population to 15%. During the same period the number of seniors aged 80 and over could increase by 43%. This translates into an increase from about 932,000 to almost 1.3 million over the next ten years. And it is that segment of our aging population, those over 80, who are likely to put the greatest pressure and strain on Canada's health care system, in particular the need for long-term care, whether home care or institutional care. With an aging population, the ability of government to adequately fund a broad base of publicly funded health care programs is a concern to all Canadians.

CAIFA and CALU commend the Minister of Finance for announcing in his recent economic and fiscal update that he is reinstating the contingency reserve, as well as committing himself to using any surplus at the end of the fiscal year to pay down the debt. However, we believe an even greater emphasis on debt reduction is required. A commitment to a long-term debt reduction plan would curb the temptation to squander surpluses on one-off spending initiatives that in the longer term may affect the government's ability to reallocate spending to other areas, such as health care and old age security. This can be accomplished by making a commitment to debt reduction a line item in the budget. In short, reducing debt today means funds will be available tomorrow to meet increased health care costs, as well as to fund future tax reduction initiatives.

I would now like to move to retirement savings. Canada's current integrated retirement savings system has its origin in the 1982 green paper, Better Pensions for Canadians. The green paper set out three goals for Canada's retirement system, to guarantee a basic income for those without resources of their own, to assure fair opportunities for Canadians to provide for their retirement years, and to enable Canadians to avoid a serious disruption in their standard of living upon retirement. CAIFA and CALU continue to support these goals set out almost two decades ago. We believe they are as valid today as they were then.

The last two objectives, however, have not been met. Contribution limits to RRSPs have been frozen since the 1996 federal budget, and increases in the contribution limits are not scheduled to commence until 2004. Further, the maximum pension benefit from defined benefit pension plans for most pension plan members has been frozen since 1976. From both a competitive and a demographic point of view, investments by Canadians in private retirement savings vehicles will both reduce dependence on government programs and produce additional tax revenue at a time when governments need to maximize their tax base and control their spending most, when the baby boom generation enters its retirement years 10 to 15 years from now.

The 2000 federal budget reintroduced full indexation of Canada's system of personal tax credits and deductions. CAIFA and CALU recommend that the government complete the full indexation of the tax system immediately. We believe this can be accomplished by tying RRSP contribution limits to the income level at which the top marginal tax rate becomes effective. For 2002 this threshold is $103,000, and for 2004 it's scheduled to be $113,00. Immediately increasing the RRSP limit to an earned income of $103,000 means it would be $18,540 in 2002 and $20,500 in 2004. In order to do that, Canada's retirement plans must be competitive with those of the United States and the United Kingdom, and to that end, we recommend that over time the RRSP limit and defined benefit limit be increased to $27,000 and $3,000 respectively.

Thank you for the opportunity to participate in this afternoon's round table.

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The Chair: Thank you very much.

Now we'll move to Mr. Milne.

Mr. Charles Milne (Vice-President, Government Affairs, CropLife Canada): Thank you very much for the opportunity to address this committee today.

Many of you are familiar with our organization, CropLife Canada, formerly known as the Crop Protection Institute. We're the trade association representing manufacturers, developers, and distributors of plant life science solutions for agriculture, forestry, and pest management in Canada.

Unlike many of the other witnesses you're likely to be seeing, I'm not here to ask for money. What CropLife Canada is asking for is a new way of working smarter and better to assist Canadian industry and, ultimately, our economy. As well, I will be proposing a model with which to test this approach, a trial balloon whose results you can evaluate.

I'd like to emphasize that our industry members stand for safety and innovation. We safeguard the health and safety of Canadians, while ensuring the competitiveness of agriculture and forestry sectors. We also support innovation and the viability of Canadian industry. We are technology developers, and we believe reforms to the federal government's regulatory system will promote business opportunities and economic growth, while maintaining environmental integrity and sustainability.

We see a high degree of alignment between the pillars of Agriculture and Agri-food Canada's agricultural policy framework and the vision our industry has for agriculture. CropLife Canada stands for safety and innovation, and that is mirrored in the pillars of the agricultural policy framework, such as food safety and quality, environment, and science and innovation. I think we have to recognize that agriculture is a significant and traditional Canadian economic driver. In the year 2000 Canadian agriculture and the agrifood system accounted for $100 billion in annual retail food service sales and 8.3% of total Canadian gross domestic product.

This being said, Canadian farmers have endured countless hardships during the past several years, many beyond their control, like the current prairie drought. In light of the severity of the situation, we want to impress on this committee that we need continued provision of safety net programs. Complementarily to this support, CropLife Canada is proposing measures today regarding interdepartmental synchronization to create a regulatory environment that is far more favourable to the agrifood sector. We believe Canada can take major steps towards embracing the virtues already set out by this committee to ensure Canadian economic prosperity and to assure the highest quality of life. Optimizing Canada's regulatory environment is not a financial obligation, but an exercise in discipline, clear communication, and coordination.

Smart regulation was highlighted in the September 2002 throne speech as a way Canada could enhance investment climate and create market trust. CropLife Canada agrees that smart regulation is crucial for Canada's economic prosperity to grow. In addition, we believe opportunities for business development would improve if government departments adopted a more lateral approach and worked more closely together in a common sense to achieve national goals.

In the current system overarching implications exist for technology regulations and affect trade, research and development, investment attraction, environmental sustainability, as well as the global competitiveness of Canadian agriculture. CropLife Canada believes a new government perspective is required to synchronize regulatory procedures so that they are consistent and predictable. This would help Canada realize its goals as a technology leader and a global trader. Such regulatory coordination is necessary across all government departments for this goal to be achieved. This would encourage business to lever R and D money in Canada, thereby strengthening our knowledge-based economy by attracting investment to Canada, despite our country's small market size.

We have presented in our brief broad concepts, but how do we put these vision statements into action? A tangible method would be to set up a pilot project that brings a horizontal, consistent approach to an issue that transcends all departments. Cost recovery plays a significant role in achieving greater operational accountability and efficiency in the regulatory system. MP Roy Cullen has reintroduced a private member's bill, Bill C-212, with recommendations about how cost-recovery user fees are evaluated and implemented. This bill embodies the recommendations of the committee's report from June 2000. Many of you were on that committee at the time and, I think, supported that report wholeheartedly.

· (1340)

Regulated industries like CropLife Canada support this thrust and the substance of this bill. It sets the tone for where we think Treasury Board should focus its own review of cost recovery policy, and the government's desire to implement smart regulation to foster innovation, by removing unnecessary regulatory barriers.

CropLife Canada members have just begun to participate in the design of a five-year review of cost recovery within the Pest Management Regulatory Agency. An external consultant will conduct this review, with the participation of active stakeholders. On behalf of CropLife Canada, I request your committee to make a recommendation to adopt the methodology suggested in Mr. Cullen's Bill C-212, on a pilot basis, in the current PMRA cost-recovery review. This could provide us with a real working example of how cost recovery and its impact on regulatory operations could be fully examined.

Since the PMRA cost recovery is the subject of recurring controversy, I suggest it would be an appropriate model to test the pilot project. The committee could invite the PMRA to brief members about the concept introduced in Mr. Cullen's bill, and how it could be incorporated into this review. The Pest Management Regulatory Agency could also be asked to provide a report, once this review is completed in the spring of 2003.

Once again, optimizing Canada's regulatory environment is not a financial obligation, but an exercise in discipline, clear communication, and coordination. The solution is better administration, not necessarily more money.

Thank you for this opportunity.

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The Chair: Thank you, Mr. Milne.

Now we'll go to the Toronto Board of Trade and Ms. Allan.

Ms. Elyse Allan (President and CEO, Toronto Board of Trade): Thank you.

The Minister of Finance came before this committee last week and once again referred to Canada as a northern tiger, an expression he has begun to use more frequently to emphasize the incredible economic potential this country has. We are leading the G-7 in growth, we continue to record budgetary surpluses, and we are on track to create a more competitive tax regime. This is all good news.

I want you to know that the Board of Trade has been supportive of the government's initiative to make this country a global leader, to grow this tiger. But I know we can and should do more. Moreover, we must secure the assets that are most vital to our economic success, to ensure that the minister's descriptor becomes entrenched in reality.

The Toronto Board of Trade, as many of you are aware, believes strongly that our cities are the drivers of growth in Canada. Cities collectively represent the heart of Manley's tiger. They pump revenues to senior governments, and flow resources to regions across the country. They drive a substantial portion of our GDP, and are the centres of our population growth.

But it is our contention that these centres, the heart of Manley's northern tiger, are at risk, and we are not alone in this conclusion. Countless task forces, experts, and interest groups have arrived at similar positions over this past year. We have all come to agree that strong cities make strong nations, and when cities falter and crumble, the cracks in the country widen as well.

There has been an incredible amount of study of the challenges, and no shortage of solutions, but there has been relatively little action. The board is before you today to urge this committee to act on the good advice given by many groups across this country and get on with the job of strengthening our cities. You can provide important direction to the government in advance of the 2003 budget by championing the needs of our cities. It is time to move from discussion to action. It is time for the federal government to take three clear actions.

First, develop a national urban infrastructure strategy, including a dedicated strategy for Canada's largest urban centre, Toronto. Second, establish long-term, sustainable and predictable funding for cities; and third, maintain competitive fiscal policies for urban regions.

Our primary recommendation focuses on infrastructure. It is the most critical area for action for cities in Canada. While we have had some success in generating federal interest, notably with the creation of the strategic infrastructure fund and the supporting communities partnership initiative, it has been on an ad hoc basis, with no overall vision or goals for cities. This approach was reinforced with the recent throne speech commitment for a ten-year infrastructure program.

We are incredibly pleased with the intent of the announcement, and certainly applaud the government for recognizing the need for longer-term commitments; however, this announcement has been made in the absence of any overall plan for cities. It effectively continues the piecemeal approach, which does little to support strong and internationally competitive cities.

What Canada needs is an overall national urban infrastructure strategy that will accomplish several things. It will set our national priorities for infrastructure, which we argue must include transit and housing.

It will establish a long-term infrastructure fund for large-scale projects in major urban centres. We expect this to build on the existing strategic infrastructure fund, and leverage the commitments made in the throne speech.

It will introduce a new shared financing arrangement with the provinces and cities directly.

It will facilitate appropriate and timely private sector involvement. We believe this element is crucial to success, as the private sector can be a incredible source of both capital and expertise, and ensures our tax regime promotes investment in infrastructure.

Last, it will coordinate federal infrastructure activities in large urban centres with provinces and affected cities.

Only by setting out a clear agenda on urban infrastructure, one that recognizes the need for coordination and partnerships, will we begin to see real benefits from federal action.

Our submission tables here today provide more detailed recommendations on how to achieve a successful program. It is estimated that the current municipal infrastructure shortfall is $44 billion and is growing by $2 billion annually. This is a daunting deficit. We know it cannot be dealt with in one budget cycle. We know there are numerous demands being placed before you for investment, and we know trade-offs will need to be made. But it is clear to us that investment in urban infrastructure does pay off for governments and for Canadians.

Strong infrastructure keeps our cities producing. Toronto alone contributes significantly more to the federal government than it gets back--$7.6 billion in 2000, as calculated in our report, “Strong City, Strong Nation: Securing Toronto's Contribution to Canada”, a copy of which is included in our submission. This is the type of return this government gets when it invests in Toronto, and this is the return that allows the government to invest in other priorities important to Canadians.

For this reason, I am also urging this committee to support the needs of Canada's largest urban centre. We believe strongly that supporting Toronto means supporting Canada. The board believes that our city can continue to contribute a high return and grow that return, if the government makes necessary investments in our infrastructure.

We are calling for the federal government to flow funds to Toronto for a limited period of time, as a transitional investment to stem further infrastructure erosion. We believe this investment must be targeted at capital upgrades and expansion of our transit system, waterfront revitalization, and expansion of affordable housing. We are working to determine the exact financial scope of such a commitment, and will provide the government with our expectation shortly.

I have talked about the need for a national infrastructure strategy, and I have advocated for specific support for Toronto, but what drives both of these recommendations is the underlying concern over the ability of our local governments to access needed resources.

As you know, cities rely largely on the property tax system to meet financing needs. This tax does not grow with the economy, and for many cities it is already too high. Other revenue sources must be considered.

In our “Strong City” report we explored the idea of public finance reform, and determined that the federal government must be involved in this discussion. As a starting point, we believe there are two revenue options that could be enacted by the government to increase the resources available to cities.

We urge the committee to recommend full GST exemptions for municipalities. We have also been on record in the past supporting municipal access to gas tax revenues, particularly in support of transit.

Finally, I would just close by reiterating the board's support for a competitive fiscal agenda to provide a solid foundation for urban economy. We urge the committee to continue to recommend the elimination of the capital tax, and to continue to focus on debt reduction.

Thank you very much for your time.

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The Chair: Thank you very much.

We're going to go with eight-minute rounds, in the following order: Mr. Penson, Mr. Masse, Mr. Wilfert, Ms. Minna, Mr. Jaffer, and Mr. Valeri.

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Mr. Charlie Penson (Peace River, Canadian Alliance): Thank you, Madam Chair.

On behalf of the committee, I'd like to welcome everybody here. Thank you for your presentations. They're very helpful to the finance committee.

We've heard from a lot of people over the last several months. Our consultations actually started in late May and were broken over summer. One common theme that I've heard developing has been that of a decline in several sectors of our economy, and not only our economy but in our military.

I heard Ms. Allan say today that the infrastructure systems for our cities need major infusions. I think that's a pretty common theme across the country. We've also heard it in health care. We've heard it in agriculture and in the forestry sector. The Canadian dollar has declined significantly in the last 30 years. The amount of foreign investment as a percentage of world investment has declined in Canada. And Canadian investors are increasingly looking outside of our country for opportunities.

It seems to me that's what is needed, even in a centre like Toronto—perhaps especially in a centre like Toronto, which is the financial centre of the country. When we're looking at the opportunities that exist for banks, about half of the income that they generate these days is from outside of Canada. They're looking for opportunities to stabilize that.

It seems to me—and I'd like your comments on this—that our standard of living has declined to about 70% of that of the United States. Our productivity is something like 80% of that of the United States. We have slipped very badly in the last couple of decades. More and more people are telling us that the way to get back on track is not to just get equal with them on taxes, but that we have to be better than the United States, that we have to have a competitive environment for regulation here, that we have to attract the kind of investment into this country that will get us rolling again.

I'd like your views on that. If that isn't an important element when it comes to these pre-budget consultations, how would you rank that in terms of your overall proposal that we need a tax environment that is competitive with that of the United States, our major competitor and home of a lot of our Canadian products?

I would then like to ask if you could comment on the bank merger issue as well, Ms. Allan, considering that Toronto is the financial centre of Canada, with our major banks all centred here. Many of them want the opportunity to be able to merge in order to be able to compete with the big players out there that have themselves merged in the last few years. Is that an important element that you might consider?

Ms. Elyse Allan: There was a lot in that question. If I might say so, however, I think our emphasis and focus on cities does in fact address a lot of what you're talking about. What we have in cities is the capacity to leverage: to leverage our education system, to leverage our financial providers and our financiers, and to leverage the social capital that exists in these cities. When we talk about the spirit of productivity, the spirit of innovation, it's not only in Toronto but across our country. We can leverage the investments that you as a government and that previous governments have made in our cities. We can in fact drive productivity across the country. I think we've seen that.

Look at the past 20 years. Toronto has consistently been a net contributor to the federal government. The capacity is there for more growth if we can turn around what are potential risk factors now.

I hope I have linked the concept of investment in the cities with the overall demands that you have for investment. By putting it there, you probably get the most leverage for that investment, which in fact gives you more return to invest in other priorities.

Secondly, with respect to competitive taxes and the competitive fiscal environment, I think what the board has always said is that we don't have to be first in the race for competitive taxes, but we do need to be in the race and we need to be competitive. But the package that attracts investment here is not necessarily just one regime or the other. Because we hear it time and time again from small, medium, and large businesses, we do continue to reinforce that the capital tax has a significant negative impact on foreign investment in this country, and certainly in Toronto. As I said, we hear that from all sides of business, continually.

My comment on the bank merger would simply be that the financial services sector—which is focused in Toronto—and the wealth it creates for our country is critical to the net success that we see and the net return that you enjoy coming from Toronto. It's critical that we continue to ensure that the industry is competitive.

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Mr. Charlie Penson: Madam Chair, if I might, I have just one other short question.

With regard to the bank merger issue, a lot of the banks are telling us that, because they're competing internationally now and because of so much of what we gain as benefits coming back to us—50% of their revenue is derived from outside Canada—they want to be able to play on this big field against huge competitors. If they're not allowed to get some size to them in order to compete, neither they nor Canada will be able to be a financial player in the international scene. Therefore, Toronto, which is the headquarters of the financial community in Canada, will be lessened by it. Do you see that as a difficulty?

Ms. Elyse Allan: It's important that the board should state formally that it has not taken a position on the bank mergers one way or the other, so I can only comment within the context of Toronto.

The financial services sector employs hundreds of thousands of employees directly, never mind the indirect impact that the financial services has on the vitality and the vibrancy of this city, let alone the financial success of the city for all of us. Secondly, we continue to hear of pressure on the financial services sector and that its ability to compete is continually being compromised across North America.

The Chair: I'm going to let Mr. Polito make a comment on that.

Mr. Joseph Polito: Thank you.

You correctly mentioned that in the last two decades we've fallen behind. A number of economists have done some work on this. Pierre Fortin is one, and Nobel Prize winner Robert Mundell is another. I'll read a quotation from page 8 of my paper. Mundell says:

To get inflation to zero, the Bank of Canada kept raising interest rates until they were five per cent above U.S. rates. ...unemployment increased and real estate prices collapsed.

And the same thing happened in 1980 with Paul Volker in the United States, which almost bankrupted Mexico.

Canada was desperately in need of a low interest rate environment—real interest rates, that is—to continue capital investment and growth, and those two interest rate shocks killed us. If you graph our debt, you'll see that our debt followed the high real interest rate policies of those two periods. So those are two things we have to keep in mind.

The other thing you mentioned was taxes. Certainly we want to keep our taxes efficient and low, and that's what I'm advocating on the payroll tax situation. But we should also remember that there are some high-tax jurisdictions in Europe that have had better productivity than the United States in the last few years, and they have much lower unemployment rates and very low child poverty rates. We should keep that in mind. We have to be smart about our taxes. If we are, we can get a lot out of them.

The Chair: Thank you very much.

Brian, go ahead for eight minutes.

Mr. Brian Masse (Windsor West, NDP): Thank you, Madam Chair.

In general, there's a good representation on the panel in terms of what we're seeing debated out there in the public with regard to a reduction in taxes versus a reduction in debt versus having resources for investment. That's where things become a little bit strained, because we're looking at trying to achieve all three of those objectives or prioritize which ones seem to be the stronger of the proponents. I put that out in general in terms of what I'd like to hear. I have a couple of specific questions, but I'd like to hear some commentary on that.

I do have a specific question with regard to duty-free goods. Knowing the tourism element is there, it is clear from your paper that it would appear that these cigarettes were used basically as a loss leader for your business in order to get people in the door, so to speak. Is there a specific percentage of people you have identified who purchase products in connection with cigarette sales?

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Mr. André Bergeron: In the duty-free industry, number one, the cigarettes as such are not a loss leader. They are an advantageous purchase and a major contributor to our ability to pay rent to the airport authorities.

Without taking too much of your time, I'll say that the airport authorities were basically the byproduct of what used to be run by the federal government. The airports used to be run by the federal government, and our rent was therefore paid directly to the Department of Finance. In a lot of the local airport authority or LAA structures, it's already enshrined in a number of their contracts that the revenues from the duty-free industry go directly back to the Department of Finance.

So the tobacco is there basically as one of the advantages of being able to shop tax- and duty-free by the removal of all the excise taxes and local taxes. It is definitely a major pull not as a loss leader, as I mentioned, but because it provides a great ability to pay rent. It has a major pull in terms of bringing customers into the store, because it is a product that is of current consumption. When someone travels, if they smoke, it's something they will always purchase, because they will have smoked their carton of cigarettes over a period of seven days, ten days, or fourteen days. Therefore, even if they are frequent travellers—for example, once a month—then they will probably need it again. With this penetration into the store, then it affects the complementary purchases for that type of customer, whether they be spirits, perfume, confectionery, or souvenir products.

It also has to be placed a bit in light of the overall business and international business. We are the only jurisdiction that I know of that imposes a tax on a duty-free shop. I was just in Europe recently to work on a tender for the Paris airport, and I can tell you that, yes, within the European Union they pay tax, but people travelling internationally in and out of the European Union are still purchasing their products tax- and duty-free, including the tobacco products.

So tobacco is there as an attraction to a group of customers—not to all of our customers, but to a group of customers—because of the market it generates. It helps us to submit and to bid with very aggressive rents to airport authorities, and that benefits the overall market.

Mr. Brian Masse: Ms. Allan, if I could switch to you with regard to financing in terms of municipalities and infrastructure, has there been any discussion with regard to...? I know our municipality has a high debt, but it also has a high credit rating, so the payments on that debt are preferred.

Has there been any thought with regard to requesting or working with local governments and the federal government to be able to guarantee or create new strategies in order to be able to lower those interest payments if municipalities are struggling with debts that are identified as a higher risk and that have higher interest payments?

Ms. Terri Lohnes (Senior Economist/Policy Adviser, Toronto Board of Trade): What we're advocating is that the federal government work with both municipalities and the province in looking at the finance structure as a whole. Yes, there are some avenues that you can look at in terms of the debt-carrying costs of municipalities. Those will differ from large urban centres to smaller municipalities. What we've been looking at is where you have the ability to manage debt. The City of Toronto is perhaps better able to borrow and to manage its debt than a smaller community just because of its fiscal borrowing capability.

I think you're good to tag onto the debt issue, because if we're looking at large-scale infrastructure financing, that means for a significant amount of debt. But we've also advocated, too, that there's a private sector component here that we don't think has been explored explicitly at the federal level. That is an incredible source of capital that can be leveraged without necessarily increasing the borrowing costs of either the federal or the municipal governments.

Mr. Brian Masse: Thank you.

Ms. Rothman, I'd like to hear from you on my original comment with regard to investing now or paying later. Could you provide some commentary with regard to your particular issue of ECE and how that can translate into the future?

Ms. Laurel Rothman: I was agreeing with Ms. Allan earlier in terms of the need to look at the whole package. I know people wouldn't expect it, but I'll make a quick comment on the tax competitiveness issue.

I'm not a tax lawyer and I'm not a statistician, but I would certainly look at comparative things in different regions and countries. Indeed, you commented about the European countries that often have tax regimes that are perhaps at a different end of the spectrum than ours, yet they are quite productive.

If we're looking at the U.S., we should be looking at PPI, the purchasing parity index, because when you balance off health care—albeit it's under stress in our country, with all of the other things—we do have, if you will, the beginnings of a better quality of life. It's very much what I think Ms. Allan referred to as the whole package. And if we look at social investment, that's also part of the package, particularly with early childhood education and income security measures like the child benefit.

The study that Michael Krashinsky and Gord Cleveland, two University of Toronto economists, did on ECEC looked at a lot of European examples, and it projected out over the lifetimes of parents and their children what that dollar investment in the first six years in early childhood--actually it was from two to six--in a regulated early childhood setting would mean. Of course, it looked at lifetime earnings, which contribute to pension, as well as employment insurance and other potential sources. So it looked at the economic side, as well as looking at the child development side for children.

It's interesting that already in Quebec, where the Quebec government has moved quite quickly and fully into a developed early childhood education and care system, I think all kids two years and above have access to quality child care for no more than $5 per day. We're already seeing a benefit in grade three testing, where Quebec children are much further ahead, for example, than Ontario children. We don't have a much wider comparison yet, but I think in many ways the investment in the early years pays off.

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The Chair: Thank you very much.

Now we'll go to Mr. Wilfert for eight minutes.

Mr. Bryon Wilfert (Oak Ridges, Lib.): Thank you, Madam Chairman.

Thank you, everyone, for coming.

Ms. Allan, I was rather struck by your presentation. It's the first time I've heard the Toronto Board of Trade take this particular tack. As a former president of the Federation of Canadian Municipalities, I would have liked this presentation 10 years ago. However, better late than never.

