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37th PARLIAMENT, 2nd SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Tuesday, November 5, 2002

0900

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

0905

Mr. Donald F. Warden (Chairman, Government Affairs Committee, Canadian Association of Fire Chiefs)

0910

0915

The Chair

Mr. Peter Lewis (Co-Chair, Canadian Association of Not-for-Profit RESP Dealers)

0920

Mr. Paul Renaud (Vice-President, Corporate Affairs, Canadian Association of Not-for-Profit RESP Dealers)

The Chair

Mr. Terry Ruffel (President, Canadian Professional Sales Association)

0925

0930

The Chair

Mr. Richard Hunter (General Manager, Conservation Ontario (Newmarket))

0935

0940

The Chair

Dr. Pete Ewins (Conservation Director, World Wildlife Fund Canada)

0945

The Chair

Mr. Charlie Penson (Peace River, Canadian Alliance)

Mr. Terry Ruffel

Mr. Charlie Penson

0950

Mr. Terry Ruffel

Mr. Charlie Penson

Mr. Terry Ruffel

Mr. Charlie Penson

Mr. Terry Ruffel

Mr. Charlie Penson

Mr. Terry Ruffel

Mr. Charlie Penson

0955

Mr. Richard Hunter

The Chair

Mr. Brian Masse (Windsor West, NDP)

Mr. Richard Hunter

Mr. Brian Masse

Mr. Richard Hunter

The Chair

Mr. Craig Mather (Chief Administrative Officer, Conservation Ontario (Newmarket))

Mr. Brian Masse

Mr. Terry Ruffel

1000

Mr. Brian Masse

Mr. Terry Ruffel

Mr. Brian Masse

The Chair

Mr. Brian Masse

Mr. Donald F. Warden

The Chair

Mr. Bryon Wilfert (Oak Ridges, Lib.)

Mr. Terry Ruffel

1005

Mr. Bryon Wilfert

Mr. Terry Ruffel

Mr. Bryon Wilfert

Mr. Richard Hunter

Mr. Bryon Wilfert

Mr. Richard Hunter

Mr. Craig Mather

1010

Mr. Bryon Wilfert

The Chair

Mr. Tony Valeri (Stoney Creek, Lib.)

Mr. Terry Ruffel

Mr. Tony Valeri

Mr. Terry Ruffel

Mr. Tony Valeri

Mr. Terry Ruffel

Mr. Tony Valeri

Mr. Terry Ruffel

Mr. Tony Valeri

Mr. Terry Ruffel

1015

Mr. Tony Valeri

Mr. Terry Ruffel

Mr. Tony Valeri

Mr. Paul Renaud

Mr. Tony Valeri

Mr. Paul Renaud

Mr. Tony Valeri

Mr. Paul Renaud

The Chair

Mr. Terry Ruffel

The Chair

Mr. Terry Ruffel

The Chair

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

1020

Mr. Paul Renaud

Ms. Maria Minna

Mr. Paul Renaud

Ms. Maria Minna

Mr. Paul Renaud

Ms. Maria Minna

Mr. Paul Renaud

Ms. Maria Minna

Mr. Paul Renaud

Ms. Maria Minna

Mr. Terry Ruffel

Ms. Maria Minna

1025

The Chair

Mr. Craig Mather

The Chair

Mr. George Braithwaite (Vice-Chair, Conservation Ontario (Newmarket))

1030

The Chair

1035

The Chair

1040

Mr. Richard Gauthier (President, Canadian Automobile Dealers Association)

1045

The Chair

Mr. Jim Keon (President, Canadian Generic Pharmaceutical Association)

Mr. Jim Keon

1050

1055

The Chair

Ms. Mae Harman (Chair, Economic Issues Committee, Canadian Pensioners Concerned Incorporated)

Ms. Mae Harman

1100

1105

The Chair

Mr. Greg deGroot-Maggetti (Socio-economic Concerns Coordinator, Citizens for Public Justice)

1110

The Chair

Mr. Leonard Crispino (President and Chief Operating Officer, Ontario Chamber of Commerce)

1115

Ms. Mary Webb (Board Member, Ontario Chamber of Commerce)

1120

Mr. Leonard Crispino

The Chair

Mr. Scott Brison (Kings—Hants, PC)

Mr. Jim Keon

1125

Mr. Scott Brison

Mr. Greg deGroot-Maggetti

1130

Ms. Gerda Kaegi (Immediate Past President, Ontario Division, Vice-President, National Association, Canadian Pensioners Concerned Incorporated)

Mr. Greg deGroot-Maggetti

(Ms. Maria Minna)

Mr. Bryon Wilfert

Mr. Richard Gauthier

1135

Mr. Bryon Wilfert

Mr. Richard Gauthier

Mr. Bryon Wilfert

Mr. Jim Keon

Mr. Bryon Wilfert

1140

Mr. Jim Keon

Mr. Bryon Wilfert

Mr. Greg deGroot-Maggetti

Mr. Bryon Wilfert

1145

The Chair

Ms. Mary Webb

Mr. Bryon Wilfert

The Chair

Ms. Mary Webb

The Chair

Mr. Leonard Crispino

The Chair

Ms. Maria Minna

1150

Mr. Leonard Crispino

Ms. Maria Minna

Mr. Leonard Crispino

Ms. Maria Minna

Mr. Leonard Crispino

Ms. Maria Minna

Mr. Leonard Crispino

Ms. Maria Minna

1155

Ms. Gerda Kaegi

Ms. Mary Webb

Mr. Greg deGroot-Maggetti

The Chair

Mr. Scott Brison

1200

Mr. Leonard Crispino

The Chair

CANADA

Standing Committee on Finance

NUMBER 015

2nd SESSION

37th PARLIAMENT

EVIDENCE

Tuesday, November 5, 2002

[Recorded by Electronic Apparatus]

¿ (0900)

[English]

The Chair (Mrs. Sue Barnes (London West, Lib.)): Good morning, everyone. The order of the day is pre-budget discussions pursuant to Standing Order 83(1).

We have two panels this morning. The first panel will be from 9 o'clock to 10:30. Welcome to all of you who are presenting.

From the Canadian Association of Fire Chiefs, we have Donald Warden, chairman, government affairs committee; from the Canadian Association of Not-for-Profit RESP Dealers, Paul Renaud, vice-president, corporate affairs, and Ray Riley, vice-president, sales--he's not coming, so he's substituted by Peter Lewis; from the Canadian Professional Sales Association, Terry Ruffel, president; from Conservation Ontario (Newmarket), Richard Hunter, general manager, George Brathwaite, vice-chair, and Craig Mather, chief administrative officer; and from the World Wildlife Fund Canada, Dr. Peter Ewins, conservation director.

Welcome to all of you. I will give you eight minutes for your presentation. If you look up at seven minutes, I'll put up a pen or a pencil just to give you fair warning that you have about a minute or five or six sentences left.

We will commence and go through in the order of the agenda, starting with the Canadian Association of Fire Chiefs. Mr. Warden, go ahead.

¿ (0905)

Mr. Donald F. Warden (Chairman, Government Affairs Committee, Canadian Association of Fire Chiefs): Thank you, Madam Chairman.

My name is Don Warden, and I am the fire chief of Wasaga Beach, Ontario. However, I'm here before you today as chairman of the government relations committee of the Canadian Association of Fire Chiefs, which is comprised of 1,100 chief fire officers located in all provinces and territories.

The first page of our submission will provide you with details on the composition mandate of the Canadian fire services. Since time is at a premium this morning, I will not even attempt to summarize most of that material, but I certainly hope you will take the time to read it.

The recommendations contained in our brief have come from two sources. First, many of them are the direct result of resolutions democratically approved by our membership of annual meetings of the association. The remainder reflects the result of a comprehensive pre-budget survey of our membership undertaken during the summer.

Our submission this year falls into two overall segments. The first of these commences on page 3 and is entitled Making Canadian Communities Safer. The second begins on page 12, under the title Other Important Pre-Budget Issues. The summary of all recommendations contained in the submission comprises the final two pages of our pre-budget document.

Returning to the theme of making Canadian communities safer, we note that the pre-election platform document of the current government, entitled Opportunities For All, promises to help Canadians make their urban or rural community safer. The results of our pre-budget survey show that 81.5% of responding fire chiefs believe either that there has been no change in the level of safety within their communities or that the level has actually declined in the past two years. Only 15% of them believe their communities have become safer.

As a direct response to the September 2001 terrorist attacks, last December's budget allocated considerable funds to Canada's Office of Critical Infrastructure Protection and Emergency Preparedness. When he appeared before the standing committee last week, the finance minister stated that one of the factors that could throw this economic forecast into disarray is the possibility of fresh acts of terrorism. Therefore, you need to be aware of the degree of progress that has been made by OCIPEP since the December 2001 budget in using its additional funding to address community safety issues, whether such issues are the result of man-made or natural causes.

One purpose of these funds was to improve laboratories and purchase specialized equipment to strengthen Canada's ability to respond to chemical, biological, and nuclear threats. Fully 77.8% of the fire chiefs have told us that little or no progress has yet been made to provide them with the strength and capacity for such responses.

The other purpose of these funds was to improve the ability to protect Canada's critical infrastructure, such as water and energy utilities and transportation and communication systems. On this front, 82% of the fire chiefs reported little or no progress within their communities.

It is not the purpose of our presentation to embarrass anyone, but this lack of progress is a fact. It is important that you be aware of this inertia so some solutions to these problems can be made available for consideration.

In the view of the Canadian Association of Fire Chiefs, a major stumbling block to effective federal action lies in OCIPEP's insistence that it totally respond to the requirements of the provinces and territories. It is not surprising, therefore, that the progress made has been neither widespread nor particularly focused.

Therefore, our submission recommends a stronger degree of federal leadership. For example, the primary responsibility for improving response to chemical, biological, radiation, or other nuclear incidents should rest with the federal government. We believe that funding should be by direct grant through the local agency and earmarked for spending according to a national equipment and training priority list.

Our pre-budget survey demonstrates that 95.9% of the fire chiefs believe that the Government of Canada has the responsibility to support training for fire service personnel. One of the purposes of the federal joint emergency preparedness program is to provide education and training related to civil preparedness for emergencies.

Our pre-budget survey asked fire chiefs to rate the effect of such JEPP-sponsored education training, and the majority said it was either somewhat unimportant or unimportant to them. This is a serious matter in the eyes of our association. We want fire chiefs to be able to regard JEPP-sponsored training and education as being of major significance to them. Therefore, we urge the standing committee to recommend that the next budget include additional funding for the Organization for Critical Infrastructure Protection and Emergency Preparedness for the express purpose of improving the quality of education and training through the joint emergency preparedness program.

A few years ago the Major Industrial Accident Council of Canada dissolved itself. To ensure that the intellectual property of that organization did not disappear, it was acquired at nominal cost by our association. Officials of the Department of Environment and of Emergency Preparedness Canada, which has just been trasformed into OCIPEP, participated actively in the development of that intellectual property. A key element of the intellectual property is the Partnerships Toward Safer Communities initiative. At its annual conference for the past two years CFC has exposed its members fully to this program.

When Canadian fire chiefs were asked in our pre-budget surveys to assess the importance they attached to the partnerships toward safer communities initiative in terms of emergency planning, preparedness, and protection within their own communities, 76.6% of them rated it as either extremely important or somewhat important. Yet that importance remains largely theoretical. For the program to flourish, it will need financial resources that are beyond our association's means both to further promote the program and for necessary upgrades.

This is essentially a voluntary initiative, but we have asked in our pre-budget submission for $200,000 per year over the next five years to ensure the future of the partnerships toward communities program. This seems to offer a cost-effective and responsible means by which the government can honour its election promise to help Canadian communities to be safer. You should know that 77.9% of the fire chiefs responding to our pre-budget survey stated that the Government of Canada has a responsibility to provide direct financial support for the partnerships toward safer communities initiative.

The second major component of our pre-budget submission consists of a variety of other issues, two of which deal directly with the volunteer fire services that are so important to many Canadian communities. The smaller municipalities in Canada are virtually all protected by volunteer fire departments, while somewhat larger municipalities have composite forces consisting of a core group of full-time personnel supplemented by volunteers. Recruiting volunteer firefighters has always been difficult and is becoming more so as a result of obstacles created by both the public and private sectors. Volunteers are either employees or self-employed and must already pay Canada Pension Plan premiums plus, in the case of employees, employment insurance premiums. The fact that they are now required to pay additional premiums based on the stipends they receive as volunteer firefighters is destructive to the voluntary nature of what they do.

¿ (0910)

We have also recommended that companies be entitled to a $500 tax credit for each volunteer firefighter or officer they employ on a full-time basis. Furthermore, we feel the credit should be extended to all self-employed individuals who are also volunteer firefighters or chiefs. Leaving work to help address emergency situations can often create economic hardship for self-employed people or companies. It also creates, in some instances, a reluctance on the part of the businesses to employ individuals who are volunteer firefighters.

On behalf of the Canadian Association of Fire Chiefs, I thank you for your attention to my presentation. I look forward to responding to your questions and comments later in this morning's session.

¿ (0915)

The Chair: Thank you very much.

We'll now move to the Canadian Association of Not-for-Profit RESP Dealers. I note that Mr. Riley has joined us, so welcome, sir.

Mr. Lewis, go ahead.

Mr. Peter Lewis (Co-Chair, Canadian Association of Not-for-Profit RESP Dealers): Good morning, Madam Chair. On behalf of the Canadian Association of Not-for-Profit RESP Dealers, I'm pleased to present our presentation on making post-secondary education accessible.

My name is Peter Lewis. I'm a co-chair of the Canadian Association of Not-for-Profit RESP Dealers. I'm joined by Mr. Paul Renaud, also co-chair of the association, and Mr. Ray Riley, who is chairman of the RESP Dealers Association of Canada.

I'm here today not just as a representative of our association, but also as father of six children from ages one to twelve. These are six children for whom I have hopes, dreams, and aspirations, and who I know are going to make a positive contribution to Canadian society. But to do so, post-secondary education is critical for them.

I have started the process of saving for their education, but I'm concerned about the number of families out there who are not yet saving. That's the reason why we're here today--to present to you this information.

I'm going to walk you through the presentation very briefly. Our objectives include increasing post-secondary education savings, focussing especially on lower- to moderate-income families. Those are the families for whom we have the greatest concern, as organizations. That increase in savings will in turn lower student loan debt, lower the default rate, and reduce the number of students who drop out of post-secondary institutions for financial reasons.

Last year we presented some recommendations to this committee, and those recommendations were endorsed by this committee. We're here today to present our recommendations again, with the hope that those recommendations will once again be endorsed, and will make their way into an upcoming budget.

We know that the cost of education is going up fairly dramatically. Our biggest concern is that since the early 1990s, the cost of education has increased at a pace greater than the consumer price index and the family income index. If this current trend in the cost of education continues, it will put higher education out of reach of the average Canadian family in the future.

Our concern is increasing accessibility to higher education. There are essentially three ways you can do that. You can fund students directly, primarily through student loan programs. You can fund institutions directly, and that's already being done in our country. But we believe it's also important to continue to encourage families to save for education, and that can be achieved through grants and incentives.

We see, in our respective organizations, that the children who have RESP plans usually pursue higher education at a rate of about twice the national average. So the fact that someone has an RESP means it increases the likelihood they'll go on to higher education.

