FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Friday, October 17, 1997

• 1510

[English]

The Chairman (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I call this meeting to order.

The first individual we will hear from is Dr. Michael Percy from the Alberta Economic Growth Summit.

I want to give you just an overview of how we're going to operate this afternoon. We usually give witnesses approximately five minutes to give the highlights of their presentation. Then we engage in a question-and-answer session with the members of the committee.

Dr. Percy, welcome.

Dr. Michael Percy (Co-Chair, Alberta Economic Growth Summit): Thank you, Mr. Chairman. I'm actually wearing two hats. One is dean of the faculty of business at the University of Alberta and one is the co-chair of the Alberta Economic Growth Summit.

I'll basically stick to the written comments I've left here.

I want to thank the committee for the opportunity to make these comments regarding the forthcoming budget and the fiscal policy of the Government of Canada.

My observations reflect the experience of the province of Alberta as it moves into the post-deficit era and also reflect my experience as the Liberal finance critic in the provincial legislature.

I have four points.

The first is—and I'm going to talk about the Alberta experience to juxtapose it against the federal experience, because I think the insights are useful—that the Government of Alberta is now in fiscal balance and is generating structural surpluses. The process of achieving fiscal balance relied on expenditure reductions, but also involved the move to business plans and explicit links to link expenditures to outcomes. The goal was to ensure that when the issue of additional spending arose, it could be framed in the context of targeted expenditures as opposed to generic increases in spending. Such an approach leads citizens to juxtapose the cost of government taxes to the value of government outcomes.

It's not clear that the federal government has been as successful in defining anticipated outcomes for its expenditures, and this possibly reflects the fact that such a large share of federal expenditures is transfers, so it's less easy to designate outcomes or there is less ability to do so.

The recent Alberta growth summit reflects this focus on outcomes and policies required to achieve outcomes. The summit had asked Albertans to describe the actions and policies of government and the private sector that would ensure that growth was sustainable and balanced until the year 2005. However, the process of answering this question really required Albertans to describe the Alberta they would like to see in place by the year 2005. Once a group decides upon an outcome they would like to achieve, it's far easier to discuss the policies that get you there. Thus, the summit provided insight to government about the allocation of the incremental surplus dollar among debt paydown, expenditures, and tax cuts.

The process of reaching this consensus involved an array of mini-summits, public submissions, and meetings of summit delegates that stretched over the summer and throughout the month of September.

The Government of Canada is in a different fiscal context as it enters the post-deficit era than was the province of Alberta. The province of Alberta entered the post-deficit era with debt servicing costs of approximately 8¢ on the dollar, a stock of debt relative to GDP among the lowest of the provinces, and a performance-based business planning process in place. On the other hand, the federal government spends approximately 30¢ of every dollar on debt servicing, the ratio of the stock of public debt to GDP is among the highest of the industrialized economies, and the share of this debt held by foreigners is among the highest also.

These factors make the federal fiscal position extremely vulnerable to interest rate spikes and shocks and really require a strong focus of sustainability of any policy once adopted over the entire cycle, not just the relative expansion that we've had over the last few years.

I would argue that the business cycle is not dead. At some point the other shoe is going to drop. Probably within the next couple of years the economic expansion will slow, the economy will contract, with pressures on federal expenditures to rise while tax revenues fall.

Given the structural characteristics of Canada's debt position, the large share held by foreigners, and the large stock of that debt relative to our GDP, I would think that in the short term fiscal policy ought to focus on debt paydown to provide breathing space in the medium term for incremental expenditures on program expenditures or what have you. But in the short term, during the expansion that we're presently undergoing, now is the time when the surplus emerges to do something about the debt, because two or three years down the road we may not have that luxury.

So what I would conclude with, to get into my five minutes, is that the federal government should focus on an aggressive debt paydown in the short term to provide fiscal space in the form of lower debt servicing costs in the medium term, because I think that type of policy would be sustainable. I think that's ultimately what people look for in government: policies that provide an element of stability in an otherwise very volatile economic climate.

• 1515

I would stop my comments there.

The Chairman: Thank you for a very succinct and well thought out presentation.

We will now move to Pam Barrett. Welcome.

Ms. Pam Barrett (Leader, New Democratic Party, Legislative Assembly of Alberta): Thank you. It's my pleasure.

Michael and I are going to respectfully disagree with each other. Of course, being from different political parties, this will surprise everybody at the table.

I speak as leader of the Alberta New Democrats, which said, during the time of the debt crisis, not to get carried away, particularly with people programs. In that very period—in other words, between three and a half years and one year ago—some $7 billion was removed from transfer payments to the provinces. These specifically addressed the social programs: health, education, post-secondary education, and social services. We lost two distinct programs, those being established programs financing and the Canada assistance plan.

The result of this was that provincial governments choosing to do so could manipulate those figures, could exaggerate to any extent they wanted—remember that repetition in politics works; it shouldn't, but it does—and could use that as a means by which to sell people on the notion that cutting half of the hospital beds out of service in Edmonton and Calgary is a legitimate response; that having the largest classroom sizes in the country is realistic or appropriate. This province sits on a big pool of oil. It is not a poor province, despite what the government has told the people for the last four years.

In the meantime, what I would suggest is that you make a bid for undoing the CPP legislation in as far as it has gotten. I do not believe it is necessary to increase premiums to a point where public support of the Canada pension program is eroded because people fear it's going to cost too much, especially when we know that Canadians who are earning between $35,000 and $55,000 are not paying into the CPP, nor will they be beneficiaries on that basis. That is bizarre. So that is the way to fix that legislation, and I believe that is the way to approach a federal budget.

Ultimately, I would suggest that after 25 years of inflation hysteria followed by seven years of debt hysteria, what we really have now is a long-term unemployment problem that will not go away unless the federal budget reflects a commitment to job creation, to bringing back the public services for which people have paid historically so much.

Thanks.

The Chairman: Thank you very much.

We will now move to Heather Smith of the United Nurses of Alberta.

Ms. Heather Smith (President, United Nurses of Alberta): I would like to thank the chair and this committee for providing the United Nurses of Alberta with the opportunity to speak with you this afternoon. I am here representing the United Nurses of Alberta, a trade union that advocates on behalf of 16,000 registered nurses and registered psychiatric nurses across the province.

As the president of UNA—and I listened to Mr. Percy—I participated in the recent Alberta growth summit, and it is with that background that I speak to this committee this afternoon. My comments respecting the federal budget are not specific to the 1998-99 budget year, but are inclusive of comments for the direction in which the federal government should take beyond the next financial year.

The people of Alberta have identified very clear fiscal priorities for the province of Alberta. I do not believe the needs and will of the people of Alberta differ drastically from the will, needs, hopes, and aspirations of their fellow Canadians. The Alberta growth summit clearly identified first and foremost the needs of Albertans, and an expressed desire for the investment in those needs: our people, our health care, and our education.

As Mike Percy has identified, this is a province that has not only had a balanced budget for three years, but has also had a surplus for three consecutive years. The people of Alberta did not endorse, nor do they support, tax reductions. It is that same message that I bring to this committee today. Overall budget initiatives, priorities, and planning should be geared towards reinvestment in the people of Alberta and Canada and towards the support and enhancement of a strong and cohesive Canadian society.

• 1520

As stated to this committee last year, we support the expansion of the Canada Health Act and are pleased by initial statements regarding national home care and pharmacare programs. We would encourage the federal government in this fiscal year to set aside additional resources to support the implementation of these initiatives.

Let us be clear, though. We are not suggesting the reallocation of current health care resources that would thereby diminish funding amounts for current health care programs. We are advocating the addition of resources to health care so these new and important programs can become a reality.

It will come as no surprise to you that there is a growing concern regarding private enterprise activity in health care in the province of Alberta. It is our belief that the growing private presence in our health system poses a threat not only to the Canadian health care system but to the very principles that underpin national unity.

