FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Friday, October 17, 1977

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[English]

The Vice-Chair (Ms. Paddy Torsney (Burlington, Lib.)): Order, please. As the finance committee, we are hearing witnesses from across Canada, and we are very pleased to be here in Winnipeg with you this afternoon. I'll introduce our panellists, who will speak in the order in which they are introduced.

Representing the Manitoba Chamber of Commerce we have Dan Overall, director of policy and communications. From the Western Canada Wheat Growers Association we have Mr. Earl and Mr. Maguire. From the Thomas Sill Foundation we have Norman Fiske, who is its president. From the Manitoba Research Council we have Dr. Garry Glavin. From the Manitoba Cancer and Treatment Research Foundation we have Dr. Arnold Greenberg. The fifth person is Mr. Sherman Kreiner, from the Crocus Investment Fund.

Mr. Overall, we have five minutes allotted to you.

Mr. Dan Overall (Director, Policy and Communications, Manitoba Chamber of Commerce): First of all, let me thank you for the honour of addressing you today.

I have been asked to address two issues. One is the process of deficit reduction. Did the government go too quickly or too slowly? Were the methods used appropriate? The second issue I was asked to address was ongoing priorities. In other words, should the federal government focus on debt reduction, spending increases or tax relief?

Given my time allotment, I will focus on the second issue. I think it is common ground. It is certainly the key issue that faces Canada today.

Certainly, I think we can all agree that the days of a balanced budget are indeed approaching. We can also agree that Canadians have felt the oppressive yoke of dragging our country to this hallowed ground. No one enjoys taking economic steps backwards, tightening their belts, buying less for their children, letting employees go, fretting about next month's mortgage, or, worse yet, giving up on the dream of having a house in the first place. That is why there is always the perhaps all too human temptation when finding a recovering economy and a balanced budget to cast off this yoke and spend our economic gains to cure the evils we have endured.

In September 1997 the Canadian Chamber of Commerce held its annual general meeting. There, 204 chambers with 521 delegates from all over Canada unanimously voted that the federal government should continue its policy of fiscal restraint well beyond the elimination of the deficit and at least until the debt-to-GDP ratio has fallen below 60%.

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The figure of 60% comes from the C.D. Howe Institute study, Beyond the Deficit. I'm sure you're all familiar with it. The rationale comes from the fact that 30¢ of every tax dollar goes to interest on the debt. In 1995-96 public debt charges accounted for 34% of federal government revenue. These horror statistics regarding the debt go on and on.

The Minister of Finance recognized the importance of this issue when he stated in his October 1996 economic and fiscal update that “The challenge now and for the future is to reduce significantly the debt-to-GDP ratio”. Certainly the drop in the debt as a percentage of total economy from 74% to 73.1% is welcome. However, we continue to have one of the highest percentage ratios in the industrialized world.

The Royal Bank of Canada's chief economist, John McCallum, calculates that the federal debt should drop below 60% of GDP within four years, even without major reductions in the debt itself, thanks to a growing economy. This suggests that more can and should be done by this government to secure a minimum target of 60% as soon as possible.

We therefore recommend that this government make debt reduction the number one priority and vigorously restrict any increases in program expenditures to 2% annually, and then only when absolutely warranted. Regretfully, we are unable to endorse the federal government's proposal of 50:50 allocation, for we feel that strays too much from the required focus of debt reduction.

We have also called for the avoidance of a significant reduction in tax rates, except for a 60% cut in EI premiums. We applaud the finance minister's acknowledgement in his October 15, 1997, presentation that a major tax reduction at this juncture would not make any sense.

Admittedly, some tax reductions should, and in fact need to, be made. Certainly there is an inherent difficulty in talking about tax reductions in the same breath as a call for giving a higher priority to debt reduction. It's the age-old call of more for less, yet there are certain tax reductions that in reality will actually generate increased revenue for government.

Every level of government and virtually every authority on the subject acknowledges that revitalization of the economy comes from business, not government. Similarly, it's acknowledged that within business it is small and medium-sized businesses that are the keys to economic growth. It is equally taken as a truism that it's small and medium-sized businesses that are the hardest hit by taxes, and that taxes are one of the greatest impediments to businesses hiring people.

The Vice-Chair (Ms. Paddy Torsney): You have one minute left.

Mr. Dan Overall: We therefore ask that the minister focus on tax reductions relating to business. Specifically, we ask the government to adopt the following. First, increase the limit of investments for RRSPs in an individual's own business from the greater of $25,000 or 18% of the book value of the RRSP, up to a maximum of $200,000.

In recognition of the high risk associated with early-stage financing of small and medium-sized enterprises, allow an offset by favourable treatment of the upside potential in the form of capital gains, but without additional protection for losses.

In 1992 the small business deduction was at $200,000, and it has stayed at that level since. This deduction must be topped up to meet inflation to regain its effectiveness. The chambers have suggested a minimum increase to $320,000.

We also suggest that this government accelerate the capital cost allowance rates for assets that have been significantly affected by the rapid technological change in the field of computers and manufacturing and processing equipment.

You will note that these reforms are specifically designed to generate the influx in investment income that small and medium-sized businesses require during their crucial first years of operation.

The Vice-Chair (Ms. Paddy Torsney): Thank you, Mr. Overall. I want to clarify with you whether item three should say “1982”; it says “1992”.

Mr. Dan Overall: It is 1982.

The Vice-Chair (Ms. Paddy Torsney): Okay.

For the benefit of our additional guests, this is Todd Lumbard, representing the Brandon Chamber of Commerce. We'll have him speaking at the end.

You have five minutes, Mr. Maguire.

Mr. Larry Maguire (President, Western Canadian Wheat Growers Association): Thank you very much. It's a pleasure to appear before your committee today. The Western Canadian Wheat Growers Association welcomes the opportunity to present its views on the next budget.

Our message on this is going to be simple and straightforward. First of all, we believe the alleged disappearance of the deficit doesn't solve Canada's fiscal problems. I would say the fiscal problems consist of two parts—the irresponsible behaviour that caused the mess and the mess that caused the irresponsible behaviour.

Getting the deficit down to zero solves the first part. It means only that the federal government has begun to live within its means and has stopped the years and years of irresponsible and wasteful spending that left the country with an enormous debt.

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The second part is of course the reduction of the $600 billion debt. With the federal debt at that level, we'd make the point that every Canadian citizen is saddled with a debt of approximately $20,000, and that does not include the debts of the provincial governments. We remind the committee that a large portion of the federal spending—and it has been outlined here—is spent on carrying costs for the debt. Canada's debt-to-GDP ratio is second only to Italy's and, according to Mr. Martin's own comments, is somewhere over 70%. If we're second behind Italy, I guess we're sixth out of seven in the G-7.

The second point is that the disappearance of the deficit may be an illusion. I make that comment only to point out the fact that we have to be aware that a 1% increase in interest rates is approximately $6 billion annually. If we were to see an overnight or unforeseen increase of about 5%, it could mean $30 billion in extra spending just to cover the debt we already have. That would create havoc with our plans for fiscal responsibility and fiscal prudence in the future.