The Canadian education savings grant was introduced in 1998. It's been a tremendous success story. It's hugely popular among the Canadian public. We've seen RESP assets grow dramatically, from $2.5 billion to $10 billion in that time period. But our experience has been that the lower- to moderate-income families still have less awareness and understanding of the grant, and as a result have less motivation to use the grant.

We know that independent savings will lead to decreased dependency on the student loan program. An important benefit of the grant has been that we've seen an increase in those savings levels. Another important benefit of the grant is that the federal government has increased information about what funds are out there, in terms of savings. That will allow it to make better decisions about where to direct funding for education.

A quick summary is on page 12. We have been talking to the various provinces. We've been encouraging them to provide added incentives for families—lower- to moderate-income families—to join in the process of saving for their children's higher education. We've seen some success and we're continuing that process.

I'm going to turn it over to Mr. Renaud. He will now provide you with our recommendations.

¿ (0920)

Mr. Paul Renaud (Vice-President, Corporate Affairs, Canadian Association of Not-for-Profit RESP Dealers): Thank you, Madam Chair, and good morning to you all.

I too am a father, not of six, but of four. I'm at the other end of the spectrum from Mr. Lewis. I have one child who has already finished university and two who are currently in university, so I can tell you the costs of post-secondary education. I can tell you from my own personal experience that costs in excess of $25,000 a year are what are required to keep two children in post-secondary education.

For those families in Canada that want to send their children to post-secondary education, this brochure that we've passed around to you, Guide to University Costs in Canada, is a key indicator of the kinds of expenses that people are likely to face as their children reach that level of education. They're not simply numbers on a page; they are a reality to families as their children reach that stage.

On page 13 of the presentation that you have in front of you, you'll find the strategies we're here to talk to you about today. They include targeting the growth in savings for post-secondary education for low- and moderate-income families that have the ability to invest in registered education savings plans and need to take advantage of the Canada education savings grant.

In addition, we also want to bring your attention to the risk some of the low- to moderate-income families face in circumstances in which their family may get into financial distress and require social assistance. Social assistance today is starting to attack savings for education by requiring families to collapse education savings plans as part of their qualification process to achieve social assistance benefits.

Our recommendation on page 14 is to change the focus of the grant slightly, change the amount of the benefit for the first $1,000 of contribution from 20% to 30%, and then reduce the contribution for the grant in the second $1,000 from 20% to 10%. It is in fact a revenue-neutral recommendation, but it brings to the fore the contributions for the lower- and middle-income families, and increases the grant's availability in those parts of the economy.

We also need your help in raising awareness about registered education savings plans. The key component in any savings program is to start early and to continue that process often.

On page 17 of the report, I just want to bring to your attention the reach of the association that is sitting here in front of you this morning. Amongst those of us sitting here at the table, we deal with over 750,000 RESP accounts for over 400,000 children in Canada. We have assets of over $2.5 billion on deposit, and we handle and make RESP payments of $750 million a year.

The RESP Dealers Association of Canada is represented on page 18, and I would just point out to you that all of the RESP dealers in Canada are represented in this association.

Madam Chair, thank you so much for your time this morning. We look forward to talking to the members of the panel during the question period.

The Chair: Thank you very much.

We'll now move on to the Canadian Professional Sales Association.

Mr. Terry Ruffel (President, Canadian Professional Sales Association): Thank you, Madam Chair.

My name is Terry Ruffel, and I'm president of the Canadian Professional Sales Association. Our association comprises 30,000 members from all aspects of sales and marketing in Canada. They range from small, independent entrepreneurs to sales and marketing personnel of major corporations. Association members are located in all provinces and territories, and make an important contribution to the economic vitality of all Canadian communities of any size. At the same time, they're individuals who sell products and services around the world.

I'm able to state with confidence that our pre-budget submission also reflects our members' views, as we took a survey this summer and sought out their pre-budget opinions.

When the standing committee invited the CPSA to participate in the pre-budget consultations this year, we were requested to express our opinions on how greater levels of economic prosperity and the highest quality of life can be achieved for all Canadians. Accordingly, we asked our members to assess how the impact of further reductions in the national debt, additional tax decreases, and higher levels of spending would affect these issues. They said clearly that the keys to increased economic prosperity lie in reductions to our national debt and in additional tax relief. Increased public spending was not regarded as a significant requirement to achieve greater economic prosperity. The same ranking applied when we asked about the quality of life for Canadians.

When he appeared before the standing committee last week, Finance Minister Manley indicated his commitment to prudence in budget-drawing when he said:

“Canadians have made it clear they want a policy of balanced books and a balanced approach to our nation's finances. We agree, because we know--and Canadians know--that sound financial management and a prudent approach to spending are the surest path to a better standard of living for our citizens and a higher quality of life for every Canadian.”

CPSA welcomed the minister's statement, and we support it strongly. We urge the standing committee to support the finance minister's promise to balance the budget this year and next while concurrently reducing our national debt, and to think strategically in terms of spending and focused priorities.

Our pre-budget submission notes Mr. Manley's appearance before the standing committee last June, when he promised further tax reductions as the government's fiscal resources permit them. We call upon the standing committee to support that commitment as well.

The CPSA is concerned about rumours that the imminent Romanow report will recommend additional spending on the health care system of such magnitude that an increased rate of GST, higher excise taxes for gasoline and fuel, and even personal income tax hikes, may become a necessity. The CPSA cannot imagine a tax increase of this kind would be well received by Canadians. We urge the standing committee to make it clear in its final report that it supports this position as well. Our submission urges you to remain committed to advocating a curtailment of spending that does not meet the productivity covenant recommended in 1999. To CPSA, the only rationale by which you can justify increasing public spending is to meet growth in inflation and population.

In his recent presentation to the standing committee, the Governor of the Bank of Canada predicted economic growth at slightly less than somewhere between 3% and 4%. Last week, the Minister of Finance suggested that it would be around 3.4% to 3.5%. It is important to note the comparison between these two forecasts and what our members think. Only 26% of them believe the national economy will grow by 3% or more next year. Indeed, about 50% of our members believe economic growth in Canada will be less than 1%, although they're a little bit more optimistic about their own companies.

CPSA members were also asked whether Canadian consumers have enough confidence to keep the economy healthy for the balance of this year and next. Net results indicate that only 40% of sales and marketing professionals believe there's sufficient confidence to keep the spending growing and keep our economy healthy. To us, this means tax reductions would be regarded as a priority for the government. We do not believe the way to bolster consumer confidence is through increased public spending.

Our association proposed two specific tax reductions. First, while recognizing that much needed personal income tax relief was provided in the 2000 budget, the decision to retain the 29% rate for taxable incomes over $100,000 was not well received by our members. When you combine federal and provincial top marginal rates, they exceed 45% in several provinces. We believe the regular incomes of Canadians are being subjected to too high and too punitive standards, certainly by international standards, and we've recommended a reduction in that bracket to 27%.

Secondly, in our pre-budget survey, 59% of our responding members indicated that the air travellers' security tax is having an impact on the cost of business. Our submission stated that Canadian firms must remain price-competitive to succeed. The surcharge on air travellers does not contribute to that competitiveness. Accordingly, we recommended that the $24 round-trip air travellers' security charge be reduced in the upcoming budget.

And I think this is going to make an impact on a large number of Canadians: Our submission notes that the $13,500 limit for RRSP contributions for the self-employed, who constitute a substantial portion of the CPSA members, is grossly inadequate compared to employer-sponsored pension plans with their $15,500 implicit limit. Therefore, we have recommended an immediate increase in the contribution limit to $15,500. Further, we've recommended that the $15,500 limit for both RRSPs and employer-sponsored plans be indexed to the maximum pension earnings for the CPP.

¿ (0925)

Members of the CPSA remain concerned about the deterioration and inadequacy of our national transportation infrastructure. We believe the standing committee should recommend that a portion of the federal gasoline and diesel fuel taxes be directed to the restoration and expansion of the national transportation infrastructure that is so critical to our economic growth and prosperity.

Finally, our pre-budget submission measured the impact of last September's terrorist attacks on our members both domestically and internationally. There are budget-making lessons to be learned from last September's tragedies. First, our survey clearly shows the negative impact on our members' domestic and export sales, indicating smaller sales for Canadian companies. Secondly, additional man-made and natural disasters affecting Canada might appear inevitable.

We applaud the re-establishment of the contingency fund of $3 billion, and we urge that it remain at that level in the forthcoming budget. I think using the contingency fund for any other use, such as a terrorist attack or other unforeseen contingencies, deserves the standing committee's commitment. Conversely, using it to underwrite increased spending for unforeseen contingencies should be avoided, so we heartily support the contingency fund and maintaining it for its appropriate use.

Thank you for your attention to my remarks. I look forward to further dialogue.

¿ (0930)

The Chair: Thank you very much.

We'll now go to Conservation Ontario. Mr. Hunter, go ahead, sir.

Mr. Richard Hunter (General Manager, Conservation Ontario (Newmarket)): Good morning.

My name is Dick Hunter, and I am the general manager for Conservation Ontario. I'm joined here today by my colleague George Braithwaite, the vice-chairman of Conservation Ontario, and Mr. Craig Mather, the chief administrative officer for the Toronto and Region Conservation Authority.

On behalf of Conservation Ontario's 36 conservation authorities, I want to thank the chair and committee members for inviting us here today to take part in the finance committee's pre-budget consultations.

Madam Chair, I understand that you and Joe Fontana had an opportunity to be briefed on Conservation Ontario's healthy Great Lakes program by Mr. Don Pearson, general manager of the Upper Thames River Conservation Authority, during a mini pre-budget consultation in London on October 11.

In operation since 1946, Ontario's conservation authorities are unique, community-based organizations providing comprehensive watershed planning and management activities, as well as educational and recreational programs. Outside of the federal and provincial governments, we are the only agency mandated to manage natural resources on a watershed basis.

To give you a sense of the magnitude of our responsibilities and reach, approximately one-half of Canada's population is concentrated in southern Ontario, in the Great Lakes and St. Lawrence watershed. This watershed is defined as the land drained by the water courses and lakes that flow into the Great Lakes and out through the St. Lawrence, including the Ottawa River.

I want to focus my comments today on Conservation Ontario's continued efforts to implement, in partnership with the federal government, a critically important and necessary program that will specifically address the growing and ongoing deterioration of our country's Great Lakes. Conservation Ontario has developed a comprehensive healthy Great Lakes program to respond to these growing environmental concerns. The particulars of this proposal have been provided to the committee previously. Conservation Ontario's proposal calls for the establishment of a $100-million healthy Great Lakes program that would be financed by the federal government equally over a five-year period.

Last year's report from Johanne Gélinas, Canada's Commissioner of the Environment and Sustainable Development, specifically raised the need for an enhanced federal government role to combat the increasing problems associated with our Great Lakes. Ms. Gélinas' report clearly indicated that the Great Lakes are facing increasing environmental stress, and strongly noted the need for federal government involvement to more adequately safeguard the Great Lakes Watershed from contaminated sediments, farm manure, and municipal sewage.

As I'm sure you are aware, a large number of Canadians are dependent on a healthy Great Lakes basin for clean drinking water. The protection of our Great Lakes is a national concern. The health, prosperity, and social well-being of approximately one-half of Canada's population is directly linked to the quality and continued health of the Great Lakes, which, incidentally, make up 20% of the world's fresh water.

Our proposed healthy Great Lakes program is a necessary extension of an already existing federal funding initiative for the restoration and remediation of areas of concern through Environment Canada's Great Lakes sustainability fund. At present, there is no established fund to deal with the associated problems outside the 16 areas of concern. The goal of the program is to restore the vast areas that drain into the Great Lakes and St. Lawrence basin and are located outside the 16 areas of concern, and in doing so, to restore the health of the Great Lakes.

Studies by a number of conservation authorities indicate that up to 90% of pollutants enter watercourses in rural areas coming from non-point sources. As well, watershed planning exercises completed by a number of conservation authorities indicate that a fund of this size will enable us to make significant progress in ensuring the integrity of the Great Lakes, as well as significantly improving the environmental quality of the Great Lakes watersheds.

As many committee members here today will recall, we appeared before the House finance committee during last year's pre-budget consultations, on October 16, 2001, on this very matter. Our presentation was positively received, as the healthy Great Lakes program was one of very few environmental funding initiatives noted and supported in the finance committee's pre-budget report, Securing Our Future, tabled in the House of Commons on November 26 of last year.

Unfortunately, the unforeseen and catastrophic events of September 11, 2001, had a major impact on the government's ability to move forward on a number of important initiatives, including the healthy Great Lakes program. However, following the government's recent Speech from the Throne, we are hopeful that the government can now move forward in addressing its agenda priorities, one of those being a commitment by the government to address a number of environmental concerns in Canada.

Over the past year, we have maintained our communication with Environment Canada officials and with the environment minister, David Anderson. Conservation Ontario has acted on the minister's advice to amend our original proposal by broadening the scope of the healthy Great Lakes program to strengthen the linkages between agricultural programs and the environment.

We also took action, on the minister's advice, to ensure and confirm support from the entire Ontario caucus for this program. Our efforts have proven fruitful and have resulted in continued strong support for the program from Agriculture Minister Vanclief, from Minister Anderson, senior Environment Canada officials, as well as unanimous support from all of the Ontario caucus.

The Ontario caucus's unanimous support the healthy Great Lakes program was recently confirmed via letters written to Minister Anderson by the chairs of the Ontario regional caucuses, as well as from John McKay, chair of the Ontario caucus, urging the government to fund this important initiative. I believe copies of those letters have been provided to the committee as well.

As you may be aware, the International Joint Commission, the IJC, co-chaired by the former Deputy Prime Minister, the Honourable Herb Gray, recently released a report indicating that the cleanup of the Great Lakes is moving too slowly. This is yet another concrete example of the need to implement the healthy Great Lakes program as soon as possible. Mr. Gray has expressed his unequivocal support for the program and suggests the federal government must play a pivotal role in funding this program.

The healthy Great Lakes program, if implemented, will serve to meet a number of federal government priorities. This program is entirely consistent with the federal government's agenda, as specifically noted in the most recent Speech from the Throne, to address many of the environmental concerns related to clean water, clean air, and climate change that fall within federal jurisdiction.

As you may be aware, the Province of Ontario has given a clear commitment to implement and fund all the recommendations included in Mr. Justice O'Connor's Walkerton inquiry report. Fundamental to these recommendations is the concept of watershed base source protection plans and associated implementation programs. The source protection component of part two of the Walkerton report has a direct bearing on the 2002 Canada-Ontario agreement. Given the interrelationship between groundwater, surface water--read that watersheds--and the health of the Great Lakes, conservation authorities have been specifically identified in part two of the Walkerton reports as the appropriate mechanism to coordinate and implement these watershed source protection plans.

Madam Chair, it becomes even clearer that Conservation Ontario's healthy Great Lakes program and the role of conservation authorities, as identified in the Walkerton report, are extremely complementary in nature. The requested funding of $100 million over five years, and corresponding provincial funding for source protection, will form a sound basis for funding many of the joint Canada-Ontario actions noted within the 2002 agreement.

