[Recorded by Electronic Apparatus]

Monday, November 4, 1996

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[English]

The Vice-Chair (Ms Whelan): I will now call the meeting to order. We're going to begin our second set of discussions.

To begin the meeting, I'd like to let you know which members of the finance committee we have with us today. We have Monsieur Rocheleau, who represents the riding of Trois-Rivières in the province of Quebec; Monte Solberg, who represents the riding of Medicine Hat in Alberta; Ron Duhamel, who represents the riding of St. Boniface in Manitoba; and Gary Pillitteri, who represents the riding of Niagara Falls in the province of Ontario. Ron Fewchuk, who represents Selkirk - Red River in the province of Manitoba, will be joining us shortly. My riding is Essex - Windsor, in the province of Ontario.

We are having the discussions in Vancouver and in every province in a round table format, where everyone will be given approximately three minutes to present - a little bit closer to five minutes, if necessary, but we would prefer you stay at three minutes because it allows more time for questions.

With that, I'll begin. I understand that the Hospital Employees Union will be filming their presentation. Is that correct?

Mr. Chris Allnutt (Secretary and Business Manager, Hospital Employees Union): We would like just a picture, actually.

The Vice-Chair (Ms Whelan): We all thought we were going to be on TV, but that's okay.

Did you want to do that at the beginning, or did you want to start with your presentation to allow that to happen first?

Mr. Allnutt: We can, but we don't want to interrupt the proceedings.

The Vice-Chair (Ms Whelan): No, that's fine. We can start with you if that makes it easier.

So we'll start with the Hospital Employees Union, with Chris Allnutt, secretary and business manager.

Mr. Allnutt: Thank you. Merci, mesdames et messieurs, ladies and gentlemen. I'd like to begin with the opening remarks, as requested.

I welcome the opportunity to appear before the standing committee on behalf of the43,000 members of the Hospital Employees Union who work in hospitals and long-term care facilities and community health services in British Columbia.

It's particularly fitting because today kicks off National Medicare Week, and across the country health care workers, health care providers, as well as community organizations and groups that use our health care system, are joining together in a week-long celebration, and protest in some cases, to defend and protect medicare.

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Part of the Canadian Union of Public Employees, HEU members are at work every day in the over 300 services across British Columbia. We are the licensed practical nurses, the care aids, the secretaries, the paramedical technicians, the drug and alcohol counsellors, the laundry workers, the mental health workers, and the secretaries who are on the front lines of our public medicare system in British Columbia.

Federal budget decisions have a dramatic impact on health care workers. Federal fiscal priorities influence the quality of care that HEU members are able to provide. As in all decisions in life, the government has choices when it comes time to draft and implement a budget. In this regard, Prime Minister Chrétien's government is no different. The fiscal choices made by this government for the 1996-97 budget year and for previous years have had a disastrous impact on our health care system and have put medicare at risk. Take the cuts to established programs financing that were massively made in the 1995 federal budget but not implemented until this budget year, 1996-97. Those cuts to health care and other vital services, particularly education, cost our provincial government more that $450 million this fiscal year.

We're fortunate here in British Columbia because our New Democratic Party government made a commitment to medicare. They made up for the federal cuts. But across Canada, other provincial governments offloaded Ottawa's reductions with cuts of their own. The consequences on our public health care system were immense.

There are other federal policies that impact on the health of Canadians. It's widely accepted that one of the key determinants of health is an individual's economic well-being. The poorer you are, the greater the chance that you'll be sick and require medical intervention; it's very simple. Ottawa's high unemployment policy makes people poor, as do the cuts in unemployment insurance that grant protection to only 50% of unemployed people in the country. It's these kinds of policies that put even more pressure on our public health care system.

There are alternatives. There are options to deficit reduction that don't target services to people to make up for the past mistakes of Liberal and Conservative politicians, options that protect medicare - things like a fair taxation system, where corporations pay their share and tax loopholes are closed, because many highly profitable companies pay no tax at all as it is now; options like creating jobs that pay a living wage to put Canadians back to work; options like ending the outrageous patent protection that allows multinational drug companies to make huge profits from medicare while driving up prescription drug costs for provincial governments.

We in B.C. and Canadians across the country need to see some real options, some real choices, and an honest commitment from our federal government to increase health care funding, and we need to see it reflected in next year's federal budget.

Thank you.

The Vice-Chair (Ms Whelan): Thank you, Mr. Allnutt.

I'll now turn to either Mr. Robinson or Mr. Klassen from Community Based Full Employment.

Mr. Peter Robinson (Representative, Community Based Full Employment): I'm Peter Robinson. Working within the three-minute format, I have to use exhibits that contain real meat, unfortunately, to back it up. So I ask that if you have them, you pay attention to the exhibits that support it, because they provide the details.

Community Based Full Employment spoke to this committee last year and the year before. It promoted the following viewpoints.

If government priority were put on building a healthy economy, deficit reduction would quickly follow. A healthy economy requires every Canadian to be moving towards the highest and best use of their work capabilities. From these viewpoints, the current government is a total failure. A declining economy was inherited, and the speed of economic deterioration is escalating.

In exhibit 1, we have a listing of the signs of economic deterioration.

When the government recognizes the folly of permitting the economy to continue to decline, the following issues will warrant consideration in the budget that follows - and I don't know when the government is going to wake up to this. As a revenue item, the current tax levels are largely accepted, but the total tax paid by Canadians will increase dramatically when we are all working to the highest and best of our capabilities.

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The budget step: make the building of a healthy economy in Canada the number one priority.

In the area of expenditure, the current government focus continues to be on cost-cutting. If governments were like businesses, this approach might be sound. But because of basic differences between governments and business, the government focus has given leadership to running the economy downhill. The issue of this difference between business and governments is that when you cut the salary of a civil servant or cut a salary at a hospital or anywhere else, you have an impact that cuts salaries or incomes to other people in this country. If you were to cut a salary of $40,000, you'd have an impact of as much as $80,000 lost to your revenues - and that is detailed in exhibit 2.

There is cause to believe that the government has experienced little or no gain from its cost-cutting. What is clear is that Canadians have experienced significant pain from the government's attempts to cut costs. In exhibit 2, the primary explanation for the deficit reduction is that interest rates have come down, and that accounts for more than the total amount of improvement that you have in the deficit - and that is detailed there.

The budget step: stop all cost-cutting immediately.

On promoting economic growth, major corporations are vital partners for redirecting Canada's economy. Government commitment to long-term economic health will gain impact if major corporations are also redirected to building long-term health. In exhibit 3, we speak to the issue of this focus in the short term, which is very common in the corporate community and in the government as well.

The budget step: a common method of paying executives is through stock options; offer significant tax benefits on income on stock options after ten years. In other words, let ten years go by and then realize tax on the income from the options. That would immediately cause every executive in Canada who is under an option program to start looking at a completely different set of parameters with regard to the health of the Canadian economy.

The Canadian economy is impeded by the practice of politics by division. This includes favouring the rich over the poor, the corporation over the union and vice versa, the people of one language group over people of another language, new Canadians over native Canadians - it goes on and on.

The budget step: economic health requires working toward the highest and best use of every Canadian; budgets must provide for the economic advancement of all people to reasonable income levels.

Turning to job creation, a healthy economy significantly reduces social costs. An unemployed person gets a job and moves from being a cost to governments to being a revenue source.

The budget step: find every method possible for assuring work availability to every Canadian. Exhibit 4 outlines where that work can come from. The business of where the jobs could come from is absolutely unrealistic as a question, because there are plenty of opportunities for jobs.

Canada is a capitalist society. A healthy economy requires an adequate flow of capital to all segments of the economy. Loan programs within a healthy economy would operate at a fraction of the cost of welfare programs.

The budget step: identify all segments of the economy that are experiencing difficulty in obtaining capital at reasonable costs and organize an approach to assuring adequate capital availability. Details of this approach were presented to this committee on October 31, 1994. Communities were proposed within that write-up as the key for relating capital to local work capabilities. I'd ask you to go back and look at them to really understand what is involved in that issue.

A further step required of the federal government is to name a cabinet minister who will be totally responsible for job creation. There isn't one now that I know of. As a government you have said your focus is ``jobs, jobs, jobs'', but I don't have any idea who carries that responsibility in your cabinet.

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Thanks for this opportunity to put these views forward.

The Vice-Chair (Ms Whelan): Thank you very much, Mr. Robinson.

I'll now turn to Mr. Ed Lavalle of the College Institute Educators' Association of British Columbia.

Mr. Ed Lavalle (President, College Institute Educators' Association of British Columbia): Thank you, Madam Chair and members of the committee.

It's one year later. I remember meeting some of you in this forum last year, and I would like to thank you for the opportunity to again bring forward the views of our organization. We represent approximately 6,000 faculty, technical and support staff in the colleges, institutes and agencies that make up the post-secondary education system in B.C. in addition to the universities. Our sister organization in the universities is the Confederation of University Faculty Associations.

If you want to follow along, our brief is the blue-covered one. I don't intend to read it. I did that last year and didn't feel it was listened to very well. I'm just going to make a few points this year, and maybe I'll end up being slightly more effective.

This is a province in which there's a substantial interest and support in post-secondary education. On page 1, I refer to the fact that all the internal stakeholders in the system have developed a strategic plan for seeing the college institute and agency system working together. That will help us to do more with the ever-diminishing and scarcer resources.

I think the kind of support you'll find in the province of British Columbia for education is reflected in our recent election. Both the government and the opposition parties vied with each other to indicate that they supported post-secondary education. Additionally, every poll conducted around the election indicated that he or she who seeks to be elected in British Columbia should have a good respect and support for post-secondary education. However, we're here to talk about federal matters.

The main thesis that I would like you to consider is that the federal role in post-secondary education with regard to financing not only has to be kept, it has to be restored to previous levels. On page 3 of our brief, we give the sad facts for the province of British Columbia. In the first year of cuts under the so-called Canada health and social transfer, the federal government reduced cash transfer payments to British Columbia by $435 million. The estimate for additional reductions in 1997-98 is another $296 million, for a total of $731 million. If we use the formulas that we've used here for over two decades, the reductions to the post-secondary education system are estimated at $66.8 million in the current fiscal year and an additional $45.5 million in 1997-98. Now, I realize these are all figures, but the figures translate themselves to the number of positions that students might access to get their education, the number of people who can engage in instruction, and the infrastructure of the system.

I would like to point out that the Government of British Columbia has chosen to maintain health and education services, but federal government cuts have created enormous problems as the B.C. government attempts to protect public goods and services while implementing its own debt management programs. The irony of the matter is that there is somewhat of a projected shortfall that is at the heart of a political dispute in the province of British Columbia. Somewhere between 50% to 60% - and probably closer to the latter - of that projected deficit would not have to be there had the federal government merely maintained the level of financing that it has given to help education and social assistance.

The matter is worse when we come to federal training and labour force development. We find that over the period from 1989 to the current period, the amount of federal support in this province has declined from $231 million to about $77 million in the current year, and it's slated to go down to about $56 million in the next year. We think the government, in spite of its red book commitment to enhancing stability and predictability, is in fact doing the reverse. We do not have stability. Any predictability we have is negative predictability. On page 5 we indicate three points we tried to share with you last year. We indicate that there were no national standards, although we recognize that those national standards are best achieved as a pan-Canadian accord through the Council of Ministers of Education Canada, which would allow Quebec to be a participant. We still feel that the federal government has some kind of role in this.

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We asked you last year to recommend separate and protected funding for each of the social programs that would include a separate envelope for post-secondary education. We indicated that we needed an education and training strategy. None of these things have come to pass. The only thing we saw useful with regard to our sector last year was a notional nod given to research and training. This was not really implemented by the government itself, a point that we made on page 7. We too would like to associate ourselves with the brief that this committee received on October 18 from AUCC and CAUT.

On the one hand, organizations like ours are sometimes looked upon a little skeptically as self-interest groups, so we had our own hearings. Our hearings were held on February 7, 1996, after your hearings and after Mr. Martin had indicated where he was going with things. In order that those who spoke to us might have voice, we have attached our hearings to this brief and submission. You will find in it widespread support for post-secondary education, widespread support for a federal role, and a very simple proposition to restore the federal funding cuts that have been delivered against post-secondary education. Do not move to a second year of cuts. Thank you.

The Vice-Chair (Ms Whelan): Thank you very much, Mr. Lavalle.

I'd like to move to Alice McQuade, from the Coalition of Public Education.

Ms Alice McQuade (Co-chair, Coalition of Public Education): Thank you. It appears that I might be the only new one here, but I'm representing the Coalition for Public Education. I want to thank you for the opportunity to make this presentation to the federal finance committee.

The Coalition for Public Education is a coalition of B.C. educators, support staff, and students representing about 120,000 people, with participation from five representative organizations. Our goals are to support and promote a universally accessible, quality public education system from kindergarten to post-secondary education, including vocational, career, and university education; and to support adequate funding for public education and oppose initiatives that result in the reduction or privatization of educational services.

The committee has asked us to give our views on how the federal government in its next budget should approach revenue and expenditure measures, as well as economic growth and job creation.

At the finance committee meeting on October 9, Finance Minister Paul Martin spoke about what he considered the federal government's success in reducing the annual federal deficit. This emphasis on the deficit is reflected in the government's publication: ``A Record of Achievement'', in which the deficit is projected to fall from $37.5 billion in 1994-95 to $24.3 billion in 1996-97. However, a large part of this achievement merely shows up as a deficit in another context: the budgets of provincial governments, who have been forced to deal with the $7 billion in unilateral cuts and federal transfers made in the 1995 budget.

In British Columbia the provincial government - this has been noted earlier - will be forced to make up for $435 million in federal cash transfers this year alone. The financial pressure to compensate for federal cuts is felt throughout the provincial government, including the kindergarten to grade 12 education system.

The results of the federal government's achievements in transmutating deficits shows up in personal debts as well. With tuition increases and cuts to grants, students are emerging from post-secondary institutions heavily indebted. In 1986, federal cash transfers amounted to 53% of total college and university operating grants. In 1994-95, the federal contribution amounted to 32%. According to a recently released study on personal bankruptcy in B.C., the largest group of people forced into declaring personal bankruptcy is between 23 and 26 years old. Obviously students whose parents are not wealthy incur the greatest degree of personal indebtedness from pursuing higher education in this area of federal cuts to higher education. I would say in fact that it's a disincentive to pursuing post-secondary education.

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Lawrence Westgeest, a Vancouver personal bankruptcy consultant, has said that for his young clients with high student debts and a 25% unemployment rate for their age group, ``There really are little or no other options'' to declaring bankruptcy ``open to many of these people. There is no light at the end of the tunnel for them.'' Westgeest attributes the burden being placed on young people to the privatization of the education system, to forcing individuals to bear the costs of higher education from which the whole of society benefits, and to turning to private businesses to deliver educational programs.

When the problem of the federal deficit is portrayed as a burden, we must not impose on young people. The solution cannot be to force them to carry this burden in the form of personal debt through cuts in federal support for higher education.

The B.C. government has responded to the financial crisis students are facing by freezing tuition fees. The federal budget should do its part by reversing the cuts made to higher education through the CHST and rebuilding the federal contribution to achieve a more accessible, high-quality post-secondary education system.

When free trade was originally being debated, Prime Minister Brian Mulroney promised that people who suffered job losses as a result of the agreement could look forward to a massive increase in federal retraining programs to help them re-enter the workforce. This commitment was abandoned, and as the current government pursues even wider trade liberalization agreements, it is simultaneously progressively withdrawing from the retraining requirements that result from federally negotiated trade deals.

In British Columbia federal spending on labour force development programs will be cut by 30% in 1996-97 from what it was in 1992-93. Virtually exclusive reliance on employment insurance funds for training means that broad categories of those who need training, like the disabled, are losing out. As well, the new restrictions on employment insurance benefits impose limitations on the training laid-off workers can receive. For example, EI benefits will be cut off to 12,000 apprentices in B.C. before their technical training can be completed.

In its ``Record of Achievement'' report the government has claimed that many of its achievements have been ``eliminating many programs and activities''. This report boasts that expenditure cuts have exceeded revenue increases by a ratio of 7:1. The government on the one hand is seeking advice to create jobs and on the other is complimenting itself on the elimination of programs that have meant job losses in the federal civil service alone of 45,000 people. Job creation and full employment should be the preferred method of dealing with the deficit, along with measures to increase revenues by increasing fairness in the tax system.

Increasingly we see the government adopting the philosophy that public service jobs are not real jobs. Yet lay-offs in the public sector are having a noticeable effect on the unemployment figures. The November 11, 1996, labour force survey released by Stats Canada indicates that employment in the public sector has fallen by 45,000 jobs since December 1995. It should be noted that these job losses were incurred before the full brunt of the federal cuts to CHST were implemented.

The notion that services are not real unless they are delivered by people in the private sector does not correspond to what Canadians are asking from their elected representatives. An Angus Reid survey released on November 1 indicates that one-third of Canadians want revenues received in excess of those required to meet deficit targets to be spent on health and education. Only 9% said they wanted the money redirected towards tax cuts.

The claim that a dollar in your pocket is worth more than a dollar in the hands of the government is not borne out by people's actual experiences. A dollar in your pocket is not worth very much if you're trying to access health care in the United States, where the inefficiencies of a for-profit health care system have been documented.

In terms of education, a recent study entitled ``Hard Lessons: Public Schools and Privatization'', evaluating privatization of education programs in the U.S., felt that the promised cost savings did not materialize and that privatization undermines the goals of society, of social equity, and of local control of education. The jobs of public sector educators are every bit as real as the jobs of those working in the Bombardier plant, which recently received a federal loan guarantee.

We welcome the Prime Minister's statement that governments can be a force for good in society, and it's one I share. I would like to see that perspective reflected in federal job creation strategies to preserve and create the very real jobs that need to be done in the public sector.

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In terms of finding the revenue to pay for the public services Canadians are asking for, we recommend the government turn to the proposals for a fair taxation system proposed in the alternate budget produced by the Canadian Centre for Policy Alternatives. These proposals stand in stark contrast to those who would aggravate the unfairness in the tax system by cutting capital gains taxes and the surtax on the wealthy and who would massively erode the funding basis for public service through billions of dollars in tax cuts.

