FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Monday, May 4, 1998

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[English]

The Chairman (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call the meeting to order and welcome everyone here this morning. This is meeting 77 for the Standing Committee on Finance.

As you all know, the orders of the day are to examine Bill C-36, an act to implement certain provisions of the budget tabled in Parliament on February 24, 1998. We will be dealing, essentially in this morning's session, with parts I and and 12.

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We have the pleasure of having for this first round table representatives from the Canadian Association of University Teachers, the Canadian Association of Student Financial Aid Administrators, and the Council of Ontario Universities.

Representing the Canadian Association of University Teachers are Dr. Claude Dionne and Mr. Robert Léger. From the Canadian Association of Student Financial Aid Administrators we have Ms. Charlotte French and Mr. Peter Dueck. Mr. David Lyon is from the Council of Ontario Universities.

Welcome. You're all very experienced on parliamentary procedures, so I won't waste your time telling you exactly how this works. I will tell you have ten minutes to make your presentation and thereafter we will engage in a question-and-answer session.

We will begin with representatives from the Canadian Association of University Teachers, Dr. Claude Dionne and Mr. Robert Léger.

[Translation]

Mr. Claude Dionne (Acting Executive Director, Canadian Association of University Teachers): Thank you very much. For my presentation, I'll read the summary of our brief and then I'll talk about the 14 recommendations. Before beginning, I'd like to thank the committee once again for giving us the opportunity to voice our concerns to the Canadian Opportunities Strategy.

In his latest budget, Mr. Martin, on behalf of the Canadian government, presented the Canadian Opportunities Strategy to enable all Canadians to have more equal opportunities to participate in tomorrow's economy, which will rely on knowledge.

The creation of the Canadian Millennium Scholarship Foundation was in a way the central feature of this new strategy. This initiative is based on the principle of equal opportunity and is aimed at helping students in need to cope with the increased cost of their post-secondary education and at reducing the financial burden of these students.

Furthermore, in all the documentation prepared for this budget, we were assured that this foundation would not add to the structures already present in all of the provinces to examine applications for financial assistance from students. Finally, we were assured that the Foundation would be a private, independent agency, managed by a board of directors made up of private individuals who would decide on the structure to adopt for the scholarship program. We have examined several provisions of Bill C-36, and I'm afraid we have found that the bill under study does not necessarily meet all the objectives sought.

The notion of financial need is linked to the condition of merit. The Canadian Association of University Teachers has always defended the position that post-secondary education should be accessible to all talented students who are interested in pursuing their studies full-time or part-time. Linking the granting of scholarships to a condition based on merit will not help all the less well-off students, particularly since this notion of merit opens the door to endless discussions about the definition of "merit."

In addition, it seems difficult for us to believe that the annual granting of 100,000 scholarships on the basis of need of financial assistance and proof of merit is not going to require a very ponderous structure. It seems to us that these scholarships cannot be distributed without adding to what already takes place at the provincial and federal levels.

CAUT is in favour of the government's initiative to introduce an education savings grant. This will encourage citizens to save for their children's education and, in the long run, reduce student indebtedness. We propose, however, an improvement on this idea for the poorest citizens.

As for the amendments proposed to the Bankruptcy and Insolvency Act, CAUT feels they are premature since we don't yet know the results of the action taken to reduce student indebtedness. Also, the gap between the way graduates who go bankrupt are treated and the way other people who file for bankruptcy are treated is widened. The Act is becoming even more discriminatory towards these graduates.

Pages 16 and 17 of our brief list the recommendations we wish to review with the members of the committee.

[English]

Mr. Robert Léger (Relations with Governments Officer, Canadian Association of University Teachers): The Canadian Association of University Teachers recommends that the definition already used by such bodies as Statistics Canada and HRDC be recognized.

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CAUT recommends that merit be further defined so as to be understood as the capacity for every student with the necessary talent to meet the academic entrance requirements and to pursue a post-graduate course or program of her or his choice.

[Translation]

CAUT recommends that examination of files and the distribution of Millennium Scholarships begin during 1999.

The Canadian Association of University Teachers recommends that the organizational structure of the Millennium Scholarship Foundation be revised so as to ensure greater participation by private individuals who are familiar with the post-secondary environment, the needs of students and those of Canadian society.

CAUT recommends that scholarships be granted to students who attend public institutions and private institutions recognized by the provinces.

CAUT recommends that the membership of the board and the number of members be revised so as to allow greater cooperation among the members of the Foundation board. We also recommend that members' duties and responsibilities be defined.

[English]

The Canadian Association of University Teachers recommends that the foundation's fund not be used for large fund-raising campaigns aimed at convincing Canadians and business to make gifts to the foundation.

[Translation]

CAUT recommends that 5 per cent of the Foundation funds not be reserved for gifted students.

CAUT recommends that the Finance Committee make every effort to encourage the federal and Quebec governments to agree on this issue so that the universities and students in this province are not penalized.

CAUT recommends that the amount of the scholarships be determined according to the annual amount available for distribution on scholarships and the number of applicants, without limiting the amount a student could receive to $15,000.

CAUT recommends that the report by the Foundation (in section 37) be submitted to Parliament the third year after coming into effect.

CAUT recommends going ahead with the introduction of Canadian Education Savings Grants.

CAUT recommends that the federal government contribution to the Canadian Education Savings Grants be increased to 100 per cent for those who are under the poverty line and that the grants be adjusted, by 100 to 20 per cent, for those who are over the poverty line, so as to encourage Canadians with low and middle incomes to invest in the future of their children.

CAUT recommends that the Bankruptcy and Solvency Act not be amended.

Mr. Chairman, we are very happy to be here. When it's time, we'll be please to answer your questions.

[English]

The Chairman: Thank you very much.

We'll now move to the representatives from the Canadian Association of Student Financial Aid Administrators.

Ms. Charlotte French, welcome.

Ms. Charlotte French (President, Canadian Association of Student Financial Aid Administrators): Thank you.

The Canadian Association of Student Financial Aid Administrators, or CASFAA, is composed of financial aid and awards officers from post-secondary institutions throughout Canada. Our members are responsible for the direct delivery of financial assistance to students. Financial aid personnel design, promote, adjudicate, and disburse awards to students in the forms of loans, grants, scholarships, and bursaries. We are pleased to have this opportunity to comment briefly on the Canada Millennium Scholarship Foundation.

CASFAA has, for many years, worked to advance concerns regarding student financial need and student debt. We have appeared before this committee, along with our partner organizations in the national round table on student assistance, to discuss the issue of rising student debt and to propose solutions to the problem.

The Canadian Association of Student Financial Aid Administrators was pleased with the measures to support students included in the federal budget of February 1998. Groundwork was laid in many of the areas that we, along with our partners, had proposed, including measures to encourage savings, reduce and manage debt, and provide upfront grants.

The fundamental principle of government student assistance programs has been to facilitate access to and encourage participation in post-secondary education by eliminating financial barriers. It is important that the federal government play a significant role in making post-secondary education accessible to all Canadians regardless of financial means.

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All qualified students from all provinces and territories should be able to pursue a post-secondary education. In many provinces grant programs have been abolished. At the federal level we have seen an increase in the student loan limits. A number of regions have had tremendous increases in the cost of living and in tuition fees. All of these issues have been well publicized in the media. These factors have worked together to make post-secondary education seem out of reach to many Canadians.

Grant programs, particularly those available to students at the beginning of their studies, help to reduce the fear and make the dream of attending university, college, or technical school achievable.

CASFAA has endorsed for some time the need for grants to students in financial need, particularly in the first years of study. For these reasons the Canadian Association of Student Financial Aid Administrators is pleased with the introduction of the Canada Millennium Scholarship Endowment Fund. The objects and purposes of the Canada Millennium Scholarship Foundation, according to part 1 of Bill C-36, are to grant scholarships to students who are in financial need and who demonstrate merit in order to improve access to post-secondary education.

If access to post-secondary education is the objective and purpose of the fund, financial need must be the primary criterion on which these scholarships are awarded. It is the financial ability to meet the costs of education, including relocation, that is the most common and significant barrier for prospective students. By making grants available to students from the time they begin their studies, the fear of accumulating large debt and the fear of not meeting financial commitments can be addressed.

Although there is a provision in the bill for scholarships rewarding meritorious performance, it is the experience of CASFAA members that adjudicating merit across types of education is extremely difficult, if not impossible. Comparing a student entering or continuing in a university economics degree program with a student in dance or visual arts at the same institution is challenging. Choosing who is more worthy of meritorious recognition when looking at a student in broadcast journalism and a student in chef training at a technical institution is difficult. How would the promising chef be compared with a perspective economist?

The process for admission to post-secondary programs, whether they are at a university, college, technical, or vocational school, is very competitive and complex. Students who are admitted are highly qualified to pursue studies or training in their field. CASFAA recommends that the element of merit be met by acceptance and continuance in a post-secondary education program and the focus of Canada millennium scholarship awards be to address financial need.

Coordinating Canada millennium scholarship adjudication with the existing provincial processes is an important delivery principle. Government programs to encourage participation and access to post-secondary education should provide a seamless system of financial assistance to students. The more complicated and disjointed the process, the more an individual can be deterred, not only from accessing available financial assistance but also from pursuing the education. Government financial assistance should ease the transition to post-secondary education, not increase the difficulty.

