FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, October 17, 2001

• 0900

[English]

The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): Good morning, everyone.

I'd like to call the meeting to order and welcome everyone here. This is our first panel in the wonderful city of Montreal.

Pursuant to Standing Order 83.1, the committee is, as you know, travelling across the country seeking public input on key economic and social issues as we get ready to write a report to the House of Commons and the Minister of Finance on what the priorities should be for the upcoming budget, which will be tabled sometime before or during the month of February.

We have the pleasure to have with us the following organizations and individuals: la Centrale des syndicats démocratiques, the president, François Vaudreuil, and Jean-Guy Ouellet; the Canadian Parks and Wilderness Society, Catherine Guillemette, member of the board; and the Forest Products Association of Canada, Frank Dottori, president and CEO, and Ashok Narang, chairman, Papier Masson Ltée.

Also appearing is the Tourism Industry Association of Canada, Christena Keon Sirsly, chief strategy officer, VIA Rail Canada Inc. and vice-chairman of the TIAC board of directors; and M. Charles Lapointe, president and CEO, Tourism Montreal, who's also a vice-chairman of the TIAC board of directors and chairman of the TIAC policy committee.

Many of you have appeared before the committee, so you know you have approximately five to seven minutes to make your presentations. Thereafter, we'll engage in a question and answer session.

We'll begin with la Centrale des syndicats démocratiques.

[Translation]

Mr. Vaudreuil, you have the floor.

Mr. François Vaudreuil (President, Centrale des syndicats démocratiques): Thank you, Mr. Chairman.

Let me make a correction. I am accompanied by Jean-Guy Ouellet who is our legal counsel. He will be speaking later on, after my presentation.

At the outset, before attempting to generate surpluses for the future, an understanding of where these surpluses come from will provide a good grounding for this debate. Since the budget surpluses result mainly from surpluses of the Employment Insurance Fund, what could be more legitimate than the demand that this money be returned to the system in order to restore it to its basic purpose, namely to cover the risk of unemployment among those who are insured.

This money would make it possible to bring about a significant improvement to the system. Eligibility standards should be lowered, the period of benefits extended, the calculation of benefits should be improved in favour of claimants, the threshold for benefit repayment should be raised, the circumstances surrounding a resignation or dismissal for misconduct should be open to the possibility of a hearing in order to avoid complete exclusion, should it arise, and employee benefits must become a true entitlement.

The present premium level does not constitute a problem for us, but rather the fact that the surpluses resulting from such premiums are not directed to their intended use. Before any review of the premium rate, the government must restore the system. Only then can there be a debate about the premium rates. That is one of the reasons why we believe that reducing the employer premiums to the same level as that of the employees is unjustified. It is also unjustified because relatively speaking, the level of payroll taxes in Canada is low in relation to the OECD average, and because from 1980 to 1997 tax revenue from individuals increased 30 times more than tax revenue from corporations.

We must also keep in mind the situation of older workers who lose their job. There are no more special programs for them since the abolition of the Older Workers Adjustment Program in March 1997. Active labour market measures often proved to be an illusion in their case, since employers will not hire someone 55 or older who has spent most of his or her professional life in a precise sector, no matter how well trained. It is therefore urgent for us to begin a discussion about the best way of assisting them by setting up, as quickly as possible, an income support program for older workers.

• 0905

Furthermore, the funding of health and social programs should no longer be established through the formula of closed resource envelopes but returned to a system based on recognized rights. Closed envelopes lead directly to underfinancing of most of the social programs aimed at implementing rights that therefore end up being increasingly theoretical.

Lastly, although we have not had the time to develop this position in the CSD, we are firmly convinced that tax reductions only accelerate the development of a two-tier society and a weakening of the solidarity among the components of society. That is why we consider that this should certainly not be the government's priority, particularly since the reductions already granted are sufficient for the time being.

The same holds true for debt reduction. The upturn in economic growth over the recent years and the fact that the Minister of Finance applied the greater part of the surpluses to debt reduction recently means that the debt/GDP ratio has been significantly reduced. Today, debt no longer represents a hindrance to our credit ratings as it once did. That is why we maintain that debt reduction should not be the government's priority either. The government should never devote more than one third of its annual surpluses to such reduction and in the coming years this amount should be significantly less in order to deal with the priorities that we have identified.

For the CSD, it is important to strengthen the social fabric and the solidarity among all levels of Canadian society. If the legislators go along with the proposals we have just made relating to the employment insurance system, that is income support for older workers and the funding of health and social programs, it is our sincere belief that there will be a considerable decrease in poverty levels in Canada and that we will once again be ranked as the best country in which to live.

Thank you.

I might perhaps add that the Auditor General of Canada clearly indicated that she could not conclude that the Employment Insurance Commission had respected the spirit of the law in the matter of premium rates for 2001 because of the accumulated surplus of $36 billion as of March 31, 2001. There's no point in reminding you that the Chief Actuary for Human Resources Development Canada is of the view that in spite of the possibility of a recession, an accumulated surplus of 10 to $15 billion, $15 billion maximum, is quite adequate to ensure the solvency of the system and its continuity.

[English]

The Chair: Thank you very much.

We'll now proceed to the Canadian Parks and Wilderness Society (Montreal), Catherine Guillemette, member of the board.

Welcome.

[Translation]

Ms. Catherine Guillemette (Director, Canadian Parks and Wilderness Society (Montreal)): Thank you.

First of all I'd like to remind you that Canada is the first western country to have signed the Convention on Ecological Diversity in 1992 in Rio. At the time it made a commitment to protect biodiversity and to establish a network of protected areas. In spite of this, Canada is ranked at only 36 among the countries of the world for its designation of areas that are legally protected against industrial development. There is still time for Canada to fulfil its commitments and to save its reputation for the Rio+10 meeting that will take place next year. It is simply a matter of ensuring adequate funding to allow the government to extend its network of national parks and marine conservation areas by the year 2002.

National parks are very important for Quebeckers. According to a study conducted by Statistics Canada in 2000, more than 2.3 million Quebeckers visited natural sites every year. This number could be doubled in the coming years.

• 0910

Here are some of the visitor figures for Quebec national parks: for the Mauricie National Park, 179,305 visitors; the Réserve de l'Archipel-de-Mingan, 29,525; Forillon National Park, 172,678; the Saguenay—St. Lawrence Marine Park, 433,255. That amounts to 814,758 visitors to the Quebec national parks for the year 2000-2001.

Protected areas also make a contribution to the Quebec economy. Quebeckers spend more than $1.2 billion a year on outdoor activities in a natural environment.

Quebec needs these protected areas. Most of the 14 million Canadians who take part in outdoor and wildlife activities do so in protected areas. The increasing levels of human activity in most of our national parks has resulted in excessive attendance, an overutilization of infrastructure, in overdevelopment and several other problems resulting in the deterioration of wildlife habitat. If we want our parks to withstand human activity, then it will be absolutely essential to extend the protected areas network.

In Quebec, only 0.5% of the territory is legally protected from any industrial use, compared to 8.8% in Ontario, 9.8% in Alberta and 11.2% in British Columbia. In other words, it is the smallest percentage in Canada.

Quebec makes a very poor showing internationally with respect to protected area networks. Its network of protected areas is far from being complete. At the present time, 99.5% of Quebec's territory is liable to being affected by industrial development. In order to retain biodiversity, it is essential to establish a protected area network.

Furthermore, all the natural regions of the territory should be represented. In 1990, the federal government promised that it would represent each of the 39 natural regions in Canada with a provincial park. At the end of 1999, 14 natural regions still remained without representation. It is in Quebec that we have the lowest number of natural regions represented, three natural regions out of 10. The contribution of national parks to the full achievement of a protected area network is therefore essential.

Quebec has the largest expanse of boreal forest in Canada. In view of the fact that almost all of this forest has been allocated to cutting operations and mining, it is urgent for us to take action. The government is able to act because 93.6% of the Quebec territory is Crown land and therefore under its responsibility. There are still large tracks of wilderness to protect in Quebec. We have one of the largest herds of cariboo in the world and some of the most powerful untamed rivers in the continent.

It is becoming urgent to establish new wildlife protection areas and to improve the management of existing parks by protecting their ecological integrity. The 1988 National Parks Act sets out ecological integrity and the preservation of resources as the predominant criteria for the management of a park. However, the members of the Ecological Integrity Commission have noted problems and stress factors that threaten our national parks and thus have an impact on their ecological integrity.

Human beings are leaving their traces everywhere. Canada and our national parks are part of a world where there are many disruptions. Even if they originate outside our national parks, they have an effect on the parks' ecosystems. The idea of wilderness is a dominant element in our national identity. Our national parks are symbols of this identity but they are also ecological indicators that warn us of the presence of far more widespread aggressions that are already being felt in a large part of the Canadian territory.

Here are some examples. In the Mauricie Park, the remaining wolf populations are having difficulty surviving. They are constantly threatened by stress factors such as human activity.

With respect to air pollution, in view of southern Quebec's status as the “exhaust pipe of North America”, the Mauricie Park remains exposed to a risk of acidification that goes beyond the environment's ability to buffer sulphates and other acidic compounds.

As for pesticides, a study in the Mauricie National Park showed that the blood and feathers of park loons contain high levels of mercury; the mercury level in the feathers is higher than any other place in North America where tests were conducted.

• 0915

Let us make a contribution to Canada's reputation by showing leadership in preserving our parks as part of our Canadian and world heritage and as special places that deserve to be protected for their intrinsical value.

Protected areas are important to us. The only way to protect the wilderness is to take sustainable measures. It is up to Canadians and to our government to make a clear commitment and to show foresight by upholding the values of our national parks. Thank you.

[English]

The Chair: Thank you very much. We'll now proceed to the Forest Products Association of Canada, the president and CEO of Tembec Inc., Frank Dottori.

Mr. Ashok Narang (Chairman, Papier Masson Ltée; Forest Products Association of Canada): Maybe I can start off.

The Chair: Ashok Narang will start off.

Mr. Ashok Narang: You all have our presentation, so I'm not going to go through all of that.

We've been called the Forest Products Association of Canada for a year now. Before that we were called the CPPA, Canadian Pulp and Paper Association. The big change is that before we used to be significantly pulp and paper, and now we are pulp and paper and wood products combined. We represent a majority of the producers in Canada and we're pretty large. It's all explained there.

I'm Ashok Narang, chairman of Papier Masson and also the chairman of the trade and competitiveness committee. Frank Dottori is the president and CEO of Tembec. He had my job a long time ago, and before that he was a chairman of CPPA. So he is a ranking member over here. We also have a vice-president of government relations with us, so if you have any questions, we can answer them.

It's never a good time to come to you and say we need a tax break or we need some help, and today is even worse than before. Right now, I think all our priorities are different since September 11 and it seems sort of...that instead of putting our efforts to the war, here we are coming to you and saying give us some help. But no time is great.

So we are here, and we have many points to make to the federal government. We have been doing that in writing, and quite recently, our group joined a coalition to come to you and make some presentations.

The thing I'd like to highlight in the whole equation is that we have a tax called “capital tax” in this country. It's a tax that reminds me of taxes in the third world countries, where the government puts tax on capital because they think any income made from that money is being squirrelled away somewhere else. They're not paying taxes on it; hence, they should charge the capital.

The capital tax does three things. In the backward countries, people just hide the capital so they won't have to pay any taxes. You can't do that here; you're all open. The second thing is that every time you invest any money in anything big, you say, oh it's going to take me three years to get the plant going and working efficiently before I get money, but we start paying the tax on day one.

On top of that, everybody knows—and I don't have to go through that part—pulp and paper is about as cyclical as an industry can be. We're a very cyclical industry—we make money sometimes, and we lose money most of the time these days. During the down periods, when the markets are down, the prices are down, you're still paying taxes. So we take a very strong objection to having a capital tax for a cyclical industry that is very capital intensive.

Now, how does that fit into the overall tax situation? That's another issue. But specifically, it is very onerous to have a tax when we're losing money. It's completely unfair.

Those are my comments. Frank can take it from here.

• 0920

Mr. Frank Dottori (President and CEO, Tembec Inc.; Forest Products Association of Canada): Mr. Chairman, I think you've heard my comments before, in writing and otherwise, on budgets, but one of the frustrating things I want to point out here is the way the pulp and paper or forest products industry is treated in Canada. We've been here for 100 years. We bring home Canada's bacon. We're basically the people who pay for the social benefits we have in Canada, because we've always been the biggest contributor to the balance of trade. Basically, it's like bringing the paycheque home.