Conservation Ontario is well positioned to work with the management committee identified in that agreement to ensure coordinated implementation of these programs, thus eliminating overlap of effort and ensuring an effective model of delivery across the Great Lakes basin. The healthy Great Lakes programs can positively affect the water quality in downstream receiving bodies, in this case the Great Lakes. This initiative lays out a comprehensive strategy for protecting and restoring watershed health. Furthermore, support of the program will assist the federal government in achieving a number of its priorities, including citizen engagement, stewardship, and volunteerism. These are fundamental principles on which authorities operate.

By partnering with Conservation Ontario, the program provides the federal government with a perfect opportunity to show its commitment to the environmental pressures facing our Great Lakes. Fundamental to this program is Conservation Ontario's role to ensure that members of Parliament are recognized for their commitment in this program.

I'll skip down to the end and go over a couple of paragraphs here.

¿ (0935)

Madam Chair, the federal government simply does not have the luxury of delaying our commitment toward the protection of the environment in the Great Lakes basin. We therefore ask the finance committee to specifically recommend in its pre-budget report that the Minister of Finance give support to the healthy Great Lakes program and allocate the appropriate funds to allow for a $100 million healthy Great Lakes program over five years, to be implemented in partnership with conservation authorities of Ontario. We have the infrastructure to work with the federal government to design and implement valuable projects in an efficient and timely manner. The pressures being put on our environment right now are very real and increasing. We must plan for the future and act now to address these very real problems. An environment that includes clean air and clean water is not a privilege, but a right that all Canadians deserve.

That concludes my remarks. My colleagues and I would be more than happy to answer any questions you may have.

¿ (0940)

The Chair: Thank you, Mr. Hunter.

Dr. Ewins, from World Wildlife Fund Canada, the floor is yours.

Dr. Pete Ewins (Conservation Director, World Wildlife Fund Canada): Thank you, Madam Chair. Thank you for this opportunity.

World Wildlife Fund Canada would like to focus this morning on two recommendations. Both are recommendations regarding long-term investment in a sustainable future for Canada using protected areas, the first being in regard to federal parks and national marine conservation areas, the second in regard to the development, in a balanced way, of a Mackenzie Valley gas pipeline.

First, World Wildlife Fund is the world's largest independent organization dedicated to the conservation of nature. Our global network operates in over 100 countries, and we raise about $1 billion Canadian annually for nature conservation. Our mission is simply to build a future in which humans live in harmony with nature. The WWF has had an organization in Canada since 1967. I currently direct our Arctic conservation program.

Canada clearly has a unique situation, where our natural heritage is still relatively intact. Indeed, we are extremely fortunate, because these natural elements are ultimately those that will sustain us, as they've sustained Canada's indigenous people for thousands of years. In Canada we still have the opportunity to protect our lands, our waters, and our wildlife and to safeguard our natural capital, i.e., ecosystem services, such as clean water, clean air, nutrient cycling, and 100,000-plus wildlife species, also known as biodiversity. We can safeguard these for future generations if we choose, but at the same time we can benefit today from the exploitation of our natural resources. In essence, this is the core of sustainable development.

So while we do not yet include natural capital in our national account--and I believe Canada should and will in future be a world leader in this regard--over the past decade our leaders have expressed clearly and repeatedly the importance of a well-planned, well-balanced approach to the further development of Canada's natural resources. Clearly, World Wildlife Fund believes that without such an investment in safeguarding these resources, Canada's natural capital and ecosystems, our descendants will face insurmountable social, health, aquatic, water, climate, and biodiversity problems. They will indeed struggle to meet the very basic needs of life.

Since 1992 at the Rio Earth Summit the so-called two-pronged approach has been widely accepted as the most effective way to achieve this satisfactory balance of development and conservation. The first prong is simply the protection of an adequate sample of natural areas in our oceans and across our lands. These would form the anchors for biodiversity, ecosystem services, aboriginal values, etc. Governments at all levels have, indeed, committed themselves to this over the last ten years. Second, across the rest of the landscape, we know how to conduct development in an environmentally and socially responsible manner, using sensitive engineering and operational techniques, mitigation, and restoration.

WWF strongly supports, as do aboriginal communities, this “conservation first” approach, conserving things we value, even if we don't put an economic value on them today, things of longer-term value, before proceeding with development. This clearly involves implementing the first prong of this two-pronged approach, to identify and protect key areas for the long-term conservation of eco-cultural values, ecosystem services, etc. This is exactly why you see in the Walkerton report that the number one recommendation is a proactive one, adopting this conservation first approach, that the watersheds be properly planned, managed, and protected in the long-term future interests of both Canadians and biodiversity.

There are also two significant topical reasons for achieving these protected area targets. First, in the Privy Council April 2001 minute establishing the terms of reference, really, for the Romanow commission on health care it was emphasized that the cultural, spiritual, and social well-being of Canadians is of paramount importance, especially regarding aboriginal communities. The mandate included the recommendation of policies and measures that strike an appropriate balance between investment in prevention and health maintenance and care and treatment. Second, there is a need to provide optimal conditions for biodiversity and ecosystems, upon which we ultimately all depend, to adapt in the face of rapid climatic change. These anchors, natural areas, will form the insurance policy for wildlife and ecosystems to adapt in the way they know best, which we cannot try to mimic.

I'd like to turn now to the two significant high-profile opportunities for the federal budget process to enable this major progress toward completing Canada's protected area system.

First, completion of the national parks system has been a top priority for this government, and rightly so. Now we simply need to implement the commitments made by the Prime Minister and in the current throne speech to establish 10 new national parks, extend three existing national parks, and establish five national marine conservation areas. In addition to that, we need to restore the degraded national parks in adjacent areas, as recommended clearly in the round table ecological integrity panel report. The cost of achieving this work has mostly been estimated in the range of $500 million over a five-year period. Whatever the number, World Wildlife Fund encourages the finance committee to ensure that the allocation is sufficient to deliver fully on the Prime Minister's announcement.

Second, in regard to the development of a Mackenzie Valley natural gas reserve, if it is planned and executed in a well-balanced manner, we believe the development of this resource can bring huge economic and social benefits to Canada and the north without significantly compromising ecological and cultural values. The alternative involves costs far greater than we would like to imagine in dealing with potential conflicts in other, more reactive ways. These are much larger and less satisfactory costs for industry, Canadian people, and aboriginal people. Protecting an adequate network of culturally important and ecologically representative areas in the Mackenzie Valley prior to pipeline completion, via the community-based and industry-supported Northwest Territories protected areas strategy, is a fundamental component of such a well-balanced approach.

My final point is that WWF encourages your committee to identify clearly within the comprehensive federal preparation and investment package for the Mackenzie gas pipeline development an allocation of $4 million per year over the coming three years, totalling $12 million, to be matched by environmental conservation organizations and other groups, including industry, which we have been working closely with, to establish this adequate protected areas network under the protected areas strategy.

Thank you very much, Madam Chair. We greatly appreciate this opportunity to present the points. We look forward to further discussion.

¿ (0945)

The Chair: Thank you to all of you for your presentations.

We're going to go to six individual questioners with seven minutes each. I'm going to start with Mr. Penson.

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

I'd like to take this opportunity to welcome all of those presenting before the finance committee today. This is an important part of the pre-budget process, and I welcome your representations to us.

Mr. Ruffel, you will understand that the finance committee in these pre-budget hearings are getting quite a cross-section of people asking for tax relief, like yourself, and others asking for increased funding from government. You can appreciate that it is a balancing act. I think you did say it's important that the finance minister try to find new areas of relief within the existing budgetary framework, or you agreed with his setting priorities. Is that not right?

Mr. Terry Ruffel: That's correct.

Mr. Charlie Penson: We had the finance minister in Halifax last week making projections five years into the future, but it seems to me that the United States is experiencing some difficulties in its economy, and so much of our economy is tied to theirs. In fact, more than 45% of our GDP comes from exports, almost 90% of that to the U.S. these days. I think you were talking about business investment. I notice that in the United States business investment is at about a 50-year low. It seems to me that's signalling some difficulties, that businessmen out there like yourselves are seeing a slow uptake in investment. Isn't that a little worrying for the Canadian economy as well?

¿ (0950)

Mr. Terry Ruffel: I think it should be, certainly on the statistics we had--mind you, they're about 60 days old. If anybody is going to be optimistic, it's got to be the sales and marketing types. Clearly, about 40% of them felt we're going to get about 3% growth. That means about 60% of them saw very marginal growth, around 1%. When you're doing your budgeting and your forecasting, you're getting a mixed message between 3% to 4% growth and a lot of Canadians out there saying, I don't think so. From the committee's point of view and the minister's point of view, I think a pretty cautionary growth forecast would probably be prudent.

I was at lunch yesterday with one of the other associations, and they were talking about the truck traffic going over Windsor and Buffalo. Somebody indicated that over the last couple of weeks the truck traffic had decreased immensely. So you get something of the pulse of the economy just in the last week or two.

Certainly, I agree with you, a cautionary approach is needed. I know a number of American associations are not doing well.

Mr. Charlie Penson: A lot of people are saying, what's the problem, with the Canadian economy growing at 4% or 5%? It seems to me that in the past we've seen some lag time, both going into difficulties and coming out, in relation to the United States economy. Is that what we may be seeing here?

Mr. Terry Ruffel: I think you're probably right. I live in southern Ontario, and the auto industry and the housing boom in our community have certainly kept us going, I think, in large part.

Mr. Charlie Penson: You made reference to the gas tax, the fuel tax. As you know, that tax raises about $4 billion that goes into general revenue for the federal government. About $190 million is spent in transportation infrastructure. The rest seems to get gobbled up in general spending by the federal government. Are you asking this committee to ensure that the entire amount of whatever fuel tax is there is dedicated to transportation infrastructure?

Mr. Terry Ruffel: I'm not sure it's the entire amount, but on the numbers you gave me, and I assume they're correct, there's quite a gap between the revenues collected and what's actually spent. We went through the list of our members and said, what do you think the priorities are if you have to spend money? For economic prosperity for all Canadians and growth, putting money back, if you had to put it back, into that area I think is essential. You're absolutely right, you're pulling billions out, and the amount of reinvestment does not match. I certainly think that if there are spending priorities that really affect our prosperity and quality of life, putting more money back into the infrastructure is important.

Mr. Charlie Penson: The United States has a tax on fuel consumption as well, and they rebate it to municipalities or the state level. One of the difficulties in Canada if you put it back into the transportation sector is that some provinces have already spent quite a bit of money on their own on this side. Provinces like Saskatchewan are having a great deal of difficulty turning what were formerly paved roads back into gravel roads. There is a discrepancy. If money was sent back to the provinces because of a dedicated tax, what would you do with provinces like Alberta that have taken the initiative on their own? Would you give them a credit? How would you handle it?

Mr. Terry Ruffel: I'm not sure a dedicated tax is the right solution. I think the message, certainly the perception of most Canadians, is that you're pulling a whole bunch of dough out and making a very small investment back. I'm sure the message to Canadians that we're reinvesting in the infrastructure and there's a proper matching of the revenues collected and the investment would probably be the way to go, rather than indicating a dedicated tax.

Mr. Charlie Penson Thank you.

Mr. Hunter, you've raised the very important topic of water pollution. There is also the air pollution in different sectors in Canada. Now, we hear a lot these days about the Kyoto accord--it's dominating the news--and where governments want to go in first ratifying it and then having a 10- to 12-year implementation plan. My understanding is that the accord doesn't really deal with your issues--i.e., pollution into water streams and heavy particulates in the air, generally speaking. Is that correct?

¿ (0955)

Mr. Richard Hunter: I'm certainly not an expert on Kyoto, but the parts of it that I do understand certainly would have a peripheral bearing on water quality. Certainly the particulates would be a component of that. We have, as part of this program, talked about afforestation and that opportunity in terms of carbon sequestration, but it would not as directly affect and positively influence the quality and quantity of water in the watersheds and the Great Lakes.

The Chair: Thank you very much.

Mr. Masse.

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

Mr. Hunter, just to carry on from Mr. Penson's line, with regard to your proposal of $100 million, can you elaborate on Conservation Ontario's ability to attract private investment with regard to land acquisition? What types of partnerships? And what do you project that, in terms of dollars versus other dollars coming in, you would be able to achieve if you were granted this request?

Mr. Richard Hunter: In the more detailed proposal that was put forward, I think we had translated this kind of investment into a 2:1 or 3:1 return on investment relative to moneys that could be put forward. Land acquisition is a component, but there are significant other components in terms of incentives for landowners to implement measures on their properties to clean up and deal up with water quality issues. But it is in the order of 2:1 to 3:1.

There could be a variety of sources for that. Certainly one place would be the municipal sector. As well, a number of corporate and private sector individuals and organizations, including foundations and other environmental and conservation groups, are equally interested in this.

Clearly we have positioned this around a partnership of a variety of interests in terms of being able to translate this into on-the-ground improvement as well as protection and preservation of wetlands and other significant natural features.

Mr. Brian Masse: Speaking from the point of view of the NDP Ontario caucus--the two of us--we're concerned that, if this is left longer, with the cost of land escalating, especially in southern Ontario, and not being able to purchase these lands past the five-year point, it could diminish any significant movement that could take place. That's why we're up to the $100 million request right now, as it is. Can you confirm that this is the expectation?

In Windsor, to give you an example, our tree coverage is at around 6%. We're very diminished, even as a county, because of our agriculture and manufacturing production.

So do you suspect that will happen if we do not move now?

Mr. Richard Hunter: I'll probably ask Mr. Mather to comment as well, but certainly from my perspective, the development pressure that exists on the land base out there, particularly across southern Ontario, in terms of both urban development and agriculture pressure, means that as every day or year goes by, the value of the land--and the pressure on that land--in fact increases.

So you're right; every year lost probably translates into some areas of wetlands and other significant natural features that we're not going to be able to pull into the public domain.

I don't know if Craig has something to add.

The Chair: Mr. Mather.

Mr. Craig Mather (Chief Administrative Officer, Conservation Ontario (Newmarket)): Thank you, Madam Chair.

Land is never cheaper than it is today. Obviously, the longer you wait, the more expensive it gets, particularly in southern Ontario. I would remind you, however, that land acquisition is only part of this program. It doesn't solve the whole problem.

Mr. Brian Masse: To Mr. Ruffel, with regard to your organization, I noticed the table here, which was good with regard to some of the priorities and so on. But I have two quick questions.

One, the United States is interested in reaching a point where they're actually going to be borrowing for their tax cuts. Does your organization support that philosophy, that governments should borrow money to provide tax cuts?

Second, I know that subsidies to business, for example, would be one of the lowest priorities for your members. However, in their auto policy, as an example, the Americans are very protectionist and very driven by the subsidy mechanisms that are basically eroding our auto industry. Is there a specific targeting that you still are open to in terms of ensuring development of an industry until trade negotiations eliminate the whole subsidy or incentive situation, which is basically taking us out of this industry altogether?

Mr. Terry Ruffel: First, on borrowing for tax cuts, I think the survey indicates that our members said tax cuts are important, and then the next thing to do would be to address our national debt. So certainly from our members' perspective, paying down the debt is certainly one of the keys. Obviously, if we think that, then borrowing money to produce tax cuts would be absolutely the wrong thing to do. I think I commented on Minister Manley's balanced approach, both on spending and tax cuts. I think a balanced approach is important. So certainly borrowing money for tax cuts is not something we would recommend.