Canada millennium scholarships should complement existing federal and provincial student assistance, recognizing unique elements in different jurisdictions. The scholarship should be designed to supplement existing financial aid so that financial need not met by other sources and accumulated student debt are addressed. Where applicable, measures should be put in place to discourage changes to provincial programs that would allow millennium scholarships to displace existing provincial student assistance.

Students across Canada should have comparable access to post-secondary education regardless of their province or territory of residence. National programs to assist students in accessing post-secondary education should maintain a course set of common criteria for all students. The Canada Millennium Scholarship Foundation should maintain in all jurisdictions the principles of addressing student financial need, whether the student is studying in or out of their province or territory of residence.

The process of designing, promoting, adjudicating, and disbursing scholarships is complicated. The need to fit the Canada millennium scholarships into the existing process will require consultation with many stakeholders. This process should be completed as quickly as possible in order to deliver funds to students in need.

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Developing methods of delivery that meet the intent of the foundation and work within and across the existing financial assistance programs will require experience and expertise.

Provision has been made for representation on the foundation's board by students. Provision should also be made for at least one director and one member of the foundation to have direct experience in delivering need- and merit-based financial assistance to students.

In conclusion, CASFAA is pleased to see the introduction of a national grant program to assist students who wish to pursue a post-secondary education. The design for the delivery of the Canada millennium scholarships must include coordination with financial assistance programs, delivered by each of the provinces and territories, without losing sight of a common set of national criteria, including supporting student mobility and focusing on financial needs.

In order to successfully fulfil the stated objectives and purpose, the foundation should include in its directors and members individuals with direct experience in the delivery of student financial assistance, both need and merit based.

Thank you.

The Chairman: Thank you very much, Ms. French and Mr. Dueck.

Now we'll move to the representative from the Council of Ontario Universities, Mr. David Lyon.

Welcome.

Mr. David Lyon (Executive Director, Research Analysis and Policy, Council of Ontario Universities): Mr. Chairman, members of the committee, good morning.

President Bonnie Patterson sends her apologies for not being able to be here today, but wishes to convey her sincere appreciation for the committee's invitation to the council to appear before you to share our perspectives on the budget initiatives of the Government of Canada as they relate to student support and to our universities.

In Ontario we have seen public funding of universities decline over the past two decades. Today Ontario universities rank tenth out of ten in per capita provincial funding among the provinces. As a result of funding reductions, we have experienced in recent years a significant loss of personnel, both faculty and non-academic staff, and a diminished capacity to attract talented replacements.

Over the same period of time, we have also seen students gradually paying a larger share of the cost of their education and assuming greater debt burdens. The consequent threat to students' access to high-quality university education in Ontario is inevitable.

Ontario has one of the highest participation rates in university education in the country. We believe every qualified student deserves the opportunity to pursue higher education to reach his or her full potential, and we believe protection of access is vital to meet the needs of our students and the demands of knowledge-based industries that require highly skilled graduates. Access by Ontarians to post-secondary education is critical to the growth and sustainability of the Ontario and Canadian economies.

It would therefore come as no surprise that COU has worked closely in the past two years with the Association of Universities and Colleges of Canada to support its efforts to develop solutions to address a world of student assistance that no longer adequately meets the needs of students.

A successful student assistance program needs the scope to provide for the needs of students before, during, and after their studies. Moreover, a successful program must be capable of limiting debt loads to affordable and manageable levels and providing targeted interest relief measures that can help students to repay their debt and avoid default.

In January 1997, when AUCC released a package of proposed reforms entitled Renewing Student Assistance in Canada, developed in collaboration with its round table partners, COU readily endorsed the package.

The blend of proposed grants and tax measures—the notion of upfront and back-end grants, the proposal for instruments to help people save for education and to help people repay their education debt more easily—were entirely consistent with a framework of pre-study, in-study, and post-study financial assistance the COU had been advocating.

We congratulate the Government of Canada for listening, for taking action, and for responding to the needs of Canadians through the Canadian opportunities strategy, of which Bill C-36 contains some important elements.

As Professor J. Robert S. Prichard, president of the University of Toronto and chair of COU, said on budget day:

Today's budget announcement is a major boost for students of all ages, our universities and our country, and we applaud the Government of Canada for demonstrating its commitment to the future of higher education.

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As we examine the appropriateness and adequacy of Bill C-36 today, and more particularly the design of the millennium fund and its implementation, it is important to recall the underlying principles set out on budget day: the value of partnership; the role of government to help young Canadians prepare for the knowledge-based society of the next century; the avoidance of duplication; complementarity with the existing provincial programs; the importance of administrative flexibility; and the value of equal opportunity and equality of access.

We are therefore pleased to note that the legislation contains provisions that ensure the foundation grants scholarships to students who are in financial need and demonstrate merit; limits the extent to which scholarships can be granted on merit only; prescribes the composition of the board of directors to include student representation; requires the foundation to keep its administrative costs low; allows for student mobility and scholarship portability; and requires transparency and accountability in the way the foundation conducts its business.

That said, we cannot overemphasize the importance of getting the implementation design right from the very outset.

We would encourage the foundation to be as widely consultative with the higher education community as possible to ensure that the program achieves its purposes and objectives to the greatest extent possible.

We would encourage the foundation, whether through the composition of the board of directors or through the appointment of members of the foundation, to ensure that the voices of university students and of the university community are welcomed and heard.

We would encourage the foundation to ensure that wherever possible the elements of the program are harmonized with existing student assistance programs, both federal and provincial, to result in integrative and complementary benefits for students.

We would encourage that the foundation be given as much flexibility as possible to recognize and respond to provincial differences and needs and to ensure that the administration and delivery of the program are uncomplicated.

While we recognize the urgency of getting the scholarships program up and running as soon as possible, we urge the foundation through consultation to take the time and care to arrive at the best possible program.

Let me close by bringing to the attention of the committee two concerns from our reading of Bill C-36.

Our first concern is with the definition of a public post-secondary educational institution. The legislation appears to set out that the public nature of an institution is demonstrated by “a substantial part of its funding comes from a provincial government”.

The determination of eligibility rests significantly on the definition of “substantial”, as well as on what constitutes funding. I wish to point out to the committee that for the year 1996-97 the Ontario government provided 41.5% of the total $4.3 billion of revenue of Ontario universities. If, however, operating revenue alone is instead used as the measure of funding, the Ontario government provided 63.3% of the $2.7 billion of operating revenue of Ontario universities.

These percentage figures will vary from university to university, depending on revenue level from tuition fees and other sources. The Ontario government froze its operating grants to universities at the 1996-97 level for 1997-98 and again for 1998-99, while tuition fees increased. One would expect these percentage figures, low as they already are, to be lower still when the foundation sets criteria for eligibility.

We would urge the foundation to consult extensively and deliberate carefully on this matter to ensure inclusiveness, equal opportunity, and equality of access for all Ontario universities and their students.

Our second concern is that graduate students do not appear to be eligible to participate in the millennium scholarships. The government's decision to increase funding to the national granting councils will help our universities begin to recover lost ground on our research capacities. While we appreciate that for some graduate students the granting councils provide a source of financial support, we believe relying on the granting councils alone is not enough.

In Ontario over the past decade we have seen the gradual decline of part-time enrolment, both undergraduate and graduate. Although the reasons for this trend remain unclear, current financial assistance provisions are among the likely causes.

Graduate students are critically important to the advancement and discovery of knowledge on which so much of our future will depend. We urge the committee to promote the pursuit of knowledge at all levels of study and to reconsider the advisability of excluding graduate students from participating.

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Thank you.

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

We'll now enter the question-and-answer session. We'll begin with Mr. Ritz.

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

Thank you, folks, for your presentations this morning. They certainly are helpful.

The one theme that seems to run through all the presentations this morning is that you folks weren't consulted beforehand. We're playing catch-up here. We're reinventing the wheel.

You talked about programs that complement, not override or overlap. We had experts from the scholarship fund appear before us, and they're telling us that the problems with the fund we're addressing, as you folks are, will all be handled by the board that will be set up. They'll be given free rein to direct this thing and make it work the way it should.

I'm wondering if you would care to comment on what you believe the make-up of the board should be and how it should administer this program. Do you have ideas we could put into place?

There's no discussion of an appeal system. We are talking about public money. There are always going to be people disgruntled that they weren't covered under the act.

One person who came before the committee said we seem to be targeting either the best of the poorest or the poorest of the best, so should there be an appeal system?

I'll toss that out for your comments, please.

The Chairman: Who would like to start? Mr. Lyon.

Mr. David Lyon: I would make the observation that the approaches to the governance of this program are not unlike those taken for the Canada Foundation for Innovation, in which the purposes and objectives were laid out and then there was a process of consultation to get the design of the implementation right.

As members may be aware, there was quite a period of consultation. In Ontario we were quite pleased with the way in which it was done, and we look forward to a similar process for the millennium foundation.

[Translation]

Mr. Robert Léger: I'd like to refer again to the recommendation respecting the participation of private individuals who are familiar with the higher education environment, the needs of students and those of Canadian society. I think that these are the three major principles that should inform our choice of the individuals we are talking about.

[English]

I would like to add a few words about the accountability of the foundation. I think there's a concern that the foundation should be accountable to the Canadian public and perhaps to the Canadian government, because it's the Canadian government that is funding this foundation. I think we have that concern too.