On the fiscal dividend I just referred to, we say there can be no fiscal dividend until the debt is reduced to a manageable level. Then, and only then, will the federal government have some room to manoeuvre and to begin to consider where additional programs could be considered. I would make the point that some of the present programs in spending that we already have could use some of those funds, perhaps better than getting into new program spending.

The fourth point we wish to make is that priorities for the federal fiscal policy are clear. The first priority is obviously debt reduction. Tax reduction should be given that next priority. Canadians are among the most highly taxed in the western world, and the lessons of history are clear: excessive taxation upsets the balance between private enterprise and the provision of public goods. Only a healthy private sector will create the wealth necessary to support a healthy public sector. Excessively high taxation destroys a healthy private sector. Only after the debt is reduced and taxes are brought down should new programs be considered—and I'm saying that should be the case only after we've looked at some of the present programs we have in spending.

Why are we here as farmers to make this point today? I would make the comment that farmers have paid their share towards deficit reduction, and they have done so without undue hardship. We have seen a $700 million annual payment under the Western Grain Transportation Act removed from the transportation of grain out of the prairies. That's approximately $7,000 per year for every farm family in western Canada. Our organization was at the front of the call to remove that subsidy and, as we predicted, the result has been a boom in the value-added industry and in the livestock production area. The farm economy is healthier as a result, despite the reduction in government payments. The end of this subsidy was opposed by special interest groups within the farm community; however, experience is proving that this special pleading was ill-advised and was not the best thing for farmers or the western Canadian economy.

It is well worth asking how many other government programs are similarly perverse in their effects. The lesson from this is clear: government spending frequently distorts economic forces and does more harm than good in many cases. Government does have a real and necessary role in providing public goods nonetheless, such as health care, education, environmental protection, defence, internal security, and justice. It also has the areas of roads and sewer and water facilities. Government also has the responsibility to provide a healthy environment for private enterprise to thrive and provide for the effective creation of wealth.

I would close by saying that we urge you to follow the lessons learned in the agricultural sector. Stop listening to some of the pleading of special interest groups that are going after more government largesse, if you will, with the idea that there are funds there now. Put the fiscal house in order, which is what you have been moving towards, by making the end of the deficit real—as opposed to an illusion borne with low interest rates—by paying off the debt and by reducing the tax burden.

The Vice-Chair (Ms. Paddy Torsney): Thank you, Mr. Maguire.

Mr. Fiske.

Mr. Norman Fiske (President, Thomas Sill Foundation): Thank you.

In each of the past two years, the Thomas Sill Foundation has made representations to this committee in respect of a proposed change in tax legislation, whereby private foundations such as ours would be allowed to offer seed funding to community foundations. To be asked to appear before your committee for a third time is both gratifying and frustrating. It is gratifying in that you appear to recognize that our request has merit, but frustrating in that we have failed to achieve the desired amendment to subsection 149(1) of the Income Tax Act.

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We remind the committee that after our first presentation on November 28, 1995, it was recommended by this committee that our proposal to allow a private foundation to include seed funding of a community foundation in its disbursement quota be permitted under the Income Tax Act. We have been advised over the past year by the Hon. Paul Martin and representatives of Revenue Canada that a change in tax legislation is not necessary because relief may be granted to a private foundation through the filing of form T2094. Encouraged by these responses, the Thomas Sill Foundation filed form T2094 requesting that some $237,500 in gifts to community foundations be included in our disbursement quota for our fiscal year ended July 31, 1996. We were refused the request because our disbursement quota was still in excess and not in jeopardy.

We point out to this committee that this exemplifies the fact that T2094 cannot be used to address the problem we have identified. Form T2094 is intended to be used to correct a deficiency in a disbursement quota when such a deficiency has arisen due to circumstances beyond a charity's control. It is intended for disaster relief only. The seed funding of a community foundation by a private foundation would usually be as a result of a carefully planned program and certainly within the control of the instigating private foundation.

It would appear to us that if Revenue Canada does grant an exemption in these circumstances, they are going beyond the intended purpose of T2094 to correct a deficiency in tax legislation.

Our program in Manitoba has fostered the creation of ten community foundations, and we point out to this committee that all the foundations, with the possible exception of one, are flourishing and exceeding targets established. All of the foundations have created strong organizations, drawing respect and co-operation from their respective communities. These community foundations, in a few short years, have husbanded assets already counted in the millions of dollars.

The dollars accumulated by community foundations, we project, will some day, and with the correct impetus, sooner than later service the social agencies that are now suffering from government cutbacks. We ask that the federal government partner with foundations such as ours to foster the growth of community foundations in Canada.

You have asked that we share our views on the matters of the process of deficit reduction and priorities with respect to debt reduction. It is our view that if the opportunity to wipe out our annual deficit is imminent, then our government should act to bring us into an annual surplus position as soon as possible. Surpluses can then be applied to reduce our debt. When our debt is reduced to an acceptable level relative to our gross national product and our ability to handle debt service costs, then tax cuts should become a priority.

Thank you.

The Vice-Chair (Ms. Paddy Torsney): Thank you, Mr. Fiske.

Mr. Kreiner.

Mr. Sherman Kreiner (President and CEO, Crocus Investment Fund): Thank you for the opportunity to participate in the pre-budget consultations of the Standing Committee on Finance.

Since 1995, the Crocus Investment Fund, as part of a group of labour-sponsored funds consisting of Crocus, the Solidarity Fund in Quebec, the Working Opportunity Fund in British Columbia, the First Ontario Labour Sponsored Investment Fund, and the Workers Investment Fund in New Brunswick, has had the opportunity to make annual presentations to the Standing Committee on Finance with respect to issues affecting labour-sponsored funds. Collectively this group manages close to $3 billion of available venture capital in Canada.

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While the group would like to have the opportunity to make a formal presentation to the standing committee on issues specific to labour-sponsored funds, Crocus, on behalf of the group, wishes to take this opportunity to make a brief presentation to the committee, in the context of pre-budget consultations, on the major issues presently affecting labour-sponsored funds.

Our submission, albeit brief, consists of two main points.

First, tax credits that promote investment in Canadian businesses, including the labour-sponsored funds investment tax credit, are an extremely effective investment of the fiscal dividend in that they are targeted, they are recoupable, and they meet demonstrable economic development needs.

Secondly, the 1996 tax amendments resulted in a dramatic reduction in investments in labour-sponsored funds in the 1997 RRSP season, putting the pool of investment capital available to small and medium-sized Canadian businesses at risk. These amendments ought to be reconsidered.

As you know, government support for labour-sponsored funds is in the form of a targeted investment tax credit. That was initially a 20% credit, up to a maximum investment of $5,000. As a part of the 1996 amendments, the amount of the credit was reduced to 15%, and the maximum available for investment was reduced to $3,500.

I want to reiterate that the labour-sponsored funds tax credit is targeted, it's recoupable, and it meets demonstrable economic development needs.

The tax credit is targeted in that it provides tax relief primarily to working class and middle class taxpayers. One of the outcomes of this commitment is that a significant number of shareholders of labour-sponsored funds are working people: 40% of our shareholders in Manitoba are union members.