Our economy and our society is healthier in every way if our young people have equal access to a quality public education system.

Thank you.

The Vice-Chair (Ms Whelan): Thank you very much, Ms McQuade.

I'll now turn to Michael Gardiner from the Canadian Federation of Students, please.

Mr. Michael Gardiner (Chairperson, (B.C. and Yukon), Canadian Federation of Students): Thank you. Those who are looking at the brief will notice the fax number at the top. We ran out of toner this morning, so we had to fax it to a machine to get copies.

Good morning, and thank you for the opportunity to present today. My name is Michael Gardiner. I'm the British Columbia chairperson of the Canadian Federation of Students and a fourth year economics major at the University of Victoria specializing in fiscal and monetary policy.

I speak today on behalf of the approximately 90,000 college and university students who are members in British Columbia. I'm aware the committee has already heard from our national chairperson, Brad Lavigne, and has read the text of his presentation. I will endeavour to spare the committee needless repetition, so you'll find my presentation to be different, which is not to say I have any disagreement with Mr. Lavigne's presentation.

The Canadian Federation of Students has many opinions respecting this government's recent approach to revenue and expenditure measures and to economic growth in general. I am sure you have heard many of them through the media and through our presentations over the years.

In response to the above issues, this year I will focus on expenditure measures in the area of education as it respects economic growth and employment, rather than the more narrowly defined job creation.

As you undoubtedly expect, the premise of my presentation today is that allowing payments to the provinces for the provision of post-secondary education to diminish is neither good social policy nor good economic policy. I'll argue that good economic policy would be to significantly increase federal contributions to post-secondary education in both infrastructure and operating expenses.

I say this knowing that this government is committed to reducing public debt and that certainly reduction is not undesirable. However, there are two brief points I wish to raise in defence of my argument to increase federal expenditures.

The first point is that in Canada the public debate has become too narrowly focused on debt and deficit reduction at the expense of the consideration of the long-term economic good. While business adheres to the principle that in the long run you're dead, government is not business and cannot ignore the long run. The late Professor Wayne Vickrey, 1996 Nobel prize winner in economics from Columbia University, would concur were he here today.

The second point is that we have set unreasonable deficit reduction criteria. Deficit reduction should be measured in terms relative to GNP not as an absolute. I suggest today that an expansion of the government component of the national expenditure equation - gross domestic product - can correspond with effective long-term debt reduction.

What I seek to convince you of is the value of increasing spending pertaining directly to post-secondary education. I must correspondingly, though separately, in the interests of time, convince the government as a whole that national principles for the provision of post-secondary education should be established that challenge the provinces to make the most of their post-secondary education systems.

I will turn to the issue of youth unemployment. I recognize that I do not need to tell this committee about the traumatic costs of high unemployment; however, my argument is partly based on this premise so I will expand somewhat.

Unemployment and underemployment affect government expenditures in many areas, in particular social services and health care. More significantly, however, unemployment costs government revenue. Those who are not earning wages are not paying income taxes and consumption taxes. They are not spending on consumer items that stimulate economic growth and expansion through multiplier effects. They are not purchasing the services that comprise an increasingly significant portion of our economy and are not generating wealth that contributes to GNP.

The segment of Canada's population most affected by our high unemployment rate is youth. No longer are young people moving from high school into the job force and well-paying industrial jobs. Increasingly they require additional training. One study has said that 17 years of education, including K to 12 is now a necessary expectation on the part of most employers for any work.

This brings me to the second aspect of my argument - the changing economy. Whether it's the Conference Board of Canada, the Organization for Economic Cooperation and Development, the Canadian Labour Force Development Board or the multi-interest party that developed ``Charting a New Course'', the strategic plan for B.C.'s colleges and institutes, there is unanimous agreement that the skills of the future employee are analytical, writing, communications and knowledge-based - the kinds of skills that are provided through extensive post-secondary education.

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At the risk of sounding clichéd, if we in Canada hope to be leaders as the economy moves forward, we need to focus on these areas and expand our commitment in these areas.

Following World War II, Canada faced a similar situation. We had a large number of people returning from Europe, from the war, facing not very great employment prospects immediately. We had a very high public debt, and rather than slashing expenditure on post-secondary education, the government dramatically expanded funding for post-secondary education to the extent that we have the system we do today. As a result, the Canadian economy grew significantly, and in fact grew its way out of the public debt we faced at the time.

I have some notes on research infrastructure. I will skip them in the interest of time and only say that we too concur with the infrastructure renovation program proposed by the Association of Universities and Colleges of Canada and the others that participated in developing this.

In conclusion, before I summarize my recommendations, I would argue that in the same way that governments once recognized the expansion of funding for post-secondary education as essential to the expansion of the economy and the expansion of the social good, I hope this committee of the government will recognize that funding for post-secondary education and the expansion of such is a necessity at the federal level.

Access to post-secondary education is our best hope for reducing unemployment among young people, for assisting those displaced from the workforce by technology or changing trade arrangements, for finding those who've been displaced from the workforce and assisting them back in, and for assuring that Canada's economy moves smoothly into the next century.

To summarize my recommendations, first, the Governor of the Bank of Canada should be immediately instructed to abandon the job-killing deficit-increasing policy of maintaining zero inflation. The Bank of Canada should further reduce interest rates and attempt to stimulate inflation at near 4%.

On fiscal policy, the federal government should abandon the use of program expenditure reduction as a means of deficit fighting. The effective measures taken to this point have been to transfer debt to the provinces and individuals, weaken the intellectual and physical infrastructure, and reduce employment levels with no significant effect on the deficit. The amount transferred to the provinces through the Canada health and social transfer should be increased significantly but should be tied directly to corresponding expenditure increases by provinces in these program areas.

The personal taxation system should be adjusted to provide for more fairness in the system, to maximize the economic growth stimulation of measures. Those who receive savings must be those who will consume rather than save their additional usable income. This should occur through an increase in the number of tax brackets, the lowering of rates in the lower brackets, and an increase in the additional higher brackets. The public does not reject higher taxes altogether. What the public rejects is higher taxes on those at the extent of their means - the working and middle classes. The federal government must begin to look at means to replace the goods and services tax with a non-consumption tax. Spending in the service industry must be stimulated for job and economic growth.

On the area of student debt relief, which has been touched on well by the college faculty and the coalition earlier, Canada remains the only country in the Organization for Economic Cooperation and Development with no national system of grants. Grants are the most effective means of improving access as they directly reduce real and perceived barriers to access. While special opportunity grants that were implemented by the federal government are a very good start, they are by no means complete. One means by which the federal government could pay for this is by reallocating the existing tax incentives, specifically tuition fee and living expense deductions, to a program of grants.

Unfortunately, I don't have the data that would provide what these costs would be. Given the extent of that change, I would recommend an interim step. The federal government should provide a tax deduction for student loan payments. In addition to increasing the fairness of the loan system, this would likely improve the rate of repayment.

I will conclude there and thank you again for the opportunity. I look forward to taking questions.

The Vice-Chair (Ms Whelan): Thank you very much, Mr. Gardiner.

I will now turn to Mr. Michael Goldberg from the Social Planning and Research Council of British Columbia.

Mr. Michael Goldberg (Director of Research, Social Planning and Research Council of British Columbia): Thank you, Madam Chair, and other members of the committee for inviting us to participate in the round table on the pre-budget consultations.

Our last presentation before this committee was over six years ago when we were asked to comment on the then proposed Bill C-69, which was the capping of CAP. During that time we raised some concerns about that, which I think are being played out again today.

I'll try to cover very briefly six points, some of which have already been raised by others here. First, we need to remind ourselves that budgets are a reflection in financial terms of where an organization, whether it be governmental or non-governmental, is going. A budget is just a means of describing; it is not an end unto itself.

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The preoccupation with the debt and deficit has led to treating the budget and subsequent fiscal policy as an end unto itself rather than as a means to achieve certain ends. Frankly, we feel that the federal government has not been clear about the ends it wishes to achieve with the 1997 budget or in fact with the previous two budgets.

I will speak briefly about the myth that governments don't create real jobs, which Ms McQuade mentioned. Public expenditures, either directly for employees or indirectly through payments to others, do create real jobs.

Frankly, I think it is insulting to doctors, nurses, teachers, judges, air traffic controllers, road builders, program officers, and all of those others receiving remuneration through public spending to portray them as a drain on society. They all do real work.

The third point we want to raise is about government's role in the economy, very much as others have mentioned: when the economy is booming and unemployment is low, there should clearly be lower government spending - especially in those sectors that are competing for a limited pool of labour - to help reduce any concerns about inflation. When the economy is not performing to capacity - that is, when unemployment is high - public expenditures should increase. It makes sense to invest in physical and human infrastructure when the demand for particular types of labour is low.

As the finance minister admitted last week, the public sector cutbacks have been a major drag on the economy. This is due not only to the lost jobs, but also to the insecurity being felt throughout Canada that is caused by such actions. Public sector cutbacks have created a negative multiplier effect that has severely stalled the Canadian economy.

One of the major issues facing the federal government is what it should be responsible for and what the provincial and municipal levels of government should be responsible for. The recent discussion paper submitted to the provincial premiers by the provincial social service ministers argues that there should be less jointly administered programs, with clear responsibilities for the two senior levels of government.

The position of the provincial premiers, we would suggest, is a direct result of the downloading that has occurred through past fiscal policy. Bill C-69, the capping of CAP, is the first thrust in the federal government's abandoning of its ability to enforce federal standards. We would argue that the CHST further erodes the ability of the federal government to maintain and enforce federal standards.

Results of the federal downloading are only now being felt at the provincial level. For example, we're starting to see increased constraints in health services and resulting pressures for the emergence of a two-tiered health care system.

One of the goals of the federal government, we would suggest, is to maintain the Canadian confederation. In 1989, when we made a presentation to the House of Commons Standing Committee on Finance, we suggested that there was a very real danger that the capping of CAP could lead to greater demands for control by the provinces, thus weakening the glue of social programs that is keeping this country together.

We would strongly suggest that the CHST, in the reduction in federal transfers to the provinces, creates a climate that further fragments us as a country. We believe there must be a strong role for federal standards and for the resulting financial clout to enforce those standards if this country is to stay together.

It is with that goal in mind that we offer our budget options.

In discussing budget options, it is our opinion that there are two overriding goals that the budget should be directed to. The first, which has already been spoken of, is a recommitment to full employment. Governments at both the federal and provincial levels must recognize their counter-cyclical role in attempting to help with this goal.

The second is to maintain the glue that keeps this country together. Canada has a thirty-year history - and I should mention that this year our non-profit organization is also celebrating its thirtieth year - that recognizes the collective responsibility for our collective well-being. It is therefore not surprising that recent public opinion polls show that Canadians prefer improved social programs over tax cuts.

We would argue that the federal government has a critical role to play in directly promoting full employment through government spending on both hard infrastructure programs and investment in human capital.

Such investment needs to also address the revenue side of the equation. In our judgment, Canadian resistance to tax increases has everything to do with the issue of tax fairness. It is not, I think, as one of the speakers earlier this morning said, about high taxes and the underground economy. There is much room for greater tax fairness that would lead to the generation of revenue to pay for such services.

It doesn't matter whether it's income taxes, payroll taxes such as EI or CPP, value-added taxes, the use of a tax expenditure such as business deductions and/or the encouragement to invest in RRSPs. All of this money comes from somewhere, usually from our pockets, either from the left side, which could be our public side, or from the right side, which many call our private side. The public expects people to be treated fairly and expects that those such as myself and others in this room pay their fair share based on their ability to pay. Thus it seems foolish to us that the government would consider lowering the rate of EI or CPP payments. Nor has there been much discussion about raising the maximum earning thresholds so all earnings are included in the contributor equation. That may even encourage a reduction in overtime, as such earnings would also be subject to payroll tax.

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There are exemptions that are also blatantly unfair: RRSPs being deducted at top rather than bottom marginal tax rates, and business expense deductions that have little or nothing to do with business and that should not be shouldered by other taxpayers.

It is also time to bring in an appropriate wealth or estate tax. It is one thing to have some room to transfer family wealth to one's children. It is another to transfer all of it when much of it has been due to luck in the first place.

These are but a few examples of the areas where there can be greater tax fairness. Such fairness, we argue, would be an important first step in restoring the public's faith in our political institutions. A budget that restored the Draconian cuts to social programs would also convey the message that there is a reason to keep Canada together. The resulting employment will help produce a climate where people feel a greater sense of financial security, thus increasing confidence that it is okay for them as consumers to spend once again.

The Vice-Chair (Ms Whelan): Thank you very much, Mr. Goldberg.

I'll now turn to Mr. Robert Orr, from the Rental Housing Council of B.C.

Mr. Robert Orr (Chairman, Rental Housing Council of B.C.): Thank you, Madam Chairman.

Committee members, I'm the chairman of the Rental Housing Council of British Columbia. We represent three associations, the Greater Vancouver Apartment Owners' Association, the Apartment Owners and Property Managers of Vancouver Island, and the Professional Association of Manager Agents. Thank you for the opportunity once again to put forward our views on taxation regarding the residential rental industry in B.C.

The Rental Housing Council of B.C. represents approximately 100,000 rental units, or 25% of the total rental stock in the province. In preparing this position paper I have reviewed previous presentations made by various members of the Rental Housing Council to the committee on taxation as well as the Shinan and Company report on rental housing taxation, dated March 13, 1984, and presented to the Minister of Lands and Parks of the province of B.C.

The continuing threat of frustration throughout these presentations, beginning in 1971 with the introduction of capital gains tax and the resulting tightening of apparent tax loopholes, has left this industry with no incentive to reinvest in the residential rental market. This has created a limited supply of rental stock and therefore a very low vacancy rate, particularly in Vancouver, resulting in the introduction of very onerous rent control regulations from 1973 to the present.

The aim of this industry is to provide an affordable alternative to market housing, one that allows the opportunity for the investor to receive a fair return on his or her investment while providing a ready supply of rental housing at competitive rates. We recommend the following be reviewed and implemented in order to encourage investment in this industry and to provide incentives to create new jobs and consumer spending, which are sorely needed now to continue economic growth and stability in British Columbia and Canada.

First, avoid legislation that has a 24-year retroactive effect.

Second, reduce the portion of capital gains subject to tax, or index capital gains to avoid taxing fictitious inflationary dollars. A dollar is not a dollar, as Mr. Carter at one time stated.

Restore the roll-over provision for recaptured depreciation and capital gains tax to allow for rational movement from city to city, province to province, or sale and purchase of a similar or larger building.

Restore depreciation on masonry buildings to 5% and frame buildings to 10%.

In conclusion, the federal government needs to show faith in the people of Canada in the area of economic responsibility. We taxpayers, whether as individuals, small business, or large corporations, must have a tax regime that is both equitable and competitive, that allows us to create jobs and savings. The current tax structure is cumbersome and inflexible and it has created as many problems as it has solved.

So I ask the committee to go back to Ottawa and be bold in its recommendations to cabinet and present the Canadian taxpayer with the tools to reinvest confidently as we enter a new millennium.

The Vice-Chair (Ms Whelan): Thank you very much, Mr. Orr.

I'd like to turn now to Mr. Nicholson, from the Advanced Educational Council of B.C.

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Mr. Neal Nicholson (Treasurer, Advanced Education Council of B.C.): Thank you, Madam Chair.

Like Mr. Lavalle, I will assume the literacy and interest of the committee members and that they will therefore read the brief we've submitted, and I will just touch on some high points. It's the first time we've been here. We would like to come back, so I'll attempt to be brief.

The Advanced Education Council represents the non-university publicly funded post-secondary institutions in the province. We're a voluntary organization and somewhat proud of the fact that all 22 of the colleges, institutes, and agencies choose to belong.

We provide educational opportunities to more than 80,000 full-time-equivalent students each year, more than 250,000 continuing education students. We directly employ over 12,000 people, more than half of whom are faculty, full and part-time. With an annual payroll of about $350 million, we're a significant part of the provincial economy.

We believe education to be the solution to the challenges facing Canada, not part of the problem. Studies over many years by federal, provincial, and private agencies repeatedly show that investment in post-secondary education pays enormous dividends, reverberating through all levels.

It's predicted that 70% of future job openings will require some post-secondary education and training, and life-long learning is now recognized as essential. Governments' investment in post-secondary education is essential to provide our citizens with the education and training necessary to succeed in our rapidly expanding economy.

We believe the future is at stake. Our provincial government is commended for its continued support of our system during difficult times. They chose not to pass along federal cuts through tuition hikes or cuts to our operating grants. The further cuts they face this year, continued funding cuts by the federal government, will seriously affect quality, accessibility, and the very future of public post-secondary education in B.C.

We believe our future as a stable and self-sufficient country depends on the ability of our citizens to understand the changing realities of employment and to have access to the educational and training opportunities that will enable them to prosper in our information- and knowledge-based global economy. High-quality education and training must be available to all Canadians and must be recognized by the federal government as an essential investment in our social and economic well-being.

The cuts that have gone on in the past have been responded to by our post-secondary institutions very well through innovation and increased productivity. We've reached the point of diminishing returns. Continued erosion can only erode the system and make it inadequate to provide the needed training.

We ask that you stop the cuts now. We respect your commitment to reducing the deficit but believe investment in the education of our citizens must have a higher priority.

We urge the creation of separate and protected funding programs for post-secondary education and the holding of provinces accountable for their spending of those funds.

We ask the federal government to establish national standards for delivery of post-secondary education and training, to ensure all Canadians have access.

Increasing debt loads for students are a serious problem. We ask for a national review of student loan programs and repayment mechanisms to ensure the greatest possible access to our system.

We close our brief with a number of questions. I will give you only one of them. British Columbia's population has grown at nearly twice the rate of that of other provinces over the last eight years, placing enormous demands on our educational system. Under the current program, why doesn't B.C. receive a proportionately larger share of funding, based on a rapidly growing population?

