FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, October 21, 1997

• 0821

[English]

The Vice-Chair (Ms. Paddy Torsney (Burlington, Lib.)): I call this meeting to order. We are the Standing Committee on Finance, and we're here in Fredericton for our pre-budget consultation. As most of you know, we've been across the country, and we will continue our meetings in Ottawa on Thursday, through next week and the following.

If something comes up following this meeting that you hear about, whether it's in our meetings in Charlottetown or St. John's, Newfoundland, then I encourage you to get the information to us. There's also an opportunity to provide further data if there's something specific, some numbers that somebody asks you about.

We're very happy to be here in Fredericton. We got in quite late, but we did manage to find some good food late at night.

Thank you very much for having us and taking the time to come and speak to us, and we look forward to your presentations.

Just by way of introduction, we have Chris Grady representing the Fredericton Area Network; Linda Silas from the New Brunswick Nurses Union; John Murphy from the New Brunswick Federation of Labour; Brian Perkins-McIntosh from the Common Front for Social Justice; John Mahar from the Lighthouse Family Resource Centre;

[Translation]

Claude Snow, of the Comité des douze;

[English]

Frank Dunn from the University of New Brunswick;

[Translation]

and Messrs. Basque and Légère, of the Moncton Coalition for Economic and Social Justice.

Welcome to all of you.

Mr. Grady, you have the floor.

[English]

A voice: Madam Chairperson, would you mind if we had the introduction of the members?

The Vice-Chair (Ms. Paddy Torsney): Oh, sure; I'm sorry.

We have Gerry Ritz, the member of Parliament for Battlefords—Lloydminster, Saskatchewan, representing the Reform Party; we have Mr. Perron, who is from Saint-Eustache—Sainte-Thérèse, representing the Bloc Québécois; we have Angela Vautour from Beauséjour—Petitcodiac, New Brunswick; we have Jim Jones, who's here from Markham, Ontario, representing the PCs; we have Mr. Gallaway, who is from Sarnia, and when he gets here, we have Mr. Iftody, who is from Manitoba, and they are both Liberal members; and my name is Paddy Torsney and I'm from Burlington, Ontario.

Mr. Grady.

Mr. Chris Grady (Fredericton Area Network): My views are collected from an eclectic background. I was self-employed, employed by the federal government, active in federal government union, and active on the social front of this community and any other community I've been involved in. So it goes from private enterprise to union work.

The points I'm going to make are a run-through of things people have said to me in discussions I've had with them. The Fredericton Area Network has 850 members, so a fair range of opinions does cross my way.

Progress toward operational deficit reduction has been believable. It's important to recognize that if you're going to take on such a task as reducing the deficit or changing the course to such a degree as the federal government did, more important than how they do it or what they do is that they engage the public in believing that what they've done was necessary.

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Consequently, if they're going to do the same thing to the debt, which most people I talk to say they should do, again, they're going to have to make it both believable and understood. But it's a more difficult prospect to pursue that now that they've put us through so much pain in reducing the deficit itself.

Consequently, they're obliged to be extremely more transparent and open about what they're doing, and to openly accept and expect public criticism of what they're doing. Perhaps it's not going to go exactly on a pre-planned road, depending on what the future brings.

I mentioned in my full written presentation one of the aspects of government itself that they should pursue: they've downsized departments, but they haven't excised the big-spending culture that still persists in government departments. I gave a specific example of one I'm familiar with, and that's the research branch of Agriculture and Agri-Food Canada, and I mentioned that the length of the title is symptomatic of the thinking within the department still.

Their managers are promoted from within the scientific ranks; they aren't professional managers. Perhaps they'd have better value for their dollar if they took this valuable resource of some exceptional researchers and their support workers and gave them a complete turnaround in management.

So the departments themselves should be examined, not so much for saving, but for quality.

Midway in my formal presentation I said the surplus should be 50% towards the debt, 25% towards a culture change within departments and 25% towards new initiatives. Those are figures that were repeated again and again in formal and informal discussions with the people I've met.

I might sum up by saying budgeting must be viewed in concert with a simplification of the tax code. We need to change our psyche from one of looking for tax loopholes to one of looking for investment opportunities. We can and should change from being debtors to being investors.

Do not borrow against our future. Stay the course; improve the quality of government; eliminate the debt; reduce, but more important, simplify taxes; and continue to invest in our future. That of course means a very careful investment in the people and the quality of life of people in Canada.

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

Ms. Silas.

[Translation]

Ms. Linda Silas (Chairperson, New Brunswick Nurses Union): Good morning. Even though French is my mother tongue, I will address you in English.

[English]

My comments come from the New Brunswick Nurses Union. I'm Linda Silas, president of the New Brunswick Nurses Union. I'm a nurse by profession and have been a nurse for the last 15 years. The New Brunswick Nurses Union represents over 6,000 nurses across our province, working in different sectors.

I was a little bit surprised with the short notice received to appear in front of the Standing Committee on Finance. I was glad to see that you only wanted a one-page wish-list, which, with creativity, we were able to place on one page.

I started by reading the Speech from the Throne to look at the promises our Prime Minister was making, and one quote that stuck out to me was, “The hopes and the dreams of the young are an inspiration for me, but in recent campaigns I have heard too many fears mixed with their dreams”. It really struck me that the head of this country is catching on that Canadians Canadians have mixed feelings. Yes, we're balancing the budget and we have some kind of surplus, but at the same time, our young and not-so-young are getting confused and worried about our future.

• 0830

The answer to your question is simple: the process of deficit reduction has been too fast. It's quite simple to answer. If we look at New Brunswick, what have federal funding cuts meant? A lack of confidence. In a recent research project on health care, 70% of New Brunswickers believe the quality of health care has declined since 1990. As for the poverty level in New Brunswick, one of every five children lives in poverty. That comes from Statistics Canada.

If we look at part-time work, 40% of women work in non-standard jobs, which is part-time and casual, no benefits, no pension plans and you know the rest. If we look at seniors, we can go into details. About 60% of working women don't have any pension plans, and when they do hit 65, live at a poverty level. We can look at all the reform that the federal government is trying to do with the CPP and old age security.

Also, federal cuts have meant an increase in health care plans. Provinces have had to cut different benefits, different surgeries, which are now all paid out of the private plans.

What should our priority be? Job creation. Everyone talks about it, but we need to do more than talking. And they have to be full-time or part-time employment jobs, not what we're seeing in the nursing workforce, where 80% of nurses under 25 are now employed as casual, compared to four years ago, when it was only 11% of nurses under 25. The average age of nurses in this province—and it's close to the country's—is 44 years. In another four or five years, 80% of nurses will be over the age of 40. For a workforce, that's very dramatic.

Bring back the confidence in the Canada social program that's mixed with the fears and dreams of our Canadians. If we look at federal funding for provincial health care, we heard the promise of the 12.5, but at the same time, is it going to be enough for each province when technology and reforms are changing?

Protect medicare national standards. Right there we have to talk about privatization and the protection of health care in our rural areas. In the Drug Patent Act a process has started. It's slowed down right now, but if you want to save dollars into health care, we have to look at Bill C-91.

Address poverty, fair pension and reform.

I'll skip to federal funding. As you know, Canada has a world-class medicare system, and in order to maintain and improve our medicare system, we need to ensure that our provinces have the fiscal resources necessary to enter the new era of progressive health care reform.

Over several years, Canadian nurses working in many sectors of provincial medicare systems have experienced an unprecedented number of lay-offs and the erosion of our ability to provide quality care to our patients. Sadly, we're not talking about quality care any more; we are talking about safe care.

We'll not go into details about Bill C-91; it's written there. If we look at New Brunswick in a 10-year period, the Minister of Health said Bill C-91 is going to cost us $14 million.

Addressing poverty, the issues have been brought up before to federal governments: a national child care program, minimum wage and social housing. And these statistics are scary.

I was at a school meeting just last week. In Fredericton the French school is still for more than middle-class; it's for high-class society, and they had to form a committee to look at children going to school without breakfast. I saw a commercial on TV yesterday in Ontario that said 100,000 children in Ontario go to school every day without breakfast. We have to examine this.

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

Mr. Murphy for five minutes, please.

Mr. John Murphy (Executive Secretary, New Brunswick Federation of Labour): Thank you, Madam Chairperson.

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I apologize for the fact that I haven't supplied written remarks. The notice that you were coming was very short and all organizations have other things on the agenda as well. But we certainly appreciate the opportunity. It's really a matter of giving you a feel for what the people we represent are thinking rather than trying to provide a lot of specifics in any event, because I think that's what you're trying to gauge, the mood of the nation in terms of our finances.