We believe this threat is so vast and so far-reaching that it warrants—I'd say demands—that a royal commission with the scope, detail, and analysis of the Emmett Hall commission investigate and put forward recommendations regarding the division of public-private financing, public-private service delivery, and the public-private partnerships in health care. We recognize this would be an additional cost in the 1998-99 budget.

Last year we raised concerns with you about the potential for internal trade agreements to undermine the NAFTA exemptions to health care. We encourage this committee to urge government to refrain from signing any internal trade agreements that would jeopardize the NAFTA exemption for health care and other social programs.

This year we bring to this committee growing fears about the multilateral agreement on investment, as well as the Asia-Pacific Economic Cooperation forum. We would ask this committee, in its examination and assessment of fiscal priorities, to ensure full public disclosure of the entire MAI and the impact of the MAI on health care specifically.

It is our understanding that the May version of the MAI did not mention protection for health care in our country. We also understand there is an October version of the MAI that has not been disclosed to the public. We are concerned that particularly in Alberta, where there is virtually no regulation regarding private enterprise in health care, we will lose any ability to control the activities of private health corporations in the future.

We do not want a two-tiered British health care system, and we oppose the development of a three-tiered American-style health care system, with its resulting explosion of costs in health care. We urge you to be very clear on the implications of MAI in terms of our health care system and to take appropriate measures to safeguard what is a very cost-effective health care system, as well as cost-effective social programs.

You have asked us to comment on the process of deficit reduction and whether it was too fast. The short answer is yes, it was too fast, particularly when combined with the Alberta attack on social programs. Throughout the deficit reduction process we expressed our concerns about the toll it was taking on our social programs and our national well-being.

It was with interest that we read the statements attributed to Finance Minister Paul Martin that Canadians can expect a tax cut. I encourage you to look instead to more human-centred development of Canada so that not only the 1998-99 budget but future budgets reflect human-centred development. Invest in the issues that are near and dear to the hearts of Albertans and their fellow Canadians. Invest in our people, our education, and our health care. This is the only way to ensure that the sun does rise on a truly Canadian age.

The Chairman: Thank you, Ms. Smith.

We'll move now to Lorraine Way, the representative from the Alberta Association of Registered Nurses.

Ms. Lorraine Way (President, Alberta Association of Registered Nurses): The AARN is the regulatory and professional body for Alberta's 23,000 registered nurses. The mandate of the AARN is to ensure the provision of safe, competent and ethical nursing care in the public interest for the public good.

The AARN does not perform a union function. That function is performed by the nurses' unions in this province.

I am pleased to be asked to provide the AARN's input to the next federal budget to members of the Standing Committee on Finance. The points I want to make fall into three categories.

• 1525

First, there's the AARN's view of the federal government's progress to date in reducing the deficit. Second, there's the AARN's concern about emerging issues particular to the federal budget and health care and social programs. Third, there are priorities that should guide the government in this year's budget.

As for the progress in deficit reduction, the AARN is cautiously supportive of the progress to date in the reduction of the federal deficit. While we understand and support the government's commitment to fiscal responsibility, health and social services should not be a target for reducing the deficit.

Health care spending is not out of control in this country, and there is evidence that there has been a declining percentage of Canada's GDP being spent on health and social services. We are deeply concerned that the cuts to the budget for health and social services have been too drastic and will decrease the federal government's role and power to sustain these systems that Canadians value and other countries admire and envy.

Many Canadians and Albertans are still suffering from unemployment and weakened access to health and social programs. It is clear that poverty and a lack of access to necessary care are negative determinants of health. The loss of federal dollars in these areas not only reduces resources spent on these programs, it also weakens the federal government's power to enforce the Canada Health Act, particularly in maintaining national standards for accessibility to programs.

Pharmacare and national home care must be funded federally, not dumped on the provinces as additional competitors for existing funds.

Consider issues in health care and social programs. The AARN views the insidious or passive increase in the privatization of health care services as a significant problem, perhaps especially in Alberta.

According to the Canadian Centre for Health Information, only two decades ago, 25% of health care expenditures involved private spending, while 75% was public. Today, it is estimated that 65% of health care involves public spending, while 35% is private. This represents an increase in private spending of approximately 10% over the past 20 years.

We recommend a strong, active federal government stand against the further privatization of health care services in Canada. By “strong”, we mean a stand taken with direct enforcement through financial penalties for contravention by any province or territory.

The AARN notes a determined push by the provincial and territorial governments for greater control of how health care and social program dollars are spent. We recommend that the federal government should keep firm control over the expenditure of these dollars. The AARN believes that the universality and accessibility to services included in the Canada Health Act must be maintained uniformly across this country.

As for priorities for the 1998 federal budget, we recommend that, first, the federal government should make an explicit, forceful recommitment to the Canada Health Act and the principles it contains. Second, make no further cuts in the areas of funding for health and social services to Canadians. Maintain the $12.5 billion for the cash entitlement portion of the Canada health and social transfer. This cash transfer is particularly important, because only this transfer, not the tax point, is subject to adherence to the five-program criteria of the Canada Health Act.

We further recommend that the $12.5 billion be operationalized as a floor, not a ceiling, for this budget line. There should be an escalator built into this budget. For example, a growth factor formulated on the amount of the GDP could gradually increase the cash portion of the transfer.

If the federal government opens the Canada Health Act for revision, we strongly recommend that those revisions move only in the direction of strengthening the act and expanding it to include health promotion, community care, illness, and injury prevention as essential provisions.

The federal government has an important role to play in health and health care beyond its transfer role. Aspects of this role include support for research, health promotion, health protection, and the delivery of services within its area of responsibility.

Consider the support for international health. The federal government needs to play a leadership role in addressing the health needs of population groups that are falling through the cracks in various parts of the country and in serious mental health and public health issues of Canadians. A strong Canada is built on strong, healthy Canadians. All Canadians, from the Bay Street lawyer to the native mother of four on Baffin Island, deserve access to health care systems that meet their individual needs.

• 1530

The federal government must continue to set the national standards for health care. We urge you to recommit philosophically and financially to the Canada Health Act and the health of Canadians.

The Chairman: Thank you very much, Ms. Way.

Now we'll hear from Pilar Martinez, the president of the Library Association of Alberta.

Ms. Pilar Martinez (President, Library Association of Alberta): Thank you for inviting the Library Association of Alberta to participate in the pre-budget consultations of the Standing Committee on Finance. The Library Association of Alberta is an umbrella organization that exists to facilitate the improvements of library services in the province of Alberta through advocacy, continuing education, and co-operation among libraries.

While fiscal responsibility is very important, we believe there needs to be a balance between fiscal and human needs. As we've seen from the results of the Alberta growth summit, governments must consider the people factor in the deficit reduction process. With the increasing importance of information, libraries have an increasingly important role to play in the lives of Canadians.

Libraries support Canada in its economic, social, cultural, and educational endeavours and respond to the information needs of all Canadians. Libraries are an investment in a more literate, productive, and globally competitive Canada. Libraries bring many strengths to Canada's economy.

The increasing value of information is recognized worldwide as we move to a knowledge-based economy. Libraries make information available and accessible in many formats to the broadest possible community in a timely fashion. Libraries provide a wealth of information services in a timely and cost-effective manner. Libraries also contribute to the local economy through staffing, goods, services, and buildings.

We also support and promote literacy. Low literacy skills cost Canadians more than $10 billion annually. Libraries promote the increase of Canadians' literacy skills, which includes computer literacy as well as basic reading and comprehension.

We also support lifelong learning for all Canadians. People need information to make informed decisions and to upgrade their work and life skills.

We support a democratic society. Citizens' access to information is an essential component of the democratic process. Public libraries offer access to information to Canadians regardless of age, income, class, race, or gender.

Libraries work together in educating children and students. Well-educated students will ensure that Canada is economically competitive.

Libraries also play an integral role in providing access to the information highway for all Canadians. This is especially important for people without access to computers or the Internet from home, school, or work.

