FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, October 1, 1998

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[English]

The Chairman (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.): I call this meeting to order and welcome everyone here this afternoon. Pursuant to Standing Orders 108(2) and 83.1, the committee is resuming its pre-budget consultation process.

This afternoon we have the pleasure to have with us: from the Canadian Housing and Renewal Association, Sharon Chisholm, executive director; from the Ontario Council of Agencies Serving Immigrants, Carl Nicholson, treasurer; from the Learning Disabilities Association of Canada, James Horan, past president; from the National Children's Alliance, Dianne Bascombe, Maggie Fietz and Harvey Weiner; from the National Council of Women of Canada, Helen Saravanamuttoo, vice-president, and Joyce Ireland and Shirley McBride; and from the North-South Institute, Roy Culpeper, president.

Welcome to you all. We look forward to your comments, and we will begin with the Canadian Housing and Renewal Association.

Ms. Sharon Chisholm (Executive Director, Canadian Housing and Renewal Association): Thank you.

The 1998 federal budget was noted for what was not there. Between the lines of recent federal budgets, we're starting to see the story of a country that's failing to address issues of social concern, while our communities are surely beginning to see the signs of a withering welfare state.

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Nowhere is that more clear than in the area of housing. It's difficult to walk down the streets of our major cities without stepping over or around people who've been forced to call the streets their home.

At least in a hospital emergency room, while you might have to wait a while for service, you're sheltered from the cold and wet. That's not really the case for homeless people in Canada, a growing number of whom are children.

Until 1995, we had an active social housing policy, one that supported the development of non-profit housing that would remain affordable over time. Why has the federal government halted the very good work that it supported in the field, while the provinces, for their part and for the most part, have not picked up the slack?

Anne Golden's recent report stated that 20% of Toronto's homeless population is children, and that families and youth under 18 years of age represent the fastest-growing segment of hostel users.

For almost 20 years, ending in 1995, 2,100 units of non-profit housing were built in the Metro area of Toronto on a yearly basis, so it's not surprising that now, without these active programs, Toronto is beginning to see devastatingly high numbers of homeless.

I want to read from a recent press release of Anne Golden:

Toronto is experiencing the strongest urban growth in the country. One in four of its families now lives in poverty, and 80,000 people are at risk of losing their homes.

Over 5,000 people a night are expected to be homeless this winter in Toronto.

At the same time, when housing is being devolved for the most part to provinces, we see a really uneven response.

I want to quote, from one province, what Ralph Klein has to say about homeless:

I've talked to a lot of these people. For the most part they're happy with their lot. I remember old Bob, the guy used to come to the race track in his barefeet, Barefoot Bob.

The point I want to make here is that we're not seeing a very even, or consistent, or realistic approach to housing at the provincial level, and I don't think the federal government can simply wash its hands of the matter. How can we sit by and watch the situation worsen, not only in Toronto but in other major urban centres as well, and in smaller communities across Canada? Do we need more stories of homeless in the street before we take action?

I visited Baltimore last month with a delegation of Canadians, Americans, and British citizens. We witnessed the immense work that has to be done to try to rebuild some of the devastated communities in different sections of that city. Many homes were boarded up, violence and drug abuse were at epidemic levels, and I was told by community development workers there that there isn't one family in their community that isn't impacted in one way or another by drug abuse, either a member of the family or someone very close to them.

We've not really seen that level of decay in Canadian communities, but how far away is it if we don't take action now?

The 1996 census reported that the number of households in need of housing assistance grew from 2.2 million in 1991 to 2.8 million in 1996. Much of the increase is in the renter population, and many of them in our major urban centres.

In Montreal, Toronto and Vancouver, close to half of all renters are paying in excess of 30% of their incomes for housing, so it's not surprising that they're just one paycheque away from being on the street. You must do something.

At their last annual meeting, the members of the Canadian Housing and Renewal Association passed two resolutions that I want to bring to your attention.

The first is that CHRA urge the federal and provincial governments to facilitate access to alternative methods of financing affordable housing, including enabling economic development, health and social funding to address housing issues, and implement appropriate changes to regulatory legislation such as the Bank Act, the tax credit system, CMHC's mortgage insurance program, and acts governing charitable corporations.

The second is that CHRA call on the Prime Minister of Canada to acknowledge the obligation of his government to provide leadership in housing, to urgently restore the leadership and, with it, the will to make access to decent and affordable housing a universal right in Canada; and towards these ends, to instruct the minister of housing to immediately initiate a country-wide process of review and consultation toward the development of a renewed national housing policy.

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There's been much debate over whether non-profit housing is more efficient than private sector housing. CHRA has done extensive work in this area, and we've found that, for the most part, over time non-profit housing is significantly less costly than private sector ventures, and in addition to providing housing, it also provides community.

Non-profit housing communities across Canada have provided supportive community environments that continue to give those lucky enough to live in them a chance to stabilize their lives, find employment, and raise their children in a secure atmosphere. But we don't have to advertise to Canadians or to the international community that we in Canada have some very good social housing communities. And I know that I don't have to try to convince you.

Mark Assad was generous enough to speak to our members at our annual congress this year and discuss with them the benefits of investing in our communities. The sad truth is this government is no longer creating any healthy communities.

CHRA has proposed the development of a dedicated fund or foundation that could be used as a catalyst to create new partnerships in housing. We know there are municipalities and community groups that would respond positively to the partnership concept. We have evidence, through our cataloguing of new ways to create affordable housing and through the home-grown solutions program, which we administer on behalf of CMHC, that such initiatives are possible.

Many other countries have brought the private sector into the provision of affordable housing through creating incentives in their tax systems. This is something Canada should look into as well.

The non-profit housing sector has been critically wounded over the past years. It's time to treat that illness and to find a new way to encourage the development of non-profit community-based and municipally based housing so the patient survives.

Federal leadership is needed. Much can be done in partnership with community groups, municipalities, and even provinces. But it will not happen without the kind of leadership that has traditionally come from the federal government. Together in partnership, Canada can again create a healthy and encouraging environment for the production of non-profit and affordable housing.

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

We'll now hear from the Learning Disability Association of Canada. Mr. James Horan, welcome.

[Translation]

Mr. James Horan (Past President, Learning Disability Association of Canada): Mr. Chairman, Committee members,

[English]

my name is Jim Horan and I've been a volunteer with LDAC for approximately a decade at the local, the provincial, and the national level, but when you get down to it, I'm just a volunteer, like everyone else who's part of that organization.

We have over three million Canadians who are learning disabled. They're just average or above-average individuals, male or female, but they experience some difficulty in their lives—reading, writing, maybe spelling, maybe mathematics, maybe social skills. But we acknowledge that if those young people and those adults and children don't have a continuum of support, what you end up with is low self-esteem, with academic failure. You end up with some difficulty. And therefore, all of a sudden they're placed at a social and economic disadvantage.

So what do we at LDAC do about that? Our cornerstone is our volunteers. We have thousands of volunteers in 140 chapters across the country, and they work every single day on behalf of those individuals who have learning disabilities. What they do is they give of their time, their money, their expertise and experience, and in some cases they dedicate their lives.

In the end, they become what I refer to as the weavers of the social fabric of our society. They're not paid, and they don't ask for much in return. But they're there to help those individuals who have learning disabilities, and individuals at risk, to simply break the cycle of failure they're in. In doing that, they maximize the personal potential of those individuals, and in doing that, they make Canada a better country.

They actually counter the forces that sometimes rip apart our social fabric. In fact, I call them everyday heroes. You don't know their names, but they're still everyday heroes, and they just work in their communities across the country, whether it happens to be in the Yukon, Newfoundland or B.C.

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It's daunting. The task they face really is daunting, because many individuals they will come across live on what's known as the fringes of our society. You see them if you happen to walk past a soup line or an unemployment line. Sometimes you see them in this very city. Just walk down to the Sparks Street Mall. Sometimes they're sitting there.

The question for me is, how did they get there? I've always asked that question. When you see someone who's really young, how did they get there? How did they get to that point in their life, being so young? It's a question that always puzzles me when I look at them. They just seem to fall into that position.

Research and experience has confirmed that early intervention really can make a difference. In fact, do you know that as many as 80% of the young people who are learning disabled have a reading disability? We know that even though a learning disability doesn't mean you're going to be a young offender, sometimes you gravitate in that direction. Heck, if you're in a cycle of failure and you can't read very well, you can't spell very well, and everyone's on your case, where are you going to go? Before you know it, you're going to end up on the fringes of our society.

Do you know that research is telling us that as many as 70% of our young offenders are also somehow tied to learning disabilities? That also means that this ends up being a cost factor for our country, a cycle of failure.

During my last two appearances before the standing committee I've talked about two things. One of them was, of course, early intervention, and we're still here talking about that, and the other one is that disability tax credit that actually recognizes that the expenses that are incurred by a parent are legitimate expenses.

I don't need to talk to you about the cuts that are happening in health care and education. Everybody is aware of them. So I'm not here to lecture on that. What I am here to say, though, is that we have lots of parents who are trapped in a cycle of failure, trapped in crises, and are somehow losing a bit of hope. What I am here to say is that parents are putting out money for tutoring, for psycho-educational assessments, for psychological therapy, and for counselling by qualified psychiatrists. Lots of expenses are being incurred by parents. I think what we're looking for is perhaps just to recognize and compensate those additional expenses.

If I'm a parent and I'm putting forth tutoring costs, if you give me some money back through my taxes, do you know what I'm going to do with that money? I'm going to put it back into tutoring costs, because tutoring doesn't happen in six weeks. Sometimes it's going to take many years for that to happen, and we know many parents are struggling.

In closing, I guess running a government is a tough job. We commend the government at this point, despite horrific problems and the difficulty in the economics. At least you're anchored by the view that we should be fully inclusive and productive. At least you're anchored in some important views. I don't think it matters what party you're with. I think in essence we all believe that Canada should be an inclusive society. In saying that, I think what we really have to do is begin to harness that potential for young Canadians.

Extension of the disability tax credit I think is an investment, an investment in families at risk, and I think either you pay now or you pay later. If you make the investment today, within the decade perhaps that investment will start paying off.

Thank you.

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

We'll now hear from the National Children's Alliance, Ms. Dianne Bascombe. Welcome.

Ms. Dianne Bascombe (National Children's Alliance): Thank you for inviting me here today.

I'm here today to speak on behalf of the National Children's Alliance. This is 25 national organizations that are concerned with the broad range of issues facing children and youth in this country. I do work with the Canadian Child Care Federation. We're one of the 25 members of the alliance.

I guess I'm here today to remind you of some of the problems facing children and youth and families in Canada today. We all want healthy children, we all want healthy families, and we all want healthy communities, but we have a big job to do because we are seeing an increase in problems for children at risk, youth at risk, families at risk, and communities at risk.

I guess with only five minutes to make my presentation today, instead of focusing on the problems, I hope we can take that as a given and move forward. I'd like to put on the table today some solutions for policy directions that we've received consensus on and have been working on in the past few months with 25 national organizations to build some consensus on what we think are some of the important policy options you could consider in the short and medium term to really make a difference for children and youth in Canada.

I guess we understand some of the challenges of the fiscal reality, and some of the measures we're recommending in our solution are short term and could and should be implemented immediately, others perhaps over the next several budget periods.

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Taken together, they do address right now some of the federal responsibilities that we feel should be an important part of a national children's agenda, an agenda that first and foremost this kind of a policy framework could offer us. We know it must go beyond the federal government and be inclusive of other levels of government and even, most importantly, the voluntary sector.

We also all know that we have to get past some of the political jurisdictional issues in order to really ensure successful outcomes for our children and youth.

In our submission today we're proposing that there be four pillars to a federal action plan that would make up a national children's agenda: we're looking at income security measures for families; we're looking at social and community supports; we're looking at a framework for national research and monitoring; and we're looking at ways to build capacity in the voluntary sector.

First, on the income security action plan, we recognize that a cornerstone of a strategy to deal with child poverty has already been laid with the national child benefits system. We support this as a beginning, but we need to strengthen this initiative. We have some very specific recommendations for strengthening the national child benefit, which include accelerating the investment. Put an additional $850 million into the national child benefit. We're looking at two instalments of $850 million in our submission, one for July 1999 and the other for July 2000, which would accelerate the investment so that we would have reached a target of $2.5 billion by the year 2000, which would make a substantial down payment on child poverty.

We're also recommending that the national child benefit be indexed in order to protect poor children and poor families from inflation.

We also believe strongly that the national child benefit should include all low-income families. Don't discriminate by source of income on the national child benefit. Perhaps consider using labour market strategies, not the national child benefit, to deal with some of the issues of low-wage employment in this country.

When we're looking at tax reform, we're recommending that you consider a national child tax credit. We're one of the very few countries that don't have this as part of their tax expenditure program. It's a progressive way to provide tax relief for families in Canada, and we would like you to consider moving it toward $2,000 per child in this country.

In concurrence with some of the words James has used, we're also recommending that tax policy be reviewed in order to assess the impact on and make some improvements for families with children with special needs.

On the employment insurance program, we're recommending a restoration to pre-1994 levels in the short term to restore the entitlement, benefit duration, replacement rate, and maximum insurable earnings. The statistics are quite clear that over the past eight years we've seen more and more of the unemployed ineligible to receive benefits and more and more shifting to use the welfare system. We would recommend strongly a restoration to pre-1994 levels.

Also, as an objective, we would ask that you consider a more comprehensive approach to parental leave, an increase in eligibility to one year—the current 15 weeks does not address what we know in the research in early childhood development—and that benefits be increased to 75% of earnings to ensure adequate income for parents who are caring for the very youngest of our children in Canada.

We also firmly believe in the importance of social and community supports to ensure that we have healthy families and healthy children who can reach their potential. We recognize the need for access to a range of social and community support services. There are urgent needs in our communities that we need to address at the federal level. We're looking for three priority areas as part of a national children's agenda. We will look for a national strategy for child care and early childhood development, a national strategy for child welfare, and a national strategy to address the needs of youth at risk. We feel that these need to be looked at in the immediate term.

We're also very interested in some of the approaches that are currently within federal jurisdiction in programs such as the community action program for children and the Canada prenatal nutrition and the nutrition program that are successfully using collaborative models of delivery, both with other levels of government and with the voluntary sector. We think that this model of program could be expanded and implemented. We're asking in the short term for an immediate investment in integrated community-based services to help meet some of the urgent needs of children and families in Canada, particularly in the areas of early childhood, child welfare, and youth at risk.

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Another area we feel could be addressed in a national children's agenda in the immediate term is national research and monitoring. There are critical gaps in the data, which make it difficult for us to adequately even track the health and well-being of Canada's children. There's tremendous potential for moving forward in this area.

We're looking for three things in the area of national research and monitoring: the development of a collaborative process at the national level to help identify a national research agenda on children and youth issues; the development and implementation of a federal coordinating mechanism for national research; and also the development of national reporting and data collection systems so that we can monitor children's health and well-being in this country.

The last of the four pillars for a national children's agenda for moving forward involves developing some initiatives to build capacity in the voluntary sector. I think that we're all beginning to learn a lot more about the power of communities and of the voluntary sector, but they have to work in concert with government and other sectors. So we need to facilitate and find ways to collaborate in order to be effective.

What we're looking for in the short term is a collaboration mechanism for the development and implementation of a policy framework for the national children's agenda. It's wonderful that there's some talk beginning on its development, but we need to move it along. You can't implement a national children's agenda without working with the NGOs and the voluntary sector, so bring us to the table sooner rather than later. Don't put us in the position to just be responsive. We're also looking for the development and implementation of a national policy and funding strategy to enable capacity building in the voluntary sector.

Another initiative that we think is very important to sort of hold the whole children's agenda together is the development and implementation of an integrated public education campaign that looks at the determinants of child health and well-being.

We're hopeful that you will seize the opportunity to provide immediate leadership in the development and implementation of the national children's agenda. I think that if you use children as the lens through which you view your policy decisions, there's an opportunity to translate good intentions into immediate action, and the children of Canada really deserve no less from all of us.

Thank you very much.

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

We'll now hear from the National Council of Women of Canada, Helen Saravanamuttoo.

Ms. Helen Saravanamuttoo (Vice-President, National Council of Women of Canada): Thank you.

First of all, I'd like to thank you very much for the opportunity to present to you on behalf of the National Council of Women. The council was founded in 1893. It's a non-profit organization with local and provincial councils and 25 nationally organized societies. Our policy is developed very democratically, and so when I speak today, I'm speaking on behalf of a very wide membership indeed. We have consultative staffers at the UN Economic and Social Council, and we're a member of the International Council of Women.

Like the previous presenter, we would like to make children the focus of the 1999 budget. We note that the number of poor children in Canada has increased significantly. The number of poor families with full-time employment has increased too.

So we are recommending, first of all, that the child tax benefit be indexed to inflation, and secondly, that the children of families that are on social assistance should also benefit. Lastly, we are recommending that part of the budget involve movement towards providing a full spectrum of services for children in conjunction with the provinces. We understand the issue of provincial jurisdiction, but we certainly hope that the federal government will maintain very strong standards when they're working with the provinces to develop these programs.

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Health care and social programs are another important area in which to maintain strong federal standards. We applaud the federal government for standing by the principles of the Canada Health Act, and we urge you to strongly continue in this area and to ensure that no more services are de-listed—in fact, to ensure that the health care services are comprehensive.

We are particularly concerned about the emphasis on health care and the de-emphasis on programs that used to be covered under the Canada Assistance Plan, and we think that it's really critical to re-establish standards here and to start funding again.

We are particularly concerned about the need for adequacy in social assistance programs and such basic rights as rights of appeal by an independent body.

Our next priority is funding for women's programs. Women's program funding has covered a wide range of programs that have given women a voice. Women represent, I think, 52% of the population. They have been underrepresented in government and in the corporate boardrooms and in the power structure of our country. It's really critical that this voice be strengthened. Over the past 10 years funding has dropped, without taking into account inflation, by 38%. This is absolutely unconscionable. Women's voice are getting less and less. We would like to support the federal government, for instance, in many of their programs, but when we write letters to the newspaper they are not published. We find it very difficult to be heard. We need this funding really badly.

We look at gender analysis, protecting seniors' living standards, social housing, and court diversion programs for young offenders. These are other priorities.

As far as tax changes are concerned, we want to recommend that, as with the child benefit, all other benefits be indexed to inflation, that the clawback levels be indexed to inflation too, as well as the tax brackets. In fact, we're getting tax increases already because of the fact that the brackets aren't linked to inflation.

We would like tax cuts, if they are to come, to come first of all for low-income and modest-income families. We think there should actually be more tax brackets in the upper ranges. We really want to support the government at present in saying that the priority is not to cut employment insurance premiums. We think this should not be a priority in any way.

Much sooner, we need the indexing to inflation of the brackets and the benefits and the cuts to low- and modest-income families.

We have made a request to present to you later in the hearings on the financial assistance task force, and you'll find in our brief a few references to this and the banking situation.

The brief that you have was written in August. Since then we have had increased market volatility and bombardment of the Canadian dollar and we are hearing more and more of threats to the global recession. What we said at the time still applies. Our brief, on page 7, talks about the need to increase the domestic economy. This really applies much more so even after the market volatility. We know the domestic economy has been stagnant for far too long, probably since the 1991 recession. If Canada is going to survive the dangers of the current global situation, we think the government must put its priorities into spending again. We are not talking about going into debt further, but we are talking about the fiscal dividend, and I think this year there still will be one.

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Also, we talked at that time of the importance of looking at controls on currency traders, and we would like to applaud the federal government in their initiative in bringing this forward. We don't necessarily agree with their solutions, but we think this is an extremely important area to address. We need to take back our sovereignty in this area.