Certainly in the labour movement our priorities, which we think should be the priorities of the government in terms of the upcoming budget for the fiscal year 1998-99, have to be first and foremost to create jobs. As Ms. Silas just noted, there's certainly a lot of unemployment and underemployment—those who even manage to have jobs ending up in casual work, with no benefits—all of which will have long-term impacts as well as a shorter-term impact.

Secondly, there has to be a more defined effort to rebuild our social programs and our public services. Thirdly, but not least, we need to initiate real tax reform in this country and real discussion about tax reform. I don't believe these particular meetings allow sufficient time for the type of thorough debate that has to take place around the issue of tax reform or fair taxation.

I would like to leave with you a quote. One of the questions we have to ask ourselves is where are we heading as a society. I think your own government has attempted to ask that question too. It's becoming more and more obvious. Even people in the corporate community are starting to ask themselves that question.

I have a quote here from the head of Noranda, Courtney Pratt, and it comes out of a speech he made to the Canadian Club on September 29, 1997. He says:

We are increasingly becoming a society of haves and have-nots. We have a country where 52% of individuals and 13% of families earn less than $20,000 per year. A country where, despite our apparent economic success, unemployment rates remain stubbornly high, with unemployment for youth particularly troubling—twice the level of the general population. And for those workers 25 to 35 years of age with jobs—their real earnings have fallen 20% relative to those of mature workers since 1974. Food banks are accepted as a necessity in this city.

He's talking about Toronto. It's no different if you read the media in this city or any other city in New Brunswick or any other city across the country, for that matter.

And in our streets the plight of the extreme have-nots is increasingly visible to us all. We are not used to seeing so many people living in the streets, so many people asking for money. If you are like me

—and remember, he's speaking to the corporate elite of Canada—

you find it profoundly disturbing. The real danger is that we become “used to” seeing these people, accept it as a fact of life, and we stop being disturbed.

Our social safety net, designed for another economic era, no longer works, and it is being cut apart every day. And, of course, as a country, we risk being pulled apart—polarized—at a time when we should be recommitting to each other.

He poses the question: “Is this our vision of the society we want to develop?” He ends by saying “It's not my vision”, and certainly it's not our vision.

I think you should reflect seriously on that quote, because it's coming more and more often at this point in time from others out there in the business community and, quite frankly, others in your own party who are elected this time around in the new government, and certainly other parties in the House of Commons. I think it is incumbent on you, as you develop your budget proposals as a committee, your recommendations to the House and the minister, to take note of the fact that we really have gone too far and we have cut much too much. We're certainly in a position, based on the minister's own report last week in terms of the finances of the nation, to change course and we have to do it very quickly.

Thank you.

The Vice-Chair (Ms. Paddy Torsney): Thank you very much, Mr. Murphy. Mr. Brian Perkins-McIntosh.

Mr. Brian Perkins-McIntosh (Fredericton Area Coalition for Social Justice): Thank you. I represent a coalition of groups whose members both include and in turn represent those who have suffered immeasurably in the last number of years due primarily to needlessly severe government fiscal policy and corporate-driven debt and deficit hysteria. Having dealt with real people and real hardship in my position as a downtown Fredericton minister, I must again object in strong terms to the current policies of the government and urge decision-makers to restore a sense of equity and fairness to our collective financial house. I will address macroeconomic policy in my presentation, concentrating on debt and deficit reduction strategies and on the tax system.

• 0840

Only yesterday Jim Stanford, an economist with the CAW and co-chair of the macro policy committee of the alternative federal budget, released a paper that once again draws a far less painful path to debt and deficit reduction than the Liberals have travelled. That paper also questions the speed with which they have balanced the budget. If the books could be balanced in 30 months, then clearly the crisis was not as immense as portrayed. There are lessons to be learned from Canada's fiscal near-death experience.

First, despite the enormous social cost of cuts and program spending implemented through the CHST and other measures, the government's main prop in its deficit-cutting strategy cuts were actually not the critical ingredient in the resulting deficit reduction recipe. Far more important was the decline in interest rates and the consequent acceleration in economic growth. In fact, Martin's program spending cuts could have been avoided altogether and he would still have met his own original timetable for deficit reduction.

Second, because of the narrow and single-minded commitment to the maintenance of very low inflation rates, signalled in recent months by the government's support for the Bank of Canada's interest rate hikes, and despite still too high real unemployment rates, it appears the government is trying to slow growth and job creation at the expense of its fiscal balance.

When all is said and done, the deep cuts in program spending account for a relatively small percentage of the total $30 billion improvement in the federal deficit. That lesson leads us to assert that there will be a huge fiscal cost imposed on Canadians and their governments if the pre-emptive tightening of monetary policy continues. In the wake of the unprecedented belt tightening and sacrifice that we've needlessly endured for the presumably unavoidable sake of putting our fiscal house in order, the thought of the government spending a potential $70 billion over five years in support of the dubious goal of low inflation should spark an outright taxpayers' revolt if the life hasn't been knocked out of us yet.

We urge the government to abandon the soft landing scenario, concentrate on job creation and not inflation policy, and restore spending in health care, education, social assistance and other public services in need of serious reinvestment.

On the revenue side of the ledger, a fair tax package would actually increase that dividend if implemented according to the alternative budget. A progressive tax system targets those with the ability to pay, but the federal government has consistently flattened the tax base and therefore widened the gap between rich and poor—once again costing Canadians billions.

Even the International Monetary Fund, that bastion of fiscal conservatism, noted in a June 1995 report that Canada's tax preferences for corporations “are relatively generous” and their effectiveness in promoting investment does not appear to have been large. It is scandalous that in a time of fiscal restraint 81,000 and more corporations made $17.11 billion in profits in 1994 and paid no taxes.

We believe a fair tax package would include the following: speeding up efforts to collect outstanding taxes; implementing a wealth tax; imposing an excess bank profits tax and a minimum corporate tax; eliminating meal and entertainment tax breaks and lobbying loopholes; adding new tax brackets for high-income earners; ending the protection of family trust from capital gains; denying a tax deduction for executive salaries of more than what is a reasonable ratio between those salaries and what average working people earn in their companies; reducing the RRSP deductible limit and adjusting the pension maximum; adding a new carbon tax; and ending the special tax benefits of resource industries as well as other measures. In addition, the after-tax income of low-income families should be increased by eliminating the surtax on incomes below $20,000, increasing the GST credit for low-income children and adults, and enhancing the child benefit by at least $1,000 per child per year.

• 0845

These and other measures, coupled with the macroeconomic policies outlined earlier, will enable ordinary Canadians to reap a much-needed financial harvest, redress the silent corporate coup of Canadian fiscal policy and repay people, real people on the street, for the needless pain that has been caused by recent government cuts in social spending.

Thank you.

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

Mr. Mahar, please, for five minutes.

Mr. John Maher (Lighthouse Family Resource Centre Inc.): Good morning from position number 13. I trust that, because I will bring to you a business outlook, particularly a small business outlook, I won't become the lightning-rod this morning. But such it is—I speak from my heart.

It is once again a pleasure to be able to address myself to the fiscal policy of the country, to do so when we appear to have at least turned on the lights in our tunnel. No, we have not reached the end of our long journey downward to the depths of the fiscal pit, but it would appear that the bottom is in sight and that we can now start to plan our ascent back to national fiscal health.

Over the last few years the deficit has been seen to be the great thing hanging over our country, but unfortunately it was just the tip of the iceberg. It was only a symptom of the real weight around our necks, the debt.

The national debt of Canada threatens the future viability of our country and, more importantly, that of our children. We are passing forward to them the dollar equivalent of what to my generation was the first mortgage and car payment as we started our adult life. By saddling them with this almost hidden cost, it's no wonder that they're having and will continue to have difficulty in establishing independent adult lives.

If we don't give them the opportunity to better themselves, it may backfire on us. After all, they are the ones who get to choose our retirement homes. Or, if they have bought into our policy of the lack of the sanctity of human life, they may just euthanize us.

We have seen, due to moderate national sacrifices, which were more like inconveniences to most people, the deficit monster wrestled to the ground. It's now time to deal with its bigger and much meaner relative, the debt.

In the mid-eighties it was predicted that in the nineties we would see interest rates in the 5% range and capital would be readily available. I really couldn't believe it at that point in time, but it's occurred. Why? Because we're being driven by the demographics of our economy.