Research on the Canadian tax system shows that 3.8 million Canadians who fall into the category of low- to middle-income earners—that is, $25,000 to $40,000 per year—pay the highest effective marginal tax rates of all Canadians, even higher than high-income earners. The labour-sponsored fund tax credit provides tax relief to this group of taxpayers while facilitating increased retirement savings.

The investment by government in labour-sponsored funds tax credits is recouped. Labour-sponsored funds invest their moneys in Canadian businesses, primarily for expansion. Resulting increases in corporate, sales, and payroll taxes rapidly offset the upfront tax credit costs to government. Studies by the Canadian Labour Market and Productivity Centre show clearly that the break-even point for governments on the cost of the tax credits is two to three years, after which there is a positive return on the government's investment.

Investments by labour-sponsored funds meet demonstrable economic development needs. The experience of Crocus in Manitoba is illustrative. In fewer than three years, we have invested more than $32 million in 19 Manitoba businesses, making Crocus the largest venture capital investor by far in the province during that period.

The Crocus portfolio reflects the diversity of the economy. Close to half of the portfolio is in the manufacturing sector; close to a quarter of our portfolio is in cutting-edge companies in the new economy, including AIDS research, bio-diagnostic software, and improved heart-lung machines. Taken together, our investments have saved or created close to 1,200 jobs, that is, one job for each $29,000 invested. These investments have also helped to maintain 2,000 existing jobs and have created several hundred construction jobs.

But this venture capital money is drying up across Canada. Mary Macdonald, president of Macdonald & Associates, speaking at the Canadian Venture Capital Association conference in Ottawa last week, noted that Canada's venture capital funds are in danger of depleting their coffers in two years. In her view, the growth of economic development would be dealt a severe blow if the funds depleted their available capital.

The belief that there is a surplus of capital in labour-sponsored funds is simply not correct. The 1996 tax amendments resulted in a 70% drop in investment in labour-sponsored funds in Ontario, and a 50% reduction here. Additionally, the peak inflows in 1995 and 1996 have now been substantially invested. Macdonald & Associates is predicting a further drop in inflows of fresh capital into labour-sponsored funds in the February 1998 selling season. At current rates, the entire available pool of investment capital will be dried up within two years.

For the foregoing reasons, we recommend that the amount of the labour-sponsored funds tax credit be increased back from 15% to 20%, that the aggregate investment amount available for tax credits be increased back to $5,000, and that the prohibition on being eligible to receive tax credits for three years after you have had shares redeemed be reduced or eliminated.

I thank you for the opportunity to make the presentation.

The Vice-Chair (Ms. Paddy Torsney): Thank you, Mr. Kreiner.

Dr. Glavin.

Dr. Garry B. Glavin (Associate Vice-President (Research), University of Manitoba): Thank you, members of the committee.

My name is Garry Glavin. I'm associate vice-president for research at the University of Manitoba and regional director for the Medical Research Council of Canada. As such, I speak not only for Manitoba health care researchers and health researchers, but for those in Canada, and by extension for all Canadians, since health research drives health care in this country.

I'd like to address the issue of serious funding shortages within the Medical Research Council of Canada.

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Figure 1 in your handout—Canada is highlighted in yellow—shows that federal funding to the Medical Research Council of Canada has sharply declined relative to that of other G-7 countries since 1994. It should be noted that health funding to medical research in this country creates spin-off companies. For each $10 million in health research spending, 620 jobs are created. Technology and commercialization create further jobs and further start-up companies. Figures 2 through 5 illustrate that cycle and those figures.

Since 1994, the faculty of medicine at this centre only, the University of Manitoba, has lost 22 highly qualified, productive young scientists, together with their sharp minds, their training—this was paid for by Canadian taxpayers—and, more importantly, their patents and intellectual properties, primarily to the United States of America. Medical research in Canada can no longer be considered one of the country's crown jewels, which was a situation that existed just a few years ago.

Medical research leads to discoveries that can be much more rapidly commercialized now, compared with the situation 10 years ago. The time from discovery at the bench to clinical use has significantly shortened in this country. Loss of funding to the MRC seriously hampers the innovative and creative process, which ultimately will have a negative impact on health care in this country.

In light of your own words, Mr. Martin, the purse strings are loosening. I suggest that this finance committee and the Government of Canada look very seriously at restoring Canada's medical research funding to bring back its world class status, which it once enjoyed but no longer does.

As a first step toward accomplishing this goal, I ask you to, first, remove the 9.8% cut in the MRC budget scheduled for this coming fiscal year, and second, restore the base budget of the MRC to what it was just three years ago: $248 million. This is a simple increase of $27 million.

In so doing, you'll create 1,600 jobs. You'll prevent countless numbers of the best and the brightest young scientists in this country from leaving for the United States, together with their minds, patents, and intellectual properties. You'll restore Canada's place as a world leader in medical research in the world. Thank you.

The Vice-Chair (Ms. Paddy Torsney): Thank you. We will now hear from Dr. Greenberg.

Dr. Arnold Greenberg (Director of Research, Manitoba Cancer Treatment and Research Foundation): Thank you for allowing me to speak in front of this committee. I am the director of research at the Manitoba Cancer Treatment and Research Foundation. Although I don't represent all research organizations of this type, I can assure you that I speak on their behalf.

My message is similar to what Dr. Glavin has directed to you, but I wish to address issues on a slightly broader basis, which is really the future of biomedical research in Canada and Canadian universities. I believe that this research is at a critical juncture, and in the next 12 to 18 months we'll determine its future.

Many, if not all, sectors of the economy that depended on government funding have suffered cutbacks with your efforts to bring some fiscal sense into our federal budgets. The impact of this effort on our biomedical research community has been major. Our researchers and research institutes have tried to weather this storm with extraordinary measures to reduce costs of operation and find alternate sources of funding, which to some extent have been successful and have left us in a better position.

However, after four years, I believe we are now at the point of doing irreversible damage to our research community. We cannot fund some of our best research programs. Even our leading programs are becoming increasingly uncompetitive in the international effort for research discovery with this type of restricted funding to our major organizations.

We have discouraged young people from returning to Canada from the U.S. As you heard from Dr. Glavin, many are leaving this country to go to the U.S. We find it increasingly difficult to convince young people even to enter a research career. They see very little future in it with the kinds of restrictive budgeting in front of us. I believe we're going to lose our future research base, that is, our young researchers, in the near future if the situation doesn't change dramatically.

Who should fund biomedical research? Efforts by the government in a number of sectors to develop new funding links through pharmaceutical industries have been an excellent idea. To a certain extent, these have been successful, although in very limited areas and in particular regions of the country. For example, the prairie region has seen very little impact from this initiative, despite major efforts from many of us to create links to the pharmaceutical industries.

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The new Foundation for Innovation, which has been announced by the government, is to be applauded for filling the gap in badly needed areas of infrastructure, but again, it doesn't address the key issue of who is going to fund ongoing research.

So biomedical research in Canada has impact in two areas of the Canadian economy: health care and our growing biotechnology industry. The first has to do with healthy populations and the other with a healthy economy.