We urge this budget to work for a really equitable distribution of income. Not only is that fair to all Canadians, but it is also very important because it is one of the factors that has been linked more closely not only with social cohesiveness, but often with better economic growth. We want this budget to emphasize employment rather than inflation controls, and we want one last measure that's very important, which is to incorporate a measure of unpaid work into the GDP.

We thank you very much for the opportunity to present.

The Acting Chairman (Mrs. Karen Redman (Kitchener Centre, Lib.)): Thank you very much.

Now we'll hear from Mr. Culpeper, president of the North-South Institute.

Mr. Roy Culpeper (President, North-South Institute): Thank you, Madam Chair, and thank you for inviting us to appear before the standing committee.

I want to make two points, which are elaborated in our submission to the committee. The first point concerns the importance of Canada's continued and credible commitment to official development assistance and the needs of developing countries. We recommend that we rebuild our ODA program, after almost a decade of deep cuts.

The second point addresses the focus of that commitment, of our ODA program, and recommends that Canadian development assistance efforts be increasingly targeted to the fundamental goal of poverty reduction.

But first, I have a very brief preamble. I was privileged over the last month to be part of a civil society and parliamentary mission to the Asian crisis countries—Indonesia and Thailand. I would be most pleased to come back with other members of our mission and talk to the committee about our findings and recommendations.

But in a word, the year-old Asian crisis indicates very clearly that development is not a linear or predictable process. Development in that region of the world has gone sharply into reverse and is being undermined in other parts of the developing world as the crisis spreads. What we're facing today is an international, global and systemic crisis of staggering proportions such as we have not seen since the 1930s. This underlies the need for Canada and other rich countries to take a much longer view of development and to increase the amount we allocate to things such as foreign aid or official development assistance.

In short, the marketplace does not cater to the needs of the poorest people or the poorest countries. Foreign aid is a vital contribution to making the world a fairer, safer and more secure place in which all of us have to live together.

My first point is on Canadian development assistance. Between 1991 and 1998, Canada's ODA budget was reduced by some 26%. This represents a decline of almost 40% in real terms. Canada's ODA-to-GNP ratio, the basic indicator with which donor countries' efforts are measured and compared, has fallen from 0.49% in 1991-92 to 0.31% in 1997-98, below the 1997 average of OECD DAC donors of 0.39%, and well under half of the agreed UN ODA target of 0.7% of GNP.

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It might interest you to know, Madam Chairman, that compared with other countries even in absolute terms, our spending has now fallen below that of Sweden. I'm talking in absolute dollars now. We only spend 90% of what Sweden spends. Sweden is a country of 8 million people. We only spend slightly more than Denmark, a country of 5 million people. We used to be among the leaders of the world in official development assistance. We are fast joining the laggards.

These disproportionate cuts to the Canadian aid budget have severely limited the ability of Canada to maintain its role both as a leading advocate of assistance for the developing world and in terms of the commitments that the Canadian government has made in a variety of international fora.

In fact, in the 1998 peer review undertaken by the OECD Development Assistance Committee of Canada's aid program, the authors conclude that the reductions in Canadian ODA raise concerns about Canada's ability to meet expectations both at home and internationally.

In terms of our recommendations on this first point, in order to ensure both the credibility of Canada's commitments to the global community and the effectiveness of Canadian efforts in assisting developing countries and addressing their own development priorities, the Canadian government must provide sustained increases to official development assistance.

What does that mean specifically in our view? Specifically, the 1998 DAC peer review, which I just referred to and cited, concludes that an increase of about 5% would be needed simply for Canada's ODA not to lose any further ground in relation to GNP growth. That's assuming that GNP growth is going to continue at foreseeable levels and not be contaminated by the global crisis. Furthermore, and again I quote from the peer review: “Even if Canada's ODA were to increase by one percentage point faster than GNP each year, it would take half a century for Canada to regain the 0.45% of GNP level” that we have not seen since the early part of this decade.

In its submission to this committee last week, the Canadian Council for International Cooperation provided a timetable for the growth of Canadian ODA that would re-establish an ODA to GNP ratio of 0.35%, which is again only one-half of the international or UN level, by the year 2005-06. But this would represent a sustained annual increase of approximately $200 million a year in the ODA budget.

My second point has to do with the focusing of the ODA program and the priority of poverty reduction in our ODA program. In 1985-86, one-third of all Canadian ODA was received by the least developed or poorest countries. By 1996, however, net disbursements to the least developed countries had fallen by 37%, and the share of aid directed to these countries had declined from one-third to 19% of total ODA, once again placing Canada below the DAC donor average of 21%.

In our recommendations, with respect to giving priority to the poorest people and countries, we say first of all that poverty reduction is a fundamental principle of Canadian aid, as outlined in both the federal government foreign policy statement Canada in the World and CIDA's own policy documents.

Canada, it should be noted, is a principal proponent of the DAC targets outlined in the document Shaping the 21st Century, including the ambitious goal of reducing by half the proportion of people living in extreme poverty in the developing world by the year 2015.

As part of this commitment, Canada is a member of the DAC Poverty Reduction Network, and is currently supporting a scoping study on practices and lessons learned among donor countries in this area. However, in order to succeed in overcoming the challenges of widespread poverty, Canada must not only increase its financial contributions to ODA, as mentioned above, but also must increasingly target these funds towards poverty reduction programming and assistance to the least-developed countries.

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Let me say in conclusion, particularly since I'm in the good company of colleagues who are mostly focused on domestic welfare and equity issues, that a caring society that puts emphasis on the needs of the poorest and most vulnerable people must begin at home, but it doesn't end at home. Poverty travels, often without a passport. Disease, terrorism, regional instability and conflict are things that cannot be contained within boundaries. It is in the interests of all Canadians to contribute towards equitable and sustainable human development throughout the world.

Thank you, Mr. Chairman.

The Acting Chairman (Mr. Roger Gallaway (Sarnia—Lambton, Lib.)): We'll go to questions.

Mr. Epp, please.

Mr. Ken Epp (Elk Island, Ref.): Thank you, Mr. Chairman, and I thank you all for your presentations.

It certainly underlines for me the fact, I guess it is, that there's a vigorous competition for what governments should be doing and where they should be emphasizing. We have, I suppose, an ongoing stream of people here who are giving us probably enough ways to spend Canadian taxpayers' money that we could spent about 300% or 400% of it.

If the other members of the committee are like me, being somewhat of a soft-hearted guy, I would like to say yes to everybody. Unfortunately, the reality prevents us from doing that because of the limitations of the amount of money pool that's available there. But you've come up with some very interesting ideas, and I appreciate that.

I'd like to pose my questions in the order in which you spoke, so the rest of you can relax while I start with Sharon Chisholm of the Canadian Housing and Renewal Association.

I'm of the belief that right now the various levels of government do in fact spend a great deal on public housing. I'm certainly aware of the fact that in my home province of Alberta the municipalities spend large amounts of money, and I know specifically that in the city of Edmonton there's a great deal of money spent.

Do you have statistics to show that the amount of support for housing for those people in need has gone down? Is that your contention?

Ms. Sharon Chisholm: In Canada, until 1995 we were building social housing for the prior 20 years, including in Alberta. There was a fair amount built in Alberta. That's why there's an existing bill in Alberta for that housing that was built up until 1995 for which mortgages are still being paid down. But since that time there has been nothing new built, and that's where we see the problem; that's where we're beginning to see people on the street.

I know you have very significant problems in Alberta. I was called out there, and the provincial minister, Iris Evans, was very concerned about trying to find solutions for towns in which jobs were being created and people were moving out and there was no housing for them, and there was no way with the kind of salaries that were being paid by those newly created jobs that anyone could ever afford housing in that province. So there's a significant problem there in some of your urban centres, certainly in Edmonton.

The moneys you're talking about that are being spent are moneys that were committed in the past. There is nothing new being committed in Alberta. In fact, I know that some of the existing commitments are being forced to be sold off so that there will no longer be mortgages paid off there.

We're saying that in a country like Canada, with the resources we have in Canada, there should be some new dollars put into housing. There are no new dollars put into housing now by the federal government or by most provinces, including Alberta. There is some activity in British Columbia and Quebec in terms of new dollars, but that's pretty well it.

Mr. Ken Epp: One of the points in your presentation was that we should encourage private sector involvement through tax reform. As you probably know right now, the GST, for example, is a tax that causes some problems for builders, and there are other taxes. Do you have any suggestions for specific tax reform to encourage private enterprise builders to build social housing?

• 1620

Ms. Sharon Chisholm: The evidence we're looking at is the kind of tax credit system in other countries, such as the U.S., where there is an incentive for the private sector to make contributions toward continuing non-profit housing projects in their communities. So they match themselves up with projects in their communities that they want to be part of, make an investment and get a tax credit for that. That is a little different from the kinds of complaints we hear from developers—I'm not saying they're not legitimate—in terms of GST, development levies and everything else.

A study was done in Toronto to look at whether there was a possibility that by reducing or eliminating GST and some development and educational levies, those developers could then create non-profit and affordable housing for the people who needed it. In fact, they couldn't and still needed some significant input of dollars.

So we're not recommending those kinds of cuts on the private sector side; we're recommending that the private sector be encouraged to work in partnership with community groups, and that encouragement would have to come through the tax system so a credit would go back to them.

Mr. Ken Epp: Okay. This raises a very interesting question. One of the areas where the government has made a positive change is that in the last couple of years it has quite dramatically increased the percentage that can be used for charitable donations. There are charitable organizations, such as the one Jimmy Carter was involved with, Habitat for Humanity. You'd think with that kind of incentive and a little bit of publicity involved there would be a lot of money, and a lot of people would be ready to support that. Businesses can donate materials and claim a tax credit on that now. Really, the government is almost bending over backwards to permit that kind of thing.

I'm just wondering whether that is sufficient or whether you're still asking for more than that.

Ms. Sharon Chisholm: I don't see where the government is bending over backwards on that, and I certainly don't think it's sufficient.

I am part of the advisory committee to the Canadian Centre for Public-Private Partnerships in Housing through CMHC, and we have been trying over the last four or five years to encourage the private sector to come forward with contributions, equity, and the partnership approach to getting affordable housing started in communities. So far we have had relatively little success.

But it's my belief that they will come forward when they can do it in partnership with a tax credit. There need to be incentives if we really want to see them enter the market. With Habitat for Humanity there might be small contributions, or whatever, but it's a small amount of housing that's built in comparison to what we need in the country.

Mr. Ken Epp: Of course, they emphasize the volunteers coming out to actually do the physical work. It's a great community effort. I've seen it work and it's really wonderful.

The Acting Chairman (Mr. Roger Gallaway): Last question.

Mr. Ken Epp: Now, Mr. Chairman, the other guy was giving me ten minutes; you're cutting me off at six.

The Acting Chairman (Mr. Roger Gallaway): You'll have another opportunity. We're running a little late.

Mr. Ken Epp: I guess now I pay the penalty for what I said earlier today.

I'll go to the next one, then, learning disabilities. Here's another area in which I have a great deal of empathy, since I have a sister whose learning disability is almost total. She's severely handicapped and does not speak, so she needs total care. It's not the type of thing you're looking at, but it certainly gives me a perspective on people who have special needs.

I was very interested in what you were saying here. There's no doubt there are many Canadians who have learning disabilities and other factors in their lives that hold them back. There's no doubt we could do more.

You're proposing, as I understand it, a federal involvement in this. I would just challenge you to think about whether or not this is really provincial jurisdiction and whether we could do better as individuals pushing this issue at politicians who are maybe a little closer to us. I don't know whether you feel that, but I know in my part of the world Ottawa is very distant, and the general thinking is that given a little bit of freedom and some tax incentives we can do very well in this area ourselves, so please keep Ottawa out of it instead of just having them tax us to death.

I'd like your response to that.

• 1625

Mr. James Horan: Sure. I think it's working in partnership, and that's what you get down to when you look at my model. You already have parents making investments in their children. In essence, what you want to do is give them a helping hand. I think the best way to do that is to look at it from a federal perspective.

Mr. Ken Epp: When you mention a disability tax credit, right now it's somewhat limited in the sense that the person has to be really quite severely disabled. Are you suggesting that be extended to people whose disability is much less and much less obvious?

Mr. James Horan: It may be less obvious, but at the same time it could be really destructive in that individual's personal life.

For example, did you know a simple psycho-educational assessment costs between $800 and $1,500, depending on where you live in the country? For a lot of parents that's a tremendous amount of money because they can't get it from the school system, in some cases. They cannot get it from their employer because of the way the benefits work.

We're saying if a parent were in that position and had to actually go out and pay the $1,500 for a psycho-educational assessment, the government should consider it to be a good investment. We know from a psycho-educational assessment you can get a tremendous amount of information that can be given to schools and counsellors about that young person.

Do you know, Mr. Epp, that it costs $100,000 to keep a young offender incarcerated? That's what we're paying right now. It's incredible. That is from Andy Scott. Every year we're paying $100,000 for a young offender and that is incredible. The federal government is paying that. Someone has to pay for those young offenders.

I'm just saying let's somehow help these parents who are basically in a cycle of risk. Parents are paying for tutors every single week out of their paycheques, after taxes. We're saying let's give them back a little bit so they can maybe pay the tutor next year.

Mr. Ken Epp: When you say give them back a little bit, are you thinking, for example, of making these actual bills tax deductible on presentation of a receipt?

Mr. James Horan: Yes. We're talking about a very specific framework. We aren't talking about something that's going to be wide open. My goodness, that's the last thing anyone wants. We want something in a very specific framework to help those who are truly in need.

Mr. Ken Epp: My ten minutes is up and I'm going to have to quit, right?

The Acting Chairman (Mr. Roger Gallaway): You're at minute 11, actually.

Mr. Ken Epp: No, it's 24, but anyway....

The Acting Chairman (Mr. Roger Gallaway): Mr. Desrochers.

[Translation]

Mr. Odina Desrochers (Lotbinière, BQ): I would also like to thank all the participants who came to present their points of view this afternoon, and to tell us how the budget surpluses should be used.

Ms. Bascombe, when you spoke of improving income security through the Employment Insurance program you said that between 1996 and 1997, the number of maternity leave benefits had decreased by 7%, whereas the number of births had decreased by 2 percent. Do you have more precise figures to give us? Where did the 5% of recipients go for help?

[English]

Ms. Dianne Bascombe: I believe there was nowhere for them to get assistance while they were on maternity leave. Certainly the figures came from the Canadian Council on Social Development, and it would have more details to back that up.

[Translation]

Mr. Odina Desrochers: If they were unable to receive assistance, did they go and knock on the provincial door to obtain social assistance?

[English]

Ms. Dianne Bascombe: It's possible. I don't believe we have the type of data tracking that enables us to track individuals while they're on maternity leave, but many people do not have the level of support they need.

[Translation]

Mr. Odina Desrochers: Would you like to see us return to the old Employment Insurance system?

[English]

Ms. Dianne Bascombe: We're saying two things need to be done. In the short term, we think it would be very helpful if we went to pre-1994 levels of entitlements and benefits, before some of the cutbacks occurred. Second, we think there should be a more comprehensive review of parental leave programs.

[Translation]

Mr. Odina Desrochers: Do you have suggestions to make to us? You spoke about returning to the old system. Could you explain what Employment Insurance could do to address the gaps that exist at this time, and help those who take parental leave?

• 1630

[English]

Ms. Dianne Bascombe: It would be particularly in the area of who is entitled to receive maternity leave. The pre-1994 regulations were more generous. More people were eligible than are eligible today. There was also a cutback from 60% to 57%, and today 55% of insurable earnings are payable for parents when they're on parental leave. So that's one area that could be improved immediately by returning to 57% or 60% of earnings.

[Translation]

Mr. Odina Desrochers: I have one final question, a short one, Mr. Chairman, as time is passing and I would like to allow others to opportunity to speak.

You say that the federal government should introduce a policy for children, but without support from the provincial level. Does this request fall within the provisions of the Constitution at this time?

[English]

Ms. Dianne Bascombe: I believe it is. Certainly, we don't want to have a discussion on constitutional issues today. But we do believe that in order to address the needs of children and families in Canada, we need to have a collaborative framework with the federal government, the provincial and territorial governments, and with the non-governmental and voluntary sector in order that we can meet the urgent needs of children in Canada.

[Translation]

Mr. Odina Desrochers: Thank you, Ms. Bascombe.

Thank you Mr. Chairman.

[English]

The Acting Chairman (Mr. Roger Gallaway): Merci.

The next questioner will be Mr. McKay.

Mr. John McKay (Scarborough East, Lib.): I want to address my question to Ms. Chisholm. It's with respect to the last paragraph in your statement where you say that CHRA is not advocating a return to the one-size-fits-all approach.

This government goes through a lot of angst about devolution of authority, etc. We've entered into agreements with a number of provinces with respect to forms of social housing. We are running into a very significant difficulty in the province of Ontario with respect to how that is to be managed, subsidized, dealt with etc. Would you advocate the development of direct relationships between the federal government and the municipalities?

Ms. Sharon Chisholm: A fast answer to that would be that I would like to see more direct relationships between municipalities and the federal government. Many of my members are municipalities, and many cities have decided either to set up a housing department and to build their own non-profit housing when federal programs were available or at least to set up a policy division so that they can help community groups within their communities with non-profit housing. That's been an incredibly successful approach. There have been situations where provinces have helped in developing partnerships between the federal and municipal governments, but that hasn't been consistent.

In my experience in housing, the breadth and depth of knowledge in terms of housing policy and what to do and how to do it has been learned at the federal level, and to try to re-create that in all these jurisdictions across the country is, in my view, counterproductive to getting the job done. I see people who need to be housed.

I understand from my members that the problem of homelessness and of people who are not able to afford to pay for their housing is felt most significantly at the municipal level. So the municipal politicians are left with this incredible problem, they're hearing about it from all sides, and they no longer have any tools to deal with it. A few years ago they would be able to set up their own corporation and to access a federal program that would help them. They don't have access to that any more, so they're throwing their hands in the air and saying, how are we supposed to deal with it from our own tax base? We don't tax in the same way the federal government does. How can we do it?

Mr. John McKay: Our sense of it here is that particularly the Government of Ontario, with its philosophical predispositions, we shall say, would dearly love to simply walk away from this issue and, to put it not too delicately, to say let the homeless people take care of themselves. Is that an accurate reading from the standpoint of your association?

• 1635

Ms. Sharon Chisholm: Well, I think they have said they want to get out of the business—I'm just quoting what they've said—and we haven't really seen a turnaround in that viewpoint, although you might want to read it a little more optimistically and say they have set up a task force now to look into homelessness and how it might be dealt with. But it's a small task force; we haven't heard a thing from them yet. We're hearing already from Metro Toronto that the situation is incredibly bleak. I'm sure you've read about it in the local papers, in the Toronto Star and the Globe. Action has to be taken now.

Mr. John McKay: It's a typical reaction to Anne Golden's task force on homelessness. It's a collection of parliamentary secretaries; they're all bought and paid for.

Ms. Sharon Chisholm: Yes.

Mr. John McKay: I wanted to be sure that was the sense you have, that they're not—

Ms. Sharon Chisholm: My numbers.

Mr. John McKay: Okay.

I have one small question for Mr. Horan, and it's with respect to the $100,000 it costs for a young offender. I've read that statistic before, and I know it's twice what it is for an adult offender. I've never been able to figure it out.

Why is it young offenders cost twice the amount of money as an adult offender?

Mr. James Horan: I think a lot of it has to do with.... When we're looking at young offenders, there is always an element of therapy, of actual counselling, that hopefully will take place with those young offenders in that facility, and in doing that you're going to have to spend quite a bit more on that kind of specialized service, which is quite costly. I think that is probably tied into it; at least that's the feeling we're getting. That number is tied directly to that extra kind of specialized service.