The Vice-Chair (Ms Whelan): Thank you very much, Mr. Nicholson.

I'll now turn to Mr. Rocheleau.

[Translation]

Mr. Rocheleau (Trois-Rivières): I want to thank the witnesses for taking the time to come and meet us, but above all, I want to congratulate them for their courage since what they said, overall, goes against the official stance too often taken nowadays, a position stemming from the neo-liberalism which also permeates too often governments in place in the western world. What they said also goes against the kind of unanimism demonstrated by the media, according to whom all these new policies are applied only in people's best interests, and who don't take into account the socio- economic impact, which is exactly what the witnesses have done this morning, and very pertinently at that.

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My questions are mostly for Mr. Goldberg and touch upon three issues. They could also be directed to Mr. Gardiner.

Did you do any specific research on the impact - which could be devastating - of the modifications to the Unemployment Insurance Act, now called the Employment Insurance Act? That change alone tells of the neo-liberal nature of the action that was taken. The words sound better, but the measures themselves translate into a reduction, when you look at their impact. Were the effects of the new Employment Insurance Act on young people who never worked or work for the first time ever analyzed?

Second, what is your response to the criticism - to which I personally subscribe - directed against those who applaud the federal government, particularly Mr. Martin, the Minister of Finance? Some say that he was quite successful. We, on the other hand, say that all he did was shovel some of his problems in the backyard of the provinces and of the most disadvantaged in our society, and make their life even more difficult.

Third, what is your reaction when you consider the position taken by the federal government regarding the issue of family trusts? Mr. Goldberg, you say in your document that everyone should pay taxes according to his or her means. What do you think of the federal government's position on the issue of family trusts and the transfer of assets to the United States, which boils down to allowing some individuals not to pay taxes on 2 billion dollars? Finally, what do you have to say about the principle underlying the fact that, in 1996, family trusts enabled rich Canadian families to defer paying taxes year after year and therefore not to make the contribution they normally should to Revenue Canada?

[English]

Mr. Goldberg: In terms of the three questions on the new EI, we did pull together a paper that looked at the question of the impact of contributions coming from all workers, particularly in terms of part-time workers who at one time had been exempt from making contributions, and it also looked at the extent to which they would receive appropriate benefits according to the formulas and the background papers.

Our conclusion is that based on the current formula many of the part-time workers who pay into EI will never see benefits. There's a lot of unfairness in the current EI.

The one thing that I think is important to recognize is that the surplus that has accumulated in the EI account is, again, our money, and it could go into providing programs. It's a source of revenue.

In this province we had the foolishness, I will call it, of setting up what we call separate accounts. They had one in forestry here, under the forest renewal fund, and there have been a lot of complaints about when that money came into general revenue. It is general revenue. There shouldn't be a tobacco fund and an alcohol fund and a this fund and a that fund. In fact, it should be everybody paying into....

In terms of your second question, I think you're correct. The success of getting the federal deficit down has in part - obviously not in total - been due to the offloading to the provinces. It's that offloading that we're now seeing the real costs of.

Perhaps Alberta has been exempt from that to some extent - or maybe exempt from that from the few years of oil benefits - but everywhere else across this country, everything that we see and hear about and any data that we're able to gather says that these costs have been borne by people with lower incomes in particular.

We're seeing again that in terms of passing the buck to the poor, this is not new. It was true under the Conservative government, it's now been true under the Liberal government, and it's particularly true in all of the provinces that have lowered their welfare rates and have made it next to impossible for people with very limited incomes. Those who were the real tragedies, if you like, of government policies over the last decade have in fact been carrying an unfair burden - and we do have documentation on that for the last ten years.

Finally, the extension for the family trusts was bad law, in my opinion, and bad fiscal policy. It's time to say to people, whether they are individual wealthy families, corporations or anything else, that what is earned in Canada is taxed in Canada. What is earned elsewhere...you're taxed in those countries. You can't transfer and you can't hide.

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It's time for us to say of the gains that Canadians have given through our collective responsibility, post-secondary, and creating a productive workforce, that in fact part of those belong to all of us and not just to individuals. The family trust legislation, to me, is very poor, both fiscal and economic, legislation.

The Vice-Chair (Ms Whelan): Thank you very much, Mr. Goldberg.

Would anyone else like to reply to that question? Mr. Gardiner.

Mr. Gardiner: Ce n'est pas une question.

On the effect of the UI changes on youth, our organization is engaged in some research, primarily gathering data from the provincial government with respect to their increase in welfare caseloads and welfare applications among youth as more and more young people are finding it impossible to access the employment insurance scheme that now exists. We're currently compiling that research nationally as well.

The changes to employment insurance that have been very significant have been the re-qualification changes, the multi-user changes. Young people are very transitional employees right now with the number of employment opportunities they face so diminished. They're changing employment regularly, moving from part-time employment to part-time employment, and although they may maintain consistent employment over the years with some breaks, they are finding themselves unable to access the employment insurance program.

Another traumatic area of the changes, which Mr. Lavalle noted earlier, has been the changes in terms of direct funding of training programs to provinces, which has forced technical institutes and colleges in particular to look for other sources of funding, and I think in many cases they've been unable to find those, given diminishing provincial revenues as well.

The Vice-Chair (Ms Whelan): Thank you, Mr. Gardiner.

Mr. Lavalle, do you wish to comment?

Mr. Lavalle: I want to point out to Mr. Rocheleau that we deal with this in part in our brief on page 4.

I want to indicate the magnitude of it. In statistical terms, in the past year, 34,000 British Columbians received training through federal programs, with a total expenditure of approximately $195 million. All those programs are doomed for termination. Most of them have been terminated. So one could argue that of the 34,000 people, some of them will transfer to the programs that are going under the other fund, the fund that's being set up under employment insurance. In fact, with the narrower eligibility restrictions, we can already identify that probably one-third of those won't be eligible for the new programs.

In addition, there are specific programs that have been designated for youth, specific programs that are being reviewed at this very time. The Prime Minister has indicated that the program is going to end in March 1997. There is the Vocational Rehabilitation of Disabled Persons Agreement, which is supposed to end in March 1997, and the general youth strategy and aboriginal strategy are being reviewed as well. So I think things look very bad on the employment side with, to sum it up, narrower eligibility and a group of people being basically abandoned by any labour force development strategy.

The Vice-Chair (Ms Whelan): Thank you, Mr. Lavalle.

Mr. Nicholson.

Mr. Nicholson: Thank you, Madam Chair. I came primarily intending to speak to where we would like to see you spend, but I must respond to the family trust issue.

I'm a practising chartered accountant in my other life. I think I have some understanding of the consequences of the actions the member referred to; I have very little understanding of the legislative background.

I'd make the simple point that in a self-assessing taxation system it's critical that those taxed believe the taxation to be fair. For them to believe it to be fair, they must be able to understand it, and that's not the case amongst my clientele, or indeed for me and some of my peers sometimes. It may be time to exhume Mr. Carter, or find his grandchild, and take another look at this system.

The Vice-Chair (Ms Whelan): Thank you, Mr. Nicholson.

Mr. Rocheleau,

[Translation]

do you have any questions?

[English]

Mr. Rocheleau. No, thank you.

The Vice-Chair (Ms Whelan): Mr. Solberg.

Mr. Solberg (Medicine Hat): Thank you very much, Madam Chair.

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Once again, welcome to the finance committee. I appreciate that people take the time and put a lot of work into their briefs, and I hope people on this committee will be respectful of what people have to say.

I want to start with a minor point on Mr. Gardiner's presentation. This is a very minor point, but it is one that stuck out for me.

You say in here that while business adheres to the principle that in the long run you're dead, government is not business, etc. I think it was John Maynard Keynes who said that the first time. I just wanted to point that out.

With respect to fiscal policy, Mr. Gardiner, you state in here that so far expenditure reduction has had no significant impact on the deficit. Given that seven out of the ten provinces have balanced their budgets - and B.C. did it, albeit very briefly, at least on paper - and given that there has been a reduction in the overall federal deficit, how can you say that?

Mr. Gardiner: When we look at the real reductions in the overall federal deficit, the role that expenditure reduction has played in that has not been significant. Canada has somehow throughout enjoyed high economic growth relative to the low inflation that has been established. To suggest that the measures of expenditure reduction were the direct responsibility of what deficit reduction has occurred I think is inaccurate.

I'm not denying that there has been deficit reduction at the federal level, but the deficit reduction targets that have been set by Mr. Martin and the federal government have been much more modest than those set by the provincial governments. And in balancing their budgets provincially, we have seen some very high costs to program delivery and service delivery as a result.

Mr. Solberg: It was not very clear in your statement, though, that that was what you were talking about. It sounded as though you were denying the fact that people had balanced budgets in seven provinces, so I just wanted to make that very clear.

I want to follow up on your third recommendation, concerning taxation. This is one that really stretches it. It's asking too much of people to buy into the idea that what we need is higher taxes. You've suggested that in the higher tax brackets we should raise taxes. I'm wondering how you can justify this, given the fact that something like the top 1% of income earners in this country pay 16% of the overall income taxes. How would that affect doctors, for instance, who are leaving the country in droves to go to other jurisdictions, in part because of the high taxation rates?

Mr. Gardiner: There are many things that determine our country's attractiveness to people, including doctors, to participate in the economy. I would argue taxation is only one of those many factors. The quality of living in this country, which is provided in part by the broad social sector we have, the leisure time that is provided and the quality of the hospitals within which doctors work all affect that.

In terms of the higher tax brackets, I'm not arguing for significant increases, nor do I suggest that those in the moderate levels right now - those in the $50,000 to $100,000 incomes - are not paying approximately their fair share. But when you mention the 16% figure for the top 1% of income earners, I'd be interested to see the corresponding stat for the percentage of wealth they earn, which I suspect is much higher than 16%.

The Vice-Chair (Ms Whelan): Do you have another question?

Mr. Solberg: Yes, I just have one more question on the whole concept of full employment. Several people have mentioned this.

I'm wondering if there are any jurisdictions people can point to where the policies you people advocate have led to full employment. I would ask you to compare this to the different countries in the world that seem to be creating the lion's share of the jobs. In the Asian tigers, for instance, where taxation levels are relatively low, I would make the argument that productivity seems to be what is driving employment in those countries.

Isn't that the real issue? Don't we need to become more productive as a nation, as opposed to imposing higher taxation in some cases and spending more, which I would argue leads to a tremendous fiscal drag and actually kills jobs?

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The Vice-Chair (Ms Whelan): Mr. Allnutt.

Mr. Allnutt: To respond to the question of the doctors who might be going elsewhere, for example, there is a transfer-of-wealth tax in the United States but there isn't one in Canada. If we had one in Canada today, we would generate $1.4 billion in revenue without the impact that you raise in terms of doctors fleeing to the United States to escape the higher taxes that exist in Canada. In the United States, the supposed land of the free and home of low taxes, they have a wealth transfer tax, but we don't have one here. It makes a lot of sense to impose or have that wealth transfer tax.

I would also like to respond to the second question you raised about the importance of creating jobs. I think we want quality jobs. We're not interested in the creation of jobs à la third world, and I hope your party isn't either.

Mr. Solberg: Could you elaborate on which jurisdictions, through demonstration of implementation of some of the policies that have been discussed here, have reached full employment?

Mr. Allnutt: Sweden has a low unemployment rate. Virtually all of the European communities have lower unemployment rates than we do.

Mr. Solberg: I believe Sweden just went through a currency crisis in 1992. They had 500% interest rates overnight to stop a run on the currency there, primarily because of the tremendously high debt levels they carried. I don't think that's the sort of thing we would like to see in this country.

Mr. Allnutt: It's 1996, and that's not the case in Sweden today.

Mr. Solberg: Well, Sweden is still in a lot of trouble with their finances. The point I'm making is that in lots of these countries, in mature economies, you have high debt levels and quite high levels of chronic or systemic unemployment in many cases, and Europe certainly is not immune to that. Many of the countries there have very high levels of unemployment.

Mr. Allnutt: But they're lower than Canada's.

The Vice-Chair (Ms Whelan): Thank you, Mr. Allnutt.

Mr. Robinson wanted to comment, as well.

Mr. Robinson: Could I speak to two or three points in regard to your question?

Mr. Solberg: Yes.

Mr. Robinson: First, I think if you want to understand the commonality of the benefits of high unemployment - or at least upper unemployment levels - you could look to the G-7's understandings of the world. The multinationals are highly respected in terms of how policy is developed. If you want to look for where this view comes from, take a look at G-7 activity. We have a group of countries that come together, and they come up with common values out of that.

Within the frame of the large corporate world, you will have noticed that we spoke to the issue of having our corporations look to long-term issues. A short-term benefit for corporations in their management of unions is to have a high unemployment level. I would speak to that very specifically within all of the places where this corporatism is dominant in the bulk of the world.

These issues of corporatism, of having this short-term view that unemployment is a good thing and having corporate influence within our government levels at all parts, are some of the primary ways in which the concept of full employment is off the table. It would not serve corporatism to have that, except in the long term. Unfortunately, corporatism has a very short view of things.

The third point I'd make is that the approach to full employment we purport to put forward comes through recognizing that banks have withdrawn from providing appropriate credit arrangements to the small business community. They have withdrawn over a number of years, and that is the reason for high unemployment levels in this country. We are a capitalist society, but the funding or capital is not available for those jobs that would clean up the whole issue.

I'm not worried about the government providing the jobs. If you were committed to a healthy economy and worked out how credit could be made available to people of skill and ability in this country, we would be going a long way towards full employment. Not having the government cutting the civil service, cutting this and that to their own detriment with regard to revenue, would most certainly be a great step forward.

The Vice-Chair (Ms Whelan): Thank you, Mr. Robinson.

Mr. Lavalle, do you wish to comment?

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Mr. Lavalle: In answer to Mr. Solberg, the Swedish situation was episodic. If you look at the advanced countries and not at the Mediterranean members of the European Union, with the exception of France, the unemployment rate is calculated in a slightly different way, one that would account for more unemployed in Europe. Nevertheless, with those simple statistics, most of them have a range between 3.5% to 7.5% unemployment - with the exception of France's 13% - with a social safety net structure that is running anywhere from 130% to 157% of the total value of the social safety net in Canada. If you want success, there it is.

Mr. Solberg: But isn't it also true, Mr. Lavalle, that Canada has the highest level of debt-to-GDP in the G-7 as well, with the possible exception of Italy, which has extremely high unemployment? I think there is a rate of 30% youth unemployment in Italy. I think that's an important factor.

With respect to the comment about the Asian tigers, I would just point out that Japan has an unemployment rate of about 2.5%. It's hardly an underdeveloped country, and it is probably a worthy model in many respects.

The Vice-Chair (Ms Whelan): Thank you, Mr. Solberg.

Mr. Pillitteri.

Mr. Pillitteri (Niagara Falls): Thank you, Madam Chair.

Thank you very much for coming here this morning. Of course, if some of those presentations had been made prior to the election of Mr. Clark's NDP government in British Columbia, he would have been very happy to have seen such a response to and so much support for the government he leads.

On the other hand, somebody said about the federal government that the finance minister has made two-year rolling targets and has met those targets. He has even bettered those targets, which is a little different from what this government in British Columbia has done under Mr. Clark. But I don't want to get into politics here - what each government is meeting or is not meeting.

There was a question asked by Mr. Rocheleau about family trusts. I don't know if you attended some of those meetings, but if you recall Mr. Rocheleau's remark, we did have a review of the family trusts. The statistics on those physicians he was talking about - the ones who were taking money out of the country - came from 1990-91. I do recall that the Liberal government of today was not in power at that time; therefore there must have been some mistakes made in those days. Our finance minister, however, has made moves to close those loopholes. As a matter of fact, he has put in a threshold of $25,000 for when you're leaving the country, and that must be advised...as tax revenue and so on. So those have been closed in a sense.

Mr. Goldberg, I see in your brief that you say ``wealth or estate tax'' and ``due to luck''. Are you saying we should have what you call a wealth tax here in Canada? What do you mean by luck? Do you mean lottery winnings? Do you mean gambling winnings? What kind of taxes do you intend to bring? You don't specify.

Mr. Goldberg: An example of luck would be someone who bought into the housing market in Vancouver fifteen years ago and who is now sitting on a piece of property that will produce a level of revenue that had nothing to do with foresight, hard work or anything else. It had everything to do with luck in a particular market. So the question is how this luck - and luck is a play in terms of what happens in our lives - gets shared when it's not earned in that sense. It's not traditionally earned.

I remember when the recently retired current chair of the NOVA Corporation of Alberta was out here speaking on the issue of debt and deficit. I'm trying to remember the gentleman's name.

An hon. member: Bob Blair.

Mr. Goldberg: Yes, that's it.

Mr. Blair commented about the building of that corporation. He was very involved in it, and he estimated that 50% of the stuff that happened in that corporation was sheer luck. The rest, or a good part of it, was that he had things that all of us paid for, like the production of a highly skilled labour force. He's never really understood - at least it is his argument - why corporate leaders don't play a bigger role in terms of writing down the debt, given that they're the ones who gained all the benefit.

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That's an argument he raises, but the issue of luck has been well documented in terms of people's outcomes in life over a long term. Wealth tax is to deal with part of that issue - to recognize it and to say it is something we all share, we all have a right to it.

Mr. Pillitteri: I beg to differ. When one borrows money, as a businessman borrows money to invest or buy a property and it goes up in price, you would call it luck. On the other hand, if an economist buys shares in a corporation, that's knowledge and skill as an investment. I beg to differ with what you call luck in your presentation in terms of someone buying a property, making an investment, and so on.

More than that, I would like to say that I don't consider it luck at all for someone to buy a property. If an individual has an income and cares to spend all of his income and another individual cares to save some income and invest it...you call it sheer luck. I beg to differ with you. I don't consider that luck.

Mr. Goldberg: Let me be very clear. I didn't say it's all luck. I'm saying that there is a part of it that is luck, and that's the part that needs to be recognized. It's not all due to hard work or foresight that an individual has because of their ability, skills, or whatever.