The biomedical researchers in our universities and research institutes are critical to the success of both of these areas. We provide the trained people, that is, the doctors and researchers. We provide the ideas in our universities, which we patent and which form the basis of new companies and are valuable to existing pharmaceutical industries. And in increasing numbers, the entrepreneurs who develop new biotech companies are emerging from academia and, I predict, will have significant impact on our economy.

I believe the Governments of Canada, the U.S., the U.K., and all the G-7 countries understand the importance of biomedical research to the biotechnology industries and to health care. However, Canada lags dismally behind all of them in investment in R and D in general and in biomedical research in particular. We are the last of the group and we are falling further and further behind each year.

Mr. Chairman and committee members, I believe we've reached the point that the government must make a decision as to whether or not to have a biomedical research enterprise in Canada. If the decision is that this is important for Canada, then you must make the appropriate investment in our researchers and research organizations. If you do not, then let us know, and we will inform the research community that this is their future.

If you do invest, you will not be disappointed, because Canada has absolutely superb researchers and wonderful research institutes. I only hope we can keep them here and working for our country.

Thank you for letting me speak.

The Vice-Chair (Ms. Paddy Torsney): Thank you, Dr. Greenberg. I think Madam Chair works a little better than Mr. Chairman.

Mr. Lumbard.

Mr. Todd Lumbard (President, Brandon Chamber of Commerce): Thank you. I'm Todd Lumbard. I'm the president of the Brandon Chamber of Commerce. I'm pleased to be here in Winnipeg to represent what I hope is the Brandon and rural Manitoba perspective.

Following the notes we received from your offices, I'll go through my presentation.

Generally, the chamber's view is that the rate of deficit reduction has been good. We'd have appreciated it if it had started a little sooner and been a little more rapid, but we are also pleased and give the government credit that there have not been major tax increases along the way.

We also believe now is the time to take advantage of the economy that exists in our country. Right now we are in very favourable economic times, and we know this can change. We urge the government to have their fiscal house in order, because when this change occurs, we do not want to be in a deficit position again. We are at the point now in this country when we see provincial governments legislating no-deficit positions, and the federal government should not accept deficits any longer.

As for our priorities, we see debt and deficit reduction as the number one priority. It worries us, as a chamber and as business people, when we hear talk of new spending when we don't even have our deficit in order yet. We would strongly urge the federal government to install a concrete plan of debt reduction that includes measurable and accountable targets and reduction in the debt-to-GDP ratio, the same as what we've heard here earlier.

Tax relief for us would be a distant second choice. The fact that the business community is talking about tax relief after debt reduction shows a commitment on behalf of the business community, who are usually talking about tax relief as number one. There's a great deal of willingness in the business community and a desire to see the debt really addressed. We know we've enjoyed some good times with low interest rates, but if that changes we could be back in a really problematic time again. So debt is definitely the priority for us.

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We had an “other” to add, and that was on the changes to the CPP. We believe the increases equate to a major payroll tax increase for business. We see it as a disincentive to growth and new hiring. We would like to see some type of a balancing effect with the surplus in the EI account to balance off the increase in the CPP payments. We think this EI surplus should be returned to the economy and to the rate payers.

I thank you for allowing us to take part in this presentation and I hope some of our recommendations from this panel will go forward and be seriously considered during the budget this year. Thank you.

The Vice-Chair (Ms. Paddy Torsney): Thank you, Mr. Lumbard. I'll make sure your final comment is also entered into our discussions on CPP, which start in about two weeks.

Mr. Todd Lumbard: Thank you.

The Vice-Chair (Ms. Paddy Torsney): Half the table heard anyway.

We'll now move to questions. We'll move through the various parties. There will be roughly five-minute rounds. The MPs will ask questions directly to one of you, hopefully. If anybody else would like to add a comment, perhaps they could just put up their hand and I'll keep a speakers list. Again, questions and comments should be as short as possible to facilitate the greatest number of questions and responses.

We'll go to you, Mr. Ritz, representing the Reform Party.

Mr. Gerry Ritz (Battlefords—Lloydminster, Ref.): Thank you, Madam Chair.

Again, those were great presentations, gentlemen. We've heard some different viewpoints from those we heard this morning, of course.

Mr. Maguire, I have a short question to you. Possibly the fellows from the Chamber of Commerce can identify with it as well. In your address you talked about the government staying on track with deficit and debt reduction. The fellows from the chamber reiterated the same thing. In fact, you talked about accountable, measurable targets that we must set and plan on.

That's a very noble goal, but what can a government do to hedge against unforeseen hurdles that may pop up in paying down the deficit and the debt? We're already at a high rate of taxation, so it's not really a viable option to raise taxes to counter those things. I'm thinking of something like a downturn in the economy.

You mentioned higher interest rates and trading partners in peril. We had the Mexican peso thing here within a year or two ago. We have an aging population.

Have you any words of wisdom to us on what a government can do to have a contingency fund, if you will, that doesn't get frittered away?

Mr. Larry Maguire: My comment would be—and I made the comment earlier—that government can create an environment for business to perform and for trade to take place. The government has brought in the free trade agreement; it has encouraged some of those areas.

Certainly in the grain sector I mentioned the Crow benefit, the Western Grain Transportation Act. We think there are other areas, particularly in the area of marketing grain, that would allow more development of processing and more opportunities for the farm community to create more of a return to the gross domestic product of the nation.

We're very encouraged by what we see. I think Mr. Lumbard referred to the good economy we see today. But we don't want to see it fall back. In terms of a contingency fund, we think putting more funds towards debt reduction early is the contingency fund. That brings it down from 70% or whatever to the 25% range, we would think.

Mr. Dan Overall: I would agree with that suggestion completely. In fact, I could be mistaken, but if I recall correctly, your party's pre-budget paper, which was circulated, stresses that the inability of government to respond now to financial issues and the inability to respond in the future are dramatically affected by the fact that we have debt. The more we reduce the debt, the freer the government is and the freer the economy is to respond in a constructive way and actually handle the fluctuations in the economy that you're talking about.

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The Vice-Chair (Ms. Paddy Torsney): Mr. Lumbard, did you wish to comment? You don't have to.

Did anybody else wish to comment?

You have about one minute, Mr. Ritz.

Mr. Gerry Ritz: I'll address the doctors with the next question on their presentations. As the government, of course, our hands are tied in funding all areas of medical research. It poses a problem. Can we prioritize them, and if so, what would these areas be? We're talking about cancer research, AIDS research, and the elderly population. These are some of the things we see coming at us. Are there areas to which we can go and others to leave for later when we can afford it?

Dr. Garry B. Glavin: Thank you for the question. The issue of prioritizing is done by the Medical Research Council of Canada itself. We're simply asking for the federal government to restore the base budget of the MRC to allow it to fund those emerging areas.

Clearly, there are emerging areas, but that is decided by the MRC itself. So the aging population, neurodegenerative diseases—these are prevalent in the elderly—AIDS, and antibiotic resistance are clearly areas that are known and defined by the MRC. So they will fund those prioritized areas, as well as the ongoing medical research in the country. That's a decision done by the agency itself.