We tend to be ignored because people feel we can't move like the high-tech industry, which can load up a truck or transfer their people to California. We have billions of dollars of investment and have to stay here, so we tend to be ignored. I just want to put it in perspective again so that people understand.

This industry has sales of $60 billion in our balance of trade in the year 2000. You can get the Price Waterhouse report. We brought $37.4 billion into Canada for the Canadian people and government to basically share. We paid $13.3 billion in taxes, which again most people don't recognize. Some of it—$1.8 billion—was in corporate stumpage, and something like $10 billion was in income and other taxes.

We create jobs that pay $54,000 per year on average, plus another $16,000 in fringe benefits. Seventy thousand dollars per year is what a person earns who works in our industry. This is the highest of any industry, except probably the stockbrokers in Toronto. It's an industry we think the Canadian government and all governments should pay attention to. Don't kill the golden goose that brings home the bacon and lays the golden egg. You should build on winners; you should build on a good foundation.

This industry has been here for 100 years. We'll be here for another 100 years, assuming you treat us fairly. The capital tax is an unfair treatment on our industry. The government gets $1.3 billion out of this unfair tax, which discourages investment, as indicated. Why should you spend $100 million—we're looking at projects of $1 billion, just in our company—and get whacked with $20 million a year in tax, even if you're not making money? I mean, it's a totally unfair tax.

Put it on cashflow, as I've indicated to you. Put it on something else if you've got to collect the pound of flesh. But the way it's structured now, it discourages investment. Here you have the industry that creates the wealth in Canada and you put a tax on it to discourage us from reinvesting in Canada. I mean, we've sold out the petroleum industry, and the high-tech industry doesn't exist. We're the guys who are still here, and I think you should treat us fairly, just as they do any place else in the world. They don't have capital taxes, except in some of the third world countries, and we don't think we should have them in Canada either.

With respect to the corporate tax, I hear people saying, “Well, it's gone from 28% to 21%.” Just bear in mind that we had a 7% remanufacturing process tax. So what you do is move it down 1% and then take 1% off on the other side. It's good for PR. The public says, “Look at these guys: they're still bitching, and you're cutting taxes.” But you cut 1% and then take 1% off on the other side, which nobody mentioned.

Sixty percent of our costs are government-controlled directly or indirectly, whether we talk of labour, energy, transportation, wood, or access to markets. Look at the recent case with the lumber issue. We can't sell our value-added products because we have tariffs going into Europe, tariffs going into China, tariffs going into Indonesia. Yet the government says, “Put money into value-added.” Well, you have to get us access to markets as well, and that's a government issue.

What we'd like you to do is this: we think eliminating the tax is a positive signal for us. We see British Columbia doing it; Ontario says it's going to do it; Alberta has done it. We think the federal government should start doing it for basic resources that create jobs. I think that'll send a message.

We think we're headed for a depression in the economy, just as in 1980-1982 and 1990-1992. We think we've got a tough, tough go ahead of us. It's been there for a year. It wasn't September 11. September 11 is a good excuse for a lot of people to use. It's going to be worse after September 11, but I can tell you we've been in a downhill slide in this economy since last year and we're going to be there for the next year to year and a half.

My advice to the government is watch your dollars. Don't spend the money. Keep it there, or if you're going to spend, look at stimulating a positive investment climate so we can create jobs, because we're going to be facing a tough go over the next two years.

Thank you.

The Chair: Thank you very much.

We'll now proceed to the Tourism Industry Association of Canada, Christena Keon Sirsly and Charles Lapointe.

Ms. Christena Keon Sirsly (Chief Strategy Officer, VIA Rail Canada Inc.; Vice-Chairman, Tourism Industry Association of Canada): Thank you, Mr. Chairman and members of the finance committee. I thank you for the opportunity to highlight the Tourism Industry Association of Canada's views as you prepare your prebudget consultation report to the Minister of Finance.

• 0925

[Translation]

The Tourism Industry Association of Canada is the main vehicle for the promotion of private sector interests in policies and programs essential for the viability and the sustainability of the tourism industry in Canada. Our promotion efforts are aimed mainly at the elimination of restrictive laws and regulatory barriers to the growth and the expansion of the tourist industry in Canada.

In Canada, our industry is one of the foremost economic sectors. In 2000, revenue increased by about 8% in relation to the previous year, totalling more than $54 billion. The industry includes 159,000 businesses employing more than 540 persons directly. From the government point of view, the tourist industry produces an estimated revenue of $16.7 billion in taxes.

[English]

The tragic events of September 11 have had a profound impact on the world. While our immediate thoughts are with those directly affected by these acts of terrorism, it's obvious there will be repercussions for tourism in Canada and in the rest of the world.

Given the effect the recent events have had on consumer and business confidence, it is key that the government move forward with policies and priorities that drive productivity, competitiveness, economic growth, and job creation. TIAC believes the most effective way to do this is through continued tax cuts.

[Translation]

Our association therefore urges the government to follow up on its five-year plan to reduce corporate and individual income tax. During periods of economic downturn, tax reductions are a stimulus and should remain a government priority. As a result of individual income tax reductions and a reduction of the capital gains tax, Canadians will have more disposable income for discretionary spending. This will have a positive impact on tourism businesses throughout the country.

[English]

Another area where the government can play a positive role in helping Canadian businesses remain viable, especially during these times, is through the reduction of payroll taxes. Payroll taxes are the most regressive form of taxation because those individuals at the lowest end of the payroll scale pay the most. This has a negative effect on labour intensive industries such as tourism.

To make employment insurance more progressive, TIAC makes two recommendations for reform.

First, TIAC recommends the equalization of employer-employee premiums through the gradual reduction of the employment insurance multiplier. This would significantly lower payroll taxes for businesses, thus improving the climate for growth and job creation.

TIAC's second recommendation is the establishment of a yearly basic exemption, or YBE, on premiums paid into employment insurance. Converting the existing earnings threshold to a YBE and extending it to employers would benefit part-time, seasonal, and low-income workers and stimulate small, labour-intensive businesses, including many in the tourism industry.

Now I'll pass you over to Charles.

Mr. Charles Lapointe (President and CEO, Tourism Montreal; Chairman, TIAC Policy Committee; Vice-Chairman, Tourism Industry Association of Canada): Thank you, Mr. Chairman and members of the committee.

Another very important issue for the tourism industry is the renewal and maintenance of Canada's highway infrastructure. Since the tragic events of September 11 it takes on a new prominence, because the major market at our disposal is the “rubber tire” market, as it is the market that has the potential to increase dramatically.

[Translation]

The Government of Canada currently collects more than $4.5 billion per year in gasoline taxes. Less than 6% of this amount, some $270 million, is reinvested in our highways by means of construction or maintenance projects. Renewing Canada's highway system will improve efficiency and safety, stimulate economic expansion, tourism and trade, and improve our economic competitiveness and productivity.

• 0930

The Tourism Industry Association of Canada recommends that the federal and provincial governments endorse a long-term investment strategy in the transportation sector, nationwide, with sufficient funding for the ongoing maintenance and construction of Canada's national highway system.

[English]

The final issue we would like to address is funding for the Canadian Tourism Commission. In late September the Canadian Tourism Commission met with the Department of Finance to request immediate additional funding for increased tourism marketing in the wake of the terrorist acts. TIAC fully endorses the CTC's request and backs all marketing initiatives necessary to address the challenges the tourism industry will be facing in the upcoming months.

As well, TIAC is seeking these additional funds of $25 million per year for the Canadian Tourism Commission for new marketing initiatives. This would increase its funding to over $100 million annually and is based on three key considerations. First is the increasing economic importance of tourism. The first competition Canada must face in international markets to maintain its position—just to give you an example—is that the City of New York alone put forward last week a special budget of $40 million U.S. to counteract the slowdown in the tourism industry. Second, there are the many investment opportunities available, which are supported by the tourism industry. Finally, given the government's expanded priorities of safety and security, this association will support efforts to enhance security at Canadian borders while balancing the need for efficient handling of travellers.

[Translation]

In conclusion, our industry was hard hit by the terrorist attacks of September 11. We must restore the confidence of consumers and business. This is essential to stimulate a recovery in the tourism sector. Our association encourages the Government of Canada to adopt and implement policies and priorities that will re-establish consumer confidence and help our companies get through this difficult period.

[English]

We would like to thank the committee for the opportunity to share our views with you and look forward to your report later on this fall.

Merci.

The Chair: Thank you very much.

We actually thank every panellist here. You certainly brought out some very interesting points that I'm sure we'll have plenty of questions on.

We'll begin with Mr. Jaffer. All members of the committee will have five minutes.

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

Thanks very much, Mr. Chairman, and thank you all for your presentations. I have just a couple of questions for a few of the panellists.

I'll start with Ms. Guillemette from Canadian Parks and Wilderness Society.

I looked over your brief. You identified a number of challenges that Parks Canada faces, as well as some solutions. But what I saw that was missing, or perhaps I missed it, was an actual figure amount. Perhaps your organization has done a study on how much money would be required in order to face some of the challenges or solve some of the problems that you've identified in your brief. Is there a dollar amount you would suggest to Heritage Canada or Parks Canada in order to solve some of those problems?

Ms. Catherine Guillemette: Yes. It has already been suggested by other environmental groups—$493 million for the next five years. This budget would be separated for ecological integrity as well as new parks creation.

Mr. Rahim Jaffer: The next question was to the Forest Products Association.

You've identified some of the areas government has to look at to alleviate some of the tax burden on your industry, and many of those I agree with.

However, in light of some of the challenges we also have, you've identified in your brief that the biggest market you deal with is the U.S., as it is in many cases here in Canada. What are some of the challenges at the border that you're seeing and facing currently, or that you foresee, especially when it comes to the traffic being held up or the fears you may have concerning what we may have to do in dealing with allowing trade to be expedited in your industry towards the south? Do you have any concerns on that front?

The Chair: Frank, I think that's too much, but go ahead.

Mr. Frank Dottori: As far as the pulp and paper sector or chemical sector, we don't see any problems. There are the additional security measures, but again we have to make sure we don't blow these things out of proportion. It takes an extra half hour or so. So we don't see that as a problem.

• 0935

Our concern right now, as you know, is the lumber side. I think the position of the Canadian government—until recently—has been excellent, in the sense that the U.S. is a big economic bully. It's their way or the highway. Canada should stand united when we're facing the U.S. I think it has been unfortunate that the Canadian government has decided to let the USTR come in and negotiate province by province. We can't even fight the U.S. together, so province by province is just a disastrous change in events as far as we're concerned.

I'm speaking from a biased point of view because I'm chairman of the Free Trade Lumber Council, which of course is a bit of a militant organization that wants free trade like NAFTA where we signed. As you know, lumber was excluded from NAFTA. We think it should be included and we should get access to the U.S. market. We're ticked off that the Canadian government doesn't really take a strong militant position. They're supposed to be our friends. If they're our friends, let them demonstrate it, especially at this time, not the other way around. So we're quite upset about that.

The other thing, as I mentioned, is that the Canadian government lectures us continuously and looks at us as a backward industry, when we actually are one of the most technologically advanced industries in Canada. I invite any of you to come and visit our mills that are run by computers where you don't even see people. If they bill value-added, it's because there's a fixed amount of resources, since we need them for parks and everything else. We have to make more with less.

I have a big coated paperboard mill, and I have a 10% tariff if I sell it outside of Canada. So what do I do? I have no customers in Canada, and I have a 10% tariff. Europe protects its own producers. China has a 39% tariff, yet we have CIDA and everybody giving them money to develop. Then they build the coated paper and ship it back to Canada. It's crazy.

So we need access to markets. And Canada—it's one of the biggest things you need—has to be very aggressive. I have to concede, because I'm not a politician, that the Liberal government has done a great job in the last couple of years by taking a stronger position. But from our point of view, it's still not strong enough. We should get rid of these tariffs for our products so we can export them. Instead of having $60 billion, we'll export $70 billion. That's how we'll grow this economy and create jobs.

Mr. Rahim Jaffer: I just have one quick last question for the tourism industry.

I notice that you've proposed as some of the changes to this act some changes to EI and the introduction of a YBE. I know that in talking to some of your friends in the restaurant and food service industry they've proposed a similar threshold. They've proposed an amount of about $2,000, I believe. I was wondering if you've come up with any figures from the tourism industry of what that threshold should be for that YBE.

Mr. Charles Lapointe: We feel that the threshold should be $3,000. There's quite a strong and important coalition in Canada agreed on this amount. There's the Canadian Restaurant and Foodservices Association, our association, TIAC, the Hotel Association of Canada, the Canadian Construction Association, the Hotel Employees and Restaurant Employees International Union, the National Anti-Poverty Organization, and the Retail Council of Canada.