The other part of luck is that we now know that much of our ability, skills, and whatever come from a path, both genetically and socially, that isn't transmitted to everybody. There is luck involved in that. Who we are in part is based on luck, not just on the activities that we do on our own.

The Vice-Chair (Ms Whelan): Thank you, Mr. Goldberg.

Mr. Klassen, do you wish to comment?

Mr. Lloyd Klassen (Representative, Community Based Full Employment): I just want to make a point that they're focusing on wealth tax. Somebody mentioned that term. The reason that kind of topic comes up is that you have.... Mr. Goldberg made the comment about 16% of overall tax being paid by 1% of the.... I'm not sure of the term you used.

We focus on wealth tax because we're in a situation in which you don't have full employment. If you had full employment, this kind of conversation wouldn't have to proceed the way it's proceeding, because the whole tax would be across the board and the revenue of the government would be such that we wouldn't have to be talking about how to get at this 1% of this income up here. It would be spread all the way across the board.

But we enter into this kind of conversation about wealth tax and about family tax - I don't know what the term was - because you have this large population that isn't paying taxes because they're not employed. It's a simple little circle, and we end up having to talk about wealth tax when we could be talking about how to employ people and not focusing on that kind of argument.

The Vice-Chair (Ms Whelan): Mr. Orr, do you wish to comment?

Mr. Orr: I would like to commend you on that comment. I would like to remind Mr. Goldberg that, as I understand, in 1971, the rationale for the capital gains tax was to replace the state tax. Originally the entire 100% of the gain was going to be taxable, and through the negotiations of some very sober people that was brought down to where the capital gains was reduced to 50% of the actual tax. Currently 75% is exposed.

I have stated in my comment here that the indexing of capital gains - the fictitious, if you wish, because inflation is also luck. An example would be a person who has a small two- or three-room apartment or suite and wants to sell that building. He or she could not go across the street and buy exactly the same building today. You would be short because of this tax structure. Roll-over would allow a person, if they wanted, to reinvest their money in the economy and keep reinvesting it, rather than taking it out and extracting it. Roll-over allows you to do that.

So I hope the members of the finance committee will seriously look at those types of options again. Thank you.

The Vice-Chair (Ms Whelan): Thank you, Mr. Orr. Thank you, Mr. Pillitteri.

Mr. Duhamel.

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Mr. Duhamel (St. Boniface): Thank you for your presentations.

I have two questions, the first to Mr. Orr. You may need to send the answers to us. I don't know how specific they are in terms of the material you have. I wanted to understand better than I do now what your recommendations, if they were to be implemented, would accomplish for you. The second part of that question is, how much would these cost the federal government? I'm assuming there's a cost there. Again, particularly with regard to the latter, you may want to send that in.

I will ask the next question as well and then we can wait for the responses. If I've misinterpreted it, please correct me - I won't be offended - but I believe I keep hearing that more strategic spending would indeed require additional expenditures but would probably result in an overall saving to the economy. If I've misunderstood that point, someone please correct it. Assuming that I have not, I'd like to hear a few comments about that, perhaps with an example or two of where people have observed that to be so.

Mr. Orr: On the first question, why we feel indexing capital gains.... It is a fictitious tax, it is a discriminatory tax, and it is not taxing the actual gain. Therefore, a person, in the example of a building, cannot sell that building and replace that building. He's actually taking a loss on it, so what was a capital gain actually becomes a capital loss.

In the case of the cost of capital gains reduction, that's a very good question. I have tried to establish the revenue generated by capital gains tax, and I and lots of other people would like to know what that number is. I don't know what that number is, and it would be lovely to know what it is and what it contributes. My suspicions are that the amount of money raised by capital gains is significantly less than the onerous burden it puts on the economy and private investors, which would provide more full employment to offset any loss in the supposed capital gains tax revenue that is generated at this time.

Mr. Duhamel: I understand the points you made. They've been useful, but if that were done, what would be the actual impact on housing here in B.C. in your sector? What would it do for you? That's the part I'm trying to get a better feel for.

Mr. Orr: An example would be the current provincial government, which had an interest subsidy program whereby they brought interest rates down to 8%. That was limited to a certain number of thousands of units. As soon as that plan came into effect.... That was at a time when interest rates were approximately 12%. Our company itself participated in that. There were some restrictions on that development, in that you could not start a title for ten or twenty years, etc. That was immediately applied for by the industry and taken care of. There was a limited amount of money that was involved in that, x number of units were built, and that was the end of it. Since then nothing's been built. Not one stick has been built for rental housing. Consequently, the only sensible investment to be made in the apartment, condo-style of building is of course market housing, which is just for sale.

We feel that by improving the depreciation rate, roll-over.... I'll give you an example and hope I don't bore you with this. I'm the president of the Greater Vancouver Apartment Owners Association. At our annual general meeting this past March, the 300 people in the room, all apartment owners, were asked if they would sell, build, or change what they do right now if there were a change made in the federal government's roll-over provision. Currently they're locked in. If they sold their properties at this time, they would pay a horrendous capital gains tax, after depreciation, etc. Over half of the people in that room stated that they would reinvest their money back into the apartment industry, creating more apartments.

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So, yes, there would be a direct impact if it happens.

Mr. Duhamel: Just to finish it off, then, Madam Chair, I want to make sure that I seize this. What you're saying is that if somehow this could be accepted and implemented, there would be more housing available because there would be additional investments in it.

Mr. Orr: Apartments and rental housing -

Mr. Duhamel: Therefore, there would be additional job creation and it would be a stimulation of the economy.

Mr. Orr: Yes, and an increase in the vacancy rate, which in Vancouver is currently less than 1%.

Mr. Duhamel: I understand it's really tough. Thank you.

The Vice-Chair (Ms Whelan): Thank you.

Mr. Gardiner.

Mr. Gardiner: In a request for an example of how...and I believe my argument was primarily that expenditures in education will correspond in job creation, in job growth. I will cite one example. First, mechanization has recently eliminated many jobs in Canada. It has forced us, in large part, into the unemployment situation we're in now because of this transition that we have yet to come out of. One of the ways we'll come out of it, I suggest, is through the knowledge-based sector and the information-based sector, and those, of course, require significant levels of education.

Another, though, is the field of animation, which is a burgeoning field and is one that Canada has been deemed quite attractive for by a number of U.S.-based companies. Disney, for example, has recently made a commitment to move an animation studio to to Vancouver, British Columbia, with the corresponding commitment that there would be an increase in the availability of animation programs that will produce animation graduates from our art schools within British Columbia.

There we have a direct correspondence between additional investment in education and the corresponding employment of those graduates. It means that for the investment we make in those students for a short period, we have ensured them long-term employment - or at least medium-term employment - at very high wages. Their employment will certainly pay back the cost of that investment very quickly, through the tax system and through the productive expansion of the economy within the city and the country.

The Vice-Chair (Ms Whelan): Thank you, Mr. Gardiner.

Mr. Robinson, do you wish to comment?

Mr. Robinson: I'd like to comment specifically on exhibit 2 in the paper I gave you. I will go through it for a moment with regard to your question as to the impact of the cut of a civil service job.

As an illustration, in Sault Ste. Marie the common understanding is that if you cut one person in the plant, you lose six jobs in the community. That would vary in different ways across the country, and I wouldn't argue that it would be 6:1 in all parts of the country. But the situation basically is this: of seven employees, one person comes out. For the business that can be a sound thing, because the revenues might stay the same and the cost would go down. The same step results in the government losing tax on seven workers. That, using a 30% rate, would mean they would lose 210% of the income related to the one civil servant they let go.

The impact of this is still to be felt in Canada, and it is going to be a disaster. When the federal government cuts jobs and cuts transfers to provinces, it's all through the medicare program and through the education system. This has been spoken about so clearly this morning. That is where these cuts are taking place. Every time you cut a dollar, you are losing significantly more in the way of revenue because you have the economic downturn that comes directly from that.

So what happens when a government cuts a job or causes the cut of a job is very specific. The difficulty is it's not easily legible. At the bottom of this exhibit, we make the point that when you cut that job, maybe part of that 30% goes to the province and part of it goes to the federal government. So it isn't just in the federal government budget that you see the loss of what I have pictured here as 210%. I'm not arguing that it's that high, but it's definitely over the 100%. And you don't see the impact in a direct way.

But you people will see your revenues go down significantly. The other piece of proof that supports this is that family incomes in Canada have come from $57,000 to $53,000 or $52,000 - and I haven't heard the recent ones on it - under your current government leadership. If you take a look at the tax impact, again using the 30% thing, that is $1,200 per family out of tax revenue at our current tax rates. That is per family across this country, and there are quite a number of families across this country.

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If you were to do the job of building a healthy economy and start lifting family incomes across this country.... I'm not worried about the unemployed; even the employed are suffering in this country, very severely. You need to lift those things in order to have a healthy flow of tax revenue so the economy doesn't continue to deteriorate and so that you can properly address the deficit. And that's the proper way to address the deficit.

The current government has ridden on the tail of the interest rate. All you have to do is think of $600 billion on which you have experienced a saving of 4%, which leaves the government with an improvement in operating deficit of $24 billion, and that is the whole story. This whole issue of interest has given you your progress that Mr. Martin is so proud of, and you have caused an awful lot of pain with these other cuts.

Mr. Duhamel: I understand now, and I really do want to believe you, believe you me, because it's very attractive - that is, not reducing the spending and thereby preserving the jobs and continuing the revenue flows, perhaps even increasing them. But I guess what's confusing me is, you have a social democratic government in power here in B.C., and if I'm current, there has been a recent statement indicating some massive cuts to the provincial civil service, which would appear to be much in line with what's happening federally, and contrary to that which we have been discussing.

Mr. Robinson: I don't see the relationship between what I have said and an NDP government or a social democratic.... I'm not talking social democratic. I have put in this paper things that say tax breaks ought to be given to executives. Is that social democratic? Hell, I'm not associated with social democratic.

But I will answer your question very specifically, with regard to the reality of Canada. Anybody who works in the financial field knows the dominance of the corporate value system. Bob Rae tried to go against it, if you want to talk in terms of social democrat, and boy, did he ever get it in the neck. But there is nobody who doesn't know that it is the Canadian banking system and the Canadian corporate world - that they are in fact.... Our federal government unfortunately regards itself more as a servant to the corporate world than to the people of Canada. This is really what is at the core of the whole thing.

What you want to work with is to get this corporation into a long-term focus on the Canadian economy - that was put into this paper very specifically for that purpose - so that they can come together and take this pressure of short-term gains off provincial governments, whether they're social democratic or whatever they are.

Mr. Duhamel: Yes. I just want to -

The Vice-Chair (Ms Whelan): Perhaps other members would want to respond as well, Mr. Duhamel, so please speak briefly.

Mr. Duhamel: All right.

I think the point was misunderstood. My point was you have a social democratic government approaching deficit debt in a very similar way to another government, if you wish, federally, I thought. I don't want to get into the -

Mr. Robinson: In response to your cuts.

The Vice-Chair (Ms Whelan): Thank you, Mr. Robinson.

Mr. Allnutt, do you wish to comment?

Mr. Allnutt: Yes. You asked for a specific example, and there are examples in health where a slight increase in public expenditure would save the whole system a lot of money, and that is in the private lab. The diagnostic services in B.C., for example - $170 million goes from the public purse to the private sector to do diagnostic and treatment work. If that were brought into the public sector, which would require a slight public investment, then the return would be dramatic because of those $170 million. For each dollar of work done, the private lab pockets 50¢. In other words, it's very profitable for them to be in that industry and to take taxpayers' money. A slight increase in the public sector investment would result in that money and that cost being recycled and put back into the public sector.

The Vice-Chair (Ms Whelan): Thank you, Mr. Allnutt.

Mr. Lavalle.

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Mr. Lavalle: Mr. Duhamel, weren't you the critic for education at one time? I sent you lots of stuff in 1989.

I want to talk a little bit about education infrastructure in relation to creating jobs. I can give you some very specific examples. One, Sony came into the province of B.C. and created a number of jobs, as long as they were sure they could get a sufficiently educated workforce. They actually made a contract with the Vancouver Film School.

Secondly, Canadian relocated their maintenance department here on the understanding that the provincial government would create a number of new apprenticeships in the aircraft industry, which in fact they did.

Also, the film council said they would increase investment in British Columbia in film-making if the educational level for film-making was improved and there were 12 new apprenticeships created in the film industry.

The current negotiations between IBM and the provincial government also have an education infrastructural aspect, which will have to be borne by the provincial government because of the cuts.

There are also new developments in aquaculture and biomedical technology.

These are just some of the examples of how social spending in education in particular is actually related to job creation, the expansion of investment. All of these, I might add, are out of the private sector.

With regard to the last thing, after four or five years of fairly big infrastructural spending, there is a possibility in the province of B.C. that we will have a shortfall. There's a possibility - not on the infrastructural development side but in the cost to government itself - that there's going to be some job loss. That's not going to bring a lot of money in right away, because most of these are going by attrition and by early retirement, and there is social spending to support downsizing a direct government workforce.

I don't think there are a lot of contradictions here in B.C. There are probably some things people don't like and some things that are difficult, but they haven't been helped by the CHST cuts

The Vice-Chair (Ms Whelan): Mr. Goldberg, did you wish to comment as well?

Mr. Goldberg: We criticized as inappropriate the government's announcement of the$3,500 job loss, much in the same way the $45,000 job loss at the federal government is inappropriate. It's inappropriate because we forget that whether we pay for it through a public measure, which we call taxes, or we pay for it through a marketplace called the private - if it's a range of services we all need, we still pay for it.

The example I give is I have an identical twin brother who lives in Orange County, California. His kids are exactly the same age as my children. His daughter goes to an out-of-state university to do a master's degree and has to pay $18,000 in tuition - and it's a public school by the way. This is one of the state schools, not one of the private schools, but out-of-state residents pay three times as much as in-state students pay.

Because they live in Orange County, California, and there are four of them, they have to have four cars. We have one. He pays insurance on four vehicles, let alone the cost of four cars. They have to have four cell phones because the quality of life across the street from his wealthy home is so bad that they're always worried about a car breaking down, or whatever, and you can't get out of your car at night.

There are costs that he's paying for privately in a very low tax regime, which has been experienced through proposition 13 and other things.

The notion that we're going to give more choice to individuals really talks about how individuals will be fundamentally different from others in those areas that we consider to be the collective. Hopefully, we have a common agreement, but what do we mean by the collective good?

To govern is to make choices, and it's really to make choices about how much individuals pay for the good as private individuals and how much we share collectively for a collective responsibility.

The Vice-Chair (Ms Whelan): Ms McQuade.

Ms McQuade: I want to add another example from my own background.

I teach in the public school system, kindergarten to 12, and one of the issues that struck B.C. in the last little while, although it's been building for a long time, is English as a second language.

We found from our research that a large percentage of the students in the public school system, from kindergarten to 12, whom we need to deal with over a seven-year period in order to make sure they're functional were actually born in Canada. We feel that if there was a greater investment, a greater amount put into adult ESL, that would decrease the commitment needed for ESL within the kindergarten to 12 system. If you put more money into this function, it should cut funding later on.

The Vice-Chair (Ms Whelan): Mr. Rocheleau has a brief question.

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[Translation]

Mr. Rocheleau: I have a question for Mr. Nicholson. Mr. Nicholson, I think I heard you say earlier that at some point, you worked as an accountant and you had clients who had set up family trusts. You had to advise them. I gather that you feel many of your clients do not understand or do not accept the way these family trusts work, in the end. I would like you elaborate on that.

[English]

The Vice-Chair (Ms Whelan): Mr. Nicholson.

Mr. Nicholson: I knew I shouldn't have gotten into this.

No, I do not have clients who have family trusts. I have had some discussions with clients about family trust and with some of my peers in attempting to understand the provisions of the Income Tax Act that apply, whether there might be things I perhaps should be recommending to people, and to have a general citizens understanding of the tax regime in the country.

My comment was really using family trust as an example of what I considered to be a very significant broad problem, which is that our taxation system is so complex that it's very difficult for a professional to understand it, a citizen simply cannot. There is a wealth of misinformation that walks into my office every day. I think I manage to set most of it straight.

I'll give you a single example. The Canadian Institute of Chartered Accountants is at the moment discussing the need to make our entry requirement for students entering our professional training program three undergraduate taxation courses rather than one because of the change in complexity over the last 10 or 15 years since simplification in 1971. My suggestion is that we might trade off a little equity for simplicity and understandability. That was the point I was trying to make.

[Translation]

Mr. Rocheleau: For Mr. Nicholson's information, when Revenue Canada's Deputy Minister appeared before the Finance and the Public Accounts Committees, he said that in Canada, there are about 140,000 family trusts. The Auditor General evaluated the assets held by family trusts at 1 billion dollars and more. When we asked the Deputy Minister to tell us how many family trusts had 500 million dollars and more, he could not say. He has no way to give members of Parliament an adequate answer, and to tell them whether there are 48, three or eight such trusts. We don't have this information. In the meantime, people don't pay taxes for 21 years. This is what happened in 1991 when the lobbying started. The first family trust was set up in 1972. In 1991, a lobby started so that people would not have to pay taxes as agreed, and the Mulroney government agreed to defer those taxes for 21 years. That's part of the problem.

[English]

The Vice-Chair (Ms Whelan): Mr. Nicholson, do you care to comment on that?

Mr. Nicholson: No. Thank you for the information.

The Vice-Chair (Ms Whelan): Before we head for our closing comments, I want to ask one quick question to whoever wishes to answer from the educational institutes we have before us. We talk a lot about spending, and I think education is very important. I'm wondering, and I haven't had a chance to read everything in detail, if there is any focus in our education system on meeting the needs in Canada, and the future needs of Canada?

I say that coming from Windsor and Essex county, where every week in my office I get a phone call from a mould-making institute or a tool and die company that doesn't have the skilled people they need. I'm wondering when our educational groups are going to come together and recognize the need to put forward some type of focus or suggestion other than just basic research and development. I think that is very important, but we have to focus on meeting the needs of where we're going as a country.