Libraries are an indispensable part of the cultural fabric. Libraries purchase written material that is illustrated, designed, performed, and sold by Canadians, helping ensure that Canadian culture continues to thrive.

Although the Government of Canada does not fund libraries directly, libraries benefit from a number of federal programs and services. For example, the library book rate postal subsidy allows libraries to mail materials at a reduced cost. The depository services program provides government information to selected libraries in order to make it available to the public. Various programs assist libraries and other organizations in accessing the information highway, thereby providing universal affordable access to Canadians.

We were very pleased with the government's commitment to make the information and knowledge infrastructure accessible to all Canadians by the year 2000 as indicated in the Speech from the Throne. The National Library of Canada, which has the most comprehensive collection of Canadiana in the world, not only plays a major role in facilitating resource sharing across Canada, but is involved in innovative technological initiatives as well. Digitization projects to create a collection of electronic resources and research tools ensure a strong Canadian presence on the information highway.

In addition, the National Library web service is now an important gateway to Canada's electronic information. These initiatives will serve as models for libraries across Canada.

The Library Association of Alberta would like to thank the Government of Canada for supporting these programs and urges you to continue supporting libraries in this way.

• 1535

Libraries would also appreciate support for copyright education so we can understand and comply with Bill C-32, the new copyright law, in order to assist our customers.

Once again I thank you for soliciting our input.

The Chairman: Thank you very much for your presentation.

We will now move to the representative from International Children's Services, Kay Feehan, past president.

Ms. Kay Feehan (Past President, International Children's Services): It's a privilege to speak with you today about the urgent issue of priorities for government attention in the coming years. It seems a time in Canadian history for us to act in a responsible manner but also in a responsive way so that the common good of all citizens is considered.

We're all relieved that the deficit is under control and believe it happened at an appropriate pace, but it seems timely that we examine thoughtfully and carefully our financial priorities to recognize the need and desirability of investing in the well-being of the nation's children. This is more urgent than debt reduction or tax relief.

The discontinuance of CAP and EPF funding, replaced by the CHST, and cutbacks in provincial budgets have had a serious impact on children. The newly announced federal child poverty initiatives are commendable, but we need to expand on these if we intend to deal effectively at all with the situation.

In 1989 the House of Commons passed a resolution to eliminate child poverty by the year 2000, but between then and 1995, child poverty increased by 41%. In 1995 the number of children living in poverty rose to 1,441,000, the second-highest rate of poverty in the industrialized world.

The impact is twofold. The well-being and quality of life of poor children is seriously impaired, and of course so is their future productivity. We know that poor children show three and a half times the number of behaviour disorders, almost two times the chronic illnesses, and over two times the rate of school problems and emotional disorders. So our economy is also affected.

The cost of incarceration is high: $50,000 a year plus to keep a person in jail. That's only one example of the “pay now or pay later” choice that we face, to say nothing of long-term investments in counselling, marriage breakups, and lost productivity. We cannot say we can't afford children's programs and leave the emotional and financial costs to accrue for the next generation.

I'd like to give you four quick examples of practical situations.

International Social Services Canada is a national non-government agency that is part of a global network that offers inter-country linkages in social services. An example of a case is a young child who was abandoned in Canada by parents who then left the country and had been unfit parents. The child was for many years in the care of a Children's Aid Society in Ontario. They asked International Social Services to see if we could trace relatives worldwide. We eventually found a sibling who had been adopted by a couple in Great Britain. They were delighted to hear about this and offered to adopt this child also. Not only were the children able to grow up together, but the Canadian taxpayer benefited by all the money they saved from keeping that child in care. Yet federal funding has been reduced to ISS.

Many provincial child welfare departments cannot pay the very modest fee they're asked for this service. ISS have also not received the funding needed to complete the research into both domestic and international laws and social practices regarding adoption that are necessary to implement the Hague Convention on Intercountry Adoption, which comes into force on November 1 of this year. There's also a need to develop national standards for inter-country adoptions.

Secondly, Head Start programs, which are pre-kindergarten programs for disadvantaged pre-schoolers, are probably the most effective prevention and early intervention programs available. Their benefits are well documented, with some of the best longitudinal studies ever done, in the Perry program, done by High/Scope Educational Research Foundation. This showed that for every dollar spent on this program, $7.16 is saved later in welfare and justice costs.

• 1540

Although some contributions have been made to Head Start through Brighter Futures funding and Aboriginal Head Start, knowing its effectiveness, it appears a much more extensive investment is justified so that every eligible child in Canada is able to access it.

Third is school lunch programs. It's obvious that when nutritional needs are not met, good health is jeopardized, which is very costly to the health system. Children can't learn when they are hungry, resulting in the need for extra supports, poor job eligibility, and an unskilled workforce.

There are programs in different parts of Canada, especially in New Brunswick, but overall there are many gaps. We need a universal rather than a fragmented approach.

Aboriginal children are particularly neglected. An aboriginal child is twice as likely to die in infancy and is far more likely to be a school drop-out, have health problems, or be incarcerated than any other Canadian child.

This not only causes distress but costs us money in the long run. Child poverty affects not only the children, who are the victims of cutbacks, but all of us; it affects the nation's future.

There's increasing research on resiliency in children. Dr. Paul Steinhauer, a prominent Canadian researcher, has recommended that child poverty be of the highest national priority. We join with him in recommending a comprehensive, integrated, long-term, research-based policy that supports child development from conception to adulthood.

I'm suggesting to you that your investment in social capital be recognized as being as essential to our country's well-being as investment in economic capital. Our children are our greatest natural resource. We need action to help their optimum development. That's one of the wisest uses of our financial resources today.

Thank you very much.

The Chairman: Thank you very much, Ms. Feehan.

We'll move now to Mr. Martin Salloum from the Edmonton Chamber of Commerce.

Mr. Martin Salloum (General Manager, Edmonton Chamber of Commerce): Thank you.

The fact that the deficit is being reduced is very positive for Canadians, and the projection that the deficit will be eliminated by the end of the next fiscal year is obviously welcome news for every citizen of this country. While we send words of congratulations to Paul Martin and his team for the work done so far, we would caution that the work really has just begun.

We continue to believe that the national debt is the most critical issue we face as a country. The federal government must deal with the debt before any consideration is given to increase spending. We must stay the course.

Before the government is pressured into increased spending, I would suggest that the federal government look at a legislated debt reduction plan that would guarantee to Canadians that the national debt will be dealt with.

We're wasting massive amounts of money on interest payments. It would be better to free up these dollars for program spending than to continue to borrow even more.

The most critical areas to be considered when the government looks at increased spending are education, health care, and social programs, in particular in the area of child poverty. But the issues of efficiency and effectiveness need to be considered in all areas before new dollars are thrown into these programs. The private sector faces this reality every day. Their ability to be effective and efficient determines whether they will survive.

In closing, we're concerned that the general public perception is that we no longer have a fiscal problem in this country. With the massive $600 billion debt, and again I stress the amount of money we're wasting on interest payments that could be going into program spending, we must continue to focus all of our energies on this critical issue.

That's my five minutes.

The Chairman: That's not even five minutes. That's very good. The time is shrinking about as quickly as the deficit is.

We'll now move to the University of Alberta representative, Richard Plain.

Welcome.

Professor Richard Plain (University of Alberta): Mr. Chairman and members of the committee, I thank you for the opportunity to address you. In addition to my professional capacity as a professor at the university, I do have a community role, which is as vice-president of the Consumers' Association of Alberta and chairman of their health committee. I'm a specialist in health care economics. I will focus on the health care economic aspects and priorities that are linked in the budget.

• 1545

The first is this issue with respect to being able to relate the federal government's role in health care and spending. As it stands, it's extremely difficult, if indeed not totally impossible, for the general public to identify the magnitude of total federal government health care transfers, the grants plus the tax points, that are made to each of the provinces. We know not where our money goes, and to what degree, on health.