Mr. Rahim Jaffer: That's fine. Thank you.

The Chair: Thank you very much.

[Translation]

Mr. Loubier.

Mr. Yvan Loubier (Saint-Hyacinthe—Bagot, BQ): Thank you, Mr. Chairman.

My first question is for Mr. Vaudreuil. I would like to ask you to give us some hints. We have tried everything for years now, ever since the Employment Insurance Fund began to run a surplus, in other words about seven years ago. I tell you, we have tried everything. I think you'll agree with me that we have tried with all our might. We have shown that there is an incredible consensus in Quebec and Canada that the employment insurance system must be reformed and that it must not become the federal government's cash cow.

Mr. Martin has always turned a deaf ear to our pleas, even though, as you mentioned, the former Auditor General denounced him. And the new Auditor General who has just begun is also speaking out against him, in her own way, because the Auditor General can never denounce a situation the same way a spokesperson of the Bloc Québécois would, for example. We realize that what's being done with the Employment Insurance Fund is highway robbery. As you mentioned, it represents the largest part of the federal government's annual surpluses.

This year we reassessed the situation. Even if we assume a recession for the last six months of this year, we know that Mr. Martin will end up with a 13-billion-dollar surplus. He will tell you, as he's done every other year, that there is no surplus or that the surplus will be two or three billion dollars, but everyone who knows him knows what's going to happen. Every year, his estimates are off by 300%.

• 0940

So, the surplus will be $13 billion, and of this amount, more than $7 billion will be from the Employment Insurance Fund. How can we convince a government that doesn't want to listen? Every day we rise in the House of Commons and demand that the government give back at least some of the surplus to the people who need it. The Minister of Human Resources Development, with her usual smugness, rises and says that this is out of the question, that the system has been reformed and that it's fine now.

So give us some hints, because we are somewhat at a loss. As you said earlier, all kinds of older workers are still being laid off en masse these days. We aren't seeing the same kinds of mass layoffs we saw 20 years ago, but there are many individual layoffs. We have a problem with that. There's no more POWA or any other kind of program for them.

I would like to hear what you have to say about that.

Mr. François Vaudreuil: Obviously, there's no magic bullet. In my opinion, despite the profound changes, the major transformations that our society is experiencing, we must promote greater justice and provide more protection against the risks one encounters in life, particularly losing one's job.

We realize just how volatile and precarious the labour market is these days. Consequently, a true insurance system is absolutely necessary in the year 2001. You have to be disconnected from reality not to see the human tragedies that are going on in many places, in many regions where people are losing their jobs.

I could give you several examples, because 90% of our union's members work in small or medium-size companies in Quebec, which are for the most part located in the regions. We see tragedies occurring in every region. One of the problems is that we have forgotten what society was like 30 or 40 years ago, for example when we're dealing with older workers.

Let me give you an example of one particular problem. A shoe factory in Richmond will be shutting down soon. Nearly 60 of the workers there are over 50. These people have little education, perhaps grade 3 or grade 4, and are aged 60 or 61. They have worked in the factory for 42 years, and in 42 years, the highest salary they ever earned was $23,000. They have managed to buy a house and set a small amount of money aside. They have $800 left in their bank account. They ask us what they are going to do, what they are going to live on.

This is about dignity. The tragedy is that these people do not stand up and complain, they turn inward and hide their poverty. So something has to be done. Something must be done right away.

To get back to your question, even if there is no magic bullet, we absolutely have to continue this debate. We must persevere, because this is a matter of fundamental justice. We are seeing too many tragedies.

With me is Mr. Jean-Guy Ouellet, who will round out my answer. For 24 years or so, Jean-Guy has been working daily with people who have lost their jobs and have to apply for employment insurance. He can tell you what these people are going through.

There is another profound imbalance these days within our society. At the end of the last decade, we went from passive measures, that is to say insurance, to active measures. The principle in itself is quite praiseworthy. A lot of work is currently being done in Quebec with these active measures, and this work has been successful. However, when we made this transition, we went from one extreme to another within our society, and now we find that some people just fall through the cracks, often older workers. As a result, we must strike a new balance so that these people can live with dignity.

I'll ask Jean-Guy to say a few more words.

Mr. Jean-Guy Ouellet (Legal Counsel, Centrale des syndicats démocratiques): Naturally, a legislative change can be made by way of political will or by the courts. One can challenge the use of the fund on constitutional grounds. I believe that attempt is currently before the courts. As the Auditor General said on September 27, in her comments on the Public Accounts, the current surpluses are clearly contrary to the spirit of the act; furthermore, they are unconstitutional as well.

• 0945

When the government first attempted to pass legislation on unemployment insurance in Canada, the Supreme Court and the Privy Council said that an unemployment insurance system could not be established under the power to levy taxes, nor under the spending power, but had to be established by way of a specific power. In 1940, that specific power was transferred to the federal government. Quite recently, in a case before the Supreme Court, the court ruled that active measures came under the spending power. So it is clear that the power to collect premiums is based on the establishment of an unemployment insurance system and cannot be collected for other purposes.

We should perhaps recall that Mackenzie King clearly indicated, in a debate in the House of Commons when the law was being passed in 1940—and I could read you the passage if you like—that in dealings with the provinces, the law was to be applied only for the purpose of the unemployment insurance system, because the provinces had not authorized anything else. Mr. McLarty, the minister at the time, had pointed out that it could not be used for health insurance purposes or even to solve the problem of poverty caused by unemployment except, perhaps, to insure the risk of unemployment.

We should also remind the government—and I see Mr. Bevilacqua... In the 1990s, I was in contact with the Liberal Party and with organizations representing the unemployed, concerning the reforms implemented by the Conservatives. Mr. Bevilacqua was very active in this fight and he recalled that in 1989, 1992, 1993 and 1994, all the governments had said that the changes made to the Unemployment Insurance Act were designed to share the burden in fighting the deficit. I have the references for all the passages in all the budget speeches of all these governments, and I can provide them to the research officers.

The fact is that there is no longer a deficit. The Auditor General said that the fund has $35 billion in it, which is $20 billion more than the $15 billion that the Chief Actuary proposed as a maximum. Consequently, according to Mr. Martin's economic forecasts, we are heading for a surplus of $70 billion in 2005-2006. This doesn't make any sense.

In the meantime, there are people who are not eligible under the system because of a considerable increase in levels, people who are living in poverty. According to recent data published by Statistics Canada, there are currently people living below the low-income threshold—and the poverty gap increases because of people living below the low-income threshold—whose losses of income, amounting to one thousand plus several hundreds of dollars, are directly attributable to cuts in the unemployment insurance system.

This leads to an increase in the poverty gap, not to mention its effect on the way people live. At our office, we see people whose unemployment benefits have run out or people who are not eligible to receive them. Their savings are eaten away, their family breaks up, spousal violence becomes a problem and, in many cases, they have to sell their home at a reduced price. All of this happens because they are not eligible for social assistance, which is a new name for public assistance.

The situation is truly worsening. The Standing Committee on Human Resources Development reported that it needed to be fixed. I think that, following the events of September 11, one answer to the economic insecurity that is beginning to be felt would be to restore consumer confidence. And consumers are also workers. If they feel insecure about their jobs, it is for us to re-establish an employment insurance system that will allow them, at least at some point in the future, to consume.

It was remarked earlier that people earn $70,000 in the logging industry. The maximum insurable earnings level is currently $39,000; it has been frozen since 1996. According to Mr. Kerr, who is a research officer for Parliament, this will be the level for another 10 years. In the future, people in the logging industry who lose their job will see their income drop sharply, to $413 per week. This is the maximum, even if they are earning an annual salary of $70,000. The maximum insurable earnings level must be increased; this was mentioned by the committee.

As for the exemption or [Editor's Note: Inaudible], the figures show that individuals are the ones who have been hard hit. Personal income taxes have increased very considerably in Canada, whereas corporate income tax levels are below the average for G-7 countries. Therefore, this does not seem to be a priority. If there is a priority, it would be to put money back into the pockets of workers who may one day lose their job. There is an extra $20 billion.

• 0950

[English]

The Chair: Thank you, Mr. Loubier.

We'll start with Mr. Discepola, then we'll go to Ms. Guarnieri and Mr. Murphy.

[Translation]

Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.): Thank you, Mr. Chairman.

I would like to put a question to the Confédération des syndicats nationaux. I did not get your presentation in French. As I just read it too rapidly, I noticed that you frequently use the term “misappropriation”. I wonder whether you really realize what the current situation is. We should know that the events of September 11, 2001 completely changed government priorities as well as the priorities that we should adopt in our coming recommendations to the Minister of Finance.

My question is very simple. The debate on employment insurance reform has already been going on for four or five years. Some improvements and changes were made in the system following various representations and requests we heard. I wonder whether you really think that we should use our entire surplus to remedy certain deficiencies.

You also mentioned the fact that the Auditor General may disagree with the way the Minister of Finance is using the Employment Insurance Fund. For all practical purposes, there is no account, except a fictitious one, which could be deemed to have a surplus. This money is part of consolidated revenue. Therefore, I do not see how I can accept this, in light of current circumstances—

In Quebec, yesterday, we heard that even the Finance Minister of our province is forecasting loss of revenue and additional expenditures that could amount to $2 billion. I do not think that we have the latitude we had perhaps three months or two years ago. How much is six hundred million times three?

Mr. Yvan Loubier: No, not at all—

Mr. Nick Discepola: You'll have the opportunity, Mr. Loubier—

Mr. Yvan Loubier: ... that is not what I mean—

[English]

The Chair: Can we get the answers from him?

[Translation]

Mr. François Vaudreuil: What distresses me about the debate over the employment insurance file, is that there is never time for it. I remember meeting Minister Pierre Pettigrew in the spring of 1997, when the government had decided to terminate assistance programs for older workers. At that time, Canada was expecting a lawsuit over contaminated blood. It was the wrong time. Now, because of the events of September 11, 2001, it is the wrong time.

I'm very sorry to have to remind you that the money and the surpluses that were freed up came from premiums paid by workers and employers. It was meant to implement a real insurance system for their protection. Previously, Canadians had the right to access the system. Now, the system is only used as a last resort, and a large number of people can longer benefit from it. We see this situation every day, workers who, for instance, come to tell us that the employment insurance official told them that their benefits might be late and that they should normally always have three months of pay set aside for hard times.

And the same workers ask us how come the government can be so attentive to an airline asking for help within ten days and how come the government is so sensitive to its problem. As for us, we've been asking the government for years to help the people who work hard for a living and who have no way of collecting reasonable insurance benefits.

The other argument we propose to you this morning is that since Bill C-2, the Finance Minister has the power to determine the amount of employment insurance premiums. In the recent history of public finances in Canada we have seen several changes in the budget process, particularly the reforms in 1994 and 2000.

• 0955

In our opinion, there must also be solidarity in a society during difficult times like the ones we are currently facing and not just during times of growth. Discussing solidarity is always appropriate. And for us, it is a question of solidarity. The unemployment insurance system that was destroyed in the early 1990s was one of Canada's strengths. So we have to rebuild that solidarity.

Mr. Ouellet.

Mr. Jean-Guy Ouellet: Let's talk numbers. You talk about fiscal capacity, about the surplus in the fund. I understand that the money has been diverted for other purposes, but essentially speaking, and according to Public Accounts accounting principles, the Chief Actuary has nevertheless forecast $1.506 billion in interest on the debt contracted by the government with regard to the Employment Insurance Fund for the year 2001. Those are the figures the Chief Actuary used in September 2001. So an amount that does not exist is nevertheless accruing interest and that is a major component; that means that in actual fact, legally and constitutionally, that money must not be used for anything else except unemployment.

Moreover, as regards the events of September 11, again according to figures quoted by the Chief Actuary in September 2001, since 1960, the average unemployment rate has been 7.6%. The Chief Actuary has calculated that every 1% increase in the unemployment rate would cost $2 billion. The surplus forecast for next year is $6.170 million, if a surplus is still being forecast.

So, in theory, when we see in the newspapers—I am not an economist, I am a lawyer—that the economy will most likely pick up in the middle of 2002... But there will not have been a significant increase in the unemployment rate. As a result, you still have a four-billion-dollar margin that, at any rate, does not belong to the government, to rebuild a system. The money belongs to the unemployment insurance system, and the government is diverting the funds for other purposes that are unconstitutional, and, in the words of the Auditor General, illegal under its own legislation.

[English]

The Chair: Let's keep the questions and perhaps even the answers a little tighter so we can get more questions and answers in.