[Translation]

Mr. Claude Dionne: To continue along the same lines, we are very concerned about the selection of the persons who are going to work within the Foundation. How many of you generally handle a portfolio worth $2.5 billion? The six persons who will head the Foundation and who will have a $2.5 billion budget to manage will probably be more interested in finances and may be a bit more distant from the post-secondary education environment. This is an extremely important concern for us to know how the criterion for granting scholarships will be defined. Will preference be given to students who are going to university to study engineering or administration, with direct connections to the working world or, on the contrary, as our colleague said earlier, to students registering for arts, humanities and history programs?

This is actually why, in our fourth recommendation, we reversed the terms. We talked about familiarity with the post- secondary environment, the needs of students and those of society, and not those of the labour market and of students. For us, it is important to ensure accessibility. Students should have access to post-secondary education, regardless of the program they choose, and obtain the money necessary to enable them to pursue their studies full-time or part-time. Thank you.

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[English]

The Chairman: Mrs. French.

Ms. Charlotte French: I think that in our presentation we've addressed the issue of the most meritorious of the needy, or the neediest of the most meritorious. That is to focus first on need, and address that financial need to improve access.

With that we've also discussed the fact that this program needs to be delivered in coordination with the existing financial needs-based programs, or the existing provincial and territorial adjudications of student loans and student grants. If it is done in coordination, there is an existing set of appeals or review processes as part of that.

Of course, we've also indicated that we on the board and amongst the members believe there should be people who have experience in the delivery of these kinds of programs to address exactly those kinds of issues.

[Translation]

The Chairman: Thank you.

Ms. Gagnon.

Ms. Christiane Gagnon (Québec, BQ): Good morning. I share many of your concerns regarding the creation of the Canadian Millennium Scholarship Foundation, about the fact that it will be based on merit, and the selection of the members of the board of directors. It all seems a bit nebulous to me. When the departmental officials appeared before us, they weren't able to tell us how much money would be allocated to administration. After one hour of questioning, we managed to get them to put forward an estimate of about 5 per cent.

I have misgivings about the use of public funds by a private company. Furthermore, the Auditor General of Canada himself expressed some reservations about this. He seemed to say that it was a roundabout way of not making the use of such funds public.

My final concern is about the lack of political consultation and consultation of those concerned. Even though at the first ministers' conference, the question of funding student aid was raised and the first ministers asked the Prime Minister to consult the provinces before introducing anything, that's not what he chose to do.

Quebec does not want to subsidize by some administrative measure the Millennium Scholarship Fund; it is demanding full compensation, that is, all the funds that would be allocated to these scholarships in the province. This foundation would go against all Quebec's claims regarding education. Spending $2.5 billion after slashing the Canada Social Transfer is a bit hard for Quebec to take when we know that our students are less indebted because the Quebec system finances their studies in part and tuition fees are fairly low. Also it jeopardizes institutions that have suffered major budget cuts.

As we were told, for students, it seems fairer to freeze tuition fees, which all students would benefit from. Under the provisions of the bill, this would be impossible: the Foundation wouldn't be able to delegate the necessary powers to the provinces. Would you like Quebec to be able to opt out, as the premier of Quebec is asking?

Mr. Robert Léger: Ms. Gagnon, CAUT has not taken a position on the constitutionality of the matter. What we are concerned about is the needs of universities and students in Quebec. I think that all parties should be concerned about the situation of Quebec's universities, which I would go so far as to say is deplorable right now.

I recently read an article in Le Devoir illustrating the library problems at the University of Quebec in Montreal. This problem has been caused in part by the ice storm, but mainly by the serious cuts made in the universities' budgets. This is why we recommend that this committee encourage both partners to open negotiations so that the Quebec government, on one hand, and the federal government on the other, can reach an agreement so that consideration can be given to the needs of universities and students in Quebec.

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The Chairman: Mr. Dionne.

Mr. Claude Dionne: Allow me, Ms. Gagnon, to refer to page 10 of our brief, where we talk about the Foundation's financial operations. It's hard for us to believe that awarding 100,000 scholarships to full-time and part-time students is not going to require the creation of a new structure.

When should a part-time student who wants to register for the fall term make his application for a scholarship? If a student decides to register for the winter session, when is she going to apply? If she registers for the spring term, when will she apply? Nothing is specified in this bill. It's pretty vague, especially regarding part-time students.

In the third paragraph on the same page, the question of operating costs is raised: will they be 3 per cent, 5 per cent or 7 per cent? Three per cent of $2.5 billion and 7 per cent of $2.5 billion will not provide you with the same structure. The operating costs are not the same. In our opinion, it's extremely important to know this, particularly since we wonder if this new foundation will have a special status. Will it be able to issue receipts for income tax purposes to those who make donations to it?

Once more, these are questions that remain unanswered in the bill. We therefore ask your committee to examine the proposed text and rethink it in a way. Thank you.

Ms. Christiane Gagnon: The university and college students associations that came to see us said that the scholarships being proposed for part-time students would in a way be contrary to what is happening in Quebec for the funding of loans and scholarships, where a regular student receives a loan and then may receive a scholarship. The bill proposes that a part-time student be able to get a scholarship without applying for a loan first. The students told us they didn't agree with this way of going about things. Do you see the same dilemma or the same disadvantage in this?

Mr. Robert Léger: I attended the presentation by the group in question. I think there is indeed a problem, but I don't think it's insoluble. It should be possible to reach an agreement between the two levels of government to solve this problem, which exists and which is a serious one, but which is not major, as far as I'm concerned.

Ms. Christiane Gagnon: When the bill has been passed, its provisions won't allow the Foundation to transfer some of its powers. Things have to be settled from a political point of view before it's passed and the amendments are made. Quebec would like to opt out and it would like to be granted full compensation. You know that these demands by Quebec go back to 1953 and that Quebec's premiers have been asking for compensation with regard to education ever since. This isn't the first time the federal government has tried to invade this area of provincial jurisdiction, that is, education. It seems to me that if you give your agreement and you ask for a few administrative amendments, what you hope for won't be possible once the bill has been passed since the Foundation won't have the power to delegate what you want to the provinces. It will only have the power to define criteria and select the list of students on which the Foundation may agree with the provinces. So, what you want won't be able to happen, at least not under the current bill. Thank you.

[English]

The Chairman: Is that a comment? Do we have anybody who wants to answer the question?

We will have to move to Mr. Earle.

Mr. Gordon Earle (Halifax West, NDP): Thank you very much, Mr. Chairman. First, I would like to commend all the presenters for very fine presentations touching upon many points that are of concern to all of us. There seem to be some common threads throughout the presentations concerning accessibility, portability, the administrative structure, student representation, and so forth.

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The briefs are quite self-explanatory, and I support most of the recommendations made in them. So it's kind of hard to ask a question. But I will ask for a little further explanation or clarification when we talk about the issue of student mobility in the portability of these things.

That's an important issue because, as we know, students don't stay put in one province as they work through their educational goals. With the idea of this fund being administered through one board, yet involving many provinces, it is important to cover that issue of mobility.

One of the briefs mentioned that we shouldn't lose sight of a common set of national criteria, including supporting student mobility.

So perhaps you could expand a bit upon how you would see that issue being dealt with. This is for anyone.

Ms. Charlotte French: In general, harmonizing the process with the provinces allows the student need to be addressed. It allows for a look at addressing this money to those students in the highest financial need, and addressing the unmet need and some of the debt issues. But we've indicated that both encouraging mobility and allowing students to pursue whichever area of study they wish....

A number of provinces restrict their funding to those staying within the province, or have restrictions on what can be allowed to move out of province. It's important that this not be part of this program. Any funding that comes from the Canada millennium scholarships should be able to support students in need in moving wherever they need to pursue their education.

Sometimes the institution most readily accessible to the student is not necessarily in their immediate province of residence. Sometimes the program in which they want to pursue their studies is not in their province of residence. Sometimes for various other reasons it may be less expensive for them to go to a province other than the one that is considered to be their province of residence to pursue their studies.

So for various reasons, these funds should target unmet needs, but should not be restricted to the province of residence as it is defined at present.

Mr. Gordon Earle: The other question I had was about the assessing of need. Most people will agree that the need element is more important than the merit element. During your presentation you mentioned that the needs assessment should be coordinated with what provinces already use, and with what is currently used, perhaps in the student loan system. But I was wondering if you feel that those criteria are sufficient at the moment. Sometimes there are students who get caught up in the question of whether in fact they are dependent upon their parents, whether certain gifts or items are relevant to their needs assessment.

So I'm just wondering if you feel that the current systems in place to assess need would be sufficient to handle this new program, or whether there should be further detail about the kinds of assessments that are made for the need element.

Ms. Charlotte French: No matter how you adjudicate need, there's always a question as to whether you are seeing the real picture. Certainly when we talk about student debt numbers, for example, we're talking strictly about the debt we see from Canada student loans, from provincial student loans. We don't talk about the debt that students have accumulated from other sources.

There are all sorts of pieces to the need assessment. One can can always ask questions about them, always review, and always improve. To my understanding, that process is under way at present as well.