The green book used to provide such information. It attempted to break down the tax points and expenditures by program scenario. It is submitted that this inability on the part of the population to link federal government revenue support with provincial government spending is seriously undermining the public's perception of the traditional role the federal government has played in developing and maintaining the Canadian medicare system.

It is suggested that the next budget should contain a commitment that the federal government intends to structure its federal transfer payment system and information reporting systems in such a way that a clear-cut linkage can be shown to exist between total federal transfer payments and the level of total health care spending carried out within each province. So it seems like a housekeeping, technical point of view, but it's absolutely crucial. We can't relate the federal spending to what's happening in the areas.

Two, it has been successfully argued in the health forum and other areas that the Canadian health care system has sufficient resources to meet the needs of the population. A number of examples exist of countries with markedly older populations that have comparable or better health status outcomes while spending markedly smaller percentages of the gross domestic product on health care.

I believe that, over time, the Canadian health care system can be reformed and restructured in such a way that a higher, or equally high, quality of health care can be delivered to a markedly older population while consuming a smaller proportion of a growing economy. We have a number of examples in the world that we can relate to on this side, over time. The long-run perspective is excellent if the provinces and the federal government continue to work at reforming the system. However, to paraphrase Keynes, we live and die in the short run.

The federal government needs to use its fiscal presence to bring the long-run objective of a more cost-effective, high-quality health care system to fruition. In particular, a number of provinces have made significant reductions in health spending by increasing the economic efficiencies of the system, something we all hope and are working on.

They have also achieved significant savings by simply shifting costs from the province to the sick and the ill, and to the various benefit plans operated by private businesses and corporations and not-for-profit agencies, such as local governments, universities and colleges, and other charitable agencies that have paid employees. These shifts have taken the form of shifting nursing, drug, and accommodation costs onto individuals and families, escalating the burden on private industry in the process. This has given rise, in a social sense, to concerns regarding access to services by moderate- and low-income Canadians.

So it's suggested that the next budget should facilitate the steps needed to initiate the development of the national home care and pharmacare programs, but this should be done very carefully and cautiously. It should be based upon in-depth economic and health service studies of successful programs that exist within and without Canada.

It should be noted that the funding of these programs needs to be conditional. The transfer of a block of unconditional funds to the provinces has an excellent chance of simply being used to accelerate the rate of debt reduction within the province receiving the grants. In effect, we have provinces—and you are in one—in which an availability of public funds is not the issue. It's not a shortage of funds dealing with how we may or may not wish to fund the Alberta health care system; it's a belief that adequate resources and the government of the day are going into the system to do the job that the province views needs to be done. If you throw more funds in there, just in a block, guess what? Don't be surprised if more funds are not put into the health care system.

• 1550

So we have a restructuring, different economic objectives, different legitimate roles of the provincial and federal governments to reconcile in this reform and restructuring. It's not going to be simple, but it's a crucial job that needs to be done.

Thank you very much.

The Chairman: Thank you very much, Professor Plain.

We will now move to the representatives from the Premier's Council on the Status of Persons with Disabilities.

Mr. Gary McPherson.

Mr. Gary McPherson (Chairman, Premier's Council on the Status of Persons with Disabilities): Thank you, Mr. Chairman. I sat here listening to the presentations before me, and I want to make sure now that I don't repeat them. I think they all have legitimacy. One of the things it points out for me is that it is not possible to separate social issues from economic issues when we're planning for a country or a province. I think we tend to do that, which gets us into problems.

To comment on debt elimination, I think it's extremely important. I listened to my colleague Dr. Mike Percy, and I think he makes a very good point. I don't know whether I agree with Mr. Salloum that it's the most critical issue we face. I think it's one of the most important issues we face, but some of the other social issues we face are more critical. Although we shouldn't take our eye off the debt, I think we need to begin to address some of the other problems.

One of the ways we can do this is to make much better use of existing resources. I don't think we use our resources very well, federally or provincially. We spend a lot of money, and we often spend it based on a historical perspective and not on what's current.

If you look at what's in the Auditor General's report, all kinds of wastage could be retargeted to social issues as well as debt elimination. We would all be better off than where we are, but it would take a whole review of what we're doing.

There are two things missing that would help us. We have neither a framework for making decisions that is values-based in this country or in this province, or any province, probably, nor any meaningful policy framework that addresses the new and emerging times in which we find ourselves in the global marketplace. It's easy to ask for more money, but it's not necessarily going to solve the problem. If you have imperfect structures and you pour money into them, you're not going to get the kind of returns you want. I think we need to do a comprehensive review. More money is needed in a number of cases, but without some creative input we're not going to solve our issues.

I'd be remiss if I didn't talk about disabilities. I think it's absolutely imperative that the federal government take a leadership role in establishing an initiative for a comprehensive and co-operative federal-provincial approach in the area of disability-related policy and programs. One of the outcomes of this is that we need to ensure that there is consistency of portability of services for Canadians with disabilities. I'll give you a simple example.

I am physically dependent for a number of my daily needs on other people. In other words, I need personal care on occasion. If I wanted to move to Ottawa to take a job, I couldn't go, because I wouldn't have the personal support I have in Alberta to allow me to do that. In other words, there may be a job in Ottawa for me but I can't move to take it, because I don't have the support in Ottawa that I have in Alberta.

Canadians with disabilities cannot move to where jobs are, in some cases, in this country. To have that as an economic strategy might be nice in words, but it's not practical for a lot of people. I suggest that may be true for a lot of disadvantaged individuals who rely on informal support networks or formal support networks.

Not only that, but the same thing is happening now in Alberta with regionalization and decentralization of programs. If I wanted to move from the Edmonton area, where I get personal care, I may not be able to move to Lethbridge for a job, simply because I could not get the same level of service.

This is absolutely critical for Canadians, because it is not portable and it is not consistent. That means people with disabilities cannot partake in the country even if they want to, in some cases. I suggest that frameworks, a co-ordinated federal-provincial approach, and a comprehensive policy review would help minimize those difficulties.

• 1555

I will just leave you with that thought, Mr. Chairman.

The Chairman: Thank you very much, Mr. McPherson.

We'll now move to the representative of the Alberta Roadbuilders Heavy Construction Association, Barrie McPhalen, president. Welcome, sir.

Mr. Barrie McPhalen (President, Albert Roadbuilders Heavy Construction Association): Thank you, Mr. Chairman.

From the 16,000 employees in the heavy construction sector in Alberta...I appreciate the opportunity to be with you today. We would like to note with favour the moves the federal government has made toward deficit reduction, and the benefits. We've already heard what that will do, and we urge you to stay the course.

Today I'd like to ask you to share with me a vision we hold in Alberta, and it should be a Canadian vision. In Alberta we believe it's entirely achievable that no raw material would ever leave this province; it would leave this province as finished goods. We believe it's possible for Canada and Alberta to assume a very significant place as world traders, and in fact our very economic survival depends on us doing that.

In order to achieve that vision we have to have an infrastructure under which those economies can develop, and I'll use roads as the most obvious example of that. Today in Canada we have no economically based road system, like the American interstate system, and it's desperately needed. The roads that are in place are in terrible condition and require about a $14 billion retrofit to bring them up to adequate international standards. The thrust of that need is if you can't move the raw materials to the factory and the finished goods to market, you can't compete economically. That's the vision.

The cloud on the horizon is what we call the hidden deficit. There's a reality in road construction that after the road has been completed there are certain repairs that have to be made to it in a timely fashion as it gets older—as I'm getting older. If you don't do them when you should do them, when the engineers tell you it's time to fix the cracks or the potholes or whatever, when you finally get around to doing it the cost can be as much as five times greater than if you had done it when you should have. The hidden deficit here in the road system in Canada is that the work is not being done and the cost is mounting.

On the one hand you have a government dedicated to reducing its own obvious and visible deficit, but no move is being made to help address the hidden deficit of the roads system.

The poor condition of the roads brings with it safety issues. There are 160 deaths a year in Canada that are directly related to poor roads—not poor driving habits or anything like that, just poor roads. There's a direct link between poor roads and fuel consumption, and of course that has economic and environmental effects.