Dr. Arnold Greenberg: I could just add to that. There are excellent initiatives between the Medical Research Council of Canada and many of the private funding organizations, like the National Cancer Institute of Canada, to develop these priority areas, such as the breast cancer program, which is well known across the country. Once the funds are in place, it allows these kinds of co-operative interactions to use private funding along with MRC funding.

Mr. Gerry Ritz: Thank you.

The Vice-Chair (Ms. Paddy Torsney): Thank you, Dr. Greenberg. Thank you, Mr. Ritz.

[Translation]

Mr. Perron, you have five minutes, please.

Mr. Gilles-A. Perron (Saint-Eustache—Sainte-Thérèse, BQ): Gentlemen, I want to welcome you and thank you for sharing some time with us.

The government could reform both the corporate tax system to help create new jobs and the personal income tax to improve its fairness. If you have any suggestions to make in that area, now is the time to let government know. You have the floor, gentlemen.

We could start with Mr. Lumbard, from the Brandon Chamber of Commerce.

[English]

Mr. Todd Lumbard: Regarding corporate tax, I'm not sure if you're talking about a reduction in corporate tax or an increase. I think that taxation levels right now are maybe.... I will never say taxation is acceptable, but I think in the economy we're experiencing, the business community is willing to accept the taxation levels where they are now, hoping we will see some decreases in the future. As a business community, our belief has always been, and I think it will be, that lowering the taxes we pay, within a reasonable amount, will increase activity.

Now I'm not sure how you quantify that, but I think that, for example, provincially, there is movement afoot to potentially reduce our sales tax a little bit or reduce our personal income tax as an option. As business people, we think some of those things would create a more robust economy and allow a little more money to circulate. I think if we're talking about a reduction in taxation it would make the business and economic communities much more viable in Canada.

So I certainly don't think taxation should be raised. I think it can certainly be reduced in moderation. I don't think it's going to hurt the country tremendously. I know the government will lose some revenue, but I think it will be made up in increased activity.

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The Vice-Chair (Ms. Paddy Torsney): Thank you.

Mr. Kreiner.

Mr. Sherman Kreiner: I think one of the major points of economic growth in Manitoba is access to capital, and that access-to-capital problem occurs at a variety of different levels. Our program targets small to mid-sized businesses, but there are also problems with access to capital for start-up businesses and for businesses that are ready to go public.

There has been a fair amount of effort to revitalize the Winnipeg Stock Exchange. I think there are opportunities to provide targeted tax credits to assist capital formation at each of those levels.

One of the things we're looking at in Manitoba is the Quebec stock savings plan to see if there is any way to apply the principles of that to the Winnipeg Stock Exchange to be able to provide access to capital for small to mid-sized businesses that want to go public but aren't nearly large enough to be able to go public on the VSE or the TSE. Again, that would be a targeted tax credit to Manitoba taxpayers that would be used to encourage them to invest their money in public offerings of Manitoba companies to permit those companies to get access to broader capital pools by going on the Winnipeg Stock Exchange.

The Vice-Chair (Ms. Paddy Torsney): Mr. Overall, did you wish to comment?

Mr. Dan Overall: Yes, just to echo my friend's comment and to elaborate. There is a temptation when things are going well to ask for tax cuts, particularly in business. In consultation with business we have decided that the reduction of debt must be our number one goal. If the tax reductions are to occur they should not be major. We have focused on tax breaks relating to small and medium-sized businesses largely due to the fact that it's common ground that the major key to this upsurge in the economy is going to count for those sides of business.

If I recall, I think 80% of our record levels of employment relates to those emanating from small and medium-sized businesses. The proposals I put forward to you during my initial presentation are tailor-made to assist small businesses in thriving and striving within the limited framework of debt reduction, and small reductions in taxes occurring within that larger framework.

The Vice-Chair (Ms. Paddy Torsney): Thank you.

Mr. Fiske.

Mr. Norman Fiske: I think all the presentations have stressed that debt reduction should come before tax cuts, but let's keep in mind that tax cuts stimulate economic activity. Stimulated economic activity reduces unemployment. If we reduce unemployment we have more economic activity and we have a greater gross national product. The government collects more taxes and has more dollars with which to reduce our debt further. If we get the ball rolling in the right direction, we'll get rid of that debt fairly quickly. Maybe it won't take 40 years. Maybe we can do it in 20 or 15.

The Vice-Chair (Ms. Paddy Torsney): Thank you very much, Mr. Fiske.

Merci monsieur Perron.

Mr. Martin, for cinq minutes.

Mr. Pat Martin (Winnipeg Centre, NDP): Thank you, Madam Chair.

At least two of the presentations made reference to the job creation possibilities with the measures they recommend. Dr. Glavin and Mr. Kreiner both spoke about job opportunities stemming from the issues they raised. I'd like to ask both of them at least, and any others who would like to interject as well, to expand somewhat on how we can put the country back to work through the measures you're recommending.

Mr. Sherman Kreiner: I just want to add to the comment that was made earlier that most of the job growth comes from small and medium-sized businesses. Our programs are focused on basically making capital available to small and medium-sized businesses. Our expectation in doing that is that it would translate into job creation. The record of our investment and the investment of some of the other labour-sponsored funds like the Solidarity Fund, which has a much longer track record, basically indicate that this outcome has come to pass.

There are various rules of thumb that have been suggested for how many jobs would be created with each dollar of venture capital invested. The labour-sponsored funds have generally exceeded those normal rules of thumb. Our record is that every $30,000 we invest is creating a job. We've already created more than 1,200 jobs. Those are in small and medium-sized businesses, which I think have historically and will continue to be the engines of job creation.

The Vice-Chair (Ms. Paddy Torsney): Thank you, Mr. Kreiner.

Dr. Glavin.

Dr. Garry B. Glavin: Thank you for the question, Mr. Martin.

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As I've indicated, each $10 million investment in health research in this country creates 620 jobs, but these are highly technical jobs. These are jobs that require training. It is my experience, and I'm sure Dr. Greenberg's experience and that of many others, that many of these positions start out as technical positions or research associate positions, but a good number of these people get hooked on the research enterprise and on medical research and go on to become researchers themselves. It is those kinds of jobs that we need.

In addition, with that kind of funding it used to be the case that a scientist's productivity was gauged by how many papers they published, sometimes in fairly arcane journals. Now that is partially true, but the other gauge of a scientist's worth and measure and productivity is the number of patents, the number of intellectual properties that individual has generated, created, and protected.

Very many of these—and again Dr. Greenberg is very familiar with this—result in the individual investigator perhaps forming a company, creating jobs, creating investment, and generating further jobs in spin-off companies in this country. It's disheartening to see the best and the brightest and the young people missing out on this opportunity. With all due respect to my colleague Dr. Greenberg, we're old, we're established, we're finished. It's the future that we're looking to, the young minds together with their patents that are going to the United States. A country that doesn't look to its future is a country that's in trouble.

Thank you.