À (1000)

Mr. Brian Masse: That's what's happening in the States right now because their economy has shrunk so much. So you would suggest then to break the promise of the tax cuts, and the business community would support that, as opposed to keeping the promise of the tax cuts.

Mr. Terry Ruffel: Well, I think the minister, in a couple of his lines, talked about the proper pacing and relationship to growth of our economy. If we keep that in mind, I think tax cuts come when it's appropriate: where we see the growth and we see the confidence.

I'm not sure I can handle your question very well on the auto industry. Certainly I know there have been some recommendations in the last few weeks about that. I have to say that it's a little out of my expertise.

Mr. Brian Masse: That's fair.

Is my time up?

The Chair: You actually have a minute and a half.

Mr. Brian Masse: Oh, great.

I would like to ask Chief Warden, with regard to firefighters who are on volunteer service, one of the problems that some municipalities face is they pay up front for that full service through professionals, whereas some of the volunteer elements.... It reflects your tax base, and what not. You're asking for tax relief because you have to pay for full service out of the municipal taxpayers, and the volunteers are a lot cheaper until you get to the capacity.

What could be offset, or is there any type of incentive that could be broad-ranged so it's not just volunteers that are receiving a tax break? Could it be applied to professionals for specific equipment or training to be more universal?

Mr. Donald F. Warden: As I understand the system, currently it's a benefit to all professional and volunteer firefighters. If a professional firefighter chooses to volunteer in the community where he lives, then he is allowed to collect tax rebate as well as the volunteers are. So they are getting some type of a benefit if they act in a volunteer capacity.

If they're working only as a professional full-time firefighter, then that's about the same as me or anybody else around the table: we don't get any other breaks. It's only for the volunteers, and it's identified strictly for a person who's acting in a volunteer capacity.

The Chair: Thank you very much.

Mr. Wilfert, seven minutes please, followed by Mr. Valeri.

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

I'd like to thank everyone for coming.

The first comment I have, with regard to the presentation from the Canadian Professional Sales Association, you had made recommendation number one with regard to sound fiscal management, reducing the debt. I couldn't agree with you more. Clearly, we're not going to go back into a deficit. That is one of the commitments we've made.

On the issue of taxes generally, you talk about top tax rates. There's a myth out there that we are somehow the highest taxed. We're actually probably number three in the G-7. That doesn't mean that we can't come down, but the fact is that we're not as overtaxed as some would think. We're 46%, versus the Americans at 44%. Yes, the gap is significant, but the fact is that in aiming at tax reductions, the government's $100 billion tax cut will have more of an impact on the Canadian economy--it already has shown that, and it's probably why we've been able to weather the storm--than in the United States.

On the issue of health care, your members say that they support health care, but they don't necessarily support the issue of funding. Can you explain how we can reduce taxes, continue the debt reduction at the same time, and deal with the issue of health care?

Mr. Terry Ruffel: That's a tough question. Obviously, I think you have to keep your spending within the realm of what you've got. I think your indication just a minute ago was that there's a commitment to balanced budgeting, so that means you have to shuffle the spending within your budget.

I was in Halifax a few days ago, and was surrounded by 800 members of Freedom 55, so I'm not sure we're going to have Freedom 55 any more; it certainly isn't relevant to me. But if the government paid down the national debt, it would release billions of dollars in interest payments. So with proper discipline and staying the course, there is the opportunity to pay down our national debt and re-divert hundreds of millions of dollars that go to interest payments. That's probably your best opportunity.

À (1005)

Mr. Bryon Wilfert: I'm certainly a huge supporter of paying down the national debt, because we'd save about $3 billion every year in interest. That certainly could be used for other things. The trick will be, as the minister said, to get other departments to review their current spending. If we go to full accrual accounting, we may also save some dollars.

Do you have any comments on that?

Mr. Terry Ruffel: I'm a chartered accountant, so I should know about full accrual accounting, but I don't have any comments about that.

Mr. Bryon Wilfert: On Conservation Ontario and $100 million over five years for healthy Great Lakes, again we're being asked to spend money. I certainly support the idea of dealing with the Great Lakes.

The problem is the province. We live in a federal system. One taketh and the other giveth. Unfortunately, we've had quite a battle with the Province of Ontario in cleaning up the Great Lakes. As you know, gentlemen, they were very reluctant to come to the table to sign the agreement.

What assurances, if any, have you received from the province that if we outlay $100 million over five years, we're going to get provincial funding, particularly for the protection you have outlined in your presentation this morning?

Mr. Richard Hunter: I would be the first to say that there are no absolute guarantees. We have certainly been into a number of ongoing discussions. Right now, we are starting to see some of the greater details coming out on the provincial side, relative to the commitments of the Premier, to implement all of those recommendations and find the mechanism by which they get funded.

So part of this proposal is to look at the opportunity to marry the federal contribution with the provincial contribution that is expected. Nothing is signed, sealed and delivered yet, but the commitments have been very firm, in terms of all of the statements the Premier has made. As recently as last Tuesday, we were down there when announcements were made on the safe drinking water legislation. There was a clear commitment.

We anticipate that Conservation Ontario will have representation on an advisory committee to counsel and advise the provincial government on what needs to happen on the source protection planning. More importantly, on the implementation side, we anticipate that finding the funding and alternative mechanisms to raise that money on a provincial front will be part of those discussions and deliberations.

Mr. Bryon Wilfert: I have another question from my municipal days. As you know--and Mr. Mather knows this well, because we've worked together over the years--there's the issue of the Oak Ridges Moraine. The concern I have is that some developers have been stripping land to the point where in the north end of Richmond Hill there is contamination of well water and underground aquifers, which run into the headwaters of the Rouge and the Don, which flow down to the Great Lakes.

What, if any, action has your association been taking, in terms of getting municipal governments and the development industry to get their acts together, particularly on issues like that? We might be looking at cleaning up the Great Lakes, but when we have a problem with the headwaters, what do we do?

Mr. Richard Hunter: Mr. Mather is front and centre, in terms of the Oak Ridges Moraine, so I'm going to let him answer the question.

Mr. Craig Mather: Obviously, the Oak Ridges Moraine has been a concern of yours for many years. I think the recent provincial action, in terms of studying the new provincial Oak Ridges Moraine Conservation, Protection and Promotion Act and putting that in place, has moved us a long way forward. I don't think there was anyone more surprised than me that they actually came forward and put that piece of legislation in place. So that gives us a really good anchor to work from, in terms of protecting the core areas.

I think it's fair to say that we haven't been as proactive as we should have been in the past in understanding the groundwater system and in understanding the connection between the groundwater system and the surface water.

In the last three or four years, without provincial support or federal support, our authority in conjunction with the regions of Peel, York, and Durham initiated a groundwater management program that is starting to address those issues. Let's understand how the system works, let's figure out how the surface and the groundwater systems relate to each other, and then you can start to deal with how development impacts it. Then, if you add this program on top, it allows us to better manage the water that ultimately gets from the surface into the groundwater.

À (1010)

Mr. Bryon Wilfert: Thank you.

The Chair: Mr. Valeri, go ahead.

Mr. Tony Valeri (Stoney Creek, Lib.): I just have a couple of questions, and this is for Mr. Ruffel.

When I was in the private sector and I wanted to find out what was going on, I would call purchasing agents and find out what the front line was thinking. I'm a bit concerned with your comment that 50% of your membership doesn't think the economy is going to do better than 1% growth in the coming year. I think we need to pay attention to that comment.

I'm wondering whether you might have some additional information you might be able to provide the committee, whether through the actual survey you put out or through some other information we might be able to review to see how you came to that conclusion. Obviously, private sector forecasters are a lot more optimistic than your membership.

Mr. Terry Ruffel: Yes, that's the part that scares me as well. When you get the sales types, who are supposedly the great optimists of the world, being rather conservative and rather modest about growth, it's interesting.

One of the results was that when asked about the Canadian economy, they were pretty cautious. When asked about their own company, they were much more optimistic. So there's a bit of deviation there as to how they think the world's going to go and how they personally or the company is going to do. Certainly, the results of the survey are there, and they're a bit cautious.

Mr. Tony Valeri: You make the point about debt repayment. I want to ask you, do you think that government should include debt repayment as a line item in their program spending envelope, or are you satisfied that we are continuing to deal with debt repayment as a form of contingency reserve or surplus-type planning?

Mr. Terry Ruffel: In forecasting, the finance minister obviously has to have some flexibility. We're talking about the truck traffic going over the bridge last week. There's not a lot of certainty in the world today, and to have a line item in there that you're going to commit so much to debt reduction when the world changed last week or is going to change tomorrow would probably be a mistake. But certainly, the commitment on the part of the committee and the finance minister to make appropriate debt reductions as the opportunities arise is probably a prudent approach.

Mr. Tony Valeri: So you are comfortable with the contingency reserve approach to debt repayment?

Mr. Terry Ruffel: Yes, and if the surplus pops up, pay down the mortgage.

Mr. Tony Valeri: The other points you made included reducing the marginal rate from 29% to 27%. I was just curious, why 27%?

Mr. Terry Ruffel: I think it was a recommendation that was made some time ago. We're really just saying that we liked the previous commitment for debt reduction. As Mr. Wilfert mentioned a minute ago, we're not that far away from the situation of our American friends, but there is a gap. I suggest that two points would be a modest reduction, and it would help close the gap.

Mr. Tony Valeri: Do you have any sense, with respect to the air travel security charge, what the number should be if not $24?

Mr. Terry Ruffel: We've talked about that, and we have sort of recommended that it should really reflect what the costs are. But you know what? As you now know, in accounting and the Enron rules, and that, costs can be anything. So I don't know what the number is. It's too expensive, and you should reduce it. What the real number is, I don't know.

That trip to Halifax that I was telling you about was $99 one way, and the taxes and the other charges were another $100. Obviously, it is too high. I think there should be a commitment somewhere to reduce it. Whatever the number is, reduce it.

À (1015)

Mr. Tony Valeri: Okay, my last point with respect to your presentation has to do with RRSPs. You mention that you would like to see them go to $15,500 immediately. The Retirement Income Coalition was in, and they are suggesting that the RRSP limits go to $18,500 and something, to deal with that top threshold now being $103,000, and then move to $27,000 to be more competitive with our G-7 counterparts. Is that...?

Mr. Terry Ruffel: I'll take the high number, if you're offering it. But realistically, I think you have to move up. Realistically, you have to put self-employed in about the same spot as the employed people. I think the recommendation is to bump it up to improve Canadians' opportunities to retire with that quality of life that you asked the question about. Certainly, a move on that would be an important step. Again, our recommendation is to index that with the CPP numbers; I think that's another important step.

Again, you have to come back to what you guys can afford and what the country can afford. As I said, I'll take the high number, but there has to be some budgetary restraint in there, and what's the impact?

Mr. Tony Valeri: I have just a couple of points on the registered education savings plans. A couple of the recommendations you've made have to do with protection from social assistance requirements that require RESPs to be collapsed. Do you have any statistics on what the experience has been? Has that actually happened, and have you seen and collected any statistics?

Mr. Paul Renaud: We have only anecdotal evidence at this point in time. We have not collected any statistics. However, the anecdotal evidence that we have is very telling at this point in time. People have reached that point. They have set aside funds for that purpose and have been forced to collapse them in order to be able to qualify for social assistance.

Mr. Tony Valeri: I think it's a very important recommendation, given the fact that we keep talking about an innovative economy and the importance of lifelong learning and skills training. We don't want to have a system in place where in fact we encourage people to get out of a cycle or to better the standard of living for future generations, and then, because of a tragic event or some event, we now have governments clawing back, or having those dollars pulled back. So I think it's something the committee should look at, very clearly.

Could you expand on what you think the impact would be of increasing the percentage of the grant at the lower level? Would there be any disincentive to get beyond the first $1,000? You mentioned that rather than the 20%, you'd want to go to 30% on the first $1,000.

Mr. Paul Renaud: Again, our members' experience is that, in many cases, an RESP is the family's very first investment, and as such, their available dollars for investment purposes are limited. The 30% would maximize the availability of the grant for those individuals. It would not represent a disincentive to go beyond, simply because as those families grow and mature, their disposal income, as you know, generally increases, and they would then be able to take advantage of the additional grant room over and above the first $1,000.

The recommendation is purely to assist those struggling families to set aside the dollars that they need in order to meet the costs that, we point out, are very high and are increasing at a rate that is greater than the rate of inflation.

Mr. Tony Valeri: Do you think the 30% grant would attract a slice of the market that might not be interested in investing at the 20% level? Would we be attracting more people? Would it make a marginal difference?

Mr. Paul Renaud: We would attract more people at that income level, yes, definitely.

Mr. Tony Valeri: Okay.

The Chair: Thank you very much.

Just before we go on to Ms. Minna, Mr. Ruffel, just to get a context of the time period, I'd like to know, was your survey completed before Labour Day?

Mr. Terry Ruffel: Yes, it was. I think we had to get the brief in by September 9, so it was done in about August.

The Chair: We were kind of hoping to be back in September.

Mr. Terry Ruffel: That was the time.

The Chair: Thank you very much. That was just to give maybe a little context to the numbers you were working with.

Ms. Minna, you have seven minutes.

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

I'd like to go to the RESP. Could you give me an idea, when you talk about lower to moderate, what's low income and what's moderate, exactly? I just want to pin down what we're talking about in terms of actual income.

À (1020)

Mr. Paul Renaud: When we talk about low-income to moderate-income families, we're talking about family incomes for the low end in the $20,000 to $30,000 a year range. As I said earlier, this is generally the first form of investment these families have the opportunity to participate in. And generally--

Ms. Maria Minna: So this is household income?

Mr. Paul Renaud: Household income, yes.

Ms. Maria Minna: Okay.

Mr. Paul Renaud: And generally these families are contributing very small amounts--$10, $15, $20 a month--into these programs.

Ms. Maria Minna: And moderate would be what, $40,000 to $60,000?

Mr. Paul Renaud: In the $40,000 to $50,000 range.

Ms. Maria Minna: Okay.

The reason I'm asking is that I see people in my constituency who are earning $30,000, but the problem is by the time they've paid for rent.... I know they're trying to put in the money, and increasing the grant may help or may not for that particular bracket, because by the time they've paid for rent and they've paid for clothing and food, some of them are actually pretty thin at the end of the month, never mind putting money aside. Because $20,000 in Toronto, let's face it, if you have a child or two--or even $30,000--is not a heck of a lot of money. So you're lucky to put away anything at all, never mind... You're looking at pretty poor levels, very low levels.

The reason I raised it and wanted to know the figures is that I'm not sure that by raising the grant to 30% it actually helps that group. It may help the $40,000 to $50,000--it may--but I'm not sure it would help the low income.

I only raise that because I think we may have to look at some other way of addressing the problem of children who come from families that--

Mr. Paul Renaud: We have also addressed this perspective from a provincial level as well, and we've requested that the province look at a provincial top-up in addition to the federal grant. So we are targeting other sources of income besides just the federal grant that currently exists.