[Translation]

Ms. Albina Guarnieri (Mississauga-East, Lib.): The personal story you told us has touched us all. As you said, there is no magic or easy solution, but we are undoubtedly going to examine that. But as you understand, of course, September 11 has changed many things and many programs. In the end—

I have two questions, one for the Tourism Industry Association of Canada,

[English]

and one for the Forest Products Association.

[Translation]

Mr. Lapointe and Ms. Sirsly, you raised major and complex problems that must be remedied to make the tourism industry profitable. One of the problems regards customs and immigration that is causing congestion at the Canada/US border. Since the tragic events of September 11, how does your industry escape Canadians' fears with respect to border security and the impact of tourism on the Canadian economy? Do you have a plan to deal with Canadians' concerns?

Ms. Christena Keon Sirsly: Yes. Our industry is very aware that, for travellers, whether they be Canadian or foreign, security is of the utmost importance. What we are proposing is to encourage Canadians to travel and Americans who live in states bordering on Canada to come here. We have to get the message out, in conjunction with the Canadian Tourism Commission and our industry partners, that Canada is above all an attractive destination and, secondly, that it is very safe. I must admit that the message is a bit... We must be very cautious. However, we feel that Canada will become a preferred destination for Americans and Canadians.

• 1000

As regards the problems with... I will address this in English.

[English]

When it comes to the issue of border crossings and additional security in the transportation system, there are issues, obviously, that are causing some concern for our industry, because the additional security is requiring more time. However, the sense we have at this point in time is that most travellers appreciate the additional security.

How long that tolerance will be there is the question. Travellers want to feel safe, and they feel safe when they see that there is an effort to ensure that we're operating a secure transportation system. I believe personally that this tolerance might not last forever; however, it certainly is the situation as we face it now and as we accept to face it over the next couple of months.

Ms. Albina Guarnieri: I'm fairly confident that Canadians will put security ahead of speed, hopefully. You mentioned earlier that you support security measures that the government will be adopting. Does your organization have any concrete solutions to suggest how it may benefit the tourist industry specifically?

Mr. Charles Lapointe: Some days I feel I have a discussion with the whole world. As an example, last week we had a consultation in Chicago with the major tour operators from the United States to discuss the market issues between Canada and the U.S. and also to discuss some border issues. There are a few details here and there that we are trying to improve to increase the flow of Americans towards Canada.

With regard to specific actions, following the September 11 events, we are part of many consulting groups with the Canadian airport authorities, with the airlines, with the railways, and with the bus transportation companies. We have had discussions with Revenue Canada, Customs Canada, and Immigration Canada to make sure that at the same time, while we approve and support more stringent security measures, we are there to bring a voice to say we should also think about the flow of people.

Ms. Albina Guarnieri: Thank you.

I have a question for the Forest Products Association. I know that all Liberal members of this committee have been certainly indoctrinated and have received an education on forestry industries by our former colleague, Ron MacDonald. We know the trade challenges go far beyond the current issue of softwood lumber, for instance.

You mentioned China earlier, and that is certainly one area that I personally think is going to be very exciting for Canada. It certainly offers a market opportunity. My question is, more or less, with regard to how we can cultivate that market. I understand we've helped to draft some of the building standards for China. Have you had a role in these discussions, and what other new opportunities do you see for us in China?

Mr. Frank Dottori: I presume you are referring to the lumber side—

Ms. Albina Guarnieri: That's right.

Mr. Frank Dottori: —where they have associations that are looking at setting up standards similar to what was done in Japan.

We operate in China. We have a trading company; it's our own company. They have a trading company in China.

Again, let me just put it in a broad perspective. China has tariffs against paper and value-added products and they allow Canada to ship pulp into China so they can build the value-added machines and then ship product back to us, which is typical of these countries. It's all nice for Canada to look after the social well-being, as we're talking about here with unemployment insurance and overall very nice people, but at the end of the day, if we don't protect our own jobs we won't generate the taxes to be nice people. So that's one issue we have.

• 1005

On the question of opening up the market to building products, again that's a long-term market. Traditionally they use hardwood. They're very big users of hardwood for furniture in that end of the business, so there is some hardwood moving in. But for building products there's a change in culture, and changes in culture take a long time. I'd say this is a 20-year program.

Ms. Albina Guarnieri: Thank you.

Back in North America we seem to have the unusual situation where the Canada-U.S. conflict is really becoming a conflict among American firms. I understand that American companies are owning more and more mills in Canada. I have to wonder how long it will be before these trade conflicts will actually disappear. The same few American companies will have the resources on both sides of the border, and there won't be much point in taxing half your own companies.

Do you see increasing American ownership at all helpful in smoothing over the trade concerns? Do you have any insights for us there?

Mr. Frank Dottori: Those kinds of arguments—I know that's not the way you meant them—irritate me a bit. If we sold our industry to the United States we'd be owned by the U.S., so why would they bother? We'd just be the 51st state, if you carried that argument—

Ms. Albina Guarnieri: I'm not advocating it; I'm asking you if that's a trend you're seeing.

Mr. Frank Dottori: Certainly it's a trend. We're selling Canada. I'm a nationalistic Canadian, you can tell. We're selling our country. The petroleum industry's gone; Calgary as a financial centre is gone; and Toronto's next. We're selling out our industry left and right. When they own us, why would they stab their right hand? There's no reason to do that.

There are some Canadians here that are advocating a 15% tax, so as a Canadian company I'm going to pay a 15% tax. The American company puts it in its pocket, it generates cash, and it comes and buys me out in a couple of years. That's what's happening.

We Canadians sometimes don't seem to be able to see past the ends of our noses. This is economic war. The United States may be our buddy, but they have economic tools that make it basically economic war. They may have the planes, but they have tools, such as anti-dumping, that they're planning to put against us by the end of this year—the 19.3%. They're totally illegal under the WTO, but they use them against their so-called best friend.

We sit here and say, “Well, gee, we have to be nice. We have to figure out how to get around it.” I think it's time to kick back where it hurts. We have energy and other things. It's about time we stood up and said, “Wait a minute.” I think that's what we have to do.

If I were Weyerhaeuser, I wouldn't care. I'd pay 15% in Canada on two billion feet and I'd have three billion in the U.S., where I'd put 15% in my pocket. So what? I'd make a little bit more money and then I'd go and buy Tembec.

Ms. Albina Guarnieri: I've always thought that Canadian ingenuity would get around any problem. Thank you.

Mr. Frank Dottori: Well, if the Canadian government helps us we will.

Ms. Albina Guarnieri: We're there to assist.

Mr. Frank Dottori: That's it.

Ms. Albina Guarnieri: Thank you.

The Chair: Mr. Murphy.

Mr. Shawn Murphy (Hillsborough, Lib.): Thank you.

I want to thank everyone for the briefs and the efforts you put into coming before this committee.

My question is to Mr. Dottori and Mr. Narang. Just to take everything into perspective on where we have come from as a country over the last nine years, fiscally we had a fairly significant deficit, and that has been corrected. It's been corrected with much pain on the part of your companies and their employees, who are represented here today.

I believe, Mr. Dottori, the last sentence in your submission to this committee was, “Watch your dollars.” Two of your recommendations were the elimination of capital taxes and the further reduction of your corporate income taxes. That would certainly cost a significant amount of money.

I'm not saying we shouldn't do it. I can certainly support a lot of your arguments on the capital tax elimination. But do you have any advice for us on where this money should come from? I think there is a natural reluctance on the part of this committee, and I think all Canadians, to go into a very significant deficit and go right back to where we were in 1993.

Mr. Ashok Narang: I think you could look at it in two ways.

• 1010

First, on any request any group makes on any certain subject, you say, “Okay, we'll give you that, but you give me something else in return from your own group.” That's one attitude you can take.

The second attitude is that the burden has to be borne by the whole country, so it will get spread all over. In our submission, we have shown where our corporate tax rates stand, which need improvement compared to the U.S.

We actually have a two-pronged request. One is on the capital tax, which we highlighted today. The second is that the overall competitive tax for our industry should become comparable to or lower than others. The way I'm looking at it here is I cannot say, “Freeze my other tax and just give me a break here”. It has to come from the general pot. There is nothing specific I can tell you to take out.

Is that what your question was?

Mr. Shawn Murphy: That was the question, yes.

Mr. Frank Dottori: Again, at times you have to look at the total argument. If you don't have a customer, you don't have a business, and you don't have jobs. We're in a global economy. For example, our company exports 90% of what we make. I don't have Canadian customers trying to accept some 2x4s in Montreal and Toronto. The rest is all sold in China, in 50 countries around the world. So what do I need? I need a customer. The first priority for us is competitive market access.

The second thing we need is a competitive position, so we can go out there and compete. We're not competing against our friends around the table here; we're competing against foreign companies. We'd like to be on the same playing field. That's all we're asking for.

You ask what happens if we give up. I think our industry paid $220 million in capital taxes. I started up Tembec from, as most of you know, Temiscaming, which was basically a shut-down community. Today we're a $4 billion company. I make the decisions where we put the money, when we do, and when we don't. I'm one of the guys who still signs the purchase orders.

You need to look at guys like me and ask what you can do to create an environment where we want to invest; where we want to sign a cheque for $1 billion; where we want to do a Gaspesia and invest in a paper machine in Manitoba. What do we need to do that?

I'm saying I want a competitive playing field to go against Weyerhaeuser, to go against Asia Pacific, to go against Stora. That's what I want. I like to think I'm smarter, but I'm not. All I want is the same even playing field as others, and I'll take them on. Canadians can take them on. We'll take them on, but give us the same playing field.

Eliminate some of these things that tick me off. It ticks me off to have to pay that frigging tax when I'm losing money. I'm looking for one million bucks and I have to sign a cheque for $20 million to the government, which I use to create jobs and raise taxes you could then distribute to the unemployed and the people. That's what we need and that's what we're asking for.

Create the environment. I think the government has done a good job in recent years—I have to be fair here. But there are still a few steps. What irritates most guys like me is that damn capital tax. I think the chairman knows. He's received enough letters from me now. Every time they have a financial committee to talk about taxes, he gets a letter on it because it's an irritant.

The other thing you have to look at, as was mentioned here, is this whole thing of getting people to invest in capital gains tax. Now don't put a tax in where I can do a real estate flip or something like that and peel the government off for $10 million on a weekend. You can put in restrictions. Put a five-year or three-year limit on it before I can get my capital back, but create an environment where people want to invest and build this country. It'll create jobs, provide surpluses, and attend to the issue.

We're going to have a tough two years. I wrote a letter a year ago saying, “Watch out, the economy is going down.” We're all looking at September 11 to hang our hats on, but this economy has been going downhill—wait until those statistics come out—since May last year.

Mr. Shawn Murphy: You're not recommending a deficit.

Mr. Frank Dottori: Absolutely not. I'm saying save your money and don't expand your social programs at this time. You're probably going to need them if the economy hangs in there for two years, then make the changes. Right now, just like the rest of us, keep your cash tight and don't spend it.

Mr. Shawn Murphy: I have a last question to either yourself or Mr. Narang. I'm going to invite you into the discussion.

We've had a discussion here this morning on the EI program. They're seeking enhanced benefits—the YDE. Your industry, according to your brief, employs directly and indirectly approximately one million people.

My question is twofold. Do you have any comments on the program and how it could be improved? Secondly, in the whole area of skills and skills development and training, are you able to access a qualified workforce, a trained workforce? Is there anything on that issue you would like to see the government consider?

• 1015

Mr. Frank Dottori: You're asking a dangerous question to a guy who's been a crusader here for twenty years.

Quebec is a good example. You should have a training tax and get rid of your HR department that spends billions of dollars. Put on a training tax and tell companies they must spend x dollars or x percent of their revenues, or their payrolls—whatever it is—to do training, and if they don't, we'll collect it. You don't have to need a bureaucracy. You do it when we send in our income taxes. And it should be classroom training, not on-the-job training where we can all beat the system. It should be specified classroom training.

Why should I pay taxes under UIC of 2% to 3% that go to the government to be reprocessed by a thousand civil servants? Then I have to go beg for a grant—which I may get, depending on who I know and how much political influence I have—that comes back to me at 50¢ on the dollar. Why not leave it there and say, Frank, you get together in a joint committee of the union and set up a training program? If it's less than 1%—or whatever you set, and we'll argue the point—then we're going to collect the training tax from you because we, the government, will do it for you.

The unions and the companies will fix it and we'll get the dollars right back there where we need them, because by the time.... I sat on this manpower training committee—federal training skills program—and by the time you figure out what skills are required, two years have gone by, the economy has changed—it's obsolete. Then if you change the minister, it takes another two years to come into effect, and then there's an election. Forget it. Just put a tax on. I know that's not what business recommends; it's a personal opinion.