I would point out to you that the Prime Minister's urban task force has identified a national urban strategy for transportation, housing, and infrastructure.

I agree with you on the issue of the infrastructure debt. When the Federation of Canadian Municipalities proposed the infrastructure program in 1983, we were at a $17 billion infrastructure debt. Unfortunately, for 10 years that program lay dormant. In 1993 the government of the day, the present government, accepted the proposal and ran with it. You've identified two infrastructure programs. One will be the 10-year program, the ongoing infrastructure program, and the other is the strategic infrastructure program for large infrastructure needs, for example, transportation on a GTA basis.

One of the issues I have--and I hope you'll make this presentation, if you haven't already, both to the City of Toronto and to the Province of Ontario--is that provinces underfund their municipalities, because they give them very little taxation power. They differ among the provinces. Manitoba, for example, allows some gas tax, some hotel tax, etc. Ontario is different, as you know. But we also should indicate to them that situation. I personally do not favour giving them the gas tax or any portion of the gas tax, because I think cities, like any other order of government, have to be accountable for their spending and their revenues. I would support a widening of the tax base for cities in this country, but that is something the provinces must do.

I'd be interested in your comments on that. And I was glad to see you support continued debt reduction, which is something I believe very strongly in.

And then, very quickly, I would ask Campaign 2000 for any comments on the full indexation of personal tax system, which, as you know, has benefited both the Canada child tax benefit and the GST credit, which I think is extremely important. You listed a number of recommendations. I'd like you to prioritize your first two, because we're not going back into a deficit.

The Canadian Association of Insurance and Financial Advisors could maybe give me their two top requests, because they all cost money, even tax cuts or tax incentives.

Thank you, Madam Chairman.

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The Chair: Ms. Allan.

Ms. Elyse Allan: Thank you.

I'll also have Terri comment specifically on the tax, because she's done so much work on the different tax options and our comments there, but in general, first and foremost, we think all levels of government need to be involved in the solution to make our cities stronger. To allay your concerns, we are making presentations at all levels of government, including at the provincial level and at the municipal level, about how they need to help themselves. We do think there is the opportunity at the provincial level to give more room and more autonomy to the cities, but only if the cities also show they have the accountability and the transparency in their governance to handle it.

Maybe Terri wants to make some additional comments on the infrastructure and the financing.

Ms. Terri Lohnes: It's not our intent that the federal government just hand out funds without any sort of local accountability for the expenditure of the funds. In the discussions we've had about gas taxes in particular, it has been, how do you ensure the accountability with those who deliver the services and those who are in charge of running and building? We'd like to see how you can ensure the transfer of tax revenues with associated accountability. That discussion hasn't happened federally, and I think we can engage in that without overstepping boundaries, and can engage with the provinces as well as to how best to do that on taxes.

The Chair: Mr. Strain.

Mr. William Strain (Chair, Taxation, Conference for Advanced Life Underwriting, Canadian Association of Insurance and Financial Advisors): Thank you.

It has been our position in appearing before this committee for eight or nine years now that the emphasis should continue to be on debt reduction. It's our position that the deficit built up over the years, in the worst days of the fight against the deficit and the debt, was accounting for over 36¢ of every tax dollar in paying interest. The deficit has been eliminated, we have seen a number of years now of consistent debt repayments, but we're concerned that perhaps the commitment might be wavering a little on the debt reduction obligation.

There's almost a feeling, it seems to us, that maybe the war has been won and it's time to get on and open up the spending envelopes. Certainly we're seeing that from a number of parties and interest groups. But the interest on the public debt, even with today's low interest rate, still amounts to over 23¢ of every tax dollar we take in. The absolute level of the debt, at over $500 billion, is still staggering. While we commend the government for sticking to the game plan and using the surpluses and the contingency reserve, where it's not needed, to pay down the debt, we frankly don't think that goes far enough. It's almost like saying, if we have any money left at the end of the day, we'll pay down the debt.

We advocate a debt reduction program that would commit a certain level of debt repayments on a consistent annual basis as a line item in the budget. That is included in our recommendations. Debt reduction continues to be a priority. Debt reduction will free up those tax revenues in the future for use on health care and education requirements and all the other priorities that are out there.

The Chair: Ms. Rothman.

Ms. Laurel Rothman: I'll just pick up on the previous gentleman's comment. I think we have to look at more of a balance. Much of debt reduction had a disproportionate impact on low- and modest-income families throughout the nineties. As I said earlier, we're having growing inequality. Indexation of the benefits has given, I think, a fairer and clearer picture to families. Nevertheless, being in the labour force isn't paying for people. They're having children at 16 who cannot envision taking on debts of $30,000 to $40,000 to get a post-secondary education in order to get out of the cycle of poverty.

I think we have to very much balance a social investment to improve the quality of life for many families in this country, along with other equitable kinds of investments and measures. These aren't my major area of expertise, but I think I'm not alone in some of what I'm saying.

If you're going to ask me what the priorities are, I can't resist. We actually expect that the announced and approved increases to the child benefit will be speeded up and done in this next budget. I don't have the figures in front of me, but my understanding is that it's quite doable. As I said, those are the announcements that were made in the 2000 budget. Instead of spreading it out to 2004-05, implement it now, at the same time making the plans in the Speech from the Throne for the next multi-year phase. We do expect a significant amount of money. We're recommending $1 billion to be available for investment in early childhood education. Those are our two priorities. We know housing is critical as well, but our partners will speak about that.

¸ (1420)

The Chair: Thank you.

Ms. Minna, eight minutes.

Ms. Maria Minna (Beaches—East York, Lib.): Thank you, Madam Chair.

First, because I'm not going to try to ask questions of everybody. I will just comment on some things that have been said on cutting taxes and how low we want to go in comparison with the U.S. It's the race to the bottom in corporate taxes. My understanding is that we will be 5% below the Americans in 2006.

On debt reduction, I'm not suggesting we don't do that, but at the same time, we can talk about the importance of the fact that we are behind in productivity. Many of the presenters talk about that in terms of cutting taxes and debt reduction, and that's always going to help productivity, but we've had other presenters in the last number of days. Universities are saying their infrastructure is falling apart; professors, 40,000 or so, are going to be retiring. The lack of training and labour force skills in this country, of mobility and flexibility in our labour force goes to the productivity issue. We don't talk about that. To me, that's economic investment.

I see that as a basis. We keep focusing only on the tax stuff. We don't talk to enough of these panels about the other side of things.

I want to talk a little with Ms. Rothman with respect to what I consider economic investment in children. We tend to look at social programs as charity rather than investment in our future. I want to say I support your position on this, and I have for quite some time. I'm not going to go into the details over again, except to ask you if you could tell me how you came up with the $4,600 investment number, and why that number specifically?

Ms. Laurel Rothman: That's a very good question. We've just been reviewing it, because we first came up with it in 1996, and many of our other organizations have also been working on it. First, you look across the country. If you're in situations that force you to rely on social assistance, the difference between what an adult and a child gets and what just one adult gets is close to that. That's a very rough measure. We think we have to look at it again. That would be, if you will, a basic amount to supplement whatever other basic income may be available at the provincial level for families--and I'm getting into more complex things here. We see that as closer to the cost of raising a child in modest circumstances.

I should underline that we think we need to review it as well. It's not a brand new number, but we think, given inflation and changing cost of living, it probably still is in the range of $4,200 to $4,400.

Ms. Maria Minna: In addition to increasing the numbers and looking at the reinvestment in early childhood care and education, I would like to suggest that we need to re-evaluate how we're doing it even now. In my riding, for instance--and I supported all these programs--we have the healthy babies program, which has a certain structure; then we have the early learning program, which is money that we have transferred under early learning to the provinces, which are now opening up little projects everywhere with their logos on it, forgetting where the money's coming from, but never mind. Then they've cut back--I'm talking about Ontario now--some of the child care spaces in the child care system, which is somewhat defeating the purpose here.

It seems to me before we even increase--and we should increase, obviously, and I'm supporting that--we need to look at how we restructure and ensure that all the children's moneys are spent within one envelope and in one system, within the child care system, so that all children are caught.

¸ (1425)

Ms. Laurel Rothman: I would agree completely. I think we could do it better. We could do it smarter. There would certainly need to be a commitment to do so. I think it will take more money, but it will also take better organization. I agree we need something coherent so there aren't 50,000 places for a family to go. Well, there aren't that many now, but....

Ms. Maria Minna: Thank you.

I have one final question with respect to the cities, and I'd like to pose it to Elyse Allan. I have to tell you I have absolutely all the time in the world to deal with the issue of cities. I understand 100% the need for infrastructure programs, which we haven't spent enough money on in our cities for a long time. The cuts have been horrible for transit, for housing, for other infrastructure expenses in general, the moneys that the cities generate, and so on. But I also want to look at the long term.

I see in the Speech from the Throne we have a 10-year commitment to infrastructure that includes transit and housing. I think probably we're looking at some sort of revolving fund that kind of stays.... There would be some accountability, I hope, because I'd like to see accountability, but in the longer term in order to give cities a more sustainable funding base so they can in fact address the issues that they have to deal with because we can keep giving them more responsibilities from different levels.

My issue here is this. Does your board believe we need to look at restructuring how cities get the money? The realty tax is not enough, so we need to look at what, another type of tax? I'm looking at long-term sustainability. There needs to be accountability, as I say. The other is the governance. I think our municipal governance, especially in the larger urban centres, needs to be reviewed in terms of the accountability and checks and balances that exist within those governances, given the size we now have.

Ms. Elyse Allan: I have this comment. In the board's report that we issued in June, “Strong City, Strong Nation”, we made several recommendations, but I'll reiterate two.

One was that we do believe there needs to be a new financing model, a fundamental new public finance model that allows more autonomy at the city level and, to your point, does ensure that there is both a sustainable and a predictable source of funding that the cities can look to, can use, and can plan against, so that they can deal with long-term infrastructure issues, whether that's housing, education, or transportation. That was one recommendation.

Second, though, we said we thought it was critical that prior to doing that, certainly in the city of Toronto--and we won't speak for other cities--in a city of that size, we needed to ensure there was in place a governance model that gave comfort, if you would, to the citizens that, as the city has this taxing authority and increased autonomy, there is a governance structure in place to ensure that it is handled well, wisely, and with transparency.

Those are two issues we are working on. The board will be establishing a task force, in fact, to be looking at the whole issue of Toronto governance and its relationship with the upper levels of government. Those are both critical.

We do specifically recommend that in terms of opportunities for financing, we think there is an opportunity around vacating tax room. We do think the gas tax, if it were specifically targeted to transit, could provide an opportunity for financing transit requirements. We do think there is an interesting opportunity around the GST, around eliminating the municipalities' requirements to be paying the GST, which of course would be an option of not transferring funds as much as not collecting the funds that you concurrently do. That would provide an immediate benefit to all municipalities across the country.

¸ (1430)

The Chair: Mr. Jaffer, eight minutes, sir.

Mr. Rahim Jaffer (Edmonton—Strathcona, Canadian Alliance): Thank you, Madam Chair.

I'd like to start with the Association of Canadian Airport and Duty-Free Operators just for a clarification. With the name “Duty-Free” you'd expect that all your products would be duty-free. I wasn't aware that with the changes to tobacco, the taxes were extended to you as well. Seeing that you're only approximately 2%, I believe, of all sales, is the number that you've quoted...

One of the things that I think we should be constantly doing as government in some of our strategies, especially as there is obviously a push to reduce overall smoking levels, and one of the answers to that was to increase taxes, is to basically see if in fact that's working at the end result.

My concern is that initially when the taxes were reduced it was to battle this contraband issue, the smuggling issue, and to be able to control what was happening to some extent on the black market. Now in fact we've flipped that again and we've raised taxes, gone in the opposite direction. The fear is that this black market is increasing to levels again that are really hard to manage and biting into sales of the tobacco companies and at the same time going against the ability for us to regulate the number of people smoking.

I guess my question is simply if you have any information overall from some of the work you've done to see if in fact that is happening, from your sources and your information--that with the increased taxes on tobacco whether or not we are actually working against ourselves in creating this black market once again, and that this is actually going in the opposite direction and the tobacco consumption has not changed. I don't know if you can help us out at all on that. Do you have any information?

Mr. Remo Mancini: Thank you for that. That's a very good question.

The combined sales of cigarettes at both the land border stores and the airport stores is approximately 1.4% of the total market. So that is not a very significant part of the market, but obviously was important for the government. I guess that's why they focused in on it.

Your questions are exactly the questions we have been trying to get answers to from the Department of Finance and from the Department of Health.

For example, at our operation in Windsor that I described earlier, which is a joint operation between ourselves and the university, if we compare cigarette sales between January and June 2000, a six-month period, cigarette carton sales have dropped 48%. I guess our question is where were these 48% of the global number of these cartons purchased if they weren't purchased at our stores? And has there been any discernible impact with regard to fewer people smoking? If there is, we'd like to know the data; we'd like to share it among our own members. And if there have been any other positive impacts, we'd like to know that too.

The only thing, sir, that we can describe to you is what we know, and what we know for sure is that sales have gone down, our businesses have been put in jeopardy, and we've gutted the principle of tax-free and duty-free at our tax-free and duty-free stores. That we know for sure, among other things that have negatively impacted our stores, our employees, our suppliers, and the general business community we interact with. All of these other things that you are asking are questions that we have been asking, and we'd like the answers to them.

I don't know if my colleagues want to add anything else to that.

Mr. André Bergeron: Yes, I would like to add a couple of things. Let's call them facts.

Fact number one is the retail duty-free industry in Canada, airport or land border, is not part of the smuggling problem. We quoted Brian Willis on this, and we'll leave it at that.

Point number two, in terms of consumption, youth travel in terms of international travel represents 3.5% of that population of travellers, so they are not a factor in the purchase of tobacco. Also, surveys and studies have shown that youth purchase single packs. We sell cartons, 200 cigarettes. The cost of a carton of cigarettes, at a tax-free and duty-free price, is still a multiplier of the cost of a single pack of cigarettes. So youth are not just using duty-free as a vehicle of privilege to purchase what was labelled cheap cigarettes.

In terms of adult consumption, a new smoker takes up smoking by purchasing a single pack. We sell cartons of cigarettes. They need to have regular access to a retail outlet to purchase cigarettes. They do not have regular access to a duty-free operation at a land border or airport to purchase tobacco, or what is called cheap tobacco. If we want to call it cheap tobacco, somebody will have to explain to me how you can call it cheap tobacco when you may save $20 or $30 on a carton of cigarettes, but in retrospect you also have to outlay $500 to have the privilege of purchasing in a duty-free shop--$500 being the average price of an international ticket by air.

So these are the facts. Point one, we're not part of the problem of smuggling. Point two, we're not part of initiating new smokers, in terms of tobacco. It has a great negative impact on our business, as Remo mentioned, and as I answered earlier in my reply.

¸ (1435)

Mr. Rahim Jaffer: I appreciate that. That particular 48% is a big question for me. Where is it being purchased? Obviously it could be the black market, once again.

I'd like to focus my second question to the Board of Trade, if I may. I noticed in your larger booklet there's a figure you've included. It says: “Barely a quarter of total respondents to a Board of Trade survey stated that Toronto was more competitive than cities in the United States, and only slightly more felt Toronto was more competitive globally”. I think that speaks to what my colleague was trying to ask earlier, this whole idea of Canada falling behind--our competitive advantage. Canadians themselves have been questioning it, to some extent. I think many people have been asking what we can do, in essence--maybe this committee--to focus on trying to address some of those issues.

But alongside that, with some of the things you're talking about with infrastructure, we have to address this competitive issue if we want to be able to pay for some of the obvious infrastructure changes that all cities need, to try to get the competitive advantage moving again. So what measures should we be focusing in on, as a committee, to get that competitive advantage, so we can pay for some of those initiatives?

One thing you just mentioned in response to one of my colleagues made me think, specifically when you referred to the fuel tax. Right now, the federal government collects about $4 billion on that particular tax, and $190 million can actually be attributed as being spent on infrastructure or something, while the rest goes into general revenue. I don't know if there's a way you could suggest... Maybe we should be earmarking some of these funds that are supposed to be collected for infrastructure and others, and maybe there should be more transparency and accountability on that front as well.

There are a few issues there, and I'll let you try to deal with them however you can.

Ms. Elyse Allan: The graph you referred to in our report was a survey we took this time last year of over 350 CEOs of all sizes of corporations that are members of the Board of Trade. It was quite frightening to find out, as you've said, that roughly a quarter felt we were more competitive than the U.S., and slightly more felt we were only more competitive than other Canadian cities.

We then followed that up to understand what specifically were some of the issues. What did they define as competitiveness? What did they think were our greatest concerns about competitiveness? It was interesting that our greatest strength as a city was our skilled workforce. So when we think about looking at what we need to preserve that, we shouldn't throw out the baby with the bath water. Ensuring that we continue to have a well-educated skilled workforce is a critical component to the productivity and innovation of the city.

The second thing was to look at what wasn't working and our disadvantages, in terms of competitiveness. Two things came out. In the years we have been doing this survey, it has always been our fiscal environment. Last year, for the first time, infrastructure was equal to our tax regime. We then proceeded to explore that in subsequent surveys and work the board has done around infrastructure, and it's amazing. You mentioned the tie to productivity, and the comment was made, “How do cities have productivity?” If you'll bear with me, I'll tell you a 60-second story.

We had a man come in who owns one of the largest convenience stores, milk stores. They're on every corner throughout the GTA. This is how he explained how infrastructure is driving his productivity in the wrong direction, and if we translate this across the country, you see the impact of infrastructure. There was a time in running a convenience store when he would have his milk and all his products come first thing in the morning. His senior people would be working the day shift. They would manage the inventory, they would do the receipts. The trucks would travel early in the morning to deliver the milk for opening.

As a result of the gridlock and the situation with infrastructure in the GTA and in the city, he has now had to completely change his entire operation, so that now for his most senior people, he has to recruit people to work the night shift. He has to receive his milk, not in the morning...but in fact all his drivers can only drive and deliver the milk if they're out in the middle of the night.

The cost...they have now had to move to double.... They have to pay the type of people they need more money to get them to work a night shift. They have had to move the drivers who used to be on day shift to the night shift, so they're now having to pay more for drivers. As a result, their cost of recruitment has also gone up.

He just went through, line by line, how the infrastructure has completely changed his ability to compete in the marketplace and to be in business, because it affects every aspect, every cost line, of his business.

I use that as an example, but that translates well across all sides of business. Infrastructure continues to be, and has been said by our members to be, a major driver of competitiveness, which is continuing to get worse and hurt us negatively.

In terms of the fuel tax question, I think we absolutely agree. We think there is room with fuel tax, because there certainly was a general understanding and appreciation that it would be something that would be focused toward transit. We think that is one place where the government could consider vacating space, and then the cities could choose whether or not they wanted to fill that space. That would allow for clearer transparency around that tax.

We don't necessarily support a change of dedicated taxes, but we think that is a tax where we could vacate room and in fact let the cities choose to take up that space if they require.

¸ (1440)

The Chair: Mr. Valeri.

Mr. Tony Valeri (Stoney Creek, Lib.): Thank you very much, Madam Chair. I'd like to make a general comment first and then ask some specific questions.

Just on the presentation by the duty free industry, I certainly would encourage a review of this to make the necessary changes. I think tourism is obviously a very critical component of our economy. It troubles me when I hear that there might be legislation or regulations that are impeding the growth in that particular sector. For the record, I would like to indicate that I would like to see a review of that.

Secondly, with respect to the presentation made by CAIFA, when you talk about a debt repayment, I guess I just want to be clear about whether you are suggesting perhaps a different fiscal anchor than we are presently using in our budgets. Going forward the anchor is the balanced budget. Are you suggesting that it should be a debt repayment? When you suggest debt repayment, are you suggesting that the repayment should be a percentage of the surplus or are you suggesting that it should be a line item like the $37 billion that we pay in interest, that you're actually looking for a line item to say that the debt repayment figure should be such-and-such as it's projected forward over the next five years?

I guess my more general question would be, given that a lot of area has been covered, I think everyone around the table is focused on improving quality of life, standard of living, and everyone has a different perspective on how to get there. From our standpoint, from the committee's standpoint, and certainly ultimately from the finance minister's standpoint, making budgets is all about trade-offs. You have to decide certain things. You can't put everything as the number one priority.

I just want to turn this around a little bit and see if we can get some comment on what it is government is doing today in terms of the spending envelope, or the tax expenditures, or the debt repayment. What is it that we should be doing differently? How should we be realigning some of our spending? Can you point to some of that? Can you point to how we should be realigning some of our spending to get to some of the priorities that have been outlined today?

Perhaps we could start with CAIFA.

Mr. William Strain (Chair, Taxation, Conference for Advanced Life Underwriting (CALU), Canadian Association of Insurance and Financial Advisors): Our recommendation within the submission for a dedicated debt repayment schedule would be, as we described it, Mr. Valeri, a line item within the budget dedicated to repayment of the debt, committing to a balanced budget process, after considering that debt repayment load; and then if circumstances permit in terms of having unallocated contingency reserves or budgetary surpluses, that too could be committed to repayment of debt. But we would like to see a committed debt repayment schedule that focuses that degree of attention on the debt repayment side of things.

Certainly we acknowledge and appreciate that program spending is a trade-off among many different priorities. My only comment would be that I was encouraged with Mr. Manley's comments to the committee the other day that we need a serious review of the program spending so that funds from programs that may no longer have the priorities they once had, that may no longer be seen as necessary, can be reallocated to the higher priorities that we are facing today. I agree, it's a balance. There's a trade-off, and the government's job is to establish those priorities within the context of what Canadians want.

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Mr. Tony Valeri: But can you actually name some programs that we should be realigning in the overall program spending? I don't think you can be specific, but just generally, what is it that we should not be doing today that we are doing to reallocate those funds to areas that have been talked about around the table this afternoon?

Mr. William Strain: I can't sit here and recommend specific actions on specific programs. We, as the Conference for Advanced Life Underwriting or CAIFA, don't have sufficient information to make those kinds of recommendations. I think the only thing we can do is to encourage the government to undertake that type of review to make those educated trade-offs.

The Chair: Mr. Polito.

Mr. Joseph Polito: I understand, from what I've read in the paper, that government spending is already the lowest it has been as a percentage. For over 50 years it hasn't been this low. And it seems to me the money that needs to be looked at the most is the money that's now earmarked for tax cuts. How can we best use that?

The proposal I made earlier, as I said, would help the Board of Trade's goals, it would help the child poverty goals. You've already cut $6.8 billion--this is an old cut now--of payroll taxes over the last eight years. And the suggestion here by these economists is that you rejig that cut so it's all in the exemption part and does other things. It frees up the labour market. I think all taxes on business are essentially sales taxes and they distort markets, including the labour market. And this is to help correct that.

I think there's a commitment to continue to reduce EI, because it's way over in surplus and it's a burden on everyone, including businesses. Again, in that reduction, if you do it the smart way, you continue to expand the exemption and get all these other benefits that I listed earlier.

Thirdly, you have a huge amount of money committed to corporate income taxes. A lot of business people will tell you--I think they'll all tell you--that they much prefer to get the tax cut up front with their EI reductions and maybe CPP, because that money is right up front. It reduces their investment level, it reduces their risk, as opposed to waiting until they're more profitable. Yes, they're more profitable. What about all our start--up companies and new economy companies that take years to make money? You'd be giving them a boost right now if you gave the same amount of money in the form of cuts to payroll taxes as opposed to waiting until they actually make money in profits.

Thank you very much. I won't keep going on.

The Chair: Mr. Milne.

Mr. Charles Milne: I'd just like to add one small area you may want to look at if you're looking for things to redirect or revise, and that's the R and D tax credit. It cuts both ways. I represent technology developers. Many of my members are international players, and they look at Canada, they see the R and D tax credit is as rich as any in the world, they come and investigate it further, and many of them turn tail and say, hey, that's the good news, but the bad news is you're flummoxed by the regulatory environment. On one hand, it looks very attractive; on the other hand, it's not doing what it was intended to do, draw people into the country.

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Ms. Elyse Allan: We've talked about investment; now how do you look at the program spending? One of our calls is for this urban strategy, which I know is also called for in the Judy Sgro report. The purpose in calling for a national urban strategy relates to what you're asking. You don't have the criteria by which to assess which programs are in or out. If you don't have the fundamental strategy on what you want to do, it makes those trade-offs very hard, because you don't have the basis for saying why one program is in and another program out.