When you add up all those things, plus maintenance and lost efficiencies, the lack of leadership at the federal level in creating a national highways program becomes really quite critical in our minds. We would urge you during your deliberations to share again with us that vision of where we are going in this country as an economic power that will create jobs for our children and sustain the social programs we hold so dear. We must have an economy under which those things can operate.

I thank you for the opportunity again, and I'll rest my case.

The Chairman: Thank you very much for your comments.

We'll move now to Mr. Don Logan, executive officer, Native Employment Services Association of Alberta. Welcome.

Mr. Don Logan (Chief Executive Officer, Native Employment Services Association of Alberta): Thank you, Mr. Chairman and members of the committee. Thank you for inviting me. The invitation was albeit last minute, and when I received the invitation it was because they were requesting some input from the aboriginal community. So I thank you for the opportunity to do that.

• 1600

I apologize that I do not have any prepared written notes for this, but I'd like to concentrate my comments on the urbanization social issues that are impacting most major centres across this country as native people leave their home communities and migrate to the larger urban centres in search of jobs, education, and better housing.

The organization I represent is—or I should say was—the largest and longest-standing aboriginal employment agency in North America. As of two hours ago we have told the provincial government that we will no longer do business with them, after 25 years. We can no longer, in our moral conscience, deal with a province that has the attitudes and morals of this one.

With the recently released royal commission on native peoples we have witnessed the most expensive and longest royal commission in this country's history, which was met with the remarks, “I'm sorry, this can't be addressed.” If this report collects dust, as many other royal commissions have, I believe it's a travesty that we should all be embarrassed for.

In Alberta, where we enjoy a particularly good standard of living and have abundant resources and well-advertised low unemployment rates, this is not true in the aboriginal community whatsoever. In Alberta, 55% of people from first nations are now living off-reserve. Alberta is unique in Canada in that it has the only land-based Métis communities in the country. There are eight Métis communities that have a land mass almost equal to the 44 first nations in Alberta.

Of the 604 reserves in Canada—I should say bands of first nations in Canada comprised of 2,500 physical reserves—the demographics are far different from the ones quoted in current popular books, such as Boom, Bust and Echo and other demographic-based books.

The demographics read for the aboriginal community like a eulogy. Unfortunately, they're often linked to those topics.

Just as deficit reduction, everybody around this table agrees, is important to the welfare and well-being of this country, discussions on GDP, GNP, G-7 standings of Canada do not equate to food or jobs to those who are on the lowest socio-economic scale in this country. I am talking about poverty more than culture. Many of the speakers before me have mentioned poverty and the issues it affects, the children it affects. If you were to compare those statistics of the aboriginal community to the rest of Canada, we are embarrassed by that.

There has been a devolution process across this country to pass along these responsibilities to the aboriginal leadership. This has been good; however, the pie has usually shrunk before it is passed on for custodianship.

Our organization in particular has placed over 12,000 people. The Alberta government now tells us that there's no such thing as special needs groups in this province. We formally withdrew our role as a contractor in this province this morning with the minister for career development. We can no longer continue, in our conscience, to have a business relationship such as that. There are not very many non-profit groups in this country that will stand that high to moral conviction, but we have done so—mind you, at our own peril and in a shrinking environment.

Where we used to have seven service centres in the province, we were reduced to one. What was the sense of continuing? You cannot run social services through a business plan. You can do it through an operational plan, not so much a business plan. We're ignoring the revenue side.

Anyway, I would like to reiterate that the issues confronting the million-plus aboriginal people in this country unfortunately all too often and too collectively do not represent the demographics of this country, and although the Department of Indian Affairs and North Development has a huge budget and one of the few that has increased.... The birth rate throughout Canada is double the national average. We have a ticking time bomb. And incarceration rates are far above national averages, etc.

• 1605

The Chairman: Thank you very much for bringing those very important points to light.

The next speaker will be Elisabeth Ballermann, president of the Health Sciences Association of Alberta.

Ms. Elisabeth Ballermann (President, Health Sciences Association of Alberta): Thank you, Mr. Chairman. The Health Sciences Association of Alberta is a trade union representing more than 7,500 para-medical, technical, professional, and general support employees in the public and private health care sectors in this province. I would like to thank the committee for this opportunity to participate in the pre-budget consultations.

As a general statement, I'd like to reiterate our position that a key component of Canada's identity is its capacity for compassion, for ensuring that all of its citizens have access to basic necessities of life. Historically, we've demonstrated this compassion through social programs such as health care, social assistance, employment insurance, and the Canada Pension Plan. These programs have come under increasing pressure as governments at all levels focus on deficit and debt reduction.

We were asked to comment on the process and the speed of the deficit reduction. For those who are fortunate enough to have above average incomes, we believe that the effect of deficit reduction has been fairly minimal. However, we believe that the zeal to reduce the deficit has created significant hardship for a large segment of the population, the same segment that unfortunately lacks the political influence to oppose the reductions imposed.

As for priorities, we were asked about increasing spending versus debt reduction versus tax cuts. We believe that spending allocations must take into account the need for services and the damage of years of federal and provincial funding cuts. Maintaining constant raw dollars is tantamount to a continuing cut due to population growth and inflation. More spending is required for programs for people.

We urge you and caution you to keep to a measured pace in debt reduction to ensure that this does not come at the further expense of the most vulnerable members of our society.

To propose tax cuts in the face of unprecedented child poverty, growing dependence on food banks, post-secondary tuitions that leave new graduates with massive debt, stubbornly high levels of unemployment in many parts of the country, and a burgeoning service sector with wages that force Canadians to work multiple jobs to make ends meet is unacceptable. Many will understand our cynicism for such tax cuts, which would be seen as little more than a publicity exercise.

As health care providers, HSA members have seen first-hand the effects of funding cutbacks on the health care system. Downloading of funding responsibilities from the federal government to provincial government and from provincial to municipal and so on has damaged Canada's social safety net to the point where it cannot adequately meet the needs of Canadians. Medicare is suffering and the ground is fertile for the increasing encroachment of private for-profit health care providers.

Medicare and other social programs have become convenient targets for government as the primary reasons for national debt and deficit. They are also subject to basic philosophies of government. Alberta and Ontario, for example, are steadily minimizing the role of government in the social and economic life of these provinces. Reducing funding for health care encourages a steady increase in privatization of the system, and the same can be said for other social services.

Diminishing access and unacceptably long waiting lists for surgeries are the consequences of provincial government policies. Privatization is increasingly seen as a viable and attractive alternative to a failing health system. This fosters a public demand for private services that large for-profit companies from around the world are poised to exploit. Alberta continues in its quest to de-insure services. A recently leaked Alberta government report, entitled “Towards a Core Health Services Framework for Alberta”, suggests charging user fees in spite of the Canada Health Act.

We are disappointed and discouraged by the federal government's apparent inability or unwillingness to follow through on the promises made by the former Minister of Health to enact legislation to prevent the opening of a private hospital in Calgary. Health Resource Group is operational, with plans for substantial expansion, and other companies are at the door.

We believe that Ottawa can exert influence to preserve our universal, accessible, comprehensive, publicly funded health care system by making its allocations for health care sufficiently meaningful to discourage privatization initiatives of provincial governments.

• 1610

We encourage the government to pursue a national pharmacare program. The move to de-institutionalized care is increasing the already substantial burden created by drug costs for many Canadians.

On the Canada Pension Plan, we urge the government to phase in the increases at a measured pace to temper the effects on working Canadians. Should further surpluses allow, we urge that a portion might be applied to offset some of these increases.

On education, as I've indicated, tuition for post-secondary education has risen dramatically. We believe federal initiatives to level the playing field would ensure that no one is denied a post-secondary education on the basis of socio-economic status.