Ms. Maria Minna: The other question is again to you. Have you had any discussions or meetings with the provincial government with respect to social assistance? Because this problem doesn't just come in with respect to the RESP; we have this problem, as you know, with the clawbacks on the child benefit, on the welfare payments, where families who are taxed by 27%, who now receive moneys from the Government of Canada, cannot. That is clawed back.

There is a clawback on the millennium fund for the bursaries that are given to students. The intention was to give them a bit extra, and they're clawed back as well. So we don't seem to succeed or get ahead. It's like clawing your way up this hill, and every time you think you're getting to the top you slip back to the bottom or to the middle.

I just wondered if you've had any real discussion with the province about this particular problem.

Mr. Paul Renaud: We have. We have received very interested, attentive presentations and discussions with the individuals involved, but at this point in time there has been little movement. We're looking for, I guess, some encouragement from this committee.

We've also raised this issue from a bankruptcy perspective. There is a separate standing committee, as you know, that is reviewing federal bankruptcy legislation, and we've put that.... Again, that issue raises itself on the bankruptcy side.

Ms. Maria Minna: Right.

Mr. Paul Renaud: And we also have recommendations in at that level. So we're trying to touch the issue on a number of fronts at this point in time.

Ms. Maria Minna: Thank you. And I hope we all succeed to some degree on that, because I agree with you 100%.

Mr. Ruffel, in your recommendation you mention the gas and gasoline taxes that go to roads and so on, but I see you don't want a dedicated tax. Am I right? I just want to clarify that, because your recommendation sounded kind of--

Mr. Terry Ruffel: Yes, I think the message is you have to allocate.... As I think Mr. Penson indicated over there, just put more back into the system. I think Canadians have to perceive what is being taken out and what's being reinvested. I don't think you need a dedicated tax to do that, but I think you need a commitment in the budget that people see that it is the proper investment.

Ms. Maria Minna Thank you.

I want to go now to Conservation Ontario and the World Wildlife Fund.

By the way, I love to think of the World Wildlife Fund as the WWF without having to think of men or women prancing about. Congratulations on that success.

Essentially, there are differences but also similarities in your presentations. There's an overlap there. And I want to say one thing: I've seen environmental degradation, horrific environmental degradation, in developing countries, and I think we have a responsibility as a country not only to address our own environmental problems but also to ensure that they don't get any worse than they really are around the world, and actually help fix the problems around the world.

To Conservation Ontario, on the Great Lakes, has there been any discussion in your organization with respect to urban sprawl and its effects on some of the environmental problems in terms of aquifers, wetlands, and all types of other things that are being kind of plowed over? I mean, when I look at Toronto's sprawl...all the creeks and what have you.

It's important, because the municipalities make decisions; they approve things. The problems have to be addressed, and it's not easy. There's this disconnect between the municipal planning process, the provincial laws, and then the federal government.

I'm just looking for some comments.

À (1025)

The Chair: Go ahead, Mr. Mather.

Mr. Craig Mather: Thank you.

For those conservation authorities that, like mine, have large urban areas, we spend a great deal of time trying to figure out the impact of urbanization on our water quality, on our water quantity, and on our biodiversity. A lot of our work is directed at trying to provide advice to the municipalities on whether it's a good idea to grow, and to grow in that particular area. Obviously, municipalities have the responsibility to determine their land use. The role of the authorities is to provide advice to them as to how to do it best and have the least impact on our natural environment.

Speaking on a larger scale, I sit on the water quality board for the International Joint Commission, and one of the things the IJC has asked its water quality board to do is look at urbanization around the Great Lakes as a whole. Because that is, from my point of view, the huge impact that nobody really understands.

When we put it all together, I think we might be quite surprised about the impact that urbanization is having today. I mean, we're talking 7 million people in the GTA alone over the next 10 or 15 years. When you look at the whole Great Lakes watershed, I think it's something we need to pay attention to.

Such programs as the one that Conservation Ontario is proposing will be one way to try to minimize that. For sure, the urban runoff itself--and there is some funding proposed in here to deal with the urban areas--calls for a different science, a different technology, from what is used in the rural areas.

The Chair: Mr. Braithwaite wanted to add something.

Mr. George Braithwaite (Vice-Chair, Conservation Ontario (Newmarket)): Thank you, Madam Chair.

The rural areas have a complementary perspective on this. Up until recent times, there wasn't much science or money invested in source protection planning. Walkerton part two provides an opportunity. If the provincial government can connect the dots between the need to protect those wetlands--the sources, the recharge areas, the discharge areas--then I think development in the rural areas can be done with some science behind it so that the local municipality, with the small rural councils, can actually integrate their planning processes effectively, with what the science tells us we must do by way of a discipline into the future.

I don't think the numbers have been added adequately at this point. But this is a personal perspective, from a rural councillor's position in life. I think the dots will get connected probably within the next six months. When they realize just how much money is to be invested here, we'll have to, I think, come to a realization that there's a shared responsibility between the provincial government and the local municipalities, and in the property tax base we'll have to strike a delicate balance.

That goes back to a question earlier about Ontario's responsibility in funding conservation improvements related to the healthy Great Lakes program. I believe that's where the Province of Ontario's responsibility rests.

Thank you for your indulgence.

À (1030)

The Chair: Thank you very much.

On behalf of all the committee members present today, thank you very much for preparing your brief. That allowed us to translate and distribute it prior to your presentation. Thank you for taking the time to show today and answer our questions.

We'll be writing our report in the near future.

We are suspended for a couple of minutes to set up the next panel.

À (1030)

À (1035)

The Chair We will start panel two, from 10:30 to 12 noon. Welcome to all of you. We are doing pre-budget discussions pursuant to Standing Order 83(1).

You will have a full eight minutes for your presentation, followed by a question period from the members present. As you will notice, some of our members have chosen to go back to the House for a vote this afternoon. But we will put you on record, and the members here will do the questioning.

From the Canadian Automobile Dealers Association, we have Richard Gauthier, who is the president. Welcome, sir. From the Canadian Generic Pharmaceutical Association, we have Jim Keon, who is the president. I saw him a second ago. And from the Canadian Pensioners Concerned Incorporated we have Margaret Watson, who is the Ontario president; Gerda Kaegi, who is the president of the national association; and Mae Harman, the chair of the economics issues committee.

From Citizens for Public Justice, we have Greg deGroot-Maggetti. He's the socio-economic concerns coordinator for the organization. And representing the Ontario Chamber of Commerce this morning are Leonard Crispino, who is the president and chief operating officer; Atul Sharma, vice-president, policy development, and chief economist; and Mary Webb, who is a board member of the Ontario Chamber. Welcome to all three of you.

We'll go in the order of the agenda. You'll have eight minutes, and at around seven minutes I'll give you fair warning to wrap up at that time.

We'll start with the Canadian Automobile Dealers Association. Mr. Gauthier.

À (1040)

Mr. Richard Gauthier (President, Canadian Automobile Dealers Association): Merci. Madam Chair, ladies and gentlemen, good morning.

As mentioned, I represent the Canadian Automobile Dealers Association. We are the national trade association, representing the franchised new automobile and truck dealers doing business in Canada. We have more than 3,000 dealers selling, leasing, and servicing new, domestic, and imported vehicles in this country. Our dealers are not employees of the vehicle manufacturers; rather, they're independent business men and women who enter into service and sales agreements with their manufacturers.

The typical dealership employs more than 30 employees and generates annual sales of approximately 340 vehicles a year. Our dealers also rely heavily on the sale of used cars, service department revenues, and leasing in order to earn a living. On average, dealers generate a profit of less than 2% of annual revenue, therefore making survival for our dealers very dependent on their ability to manage volume in combination with razor-thin margins.

As an industry, Canada's auto dealers employ more than 115,000 men and women across the country, and are responsible for annual sales in excess of $90 billion, making the auto industry the largest contributor to Canada's GDP. As many of you may know, one in seven Canadians depends on the automotive industry for employment.

CADA's presentation today will focus on small-business taxation and creating opportunities for a tax structure that allows small-business owners to reinvest in the growth of their ongoing operations.

I would like to put forward three tax-related measures that we believe would be appropriate at this time and would lead, ultimately, to greater investment in this crucial sector of our economy.

Firstly I'd like to start off with these small-business deductions. It's been a longstanding policy of government to set a lower corporate tax rate for small businesses. The lower rate is intended to compensate small businesses for the structural costs they encounter and that are not faced, typically, by large businesses. It also allows small businesses to reinvest their after-tax income into expansion and employment.

While the CADA appreciates previous extensions of the small-business deduction, we believe more must be done in this area. It's critical that dealers be in a position to reinvest in the growth and success of their operations. An increase in the small-business deduction would allow many of our 3,000 dealers across the country to create more jobs, economic activity, and income for Canadians.

The second issue I'd like to talk about deals with the definition of “taxable capital”. It's our belief that the government should re-examine this policy relating to the taxing of business capital. Apart from being an easy target for filling government coffers, it's hard to see what public policy objectives are being served by this tax. In any event, the tax was never intended to hit small businesses. As a result, a $10 million threshold was introduced, and small business with taxable capital below $10 million subsequently is exempt. Because of the way the taxable capital has been defined, an unfair anomaly has been created for automobile dealers over the years.

Unlike virtually any other retail industry, automobile dealers finance the acquisition of inventory through indebtedness known as lien notes. In other industries, the acquisition of inventory is financed through the trade accounts payable. Liabilities evidenced by lien notes are included in the definition of taxable capital. Liabilities evidenced by trade accounts payable, however, are not. Therefore, the current definition of taxable capital requires retail automobile dealers to include inventory financing in taxable capital. Other industries do not have to do this. Because automobiles are high-cost items with a relatively slow turnover period, the effect of inventory on capital is much greater than with other retailers.

To eliminate this anomaly, we recommend that the definition of taxable capital be amended to exclude lien notes. This will not be a precedent, because this anomaly has already been recognized by the governments of three provinces, Manitoba, British Columbia, and Quebec, the three provinces that actually levy a provincial capital tax on automobile dealers.

In prior years the inclusion of wholesale financing liabilities in the calculation of taxable capital was less of a concern for most automobile dealerships. That was because the inclusion of wholesale financing liabilities for few dealerships breached the $10 million taxable capital exemption, and so they were not subject to the LCT or the erosion to their small business limit. Recent developments in the retail industry have changed this. These developments include increasing vehicle prices--and they going up on a yearly basis--and the great amount of pressure from vehicle manufacturers on auto dealers to carry larger inventories. The result of these developments is that automobile dealerships' inventory levels and the corresponding wholesale financing liabilities have increased substantially in recent years. So many auto dealers are breaching the $10 million taxable capital exemption and are thus subject to LCT and the erosion of their small business limits.

Finally, I would like to highlight CADA's concern with the recent rumours of a proposed planned increase to the GST. While our dealers were pleased to note the vigour with which Minister Manley and the Prime Minister rejected a GST rate increase across the country, dealers remain concerned. As you know, the retail automobile business is extremely sensitive to price increases. In addition, the burden of retail sales tax rates are heavily felt by our customers when you take into account both the federal and the provincial sales taxes. Any increase to retail sales tax levels, whether to pay for health care or any other service, would be strongly opposed by our members.

In conclusion, Madam Chair, CADA believes adjustments to these tax measures would represent a fine-tuning of the tax regime an important group of small and medium-sized business must operate within. Any immediate shortfall of government revenue these measures would entail would be more than compensated for over the years by increased investment in their businesses.

I would be remiss if I did not thank this committee for its long-standing support and hard work on the issue of technicians' tools. Your committee's previous recommendations to support fair tax treatment for technicians deserves much credit for the December 2001 announcement by then Finance Minister Paul Martin granting limited tax relief for apprentice automotive technicians. This budget measure addressed a long-standing concern of the Canadian Automobile Dealers Association and allowed for fair treatment of automotive dealership employees. For that I would like to thank you very much.

I would be more than happy to answer questions.

À (1045)

The Chair: Thank you very much.

We'll move to the second presenter, from the Canadian Generic Pharmaceutical Association. Mr. Keon, the floor is yours.

Mr. Jim Keon (President, Canadian Generic Pharmaceutical Association): Thank you, Madam Chair.

Some of you may have known us previously as the Canadian Drug Manufacturers Association. We've recently changed our name to put the words “generic pharmaceutical” in, to more clearly represent the companies.

I'm very pleased to be here today to present to the members of the committee our recommendations from the generic pharmaceutical industry with respect to the upcoming federal budget. I will start by telling you briefly who we are and what we do.

The Canadian Generic Pharmaceutical Association member companies employ more than 6,000 people in well-paid, highly skilled jobs, laboratories, production facilities, and other operations. In 2001 our member companies paid out more than $317 million in salaries and benefits to employees in Canada.

Mr. Jim Keon: The generic industry fuels the Canadian economy through direct capital expenditure and spending on research and development. Last year CGPA member companies spent $240 million on R and D in Canada. CGPA member companies invest 20% of sales in research and development and have more than 100 products currently in development. R and D expenditures have increased more than sevenfold since 1990, and our member companies have targeted more than $1 billion in R and D over the next four years.

We also have a highly successful export industry. Canada's generic drug industry has built a successful international business, generating 20% of its sales volume from exporting high-quality made-in-Canada pharmaceuticals to over 120 countries. The majority of the industry's profits stay in Canada, helping preserve and create jobs for Canadians.

Generic drugs are low-cost versions of brand name prescription drugs that have been designated by Health Canada to be as safe and effective as their brand name equivalents. The importance of generic drugs is that we help control Canada's rising health care costs. Generic drugs are, on average, 45% less costly than their brand name equivalents, and they play a key role in keeping prescription drugs affordable in Canada. This can be best illustrated by the fact that more than 40% of all prescriptions in Canada are filled with generics, yet generic equivalents account for less than 14% of the more than $12 billion in annual spending on prescription medicines--so 40% of all prescriptions, but only 14% of spending. The use of generic drugs saved Canadians, their governments, and private insurers more than $1.25 billion last year alone. To further illustrate the cost point, the average selling price of a generic prescription is less than $22, while the average price of a brand name prescription is more than double that at $55.

Drug costs are far and away the fastest rising cost to Canadian health care. The latest annual report of the Patented Medicine Prices Review Board states that Canada's drug costs have increased at three times the rate of annual inflation and two times the rate of other health care components over the past 10 years. As the report released on October 25 by the Senate Standing Committee on Social Affairs, Science and Technology notes, since 1997 spending on drugs, both prescription and non-prescription, has been the second largest category of health care spending in Canada, behind only hospitals. Canadians now spend more on drugs than they do on doctors.

We have two proposals to make to the committee today--and I'll provide a very brief summary of them--that, according to our calculations, if implemented, would save our health care system approximately $250 million annually.

I'll start with eliminating delays in approving generic drugs at Health Canada. Before generic drugs are sold in Canada, they are approved by the Therapeutic Products Directorate, or TPD, at Health Canada. Because of a lack of resources at TPD, generic approval submissions often wait months, sometimes years, before they are reviewed. These delays hold up introduction of the lower-cost generic drugs and result in tens of millions of dollars in lost savings every year for provincial governments, private insurers, and those Canadians who pay out of pocket for their prescriptions. I also wish to note that these delays have a direct impact on the federal government's budget by driving up the cost of drug plans for members of Parliament, Senators, their staff, federal employees, the Canadian military, federal inmates, and the federally sponsored drug plans for Canada's aboriginal peoples, all of which are funded from the federal treasury.