Mr. Pat Martin: I for one don't buy the idea that our debt and deficit problems are due to overspending on our social programs. I think a lot of our debt and deficit problem is dealing with the economic policy of fighting inflation through high interest rates.

I haven't heard anybody mention the NAIRU, which is the non-inflationary level of joblessness really that Mr. Martin has made reference to in his speeches. He talks about 7.8% as a goal for the unemployment rate and says that if we go under that we're going to see a spike in inflation. Would anybody from the business community or anybody at all like to comment on that?

Mr. Norman Fiske: I'd just like to examine the rationale whereby you came across the figure of 7.8%. I think in most sectors in the United States the unemployment rate is 6%, 5%, and even under 4%, yet I don't see their inflation being any greater than ours. In fact, in a lot of situations over the past couple of years their monthly inflation rates have been lower than ours.

So I can't buy 7.8% as being a threshold. I think it should be 5%, perhaps 4.5%. At 3% it's virtually nil. I'd like to see it there because I don't think that will necessarily drive inflation. I think there are many other factors that have to go along with that.

The Vice-Chair (Ms. Paddy Torsney): Would anybody else like to comment? Mr. Lumbard.

Mr. Todd Lumbard: Obviously it depends on how you calculate the unemployment rate and who fits into that bracket.

Just speaking from personal experience, our unemployment rate in Brandon right now is less than 5%, and I think we're functioning quite well as a city. We do have a few shortages in certain skilled labour positions, but I agree; I'm not sure where that 7.8% has arisen. I don't think that should be a guiding light in the determination of whether we will be in an inflationary period again if we get under 7.8%. I would like to think that our target would be lower than that. If we're avoiding lower unemployment because we think we're going to get into an inflation problem, I think that's the wrong message to send to the citizens of Canada, especially those who are unemployed.

The Vice-Chair (Ms. Paddy Torsney): Thank you, Mr. Lumbard and Mr. Martin.

We'll now move to Mr. Iftody.

Mr. David Iftody (Provencher, Lib.): Thank you, Madam Chair. Notice how I was very careful not to get into trouble on that one.

Thank you very much for the presentations here. I appreciate that they were well thought out, and you're all very articulate gentlemen. I am struck by the—given some variation—thinking with respect to taxation versus debt reduction, particularly the two chambers of commerce. I have a couple of questions, so maybe you can help me out.

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Here's one of the things I'd like you to think about very specifically. We talked about, in terms of the framework for the upcoming budget, using 50% of the surplus, whatever that might be, with some combination therein toward selective, specific, targeted tax cuts, I would argue, or general debt relief, and thinking about some options within that.

I would like to direct my first question to Mr. Maguire on that one. I wanted to clarify the position of the grain growers with respect to that. I have a second question with respect to the mutual funds, if I can, for Sherman on the labour-sponsored venture capital, with some discussion there. Mr. Maguire, could you answer just the first one, please?

Mr. Larry Maguire: Thank you, Mr. Iftody.

To be clear, we're aware that you're looking at taking half the funds out of any surplus. Looking at program spending, we think it should be done in perhaps another manner. At least half of it should be used for debt reduction for the kind of fiscal package that.... This is just so that we don't get hit with any of those surprises down the road as you plan future budgets that may arise from sudden changes in the economy worldwide, because we're certainly in a global economy.

Our clarity on that one would be to use the majority of the funds for debt reduction until we're into a position in which it may be easier to carry the debt, compared to the domestic product we have. Then we can use tax reduction as the second priority, if you will, in that whole area. Then we can use funds to manage some of the programs we have today, and make sure they are meeting the needs of Canadians at the level they may want them to be met. Fourth, look at any new program spending that might come into being.

Mr. Sherman Kreiner: I guess I have two things. I'll repeat the general thrust of the comments I made earlier. When you have investment credits for investment in Canadian business, you're basically providing a fiscal dividend to people that they would see as a tax reduction. You're doing it at no cost to government, because that dividend is going to be recouped by increased revenues to government in a relatively short period of time. That's the beauty, I think, of that sort of approach.

With regard to the broader question, I guess the only concern I see in the discussion regarding debt levels is that it seems to me that the time horizon for that discussion still seems to be relatively short. I have some questions and concerns about what the demands are going to be on the public treasury, as particularly the baby boom generation ages, with regard to transfer payments associated with medical and retirement benefits.

I have some concern that the entire framework for this budget is too short, or it's an intermediate term, and that there has not really been enough analysis of what the long-term needs are going to be for this society relative to the population demographics. This is forgetting about changes in the business cycle or any economic trends, but just given the overall demographic trends in the society.

What sort of demand is that going to place on the public treasury and what provision will be made in any planning for the expectation of those demands?

The Vice-Chair (Ms. Paddy Torsney): How are you going to support Dr. Glavin? Mr. Iftody.

Mr. David Iftody: Thank you for that. I'll just continue on that. As for the creation of wealth in Canadian society, job creation, any way you want to frame that, we talk about using policy instruments to reach that goal to make Canada a better society.

Look at the terms of public expenditures. Sherman, you know that we've had a discussion about this before. Prior to sitting down, I asked you what the rate of return was on your fund. You told me it was 7%. I was struck when reading the newspapers every morning with some of the glaring comments from some of the other mutual funds, with a 24% and 36%—some of them were 49%—return.

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Given the fact that a big reason why Canadians would invest in a labour-sponsored fund is the generous tax break, yet the comparative rate of return as a way of fuelling job creation and job growth as a tax measure that you talk about really seems, in the last three years with the way the mutual funds are going, terribly low, at least in my view...and maybe you even have some funds that have a negative return. Maybe you have some elements or envelopes within your overall package that have a negative return.

In terms of selective tax cuts, if we don't go to deficit reduction and we go to some of these things, in terms of creating venture capital for small business, for farms, expansions, and these kinds of things, should we just allow the market forces, with the tremendous growth in small-cap funds, for example, right now, or should we continue to give tax breaks through public expenditures when the rate of return is only about 7%?

The Vice-Chair (Ms. Paddy Torsney): Mr. Kreiner.

Mr. Sherman Kreiner: I have several responses to that. One is that the idea behind these programs was that this was going to be patient, long-term capital for small and medium-sized businesses, and I think the evaluation as to whether these returns are appropriate is going to need to be made on a longer-term basis, not over the basis of several years of investment history.

I think we will have failed as a fund if, when you look at us two or three or four or five years from now, our returns aren't significantly higher than the returns we've had to this point.

Notwithstanding that, I think there was a recognition by government that a lot of the other vehicles available for investment aren't meeting the needs of small and medium-sized businesses. Small-cap funds are only invested in publicly traded companies. They aren't invested in small, private companies like the type of companies we invest in. I think there's a further recognition that those small, private companies are the primary engines for job creation and job growth.

The idea behind government providing the tax credit was to effectively subsidize the return for investors to assure that the money would be directed towards domestic small and medium-sized companies rather than people taking their money and investing it in large-cap companies or overseas, which may generate a significant financial return for them but it isn't going to do a hill of beans for the Canadian economy, and in some instances it is going to result in job creation somewhere else at the expense of Canadian jobs.