Mr. Shawn Murphy: Is that the association's position?

Mr. Ashok Narang: No. As far as Quebec is concerned, I'm very happy with that. Our company is very happy. We never have any shortage of people; we find people and we train them.

The Chair: Thank you, Mr. Murphy.

For the record, Mr. Dottori, this committee has recommended the reduction and elimination of capital tax on a number of occasions—just so you're clear on the position.

Mr. Frank Dottori: No, I understand that. Mr. Martin thinks it's a good idea too, but somehow it doesn't seem to get into the books.

The Chair: Yes.

Ms. Bennett, I think you have one question.

Ms. Carolyn Bennett (St. Paul's, Lib): I do. I was interested in the Société pour la nature et les parcs du Canada. It was impressive in your presentation that the numbers here in Quebec aren't on a national average.

Are there a couple of areas you would like to recommend? Are there areas you know are ready and only need a green light and some dollars from Parks Canada to go ahead? And I noticed that the actual brief from the tourism association also expressed the feeling that our national parks system was really important to be investing in.

So are there areas that are ready to go? Sometimes it is helpful to actually push for specific things rather than an idea.

Ms. Catherine Guillemette: Yes. In the area of la Basse-Côte-Nord in Quebec we have a lot of forest and it's still un milieu sauvage. It's a place we want to invest in a lot and start studying possible areas—and they are large areas, which can survive. If the parks are too small, it's not good...well, it's not...

[Translation]

They cannot survive on their own, because they are too small and the animals must—

[English]

...go in unprotected areas. So, yes, la Basse-Côte-Nord, and we also have a lot of small rivers over there that are really important to protect.

Ms. Carolyn Bennett: But the situation with the...was it the wolves in the Marsee?

Are you suggesting more land is needed nearby so that the effects of humans aren't as...? What would be the solution? It's a worry that there are areas where...but did you want the government to purchase more land nearby or change...? What would be the solution you're putting forward?

Ms. Catherine Guillemette: We would have to sensitize a lot of people going into the parks as well as those taking part in activities surrounding the them, which can have many negative influences on the park. So look for activities close by.

I have examples, maybe more in other parks than those in Quebec, but some parks are surrounded by mines, some others by forestry cuts. These have bad influences on the parks, so we have to choose areas that are not surrounded by all those industrial activities.

• 1020

The Chair: Thank you.

The final two questioners are Mr. Nystrom and Mr. Brison.

[Translation]

Mr. Lorne Nystrom (Regina—Qu'Appelle, NDP): Thank you, Mr. Chairman. I have two questions. I will start with a question for Mr. Ouellet.

Do you agree with Mr. Dottori on the issue of training and the Department of Human Resources Development?

Mr. Jean-Guy Ouellet: I invite you to look at the Grandpré Report of 1993, which stated that funds from the Employment Insurance Fund should not be used for training, but that a per cent payroll tax should be levied.

In this regard, I think that employment insurance premiums should be funded some other way, using the Consolidated Revenue Fund, that is clear, and not using premiums. So I think that for once, perhaps the employers and unions have reached some common ground.

Mr. Yvan Loubier: That is interesting. There's a real consensus there.

Mr. Lorne Nystrom: It's a new kind of Canadian alliance isn't it?

Mr. Frank Dottori: [Editor's Note: Inaudible]

Mr. Lorne Nystrom: I have a question for Mr. Lapointe. Welcome to our committee. Mr. Lapointe is a former member of Parliament. He sat in Parliament for a long time. He is a former Trudeau Cabinet minister. That was from 1983 to 1984, if I remember correctly.

Mr. Charles Lapointe: It was from 1980 to 1984.

Mr. Lorne Nystrom: I see. You were a Cabinet minister for four years.

If you can, Mr. Lapointe, take off your hat as a representative of the tourism industry. Do you have any advice to give the committee on what we can do now? Should we have additional tax cuts, more debt reduction or more spending on social programs and other federal government programs? There is a very difficult balance to maintain with an economy that has slowed down since last year. What is your opinion, as a very wise person, as a former member of Parliament and former minister?

Mr. Charles Lapointe: I will remind you, my friend Mr. Nystrom and former colleagues, that I'm here with my tourism industry hat on. So it is difficult for me to remove it.

I cannot answer your question. I have some personal views, but I do not think it would be appropriate to share them with you at this point.

Of course, there is one expenditure that must be made, and I noted that in Mexico. You talked about New York earlier on. I did not tell you everything about what the other US states are doing. We have a problem with respect to consumer confidence, as regards retail spending, travel, and air travel. We have to find better ways to renew confidence. And there are some. Security is one, and I think we are on the right track in that regard. Additional money has been spent to improve airport and border security, but governments or organizations like mine and like the city of New York or like all US states must bombard consumers with the following message: “Get on with your lives, ladies and gentlemen”. We have to keep the economy rolling, and that is why we recommend that the Canadian Tourism Commission immediately receive an additional $25 million to get the message out, to tell Canadian and American consumers to start travelling again.

In other words, I think that with all of the wisdom that you have acquired in all of the years you have been sitting in Parliament, the committee is in good hands and you are going to be able to advise it adequately.

Mr. Lorne Nystrom: What a diplomat!

[English]

The Chair: It still counts.

[Translation]

Mr. Lorne Nystrom: Yes, I agree on that.

[English]

Perhaps I'll put my very last question to Mr. Dottori.

Certain people are now talking about a North American perimeter and integrating our country more closely to the United States economically and in other ways, maybe even looking at what's called dollarization, which is use of the American dollar. I don't share these points of view but certain people have raised them.

What is your advice to the committee in terms of expediting our voyage down this trail?

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Mr. Frank Dottori: Personally, I like the European system. I don't recommend giving up the Canadian dollar. Again, because of my nationalistic streak, I think once you've done that you may as well apply to be the 51st state. But I do think customs and those areas should be eliminated, as they have been in France.

As a Canadian I can move into France and Germany and around any of those countries without even showing a passport. Like last week—I can travel all those countries without even showing a passport, and I can't get into the U.S. So there should be a move to eliminate the customs and borders between Canada and the U.S. and have some of that sort of a perimeter, the same type of regulations they have in Europe in that area. That'll help the economy, help business.

The other thing I'd suggest is that you should also do it between the provinces. As you know, it is worse between Quebec and Ontario than it is between Canada and the United States. We should also look at provincial barriers, and this is an area where the federal government should take some strong leadership; eliminate provincial barriers. First, let's clean up our own shop at home, and then let's do it with the U.S. Then let's go to free trade elsewhere.

The Chair: That's quite a nationalist stand we've heard.

Thank you, Mr. Nystrom.

Mr. Brison.

Mr. Scott Brison (Kings—Hants, PC/DR): Thank you, Mr. Chairman, and thanks to all of our presenters for your interventions today.

First, both the tourism industry and the forestry industry have articulated strong cases against profit-insensitive taxes. The tourism industry spoke about payroll taxes, the forestry industry about capital taxes. Now there's a strong case for a couple of reasons that from a competitiveness perspective the capital tax plays an even more dramatic role in terms of impeding Canadian productivity than the payroll taxes in the short term. I'd like your feedback on this, because if we look comparatively at payroll taxes around the world, Canada's payroll taxes are not as high as our capital taxes would be, comparatively. In fact most industrialized countries don't have capital taxes at all.

Secondly, the capital tax argument is strengthened by the fact that it raises only $1.3 billion in the first case, so it's not as expensive to adjust. And thirdly, if you look at the cost to the economy of taxes, there's no more expensive tax to the economy in terms of what it takes out of the economy. Every dollar raised by the government through capital tax actually costs the economy about $1.50 in most economic analysis.

Capital taxes reduce investment and as such reduce productivity, and ultimately when our productivity is reduced we end up with a lower Canadian dollar, because there's no better reflection of productivity than a country's floating currency. And of course that has the perverse impact of reducing the reasons why Canadian companies feel compelled to be productive because there's a certain insulative quality in a low dollar in the short-term. It actually expedites the takeovers of Canadian corporate assets, whether it's the petroleum industry in Calgary or the loss of MacMillan Bloedel to a Weyerhaeuser.

While they're both very, very important, we need to approach them in tandem, and it's easier in the short term to eliminate capital taxes. I'd appreciate your feedback on this.

Another point is, if you look at impact on the economy, there are strong economic arguments that consumption taxes are absolutely far less detrimental to growth, productivity, and prosperity than are profit-insensitive taxes. In fact there are consumption taxes that are actually preferable to income taxes.

Would you support in a more general sense a long-term shift towards greater reliance on consumption taxes and away from taxing income all together? I'd appreciate your feedback on both points for both industries' perspectives.

Mr. Frank Dottori: I just wanted to make one point that I think the government's studies show. The public prefers the products industry. It's the only industry in Canada that's more productive than the American industry. Depending on the report, it's 15% to 30% more productive, while on average, Canadian industry is 15% to 30% less productive than the North American industry, which addresses some of the issues.

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I think the capital tax is more important. My personal opinion is that income taxes and payroll taxes are negative, that you should have a consumption tax. That's the proper way to do it. It's more efficient. It's the right way for the economy. In Europe you have VAT taxes of 20%, 22%, 24%. They also have high personal taxes too, but they've come down, I think, to the lower levels in Canada.

I'm not a politician, but I know from reading the papers.... You know the problem you had with the GST. Would you like to double it to 20% and then get re-elected? I think you have a political issue here in Canada. But that's the right way to go. The right way to go is to raise taxes so that we keep the money, and when we spend it we pay. I think that's a more efficient way of doing it. I just think that's a tough sell in Canada, unless you start getting the press to start selling that line.

Ms. Christena Keon Sirsly: Our industry is a mix of large and small companies, and clearly, for the capital-intensive businesses in our industry, capital taxes are an issue. However, as I'm sure you all know, much of the employment in the tourism industry, the employment growth over the last number of years, has come from small enterprises, who are not necessarily capital intensive. The payroll taxes for them represent a significant burden, or the reduction of payroll taxes could represent a significant opportunity either to expand their employment or to do other things.

I will remind you of what Prime Minister Chrétien said when he created the Canadian Tourism Industry when he was talking to the Prime Minister of Israel. The Prime Minister of Israel said “Don't talk about high-tech; if you want to create employment, talk about tourism. That has the fastest impact on employment of any industry.”

So if you're concerned about creating jobs, the tourism industry can do that very quickly, if we have a healthy industry.

On the issue of consumption taxes, our customers hate consumption taxes. It is a political issue. We recognize I think as an industry that it's probably the right way to go, but selling consumption taxes to a traveller is a real tough sell.

Mr. Scott Brison: I can say as a Progressive Conservative that my party doesn't have a very good record in marketing consumption taxes and has probably paid a greater price than any individual Canadian for consumption taxes, but that's a story for another day.

Thank you very much.

The Chair: Thank you, Mr. Brison.

On behalf of the committee, I want to thank you.

Mr. Dottori, before you leave, I heard you call yourself a Canadian nationalist, and I guess that's how you feel about yourself. Am I correct in assuming that you would like to see a seamless border between Canada and the United States because you understand the economic efficiencies of that?

Mr. Frank Dottori: That's correct. I think you can be both.

The Chair: So this concept of being a nationalist yet advocating for seamless borders is pretty consistent?

Mr. Frank Dottori: I think it is.

The Chair: I think so too.

A voice: Let the record so state.

The Chair: Duly noted.

On the issue of consumption tax, the thing is you lower income tax and the GST stays at the same level. You do have an automatic shift towards a consumption tax, and it does make sense.

I just want to wrap up by saying that we continue to learn from every panel that participates in these hearings, and you can rest assured that we have listened very carefully and have taken note of everything you have said. The knowledge you express so eloquently every year to this committee has really helped our committee draft what I think have been recommendations that reflect the needs and aspirations of Canadians, and for that we're very grateful.

Thank you.

We're going to suspend for approximately five minutes.

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• 1049

The Chair: I'd like to call the meeting to order and welcome everyone back this morning for the second panel. We have the pleasure to have with us the following witnesses from the Confederation of National Trade, Claudette Carbonneau, first vice-president, and François Bélanger, Conseiller à la recherche au Service des relations du travail; and from McGill University, vice-principal of research, Pierre Bélanger, and vice-principal of administration and finance, Morty Yalovsky.

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As you've probably already been told, you have approximately five to seven minutes to make your presentation; thereafter we'll engage in a question and answer session. We'll begin with the Confédération des syndicats nationaux. Welcome. You may begin.