Perhaps, Mr. Nicholson, you could comment on that briefly.

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Mr. Nicholson: Madam Chair, other people in the room may be better able to answer this. I wasn't part of the discussions that took place over the past year that produced the strategic plan for our college institute agency system titled ``Charting a New Course''.

The major feature of that plan is the putting into place of opportunities for the educators, administrators, employers and learners for us to better fit the education provided to the employer needs of the future.

But that's not a unilateral approach. There continues to be the belief in the need for a liberal education, which is people learning to learn in order that they can learn what they need.

The Vice-Chair (Ms Whelan): Ms McQuade, you had a comment.

Ms McQuade: It's a difficult question to deal with. My background is that I teach business education. The research that we've done with employers, including some of the findings of the Conference Board of Canada, is that the majority of employers want all the kinds of things that go along with a liberal arts education. They want problem-solving. They want students to be able to, obviously, have the basics, which are literacy and arithmetic and those kinds of basic skills, but they want them to be able to work in teams. They very rarely put an emphasis on training for specific kinds of jobs.

I think that has to be balanced with the legitimate need of the business community, whatever kind of business it is, to have the employees who can come in and do the kinds of jobs they need.

I think we have to talk about the role of post-secondary institutions and their ability to provide for liberal arts, as well as opportunities for young people who want specific training in certain areas. I think it should be done in the post-secondary environment. It's a public education environment. I think that's the best use of our money.

The Vice-Chair (Ms Whelan): Thank you.

We're going to turn to closing comments now. If anyone has anything they haven't added, they can do it at this time. We are running out of time quickly. Please take 60 seconds or less.

I'll start with Michael Gardiner.

Mr. Gardiner: I just want to reiterate the importance in furthering the strategic investment - that's the term that has been used - in education as a means for improving the long-term viability of the economy.

As a country and as a federal government, we certainly have taken a very close look at how we need to address the deficit over the long term. We have the rolling plans and this vision toward long-term reduction, but we haven't done the same thing in other areas to the same extent in terms of educational infrastructure, job creation and those kinds of plans.

I would hope that this committee, as it deliberates on all the information it has received and then makes a presentation to Paul Martin and the government, takes into very careful consideration the long-term implications associated with policies of deficit reduction. I hope it looks toward building a strong infrastructure for the future, both physical and intellectual.

The Vice-Chair (Ms Whelan): Thank you.

Mr. Goldberg.

Mr. Goldberg: Just to reiterate, one of the big concerns I have is what's happening with what I call the inward-looking attitude that is taking place, as well as our very short-time horizons. We essentially talked about an event that will come out in February or March, without really looking at the longer term.

While I recognize that the Liberals did inherit a mess from the Conservative government, the question is whether, in their first term of office, they've made things a lot better. They focused it on one little area, and it may have cost another.

I think we need to recognize that it's not surprising that B.C., Alberta and Ontario are leading the charge, if you want, for greater provincial autonomy, outside of the historic work that Quebec has been doing. I think there's a real danger that, as they look inward and feel they've been penalized so that they're paying a cost and can't fight their own deficits, our capacity to stay together, be concerned about one another, and have an extended external view is being lost.

I hope all parties beyond this 1997 budget will begin to ask themselves where it is we want to go in the long term.

The Vice-Chair (Ms Whelan): Thank you.

Mr. Nicholson.

Mr. Nicholson: Thank you, Madam Chair, committee members. I would simply say that I'm glad we were here. I would hope to be here again next year. We will be paying attention during the year. Thank you.

The Vice-Chair (Ms Whelan): Thank you.

Mr. Klassen.

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Mr. Klassen: I want to make just one simple point. I would call it a moral point. It is to pay attention to how we do things.

I look at even the way this whole event is structured. I came a bit early. It was at about 10:45 a.m. It was fairly obvious that with the group of people sitting there, the basic message was that everything was fine. Then we have a group of people now who say that everything is in a shambles.

So we continue to place each other in camps and set up situations that make it next to impossible to really listen to what anybody is saying or start to pay attention and actually want to work toward everybody's well-being rather than putting this particular group against that particular group.

I don't have a great deal of confidence that this is going to happen in the next year or so, but I would like to just say that I hope, as people, we can start to think in those kinds of terms rather than in this kind of divisive way of doing things.

Mr. Robinson: I just repeat that I would love to see this committee take seriously the fact that the central responsibility of the federal government is to provide leadership in building a healthy economy. That has to be priority number one. I have no sense, at this point, that this is being picked up or will be picked up, or even has any place in your dialogue.

Ms McQuade: This is my first time appearing in front of a committee such as this. I must admit that I was a bit discouraged by a lot of the discussion because it was so tied to squeezing a little bit more money out of here, cutting more employees here, as well as the costs and all those other kinds of things.

So for my final comments, I'd like to reverse it. I'll ask the committee to consider the cost to our society and country of not providing quality education or health care. I would agree with the Prime Minister, who believes that government can be a force for good. I believe that too, but I believe it's in your hands now.

Mr. Lavalle: I think the educational institutions in the country, particularly in British Columbia, have gone through a physical process to try to balance what they saw as the traditional needs of education with the new needs, the labour-market-oriented needs, which I think you raised in your question. I think we're on the verge of being able to have a happy blend and make some progress, but money is short. And as indicated, the policies of the government are not helping that opportunity to come about.

I guess I'd close with one thing, as well as thanking you for having these hearings at least. Remember that the majority of those in this committee belong to a party that was the architect of these programs and stimulated these kinds of measures that had an equity aspect, democratic aspect, economic aspect and social-cultural aspect. All these things were in those early debates, when you put things like the CHST into effect or the forerunners of it. I would ask you to go back to your roots, because they're your roots as well as mine.

Mr. Orr: I'd like to just close on a positive note and perhaps with a small bit of information.

I am in the real estate business. Everybody in our industry certainly puts education and a strong health system at the top of the list as far as resources that cannot be let down. However, one of the things that I think the government over the years has evolved into, unfortunately, is that it became apparent that its policy would drive the economy of the western countries, which is the cause of the drastic cutting now.

That has proven not to be a particularly sound methodology. Individual ability, given the right tools, is unbelievably creative with great ingenuity.

I'll leave you with this one statistic. Two years ago, we had a poll constructed to find out what a fair tax was. Before we talk about capital gains or anything, maybe we should find out what people actually thought was an acceptable threshold of taxation.

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We had a professional poll done on that, and it was tagged to a whole series of questions. To be brief, the question simply asked people what they thought was a fair taxation rate - the total taxes paid - for all the services they received from the provincial and federal governments. That was a poll of 500 people across the province of British Columbia. Over 75% of the people suggested that 20% was that number. They were prepared to pay 20%. After that, there was one gentleman who wanted to pay 95%, and there was one gentleman who didn't want to pay any tax, but 75% of the people thought that 20% was a proper threshold.

So, we're out there, as taxpayers, as citizens of this country.... Everyone wants to pay their fair share. However, no one wants to be gouged. Those people who do create jobs want the opportunity to create jobs. Without a proper tax regime that's impossible.

Thank you.

The Vice-Chair (Ms Whelan): Thank you very much, Mr. Orr. That was a very fitting closing comment.

I want to thank all of the witnesses who have appeared before us. Your comments are listened to.

Mr. Klassen, although you pointed out that we do have different types of settings or different types of groups, we have those across the country. It's not as if we only hear one voice. We do hear all voices and we try to encourage discussions on similar topics among individuals appearing before us. Sometimes we're better matched than others, but we do appreciate that. It will be noted that you felt that way.

I appreciate all the comments today. I hope you'll watch the budget with interest now that you've participated in the process.

We will reconvene in an hour.

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The Vice-Chair (Ms Whelan): I call this meeting to order.

It is a round table format today. You will have approximately three minutes to present your opening comments, and after that we'll go to questions. If you wish to participate in a question that's not directed to you, indicate that to me, I'll make note of it, and you'll be allowed to answer or participate in any question or discussion you see fit to. Try to keep your opening comments as succinct as possible so that you get the pertinent points on the table, but leave plenty of time for a question.

I would like to begin with Chris Richardson from the Vancouver Foundation.

Mr. Christopher J.K. Richardson (Director, Gift Planning, Vancouver Foundation): Thank you, Madam Chairman. I'm delighted today to be accompanied by the president and CEO of the Vancouver Foundation, Richard Mulcaster, and Bruce Buchanan, the volunteer chair of the foundation. We're pleased to be here to speak on a provision that we think is very important, which is the crown-like treatment of all gifts to create or to build permanent endowments.

On page 3 of my prepared remarks - this proposal will level the playing field. It was proposed to you during your consultation last year, on December 1, and was one of three major proposals from the volunteer sector round table review task force that I had the pleasure of working on with finance department staff from May to July.

This proposal is so important because it is simple. It will equitably apply to all charities, and in these times of fiscal restraint I believe it would be good public policy.

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The last point on page 3 is simply that there are Canadians who have been supporting charities. With the trillion dollars that we keep hearing about but are looking for that will be transferred from one generation to another in the next decade, it is important that those funds see themselves in benefit to charities.

I'd like to jump to page 5 of the presentation. There are a few questions. Why are endowments necessary? Why crown-like treatment? Weren't the March 6 changes - which we appreciate - enough? Does the proposal meet all the principles identified by the incentives review task force?

Before I start answering those, I would draw your attention to our annual report. On page 6 I mention some very innovative projects that have been highlighted, which is why community foundations are so important. Post-secondary education is important and health care is important, but community foundations, as well as other charities, have to respond to the needs of today that cannot be anticipated.

Our proposal in terms of crown-like treatment says that if you provide money for an endowment, you'll receive the ability to deduct up to 100% of your net income. Not a lot of people will do this, but it will level the playing field, as I say on page 8, with entities that are not of your development, but which we all face - crowns, a patchwork of benefits that some have and some don't.

On page 9 I mention that some principles were created to judge incentives, and this proposal certainly passes those. I believe it makes sense, and I would ask that your committee give consideration to a very simple amendment to the Income Tax Act, which is that crown-like treatment be afforded to all gifts. I've suggested charitable organizations, public foundations and municipalities, as long as those gifts are part of a permanent endowment.

Madam Chair, that is my presentation.

The Vice-Chair (Ms Whelan): Thank you, Mr. Richardson.

I'd like to turn to Mr. Peter Armstrong from the Great Canadian Railtour Company Ltd.

Mr. Peter Armstrong (President and Chief Executive Officer, Great Canadian Railtour Company Ltd.): Good afternoon, Madam Chair and members of the committee.

My name is Peter Armstrong. I'm the president, CEO and founder of the Great Canadian Railtour Company, which operates the Rocky Mountaineer train service.

In 1990 my company privatized the tour train that had previously been operated by VIA Rail Canada. It runs between Vancouver and the Rocky Mountain resort communities of Jasper and Banff, with an overnight stop in Kamloops. Our customers refer to our service as the most spectacular train trip in the world.

I appreciate the opportunity to participate in this important pre-budget consultation. The committee is seeking input from Canadians on how best to promote economic growth and job creation. It is this specific term of reference that has made me so anxious to be here with you today. I'm very proud of our small company and the accomplishments of our growing team of dedicated employees.

When we acquired the operating rights of the Rocky Mountaineer rail tour from VIA Rail, the service was losing money and there were only 7,200 passenger reservations. Since then we have grown steadily each and every year. In the operating season just completed we carried almost44,000 passengers, offering a unique rail experience through the Canadian Rockies.

In September of this year the season was highlighted by Rocky Mountaineer pulling out of Vancouver station with a 37-car train filled with 1,100 passengers, the longest passenger train in Canadian history.

We're committed to delivering the highest quality rail tours and experience. In fulfilling this dream, we developed an aggressive international marketing program. We've grown to the point where we directly impact the employment of several hundred people in British Columbia and Alberta, providing a significant economic stimulus to the cities of Vancouver, Kamloops, Jasper, Banff and Calgary. Because more than 75% of the excursion visitors who enjoy our service come from outside of the country, our company is contributing in a very positive way to the Canadian balance of trade, particularly to the balance of trade in tourism. We're doing all of this on our own, without any government subsidy. If fact we're now paying taxes.

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It has not been easy. We've had to overcome many challenges, including the widespread impression in the marketplace that train travel in Canada was either in decline or non-existent. We had to suffer through four years of losses. We've done everything the government has asked us and more. We've clearly demonstrated that a policy of commercialization can succeed, to the greater benefit of all taxpayers.

Members of the committee, we want it to continue to grow, to create more new jobs and to promote economic growth. I was planning to inform you today that our plans for future growth continue.

Our company had decided to invest an additional $13 million to build facilities in Kamloops to maintain our equipment, to store and upgrade it, and we have bought additional cars to increase our frequency. We are acquiring new cars and renovating our present fleet, and this is a major investment for a company of our size.

However, instead I must tell you that our company is seriously threatened and our very survival is at stake. Why? Because heavily subsidized VIA Rail is now proposing to compete directly with us. The crown corporation's western transcontinental service also travels along our route between Jasper and Vancouver. VIA proposes to double its capacity, but only during our operating season and only between Jasper and Vancouver.

We cannot compete with a large crown corporation that is subsidized each year by hundreds of millions of taxpayers' dollars. No private operator could compete under those circumstances.

VIA Rail's mandate is to provide an inter-city network of passenger services, not to serve as a tourism carrier competing unfairly with the private sector. Furthermore, there is no public need for VIA Rail to expand its seating capacity along the Rocky Mountain route only during our operating season, unless of course this is part of a deliberate effort to put us out of business.

VIA Rail is attempting to justify this very selective expansion by claiming they will now be able to turn a profit on this small portion of their western transcontinental route. That would be a first. It could only be believed if one was willing to completely ignore the fact that the crown corporation does not properly account for its overhead costs or pay any interest on its massive debt.

In less than two decades VIA Rail has added more than $7 billion to Canada's national debt. According to the crown corporation's most recently approved corporate plan, VIA will add another $1 billion of debt by the turn of the century. It is therefore extremely difficult for me, and for our company's stakeholders, to fathom why this government-owned company would be permitted to expand on any route, let alone on ours, which is the only portion of any VIA route where there is private sector competition.

I must add that the government has consistently encouraged private competition. Such a move by VIA Rail doesn't make any sense, especially at a time when our country is finally making progress in addressing the issues of debt and deficits. Neither does it make any sense if we are truly serious about creating new jobs and encouraging economic growth. Why would Canadian taxpayers want to subsidize the travel of foreign visitors to our country? Make no mistake, because that's precisely what we would be doing if we allowed VIA to expand into the tourism business.

Members of the committee, I'm asking you today to recommend to the Minister of Finance and to the Government of Canada that an immediate halt be placed on any expansion plans of this subsidized crown corporation. Its proposed plan of action now threatens the continued viability of a tax-paying company.

A promised comprehensive review of VIA Rail and passenger rail travel in our country must be conducted before any expansion of VIA's mandate is considered. I urge members of the committee not to sit back and let this taxpayer-supported company kill the goose that is laying the golden eggs. Our company's future, and the hopes and dreams of our 250 employees and our many suppliers, depends upon your support.

I've also brought some background papers, dated October 2, and a brochure on our company.

The Vice-Chair (Ms Whelan): Thank you, Mr. Armstrong.

I'd like to turn now to Gary Matich from Sport B.C.

Mr. Gary Matich (Director, Administration and Finance, Sport BC): I'm here representing two organizations - Sport BC, which is the umbrella sport federation of the province for the 80 sport governing bodies, and the Canadian Council of Provincial and Territorial Sport Federations, the members of which are the 12 federations from each of the provinces and territories.

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I'd like to address one very specific and technical issue on the Income Tax Act, which grants charitable status to sport under what's called the Registered Canadian Amateur Athletic Associations definition. It means an association that has as its primary purpose and function the promotion of amateur athletics in Canada on a nationwide basis. It's on the nationwide basis that I'd like to speak, because that provision has caused a number of problems for us in the sport community, and some inequities. In the brief I have them all listed. I won't go through them all.

One of the inequities is that other causes out there, whether they're arts or recreation, do not have this nationwide restriction on them, whereas sport does. At Sport BC our theme is sport builds strong, healthy communities. We address health issues. We address social issues, such as youth at risk. We address education issues. All through it, sport is our tool. We find it's a very economical method of addressing those issues. But it does not have the same status as other organizations in the community for getting charitable status.

Another inequity caused by that nationwide scope is the administrative burden. In practical terms, it means a national organization, say Volleyball Canada, has charitable status, but the BC Volleyball Association, or Sport BC, for that matter, does not have charitable status. Therefore everything that needs to be processed has to go through a national office, generally in Ottawa.

With all the different levels of programming, etc., often it isn't worth making the effort to fund-raise on behalf of sport, because of the red tape involved. Secondly, the national office loses control. There's an accountability issue. Because programs happen at a local level and get filtered through the national office, some accountability gets lost in those programs and how they're controlled.

In 1989 the Deputy Minister of the Department of Finance wrote to us and indicated the rationale for the nationwide scope. He said it was intended to ensure the bona fides of applicants and to ensure no duplication in entitlement could be achieved.

We believe there are other ways of achieving those objectives. I've given an example in here. For example, it could be restricted to members of organizations recognized by Sport Canada or the Canadian Olympic Association.

There are other ways of doing it that could eliminate some of the inequities and reduce some of the administrative burden involved.

Also, in a time of declining government dollars that can go towards sport, we look for tools we can use ourselves to do some fund-raising and achieve resources outside of government. We're looking for some change to the Income Tax Act that could make it a little more practical for us to do that.

I thank you for inviting me to address you today.

The Vice-Chair (Ms Whelan): Thank you very much, Mr. Matich.

I'd like to turn now to Connie Eaves from the National Cancer Institute of Canada.

Dr. Connie Eaves (President, National Cancer Institute of Canada): Thank you. I'm pleased to be here today.

I'd like to speak to you not only as president of the National Cancer Institute of Canada but also as a leukemia researcher at the British Columbia Cancer Agency and the University of British Columbia.