The concept of putting together a national urban strategy allows you collectively to look at all the different programs that are trying to help urban economies, to assess them, and put them all under one umbrella: when you look at the scope of those programs, in which ones are you getting the most impact for that dollar investment, for that spending dollar? Right now they're so piecemeal and buried under such different titles, it's hard to really know what is fully out there in urban investment. We could package urban strategy and say, this is what we want to accomplish as a government to ensure that the productivity and the innovation we want in our country is leveraging the infrastructure we've already invested in in our cities; now here's the incremental amount of spending we can make, and here's how we can deliver it as effectively as possible, so it's not in so many piecemeal programs.

We would just urge that cost of putting together the strategy and bundling the thinking, thereby identifying the ways to get the most leverage for every dollar of investment. That doesn't happen in a piecemeal way.

The Chair: We've finished our first round. I'll take people wishing for a short question.

Mr. Penson, and then Mr. Wilfert.

Mr. Charlie Penson: Picking up on Mr. Valeri's question about a line item for debt repayment, as you know, Mr. Strain, this year's debt repayment will come in at about $9 billion. My view is that it's kind of accidental. My understanding is that you want a dedicated figure for that. Although you have indicated to Mr. Valerie that you're not quite sure what that would be, have you not any indicator of what you're asking for there? Are we talking $5 billion a year? As you know, this year it came in at $8.9 billion. Even at that rate, it's going to take 60 years to retire this debt, and there are no provisions for debt repayment this year. There is a contingency reserve; Mr. Manley has set up about $3 billion. Can you give us some indicator of what you might be talking about or what kind of timeframe you want for retirement, so we can get to the same answer?

Mr. William Strain: We don't have a specific recommendation for the amount. Our concern is to see the degree of attention being given to debt reduction that would move it to an absolute commitment, as opposed to saying, well, if we have anything left at the end of the day, we'll use it to pay down some of the debt. I think it needs study, it needs assessment. The overall balance of the priority is spending, but I think it has to be moved above the line, so to speak, so that we have a commitment for the debt reduction program that is taken into consideration before we come to the conclusion whether or not we have a balanced budget going forward.

Mr. Charlie Penson: If it were $1 billion a year, it would take 500 years to pay off. Don't you need to give us some guidance here on a percentage basis? Would you look at some kind of program review, with certain items in the budget you would like to see given a very low priority in order to make room for your priority, which is a line item for debt repayment?

Mr. William Strain: I think it's unrealistic to expect that we will ever pay off the debt, that we'll be a debt-free economy. Debt is currently at an unmanageable level in relation to the GDP. It's taking 23 cents of every tax dollar to pay the interest. That has to be brought down to a more manageable level going forward. I can't sit here and tell you what those levels might be. We're certainly encouraged by the level of debt repayment that has occurred over the last few years, and a commitment, even on a five-year timeframe, in the order of magnitude we've seen over the last few years would be a step in the right direction, to have it up in that $5 billion to $10 billion a year committed repayment level.

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The Chair: Thank you.

Mr. Wilfert, and then Ms. Minna.

Mr. Bryon Wilfert: I have a comment on R and D. On tax credits in Canada, the 20% applies to all R and D expenditures, compared to the United States, which is only on an incremental base, which is a very important point to mention.

On the issue of federal investments in cities, our task force came to a staggering conclusion. I don't want to be quoted on the figure because it's gone out of my mind--I've been dealing with too many figures lately--but I think around $54 billion is invested back by the federal government in cities across Canada. Therefore, there is a tremendous amount of money that goes back to cities; yes, cities are the economic generators of the country.

One of the problems I have with some of my colleagues with whom I've toiled for 12 years, and continue to toil with in a very cooperative way, is that in the GTA since 1967 we have been declining significantly in terms of the intensification of housing. Therefore, on the one hand, our municipal politicians cry that they need more money for transit. At the same time they're not intensifying the GTA. In fact, they're spreading out, which I have problems with. I also have problems when they build all these homes and then come to me and say, “We need money for transit”, etc. They created the problem and now they're asking me to clean up their situation.

I want to ask CAIFA, with regard to putting the RRSP to 18%, what is your rationale for that particular increase?

Mr. David Thibaudeau: The rationale was pretty well in line with the points we covered that went back to the 1982 pension review, and that is that all of the areas that they believed were going to be right for Canadians in terms of pensions were in those statements. The one thing that hasn't kept pace has been the limit for RRSPs and for pensions. Really, what we're looking at here is an issue that is asking, “Are we really giving up money in order to allow these contributions to increase, or are we not looking down the line at where the income will come from 10 to 15 years from now when we have a lot fewer people paying taxes?” If we were able to encourage this, we would do two things. We would encourage people to save money, to put it into their RRSPs and their pension plans, so they would have a retirement income that was relative to their income today, or their finishing income as they enter retirement. The rationale is that if you were going to open up the indexation, you would be able to do the same thing with the percentage of that income. Rather than changing it and saying if it's going to be a flat amount, it's 13.5% and we're going to make it 15.5% or 16.5%, you just let it slide up as a percentage of what that number would be. As a result, that would likely fit in.

You would probably need to go a lot higher than that to be competitive with the U.S. or the U.K. It's another thing about attracting people to stay in this country, to come to this country to work and so on.

The Chair: Ms. Minna.

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Ms. Maria Minna: Thank you.

My question is on the RRSPs. I understand the need for wanting to increase, but any increase to RRSPs is also a tax deduction, which is a tax expenditure--tax expenditures are spending. We currently are also having to deal with... I'm working on some programs to do with seniors who are below the poverty line at the moment. There are about 647,000 unattached seniors below the poverty line who are not able to cope at all, are missing medicines, are not eating, are not paying rent. Most of them are women. If we increase the guaranteed income supplement, we're looking at a fairly hefty bill, because that's the only way to really take them out of the poverty level. So sometimes we need to choose and we need to plan, and at the same time we're talking about cutting debt first and not investing in seniors or in RRSPs. Well, should we cut debt or should we increase the RRSPs? This is a choice. I think it's not fair, but...

Mr. David Thibaudeau: Perhaps Bill would like to make further comments, but my initial reaction to that is, boy, you're going to have one heck of a bill to pay ten to fifteen years from now for those seniors. If you think this is an issue today, you're going to have a double issue later on. So when I look at the expenditure of not allowing RRSP to go up, you won't have income to draw on, the ability to tax people, to get the money, to provide for the people, when there are going to be 30% or 40% more people over 80.

Ms. Maria Minna: Okay, but you would support increasing RRSPs now and increasing GIS.

Mr. David Thibaudeau: No, I didn't say that.

Ms. Maria Minna: You would support an increase in the RRSP and the guaranteed income supplement. I have to choose between the senior who is not eating today and the problems we may have in the future. Which one do I choose?

Mr. David Thibaudeau: Well, I'll--

Ms. Maria Minna: You have to be fair when we talk about this. Mr. Strain wants the debt reduced, so you know--

Mr. William Strain: There are a couple of points to be remembered here. One is that we tend to look at the taxes forgone based on RRSP contributions as a tax expenditure like any other tax expenditure. I'd remind the committee members that it is very different from a tax expenditure on your typical program spending, because it's not a tax that is forgone, it is a tax that is deferred. As the savings within the retirement savings programs increase, so does the potential tax revenue to be gained in the future from those increased revenues when they start to be paid out to those who become entitled to retirement benefits. There's even a question as to whether savings should be in the tax base at all, but that's another issue we don't want to get to. But I think it's important to have an appreciation for what the nature of the tax assistance really is for retirement savings programs.

As to priorities, it's a mug's game. You can ask any member of this panel whether they would trade this off against that. That's a question we could address, if you're talking about increasing the guaranteed income supplement to allow those who are in poverty situations a priority. If you've only got two trade-offs to make, between increasing the RRSP contributions and having a significant increase in the guaranteed income supplement, I personally would say we should favour the guaranteed income supplement increase. It's probably the more urgent of those two very discrete priorities, but I don't think that necessarily means you can't do both, given the overall package of decisions that have to be made.

The Chair: Committee members have indicated to me that they have all their questions, but I'm going to take the opportunity to ask a couple of questions of my own. Please don't read any priority into this, because that's not what's fair.

The OECD study on early childhood education was started in 1998, and it's finished now. Canada wasn't in phase one, but it will be in phase two. Could you just give me an update on when that's starting, how much time is involved? That's the first quick factual piece I need to know.

Ms. Laurel Rothman: Very good. You're really up to date.

My understanding is that whatever Canada has reported probably should be completed by January, maybe February. That's as much as I know.

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The Chair: All right. So it's fairly soon.

Your charts here--I see you didn't produce them, but one of the universities did--

Ms. Laurel Rothman: Actually, we did produce it, with information from them.

The Chair: I understood that some of the western provinces and the territories had made a fair amount of input into ECE, but it's not shown. You say no details are available or it's unknown.

Ms. Laurel Rothman: Unfortunately, this is a reflection of what we would consider to be not a good reporting system, and it's not really sound enough accountability. So to answer your question, we really don't know. There are press release announcements, but we don't consider those real plans. That's why we didn't put in what Alberta's press release said is going into child prostitution, which, from our perspective, is not really an early childhood priority. It's an important priority, but not for young children. I'm not sure about British Columbia or the territories.

The Chair: In fairness, though, 2002 is not yet over, so there's some room here. There is nobody showing that they've spent all the moneys allocated.

My point is that every taxpayer on every program is looking for more transparency and accountability, whether it's infrastructure, whether it's taxation. The witnesses we've heard to date--and we still have all this week's worth--are saying, as priorities, increase child tax benefits and, second, get into better and more ECE.

Do you think the times have changed? I remember back when Lloyd Axworthy was in Human Resources and the federal government did go with a sharing program to the provinces and territories, Nobody was sufficiently in financial shape at that time. What do you think has changed, if anything, right now?

Ms. Laurel Rothman: That's a good question. I think we have some good examples in this country. We do have Quebec, which took the initiative to develop a broad program and phase it in, and as I mentioned earlier, I think it's producing some good news stories, as well as the fact that many parents are relieved at being able to afford reliable child care. We also probably have learned more from research. and perhaps we've learned from the results of the negotiations that ended up in such a broad agreement on early childhood development that we're not coming out with some of the key investments we hoped to have. We know Manitoba is ready to go forward. Ontario, to our knowledge, is not, unfortunately. A number of Atlantic provinces have indicated.

The Chair: Thank you.

You saw with the fiscal update--and this is to anybody who wishes to go after it--that the forecast for planning purposes is much more constrained in the near future, as opposed to the far future. One of the questions that was given the committee to canvass was how much prudence we should have in there. The minister himself has set the $3 billion, but they're talking about whether it should be $1 billion. Is that sufficient? Should we have more of a cushion in case there is some unusual circumstance? Does anybody want to go there? I know you didn't want to be pegged down on what your debt number is, but maybe I'll be more successful than Mr. Penson in getting some idea. Should this be equivalent to contingency? In the past the prudence factor has been spent in many budgets, but usually, we don't have to go into the contingency moneys. Does anybody want to try that one?

Go ahead, Mr. Strain--a courageous man.

Mr. William Strain: I'll jump into the fray again, only to say that when the former finance minister presented his first budget, he laid out the strategy of holding to a two-year planning horizon, because once you get even beyond that two years, you're almost into never-never land in your ability to make accurate forecasts, so having two-year rolling time horizons seem to be an appropriate measure. We at CAIFA and CALU supported that position. We supported the contingency reserve approach to things. The $3 billion sounded like a reasonable amount in that context.

Also, I think that choosing the prudent economic forecasting and conservative approaches in terms of looking at the averages of the independent market economists and so on was good in terms of the financial planning horizon. I know that there has been criticism forthcoming that perhaps they were too prudent or were packing away the reserves, which come out and make the surpluses look extremely high. But we've been lucky over the past number of years on the interest rate horizon. If interest rates were to take a spike, with the debt levels where they are, it wouldn't take very much to more than chew up that surplus and contingency reserve and go right back into deficit. I think that's the important reason for continuing to concentrate on the repayment of the debt, so that we don't get held hostage to the fluctuations of the world economies and the current political situation we're seeing around the world.

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The Chair: Mr. Polito, you wanted to add something.

Mr. Joseph Polito: Yes. Thank you.

I agree with that point. But I'd like to remind everyone of something.The issue of investment has been raised over and over again. If I'm spending my money on my home and children, then I'm investing. If I'm spending it on trips to Las Vegas, then I'm frittering it away. Even if we don't put anything toward the deficit this year or the next couple of years but we invest that money in our people, then it's a good thing.

I understand the Conference Board is projecting over the long term continued surpluses, to the point where we could even pay off all our debt by 2020 or so. I can't remember what the date was. We do have to consider current investments now. Certainly we don't want to fritter it away in Las Vegas, but we also don't want to cut back on the necessary investments in our people.

The Chair: Ms. Lohnes, did you want to comment?

Ms. Terri Lohnes: I just want to echo that I think restoring the $3 billion contingency reserve was a positive measure, and I think that probably is an appropriate amount. In past fiscal years we've had about a billion dollars of what I call wiggle room in the budget in terms of foreseeing any economic challenges. It's probably appropriate to start pocketing money away in the budget, sort of rainy day funds, for the near term. I think your looking for direction in this fiscal budget only is perhaps not the best use of the fiscal flexibility you may find yourselves in.

You've been hearing from many of the people here today that there are priorities, and if you're looking at longer-term gains and benefits, there are investments. As the board said today, investments in infrastructure can grow those returns. To be pigeonholing funds to be used indeterminately if need be, or however that should be described, is perhaps not the best fiscal policy if you want to be accountable to the taxpayer.

The Chair: Thank you.

Mr. Bergeron.

Mr. André Bergeron: Even though it may not be directly answering your question, I have to say it's very humbling on our part, the Association of Canadian Airport Duty Free Operators, to be at this table today. We hear numbers into the billions, and really our problem is only in the millions. Our numbers are probably not equivalent to any kinds of rounding-up factors you're putting in. We're talking about $2.5 million to $3 million to correct that problem in our case. As I said, it's kind of humbling to be surrounded by all these people who are talking in terms of billions.

Thank you.

The Chair: On behalf of all the members of this committee, we certainly appreciate the time, effort, and talent you've put into developing and presenting your briefs. We appreciated receiving those that arrived early for translation purposes. We thank you also for taking the time today to answer the questions of the committee.

I will suspend for about seven minutes, and then we'll go on to our next panel.

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The Chair: Good afternoon. Welcome.

We are on panel two of our afternoon of pre-budget discussions pursuant to Standing Order 83(1), and I welcome all of you today.

From the Campaign for Stable Funding of Adult ESL Classes, we have Graham Hollings, who is the instructor, and he is accompanied by Prasanna Hettiarachchi; from the Canadian Centre for Philanthropy, Gordon Floyd, who is the vice-president of public affairs; from the Canadian Restaurant and Food Services Association, Don Maunders, who is the vice-president at A & W Food Services of Canada--one of my earliest employers, I might add--and Joyce Reynolds, senior vice-president of government affairs; and from the Hospital for Sick Children Foundation, Malcolm Burrows, who is the director of development and gift planning. So welcome to you all.

As we are only four of us on this panel, each person presenting will have up to ten minutes, and we'll go with the order we have you on the agenda today.

So for the Campaign for Stable Funding for Adult ESL Classes, Mr. Hollings, the floor is yours.

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Mr. Graham Hollings (Coordinator, Campaign for Stable Funding of Adult ESL Classes): Do people normally want to follow along with text?

The Chair: Actually, the brief has been distributed and translated, so people have had it ahead of time. If you wish to speak to your brief, or whatever you want to do, it's ten minutes. Usually, speaking from the brief is most effective.

Mr. Graham Hollings: If people do want to follow along, it's on about the fourth page, inside the red folder. I'm sorry there are no French translations. We got fairly late notice.

I teach adult English as a second language for the Toronto District School Board. I'm also the coordinator for the Campaign for Stable Funding of Adult ESL Classes, a campaign that involves more than 40 organizations that work with immigrants. These organizations include the Chinese Canadian National Council, the Canadian Arab Federation, the Canadian Council for Refugees, and many other organizations. There is a list provided in the document here.

Over the past nine months, our campaign has lobbied MPs and MPPs in Ontario, through a postcard campaign and face-to-face meetings with MPs and MPPs, over the inadequacy of funding for adult ESL programs. I am here today to talk about the federal side of this campaign.

The federal government currently provides English language training through the LINC program, language instruction for newcomers to Canada. Thousands of Canadian residents, and the country as a whole, would be better served by some changes to the programs for essential language training. And by focusing on ESL programs, we do not mean to downplay the importance of French language training programs.

The changes we are seeking through federally funded language training programs are outlined on the postcards that many MPs and MPPs have received. We are asking that the federal government provide ESL instruction to an advanced level--including bridging programs to employment--to all citizens, immigrants, and refugee claimants who are in need of such training, and to unemployed workers who need English to return to the job market. I'd like to address each of these issues separately.

Number one, LINC programs should be offered to an advanced level. LINC classes currently stop at the intermediate level. At this level, people may be able to conduct a conversation in English but they do not have the language skills necessary to find meaningful employment. Studies show that the average immigrant living in Canada is better educated than the average Canadian-born person. However, many people who come to Canada remain underemployed for many years. A lot of this has to do with language skills. Citizenship and Immigration's analysis of the 1996 census states that the lack of knowledge of English is a major barrier to labour force participation. Offering people language training to an advanced level will help fill this gap. Why would we want to run programs that stop short of their target?

Similarly, we believe federally funded programs should provide bridging programs to employment, programs that teach job-specific language and help people find meaningful employment in their field. Many newcomers to Toronto enrol in adult high school co-op programs simply because they are seeking Canadian experience in their profession.

Number two, federally funded language programs should be open to any Canadian resident, citizen or refugee claimant, who needs the programs. LINC programs are currently limited to landed immigrants and convention refugees. Many people are served by these essential language training programs. However, the demand is much greater than is provided for by the federal government.

In Toronto, LINC serves less than half of the adults who take ESL classes. The Ontario Ministry of Education provides non-credit adult ESL classes for the rest of the people through its continuing education grant.

It is clear that LINC is not meeting the demand for language training. The Prime Minister's task force on urban issues states:

The shortage of resources for English and French as a Second Language, and skills training for immigrants, oftenhinder their ability to enter the workforce and fill labour shortages.

There is no federal funding available for refugee claimants or Canadian citizens who need language training. Why is Ottawa providing essential language training to some Canadian residents while denying it to others?

Finally, federally funded language training programs should be expanded to include unemployed workers who need English to return to the job market. During the recession of the 1990s, Human Resources Development Canada found that many laid-off factory workers, including citizens, needed language training before they could be retrained for other work.

There needs to be recognition that the responsibility for language training should not fall solely on the Department of Citizenship and Immigration. Communication through language is an integral part of every social and economic activity. When large numbers of people cannot speak fluently, read, or write at least one of Canada's official languages, we all lose. It affects our economy, it affects our ability to provide quality health care, and it affects our ability to deal with other social issues. It also hinders public participation in decision-making and weakens democracy.

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The Campaign for Stable Funding of Adult ESL Classes believes the delivery of language training programs should be integrated to involve the departments of Human Resources Development, Health, Industry, and the Secretary of State for Multiculturalism, together with their provincial and municipal counterparts. We would all benefit from such an approach.

I'm sharing my time with Prasanna Hettiarachchi, who is a former adult ESL student. He will introduce himself.

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Mr. Prasanna Hettiarachchi (Former Adult ESL Student, Campaign for Stable Funding of Adult ESL Classes): My name is Prasanna Hettiarachchi. I came to Canada from Sri Lanka as a refugee claimant in 1991. I arrived in Toronto with $69 in my pocket. I didn't speak any English, and I had no family members.

Within a week of coming to Toronto, I enrolled in a school called the Overland Learning Centre. This school is funded by the Ontario Ministry of Education and provides non-credit classes for adults in English as a second language. I was admitted to a beginners class, and I began classes right away.

It is such a relief to be able to get a class and then start something when you come here. When you don't know anybody, you cannot do anything. It is very important for people like us, when we come here, to have some hope that we can start life. My first circle of friends came from this school. My first connection to Canadian society came from this school. I felt I belonged there and had a future in this country.

After six months, I got my work permit. Right away, I started working in a doughnut store at night. I learned English in the daytime. I studied at Overland for three years. I did advanced English, job search, and a co-op program. I couldn't get into any other programs because of my status. I tried to go to George Brown, but I couldn't. I tried to go to high school, but I couldn't because of my status. Finally, after three years, I received my Canadian refugee status, and enrolled in baking and technology at George Brown College while working evenings.

After graduating from George Brown, I continued training and working with— [Editor's Note: Inaudible]— I started with them at minimum wage, which was $4.85 at that time. I was selling bread. Last year, I finished my job there. I was in charge of the Montreal division, in pastry and the bakery.

Recently, I returned to Toronto to start my own business. Today, I have two Great Canadian Bagel stores. I am a licensee with the Hudson's Bay Company. We are in negotiations right now to go into a partnership with them in food services.

The ESL training that I received when I arrived as a refugee claimant provided me with the foundation I needed to further myself in Canada. I'm thankful that those services were there for me. The school I attended has lost its co-op program and is threatened with closure. While the provinces provides money for the instructors, it doesn't provide any money for the building and its maintenance. I'm very concerned that future refugee claimants might not having the chances I had.

Thank you.

The Chair: Thank you very much.

I will now go on to the second presenter, Mr. Floyd.

Mr. Gordon Floyd (Vice-President of Public Affairs, Canadian Centre for Philanthropy): Thanks, Madam Chair, and thank you for having the Canadian Centrefor Philanthropy back before you again this year.

There are several new members of your committee who may not know the centre, and so perhaps I should open with a couple of comments about who we are.

The Canadian Centrefor Philanthropy is the most broadly based of the umbrella organizations in Canada's voluntary sector. Our membership consists of about 1,200 organizations, almost all of which are registered charities and therefore governed by the provisions of the Income Tax Act. They are active in all ten provinces and three territories, and they're engaged in areas as diverse as social services, health care, education, international development, the environment, arts and culture, recreation, and philanthropy.

Very often I think Canada's charities are simply seen as groups of volunteers, and this is a serious misperception that exists among the Canadian public generally, and I think also among some parliamentarians. It's true, certainly, that the voluntary sector in Canada engages about 6.5 million Canadians as volunteers, but the sector is much more than that; it's a major employer, accounting for approximately 11% of the Canadian workforce and 9% of the Canadian GNP, and it has a paid workforce of about 1.3 million Canadians.

It supports groundbreaking health research in Canada, it delivers literacy programs, as we've just heard, skills training, housing, and a range of social services to the most disadvantaged Canadians, it gives artistic expression to our national spirit, and it meets the most basic needs of millions of people living in the poorest countries of the world. The voluntary sector advances solutions to many of our most challenging public policy issues, ranging from the environment to child poverty to urban development.

In the brief we have submitted to you we've addressed six proposals. I intend to touch on only four of those this afternoon, due to the time. We believe these proposals, all of which relate to registered charities and the provisions of the Income Tax Act that apply to them, will significantly enhance the ability of the charitable sector to improve prosperity and quality of life in Canada.

The first proposal I'd like to draw to your attention is one that you have heard before and that you've made recommendations on before. This concerns the inclusion rate for capital gains tax on gifts of appreciated securities, publicly traded securities. The value of the reduced inclusion rate, which was first introduced in 1997, has been significantly eroded since its introduction. Initially, the reduced capital gains tax was worth 20% of the capital gain on a donation of publicly traded shares, but today it's worth less than 12% of the appreciated value.

This relatively new tax incentive has been spectacularly successful in attracting new donations to charities across Canada. The Department of Finance released an analysis of the impact of this measure only last week. It showed that the increase in gifts of this kind was a jump from about $69 million in 1997 to over $200 million in the year 2000. All of this happened at a cost to the treasury of $73 million. In other words, for every dollar of forgone revenue, $3 of new donations were made, and that's making the most generous assumptions in terms of the cost to government. That's assuming that every one of these donations would not have happened in any form before this measure was introduced.