While the federal government has taken some steps to increase the resources at Health Canada, the average approval times for generic drugs are almost double Health Canada's own performance target of 225 days. We propose to the committee that the Canadian government direct more funding to Health Canada to reduce the time needed to properly review generic pharmaceuticals.

Our second proposal is that the special provisions of the Patent Act that are biased against generic drug manufacturers be removed, so that the pharmaceutical industry is brought into line with every other industry under the act. The patented medicine notice of compliance regulations of Canada's Patent Act allow brand name companies to stop Health Canada approval of generic drugs simply by alleging patent infringement. The automatic 24-month stay under the regulations means that Health Canada cannot approve a generic drug until any claim of alleged patent infringement is decided in court.

À (1050)

The regulations withhold Health Canada approval not when the patent is actually being infringed, but when the brand name company says it might be. Unlike the case with patent disputes in every other industry, a brand name company does not have to obtain a preliminary injunction from the courts to stop generic drug approval. This provides an enormous financial incentive to brand name drug companies to allege patent infringement, regardless of the possible outcome of the litigation. They strategically lift the number of additional patents on a single drug in order to prolong the litigation under the regulations and keep competition off the market. This practice is called evergreening or layering. Even when the generic manufacturer wins, which has happened in 80% of the cases since the last amendments to the regulations in 1998, the generic drug is still kept off the markets through lengthy and costly litigation, often for years past the expiry of the original patent.

The Supreme Court of Canada has described the regulations as Draconian in their effect on the generic industry. Not only is this abuse of Canada's patent regime extremely harmful to Canada's generic pharmaceutical industry, Canadian taxpayers lose out on millions of dollars in savings by having to pay for higher-price brand name drugs for extended periods of time. Repealing or amending the regulations would leave Canada in full compliance with international trade agreements, and the brand name pharmaceutical companies would still have full legal recourse to protect their 20-year patents.

Patent disputes in the pharmaceutical industry should be resolved through the normal litigation process used by every other industry in Canada. The world's richest companies do not need their own special set of rules for patent use, particularly when these are being systematically abused to extend monopolies beyond the expiry of the basic patents and forcing Canadians to pay higher drug prices for longer. The regulations should be eliminated, or at the very least amended, to force patent holders to convince the judge in a preliminary hearing that their suit has merit.

To conclude, I'm sure all members of the committee are fully aware of the enormous cost pressures that are threatening the viability of Canada's health care system. By taking steps to prevent abuse of our drug patent laws and increasing resources for generic drug approvals at Health Canada, we can save hundreds of millions of dollars each year. That money can then be used to preserve, or even enhance, other aspects of health care in Canada.

Thank you.

À (1055)

The Chair: Thank you very much for the presentation.

Now we'll move to Canadian Pensioners Concerned Incorporated. Ms. Harman, go ahead.

Ms. Mae Harman (Chair, Economic Issues Committee, Canadian Pensioners Concerned Incorporated): Canadian Pensioners Concerned, founded in 1969, is a national, voluntary, membership-based, non-partisan organization of mature Canadians committed to preserving and enhancing a humanitarian vision of life for all citizens of all ages.

I will comment briefly on some of the points raised in our written report.

The prime concern of government should be to ensure that the rights and basic needs of all citizens are met, thus ensuring greater levels of prosperity and the highest quality of life for all Canadians. The only environment that is favourable to economic growth and trade is one in which all citizens are able to contribute to their maximum potential in a healthy, clean, and safe environment, an environment where lifelong educational opportunities are there for all and poverty, homelessness, preventable diseases, and hunger have been eliminated. Economic prosperity depends on a strong, healthy, well-educated, productive, and prosperous society.

We must take greater responsibility for helping other countries to educate their people, grow the food they need, provide health services for those in need of care, protect their citizens from diseases, and develop the technology to take their full place in the international scene. This requires the transfer of a substantial amount of money, the swift transfer of money already promised, and the provision of help from personnel who will work with communities abroad so they can resolve their own difficulties. The role of trade should be to exchange goods and services, not to supplant domestic resources.

Cities are the economic engines of our economy. If they are given the tools to thrive and meet the needs of their citizens and the environment, the economy of the country will thrive. In Canada cities have become the victims of an irrational devolution of responsibilities and costs from the higher levels of government.

Ms. Mae Harman: We reject the constitutional argument that cities are the creatures of the provinces and thus the federal government cannot work directly with them. The federal government has a constitutional responsibility to use its fiscal and spending powers to work for the betterment of Canadians wherever they live. Cities should not have to go begging to the other levels of government for assistance; they should be guaranteed funding to cover the needs of their citizens, not just on a yearly basis, but with an opportunity to plan for the long term.

We see taxes as necessary and useful in providing a well-functioning civil society. We believe that poverty, homelessness, preventable disease, and many of the other ills that beset our society have a root cause, the inequitable distribution of wealth, and we see this inequality continuing to increase at a very fast rate. We believe in a fair, progressive, and incremental tax system that is more fairly distributed across all income levels.

The Canadian government must proceed quickly to sign the Kyoto Protocol and to endeavour to influence all other countries to do so. We must develop the skills and technologies to improve the quality of our air, water, and earth. We must phase out all forms of tax incentives that go to support economic activities that harm the environment.

We are appalled by the ever-growing gap between the very rich and the very poor, which is leading us into a seriously divided society. The rising tide of homelessness; the high level of student debt for post-secondary education; the growing demands on food banks; user fees for health services; cuts in services previously provided by some provinces, such as home care; long waiting lists for low-cost housing, nursing homes, and some medical procedures--all these take place as the very rich continue an extremely high level of consumption while the poor are left to struggle with higher costs of living and doing without life essentials.

The federal government must increase its spending on the above-stated programs. Such spending does stimulate the economy. It is in effect an essential redistribution of wealth; thus more money remains in the hands of the population, who do spend it on consumer goods.

Children are our future. We need to invest in quality health care, education, recreation, and socialization, which will best prepare all of them to take their full place in society as citizens, workers, and leaders. Poor children live in poor families, and their families need adequate support. We support the proposals of Campaign 2000 for a comprehensive children's agenda.

We need a national housing strategy to combat the ever-growing number of homeless people, the long waiting lists for public housing, the number of evictions, the worry experienced by long-term residents who cannot meet rent increases. Canada Mortgage and Housing Corporation must be returned to its former role in funding and spearheading activities to meet the housing needs for low- and moderate-income individuals and families. The private sector building industry will not address these housing needs without federal leadership and funding incentives. CMHC and the federal government need to play a strong role in cooperative and low-income housing.

Mr. Romanow has heard loudly and clearly from Canadians that we want our public medicare preserved and improved. We are totally opposed to any kind of privatization of health services. Privatization leads to control of the system by those who wish to profit from it. It leads to incentives to do less for patients and to practise cookbook medicine. Fees for service divide the populace into two groups: those who can afford to pay and those who must do without services or wait longer for them.

Á (1100)

The costs of health care must be covered by governments and general revenue, not a dedicated tax or health care insurance premium as proposed by the Kirby report, which would place a greater burden on lower-income people.

We support primary care through a new professional team and a companion act including home care, pharmacare, palliative care, and elder care. Home care must not be restricted to post-hospital care, as the Kirby report recommends, but provide the support that will allow people to age in place.

Our position on health care is one that has been supported by the Congress of National Seniors Organizations. The congress represents a total membership of almost two million Canadians. It is time to invest in Canadian citizens--citizens with needs, hopes, and aspirations. It is time to put the Canadian people first. Business looks after itself very well. They have had priority with governments. A significant change in priority is needed.

Thank you.

Á (1105)

The Chair: Thank you very much.

Now we'll move to Citizens for Public Justice. Mr. deGroot-Maggetti, go ahead, please.

Mr. Greg deGroot-Maggetti (Socio-economic Concerns Coordinator, Citizens for Public Justice): Thank you, Madam Chair and members of the committee. I'm glad of this chance to discuss with you again important policy directions for the upcoming federal budget.

As we stated in our written submission, Citizens for Public Justice shares the committee's concern with ensuring the highest quality of life for all. CPJ finds, however, that expanding prosperity, especially when prosperity is measured as per capita gross domestic product, is not the best nor the only indicator of quality of life. The rate and depth of poverty, particularly among families with children, provides another important indicator. Trends in the level of income inequality and wealth inequality provide additional indicators, as do the numbers of food bank users and of households in core housing need.

So Citizens for Public Justice was pleased to see in the Speech from the Throne the government's continued desire to do better for families with children. CPJ supports the pledges made to invest further in child benefits, in early childhood education and care, and affordable housing. Likewise the throne speech commitments made toward families with children with disabilities and to the well-being of aboriginal children, families, and communities are worthy.

The task now is to move forward in creating the Canada we want. My message today is to encourage you to recommend budget measures that will build robust, inclusive, and universal supports and services for families with children.

We must be wary of the lure of half measures, but believing that with narrow targeting of programs and parsimonious spending we can address the root problems that poverty indicators alert us to.

We must not lose sight of the goal of creating the conditions where all children can develop their capabilities to their full so as to enjoy a good quality of life. Providing a floor of basic income and access to affordable housing will assure families the most basic resources to feed, clothe, and house their children, regardless of the ups and downs of the business cycle, or of personal circumstances that jeopardize the market incomes of families.

New investments in child benefits, for example, should be accessible not just to families with the very lowest incomes but to modest- and middle-income households as well.

Public funding for housing should support the construction of affordable housing and not just subsidize market rent housing that is beyond the means of low- and modest-income households.

Early childhood education and care is a particularly good example where there's really no substitute for creating a universal national system. Such a system should be broad enough to meet the varied needs of families, providing full- and part-time childcare, preschool programs, parent/child play groups, and family resource centres. High quality play-based learning is beneficial for all children's social, physical, and cognitive development.

In a predominantly user-pay system such as we have now, outside of Quebec, very few families can afford good childhood education and care.

Here's a fact that's often overlooked. About 15% to 20% of all preschoolers experience delayed vocabulary development. That proportion rises to 30%, 35%, for children in low-income families. The national longitudinal survey of children and youth, as well as other studies, has found similar patterns with respect to functional health and readiness to learn.

Low income clearly makes the situation worse, but the developmental hurdles exist for a significant portion of children across socio-economic circumstances. It would therefore be a mistake if we created public systems of support for early childhood education and care that were targeted narrowly at those families with the lowest incomes. If we did so, we would exclude far more children who would benefit from such programs but whose families could not afford them out of their own private resources.

The same can be said for services for families of children with disabilities. The support cannot be exclusively targeted to low income families with children with severe disabilities. Universally accessible early childhood education and care, along with broad support for families of children with disabilities, would help to assure that we reach all children with higher developmental needs, while also enabling all children to develop their capabilities more fully. Such services and support would also assist parents in their multiple roles as caregivers and bread winners, among other roles.

To do it right, supports and services for families with children will not be cheap, but experience shows that they are effective. European countries with strong child benefits, early childhood education and care, housing, maternity and parental leave, and other programs for families with children, report the lowest levels of child poverty. Countless studies point to the positive benefits of high-quality early childhood education, care, and services. Canada's experience of cutting seniors' poverty rates in half through well-designed income supports indicates what we can do for families with children.

As Finance Minister Manley said to you last week, we have choices to make. Will we choose to build a strong foundation for the future? Will we choose to invest in people and communities? Will we choose to take up our public responsibility to make sure no families are faced with the terrible choice of whether to pay the rent or feed the kids?

The Auditor General recently underscored the point that the government does have real fiscal choices that it can make. The government has chosen to consistently underestimate its fiscal capacity and to build contingency factors and reserves into its budget-making in the name of fiscal prudence. Fair enough. But the government has also chosen to use all of the ensuing budget surpluses—a total of about $40 billion over the past three years—paying down the debt. But that is a choice, not a legal requirement.

Is that the most responsible choice, given the fact that children still make up 40% of food bank recipients? Is it the most responsible choice when families with children are among the fastest growing groups without stable, affordable housing? Is that the most responsible choice when most Canadian children cannot participate in high-quality early childhood education and care that will lay the foundation for them to develop their capabilities to the fullest? And is it the most responsible choice when we know our common future requires that all Canadians have the skills and capabilities to contribute to the social, economic, political, cultural, and spiritual needs of our country?

Citizens for Public Justice appeals to you to back up the throne speech commitments with recommendations to invest, in full measure, in our children, in families, and in communities. CPJ urges that you recommend that we fulfill our public responsibilities toward one another so that not only do we see the lines of food banks and shelters disappear, but also that each person can develop their capabilities to the fullest and our communities can flourish.

Thank you.

Á (1110)

The Chair: Thank you very much.

Next, we'll hear from the Ontario Chamber of Commerce.

Mr. Leonard Crispino (President and Chief Operating Officer, Ontario Chamber of Commerce): Thank you, Madam Chair, ladies and gentlemen.

You do have our presentation in front of you. It's a powerpoint presentation that will outline more specifically, in point form, some of the priorities that we at the chamber are putting forward. Within the time allotted, I will be sharing the presentation with Mary Webb, the chair of our finance committee.

The Ontario Chamber of Commerce is a confederation of some 156 chambers of commerce and boards of trade right across the province. We represent some 57,000 businesses across Canada, from a whole cross-section of sectors, with all sizes, small, medium, and large, and with an emphasis on SMEs. We are the largest organization in Ontario that represents business interests.

Mary, you can go on with building competitiveness.

Á (1115)

Ms. Mary Webb (Board Member, Ontario Chamber of Commerce) Good morning.

When we look at the economic data, Canada currently is in the very favourable position of leading G-7 growth, and Ontario is pacing Canada. Nevertheless, looking forward, we see an environment of considerable risk and uncertainty. Canada is the most open industrial economy in the world, and therefore the sputtering global economy in the U.S., Europe, and some Asian countries is certainly going to impact us eventually.

The backdrop we see is a very competitive environment, with little pricing power for our producers and growth that is in the 3% range, not anywhere close to the 4% and 5% experience that we saw from 1997 to 2000. This year, in fact, we've been lucky. Canada has benefited from a low Canadian dollar and low interest rates; massive inventory destocking shifted to restocking; the automobile sector has strengthened, and that's particularly important to Ontario; housing has surged; and infrastructure investment has picked up.

Looking to 2003, we see Ontario's growth moving from about 3.5%, similar to Canada's, down to less than 3%, with Canada at about 3%. That's a moderate recovery, not robust. Housing is expected to cool, and corporate caution is going to remain very dominant. That means the recovery in profits, the recovery in business investment could well be slower than many anticipate.

One of the sectors we've highlighted in this presentation is motor vehicles, for several reasons. This is an area where Canada is very competitive. With the closure of the Sainte-Thérèse plant, the production listed on vehicle assembly is in fact now all in Ontario. But when you look at the U.S. and Mexico, in fact we took the hardest hit in terms of the number of vehicles assembled last year. Although our 4.3% growth has been beneficial this year, we essentially expect production to level off over the next couple of years. This has serious consequences for all the spinoff industries, manufacturers and services that are linked to the motor vehicle sector, and it certainly underlines the competitive threat of Mexico, where their share of NAFTA production is increasing.