Now, in some cases in the country it's not quite $100,000; it's quite a bit less. What we're finding is that perhaps some of those young people aren't getting that specialized therapeutic counselling they may need to turn things around for themselves.

Mr. John McKay: Thank you.

The Acting Chairman (Mr. Roger Gallaway): Thank you, Mr. McKay.

Mr. O'Brien and then Mr. Riis.

Mr. Pat O'Brien (London—Fanshawe, Lib.): Thank you, Mr. Chairman.

Following on my colleague Mr. McKay, who just spoke, I too have a couple of questions for Ms. Chisholm.

The first relates to something a number of us feel strongly in support of, and that is the idea of the federal government setting up administrative agreements directly with co-ops, where we have the authority to do that. I've heard from constituents of mine in London, Ontario, that they're very interested in such an opportunity. I wonder if you could comment on that.

Ms. Sharon Chisholm: Sure.

When Mr. Martin announced in his budget a few years ago the federal government would be passing administration of the existing social housing portfolio, including co-ops, on to provinces, it also said CMHC would have the ability to negotiate with community-based groups who could take over the management as well, and sort of weigh out the options.

At that time the co-operative housing sector as well as the community-based sector that I represent came forward with management proposals. We felt we could just as efficiently, if not more efficiently and more sensitively, take on the administration of the existing portfolios, and in that way we would keep it tied together across the country as opposed to starting to chop it down. We were all concerned with the risk of some provinces trying to sell off, and we see that happening. That is happening; there's no question about it. We're losing the stock that we all, as Canadians, bought and started to pay for.

So the co-ops came forward with a proposal—I think it was a decent proposal—and both sectors felt that neither of our proposals were really fairly considered. In fact, what we've been told is that the offers would be made to the provinces first, and if those offers failed they would come back and look at other potential ways of administration. So in fact they've been put to the back burner, and I don't think that was quite fair, nor was it the intention that was originally in place.

Mr. Pat O'Brien: Thank you.

Mr. Chairman, I'm not a lawyer like my friend and colleague Mr. McKay, but I did have 11 years in municipal government. It seems to me it's not as easy to bypass the provinces in a federal-municipal agreement, the municipalities being creatures of the provinces, or whatever the legalese is.

I wonder if you'd comment on Mr. McKay's earlier question. Am I seeing the problem as being greater than it is? What's your perspective on that question?

• 1640

Ms. Sharon Chisholm: I agree with you that it's very complicated. In Canada right now, we've put ourselves in a position in which the provinces are spending a good deal more of the money that we collectively bring together in taxes than they used to in the past. The more they spend, the more they want be in control of the spending. The federal government has put itself in a position where it's legislating less and is spending less. I think it's a dangerous position to be in.

Just to bring it right back down to housing, all I know is that in the past, municipalities were able to take action. Right now, they're not. The reason they were able to do so before was that we had a federal government that showed leadership, that came up with an innovative community-based program that municipalities could see would work well for them and enable them to do integrated housing within their own communities. Their constituents wanted it, the residents wanted it, and it worked, but they're no longer able to do that.

Mr. Scott Brison (Kings—Hants, PC): What year was this?

Ms. Sharon Chisholm: That was until 1995.

Mr. Pat O'Brien: I was with you until that last statement. I wish it was as easy as a lot of us wish it was to bypass the provinces. The problem is that in my experience it's much more complicated when you try to do it in practice. It has always been much more complicated, both prior to 1995 and post-1995. So, frankly, I don't understand that criticism. I'm open to criticisms of our government, but I don't understand that one. My time in municipal government was 1982 to 1993, and it was very complicated to bypass the provinces in any direct way, federal to municipal. That's how it was in the province of Ontario anyway.

Can you clarify your comment?

Ms. Sharon Chisholm: From a housing perspective, Mr. O'Brien, until recently, it was possible for municipalities to have some direction.

Mr. Pat O'Brien: With the agreement of the province, though.

Ms. Sharon Chisholm: Not necessarily.

Mr. Pat O'Brien: Well, that's interesting.

Ms. Sharon Chisholm: In many cases it was through a direct relationship with their local CMHC offices, and in some provinces it was through the province.

Mr. Pat O'Brien: Frankly, CMHC is seen by some MPs—me and possibly some colleagues of mine on our side—as the problem in terms of administrative agreement. Some of us wonder whether they want the federal government to pursue that. Do you have any comment on that perspective?

Ms. Sharon Chisholm: Whether they want the federal government to pursue...?

Mr. Pat O'Brien: Direct administrative agreements with co-ops, whereby we can—

Ms. Sharon Chisholm: Oh, on the co-op scene. Well, the evidence seems to be that CMHC is negotiating first with the provinces. Secondly, on the back burner, there is the proposal from the co-ops.

Mr. Pat O'Brien: But you're not aware of any feeling at CMHC that they don't want our government to proceed in that regard at all? Or are you aware of such a feeling?

Ms. Sharon Chisholm: I'm not aware of it, no.

Mr. Pat O'Brien: All right.

Thank you, Mr. Chairman.

The Acting Chairman (Mr. Roger Gallaway): Thank you, Mr. O'Brien.

Mr. Riis, please.

Mr. Nelson Riis (Kamloops, Thompson and Highland Valleys, NDP): Mr. Chairman, in my previous life, I also spent time in municipal politics. I know that in the city of Kamloops we had a number of developments directly with the federal government. The co-op housing movement was essentially direct, and a lot of native housing was also direct funding. We put together I can't imagine how many developments, but there were probably fifteen to twenty for a city the size of Kamloops, and they are actually the showpieces of the city these days. I think there's a stigma sometimes attached to social housing, yet I can say they're the best housing complexes in our city, bar none. Unfortunately, they're not happening any more. There is some native housing, to be fair, but that co-op housing program done directly with CMHC was remarkable.

I think it's time we revisit this. Without sounding preachy this afternoon, I think it's fair to say most people—in fact, I would say everybody—would agree that food, clothing and shelter are three fundamental rights of being a citizen of this country. Yet when I hear people like Sharon say 20% of the homeless in Toronto are children, just the spectre that is being created....

I suspect there's not a municipality in this country that isn't having difficulty with homeless people or people who simply can't afford decent housing. It is a growing crisis. As a federal government, I don't think we can ignore this and say it's somebody else's responsibility, because they're obviously not able to deal with it properly.

My other point is that if there's one thing that distinguishes Canada from a lot of other countries, it's the fact that we actually believe in providing equal opportunity for people, which brings me to Mr. Horan's point. When you consider parents who are raising children with learning disabilities, and when you think of the additional expense, which is only one of the challenges that family will face, it seems to me that we would do whatever we could to provide an equal opportunity for those children and those families. You provided at least a modest proposal in that respect.

• 1645

When it comes to the other issues relating to children, in 1989 we unanimously passed a motion in Parliament saying that we would eradicate child poverty by the year 2000. We're getting awfully close to that date. I suspect that as we tour across the country, we're going to continue to hear that the situation has not only gotten a whole lot worse but is getting worse every day. This whole issue of child poverty seems to be something that we, as a country, simply can't afford to ignore. And I don't say we're ignoring it, because there have been steps, to be fair. But we certainly are not taking it seriously.

As our friend from the North-South Institute reminds us, this is a global issue, and we have challenges to meet internationally as well. Consider that there are countries where they don't have child poverty. We were talking earlier about what countries do in terms of parental leave programs. Well, in many of the Nordic countries—and maybe all of them—if a family has a child, the mother has one year's leave at 95% entitlement. After that one year, the father has up to six months' leave at 95% entitlement. In other words, they put a priority on parents being with those children in those formative years. Here, we make it almost impossible for people to take any time off at all.

We're not short of examples on what to do. You folks have provided us with all sorts of things just in this presentation this afternoon, and we'll hear more in the next three or four weeks.

It comes down to what our priorities are. I think it will be a real test for us, as a committee, to decide if the priority is giving a tax break to upper-income people so that they tend not to go to the United States—that may be a priority—or if it is to deal effectively with providing for these young children in whatever way. I see this as certainly a real ethical dilemma that we face. What does it say about the morality of a country that can afford to do it, but will not address seriously the issue of child poverty and child homelessness? It really says a great deal.

I don't have any particular question. As I say, I don't want to preach, particularly. I just felt this provided an opportunity to say a few things that I think will help us in our deliberations ahead.

The Acting Chairman (Mr. Roger Gallaway): Ms. Saravanamuttoo.

Ms. Helen Saravanamuttoo: You're quite right. Since 1989, the number of children living in poverty has increased by 58%, according to Campaign 2000 figures.

The Acting Chairman (Mr. Roger Gallaway): Thank you.

We'll move on to Ms. Leung, followed by Mr. Brison.

Ms. Sophia Leung (Vancouver Kingsway, Lib.): Thank you, Mr. Chairman. My first question is to Ms. Chisholm.

I believe the government is trying to work with the private sector in different ways. As a matter of fact, I saw a finished product in B.C., which is where I'm from. You probably know more than I do about the CMHC, but I was involved in the opening, and it was a very successful example. CMHC was sort of the mortgage guarantor and involved the private sector. This was not for low-cost housing, it was for housing for seniors.

I wanted to call your attention to this because I am very interested in social housing, so I think this kind of example is excellent. If I had more time, I'd like to see one built in my riding. I think it's something we should continue, and you can pursue that.

Ms. Sharon Chisholm: Thank you for bringing that up. I think that's through the work at the public-private partnership centre, which has certainly been able to provide some tools, such as mortgage insurance. That's a great system that we have in this country. There are a lot of terrific things that CMHC has done since the war years, and one of them is mortgage insurance. It's an incredible tool, and it was able to get quite a few projects started across the country.

We on the advisory committee are pushing CMHC to make that tool available for even more innovative projects and more low-income projects. If you're housing really low-income people, there's always a bit of risk. We're pushing to get that mortgage insurance extended, though, because I think it can be quite effective.

• 1650

Ms. Sophia Leung: Thank you.

Mr. Horan, I'm quite sympathetic to the needs of learning-disabled children or adults. You do request to have a disability tax credit. But don't you think you also need more supportive educational programs? They're linked.

Mr. James Horan: I think you're right. It's interesting that at the time Jim Peterson was in the chair, we were desperate to provide some educational materials for families at risk. The government also saw the need, and we collaborated and actually brought that forth. The next year we saw that need grow for very young children and their families. Again, the government collaborated and put something together from an educational point of view, which we could use when working in the communities, and we've actually been quite successful in that area.

Right now we're into literacy, and we are starting something called Project Success, which is a national tutoring program to help young Canadians at risk, and we don't have government funding. I remember that a couple of years ago Jim Peterson said to all of us around the table, “What are you yourselves going to do?” We took him up on that challenge. It didn't matter what party he was from, we just took him up on the challenge. We've actually started a national tutoring program, with just two pilot sites. We didn't ask for government money. In fact, we've gone to corporations and to private individuals. Again, the educational component is essential.

I think there are a whole lot of pieces to the puzzle, and today I presented just one piece. But thank you for again reminding us that there are lots of pieces that kind of go together.

Ms. Sophia Leung: Dianne, you presented a very thoughtful list in the summary of actions. I just wonder about one part, and that is the social and community support. I'm pretty sure that in different communities in different provinces there must be a lot of plans already in action. Perhaps there's a lot of overlapping. I think the integration of services is probably more important.

Ms. Dianne Bascombe: That is really one of our points in looking at integrated community services. We have 25 large national associations that work with children and families in a broad range of services, and we're seeing that struggle at the community level to try to provide integrated children and family services and to try to break down the barriers, both jurisdictional and departmental, at three levels of government. And, boy, is it tough!

I think that's why we're asking in our proposal to you today that the federal government take some leadership in going forward with a national children's agenda. We need some help to get into a position where we can adequately integrate services at the community level.

Ms. Sophia Leung: We have a project in Vancouver, which we call a window of learning. It's very integrated, but it's costly, and we're working on that.

Ms. Dianne Bascombe: Yes, there are some spectacular success stories at the community level. But we even need to use our national policy and infrastructure to tell people about the success stories, to look at the best practices, to communicate how to do it, and to provide some tools and capacity for communities that are trying to do this.

Ms. Sophia Leung: I have just one last question.

The Acting Chairman (Mr. Roger Gallaway): Ask it very quickly.

Ms. Sophia Leung: Okay. Helen, I just want to congratulate you as the president of the National Council of Women. You know we are making progress in Parliament. Twenty-five percent of the MPs are women, and you can lobby all of us. We'll help you.

Ms. Helen Saravanamuttoo: Thank you. We really appreciate it. We must continue to increase that until it's at least 50%.

Ms. Sophia Leung: I'm glad you picked up on the point.

The Acting Chairman (Mr. Roger Gallaway): Thank you. That's the second political speech I've heard here this afternoon.

Mr. Brison.

Mr. Scott Brison: Thank you, Mr. Chair.

That was a good segue to my intervention, because our Progressive Conservative Party was the only party to achieve gender equality in the House of Commons after the 1993 election. It's an achievement we're very proud of, although the transition was a bit painful, as it is with all dramatic social change.

Some hon. members: Oh, oh!

Mr. Scott Brison: Thank you very much for your presentations today.

• 1655

I have a couple of questions for Ms. Saravanamuttoo. You stated you'd like the budget to focus on employment as opposed to inflation, or at least increases. You also stated that EI premiums should not be reduced. There is quantifiable evidence that demonstrates that high payroll taxes—direct taxes on the cost of the input of labour—lead to higher rates of unemployment. You obviously recognize the importance of growth in employment and decreases in unemployment. Isn't that inconsistent with the position on EI premiums?

Ms. Helen Saravanamuttoo: I don't believe so. First of all, we're talking about employment versus inflation; we're talking about interest rates here. We know that Canada does not have high payroll taxes. I have the reference here if you don't believe me, but we know they are less than those of the U.S., for instance.

We also know that if we lower payroll taxes, it is a less equitable way to redistribute income. We know that the upper-income people gain more from payroll taxes being lowered than they do if we, for instance, make the tax system for individuals more equitable, less regressive.

We're looking at employment versus inflation, and I don't believe high payroll taxes are job killers. I think if low- and moderate-income people have more money in their pockets to spend, then there will be more employment.

Mr. Scott Brison: You are comparing the Canadian and the U.S. economies, which have a number of structural differences. We have a number of structural impediments in Canada that reduce our productivity as Canadians, reduce our levels of employment, and reduce our economic potential. Tax structures are one of those, but most of the economic evidence I've read indicates fairly unequivocally that the payroll taxes are a significant impediment to job growth. It does bear a certain amount of logic, based on the cost of input. Also, the U.S. comparison does not contain the Canada Pension Plan increase, which has been 70%.

In any case, I wanted to at least plant that seed and address my concern that if we are serious about reducing unemployment, raising or maintaining egregiously or unnecessarily high payroll taxes may not be the best way to do that.

Ms. Helen Saravanamuttoo: But they aren't high compared to—

Mr. Scott Brison: If you take CPP, they are.

Ms. Helen Saravanamuttoo: In fact, the European countries have significantly higher social security taxes. We have a real competitive advantage in our health care that really helps our employers a lot. We have good community support and a well-educated workforce. These are the things, in the longer term, that will increase investment in communities and generate really good-paying jobs.

Mr. Scott Brison: We had a health care system. It's not quite what it used to be, I would argue. That is part of the issue now, given the fact that we are losing a significant number of our best and brightest young people, including 80% of the Waterloo computer science graduates, to the U.S. each year.

We could take every politician in Ottawa and stand on the border and pontificate about the benefits of staying in Canada, but people would still leave if the economic reality were that they could prosper more elsewhere. We are losing an awful lot of good young people.

• 1700

Ms. Helen Saravanamuttoo: That may be true, but we are also attracting young people. People come back to Canada later—

Mr. Scott Brison: To retire.

Ms. Helen Saravanamuttoo: No, they quite often come back earlier to take part in the workforce. I think we have to look at rebuilding our public sector so we do attract people. We have to look at doing good research here. We have to look at all these other areas where the federal government has fallen by the wayside over the years—over the Mulroney years, for instance.

Mr. Scott Brison: We seem to have paid a price. Not everybody who's been involved in those kinds of activities has—

Ms. Helen Saravanamuttoo: It has continued during the Chrétien years.

Mr. Scott Brison: In any case, one of the issues in terms of the global economy, and one of the suggestions that I've read recently by Jeff Garten—who is currently head of the management school at Yale and was under-secretary of commerce under Brown in Clinton's first administration—is that there be a global central bank. This global central bank may be with some type of expanded G-8 to maybe G-15 countries. I'd be interested in your opinions on that.

Mr. Culpeper, it's very interesting that in your paper you mentioned the reduced commitments to ODA in Canada, but you didn't really address the increased role the NGOs have played over the past several years. I understand the NGOs have played a greater role than they have in the past, and in fact have done a fair bit.

You also didn't mention trade and trade's role in improving the lot of those in developing countries and providing access to the levers of economic development and growth. I'd be interested to hear from you on that. Then I have a question on early intervention and head start, which I'd like to get some feedback on.

Mr. Roy Culpeper: Thank you. On global central banks, I'm tempted to quip that we already have a global central bank; it's called the U.S. Federal Reserve, and the governor is Alan Greenspan. Earlier this week, the markets all over the world were on tenterhooks waiting to see how the Federal Reserve would move, and when it did markets reacted.

But more seriously, I think we're actually moving in the direction of having one central bank and one currency. A lot of countries in the world are “dollarized”, such as Argentina and Hong Kong. There's all this talk about currency boards. It basically transfers sovereignty over monitory policy to the country that has the right to issue that currency.

Mr. Scott Brison: Arguably, in a post-Cold-War environment, where the nation state is becoming less and less relevant in some ways and the national security is not being considered as important, for instance, as human security, that may not be a bad thing to embrace, if we can avert some of the disasters that have occurred.

Mr. Roy Culpeper: It would be desirable if the global central bank were democratic, accountable and transparent.

Mr. Scott Brison: Yes, you're right.

Mr. Roy Culpeper: I'm afraid the drift of central banks and the central banking policy over the last ten years has gone in exactly the opposite direction. We've set up central banks as almost gods in our society, completely out of reach of human contact, finance committees, finance ministers and so forth. I would be very apprehensive about creating a global central bank that was not democratic or accountable.

The Acting Chairman (Mr. Roger Gallaway): Ms. Saravanamuttoo.

Ms. Helen Saravanamuttoo: Thank you. I think it's really important that we look at the way the Bretton Woods institutions have been incapacitated and are no longer effective. I think we need to look at new ways.

I really support Roy in saying we need these organizations to be accountable and open. In 1994 I was at an international conference, and there was a big movement then that 50 years was enough and we should abolish the World Bank. It was very interesting. After that we did have a change of leadership there, and we have certainly more looking at the effect on communities.

• 1705

As far as the banking is concerned, we have the Bank for International Settlements in Basel coming out with policies, and very seldom have people even heard of this organization. I do agree that Greenspan has had the major effect, but this is incredible.

Mr. Scott Brison: Arguably, there has to be a rethinking of a lot of these, as you mentioned, the Bretton Woods agencies, because they were formed in a very different global environment than exists now. For instance, you're right that the World Bank under Wolfensohn has, I think, improved significantly and has demonstrated some improvement.

I have one question, again—

The Acting Chairman (Mr. Roger Gallaway): Mr. Brison, could you make this question your last one? Thank you.

Mr. Scott Brison: Thank you very much, Mr. Chairman. You're way too kind.

On an early intervention or a national head start program—and I think this ties into youth in high-risk situations and it may tie into youth with learning disabilities—you were mentioning the young adult literacy programs. If we had early intervention and head start, maybe we wouldn't need young adult literacy programs at some point in the future.