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It has been, as I say, a spectacularly successful new incentive, which had its origins at this committee and was first recommended to the Minister of Finance by this committee. Because of its success, the government accepted your recommendation last year to make what was initially a five-year trial measure a permanent one, and we're now calling on you to repeat a recommendation that you made last year to take the next step and follow the example of both the United States and the United Kingdom and eliminate entirely the capital gains tax on donations of publicly traded securities. Doing so would more or less restore the value of this tax incentive to the same level it was at when it was first introduced in 1997, and it would approximately make it equal with the level of assistance that's available in the United States.

The finance department analysis showed--and we haven't had a chance to go through it in detail, but using their numbers from the report they released last week, a gift of $100 worth of stock in Canada generates a total tax break of $53. In the United States, the same gift generates a total tax break of $59. The value of eliminating the remaining half in Canada would be $7, so that would move our $53 to $60, which would be bringing us to parity with the American standards.

We can understand that there might be some nervousness about a new tax break. We would therefore propose to you that just as was done initially with the existing capital gains incentive, the recommendation be that on a five-year trial basis we look at eliminating the capital gains tax measure entirely and see if we can't repeat the kind of spectacular success that we've had to date.

The second recommendation I'd like to speak to you about also involves the capital gains provision. Currently this provision is available to all donations to registered charities except those donations that are made to private foundations. So we have in the current law discriminatory treatment against private foundations. It's these foundations that are very often the preferred vehicle of choice for wealthy Canadians who are doing their tax planning, thinking about leaving their bequests to society, and turning some of their assets over to public benefit purposes.

At the moment, the full amount of the capital gain on donated securities is subject to capital gains tax if those securities are donated to a private foundation, compared to only half the gain being taxed if the securities are donated to any other type of charity.

Our point simply is that tax incentives in this area should not be designed to discriminate against one form of charitable giving over another. They should be designed to encourage all forms of charitable giving without distorting the donor's choice of charity.

So our recommendation is that donations of publicly traded securities to private foundations should qualify for the same capital gains tax treatment as similar donations to other charities.

I will skip over my third one because I have had the signal for time.

The Chair: You have one minute.

Mr. Gordon Floyd: I will go to the last one, which relates to recognizing the important role of advocacy of charities in Canada.

Members of the committee will do the voluntary sector an enormous service if you acknowledge that the non-partisan public policy work, public education, and awareness initiatives undertaken by charities in furtherance of their charitable objects is not political activity but is charitable activity that enriches our society and our democracy. In fact, policy advocacy is often one of the most efficient and effective ways for a charity to fulfill its mission, as has been well demonstrated by such charities as Amnesty International, Mothers Against Drunk Driving, and the Canadian Cancer Society, among others.

Subsection 149.1(6) of the Income Tax Act should be rewritten, in our submission, to reflect clearly that while charities must not have a political purpose and may not engage in any partisan political activity, they are allowed to engage in non-partisan advocacy that is incidental and ancillary to their charitable purposes, as the common law has provided for more than a century. The current wording of the act in this area is very confused and very confusing.

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The current rules are impossible to understand or explain. They're causing many charities to avoid all public policy activity, for fear of losing the right to issue receipts. As a result, some of Canada's best informed and most experienced voices--those who are working on the front lines in almost every aspect of community life--are not able to contribute to the vital public policy debates that are going on in this country in such areas as health care reform, poverty alleviation, environmental sustainability, and so on.

I have tabled with the clerk two versions of proposed amendments. We are not talking about a massive rewrite of the act here. If you take a look at the first of the options that have been tabled, you will see, by reading the words that are struck out, as well, in that version, just how convoluted the current wording is and why it's causing such incredible confusion.

We request that the committee recommend we strengthen Canada's democratic system by allowing charities to speak out on matters that are related to the charitable purposes for which they are registered, provided their advocacy is non-partisan and remains incidental, in other words, does not become a purpose for the charity itself.

Thank you.

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The Chair: Thank you very much.

We'll now move on to Mr. Maunders, from the Canadian Restaurant and Foodservices Association. Go ahead.

Mr. Don Maunders (Vice-President, Canadian Restaurant and Foodservices Association): Thank you.

Good afternoon. I am the chair of the human resources committee of the Canadian Restaurant and Foodservices Association, an organization made up of 16,400 members that control more than 48,000 food service establishments. Our $42 billion industry employs close to one million Canadians coast to coast.

I'm also vice-president of marketing at A & W Food Services of Canada, which is a B.C.-based Canadian company with 610 restaurants in every province of the country, employing between 12,000 and 15,000 people.

The majority of our restaurants are owned and operated by independent franchisees, who make important investments in their communities and, in turn, regularly give us feedback on what they need, to compete in today's highly competitive business environment.

As much as I represent our company in total, I very much want to represent the views of the many small-business owners who make up the A & W chain. I think to understand the payroll issues that we have put forward to the committee in our submission, you really have to view them at the individual restaurant level, and I'll try to speak to that this afternoon.

First of all, I'm here to thank the committee for your recommendation last year for a yearly basic exemption--a YBE--in the employment insurance program, and to seek your support to get this proposal implemented in 2003. I won't repeat what's in our CRFA submission, because I know this committee understands the point that payroll taxes are job killers. They are most punishing to labour-intensive businesses and entry-level employees, and they prevent young Canadians from getting a foothold in the labour market. You've also recognized a yearly basic exemption as an effective and efficient way to target payroll tax relief to those groups that need it the most.

In the limited time available today, I'd like to focus my comments on giving you some real-life examples of how payroll taxes impact our franchisees and employees, and I thought some context might help.

Our restaurants fight it out in what is clearly one of the most competitive business arenas in Canada--the quick-service restaurant business. Bottom line profits for most of our restaurant operators run in the range of 4¢ to 6¢ on each dollar they receive. Any slippage in their P and L is literally a killer.

In that P and L, food and labour typically account for about 65% of every dollar received. Food and labour are about the only two variables an operator can influence control over, to ensure that they deliver a healthy bottom line and secure the future of their business. Even then, much of our food cost is largely beyond the operator's influence, because those input prices are set in a very competitive marketplace.

In the end, labour is the key variable that restaurants manage, week in and week out, to deliver their bottom line. On a restaurant-by-restaurant basis, an operator will typically anticipate their sales for a week and budget total dollars they can afford to spend on labour, whether it's in the form of hourly wages, payroll taxes, or staff benefits. What really matters to a restaurant operator is how many dollars can they afford and run their business, given the sales they anticipate? If sales are below projection, it means decisions are made to cut hours to try to keep total labour costs in line. If sales are stronger, extra shifts get added.

The point of the presentation is to say it's a very, very tight business, and those who don't run by that tight set of rules typically don't last very long in our industry.

In recent years the pressure on labour costs has risen steadily. As a result, virtually every operator in our system today runs staffing below his or her ideal needs, because they simply can't afford to staff fully. The pressure on labour costs have risen, and sacrifices are made in terms of hours employed. They just don't run their restaurants to the full complement, to the level of service they would like to achieve.

In this highly competitive environment, every change that raises the cost of labour has to be paid for either by cutting back somewhere else or in raising prices. The latter is very tough to do in a mature market like ours. That's good news for consumers, but not very good for our hourly staff, and especially for our newest and youngest staff. Typically an increase in the cost of labour means fewer man-hours available to run the restaurant, and it's the part-time younger people who lose out.

Conversely, anything that lowers the cost of labour will show up immediately in room to add extra hours of staffing to meet the restaurant's needs, and the people who benefit, again, are typically our youngest staff, those most in need of experience and first-job training to get their foothold in Canada's workplace.

So when I ask our operators about what they need to hire more young people, they're very clear. They say “Make it less expensive for me to hire that person, and I'll add them tomorrow”. They look at payroll taxes as a particularly expensive barrier to hiring more staff. As labour gets more expensive, they look for ways to drive more hours out of the work week.

I thought I'd illustrate this point with a very real example: onion rings. I'm hoping everybody at this table has enjoyed, at one point, A & W onion rings. We're very proud of them. They're a great product. We make them by hand every day in our restaurants. But they also come with a high labour cost component. In each restaurant, about four to six hours will be spent every day just in making fresh onion rings. So as we look at that menu item, every time the cost of labour goes up, there's added pressure to find ways to cut labour on this item, and the things that start to get on the agenda are pre-cut onions and machines that can replace staff in battering and breading. The payback on those kinds of investments gets better and better every time payroll taxes go up, as they have so dramatically in the last ten years.

As the cost of labour goes up, service-intensive businesses like ours look hard at substituting new equipment to replace hourly staff. It's a fact of life and a matter of business survival.

That's just one small example from our chain. Those kinds of trade-offs in terms of labour investment and ongoing structure of labour, and replacing it as the cost goes up, are realities played out in our chain every day. The scenario I just related is also played out in the rest of food service, in retail, in tourism, and in other service businesses across the country.

Despite the direct link between youth jobs and payroll taxes, government continues to become more and more reliant on payroll taxes for revenue. In recent years the government has made strides in reducing business and corporate taxes, which of course is appreciated; however, the impact has been minimized because of significant increases in payroll taxes, and those payroll taxes comprise 40% of an average restaurant's tax burden in a given year.

The federal payroll tax burden for the average restaurant has jumped 20% since 1993, and that was following a 24% increase from 1990 to 1993.

Government is pouring more and more money into youth employment programs, but the youth unemployment rate remains stuck at twice that of adults, and there will be even more pressure to cut back on hours and staff in our restaurants and across the industry when CPP rates increase another 25¢ in January.

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We were petrified this summer when rumours began circulating about a 3% increase in the GST. But we're even more concerned about the prospect of a dedicated payroll tax to fund health care. While we appreciate the importance of health care, we would like to see spending reductions to business subsidies and other market-distorting programs before any new taxes are considered, particularly any tax on jobs.

Madam Chair, you asked presenters to bring forward ideas that will contribute to greater levels of economic prosperity that will be widely shared by all Canadians and that will result in quality-of-life improvements for Canadians. Implementing a YBE in the EI program and enhancing the YBE that's in the CPP program will increase the take-home pay of every working Canadian and will also enhance the job opportunities for those not able to find work, especially those seeking their first job. We encourage the committee to push hard for the implementation of both of these proposals and to resist any new form of payroll tax.

Thank you very much.

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The Chair: Thank you very much.

We'll now go to the Hospital for Sick Children Foundation, Mr. Burrows.

Mr. Malcolm Burrows (Director, Development and Gift Planning, Hospital for Sick Children Foundation): Thank you very much.

My name is Malcolm Burrows, and I'm the director of development and gift planning at the Hospital for Sick Children as well as the government relations chair of the Canadian Association of Gift Planners, which is a national professional association in the charitable sector. I'm here with my Sick Kids hat on today.

My comments in many ways are fairly similar to those of Mr. Floyd from the Canadian Centre for Philanthropy, oddly enough. It wasn't planned, but that's the way it is.

I think that providing you with an actual front line example of a charity, admittedly a large charity, will help dramatize what we're going through and why we need certain incentives in the Income Tax Act to support charitable giving in Canada.

The Hospital for Sick Children Foundation was founded in 1972. It's Canada's largest hospital foundation, with over $400 million in assets. We started building our assets back in the 1880s, so there are well over 120 years of tradition. We have annual fundraising revenue of close to $42 million. We're the only hospital foundation in the country with a national grants program and the only one to support something other than our parent organization. We grant nationally to support children's health research to the tune of $3.3 million a year.

The foundation's principal mandate, however, is to support pediatric research at the Hospital for Sick Children, which is the largest pediatric research facility in Canada and one of the largest in the world. We have an international reputation for genetics. Of all the institutions in the world, no institution has discovered more disease-specific genes than the Hospital for Sick Children. We've discovered 20 alone and 40 in partnership. We're a real national treasure in that sense. It also extends to population health and of course on a daily basis expanding new treatments for children.

Because of our international position, we have to compete internationally for talent, which means making sure that we retain talented physicians and scientists in Canada and also recruit them back to Canada. In addition we train researchers who come here as fellows from around the world. Canada's immigration policy actually makes us highly competitive in this way. We have a United Nations of trainees at Sick Kids, but ensuring that they stay here and contribute to our country is an ongoing challenge for us.

Since 1972 the foundation has granted $317 million for research at the hospital. While Sick Kids is clearly a tremendous success story, we also have tremendous challenges as we seek to satisfy ever greater requirements at the hospital as we go forward. We're a big charity by any measure, but we're struggling to raise the funds required to compete in the international medical and scientific world. To illustrate the size of our challenge, I want the members of this committee to know that the foundation's grant to the hospital has increased two and a half times in four years. We've gone from $19 million in 1999 to almost $49 million in fiscal 2003. Next year our grant to the hospital will be increased to $55 million.

Like other charities in this sector, the fundraising challenge at Sick Kids is enormous. As I said, we're large, we're fortunate, and we've been very successful, but we need to do better. The government can help in a significant way with one tax incentive.

I'm appearing before this committee today to once again recommend the complete elimination of capital gains tax on publicly traded securities. This is a recommendation that, as Mr. Floyd mentioned, was introduced through a recommendation of this committee back in 1997 and was recommended again last year, in 2001.

This is the single most promising new source of philanthropic funds to the sector, certainly since we've contributed from 1997. I too was very taken with the recent paper released by the Department of Finance on October 25 entitled “Special Federal Tax Assistance for Charitable Donations of Publicly Traded Securities”. It says that gifts of publicly traded securities grew almost threefold between 1997 and 2000. The growth in donations and securities was much more rapid than the increase in total donations over the period. Mr. Floyd mentioned that this has moved from $69 million to $200 million.

At Sick Kids we've actually experienced, in some years, up to a four-fold increase and in other years up to a fifteen-fold increase. Since the introduction of the incentive we have received over $27 million in gifts of securities, which has been incredibly helpful.

The department's paper makes a point that the current one-half exemption of capital gains on gifts of publicly traded securities is competitive with the U.S. Even though there's a differential between the 53 and 59¢, the basic thesis of the paper is that it's competitive, partly because of lower U.S. tax rates but partly because of our contribution limits.

To quote the paper, Canadian and U.S. regimes produce roughly similar results in terms of tax assistance from donors. Now this may appear to undermine, I think, the assertion--and you've probably heard it from more than one charitable group--that this is an extremely important incentive. I would urge this committee to look at both the tax policy argument as well as the social policy argument. What we've seen is a significant increase, unlike any other incentive in the history of charitable incentives in this country.

I guess the department could be said to be essentially right in this argument. Although they use the 46% rate in their illustration, they ignore Alberta at a 39% marginal rate and they ignore British Columbia at 43%. So the figures Mr. Floyd shared earlier would be somewhat out of whack if we factored in these lower rates.

The point is, the charitable sector at this time needs a super incentive, something that will be a tremendous spur to further giving. Relative to our peers in the U.S. in particular, our giving rates are significantly lower. We need something to galvanize philanthropists, to galvanize individuals, to give gifts of assets.

The government and this committee have been very supportive over the years. We've seen more changes to the Income Tax Act over the last six years than at any time in the history of Canada to support charitable incentives. This is work that is very, very much appreciated, but it needs to be continued. And this kind of super incentive, with the full elimination, is the kind of thing that will change the philanthropic culture in Canada and trickle down to charities of all sizes.

So, very simply, we strongly recommend the elimination of capital gains on gifts of publicly traded securities to charities.

In the couple of minutes I have remaining, I'd like to... We mention two other incentives in our paper, which I wasn't going to mention, but now that I have ten minutes... The first is the gifts of publicly traded securities to private foundations. As a large public foundation we think this is an important policy point, having parity, because we receive, as do many smaller charities, but particularly the smaller charities, funds through intermediaries such as private foundations. So this is where the large capital gifts go, and then it's distributed over many years to smaller charities. This is a key point.

There have been a lot of questions raised about whether or not this is appropriate because it seems to be a non-arm's-length transaction. We would further recommend that there be some sort of monetization process, so if the donor wishes to give a large gift of publicly traded securities to a private foundation, the link be cut. So if they are a principal of a publicly traded company, this has to be broken. It will promote philanthropy and it will address the arm's-length issue, and I think that would satisfy both sides of the public policy debate.

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Finally, I'd like to encourage this committee to look forward, with charitable giving incentives, to a similar super-incentive for gifts of real estate. Real estate is one of the most widely held assets in Canada, often a capital asset, though not in all cases, and it's one area that's proved quite successful in the United States. If we could expand it beyond just the publicly listed securities, I think you'd be opening up the charitable sector to a whole new source of revenue. Elimination of capital gains on gifts of real estate would be a tremendous super-incentive for the sector.

Thank you very much for your time.

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The Chair: Thank you very much.

We're going to start with Mr. Jaffer for ten minutes. Everybody in the room will have ten minutes.

Mr. Rahim Jaffer: Thanks, Madam Chair, and thanks to all the presenters this afternoon. I've really appreciated all the information.

I'd like to start with Graham and Prasanna, especially on the ESL funding. Our immigration system is trying to be proactive to attract people here, but the focus seems to be more on that process and tends to stop once they get here. So our immigration system needs to look a little more at what we can do for people coming to the country, integrating them better and providing a lot of the support they need.

My question is going to focus today on the fees that are being collected, especially when you come in contact, I believe, as an instructor, with people who are recently come to Canada. I've heard more recently a lot of concern with the amount of fees being collected. The average person now who comes to the country, whether they're claiming refugee status or apply to come, finds the average fees are about $1,500, if I'm not mistaken, and quite often, those fees, if they come as a refugee, are added on as a debt that has to be repaid to the government at some point.

The reason I'm asking about these fees is that more and more I've heard that people are finding them very burdensome when they come first to this country. Second, even though there may be an administrative cost associated with people's applications, whether they be refugees or going through the proper immigration process, and there's a portion of that $1,500 that may go to administrative fees, what we're not seeing is what the rest of that money is going to. We're not clear whether it's all going towards administrative fees, and I'm willing to doubt it. Would you be supportive of trying to see more transparency? If those fees are going to remain in place, should some of that money be earmarked for language training or other forms of support for people coming to this country? Because we're not clear on where that money is going.

Mr. Graham Hollings: Of course, I think it would be wonderful if things like that were more transparent. I actually have no idea how that money is spent. I know it is, as you say, very burdensome for a lot of people, and we would like to see more of that money, if it's not being directed into language training, be so directed. In our postcard campaign we've also asked that perhaps EI surplus money, since this is an employment issue, also be directed into these programs. I know that's probably a big minefield, but who knows?

Mr. Rahim Jaffer: In the future, as you are making these sort of presentations, if you do happen to come across that information with some of the work you're doing, how that money is being spent--because we often ask that, and it's not clear--if you could share that with us, I think it would be very useful as we make the case for how we can support more of what you do.

Mr. Graham Hollings: We could try to find out, sure.

Mr. Rahim Jaffer: On the EI surplus, I'll move to our friends from CRFA and get a further clarification. As a small business owner myself, I always found payroll taxes a big problem, and I know, if payroll taxes went up, it would be a direct tax on job creation and I would spend more time behind the counter if I had to--obviously, sales wouldn't go up with any costs that were indirectly based on employment.

I wanted to ask you specifically if you know how our payroll tax regime here in this country compares to that of the United States, one of our biggest competitors, although not so directly in the service industry. How do we compare, if you happen to have that information today?

I tend to agree with the YBE suggestion to increase the basic exemption, as you suggest in your presentation. I guess what I'm asking is whether that is the best way to go, or should we focus more as a committee on reducing the overall premiums when it comes to the EI collection of premiums? We still have a huge surplus within that area, if I'm not mistaken, to the tune of $40-odd billion. What are your thoughts on that front, whether we need to do it on both fronts, reducing the premiums and still increasing the YBE? What suggestions do you have?

I guess we may even have some new information on that. From what I understand, the Auditor General's weighing into that now, saying whether or not that surplus is in fact legal or not, but that's another issue.

If you can just clarify a couple of those points I've asked about, I think it would be very useful to the committee.

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Mr. Don Maunders: Yes. Actually, on the two points, I'll defer to Joyce from the restaurant association, who will know more of the comparison to the U.S., and then probably I can talk about the policy alternatives that were pursued.

I do know that YBE is very effective and makes a powerful difference in specifically focusing the tax, the improvement of payroll taxes, right to the people who we think can use it the most and make the biggest difference. That's why that instrument was chosen.

I'll let Joyce speak to both of those points.

Ms. Joyce Reynolds (Senior Director, Government Affairs, Canadian Restaurant and Food Services Association): In terms of our payroll taxes, it's very difficult to get a clear comparison with other countries. We have payroll taxes at the provincial level and the federal government. Often the OECD comparisons don't break them down to the same degree. Also, on the percentage paid by the employee compared to the employer, we pay 60% of the EI costs, as you know.

When we look at the overall numbers provided by the OECD, it may look like Canada's aren't out of whack and in fact may look lower, but if you really get into the details, I think you'll find that in terms of payroll taxes and payroll costs as well, there's an awful lot that goes into payroll costs. When we compare Canadian and U.S. operations, we often find that our overall payroll costs are higher.

Mr. Rahim Jaffer: I guess that would factor in the regulatory burden as well, quite often.

Ms. Joyce Reynolds: Right.

Mr. Rahim Jaffer: Okay. Fair enough.

My final question, if I may, is to the groups dealing with the philanthropy issue and capital gains.

There's still this perception out there that in fact by reducing capital gains you're only in fact helping the wealthy, and there really isn't much spinoff when it comes to many other groups. We're sort of hearing the opposite from you today. I'm wondering if you have more information to back that up, where there is in fact proof so that we could start debunking the fact that more average people do benefit from a reduction and elimination of capital tax completely, as this committee has recommended in the past. On a number of levels, whether it's on property or whatever it might be, that money is gained and then can be reinvested. Or in many cases, charities often benefit.

There still is that perception that reducing capital taxes overall only helps the wealthy and doesn't have positive spinoffs. I'm wondering if you can comment on that.

Mr. Malcolm Burrows: Sure. Thank you.

I take that question from a couple of different perspectives, first, remembering that charitable giving is not an end in itself. It's not just a tax gain; there are tremendous benefits to the community. When you look at who's benefiting, with so many social service organizations, with everything from scholarships in education, whatever the case may be, there are people from all walks of the country who end up benefiting.

What you have to some extent is wealth transfer from people who are less fortunate for the benefit of society. Losing that perspective and thinking that it's just going to charity and charity is an end in itself I think is the wrong way to look at it.

What I've experienced, because I work with donors who give these gifts, is that, sure, we've seen multi-millionaires give very, very large gifts. There's no question that people with more money and larger asset bases are going to benefit. But it is an incentive. I've also talked to multimillionaires who say this is helping them to give more. It is an incentive to give more because it aligns their values. They have to give something to society, they want to give it in this way, and they're willing to give far more.

Frankly, though, I've also seen so many people who are middle-class Canadians who have been giving $50, $100, or maybe $200 for years, and all of a sudden they come across this incentive and they will give $5,000 or $10,000, because they're not giving out of the cashflow pocket, they're giving out of the asset pocket. As the policy is a public policy choice encouraging people to give out of the asset pocket, it is a tremendous boon, because we've been focused on just cashflow giving for so long.

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Mr. Gordon Floyd: The only thing I'd add to that is a perspective that what we're really trying to do here is get people to give some of their wealth for public benefit purposes. At the end of the day, they lose control over and lose ownership of that money. I think there's a very interesting philosophical discussion to be had about whether it is appropriate to be taxing the dollars that people are giving away for public benefit purposes at all. My guess is that we wouldn't be able to make it fly that there should be no tax on those dollars, but the notion is there that we can encourage this transfer from private wealth to public benefit by reducing the tax burden that is assessed against this portion of an individual's wealth. The winner in that scenario is not really the donor, it's the recipient of the charitable services being paid for by that donation.

The Chair: Mr. Masse, you have ten minutes.

Mr. Brian Masse: Madam Chair, I'd like to start in a similar order, actually.

To pick up on your presentation with regard to the whole language issue in our community, prior to being elected to this seat, I was at the multicultural council, running Youth Service Canada programs. I do take note of your comments with regard to youth services, but I must defend that our program had over 95% success rate for the five years I was involved in it.

I want you to elaborate on the core funding issue. One of the biggest problems that agencies have had, especially with providing language services in my community, has been sustainability and the ability to even operate because there have been cutbacks with regard to administrative support and operational issues, and also with regard to having to provide the services in a good, decent environment. So I want to get your comments with regard to the actual operational issues in core funding.