I'm here today to represent the Council for Health Research in Canada and also Canadian scientists and teachers at large and women and youth in particular.

The purpose of my presentation, which I hope you have a copy of - I gave one to the lady at the desk at the beginning of the meeting - is to bring to your attention the terrible erosion that is occurring in university and hospital-based biomedical research in Canada. I would bring your attention to the figure that's attached to the back of the presentation. You can see the funding of government-based research in Canada through the Medical Research Council has fallen over the last several years, in marked contrast to the other major leading countries in the western civilized world. It takes no imagination to appreciate what the consequences of that are likely to be in all aspects of our society.

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So one of the purposes of this presentation is to make the case for increased government spending in biomedical research and health services research.

The Council for Health Research in Canada is a coalition of nine voluntary health agencies and medical research institutes. In particular, this includes the two largest charitable organizations: the Canadian Cancer Society, with a membership of over half a million people across Canada, and the Heart and Stroke Foundation of Canada.

As part of this group, I wish to make the following points. Increased government spending on research promotes health - in fact is essential to promote health - and provides jobs, in both the short term and the long term. These are crucial points as we move towards an increasingly technology-based society. Increased government spending on research is also critical to attract our youth back into science and to salvage our eroding training programs. Increased government spending on research is critical to prevent the dissolution of recent fledgling initiatives, such as training women in science, women's health, the Canadian breast cancer research initiative, a growing desire to have a larger input into prostate cancer, and smoking prevention in our youth, to name only a few.

How can this be achieved? I've suggested three ways that one might focus on initially. We are asking that 1% of all health dollars be set aside for both basic research and the evaluation of our health services. Improve health care not by simply adding new services, but by replacing those that are ineffective with newer mechanisms and with knowledge, not with hearsay. Increase allocations to the research councils: NSERC, MRC, and SSHRC. Reverse the cuts of the last four years and bring Canada's research investment in line with the other G-7 countries. Improve measures for making charitable donations more fiscally attractive, a theme we heard earlier. A large proportion of peer-reviewed medical research, particularly in cancer, in which it's almost half of all cancer research, is now funded by charitable dollars. More could be achieved through this important avenue.

We believe Canadian science is at risk as never before, and the Canadian public wants research and technology to increase. We ask for the next budget that the federal government invest in science, reinvest in its scientists, and reinvest in its scientists of the future. These dollars will lever key funds from industry. They will create new industries, rather than go across the border along with our talented young people, and they will offer new opportunities for a better health care system here in Canada.

Thank you.

The Vice-Chair (Ms Whelan): Thank you, Ms Eaves.

I'd like to turn now to Dr. Victor Ling from the B.C. Cancer Agency.

Dr. Victor Ling (Vice-President, Research, B.C. Cancer Agency): Thank you, Madam Chairman.

My name is Dr. Ling, and I'm the vice-president of research for the B.C. Cancer Agency. I'm also the vice-dean of cancer research at the University of British Columbia.

The B.C. Cancer Agency has the mandate to undertake cancer care, education, and research. Cancer is now the number one killer in British Columbia, surpassing heart disease. It consumes significant health care dollars and affects the lives of every family in this country.

Canada has an enviable record in innovations that have made a difference in cancer control and therapy. The cobalt bomb for radiation treatment of cancer was invented in Canada by Harold Johns. The basic knowledge that eventually led to bone marrow transplantation was discovered here in Canada by Drs. Till and McCulloch. The discovery of anti-cancer drugs such as vinca alkaloid was made here in British Columbia. These discoveries and innovations have impacted positively on the economy of Canada, reducing mortality and morbidity from this dreaded disease.

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As Dr. Connie Eaves has already pointed out, reduced funding for research in this country has already put us on the endangered list as far as being a provider and innovator of new technology in health care. Unless we take positive steps to embed in our policies a commitment to support research for health care, we will end up importing and consuming technology from other countries.

We see on the horizon the enormous impact that genome science will have for many diseases as well, well into the 21st century. Many countries have made major investments in this area. We in Canada are cutting back on funding for agencies that are in the position to coordinate efforts in this area.

Investing in scientific research is investing in the future of our country. We are competing with other developed nations, particularly the United States, where very much larger sums of money per capita are supporting innovative research.

Our bright and talented young people will soon find that they have no future in this country. We need to be in the position to attract the brightest and the best to work in our health care system and in our biotechnology industry.

There need to be commitments at the policy level not to further erode research dollars to the health care industry. This must be a long-term commitment because the training of a clinical scientist takes about ten years after he or she receives a first university degree.

Without clear evidence that this country is interested in the development of innovative health care solutions, it is hard for us to encourage young people to take up medical research as a career. It is often difficult for us to attract young faculty members to fuel and rejuvenate our university-based research system and our internship-based research system.

Madam Chair, a number of my colleagues told me I was wasting my time to come to this committee, but I hope you will prove them wrong.

The Vice-Chair (Ms Whelan): Well, we hope so, too. Thank you, Mr. Ling.

I'd like to turn now to Janice Margolis, from the endowment fund of Jewish Federation of Greater Vancouver.

Ms Janice Loomer Margolis (Jewish Federation of Greater Vancouver): Thank you, Madam Chair. Thank you, all, for providing Jewish Federation of Greater Vancouver with the opportunity to present its proposals to you.

Jewish Federation of Greater Vancouver is the umbrella organization representing the Jewish community of the lower mainland of B.C. and 23 Jewish agencies and service organizations that provide educational, cultural and social services. It is a public, charitable foundation.

Like many other charities, Jewish Federation is finding it more difficult each year to increase the dollars raised, let alone raise the same dollars as were raised in previous years.

Of course we are all looking for new ways to raise funds, but we believe that tax incentives that encourage increased giving would assist greatly in stimulating philanthropy. I'm going to reiterate or review three proposals that I know have been put before you by the Charitable Incentives Review Task Force and the Canadian Association of Gift Planners.

I do have a brief, and I'm just going to go through it, highlighting some of the aspects of it.

We are making three proposals. The first is to develop incentives for endowment building, which Christopher Richardson spoke about. The second is to create a stretch credit for donations in excess of previous donations, and the third is to exempt gifts of appreciated property from capital gains tax.

The first - the incentive for endowment building - is really a response to the need for charities to have reliable funds from which they can provide their services. If charities - and particularly small organizations that do not often have resources for raising funds - knew they could rely on regular funding sources, they could more effectively provide services for the good of the community.

Reliable funds may be provided through endowments, which are capital amounts that are invested in perpetuity and the income annually distributed. We propose there be an incentive to taxpayers to increase the donations to build endowments. To do that, we propose there be tax credits for gifts to endowments that may be applied against 100% of the donor's taxable income - the crown-like treatment Christopher Richardson spoke about. This would clearly encourage increased giving to endowments. It would benefit all charities, large and small, and would be acceptable to all taxpayers of all income levels.

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The second proposal is the stretch credit. Charities are trying to provide potential donors with information on how needs have increased, but it's imperative there be a partnership to also provide incentives for incremental giving. This partnership would be tax incentives provided by the government.

We propose there be a more generous tax credit for donations that exceed the greatest amount a donor has claimed in any previous year. So incremental gifts would be given a greater tax relief. We propose that the donation amounts that exceed their lower-level giving be eligible for a tax credit rate of 40%. This benefit would clearly encourage increased giving year after year; would benefit all charities, large and small; and would be meaningful to each taxpayer, because it would be unique to his or her giving pattern.

The third proposal is an exemption of capital gains tax. Charities are very aware that there is going to be a significant transfer of wealth between generations within the next 20-year period. We also know the generation that's going to be receiving this wealth is not generally as philanthropic as the generation that now holds it. So we really are looking at ways to encourage individuals who've acquired and held assets during their lifetime to transfer those assets to charities.

We propose that gifts of appreciated property be exempt from capital gains tax. The experience in the United States has shown that individuals who transfer these appreciated capital assets receive tax receipts for the full value of the asset, which can then be used to offset other income. This is a great incentive for encouraging charitable gifts of these assets. They don't realize the capital gain from the disposition.

Currently the tax receipt is primarily used to offset the capital gain that is realized on the disposition. If the capital gain weren't realized on the disposition, the tax receipt could be used to offset other income. This is a win for the donors, in their minds.

There have been studies on how much in fact comes out of the public coffer to encourage this. It really allows the individuals to have increased income and at the same time provide dollars for the public good.

This kind of tax benefit would encourage increased and accelerated philanthropy. Again, it would be available to taxpayers of all income levels and it would assist charities both large and small. Particular community foundations are set up so they can assist smaller organizations to assist in the facilitation of major planned gifts.

Those are the three proposals we put forward: tax incentives for endowment-building, the stretch credit, and the exemption of capital gains tax on appreciated property. We believe these would stimulate increased philanthropy and are critical to encouraging individuals to transfer their personal wealth for the benefit of the public good.

Thank you.

The Vice-Chair (Ms Whelan): Thank you very much, Ms Loomer Margolis.

We'll start now with questioning from Mr. Rocheleau.

[Translation]

Mr. Rocheleau: I have two questions. The first is directed to Mr. Armstrong and the other, to Mrs. Eaves.

Mr. Armstrong, it seems to me you are very hard with VIA Rail. Such a company has to operate throughout Canada, even in those parts where the density of population is low, while you, with the government's authorization, have taken over a sector which begged to be developed.

Are we to understand from what you said that you are concerned about the competition which could come from VIA Rail, should this company try to match your performance over the last six years? This is my first question, and I am going to ask right away, if you allow me, the question I want to direct to Mrs. Eaves.

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Mrs. Eaves, could you clarify a bit further the second issue you raise on the first page of your brief:

[English]

Increased government spending on research is critical to attracting our youth back into science and to salvage our eroding training programs.

I would like you to comment this paragraph.

[English]

Mr. Armstrong: I'd like to respond to your first question. I do not feel I've been overly harsh on VIA. I believe VIA has provided a service - a very expensive service - that has not been something the general public uses. The average subsidy is approximately $100 per passenger. In these tight fiscal times, with the problems that all levels of government are experiencing, I think the VIA Rail model is not necessarily the only model for transportation, and I think there are better ways to use those limited dollars.

With regard to competition, our company is not afraid of any competition. As a matter of fact, we compete daily with other providers of tourism service. In western Canada there are a number of modes of transportation that people can take. They can go by motor coach, private car, renting campers and other ways to see the Rockies. We have to provide a service that is competitive and attractive to our customers, so we're in competition all the time. At some point in time there could be another private sector competitor. We're very aware of that possibility and might even welcome it.

But VIA is not a private sector competitor. They have received $200 million in capital upgrades to their equipment - something I didn't receive. They have a preferential trackage fee that they inherited when CN was privatized - something I didn't receive. They pay no rent or taxes on their stations - I don't receive that benefit. The list goes on. Comparing a company like ours against something that is so subsidized in so many different ways - there's no easy way to make a comparison other than the fact that if the government feels the benefits outweigh the dollars, then I have a real problem. But I don't think they're going to find that.

When they do a detailed study I think they're going to find that we attract good quality tourists who bring their money, and we get no subsidy for it. Our growth has been 900% over the last six years, and VIA's growth has been marginal over those past six years.

[Translation]

Mr. Rocheleau: Do you still mean VIA Rail or do you sometimes also include CN when you talk about public companies?

[English]

Mr. Armstrong: I was speaking only about VIA Rail. The reference to trackage is a special deal that VIA Rail got in the privatization of CN. That's a historic agreement they have that goes on for another 12 years, but we have no gripes with CN. We pay commercial rates to CN and to CP. One of the great myths in this business is that you can't get along with the railroads, that they don't like passengers. Nothing is further from the truth. Both have been incredibly good companies to work with and great suppliers.

The Vice-Chair (Ms Whelan): Dr. Eaves, would you like to answer the second question?

Dr. Eaves: I think the question lost something in the translation. My understanding is that you were asking more specifically about trainees, or were you asking about the entire research budget?

[Translation]

Mr. Rocheleau: I just want you to elaborate on the second issue you raise on the first page of your brief.

[English]

Dr. Eaves: Right. A few years ago we had a Medical Research Council program that funded students not only through the operating grants program, but it also made independent awards to students so that they could choose their own site.

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The same was true in the National Cancer Institute. With the general climate of decreased funding, these programs have been terminated. With the general decline of research funding, which has impacted on the universities in terms of their ability to sustain researchers and research, their ability to support trainees is also declining. So we have a multi-factor input into the erosion of training of graduate students and post-doctoral fellows, which are the steps all trainees go through in order to become independent scientists or independent scientists in industry.

The general feeling is that there's been a decline in the accessibility of those people, the opportunities we can provide to those people, and the number of young people who are coming into professional science training. Does that answer your question?

[Translation]

Mr. Rocheleau: Yes, thank you. I have a short question for Mrs. Margolis. In your brief, you say:

[English]

``Jewish Federation of Greater Vancouver; For Ourselves; For Our Children; For Israel; Forever''.

[Translation]

Should we understand that part of the funds collected by the Jewish Federation of Greater Vancouver is sent to Israel and, if this is the case, how much?

[English]

Ms Loomer Margolis: I may have missed a bit of it, but I think you were asking what percentage of funds actually go to overseas charitable initiatives. From the funds raised in the Greater Vancouver area, approximately 40% to 50% go to overseas programs. That would be in Israel or around the world. The remaining portion would stay in Canada.

The Vice-Chair (Ms Whelan): Could you expand on those programs? What is their purpose? What are they used for?

Ms Loomer Margolis: The overseas programs?

The Vice-Chair (Ms Whelan): Right.

Ms Loomer Margolis: The overseas programs are absorption programs financed through funds raised by the Jewish Federation - social service programs and buildings and things like that for new immigrants in Israel. What is your concern that it could be? Do you have a concern that it could be a particular area of things?

[Translation]

Mr. Rocheleau: No. I am trying to find out how much is going to another country, and I would also like to know whether community groups such as yours, which are supported by the government, proceed the same way and send funds overseas, for instance, the Greek or the Italian communities, or if it is only the Jewish community who takes such actions.

[English]

Ms Loomer Margolis: I can't speak on behalf of the other agencies, so I don't know that for sure. We don't send it abroad directly from Vancouver. It goes through a national organization that is monitored - the United Israel Appeal, which in fact sends the money abroad. So it doesn't actually happen at the local level. Some of the money that is sent through the United Israel Appeal is actually filtered back across Canada. That's why I'm saying 40% to 50%, because a lot of those dollars, even though they come from Vancouver, are allotted across Canada.

The Vice-Chair (Ms Whelan): Are you finished Mr. Rocheleau?

[Translation]

Mr. Rocheleau: How can you say that it comes back to Canada?

[English]

Ms Loomer Margolis: It leaves the Vancouver area and goes to a national organization that would support organizations that are being funded nationally.

For example, the Canadian Jewish Congress has a Pacific region office here in Vancouver. They get their funding from the national organization. That budget process is done nationally, not from a local pot. The funds raised in Vancouver don't go to our local organization. They go nationally and then are filtered back to the different Jewish communities across Canada.

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The Vice-Chair (Ms Whelan): Thank you.

Mr. Solberg.

Mr. Solberg: Thank you very much, Madam Chairman.

I'd like to welcome all the witnesses today. In your individual sectors, you all make great contributions.

I want to follow up briefly on what Mr. Rocheleau was saying. I want to clear up what I think is a misconception.

Mr. Rocheleau seemed to indicate that the Jewish Federation is receiving government grants. That's what it sounded like to me, and I don't think that's anywhere in your brief and I don't believe you do.

Ms Loomer Margolis: That's correct.

Mr. Solberg: Okay. I just wanted to make that very clear.

I also want to point out that there are all kinds of non-governmental charitable organizations in Canada that receive money and then use it for relief work around the world. This is not an anomaly.

I want to follow up, though, primarily on what Mr. Armstrong was saying.

Madam Chair, I'm happy to have Mr. Armstrong here, but it should be to point him out as an example of what we should be doing with our transportation services across the country. Contrary to what Mr. Rocheleau said, companies such as Mr. Armstrong's are precisely the types of companies we need to have across the country.

If we've lost $7 billion over several years because VIA Rail is that inefficient, then perhaps we should have more companies like yours in other parts of the country.

My only experience with VIA Rail before they had to abandon the route on the prairies was this one. My wife and I were waiting at the train station in my community, in Brooks, Alberta. We waited for an hour; there was no train. We picked up the phone and called them. We phoned several times and couldn't get an answer. We finally got an answer and they said, ``We're going to be late''. I asked how late, and they said, ``Two days.'' Two days late! So it's not really a surprise to me that VIA Rail no longer exists on that particular route.

In that instance, by the way, they had problems with the rails because of the cold weather.

I congratulate you on what you've done. I'm amazed that you have to come here to make your case. I can't believe VIA Rail has the audacity to try to cherry-pick after you've proven you can do the job ten times better than they could.

I don't know if you want to respond to that, but I'm amazed it had to get to the point where you have to come to the finance committee to make your case. I can't believe VIA Rail would be allowed to do this after they've proven they couldn't do it in the past.

Mr. Armstrong: Thank you very much, on behalf of the 25,000 shareholders we have in our company. I'm going to take your message back to them. This is fantastic.

We're equally amazed, and it gets even more bizarre. VIA Rail, which receives basically $2 to $3 in the way of subsidy for every $1 of revenue, does not publish any information that allows you to make any determination of how effective they are or are not by route. They always seem to be able to find those one or two little items that indicate they've had a good year, but not on any commercial basis.

As a matter of fact, if they were a public company, under the rules of the TSE, they'd have to file a lot more information. There's no information in the public domain as to how effective they're not.

What's most astounding is that the subsidy for the trans-continental is approximately $50 million a year. It could be as high as $100 million, depending on how they account for it. For that, in the summer months they generate 30,000 to 40,000 passengers on the western trans-continental between Vancouver and Jasper.

The Prime Minister has put together the Canadian Tourism Commission and given them $50 million, and they're generating $8 billion to $9 billion of economic activity out of those marketing dollars.

If the money were redeployed - and that's one of the things I want to say in my message - they could do even more. They could create more taxes to be paid, more jobs, more well-being and hopefully people who would be able to give money to charities.