When the first boomers started to turn 40, a realization hit them. Money would be required for retirement for themselves and, secondly, for any children's higher education. The prediction has come to pass. But the first of those boomers are starting to turn 50 this year, and that same peg passing through the snake will change our society. We have only a limited window of opportunity before that same capital will be required, and the low interest that is currently being paid on the debt may disappear and increase the carrying cost.

It's wise to remember that just a scant few years ago the interest on the debt was the deficit.

Now is the time to get our fiscal house in order and bring the debt down to a level where it or its carrying costs will never again threaten the economic health of our country.

The time has come for true leadership, not management, regarding our national fiscal policy. Leadership means facing the hard questions and sometimes not following the opinion polls. A democracy is not about the manipulated opinion of the populace at this moment, but about the popularly elected leadership making the decisions it believes are necessary for the common good.

The largesse and largeness of government are hopefully at an end. Bureaucracy, by its very nature, is inefficient, as people find ways to exercise control over those under them. If I must have someone over me, it is far better to be someone who can truly reward me for what I accomplish and then leave me free to decide where I will expend my rewards based on free economic forces, not contrived or artificially propped up ones.

Workers who have had their accomplishments redistributed by government will be much better served by a robust economy than by government largesse. They may have to work for their proverbial daily bread, but the value of the learning and earning experience has yet to be disproved.

A fiscally strong country is the only one that can afford to be generous in social and educational programs, particularly over the long term.

The move to a more user-pay educational system may have a positive impact in the longer term. If we have to incur debt to finance our education, then we will expect a return on that investment.

Ask a computer graduate this year if they're worried about employment.

We do our youth a disservice by selling them the notion that they should follow their dreams and seek flawless perfection in life with instant and long-term gratification. Nature doesn't run that way. We're just as wrong to have minimum wage history majors with $40,000-plus debts as we are to have high school drop-outs who can't read.

We also need to seek to eliminate regional handouts. Even Premier McKenna, musing as he was stepping down, wondered about how productive and how counter-productive they were. I've seen that mentality hit the maritimes, both in my employees and in others. It has ruined our competitiveness, it has ruined our possibilities. We're seen to be one of the areas that can deliver jobs and deliver business advantages at the lowest possible cost, but I don't think businesses will come here, because they know that when they arrive they're going to run into the mentality that people are expecting something be given to them.

• 0850

If we must fund our social fabric and social programs, I would suggest that charities be allowed to raise as much as they can through private donations or corporate donations—which are, by the way, raised by volunteers and not by the preying professionals we see preying on our seniors—and then perhaps have the government match these funds. Even in the Bible we are told that the involved shepherd is far superior to the hireling who runs away when trouble comes. If we're involved in raising the funds and distributing them on our own level, we have far more control. Government may help, but I think it is inherently wrong for government to directly fund.

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

[Translation]

Mr. Snow, please. You have five minutes.

Mr. Claude Snow (Spokesperson, Comité des douze): Thank you. My background is in social work, I am self-employed and I work with many people living under the level of poverty. Our group, which works for social justice, is in contact with many other groups of the province. Therefore, I believe that I also represent those other groups, in a way, when I speak to you.

I provided you with statistics relating the Eastern part of New Brunswick. I believed that the members of the Committee and other participants would have copies of my documents. In any case, I gave you those statistics to underline the type of economy we have in the North of the province.

You will see for example, in Table 3, that only 6,000 workers have a full-time job out of 24,000 workers. This means that two- thirds of our workers in that region, or 17,000 persons, have a very insecure job. That is an enormous proportion. And that is why people face such enormous economic difficulties. It is because of the type of jobs they have.

You will see in Tables 8 and 9 that the gap between the poor and the rich keeps increasing. You will see that in the North of New Brunswick, the proportion of have-nots has increased from 9 per cent to 13 per cent. This means that there is in the region a rate of impoverishment of about 1 per cent per year, which is very high.

I would like to speak also about a more general table that will tell you how we perceive the situation about the next budget. First of all, we absolutely need to talk about the effects of federal transfers. As you know, the government's decision to replace the old transfer formula by the Canadian Social Transfer has been a disaster. For 1997-98, it will mean a reduction that could reach from $25 billion to $37 billion. Whatever the final figure, it is quite clear that the reduction will reach several billion dollars, which is enormous.

This has had a terrible impact on people's lives. This morning, in the few minutes available to me, I would like to talk about the real impact of such a decision on the daily lives of people. Let's take the case of unemployment, which is not really related to the Canadian Social Transfer but which is a very important matter because there may be people, in some regions of the country, who are pleased about what has been done about that. In our area, we see more and more people collect only $30, $40 or $50 per week as unemployment benefits and this has a terrible effect on their lives.

The very fact that 14 weeks of work are required instead of 12 means a loss of 17 per cent right from the start. And the effects are there for all to see: the number of bankruptcies keeps increasing, not only here but everywhere in the country.

• 0855

We also know that people's homes are being auctioned off because the financing companies or the banks do not even want to take them over. Sometimes, they rent them back to their previous owners.

And what about suicides? In our region, and I would be remiss not to talk about it, the rate of suicide among our 20 to 24-year- olds is double the national rate. That is enormous.

Our social security net keeps being torn apart, as you will see on the sheet I gave you. People are beginning to demonstrate, as you may have seen in the local newspapers. In one month, 6,000 people demonstrated in the streets. This is a new phenomenon in New Brunswick because we are not used to that.

People demonstrate because they are angry, because they want change and, especially, because they want more human policies from the government. Cutting the deficit may be a good idea but one should not forget the enormous social costs it entails.

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

Mr. Dunn, you have five minutes.

[English]

Mr. Frank Dunn (Planned Giving Officer, University of New Brunswick): Thank you, Madam Chairperson.

Since its inception more than 200 years ago, the University of New Brunswick has been the beneficiary of the support of concerned individuals and organizations. From the first scholarship, established in 1883, to the successful completion of the debenture campaign, a major fund-raising campaign that was completed in the spring of this year, charitable donations have been a key factor in the development and well-being of UNB.

Today, more than 7,000 contribute annually to the support of the university, providing scholarships, project research, improved facilities, and advanced programs. Though this support represents only a small proportion of UNB's overall budget, it's critical to the quality and educational experience on the two campuses by assuring that this experience is not simply adequate, but truly excellent.

Gifts of wealth from individuals are a major source of funds for large fund-raising initiatives that support educational, health and, cultural activities in communities across Canada. Canadians rely on philanthropic dollars to provide programs and services that are a fundamental part of our community. Tax credits provided for charitable gifts are one way that the government can contribute to community programs and services.

Over the past few years, charities have communicated with the finance committee to request increases to tax initiatives for charitable giving. The government has listened to charities. In 1996 and 1997, it included some encouraging measures in budget proposals, such as increasing the limit on the application of tax credits from 20% of taxable income to 50% in 1996 and 75% in 1997. Also, it was 100% for capital gains and gifts made in the year of death, as well as special rules for gifts of publicly listed securities.

However, the 1997 budget proposal included a penalty provision: resolution 21, which was later changed to a delayed receipt for gifts of non-qualifying securities, which are basically private company debt and shares. Resolution 21 has made huge steps backward in terms of significant philanthropy in Canada, for many major gifts involved the use of what are now considered non-qualifying securities.

We urge you, the Standing Committee on Finance, to recommend a reconsideration of resolution 21 and the setting up of a process to better understand and create an equitable and efficient system to stimulate financial philanthropy in Canada.

The university agrees with the two proposals submitted by the British Columbia Cancer Foundation in their presentation to your committee on October 16, 1997, in Vancouver, B.C. The two proposals are as follows: remove or amend resolution 21 of the federal government's 1997 budget of February 1997 and the related draft legislation of July 31, 1997, which deals with the gifting of non-qualifying securities; and establish a committee made up of a representative from the private sector, government, charities, and Revenue Canada to review the charitable sector and to make recommendations for amendments to legislation in practice. The following is a description of these proposals.

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Resolution 21 of the federal government's 1997 budget of February 19, 1997, and the related draft legislation of July 31, 1997, which deals with the gifting of non-qualifying securities, is an albatross. We propose that a multi-party committee be established to review the charitable section and to make recommendations or amendments to legislation and practice.

We trust that this presentation outlines to you the importance of removing or amending resolution 21 of the 1997 budget proposal and establishing a multi-party charity committee. We believe you understand your role in the partnership to encourage philanthropy and that just by addressing these issues all Canadians will benefit.

Thank you for providing me with the opportunity to present this proposal to you today.