Mr. Graham Hollings: Our campaign had a provincial part and a federal part. I touched on this a little bit in the report. For example, in Toronto, provincially funded programs serve more people than federally funded programs, but those programs have a serious problem. Basically, they receive no funding to pay for space, heating, electricity, etc. A lot of those programs have closed in the last few years, and they continue to close. This includes programs that are in schools themselves, because they receive no accommodation grants. They occupy space that's considered unfunded, and as school boards are facing the squeeze, a lot of school boards have been pushing out these programs because they can't afford to pay for their space any more.

There seems to be a misperception. From a couple of MPPs I've talked to, I get the sense that the provincial government probably thinks our programs run in the evenings and after school, when 80% of them run during the regular school day in space that is unfunded.

Now, to my knowledge, there isn't a major problem with the federally funded programs, although--and again, this is more in Toronto--there are a lot of partnership programs with agencies, and agencies have been losing funding, and space is disappearing. But I don't know if this is having an impact on the federally funded programs that I was mainly talking about.

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Mr. Brian Masse: With regard to the fees, really, I've seen the effects they've had on some of the people who've come here. Often they have family members who are incurring debt, and interest on that debt is above the cost of living and above the rate of inflation, and they're having to pay it back. Do you think, though, if that wasn't eliminated but was redirected toward I guess some kind of training funding opportunity or enhanced services there would be more support?

Prasanna, perhaps you would be a good one to respond to this. How would you feel if you still had that type of fee imposed but it translated into actual services? One good example is actually the advanced class learning. I have seen professionals basically stuck without the proper support and then have to go through years of training. They could be fast-tracked through that. Do you think that would be an appropriate vehicle to redirect funds to?

Mr. Prasanna Hettiarachchi: Of course. When we come here, most of us want to achieve our goals as soon as possible. If you don't have funds, if you don't have programs, you stagnate for three or four years, and in life that's a long time.

Mr. Brian Masse: So you wouldn't object if there was redirection.

Mr. Prasanna Hettiarachchi: No.

Mr. Brian Masse: Thank you.

To our friends from the CRFA--and you're right, the onion rings are good--one of the things I noted from your presentation was that the surplus is generated disproportionately, probably through your industry in particular. I wonder if I could get a comment from you with regard to the turnover and training that you also have to incur at probably a higher rate than other employers. What type of cost is associated with that aspect, being that you have a lot more youth employed in your services and might have to train quicker than other organizations do?

Mr. Don Maunders: Let me make sure I understand the question. I can absolutely confirm that turnover is an issue in our industry. Of course, we are typically the starting place for most Canadians; their first job is in the restaurant industry. Joyce can correct me if I don't get the statistic right, but I think 43% of Canadians between the ages of 15 and 24 work in the restaurant business.

Ms. Joyce Reynolds: I have to correct you; 43% of our workforce is under the age of 25.

Mr. Don Maunders: Yes, sorry.

As you might imagine, we are where many people get their first start. And it's a great job in terms of learning many of the fundamentals that carry on in your work career. I don't always get a chance to speak to this, although it's one of my favourite things to say: it's a great industry, and they are great jobs. They are maligned too often by people. In terms of what people need to get early in their careers in terms of teamwork and responsibility and everything, they're great jobs.

That said, because it is that age group, we do have a tremendous amount of turnover. As people move on to other things in their life or drop out of the workforce, it's a real issue for us to contend with. That puts added pressure on training, of course, since there's a bit of redundant effort, but that's a fact of life for our business and has always been.

From speaking to operators, I think it's the same as it's always been. Good operators offer better work environments and have less turnover. That's one of the other things that comes into play.

So other than confirming that, I'm not sure if there's something else in your question that I can address.

Mr. Brian Masse: Well, to go a little bit further in terms of that 43%, I don't have here, and I don't know if you do, any knowledge of what other general industry standards are for that. If you're providing entry-level positions, you're providing also a larger service to the greater economy, because you're actually having to incur the costs of training--i.e., workplace culturalization, ethics, behaviour, and all the different elements often taught at the first job. Whether you keep it or lose it, you experience it. I wonder what that cost is to your business.

Mr. Don Maunders: That's a great question and a good observation in terms of reality. For instance, one of the gentlemen who also presented today talked about arriving in Canada and where his first employment was. I congratulate him for his success in becoming a franchisee with his own two operations. What a stunning story that is about the contribution made by immigrants to the country.

For an employer, of course, there is an added burden to bridge the cultural and the language gap often, with training materials and additional time. Anything that makes our industry competitive allows for more of that to happen and is absolutely a win-win in our communities. It's good for the employer, with a large and ready pool of people to turn to, and it's good for employees, particularly new Canadians, as a chance to get started. We see it played out in our businesses every day.

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The Chair: Ms. Reynolds.

Ms. Joyce Reynolds: I think 18% of the overall workforce is under the age of 25, compared to 43% in our sector.

Mr. Brian Masse: Okay. Thank you.

I have one quick question to our philanthropists here--and maybe they are in reality--with regard to capital gains. There's been some good discussion about that, and you did refer earlier to front-loading the cash, but one thing I get from Canadians--and I know it hasn't been the focus of your presentation, but it was mentioned--is that they're really irritated that for your political donations, especially the first $300, you get an absolute killing in return, whereas if you donate to charitable organizations, it's greatly reduced. Has the idea ever been advanced by your organizations of having a parallel system? It's something I hear repeatedly. Those services go directly back to empowering the charitable organizations and are pure generators for the community.

Mr. Gordon Floyd: What we'd really like to have is a parallel system up to about $1,200.

Mr. Brian Masse: Fair enough.

Mr. Gordon Floyd: The way the system works right now, political donations attract a much more generous credit at the lower level, but the lines cross at around $1,200. Beyond that the charitable tax credit is a more generous credit. The reality for charities is that about 80% of donations come in the form of large donations, and we would not want to see the political tax credit applied at that level.

Mr. Brian Masse: Okay.

The Chair: Thank you very much.

Mr. Wilfert, ten minutes.

Mr. Bryon Wilfert: Thank you, Madam Chairman.

I thank everyone for coming.

Mr. Maunders, you made a comment--and I hope I didn't hear it correctly--that with social security and payroll taxes Canada is the lowest of the G-7. In 2000 we're at 5.8, compared to the U.S. at 6.9, the French at 17.4, Great Britain at 6.1, etc. In fact, we've been going down. I hopefully didn't hear it that way--I have the impression Mr. Valeri did as well.

At the same time, on the $3,000 yearly basic exemption, we have talked about it before and I have been supportive of it, but I'd like to put it in context. We often talk about the United States. Talking about the G-7 and the OECD report is very important. Could you just clarify that for me and your comments?

Don't tell me it was Joyce.

Ms. Joyce Reynolds: It was me.

What I said was, sometimes, when you look at the country numbers, they don't reflect all the payroll taxes within the various countries. With overall payroll costs, for instance, if you look at one operation in Canada and at a similar operation in the U.S., labour costs are often higher in Canada. It's payroll taxes combined with other regulatory costs.

The other thing I'd like to point out is that although our costs may be lower in some cases, they've been increasing a lot faster than in the other countries, and that's what's taking a toll on our operators. I think there were only three others among the OECD countries whose overall payroll tax burden was increasing faster than in Canada.

Mr. Bryon Wilfert: Could you tell me the cost to the federal government of this increase? I've forgotten what that is.

Ms. Joyce Reynolds: Approximately $2.1 billion, based on 2002 premium rates.

Mr. Bryon Wilfert So you'd be looking at it's being phased in, I would assume.

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Ms. Joyce Reynolds: We're very aware of the $42 billion surplus in the account, and of course, we'd love to have it all, but we know the realities, and that's not going to be the case. So I imagine it would have to be phased in. We would certainly like to get that rate-setting process situation resolved quickly, and I think one of the key components would be a YBE.

Mr. Bryon Wilfert: As you know, the minister has indicated that he is very interested in this issue dealing with EI. There is no separate EI account, and there hasn't been since the Auditor General said we couldn't do it that way. So there is no separate fund sitting out there with all this money in it. However, the minister is committed, as we have been as a government, to continuing to lower the EI premiums, and one of the issues will be to have a reasonable amount of money in there for down times, at the same time making sure we don't have the so-called access.

By the way, your comment on the onion rings really disappointed me, because we don't have any cookies here that I've noticed, so the onion rings would have been a great fill-in. It was just a comment, but I certainly agree with the onion rings.

To the Centre for Philanthropy, you have listed six recommendations. Some of them cost money, some of them may not cost as much. We're not going to go back into a deficit, period. So what's your priority among the six and why?

Mr. Gordon Floyd: I tried to address the priorities by selecting the three I spoke to.

Mr. Bryon Wilfert: Right, but which of those would be your priority?

Mr. Gordon Floyd: One of those three has no cost implications at all, as far as we can tell--

Mr. Bryon Wilfert: I like that.

Mr. Gordon Floyd: --and that's the one related to changing the rules on advocacy. The other two are both measures related to capital gains tax.

Mr. Bryon Wilfert: Again, if we were to phase those in over a two-or three-year period, would that be helpful?

Mr. Gordon Floyd: Yes, it would be helpful. You're talking about phasing towards complete elimination?

Mr. Bryon Wilfert: Yes.

Mr. Gordon Floyd: I think that would be helpful, and it might also be a very useful way of getting there. I suggested a five-year trial. I think a phase-in is another way of moving slowly on this one.

Mr. Bryon Wilfert: I noticed you mentioned a five-year trial. My view on the phasing would be to send the right signal, but at the same time indicate that since we're not going back into a deficit and we have to deal with the first ministers conference on health care in Kyoto, we won't be awash in dollars, because we're also paying off the national debt. I'm a great believer in phasing in, because it sends certain signals and at the same time gives us an opportunity to evaluate how that phasing-in is going.

Mr. Gordon Floyd: The other point I'd make here is that the latest numbers on this the department has produced are for the year 2000, and there were a lot more shares that had appreciated in value kicking around in 2000 than there are currently. So this is likely a measure that, were the government to move on it in the near term, would have very modest cost implications.

I would like to underline, though, that the current inequitable treatment of private foundations is a blot we really do feel strongly should be dealt with.

Mr. Bryon Wilfert: I certainly noted your comment and I appreciate that.

I don't necessarily need a comment today, but I'm still trying to get my head around this change to the Income Tax Act for greater latitude for charities to provide public policy input. I don't quite understand, because from my perspective, if I give money to a charity, I expect it to go for certain purposes. As far as public lobbying or whatever you want to call it is concerned, I presume they have access along with anyone else, and they should have that access. My concern would be over what kinds of dollars would be used for public policy pronouncements. Some charities like to say 85% is used for charitable purposes and 15% is administration.

I don't want to see 15% for administration and 15% for public policy and it whittles its way down. It's by way of a comment. Obviously, we don't have time, but I would like you to come back to that at some point, if you could.

On the ESL, in your map here of the federal government, you have 42% of immigrants going to Toronto. This may not be what you've intended, but there's a great misnomer, particularly among Toronto politicians at the municipal level, that we're not doing our fair share in terms of providing dollars, and in fact we are, on resettlement issues, etc. Had I known this, I would have provided the figures for you today. It was one of the things we found out on our urban task force. But it's a great misnomer. Some of them on city council didn't even know in fact that we provided any money.

I'm all for supporting ESL programs; however, I have constituents who say we shouldn't be supporting any ESL programs because immigrants should have the language skills--and that was a floater by one former minister--before they get here. I'd be interested in your response to that, as well as to the fact that if we're going to provide money for ESL programs, again, we can't be at cross purposes with some of the provinces, and sometimes I think we are.

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Mr. Prasanna Hettiarachchi: I came to this country because I'm running away from death. If I had stayed there, within another month or two I would have been dead. More than 200 of my friends have been killed. I didn't have time to learn English. I didn't have any idea that I was going to come here two years before that situation. I had a better life back home. I came from a very well-to-do family, but when I lost everything I had to make a choice.

Mr. Bryon Wilfert: You're referring, though, sir, to refugees. The comments I get from a number of constituents are not about refugees. They're talking about those who come here as landed immigrants. That's the comment directed to me. For refugees, I understand that. Again, I am a great supporter of ESL programs. As a former educator I can tell you I had to deal with those issues.

My issue is talking about funding to cities through the federal government and not necessarily getting the recognition that it's there, and I wanted you to elaborate on that, sir.

The other one was on the issue of immigration for landed immigrants. There has been concern. I've just gone through a situation where someone applied in Pakistan, was short four points because of the language, was told to go back and get the program, did it, and now has to reapply because they've expired.

The Chair: Our time has expired too, so I'm going to allow you to make a brief comment and then I'm going to allow Mr. Floyd to comment on the charitable....

Mr. Graham Hollings: One of the things I would say is that unless all the immigration to this country is coming from only English-speaking countries, then the reality is that.... Many people who come here do have reasonable language skills, but the main issue we have to deal with here is that even people who can carry on a conversation can often not deal in a professional workplace.

One of the things that I think is worth focusing on here is that we're losing an awful lot of human potential by having people here who, yes, can talk to you and carry on a conversation, but they can't function as engineers, doctors, etc. Currently a huge percentage of the people coming to the country are very highly educated people.

There's a lot more you could say here.

The Chair: Mr. Floyd, we'll give you a couple of sentences.

Mr. Gordon Floyd: Thank you very much, Madam Chair.

Very briefly, I think the points Mr. Wilfert has raised are important ones and deserve a response. We asked Canadians what they think about charities using some of their money to speak on the issues they're dealing with, and we were stunned by the results: 88% of Canadians believe that charities should be spending some of their resources speaking out on the issues.

What we think that is about is that people understand it's a bad use of resources. It's a bad restriction to have charities focused only on cure and not on addressing some of the underlying causes. In other words, the notion that charity is just about delivering services, alms for the poor, is not an appropriate notion. In fact, the current law is encouraging charities, forcing charities often, to use their resources inefficiently.

The Canadian Cancer Society will tell you that the most efficient spending they have done has been on tobacco issues.

º (1645)

The Chair: Now we'll go to Mr. Valeri for ten minutes.

Mr. Tony Valeri: Thank you, Madam Chair.

I just want to pick up on some of the comments with respect to stable funding for the ESL. I think what you're really hitting on is an issue that we're trying to grapple with, and that's the lifelong learning skills training agenda. It's not just a matter of having immigrants come to the country knowing the language, it's ensuring that literacy levels and numeracy levels in this country are at such a level that we are enhancing productivity and standard of living for all Canadians.

I think your brief is saying the federal government should be playing a larger role financially in ensuring that the English language is certainly understood by Canadians, and immigrants in particular, in your case. So I really appreciate the fact that you're here today.

I want to thank you, Prasanna, for coming to Canada, and seeing now that you're a valuable contributor to this country and are going to build this country. We're going to do it together. I think that's really the miracle of immigration. As much as we can point to faults within our immigration system, we see the successes, and it gives people motivation to continue to push for better immigration, because we need it as a country, and you're a fine example of what we can have in this country.

So thank you for coming, and welcome. I just wanted to make that comment with respect to ESL. You can respond if you like.

Also, I'd like to ask Mr. Burrows to comment. I was interested in your last recommendation, talking about real estate, expanding it to real estate. I'd be interested in knowing what impact it would have on the charitable sector. I don't know whether you might have those types of numbers, but what will the impact be on the charitable sector if in fact we made that kind of change, to include real estate as qualifying for a charitable donation?

My last question would be to the Canadian Restaurant and Foodservices Association. I'm interested in a reaction to a proposal that we got earlier today on EI, where a suggestion was made that the basic exemption not be $3,000, but actually $9,000, and that any further corporate or personal income tax reduction should be directed towards increasing the exemption, rather than reducing the premium, or any further reduction in EI premiums should go towards increasing the exemption rather than the reduction of EI premium.

I'd also be interested in knowing your general thoughts, from an SME perspective, on what your fiscal priorities are as an association. In particular, I'm interested in knowing how you react to RRSPs, the RRSP discussion that's going on in raising the limits to $19,000, and subsequently to $27,000. I don't know whether the association has a position on that, but as small business owners, I'm interested in your reaction. I think your comments on debt reduction, tax reduction, and program spending would be helpful to the committee as we continue to deliberate.

I don't know where you want to start, but....

The Chair: Go ahead, Mr. Hollings.

Mr. Graham Hollings: I'll just say briefly that one of the things we would like to see—though I have no idea of how these things work—is perhaps more cooperation between the federal government, provincial governments, and municipal governments, because services are being provided at every level and there are holes. That was a big part of the focus of my presentation. I think there are a lot of good programs out there, but because different levels of government are offering different things, all kinds of people fall between the cracks.

º (1650)

Mr. Malcolm Burrows: On the issue of real estate, what's the upside for society? We have a reasonably good sense of that because the incentive in the U.S.—the complete elimination of capital gains—actually applies to real estate as well, and to all appreciated property. The philosophy there is that because it's such a widely held asset—I've seen figures from the States, and between 40% and 50% of all assets held are in real estate—there is a potential to unlock it for the charitable sector. And it's not just for the use of lands themselves. For example, ecologically sensitive lands can be sold, and the proceeds could be used to run a food bank or something like that. It's an asset that could be transferred and then liquidated for the use of the charitable sector.

It's never going to be as large as public securities, because real estate is a more emotional asset, frankly. But by unlocking that potential, it could grow to between 2% and 5% of the value of gifts given. It's probably close to 0% right now, though, because of the way it's currently taxed. You pay full capital gains taxes when you dispose of real estate as a gift, so it's very rarely seen.

Mr. Tony Valeri: You gave the example of perhaps selling land and using the money at a food bank. Would you actually be constrained to selling it for uses that would be not for profit, or could the charity actually just sell it and take the moneys gained to fulfill its own mandate? You're not suggesting that you would be confined or constricted, are you?

Mr. Malcolm Burrows: No. In most cases, the asset would be disposed of and the proceeds would be used for charitable purposes. It's just a way of transferring assets. It's giving them incentives so that rather than having the business owner liquidating it—let's say it was a plot of land or something—transferring it over outright facilitates giving that much more. But as charities, we really don't want the property. We want the proceeds, of course.

Mr. Tony Valeri: Okay, thank you.

The Chair: Mr. Maunders, a couple of those questions were to you.

Mr. Don Maunders: Thank you. There were several questions. I'll check with my colleague in terms of some of the details.

Certainly EI at $9,000 is a fairly bold recommendation, obviously. If we've come forward with $3,000, then $9,000 does it three times as well as what we've anted up. But the notion of $3,000 or $9,000 is it that it's a fairly effective and directed tax reduction that has an influence on our industry, but also on employment levels and in terms of the overall community. We would therefore heartily endorse going even more boldly than we've gone with $3,000.

Mr. Tony Valeri: I should say, though, that the proposal suggests taking the rate back to the 1994 rate in order to get it to the $9,000.

Mr. Don Maunders: To raise the rate?

Mr. Tony Valeri: Right. In other words, rather than reducing the rate, the proposal is to focus on the exemption level, with that having a greater impact economically than just the reduction of the rate.

In fairness, you're responding to this without having the actual proposal and numbers, but I'm just looking for a reaction to it.

Ms. Joyce Reynolds: In looking at the youth employment situation and in looking at our proposals, one of the things you have to take into consideration is that back in 1996, when the CPP program was changed, the YBE was frozen. In 1996, when the EI legislation changed, the old exemption was removed. So there already have been hits on youth employment. They've had to shoulder more of the increases in payroll taxes up to this point, and that's one of the reasons why we've put forward this proposal.

As you said, we'd have to go back and do some more number crunching, and it would depend on how the numbers worked out. But I don't think going back to the 1994 rates would fly with our members. We'd need to go back and look at it.

º (1655)

Mr. Don Maunders: It's an interesting approach, but I agree with Joyce's comment. We'd have to really go back and do the numbers on behalf of our members to see if that's going to build the right things in the industry and in the community.

You also asked about RRSP limits. Just as a general reaction, I just checked with Joyce, and as an industry we don't have a policy or a position on it specifically. I would just say independently that, to me, the notion of people understanding their own responsibility and then taking greater ownership of managing their future by way of a larger RRSP limit makes great sense to me. People should have that responsibility, get it early in life, and conduct themselves accordingly. That's my quick reaction to RRSPs.

In terms of debt reduction and the overall tax structure, you asked for a comment on that. A fairly extensive piece of work was done with the Conference Board of Canada to do different modelling of what tax cuts and which forms have the biggest implication in terms of the most positive contribution to GDP, and which give you the biggest bang for the buck. Out of that work, the CRFA's position is the payroll taxes have the biggest bang for the buck. That's referred to in our document, on page 8; some of the numbers are gathered there.

In terms of the priority, our industry would say to start with payroll taxes and get that barrier out of the way. Beyond that, look at the GST in terms of broadening it and then lowering it. And lower down on the list would be income taxes, property taxes, and other forms of tax reduction. But the very top of that list would still be anything we can do about payroll taxes.

The Chair: Thank you.

Mr. Brison, for ten minutes.

Mr. Scott Brison (Kings—Hants, PC): Thank you, Madam Chair.

Thank you, each of you, for your interventions here today. It's always of great value hearing from you, and it's great to see some of the recommendations make it into the final report that goes to the minister. It's even better when we see some of the minister's responses in the form of a budget at some point in the future that actually includes some of those. So your contributions are very valuable.

My first question is on some of the issues facing hospital foundations and on hospitals in general in terms of the research side of things. I've been told there are some really tax-driven issues around attracting and keeping top-quality research talent in Canada and around the income tax issues, as well as around some of the ones you mentioned.

Quebec has a program wherein PhDs involved in research do not pay provincial income tax, as a means by which to equalize the tax burden with some of the jurisdictions that we are competing with, particularly with the U.S. The Quebec government claims this has been quite successful, but I would appreciate your feedback in terms of the degree to which our income tax rates, and particularly our marginal tax rates, impact on or make it more difficult to attract and keep talented researchers and, in some cases medical practitioners, in Canada. That's one issue.

On eliminating the capital gains tax on gifts of listed securities, I asked our researchers to provide some information on what the actual cost of that would be. The low end of that is estimated at $20 million per year. You quite rightly identified that this would probably be one of the best years to eliminate it. I don't know about you, but I don't know too many people who paid capital gains tax this year. I sure as heck haven't.

It strikes me that when you're talking about a tax expenditure of less than $20 million per year, and you consider the amount of pent-up capital out there that many philanthropically minded Canadians would contribute, it seems like a very small investment that would pay significant rewards.

I was proud of the fact that our committee last year had such a strong recommendation, in terms of moving beyond the status quo to the elimination, so I hope we can actually move beyond that issue in the report.

Those are my first two questions, and then I have some other questions.

» (1700)

Mr. Malcolm Burrows: Starting with the question of researchers, and perhaps doctors writ large, I suppose it very much depends on what centres you're looking at, what institutions you're being attracted to, if indeed they are being attracted to institutions.

The Hospital for Sick Children is actually quite unusual because we have a brain-gain situation. For example, we've had four major recruits in the past two years to our pediatric oncology area. They've come from Great Ormond Street in London, Children's Hospital Boston at Harvard, St. Jude in Memphis, and another American centre. To some extent it's not purely economic. Obviously it helps to have the right package, but so much of what researchers and physicians at that level are looking for is the right environment.

So for us it's things like indirect costs of research, which you may have heard about from the university sector, because we're a teaching hospital. As a research institution, the indirect costs of research are essentially an additional supplement to the Canadian Institutes of Health Research grants. When they go out, you pay for some of the research infrastructure.

Those sorts of things actually end up, from a research hospital perspective, being far more important than pure payroll. When you're talking about, say, a general practitioner in Brockville, obviously tax incentives and marginal tax rates play a big role there.

Mr. Scott Brison: On the land, including real estate contributions and treating them as we would contributions of publicly listed securities, it makes a great deal of sense because there's a market in place that can value land in the same way that there is a stock market that can value public securities. It's not like contributing parts of a private business, where you don't have that. So I think you're on to something.

You should also link that more closely with environmental stewardship--the whole issue of green space, and the potential to do not just what is economically sound, but also what is environmentally sound.