But at the present time it's the best tool we have. There is a great deal of input from the stakeholders in how that is put together. It's making sure this process continues to be a good tool, and an improving tool. It is also making sure we are using that as best we can to deliver the funding efficiently, and in a cost-effective way to be able to put the money to work supporting students rather than toward administration.

The Chairman: Monsieur Léger.

Mr. Robert Léger: I understand your concern. It's possible that, as it is being done today, the assessment of need could be improved. But I would say that we should not try to create another needs assessment structure. The present system is perhaps not perfect, but it's working rather well. We should not create another structure, but try to improve this system. As my colleague said, there are consultations with the stakeholders, and perhaps together we can improve the assessment of need, but not by creating a new way or a new structure.

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The Chairman: Mr. Dueck.

Mr. Peter Dueck (Manitoba/Saskatchewan Representative, Canadian Association of Student Financial Aid Administrators): I'd just like to repeat some of the things that have been said here. If improvements are to be made to the assessment procedure, they should be made to the current one. Incremental changes can be made to that program.

In addition to that, I'd like to just add that committee members should be aware that even with the current assessment process, there is a growing amount of unmet need out there. So we shouldn't be expanding the assessment package before addressing the unmet need area. The millennium scholarship fund could help us do part of that.

The Chairman: Monsieur Dionne.

[Translation]

Mr. Claude Dionne: Section 32(b) actually deals with cases where the scholarship applies to students registered outside Canada. The mention of a limited duration in the paragraph seems rather restrictive to us.

Think, for example, of certain programs, such as engineering at Queen's University, those at the universities in Ottawa, and Moncton, Acadia. Exchanges with another country may last for as long as 12 months. If they want to talk about limited duration, it would be good, at the very least, to specify "depending on the type of program or the university attended." This way we could be sure that students won't be penalized if they register in such a program and spend 12 months studying in another country, because their money will still be paid to them.

[English]

The Chairman: Thank you.

Mr. Brison.

Mr. Scott Brison (Kings—Hants, PC): Thank you, Mr. Chairman. Thank you for your interventions today.

Professor Stager from the University of Toronto appeared before the committee two weeks ago, and he was speaking about accessibility. One of the things he said was interesting. He said that typically if a program is going to have a significant impact on improving accessibility, it's better to provide a small amount of money to a lot of people, as opposed to a fairly significant amount to a small group.

Given that the millennium scholarship fund is going to benefit 7% of students seeking higher education, is there some concern in your ranks related to the real impact it will have on accessibility?

I have a second question related to career colleges. One discussion I've had with the National Association of Career Colleges was related to the fact that career colleges aren't really covered under the millennium scholarship eligibility. Students seeking education in a career college are not covered under the millennium scholarship.

Given that there is an accreditation process currently for career colleges, and that in terms of labour mobility, placement of students and work afterwards the career colleges clearly have been quite successful, do you have a rationale on why they would not be included? How do you feel about that?

So there are two questions.

[Translation]

Mr. Robert Léger: A word about the matter of accessibility. As far as meeting the needs of the poorest students goes, it's mainly at the beginning of their university education that this has to be done. This is the time when scholarships may be the most useful. American research has shown this: it's at the beginning of a program or even just before beginning a program that scholarships are of the most benefit.

As for colleges, we recommend that they be approved and that there be an accreditation process.

[English]

an accreditation process for colleges that should be based on certain quality criteria.

I don't know enough to go further than that.

The Chairman: Is there anybody else who would like to add to that? Ms. French?

She wants to answer your original question.

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Mr. Scott Brison: Yes, further to that, I understand there's currently an accreditation process. But would it be your feeling that if there were a recognized accreditation program, it may not be a bad thing to have career college students eligible for millennium scholarships?

Mr. Robert Léger: If the college is a bona fide institution from that process, I don't have a problem.

Mr. Scott Brison: Thank you.

Ms. Charlotte French: I will comment on the second part first. Again, when we discuss harmonization with the provinces, each province now has a different designation process in their own financial aid programs. So that could be worked out as part of that.

In terms of your first question with regard to accessibility, I would echo what my colleague has already indicated. We're dealing here with different amounts of accessibility based on financial background and financial means. So, yes, it will affect a smaller number of students, because a smaller number of students have a higher need. But that's what we should be looking at.

Certainly in British Columbia we now have in place a grant program for first- and second-year students. The entire purpose of that was to improve the accessibility because of a low participation rate in post-secondary.... The province is quite happy with the outcome of having implemented and maintained that granting program.

Mr. Peter Dueck: I just wanted to give you a concrete example. At the University of Manitoba and in the province of Manitoba over the past decade, about a third, or perhaps a bit less, of full-time students actually do receive student aid. That's less than a third of those students who in the past were eligible for the province's bursary program. That was when the province still had a bursary program.

So you can see that the number of students who had assessed needs of more than $3,500 a year were in the area of about 7% to 10%, something like that.

Mr. Robert Léger: On the issue of accessibility, I would add that the millennium fund is certainly a good thing, a good instrument to help on this issue of accessibility. But it's probably not sufficient because of the cuts that have been made to the old system of post-secondary education. If, for example, those cuts were to continue, and if student fees were to increase—I hope not, but—then we would still be in trouble.

My point here is that we will probably have to do something else besides the millennium fund to solve this problem.

The Chairman: Ms. Torsney.

Ms. Paddy Torsney (Burlington, Lib.): Thank you.

Just to clarify this, are you all agreed that merit should not be a principle basically, that acceptance into a college or university, and need, of course, should be the criteria as to whether you qualify?

Mr. Robert Léger: Yes.

Ms. Charlotte French: Yes.

Ms. Paddy Torsney: The record doesn't record nods.

A witness: Sorry.

Ms. Paddy Torsney: I guess you're all waiting for the chair to....

Mr. Lyon.

Mr. David Lyon: I think need is important, and recognizing that there's never enough money to go around for every student, you have to have a balance of criteria. In our view, what is put in the legislation as being inclusive, which does not tie the hands of the foundation in determining that balance, is the right way to go.

Ms. Paddy Torsney: So should merit be one of the criteria or not, Mr. Lyon?

Mr. David Lyon: I believe so, yes.

Ms. Paddy Torsney: Okay, so you're not unanimous.

My colleague from the Conservative Party raised a question about whether private colleges and technical schools, career college-type things, should be included. In Ontario, for instance, we have the Academy of Learning, or the Toronto School of Business. Those are schools that are licensed by the provinces and meet certain criteria. I take it you agree that they should have access to some funds, but should there be a board member representing that organization on the foundation board?

If you're not in agreement that students attending those schools should be able to access funds, please say so as well.

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Mr. David Lyon: We haven't given that matter a lot of consideration, but I would make a couple of observations.

In Ontario right now, as long as the private vocational schools meet the government's criteria, their students are eligible for the Ontario student aid program. Yet one of the concerns we're aware of is that there is a very high default rate of student loans by students in these career colleges. That's certainly something to think about.

In Ontario the average default rate is something in the order of 23% for the entire sector of universities, colleges and the private career colleges. The universities' default rate is in the area of 16%, whereas the rate at private vocation schools is somewhere around 35% or 36% on average.

[Translation]

The Chairman: Mr. Léger.

Mr. Robert Léger: About the representation of private colleges, I think that what's important is that the persons selected be familiar with post-secondary education in general, not only universities, but also community colleges, for example.

I don't attach too much importance to the area people come from, but rather their familiarity with the system and their sympathy for the system. They also have to be people who are very familiar not only with the system but also students' needs. This foundation is being created first and foremost for students. So we need people who are very well acquainted with students' needs. To my mind, this is what's important.

[English]

Ms. Paddy Torsney: Mr. Lyon, you provided some statistics. I wondered if you could give those to the committee, because we've heard different numbers. That's what my question was.

I just have a last question. If you're going to move the $15,000 limit, what would you put it at for students? That was a CAUT recommendation.

Mr. Robert Léger: Our answer to that was that there should not be a limit. The scholarship should be based on the amount of money available each year and the number of students who are asking for the money. But you should be a realist. You should still take into account the amount of money that you have available.

But our recommendation is to remove the limit, so that if there's a need for $15,500, you know, then....

Ms. Paddy Torsney: Okay.

Mr. Robert Léger: Okay?

[Translation]

Mr. Claude Dionne: The reason why we suggested eliminating this $15,000 limit is very simple. It's quite possible that a person who graduates in the next ten years with a degree or a diploma will have to work for two, three or four years, and then may wish to go back to school, to get another diploma from a community college, or to enrol at university after attending a community college. Therefore we didn't want the scholarships to be limited in time to five years or to $15,000. Since the Foundation has to exist for at least ten years, access to these scholarships should be given to people who are going to want to go back to full- time or part-time studies.

[English]

The Chairman: Thank you. Mr. Szabo.

Mr. Paul Szabo (Mississauga South, Lib.): Thank you. I wonder if anybody on the panel has an idea of how much money is contributed by governments to post-secondary education annually today? What's the magnitude? Does anybody know?

Mr. David Lyon: Well, in my presentation I gave an indication that in 1996-97 the Ontario government contributed something like 40% of the total revenues of our universities. And if you just look at the operating part, which does not include other revenues, i.e., research revenues—

Mr. Paul Szabo: Okay. The point I was trying to make, though, is that if we have 100,000 students a year, the average scholarship would be something like $3,000. We're talking about $300 million annually, and I suspect that the $300 million as a percent of the total spent on education is fairly small. Yet what astounds me is we have all of these wonderful concerns about how this is going to work for this small piece of investment.