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

[Translation]

We will now hear Mr. Basque.

Mr. Jean-Claude Basque (Moncton Coalition for Economic and Social Justice): Good morning.

I find it interesting that most of the social groups are being heard this morning whereas the companies and the chambers of commerce will be heard this afternoon. If ever we accepted to come back, next year, that should be changed because, as you know, most members of social organizations do not have any money. Therefore, they cannot come here the day before, and they have to leave home at 6:00 AM, or even earlier if they come from Campbellton. However, most of the people scheduled for this afternoon are business people.

Two groups only have asked to testify in the afternoon. They are the Association acadienne des artistes professionnel(le)s et the Futurs sans-abri de Restigouche. They have asked to appear in the afternoon because they would be unable to be here in the morning since they come from too far away.

I believe also that separating both types of presentations, except for one of the groups scheduled for this morning, will prevent some discussions which would have been very useful for the Committee to have a clear vision of what people think. A debate would have been beneficial to the Committee.

I also want to raise another issue. This is the second or third time that your Committee holds hearings in New Brunswick, always in Fredericton. I believe you should change your plans a little bit in order to visit the North of the province, where you would see a bit better the real impact of the federal budgets. You should not look only at Fredericton, you should go to the coast and in the rural areas. I believe you should think about this for next year.

My statement will be very short. For twelve years, the federal government's agenda has been established by big business, mainly by organizations such as the Business Council on National Issues, which have lobbied for some solutions to the problem as they see it.

In the beginning, with Mr. Mulroney, free trade was going to create jobs. We had to link our market to that of the U.S. because that would give us thousands of jobs. When he made that the theme of a political campaign, most of the Canadians voted against him, which did not prevent him from taking power and from negotiating the Free-Trade Agreement. However, the promises did not pan out, we did not get more jobs.

Then, we were sold NAFTA, with an even greater opening of our markets through a link between Canada, Mexico and the U.S. There again, we were promised there would be no job losses and that corporations would not move because of the Agreement.

• 0905

But things did not turn out that way. Thousands of jobs have been lost. The only result we found was the scandal that exploded last year in the food sector about Mexican strawberries. I do not believe there was very much else.

After that, but mainly with Prime Minister Chrétien, the deficit became the major issue. If we did not solve the problem immediately, we were going to hit the wall and we could not guarantee the future of our social programs and of our children.

We were told that one of the major reasons for the increase of the deficit was our social programs. So, to solve the problem, we had to make deep cuts in social programs and in our public service.

Today, we see that this did not resolve the problem. There has been a rather enormous increase of unemployment and of poverty. We have solved part of the deficit problem—we are in fact being told that we are close to a zero deficit—but at what cost?

What was not considered in that process was the social, family and individual costs which accumulate and lead to costs for society and for individuals.

In 1997, according to Paul Martin... I mentioned Paul Martin but he was certainly not the only one because, if you read the business section of the Globe and Mail or business magazines, the message is always that we have to cut the deficit. This is also the obvious agenda of big business.

Now, as we heard this morning, the issue is not only to cut the deficit but also the debt. So, the government has to continue cutting because, we are told, if we do not deal with the debt, we will end up with a depression. Well, we are already in a depression.

What is the impact of all that? In New Brunswick, despite a slight increase in the number of jobs, we have seen unemployment increase in 1996-97. There has not been any real change. And I will give you a very concrete example of what this increase of poverty means. Let us not forget that close to 1.5 million children live in poverty in our country, which means that their parents are poor.

Let's consider this case from the Albert riding where, in a two-children family, the father has just seen his unemployment benefits expire. The mother has a job and earns $7.50 an hour, which is even a good salary in this region, but perhaps not with two children. The family has been unable to pay their hydro bill for the past four months and their electricity supply has been cut off.

What does this mean for them? It means that they lost the meat stored in their freezer. It means that they cannot use their fridge anymore, that they have no hot water and that they cannot use their washing machine. You can imagine the type of changes this makes in their lives.

There will also be social consequences. So, when one talks about budgeting, one also has to take social costs into account. One must stop looking only at the financial balance sheet because there is also a social balance sheet that must be considered. That is what I wanted to say this morning.

The Vice-Chair (Ms. Paddy Torsney): Thank you, Mr. Basque. We have taken notice of your recommendations about our next round of hearings. We will go to the capital of each province but each member also has the possibility to hold hearings in his or her riding, which provides people other opportunities to speak to the Committee. I hope that your M.P. will take this advice.

I would like to add a final thing.

[English]

I'm very happy to have the opportunity to travel in New Brunswick. I love being in this province, and I hope to be able to get out to different parts of it.

We have heard your suggestion for a mixing up of the groups. I encourage you, if ever you or any group is asked to participate in the consultation and the timing doesn't suit you, to ask for a different time. They should be able to accommodate that.

• 0910

The meetings were set up—and this is for everyone's benefit—on fairly short notice because the House came back a bit later. We do have a requirement in the rules to report to the minister. We wanted to get to it by November 28, and we wanted to get the benefit of as many presentations, from as many people across the country, as we could.

So we have tried to accommodate that and to be across the country to both hear from citizens and see different parts of the country. The scheduling was a bit of a nightmare for all of us who would have preferred a different date.

[Translation]

Mr. Basque.

Mr. Jean-Claude Basque: Do not forget there is a whole region that is not represented here, the Madawaska. As far as I know, there is no social group or business organization from that region that will appear.

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

[English]

I would suggest that before we go to questions,

[Translation]

we might take the time to have a coffee or to smoke a cigarette.

[English]

for those who are so afflicted. I propose that we wrap up this session at about 11 a.m. instead of 10.30 a.m.

As well, there are copies here of each of your briefs if you want to look at what your neighbour has suggested. There are also copies of the minister's statement if you haven't seen it.

• 0912

• 0924

The Vice-Chair (Ms. Paddy Torsney): I call this meeting back to order.

Beginning the questions we have Mr. Ritz, for approximately five minutes.

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

I'd like to welcome everyone here again. There were some excellent presentations. I thank you for your thoughts and your joining us this morning.

I would like to ask a question of Mr. Perkins-McIntosh. There were a couple of points he made in his presentation that I would like a little clarification on.

You talked about a wealth tax. I'd like to know who you would target. Do you have a benchmark where you say, for instance, this person is wealthy because they earn x dollars?

In relation to that, in Mr. Dunn's presentation he talked about how philanthropists, which of course we target as the wealthy corporations and so on, form the backbone of university funding. If you start to catch these so-called wealthy people with taxes, will there then still be money for the university programs that are so strongly needed?

Mr. Brian Perkins-McIntosh: To answer the second part first, as the presenter over here admitted, charitable donations from businesses to institutions such as universities do not form the major portion of universities' budgets. I therefore don't think it would unduly create a crisis situation for universities to maintain that, although I do agree with the presentation.

• 0925

On the wealth tax, yes, there is a limit. I would ask the committee to get hold of a copy of the alternative federal budget from last year. It outlines a whole series of taxation measures on the revenue side. There has been far too much of an emphasis on spending reduction, and we believe that billions of dollars could be gained on the revenue side, as well as with continued low interest rates, which I emphasized in my presentation. That would stimulate economic investment and economic growth, and revenues would therefore also rise accordingly. So there is a limit there, as well as on the level for increased tax brackets on high-income people. People over $100,000, for instance, should pay a 32% rate. People earning more than $150,000 should pay a 34% rate. Just those two changes alone would yield $775 million.

The Vice-Chair (Ms. Paddy Torsney): Mr. Perkins-McIntosh, I think you were referring to a document. Is that the alternative budget?

Mr. Brian Perkins-McIntosh: Yes, it is.

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

Mr. Dunn.

Mr. Frank Dunn: It relates to comments that I made. I did indicate in my submission that it's only a small proportion. However, with the reduction of transfer payments by the federal government to the provincial government, it has a direct result in the reduction of support to higher education. So even though this portion is very small, it's now becoming critical for that very reason.

The Vice-Chair (Ms. Paddy Torsney): Does anybody else wish to comment?

Mr. John Murphy: When it comes to the issue of taxation—and I've made it clear in the alternative budget document for the last couple of years, and I'm sure it's in the documentation that's going to be presented this year to your committee—what people are talking about is fairer taxation. It's not only the perception of fair taxation, but the reality of it. Whether it's small or large, whether it's corporate taxation or individual taxation, all Canadians and all political parties hopefully subscribe to the idea that that at the end of the day, people have to pay their fair share of taxes in accordance with their ability. When you look and see, for whatever reason, that x numbers of individuals or corporations are not paying any taxation because of the legal opportunities either to avoid paying taxes or to reduce the levels of tax they have to pay, it's unacceptable in this day and age, particularly if people are going to continue to focus on not now reducing the deficit or eliminating it, but relieving the debt.