Last year the government spent $2.5 billion on the Millennium Scholarship Endowment Fund, which is aimed at improving access to higher education, and ultimately, when it's implemented, it will benefit 5% of students seeking higher education.

At that time and since that time, I have been saying that I would prefer to see that in an early intervention program or a head start program. If we are going to maximize societal investment, I think the best place to start is early, even before the age of three. Most of the studies have indicated that, with a one-to-seven ratio of return.

In any case, I would like to hear some of your feedback on the benefits of early intervention and what you would suggest to a federal government that has made decisions to reinvest, but chose post-secondary education to start. How do you feel about that, and where would you have made that investment?

Ms. Sharon Chisholm: I don't think you can do one and not the other.

Early intervention is incredibly productive, and finally Canada has launched a national longitudinal study that will let us know the cost-benefits of early intervention over the years.

But in launching that, there was a lot of research done in other countries, and what they found was that minimal amounts of intervention in the earliest years of a child's life cause huge benefits when they become teenagers—and this is when they get to the incarceration age. They're better able to deal with stress. There are far fewer teenage pregnancies. They get through school.

They didn't show that there were major changes in how they performed at school, because I think the school system would have to change in order to bring children with different abilities all up to the same level. But where they did see the difference was in how they coped with life as they got older. We know ourselves that by keeping one kid out of trouble and then giving them the opportunity to get an education, which I think has to go hand in hand with that, we save a lot of money down the road.

So early intervention is incredibly important; I think we would all agree with that. CHRA is a member of Campaign 2000, and we strongly support what they have to say on that.

Once you get to be a teenager, you have to have a sense of hope that you're going to be able to participate in the economy in Canada; and if your parents are making minimum wage or slightly better than it, there's not much hope of that. So I think you need both.

The Acting Chairman (Mr. Roger Gallaway): Thank you.

I think Mr. Horan wanted to say something.

Mr. James Horan: I agree. I think you have to have both. It's essential that you have a parallel system for a while.

I don't think anyone around the table disagrees that you have to have some really early intervention. There is all kinds of research that substantiates the payoffs for early intervention. Once you have that early intervention, there are payoffs at the other end.

On the flip side, you also always have to provide opportunities for young people, much as you were indicating, that there will be hope. Somehow, right now, we do have a generation of young people who are between 16 and 24—and you don't have to look very far to find them—who really have run out of hope right now. In some ways, what we have to do is ensure that they, too, get a piece of it.

So there is more than one piece of the puzzle or an and/or situation. Rather, what you have to do is look at the spectrum and say, okay, let's make some investments here, and then let's make some investments here for a while.

The Acting Chairman (Mr. Roger Gallaway): Okay, thank you.

Ms. Bascombe.

Ms. Dianne Bascombe: One of the key pillars we have in our strategy is the need for a national program of child care and early childhood development. For all the reasons we're learning, with the new brain and neurological research that's coming out, looking at the importance of 0 to 6 years of age, that gives us all the backing we need to move forward on something like this.

• 1710

I would also caution us to think a little more broadly beyond just early intervention and head start and really think about high-quality early childhood development settings and environments for all children. It's very difficult to even identify the at-risk when they are that young.

We really have to ensure that we do have community-based, quality environments for young children and supports to families that have young children. We need the full range in our communities. If we just try to target, especially for very young children, we could very easily miss the mark because there is no entry point; they're not in the school system so they are difficult to identify. I think we're looking for a much broader national strategy toward child care and early childhood education.

The Acting Chairman (Mr. Roger Gallaway): Thank you.

Mrs. Saravanamuttoo.

Ms. Helen Saravanamuttoo: We urge the federal government to work strongly with the provinces on the importance of standards in this area. All the time we're seeing cuts at the community level of programs that have been really beneficial. Some of the provinces don't seem to recognize the importance of this. That's my first point.

The second point is that there is a very good child crime prevention program that has come forward from the Department of Justice. We really encourage full financial support of this program. It concentrates on the 0 to 6 and it has many of these elements in it. As I say, I really emphasize how we're seeing these vital programs in the community being cut back.

The Acting Chairman (Mr. Roger Gallaway): Mr. Culpeper, you have the last word.

Mr. Roy Culpeper: Thank you. I just wanted to respond to a couple of questions that Mr. Brison raised that I didn't get a chance to answer. First of all, on NGOs, it's true that Canada has a relatively high proportion of our aid allocated through NGOs and we have a good reputation for that. Notwithstanding that, NGO support through the aid program has been cut back along with everything else. In 1995 it was $175 million; in 1996 it fell to $153.4 million. The activity and the reputation is high but it's not reflected in public spending support.

On the role of trade, one of the things that we brought back from our mission to Southeast Asia was that in fact the trade exporting model or paradigm that these previously labelled Asian tigers had emphasized so much was not sustainable. You simply cannot sustain 6% to 8% export growth rate, as these countries had, forever. Something has to give. Markets get saturated or sustainability gives way in other areas—for example, environmental degradation. We visited projects that were obviously built on the basis of export markets but were degrading—pulp and paper projects, for example, were degrading local environments.

I think trade can play a role. Certainly it's in our interests to have fair trade with developing countries and open our markets. But I think we shouldn't put all of our eggs in that basket. It's not necessarily true that all people will benefit from trade.

I think for our part we have to be careful about what kind of trade we engage in. For example, there were criticisms of CANDU sales on our part as being environmentally unsafe, and also criticisms of our hydro utilities—Hydro Quebec and Ontario Hydro, involved in the Mekong watershed area. Some 200 dams are being constructed in the Mekong watershed and both of our large hydro utilities are involved. The environmental consequences of that leave a lot to be desired. I think we should encourage trade, but it should be environmentally sustainable as well as equitable.

The Acting Chairman (Mr. Roger Gallaway): Thank you very much.

Ms. Bennett.

Ms. Carolyn Bennett (St. Paul's, Lib.): Thank you, Mr. Chairman. I hope it means that I get the next 45 minutes; is that correct?

The Acting Chairman (Mr. Roger Gallaway): Absolutely.

• 1715

Ms. Carolyn Bennett: My first question is for Ms. Chisholm. Obviously there's been a huge change in terms of the number of people going to food banks and in the incidence of child poverty. What do you think the impact of not enough affordable housing has been in terms of the amount of money people have to spend on rent, which then contributes to the lack of food security?

Ms. Sharon Chisholm: It's an incredibly direct relationship. We find when the market gets tight and rents go up, people go to the food bank. They don't have a choice. You've got to keep your house. The other thing that happens when rents go up or the situation grows tighter is families move more often, and this has a devastating effect on children.

So in our experience, when families move into non-profit housing where they know they're going to be able to stay, and it's going to remain affordable for them, the children get stabilized. They begin to do better at school; there's enough money for food. There's a sense of security and all the kinds of things that come along with building a good community. All of a sudden they can participate in a community.

So it has an incredibly direct relationship, not only with food supplies but with admissions to emergency hospitals as well as with the rate of police monitoring that's needed in neighbourhoods. There is a whole number of direct costs that are related to not having enough affordable housing in a community.

Ms. Carolyn Bennett: Can you fill us in a little bit on waiting lists for affordable housing? I understand in Ontario, however many years ago, there was an average of 12,000 new units a year, and last year it was 786 or something. What does that mean to waiting lists?

Ms. Sharon Chisholm: What it's done to waiting lists is it means.... I've heard from a few different municipalities. I was talking to the councillors from Peel a few weeks ago, and their waiting list is something like 10 years long. They're doing it in terms of time now. Sign up, and in 8 or 10 years we may have a housing unit for you. And unfortunately, people's situations change. People can't wait 8 or 10 years.

Ms. Carolyn Bennett: Obviously in the social union negotiations there is talk about accountability or national standards on some of these things. Would it ever happen that waiting lists would be measured in housing, and is there a standard by which you don't get on the waiting list unless you qualify in terms of income?

Ms. Sharon Chisholm: I'd like to first comment that we haven't heard very much about the social union discussions, because for the most part they're being done behind closed doors. I think they're incredibly important discussions and they ought to be opened up to the community. I'd like to know what kind of proposal the federal government, for example, has put on the table recently. But I couldn't tell you what it is.

I think the only government that's going to be able to measure standards and set policy is the federal government, whether or not the provinces are implementing programs, setting up their own programs, or whatever. So I'm a big supporter of federal institutions and I would like to see them remain in place.

The measurement that has been used in the past to look at housing need is the core housing need numbers. And those numbers are not being produced in the same way any more. So it's a way of making need go away, isn't it? I mean, we don't see the numbers and we can't react to them as easily, although we do know from the Statistics Canada numbers I talked about earlier that they're increasing.

Ms. Carolyn Bennett: Is membership in your organization a voluntary thing? And is there a way your organization could push for a common way of measuring these things?

Ms. Sharon Chisholm: Yes, it is, and perhaps we should be doing that. Thank you for bringing that up; I'll certainly take that back to our board.

Our members tend to be municipalities—cities themselves join—municipal non-profit organizations, managers, boards of directors, academics, people who are on waiting lists, and people who are living in non-profit projects across the country.

Ms. Carolyn Bennett: Thank you.

On the measurement thing, which is one of my favourite things, I guess Dianne, the national research and monitoring...and a little bit to Mr. Horan as well....

As you know, the red book talked about readiness to learn, and I guess there are tonnes of things we could measure if we were going to start measuring readiness to learn. Obviously learning disabilities are one of those things. My experience is that it's a bit upsetting to find out your grade 11 son has a learning disability after he's struggled all of those years. Would you put some national program, in terms of measuring learning disabilities, at the top of the dance card?

Mr. James Horan: I think again it's that whole idea of having one more component added. I think you have to do some longitudinal studies. I think you have to put some money in, and then say, okay, over a period of time what happens to this group of young people as they travel through life? Was it better for them? I think we would probably say yes.

• 1720

Ms. Carolyn Bennett: I don't think we got on the record what is the percentage of youth offenders with learning disabilities.

Mr. James Horan: It's 70%.

Ms. Carolyn Bennett: I guess as they experience frustration in terms of the system....

Mr. James Horan: You're right, all of a sudden, for a lot of our young people, you're 11 or 12 years old, you don't read the same as everyone else, perhaps, you don't spell the same as everyone else. All of a sudden things become a bit more frustrating, self-esteem drops, you enter into that cycle of failure. Then, before you know it, you're going into grade 9 maybe, and you're going well, maybe you don't want to go to school any more. Then, of course, what happens is that there are elements out there that attract you, because perhaps there's fast money, perhaps there are things that are a lot better than trying to slug it out on a daily basis trying to read material that you can't read.

Ms. Carolyn Bennett: Dianne, what would be the first things you would start measuring if there was a national research and monitoring program?

Ms. Dianne Bascombe: When we're talking about national research and monitoring, we're looking at the two sides. One of them is looking at child outcomes, and I think there's a good beginning with the National Longitudinal Survey on Children and Youth, which can be expanded on. It's scratching the surface and there's much more work and resources that could be done, put directly into the NLSCY.

The other thing is that we are missing basic data just on services for children and young children. We don't have consistency in the way data is collected in areas like child care. I can't tell you how many kids are being served in regulated child care across this country, because we don't have any standards for collecting the data. We are missing standards for a lot of data on some of our kids that are most at risk in the child welfare system.

There's a huge potential even to come to some agreement on how we define and how we collect our data, just so that we can have a picture of how our kids our doing in Canada. It's really the two sides.

Ms. Carolyn Bennett: In the countries that have a longer maternity leave, like a year in the Scandinavian countries, is there an impact on employment rates? I would tend to think that if you only get 15 weeks off your employer might sort of struggle along without you, but if you have a year off they would hire somebody else.

Ms. Dianne Bascombe: It's really hard to say because it is some of the Scandinavian countries that have a one-year maternity leave, for example, and they tend to have a very different structure of employment—part time versus full time, also for women—so you can't really make a direct correlation.

Certainly, though, what also affects looking at one year of maternity leave is that there is an absolute crisis in regulated infant care in this country. We don't have high-quality regulated child care environments for infants in Canada, so it's not only the difficulties of returning to work in 15 weeks, it's the difficulties of finding adequate child care, and affordable child care.

When we're looking at wanting to have ratios of one to three, for instance, it's not....

Ms. Carolyn Bennett: If the government were to be able to increase the funding for CAP-C programs, and I understand there's some capacity there, would that be a beginning? Would that be a good thing for us to do? The other point is that certainly some of the people from the food banks have some concern that the prenatal nutrition program, as good as it seems, has maybe allowed these people to have an extra staff member but the food still comes from the food banks.

Ms. Dianne Bascombe: In looking at CAP-C and the CNCP programs, we're not saying that the programs themselves are perfect. It's really hard to have perfect programs, and we can look at some improvement. What we are looking at is the models of how they're delivered, which we think have a lot of potential for acting as a catalyst for some of these integrated community services that we need.

We also think we want to look more broadly than just at the populations that are being served through CAP-C and CNCP, to look at a broader range of child care and early childhood development programs, youth at risk programs, and child welfare programs, but perhaps thinking about the CAP-C as a model.

Ms. Carolyn Bennett: Is CAP-C generally viewed as a very successful program?

Ms. Dianne Bascombe: Absolutely.

Ms. Carolyn Bennett: Thank you. I would also like to ask about disability tax credits, although I know that's a big can of worms.

Mr. James Horan: It sure is.

Ms. Carolyn Bennett: My friends at cystic fibrosis are having a little trouble with this. Is that really the optimal thing, or would just being able to deduct the psycho-educational assessment as a medical expense be maybe better?

• 1725

Mr. James Horan: I think it goes beyond that. It gets into things like tutoring, and that's why it has to be broad. As soon as you get into tutoring, then it is broad. It's those types of things.

Sometimes it's computer-assisted devices, because we know computer technology is really making a difference in the lives of some of these young people, as the technology itself is so advanced that it really helps them in their struggle to actually learn. Therefore, if there is a specialized piece of technology that a parent has gone out and bought to help their child, you'd want that too. That's what makes it broader than just the medical definition.

Ms. Carolyn Bennett: Is it possible to stretch that out to a medical expense, if learning disability is a medical diagnosis?

Mr. James Horan: Right now, learning disability, of course, is diagnosed by child psychologists and psychometrists in schools generally across this country.

Ms. Carolyn Bennett: But the family doctor tends to have to help with that, right?

Mr. James Horan: It depends.

For example, in Ontario, the majority of the young people have received their assessment through a school system and through a registered psychologist or a psychometrist, and they, in turn, actually report to the family physician about what has just happened.

That also brings me to a point, if I could say so. We decided recently to actually sample to see whether Canadians were even interested in this type of thing. I have before me 500 petitions, and it talks about just that—disability tax credit. We probably could have had 50,000 or 500,000 of them, but you know, when you're a charity you don't want to have 140 chapters out there gathering thousands of signatures. Rather, what we decided to do at the national office was put it out to a cross-section, a couple of hundred people, and see what happened. So what we've got recently—and I'll submit it to the chair—is basically 500 petitions, just a sampling of what Canada feels about it.

But as I say, I really prefer my volunteers and my organization to spend the time in their chapters working with those who have learning disabilities, struggling with them, rather than being out there in 140 locations. I don't think sitting in malls gathering petitions is all that worth while.

But at the same time, I think it's important that the committee has a sense of, yes, Canadians are in favour of this, and that Canadians are willing to buy into this, because it's partnership. I think we in Canada are very much now in that mode of partnership. We're not going to give you everything, but we're going to help you; we're going to form a partnership with you.

The Acting Chairman (Mr. Roger Gallaway): Ms. Saravanamuttoo.

This will be the last response.

Ms. Helen Saravanamuttoo: We feel very strongly that a tax credit is not enough, though, because the poor people, people with low incomes, are not going to benefit from this at all. You have to have more than just tax credits to deal with that.

The issue of learning disabilities is enormous, and it is that much worse when children are living in poverty, when there are really high levels of stress in the family as a result of the poverty. With the figure that 70% of adult offenders have learning disabilities, we should really sit up and take note of that.

Mr. James Horan: It's 70% of young offenders.

Ms. Helen Saravanamuttoo: But even with the adult offenders, an enormously high percentage have learning disabilities, too.

The Acting Chairman (Mr. Roger Gallaway): Mr. Epp wants one minute to make a statement.

Mr. Ken Epp: No, it won't even be that long. I just need a clarification from Ms. Bascombe. She has these four points, and I think I understand them all, but I would like to have her explain to us precisely what she means by building capacity.

Ms. Dianne Bascombe: What we're looking at is a national initiative that would deal with supporting the national voluntary sector in working with the federal government to do the things that we need to do together, things like disseminating information about best practices in community-based programming, as an example.

Mr. Ken Epp: Do you mean by that, then, recruiting volunteers?

Ms. Dianne Bascombe: It could be that as well. It's a broad range of activities that the voluntary sector is engaged in, everything from mobilizing volunteers, acting as catalysts to community development, information sharing about success stories across the country. So it's sort of looking at the different ways we can come into partnership with the voluntary sector and the federal government to make sure that all of that happens as efficiently and effectively as it can.

The Acting Chairman (Mr. Roger Gallaway): Thank you, Ms. Bascombe, and thank you, Mr. Epp.

Thank you for coming here today. As you can see, you've incited this group to become very animated, and your presentations were certainly animated. I think you've challenged and educated the committee, and I thank you for coming here today to contribute to the work of the committee.

At this time, our meeting will be suspended until 6 p.m.

Thank you.

• 1730

• 1805

The Vice-Chair (Mr. Dick Harris (Prince George—Bulkley Valley, Ref.)): I call this meeting to order.

Welcome, presenters, to the Standing Committee on Finance, as we go through our pre-budget consultations. We have a number of presenters tonight, and the process will be to ask each of you to give a 10-minute presentation. After we've heard from all of you, we will turn to questions from the members of the committee.

The first presenter will be Marie-Josée Corbeil, from the Quebec Association of Film and Television Producers. Ms. Corbeil.

Ms. Marie-Josée Corbeil (Vice-President and Head of Legal and Commercial Affairs of CINAR Films; Association des producteurs de films et de télévision du Québec (APFTQ)): May we suggest that Elizabeth McDonald, representing the Canadian Film and Television Production Association, start?

The Vice-Chair (Mr. Dick Harris): Yes. Ms. McDonald.

Ms. Elizabeth McDonald (President and Chief Executive Officer, Canadian Film and Television Production Association): Thank you very much for giving us the opportunity to appear before the standing committee. My name is Elizabeth McDonald, and I'm the president and chief executive officer of the Canadian Film and Television Production Association. I'm hoping to be joined in a few minutes by Guy Mayson, our senior vice-president, who at this moment is delivering an intervention to the CRTC because our fax machine gave up on us.

As spokespersons for this professional association, we represent over 300 independent producers of Canadian film and television productions. We appreciate the invitation to once again contribute to the committee's important work. The Canadian Film and Television Production Association has appeared before the committee each fall for the past several years, and we very much value the opportunity to participate.

I would also like to take this opportunity to thank the chairman and all the members of the committee for their attention to our representations over the past year and for their support for the renewal of the government's commitment to the Canadian Television and Cable Production Fund, CTCPF—recently and thankfully renamed the Canadian Television Fund, CTF—which appeared in last year's report. Clearly, this encouraged the government to provide a more stable commitment to the fund and to ensure a more secure funding environment for producers of Canadian programming. The efforts of the committee in this area were greatly appreciated by our industry and by viewers of Canadian television programs.

I appreciate that our time is short, and we don't want to waste the committee's time with lengthy remarks. In its consideration of what the government's spending priorities should be in the coming year, I trust that the committee has had time to consider the suggestions in our brief that was submitted on September 4.

I will briefly outline our main points, and I'll be happy to discuss them in greater depth with the committee or to answer any questions.