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In any event, I thought I'd just leave that with you. I hope we're as aggressively dealing with the rest of the money and how it's spent on and invested in kids.

Mr. Chairman, the genesis of what I wanted to ask the panel for their thoughts on has to do with a concern about high school drop-out rates. In Canada, I'm told, the high school drop-out rate is somewhere around 30% average. It's quite a bit higher in Quebec, and I'm not exactly sure why. I think some have suggested it could be as high as 50%. That means to me that the pool of students available to go to post-secondary may be shrinking, and therefore we may have to more aggressively go after.... We have less population to choose from or to draw from to keep our universities' enrolments up.

If that's the case, then I can understand, for instance, why Quebec has lower tuition fees, because it has a lower population per capita from which to draw university students. Therefore it's already invested in access by having lower tuition fees, whereas other provinces have not.

So I guess maybe the question for you is, can you let us know whether universities have an appetite for more students? Do we have an excess capacity there? And if we do, do you agree that it would be better to target scholarship funds at students who otherwise would not choose post-secondary, to get the enrolments up so that you can average down the cost and in fact secure more stability in the cost of tuition, simply because you have a larger population of post-secondary students over which to share that burden? So the question really has to do with where we are in terms of capacity or available capacity within our post-secondary system.

Mr. Robert Léger: My understanding is that the number of students is actually decreasing, and one of the reasons is demographic. There are fewer people in the age group, the traditional group at least, than was the case a few years ago.

About drop-out rates for high schools, I don't think I'm able to comment on that, but I would like to talk about the drop-out from universities, because we lose some students during their studies. We lose them for different reasons. For some of them it's because of their academic failure, but for some of them it's for financial reasons.

I would like to point out that this foundation, even if the amount of money is small compared to the total budget of universities, will help some of those students who are getting discouraged because they don't have enough money and they are getting into high debt and all that.

I would like, furthermore, to add that receiving some help at the very beginning of their studies will probably convince a few of the high school graduates to go into post-secondary education. So again, this millennium fund will address part of that problem of drop-out. I see it as a positive way.

The Chairman: Thank you, Mr. Szabo.

[Translation]

Mr. Dionne.

Mr. Claude Dionne: I must say that I don't necessarily share your instrumentalist view of the university, that is, if we had 100,000 clients more, or 10,000 or 20,000 more, it would be possible for us to reduce the price of the product. That's one way of looking at universities. It's not the way of the Canadian Association of University Teachers. Universities are not factories. They are part of a country's heritage and cultural legacy.

If we have faith in post-secondary education, particularly in the institution represented by universities in a country, and in its contribution in all areas, I think this institution should be awarded the funding necessary for it to exist. If universities disappeared from society from one day to the next, Canada would be deeply affected.

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When you say that part of the student population headed to university comes from high school, you are quite right. Now, the creation of this fund, of this foundation may encourage adult students with more or less precarious employment to go back to school in order to improve their lot, because they can get a scholarship that will allow them to do so.

This is a point that is often forgotten: the issue of adult students, their place in the university if they are allowed to go back to school. If they're granted some monetary advantages, they may go back so as to improve their lot and thus eventually help decrease social costs, of welfare and so on.

There's also talk of students. Too often we forget that adult students may be interested in part-time courses. When we think about taking part-time courses, we too often think about the aspect of tuition fees. It must be remembered that that the expenses of a person who attends university part-time involve more than tuition fees. Someone who lives 30 or 40 kilometres outside Ottawa, who doesn't have a car and who wants to take courses at the University of Ottawa to improve their lot has to find a way to get to Ottawa and back again. That involves money.

It's in this regard that we're glad the scholarship provides a generous amount of money, and that it goes far beyond tuition fees.

You talk about capacity. You wonder whether university capacities are too large. What the point is in having extra capacity.

Here and there throughout Canada, universities are falling apart. Go to McGill and you will see walls crumbling in the classrooms. It's dangerous to teach in them and so on. There are examples here and there across the country. In Canada, universities are part of our heritage, and this must be recognized. We have to be prepared to invest the funds necessary to keep them alive. Thank you.

[English]

The Chairman: Ms. French.

Ms. Charlotte French: First of all I'd like to make a couple of points, one of which is that post-secondary education is not just about universities. In this bill we are talking about, along with the other measures, vocational institutions, technical institutions, and community colleges. So students who would be accessing the millennium fund and who already access the student aid programs may have at one point dropped out of high school, but are in many cases returning to education.

My colleagues talked about not forgetting the adult students, and we certainly don't forget about the students returning to school, because this is the group we've worked with a great deal. If you're talking about resource economies and changes in what's happening in the workplace, you see many people coming back to school who have been in the workforce and are returning and have various other financial commitments.

Available capacity in universities or in post-secondary is very regional, and it depends on the region you're in as to whether there's excess capacity or not. Certainly that all has to do with government funding to the institutions as well.

This is about student accessibility based on their financial ability to pay and their financial ability to meet the costs of education, which include tuition, books, and direct educational costs, but also costs of living.

Students come from various different financial backgrounds for various different reasons. Whether it's because they dropped out of high school and are returning for upgrading of their high school so they can go on to a university program, whether it's because they have been in the workforce and for whatever reason are needing to make a change in their education to be able to stay in the workforce, or whether they are retraining because of downsizing, the accessibility to financial assistance, including grant programs, is what makes post-secondary accessible to them, whether it's university, college, or technical school.

The Chairman: Thank you.

Mr. Lyon.

Mr. David Lyon: I don't think I can comment on the issue of drop-out from secondary school in Ontario—and I can only speak for Ontario—but I don't think there is a concern about the lack of students coming to university, because if you look at the demographics, despite the bottoming out over the last decade or more, participation rates in Ontario universities have been going up. Even if those participation rates hold level and do not increase, I think we're going to be faced with an increasing demand.

• 1145

The challenge for us is that because of the demographics, we're on the verge of the echo boom coming through, starting in about the year 2000.

The second factor that we anticipate will create a tremendous demand is the reform of the secondary school curriculum in Ontario. What we lovingly called the double cohort may be on the verge, and that would create an extraordinary demand both at the undergraduate studies and graduate studies levels for a period of time. There's going to be what we call a bubble of demand.

Our main concern, in addition to the ability of students to finance their education and the role of public aid for them to do so, is the lack of provincial general support for education that would enable us to meet the quality and to deliver quality programs to these students.

The Chairman: Mr. Dueck.

Mr. Peter Dueck: I just wanted to make a comment about the size of the fund and what sort of impact a fund of even this relatively modest size can have on students.

If you think about it from a student perspective, and especially a needy student perspective, please remember that it costs something like $10,000 for a student who's relocating to go to school—one without dependants—and that includes tuition, books and supplies, and living costs. If you give that student $3,000, that has a significant impact on that student. Even for a student with dependants—say this is a single parent—if they're allowed living costs and tuition, books and supplies and so on, it comes to $15,000. Even for that person, $3,000 makes a fairly significant impact.

In fact, if you want to compare it to tuition rates, tuition rates for...I won't speak for across the country, but they can still start at around $3,000 for a year. Well, that $3,000 can cover that amount for those students. It can still make an impact. It might not feature as largely if you're thinking about the entire post-secondary education budget.

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

On behalf of the committee, I would like to thank all of you for your input. Your perspectives are certainly going to help us study this bill.

We would like to remind you that this committee will very soon begin also its pre-budget consultation process once again, and we would like to tell you ahead of time to get ready. Thanks.

Mr. Earle, do you have a final question or comment?

Mr. Gordon Earle: Yes. Is it possible to have one final question?

The Chairman: Yes, very briefly.

Mr. Gordon Earle: There has been some concern about administrative costs. I think some people said right from the beginning that perhaps the administration of this program should not have been left in the hands of a private foundation, but should have perhaps been handled through maybe Human Resources Development, the government department that currently handles the student loans. It ties in with what you mentioned before about harmonizing.

What are your views on that? Is everybody here comfortable with the fact that this foundation has been set up to handle this administrative process, or do you feel it would have been better handled through the government department?

The Chairman: Mr. Léger.

[Translation]

Mr. Robert Léger: Mr. Earle, last fall, the roundtable on student aid expressed views somewhat similar to what you've just said. We think that Human Resources Development Canada

[English]

is doing a rather good job in administering the Canada student loans program, and because they are doing a good job, we felt it probably could have done this one too.

The Chairman: I think that answers your question.

Mr. Gordon Earle: Merci.

The Chairman: Mr. Lyon.

Mr. David Lyon: We're entirely comfortable with the foundation administering the program on its own and maintaining a certain amount of arm's length from government. Because of the legislation that enshrines the purposes and objectives, I think the principles are there that anyone can administer. Because of the governance, we would be entirely comfortable with the construct as it is.

The Chairman: Thank you. Any further comments?

I get to thank you again after those comments, and to remind you again about pre-budget consultation. Thank you.

We'll suspend, and we'll be back at 12.30 p.m.

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• 1237

The Chairman: I call the meeting to order. I welcome everyone back here this afternoon.