Mr. Malcolm Burrows: From the perspective of the charitable sector, we think it would make good public policy sense to have one tax rule that applied to all types of lands. With the recent incentive for ecologically sensitive lands, you now have urban green space groups wanting in on it. You end up with a very fragmented tax system, with what could be considered special interest groups, as opposed to one policy across the board that can be easily understood and broadly adopted for the whole benefit of society.

Mr. Scott Brison: I have a question for the restaurant association, or the Canadian association of onion rings, as I'm going to think of you from now on.

Does your association have a view on the basic personal exemption? Our basic personal exemption in Canada is $7,400. We start taxing people in Canada when they hit that lofty threshold of $7,400. That's like onion rings, a mama burger, and a diet Coke or something every day. Really, it's ludicrous.

A voice: A root beer.

Mr. Scott Brison: Root beer, sorry, that's right.

What is your association's view on that? It strikes me as something that impedes labour market entry at lower-level or entry-level jobs. It strikes me as being wrong-headed that we are taxing people at that level and creating some significant disincentives for people to work, as opposed to not work.

» (1705)

Mr. Don Maunders: Overall, I would say I'm impressed by the impact the comment about onion rings had. There were several comments. Bear in mind that as the vice-president of marketing, half of my job here today is marketing. Remember, there's only one way to get that taste.

Obviously it's a great concern for us in terms of the level of taxation on young people who come to us. I think the work that Joyce has led--and with the conference board--has shown that any time you can improve the take-away disposable income of that group you make a disproportionate impact in the community and into the economy, because they're the people with the greatest set of spending needs, and any relief as a proportion of income is much greater. The direction of your question I think is an excellent one in terms of making it possible for more people to participate with greater choice in the economy.

Having not said what the limit should be, I can't respond to it, but I think it is an excellent consideration, because those jobs--with the cost of living in Canada--are harder pressed to make ends meet. There's no question that that kind of difference would be profound for the people who work for us, and anything we could do for them I think improves their whole take in our economy.

Joyce...

Ms. Joyce Reynolds: That would be the position of our association as well.

The Chair: You have 30 seconds, but this meeting has to end at 5:15.

Mr. Scott Brison: Okay. I think that's just about it, given 30 seconds. I can't even say hello in 30 seconds, Madam Chair.

I'll just say... Mr. Hettiarachchi, I just wanted to say that your story today was inspirational and it's great to hear and it makes me even more proud to be a Canadian.

The Chair: An excellent use of your 30 seconds, Mr. Brison.

Ms. Minna, ten minutes.

Ms. Maria Minna: Thank you, Madam Chair.

I'm going to focus a bit on the ESL issue, partly because it was a great part of my life for many, many years. I was—as you may know—a volunteer at COSTI for twenty years and the president of COSTI for eleven and a half years, so I have a fair understanding of the issue you're discussing today and the difficulties of establishing oneself in the country.

Mr. Hettiarachchi—that's how you pronounce your name, right?—I want to talk about a couple of things.

I notice in one of your charts you have amounts going back and forth and what's covered, provincial versus federal funding. In Ontario we have federal at 78.9 in the whole of Ontario, but 53.5 for Toronto. Although the amounts themselves are interesting, what struck me is what you said earlier: that the federal funding provides support for leases, rental, and what have you, whereas the provincial does not provide that type of support. The federal provides child care programs on the premises, I presume, while the provincial one does not.

One of the questions I wanted to ask with respect to the child care specifically is to what extent you notice in the work that you do the effect or impact on women coming to this country, their ability to learn English. To what extent are they left behind because of the fact that they just don't have that ability?

Mr. Prasanna Hettiarachchi: I think it does impact very seriously on women. I know, for example, that in linked programs child care is not provided for children under two years of age. The programs only accept convention refugees and landed immigrants. Most landed immigrants--I don't have stats on this--become citizens within three years of arriving in the country, because it's beneficial in various ways to be a citizen.

I think what we have is.... For example, a woman who has a baby or a couple of children may only be able to get into those programs for a year or so, and then she becomes a citizen and then she's not eligible for them. The only option left open would be to go over to provincial programs, and they don't have child care.

I don't have statistics about link programs, but I know in Toronto, for example, in the school board programs about 65% of the learners are women, a disproportionate number. I think there are various explanations for this. Having access to child care makes a big difference, but the big problem with link programs is that people may not be eligible any more.

» (1710)

Ms. Maria Minna: On the other hand, I want to add to my original comment, there's been a trend, to some degree, where we want to bring to Canada the perfect immigrant. They arrive in this country, they can speak English and French, hit the ground running, don't need any assistance from us, and we don't have to do anything. That's a utopia we're getting ourselves into, quite frankly. There are countries where English is spoken and people who have university-level education may have studied English, but if we look at the skilled workers we want in this country, if you want a blueprint reader who may decide to come, they don't necessarily speak the language to the extent they need. I think the fact that we don't have to train any of these people, for starters, is a huge benefit to our economy, never mind having to spend some for English as a second language. That's my position on that.

One of the problems, as you said, is that after you are a citizen, you normally get the federal funding. That's a problem, because people are not integrated and are not fully conversant with the advanced level of English after three years. So that's something I think I agree with you on.

What about EI? With new people who are under unemployment insurance, does EI take advantage and use ESL as one of their training programs? Do you see that happening much?

Mr. Graham Hollings: I'm not sure if I completely understand.

Ms. Maria Minna: Does EI offer ESL to unemployed workers who need it in order to get better training or get into a training program?

Mr. Graham Hollings: No, it doesn't. That's my understanding.

Ms. Maria Minna: So that becomes an impediment for any training or realignment of a job.

Mr. Graham Hollings: A major impediment, yes. When I was doing my spiel, I referred to a report that mentions this. I can't remember where it came from.

Ms. Maria Minna: Okay.

With respect to the school kids, I know there have been, in Toronto and Ontario anyway, a great number of cutbacks on programming. I know ESL is also becoming scarce in schools. Do you track any data to see to what extent children are being affected in respect of their access to ESL programs in the classrooms in their schools, which would affect their long-term ability to be integrated and function?

Mr. Graham Hollings: No. I can probably get data for you. A couple of weeks ago there was an article in the Toronto Star about the lack of ESL teachers in the Peel region, I think it was. I can get statistics for you on Toronto.

Ms. Maria Minna: I was just wondering if you were tracking any of that, because it is a problem, in the sense that it prevents those children of immigrant background from having the ability to succeed as other children do.

Mr. Graham Hollings: One thing I can add. My understanding is that children who are born in Canada cannot go into school-based ESL programs. From what I've heard, many children born to parents who don't yet speak English go into the school system not speaking English, but are then denied access to programs because they were born here.

Ms. Maria Minna: This is something we need to address. My generation of immigrants went through the same thing. The reality is that when a family doesn't learn English right away, it affects the first generation of children, who are then in school denied language training, in essence denying them a future. That's an issue I could go on about. It`s bothered me for the last 25 years, and it will bother me until we fix it.

I want to go back to a chart you showed us. It says “Poverty Rates by Periods of Immigration”. To what extent is ESL one of the major factors in the poverty rates I see? People who immigrated prior to 1986 had lower poverty rates than Canadians born in Canada, but then with immigrants arriving in Canada from 1986 to 1990, it shot up to 35%, and from then on it goes up. To what extent is ESL the primary cause of that problem?

» (1715)

Mr. Graham Hollings: I took this from a report from the Canadian Council on Social Development.

I haven't been able to find any studies that indicate that language is the determining factor here, but it seems that in all the reports I mentioned in the bibliography, or most of them, it has to do with language. Everybody seems to agree that there is an obvious correlation between language ability and people's employment and income levels. I don't have anything I can point to that proves it is language, but lots of people seem to be saying there's clearly a strong correlation here.

Ms. Maria Minna: In addition to increasing the amount of dollars going to the ESL program, would you also want to see the government negotiate, to some degree, with the provinces to amalgamate and integrate the two levels of programming so that you have the same standards and the same entry and program levels at both levels?

Mr. Graham Hollings: Yes, definitely.

Ms. Maria Minna: The provincial system deals with advanced, and the federal stops at the three-year juncture.

Mr. Graham Hollings: The provincial programs go from beginner to advanced, but the link programs stop at intermediate.

The bottom line is that people need these programs. The people taking the classes don't care which level of government is paying for this; they don't usually even know.

I work at a site where there's a sign on the wall in the hall that says, “Department of Citizenship and Immigration”, or “Funded by....” The main issue here is that we would love to see the provincial and federal governments work together.

Part of my job is assessing new students for the Toronto school board. A lot of the people who come in for an assessment have no idea what kinds of classes are available, have no idea that they're eligible for these but not for those. There are an awful lot of people tripping over their feet and sometimes not finding programs that they are eligible for, so there needs to be some sort of integration here.

Ms. Maria Minna: Thank you.

The Chair: Mr. Penson, I'm going to allow you six minutes here.

Mr. Charlie Penson: Mr. Hollings, it seems to me that your presentation today is really relevant to Canada, considering what's happening to us in terms of an aging population and the fact that immigration is going to have to fill a huge gap. Not only Canada, but the United States and Europe are going through the same kind of dynamics of an aging population. So I think what you have brought forward to the committee today is very important. The bottom line is, I guess it doesn't matter who pays, but there is going to be a need for continued and enhanced service in that area.

I would just add my voice to those who really have had a problem for a long time with the criteria for immigration asking for language skills. I don't think that's important. Our forefathers have come here not knowing the language. Anybody who wants to be a constructive member of society will quickly try to get those skills in place in order to do that, and it's up to us to make that available to them. So that's just a comment I have.

I would like to switch to the restaurant association, though, for my question.

Mr. Maunders, I think the only way you would have had more impact with your story on onion rings is if you had provided some for the committee today. But I do want to ask you about something you did not bring up, and maybe that's because it's under provincial legislation, but it's the issue of minimum wage in the restaurant industry.

I have four children. To supplement their income as students, three worked in the restaurant industry and therefore received a minimum wage. Most of them received a lot more money in tips than they received in wages. But I know an important element for you is how much that minimum wage is.

It has often bothered me, because it seems to me that some people tend to make this into a huge issue, as if most people were going to stay in that business all their lives. As I think you said earlier, for a lot of people it's a job that they go through and then move on to something else.

It seems to me that I've heard many times that a minimum wage has put us into a difficult position, not only there but in agriculture, where we have to bring in people from Mexico to work in the vegetable industry. Is that not a factor for you when you say a big portion of your costs are labour?

» (1720)

Mr. Don Maunders: Absolutely. Minimum wage is a critical issue in the industry, and we do look to partner with each of the provincial ministries in terms of what is the appropriate approach to minimum wage.

Let me just clarify something. We do have people whose first job is in our industry, and we do have a lot of people who do make careers in our industry. I've had the benefit of meeting and working with some wonderful people, elbow to elbow, who have been in our business for 25 years. So I don't want to give you the sense that it's an industry that you have to move out of. A lot of people love working with the public and stay.

Mr. Charlie Penson: But in that case I would expect some of those people would move beyond minimum wage.

Mr. Don Maunders: Absolutely, they do move beyond minimum wage. What we look for in minimum wage is that with good dialogue it's set with good care. I think one of the best models is that it should move up as an appropriate floor to the process. When it gets ahead of the economy, it hurts, and for the reasons I said earlier. If minimum wage policies are very aggressive, it hurts because it absolutely raises the cost of employing somebody, and the minimum wage of an unemployed person is zero. We always come back to that because we always like to have the ability to pay everybody more, but in reality it's set by the marketplace.

So we really do need thoughtful minimum wage legislation. It's a major issue for us. We can't have it get out in front because it hurts youth employment and it hurts our businesses, and it makes it less competitive for us. What happens in the end, you remember, is that we compete with the brown bag. So when our cost structures get out of line, we don't become very competitive as a business, and therefore there's less employment all around because of that.

I think the best model right now is probably Alberta, and I don't recall what the minimum wage in Alberta is today, but they've been more cautious about not getting out in front of the economy.

In doing so, they actually leave more room for the operator to manoeuvre. I think our average wage is probably as high in Alberta as it is elsewhere, but the difference is when you employ somebody, you have room to reinforce their performance and give them increases and keep them moving, which of course are wonderful ways to learn about moving through life.

So it's a big topic you've raised in terms of minimum wage, and it really is critical that we continue to have a dialogue provincially on that because it changes our life.

Mr. Charlie Penson: Thank you.

The Chair: Thank you very much.

On behalf of all the committee members I want to thank you for preparing your briefs, for coming forth and doing your presentations and answering the committee's questions today. We appreciate it, and we will be considering all these things as we think about our report, which we'll be writing shortly.

We'll suspend for a couple of minutes, change the seating, and move on with our final panel of the day.

Thank you.

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» (1730)

The Chair: We will continue with the third panel of the day. Pursuant to Standing Order 83(1), we are in pre-budget discussions. Most of our panellists are here. Some have yet to arrive, but we will start.

First of all, welcome to all of you. Thank you for joining us.

From Canadian Ecumenical Justice Initiatives, Kairos, I welcome our former clerk of the finance committee, who is now the executive director, Pat Steenberg, as well as Dennis Howlett, who is the team leader for Canadian justice.

Welcome to you both. In a minute, I will ask you to be the first presenters.

On behalf of the committee, I would also like to welcome Robert Barnett, executive director of the Escarpment Biosphere Foundation; Mel Norton, a member of the board of directors of the Multi-Employer Benefit Plan Council of Canada; Geoff Fortier, a representative of the Union of Canadian Transportation Employees; and Mr. David Cross, who is appearing as an individual.

The witnesses from the University of Toronto have yet to appear, but they'll just take their places when they get here.

Your briefs have been translated and circulated. We would like you address your briefs for up to eight minutes.

Ms. Pat Steenberg (Executive Director, Canadian Ecumenical Justice Initiatives (Kairos)): I'd like to begin by thanking you and the other members of the committee for including Kairos in your pre-budget consultations.

As an ecumenical justice coalition of the Canadian churches, Kairos can draw on over 30 years' experience in working on social and economic issues. Today, the spirit of the church and the reality of faith are often experienced most powerfully in the global struggle for justice. Canadians confront three actual issues that call into question the sustainability of our planet and the solidarity of human society. They are poverty and increasing disparities in the distribution of wealth, health care, and climate change.

Internationally, the single most significant expression of wealth disparity is the level of southern debt. Despite paying out over $3 trillion, southern debt today is triple the amount initially owed. In fact, for every one dollar that northern countries provide in aid, over three dollars come back in debt service payments.

Canada must continue to exercise leadership by calling on the international financial institutions to unconditionally cancel their portion of the debt of the world's poorest countries. The call for debt cancellation is not an appeal to northern charities. In fact, as the product of half a millennium of aggression and colonial exploitation, this debt reflects a profound failure in moral and distributive justice.

The fight to safeguard medicare is rooted in our understanding of community, compassion, equity, and fairness. Societies are measured by how they care for their vulnerable people. The struggle to preserve our publicly funded and administered health care system speaks to what, for Canadians, constitutes justice.

Finally, the implications of climate change force us to take responsibility for individual and collective choices that are ecologically unsustainable. With less than 5% of the world's population, the U.S.A. consumes 65% of the world's energy, and Canadians consume even more energy per capita than do Americans.

In his presentation to this committee last Wednesday, Minister Manley challenged us to propose how the government could best realign its spending to meet the highest priorities of Canadians. These consultations, he continued, are not just about what should be contained in the next budget; they are also about the kind of Canada we want. The government's Speech from the Throne touted new opportunities and possibilities for creating this kind of Canada: to put in place a health care system for the 21st century; to tackle the problem of climate change; to close the gap in life chances, particularly between aboriginal and non-aboriginal peoples; and to contribute solutions to global problems, including the growing global divide between rich and poor.

These promises respond positively to the churches' call for increased foreign aid, a renewed public health care system, the elimination of poverty, ratification of the Kyoto Protocol, and measures to address the needs of aboriginal people. We welcome these initiatives and applaud the Prime Minister for exercising moral leadership in addressing justices that have been too long ignored.

However, while the throne speech is important in signaling the intent of the government, promising words must be backed by action. The action needed must be forthcoming in the next federal budget.

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Mr. Dennis Howlett (Team Leader, Canadian Justice Cluster, Canadian Ecumenical Justice Initiatives (Kairos)): The intent to double Canada's development assistance by the year 2010 is welcome after many years of spending cuts. However, this increase will only raise our overseas development assistance contributions to 0.35% of GNP, which is still only half of the internationally agreed upon target of 0.7%. Much more must be done to close the increasingly large gap between the world's haves and have-nots, a gap that more than doubled between 1960 and 2001, in a world in which just 500 people are worth more than half of the global population and in which 11,000 children die each day of hunger or preventable disease.

The churches applaud the government's commitment to reforming Canada's health care system and to putting in place “the necessary federal long-term investments”. Bioethicist and doctor Nuala Kenny argues that health needs are different from other human needs because of the acute vulnerability of those afflicted. Health care encounters, she maintains, are places of moral meaning where the language of right and wrong, of caring and compassion, is pertinent.

More federal money is needed to address the grave problems afflicting this cherished Canadian institution. But even more important than money is improving the accountability of federal and provincial governments for how that money is spent. By increasing its share of health care spending, the federal government can ensure that provinces comply with Canada Health Act standards, and can use its leverage to end the growth of two-tier, for-profit care that is putting at risk the equality of access to and efficiency of Canadian medicare.

Medicare does not just need fixing. It must be expanded to include home care and pharmacare, new programs that recognize that health care is increasingly being delivered in ways that go beyond the hospital and doctor's services that the system was designed to cover. A federal pharmacare program would ensure that the poor do not have to choose between buying food or medicine.

The throne speech promised significant measures targeted at improving the welfare of children, including increases to the national child benefit for poor families, improved access to early learning opportunities and quality child care, assistance for aboriginal children, investments in affordable housing, and help for families with disabled children.

Wealth disparity and poverty remain serious problems in Canada. According to the Vanier Institute of the Family, the top 10% of Canadian households control 45% of household wealth. That's over four times as much as the entire bottom half. Moreover, over the past decade and a half, the net worth of the poorest one-third has declined. One in five Canadian children now live in poverty—a situation that is unacceptable in a country as rich as Canada.

The national child benefit has been an important step toward addressing this problem, but the maximum yearly benefits must be raised to $4,200 per child. It must also go to all families on social assistance and be protected from provincial clawbacks. Such an expenditure would help to reduce child poverty in Canada by half over the next five years. But much more also needs to be done to ensure affordable housing and to alleviate homelessness. While some promising initiatives have been launched, they remain seriously underfunded given the need. Once again, commitment to the throne speech promises will be found in the budget.

In his economic update, Mr. Manley gave assurance that the federal government was working with the provinces and industry to ensure that Canada lives up to its international responsibilities on climate change, as embodied in the Kyoto accord. While this is an important first step, it must be reinforced by other measures significantly. We must not continue to allow industry to externalize the social and environmental costs of pollution. Not only does this place an unfair burden on individual taxpayers, it also prevents prices from providing the signals needed to ensure the proper management and use of non-renewable natural resources.

Improving our energy efficiency and reducing greenhouse gas emissions will result in positive payoffs down the line, both in a more efficient and productive economy and in improved public health in Canada. But investments will be needed up front. If we could offer home owners 0% financing for energy-saving retrofits, such as those now being offered for energy-wasting SUVs, this could kick-start Canadians on the road to real energy conservation. Much of the money for this investment in cleaner energy can be found by reallocating the estimated $450 million to $500 million in annual subsidies to the fossil fuel sector and from revenue generated by the emissions trading system.

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Ms. Pat Steenberg: Globalization has changed the ground rules for the social justice project, its scope, its substance, and its urgency. In the words of Albert La Chance, “Our bodies are breaking down under the strain of the intoxication of our shared body, the Earth”. And in the words of another, “If we are lucky, mankind as it is has about fifty years left”. I say this not to encourage pessimism, but to suggest that if we hope to change this trajectory, we have only a very narrow window of opportunity in which to act.

Mr. Manley aims to create a Canada that strives to give its citizens not only a better standard of living, but the best standard of living in the world. By any measure you choose, Canada already has one of the highest standards of living of any place on earth. The challenge is not to make ourselves even richer, but rather to share that wealth more equitably among people in this country, around the globe, and in the generations to come.

Thank you for your time.

The Chair: Thank you very much.

From the Escarpment Biosphere Foundation, Mr. Barnett, the floor is yours.

Mr. Robert Barnett (Executive Director, Escarpment Biosphere Foundation; Ontario Land Trust Alliance): Thank you very much for inviting us to join you here.

As the executive director, I'm representing our 15 board members all the way from Hamilton, Ontario, to Gore Bay on Manitoulin Island. In addition, I've been authorized to represent the Ontario Land Trust Alliance, which has 32 land trusts in the province. That's our umbrella group. Unofficially, I'm speaking for the 82 land trusts across Canada. Altogether, these trusts protect 900 properties with 1,750,000 acres across Canada. So we very much appreciate the commitment this government has made to a legacy of new parks and protection of species at risk. That, we think, is very positive. What we're suggesting is that landowners be further encouraged to join with the government initiative and leave a legacy to this country through their local land trust. We hope taxpayers and citizens can join in this broad initiative.

The last time I was here presenting to this committee was in 1997. The government did reduce capital gains tax rather dramatically, and we very much appreciate that. That's allowed us to protect a lot of ecologically sensitive land across Canada. It's a very important initiative, and we very much appreciate it. Since that time our land trust has grown substantially--and that was only five years ago. By Christmas our land trust, just one of many in Canada, should have created 20 nature reserves protecting 1,400 acres. That wouldn't have been possible without those reductions to capital gains tax.

One of the big things that makes a difference is what we call the pre-approval of an appraisal. That's done beforehand. It's been all checked out. When the taxpayer uses it on income tax, there's no longer any question about it. That's made a big difference. It's not iffy for a landowner to donate their land any more. We do appreciate this partnership between Finance, Environment, and local trusts. This program, called the ecogift program, is very important.

I'm suggesting three, I think, relatively modest improvements to what's happening. We like the flow; we're just suggesting some minor changes.

Any potential decrease in capital gains tax would be very much appreciated. We think it's going in the right direction from 75% to 66.5% to 50% down to 25%. If that could be further reduced, either to 10% or zero, we would have got there. We appreciate the incremental change, but when a landowner is donating ecologically sensitive land, it should be an incentive for them to do that. So hopefully, capital gains tax stays up for other taxpayers and goes down for them, so that there is some incentive for them to donate, rather than just selling it like a normal landowner. Strangely enough, we appreciate the gap, we appreciate other people having a high capital gains tax.

Canada's conservation goals are to protect 12% of the land here. We're here to help achieve that, and we're achieving that at a cost to the government of 12%. If the capital gains is 25%, it's costing the government 12% of that. So that we think is major improvement for not very much money. It's only 12%, and the provinces pay 4% or 5% of that, so it's really costing the federal government about 7% to protect this land. So when a landowner donates, it's just like giving money, but the capital gains tax is a real disincentive. We think land is more important than the money, so we're trying to encourage landowners to protect this important land. Frankly, the costs are not very great for the amount of land we're protecting. In the U.S. they have no capital gains tax on donations of ecologically sensitive land. We hope we can adopt the same strategy here.

Another, technical issue is that of inventory land. Developers perhaps can be encouraged to donate some land, but that happens in the inventory land category. Currently, that's not dealt with the same way with the capital gains tax. So if that could be included, maybe we can get developers to join the party here. We think that would be very important.

Also, right now we can't really issue tax receipts on cultural properties or historic properties. So it would be an advantage to include them.

Another area is where landowners don't need the full ecogift treatment, but they would like to get their appraisals approved in advance. Maybe they could join in at least to that degree. Maybe they've got enough to write off and they're not worried about the full ecogift program. It's a little technical point, but it would be very important to us.

Another initiative is what we call bargain sales. Landowners may be willing to donate part of their land, but not all of it. Right now the Income Tax Act prohibits a partial donation: you either donate the whole thing or you don't donate any of it. In the States you can donate half and sell half to a land trust. We would like to have that capability, so that landowners who can't use the full tax receipt--maybe they can only use a small tax receipt--could participate in the program. Folks who've been farming don't have a lot of taxable income, and they, in many cases, are the folks we want to donate their relatively sensitive land, the back forty, very important to us, but they don't have enough income tax payments to use the tax system. So we'd like to do a little bit half and half. The U.S.A. also allows these things called bargain sales, so we think that's the right direction to head in.