Mr. Solberg: I just want to ask one final question to the people from the charitable sector.

I've read some of these proposals before. I think they're excellent. Perhaps people in the finance department would want to consider some of the specifics and what kind of impact they have.

I'm wondering whether or not you have any studies that indicate what kind of impact this would have on revenue, or if you've made any projections, and also what kind of impact it would have on giving for things such as endowments as well as capital assets.

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Do you have any kind of study or information you can refer to?

Mr. Richardson: As a result of the discussions, and I had the privilege of being one of the five members of the sector meeting with Finance officials, there are some models that the finance department has access to.

I am not aware of their numbers because I'm not privy to them. We met on five separate occasions over three meetings in May, June and July. In all our discussions the feeling was that since it was the finance minister who encouraged the consultation, to further encourage charitable giving.... The paper you have as appendix C to the presentation today is the interim report of the committee.

We had always been going on the basis that there might be.... About $900 million is the revenue cost of charitable donations in Canada. We were talking in the neighbourhood of $50 million to $100 million, given its multiplier effect, which is a factor of anywhere from 3 to 4 to 1. We believed this might be a reasonable cost. It's not a cost; in fact it's an investment.

Specifically, for the proposals that Ms Margolis has outlined, I don't know the breakdown, but certainly in the discussions we had the feeling was...what we were trying to do was attract attention.

Whether you get a 30% credit or you get a net of provincial taxes and surtaxes and the like, whether we're talking 54.16% in British Columbia, or through a stretch credit 40%, which may be 70%, it still costs money for a donor to part with their money. It is an investment but it isn't a tax shelter.

Breaking them down, we don't have that sense because in fact we don't have that experience. But as someone who - and Janice can speak to it, as well - sits down with people daily, a lot of it is that you want to cause them to move today and not at some future time down the road. It's very easy for people to say they're going to be dead and buried before they give away their legacy. The truth is there's a great circle route effect, which is, if the need is now, why don't I do something now? So there is an advantage.

I would hope, and we had hoped between the hearings last Tuesday and today and your hearings across the country, that we might have this information. Certainly, this document and the proposals we brought forward, which have been mentioned, were part of the process from day one of our deliberations in May, June and July.

I'm hoping that rather than a blue sky figure, we may in fact have some sense of magnitude. The truth is if people are overly generous, I think the country will be the winner.

Mr. Solberg: Absolutely. I commend you. I really do think these are some very creative proposals.

Ms Loomer Margolis: I would like to add that there is the American experience, in particular with regard to the exemption of capital gains on the transfer of appreciated capital property.

The experience in Canada is that it has not been the most attractive kind of giving vehicle, while in the United States it is very attractive. We're hoping in Canada that we can piggyback on this experience and also have people transfer appreciated capital assets and not have to realize the gains, not have the value of the receipt be used to offset the gain primarily, but to be used to provide them with other tax relief.

My second point is on the whole idea of kinds of incentives, and I mentioned the partnership. I know that a lot of things we're doing within our own campaign encourage incremental giving, allowing designation on incremental giving - different areas with a focus on incremental giving. I think that's where the stretch credit kind of proposal is very attractive. I think really encouraging people by saying it's really important, and by the way there's an additional tax incentive for doing that, would also be very helpful.

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For charities and research, all areas are in dire straits. The government funding we were used to getting is just not happening in the same way. The donor fatigue with events and just the cost of raising dollars are so significant. We're really looking at all ways in which we can really create a wonderful community for Canadians.

The Vice-Chair (Ms Whelan): Mr. Duhamel.

Mr. Duhamel: Thank you, Madam Chair. I have three questions.

Mr. Ling, if some people said to you that perhaps this wasn't the most productive use of your time, could you elaborate on that a bit so I can understand it better? Did they give you any other alternatives as to how you might use your time, in terms of the objectives obviously that you had in mind?

I want to direct a second question to Ms Eaves. You mentioned a 1% target of those moneys that are now spent on research. Do you know how many dollars we're talking about in order to stretch from where we are to what that would be? Perhaps you could address that.

The third question is with respect to charities and the various vehicles you're sharing with us today. I want to understand the following better than I do. On one particular side of the equation there has to be a cost; we can call it investment, and it is, but there is also a cost, because otherwise the government would just say go ahead and do it, God bless, raise as much as you can.

Do you have a sense of how much more you might be able to raise as compared to what you're raising now? Surely you must have at least an intuitive idea, because you wouldn't be working nearly as hard and be as convincing as you are if you didn't have some feeling that this would yield some rather significant results, it would seem to me.

Also, have you had governments say to you, we're just a little reluctant because we think we're going to lose, that is, we're not going to get as much revenue as we would normally get? I understand there's the argument that if we don't change some of these measures people will just hang onto their dollars and therefore everybody loses.

There are three questions, and perhaps you could respond according to the order in which I've raised them.

The Vice-Chair (Ms Whelan): Dr. Ling, would you like to address the first question?

Dr. Ling: Yes. Thank you for asking the question. I apologize if I've offended anybody on this committee -

Mr. Duhamel: No, you didn't.

Dr. Ling: - but I think amongst my colleagues there is a feeling that year in and year out, although we pay lip-service to the idea and say we want to support innovation and technology in this country, that we want to move from a resource-based economy to a knowledge-based economy, the policies of the government have not reflected this. So the question really is whether another presentation to the government at this level would make any difference or not.

I believe Dr. Eaves has showed some compelling data that say our colleagues in the western world, France and even Australia - which shouldn't even be in the same league as we are - are spending more money on health care research dollars, accumulated over the last four or five years, while we on the other hand are in a state of not increasing but in fact decreasing down to a negative level.

I think there is a sense of frustration reflected in those remarks. Personally, I believe that the fact you folks have spent time listening to us is a positive indication that something may happen. I'm happy to report back to my colleagues that you have raised this question.

Mr. Duhamel: But it was a very serious question. I think you know that, because I don't disagree with you that it might be in vain. We do a lot of discussion, a lot of dialoguing, a lot of consultation, and it's appropriate to ask where will this end.

I guess I would have been interested as well in the other part of the question; that is, let's assume for one moment that this is not the most useful way to go about affecting change from a resource-based to a knowledge-based economy - an innovative knowledge-based economy.

Did they suggest to you what you might do in order to do that? In other words, if it's not this approach or this way, what are they suggesting?

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Dr. Ling: Obviously it's something we're doing, and we're working very closely with fund-raising organizations and foundations to try to raise money for the cause we believe in. On the other hand, the government would have to put policies in place that would allow us to do this effectively and efficiently, in a way that would allow us to survive. We're really talking about survival here.

I would also say, from a Vancouver and B.C. perspective, we are getting a lot of feelers from the Pacific Rim as to how we can collaborate with them in the area of technology. If they see that our government's policy is not encouraging in this area, they will go to the United States. We are competing with the United States on the west coast.

Mr. Duhamel: Thank you.

The Vice-Chair (Ms Whelan): Ms Eaves, would you like to respond to the second question?

Dr. Eaves: Well, I'll try. You will appreciate, I hope, that I'm not from the Council for Health Research, which is accumulating the data, but I did ask some of these questions myself in preparation for this meeting.

My understanding is that the total health care dollar picture in Canada is in the order of$90 billion, but a very large proportion of that is provincial, because health delivery is a provincial affair. One can get into a discussion as to how much my remarks would be targeted at the federal government budget and how much would be indirect, from the federal government to the provincial.

I was also told the federal health envelope is much smaller than that, in the order of $3.5 billion. I don't know if that's correct, but a simple calculation of 1% of that is about $35 million. I believe that's in the order of the cuts that over the last three or four years have been made to the Medical Research Council, which has been devastated by those cuts.

So even that simple measure, which would have an enormous impact on health delivery, would be a first step. But clearly the desire of the scientific community would be to then spread that through the entire health care field.

Does that answer your question?

Mr. Duhamel: Yes.

The Vice-Chair (Ms Whelan): Who wants to try that? Mr. Mulcaster?

Mr. Richard Mulcaster (Representative, Vancouver Foundation): I will attempt to speak to part of it.

Building on what Dr. Eaves has just mentioned, I can tell you the Vancouver Foundation is a funder of medical research as well, through the British Columbia Medical Services Foundation. We deliver about $1 million a year in medical research grants in British Columbia. Obviously we're small by comparison, or at least we were, and are absolutely minuscule in terms of demand.

It wasn't too many years ago when we were able to joint fund, with MRC and the other medical funders, federal programs on the community-based part of a research project. Now we're finding that we're very much alone, or becoming more and more alone, in that research funding field. While there is a move to establish more endowment and bring in more money for medical research, the demand is far in excess of what's possible. So I certainly would endorse exactly what the other two speakers have said in that regard.

As to the question of how much more money we could expect to raise with these provisions or suggestions, it is a very difficult question, obviously. How long is a piece of string? What will people ultimately do?

We talk about this $1 trillion a year that we think is somewhere out there, this transference of wealth and what percentage of that could be attracted today. The question is really, how can we accelerate what people would do anyway to meet today's needs? These provisions and certainly the change that was made within the last budget are all incremental pieces that have to form together for that to happen.

I really don't know the dollar amounts, but I can tell you that part of the situation as it exists is not so much the amount but where. Donors that come to us are concerned with tax, but that's not what motivates them to do what they do. They do it for charitable purposes, but they are tax-conscious.

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If they're going to give money to charity, they tend to look at crown foundations, which drifts money for a particular important area - education and health - away from other sectors in the community that otherwise could be equally as attractive, and I think it's that ``where'' question that's important to consider.

The need to establish greater capacity within our society has to be our primary concern right now, I think. The non-profit organizations that have been cut back know full well that the non-government funding from foundations and corporate fund-raising will never take the place of government money. It just is not enough. It's not possible, I think. This trillion dollars will play a part in that, but the demand is far in excess of that.

I think sowing the seeds now with proper tax legislation that will allow people to provide a legacy in the community is part of the answer, and I can't think of another solution that is more critical, or another option that will be more effective, than doing that today.

The Vice-Chair (Ms Whelan): Thank you, Mr. Mulcaster.

Mr. Richardson, would you like to add to that?

Mr. Richardson: Very briefly, Madam Chair.

This morning I was teaching an auditing course for chartered accountants, CGAs and CMAs - audits of not-for-profits. One of the things we were looking at was dependency analysis. What happens to your core activities when either the fund-raising doesn't work, or through downloading or for whatever reason you don't get the funds you're getting now? How are we going to say no? Or are you going to respond?

Part of that response is creating positions, like me and Janice, soon at the cancer control agency, but plan on getting jobs - people who are qualified lawyers, accountants and financial planners who can sit down with donors and listen to what they want to accomplish with their assets and then turn around that by offering them something. A lot of the time the tax incentive isn't the spark, but it certainly helps get us there quicker.

Page C-4 of the brief that I presented today, which is part of the Charitable Incentives Review Task Force paper, looks at some principles. I don't think the stretch provision had been thought of. I had the pleasure of making a presentation to an American conference of community foundations about six weeks ago. There was a chap from Washington who said this stretch provision, the endowment billing provision - these are really neat things. They had a three-year task force that looked at this whole thing in the mid-1960s - that's when their big push for charities was - and out of that came the capital gains exemption.

Unfortunately, we have some new ideas. We're not sure what the reaction is, but as it says, they are incremental giving. We're not trying to reward existing behaviour. What we're saying with the stretch is that if you give more than you've ever given before, we'll give you an incentive. If you just do the same as you've done every year, we're not going to change that.

It is the same with compliance. We were concerned, and all of these things are easily subject to compliance. The affordability - that's where we talk about the $50 million to $100 million. That's the number we played around with. It may be that the lack of response from Finance officials was because they were humouring us, but I believe it was genuine interest. The finance minister wouldn't have said we want this consultation process if there was truly some desire to move forward.

The integrity of the system - we were concerned that this be equitable. Every charity, whether a women's shelter, a food bank, the cancer control agency or the Vancouver Foundation, should benefit, and at every level, whether a small taxpayer or somebody who has millions of dollars and is moving wealth through the system. The idea was to make it so that everyone can be part of this.

I don't know what those numbers are. Hopefully, I will be pleasantly surprised, but there are ways to make sure this doesn't get out of control, which would be our best....

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Finally, we believe that as a result of our July and August discussions, if the Canadian Centre for Philanthropy had hoped, in discussion with some Department of Finance representatives...looking at these specific things and seeing what we do know. Last year, when the Canadian Association of Gift Planners' proposal on exempting the taxation of capital gains on depreciated property was before you, there was a number that came out of a process that I didn't understand. It was actuaries and others who were trying as best they could to model what the tax cost was.

We can take a pretty good stab at it. Just as in the March 6, 1996, budget proposals, someone said it's going to be $5 million in the short year and $20 million in each of the next two fiscal years. I don't know where they got those numbers. I'd ask that same person to come forward and ``blue sky'' these ones as well, to give us some magnitude.... Is it a little, horribly a lot, or is it in the middle? I don't know where we are at the moment.

The Vice-Chair (Ms Whelan): Thank you, Mr. Duhamel. Thank you, Mr. Richardson.

Mr. Pillitteri.

Mr. Pillitteri: I was listening to Dr. Ling's comments in his presentation, where he said he didn't know if they'd be listening, but last year - to the charitable organizations that came before the finance committee - we did make some changes.

There were three presentations. Mr. Richardson, I think you were present at the presentation in Ottawa. I don't recall if you were present at the one by the charitable organizations, which was only last week, but there was quite a presentation. If my memory recalls it right, the Lieutenant Governor of Ontario was also present at the presentation, which was made in Ottawa.

So think about giving the leaders.... I'd like to attack it a little differently, and I want you to answer this question. Our generation is saying the need is now, why wait until someone passes away before we get our hands on it, or before it is actually left to us, because then no tax will be levied because people could give to those charities?

If we look at it - it is our generation that has accumulated something like $600 million in debt. I think our generation has benefited. We've taken away from the future generation, because they do not have the benefits we have been receiving through our governments for the past twenty years. In moving from one generation to another - I'd like to hear your comments. Will there be anything in the future? Should we maybe leave some of that for the future? There are future generations that could benefit from what we have taken away from them. I'd like to hear your comments on that.

The Vice-Chair (Ms Whelan): Mr. Pillitteri, I believe there were two sections on charities in Ottawa last week. I believe Mr. Richardson was in the morning and Mr. Jackman in the afternoon.

Mr. Pillitteri: It was in the afternoon, yes.

Mr. Richardson: I was wondering if I was in the same meeting. I knew it was a quick trip to Ottawa but I don't recall the players.

On B-3 of my presentation last Tuesday morning - we did make a point to stop during the presentation. Before I go further I must thank and compliment those who contributed to the best-welcomed suggestions of your report a year ago - the changes in March and the consultations. We didn't want to overdo the praise, but we were very pleased. Don't get me wrong. I didn't mention that today, but that's only because I said it last week.

The proposal that the Vancouver Foundation and all the voluntary sector round tables are putting forward in terms of building permanent endowments - that's exactly what we want to do. Rather than the money coming now or at a future date and being flowed through and spent, it's to provide - and it's a balance. In the wrapping up comments of Mr. Peterson last week, the feeling was that we need a balance. It can't be endowment-building in lieu of current donations that can be used for research on the streets today. It's a balance, and what I'm finding is that many donors are willing, as Janet says, to give a little bit extra, so it's their current gift.

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But what about making an endowment gift? It's a balance, so there will be a portion of that trillion dollars available for generations to come. The beauty of an endowment is the perpetual nature of it. It will be there forever. If it's properly managed and invested, the capital will retain its purchasing power and will be providing funding that is predictable and can be used. So I think we are in fact - it's a balance.

The Vice-Chair (Ms Whelan): Ms Margolis.

Ms Loomer Margolis: I don't know if you're really asking whether we're trying to deal with a generation that is older than your generation.

Mr. Pillitteri: Some of us have still benefited from what we have created. I feel that I have benefited.

Ms Loomer Margolis: Yes, but we're talking primarily about individuals over 65 or 70 who have accumulated some wealth, many of whom do not have significant incomes now. They hold capital assets but their incomes are not that great. They're just living off the income from those capital assets and other things. So that's the first piece. We may see them as wealthy, but they aren't people of enormous wealth in many cases. It can be very average people that we are talking to in terms of transferring wealth.

The second piece is that they come from a different type of mentality. Many of them grew up and lived through the Depression. Many of them were business people, which created more opportunities for accumulating wealth, whereas the later generations are primarily professionals. They are also people who haven't grown up thinking they don't know where the next dollar is going to be - the whole Depression syndrome - so it's a difference of philosophy.

We're not just going to totally rely on the older generation. We also have to be educating the younger generation about philanthropy, caring and giving back to their communities. So we're not saying we're just going to deal with the older people and not the younger - we'll do both. But with the tax incentives right now, we're really talking about attracting those older dollars.

Mr. Pillitteri: But when you're talking about somebody giving an option on stocks and so on - that is a tax break. When you're giving up the capital gain - that is a tax break for that individual to use specifically. Are we talking about someone who is able to...? In order to give this money away, they've done away without paying the capital gains. On the other hand you're telling this committee that those individuals are living off that property, that they haven't got any wealth.

The two of them really don't add up. You're asking this committee to forgo the capital gains on the one hand, and on the other hand you are saying those individuals don't have that much, they're living off it. There are two different things. I'm trying to grasp it here to see how we could put both together.

The Vice-Chair (Ms Whelan): Ms Margolis.

Ms Loomer Margolis: For example, somebody could be receiving 3% interest on their stock. They don't have a significant income from that stock, but they do have a significant asset. If they did transfer that stock to a charity, we're proposing they would get a tax receipt for the fair market value of that stock, but they would not realize the capital gain. Yes, they wouldn't realize the capital gain, and they would be able to use the tax receipt to offset the income they're receiving otherwise.

So, yes, it is an incentive for them. The capital gains tax that would come to the government, or to the public, would be foregone, but we believe the incentive for doing that, and the additional dollars that will be going for the public good through charities, offsets that capital gains tax that will not be collected.