What we've said in the trade union movement, what people have said in a lot of social action groups, and what I said earlier, is that more and more corporate people are starting to allude to the fact that we have to have some fairness in our system. We've talked about the development of a two-tier medicare system. We have a two-tier society in this country, both in terms of reality and in terms of taxation. It has to end, and I think people are looking for government to say it is serious about ending it. I think the government has talked about tax reform and there has been some minor tinkering, but nothing serious. I think the time has arrived. We have to tackle taxation and bring about fair taxation in the same way that the government supposedly has addressed the issue of our financial situation in this country.

Mr. Gerry Ritz: The comment was made that we need leadership, not management. That's basically what you're talking about.

Mr. John Murphy: Right.

The Vice-Chair (Ms. Paddy Torsney): Thanks, Mr. Murphy, and thank you, Mr. Ritz.

[Translation]

Mr. Perron, you have five minutes.

Mr. Gilles-A. Perron (Saint-Eustache—Sainte-Thérèse, BQ): Thank you, Madam Chair. I would like to ask a two-sided question. The first part relates to the major tax expenditures for corporations, which represent a big loss for the federal government. Here are some figures coming from the Department of Finance itself: deferred taxes represent a tax expenditure of $100 million, $1 billion; capital gains exemptions, $1.5 billion; use of affiliated companies and tax heavens, no figure is provided but I believe it's because it would be much too high.

• 0930

That is the first part of my question, which I address to Mr. McIntosh because he alluded to this matter in his presentation. Do you think the time has come for a major reform of our tax system, since the last one goes back to 1962?

Similarly, do you believe that there should be a tax reform for corporations and a tax reform with more equity for individuals?

The second part of my question is addressed to Linda Silas. You talked at length of cuts in tax transfers, in social transfers to the provinces, which hurt health, education, etc.

Do you believe that as soon as the federal government gets some available cash, as it will, some money should be returned to the provinces under social transfers? And do you believe that provincial governments, which are closer to society, to the small people that we are, could and should manage all the federal programs that would be transferred to them, with the corresponding funds, of course?

[English]

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

Mr. Brian Perkins-McIntosh: As I outlined in my presentation, it clearly is time for the tax structure to be changed in this country with regard to both personal and corporate taxation. That means we need to redress the imbalance in recent decades to better reflect the collective vision of the country, namely, that we all have to share equally in terms of the ability to pay and in terms of the burden of taxation in the country.

I didn't get a chance to say other things that I had planned to say about taxation, but they're in my written presentation. It's clear that in the last 40 years, for instance, the degree to which the federal budget has been financed by corporate taxation has fallen dramatically and the degree to which the budget has been financed by individual taxation has risen dramatically. Therefore, corporate taxation ought to be strengthened. Also, as individual taxes have gone up, they've gone up disproportionately insofar as those who have less ability to pay have been hit harder by the changes that have taken place in the last number of decades. We need to seriously redress.

There's a poster here that the Jesuits have come out with that outlines a whole series on exposing the face of corporate rulers. They reap record profits while paying little or nothing in taxes, and that applies to both companies and individuals. There are thousands of very wealthy corporations who pay little or no taxes. As well, 250 Canadians earning more than $250,000, for instance, avoided paying any income tax last year. And if you think that's fair, I question your values.

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

Mme Silas, et ensuite M. Grady.

[Translation]

Ms. Linda Silas: About the federal transfers, I would say yes. Minister Martin has told us that there would be a budget surplus and, of course, the first thing to do would be to return the money where it was cut, that is to say in social programs. That is absolutely obvious. The Canadian Federation of Independent Business expressed the same opinion, as was reported in the news two weeks ago. When funds were cut from a program where we now see that there is not enough money, we should re-establish the previous funding. This is what keeps our country together.

• 0935

We hear that Canada spends more money than all the other industrialized countries in relation to his GDP. However, that includes federal as well as provincial expenditures. But the amount of private expenditures for health care is still as high as 25 per cent, and only 6 per cent is being paid by the government. We should consider using the surplus for social programs.

As for management, I believe it should remain federal if we want to preserve universality. Many provincial Ministers of Health are now locked in battle to wrestle the full administration of health care from the federal government.

We want to have gold-plated services in Ontario and in B.C., and probably also in Quebec. Furthermore, the provinces have taken steps to implement transfers from one province to another.

Daily management of the system must remain in the hands of the provinces. Whether it be in Caraquet or in Ottawa, daily management must be done at the local level. However, our medicare system must be protected and the federal government must remain the major power in that field.

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

[English]

Mr. Chris Grady: This is in reference to the complicated tax system we have that allows people to escape paying tax, particularly in the higher income brackets, while at the same time talking about tax incentives. I think the idea of a flat tax regime, with a no-tax bracket for low-income earners, came to the minds of many people I talked to as something they would understand and live with, both in the case of high incomes and low incomes.

At the same time, people say you shouldn't give this or that to industry. I agree with the comments made earlier that you shouldn't give a direct incentive to industry, but you should then consider tax incentives for business.

But once that is said, you have to understand that a small business in New Brunswick wouldn't even rate on the scale in Ontario. A middle-sized business in New Brunswick would be a very small business in Ontario.

So you have to have some provincial and municipal input into targeted tax incentives for business. How you are going to do that, I don't know, but definitely it doesn't do to bring Ontario or British Columbian sensibilities to the business climate of New Brunswick. We can do quite well here with our own ideas of what a good life is.

The Vice-Chair (Ms. Paddy Torsney): Thank you, Mr. Grady. I guess you mean Toronto too, as opposed to all of Ontario or small parts of Ontario.

[Translation]

We will hear Mr. Snow and then Mr. Basque.

Mr. Claude Snow: Mr. Perron, I would like to come back to your last question relating to the management of programs by the provinces.

I believe that such a step would be very dangerous because it would be linked to the whole matter of power devolution to the provinces.

As far as we are concerned, our most important supporter was the federal government because we were at the mercy of provincial governments which did not respect our rights fully nor ensured accessibility. But we could always rely on the federal government, the a big brother if I may say so, to police the province and to ensure that it did not stray too far.

If we devolve power relating to income assistance, health care, employment, training, etc., the money will be put in the general revenues of the province, in most cases. Then, it will be very difficult to ensure accessibility. We will end up with unequal access and we will see that provinces establish the rules as they wish, which will dilute more and more the notion of universality.

Then, what will become of our social security? We are going to lose our basic values. The whole idea of equal opportunities, social equity, good medicare, etc., is starting to crumble.

• 0940

I would be very disheartened if this trend continued.

The Vice-Chair (Ms. Paddy Torsney): Thank you very much. A last word, Mr. Basque?

Mr. Jean-Claude Basque: One has to understand that the problem goes even further. If we believe what the corporations have always been telling us, especially for the past ten years, we would not have any financial problem if we let the market forces operate. There should be self-regulation of our economy. That is the theory.

However, companies call on the government, whether it be municipal, federal or provincial, to obtain grants or subsidies for training, for job creation, for expansion, and all kinds of other monies. When he was first elected, our ex-Premier, Mr. McKenna, stated that he would abolish all those grants. However, it would appear that he is the one who gave the most to corporations. The end result is that the province has lost lots of money.

I believe that this is what we should stop. We should tell companies that, if they are so much in favour of free competition and free markets, they should reject all those grants because they cannot have their cake and eat it too.

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

We will now hear Ms. Vautour, for five minutes.

Ms. Angela Vautour (Beauséjour—Petitcodiac, NDP): Good morning everybody. Thank you for your presentations.

This is a rather unusual position for me because, for the past three years, I was the one making the presentations, and I must say that I believed deeply, and still do, in what I was saying. The last general elections told us that there are reasons why the Maritimes are a bit excited, at the present time, and that is because we are obviously in trouble. I understand you.

I must say that I am still a bit surprised to find some people who believe that the debt should be our priority. Since I have been elected, I have received so many calls from people whose hydro is being cut off because of the budget cuts. I got four such calls in one day last week.

As Mr. Basque was suggesting, I believe it would be important for the Committee to go into the regions because M.P.s from the other provinces should be able to see the poverty that was caused in our communities because of cuts in UI. There are so many people who have no job and who do not receive any benefits. There are people in New Brunswick who have the lowest income of all of Canada and, today, a washing machine is not considered a basic necessity anymore for single-parent families. There are some terrible cases.