The federal infrastructure program was helpful in providing meaningful work for many Canadians. As has been mentioned, it contributed to the construction of roads and other public facilities. The maintenance of our highway system is a huge task, because of the enormous distances and extreme climatic conditions present in Canada. It is of paramount importance that this network be maintained and developed to enable our economy to grow by making the transport of goods and people as efficient as possible. Renewal of the infrastructure program or some equivalent would be in the interests of all Canadians and would help to ensure that even geographically remote communities are readily accessible.

We reiterate our opposition to the CHST as a replacement for specifically targeted funding. It is our view that the collapse of federal cash transfers to health, post-secondary education, and social assistance into one fund allows provincial governments too much control into how funds are distributed. The federal government now has little control over where this funding goes. This hands-off approach means Canada is in the process of developing 12 health, education, and social service systems. The CHST framework and reduced funding contribute to the dismantling of national standards in these areas.

In conclusion, Albertans have recently reaffirmed through the growth summit that in this province deficit and debt reduction are unquestionably of lower priority than health, education, and social programs. We ask that all levels of government take note of this and respond accordingly. The federal government must renew its capacity to maintain national standards for social programs, standards that are enforceable and equitable. It is the only government that can speak for all Canadians. It must be willing to tackle the issue and to challenge provinces such as Alberta and Ontario, and it must act swiftly.

The Chairman: Thank you very much, Ms. Ballermann.

Mr. Lynch.

Mr. John Lynch (Director, Social Justice Commission, Archdiocese of Edmonton): Thank you.

The Social Justice Commission of the Archdiocese of Edmonton, which represents 300,000 Catholics, is vitally interested in the process of deficit reduction. Our main concern is that deficit reduction should impact on our corporate citizens more than it impacts on those struggling to survive at or below the poverty line. There must be a fair distribution of the great wealth of Canada, to the benefit of all Canadians.

We strongly believe the essential role of the federal government is to create a socio-economic order that respects and contributes to the common good of all its citizens. Social policies must specifically espouse this principle and economic policies must be based on it if they are to operate for the good of each and every person.

Cuts to health care and social welfare benefits are a definite federal retreat from that role. There must be a strong federal authority that ensures control over matters essential to the common good of the citizens of Canada. The retreat from responsibility in these areas, leaving the field to the provinces, is a cause for alarm, especially in Alberta and British Columbia, where people living in poverty and not the poverty are regarded as the real problem. A good note to that alarm was the fact that our social service minister this morning declared that he needs a $90,000 reading program for him to find out if the report from the child's advocate means what it says.

The common good of every society must actively support the intrinsic value of every human being, not only those within its own constituency but those impacted on by the actions of its government and living outside its jurisdiction. As we cast further and further offshore in our efforts to ensure sustainable and broad economic growth for Canada, we are obliged to deal with the people of those lands no less justly than we are obliged to deal with our own workers. Just wages and working conditions know no nationality.

• 1615

Deficit reduction is not an unqualified good. It must serve the common good and respect the intrinsic value of every citizen. Unfortunately, in our opinion, Canada has moved too rapidly. As the budget deficit declines, the human deficit is increasing dramatically. That is the hidden deficit.

Our economic policies have had their part in doubling the number of children living in poverty-stricken families over the last ten years. As the human deficit increased, volunteers scrambled to offset the failure of our governments to adequately respond to their survival needs. Charitable responses have been fantastic but will never be adequate to address all the compelling needs of our communities. That requires a strong federal presence to ensure that all Canadians, and not just the rich and powerful, participate in the richness God has given to our great Canada.

To adequately respond to the first two principles of the common good and human dignity, the federal government must also give active assent to the principle that every citizen has a basic human right to earn a sustainable living and to actively participate in the well-being of society to the extent that he or she is capable. It is through the activity of work that people exercise their creative spirit and realize their human dignity by sharing in creation. Work is a fundamental dimension of human existence. Given how intrinsic work is to our socio-economic fabric, it would appear to be the essential key to the whole social question.

Full employment is the key to rational deficit reduction. It is the key to the total elimination of the human deficit. To give this principle full credibility, workers are entitled to earn a decent and sustainable living through their labour, so that they can also live in dignity as full human beings. This will mean replacing regressive tax measures with progressive measures that will benefit those living at, below, or on the poverty line, more than those measures benefit the haves, who seem to be able to demand more and more from our governments at the expense of the poor. Increased job creation through effective skill training must be a priority in order to allow more Canadians to take the skill-demanding jobs that are being created.

What about those who, because of circumstances beyond their control, are unable to earn a decent living? We believe they, too, are entitled to decent living standards so that they can live in dignity as full human beings. To the extent they are forced to exist in less than human circumstances, struggling simply to survive in a world of abundance, we stifle their ability to participate actively in our society. Society is human beings.

The economic system must provide for all members of society, especially the disadvantaged. The economy is a human artefact, fashioned in large part by government policies and priorities. Socio-economic growth must include the poor and the disabled, integrate the marginalized, and provide support for the downtrodden. The government has the duty to protect the rights of its weakest members. Government must ensure that the more fortunate among its citizens share their abundance more generously with those less fortunate. The greatness of a society should be measured against the depth of compassionate support it gives to its weakest members.

Society is a construct that we human beings create to realize our inherent dignity through the creativity of work. We elect governments to help us pursue this end by serving as our representatives to formulate socio-economic policies and procedures that will enable us as individuals to work together for our own common good. Only through effective government representation can we ensure that the abundant creation Canada has been gifted with will be used for the common good. Private enterprise cannot be counted on to work toward this end in an era in which human beings are more and more placed in subservience to profit and the bottom line.

• 1620

Government must not be allowed to abrogate its responsibility to regulate the consumption of non-renewable resources for the good of all. This must not be left to profit-driven private corporations. Regulations must protect our environment from the rape of multinational corporations that would clear-cut watersheds and destroy the ecological balance in many parts of Canada, all in the name of global trade. The common good is not served by allowing private corporations to pollute our streams and the air we breath for the sake of larger profit and more efficient operations. Economic growth must not be at the cost of our God-given environment.

New technologies are the products of human creativity. They must always be used to forward the common good by improving human conditions. It is the rule of good government that ensures technology is not used to destroy life or the environment.

Socio-economic growth must be founded on the morally proper use of technology. Government must regulate against the indiscriminate application of scientific advances in technology in matters harmful to humanity and the environment, which supports us. Technological advances must be used for the common good so that both income and employment are shared by all members of society, directly or indirectly, as in the case of the disadvantaged.

Thank you very much, Mr. Chairman.

The Chairman: We will move to the question-and-answer period now. We will start with Mr. Jaffer.

Mr. Rahim Jaffer (Edmonton—Strathcona, Ref.): I am going to direct my questions to Dr. Percy, but I know a number of people spoke about debt reduction. If there are others who want to answer this question, then I'll open the floor to them.

I heard a number of speakers talk about debt reduction specifically coupled with a social conscience. What I would like to hear is simply the fact that sometimes I think we underestimate the power of families to make decisions on behalf of themselves on simple choices.

Say we are looking at all the tax cuts. Say we are going to target tax cuts. For example, look at areas of raising the basic exemption so that low-income families would be taken right off the tax rolls. This is especially so in light of CPP increases that are coming down the line. People and families are going to have to make decisions between a mortgage and groceries.

One of the things we need to do is focus in on maybe when, at what point, should the government look at implementing tax cuts. Should the government be moving toward a plan of how and when to introduce these cuts? I would like to hear your thoughts on that, Dr. Percy.

Dr. Michael Percy: I have three points. I would like to take two points to actually answer your question.

One of the reasons that the Alberta growth summit was able to make recommendations with regard to people development, health care, and quality of life as being the highest priorities was because of the fiscal position of the province. One of the reasons I wanted to juxtapose where the province is today is because the province has great flexibility in its choices relative to where the federal government is. The constraints of debt-servicing are far more binding on the feds than they are on the province. There are differences when you go through this consultation process in what is possibly feasible, but more importantly, sustainable, over the whole economic cycle.

