FINA Committee Report
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This fall’s pre-budget consultations saw more than 300 groups and individuals provide the Standing Committee on Finance with a wide variety of insightful and informative presentations aimed at meeting the needs of Canadians today and into the future. We are most grateful for their participation and guidance.
New Democrats have been actively pushing to open up the pre-budget consultation process to include the participation of more Canadians. In this respect, we were pleased that this year’s cross-country hearings reached communities such as Whitehorse, Fort McMurray, St. John’s and Portage-la-Prairie not normally included. However, much work still needs to be done to broaden the PBC process and engage Canadians. KAIROS reminded us that we have an opportunity to create space in the budgeting process for citizens of different backgrounds and views.
This year, the Committee had asked witnesses to focus especially, although not exclusively, on measures to increase Canadian competitiveness in the world.
The predominant message we received from across regions and across sectors was to look at ‘competitiveness’ from a broad perspective. We were told that if we are serious about meeting the very real challenge of keeping Canada competitive in the new world economy, we must not take a superficial approach simply equating economic competitiveness with lower corporate tax rates and higher profits, as advocated mainly by corporate interests. The overwhelming response advised that the key to improving our competitive position, instead, lies in enhancing Canadians’ ability to participate fully in economic life and to contribute productively to their full potential. This should be achieved through investing in people together with targeted industrial investment.
Although the NDP successfully negotiated improvements in this regard during its drafting, the Committee’s main report fails to reflect a significant number of proposals in its recommendations and we, accordingly, submit this supplementary report.
The skill shortage impact
Woven throughout the report are references to the growing shortage of skilled workers, but it narrowly focuses on stop-gap suggestions. For example, instead of addressing pressing issues of seniors’ income security such as the protection of workplace pension benefits, enhancements to encourage defined benefit pension plans and increases to bring our basic senior income plans in line with today’s needs, the report focuses almost exclusively on ways to encourage seniors to work longer.
The NDP believes this should not just be about incentives to get people to work longer. Many witnesses joined the NDP in looking to other, more effective solutions. These include both measures to enable skilled workers to participate in the workforce more easily and measures to help people develop the skills needed to meet ongoing and future needs.
We heard overwhelming support for a national child care program to enable parents caring for children – predominantly women – to bring their skills back into the active workforce either full or part-time, while still parenting responsibly. From Whitehorse to Halifax we heard appeal after appeal for significant budget action on child care financing moving toward a full, universal, regulated, non-profit child care program available to all parents across the country. In contrast to the exaggerated cost claims of Conservative Committee members, witnesses proposed a phased-in approach calling for $1.3 billion in 2006 (including $500 million specifically for aboriginal programs), and an additional $250 million per year in the years following. While we did succeed in getting a recommendation on child care into the report, it is still missing any timeframe or action plan with new spaces that parents can count on. The NDP clearly sees this as a competitiveness priority.
Measures to develop skills are equally critical. Delivering qualified, skilled graduates to take up positions in the new economy is our best guarantee of remaining competitive. Last year’s NDP budget provided $1.5 billion in additional funding for education and training. We need to build on that initiative. Federal education transfers have sunk below 10 percent of education costs and are nowhere close to levels preceding the vicious Liberal cuts of the mid-90s. Earlier this year, provincial and territorial governments set $4.9 billion as the amount needed to restore federal transfers for post-secondary education to 1992-3 levels. Witnesses told us we must move to increase funding in a dedicated transfer with clear, built-in accountability conditions
The NDP recognizes that Canada needs a comprehensive strategy to enable those currently not employed to develop new skills to help them enter or re-enter the workforce and contribute productively. Just as critical is the need for a strategy to enable those currently employed to upgrade their skills to meet new job demands – to keep pace and have the opportunity to get ahead. This need was identified repeatedly by witnesses representing business and others, yet constructive, innovative suggestions, such as those advanced by the Canadian Labour Congress and others, on the use of business training levies or the Employment Insurance fund — even for pilot projects — did not make it into the recommendations.
Unaccountable corporate tax breaks
Once again, corporate interests came to the Committee demanding across-the-board cuts in corporate taxation, falsely equating lower taxes and higher profits with competitiveness. Corporations have been basking in record profits over the past six years from the previous Liberal government’s bonanza of corporate tax cuts. Profits have been running in the record 14 percent range. At the same time, the rate of corporate reinvestment has dropped to record lows. Only about one percent of GDP is flowing to research and development as a result. Canadians want results for corporate tax cuts. Like us, they are not impressed by corporate witnesses refusing to consider accountability requirements on future cuts and subsidies. On the basis of what we heard from witnesses, we recommend that a cost-benefit analysis be required to ensure that future tax cuts and subsidies will translate into new Canadian investments to boost competitiveness.
The Committee is keenly aware that the current government’s promises and priorities have limited the resources available for budgeting. The cost of the GST reduction, the $3 billion committed to accelerated debt-reduction, financing shortened wait-times, and increased spending in certain areas such as military funding are among the reasons that economists as diverse as the Canadian Centre for Policy Alternatives and Global Insight have said that further tax cuts at this time may be ill-advised. Adamant government promises of further cuts on top of the corporate tax reductions outlined in its 2006 budget ought to be of particular concern to those who, like the NDP, are committed to keeping the budget out of deficit. Of course, this did not stop corporate interests from proposing just such widespread cuts to the Committee. The NDP is committed to maintaining a competitive tax regime such as we currently enjoy in relation to the US, our closest competitor. We also believe in accountability for spending tax dollars, whether on programs or tax measures. Canadians want to see results from corporate tax cuts.