I would like to ask Brian Perkins-McIntosh what he would like to see in the 1997 budget.

I would also like to address a question to Jean-Claude Basque. As you know, the deficit is close to zero but the government is not recognizing it yet. It wants to accumulate a surplus of about $12 billion in the UI fund. I would like to ask you what we should do with that surplus. So, I have two questions, one for Mr. Perkins- McIntosh and one for Mr. Basque.

[English]

Mr. Brian Perkins-McIntosh: Thank you, Angela, for the opportunity.

There are a number of provisions in the alternative federal budgets each and every year and I just want to highlight a few. First of all, the Liberal government was originally elected in 1993 on the promise of concentration on job creation and we've seen that just hasn't happened. It was a very short time before the Minister of Finance began to wield more power than the Prime Minister in terms of fiscal policy in the country.

• 0945

We would like to see the establishment of an emergency job creation program to invest in communities. We would like to see the redistribution of work time so the unemployed can share in the work that is available. We would like to strengthen public sector employment once again through the restoration of some degree of equity in terms of transfer payments.

We would like to support community development by setting up a national investment bank that would enable investment in people at local community levels. We would like to see the maintenance of low interest rates, as I highlighted primarily in my report, so job growth can be stimulated and welfare for the rich by just leaving their money in the banks can be lessened.

We would also like to see a series of social investment funds, including, as Linda and I am sure others will highlight, a restoration of adequate health care funding for the provinces; adequate post-secondary education funding; a restoration of some national standards and delivery of transfer payments so income support can be strengthened, as you indicated in your remarks; a child care fund; a retirement income fund; the reorganization of unemployment insurance, calling it once again what it should be called—Jean-Claude I am sure will address that—as well as a housing fund.

There are a couple of smaller items in the budget. We believe there should be more support for our first nations people, more support for the fisheries in this region, and more support for foreign affairs. The percentage of moneys we give to other countries to help with their social development is so low and we are so far away from the commitments we made a number of years ago to approach 0.7% of our GDP in foreign donations. So we would like to see those, among a number of other things, put in the budget.

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

[Translation]

Mr. Basque, a few words.

Mr. Jean-Claude Basque: It is quite clear that the latest cuts have caused many changes. One of them, which we have to correct, is that now people can only receive 55 per cent of their salary if they lose their job. And that can even go down to 50 per cent. I think we definitely have to change that and to come back to a minimum of 60 per cent of salary. For a person earning the minimum rate of pay in New Brunswick—and there are many of them—that would be a gross income of only $200 per week, which would mean only $100 a week as unemployment benefits. One should not forget that unemployment benefits were created precisely to help people between jobs.

The other major change relates to the qualifying period. The number of hours—since it is now based on hours of work—should be reduced, and the period during which people could get benefits should be increased. It is quite clear that jobs are not there. It would be different if there were jobs for everybody but that is not the case, here in New Brunswick or in the Maritimes. It is not the case either in the rest of Canada, except perhaps in some provinces or in some areas of some provinces.

I believe that those three changes must absolutely be made.

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

Mr. Jones, for five minutes.

[English]

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

It was interesting to listen to all the presentations. I think Chris said we need to change the culture in the federal government. I think we need to change the culture in this country and the culture of handouts to the culture of hope and opportunity. If you strive for what you want to reach, we have to make sure we are providing that opportunity.

• 0950

In the federal government I wouldn't spend 25% on changing the culture; I would just put in good leadership, especially on the bureaucratic side. When the company I work for brought in a person who changed our culture, we didn't need to spend a lot of money, and so I think we just have to change the culture.

The other thing is, Mr. Basque, I agree with your comments about where we have all the same group here. I think it's important that we have different perspectives sitting at this table all day, so that we hear what people are perceiving they need from the social programs, but also so the social people understand the problems that the business community are having, and I think then we'll have a lot better interchange of values and ideas.

You did say something I don't agree with about free trade, that it didn't create any jobs.

Free trade has been the bonanza for Canada in the last four years. It has created a $17-billion tax benefit in increasing the coffers of the government. But what free trade initially demonstrated to Canada—because we were always telling how great we were, how competitive we were—was that we weren't as competitive as we thought. I think now, after the first few years of struggling with free trade, we're finding out that if we get more nimble, more efficient, more effective, we can compete with that big giant to the south of us in the U.S.

But the U.S. is not going to sit still and let us continue to have the surpluses. I think last year or the year before we had a $40 billion trade surplus with them. Now we're trending down towards $15 billion this year and I wouldn't be surprised, if we don't become more efficient, more effective, if they're going to enjoy the surpluses with us.

So I think free trade is where a lot of the new jobs are going to be created, but when we were out in Alberta somebody mentioned something that I always thought I agreed with. He said we have to stop shipping raw materials out of this province; we have to start shipping more finished goods. I agree that we have to start doing that for the whole country.

The information age is not going to create all the jobs we need, but we're going to need the skills in the sciences and the math and all that. But also, if you become good in industrializing, you'll need the math and the sciences for the engineering and the research and all that type of stuff. So I think we have to take more control of our destiny and I think we need a vision for this country of what we want to do.

I know the vast majority of Canadians want to work. I think for hours, okay, this area of the country is beautiful; I know they don't want handouts, unemployment, or socialism. We just have to figure out how we can put decent jobs down here and give the people hope and opportunity.

Free trade is our bonanza, but we have to either compete in that world or close our doors. Free trade has created a lot of jobs. I'd like you to comment on that.

Then the last question is what I think we were all asked to comment on: the fiscal dividend.

To me, the fiscal dividend is not when we generate a surplus. The fiscal dividend will be when we start paying down the debt. Right now our servicing cost on the debt is $46 billion, $44 billion, $48 billion—I don't know what the exact figure is—just to service the debt. That is clearly the largest department in the federal government. But when we do pay down the debt, say it goes from $48 billion down to $44 billion, then that which we don't have to pay in interest is the fiscal dividend. That's what we could either reinvest with tax deductions or by improving programs.

Now, I do agree that even before we start realizing a fiscal dividend we should be fixing up health and education, which are two important things that have to be fixed up.

I would like to have your comment on what I've said, and anybody's comment on what their interpretation is of the fiscal dividend.

The Vice-Chair (Ms. Paddy Torsney): That was a six-minute intervention, Mr. Jones. You have left your speakers about 30 seconds each.

[Translation]

Mr. Basque.

Mr. Jean-Claude Basque: I agree that we have to change the culture, but we must also take account of reality.

• 0955

In New Brunswick, we have had a premier who tried to change the culture for ten years. Yes, we were a small province but we had to be proud. We had to fight. I have no problem with that.

My problem is with the method and the results. The method used was to go and sell the province elsewhere in saying that we had the lowest minimum pay of the country, the lowest social programs, the lowest rates of pay, etc. That is not what I mean by changing the culture.

Let's consider the result of all that. Andersen Consulting, which went to the U.S., lost millions of dollars. Wackenhut wanted to privatize one of our jails, which costs us money. Blue Cross wanted to give the administration of all its hospital bills somewhere else, which costs us millions of dollars and did not work. The latest case is IBM. And we should not be surprised that it left.

Yes, we have to change the culture, but how? There is nothing wrong in trying to instill pride in people or in a province, but in what manner?

About free trade, we have obviously always traded with the U.S. as well as with other countries. The problem is when the majority of our trade is limited to one country, the U.S. That would be a problem for any country. I think we should open our trade to other markets, in Europe and elsewhere.

It is not necessarily because of free trade that our economy... One should try and measure the degree of success of free trade and, especially, consider the role of our low dollar in the expansion of our trade. With a low dollar, it is easy to sell.

But there are other effects to consider also. Here, in New Brunswick, we see that with our lumber. The American market for our lumber is very strong but we are in the process of overcutting our forests. So, we may be destroying our future, not twenty years from now but ten years from now.

Even the Minister, Mr. Graham, has had to recognize that fact and he is trying to find all sorts of solutions. There is a price to pay in not planning our trade. That is free trade, it is freeing everything.

Even though I do not approve of protectionism, I believe that we have to take a long hard look at the consequences of free trade. When our dollar is low...

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

[English]

Mr. Chris Grady: Just a comment on the idea of changing the culture. People who have talked to me have mentioned the importance...and I actually stuck in a figure of 25% changing within the departments.