As you know, we are here in accordance with the Order of Reference of the House of Commons of Tuesday, March 31, 1998, that the committee resume consideration of Bill C-36, an act to implement certain provisions of the budget tabled in Parliament on February 24, 1998. This afternoon we have with us representatives from One Voice, the Canadian Seniors Network, Mr. Ivan Hale, national secretary, Hazel Wilson and Mr. Richard Shillington.

You have approximately ten minutes to make your presentation, and thereafter we will engage in a question and answer session. You may begin.

Mr. Ivan Hale (National Secretary, One Voice, the Canadian Seniors Network): Thank you.

We appreciate the opportunity to be included here today. We will certainly do our best to speak to the issues at hand.

I would like to explain the connection in terms of the three of us. Hazel Wilson comes from Edmonton and is past president of the Alberta Council on Aging and president of the Society for the Retired & Semi-Retired. She has been a very active board member with One Voice as well. For many years she chaired our national issues committee.

Richard Shillington is here both as a friend of the organization and as a policy associate to lend us technical assistance and policy analysis capability.

I must be honest with you. We were involved, at the time of the budget lock-up, with a number of other national organizations representing seniors. We downloaded the budget that day and analysed it that night, and I guess the next day we were part of issuing a news release. Any notion of changes regarding the GIS and OAS had really escaped us, so it came as a bit of a surprise to be invited here today to speak specifically to Bill C-36 and those changes.

We were not aware of any consultations that had taken place in advance of that. That's not to say they didn't take place, but that we just weren't aware of them. It's our understanding that in the briefings this committee received from officials at the Department of Finance, they didn't make reference to the specific changes as they relate to GIS.

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We thought that in the time available today we would begin by speaking to several points we have been able to uncover that we think are relevant and of some interest. Then we thought we might stray a little bit to talk about this in the greater context of the changes that are taking place to both the Canada Pension Plan and the proposed seniors benefit. But that's time permitting and at your pleasure, of course.

I would invite Hazel Wilson to begin by bringing us back to the bill and the specific points that came to our attention.

Ms. Hazel Wilson (One Voice, the Canadian Seniors Network): First, we identified a statement of delay in the implementation of the new income provisions from April to July, so there's more time to get the correct information, and certainly this is desirable. Having to get information in at the end of March, as previously, is very difficult, so this is a real improvement and we applaud this change.

Second, before the meeting started we were discussing the changes to marital status. We're not clear about what these changes are and their implications. I have great difficulty remembering things, so I suggested that something in clear English regarding this change would be desirable for the elderly to refer to.

Mr. Ivan Hale: On that point, we were talking to the officials present here just prior to the meeting getting under way, and they were able to shed a little light on it for us. We're not in a position to comment on it today, but we'll certainly go back and study it and let you know if we have any specific reactions to that provision.

Hazel, would you like to speak to the fourth point on our list?

Ms. Hazel Wilson: If Richard started first, then I could speak to the one issue.

Mr. Richard Shillington (One Voice, the Canadian Seniors Network): I'm not sure how familiar you are with the details of what these proposed changes are, but one issue is the definition of income for the purposes of calculating GIS. Is it worth while if I spend a moment recounting how this...?

The Chairman: Absolutely. Go ahead.

Mr. Richard Shillington: Okay. The GIS is the guaranteed income supplement, which is paid to low-income seniors. About 40% of seniors receive the guaranteed income supplement. For the purposes of administering that program, there is a targeting—for every dollar of income you earn, your GIS is reduced. Part of this legislation changes the definition of income for the purposes of administering GIS.

I want to thank the officials for helping me with this, because I couldn't understand the legislation. Right now, if you have earnings and you're in a family with a senior, your contributions to CPP or UIC are deducted from that income before determining your eligibility for GIS, as well as an employment expense deduction—a hold-over from the pre-tax reform days—which is still in place for GIS.

My understanding is that the intent of this legislation is to eliminate those deductions from the definition of income. So if you're a senior and you're in receipt of GIS, and you have $500 of employment income, we will no longer deduct any contributions to UI or CPP that might have been paid before determining your eligibility for GIS.

Like Mr. Hale, when I first heard about this I didn't think there was anything in the 1998 budget about the GIS, but then finally the details came out. I think you should tread very carefully here. You can understand the argument in terms of simplification, but remember that these are low-income seniors, and that many of these seniors are also receiving benefits from the province—so-called GIS top-ups.

There are GIS top-ups in the province of Ontario and west, and the federal government helps those provinces administer those programs. The federal government provides information to them about the people's income for administering the provincial top-ups. So if you change the definition of income for the federal GIS, you're also changing the definition of income for the provincial top-ups. The way those programs work right now, for every dollar of income you have, you lose 50¢ off your GIS from the federal government. You also lose 50¢ off your GIS top-up. You have 100% tax-back rates. The proposal in front of us, if I understand it correctly, is to eliminate the deduction for UI and CPP.

• 1245

Mr. Paul Szabo: Mr. Chairman, can I ask for elaboration on that? If we lose 50% of the federal and 50% of the provincial, the conclusion is that you've got a 100% clawback.

Mr. Richard Shillington: That's right.

Mr. Paul Szabo: Please explain that. If you lose half of a half and a half of another half, that is only a 50% clawback. Maybe you can help me there.

Mr. Richard Shillington: If you earn $500, your GIS from the federal government will go down by $250, and the GIS top-up that you're getting from the province will also go down by $250.

Mr. Paul Szabo: The top-up is equal to the federal?

Mr. Richard Shillington: The reduction rate is equal to the federal. You can ask for confirmation from the officials, but I'm certain of it.

This is because you're really trying to target this. The number of seniors who get the GIS top-up is fairly small. Of seniors, 40% get the federal GIS but only a small number will get the provincial GIS top-ups. Recognize that currently there is a 100% tax-back rate, and imagine removing the deduction for UI and CPP contributions from the definition of income. Now you will have $500 of earned income, and you will pay some CPP and UIC on that—let's say $50 or $100—and then you will lose $500 off your federal plus provincial top-ups. So in fact you're taxed at more than 100%.

For those seniors who are GIS recipients who have some earned income in their family—it may not be them, it could be a spouse who is under 65 or who has earned income, and if they're getting the GIS top-up from the provinces.... Given the amount of time and only becoming aware of these changes very recently, I don't know how many people will be in this situation, but I suggest that you tread very carefully.

We already have a situation in which earned income is being taxed at 100% for these few people, and we certainly don't want it any higher than that. My only comment is to be very cautious about this and find out whether any of these fears are well-founded. If they're unfounded, that's fine, but I suspect there are situations in which we're having these types of very high marginal tax rates.

The Chairman: Any further comments?

Ms. Wilson.

Ms. Hazel Wilson: I would like to comment on this, particularly unemployment insurance being related to the Canada Pension Plan. If someone is retired, is on Canada Pension Plan and is employed, they are required to pay unemployment insurance, but they are not eligible to collect it. To me this seems grossly unfair. If they can't collect it they shouldn't be paying the premium.

The Chairman: Any further comments from the panel?

We can start the question and answer session.

Mr. Harris.

Mr. Dick Harris (Prince George—Bulkley Valley, Ref.): I'll pass for now, Mr. Chairman.

The Chairman: Madame Gagnon.

[Translation]

Ms. Christiane Gagnon: Thus you are raising a problem that also affects employment insurance: more and more people are paying into it, but fewer and fewer people are entitled to receive it. We're afraid that the bill the Minister is proposing takes away the incentive to save from middle- and low-income people. They wonder what more it will give them if their earnings are taken into account and in the end they're no longer entitled to the old age tax benefit. It's like a loss of certain social safety nets for the whole population. As Ms. Wilson mentioned a moment ago, I find it quite shameful that women should not be entitled to it, after all the battles we've waged. There are a lot of women who expect to receive old age security benefits in order to have a little nest egg and no longer depend on their husbands. This is why I'm against this bill.

• 1250

Can you explain to us how small savers will benefit less and why they won't have an incentive to save a little money because anyway they'll be compared to those who don't have any savings at all?

[English]

Ms. Hazel Wilson: I guess you're talking about the seniors benefit program. I think there are many flaws in it. If you have time to listen, I could talk to some of them, but the issue I raised here has to do with the unfairness of somebody collecting Canada Pension Plan, paying into unemployment insurance and not being able to benefit from it. But certainly I think there are many flaws in the proposed seniors benefit program.

The Chairman: Mr. Shillington.

Mr. Richard Shillington: You've talked about the disincentive to save and I guess you're talking about the seniors benefit program. I don't know how much time you want to spend on the seniors benefit—I gather the proposal will come back here at some point.

The Chairman: The budget consultations and hearings on the seniors benefit eventually....

Mr. Richard Shillington: I have two quick comments. Before the seniors benefit proposal was made in the 1996 budget, when I was asked for advice by friends—they think I know something about the tax system, even though I'm not an accountant or a lawyer—I said that if your income is below $30,000 to 35,000, don't save for your retirement. Own your home but don't save for your retirement, because with GIS and GIS top-ups....

We can go on about the income-tested programs for seniors. This is not all a federal issue. The long-term care facilities where the amount you pay for the facilities is geared to your income, the pharmacare programs the provinces run where the deductibles are geared to your income—there's a wide range of income for seniors over which you're not going to see much increase in your standard of living, and most of these programs are income-tested, they're not tied to assets. So own your home, but enjoy your money now.