A healthy population – healthy and prosperous communities
A healthy population and competitiveness go hand in hand. Canada’s Medicare system is a major plus in attracting investment and skilled workers. The proof is in the bottom line. In the extremely competitive auto industry, for example, research found that health savings from our public health system cut auto makers’ production costs by $1,380US per vehicle. This translates to $6 per hour per worker. This type of competitive health advantage applies throughout other industries. Skilled workers weighing competing job opportunities in Canada and the US will also surely factor in the individual health cost differential, with average US health premium costing more than $10,000. This report needs to reaffirm our commitment to a universal, not-for-profit, publicly-delivered health system as a key Canadian competitive advantage.
We were also told to fill in the gaps. We heard repeated calls to lay the foundation for a national Pharmacare program in this year’s budget. A way to cut both individual health costs and the overall costs to the system, measures to reduce drug costs were left out of the recommendations. Although the report recommends a mental health strategy it falls short in terms of fully addressing the loss of competitive potential experienced by those with mental illness, chronic diseases and disabilities..
Witnesses told us that decent housing is just as fundamental to our well-being as health care and reminded us that Canada is the only prominent industrialized nation without a national housing strategy. The NDP Budget last year committed $1.6 billion of new money to housing. Based on what we heard at the hearings and on the government’s recent actions (shifting financing to trust funds and indicating it may withdraw from the housing area altogether), we recommend that the federal government remain involved on a financial and policy basis in the full range of housing programs including social housing, co-operative housing, affordable home ownership and on-reserve housing.
Being competitive in the new economy
Canada’s highly educated workforce makes us a potential leader in the new, knowledge-based 21st century economy. To grasp that opportunity requires federal government leadership, not government withdrawal. Witnesses tried to fill the Conservative economic strategy void and we were listening.
Based on what we heard, we recommend:
- Targeted incentives focused on industries where we can strengthen our competitiveness and create high quality jobs.
- A shift of subsidies from the oil and gas industries, with their $30 billion profits, toward environmentally sound industries. As the world comes to grip with climate change and takes steps toward renewable energy to fuel the new economy, Canada is well-positioned to become a world leader in green-technology industries. The window is small, however, and decisive federal action is needed.
- Collaboration with Aboriginal communities to invest in the social and hard infrastructural development needed to ensure their full participation in the new economy and able to contribute to Canada’s competitive standing.
- Focused support for our manufacturing sector, reeling from the high dollar and slowing US economy. More than 200,000 jobs have been lost since 2002. Our neglect of our manufacturing sector and over-dependence on resource extraction and export is a giant economic step backwards. Increased support for the work of sectoral councils.<
- Measures to grow our social economy as a means to develop strong, competitive, prosperous community and regional economies to attract and retain working families. Increased emphasis on co-operatives, micro-credit, and union-sponsored venture capital initiatives.
- Greater emphasis on community economic development, recognizing the critical role that women often play at the local level and increased support for Canada’s grassroots network of cooperative enterprises and community entrepreneurs.
- Increased support for the arts and cultural and recreational initiatives to strengthen the competitive attraction of communities through a vibrant social infrastructure.
- Support for the family farm and long-term funding for sustainable agricultural support programs as a key element of any competitiveness strategy, which is glaringly absent from the report except for a concession we won to distinguish emergency relief from regular financial support.
- Recognition of immigration as fundamental to addressing Canada’s severe skills shortage, including the overhaul of the immigration department and a clear, welcoming immigration policy that finally moves on the recognition of foreign credentials and includes an effective integration strategy.
The NDP approach to the new economy is an inclusive one that includes all Canadians in moving toward a competitive future together. We reject the divisive policies of the current and past governments wherein some Canadians benefit greatly and the majority depend on benefits eventually trickling down to them. How can we speak in this report of Canada as an internationally competitive nation blithely omitting references to Canada’s northern, remote and rural communities and ignoring our appalling record on housing and Third World poverty conditions? In so doing, it supports the myth that trickle-down economics works. Not only does Canada have the resources to remove this blight from our reputation, but we have an obligation to address these conditions both at home and abroad.
Conclusion
There are many and varied criteria for measuring competitiveness. We were urged not to limit our study to corporate criteria alone. But even using the measure designed by the world’s business elite, the World Economic Forum’s Global Competitiveness Index, Canada is still 16th among industrialized nations and falling. The nations ranked at the top are not the ones with the lowest tax rates – nine of the 15 countries ahead of us have higher tax rates than we do. The leading competitors are the ones investing in their populations through education and training, innovation and technology and social program supports.
Clearly, the government’s agenda of radical debt reduction and more corporate tax cuts together with additional program cuts is ideologically based and out of step with competition in the new economy. It’s time we started to seriously plan, as a national government, how we intend to achieve our competitiveness goal and take our place as a leading nation in terms of economic prosperity grounded in ecological and humanitarian values.