[Translation]

Ms. Claudette Carbonneau (First Vice-President, Confédération des syndicats nationaux): Good morning. Thank you for hearing us today. Please allow me to introduce François Bélanger, an Economist in our Labour Relations Division, who is here with me today.

We do not have very much time for the presentation, so I will give you an outline. At the outset, I would like to say that the CSN finds it unacceptable that after eliminating the deficit and accumulating a substantial surplus, the federal government continues to put money into tax reduction and debt repayment, when there were unprecedented cuts to public services and program spending in order to fight the deficit.

There is also a new factor—the economic downturn. In our view, the downturn requires anticyclical measures. Yet, to date the federal government has not changed the budget in any way, except to implement some immediate measures in response to the events of September 11.

The CSN believes that we can no longer continue to depend only on the Bank of Canada's monetary policy, which has been good for the country so far. However, in our view, that policy is no longer sufficient in the current economic situation, and we would like the federal government to table a new budget, and if necessary use some of the contingency fund. The federal government certainly has the means to do this. Between April and August of 2001 alone, there was a surplus of $11.1 billion.

In the last fiscal year, $17 billion were applied toward debt repayment. For the coming years, the IMF projects structural surpluses on the order of $10 billion.

The CSN therefore invites the federal government to review its priorities. We have some comments regarding the government's focus on tax cuts. First of all, by reducing taxes, we make individuals responsible for meeting their own essential needs, whereas in our view, it would be far more effective and fair to have those essential needs met through program spending.

We have also noted that tax cuts have made the federal tax system far more regressive. Let me give you some examples to support that statement: one third of low-income taxpayers had tax refunds of only 4%; another third of taxpayers, the middle class, had tax refunds of 13%, while the richest third had the lion's share—tax refunds of 83%.

The CSN considers the effort to pay down the debt disproportionate in view of the current economic situation, and considers it the least appropriate measure in these circumstances.

We believe the federal government should reinvest that money differently, first of all by restoring all transfer payments to the provinces. Even after the federal-provincial agreement of September 2000, federal funding in absolute terms is still lower than it was in 1994-95, something that largely explains the enormous pressure on the health care system.

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We would like to see more stable solutions—more stable, predictable funding which makes it possible for the provinces to meet their principal social spending commitments. We would like to see the CHST replaced with a system of tax point transfers equivalent to at least 18% of social spending by the provinces.

We are of course aware that tax point transfers are better suited to the provinces with larger populations. This is why we agree with the provincial consensus that equalization payment caps should be eliminated immediately, and that a more equitable formula for equalization payments should be established.

If we have to continue living with transfer payments, we would at least like them to be increased to 18% of provincial social spending so that we can return to 1994-95 levels. We would also like a satisfactory indexing formula to be established. Regardless of the formula we end up with, we stress that provinces must retain the right to opt out with compensation. In our view, this is the only way to reconcile federal spending power and compliance with the provinces' constitutional areas of jurisdiction.

Another area in which we would like to see the federal government invest is of course employment insurance. I would remind you that the revenues of the Employment Insurance Fund are considerably higher than spending on benefits, and that large amounts from that fund have been diverted for some years now. On March 31, the fund had a surplus of $34.6 billion, significantly more than is required as a reserve to stabilize premiums. We would therefore like better benefits, a higher rate of income replacement, and longer benefit periods. It is imperative that spending be adjusted until it is in line with revenues, in order to comply with the delegation of authority to the federal government by the provinces, and particularly in order to comply with the plan's intent. We therefore support the parliamentary committee's unanimous resolution, that proposes an increase in employment insurance benefits, except for the measure—the details are here—which would revise employee premiums.

Another priority for the CSN is parental insurance. The federal government must be open to negotiating with the Quebec government. We are not asking for the world. We are simply requesting that the federal government comply with its own legislation, specifically subsection 69(2), which provides for the possibility of transferring money to the provinces if they set up a better program. Bill 140, which was passed by Quebec, provides for greater access and better coverage for part-time and self- employed workers. It increases benefits. It also provides more leave for fathers, which we believe is highly advantageous. The federal government should stop playing petty politics and let provinces establish social programs that are better for their residents.

Another area in which we would like to see the federal government invest is spending for assistance to older workers. This is one category of the labour market which has been very hard hit. They are frequently less skilled than other worker categories, and often lose their jobs in greater numbers and for longer periods. We would ask the federal government to consider a variety of options.

Though this brief does not provide details on costs and specific measures, we would ask the federal government to consider, among other things, extending employment insurance benefit periods for older workers, implementing new adjustment programs for them, and implementing measures to promote gradual retirement. There are such provisions in the Quebec legislation. Furthermore, we would like the federal government to use part of its accumulated surplus to compensate older workers for income lost in order to facilitate access to gradual retirement.

The government must also reinvest in social housing. We are experiencing a housing crisis. I would remind the federal government that it pulled out of housing in 1994 in order to fight the deficit. Investing in social housing means investing in construction. Given the current slowdown, such investment would boost the economy in addition to providing significant social benefits.

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I would remind the committee that even the UN criticized the Canadian government for departing from provisions in the UN pact on economic, social and cultural rights. I would also remind you that, currently in Canada, over half a million people spend 30% to 50% of their income on housing, which is far too much. Over 8,000 social housing units would be required for Quebec alone.

In conclusion, I would point out that in recent years we have seen the government's political goals shift considerably. The government is moving away from election promises, which guaranteed over 50% reinvestment in social spending. Funds are being diverted from social spending towards tax relief in a system that is still regressive, and there is disproportionate debt repayment at the expense of social spending, public services and the boost the economy would need to end the current downturn.

I will stop here.

[English]

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

We will now hear from McGill University, Pierre Bélanger and Morty Yalovsky. Once again, welcome.

Mr. Pierre Bélanger (Vice-Principal, Research, McGill University): Thank you, Mr. Chair.

The federal government has announced its intention to become the fifth country in the world in R and D. When one considers the GERD, gross expenditures on research and development, of course, some of the increase in the research spending is going to have to come from industry, but I'm sure the government realizes that a substantial increase in government funding will also have to come about in order to reach this goal. So the only choice is where to put the money.

I'm going to make a pitch to you to the effect that indirect costs of research in universities are one place where investment should be made. I don't have to tell you what indirect costs are. It's what you can bill to a project every week, an engineer filling out his time sheet on Friday afternoon. Indirect costs would be management costs, the corporate services, and so on. And the research business in university is no different from that.

A 1995 Arthur Andersen U.S. study said that in the United States 45% of direct costs is the indirect costs of research. As a matter of fact, U.S. universities negotiate with the NIH and the NSF on overhead rates and they range between 45% and 70%. In addition, in the United States many federal agencies allow salaries to be charged to research grants, researchers' salaries, professors' salaries, which we do not in Canada, so not only do they get more money on the direct side, but they generate additional indirect increases.

I should tell you, because the research business is a pretty special one, what are indirect costs. What do we call indirect costs in university? There are two ways to look at it, two places where they're incurred. One is the so-called lab-level cost, which the Arthur Andersen study I've mentioned before estimated as accounting for about a quarter of the overhead expenses, and the other one is the central overhead.

If I look at the lab in terms of what happens and what kind of human infrastructure one needs that is really an indirect cost, you have professors, researchers, who run a lab with $500,000 a year. You put two or three of them together—and having labs that go between $1 million and $2 million a year of direct expenditures is not rare. Of course, that needs management, a large enough amount. You need to manage the budget, you need to manage the HR, and then you constantly need to apply for a grant to keep up your intake, so you need people to organize the writing of grants, especially when multi-institutional grants are involved. Then you need things like organized visits for scientists and industrialists, because we're trying to interact more.

We also have animal facilities. This is required in every university, and it's another piece of infrastructure. You have physical infrastructure. Every lab has standard equipment. In a wet lab you'll find fume hoods, you'll find microscopes, you'll find autoclave distilled water. Dry labs will have an assortment of electronics instrumentation, and everybody has computers now and it's no longer a piece of specialized equipment; it's something you expect to have. So keeping that part of the equipment is an indirect cost.

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Setting up new laboratories, at least in part, is an indirect cost. The CFI will provide money for specialized equipment, that's true, but still you need the standard part of the lab often requiring innovations. Don't forget we're hiring a hundred new professors a year to replace those who leave and also to expand the capacity. All of them come in as researchers, and most of them, at least the ones in the sciences, want labs and need labs.

On the central side there's a human infrastructure. Certainly my research administration office has incurred additional costs in recent years. What do they do? They look at grant applications to make sure the applicants fulfill all the rules. Then when the grant comes in, they have to check to make sure the protocols have been approved for, experiments with human beings or with animals. All those things have to take place.

So these people have to know the rules. We've had a proliferation of programs, of granting agencies—we do more work in the United States now—and also we have a hundred new professors a year, as I said, and they're neophytes and they have to be held by the hand and guided through, so that takes more time.

Ethics reviews have become more stringent. Accountability has become more stringent. We have radiation safety units and environmental safety units. They have to license people, they have to train people, and certainly that's an indirect cost. We have other units like the office of tech transfer, which does the commercialization work and which is the liaison with industry. And consonant with our liaison with industry we have legal work. We have more legal work, writing contracts and licences, than we ever used to have before.

Finally, we're now realizing in university that we have to communicate the results of our research and what we do to Canadians. They have to know how their money is spent, and we haven't really done a very good job of communicating with them. We're coming down from the ivory tower. So communications is an expense that is rising, and that's in infrastructure as well—physical infrastructure.

Library costs are driven largely by research needs. If you had only an undergraduate university, your library costs would be much smaller than that. We have a range of formats now. We have from full text electronics journals to manuscripts. It's not just books any more in the library; it's all sorts of things. And librarians are not only the custodians of the written material, they're the people who have to train professors, students, and so on, so there's more going on there. With the electronics, certainly the computing backbone of the university, which connects it to the outside world, is important. We did receive money from CFI for McGill to build up that backbone, but it has to be maintained.

I mentioned accountability before. We must improve the reporting, which means that we have to buy new software, new databases, so that we can adequately fulfill our reporting needs to the various granting agencies.

You have of course the general central costs, the buildings, the administration, the heat, the lighting, and so on. I would estimate, and it's a commonly used figure, that 40% of professors' time is given to research, and you could say that 40% of those central costs are also overhead.

People sometimes lump the commercialization activities in indirect costs. I would not agree with that. I don't think they have anything to do with indirect costs. I think commercialization is something that comes on after the research is done, so it's downstream expense. I certainly think universities do need some help in commercialization. The ACST expert panel said so a few years ago in the Fortier report. I think that recommendation was a good one, and I would urge that you fund commercialization, but that you have it in a different envelope, not under indirect costs.

Finally, Canadian universities are currently receiving maybe 10% to 20% support for indirect costs and there's a deficiency there of about 30% to 40%. We've been pleading our case for years with Quebec and federal governments, but without much significant result. The Quebec government has made a serious effort to recognize the need to support research in universities and they've also been paying some indirect costs for a number of years now. In this new policy the issue of indirect cost was raised again, as well as the intention of the provincial government to pay it in full, namely 40%. We know that for the most part the provinces don't have sufficient means to address all the many competing and worthy demands made on their treasuries and that the issue of indirect costs has been under discussion now for several years.

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The federal government has traditionally seen its role as funding direct costs of research but has not recognized that indirect costs are genuine expenditures that must be addressed—by the federal government, the same as in most other countries of the world. In the present economy, where the advancement of knowledge is the key to social and economic prosperity, the time has come for the federal government to resolve the issue to the benefit of Canadians.

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

We'll proceed to the question and answer session with five-minute rounds for all members. We'll start with Mr. Jaffer and then we'll go to Mr. Loubier.

Mr. Rahim Jaffer: Thank you, Mr. Chairman, and thank you all for your presentations.

I'll just start with my first question for the CSN. I was looking over your brief, and you're obviously advocating increased program spending for a number of areas. I think many of them are legitimate and obviously need to be considered in light of some of the challenges we have on the social side of spending.

If we look over the years of sacrifice Canadians have had in trying to reduce deficits and then slowly paying down the debt, we've obviously got a challenge in front of us after September 11. Some priority now has to be shifted towards security, and consideration must be given to increasing budgets on that front. As you point out in your document—and as do others—the surplus may vary now because of some of those new, increased risks we're faced with.

My question is, in light of efforts to make decisions where social spending is important, as much of it is, and considering the new challenges we have on the security side, would you be comfortable with Canada possibly going back into a deficit situation? Or, rather, would you encourage us as policy makers to put together a budget that tries to avoid going back into a deficit situation, balancing the resources we have according to program spending and the demands of our new security risks? I would just like to hear what your comments are on that front.