Housing is another area that has surged. No forecaster at the beginning of the year anticipated 200,000 units for 2002. The fallback that we're looking for nationally to 182,000 units is still a very strong level of activity. Nevertheless, we cannot rely on the U.S. and the Canadian consumer to keep pulling this economy along. They're at record spending levels, and it will be tough to push them to new records.

So when we look at Canada's recovery, much depends on our position within NAFTA. NAFTA has been a tremendous opportunity for Canada. Trade within NAFTA has more than doubled within the past decade. Direct investment within NAFTA has increased by a factor of more than five. But in the post-9/11 environment, the importance and the urgency of accomplishing seamless border crossings is essential. This is particularly important for Ontario, where our production is so integrated with neighbouring states. The competition for new activity and new investment is intense, and we believe it is going to remain so--and of course, I've just mentioned the longer-term threat for productive capacity from Mexico.

We looked at the trade challenges. The most notable one--and this impacts Ontario as well as B.C., Alberta, and Quebec--is the softwood lumber dispute. The OCC is concerned about this, particularly U.S. attempts to weaken Canadian industry. We believe much of the countervailing duty and anti-dumping tariffs are unfounded. Therefore our recommendation is to urge an equitable and long-term solution as quickly as possible.

Much of our focus is on creating a more competitive economy for Canada, and Ontario within Canada. This requires debt reduction, tax reform, streamlining regulations, eliminating internal trade barriers, and addressing climate change.

The OCC's first policy priority at the provincial and federal levels of government has been debt reduction. We certainly applaud the more than $45 billion of debt retirement that Ottawa has accomplished over the past five years. Certainly we applaud the fact that you've brought down the debt service from 36¢ of every revenue dollar to 21.8¢. However, 22¢ is still too high, and we urge further reduction of the debt as one sure route to greater fiscal flexibility.

There is a window of opportunity here that has been widened by Washington's growing deficit and by Europe postponing their target date for balancing the books from 2004 to 2006. If Ottawa can continue to retire even a small amount of debt, we can continue to lessen our debt and our taxation burdens relative to our major trading partners.

On tax reform, we applaud Ottawa's commitment to the five-year taxation package, particularly to implementing the remaining measures of that package, most notably the decline in the general corporate tax breakdown to 21% and the indexation of the target.

We look for the removal of the capital tax and other profit-insensitive levies, such as EI premiums. We're always concerned about small business investments. A graduated increase in CIT is something we'd like to see, with improvement to the skilled labour shortages and facilitating access to new markets.

We look for efficiency items such as addressing the multiple number of tax expenditures that have a low price tag or even a positive impact on revenue. Of course, we also look for a greater investment in the future. We're concerned about urban expansion, with the largest metropolitans now under pressure.

Á (1120)

Mr. Leonard Crispino: Just to finish off, Madam Chair, the OCC applauds Ottawa's longer-term strategy for infrastructure development. The Ontario Chamber of Commerce for quite some time now has been advocating the notion of a transportation authority that would reduce the complexities of decision-making.

On cross-border infrastructure, which has already been mentioned, Detroit-Windsor is the busiest crossing in all the world, and we believe the needs there have to be addressed fairly quickly. We believe there has been lack of progress. A number of initiatives, both short- and long-term, are on the books, and we would urge the federal government to move quickly.

On health care, I think we would echo everyone's concerns around the need for reform, but at the same time, we believe our health care system does present a competitive advantage for foreign investors. We need to be able to protect that.

On the Kyoto Protocol, our membership has made it very clear that there are too many uncertainties surrounding Kyoto implementation. We would ask for further clarification of costs by industry and provinces, and strongly recommend that the Kyoto Protocol not be ratified until there has been full provincial support and consultation. There perhaps are some who would argue that in the House of Commons there might be a free vote in relationship to this simply because of the far-reaching implications and the impact. Canadians generally, from recent polling, appear to be very much divided.

In conclusion, we believe the fiscal and economic goals of both the provincial and federal governments should be to make Ontario and Canada more competitive jurisdictions within NAFTA. Our priorities clearly are debt repayment; further reduction and restructuring of the tax burden; reduced regulatory costs; federal-provincial cooperation; and strategic infrastructure investment.

Thank you.

The Chair: We'll go to ten-minute rounds.

Mr. Brison.

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

Thanks to each of our witnesses today for your interventions. We see some familiar faces, and we always value your interventions here at the finance committee. It's very helpful to us in our deliberations when we write our report.

My first question is for Mr. Keon. Yesterday, representatives from the University of Toronto's commercialization and technology transfer group appeared before the committee. In their presentation and response to some of the questions, they stated specifically that, because of the relationship between the pharmaceutical companies and the biotechnology companies and the universities, any dilution of patent protection in Canada for the pharmaceutical industry would have a devastating impact on commercialization and technology transfer at the university level.

I would appreciate your response to that.

Mr. Jim Keon: Thank you.

We're actually calling for the maintenance of 20-year patents. We accept that Canada is part of the World Trade Organization, and some incentives and rewards produce resources going into research for new medicines.

But from what we've see in Canada over the last 15 years, there are lot of problems with Canadian patent policy. In particular, today I focused on regulations that are specific to the pharmaceutical industry, which we believe give incentives to litigate and not to innovate. The rules are very complicated, and the incentives are to go to court. There have been over 240 cases, and the generic drugs are tied up in court for months, if not years, beyond the expiry of original patents.

So we're proposing a simplifying of the rules. I would note that even in the United States, which is the only other country that has similar rules, President Bush, a Republican president who has typically been very supportive of the big pharmaceutical industry, has actually called for a simplifying of that system. That's what we're calling for today. I believe that's not inconsistent with what the U of T technology transfer group would want: a simplified system, so that after patents expire people can compete and bring down drug costs.

Á (1125)

Mr. Scott Brison: Thank you.

Mr. deGroot-Maggetti, I listened with great interest to your presentation and your support for universality, in terms of some of the child care funding initiatives. I couldn't agree with you more.

The current system, where there's a petering off of child care assistance based on income, sometimes ignores the fact that working families, for instance, in the $30,000 or $40,000 range, depending on the number of kids and where they live, can be incredibly strained financially to provide for children and families. I think we should take very seriously your suggestion that we revisit the importance of the notion of universality for child care funding .

There's a further problem created by having these programs peter out at relatively low-income thresholds. It discourages and reduces incentives for individuals and families to bootstrap themselves and try to succeed. We have a system that actually discourages people, as they have the opportunity to upgrade their skills and succeed a little more, because they actually receive less money from the system. So I thought that was a good point.

I really hope we take particular note of that, because If we look at the impact of our marginal tax rates on these types of programs, where there is a petering out of the benefit based on income, it is very significant and negative, in its current structure.

I have a question for Ms. Harman, Mr. de Groot-Maggetti, and anyone else. The basic personal exemption now in Canada--the point at which Canadians begin to pay income taxes--is in the $7,400 range. I find that shocking. That threshold is lower than in the U.S. and U.K. tax systems. It seems counterproductive and just wrong-headed to tax people at such a low income level.

I would appreciate your feedback on that, and particularly on what disincentive or discouragement that may provide to somebody who is at that very critical point where they're trying to perhaps move from social assistance to working, but find they actually make less money in a working environment, particularly if they have to pay for child care and that sort of thing.

So I'd appreciate your feedback on the basic personal exemption, and what we ought to be looking at doing with that.

Mr. Greg deGroot-Maggetti: Some of the research I've seen done around how benefits of tax changes are distributed finds that refundable tax credits are most effective in reaching low-, modest-, and middle-income households. That's where we would put the emphasis, particularly when we are looking at the situation of families with children. That's where we would put the emphasis; I think I'll just leave it at that.

The other thing to note, though, is that when we have good, strong public services in place and investment in community resources, we all benefit. I think low-income, modest-income households, as well as others, are ready and willing to pay their fair share. I think we can design taxes in such a way that we all carry the load we can, then, as I said, provide the refundable credits, so that if you're below that $7,000 threshold--or if it were bumped up to $10,000, if you're below that--you can still get benefits from the programs and have the income you need to actually pay the bills.

That's where we'd put the emphasis: on refundable tax credits.

Á (1130)

Ms. Gerda Kaegi (Immediate Past President, Ontario Division, Vice-President, National Association, Canadian Pensioners Concerned Incorporated): We would agree with the former comments. We also find, if I can refer to an earlier reference to the poverty of seniors having been significantly reduced, that it has been reduced, but what we are finding is that the poverty rate is starting to rise. We had, in greater Toronto, over 400 seniors in shelters. These are people below the capacity to pay any tax at all. But we agree with you that as the costs and the burdens are going up, that limited personal tax exemption, which was frozen for a period of time, became very problematic. Even if you are at the lowest marginal rate, every dollar counts. We believe it should be reviewed and revisited, because we don't see it as truly progressive.

Mr. Greg deGroot-Maggetti: Just to pick up on the point you made earlier, Mr. Brison, about the effect of stacking of income-tested benefits and things like that and how it impacts families with children, the same type of thing happens with seniors, where a lot of the benefit--and this is a study that Richard Shillington did a year or two ago for St. Christopher House in Toronto.... He was astounded to find that all kinds of benefits are income tested. So, for example, you get really perverse things, like seniors who put away money in RRSPs, but when they tap into that income, all of a sudden they begin to lose all the other income-tested benefits: the reductions in old age security, of Meals on Wheels, of subsidized housing.

Again, if we look at the beginning of the life cycle--young children and families--we find out that where we have these really narrowly targeted, income-tested programs, oftentimes we get perverse effects where we end up taxing people the most. When we go to the other end of the life cycle, we can end up with the same kinds of things.

Your caution about being careful how we design these programs is well taken, and serves throughout our lifetime.

The Acting Chair (Ms. Maria Minna): You have a few seconds--one, two, gone. Sorry, I think it's actually gone.

We'll go to Mr. Wilfert.

Mr. Bryon Wilfert: Thank you, Madam Chair.

I want to thank everyone for coming today.

I'll just go through a few items. To the Canadian Automobile Dealers, concerning the small-business deduction you said more needs to be done. Can you define “more”? And how much is “more”?

Mr. Richard Gauthier We didn't put a number on that, I guess, for the purpose of not appearing to be greedy. Back in 1994 the Liberal task force on jobs and small businesses recommended $400,000. Certainly, our industry would be in support of that if it were to be considered at this time.

Á (1135)

Mr. Bryon Wilfert: The government has clearly said we're not going to go back into a deficit position. We always have to balance the needs. I believe government has a constructive role in society. At the same time, I believe we need to make sure we take initiatives that are going to create opportunities for people. I will again emphasize that there will be no tax increases. As the parliamentary secretary to the Minister of Finance, I will again tell you, the minister has made it very clear, we're in the business of cutting taxes, not raising taxes. I'm still dismayed to read that your members still have some concern about the GST. If you want the truth, don't read the papers. The fact is, it's not happening.

Mr. Richard Gauthier: That's a good point. As I mentioned in my comments, we certainly took a lot of encouragement from Minister Manley's previous comments, as well as the Prime Minister's adamant denial that the government was currently considering this. However, in the Globe and Mail article yesterday on the subject of a potential health tax we find that Mr. Manley, during an interview with the CTV television program Question Period did indicate, once pressed, “if we're driven to that conclusion in the end, then we'll have to consider it”. He later said, we don't want to increase taxes, but on the other hand, we also are cognizant of the fact that citizens are prepared to pay more for better health care. So there seems to be some contradiction in some of the public statements that are made.

As I said, we were very pleased with the minister's firm denial that they were going to consider this, but we wanted to make sure it was on the record that we would oppose any kind of tax that would affect us. We're already an industry that is taxed in some of the harmonized provinces at a rate of up to 15% and 16% on the purchase of a vehicle that averages approximately $30,000. That represents close to $5,000 in sales tax alone.

Mr. Bryon Wilfert: Many of you have talked about health care. My own view is, until we decide what kind of health care system we want, we can't talk about how to pay for it. That leads me to generic drugs.

I agree with you totally, Mr. Keon, on the issue of simplifying the rules. The United States is going to do it, as you pointed out. It's about time we did. I think there are unfair provisions there. The Patent Act is one area I think we need to look at.

On the generic approval process, I understand the premiers have finally got their act together and said they would support at least reviewing one-stop shopping in approval process. Right now we approve it and each province approves it, adding hundreds of millions of dollars to the cost of drugs, Ontario being the slowest to approve. Do you have any comment on that?

Mr. Jim Keon: Yes, thank you, Mr. Wilfert.

You're correct, the premiers, at the start of this year, at a health conference they held in Vancouver, announced they wanted to streamline the provincial drug approval systems. The purpose of doing that was, as they said, to reduce their costs. They're going to get an equivalent medicine and maintain the same level of health care at a lower cost. They want to do that as soon as possible. We have been working with all the drug program managers across the country to try to make that happen.

Health Canada has a world-class system. The regulatory requirements are internationally recognized. They work closely with their partners. What the provinces now have is a helter-skelter approach, with each province having a committee that has different rules and regulations. So we're hopeful that will happen. Of course, the provinces can only help themselves streamline after the federal government approves a drug as being safe and efficacious and equivalent. That's why we're calling on the finance committee to recommend more resources for Health Canada.

Mr. Bryon Wilfert: I would certainly be supportive of more resources going to Health Canada if I knew I was going to get equivalent action from the provinces.

Á (1140)

Mr. Jim Keon: We're very confident that will happen as well.

Mr. Bryon Wilfert: Thank you.

On cities, as a former president of the Federation of Canadian Municipalities, I would point out to you that the federal government has worked and continues to work very aggressively with cities. However, we're not an ATM machine, and that is my great concern with my municipal colleagues. Often, because they get no from the provinces, they come to us. One of the best ways for cities to expand their ability to fund their needs is to have the provinces give them more taxation authority. Whether they use it or not would be up to them. I give you the example of Manitoba. They can use hotel taxes and some gasoline tax.

As to a national housing strategy, the Prime Minister's urban task force, which I'm a member of, has called for that. Again, though, we need to get the support of the provinces. Some provinces, like Ontario, don't want to put any money on the table. That causes great concern, and I share your view with regard to two-tier health care.

On the issue of public justice, one of the most important initiatives, I think, the government has taken--and I would credit my colleague to the left of me, figuratively and literally--is the Canada child tax benefit. A two-child family now receives up to $4,500 a year in child benefits. I think that is one of the most important initiatives we've taken, as well as full indexation, which helps seniors, the poor, everyone. I think that is really important. The best way to get people off poverty is to get them a job, and I think the fact that we are creating jobs--not we, the government, but the economy as it is moving along at the present time--is one of the best ways to do that.

With all due respect, I disagree with you on the debt. I think the debt is the most important issue, because we save $3 billion a year in interest payments each year. What do we do with that $3 billion? We can use it towards issues such as seniors, child poverty, etc. That is a matter of priorities, but I do believe it's important, and I'm interested in your comment on that.

Mr. Greg deGroot-Maggetti: I'd be glad to comment, and thank you very much.

I agree with the points made about child benefits. I think the government has made important strides, and again, we would encourage the government to continue along the path it's laid out on child benefits.

On debt, Mr. Manley, when he appeared before you last week, talked about the government having to manage its finances like a family manages finances.

Mr. Bryon Wilfert: Absolutely.