We recognize that the committee has an enormous task before it. You will be hearing from many industries and interest groups, and the government will be under great pressure to spend its coming fiscal dividend on both tax relief for Canadians and a wide range of policy priorities and programs.

We feel very strongly that there are two main areas where the government should be considering new initiatives for the film and video production sector. The government has traditionally maintained a strong policy commitment to encourage the growth of a strong Canadian-owned production sector and the production of Canadian content. The emergence of a strong industry has been a major success story. Our production industry profile, which we'll make available to the committee, indicates dramatic increases in overall production activity, export dollars, and jobs between 1991 and 1997.

Government support for film and television production has played a critical role in this growth, but our industry has also become increasingly less reliant on government funding. Over the past 6 years, on average, less than 15% of the financing for certified film and videos has come from the public sector. While public funding remains crucial to the financing of Canadian production and the attainment of the government's cultural objectives, the dramatic developments in export and job figures during this period underline that public funding can also be viewed as an important stimulus for a growing, labour-intensive industry.

• 1810

We believe that government support for the industry is a good investment in the economic future as well as the cultural future of the country.

In terms of new investments and changes to the tax system, we would urge the government to consider two initiatives in two main areas. One is to reassess the current structure and design of the Canadian film or video production tax credit in order to simplify its operation and improve its return to producers of Canadian content. Two is to support the creation of new funding initiatives in the area of theatrical feature films, to encourage improved production and production entities, promotion, training, and development within the feature film sector.

In terms of the film or video production tax credit, the federal government has maintained a long-standing commitment to a system of tax incentives to encourage Canadian film and television production and the growth of the Canadian independent production sector.

There are now two systems of tax credit for film and television production in the tax system. One is a certified film or video production credit created in 1995, which exists for productions that meet high levels of Canadian creative and technical content and are produced by Canadian-controlled companies. The maximum credit achievable is 12% of total budget. The second system is the production services credit created in 1997, which provides a rebate of Canadian labour costs to producers or service providers for productions that must meet no minimum Canadian creative content criteria requirements. It is designed to encourage the use of Canadian labour in Canada but is targeted largely at encouraging foreign production to shoot in Canada. The normal maximum credit range is approximately 5.5% of total budget.

We have recently finalized a study of the certified credit performance in its first two years of operation undertaken by the accounting firm of Ernst & Young and have submitted the report to Mr. Martin's office for consideration.

Ernst & Young's assessment is that the average tax credit under the existing program is approximately 8.5% of total production budget, with many regional, French-language productions, documentary, and feature film productions achieving returns that are much lower. This is far from the maximum of 12% that is available through the program.

Our concern increases when we consider that the support granted by the Canadian government to non-Canadian content productions through the new production services tax credit program appears to be in the range of 5.5% of total budget, close to the actual incentive achieved by many Canadian content productions. In short, the incentive to foreign producers is approaching the level of Canadian productions.

The analysis suggests that this inequity may be a result of the overly complicated design of the credit calculation structure, which has a double calculation or test. The eligible credit amount is generally 25% of the lesser of the producer's labour expenditures or 48% of the total production costs less the amount of any assistance or equity related to the production. The total production cost test effectively caps the qualified labour amount. It also results in a number of administrative complexities that undermine the benefit of the credit.

In our view, the ceiling imposed by a percentage of total budget on the tax credit base for cost is not necessary. The credit should simply be based on eligible labour cost, as is now the case with non-Canadian-content productions. This could be done by simply eliminating the second test of the tax credit calculation based on total budget.

This approach should not likely result in a dramatic increase in the cost of the program, and would be consistent with the objectives of the program. It would simplify the calculation of the tax credit and would respect the finance department's stated intention that the tax credit program for Canadian productions should provide a clearly superior advantage over similar programs for service productions.

Turning to feature film, we would also urge the committee to be aware of the need to direct additional resources to the production and promotion of theatrical feature films.

Feature film has a very different cultural and economic reality from television production. It is feature film that carries the creative experience and vision of a country to its people and to the world, and it is feature film that must compete for the theatrical audiences against the well-financed and heavily promoted output of the major U.S.-based studios.

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Canada's feature film sector has progressed to a new level, and with the help of additional public policy and financial support mechanisms should be on the verge of a major breakthrough, both domestically and abroad. Canadian producers now regularly produce high-quality indigenous tales for the international market, including films such as The Sweet Hereafter, The Hanging Garden, and, recently featured at the Toronto Film Festival, The Red Violin.

A specific policy strategy for feature films and additional financial support for the industry at this critical time will help ensure a critical mass of high-quality product in the competitive theatrical market.

The Honourable Sheila Copps, Minister of Canadian Heritage, has initiated a major review of the feature film sector and the government's policy and program objectives in that area. This review has been extensive, involving new research and discussion documents, formal consultations of industry stakeholders and the public, as well as the formation of an industry advisory committee to assist the department with its analysis.

The central concern of the review has been how to expand the audience and improve the performance of Canadian theatrical features within our own market, where, despite some notable successes, box office and market share remain low. The department's research points out that during the time when international film budgets were increasing by 17% to 35% from country to country, average budgets for Canadian feature films have actually declined by 8% to 10% between 1988 and 1996.

Research also establishes a direct correlation between minimum average budgets and box office performance, and indicates that Canadian box office for domestic films has traditionally remained among the lowest in the world. Budgets for marketing and distribution have also been inadequate. Meanwhile, government resources for feature films through Telefilm Canada have shrunk during the extended period of budget reduction in recent years and have simply not recovered.

We understand that the Minister of Canadian Heritage may be seeking the support of the Minister of Finance for new tax or program support measures in the coming months to assist in addressing these issues. We would ask for the committee's attention and support for these initiatives.

As we indicated earlier, the Canadian film and television production in this sector has grown rapidly, as have the number of jobs linked to it. In 1996-97 the industry supported almost 30,000 direct jobs and 48,000 indirect jobs, in every region of the country. There's every indication that as long as there are measures to encourage production in Canada, job creation will continue to expand.

These are jobs closely linked to the new knowledge-based economy. They are high-skilled, well-paying, creative positions, providing new opportunities primarily for young people. The production sector is increasingly high tech as well, with major technological developments occurring within traditional production and post-production environments, as well as the creation of new media.

As the industry expands, Canada has become well respected for the quality of its creative and technical teams, which in turn helps to generate new market interest and increased opportunities. Canada is also highly skilled in the development of leading-edge special effects film software, as evidenced by the internationally renowned companies such as Alias, Discreet Logic, Softimage, and IMAX.

It's not surprising that the Canadian heritage film industry consultation revealed a strong industry need to encourage new entrants and build on existing expertise in the art of production management, screenwriting and directing and to include more opportunities for mentorship in the business of producing and film-making. Any initiative in the feature film area should address these issues and further expand our industry's ability to employ new people.

The film and television production industry is already an important part of the new economy, and a growing one. Support for our sector is a good investment in the future of our cultural and economic life of our country and the energy and creativity of our youth.

Thank you for your time and consideration.

I'll now turn to Marie-Josée, our colleague from the APFTQ. We work very closely together, and we support all of the initiatives she will be discussing.

The Chairman: Thank you, and welcome.

Ms. Marie-Josée Corbeil: I will make my presentation in French, but I'm extremely pleased to answer any questions you may have later in either French or English.

[Translation]

Thank you very much for having invited us to this meeting. My name is Marie-Josée Corbeil and I am a member of the Finance Committee of the Quebec Association of Film and Television Producers. With me today is Mylène Alder, Director of Legal Affairs and Labour Relations. Later on, she too will be available to answer any questions.

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We of course support the statements made by Ms. McDonald.

The Quebec Association of Film and Television Producers represents over 110 independent production houses, most of which are Quebec film and television producers, in all areas of production. The volume of production by APFTQ members totalled approximately $390 million last year. Half of this figure was accounted for by wages paid to over 2,500 permanent employees and several thousand freelancers.

We are happy to share with the House Standing Committee on Finance our thoughts about the four questions we were asked. Given the nature of our association, our brief will naturally primarily concern proposals about the film and television industry, and it is precisely such issues that we will discuss.

This industry is a bastion of culture. It is highly strategic for a number of reasons, including the fact that it creates a large number of interesting and well-paid jobs for young Canadians. However, it requires major contributions from governments to finance the development and production of original Canadian content. Without such contributions, the quality, specificity and the very existence of Canadian production would be compromised.

That government support in financing Canadian film and audio- visual production should remain a priority in terms of fiscal dividends is obvious for us. The statistics show that independent Canadian film and television production is growing rapidly; one has only to look at the volume of production in Quebec, which went from $145.4 million in 1991-1992 to $387.5 million in 1996-1997, and that is only for productions eligible for the Quebec tax credit program.

The expansion of independent production is also very lucrative for governments, because there are significant benefits in the form of direct and indirect taxes. On this point, the Bureau de la statistique du Québec has compiled very meaningful statistics—which we report in our brief—that show government revenues from film and television production expenditure. For example, spending of $18 million on production in 1996 generated more than $2.2 million in revenue for the federal government, which is more than the amounts granted under tax credits.

As I was saying, I hope we will be able to return to this matter later during the question period.

We are in favour of two areas for government intervention and support, which we believe would be very profitable for the Canadian economy: first, the long-term maintenance of public funding mechanisms for the support and growth of the independent production industry in Canada, and second, strengthened and renewed support for the production of Canadian feature films.

As Ms. McDonald was saying earlier, the Canadian certified film and video production tax credit program was introduced in 1995. It replaced the CCA. The experience acquired over the past three years has made it possible to carry out a critical analysis of this tax credit, in terms of both its operations and performance. We believe that in many instances it has been disappointing. Indeed, when the tax credit program was introduced, it was said that it would in principle give a net benefit amounting to 12% of production cost. As Ms. McDonald pointed out, in Canada, this credit appears in practice to average 8.5%, pre-audit.

For Quebec productions, the situation is even worse. The average tax credit in Quebec is closer to 6-7% of the total production budget. In addition, French-language productions, particularly features, are by their very nature more likely to receive funding from government institutions, which reduces the tax credit received still further. Thus, French-language features at the lowest tax credit rate can often achieve a return of no better than 0.5 percent.

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There are various reasons for all of these reductions, as Ms. McDonald briefly mentioned, including the requirement to deduct assistance and investment amounts, the ceiling on eligible labour costs and Revenue Canada's interpretation of the concept of total production cost at the time of processing applications.

This results in two impacts: first, a credit that is lower than producers expected to receive, and second, it makes it impossible for producers to know how much of a tax credit they can obtain. It often takes a year or two before the amount of the tax credit is confirmed.

These are very important problems. We are not saying that the tax mechanism should be eliminated. On the contrary, we believe that it should remain, but that it should be simplified and improved.

Eliminating the reduction factors would, achieve both objectives. What are they? First, the elimination of the ceiling based on total production cost of a film and second, the elimination of reductions of amounts of assistance and investment. This solution was suggested to us by the new production services tax credit, for which neither of these reductions is required.

Introducing these two measures would make the net return on the tax credit approximately 12.5%, on the recognized assumption that eligible labour cost accounts for 50% of the total production cost. This would therefore allow us to achieve the goal announced at the time when the tax credit was introduced.

I now have a few words about the Canadian Television and Cable Production Fund, now called the Canadian Television Fund. The soundness of the government's long-term commitment to this fund is indisputable. Last spring, the APFTQ was pleased to see that the government recognized the importance of its commitment by renewing its $100 million per year contribution to this fund for the next three years. We are grateful for this.

Lastly, we suggest increased support for Canadian feature production. Based on data from the Department of Canadian Heritage, production budgets for Canadian features have declined significantly over the past 10 years. Earlier, the Canadian Film and Television Production Association referred to a reduction for English-language productions. This reduction was even greater for French-language productions and now stands at 10 percent.

Likewise, the amount of money available to finance Canadian film production is becoming increasingly scarce. Additional resources to support production are therefore essential if we are to maintain minimum standards for Canadian cinematography and encourage the development of an authentically Canadian industry. What is involved is ensuring that a critical mass of Canadian films of various types be produced, with budgets appropriate to these categories and the types of scripts involved.

Similarly, the whole industry agrees that marketing also requires an injection of additional resources. In the document submitted by the APFTQ to the Department of Canadian Heritage, we proposed a solution based on the success of the Canadian Television Fund. This was to involve the creation of a fund solely for financing the production and marketing of Canadian features, combining public and private financial resources with an annual budget of $100 million.

We recommend three things to make it possible to create an operating budget on this scale: an increase in the direct contribution by Canadian Heritage, as well as the introduction of a mandatory contribution by distribution companies and videocassette wholesalers based on their annual gross revenues. Added to this would be a portion of the contributions made by broadcasters to the Canadian Television Fund, as a percentage of their revenues on the broadcast of features. We are convinced that such a fund would be as effective a mechanism for film production as the Canadian Television Fund is for television production.

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In concluding, granting fiscal dividends to independent Canadian production would have a positive impact on employment. As we mentioned earlier, production is a leading area in which 50% of production budgets are spent on labour. Our industry can provide young Canadians with a bright future if it remains healthy and succeeds in breaking into the new markets that are opening up.

Thank you for your attention.

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

[English]

Now I'll move to the Association of Canadian Publishers, Mr. Jack Stoddart. Welcome.

Mr. Jack Stoddart (President, Association of Canadian Publishers): Thank you.

I believe this is our fourth presentation to the finance committee and we thank you for the invitation back.

We have presented a paper to you already, so rather than go through it in detail, what I'd like to do is focus on the proposal we've been making to the Department of Canadian Heritage. It is one that I actually touched on last year at the very end of my presentation, but which was still in the formative stage, so we didn't bring it forward in any detail.

The issue we're talking about is equity that publishers can develop in their publishing companies—or cannot—and that I guess is the essence of the problem.

Our industry has been studied to death, I think; there is so much data on the industry. Everyone comes back and says this industry is very stable. It is culturally very successful; it produces wonderful Canadian products—books that fit all kinds of genres. It almost never goes bankrupt; our default rate is something like 3% or 5% in the last 25 years, which is amazingly low for a cultural industry. Yet on the other hand, we never make quite enough money to recapitalize our industry and our companies.

Fortunately, there are programs through the Department of Canadian Heritage and the Canada Council, and some provincial programs that help in the development of the cultural side of the books we bring forward. But our industry has a fundamental problem of not being able to expand, or if it does expand, it goes into debt because the income it raises is not enough to recapitalize the corporations.

That problem has been heightened by the fact that over the last 10 years almost all of the international—in this case American, on the English-language side—publishing companies have been approved for operation in Canada one way or another, and generally the undertakings they've made have been to start publishing Canadian. Before the undertakings and their approval by Investment Canada, almost invariably they did not publish Canadian books; they left it to us Canadians.

Well, Canadian policy says you should be doing something if you're going to operate here, so it has made it more difficult for the Canadian-owned sector, as regulations have insisted they in fact participate.

From an author's point of view, and I'm sure Merilyn Simonds will echo this, the authors are clearly very happy there is more action. And as a competitor I'd rather not see it, but I think the reality is that's the world we live in and we will continue to live in it.

The concern we bring forward is whether the Canadian-owned sector has the ability to continue. We are under restrictions of sale: if you're Canadian owned, you cannot sell to a foreign buyer unless you're bankrupt. And if you're bankrupt, that's not a sale. In essence, you just cannot do that.

Some in our industry feel that's an unfair regulation. I personally support it. I think ownership in cultural industries is a very important issue and should be continued, but you can't continue to have an industry that is perpetually in debt beyond its means. And if we can't find a way to solve that problem, I worry that in two and five and ten years, we just will not have a viable Canadian-owned industry, and we will have strictly American-produced books in this market—of Canadian-authored work as well, but basically under the control of others outside the country.

Pure grants would be fine, but I don't think in today's economy and economic situation that's going to be a reasonable request.

So what we've looked at is the way other industries have been treated when they need investment to start up or develop or further the ability of that industry. If you look at the mining industry, you've got mining depletion allowances. If you look at the science and research technology program of the 1980s, I guess it was—a program that I know fell into some disrepute—it was actually a very innovative and successful program, except the controls weren't on it. When the controls were not significant and strong enough, it got abused. Consequently, the whole idea of government, in some proportion, matching funds with private investment seems to have gone out the window. We had software development programs using the tax matters, and they've been very successful in developing some of our software businesses.

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Today we're proposing a measure that we are calling EPIC, the equity publishers investment tax credit. It would match funds from private sector investment in publishing companies to put equity into publishing companies. This might be to rebuild companies, for transition from generation to generation, or from one owner to another. It is detailed fairly well in both the paper you have and in an additional paper that we'll distribute to anyone who would like it.

We don't feel this is strictly an issue for book publishing. Clearly, sound recording has a very similar problem to face, and several other cultural industries. We are really suggesting that this is a model the government should look at for strengthening the Canadian-owned industries of our cultural base.

In some industries you can finance the product. The film industry is a typical example of that, where because of the size and the budget of a film, tax credits to invest in the individual product, the film, make a lot of sense. In publishing they really don't. The individual numbers are too small, and with the breadth of what you need to do, it just doesn't make any sense. You have to invest in the companies.

Our membership is made up of about 135 publishers from right across the country, and most of them have been in business 25, 30, or 35 years. This is not an industry that just pops up and takes advantage of something and then goes away. It's a very dedicated and successful industry in what it produces.

Without dwelling too much—I know time is limited tonight—I will cut it off at that point and say the detail is available. We have been talking with the Department of Canadian Heritage, which is considering the proposals. We will be talking with the Department of Finance specifically and others. We hope the proposals we bring forward will make sense, not just for the publishing industry in the very near term but also for several of the other cultural industries as a model. Thank you.

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

We will now go to the Canadian Conference of the Arts, Ms. Philippa Borgal. Welcome.

Ms. Philippa Borgal (Associate Director, Canadian Conference of the Arts): Thank you very much. Megan Williams, who is our new national director, sends her apologies for not being with you today. She is out on tour visiting our members in various parts of Canada at the moment.

The Canadian Conference of the Arts appreciates the opportunity to once again provide a pre-budget submission to the Standing Committee on Finance. Over the past years, we've found the Standing Committee on Finance to be sympathetic to a number of our recommendations, a situation that we sincerely hope will continue in the future.

We've also been encouraged by the adherence of the Government of Canada to its promises for the cultural sector as laid out in the red book two, Sharing Our Future Together. The finance minister has succeeded in balancing the budget and reducing the deficit considerably, but an enormous debt load remains outstanding.

The Canadian cultural sector also finds itself at a crossroads as we approach the next century. The sector itself is strong. Canadian artists and creators in all disciplines have achieved and continue to achieve international recognition and acclaim. But the full impact of cutbacks resulting from the government's program review is only now being felt. The CBC has not resolved its funding problems. Art service organizations have either been forced to downsize drastically or have folded completely. Our national training institutions remain uncertain about their funding in future years, and to offset the erosion of government funding, arts organizations are developing stabilization funds—private-public sector partnerships designed to achieve financial stability and handle deficits.

As the new publication from the Department of Canadian Heritage attests, nearly every country in the world is grappling with the question of how to maintain its cultural identity when global culture is washing over the earth.

In the fall of 1997, the Canadian Conference of the Arts brought together a high-powered group of artists, creators and cultural workers—the Working Group on Cultural Policy for the 21st Century—and tasked them with drawing up a comprehensive road map to guide government and the cultural community through the next decades. This group's final report offers creative, imaginative, and radical suggestions for forging a stronger partnership between government and the cultural community. We did attach copies of the final report with our submission, and I advise any of you who haven't had a chance to read it to do so. It's a very good report.

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Several of the recommendations of the Working Group on Cultural Policy for the 21st Century appeared in our pre-budget submission and I won't repeat them all at this time. Just to give you a quick look back, in spite of the economic situation it's encouraging to realize that since last year's submissions were received by the standing committee, some of the cultural sector's recommendations have been implemented with positive results.