With respect to the issue of tax cuts, certainly in Alberta, there has been a modest program directed at tax cuts for low-income families. That was introduced.

If you are asking my opinion with regard to the hierarchy at this stage, then if the Minister of Finance has said that they have already made the decision that 50% of any potential surplus is going to program expenditures, my comments relate to that next 50%. My perception is that the next 50% should go to debt retirement without, at this stage, looking at tax cuts.

That's simply because of the high stock of debt, particularly the large amount held by foreigners. I think if we want to be able to direct our own future through time and design our own programs, then the more we can reduce the stock of debt and the lower we can make the ownership of that debt, and the more control Canadians have over designing their own social programs and the sustainability of those programs.

[Translation]

The Chairman: Mr. Desrochers.

Mr. Odina Desrochers (Lotbinière, BQ): I will confine myself to one comment.

• 1625

Good afternoon. In light of the testimony that I have heard since this afternoon's proceedings began, it is clear to me that we still face and will continue to face serious problems in our society. The federal government must plot another course if it is to deal with this situation. We in the Bloc Québécois advocate three short-term solutions.

Firstly, the Minister of Finance must stop cutting transfer payments to the provinces. Secondly, in light of the anticipated surplus, he should give back to the provinces the funds withheld since 1994 and review the way in which the employment insurance system currently operates, given that it penalizes many workers. Program eligibility requirements should be changed and high premium levels reduced. These are very pressing demands that you can convey to the current government.

Thank you for your participation and congratulations on the work that you have accomplished thus far this afternoon.

[English]

The Chairman: Thank you.

Mr. Riis.

Mr. Nelson Riis (Kamloops, NDP): Thank you, Mr. Chairman.

I've been listening to the excellent presentations this afternoon, and if I could summarize there seem to be almost two unanimous areas of agreement, which is unusual these days. First, I've heard that now is not the time for tax cuts as an option. That's probably the lowest priority by far.

Secondly, if there are going to be expenditures they should clearly be along the lines identified here in Alberta—health care, education, and social services. With all due respect to the road builders, I'm not sure what that means, but I don't suppose it means you're excluded.

I think we can thank Gary and Don for pointing out that there are obviously many Canadians who are not being treated equally these days, and something ought to be done about that.

But my question is to Dr. Percy. I listened carefully at the outset and realized that you hadn't heard any of these presentations when you made your plea for aggressive debt reduction. I suspect you are a compassionate person and you've heard people really articulating disasters in certain sectors of our society—cruel, mean-spirited policies have occurred. I don't think you can call them anything else. We have victimized people who are victims of some very difficult economic choices that have been made.

After listening to all of these people, do you still believe we should ignore serious spending in areas that will bring some relief to some of these people, or do you consider we should still maintain aggressive debt reduction as our priority?

Dr. Michael Percy: I welcome the opportunity to respond. I have two points. First, I think I made it clear when I was replying to the question from Rahim that I take it as a given that the Minister of Finance has signalled clearly that within his own mind he has allocated where that incremental dollar will be spent. It appears the decision has already been made that 50¢ of it will go to program expenditures. You want to link it to outcomes, because one of the problems in our society today is that people see the cost of government, but, as Dick pointed out, they can rarely assign a value to it. So I think outcome-based management is very important.

Mr. Nelson Riis: I apologize because I didn't realize you would agree that whatever the surplus was, 50% could go to investing in social programs.

Dr. Michael Percy: That seems to be a pretty clear signal, at least from what I read.

On that next increment, when I look at the difference between tax reduction and debt retirement, it's clear to me it has to be debt retirement to free up funds on a sustainable basis. At some point, if we get a shock related to unity or some other type of external shock that spikes up interest rates, you could easily see the federal government in a deficit position again. The issue is sustainability of policies over the cycle so you provide a framework for individuals to make plans, knowing that the programs in place will be there for some time.

Mr. Nelson Riis: Just a quick question to Elisabeth and Lorraine on the pharmacare proposal that has been announced—at least consideration has been given to it. Do you have any concerns about the ability to actually introduce a comprehensive pharmacare program across the country with the existing legislation that is in place regarding pharmaceuticals—Bill C-91, to be specific—in terms of the 20-year monopoly, the difficulty in getting generic drugs on the market, and so on? Did you see a conflict in these two programs, or can they actually co-exist?

• 1630

Ms. Elisabeth Ballermann: I'll start on that.

In the past, we have certainly advocated a very careful review of where Bill C-91 is at this point in time with regard to that issue. It is our opinion that the granting of these extended patents for drugs does not serve Canadians terribly well. It has not created a whole lot of jobs, and we therefore believe they are incompatible with an effective program.

Having said that, if we are into a situation of mass purchasing of drugs through a government agency, simply because of economic efficiencies and volume purchasing, the cost of those drugs should be lower than what they are through retail at this point in time. Retail drugs are incredibly expensive for Canadians.

Ms. Lorraine Way: Part of the concern around the increasing costs of drugs is that, because there has been a great shift to providing care in institutions and hospitals—where those drugs were of course covered under the Canada Health Act—now families are picking up those costs. But I agree with Mr. Plain that along with pharmacare, we also have to look at the effectiveness of the whole use of drugs, period.

If I could suggest it, Heather Smith might have something. She also mentioned pharmacare in her presentation.

The Chairman: Yes, go ahead.

Ms. Heather Smith: I would like to have seen changes in terms of Bill C-91, particularly in regard to all medicines being subject to review in terms of cost and pricing and not just the patent medicines. Despite the limitations we have in terms of Bill C-91, I still think it becomes even more imperative that we have a national pharmacare program.

I'm sure that with the cost efficiencies that we have been able to demonstrate because of the economies of scale we have, and in terms of health care generally, if you asked Canadians if pharmacare and home care national programs are worth another dollar in terms of tax, you would be told they are. I think Canadians would even accept higher taxation, generally—I'm not suggesting it has to be a huge amount—and they would even accept higher taxation to have that comprehensive cost effectiveness and the protection that would come from a national program in terms of the costs of these drugs. Take away some of the penalties that currently exist against people who are sick.

The Chairman: Thank you very much.

We will now move to Mr. Jones.

Mr. Jim Jones (Markham, PC): Thank you, Mr. Chairman.

First of all, I would like to thank you all for taking the time to make your presentations this afternoon. I don't really have any questions, but I do have some comments.

Over the last two decades, not only in the private sector but in the public sector, I don't think we ever thought we would be running into the situation we're running into, this brick wall, where we have to be financially responsible and spend properly. A lot of large corporations in the private sector had to do tremendous reorganizations. You talk about pain and hurt. Well, I don't think the public sector has seen the pain and hurt that some of the companies have experienced in the private sector, where people have taken 20% and 30% salary reductions, where they have had to cut 20% to 30% of their staff. I think we have to do that.

I think somebody mentioned this, but we need to create a vision for Canada in terms of where Canada is going to go into the millennium and into the next century. This has come up many times in other conversations, but one gentleman said no raw materials should leave Alberta. I say that no raw materials should really leave this country. We should be making them into finished products here, instead of shipping raw materials to other countries and then having them come back in the form of finished goods. That creates a lot of jobs in those countries but not very many in these countries. We should be doing that.

• 1635

For 27 years the federal government ran a deficit budget, and my government was responsible just as much as the Liberals were over the last 27 years. One of the reasons why I decided to run was I couldn't figure out how we could always figure that we could borrow on tomorrow for some short-term gain. Now what we're doing is long-term paying.

I know the other day Mr. Martin said we're close to a balanced budget; we're talking about a fiscal dividend. I can't believe it: 27 years of deficit financing and we're already trying to spend it. I think balanced budget legislation should be put in place such that never again, unless in time of war or national disaster, will we ever run into a deficit budget.

We also must put in place a debt-reduction program to retire the debt. As I think Mr. Boothe from the University of Alberta said this morning, as we retire the debt and we free up the servicing charges on that $48 billion we're paying, that is the fiscal dividend, not this dividend they are talking about now.