My third suggestion is that modest grant programs through Environment Canada would help us to secure more land. Right now, if a landowner donates to us, it costs the trust $5,000 to $7,000 for appraisals and surveys and busy work to accept that donation. So we think it would be a good program if the federal government were able to contribute to the relatively modest costs of accepting those donations, to pay for appraisals, because we need a very high quality appraisal to satisfy the Minister of Finance, and we're the ones who are paying for that. So that would be a good program, and normally, those costs are less than 10% of the value of the land. That would be a further incentive, another way we could get more land donated.

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Close to national parks, national wildlife areas, nationally rated canals and historic sites, instead of having the federal government acquire additional land or adjacent land as buffers, we can do all that work if there is a modest financial incentive, maybe 30%. Instead of the 100% that would have to be paid to a landowner, maybe we can receive that if we can get some modest grants. I'm suggesting a pretty small program across the country. Maybe $1 million would do a lot of that. In Ontario we got foundation funding of $170,000 to pay for these appraisals and surveys. We parleyed that into 3,000 acres of protected land worth $4 million. That's a 25-to-1 leveraging of that money. We think there'd be a really high payoff.

We want to be sympathetic with the suggestions of the national round table, the Green Budget Coalition, etc. The scientists seem to agree that natural land protected is worth about 100 times what agricultural land is, just for the health of Canada.

I appreciate your inviting me here, and I hope that was useful. Thank you.

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The Chair: Thank you very much for the presentation.

Now from the Multi-Employer Benefit Plan Council of Canada, Mr. Norton, go ahead.

Mr. Mel Norton (Member, Board of Directors, Multi-Employer Benefit Plan Council of Canada): Thank you very much. Thank you for inviting the Multi-Employer Benefit Plan Council to meet with you today.

The first thing I'm going to talk about is what we are. The Multi-Employer Benefit Plan Council represents interests of Canadian multi-employer pension and benefit plans. Its membership includes representatives of all persons and disciplines involved in these programs, including union and employer trustees, various professionals, including actuaries, such as myself, lawyers, plan administrators, etc.

There are over one million Canadians covered under multi-employer benefit plans or multi-employer pension plans, and to give you a bit of perspective, if you look at the number of Canadians who are covered in private sector pension plans, multi-employer plans are at approximately 25%.

Multi-employer plans exist in a wide variety of industries, construction and retail among others. They exist where employees may stay in the industry, but work from program to program or employer to employer. Without a multi-employer type of plan where you can have affordability, where you can move from one employer to the other and not lose your pension and benefits, these individuals would not have a benefit program and would not have a pension program. A multi-employer plan allows the individuals to continue to look after themselves and their families, both for retirement and for their health benefits.

This year I understand the focus of the committee is to ask Canadians to advise on how Canada can best ensure that greater levels of economic prosperity are widely shared and how the government can best assure the highest quality of life for all. We believe multi-employer benefit plans and multi-employer pension plans are an important tool in accomplishing both of these goals. Multi-employer benefit plans, the health and welfare plans in particular, and similar programs are socially desirable, and they help ensure the quality of life for all Canadians equally. The role of multi-employer plans should not only be recognized by the government, but also be preserved, and indeed encouraged, with the continuation of tax treatment that both provides necessary health and dental care benefits not otherwise available under Canada's public health system and promotes savings that will provide income during retirement.

In response to these themes, I'd like to highlight a few of MEBPCOs recommendations. Even though I'm only going to touch on a couple, I'd be quite happy to respond to any questions on related topics, including things like RRSP limits--we don't think they need to go up--the Canada Pension Plan--we think it works--and employment insurance. In the economic statement the Minister of Finance signals that there will be a modest budget surplus this year and spending will need to be reallocated. We are not really looking for very many tax dollars, we're just hoping the reallocation won't add any tax dollars to a multi-employer program.

One of the issues we are coming to you with our hand out on is with respect to the GST. Several years ago both multi-employer pension plans and multi-employer benefit plans had to pay GST and, unlike a single employer equivalent program, could not get input tax credits and recover it. The situation was rectified, at least in part, for the multi-employer pension plans, but has not been rectified for the multi-employer benefit plans. So a health and welfare plan, when it incurs the GST in the multi-employer environment, cannot get input tax credits. A single employer plan.... As an actuary, if I send my bill to an employer, I add GST to the bill, and the employer gets a credit for that. I send my similar bill to a multi-employer plan, and I have to add GST to that, and there's no input tax credit or credit on that.

One of the things that we support strongly is no change in the current taxation of supplementary health and dental plans. We are concerned that several years ago there was a trial balloon floated that benefit plans in general would have their tax--the old “a buck is a buck is a buck” thing and it should be taxed. We believe that private health services plans are very socially desirable. They have a favourable tax status right now, and we are concerned that if the tax status changes dramatically the coverage and the incidence of these programs would be changed.

There's a number of technical things that we'd like to broach upon on the pension side. In a single employer plan, an individual with 80 points--a point being a year of age or a year of service--is permitted to retire at a non-reduced pension. However, if a person moves from plan to plan, they cannot accrue the service credits and take them forth to the new plan, so a mobile employee is less favoured under the pension laws than an employee who spends the whole career with an individual. We'd like to see that changed; we don't think that service with a particular plan or a particular employer should be a prerequisite for the ability to retire at a non-reduced pension.

There are a number of issues with respect to specified multi-employer pension plans that are technical in nature and that cause some problems. We suggest to you that the multi-employer pension plan, treated for PA purposes like a defined contribution plan, should be treated as such for all purposes, and that there shouldn't be any limit on the benefit that's provided other than what can be provided from the contributions.

In particular, MEBPCO is concerned that ultimately there will be some form of taxation imposed on investment earnings or contributions to RRSPs and registered pension plans. We believe that Canada's approach to this should remain EET--exempt, exempt tax, meaning no taxation on contributions, no taxation on investment earnings, and tax on the proceeds coming back out.

We're also concerned, perhaps a little less these days, that there may be a harmonization of the provincial sales tax and the GST, and in particular in Ontario, which is where many of our members are based. We'd like to think that if it happens, there is a harmonization across the country of all of this; that the multi-employer benefit plans could be exempt from this GST. Otherwise, it will add another burden to the tax. Right now the provincial sales tax applies to group insurance costs or private health service plans costs.

Finally, with respect to health care, that's a very key issue that's going on right now with several commissions out there. MEBPCO does believe that Canada needs a health care system revamp; we believe that the costs are going up; we believe that, in particular, the benefits that are provided by the public sector right now should be maintained. We are very concerned with downloading--that is, shifting benefits that are currently provided under the public program into the private sector, because this also adds a cost to our plans.

In conclusion, thank you very much for inviting us here. Later on I look forward to answering any questions.

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The Chair: Thank you very much.

From the Union of Canadian Transportation Employees, Monsieur Fortier.

Mr. Geoff Fortier (Representative, Union of Canadian Transportation Employees): First, I would like to state that this presentation is in no way intended to undermine the dedicated work carried out by the women and men of the Canadian Coast Guard. Rather, it is intended to highlight the impact that budget restraints and cuts are having on their ability to provide service to the marine community, and to draw attention to potential safety issues if the coast guard continues on this course to slash costs year after year after year.

Program review reductions during the middle to late 1990s have seen human resources reduced by 40% staffing levels in some departments. Recapitalization investment in the Canadian Coast Guard's infrastructure is approximately 25% of the amounts required for appropriate renewal levels. The coast guard's commissioner indicated that the coast guard should be investing 4% for the renewal of their asset base, meaning $140 million to $150 million of capital funding annually.Yet annual budgets over the past 10 years have only reflected $30 million to $40 million in this area of renewal.

In 1995 the Canadian Coast Guard amalgamated with DFO, and what had previously been central region now became central and Arctic region. The minimal increases in budgets during this region's growth, incorporating Arctic facilities and responsibilities, in no way was capable of effectively administering the service required in the north. Many sites were greatly in need of life cycle management. More recently, environmental issues in the Arctic have placed a significant strain on already stretched budgets. Costs of maintaining a coast guard service in Arctic locations can run as much as 500% or more to that of maintaining resources in the south.

Recent budget cuts are having managers seriously discussing reducing or eliminating some service in the Arctic merely to reduce cost. One site on the tip of Quebec and Labrador that provides coast guard radio peripheral coverage to the northeastern Atlantic and Hudson Strait has recently come under review for eliminating service merely to reduce cost.

Program review cuts through the mid- to late 1990s significantly impacted on the central and Arctic region's ability to maintain service and systems in the marine world. The following areas are cited as being most greatly affected in this region as a result of reduced resources.

One is the coast guard's inability to maintain their current infrastructure. Lack of both financial and human resources were cited.

For example, during this fiscal year, maintenance crews were carrying out inspections at a radio tower at Inuvik in the Northwest Territories. Weakened guy wire anchors let go while the crews had gone for lunch. The tower, which had personnel on it shortly before, was found on the ground upon their return. The cost of replacing such a tower is in the six-digit figures. Lack of resources to maintain these systems annually contributed to this loss, and managers contend that this is merely the tip of the iceberg. Capital funding to replace these units and O and M funding to maintain them adequately are simply not there.

Light stations are in a state of needed repair. Structures dating back as far as the early 1900s are crumbling. One such site, Long Point light station in Lake Erie, has had basketball-sized pieces of cement falling from the 100-foot structure. This site is accessible by the general public. Fleet management believes this to be one of their greatest concerns, as there is virtually no funding available for the should-do work or retention and recruitment of personnel.

Training funds have been slashed significantly. There is an ever-growing need to meet international and occupational health and safety standards with regard to certification and training. The coast guard is losing ground on these demands.

Spare parts for services such as MCTS centres are required to ensure that systems are returned to service as soon as possible. Departments are finding that little time is left to make repairs to equipment that has been removed from service and marked for troubleshooting. Eventually the spares will be depleted, meaning extended downtime to coast guard radio stations that coordinate the communications for marine incidents and distress calls.

Secondly, reductions tend to be cost- or monetary-driven, as opposed to operationally driven, or it appears that cost reductions take precedence over the provision of a safe and effective service.

For example, a review of marine communication and traffic service centres, being consolidated into centrally located superstations, is purely a cost exercise. Coast guard radio station links to peripheral transceiver sites are through commercial communication systems. With the single superstation approach, downlinks at the central station would mean an entire regional communication system would be out of service.

Noise levels, or the amount of incoming calls at larger consolidated radio stations, increase the possibility of missed distress calls by operators who must listen to multiple peripheral sites. One station covering the entire region would increase the number of peripherals that one operator would have to monitor.

Thirdly, departmental cuts have caused downloading to other departments, who ultimately download onto someone else. Departments are being forced to eliminate common services as a result of budgetary restraint pressures. The taxpayer sees no savings; merely, expenses are shuffled internally.

On brain drain and a lack of succession planning, program review saw major human resources cuts, mostly in our senior employee ranks. We are currently on the verge of losing many of our aging workforce and losing invaluable years of experience and knowledge. Years of contract hiring and term tenures do not lend themselves to long-term human resource plans. Reviews of some departments have shown losses through attrition to be 50% or more over the next 5 to 10 years. Salary rates that do not keep in line with the private sector negatively affect retention and recruitment issues. A continual addressing of organizational structures and approaches does not add stability to the Canadian Coast Guard. A weakening of employee morale issues results from this constant state of change.

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Programs such as the office of boating safety endeavour to operate in an unfunded state, with few to nil resources. Opportunities to get the safe boating message out to the general public are missed, for Canadian Coast Guard booths are not staffed by coast guard personnel but rather by volunteers outside of the coast guard. Are we getting our message out to the taxpayers? It's difficult if the coast guard isn't able to put their staff where they actually get to meet the end users. Some office of boating safety officers have indicated that reduced funding has resulted in a 75% to 90% loss of opportunities to present safe boating methods to the users.

Demands to reduce the fleet operating budgets have required some vessels to be held in a state of lay-up. Vessels are non-operational for a great portion of the year. Crewing of these vessels for short periods of high demand is difficult at best. Smaller-class vessels are not even capable of handling all floating aids, which are commissioned in an attempt to cut costs. This causes delays in the servicing and correction of aids to navigation annually. Annually delegated budgets have been slashed to the extent that some managers do not have the funds delegated to pay the salaries of their full-time staff. This results in looking for funds in other line objects, meaning rollbacks in other areas.

In the wake of September 11, 2001, security was at an all-time high and additional resources that had not been anticipated were added to the coast guard's increasing costs. One year later, security audits at coast guard facilities continue to call for maintaining sound security measures, but budget allocations are simply not there, even though they have been requested. Coast guard centres face reducing their security measures purely as a cost reduction exercise.

As ongoing cuts and funding plague the coast guard, more and more departments are pressured to reduce or endeavour to be more efficient. It has reached the point where the coast guard is saying, we can no longer continue to trim year after year from our programs; what we now have to look at is what don't you want us to do.

The coast guard has traditionally been there, not only for marine concerns but also for regional and national disasters. In this region, for example, there were the Winnipeg floods and the ice storm of 1998. These were specifically not coast guard issues, but they were there. There is a high expectation from the public that the Canadian Coast Guard will respond. It is becoming more probable that as the coast guard deals with ongoing cuts and reductions, their ability to respond is losing ground.

Thank you.

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The Chair: Thank you very much.

Before I go to the University of Toronto, we'll finish with Mr. Cross.

Mr. David Cross (Individual Presentation): Thank you very much for the opportunity to speak here today.

First of all, I want to apologize for the presentation of my notes. I didn't appreciate that they would be taken, copied, and distributed, so what you have are genuine speaking notes, with more notes added and a few notes scribbled on for good measure, but I hope the information is useful.

I work as a freelance trainer. I have done so for about a year here in Toronto, and previously I managed an employee resource centre in the city. Prior to that I worked on unemployment projects in the U.K. So as a relatively new Canadian, I'd like to comment on the way in which Canada is viewed by the rest of the world in two particular aspects.

There's a certain branding that goes along with the flag, the maple leaf, the Canada mark, and so on, and as with any other branding, there's a reputation that goes with that, which can be good, very positive, but it can also become tarnished. I want to touch on two areas where I feel the tarnishing is starting to take effect and may be affecting Canada's reputation in the world.

My work in the employment resource centre included working with foreign-trained professionals and newcomers to Canada. In fact, of the 100 clients a day coming into the centre, around 40% were newcomers from all different parts of the world. They consistently expressed concerns about how Canada is viewed by people who come here to live and work. They report misleading information often given to them in their country of origin. An example is that just today I met a group of IT specialists from different parts of the world who came here looking for work, only to find that the IT bubble burst 18 months ago. Another example is the vice-president of an Indian bank, who gave up his job and moved to Canada to find that his qualifications weren't recognized in Canada. He couldn't get even an entry-level job because he had no computer skills.

Newcomers are feeding this information back into their country of origin, and in the future Canada may not be the first choice for their friends and relatives to make a move, no matter how good or how needed their skills may be. Some are even seeing Canadian policy in a particularly negative light in that people with potential are accepted, but once here, how they succeed is up to them. They have to work somehow so they'll contribute, and use their money here, or go back to their countries of origin. That's the word on the street, as it were.

So my first request is that adequate support and current information be given to embassy and consulate staff. They should be given information on current skill shortages, which needs to be updated regularly; licensing requirements for professionals; the way the labour market works; and the process for having qualifications assessed against current Canadian standards. Members of the diplomatic staff representing Canada in the world really need to be aware of these issues.

Once people have arrived, support for them to adjust and settle is crucial. Toronto has many services and programs, some general, some specific to professions. Newcomers often have contacts from their own countries here in Toronto. Employers in Toronto are familiar with multicultural environments, but there is still some discrimination. The term “must have Canadian experience” does need to be challenged.

So my second request is that, once here, newcomers are offered a fair opportunity to fulfill their potential. It's important to provide adequate information and support, especially if the policies under discussion, to direct someone away from major metropolitan centres, is followed through. It is to Canada's benefit if newcomers reach their full potential in the shortest possible time.

One particular area of concern is medical staff. Canada is consistently attracting physicians, nurses, and other medical staff, but many are frustrated when they cannot practise their skills here. Canada has looming shortages in these fields, yet many work in very different fields, including cab driving and pizza delivery here in Toronto. And some indeed come from countries with chronic medical problems--for example, HIV/AIDS and TB--and amazing shortages of people with these skills.

So my third request is that if we're going to do this, let's put some resources into ensuring that people's skills are fully used when they arrive.

The next area I'd like to touch on is international cooperation and aid. Canada is seen internationally as a caring, compassionate country. This is what the maple leaf stands for--the message that goes with the branding. It's an area in which Canada has much to be proud of. Contributions to the United Nations peacekeeping force are noted internationally. Recently, UNICEF commented very positively on the Canadian international immunization initiative, and calculated that something between 300,000 and 700,000 deaths were prevented. The cost to Canada for this: $10 million per year over five years. Canada has recently committed an additional $80 million over four years to fight the spread of tuberculosis.

Recent announcements are also encouraging. The Speech from the Throne indicated an intention to double development assistance by 2010, to commit at least half of that increase to Africa, and to eliminate tariffs and quotas. Recent CIDA policies and social development priorities to strengthen aid effectiveness are leading to more money being spent in areas of greatest effect. Education and health care are two, and microcredit is another one for the future, I believe.

For many years, the internationally accepted aid budget target of 0.7% of GNP has been accepted by the Canadian government. When the Liberals came to power in 1993, the aid budget was running at just under 0.5%. A doubling of Canada's aid would be welcome, but it is currently running at 0.23% of GNP.

According to the United Nations, Canada is ranked third in the world, just behind Sweden and Norway, in the measure of quality of life that includes life expectancy, education levels, and levels of income. Sweden and Norway both have international aid budgets above 0.7% of GNP. In 1995 Canada was the sixth most generous of the 22 major donor nations. It is now eighteenth.

Why should we be concerned with this?

Canada's international reputation is falling. It's not now always seen as caring and compassionate. Internationally, some are commenting that Canada is not pulling its weight for a G-8 country. This weekend, Pat Buchanan accused Canada of being a freeloading country.

Canada's ability to influence world events is being lost. More spending on defence has been suggested, and it's certainly an embarrassment that Canadian troops need others' transport to get where they're needed. No matter how much Canada spends on the military, however, it will not match the U.S. On the other hand, international aid is a way to maintain influence. It's the right thing to do. It reflects and is a way to project Canadian values--care, compassion, multiculturalism. This is important at a time when other international values are being projected all too clearly. As well, $50 million over five years saves between 350,000 and 700,000 lives, but $50 million wouldn't buy one military aircraft.

My final request is for a substantial increase in the international aid budget. It gives Canada and Canadian values a profile that they need and deserve, and it is the right thing to do.

I thank you for your time.

¼ (1810)

The Chair: Thank you very much.

Now, from the University of Toronto, I'd like to welcome Mr. Peter Munsche, who is the assistant vice-president, technology transfer research and international relations. He is accompanied today by Carolyn Tuohy, who is the interim vice-president, research and international relations, and vice-president, policy development, and associate provost.

Welcome to you both. Who would like to start the presentation?

¼ (1815)

Professor Carolyn Tuohy (Interim Vice-President, Research and International Relations; Vice-President, Policy Development and Associate Provost, University of Toronto): I will be making the presentation, Madam Chair. Thank you very much.

I'd like to thank members of the Standing Committee on Finance for the opportunity to speak to you today about activities at the University of Toronto and the critical role of research-intensive universities in bolstering Canada's competitiveness in the global knowledge economy.

It is a knowledge-driven economy, and the central role of universities is to be creators and transmitters of knowledge. In order to make their greatest contribution, these public research universities require both short- and long-term support from the federal government as a social partner.

In this light, I want to highlight three priorities for members of the committee today. First and foremost is the need for increased and permanent funding for the full cost of research, then increased support for graduate students, and increased funding to the federal granting councils: the Natural Sciences and Engineering Research Council, the Social Sciences and Humanities Research Council, and the Canadian Institutes of Health Research. With this support, Canada's public research universities will do their part and increasingly become magnets for talent and hubs of cutting-edge research that will contribute to the future prosperity of all Canadians.

We believe that the Government of Canada and the members of this committee share our vision that Canadians deserve universities that rank with the best in the world, and offer the best level of education possible. Our graduates will be competing globally and they need to be prepared accordingly. Programs such as the Canada Foundation for Innovation and the Canada research chairs have created unprecedented opportunities for the University of Toronto, our affiliated hospitals, and our sister institutions across the country.

I would like to thank members of this committee for continuing their support, year after year, for these important programs. These investments have helped Canada attract and keep world-class researchers and scholars, who are now contributing to Canada's capacity for research and innovation.

One example is our outstanding photonics research team, which includes Canada research chairs Geoff Ozin from chemistry, physicist Sajeev John, and engineering professor Ted Sargent. Professor John's leading-edge research, for example, may result in the development of photonic computers, using laser light to carry information instead of electronic current. This would lead to faster, less expensive, and more versatile tools in the computer and telecommunications industries.

Federal support has kept Canada research chair holder Rosemary Sullivan, an English professor and one of the country's leading figures in contemporary literature, at the University of Toronto. Your support has also brought back two outstanding sociologists, Monica Boyd and John Myles, to hold positions at both the University of Toronto and Statistics Canada to conduct research that will increase our knowledge of the factors that lead to improvements in the health of the Canadian population.

In medicine, federal funding initiatives have enabled the University of Toronto to retain Lewis Kay, one of the world's foremost authorities on nuclear magnetic resonance techniques for the analysis of gene structures, as well as his wife and distinguished research collaborator, Julie Foreman-Kay.

Through the federal government's investments, the University of Toronto has also been able to engage in extensive research collaborations with other universities and research institutes across the country and internationally. A good example is Micronet, a University of Toronto-based national centre of excellence that involves researchers from Concordia, Carleton University, the University of Windsor, and the University of Victoria.

The University of Toronto participates in 17 national centres of excellence, such as Micronet, and these partnerships ensure that federal research investments in the University of Toronto have a broad national impact and contribute to the future economic and social prosperity of the country.

In addition, we're proud that the University of Toronto helps educate a significant proportion of Canadian university faculty. In fact, one in every six professors with tenured appointments at English-speaking Canadian universities has at least one degree from the University of Toronto.

Numerous studies have demonstrated the vital place of research universities in knowledge-based economies, often through geographically concentrated clusters of discovery and innovation. For this reason, in Ontario and Canada government and industry are seeking to collaborate with universities in order to provide not only an improved social and cultural environment, but also the technology and talent needed to compete in the global economy.

For its part the University of Toronto has established the Innovations Foundation, which is our arm's-length vehicle for commercialization of university-based discoveries. We've created our business incubator, which we call the Exceler@tor, and we have become a key partner in the MaRS Discovery District, MaRS standing for Medical and Related Sciences, a massive research business complex, which will be the first of its kind in Canada. These are examples from the University of Toronto itself, but they are illustrative of initiatives that bode well for the future of research at Canadian universities.

However, sustained strength depends on sustained funding. Canada is alone among its competitors in the global knowledge economy in not providing permanent funds for the indirect as well as the direct costs of research. This means that for every dollar we receive in research funding from the federal granting councils, we must spend 40¢ from our educational budget to cover the overhead costs. We simply cannot expand our research activities on the scale we would want to and on the scale necessary to keep Canada globally competitive as long as we must keep up this level of subsidy from our operating budget.

In case overhead or indirect costs appear to you as abstract terms, let me be more concrete. When I speak of indirect costs, I mean keeping the buildings in which research is conducted heated and cooled, administering research grants in order to be accountable to funders, running panels for the ethical review of research projects according to federal criteria, administering the human resource systems that pay the salaries and oversee the employment conditions of our faculty and other research personnel, and maintaining and keeping current the libraries that are so essential to research in the context of an explosion of digital library resources.

I could go on, but I hope I've made the point. Every research project involves some such cost, and every advanced nation other than Canada recognizes that fact when funding research. We were very encouraged by the recent throne speech commitment to work with the universities on the indirect costs of research, and we welcomed last year's one-time indirect cost payment as an important first step or down payment toward permanent and full support for indirect costs. We strongly urge members of this committee to continue in this vein and support the funding of the full cost of research on a permanent basis. Our first priority, then, is to secure permanent funding for indirect costs of research at the level of 40% of direct costs, as is the case for other nations.