Telefilm has received support to launch a $30 million multimedia fund that recognizes the important role of Canadian artists as creators of content for new media. Renewed funding for the Canada Television and Cable Production Fund has been confirmed, as has operational support for Radio Canada International. Canadian Heritage has restored funding to its book publishing program.

Recognition of the importance of protecting the interests of Canadian cultural industries under world trade agreements was confirmed by the measures proposed to protect Canadian magazines in the wake of the WTO ruling. The heritage minister's initiative in organizing an international conference for culture ministers and in supporting a parallel meeting for cultural NGOs in June was also well received by the cultural sector. The challenge now is to keep up the momentum.

On the subject of EI, I'd like to say that the Minister of Finance finds himself with an embarrassment of riches at the moment, and the Canadian Conference of the Arts would respectfully request that before any EI moneys are diverted away from the cause for which they were intended, careful consideration be given to providing access to employment insurance, and consequently to training and professional development, for self-employed individuals. To quote from the Globe and Mail of September 29:

A poll conducted...earlier this year showed that Canadians preferred that any UI surplus be used for active employment measures, such as training.

It should be remembered that part of this EI surplus comes from deductions from those in the cultural sector who hold dual status.

There are just a few other points I would like to make. I join with my colleagues from the Writers' Union of Canada, the Association of Canadian Publishers, and the Cultural Human Resources Council in urging the Minister of Finance to reintroduce income averaging. We firmly believe that selected, targeted tax reductions such as those outlined in the report prepared by Price Waterhouse entitled “Promoting Fairness for the Self-Employed through Income Averaging”, a report that was attached as an appendix to our submission, will go a long way to easing the financial burden of many artists and creators.

Another of our recommendations is that the Minister of Finance introduce amendments to the Income Tax Act in the next federal budget to facilitate the so-called “stretch” proposal for small or average donors. This would provide a higher rate of tax credit for year-over-year growth in donations to registered charities and arts service organizations.

We would like to point out at this time that in Statistics Canada's report “Caring Canadians, Involved Canadians”, released in August, the data reinforce our belief that Canadians would give more if the tax incentives were improved. To quote from the report, “The point to be made is that smaller donations count”.

While we don't make specific reference to it in our submission, the CCA also supports the Canadian Museums Association's recommendation that the museums assistance program be restored to adequate levels.

In finishing, I'd just like to give a quote from Hal Jackman that appeared in the Globe and Mail on July 31:

For spiritual nourishment, soul enhancement, job creation, skills training, visitor attraction, urban renewal, economic development, corporate marketing and consumer attractiveness, the arts are proving to be one of the soundest long-term investments a government can support.

We thank you for your attention.

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

We will now hear from the Canadian Museums Association. Mr. John G. McAvity, welcome.

Mr. John G. McAvity (Executive Director, Canadian Museums Association): Thank you. Like other witnesses, we're very pleased to be here today. I'd like to point out that we've been here for a number of years. This is the first time in three years that you have not held this hearing on my birthday, but it's quite all right if you would still like to go ahead and grant some of my birthday wishes.

I'm not going to read from our brief. You have copies of it, and I assume you've had a chance to look it over. I would really like to try to focus on a few of the key issues and reiterate a few of the sentiments that I think you've already heard here. Before I do that, I'd just like to point out that I think—I certainly hope—we're all in agreement that museums are a fundamental institution in our society. They are there not just for the preservation of the past, but the exploration of our present, and they help us point the way to the future.

We have 2,400 not-for-profit museums. The ones that we represent are all non-profit, registered charities in Canada. These institutions attract over 55 million visitors per year, so they're a very dynamic group. They're also a very small and very fragile sector as a whole.

I want to point out that the methods often used to measure the effectiveness of our institutions are tourism or economic impact. Each one of those studies points to very positive results, but is in fact not the real measure of what a museum is all about. A museum is all about studying our past and present and preserving them, and acting as an educational centre for the betterment of our communities and for the country as a whole. I urge you to think in those terms. Culture is really a hallmark of a civilized society. I think all of us in this room would like to see Canadian culture elevated and protected as much as possible.

As Jack Stoddart mentioned, our sector also feels it has been studied to death. We have had many hearings before different parliamentary committees. We've had task forces. We've had policy reviews. There have been all sorts of very in-depth and very professional and well-intentioned actions; however, I must point out that at the end of the day we've seen little to no progress from those actions, frankly, and cuts have in fact continued to besiege our sector.

If I look at the museum community today and compare it to that of, say, ten years ago, there have been significant numbers of job losses—well over 1,000, and probably closer to 1,500. There have been program cuts. Travelling exhibitions have been cancelled, withdrawn from the roads, or not brought into being at all. Some institutions have been forced to sell their collections. A number of institutions have even had to close their doors. So it is not really a rosy picture that I have to present to you today.

What I would like to do is look at some of the recommendations that we're making. I think they are of a very pragmatic nature.

The first one is on page 2 of our brief, and it relates to the funding issue. The museum assistance program, which was established by Gérard Pelletier in 1972, is and remains the centrepiece of the museum policy in Canada. It's a good program. It has withstood many reviews by consultants, by governments, and by the community. However, its appropriation today is unfortunately really and almost exactly, to the penny, at the same level it was at in 1972, without even an inflationary increase. It is at about just over $7 million per year. It climbed for a few years in the early 1990s, but was a victim of program cuts.

Our first recommendation to you is really coming unanimously from our sector and from other supporting sectors, and that is that museum assistance program funding be restored to $15 million per year in the next fiscal budget.

I also want to point out that those museum assistance grants represent a very small fraction of the total revenues in the museum community. They represent less than about 2% of the entire sector, but that small amount of money is still key money that brings in matching levels of support from provincial governments, from municipalities, and from the private sector, and it's matched many times over.

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We also applaud the increases that were given to the Canada Council last year. We're very pleased with those increases because they have allowed the Canada Council to increase support for contemporary art centres and art galleries. They have, however, unfortunately created a disparity, because historical art and historical museums are not eligible for that kind of funding. They have to go to the museum assistance program.

The second area I'd like to bring to your attention is the recommendation concerning what we call indemnification, which is a really big word. Indemnification is a proposal that we have presented to the Minister of Canadian Heritage, and it would allow for the federal government to assist, in a very low-cost way, with travelling exhibitions and major exhibitions that come to our museums, and for which insurance is a major issue. We've had very receptive support from the minister, and we're hoping an announcement will be forthcoming and that legislation will be introduced to progress on this front.

In the area of tax incentives, there are two issues we are really bringing to you this year. One is that memberships in non-profit organizations like museums be made tax deductible or eligible for tax credits. With these memberships, individuals or families join an institution for a cost of something like $25 a year, often getting benefits that go along with the membership fee. Making them tax deductible would be a small step, and it is one that has happened in the United States. Most importantly, I think it's a symbol because it says that you, the federal government, are encouraging personal involvement in these institutions, are encouraging individuals to make a commitment on an individual level.

Our second recommendation refers to the estates of artists, because this area has been a bit of a problem that a number of our members have brought to our attention. When an estate of an artist wishes to donate some of that artist's collection to a museum, it's almost penalized as opposed to how the artist himself or herself would have been treated. We've brought this to the attention of Paul Martin, and we have from him a letter indicating his complete support in that he will seek amendments to the Income Tax Act. We applaud that, and we would like to see that progress at the earliest opportunity.

The final area we're bringing to your attention today is that of youth employment. The museum community, and indeed other sectors, have benefited from a number of small but very effective programs that have allowed young people to develop their experience, their capabilities and their skills in our workplaces. We think we've offered them tremendous opportunities not just in improving their skills, but also in contributing to the communities in which they've worked, and in travelling and learning more about this country. We urge you to ensure that these youth employment programs are continued and expanded upon.

That really concludes the major part of the recommendations that I wanted to bring to your attention. They focus largely on the federal government's role outside of Ottawa. The federal government does have direct responsibility for the major museums that are here in Ottawa. Because they're national institutions, they're supported to the tune of about $130 million a year. Our concern at this moment, however, is chiefly the institutions and the federal government's role across Canada.

I hope the recommendations we have brought are straightforward and pragmatic, and that you will grant me my pre-birthday wishes this year.

Thank you.

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

We'll go to the Cultural Human Resources Council, and Mr. Jean-Philippe Tabet.

[Translation]

Mr. Jean-Philippe Tabet (Director General, Cultural Human Resources Council): Good evening and thank you for having invited us to make a presentation.

Like my colleagues from the cultural sector, I came to present a brief that will discuss an aspect that is a bit more specific to us, namely labour, the labour force in the cultural sector. The brief before you contains recommendations to which I will draw your attention somewhat later.

Our sector is growing rapidly. It employs approximately one million people in Canada and contributes some $30 billion to the Canadian economy. This rapidly expanding sector grew by 32% between 1980 and 1996, and by 14% between 1991 and 1996. It represents considerable added value for Canada, as my colleagues have already noted.

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Fifty percent of workers in the cultural sector are self- employed. This characteristic of the labour force plays a considerable role in the decisions you will need to make with respect to support for this sector.

These workers, whose important role and whose contribution to the economy I have attempted to make clear, do not receive the benefits that have for a long time been available under Canada's social safety net. There have been discussions about the Unemployment Insurance Fund. I would like to draw the Committee's attention to the fact that if the Unemployment Insurance Fund is as big as it is today, it is probably because there are fewer workers who can draw benefits, and because it is more difficult for those who are eligible to actually receive benefits.

Over the years, we have therefore created a situation in which a large component of the labour force does not benefit from the social safety net. That is why we are recommending to the federal government, this is recommendation number four in our brief, that it establish a human resources development fund in the cultural sector as a pilot project under the Employment Insurance Act, in particular for self-employed workers in Canada.

It has become extremely important, and I am certain that many presenters to the Standing Committee on Finance have pointed out that the number of self-employed workers in Canada grew considerably over the past five years. Approximately 20% of the Canadian labour force consists of self-employed workers, compared to 8% or 10% in the United States.

There is a large segment of our population that is not served at the moment by the existing system. We recommend to the Standing Committee on Finance that, in view of the fact that the cultural sector consists to a great extent of self-employed workers, that it be treated as a pilot sector in which the federal government could look into new ways of meeting the needs of a growing labour force.

The other recommendations I would like to make are of three kinds. First, I believe that it is very important to continue to help young Canadians enter the job market. In particular, we request that an initiative, to be called Young Canada Works in Culture, be established to complement a number of existing initiatives, but which do not strictly speaking exist in the cultural sector.

There was discussion of museums. In the museums field, for example, there has already been progress. We would like this progress to be sped up a bit to recognize the value of our sector and the contribution it makes not only to the economy of a community, but also to its well-being.

Second, we recommend a very practical measure. We ask that Revenue Canada prepare a new interpretation bulletin on training fees for people who have a job and for self-employed workers, and that this bulletin should include all the latest information about the deductibility of training costs and fees, and indicate other deductible fees that would make the development of knowledge, skills upgrading and lifelong learning more accessible to everyone.

This is one of the basic points we advocate: that measures you could take to meet the needs of labour today be measures aimed at consolidating lifelong learning. Lastly, we ask that the Government of Canada introduce a provision to spread income in order to generally reduce the fiscal burden on low-income workers like artists, writers and other people who work in the cultural field.

• 1900

We also ask that the number of tax incentives for small and medium-sized businesses be increased to enable them to attract investors. That is what our friends from the ACPFT attempted to emphasize. There are existing measures that limit investment in small and medium-sized businesses that produce cultural property. For them and for us, it would mean a better way to develop effective strategies to generate independent private revenue for our industry. It is therefore important to simplify and clarify the tax incentive measures for investors, and to make them more productive.

I would like to end by saying that this is at least the second time that stakeholders in the cultural sectors have come together to encourage you to take progressive action. One of the things that we have been able to do thus far is show that together, we have attempted to develop a coherent strategy that is based not only on the decisions you will have to make, but also on the potential contribution of our respective industries. This partnership between us, which we would like to develop further, is an important factor. Thank you very much.

The Chairman: Thank you Mr. Tabet.

[English]

We'll now hear from the Writers' Union of Canada, Ms. Merilyn Simonds. Welcome.

Ms. Merilyn Simonds (Co-Chair, Cultural Agenda Lobby Committee, Writers' Union of Canada): Thank you.

Thank you once again for inviting the Writers' Union to address this committee. I think it's really important that you hear not only from the cultural industries, but also from the individuals, the creators, who are sort of the bottom rung or the core, depending on how you look at it, of the cultural sector.

We have not been studied to death. In fact, hardly anybody knows we exist, because we're seldom part of this process. So we really welcome this opportunity.

I could sit here and give you the same brief I gave you last year, because in fact my theme is the same. Last year we drew your attention to the inequity in the Canadian income tax system, which isn't only unfair but compromises Canadian culture, because it makes it even more difficult than is necessary to pursue a career as a creator in this country.

We said last year that to develop a knowledge-based economy, a nation has to nurture those who create the intellectual property that will be the currency of the future. Yet creators are not only in the lowest income tax bracket in the country—our average incomes are on a par with pet groomers—but they earn their incomes in a way that puts them at a disadvantage within the tax system.

Creators are self-employed, their projects take several years to complete, and their payments come in lump sums—moments of plenty, separated by long periods of want. So when a big cheque finally arrives, the creator is taxed in that one year as if they earned it every year.

Last year this committee—very wisely, I thought—recommended:

that the government consider an income averaging measure which would reduce the overall tax burden on generally low-income earners such as artists or writers.

That's a quote from last year's report. The same recommendation was made the year before, so that's two years in a row that this committee has recommended income averaging. The government has ignored both of those recommendations.

In response to our brief last year, which we sent to the Minister of Finance, the Honourable Paul Martin sent us a letter explaining why in fact income averaging was not necessary. I want to share that with you.

He pointed out that reducing the top marginal tax rate and the number of tax brackets diminished the adverse tax consequences of income fluctuations.

In fact, that only reduces the consequences of income fluctuations for people who earn more than $50,000 a year. So if your income is fluctuating between $50,000 and say, $1 million, you're fine, because you're at one tax rate. But if in fact it's fluctuating between $10,000 and $50,000, you're in big trouble.

• 1905

He also said that RRSPs minimize the need for income averaging because in fact a taxpayer can use RRSPs as a way of equalizing their income over several years by moving forward RRSP deductions that are unused. Again, this only really applies to high-income earners. RRSPs are a godsend for people who experience windfall incomes and whose usual annual income is sufficient to support them.

RRSP provisions are of no use whatsoever to the artists and creators and low-income Canadians who have to borrow money year after year for several years in order to make ends meet until that large sum comes, which is then used not to buy RRSPs—nobody can have savings out of that—but to pay off the bills that allowed them to get there in the first place. RRSPs for most writers, in fact, are an impossible dream. They're about the same as selling movie rights to Tom Hanks.

I come back to the same point I made last year and that others have made before me at this table this year and other years: this is not fair. Last December Scott Wilson, a partner in Price Waterhouse, prepared a report for the strategic management sector of the Department of Canadian Heritage, and I think the CCA has submitted that along with their brief. Heritage has recognized that when income averaging was eliminated several years ago some individuals were still exposed to tax inequity relating to fluctuating income.

This report analyzed that sector of society that's most vulnerable and they came up with a target group, which is the self-employed, those who realize significant increase in income in one year. This report recommends targeted income averaging, targeted to self-employed people whose average income for the last two years doubles in one year. In principle we agree with this report; it's a very good report and it moves things forward. However, they go on to make the proposal that instead of having a tax calculation based on the actual income earned, a tax credit be applied. We find this very questionable.

The scenarios that Price Waterhouse worked out don't bear much relationship to our experience of a writer's reality. What they're suggesting is that in order for income averaging to kick in, your income must double. Well, what about the poor blokes whose income increases by 85%? They also only talk about doubling income. Now, I personally know one person whose income for the last two years was $10,000 and whose income this year is $70,000. Over three years the total income is $90,000. Averaged over three years, that's $30,000 a year. That's fairly marginal. The tax on that would be about $12,000. The tax on $70,000 is more in the order of $20,000. So there's an enormous overpayment of tax that a $2,000 tax credit is not going to adjust.

We recommend that this report be taken very seriously but that the Department of Finance consult with representatives of creator groups before they actually figure out how to develop an equitable form of targeted income averaging. We strongly suspect that a tax credit is not going to be the answer.

Mr. Martin, in his letter to us on income averaging, said that the provisions are very complex both to comply with and to administer. Our sense is that after many years of recommendations there's quite a lot of resistance at the Department of Finance to this proposal, possibly because to them it might represent the thin edge of the wedge.

We are therefore proposing another way, which we mentioned briefly last year but which we've included documentation on this year. There is a way for the government to provide immediate financial relief to creators and at the same time to further their avowed commitment to Canadian culture.

It's a very elegant measure, it's very simple to use, it's simple to administer, it's virtually immune to abuse, unlike income averaging, and it's already been used for several years so it has a proven track record. What we're recommending is that the Department of Finance institute a copyright income deduction for creators.

This was initiated in Quebec, and I've included the pertinent sections from the Quebec budget of 1995-96 that show how this was implemented. Basically, copyright income up to $20,000 becomes a deduction to their other income. This provision applies to all writers, artists, filmmakers, anyone who produces copyrighted material. This makes it absolutely easy to administer, because we have a Copyright Act and it's absolutely clear at this point who the first copyright holder is on all material.

• 1910

The copyright income deduction can be claimed provided the total copyright income doesn't exceed $30,000. So it has the double effect, then, of only applying to low-income creators. It automatically eliminates the Margaret Atwoods and the Pierre Burtons, but not people like me.

It also effectively removes the fluctuations from creators' incomes, because the truth is that most creators in this country can't live on what they produce. They cobble their income together from many sources—teaching, editing, waitressing, that sort of thing. But it's the royalties; it's the income that comes in big doses that really creates the income tax inequity, and this copyright income deduction would eliminate that.

The copyright income deduction requires almost no calculation. It fits within the existing income tax form. Canada already has a long history of giving special consideration to enterprises that further the national interest, and this deduction would function in the same way, providing an incentive to those who are actually producing the intellectual property.

As I said, it's in the brief so I won't go into the details of it.

We have one further recommendation, and that is that the government make subsistence grants to creators tax-exempt. This is a constant problem for writers. The Canada Council for the Arts gives out subsistence grants. This is based on a monthly subsistence income of $1,500 a month, and yet this is taxed back, so what is actually available to the artist or the writer to produce the work is reduced by another 17%. So we are asking for that to be rectified.

I don't think there's any doubt that the income tax system as it stands treats creators' incomes unfairly. We pay more than our fair share of tax. We don't derive the same benefits. We're not eligible for employment insurance, although we are gainfully employed. So we urge the standing committee to recommend once again that the government correct this inequity. We urge that they meet with creator groups so that they can understand our financial situation and work with us to find a solution; implement targeted income averaging that will help all low-income self-employed; create a copyright income deduction that specifically encourages Canadian creation; and allow these subsistence grants that we receive to be put into creation, not into paying tax on what already comes out of citizens' pockets as tax.

It's unconscionable that this inequity has gone on for so long uncorrected. Creators are a very small segment of society. I represent the Writers' Union, but our brief has been circulated amongst other creator groups as well and we have their support, along with UNEQ, Union des écrivaines et écrivains québécois. We believe that although we're small, we're very essential to the cultural and the economic vigour of the country.

Thank you.

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

We will now enter the question and answer session, with Mr. Harris.

Mr. Dick Harris: Thank you, Mr. Chairman.

Thank you for your presentations. The first question would be to Ms. Simonds.

Would it be correct to assume that as a writer, as far as the tax department is concerned, you'd be classified as a sole proprietor, a small business person under the sole proprietor tax status?