The Vice-Chair (Ms. Paddy Torsney): Thank you, Mr. Kreiner.

Mr. Gallaway.

Mr. Roger Gallaway (Sarnia—Lambton, Lib.): Mr. Maguire, you made note of the fact that government spending frequently distorts economic forces and that your association in fact was at the forefront of calling for the end of the Crow rate. Yet we still continue to see in this country that relative to our American neighbours the rate of subsidization of the Canadian farmer is higher.

We also see the indirect subsidy of supply management systems. Recently I met with some people from the hospitality industry who told me that their competitive edge is eroded by as much as 40% on a number of products because Canadians, through marketing boards, are paying 40% too much for products.

You're from the general agriculture sector. Where then do we make the cuts in agriculture? We've started. Where would you go next?

The Vice-Chair (Ms. Paddy Torsney): Mr. Maguire.

A voice: Stay away from supply management.

Mr. Larry Maguire: There was a trade-off in the last round of GATT talks between the grain sector and the supply management sector. There's no doubt about that, and $700 million annually was taken out of the grain sector. As I pointed out, it has helped the expansion of the livestock and processing industries, and not only livestock but in small grains and the development of new crops—many of those areas.

But it is not right in the wheat sector, at least, to say that Canadian farmers are more heavily subsidized than the U.S. In fact, it's 2:1 the other way at the present time. Those are numbers from international organizations and are supplied and sent in by both countries. In that area, there is no argument in wheat and barley. American farmers are much more heavily subsidized under the fair farm bill, if you will, than farmers in Canada are, and we're not bemoaning that fact.

All we're saying in our brief is that you use that as an experience from a sector that's already been hit to show how it can rejuvenate and expand and create new wealth for the economy. Yes, there is hurt in some areas, there's no doubt about it. But there are certainly going to be opportunities, to wear my specific commodity group hat on this one, for farmers to market their own wheat and barley. We're not saying end the Canadian Wheat Board, but give people a choice in those areas and you'll see much more expansion in some of those areas.

• 1520

The supply management sector knows it is going to be faced with some changes down the road. We will be faced with a new round of world trade talks within a year and a half to two years; in fact, within two years of the time we're sitting here. The supply management sector has made a lot of adjustments in Canada. If you go back to 1986, when the last round was first being talked about...there's been a great deal of progress made in that whole area, but there needs to be a lot more.

The export of many of our supply management commodities today needs to be enhanced, and there are opportunities for the government in that whole role. It's an example of freeing up a sector of an economy that could really flourish on its own and still contribute more taxes, if you will, towards paying down this debt. We'd be more than glad to help you with it and to have the opportunity to do so.

Mr. Roger Gallaway: Thank you. That's all.

The Vice-Chair (Ms. Paddy Torsney): Thank you.

I have one quick question for you, Dr. Glavin.

One of the criticisms in the past for the MRC has been the distribution of research dollars, particularly between more established researchers and younger researchers. Of course, within that group there would probably be some gender distribution problems as well. Has the MRC made any progress in getting research dollars to younger researchers? Perhaps you could report on that.

Dr. Garry B. Glavin: The issue of targeting funds to established groups versus younger researchers has been looked at by the MRC, and steps have been taken to in some ways protect the younger researchers. For example, in the past six years if a particular individual was awarded an operating grant from the MRC, it was immediately reduced by a certain percentage for budget reductions and cut-backs, whereas the grants given to younger individuals and first-time applicants were exempted from those kinds of budget cuts.

In terms of gender balance, the priority of the MRC is now to get gender balance on the peer review committees, so that is much more balanced at this time, but the gender imbalance largely reflects the lack of women in biomedical science. That is also changing. If you look at medical school classes and graduate schools, for example, over the entire country, it's 65:45 in favour of females at this time.

The Vice-Chair (Ms. Paddy Torsney): I guess the issue is that it doesn't have to be a 50:50 split but appropriate to their participation in the research community. In particular, I think there were some concerns in the past about the research that was being done and who in our society was benefiting more or less.

Dr. Garry B. Glavin: When one is submitting a proposal to the Medical Research Council of Canada, aside from the science, methods, and everything else, the bottom line is what it will do for this or that disease, what it will do to the health of Canadians.

The Vice-Chair (Ms. Paddy Torsney): Are there any splits in terms of gender or age in the brain drain issue?

Dr. Garry B. Glavin: In terms of gender, I don't know, but in terms of age, it is clearly those in their early 30s and down, those coming from a post-doctoral fellowship and who are one or two or three years into their careers...certainly in their early to mid-30s. In other words, the youngest, the best or the brightest, whose most productive years are ahead of them, are going.

The Vice-Chair (Ms. Paddy Torsney): Thank you.

Mr. Maguire, I think Mr. Gallaway raised it to some extent, but in your brief you loosely mention that there are still things the government is spending on that you think it shouldn't be. I wonder if you could be specific about perhaps two areas you think the government should not be spending on.

Mr. Larry Maguire: As I mentioned, over the last...certainly not just in the term of your government but in those of previous governments as well, we have seen specific special interest programs for special interest groups. We are saying perhaps more scrutiny should be put into those. Sometimes we're one of them, but we generally aren't out asking for more funds in those areas—

The Vice-Chair (Ms. Paddy Torsney): Is there something specific you can tell me today that you wish the government was not spending on?

Mr. Larry Maguire: I think more to the point it's the kinds of programs we need to look at in revamping the spending that is going to go on in the future. We're looking at some of the programs in relation to spending more in the area of agriculture, if you want to be specific in our case. It's just that we wish there was less involvement in many cases in our business. It's not as predominant on the grain side perhaps, as it is, as pointed out by Mr. Gallaway, in the supply management sector.

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It is a matter of support in some of those areas, whether it's—I'm not going to name another industry—fisheries, health, or education. Many of those areas have been devastated or hurt by a lack of spending in some of those areas. That's why we're saying if the debt were to come down, there would be money to re-establish some of the areas spending could be a priority in.

The Vice-Chair (Ms. Paddy Torsney): Mr. Iftody, you had one quick question.

Mr. David Iftody: Dr. Arnold Greenberg, I wanted to talk a bit about research and development.

The Whiteshell nuclear research facility is just next door to where I live, in Pinawa. The academic and research community is very aware of what's been happening there in the past couple of years.

We are going through a buy-out process right now with Canadian nuclear fuels. A worldwide consortium was put together to buy the facility, to privatize it, and we're very excited about the possibilities of moving it. I think the employees and the very eminent world-class scientists we have there are excited about moving away from government, privatizing it, and trying to apply much of the basic research that has gone on there for almost 20 years now. Much of it was never applied and marketed in a very, very meaningful way, which would make lives richer for Canadians and indeed people around the world. This is fundamentally our goal.

I would like to know, with all the young, bright minds that are leaving Manitoba or Canada.... I hear frequently of young medical doctors leaving Manitoba for Florida, and this kind of thing, for a brighter future. Certainly I would take that option if it were available to me, but I haven't been offered a job as a congressman in Florida yet.