People have the impression that government departments spend too much of their tax dollars. When I look at these two documents you have presented us with.... The worst example is the constitutional conferences, where I had about 30 pounds of this stuff, which could have been printed on about 5 pounds. This one at least is printed on paper that's not too bad; it's not too expensive. The other one is more expensive. But all of them will probably be read for 20 minutes, half an hour. Thousands have been printed and they will be thrown out.

They look pretty in Ottawa. They look pretty where you have to dress to the culture of Ottawa. But to the people out in the regions that's excessive. It's just an example of what I experience as a federal government employee.

I know the federal government department I work for could do more for the people of Canada. It could provide leadership in that respect and provide pride for the people who are government employees, as well as Canadians themselves. But they can't do that without leadership and management, which is a change in mindset.

That is what I was referring to. I think you were also referring to a change of mindset in the population at large.

Mr. Jim Jones: I thought you meant spending more money.

Mr. Chris Grady: No.

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

Ms. Linda Silas: I will concur with Mr. Jones.

I'm quite pleased that you agree that before the dividends are spent we have to look at health care and education, which were cut first. Especially when we talk about Canadian culture, there's nothing more important for Canadians than our medicare system. It has been in every poll, every research study. Canadians are voicing to our government, either the opposition or the government itself, that they have to take care of health care.

So I concur.

• 1000

The Vice-Chair (Ms. Paddy Torsney): Mr. Iftody, s'il vous plaît, pour cinq minutes.

Mr. David Iftody (Provencher, Lib.): Did you say 40 minutes?

The Vice-Chair (Ms. Paddy Torsney): Right!

Mr. David Iftody: Well, I won't do a six-minute preamble like my colleague here from the Conservative Party.

The Vice-Chair (Ms. Paddy Torsney): He's still learning. He's new to our group.

Mr. David Iftody: Yes, he's still learning.

I was hoping to address my questions to Reverend Perkins-McIntosh, but I guess he's left. I wanted to address some of my comments to his remarks for a couple of reasons. I was struck by the emotional intensity of his presentation.

I am a little bit familiar with the architects of the alternative budget. I believe it was John Loxley from the University of Manitoba, whom I know, who was also, of course, an adviser to the Schreyer and Pawley governments.

I've seen some of their work. In fact, as a Manitoban I'm still living some of their work, which hasn't been absolutely successful.

I noticed one of the quotes. I say this respectfully, but I have to challenge some of these things. One of the quotations in Brian's presentation is called “Over the Rainbow: the Balanced Budget”. If I can say this respectfully, I was struck by the naivety in terms of the expected outcomes of this kind of budget, because I really don't see that happening. Certainly in some of the experimentation in Manitoba between 1970 and 1985, we didn't see that at all.

I want to address two points that were made in these presentations.

First, I think the assumptions in the alternative budget are exceedingly dramatic. What I find quite odd, actually, is the notion that rather than spending cuts or any kinds of changes at all.... I agree that they have been very painful and very difficult, particularly as a rural member of Parliament, as my colleague is. She knows and I know that in the rural areas in particular it's been really tough, particularly where I live and have lived for the past 40 years, in the natural resource industry.

There was a notion that we should deal with the budget in terms of interest rates. But unless we reduce the debt, we're not going to get our interest rates down. The two are absolutely linked together. That's the first thing that I'd like to open up for discussion for the group.

The second is in terms of the personal income taxes. Canadians earning $50,000 or more represent 10% of the total aggregate number of taxpayers in the country but are paying 50% of the personal tax take of the federal government. A member of Parliament makes $64,500 a year. Maybe we should tax members of Parliament more. Everyone's going to say “Hear, hear” after that one.

Those are some of the realistic things that we're dealing with.

Some of the committee members are asking if we want that group that's paying 50% of that now to pay more. If so, how much more and where do we go?

So I have two questions. The interest rate: unless we reduce the debt, we won't keep interest rates down. That's the number one problem I'd really appreciate some feedback on. The second is if we're going to tax more folks who have between $50,000 and, say, $75,000 or $100,000 a year in salary, how much more? I'll open that up.

The Vice-Chair (Ms. Paddy Torsney): Thank you. I'll take a speakers list.

Mr. Murphy, s'il vous plaît.

Mr. John Murphy: Certainly low interest rates are important. The labour movement has been flagging that. I stand to be corrected, but when you relate it to the deficit and the debt at this point in time, we're at historically low interest rates, yet we have an historically high accumulated debt as a country. But the reality is it's the money players of the world, to a large degree, who at the end of the day are influencing where interest rates go in not only this country but other countries.

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What we've tried to say is that the government at the very least has to signal to the Bank of Canada that we don't want these knee-jerk reactions in how they are going to direct interest rates when all of a sudden a fragile, weak economy is starting to recover. Some people are starting to get jobs and some of the jobs are starting to be viewed or played out as actually full-time employment. We've acknowledged in the trade union movement that there has been that bit of a development within the last few months. But all of a sudden you see the people from the Bank of Canada saying, well, now we have to move interest rates up. They always have a variety of reasons, inflation, international pressures, the situation in Quebec, or whatever. It's like the weather changing. I think that becomes a bit much for the average Canadian.

What we're saying is we're in a position where this government can influence the Bank of Canada to manage its affairs in such a way that interest rates are kept low. We don't think it's going to impact on the ability of this government to carry on its affairs. As a matter of fact, as I understand it, it has reached a point where its requirement to borrow out of the country is basically gone. So we are in a position to manage interest rates in the interests of Canadians, Canadians being the ordinary workers and the unemployed who are looking for the jobs, as well as business, particularly small businesses who are looking for loans at reasonable opportunities.

Unless we continue to follow that type of policy, we're going to pay the price in another depression or recession; call it what you want. I think you have to look at interest rates in that context. Certainly that's what we're doing.

About revenues, the message I've tried to leave here is that it's the jobs that are going to give us the revenue, the people working, and people aren't going to be working unless we keep interest rates down and we create that demand out there and people buy. When industry employs, people are gainfully employed and people are able to spend.

If we don't look at it that way and create the opportunity...and we're not saying government has to create all the jobs, but certainly we're at a point in time when the government has to allow for some type of stimulus. It doesn't take us to say it. A lot of noted, reputable economists are saying it. The massive lay-offs in the public sector, which are well-paying jobs, providing necessary public services, have disappeared by the thousands. You people know that as well as we do. If we don't start to address that issue, then we're going to have unemployment or under-employment. Add up the income the government is getting from that. At the same time, either you're going to pay for it through a proper social security network or you're going to take the road of increasing charitable tax breaks so the corporate community or business community or individuals who are well-to-do can profess to be doing the right thing, the old poorhouse type approach: “We'll make contributions. We'll take care of the needy”.

There are tax implications for that type of program too. We talked about it earlier: giving a tax break to those who make a hefty charitable contribution. We're saying let's have a fair taxation system, let's focus on creating the meaningful job opportunities. You don't do that by continuing to massacre the public service in terms of jobs. The figures are there. It's thousands and thousands, and there's no end to it yet.

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

[Translation]

Mr. Jean-Claude Basque: It is interesting to see the alternative budget being qualified as naive and to see someone trying to discredit the process.

I think the alternative budget should first of all be seen as the result of consultations all over the country. It has not been drafted by one single person.

Furthermore, the last alternative budget was supported by at least 150 economists and by many other people. So, it is not a naive document or something taken out of thin air.

Finally, the alternative budget has the same objective as the federal government's as far as the deficit is concerned.

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The only difference, and it is major, is that we would like to change the attitude and the culture of the people who drafted the budget, Minister Paul Martin among them. We are aiming at the same things but through other means. Instead of cutting, we recommend other steps that lead to the same results. I think that is a very important consultation.

As far as taxation is concerned, you asked if we should increase the taxes of people having $55,000 of income. Obviously, there is no unanimous agreement about that.

However, that is perhaps not what should be changed. Let us look at the percentage of federal revenue coming from individuals and from corporations. In 1994, about 35 per cent came from individuals and 23 per cent from corporations.

In 1994—and I am sure it is worse in 1997—58 per cent of federal revenue comes from individuals and about 10 per cent from corporations.

That is obviously a problem. So let us not confuse the issues. It may be interesting to have a debate on whether we should collect more taxes from people earning at least $55,000 but that is not the real issue. The real issue is the imbalance that I have just mentioned.

The Vice-Chair (Ms. Paddy Torsney): Where can we find those figures, Mr. Basque?

Mr. Jean-Claude Basque: In a document from Statistics Canada.

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

A final word from Mr. Grady.