Ms. Merilyn Simonds: Yes.

Mr. Dick Harris: I think I see the thin edge of the wedge that you talked about, and why the government would be reluctant to enter into any special tax provisions for people engaged in writing, because in a way you're not unlike probably tens of thousands of other sole proprietors in Canada who just happen to have chosen a different product to produce or sell or service. The sole proprietors, as a matter of fact, do go from feast to famine throughout any period of time. In one year they may have an income of $30,000 to $60,000 and in the next year they may earn $10,000 or $15,000, and they are taxed in the year of their earnings, based on the earnings they have in that year.

• 1915

So I would think the tax department would be looking at your request, saying that if we did this for this group of sole proprietors who have chosen writing as a product they produce, then we would be obligated to do it for almost every other sole proprietor in the country. Basically, from a tax department point of view, you're in the same type of business, you're in the same type of occupation. The only thing different is the product.

Ms. Merilyn Simonds: I take your point. I think the Price Waterhouse report would be worth referring to, since it goes into the financial documentation much more accurately than I could, not being either an accountant or particularly adept at that area.

I think the difficulty is with the low-income self-employed group, not with the group as a whole. In the Price Waterhouse report, they do recognize that this targeted income averaging group as a whole.... You're right, it involves many more than simply writers or painters or anyone who takes several years to produce one product, and yes, it would embrace all of those people, but I still think that's a fairly small segment of society, and there is a way of targeting it if they wish to do so, and that is through the Copyright Act.

Mr. Dick Harris: Thank you.

My next question would be to Mr. Stoddart.

I guess the nagging question I have is why isn't the publishing industry in Canada making money? What is the big impediment to it making money? Are there not enough customers, or are they not producing a product that everyone wants to pay a lot of big bucks for?

Mr. Jack Stoddart: No, I think we're very successful in doing that. It's a very simple problem, in fact, and that is that books from either side of the border tend to look the same. Authors are different, what's inside is different, but it is very difficult to say that an American book should be $25 and a Canadian book should be $45. The difference, of course, is that when you're producing material for an audience in the English language of about 14 million or 15 million or 18 million—it depends—as opposed to a market of 200 million, the costs are essentially the same for producing the book, the royalties are the same as a percentage of list price; but in Canada we would tend to work on a five- to six-time multiple of manufacturing cost to list price, and in the States it would be 12 to 15 times multiple.

So in the U.S. the average profit before tax on a trade publishing program would be somewhere in the 10% to 20% range. In Canada, by both StatsCan and heritage department numbers, it's plus or minus 2% on trade publishing, and on French-language publishing it's generally about zero to 5%. The difference between the two language groups is that the prices in French-language publishing are probably a third to 50% more on a similar book, because there is less comparative pricing on the French-language books than there is on the English.

We are flooded...70% of the market sales in this country are American books. To some people that sounds horrendous. On the other hand, 30% are Canadian books, and I think that's a great accomplishment against the largest-producing country in the world. However, there is no way we can have books at a different price than books that make up 70% of the market. People will not pay that extra amount just because they're Canadian. So we must price to a market, and the price is set in New York and Chicago instead of in Vancouver, Toronto, or Montreal.

• 1920

Mr. Dick Harris: Do Canadian publishers have access to the U.S. market? I have to admit I don't know.

Mr. Jack Stoddart: As publishers, we do sell both rights and finished books in the U.S. market. I will say it's a difficult market. It's very parochial. In educational markets they tend to exclude anything that is not American. The New York Times won't do a review of a book that is not American published, so any Canadian book is not eligible for review in the New York Times.

Yes, we do to a certain extent. Our industry has tripled its exports to the U.S. market in the last five years. We're moving hard and fast into that area because it is an open market for us. We make up by far the biggest export market for the United States. It's in the hundreds of millions of dollars. Our business going back is in the tens of millions of dollars, and it is not significant enough yet to offset the difference in cost. But, yes, we are moving in that direction.

We're being very aggressive as an industry. Our writers are clearly writing at a quality level. We don't have a problem in the U.S. market with the quality of writing, the design of a book, or anything else. It's just that a lot of what we publish is for Canadians. It's designed for our market, and that's why a lot of the books just don't apply south of the border.

Mr. Dick Harris: I have one last question for Mr. McAvity. I see that in your submission you were requesting that museum memberships of up to $50, I think it was, become tax deductible or treated as a tax credit. I'm just wondering why you have to sell memberships. I know it is to get money, but one of the fundamental things about fund-raising is to have as many names as possible to seek donations from. This might be a redundant question, but would it not be a great idea to give free memberships to as many people as you could find interested in order to get their names in a database and then to go back to them for donations after they have realized the benefits of being part of the museum? Then their donations would be treated as a tax deduction, if you're a non-profit society.

Mr. John McAvity: That would be a terrific idea. It would also cost us through the loss of a great deal of revenue. As non-profit organizations, museums, hospitals, and universities have become amazingly creative at raising money through many different mechanisms, and membership has been one way. People become members, they're prepared to pay a fee for that, they get benefits in return, and they get closer to the organization. The museum, the hospital, or the university does work on that relationship. It pulls them in and makes them friends of the institution.

Recently there was the story of a woman in Toronto who was a $25 card-carrying member, and she volunteered for years and years. That woman died about a year ago, and she left $50 million to the museum. So that kind of friendship development is very critical for non-profit organizations.

To put it in business terms, whether it would be cost-effective to make it free is another question. About 10 years ago the federal government sponsored a task force on funding of the arts in Canada, and at that point most of the museums, art galleries, and related institutions gave free admission. Our museums were free to go into. That task force recommended that day come to an end and that we start charging for admission. We reluctantly did that, and today most museums charge an admission. For instance, it costs about $5 to go into the Museum of Civilization. There's a charge to go into the Art Gallery of Ontario, the Vancouver, British Columbia, Museum of Anthropology, whatever. We regret having to do that. We would like these institutions to be free and open so people can come, but that day has really passed.

• 1925

In England there's a huge debate over whether the National Museum should be free or not. This debate is being carried out in the media, in the newspapers and in the House of Commons.

We have had to do that, and with 55 million visitors—you can figure it out—it's worth a little bit of money for the attendance. We've really tried to make sure the admission fees are reasonable. They're not excessive; we're not Disneyland. We cannot charge $50 per person to go to these institutions, but we can charge a reasonable amount that's not excessive. We can have programs in place for those who cannot afford to attend. Many museums have free days or free evenings for students, the public and the unemployed.

So I think it's been a very reasonable approach, and developing those contacts and friendships you're referring to through plan-giving programs, donation programs, and so on can be of advantage.

One of the other recommendations we made was concerning artists' estates. Right now when an artist dies, their estate—and I'm talking about the paintings, the works of art that go into their collections—is taxed at a different level if they make a donation to a museum. There's currently no incentive for them to give that work to the museum. They're better off to sell it in the private marketplace or export it out of the country than they are to give it to a museum, because the adjusted cost base on capital gains merely mirrors the fair market value. There's no incentive in the end.

The Chairman: Madame Tremblay.

[Translation]

Ms. Suzanne Tremblay (Rimouski—Mitis, BQ): Good day dear friends and thank you for your presentation. I find it a bit odd to see you in this evening's context, because we usually speak about other things.

I read recently in an article that governments were spending less and less on culture. Statistics Canada reported budget cuts for culture seven years in a row. The figures for 1996-1997 showed a drop of 2.8 percent.

You have each, in your own way, reported needs that appear to me to be fully legitimate. Ms. Borgal, do you know whether the government's spending in all cultural sectors together totals 1% of its budget? Is this something you know?

[English]

Ms. Philippa Borgal: I wish I could tell you I did have that information on hand, Madame Tremblay. If you like, I can check on that and give it to your office tomorrow. I'm glad to see you here and I thank you for coming. I'm sorry I don't have that with me.

[Translation]

Ms. Suzanne Tremblay: Fine. I would like to know if possible, the percentage that this represents. It could give us some idea of the amounts to aim for afterwards.

The cable fund is a very good example. As you said already, it has been very successful, and you are requesting the establishment of a similar fund in another area. You are asking for tax deductions. However, if there is less money coming in because there are deductions just about everywhere, will this lead to a surplus?

Ms. Marie-Josée Corbeil: I can answer that question. On the one hand, as demonstrated in the table given in our brief, as direct taxes that the government would receive and the effect of incidental taxation—for example contributions to Unemployment Insurance and other types of contributions—if the government made the tax credit 12%, as it had announced, the effect would be virtually neutral.

• 1930

Ms. Suzanne Tremblay: So it wouldn't cost the government anything.

Ms. Marie-Josée Corbeil: It would not cost anything. At the moment, the government makes money by granting us this tax credit because the credit generates more direct and indirect taxes than it costs the government. Thus is the government were to raise the rate for Quebec productions by 6% or 7% to 12%, as announced, the cost to the government would be minimal. Furthermore, additional jobs would be created.

To answer your question about establishing a fund like the Canadian Television Fund, there would be a cost, but we suggest that part of the broadcasters' contributions to this fund be assigned to features. Thus these would not be completely new amounts being injected into the system. Existing amounts would be taken and reallocated to feature production.

Ms. Suzanne Tremblay: Do you mean that part of the cable fund would, on a mandatory basis be allocated to the fund for...?

[English]

Ms. Elizabeth McDonald: No, I think actually the recommendation the two associations have put together is that there be a fund—

Ms. Suzanne Tremblay: A new one.

Ms. Elizabeth McDonald: —a new one, and that we try to concentrate all the dollars in one place, because they're all over the place right now and so they're not as effective; and that there be a mixture of private and public money, but that the governance body include the participation of the private sector, as the Canadian Television Fund does, so that it realistically responds to the needs of the industry, as opposed to being imposed by a bureaucratic body that may not be directly involved in the industry.

The Chairman: Mr. Stoddart.

Mr. Jack Stoddart: I have a slightly different answer. For Canadian publishers or Canadian filmmakers or Canadian people in these industries, if you make a profit you have to pay tax on that. That's pretty fundamental.

I know most of my competitors who are foreign-owned pay little or no tax in this country. They do $500 million a year, and if they pay 2% of their profits in tax, I would be very surprised. Transfer pricing and issues like that have meant that they would rather pay their tax in another country than in Canada.

I'm aware of one example where a major competitor in the book publishing business has had more in tax rebates as a foreign corporation, who suddenly started losing $2 million and $3 million a year, and as a result of the tax remissions, got more than the largest three Canadian-owned publishers did in grants in a five-year period. In other words, the Canadian government was granting to foreign corporations to take their profits out of Canada and giving them a tax rebate.

I would argue that if the cultural industries had to operate in a tax-realistic way in this country, foreign- or Canadian-owned, the tax revenue from all the business done in the cultural industries, properly reported, would be more than any grants or any other programs of tax issues that we are talking about. Today that is not the case, and I think it would be a valid investigation to take place. I don't think it's just in the cultural industries, but I can speak with some authority on that.

I see other people shaking their heads, who know these industries, that it is not a fair competition between Canadian and foreign-owned companies. But more importantly, it's not fair to the Canadian people and the Canadian taxpayer that the major players from outside this country, who do huge amounts of business, pay little or no tax in this country, yet we welcome them through Investment Canada with no review of profitability, performance, and so on. I think it's atrocious, and it's something that this committee and others should look into, because it drains this country of huge amounts of taxable income and taxes as a result.

[Translation]

Ms. Suzanne Tremblay: Can I ask another question?

I read somewhere that the boom in films was being targeted by Revenue Canada. How do you react to the fact that on the one hand, the Minister of Finance makes things easier for the majors to come and make movies in Montreal, Toronto or Vancouver, and that on the other hand we are told that Revenue Canada will handle it?

• 1935

I don't know you can reconcile this with what you have just told me. We are being told that if Revenue Canada meddles too much, Jules Vernes might be produced somewhere other than Montreal. Do you understand?

Ms. Marie-Josée Corbeil: No. I am not sure that I understand your question.

Ms. Suzanne Tremblay: The film industry is afraid that Revenue Canada, with its new guidelines, is going to kill the goose that lays the golden eggs.

Ms. Marie-Josée Corbeil: Now I understand. Unfortunately, I have not read the article you mentioned, but if it's what I'm thinking of, then indeed, the word is that guidelines were recently issued by Revenue Canada, and that there will be consultation in the industry.

These guidelines are aimed at defining the concept of investor. Currently, under the Income Tax Act, unless investors are on a prescribed list—in which there are only four categories—the production is not eligible for the certified Canadian production federal tax credit. This is the case for a production like Les aventures de Jules Vernes.

What the industry finds very worrisome is the fact that the guidelines as written could threaten the way the industry works. They would make all of the financial structures established ineligible. This includes the usual agreements with distributors or broadcasters.

It is therefore something that causes a great deal of worry. There is a problem because they do not include a tax credit for production services. In fact, the tax credit for foreign productions is a credit based on eligible labour cost.

That is one of the reasons why we feel that these tax credit rules for Canadian productions should be eliminated. In many cases, the return is almost the same as the production services tax credit, and in other cases, the tax credit is even lower than the production services tax credit.

We were saying earlier that for Quebec productions, the tax credit was 6 or 7 percent. The production services tax credit is 5 percent. For French-language Quebec features, the rate is often 0.5 percent. I think that is what was being alluded to in the article you read.

Ms. Suzanne Tremblay: Several among you referred to training fees, information bulletins, young people entering the job market, etc. Does this mean that you would like to see a special internship program for young people to be hired in various cultural sectors to start their careers, a program specifically for young people? Can you elaborate on this?

Mr. Jean-Philippe Tabet: There are currently different job entry programs for young people in Canada, both at the federal and provincial level. An important point that came out of our research is that young people are strongly attracted to the cultural sector. They are attracted by the glamour. We would like to see internships for young people to give them a better understanding of the realities of work in the cultural sector, and in particular to develop approaches based on sponsoring or apprenticeships to better meet the needs of the industry.

One area in which young people are very much interested is new media. As the new media industry needs creative talent, we would like the government to support a program which could be called Young Canada Works, if you will, or a program of young trainees in the field of culture. It would have to be very explicit, because for the moment, there are all kinds of programs alongside one another, but no overall coherent approach. For young people, it's a real mess, and it can be very complicated for them to try to find out where to go.

• 1940

As we all pointed out, this overall, coherent, approach needs to be introduced in all our industries. It is one of the ways we are striving to develop at the Cultural Human Resources Council.

[English]

The Chairman: Have you any further questions, Madame Tremblay?

Mrs. Redman.

Mrs. Karen Redman: Thank you, Mr. Chair.

Ms. Simonds, you mentioned that the Standing Committee on Finance has brought forward some of the recommendations that you brought to our attention before and that the finance minister wrote you a letter back explaining why it didn't look like it was going to make it in the budget that year, justifying why it didn't.

Can I take from your comments that there was a lack of understanding, specifically at the income bracket and the plight of writers and creators because they're in such a low income tax bracket, and that's why your concerns weren't being addressed?

Ms. Merilyn Simonds: That was my understanding from his letter. His letter implied to me that he wasn't targeting his thinking to low-income self-employed people, that the measures that he said in fact worked towards evening out income fluctuations really only worked for higher- and middle-income—to some extent—Canadians but they don't work for low-income Canadians. That's the same result the Price Waterhouse report found as well. And necessarily this involves away more people than simply the creative community, but coincidentally most creators find themselves in this low-income self-employed group.

Mrs. Karen Redman: You said at the outset of your remarks that yours was one sector that had not been studied to death. Are there the statistics and the studies that we need to make informed decisions around this? Do we know how much the price tag will be and how many people are impacted by the suggestions that you've made?

Ms. Merilyn Simonds: No, I don't think so—not unless someone else has other information. We are about to embark this year on a study of writers' incomes and how their incomes are made up and what proportion of their income comes from copyright-generated material. We're hoping that will help provide some of the statistical basis to put forward this argument.

Did you have a...?

Mr. Jean-Philippe Tabet: There has been some kind of study that we have done on the average income of the cultural workforce. But I must tell you that because we are dealing with a workforce that does not have such a long history of being recognized by the different levels of researchers in government agencies, we have still a lot of work to do in that area.

I'll just give you an example. The classification of occupations, which really is a bible by which you are registered under the census, is not adequate to reflect the reality of the cultural workers, mainly because many of our professions are new and emerging and changing, but also because the way we are reporting ourselves might be very different from the way the person is taking the information.

So there is a lot of awareness that needs to be done, and obviously Revenue Canada needs to be more aware of the reality of our workforce. But I would emphasize again the idea of self-employment.

This is a strong workforce in Canada now, where there is really very little done at the government level, and it is growing. It has grown tremendously over the past five years. I don't have the statistics with me here, but I will be able to show it to you. And the case we are making is not only for writers or artists, but it's also for an intrinsically growing part of our Canadian population.

We need to do something about it. We are talking about the EI legislation. We are recommending that one of the pilot projects the federal government could be embarking on is to find new measures or new venues to support the development of that workforce.

• 1945

The Chairman: Ms. Borgal.

Ms. Philippa Borgal: I would add that Statistics Canada did a cultural labour force survey. They took the data from 1993 and it was released in 1995. As Merilyn will know only too well, it did report that incomes throughout the cultural sector were extremely low for writers and also for visual artists. At that time visual artists reported average incomes of less than $8,000 a year from their artistic endeavours.

So there is a fair amount out there in terms of how little people earn, but in other respects we still need more data.

The Chairman: Go ahead.

Ms. Merilyn Simonds: Something the committee could very usefully do would be to recommend more study in this area. The self-employed population is one thing. Within that are the fluctuating incomes of self-employed people, and I think that's where creators are a somewhat special case, those who work for long periods to produce a single product. I think that's a fairly unique situation.

And then added on top of that is the value of that product in terms of the whole structure that rests upon it: the book that takes eight years to write then becomes the play, becomes the movie, becomes the television series—we hope. The industries are very delicately poised on that one thing. If it is too difficult for that person to continue in what he or she does then you're compromising the culture as a whole. That's why we really hope the committee can focus in on that.

The Chairman: Mr. Stoddart.

Mr. Jack Stoddart: Another issue is an awful lot of creators' income doesn't get reported as Canadian income. I'm thinking here more of the music business perhaps than the writing business. Most writers of music set themselves up as corporations outside this country, and all of their U.S. royalties and all their worldwide royalties never see the light of day in Canada.

The reporting on an awful lot of people who are in certain cultural industries, if you did it in a worldwide fashion, would be hugely different from what we see out of the Canadian statistics. So it isn't just a matter of what are some creators making in this country; it's how it is getting reported. And for tax reasons it in many cases is not reported in Canada. It is reported elsewhere and put through corporate structures so you can never trace it.

I wish the music industry were represented here tonight, because some of the stories they tell about the income loss to this country that should be tax-useful income is absolutely amazing—what the Bryan Adams of the world don't pay in this country because of use of tax structures that take it right outside the country. That's not as much as.... Merilyn is talking about the smaller end of the income scale, but I think it is all part of the same question: how we treat creators.

Ireland did it differently. Ireland said “We welcome writers. We want them in. We're going to give them a tax break because what they bring to our society is something very worth while.”

I'm not saying a zero tax rate in Canada, but maybe we should look at the creators in our society and maybe some international ones living here in a much reduced tax rate. I would bet you anything that Canada would be the net benefactor on the taxes if we took a low tax rate on creators of unique material. It's another idea, totally different from what we're talking about. But we lose far more than we ever get reported out of this country from creative works.

The Chairman: Go ahead, Ms. Redman.

Mrs. Karen Redman: I know, Mr. Stoddart, you're a regular here, so when you come back next year if you can come back with more solutions that would be terrific.

The Chairman: Mr. Gallaway.