[Translation]

Ms. Claudette Carbonneau: First of all, in our view, even if the government did meet all those needs, there would be no significant risk of a deficit. On the contrary, of all Canadian governments, it is the federal government which is best placed to generate a structural surplus. We do not believe in that hypothesis.

You said, “met a number of social spending obligations.” I would remind you that what you call social spending might also be investment, particularly during an economic slowdown where it would be a very good thing if social needs could be met while at the same time employment could be effectively supported.

[English]

Mr. Rahim Jaffer: My next question is just a brief one. It's a somewhat interesting issue you raised when you talked about the challenges universities have, especially when it comes to infrastructure costs and the challenge they face to finance them. In my riding I have the University of Alberta, so I'm in touch with many of the issues and am aware of the challenges the universities have. This has continuously come up, namely the investment that is required for universities and the challenges they face on all levels when it comes to building infrastructure or, as you mentioned in your report, various other external costs that don't often come into the mix.

However, I know one thing the University of Alberta has been doing quite successfully. Now, they say it still doesn't solve all the problems they face, but with respect to the idea of the commercialization you spoke about, they have this industry liaison department that specifically targets commercialization. They seem to be quite successful at mixing investment for research and a number of other things and slowly taking different university developments through the product stages and, hopefully, finalizing their commercialization. Now, they still maintain that this is not enough in order for them to invest in infrastructure and so on and so forth.

You did mention that this is a challenge many universities face. I was curious as to how, from McGill's perspective, that process is evolving—if it is—and how it is helping to relieve some of the challenges. Or is that the direction universities need to go, especially when it comes to the commercialization aspect of balancing investments and research?

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Mr. Pierre Bélanger: I happen to know the University of Alberta situation quite well. I know Jim Murray very well, and you probably know Jim as well. I'd point out that the University of Alberta, along with UBC and Calgary, have been the most successful universities at doing this. One reason is very simply that they have been supported by their provincial governments for some years now and therefore were able to hire a core of people and develop that.

That has not happened everywhere in Canada. What's happening here in Quebec is, yes, we've had an office of tech transfer for some years now, and we've spun off about 30 companies. Our royalty stream does not yet compare to that of Alberta. I think we're at the level of $1.2 million a year in gross royalties, but we're increasing that.

The provincial government has in fact made a contribution to set up four companies, what they call sociétés de valorisation, which are supposed to commercialize the results of university research. Ours will probably be launched within a week or two with $15 million of capital from the Quebec government, some contributions from the university, and, we hope, also some private capital. The goal is mostly so we, along with the venture capital community, which is considerable here in Quebec, can set up spinoff companies.

Certainly, we are looking at this as a means of perhaps raising some revenue, but let's remember that even if you look at the U.S.A., you are really not going to solve universities' budgetary problems in that way unless you have a blockbuster like Gatorade, for example.

The Chair: Thank you, Mr. Jaffer.

[Translation]

Mr. Loubier.

Mr. Yvan Loubier: Thank you, Mr. Chairman. Welcome to the Finance Committee.

Ms. Carbonneau, you focus on the tax imbalance between Ottawa, Quebec and the Canadian provinces. For the benefit of my colleagues, who find the concept of tax imbalance peculiar, could you please explain what it is? They are likelier to believe your explanation than mine.

Secondly, what impact does that imbalance have in Quebec, for example when the Quebec government wants to offer genuine services to Quebeckers?

Before the summer adjournment, we had a day of debate on the issue of returning tax points to the Quebec government and provinces which wanted it—some do not want them, of course. We heard all kinds of statements to the effect that the tax imbalance did not in fact exist. We were told that surpluses had to accumulate in the federal government's coffers to demonstrate the strength of the Canadian government, and for the federal government to comply with its obligations, even though the Constitution is very clear. Areas of jurisdiction have been separated, and the calculations are not very difficult to make. The federal government has more money than it needs to meet its own areas of jurisdiction.

I would therefore like you to explain all this to my colleagues.

Ms. Claudette Carbonneau: If I may, I will answer this in conjunction with one of my colleagues. I will perhaps begin by explaining the drastic impacts we see every day. I will talk about one particular sector which is very important to Quebeckers and I believe very important to all Canadians—the health sector.

In Quebec, like elsewhere, there have been significant reforms due to new technologies, and demographic changes. Unfortunately, health reform has left enormous gaps because there have not been the funds required to properly implement the measures put in place.

We shut down many, many hospitals. That's a debate that the new technology can perhaps indulge in, but it assumes that we transfer some of the expenses and that, for example, we are able to meet the need for home care, or the need to care for these patients through adequate home care services. This area is chronically underfunded, it's a real tragedy. Despite efforts to adapt to the new situation, good ideas get sidetracked. Long waiting lists, patients with such dreadful diseases as cancer who are now referred to the United States—these are blatant examples of how things have gone seriously wrong in this system.

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Reforms are also being attempted in education. At the present time, we do not have enough resources, equipment and many other things to reach our objectives. In this sense, then, this is definitely not an academic point of view. You need only talk to people in Quebec to realize just how pressing these needs are. And the current lack of resources is especially serious when one looks at the whole issue of drugs in the health field. Prices have risen dramatically. On the one hand, drugs are playing a greater role in patient treatment and, on the other hand, costs are spinning out of control.

So, we are clearly unable to meet all of these needs and to carry on activities that are absolutely essential to Quebeckers, to guarantee citizens a long and healthy life and to address various social problems.

I'll ask François to continue on the issue of tax imbalance.

Mr. François Bélanger (Research Adviser, Labour Relations Unit, Confédération des syndicats nationaux): Okay.

I'll try to briefly go through the reasons why we are actually seeing a tax imbalance—that economists refer to as a vertical tax imbalance—between the two orders of government, namely between the provincial and federal governments. This is not really an issue that concerns Quebec exclusively in relation to Ottawa. It is not an Ottawa/Quebec issue. All the provinces are affected by this imbalance between the financial resources available to the two levels of government in carrying out their responsibilities in their fields of constitutional jurisdiction.

First, as far as revenues are concerned, the Quebec government is treated unfairly in two ways. For some time, but more significantly since the mid-1990s, Quebec has found itself at a disadvantage because of the major reduction in cash transfers that was imposed by the federal government on all the provinces, mainly in the CHST, the Canada Health and Social Transfer. These transfers now represent only 14% of the provinces' social expenditures, whereas they represented 18% of these expenditures, on the average, in 1994-95.

The Federal-Provincial Agreement on Health, reached in September 2000, will restore some of the funding starting in the next fiscal year. However, once again, in cash value, this will not even bring us up to the amount provided in 1994-95, which was an amount of $18.7 billion. We have not yet even reached that level. What this actually means is even less money to buy drugs or school supplies, to invest in the systems that we had in 1994-95, taking inflation into account. This is a very important aspect of the financial pressure facing the provinces, including Quebec.

There is also the fact that the revenues flowing independently to the provinces, and particularly to Quebec, increase more slowly than those of the federal government, for the good reason that the Quebec government has access to a smaller share of the tax field, of personal income tax. This is the field of taxation that increases the most rapidly with economic growth, precisely because of the progressive nature of the income tax structure. Since Quebec has access to a smaller share of this tax base, its revenues grow more slowly than those of the federal government.

The Government of Quebec has made the following assessment of these tax bases, after deducting what is referred to as the Quebec tax abatement, which is in fact a tax points transfer, but is recovered by the federal government through a deduction from the Canadian Social Transfer, the net result being that even though it does impose income taxes on individuals, the government does not end up with more in terms of aggregate revenue. Thus the Quebec provincial government's estimate of individual income tax is that 58% of this tax field is under federal government control with Quebec controlling 42%. That is the explanation for the slower growth in Quebec government autonomous revenue.

So there are two factors on the revenue side that constitute a handicap for the provinces and Quebec: the lower growth in autonomous revenue resulting from the division of tax bases between the levels of government in Canada, as well as the very large cutbacks during the period when Canada's public finances were being restored to a sound footing, when the federal government was balancing the budget. This money has still not been returned to the provinces, either in nominal or in real terms.

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On the spending side, there are also aggravating factors for the provinces, including health expenditures, that are a matter of provincial responsibility. In this sector, spending is increasing very rapidly. They are in fact the expenditures that have been most significantly impacted, notably because of new technologies and the aging of the population.

To give you an idea, let me note that there was a very sizable increase in health spending in Quebec. It now amounts to almost $16 billion. As for the federal government, it has fairly few program expenditures that are affected by the aging of the population. We can refer to senior benefits, mainly the Old Age Security benefit. Such federal spending does not account for much in relation to its total expenditures. Old Age Security benefits account for approximately 10% of the federal government's total spending whereas age-related spending, particularly in health, accounts for far more than 10% of overall provincial spending. The same holds true for Quebec.

It can also be added that education spending, even though there's a lower growth in population, is not decreasing as much as might be expected as a result of the aging population. The spending level has not gone down that much, particularly because of training requirements relating to the new knowledge-based economy. So there are not many savings that can be transferred from education to health.

That explains why the provinces have much tighter budget balances than the federal government at the present time and for the foreseeable future. That also explains why the federal government is able to afford to encroach on a number of areas of provincial jurisdiction and does not miss an opportunity to do so.

I think that is a quick summary of some of the factors of fiscal imbalance.

[English]

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

Moving on, we'll have Ms. Bennett and then Mr. Discepola.

Ms. Carolyn Bennett: I don't think we've heard this often. Usually in this kind of committee hearing there's a theme that comes back like the duck in the Groucho Marx show, where the sign comes down from the ceiling. Maybe you're too young to remember that.

The indirect cost of research is something we have heard at almost every panel. We fought hard to get some of these programs and get these dollars up. There are some of us like me on record saying we want the CIHR budget at a billion dollars as soon as we can.

In these post-September 11 times, we need some specific advice. That is, would you rather have the money for indirect costs and more money for research? Or if we had to trade it off, or...? What would be this one sentence in the report? Do you want us to slow down on the money for research so there will be more money for indirect costs?

My second question relates to the fact that some of us always thought that the CHST for post-secondary education was where those indirect costs were covered. Do you think you are getting the money for post-secondary education out of the CHST that you ought to be getting from provincial governments?

Mr. Pierre Bélanger: I'll take the first part of your question, and I'd like my colleague to answer the second part.

Certainly, increasing granting council funding is vital because each year we hire 100 new professors, and all of them have an active research career. Meanwhile, the ones who are dropping off the end of the table and retiring have been slowing down, and therefore the money to cover their research needs has not been as high.

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I might suggest that you don't have to fund either one at 100% of what would be desirable, but at least you can make a start on both. At what level I don't know, but there should be a commitment to build it up and a goal we expect to reach in x years. This might be an approach you would want to consider.

Ms. Carolyn Bennett: We've heard two different stories. Some people want a separate fund for indirect costs, while some people feel it should be like a ribbon that goes along with the research dollars. Do you have a preference?

Mr. Pierre Bélanger: The first way was just a separate envelope. In the United States it comes along as a straight add-on percentage.

Ms. Carolyn Bennett: You're referring to the NIH.

Mr. Pierre Bélanger: The NIH and the NSF. That's the way the U.S. agencies do it. I think that would probably be preferable to having have a whole accounting and auditing system with its own conditions for a separate block of money.

Ms. Carolyn Bennett: For the commercialization aspect, is there or is there not the possibility of using some of the dollars at Industry Canada?

Mr. Pierre Bélanger: Industry Canada? No, there isn't—not so far, anyway.

Do you want to take the other part?

Mr. Morty Yalovsky (Vice-Principal, Administration and Finance, McGill University): Certainly. Maybe I'll even try to address the first question in part.

I certainly agree with Pierre that the objectives we're asking for are rather steep. However, that is the ultimate goal, and one should try to attain that over a period of time, not necessarily when one first asks for it, given the other difficulties.

We also have to understand that in terms of research, we've been seeing a lot of money put into areas such as science, medicine, and engineering, areas specifically where the indirect costs of research are extremely high. If one has to go ahead and support these indirect costs of research from the operating budgets, which one gets from the province—in Quebec we're getting ourselves a reasonable amount of money for indirect costs—then the impact it will have will be on other programs that are not in science, medicine, or engineering. That is something we cannot let happen within the university structure.

There are flavours of the month that do come up, and what we have to ascertain is that the universities—unlike the hospitals, for example, where you go into a hospital with a certain illness and you want to be treated right away—are an investment in the long term. We invest now, and we'll see the results not necessarily this year but in years to come. I'm looking at it from a long-range perspective.

The Chair: Thank you, Ms. Bennett.