I was in municipal government for nine years and I saw a lot of duplication there. I saw a lot of empire building. I saw where one fire station couldn't cross the line because of the way contracts are written.

There's a lot of money out there. We're spending a lot of money in the public sector. We must change the paradigm. We must co-operate better with each other, with the different levels of government. I still don't think we have to suffer a lot in our standard of living if we just work more efficiently together in the government.

The Chairman: Can you hold that thought for a second, Mr. Jones? Professor Plain would probably like to ask you a question or make a comment.

Prof. Richard Plain: It's actually to supplement an earlier point on pharmacare and the part of my presentation on that.

The Chairman: Then finish your point, Mr. Jones.

Mr. Jim Jones: The last thing was really going to be directed at Pam Barrett.

In 1990 Ontario was very lucky and it elected an NDP government and Bob Rae. He inherited either a $30 million deficit or a $1.5 billion deficit. But within a year he ramped up the deficit to $10 billion a year. Ontario is still paying for that. We went from $40 billion in debt to over $100 billion.

Mr. Nelson Riis: Let's talk about Saskatchewan for a while.

Mr. Jim Jones: No, this is Ontario.

Mr. Nelson Riis: The Tories in Saskatchewan are all in jail.

Mr. Jim Jones: All I'm saying is—

Mr. Nelson Riis: Nothing personal.

Mr. Jim Jones: —it is criminal to borrow on tomorrow. We must pay as we go. I think some of the people were saying that. At the same time we must be humane and look after the people who are less fortunate. I think we can do that. We have to have the partnerships not only with the government but with the private sector and the corporations.

Ms. Pam Barrett: Well, if Mr. Jones wants to talk about criminal, let me talk about the free trade agreement signed in 1989.

The Chairman: Before you do that, can I recognize you?

Ms. Pam Barrett: Okay.

The Chairman: Okay, Ms. Barrett.

Ms. Pam Barrett: Then I have to run.

The free trade agreement without question cost the loss of tens of thousands of jobs in Ontario alone. The North American Free Trade Agreement was subsequently signed, and now the Multilateral Agreement on Investment, which the Liberal government has entertained, I believe would be the most criminal of all, because it would allow all transcontinental corporations to enjoy their third world standard of living when it comes to polluting our atmosphere or treating our workers the way they treat theirs. So I would think if you want to be a good opposition MP, the first thing you should do is go after the MAI.

Mr. Jim Jones: Just one quick retort on that. The reason we got our deficit down was that $17.5 billion has come in as an incremental tax dividend from free trade.

• 1640

Ms. Pam Barrett: Well, I can tell you in response then that the per capita deficit—

The Chairman: I'm going to cut both of you off and I'm going to go to Professor Plain.

Ms. Pam Barrett: —in Alberta was higher than Ontario ever had.

I have to go. Thank you.

The Chairman: Okay.

Prof. Richard Plain: Mr. Chairman, I wanted to supplement a point or two that was made about pharmacare and also to perhaps clarify a point I made on the pharmacare program and why I thought very careful deliberation and caution should be employed in implementing that program.

Professor Robert Evans, who's an eminent, well-known health care economist in the national forum, after two years of looking at this and other areas, set out this very interesting challenge to Canadians. He said when we talk about putting in a national pharmacare program, we are not talking about adding more resources. We are talking about consolidating the existing resources that go into a multiplicity of drug insurance plans across this nation that are highly inefficient and ineffective, with high levels of administrative and other costs, and using what we've learned under a medicare single-payer delivery system to make available to all Canadians access to needed resources, with the same total amount of spending we're doing now.

This will not be painless, and it will certainly be interesting, but that's the challenge and that's what we need to look at very carefully. I felt we should supplement it, because there was a suggestion that additional resources over and above had to go in, and I don't think so.

The Chairman: Thank you very much.

Now we'll move to a final question, Mr. Valeri.

Mr. Tony Valeri (Stoney Creek, Lib.): Thank you, Mr. Chairman. I have a general comment and then a question for Dr. Percy.

Certainly no one around this table takes any pleasure in the kind of pain that has gone on, essentially because we were forced as a government to deal with the very difficult financial situation. I don't want to get into the politics of whose fault it was or party partisanship or anything like that, because that's not the purpose of these committee meetings.

I almost feel compelled to apologize for the last exchange, because what we want to do is hear from Canadians, while we are going forward across this country, on what kinds of things we need to do to improve the quality of life for Canadians. Now we finally have an opportunity to start that discussion and gain that input and start to put in place some of the things that are important to Canadians.

As a general comment, a question we need to answer is what new appropriate strategic investments need to be made. What I hear from this round table this afternoon is that health care and education, I guess in the form of transfer payments going back to the provinces, but with some type of condition to those moneys, are crucially important from your standpoint. That's the message I got from you this afternoon. Perhaps I can ask Lorraine Way or anyone else to comment on whether I have the message right.

The second question I have is for Dr. Percy.

In your brief you mentioned “vulnerable to interest rate spikes”. Part of the process we've used in putting forward budgets in the past is the use of prudent economic assumptions; one of those is obviously interest rates and the other is economic growth.

Professor Boothe presented to us this morning. He talked about his model and made the reference that we should do away with those types of economic assumptions and deal with just a contingency fund. I wonder if perhaps you could comment on that in your capacity and give us some sort of direction as to whether we should continue in the process as we have in the past or whether you have any other suggestions for us when we formulate the budget.

Dr. Michael Percy: Thank you.

I'm glad to hear Professor Boothe is advocating that, because I certainly think Alberta needs a stabilization fund as opposed to building the cushions in the current fiscal environment.

I would, with respect, disagree with my colleague and argue that you do need prudent assumptions built into the budgeting process, because the downside of being wrong and being overly pessimistic is that you have incremental funds that are either applied to the debt or.... In one sense it's the hand on the brake that you need.

So I would think a stabilization fund.... Given the interest servicing costs we currently face, once we've made the decision that there are targeted expenditures required to achieve specific outcomes as opposed to just a generic increase in spending because we have an extra dollar, once we agree there is targeting and it is to a well-defined objective and we will know what we will get out of it at the end of the day.... You do that on the revenue side in the context of a set of projections that are prudent and consistent and provide a planning horizon so that people out there also have an idea of what is happening on the revenue side, because they compare it to the realized outcomes for these variables. So the first point is that I would stick with a prudent set of projections.

• 1645

I think the second point in terms of the issue of the stabilization fund is that the best stabilization fund you can have is once you have made your decision about expenditures and you have set your targets and certain outcomes and you have incremental funds at this stage, they go to debt retirement to free up on a permanent basis the interest savings that are available permanently, those extra dollars. I'm not sure. I guess at this stage I would stick with the prudent projections. After all, given the surplus in the UIC fund, given the surplus that will exist in CPP, there's already enough built in there in terms of funds that are being withdrawn from the economy. So I would leave it as it is.

Mr. Tony Valeri: Although, as a comment on the CPP, the change to the CPP is only in fact going to the fuller funding and not in fact to—

Dr. Michael Percy: Yes, it has gone actuarial.

Mr. Tony Valeri: There will not be a surplus in the CPP fund for—

Dr. Michael Percy: It's just in the short term, but in an actuarial sense there won't be.

Mr. Tony Valeri: Thank you.

The Chairman: Are there any further questions?

On behalf of the committee I would like to thank you very much. This has been a very worthwhile exercise. The thoughts and ideas that have come from your group have been truly exceptional.

As we attempt to break new ground, I'm finding that there is enough common ground to do that. I am quite optimistic about this exercise because for the very first time I see sectors in our society that at times were not necessarily working together starting to say more or less the same thing. That speaks well for the process, and it gives us an idea that indeed we can build a strong economy but at the same time also help to build a healthy society where, while we move ahead, nobody is left behind.

On behalf of the committee I would like to thank you very much for your great contribution.

The meeting is adjourned.