Mr. Greg deGroot-Maggetti: Well, I think about my own family. I've got three young children, I've got a mortgage. Our per capita costs and debts are similar to what our proportion of the federal debt would be. I've tried to figure out the debt servicing costs compared to dollar income and stuff like that. Should I rush to pay that off--it's sustainable right now--at the expense of, say, feeding my kids or clothing them or enabling them to participate in the different activities that, more and more, we have to pay for at schools? And I've talked to the provincial government on education too.

That's why I say we have to have a bit of a balance. I don't disagree with the government's practice of using fiscal prudence for budgeting purposes. You perhaps saw the recent report from the Canadian Council on Social Development, The Progress of Canada's Children. It's true that we've had strong job growth, yet many families with one and two parents working are still having trouble paying the bills, and they can't find things like child care that would enable them to get employment. This is one of the reasons we strongly support investing in early childhood education and lifelong learning, to equip people with the skills to get better paying jobs. We need that for the whole of Canada.

Mr. Bryon Wilfert: I would just say again, the government has taken initiatives with early childhood education. The difficulty sometimes is in the implementation and issues with the provinces.

To the Ontario Chamber of Commerce, I agree with you on debt. I have different views on taxes to a degree, because I do believe our corporate taxes by 2006 will be 5% less than the United States. You rightly note that our tax cuts are having a big impact on the economy.

I don't agree with you on Kyoto. I think we should implement Kyoto. One of the things I find interesting about the business community is, again, the NAFTA; they didn't want to know. There were a lot of uncertainties, and they said just go for it. On Kyoto, everybody is saying, well, you know, we're not too sure.

I don't know if your members have done a survey. How many of the border points are open, that is, all of the kiosks, when they go through there? I often hear how there's a problem, and yet where there are ten kiosks, you see five or six that are closed.

There's one last comment I would make--and as I said, I agree with you very strongly on debt reduction. Does your association have a policy on the obscenity that I see in this country, of foreign ownership, not foreign investment, on the obscene amount of foreign ownership in this country, which in my view is robbing the birthright of Canadians to the point that--we hear the word “integration” used, and we talk about the auto industry, the drug industry, and so on--if we continue, we're going to simply lose any ability to be able to make our own decisions?

Á (1145)

The Chair: Ms. Webb, you may go ahead.

Ms. Mary Webb: Thank you.

First of all, on the debt, Canada is facing three major commitments--not only our government debt, but also our CPP-QPP commitment, and our commitment to public health care. If we're comparing ourselves to a family's life cycle, in fact we're in the latter years. Within a decade we'll have increasing numbers of the baby boom generation beginning to retire, and that shrinkage of our workforce growth is definitely going to impact our ability to fund social programs, as well as any further debt repayment.

So we see debt repayment as a huge priority, and we applaud the government for recognizing the tough decisions. It is a tough act, and that's one reason we were encouraged by Mr. Manley's insisting that he will go back to existing programs in order to reset priorities.

On the ownership, yes, we can all think of examples where it is worrisome. But a very interesting trend is the amount of Canadian direct investment going abroad. In fact, it's being--

Mr. Bryon Wilfert: With all due respect, in the United States it's less than 1%. We are the most foreign-owned industrial country in the world.

Ms. Mary Webb: That's certainly true.

Mr. Bryon Wilfert: And I hear this thing about the United States--

The Chair: I would like to have the witness answer the question. Thank you.

Ms. Mary Webb: At this point, I'll turn it over to Len on Kyoto.

Mr. Bryon Wilfert: A very, very sensitive topic.

The Chair: If you would like to answer the question....

Mr. Bryon Wilfert: On Kyoto, yes.

Mr. Leonard Crispino: I'd like to just make a comment on Kyoto. Our question would be, what is the rush to ratify Kyoto within basically the next two months when it's clear that Canadians, as they learn more and more about the Kyoto protocol, are less inclined to support it?

Not that we should get to the point where people are against it, but I guess the issue is, we're all in favour of a cleaner environment. We're all in favour of addressing the challenges of climate change. Our view and the views of our membership is that Kyoto in fact does not go far enough and that Canadians should be consulted. Canadians on the street should be consulted on the implications and the effect that has on their day-to-day lives. I would hasten to say that most Canadians probably do not understand what Kyoto is all about.

The Chair: Thank you very much.

We'll go to Ms. Minna now, for 10 minutes, please.

Ms. Maria Minna: Thank you, Madam Chair.

I'll pick up very briefly on the Kyoto issue, because, like Mr. Wilfert, I believe we should ratify Kyoto. We've had discussions and discussions in this country, and other countries that are ratifying have had the same discussions. We're never going to get to the point where we're going to cost it out exactly and give that kind of.... But I think it's an evolving thing that happens, to some degree. We need to work with it, because things will change with new technologies and new solutions.

We met with the Federation of Canadian Municipalities, and they have tremendous proposals on how they can cut back on emissions, if we were to listen to even part of what they said. They are ready to go, and they have it. So I think we're sticking our heads in the sand a bit on it.

Part of the reason some Canadians, not all, and in some parts of the country, actually, are starting to rethink it is because we've had huge propaganda against Kyoto. Let's also be honest about that.

I mean, when you see ads over and over again about how the sky's going to fall, I guess people start getting a little bit concerned. A few months back, before the ads started, Albertans--even in rural Alberta--and western Canada were in support of Kyoto. The ads started with Mr. Klein telling them the world was going to end if we ratified, and of course they started to become skeptical. So I think you have to be fair on that one.

I don't know if you want to add anything to that, because I'm going to go on to something else.

Á (1150)

Mr. Leonard Crispino: Do you want me to comment now? Please?

Ms. Maria Minna: Yes, please.

Mr. Leonard Crispino: I think we would all agree and accept the fact that trying to get detailed costing on the implications of Kyoto is very difficult. At the same time, it's incumbent, in our view, on the federal government to ensure that Canadians do understand.

If Canadians, after a period of consultation, whether that consultation is four or five or six months, believe they should proceed with ratification of Kyoto, we would all be in favour of it. I guess it's the process more than the end result that we're very much concerned about.

I guess the last point is that it is of concern to us that the U.S., our major trading partner, is not moving forward on Kyoto.

Ms. Maria Minna: I have two comments on that. Firstly, sometimes we can get lost in process and forget what it was we were trying to accomplish, and we need to make sure we don't do that.

Secondly, the U.S. doesn't join anything. They didn't join the International Criminal Court; they're trying to change it because of whatever. They haven't ratified the land mines treaty, for their own reasons. They don't support the UN terribly well. They're not going to sign anything. They just don't join clubs of any kind.

On Kyoto, while they're not signing because they don't join, they are way ahead of us in implementing a lot of what we would call Kyoto measures anyway, and especially in research and new technologies and things we would be buying from them. I think we have to be careful about the semantics we get into.

Mr. Leonard Crispino: I guess, Madam Chair, my question on that would be why, then, do you need Kyoto if you can do it without Kyoto?

Ms. Maria Minna: Because it's an international agreement, and I think it helps all of us to check on each other around the world, and we need to work with the developing countries as well.

Mr. Leonard Crispino: California has very clearly demonstrated major innovations in the area of climate change, so why not proceed? With respect to the broader agreement, why not consult with Canadians to see whether in fact that is the best avenue for them to reach that end result?

Ms. Maria Minna: We have been consulting. I think I'm going to move on to another point.

I want to go on to another point, actually, before I run out of time here, because I've got two things I want to get into.

One is for the Citizens for Public Justice. I want to say to you, quite frankly, I think this country--provinces and the federal government--seems to be out to lunch when it comes to really addressing the issue of children. You're absolutely right. I'm not even going to try to ask you questions.

The whole point is that we have to address.... What you say is 100% right. I worked very closely with my colleagues and pushed, as my colleagues suggested, the child benefit and the early learning program. There were eight MPs involved in those two things who aggressively lobbied the government. I think we haven't gotten anywhere near where we should be on both those issues, especially early learning.

I think it's time we challenged the provinces to get off their duffs. In Ontario it's shameful. In my riding I have child care centres that are losing subsidized spaces. I have the healthy babies program over there, the early learning program now with the province's logo--though it's our money, it's federal transfers--over here, replicating infrastructure, instead of dealing with the holistic approach that we were doing in Ontario, where this should be part of the schools. The Government of Ontario ordered them shut down and some of them destroyed, when it should be the hub, an integrated approach to children.

We know the facts: that a child's development from age zero to age six is critical. We invest tons of money in elementary, and we should. But by the time kids get to that age, we've already lost a ton of them. You're quite right in the percentages you have. We think it's only the poor kids. The middle class is just as affected.

I just wanted to tell you and put it on the record that it's time we stopped.

By the way, I'm saying this because I want to say to the Chamber of Commerce--and I like the feeling of your presentation, by the way--and also to others who have come before this panel to talk about cuts, cuts, cuts, you know what? We can cut the debt to zero, but if we don't invest in kids.... That is economic investment, economic output in the future, just as much as health is an economic tool and everything else. That's my little critique.

I just want to move very quickly, before I lose my time, to RRSPs. To the pensioner group, you're recommending that we reduce. Everybody who has presented to this panel has said increase to $19,000 and then $27,000. You're recommending to reduce. In your background document you say, in number 5, “RRSP tax subsidies should be reduced. The current format of the RRSP program subsidizes the investments of high-income individuals...”. Could you expand on that a bit? We've heard the complete opposite from everybody else in this town.

Á (1155)

Ms. Gerda Kaegi: If you are privileged enough to have the income to invest in an RRSP, you are getting an advantage that those at very low income levels don't have, and so the reason we're saying to reduce that tax advantage is that it excludes a huge percentage of the population. And that ties into the discussion on child poverty. Families are poor, and children are poor because families are poor. Poor families cannot invest in RRSPs.

Ms. Maria Minna: I agree.

Ms. Gerda Kaegi: Therefore, we're making the argument that we believe in collective responsibility and therefore we support the changes that have been made to the Canada Pension Plan. We believe in that kind of collective responsibility, and therefore we argue that the tax advantage on the RRSPs is something that should be questioned.

Ms. Mary Webb: The OCC has a slightly different position on that. The RRSP limits were supposed to be raised so they would represent an alternative that was comparable to the benefits that could be received from a defined benefit employee plan of either the private or the public sector. If we reduce those RRSP limits, we are limiting the retirement saving options that are available for small and mid-sized businesses that do not have a defined benefit plan. So if we're concerned about poverty of seniors, we will simply amplify that problem going forward if we reduce those RRSP limits.

Mr. Greg deGroot-Maggetti: I recognize the point you make about the need for small businesses to be able to provide some kind of pension program for their employees. But we have registered retirement savings plans, registered education savings plans, and the more we privatize all of the needs that we all have at a time when we all see disparities in income, what happens is--and I quote from David Dodge, the Governor of the Bank of Canada:

“The evidence shows that many households, particularly those with lower incomes, cannot borrow freely against future income and therefore are often significantly constrained by their current level of disposable income.”

This is the problem. When Statistics Canada looks at who's benefiting from things like RRSPs, it's not low- and modest-income families, because they can't afford to invest in them.

The choice we have to make is how we are going to fund programs to make sure we have livable communities where nobody goes hungry and where we support one another. I'd be willing to see the limit reduced for RRSPs--that's one of the things we suggest in our written submission--or I'd be willing to pay more income tax, a progressive income tax. I know it goes against conventional wisdom, but either we find some way to fulfill our responsibilities to one another.... All of us know people within our families and communities who can't make ends meet through work. There are going to be people who, at different times of life, can't. How do we pay to make sure people get that?

The Chair: Thank you very much.

We'll go to Mr. Brison for five minutes.

Mr. Scott Brison: Thank you, Madam Chair.

I have a couple of quick points on RRSPs.

While there is a tax benefit at the time one makes an RRSP contribution, in fact it's not a write-off of taxes; it does defer tax revenue to the future. If you look at the demographic bubble that is going to exist in Canada in the future, at a point at which more people will be retired and fewer people will be working, it makes good economic sense to ensure, through deferred tax revenue that will come in later on, that the RRSP system works from a public policy perspective. I think we have to consider it through that light.

I'm a strong supporter of raising RRSP limits, because it's one of the ways we can actually keep some of the best and brightest income earners in this country. If we continue to drive some of our best and brightest outside of Canada, with high marginal tax rates and taxes that pummel upward mobility, we'll gut our future productivity and tax revenue as a country.

Our ability to afford the kinds of programs all of us around this table value, which you are rightly defending, is contingent on our ability to ensure there is an environment and a culture of opportunity and success that can co-exist with that opportunity of social responsibility.

On Mr. Wilfert's point relative to corporate ownership in Canada, I would argue the biggest reason we have such a level of growth in foreign ownership of corporate Canada is because of our low Canadian dollar. It's lost 20% of its value since 1993. We're having a fire sale on Canadian corporate assets because of our slow productivity growth, and the fact that our productivity has lagged behind that of our greatest trading partner, the U.S.

If we're serious about defending Canadian economic sovereignty, we'd better get a tax system and a regulatory system in Canada that actually addresses productivity, as opposed to sticking our chests out like bantam roosters and wrapping ourselves in flags, without a real plan to make a difference.

Lastly, on Kyoto, would the Chamber of Commerce agree that a North American approach to greenhouse gas emissions, in lockstep with a North American approach to energy policy, could make a great deal of sense? A previous government had an influential relationship with the U.S., and was actually able to negotiate not only a free trade agreement, but an acid rain treaty, which had significant impact.

We've gone from being influential with the U.S. and the White House to becoming irrelevant under this government, to being an irritant at this point. I'd appreciate your feedback on whether or not a more constructive relationship with the U.S. might foster a real response to greenhouse gas emissions in Canada, and not simply ratification of an agreement that we have absolutely no mechanism, sub-nationally, to meet.

Thank you.

Â (1200)

Mr. Leonard Crispino: I think that would certainly have some merit. Greenhouse gases, obviously, don't stop at the border. To that extent, being part of the whole NAFTA environment, we believe a closer relationship with our largest trading partner, the United States, as well as Mexico would certainly go a long way.

Part of our concern--and I know there are some other views on this--is that a number of countries in the world, such as China, and particularly India, have large burgeoning middle classes. Those in the middle class have a tendency to be major consumers, and consequently greenhouse emissions tend to go up.

If those countries are not part of this agreement, at least in the short term, we believe it will be counterproductive. We certainly agree with you that a closer relationship within the NAFTA context would go a long way.

The Chair: Thank you very much.

On behalf of the committee, I want to thank you for coming to present your reports and giving us the time to translate them and circulate them to the full membership of the committee. As you know, some of them are out west, as we're sitting here, and some of them are back at the House. I do appreciate the time you've taken today, and the energy you've put into it.

Just as one piece of clarification, by the time our report is in print, we will not have had the benefit of Romanow. As some of you have raised health care, I just thought I'd clarify that for you, because it's going to make it a little more difficult to be very definitive.

One thing is interesting to me as I sit here and listen to everybody. Here, we are often talking about Kyoto in a vein somewhat similar to how we used to talk about NAFTA, with some of the same concerns in the public. That was all about jobs and fear and not being able to cost out, too. So there are some good comparisons and then there are some not so good comparisons. This committee is listening to everybody's views, though, so thank you very much for coming.

We are adjourned until this afternoon's session.