Mr. Discepola.

[Translation]

Mr. Nick Discepola: Thank you, Mr. Chairman. My question is for Mr. Bélanger.

As an economist, have you done any studies to determine whether we are on the verge of a recession and to find out what the rate of economic growth will be, for the next six months or the next year? Do you have any forecasts?

Mr. François Bélanger: Well of course, the CSN does not produce any forecasts, but the Toronto Dominion Bank does and it has just published a report. Their forecasts are in line with those of the Caisses Desjardins. We'll have to wait for next month's data for a more thorough assessment of the impact of the September 11 catastrophe, because for the time being we only have a partial picture, but generally speaking economists, in banks and elsewhere, forecast a relatively moderate economic downturn. They expect an economic upturn in the middle of 2002, starting in the third quarter.

I'd like to return to the analyses I read. The economists of the Toronto Dominion Bank are not talking about a recession. They talk about a significant downturn followed by an upturn in the economy starting in 2002. Once again, it may be too soon to say.

Mr. Nick Discepola: Once again, as an economist, when predicting an economic downturn, shouldn't one be careful rather than begin indiscriminate spending?

Mr. François Bélanger: Our message is quite simple. Economically speaking, there is at the present time a sort of damper on consumer confidence. There is a noticeable downturn in certain sectors although in other sectors, things are continuing to work out all right.

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Even before the September 11 catastrophe, we could no longer rely on investment. Investment was the driver of economic growth for the last two years but this year investment-driven growth was not in the cards.

As far as net exports go, things are all right. Canada still has a relatively large trade surplus, even though it is slightly down in relation to last year's excellent performance. So it is clear that in the standard economic equation, there is only the government sector left. If the government sector does not manage to give the economy a boost, then there will definitely be a slightly deeper downturn.

Without necessarily compromising your fiscal planning and generating new deficits, you do have sufficient latitude, even without a deficit, to take more significant action to support the economy through spending in various sectors where it is necessary, as we have demonstrated. You clearly have the means to do so. In last year's economic statement, you promised that you would make $100 million in tax cuts for the next five years. It is certainly possible for you to make some adjustments to the timing of these tax cuts. I imagine that if there were a disaster, you would do so. It is possible to recover some of this money and spend it now, in the same way as the contingency fund was initially designed so that it could be called upon, not in the event of an economic catastrophe but rather—

Mr. Nick Discepola: My time is limited. The chair will soon be cutting me off. As an economist, do you believe that we have to be careful and that Canada must not bring about a situation where there is a risk of returning to a deficit, yes or no?

You say that there is room to manoeuvre. Good enough. We'll find out what measures should be taken. But in your opinion, should we avoid another deficit at all costs?

Mr. François Bélanger: I don't think that we are faced with that question at the present time. I think that you do have room to intervene in program spending.

Mr. Nick Discepola: So we have quite enough money, in your opinion.

Mr. François Bélanger: I'm not talking about a huge—

Mr. Nick Discepola: Ms. Carbonneau, when you make a presentation as first vice-president, are you doing so on behalf of the CSN executive or on behalf of your members?

Ms. Claudette Carbonneau: My answer would be that presentations of this kind are always submitted to a broad range of groups within the CSN. In our case, it is the broadest such group in the congress that decided on the kind of representation we would make. Let me also note that we regularly visit our affiliated unions and that there is a constant debate. The concerns we raise here are our daily subject matter.

Mr. Nick Discepola: Do you have members living in Vaudreuil—Soulanges?

Ms. Claudette Carbonneau: Certainly. We have members everywhere in Quebec.

Mr. Neil Discepola: Let me remind you of a few things.

First of all, on manpower training, an agreement was signed by the governments of Quebec and Canada and there was a transfer of $2.5 million. Here, once again, you are calling for government intervention, particularly for older people. I agree with that point but I am not sure that the Government of Quebec would agree, because of this accord.

With regard to social housing, you said that the federal government should do more. There is no doubt about that. Even during local elections, mayors discuss this because there is a need for it. I must remind you that the Government of Canada signed a 1.3-billion-dollar agreement with the Government of Quebec and that Mme Harel was very open about the flexibility of the agreement.

The 10 provincial premiers have agreed on the provinces' needs in the area of health care. They got what they wanted. In terms of social transfers, they got what they wanted. So I fail to understand why you're coming back here again to talk about opting out and tax point transfers. You say you represent members from Vaudreuil—Soulanges. It seems to me that if people had had demands in this regard, they would have talked to me about them.

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I must say that for my constituents, the fact that taxes were cut was the most important thing. I'm listening to you say that perhaps we should stop the tax cut that's already announced and spend more. In my riding, we have no appetite for more spending. We have to be prudent these days.

Ms. Claudette Carbonneau: When you ask me if I debate these issues with my members, I'd be tempted to ask you if you watch television. You're telling me that somewhere, premiers signed an agreement with the federal government on health care. That was in September 2000. Since then, there was Victoria. There were a few television programs about that, at least in Quebec. I imagine that you were able to see them also. From that standpoint, a large number of the issues that were putting forth today reflect that provincial consensus.

You say that people are happy with tax cuts. You're not being fought every step of the way. We're not against any form of tax cuts. We're saying that this must be measured in terms of current conditions and not compromise other objectives that are dear to our members. In any case, when these tax cuts were made, what we were calling into question, specially before the September 11 situation, was the regressive nature of the choices that had been made.

You can't tell me that this will fly when we know that one third of the lowest income earners in our population end up with a tax refund of 4%. Let me remind you that the poorest in our society are those who do not pay taxes. They gain nothing from these measures. Among low and middle income earners, there are a lot of members of the CSN. They reflect the general population. As far as they are concerned, if there are to be tax cuts, it is certainly appropriate to maintain a tax system that is less regressive than the latest trends we've seen.

You said that the citizens in your riding have no appetite for reinvestment. Well, anytime you happen to be in your riding, we can tour some hospitals together. I will let you hear other opinions, not only among our members, but also among users. We can leave the hospitals. We can also go to seniors' residences. When we hear the debates that took place in Quebec and when we know that there are people who will be deprived of the only bath they get every week, we realize that it's certainly possible for you to hear something else.

Mr. Nick Discepola: Is that the responsibility of the Government of Canada?

Ms. Claudette Carbonneau: As far as that's concerned, I always welcomed the broad provisions of the Canadian legislation with regard to free services, accessibility and excellence of service and the public nature of these services, but you end up seeing that there's something very hypocritical about all this when you don't dedicate the necessary resources for this to happen. Very high standards are imposed, but the necessary resources aren't provided. From that point of view, yes, there is a federal responsibility with regard to transfers.

Mr. Nick Discepola: [Editor's Note: Inaudible] ... responsibility toward the provinces... I have to continue.

[English]

The Chair: We're going to have to move along, though, because it's becoming quite a debate. That's fine, but we have other questioners as well. What I'll let you do is just a wrap-up, just a final comment.

[Translation]

Mr. Nick Discepola: I'm talking about the federal government's priorities. The provinces have the same responsibilities. Four or five years ago, Mr. Klein had decided to close hospitals and now there are exorbitant surpluses. Mr. Harris had decided to close schools and hospitals. He had surpluses and he put the province in debt in order to be able to proceed with tax cuts. That's not the federal government's fault. Those are the choices that premiers made for their provinces.

In our province, the Government of Quebec had decided to give doctors early retirement, which was supposed to save $800 million. Today, we have a shortage of professionals. That's not the fault of the system itself. They got the money they wanted, but they decided to implement their own priorities for their provinces, which is perfectly normal.

Ms. Claudette Carbonneau: I regularly make representations before the Quebec government. The positions of the CSN do not deal entirely with the specific choices that the Government of Quebec must make in health care, education and other sectors.

Having said that, there still exists an objective reality. In order to fulfil a certain number of needs, you have to have access to sufficient resources. From that standpoint, I refer you back to the answer we gave about fiscal imbalance. That's not just an impression; that's reality.

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[English]

The Chair: Thank you.

Mr. Brison, the final questioner.

Mr. Scott Brison: My question for the people from McGill is on the participation of private sector venture capital firms in technology transfer and commercialization.

I'd like to have a better idea from your perspective as to how active private VCs are in Canada in this regard on campuses, particularly the labour-sponsored venture capital firms.

Further, I'd like your perspective on how the commercialization and tech transfer environment in Canada compares with that of the U.S.

Thirdly, there is a policy that is under provincial jurisdiction, but I'd be interested in your perspective on how successful it has been. The provincial government in Quebec, if I'm not mistaken, has a program whereby Ph.D.s involved in research who are drawn to the province pay no provincial tax, which to me sounds like a very innovative way to provide a more competitive tax strategy aimed at this. I would be interested in your feedback as to the success of that, just so I can feel comfortable in potentially recommending that to my provincial colleagues in Nova Scotia—the cradle of higher education in Canada, I may add. I look forward to your response.

Mr. Pierre Bélanger: Well, first of all, on the question of venture capitalists and their activity on campus, we deal with all sorts and manner of venture capitalists, especially in the health area, which is where I guess the majority of our spinoff companies would be.

There are venture capitalists that are tied to the Caisse de dépôt, in particular one called T2/C2, which is funded partially by the Caisse de dépôt, but also by MDS. There are also other more specific venture capitalists in the medical area, like Medtech, which is an MDS company; BioCapital; GenChem; and so on. Those are the ones, by and large, our office of technology transfer deals with. They are the ones we go to when we're trying to put together a new spinoff company. We try to put these people around the table.

As I was mentioning before, we've gotten some help from the province to create that other company, which is essentially going to be a limited partnership in form. It will operate as a seed fund for a finite duration and will be the main broker of first-round financing to create these new companies.

How are we doing with respect to the U.S.? Still not so well. In fact, the provincial government money that was put out to form these four sociétés de valorisation came after a report that was done by the Montreal board of trade in which they analysed the situation in the U.S. and in Canada. It turned out that on a per capita basis we published as much as the Americans, but when you looked at how many licences came out of those publications, we were falling well short. That formed the impetus for convincing the provincial government they had to invest in something to help the universities commercialize the results of their research.

Time will tell how successful these have been. But I think at least here in Quebec the efforts of the provincial government have been in the right direction. What we need now is some operating money for our internal office of technology transfer, and that's why I was referring to the Fortier report and the expert panel on commercialization.

I'll let my colleague Morty answer the third one.

Mr. Morty Yalovsky: I think the provincial government has been extremely progressive, not only with respect to industry but also with respect to the education sector.

I think, as Pierre indicated, we are currently hiring hundreds of faculty members—in fact we've done a bit more over the past two years—effectively to help us grow, to address some of the decline we've had in the past couple of years, and to gear up for retirements, because over the next 10 years, close to 50% of our faculty will be eligible to retire, if we see age 65 as the age of retirement.

In attempting to recruit individuals from outside of Quebec and outside of Canada, we realized the tax burden is quite high. We did approach the provincial government, and they established a program last year in certain selected areas where it is extremely difficult to bring individuals to—to Quebec, and even to Canada—whereby faculty members, not only researchers in industry, hired in, for example, the area of finance—corporate finance, investment finance.... This does not apply to other areas of management, for example, accounting or marketing. Certain sectors in technology and medicine are given, effectively, a release of provincial taxes for a period of five years. They could be Canadians who have been attracted to come back to Canada, but the ruling is they have to have been outside Canada for a duration of time, and that has helped us considerably in attracting, literally, top researchers. In fact, some of them have been hired as Canada Research Chairs.

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I think it's also important to note that, for example, in education—the federal government's introduction of the Canada Research Chairs—McGill has taken the position that we want to fill these only with people who come from outside the system. In other words, the issue is to draw more and more individuals into Quebec and into Canada.

Mr. Scott Brison: Thank you very much.

Mr. Pierre Bélanger: The tax cuts also apply to doctoral fellowships and post-docs as well.

Mr. Scott Brison: I'm heartened to hear of the success of that program. I understood the program had been enacted, but I wasn't aware of how successful it had been. That's good to hear.

Mr. Morty Yalovsky: I believe last year there were approximately 30 to 35 people who were eligible at McGill, out of the 100 who were hired.

Mr. Scott Brison: Thank you.

The Chair: Thank you very much, Mr. Brison. On behalf of the committee, I'd like to express to you our sincerest gratitude for your presentations. It's very important to hear from Canadians who come to issues from a different perspective. Of course, we will have to evaluate the thoughts and ideas expressed and interpret the best avenue to take as we prepare recommendations for the Minister of Finance.

Thank you very much, we appreciate it.

We will adjourn now until 1:30 p.m., in the same room.