[English]

Mr. Chris Grady: When we were asked to produce material for this session you asked us to produce 30 copies of our point-by-point, and some of us did that. At least that's the communication I had. It might have been more useful to produce 30 copies of our longer presentation plus the point-by-point on the cover. You might consider that when you meet other people. A lot of the items that have been addressed here are in my longer presentation, but unfortunately I didn't have enough copies for everybody else as well.

The Vice-Chair (Ms. Paddy Torsney): Thank you. I think it has been photocopied here today and I'm glad we assumed the cost.

Mr. Chris Grady: For the members—

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

Mr. Chris Grady: —but not for the participants.

The Vice-Chair (Ms. Paddy Torsney): Thank you. This meeting is being recorded and it is being posted on the Internet for those who are hooked up, so that helps some additional people get the information. And if someone needs the information they certainly could use the office of a member of Parliament in order to download it. But you're right, we probably should make more copies available. I'm always conscious of what cost that involves, especially if it's a long presentation.

Mr. Dunn.

Mr. Frank Dunn: Will it all be on the Internet?

The Vice-Chair (Ms. Paddy Torsney): Yes, all the proceedings and the documents that are given to us should be there. As well, they should be appended to the report that we make to the minister and presenters should automatically get a copy of that. If for some reason you don't, please contact your own member of Parliament and they should be able to get copies of the report for you. I know that I mail out lots of copies to people.

Just before the one-minute wrap-ups, I have a specific question for you, Madame Silas. In your chart, on the one that says what federal spending cuts mean, I just want to clarify something. You say that 80% of single seniors poor enough to claim the guaranteed income supplement are women. Is that unique to New Brunswick or is that—

Ms. Linda Silas: Statistics Canada.

The Vice-Chair (Ms. Paddy Torsney): Just for your own information, in some ways I'm not surprised by that. The guaranteed income supplement was actually set up to address the problem of single senior women who were in fact poor. Because they didn't have public pensions, CPP or work pensions and they weren't paid outside of their homes, and probably weren't paid inside of their homes either, they didn't have an income. That's why that program was set up. Of course the seniors' benefit is also intended to change the situation to help them out.

But if you have comments on the CPP and on the seniors' benefit, the CPP hearings will start on October 28. You can get information to this committee. And remember that postage is free when writing to your member of Parliament or when sending something care of us to the finance committee No postage is necessary, so I encourage people in the Madawaska or any other part of the country to make sure they send their information to us in whatever form they can get it in. We're always happy to receive ideas and submissions. Yesterday one gentlemen just had one specific sentence to give to us. So we're happy to do that wherever possible, whether it's written, by telephone, or whatever.

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We'll now go to the one-minute statements. I'll start with you again, Mr. Grady. Use it as you wish, to either add an additional point or to make the same point again. And you don't have to use the whole thing.

Mr. Chris Grady: I think I'll repeat the closing of my presentation.

Budgeting must be viewed in concert with simplification of the tax code. We need to change our psyche from one of looking for tax loopholes to one of investment. We can and should change from being debtors to investors. I think we should stay the course and eliminate the debt, reduce or simplify taxes, and invest in our future. We can't put the whole thing in a capsule and say there's the solution. It's going to be a progressive thing, and that's going to mean change along the way. I think the government of the day should be accepting of that out front.

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

Madame Silas.

Ms. Linda Silas: The comments concluding my report are those that I'll reiterate.

In the Speech from the Throne, His Excellency Roméo Leblanc said that we must equip our children with the capacity they need in order to be ready to learn and to participate fully in our society. What we've seen in the last few years is the huff and hoopla with computers. We've seen it in this province more than any other. For what used to be a has-been province, we now have enough computers to go around. We have to translate these words into adequate food, shelter and help for our children, and not into a quick fix like we're seeing right now, into what looks better.

Monsieur Basque mentioned Fredericton. It is not the poorest city, but we still have over 200 teenagers living in the streets in this beautiful city. It is a question to be answered in terms of what is happening with our high-tech communities and high-tech thinking.

Thank you.

The Vice-Chair (Ms. Paddy Torsney): Merci beaucoup.

Mr. Murphy.

Mr. John Murphy: Thank you. I think a member of the committee, Mr. Jones, mentioned that people weren't necessarily looking for socialism, but with all respect to you and other members of the committee, I'd suggest that people are looking for social equity. I certainly hope the committee will address that particular issue and come to the realization that there must be an immediate addressing of the issue of the social deficit in this country. Others alluded to health, education and social services. As I said earlier, we've gone much too far. We had better address it before it's too late.

In terms of signalling fairness in our tax system, I realize there won't be tax reform overnight. But certainly a new government entering the first year of its mandate has to include in its first budget this time around, as an indicator in real terms, a minimum corporate tax, a wealth tax. The records shows that these exist in other nations—our major trading partner, the U.S., and other countries who form part of the OECD or the G-7—and there is absolutely no reason why it cannot be introduced into our fiscal and tax regime.

Last but not least, it hasn't been talked about here, but I alluded to the first priority being jobs. There's absolutely no reason why the budget speech cannot, at the very least, signal that this government is prepared to introduce and identify for the Canadian electorate job creation targets, targets for reducing unemployment, and the setting of timetables. It's been done on the deficit, you're about to do it on the debt, and it has been done on an international basis in terms of the environment and greenhouse gases. It's scandalous that it has not yet been done in terms of jobs. They are the real issue, because this problem will never go away without them.

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

Mr. Maher.

Mr. John Maher: The sad fact of life in a consumer society is that in order for us to feel we're receiving a deal, we need at least a 10% discount. I don't think we can afford that big a tax decrease and still stay on target for debt reduction. Maybe the best we can be promised is no increases of any kind in direct or indirect taxation. The best guarantee of a healthy country is a health economy.

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Small and medium-sized businesses continue to be the largest provider and creator of jobs we have. Policies that allow them to make a fair return on investment are the best long-term guarantee we have of a productive, caring society, the Canada we hold dear. A very large portion of their expenditures are made at the local, provincial and national levels, and their profits enrich the community where they're located.

I would far sooner be forced to make sacrifices or be inconvenienced now, during my most potentially productive years, than to have my children still dependent on me and probably camped out on my doorstep with their own dependants during my hoped-for golden years because they're unable to thrive under the debt load that some of us would have them leave as a legacy.

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

[Translation]

Mr. Snow, please.

Mr. Claude Snow: I would like to come back to the effect of the federal cuts which have hurt the provinces deeply and then the municipalities.

I would also remind the federal government that it should not operate as a corporation. Its role is to protect the whole of the population, the welfare of the citizens, the life of the poorest of the poor, and that is one thing that is nearly forgotten today. Very few people talk about that anymore. Our government should make sure that the citizens do not feel insecure, which is a growing problem today, and that they can live with dignity.

Many of those problems started under Mr. Mulroney but there are still with us under the Liberals because the old programs that were aimed at protecting the dignity of our citizens are crumbling.

I think this is a disaster and that it should be a major consideration in the drafting of the next budget.

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

[English]

Mr. Dunn.

Mr. Frank Dunn: The reduction in transfer payments has had a negative impact on our two pillars of society, which are education and health. The dividend surplus really should be used to bring back our moral high standards for both these areas.

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

[Translation]

Mr. Basque and then Mr. Légère, if he wants to add something.

Mr. Jean-Claude Basque: I believe that the Maritimes have clearly rejected the vision and the direction of the previous budgets coming from Prime Ministers Mulroney and Chrétien. At the time of the Mulroney government, we had finally elected, if I am not mistaken, mostly Liberals. During the last elections, the Maritimes elected several NDP candidates.

Therefore, it is quite clear that the direction and the vision of Minister Martin and of his government, to which you also belong, have been rejected. We want the situation to change because we do not agree with you anymore.

One keeps hearing about investing in the future, about cutting the debt, etc., but the future is built on the present and we are at the present time building a society of the poor, a society without any social safety net, a society with a very poor future.

Yes, we can invest for the future but we should not forget the present.

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

Mr. Légère, you have nothing to add? Mr. Basque kept taking the floor.

Thank you very much.

[English]

Thank you very much to everyone who has made their day available to us and for the benefit of their ideas and their commitments. We really appreciated hearing from you.

In spite of everything, we've had some good mix of ideas, Mr. Basque, and we hope to as well this afternoon.

Again, if you have additional comments, ideas, numbers or anything, please make sure you get them through to the clerk, Christine Fisher, and she'll make sure we get a copy of everything.

Thank you very much. This meeting is adjourned until 1 o'clock.