The seniors benefit is not going to change that or address it. The part of the seniors benefit that has many people concerned is increasing the marginal tax rate for a wide range of seniors with incomes between $25,000 and $50,000 by adding an additional 20% because of the clawback on the seniors benefit. That's left an impression with many middle-income Canadians that the incentives to save for their retirement are not what they used to be, and I think that's a concern for government.

I can understand, although I'm not convinced, the argument if we're making the seniors benefit program sustainable. However, the cost of the seniors benefit proposal has led to a great deal of uncertainty among many people about what the seniors program will look like when they retire. It has left a lot of people believing they shouldn't be saving for their retirement, and I don't think that's a healthy thing.

The Chairman: Mr. Hale, do you want to add anything to it?

Mr. Ivan Hale: Let me put it this way. We've often been reminded by people in government that universality is a dead issue, that we've lost that battle. I would want to say that older adults don't believe we necessarily should lose that battle, nor do we necessarily believe it is over. It's more than symbolic for everybody to receive a benefit as opposed to moving towards targeted benefits, and we think that what the Canadian people want is universal access to benefits, and to use the tax system, of course, to recover from those high-income earners. Make it a progressive system, by all means.

We also completely support the notion that any system must be fully sustainable into the future, and has to be designed that way. What gives us a fair amount of discomfort today is that there is so much uncertainty that ordinary Canadians, no matter what their age, aren't sure how to plan for their retirement years. When you get close to those retirement years or when you are retired, your options are precious few and you're very vulnerable.

Obviously issues such as advance notice become very important for the amount of lead time people have to prepare, as well as having plain-language communication. You also need a full understanding of the implications, so that if a change is made at the federal level, you also know what the implications are in terms of your provincial taxation and ultimately, down the road, the offloading to the municipalities.

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The Chairman: Mr. Harris, do you have a question?

Mr. Dick Harris: I just want to ask one of the presenters about that proposed seniors benefit. It is a big concern out there.

I've talked to many seniors. Have you done any research, or do you have any numbers that would show the amount of people who would be affected and where the maximum taxation on their additional income would take place? This would mean the people who have a supplement of $12,000 over and above their seniors benefit income, where that 75% taxation takes effect on that. Are there any numbers on how many seniors there are in that $23,000 a year gross...?

Mr. Richard Shillington: It's not hard to find those types of numbers. The officials from HRDC can tell you the number of seniors in those income groups. I might also refer you to a paper by Malcolm Hamilton, published in the Canadian Tax Journal a year or two ago, where he did quite an exhaustive...I don't agree with all of the political aspects of what he said, but I think the numbers are fairly solid.

There are two ranges where you're going to have high marginal tax rates: the very low-income seniors and the new seniors with incomes between $25,000 and $50,000. He certainly has numbers on the number of people in those groups, so they are available.

The Chairman: Thank you, Mr. Shillington.

We'll go to Ms. Torsney. Before we do that, we'll go to Mr. Valeri's comment.

Mr. Tony Valeri (Stoney Creek, Lib.): Thank you, Mr. Chairman.

Since the topic moved to the seniors benefit, I'm sure you're aware that there has been a substantial amount of consultation since the announcement on the seniors, benefit. I believe the minister did indicate that changes were being contemplated with respect to the seniors benefit to reflect those concerns—like the clawback, the disincentive to save, and a number of other issues. I know your particular group has had an opportunity to communicate those concerns.

So again I want to thank you for the work you've done on the seniors benefit; I'm sure it will be a better product for it. I thank you for taking the time to come forward this morning to present your information.

The Chairman: Thank you, Mr. Valeri.

Ms. Torsney.

Ms. Paddy Torsney: I have a couple of questions. Do you have any idea how many seniors are caught in this little group of people who are paying EI and CPP and who won't be able to collect?

Mr. Richard Shillington: No, I don't. As I said, I only was aware of it in the last week. It is a question that I assume the officials could talk to.

It doesn't necessarily...people paying CPP or EI themselves. Let me emphasize that. You could be a senior married to somebody who's under 60, because the GIS is based on family income, right? So the CPP or EI contributions could be paid by a 50-year-old who is married to somebody who's 70 years old.

I don't know. Even if it's 12 people and they could sit at this table, do you want to tell those 12 people that, by the way, they're at a 100% tax-back rate. We know what the reaction would be if you told 12 lawyers that they were at a 100% tax-back rate, and I don't think their reaction should be any different if they're low-income seniors. In fact, I would suspect that if we're in this world we have an obligation to inform seniors that, by the way, they'd better not have any earned income because not only will they not get any benefit, but they'll be worse off.

Ms. Paddy Torsney: I certainly thank you for alerting us to this little problem, and we'll take it under advisement and try to figure out a solution.

The other question I had for you with regard to the seniors benefit or to that whole question of support for people in their later years is what would you think about a system where I had to put $500 into my spouse's and $500 into mine, and pensions as well, to get a $1,000 tax credit for my RRSP contribution so that we had a guaranteed stream at the end for spouses? That would address some of the issues related to family income and to cutting off a number of people under the proposed seniors benefit from any kind of cheque.

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Ms. Hazel Wilson: My initial response would be that this would benefit the higher-income people because there are an awful lot of low-income people who really don't contribute to RRSPs. And certainly with the economic situation now there are an awful lot of people who are not contributing to RRSPs.

Ms. Paddy Torsney: The idea is not so much high income versus low income; it's to make sure that spouses who have spent their time in the family, who didn't have any earned income but who clearly worked for a lot of years.... Under the seniors benefit, if they were a higher-income family, they would lose income that they would obviously not be getting under a GIS but certainly would be getting under an OAS cheque. The family class, viewing them as a family, takes away an income cheque for them, which of course is taxed back, by and large, by their spouse, but at least they have some dollars in their own hands. This would say that if you're going to get your pension, if you're going to get your high income in your senior years, you'd better have set it up so that the spouse gets her or his—it's often her—income as well.

Ms. Hazel Wilson: Yes, certainly I would approve. I am a child of the Depression...and so is my family. My mother was a housewife all her life. The old age security had tremendous significance for her because for the first time in her life she was independent. She had some money that she didn't have to ask my dad for; she could buy gifts for grandchildren; she could do things. It was a tremendous feeling of independence, which was just remarkable. And in planning your future plan, you really need to see that women are taken care of.

Mr. Richard Shillington: You remind me of the homemakers pension proposals from the early 1980s for the Canada Pension Plan, where part of the Canada Pension Plan would be set aside for what we then called homemakers. Normally husbands, we'll say, had to pay extra.

What you're talking about is actually good tax planning for any high-income family. They're already trying to equalize the pension income at retirement. And if you can encourage it, it is certainly a good idea.

Right now one more advantage of RRSP savings for retirement over other forms is that when you're saving for RRSPs you have a lot of flexibility for income splitting—high-income husbands will contribute to both RRSPs so the incomes are split; whereas if you have an employer pension plan, you can't split that. It's all in the hand. So it would allow some of that. It's not a bad idea at all.

Ms. Paddy Torsney: Lastly, I'd like to discuss the whole issue of somebody who's making $25,000 or $30,000 who is not contributing to an RRSP because income support will be there in their later years.

You made some comments about owning your home but not worrying about the rest of it because you'll get income support. Isn't that a funny mixed message? Certainly what we're trying to tell people is to contribute when you're very young so that the money grows and you have lots more money in the end. To suggest to people in their late twenties and early thirties that they're only making $25,000 to $30,000 so there's no hope for a change in their income levels...and also that they couldn't, if they were wise in their planning, in fact end up actually enjoying their later years more so than they would all their working years.

Mr. Richard Shillington: Based on the tax and transfer system as we have it now, over a very wide range of your private income your standard of living changes very, very little because of the top-ups and the way a GIS works. That might change, but the other thing we don't know, of course, is what the retirement system's going to be like for us.

Anecdotally, is targeting going to continue or not? Universality is now the bad word. You've lost all credibility if you believe in universality now. I suspect we're not going back to universal programs; we're going back to more and more income-tested programs. We have drug plans run by provinces that are now income tested. That's on top of all the other income testing.

So my advice, which is worth no more than anybody else's, is to say to people, I suspect that when you retire all the programs are going to be even more income tested than they are now.

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Ms. Paddy Torsney: If you tell a 25- or 30-year-old to put in $5,000 each year, to borrow the money, they end up with a hell of a lot more money at the end than waiting—

Mr. Richard Shillington: If you can find a 25- or 30-year-old who at the end of the year has $5,000 just sitting in the bottom drawer because they had forgotten about—

Ms. Paddy Torsney: They used to borrow for it, actually.

Mr. Richard Shillington: My 19-year-old son just yesterday was scanning something at my desk and he saw a graph of tuition fees over the last three or four years, a 50% increase in the last three years. Is he going to be contributing $5,000 to his RRSP? I suspect not.

Ms. Paddy Torsney: A 25-year-old, yes.

Mr. Richard Shillington: You know what I mean by my point.

The Chairman: Ms. Wilson.

Ms. Hazel Wilson: I would like to respond to Mr. Valeri. I quite appreciate that Paul Martin and the others are relooking at the seniors benefit program. They made this program without any consultation with seniors. They're making the change, and we do sincerely hope they will talk to seniors and that there will be consultation before this is implemented, because this is a significant change and we do really want to participate.