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Mr. Fewchuk (Selkirk - Red River): The question is open. Where do most of your donations come from? Is it from the $50 donations or the $100 donations? What class of people are building up most of your funds?

The Vice-Chair (Ms Whelan): Who would like to try that? Mr. Richardson.

Mr. Richardson: Certainly. The Vancouver Foundation has historically had the larger gifts. It's the transfer of estate gifts.

By its very nature, the Vancouver Foundation has been a quiet foundation in supporting charities. We position ourselves not as being in competition with the cancer control agency or the Heart and Stroke Foundation of Canada. We do not have direct mail, for instance. We don't have a mailing list. We send out one or two requests a year.

People come to us who want to set aside money for - this is in our annual report - one of various fields of interest or to benefit any one of the 73,000 charities in Canada of which a number are in British Columbia. Certainly our focus is in British Columbia. I would say that we're in the wealth-transfer benefit, but we do accept small gifts, certainly any gift.

In our case, the Vancouver Foundation is one of many community foundations out there. There are 22 or 23 others in British Columbia, 76 across Canada, that are much like a charity. They're doing some of the same things in terms of direct appeal, because they're struggling to get that critical mass. That's something Richard may wish to speak of. But then there are other charities that are dependent upon those $37 gifts.

Mr. Mulcaster: I'll just add to what Christopher has just said. Within the Vancouver Foundation, as with most community foundations, we have a lot of endowments for the local family service organizations and the arts organizations. It's right across the spectrum in the province of British Columbia. Many other non-profit organizations have endowments that we administer more efficiently and effectively than they could on their own.

As for the money they receive - in some cases, it's the money they're able to accumulate through a surplus, or whatever, in terms of the efficiency of their operation - they will put that into their endowment with us. We then administer that for them. Those organizations have individually raised money dollar by dollar with warm-bun sales and the activities that go on and on in order to accumulate some bit of an asset that they can establish in terms of an investment. We handle that for them.

So certainly there is a whole range of money that flows. I think that's true for most organizations that have endowments. There are small donors who can give $100 or $50 a year. There are enough of them to attract a few large benefactors that will establish, either in their lifetime or through their estate, a more significant contribution. It's very open.

Ms Loomer Margolis: The Jewish Federation of Greater Vancouver is broader toward kinds of donations. We receive anything from $10 donations right up to significant-dollar donations. In particular, in our endowment fund, which we invest and hold and distribute for programs and organizations, we receive some larger gifts. But we have the whole spectrum.

Mr. Fewchuk: I have a question. I was in Vancouver on Saturday. I was at one of these official openings. A fellow came up to me and said he wanted to donate $1 million tomorrow from his company. He said he didn't want to be a burden to the government. He said he should be allowed to give a tax-free gift. He couldn't understand some of his colleagues always wanting this tax credit. I said I didn't have the answer for that either.

So I'm just throwing out to you what I'm getting on the street.

There was another guy in the news yesterday. He made a $1-million investment in Neepawa. The poor farmer just left it to the hospital. Everybody thought he didn't have the money, but he just left it to them with no strings attached.

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My point is, after hearing this from two or three other people, why is it that for the sake of giving somebody wants a credit? Am I wrong?

Ms Loomer Margolis: I think philanthropic intent is the key. Everybody is paying for their gift; they're giving that to you up front. But I think the tax incentives are just incentives to encourage greater philanthropy. The first thing, though, is people who want to make a difference, who want to do something for their community. That's the key.

I guess the other side of it is, just the whole reason why the government gave tax incentives in the first place - because they really believe that individuals are carrying out the services and the programs the government would otherwise be carrying out. So it's just a flow-through, really, to allow the individuals to have some say about which programs and services they'd like to see carried out.

Mr. Fewchuk: I'll just give you an example of some of the questions we get answered on the street. They say we're giving too many tax credits on one side. For example: ``When is the government going to stop giving it - at what point, 50%? Now they're asking 100%. What is your answer on it? Tell me, how far...? I'm just a local guy, my wife and I make $18,000 a year, and we give for the sake of giving - $10 or whatever we can give - but are we in any way tied in to that multimillionaire who wants to give his property away? Are we also paying towards that, to some extent, because of the tax burden we have to pick up?''

That's what I'm getting on the street. I throw that out. Thank you.

The Vice-Chair (Ms Whelan): Mr. Richardson would like a try at that one.

Mr. Richardson: I think it's worthy to note that with this trillion dollars, all of our present system is based upon that income. I can only give getting full participation of the government. If I want to, and many people do, give more than I could ever receive benefits for.... So it isn't to say that everybody wants a dollar-for-dollar tax credit for their gift.

Most bequest gifts are far in excess.... There were some recent statistics where someone asked: why are we giving away $5 billion worth of receipts, but people are only claiming about $4 billion? A lot of that is those big wealth gifts where someone is giving away their entire estate.

The other thing is that we're still...when I say 100% of net income, what I'm really saying is that person wants to move a big chunk of wealth. That's going to remain to help Canadians forever. I appreciate that there's some forgiven tax revenue, and at the present time, say at the top British Columbia rate, 54.16%, that's still costing that taxpayer 45¢.

It isn't as if you couldn't get a system, if you wanted to, that said you'll give away a dollar and you'll get back a dollar, so it won't cost you anything. We're not suggesting that at all. We're suggesting a system of incentives to encourage it, just as the current one does.

We're really twigging on the edges here. What the government is already doing, we think, and what we're really doing is saying there's a trillion dollars and we want to make sure that isn't just spent - I won't say squandered - that it doesn't disappear. We'd like to ensure that it helps lots of charities.

Mr. Fewchuk: Thank you.

The Vice-Chair (Ms Whelan): Mr. Solberg, did you have a brief question on that?

Mr. Solberg: Just one additional point, and perhaps this has been addressed - forgive me, because I was out of the room.

If somebody realizes a capital gain because of inflation and would have to pay capital gains tax as a result of that, they are in a situation where really they are not making any more money on their capital gains, because it's all inflated dollars that they're receiving. So implementing the type of incentive you're talking about would remove that disincentive to giving. In other words, people don't want to come out behind if they're giving to a charity. Is that not correct? Am I putting that correctly?

Ms Loomer Margolis: There's no real disincentive with the current proposal that the budget came out with last March. The capital gains in that proposal are offset up to 100% of taxable income. The capital gain portion will be covered completely by the tax receipt the individual is getting. So there isn't a disincentive such as the one you're talking about. There used to be a little bit more of an inequity. That's not the case any more.

Mr. Solberg: I appreciate that.

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The Vice-Chair (Ms Whelan): Thank you.

Mr. Rocheleau, did you have another question? No?

I have a brief question for Mr. Armstrong.

I just want to clarify something. The route that your company is running right now is one you purchased from VIA Rail?

Mr. Armstrong: That is correct.

The Vice-Chair (Ms Whelan): But at the same time, VIA Rail is still running a similar route as part of their western trans-continental service. Where does that start and stop? Do you know?

Mr. Armstrong: Yes. The western trans-continental starts in Vancouver and goes through Jasper, Edmonton, Saskatoon, Winnipeg, and then on to Toronto.

The route we purchased was the Rocky Mountaineer's. It is a daylight service originating in Vancouver and going to Kamloops and then up to Jasper, or from Kamloops through Banff to Calgary. So two legs of our operation go from Kamloops; one goes north on CN and the other one goes south on CP.

The Vice-Chair (Ms Whelan): You made a suggestion earlier - and I hope I interpreted it correctly - that the western trans-continental service offered by VIA Rail receives $15 million in subsidy. You're not suggesting that be ended and that there be no service from Toronto to Vancouver?

Mr. Armstrong: At this time we have to look at whether this is the best use of the funds.

The western trans-continental is being sold as a tourism service. Nobody is going to take a train from Toronto to Vancouver for three or four days because it's the most efficient form of transportation. You'd be better to go on Greyhound Air, WestJet, Canadian Airlines or Air Canada, because the cost is cheaper. It's totally a tourism product now.

There are other private companies. There's going to be a new company coming out of the United States, using the American Orient Express equipment. They will operate a train from Vancouver to Montreal. It will be about a six-day program, it will be totally tourism, and it will sell for seven to eight times more than what VIA Rail charges. It will be a private sector company.

So one has to ask the question, if it is costing $50 million, is it important to do it? To pick up on something Mr. Solberg mentioned, it may be better to have other companies come in and do the service.

The Vice-Chair (Ms Whelan): Well, I'm not going to disagree with you that there are certain areas where the government has seen the need to get out of service, and there may be future areas, but I do believe in the necessity of transportation and accessibility to Canadians.

The VIA route stops at more than just the major cities along the way. There are no other modes of transportation. Airlines do not accommodate. That's something we can't forget when we're talking about transportation for all Canadians, not just those routes that make money. If that were the case, we wouldn't have a rail service from coast to coast, because it never made money in Canada's history. We have to take all those factors into consideration.

I understand your point, though, that VIA Rail sold you a line and now wants to get back into it. We obviously all will look at that very seriously.

I have a question for Ms Eaves.

You mentioned the level of funding, and I understand you didn't put the numbers together. I had a group in my riding put together some numbers, and their suggestion was that 5% of funding spent on the treatment of cancer be designated to research. You're suggesting 1% of total health funding. I'm just not sure if you have any idea how that would correlate, how those two numbers would match up. You're talking about all types of research, not just cancer-related research.

Dr. Eaves: Yes, I was speaking of all biomedical research in Canada, not just cancer research.

I'd have to do some fancy mental arithmetic, but I believe the Cancer Agency's budget is in the order of $80 million. Is that about right? So if you took 5% of that and multiplied it by ten - or I guess for B.C. you wouldn't multiply it by ten; you'd multiply it by five - you'd come up with some number.

But I was not focusing on cancer.

The Vice-Chair (Ms Whelan): I guess my question is can you allocate funding for research based on the percentage of the population that is afflicted with the disease or is under that type of treatment? Does that correlate into how you should fund the research in those areas? Is there any correlation between a percentage of the population that's affected in one area versus another? I don't want to pit disease against disease. I'm just curious as to whether or not there's any correlation between the number of Canadians who are affected and how we should be allocating funding.

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Dr. Eaves: That's a very popular discussion right now, and it's certainly one that helped the women's initiative to get the Canadian breast cancer research initiative off the ground. There was a sense that not enough funds were being spent on breast cancer and a huge number of women felt that their immediate needs were not being addressed. Those were persuasive arguments, both by and to the public and to the government. That actually is now at risk.

The National Cancer Institute of Canada board decided in September that they would continue the initiative, as did the Canadian Cancer Society, which supplies the funds the National Cancer Institute spends. There is no sense that the dollars that originally came from the government through NSERC or NHRDP and MRC to help support that initiative will be forthcoming for its continuation, so it's a very serious situation right now.

There are many other examples where charitable dollars partner with government funds.

I was going to say that in listening to some of the discussions I've heard this afternoon, whereas it's very clear that charitable organizations play a very important role, in terms of investment in the future I cannot imagine that our government would not be number one in putting its foot forward and recognizing that this is where our society must go. Whether or not we do it by disease site, I think we get into very short-sighted arguments, because the whole nature of technology and discovery-based knowledge cannot be driven by immediate needs. It has to recognize and support immediate needs, but I think if we start to carve everything up in terms of who has this many cars or who speaks that language or who dies most frequently of this disease, we're getting away from the basic principles. I think we need to pay attention to where our problems are, but I don't think we can get into disease formula-driven research priorities.

The Vice-Chair (Ms Whelan): I have one quick question for Mr. Richardson with regard to stretch-funding proposals. I raised this at the finance meeting last week, and I don't believe my question was quite understood at the meeting. I didn't raise it with you, but it was with regard to how the credits would work for the dollars that were put forward. I wasn't concerned so much with how the tax credits would work out, but with what was the actual level of tax dollars that would be lost to the government in the end if someone were to delay.

There was a scenario put forward that suggested people would not delay $100 and $100 to have $300 in one year because of the small tax credit advantage of about $35. But for someone in that income bracket of $50,000 plus, if you delay the $300, what would be, if you can tell me, and I think you might be able to...? I'm wondering if you have any of those numbers or if there's been any analysis done to see whether or not there really is any benefit to someone delaying, and whether someone would actually do that.

Mr. Richardson: I am an alumnus of Price Waterhouse so I can speak for Scott Wilson, whom you did direct that question to.

In his appendix to a document - which I will find and give to you, or send to you if I don't find it - he did do a scenario based on some of the capital campaigns. If you were to give $30,000 - $10,000 a year or $30,000 in year three, say - what would be the difference, and would that not hurt capital campaigns, with the stretch encouraging you to bunch your donations? He does have an example in there, indicating that as a relative impact the advantage of holding those donations for three or five years and then giving it all in one fell swoop is very small. Appreciating that the charity might say fine, give it to us up front....

I think that is a good point.

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The Vice-Chair (Ms Whelan): The example I saw, in the appendix you referred me to, dealt with just the tax credit side of it. You're telling me there's one in there that would actually discuss the tax dollar implication to the government.

Mr. Richardson: No. Again, as I referred to earlier, when we finalized we threw a whole lot of things on the table in May, June and July. I guess it was July 28, or so, when we had our last meeting. The only number I've seen is an estimate of what impact of crowns have been on giving. That number was generated in early September. I'm trusting that both the Canadian Centre for Philanthropy and the Department of Finance are trying to look at those numbers.

I'm sorry, I thought it was how it would impact the behaviour of donors. I appreciate, and we all do, that you don't have unlimited dollars, although Mr. Martin might be wondering what to do with his situation. I don't know how much. Certainly, the feeling was that for some of these it's a mix and match. It may be a little bit of stretch and a little bit of endowment dollars. We're asking for a hundred. It may not be that we get it all. But I think the experience has been, just as the government did with the proposals in March...they said it's $5 million this year and $20 million in the next two years. We did discuss whether people were uncomfortable with those numbers. As I understand it, they came up with them in 48 hours. We're hoping in the next six to eight weeks to be able to give your committee the best guess that we can all agree on so that you're not blindly recommending something that all of a sudden becomes an SRTC.

The Vice-Chair (Ms Whelan): With that, I want to thank everyone for coming today. I'd like to ask you if you could sum up in a minute or two your final comments and where you'd like to see the budget go for this year.

First, Mr. Armstrong, and then I'll go around the table.

Mr. Armstrong: I think what Paul Martin and your committee here have done over the past few years is commendable. You're moving the country in the right direction. I think there are other areas where you can make almost transparent reductions and provide opportunities for the private sector to get more involved. I encourage this committee to take forward those types of initiatives using Rocky Mountaineer as a prime example. Thank you.

The Vice-Chair (Ms Whelan): Thank you, Mr. Armstrong.

Ms Margolis.

Ms Loomer Margolis: Thank you.

I think we really reviewed it very carefully. You asked a lot of good questions, but I think it's still a partnership; it's still government funding for the social services, and I think the charities want to get in there and help do that. So I think the partnership requires continued funding of the services and research you are now funding, and to do that on a greater level, and also provide tax incentives that will stimulate greater philanthropy to pick up some of the additional dollars that are required. It also requires the charities working harder to bring education and awareness to the community. I think working together we can really make a better place in Canada.

The Vice-Chair (Ms Whelan): Thank you, Ms Margolis.

Mr. Richardson.

Mr. Richardson: Again, I thank you very much for this opportunity. I think Arthur Drache said that this is the first time in his lifetime - so that's a long time - that there has been this consultation and true discussion with the charitable sector to discuss possible changes.

I'd like to leave the endowment-building proposal, which I think will help many Canadians who, during their lifetimes, have been very productive and would like to leave a legacy for many charitable pursuits that they feel deserve ongoing support.

The Vice-Chair (Ms Whelan): Thank you.

Mr. Mulcaster, did you have any final comment?

Mr. Mulcaster: No, other than to emphasize the idea of building capacity on the street, as was pointed out in what people were talking about. Emphasizing what people need in local communities is the way for the finance committee to look at tax. It should be based on community needs. I think the three proposals we've been suggesting will add a lot to that process. I would thank you all as well.

The Vice-Chair (Ms Whelan): Thank you.

Mr. Matich.

Mr. Matich: Thank you for allowing us to make this presentation. I encourage you to help groups help themselves. I was encouraged by a lot of the comments that were made.

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More specifically, in sport we have a very specific issue here, and I would ask you at some point to take a look at this or pass it on to staff members in the department to take a look at. I think there's an improvement here that helps build a better system.

The Vice-Chair (Ms Whelan): Thank you, Mr. Matich. We'll definitely take that under advisement.

Ms Eaves.

Dr. Eaves: I'm ecstatic to have been here this afternoon. I would hope that there would be created greater opportunities for government to interact with the academic and scientific communities, as has occurred this afternoon. I think it has been excellent, and I don't think the academic community is nearly as aware of this option as they should and could be.

I'd also like to focus for one moment on the urgency of the issue that I think we've tried to bring forward, which perhaps was not touched on. Science in Canada is about to be destabilized. It isn't just a question of funding going down; it reaches a point where it's unrecoverable, just like any enterprise. We may have reached that point with our training programs, but we are clearly reaching that point with our existing scientists. I would really stress the urgency of the issue, and I would like to leave that message with you.

The Vice-Chair (Ms Whelan): Thank you.

Mr. Ling.

Dr. Ling: Thank you for the opportunity to present here this afternoon. I really want to echo what Dr. Eaves has said, which is that I would like to see the government take leadership in this area. We are not simply asking for a great infusion of dollars, which I appreciate may not be possible, but really we are urging the government to show leadership in embedding policies that support the kind of health care research we're talking about, and indeed fundamental research. They should indicate that this is going to be part of the activities of this country and this government.

I think this would send a clear signal to the young people of this country that there is indeed a future for them. Thank you.

The Vice-Chair (Ms Whelan): I want to again thank all of the witnesses today. It was a very interesting and thoughtful discussion we had this afternoon. I know we're all leaving here with many suggestions and proposals.

The meeting is adjourned.

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