Are some of these people going to private sector corporations in the U.S., where the research funding is drawn largely from the capitalization of those companies and written off as a tax incentive, or are these young, bright minds, male and female, leaving to go to government organizations? Are you tracking where they're going?

The Vice-Chair (Ms. Paddy Torsney): Dr. Greenberg.

Dr. Arnold Greenberg: I don't have the exact figures. I can only give you the information available to me on the groups I have followed. They're quite dispersed.

The development of the biomedical research industry in the U.S. has been remarkably ahead of us. They went through their financial crisis in the early 1980s and during the Reagan years. That pushed a great portion of the biomedical researchers into developing either their own companies or joining expanding pharmaceutical companies. The pharmaceutical companies, realizing the huge and exciting future in the developments in DNA technology, also expanded greatly. So there was a big shift out of the publicly funded, hospital research institutes in government organizations into the industry there.

Now the whole picture has reorganized itself, and I think Canada is going through exactly the same kind of reorganization. Two divisions, if you like, have developed, which almost reflect the internal structure of a pharmaceutical company. You have a discovery group, a group involved in basic discoveries; an evaluation development group; and an implementation group, one that takes the drug to market—a private company, a Merck, or one of the large pharmaceutical companies organized along those lines.

• 1530

We in the biomedical research community, in a broader context, are also becoming organized in that way. We have a basic biomedical discovery group. Many of these are university-based or hospital institute-based. Small biotech companies are emerging that take those ideas and try them for the first time in clinical trials. Then the big pharmaceutical companies that have hundreds of millions of dollars to evaluate drugs come in with those drugs and take them to market.

So our structure has changed and we've now come to the point where we have everything in place. However, Dr. Glavin and I have been saying that we think it has gone to the point where we're starting one sector—the discovery sector. If you lose the discovery sector, the one that finds the new drugs, the new things that can be patented and brought to market, you destroy your future.

So a pharmaceutical company invests enormous amounts of money in research. That is their future. They understand it. As a country, we who have a basic biomedical discovery within our universities and institutes have to do the same thing if in the long run we want to have that kind of industry.

We can say that we don't want this. This is a choice that a country has—we don't want research in our universities and in our biomedical institutes; we want to give it all to the pharmaceutical industries to do. That is a choice we can make.

But you'll miss two things. One is that Canada does not have a pharmaceutical industry, so it will all leave the country. Second, the truly novel ideas, the ones that don't appeal directly to the market, won't appear. Those are the ones that ultimately give you the huge discoveries, such as the DNA technology discoveries the whole industry is based on now.

So I think it's necessary to put in place that infrastructure for discovery, and we have. We've developed the basis for moving these discoveries into the marketplace through a number of means.

The Vice-Chair (Ms. Paddy Torsney): Thank you, Dr. Greenberg.

We'll now go to one-minute rounds.

Mr. Overall.

Mr. Dan Overall: I'm sorry, what are the one-minute rounds?

The Vice-Chair (Ms. Paddy Torsney): I'm sorry. I explained it to the other side of the table. I didn't have a chance earlier.

Mr. Dan Overall: I went to Florida temporarily.

The Vice-Chair (Ms. Paddy Torsney): We will allow you one minute, and no more, to make a final statement or give us your bottom line. If you have any additional information as a result of this meeting, or as a result of things you hear in the process that has taken place across the country, we would encourage you to send that in to us, but we are offering everybody one final minute at this point.

Mr. Lumbard will be last. Otherwise we'll go in the same order we started in.

Mr. Dan Overall: I would just be recapping what seems to have been rehashed a number of times around this table, which is to implore that the debt remain the number one goal.

Perhaps the only other request I'd make is that next time perhaps we could have more than five minutes each.

Other than that, what we feel should be the crucial agenda facing this government has been mentioned a number of times today.

The Vice-Chair (Ms. Paddy Torsney): Thank you.

Mr. Maguire.

Mr. Larry Maguire: Thank you. I want to reiterate our earlier comment, which is to make sure the deficit does get to zero.

What we're talking about is a reprioritization of the focus from debt reduction to new program spending, and moving into the taxation area as well. Reduction of taxation will stimulate the economy, as has been pointed out, and we're encouraged by that.

In relation to programs where government has spent money, particularly in agriculture, the Crow was one of those $700 million costs per year, and it was good to have gotten out of that. But now we need to give farmers the opportunity to do more trade on their own as well. If we're going to be told by government that we are going to be more business-like, then we have to be able to manage that risk ourselves.

We think that freeing up through the new bill—Bill C-4, which will go through the House on wheat board monopolies and changes to the board—will be a good starting point. It will give farmers a choice in how they are able to manage that risk themselves.

The Vice-Chair (Ms. Paddy Torsney): Thank you.

Mr. Fiske.

Mr. Norman Fiske: Thank you, Madam Chair.

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The province of Manitoba has more community foundations than any other province in Canada as a result of our program.

The community foundation movement can be a great thing for fostering community spirit throughout Canada. It will reduce demands on government for social services. We need partners to spread our community foundation program to the rest of Canada. Thank you.

The Vice-Chair (Ms. Paddy Torsney): Thank you.

Mr. Kreiner.

Mr. Sherman Kreiner: Madam Chair, tax credits that promote investment in Canadian businesses are an extremely effective investment of the fiscal dividend, because they're targeted, they're recoupable, and they meet demonstrable economic development needs. So you basically get a significant amount of benefit with very little cost, if any, to government.

The Vice-Chair (Ms. Paddy Torsney): Thank you, Mr. Kreiner.

Dr. Greenberg.

Dr. Arnold Greenberg: I will speak on behalf of both Dr. Glavin and myself to request that the committee reconsider the cuts being proposed for the Medical Research Council and the reestablishment of the base budget. I think any further cuts to the MRC will do irreparable damage and will mark a sad day for the country and the future of our biomedical research industry.

The Vice-Chair (Ms. Paddy Torsney): Thank you, Dr. Greenberg.

The last word is to you, Mr. Lumbard.

Mr. Todd Lumbard: I would just like to reiterate priority debt reduction, and a comment I made before, urging the government to install a concrete plan for debt reduction, including accountable and measurable targets. An example is the province of Manitoba's 30-year debt reduction plan: they cannot run a deficit in their budget. I think this is a leadership thing on their part. Whether it's creative accounting....

Mr. David Iftody: They won't be empowered.

Mr. Todd Lumbard: Well, let's just say it looks good, and it's nice to see that there is an end. I think it behoves the federal government to do that, get rid of the deficit, and then start working our way on the debt.

The Vice-Chair (Ms. Paddy Torsney): Thank you, Mr. Lumbard.

I encourage all participants to make sure they receive the documents that were available. It also includes documents the Minister of Finance released to all of us on Wednesday. The presentations made this morning may have had a slightly different perspective from some of those this afternoon.

This committee will now travel on to Montreal, where we will hear from witnesses at 9 a.m. on Monday.

We thank those of you representing your various interests for giving us such a warm welcome here in Manitoba, and in Winnipeg particularly. We wish you all a good weekend, and thank you for your time and effort in making your information available to us.

Thank you.