Mr. Tony Valeri: I appreciate your comments. My response to that would be that it is exactly for those reasons that the seniors benefit legislation is now before us and we are consulting with groups to ensure it's right.

Ms. Hazel Wilson: I haven't had any consultations, and I've been active in the senior community for a long time.

Mr. Tony Valeri: Are you part of the Retirement Income Coalition?

Ms. Hazel Wilson: I'm part of the senior community in the province of Alberta as well as One Voice. A tremendous amount of lip service is given to consultation.

Mr. Ivan Hale: Just for information purposes, One Voice is part of the Coalition of Seniors for Social Equity, which has appeared before the finance minister and senior government officials. We're an observing member of the Retirement Income Coalition.

In meetings we have had with the finance minister he has assured us that there will be full and open opportunities for consultation and input from people across the country. What Hazel is pointing to is that until now the input has been of a fairly restricted nature, perhaps understandably.

Again, somewhat anecdotally, we recently brought together our national board and issues committee. I wanted to have up-to-date thinking from the Department of Finance to share with our group, because it's somewhat rare that we have the ability to meet. I was told by the finance officials that there was no point in giving us anything because the briefing materials we had before were now out of date.

I can understand that, but does it mean there's nothing for us to consult, other than what had been released two years ago? It just seems as if we're missing the gap. Even Minister Martin admitted in meetings with us that there's a credibility problem and a need to bridge that gap of communication. It would seem to me that even in this pre-consultation of a formal consultation period the department could be providing some material for us to look at that's really current, even if it's a discussion piece.

Mr. Tony Valeri: I appreciate those comments.

Madam Wilson, I'll ensure that you're on this list and you are consulted with.

The Chairman: Of course, when this committee deals with seniors benefits we'll call you.

Mrs. Redman.

Mrs. Karen Redman (Kitchener Centre, Lib.): Thank you, Mr. Chairman.

I just wanted to pick up on a comment that Mr. Shillington made. I did have a meeting in my constituency over the changes to CPP, and seniors benefits did come up. And you made the comment that being income tested on the amount of income you had was unfair if you could look at some of the assets people might have that don't translate to income, or at least that's what I was hearing you say.

By far, seniors were the majority in the audience that evening. Two or three of them stood up and said they felt that looking at one's total net worth was a far more accurate way to do it. If you were saving, you shouldn't be penalized because you happened to have an income that would see your benefit clawed back in a way that somebody else who had all their money sunk into real estate assets wouldn't.

I just wonder if you've had that discussion and whether or not you have an opinion on it.

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Mr. Richard Shillington: We have a trend now towards not just targeting on income but also targeting on assets.

What's the fairness? If you want support programs for very low-income seniors to be run like welfare, then of course a senior who has a $50,000 home in New Brunswick should be told, “You come back when the house is sold, and all those assets, and then we'll be willing to...”. If that's what we were going to do, if this were to be run like welfare, then that's the principle.

There are seniors benefits and the whole seniors benefit package...and I hate talking about seniors benefits without talking about CPP, or about private pensions and RRSPs. Really, they should all go into one conversation, and we've actually split those three discussions.

The seniors benefit is not just an anti-poverty program or you wouldn't be giving it to people with incomes of $40,000 or $50,000. We get mixed up when we start using the same criteria that you'd use to administer an anti-poverty program for a program that is supposed to be also recognizing people's contribution over the lifetime. This is why I don't see it as being inconsistent to say you're going to family-income-test GIS because it's an anti-poverty program.

I actually don't think you'd want to get into asset testing as well, although I think it's Nova Scotia or New Brunswick that has a GIS top-up, which includes—I'm looking at officials for confirmation—an asset test.

I hear from people who have been doing this type of work far longer than I have that this is the way old age security started, that it was needs tested, and that one of the great developments was that you no longer had seniors filling out application forms that included how much money was in their bank account and what their house was worth. I don't think that's fair.

But the point I was trying to make is that the income testing you use for the very low end of the seniors benefit does not have to be the same as the income test you use for the end of the program that says this isn't about welfare. This is not about income support for low-income seniors. This is about support for all seniors as a matter of entitlement—senior citizenship.

I don't know if I've really answered your question, but....

Mrs. Karen Redman: Just to be very clear, the seniors themselves were suggesting that this would perhaps be a fairer way. That's why I was inviting input on it.

Mr. Richard Shillington: Oh, sure. You might get that from some seniors.

Ms. Hazel Wilson: I'd like to comment. I am one of the people who really supports the concept of universality. I think the seniors benefit program is now a welfare program, and five or ten years down the road we're going to talk about seniors who are welfare bums, and I think this will really be a sad comment on our social values.

The Chairman: Thank you, Ms. Wilson. Thank you, Mrs. Redman.

Mr. Szabo, do you have a final question?

Mr. Paul Szabo: Yes. The interesting thing about clawbacks is that the intention of a clawback is to put somebody in the position they should have been in had all the information been known. But if I was on one side of the fence, I would say let's just call it a 100% tax on every dollar you take back. It tends to be a little bit alarmist when in fact GIS, and I guess for all intents and purposes OAS, are really income redistribution programs, as much as we'd like to think they're universal and everybody gets them.

We sometimes forget, Mr. Chairman, though, that today's seniors paid into OAS up until 1970, I believe. I think it was the early 1970s.

Mr. Richard Shillington: Officials are nodding. It was 1972.

Mr. Paul Szabo: Ostensibly that means there's a real entitlement for a benefit regardless of income. I think we should keep reminding people about that.

But there is a change. When it changes, where there's no contribution, should the view of the entitlement also change? I think the answer I would give to the panellists, Mr. Chairman, is that if there were no GIS or OAS we would have fought for something else to make it better. But if there is one, then we will back off something else, because there is an equilibrium in the overall social equity.

You could probably put into that same kettle of fish the Canada Pension Plan, where today's seniors are getting substantially more for contributions—$7 for every $1 put in. But we're going to penalize them for that, because if you didn't have that good return you would have sought benefits elsewhere to again keep the equilibrium.

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So I think we all understand how the mathematics can play out, but I'm a little concerned that we're alarming seniors by saying things such as 100% tax rates, etc.

I do have a question, and it's for Mr. Shillington. It has to do with the statements you made about advising seniors that there comes a point at which you shouldn't bother saving for your retirement.

Mr. Richard Shillington: Advising non-seniors.

Mr. Paul Szabo: I think if a senior heard that, they might believe you, because you represent this group. But I want to go on the record as saying this would be absolutely the worst advice you could give to anybody, because even if you had that additional income available to save for retirement, even to invest it in a capital asset that gave no income would result in no clawback, and you would have a net worth that would grow. It is absolutely wrong and immoral to suggest to any senior or any person not to save for their retirement because of a clawback. There are ways to get around the clawback, simply by not investing in income-producing assets that have capital growth.

So I raise that because I really think we can carry it too far, trying to sell our position by going to extremes, which in fact are against seniors.

Ms. Hazel Wilson: I am an elderly female, and I started out on a very small salary. Someone who was my senior at that time said, “Now that you are earning regularly, you save regularly”. That has been the value of many of us older people, but I'm not so sure it's there today. I had a very small salary, and I started putting money away.

The Chairman: Are there any further comments?

A final question, Madame Gagnon.

[Translation]

Ms. Christiane Gagnon: Canada is part of the OECD and is therefore one of the richest countries. The Minister's proposal was based on the fact that, in 1993, 5.3 per cent of the budget was allocated to income support for the elderly and that this share is expected, in 2030, to have increased to 8 per cent. The World Bank estimates the cost of public pensions in OECD countries to be 9.2 per cent. That means that even with what we fund at present and the 8 per cent forecast for 2003, the Minister feels forced to restrict the possibility of a universal system because it will cost too much. So, with figures like these, the Minister is wrong to suggest such an alignment when he is not spending what he should be spending.

[English]

Mr. Richard Shillington: The one clear statement the government has made about the reason for going to the seniors benefit is they believe the OAS and GIS system, as currently structured, is unsustainable. I've seen the graphs produced by the Department of Finance, but I don't find them compelling. Yes, you can quote the same figures other people have quoted about how Canada is spending on these programs as a percentage of GDP compared to other OECD countries, and by the year 2000 we might be spending what other countries are already spending.

So sustainability might be one way to describe it; choice might be another way to describe it. But I certainly haven't seen information that's compelling. It's too easy to play with numbers.

[Translation]

Ms. Christiane Gagnon: You say that people would have less incentive to save. Can you tell us what the impact would be on the economy?

[English]

Mr. Richard Shillington: Well, generally you're going to have people spending currently, rather than.... I'm not an economist, so I really shouldn't say that. But I don't think it's healthy to put in a system with a great deal of uncertainty and a low level of trust in governments in terms of describing what the programs are going to be later on. It's not healthy from a citizenship point of view and it's not healthy for people knowing how to save for their retirement.

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The Chairman: Thank you, Madame Gagnon.

Mr. Shillington, Mr. Hale, and Ms. Wilson, on behalf of the committee, I'd like to thank you very much for providing us with your perspective on Bill C-36. Your insights have certainly been helpful in studying the bill. Thank you.

Committee members, we will meet here again in room 269, West Block, at 3.30 p.m.

The meeting is adjourned.