Let me now turn to another key priority: federal support for graduate students. It has been remarked that the best form of technology transfer walks on two feet. Human beings educated in research-intensive universities who move into other areas of the private and public sectors bring with them the ability to interpret, develop, and apply the research flowing from universities. The graduate students of today are not only the university-based researchers and educators of tomorrow, they are also the highly qualified personnel who will be the receptors and catalysts for research and development activities outside universities.

Currently, many of our best undergraduate students leave Canada to pursue graduate studies elsewhere where financial support packages are much more attractive, and statistics show that most do not return. While international mobility is not to be discouraged, we cannot have our best students leaving because they cannot be sufficiently supported at home. Similarly, if we are to attract the best international students, we need to offer internationally competitive packages of support. The pool of talent is worldwide, and we need to be competitive in that pool for graduate students, just as we need to be competitive for faculty.

Finally, let me turn to the importance of funding for the federal granting councils. This is the bedrock of university-based research. It is difficult, if not impossible, for governments to predict winners and losers in the knowledge economy. No one foresaw, for example, that the Internet would arise from a need of physicists engaged in the most basic research to exchange massive amounts of data internationally. No one would have thought that an obscure study of the fur trade in Canada by Harold Innes would spark a line of thought that transformed the way we think about communications technology in Marshall McLuhan's global village. But these examples show that basic research led not only to the World Wide Web, but also to the way we assess its social impact. These are not isolated examples. Overall I can report that more than 75% of the inventions that are reported to U of T every year arise out of projects funded not by industrial partners, but by the federal granting councils.

Investment in basic research pays off. My key point here is that basic research conducted at our public research universities can have unforeseen and dramatic impacts over the long term. For this reason we need decision-makers and political leaders who have a long-term vision of Canada's performance in the new economy.

As members of this committee look toward the next federal budget, I urge you to consider favourably the recommendations that will arise from the government's innovation strategy. This strategy embodies a set of initiatives that, if fulfilled, promise to yield broad benefits to Canadian society. We are looking forward to the innovation summit in a few weeks to further realize the universities' potential in this regard.

¼ (1820)

The world is not standing still, and Canada cannot afford to lag behind. I know you will face many competing demands for scarce resources; we've heard that here today. As you do, it is essential to remember that investments in talented people and knowledge have been proven to have a positive and powerful impact on the future prosperity of nations. Full and permanent funding for the full cost of research, new support for graduate students, and increased funding to the granting councils will strengthen the ability of public research universities to enhance and contribute to Canada's knowledge economy. Let me assure you that the University of Toronto is fully committed to working with the federal government to realize the goal of making Canada one of the world's most innovative and productive nations.

Thank you very much for the opportunity to speak to you today and for your attention.

¼ (1825)

The Chair: Thank you very much.

I'm going to do five- to six-minute rounds.

Mr. Penson, you can start.

Mr. Charlie Penson: Thank you, Madam Chair.

Mrs. Tuohy, I was on the industry committee prior to coming on finance, and I've heard the universities' argument many times. I basically support what you're saying. One of Canada's strengths, of course, is our educated society, our workforce, and we need to continue that, but as you said yourself, there are many requests for funding, and it's a matter of setting priorities. So if this has to rise in the order, something else has to go down, unless we see a tax increase, and Canadians feel pretty heavily taxed already.

I want to ask you two questions. I support what you're doing here, but what about the idea of some sort of direct payback to the federal government for funding by way of commercialization of technology that comes out of university research, so that when that happens, there's a stream of money that could come back to the taxpayer and there's a reward for this money that's being pumped into universities through research and development? Do you support that?

Prof. Carolyn Tuohy: I think we need to see the federal government's investment as one that, through commercialization, will lead to the creation of jobs, the creation of various revenue streams that, if not quite as direct as an immediate royalty or whatever to the federal government, will certainly increase federal revenues.

Perhaps my assistant vice-president, Dr. Munsche, would like to speak to this as well.

Professor Peter Munsche (Assistant Vice-President, Technology Transfer Research and International Relations, University of Toronto): I can echo what Professor Tuohy says. The real return from commercialization of research lies first in the competitiveness of Canadian companies. A lot of attention is focused on royalties and the like, but the real investment in university technology comes from Canadian industry supporting collaborative research projects. I can just give you a sense of the scale. Last year the University of Toronto got about $3 million in licence revenue, it got $58 million in industry support for that research. So that is where the real payback is. I think that's where the benefit to the Canadian taxpayer comes, in increased tax revenues, both from the companies that are made competitive by this research and from the individuals they employ, who, in turn, pay income tax and sales tax.

Mr. Charlie Penson: As long as we don't lose them to the United States.

Prof. Peter Munsche: Indeed. That's what I spend part of my time every day working at, ensuring that there is a good environment to keep our knowledge and our knowledgeable people in Canada working to strengthen the Canadian economy.

Mr. Charlie Penson: In order to apply the technology that's being developed in research, there's an uptake of it that needs investment. Venture capital is one of the things that is in short supply, and sometimes we're a little too short-term in some of that support.

As you probably know, over the last 30 years Canada has been losing market share in terms of the percentage of direct foreign investment. In fact, our own Canadian investors are increasingly looking outside the country to invest. There's been a massive sea change. I hear you saying, I think, that there needs to be a good environment here for Canadians to encourage that investment to come in, for companies to locate in Canada, which would help with the uptake of your research and development. Is that right?

¼ (1830)

Prof. Peter Munsche: Yes, that's undoubtedly true. I'd say that venture capital, like other parts of the economy, has its high points and its low points. At the moment we're in a somewhat depressed state, but over time--and this is a way of looking at economies--we've seen a strengthening of venture capital investment in university research. I look forward to the next upswing so that we can have another chance to catch that wave.

Mr. Charlie Penson: I think we all do, but it's a matter of when it will happen. We're hoping it's sooner rather than later.

To Mr. Barnett, in your presentation you talked about land trusts, and you raised the issue of endangered species. I think you also told us that there are a lot of other countries that go by way of trusts--Britain, for example, with private trusts in many cases there--in order to provide habitat for wildlife and species and that type of thing.

Being a landowner in western Canada and knowing what's involved in protecting species at risk, it seems to me that if governments are not prepared to guarantee that they will pay landowners for loss of the use of land... It just seems to me that there are alternatives to that. One of the ones that might be used is your idea of land trusts. Ducks Unlimited is working very successfully in this area.

It just seems to me that landowners, resource companies, farmers, and ranchers can't be expected to bear the brunt themselves. If there are individuals who want to put money into land trusts, you're trying to facilitate that by lowering the capital gains tax to allow them to do so. Or I think that was your point.

I see I'm getting the hook from the chair, Mr. Barnett, so we'll have to wrap it up. I'll just ask you for your comments.

Mr. Robert Barnett: Just to make it very simple, we are basically making parkland for Canadians, as land trusts. We do that at a much lower cost than the government can do it. If the government goes out and buys land for those parks, typically we can do that for 5% to 10% to 15% of what the government is spending. So we think we're achieving the government's species at risk objectives at a very modest cost. As well, we're involving local Canadians and local communities instead of park wardens and paid staff out looking after that land. We're trying to get neighbours to help look after neighbours' land.

So we think we're an economically efficient way to achieve the government's objectives, especially in places like southern Ontario and areas around Vancouver, where the land is so expensive. Landowners are willing to donate it, so take them up on the offer.

Mr. Charlie Penson: But just remove the roadblocks in the way of their doing that.

Mr. Robert Barnett: Exactly.

The Chair: Thank you very much.

Mr. Masse.

Mr. Brian Masse: Thank you, Madam Chair.

Great presentations. I'm going to try to move along and get in a couple of questions here.

Mr. Barnett, following up on watershed protection, I know that farmers with, for example, tributary streams through their property have been reluctant to give up those parcels. But if we provide five metres of buffer on each side, it's a significant watershed improvement. Do you feel that your proposal will open up some of those opportunities for the farmers?

As well, if they ever wanted the land back, is there potential for something to be done? What are you running into in terms of that issue?

Mr. Robert Barnett: We have a device called a conservation easement. Sometimes we buy our own land or donated land, but sometimes we use this thing called a conservation easement. When we do that, the landowner continues to own the land but agrees to offer the stream, for example, or not to cut down all the trees, put in a golf course or a quarry, or whatever. Basically, we work in partnership with the landowner so that the landowner looks after the land and does most of the work for us, and we just make sure they're doing it properly.

¼ (1835)

Mr. Brian Masse: Do you think your proposal under part 2 would actually get some of those properties in the public interest though? Would you be able to acquire some of those? That's with regard to partial land donation.

Mr. Robert Barnett: That's correct. I've given the example of a purchase of land, but let's say the landowner is willing to donate a $100,000 easement but they can't use a $100,000 tax receipt. Maybe we then pay them $50,000 and they donate the rest. It's the same principle.

Mr. Brian Masse: Great. Thank you.

Mr. Fortier, you described a coast guard in obvious need of rescuing. With regard to your presentation, there wasn't a final figure with regard to suggestions of what it would cost to get it up to a workable model or one that would address some of these problems. Do you have any estimates in terms of what that would take?

Mr. Geoff Fortier: No, I'm sorry, I don't have the actual estimates. All I can tell you is that I was basically asked to make this presentation last week, so I was in quite a rush to try to put a lot of information together. I contacted a number of the line managers and regional managers in our particular region to try to get some input from them, to get them to highlight some of the areas of difficulty. I did have one of my colleagues from the Maritimes make a presentation a week ago—I don't know if it was to this exact same committee—and he spent a lot of his time addressing both fleet and SAR issues.

Most people consider the coast guard to be strictly what we call the red-and-whites, the ships. There are far greater resources than just the red-and-whites. There are also shore-based personnel who basically provide support to the ships to ensure that they continue to operate.

On issues in the Arctic, we became the central and Arctic region in 1995-96. It was a totally new concept for us to start providing service in the Arctic. The amount of resources that we had to actually expend in the Arctic was just unbelievable, but I don't actually have facts and figures to that extent.

Mr. Brian Masse: If they become available, I would ask that they be forwarded to the committee. I think they would be very helpful.

Mr. Geoff Fortier: Yes, sir.

Mr. Brian Masse: Professor Tuohy, with regard to research, through the innovation summit and elsewhere, I've had a chance to discuss research with professors who are actually getting private research funds, and they also raised concerns over the lack of public funds available. They were describing a scenario in which, with private research, they sometimes get seconded in a sense. The students get somebody else going to class because the professors are working on the private research, and the knowledge base of the students and the grad students who are working ends up being part of the actual research programs. It's therefore a very valuable tool for the private company that has donated for the research. At the end of the day, though, there's also a situation that develops in terms of documents, or if whatever has been developed is controversial, or over who has ownership.

I guess I'd like your comment here. Is that an accurate scenario that can develop if we don't have a strong commitment to public research in terms of the taxpayers investing in that element?

Prof. Carolyn Tuohy: I think there are two dimensions to my response. One is to say we certainly do need increased public investment in research. We ensure that all of our faculty members who are engaged in research are also equally engaged in teaching. This is something we insist on at the University of Toronto. For example, Canada research chairs have the same teaching responsibilities as all other members of the faculty.

In terms of the intellectual property issues that arise with private research, without a properly constituted IP regime, I believe we can mitigate the potential difficulties that you mention. I'm sure the assistant vice-president of technology transfer would be happy to elaborate on that, but we may not have enough time.

Prof. Peter Munsche: All I would add is that many of the problems are potential ones, but they can be dealt with through good agreements between the university and the companies. It's often said that good fences make good neighbours. Well, good agreements make good partners as well.

The Chair: Thank you very much.

Mr. Wilfert.

¼ (1840)

Mr. Bryon Wilfert: Thank you, Madam Chairman.

On the issue, Mr. Barnett, of the land trust, it certainly worked in my own community with the Oak Ridges Land Trust, etc. I wish all governments, though, were not at cross purposes, which unfortunately they tend to be, certainly in this province.

On the issue of tax receipts for historical and cultural sites, we definitely need them, and the Minister of Heritage has been talking about this for longer than I'd like. I hope we will get that, because one of the things I find out about developers is that some of them would, in fact, like to save historical properties. We have a toothless heritage act in this province, within 180 days of its invoking, as you know, and I'd like to see that, because I'd like to see those historical sites left. In my own community I have the remnants of a piece of concrete from a 1911 state-of-the-art water tower that was destroyed after a commitment by the developer to keep it. If we'd had these tax provisions in place for historical and cultural sites, we might not have lost it.

On the coast guard, I certainly support looking again at the issue of a separation of DFO from coast guard. We can't expect the coast guard to act in the national interest when they are getting their budget siphoned off to other areas. I think that's a point that was made before.

Mr. Cross, I certainly agree with you, we're not doing a good enough job at our embassies. Part of that is that we're not getting the information we need from the provinces, particularly on accreditation issues, teaching, medical, engineering. They're not our responsibility but the provinces' responsibility, but we need them to be much more engaged in getting the right information out.

To the University of Toronto, I would like your comment as to the unbundling of the CHST, which I'm all in favour of, not speaking as the PS of the Minister of Finance. I do believe one of the problems we're having with post-secondary funding is the shell game the provinces play with regard to health, social services, and so on.

Finally, on the issue of the GST, you mentioned tax credits for benefit plans. You might provide the committee with a little more information on its impact, because with the things all of you have presented, some very interesting things, we only have so much money that may or may not be available after we deal with health care and Kyoto, and I always like to see what the priorities are.

Those are my comments. If anybody wants to tackle them, including the U of T on the CHST, I'd love to hear replies in 30 seconds or less.

Prof. Carolyn Tuohy: As a person who in my scholarly life paid some attention to health policy, I expected the unbundling of the CHST. The impetus for that is likely to come much from the health side than from the post-secondary education side. We may well be the residual in that. That being said, I think a more transparent and accountable transfer is quite appropriate.

The Chair: Mr. Norton.

Mr. Mel Norton: I believe, if we put our hand out, we're asking for approximately $20 million a year. That would be the cost of it.

The Chair: Anybody else?

Mr. Wilfert, you're under time. I don't believe it.

Mr. Bryon Wilfert: It's hard to believe.

The Chair: It is hard to believe.

Mr. Bryon Wilfert: That's probably because I'm going to go see my sick mother in Stoufville.

The Chair: All right, thank you.

Mr. Valeri.

Mr. Tony Valeri: With respect to the presentation by Mr. Norton, although you mention the figure, I think the point the committee needs to understand is that what you're looking for is that multiple-employer benefit plans and single-employer benefit plans be treated equally. I think we need to ensure that we pursue that avenue.

The only other point I want to make, though so many people made so many very good comments, would be directed to the University of Toronto. After looking through this document, I see the innovation strategy as ultimately what we're striving for on a national level, but I wondered if you might comment on what might be missing outside of the research side. What else would you like to see included? I'm talking about the tax side or the financing side.

I know, Dr. Munsche, that you're involved in technology transfer. I'm wondering if you can give us a sense of how your challenges stack up against your counterparts in the United States and other countries. What are some of the advantages they may have or disadvantages? What do you benchmark against? How do we know that we've achieved success? How do we know that we've achieved an innovative economy? I'm interested in your comments.

¼ (1845)

Prof. Peter Munsche: I probably have 30 seconds to spell it all out. I think what you need for a successful innovation economy are really three elements. One is a flow of good innovative ideas, and I think those are definitely coming out of the universities. I think that with an increase in granting council funding, you'll get even more, because three out of every four invention disclosures I see come out of granting council funded projects.

The second thing you need is good people, and I mean not just the researchers but tech transfer personnel. In fact, there's a real shortage of experienced tech transfer personnel at universities. There's also an equally severe shortage of individuals who can take up the management of spinoff companies and make them a success.

The third element is obviously capital. We've seen a growth in venture capital in Canada over the past 10 years. When I first started, there wasn't any venture capital at all. But what we need is venture capital that is more tolerant of risk and more patient, which is very difficult to find in Canada right now. Some further tweaking of the financial system would probably encourage a greater tolerance of risk and greater patience.

Mr. Tony Valeri: When you say tweaking of the system, are you suggesting a tax incentive?

Do you have any suggestions on how we might deal with the shortage of management and technology transfer people?

Prof. Peter Munsche: One program that I think the committee might want to look at is the Ontario community small business investment fund. This has, in effect, encouraged not only the labour-sponsored venture caps but also the banks to start to funnel a small part, admittedly, but an important part of their fund toward very early stage investment opportunities. They do it through a series of tax incentives. I'd be happy to provide further information about what those are. But I think to take a look at what Ontario has done and see whether it could be applied across the country would be very useful.

As for more people, I think part of that is a product of time, but also part of it has to do with providing training and experience for young people to get into the field. At the University of Toronto we run a very small intern program in this area, because that's all we can afford. If we had more funds, we could train more people.

The Chair: Thank you very much.

Mr. Brison.

Mr. Scott Brison: Thank you, Madam Chair.

Thank you to each of the witnesses for your interventions today.

Let me be the first to welcome Pat Steenberg back to the finance committee. Sorry, I was the second. So I'll second that welcoming back of Pat Steenberg.

Firstly, Mr. Barnett, I was delighted to hear you speak of the case, which exists in so many rural communities, of individuals who, because of capital gains tax considerations, have a great deal of difficulty holding on to land through succession.

Just to acquaint you with another aspect of that, in rural Atlantic Canada most of the woodlands are privately held, but in other parts of the country there's a lot more crown land. In rural Atlantic Canada, where most of the woodlots are privately held, it has become a huge issue in that, for some families, their major asset upon the death of an individual, or his or her major asset in a lot of cases, is that 50 acres of woodland, and they simply cannot afford to pass that woodlot land on to heirs.

What has been happening is just an extraordinary amount of clear-cutting, where heirs, in order to help reduce the amount of capital gains tax, clear-cut the land, because clear-cutting actually reduces the value of it. But when they pursue that, they also get about $900 per acre from the forestry companies for stumpage. So there are a lot of disincentives for people to do the right thing.

Mr. Fortier, your representative from Atlantic Canada did a terrific job in Halifax in presenting the case. He described the coast guard as the battered spouse of the Department of Fisheries and Oceans, and he said you were seeking a divorce. So in that inimitable Atlantic Canadian communication style, his point was made very well in that part of the country.

On commercialization--to our witnesses from the University of Toronto--I'd be interested in your view on patent protection and the environment within Canada from a patent protection perspective, particularly in terms of commercialization and early-stage investment in biotechnology, because I know there's a significant synergy between biotech and big pharma. So I'd want your views on that. That's an issue we deal with at the industry committee, as well as in a general public policy sense, because there is significant pressure on public policy-makers in Ottawa to reconsider the degree to which, in Canada, we protect patents and intellectual property, and I'd appreciate your views on the value of that.

Secondly, what has been the impact of the capital market meltdown on the commercialization environment at universities? I speak as someone who was involved in venture capital, before politics, in investment banking of biotech companies, and it's a pretty tough environment out there, so I'd be interested in what impact that has had.

Also, I'd like to know whether you are aware of some of the tax-driven strategies taken by the Province of Quebec, particularly the elimination of personal capital gains tax for research, or PhDs' research, and whether that is having the desired impact and whether it ought to be considered as a national initiative to try to address, in a very targeted way, income taxes on those involved directly in research.

Thank you.

¼ (1850)

Prof. Peter Munsche: In terms of patent protection, I think I can say, not only for myself but for my colleagues in the tech transfer trade, that any weakening of patent protection would have a very, very detrimental effect on what we do, and also on the growth of technology-based companies in Canada.

In addition, I think a successful outcome of the current litigation over the Harvard mouse would have a salutary effect. I think you'll probably guess what I mean by “successful outcome”.

With regard to the capital markets, clearly we're feeling the chill even in tech transfer departments over the downturn. I think the shock is greater in the information technology side. At the moment, biotech is somewhat used to the up and down cycles. They have longer memories of these things than the folks who have lived through the IT bubble. They don't remember anything before that because they were in kindergarten when it happened.

I think we take solace in the fact that these are cycles and good times will come again. Certainly the fundamental need of the country for information technology remains as strong as ever. Once the industry has sorted out its problems, I think we'll see good times.

As for Quebec, I would be somewhat shy about pronouncing on the effect of that. I'm just not close enough to it right now. So if I could beg off on that question, I'd appreciate it.

¼ (1855)

Mr. Scott Brison: Just as a quick closing comment, when you say that in the long run things will be better, I think it was John Maynard Keynes who said one time that in the long run it will be better, but the problem is, in the long run we are all dead.

Thanks to all of you.

The Chair: Thank you.

Ms. Minna, for the last round.

Ms. Maria Minna: Thank you very much, Madam Chair.

I want to go to Ms. Steenberg with respect to the discussion on your presentation. First, I want to say that I wholeheartedly agree with you on the issues that have to be addressed in terms of poverty, health care, climate change, and what have you in our own country.

I want to focus a little bit on the issue of development. I'm pleased to see that the Prime Minister put in the Speech from the Throne the doubling of development. Although it's not yet going to get us close to where we want to be, obviously it's a good start.

I want to discuss NEPAD a little bit. When I was involved with CIDA, I had a meeting in Africa. I was at the African coalition meeting where NEPAD had just been announced. There was a lot of debate at the time with African heads of state and other businesses and NGOs and so on. While there was a major concern as to how it would be developed--I mean, the average citizen didn't know what NEPAD was about, and weren't really well informed in the early stages--the coalition decided that part of their job would be to try to ensure that the civil society of Africa did understand and had some say in what was going on. As well, they would try to hold the NEPAD process accountable to other commitments we'd made in previous international meetings--education for all, the global health fund, and so on.

I'm wondering if you could expand on your main concern here. Has something specifically happened with the direction of NEPAD that gives you concern? You mentioned that the model may be rooted in the wrong....

Ms. Pat Steenberg: I think our concerns are really based on the information we have from the partners we work with in Africa, many of whom came over during the G-8 meetings last year. The concern is exactly as you've raised it, that there is still felt to be an insufficient involvement of civil society in those decisions. I think there is considerable concern about the institutional approaches that have been taken to things like poverty relief internationally through organizations like the World Bank and the International Monetary Fund.

The conditions that those organizations have placed or exacted on governments and societies in the third world, or in the global south, have included tremendous pressure to downsize their government; to privatize and reduce public services, particularly in education and health and the environment; to open up their markets; and to deregulate. So I think the main concern with a program like NEPAD is that those same dynamics will be introduced into the kind of development that NEPAD is funding.

Ms. Maria Minna: Okay. I understand the concern. I was there, I understand it, and I'm still there with you. I think, though, given that NEPAD was developed by Africans for Africans...and it's not a perfect model by any means. We have the poverty reduction strategy plans that were brought forward by the IMF and the World Bank, as you know. And then there are other schemes out there. They have to be somehow pulled together, because there are far too many things for countries to have to cope with.

The fact is that this initiative comes from African countries. I understand your concern, but I also think we need to encourage it, support it, and make sure it does go in the right direction. We need to become partners with them. We can go a long way toward really beginning to pull Africa out of the poverty that it's in if we begin to give the countries there the tools.

My major concern with NEPAD is that we may not fund it. I'm not suggesting that we fund it blindly, without any accountability, or without ensuring that it meets the kinds of needs you're talking about, or that it does not have input from those societies—which was our concern when I was at the coalition's meeting. My concern is that it's almost a fad. It's here, we've discussed it, and now it might go away and we'll come up with an entirely new model at another time.

I think this is the third or fourth time that the African countries have tried to come forward with a proposal. Maybe this one is more advanced, much more specific, and much more realistic than others we've seen before that have tended to be somewhat broad.

So I take your point. I guess my concern—

½ (1900)

Ms. Pat Steenberg: It's a cooperative thing in terms of saying we need to encourage a different approach from the ones that have been operating in the past. While we aren't saying it shouldn't go through NEPAD, we're raising the concern that if it does, it must not follow the same route as the poverty reduction strategies of the World Bank and the IMF.

Ms. Maria Minna: Am I out of time? Yes? Of course. Thank you.

The Chair: Thank you very much.

On behalf of all the committee members, thank you for presenting your briefs, for delivering them to us, and for answering our questions. We're trying to hear from as many people as possible across the country during what is a very abbreviated time in this particular week. We appreciate your indulgence in allowing us to go over by about 10 minutes tonight, too, so thank you.

We are adjourned until the morning.