Mr. Roger Gallaway: I just wanted to raise a point of order. With respect to Ms. Tremblay's request for information, I believe it should be sent to the committee, as opposed to directly to Ms. Tremblay.

Ms. Philippa Borgal: I'd be glad to do that.

Mr. Roger Gallaway: Thank you.

I don't have many questions, but I think what we've heard this evening—at least to me, and maybe it's the hour of the day—is a conflicting message. Maybe it's the hour of the day.

• 1950

I've heard about certain aspects of industry that are strong. I've heard about requests for money. I've heard about requests for tax breaks. I think most people have a great deal of—I don't want to use the word “sympathy”—admiration for people who work in the cultural industries. In many respects, I suppose if you enter the industry in Canada, it's almost like joining a religious order, because you're taking vows of poverty.

There's something I want to know, first from Ms. Borgal. I'm trying to understand the layers of the industry, and I'll give you an example. You raised the issue of the Canada Council. As I understand the Canada Council, it receives money from the Government of Canada. It is then responsible for assessing and distributing that money. That's sort of a simplistic overview, but that's generally the way it works.

I was told last year that the Toronto Symphony receives money, for example, but the Mendelssohn Choir does not. The Toronto Symphony receives money, but the Sault Ste. Marie Symphony doesn't. For Canadians who are in fact paying this money to the government, it becomes rather confusing because it's perceived to be an elitist business. If you live in Toronto, you have generally the benefit of the Toronto Symphony, or you can avail yourself of the benefit of it. If you live in Sarnia, where I live, we have an international symphony that doesn't get a penny from the Canada Council. In Sarnia, you don't get the benefit of your own tax dollars because they're being funnelled to a couple of major centres.

I know you're not from the Canada Council, so I'm not going to ask you to explain the rationale behind this, but I wonder if you can just comment on or give me your impression of that perception of what occurs.

Ms. Philippa Borgal: As you say, I'm not from the Canada Council. The Canadian Conference of the Arts is not a funding organization, so what you are speaking of is really beyond my realm. However, as far as I know, the Canada Council uses a peer jury system in order to grant its funding. Every application the council receives is examined not only by Canada Council staff but also by people who are working in the field. Perhaps what you're speaking of is the fact that there simply isn't enough money to go around for everybody.

I wish I could answer it more specifically, but I don't have that expertise.

Did you want to speak about that, Mr. McAvity?

Mr. John McAvity: Yes. I mentioned the Canada Council in a different context, but let me wade into it just a little bit here.

I hear your comment. It's one we hear quite often. It often is divided into two different parts. One is the need for funding symphony orchestras or theatre companies, for example—that is, institutions as opposed to the creative artist, whether that person is a singer or a writer or a dancer.

I'm really expressing my own point of view here, but I think the Canada Council does an admirable, absolutely fantastic job in assessing those creative applications. The problem arises when the Canada Council is expected to be the sole funder of the institutions, because institutions grow, they change. Sarnia may have a symphony orchestra and it may not be funded, and this is almost a different context.

In my case, in the museum community, this is where we have a certain number of museums that deal with contemporary art. They're funded by the Canada Council. But as soon as the museum really deals with historical art—i.e., the artist is dead—it moves over to the Department of Communications. Natural history museums move over to the Department of Communications. We have a division in the field, and I personally think there's a need to rationalize that. I think it's a division that my community illustrates, and perhaps there is need for a much more comprehensive and strategic approach by the department to fund the institutional strength of the country.

The Chairman: Thank you.

Mr. Gallaway.

• 1955

Mr. Roger Gallaway: Ms. McDonald, you had outlined or suggested, or I think it's actually a reiteration of what the Department of Canadian Heritage report says, that you're calling for additional resources to bolster the development of feature film productions. In the next paragraph, you note that there's a correlation between minimum average budgets of a film and the box office performance and you indicate that the Canadian box office for domestic film productions has traditionally remained amongst the lowest in the world.

I want to dwell on that for a minute. Firstly, I know there's not a single reason for that, but I wonder if you can tell me what some of the reasons for it might be.

Ms. Elizabeth McDonald: First of all, I've been spending a lot of time at a public hearing in Hull lately. Somebody asked how long public assistance would be needed for Canadian television, and that person responded, “Only until we can move our border from the United States.”

I think that's even more critical in the feature film industry, where you have to put into context that we are the only country that shares a language, a border, and airwaves and theatres with the largest entertainment business in the world. In fact, if you look at the United States when they're not at war, their entertainment business is their number one business, and that's a very important thing to understand.

Then you have to look at what happens. In Canada, we have access to perhaps 15% of the market; 85% of that market belongs to our friends from the other side of the border. With that also is their access to the promotional airways, whether that be television, or magazines, or whatever.

I have an 18-year-old son. When he goes to the movies, he will not necessarily think of going to The Sweet Hereafter. He went and he loved it, but he didn't go there first, because we do not have the money to point him there.

The Sweet Hereafter is one of the best Canadian features we've seen in a long time, beautiful production value. We all should be proud of it. It was made from a budget that did not exceed $5 million, and that's exceptional for a Canadian feature film.

But when you look at what the promotion budget is for the average U.S. blockbuster that comes in—and I'm not up at Titanic, just to sort of average—it's a budget of about $65 million to create, and about $30 million in promotion.

So if you have $5 million, and that's for the Cadillac that was The Sweet Hereafter, and what percentage.... I know that at that time Alliance put a tremendous amount of money into that promotion.

Other English-language movies, like The Hanging Garden, which by the way got a 2% tax credit after all was said and done, had even less. It was the star of the Toronto Film Festival last year, it was the People's Choice, and it got more promotion because of that. But it's in the power of the huge U.S. studios to eat up all of the airwaves and time and how to connect to the audiences.

Basically, we share that market. Our children and people who go to the movies on Friday night, if they can get a babysitter, are first and foremost aware of the U.S. films. It's not the quality of Canadian features; they're getting really great. The Red Violin, which was featured at the Toronto Film Festival, is outstanding. Rhombus Media made it with $15 million, but most of that came through co-production. It's an incredible cobbling together of a fabulous budget, and Danny Iron, who did it at Rhombus, should really be praised. It's a tremendous amount of energy for a company that has been there for 20 to 25 years, and most of those companies are on the edge every day.

So you have a promotion situation. You don't have access to your market. You have lower amounts of money available. It's very hard to break into the largest market.

Mr. Stoddart talked about selling to the U.S. market, and he called it parochial. That's polite. They don't like our accents; they don't like our weather. They just like themselves, really.

• 2000

So there are a whole lot of things, when you put it together, that make it very difficult. If we could get the money together and a single strategy together, we have the creative workforce.

And if it's incredible in English Canada, it's beyond belief in French-speaking Canada. With Les Boys, they've touched the people so much. When they can find it....

The Chairman: Mr. Stoddart.

Mr. Jack Stoddart: I'd like to touch on that also, because the distribution of product into a market is really critical.

One of the things I think Canada has done right in the cultural industry is that in book publishing, where we have ownership regulations, all our bookstores are Canadian owned. That doesn't mean they're wonderful, and it doesn't mean they're perfect. There's good and bad and everything else in between. But Canadian-authored books have a 30% market share. That's amazing. When you think of all the competition, all the Danielle Steeles and Jeffrey Archers, etc.... Our citizens choose. If they never saw those books in the stores, we wouldn't have a 30% market share. We wouldn't have Canadian writers all over the world now being recognized as wonderful writers. Of course, 99% of Americans think Margaret Atwood is American. But that's fine. It's her writing that's very important.

But if we didn't have access to our stores, we wouldn't have that market share. And I think a lot of the problem with the film industry is that you can't get time in the theatres, aside from the marketing cost. And even though one of the chains was sort of Canadian owned, the reality is that they ran it like an American chain of theatres. Fine, that's business. That's called business.

The one industry that really has had an ownership provision is the one that has a 30% market share for Canadian-produced and -written products. So I think there is something there. I don't know how you address it to other industries, because once you've lost it you'll never get it back. But that's part of what we've been talking about also in this tax credit system.

The Chairman: Mr. Gallaway.

Mr. Roger Gallaway: Thank you, Mr. Chairman.

I just wanted to say to Mr. Stoddart that the rules he's applying to bookstores we find are running parallel within Canadian banks. Anyway, that's another story.

Ms. Elizabeth McDonald: Could I just comment too that in terms of what you say, absolutely, we're holding on by the skin of our teeth to 15% of the market. What Mr. Stoddart said is absolutely true.

The other thing is that now, through the production services tax credit, we're absolutely overrun by advantages to U.S. production companies. I understand that they are to stimulate jobs. But when you consider where our dollar is—and I know this morning it wasn't terrific for us but it sure was terrific for the Americans—that on its own is an incredible incentive to work with highly developed crews, etc.

So the whammy of owning the marketplace, being allowed to work here, getting a tax credit, being able to pay people a low dollar...we're having trouble getting Canadian crews to work because the advantages of working on these U.S. productions are incredible. So we're going to lose some of our creative people, if we haven't lost them already. That's one of the heartbreaks of the Vancouver film industry, and that of Montreal.

The Chairman: Thank you.

Mr. McAvity.

Mr. John McAvity: I have one brief comment from our sector on a couple of these points.

We too experimented with a project marketed in the United States. We do a mail order catalogue on behalf of the museums and galleries of Canada. We have a central warehouse, an order fulfilment centre, and so on. We print about 400,000 copies of it, distributed in Canada. We thought we would try it in the United States.

So we did a trial drop on a very good mailing list in the United States, and because it said “Canada” and because it said “Canadian culture” and because it was a mailing address in Canada and used Canadian dollars, it was a futile effort in the United States. So we found it to be highly competitive, very hard to break into. It's tantalizing, but Americans are generally not very interested in Canadian cultural products.

The Chairman: Thank you.

Ms. Leung.

Ms. Sophia Leung: Thank you. My question is for Ms. Simonds and Mr. Stoddart.

Before I came here I was a part-time writer, so certainly I have some taste of struggle, and I published three books, two in Canada and one outside Canada.

• 2005

I have a question for Merilyn. Why doesn't a writer qualify for UI? Is it because it's a very limited income?

Ms. Merilyn Simonds: With regard to unemployment insurance, or rather employment insurance—they've changed it to employment insurance, which is, I must say, a real misnomer—you have to be employed in order to collect.

Ms. Sophia Leung: Aren't writers employed?

Ms. Merilyn Simonds: I'm self-employed.

Ms. Sophia Leung: What is the average income of a writer?

Ms. Merilyn Simonds: It's very difficult to get a fix on that, which is why we're initiating this study. It depends on how you count the beans and how they report it, but it's certainly $15,000 or less. It's probably more around $10,000, I would think.

Ms. Sophia Leung: It's very low.

Ms. Merilyn Simonds: Yes, it's extremely low. That's an average. That's taking into account the people who are receiving the $100,000 advances. For many people their copyright income is probably a matter of a few thousand dollars.

Ms. Sophia Leung: To the publisher, I know that the cost of Canadian books is very high and that the market is very small. Can you find ways to cut the cost? I know there are publishers that send books to Asia, where the printing quality is quite high, and then bring the books back when they're finished, just like the garment industry. Have you ever thought of other ways to combat your problem?

Mr. Jack Stoddart: First of all, if the book is Canadian authored and is going to be eligible for Canada Council grants, it's not eligible for foreign production, unless the production facility isn't available in Canada. The big luxurious books costing $50, $60, or $70 are in fact produced in Hong Kong, Singapore, Malaysia, etc., just because the price is so hugely different.

We in book publishing are in the entertainment business. We put a book out today, and we print maybe 10,000 copies. We hope to sell 40,000 or 50,000 before Christmas. We may sell 5,000. The timeframe of reprints is very difficult, so if we suddenly need another 10,000 or 20,000 it doesn't make any sense for it to have to come from England, the Far East, Italy, or wherever, where they also have very good printing industries.

Frankly, with the Canadian dollar where it is, Americans are starting to use our printing facilities because it is so much cheaper. I haven't seen the statistics, but just as a company that has to price competitively against American titles and our other competitors all the time..... I think that if you did a study, you would find that Canadian-authored works that are published in Canada are in fact cheaper than most of the American counterparts, other than the obvious Danielle Steeles that print in the millions. But I really think that, if anything, our prices are now lower than foreign books. But most of the work we do isn't of a general nature that travels worldwide, and so we are really producing for ourselves.

It may also partly be the case in the film industry. When you're producing a film that relates to a Canadian audience, you can't expect to sell millions of copies or the equivalent of it all over the world unless it is designed that way. A lot of what we do as publishers, music producers, and film people is designed price-wise and everything else to suit this market and to satisfy the citizens of this country, not the whole world.

Ms. Sophia Leung: Thank you.

Ms. McDonald, I'm pleased you talked about the future of film. I'm from B.C., and you know that B.C. is becoming Hollywood North. Of course, that's mainly for U.S. film production. There used to be tax incentives and tax shelters in order to attract big investors. I'm not talking about small ones. Is that still working to your benefit?

Ms. Elizabeth McDonald: The capital cost allowance program you talked about disappeared in 1995. It was replaced by the video tax credit for certified production, and that's what I was referring to. That was done because the government felt there were some abuses to the program. There was a suspicion that the middlemen, the lawyers and accountants, were actually doing better than the filmmakers, and to that end the tax credit was introduced. In fact, subsequent to that we've been embroiled in what I can only call a tax credit battle between the provinces. And there's a very active one going on between Ontario and British Columbia. It's very interesting to watch.

• 2010

In terms of British Columbia, part of the issue is that with the production services tax credit at the federal level and the provincial level it is bringing even more service work. What that means is that you have people working on film and television sets who are Canadians, but the copyright control and exploitation of that product does not belong to Canadians. So what happens is they become for-hire producers. They don't create a body of work and the economic return is not to Canada, but they work. They are working, they are earning money, and they get the opportunity to work with some large U.S. services. But what's happening is that the creative element coming from British Columbia has not been encouraged as much.

There is now a very vibrant film industry in British Columbia. We in fact have an office in Vancouver to work with that group and to make sure their voice is heard. It's very vocal. They are working very hard to get their feature films out. They are very active on the feature film advisory review. The same is true in television. In fact one of the big hits of Canadian television, Cold Squad, comes from Vancouver and in fact beats all audiences, including American shows, in its time slot on CTV. So it's there.

The tax credit programs are supposed to ensure that the return is directly to the filmmaker. The complexity of the federal program I think may be.... Well, first of all, the money takes a long time to come, a significant amount of time to come. But the other issue is that it's quite complex, so I'm not sure that the accountants have lost anything; they've just got a new program. So that is an issue.

The B.C. tax credit program has just been introduced, and it also is a service production side. It encourages people to work outside the zone, as it's called. So there's a lot of activity in British Columbia, there's no question. If our dollar ever went up, whether that activity would stay there is questionable.

I think the other problem in terms of the service production is that some American states, including the State of California, are actively setting up programs to try to repatriate Americans back to working in the States. Canada is out there with our low dollar that we appear to want so badly, and this is part of our way of enticing Americans. So it's very complex.

Certainly there's investment. It's whether that investment is creating an industry or not, or just creating Canadians for hire—that's the big issue.

Ms. Sophia Leung: I think our government assisted the film industry in B.C. not too long ago with a big grant.

Ms. Elizabeth McDonald: Absolutely. There's no question that the federal government is particularly focused on trying to help an indigenous industry.

Ms. Sophia Leung: I have a last one, for Mr. McAvity. I did serve on the boards of a couple of museums in Vancouver, Science World, and I know how hard it is to start a big museum or a big art gallery. I just wonder about what you request. You want $7 million raised to $15 million. We always have a lot of requests. Anyhow, on the tax incentive for donations, I thought we already give very favourable tax deductions for 50% on that, and that's been in practice for a while.

Mr. John McAvity: Yes, several years ago the budget included some very important amendments to encourage and increase private support through donations. They are in place and they are working with that. We're not addressing those particular issues at this point. The two specific ones we're making are in addition to what's already in place.

In terms of your first point, and that was the actual funding to the museum assistance program, this is a grants or a contributions program, sort of a combination of grants and contributions, to support museums. I think we're being very modest in asking it only to go to $15 million. This is still not very much money, but I think it's a practical step. I think it's an achievable step. You've balanced the books; the house is in order. It's time to really go back and address some of these things, which are really the glue that keeps Canada together.

• 2015

I'm very familiar with Science World. I don't know what other institution you were involved with, but Science World is an excellent example of an institution that's a multi-million-dollar facility that grew up—

Ms. Sophia Leung: We're always short of money.

Mr. John McAvity: Always short of money, but that has had a very, shall I say, entrepreneurial approach. It does not get a lot in the way of support from government, but it has received money from the museum assistance program and from the B.C. government. It has really gone out there and developed the donations side and the sponsorship side and the earned revenue side through its shops and rental facilities very well.

The Chairman: Thank you, Ms. Leung.

The final question is for Ms. Bennett, unless Madame Tremblay has a question. No? Ms. Bennett.

Ms. Carolyn Bennett: I have a few short questions, Mr. Chair.

The Chairman: I have nothing special this evening.

Ms. Carolyn Bennett: I can't help but comment that it is a shame that our loyal opposition is not here, because they refuse to believe that investment in cultural industries is actually jobs and good for the economy. Maybe I'll go to that question first, which was for Marie-Josée.

On page 9 of your brief you footnoted Statistics Canada, the economic impact of the cultural sector. When the cultural ministers met I think there was an acceptance that investment in cultural industries is the most secure investment any government can make, as Mr. Jackman said. To go over this, for each $100 million that goes to the fund, your figures are.... Is that $625 million per year per $100 million invested? I think those were the sorts of numbers that we were led.... For every dollar the government invests they get about $6 or $7 back in terms of economic performance.

Ms. Marie-Josée Corbeil: I think I will ask Mylène to answer the question.

[Translation]

Ms. Mylène Alder (Director Legal Affairs and Labour Relations, Quebec Association of Film and Television Producers): It is in the document you received last year, called

[English]

“Canadian Film and Television Production Industry Profile”. These are figures that were calculated by StatsCan for 1996-97. Within a few months we will probably have the figures for the last year, 1997-98.

Ms. Elizabeth McDonald: Actually, we'll be putting them out here in Ottawa on February 3 at our policy conference. Thank you for giving me the opportunity for that commercial.

Ms. Carolyn Bennett: That's fine.

My other question then would be for Ms. McDonald. I think Mr. Stoddart's number in terms of the real miracle the publishing industry takes by actually getting 30% of the market is pretty impressive. What is the percentage of Canadian feature films' screen time?

Ms. Elizabeth McDonald: It's about 2%. I think the feature film advisory committee—and you may know this, Dr. Bennett—has a long-term goal of trying to get 10% of the screen time for Canadian features. This is long term—ambitious.

Ms. Carolyn Bennett: The service tax credit that now is for non-Canadian films that happen to produce here in this country—I understand there's perhaps a WTO challenge in terms of our seducing this business to this country. Is that possible? How do we get away with that?

Ms. Elizabeth McDonald: How do we get away with having a production services tax credit?

Ms. Carolyn Bennett: Yes.

Ms. Elizabeth McDonald: That's very interesting. It all happened one afternoon. It certainly took me by surprise, and the APFTQ. How did it happen? I think it happened because there was a very strong lobby on the part of the American major studios, an extremely strong lobby. They also made a very compelling case to some of the unions and guilds involved in the industry, and it's almost impossible for them to walk away from it. As much as I believe every union and guild in Canada that works in our sector supports the creation of Canadian content and keeping Canadian copyright and building Canadian industry, it becomes very difficult for them when the American majors say they'll pull out if you don't support them, and that's what they say.

• 2020

Ms. Carolyn Bennett: What would that dollar number be per year to Canada that we are actually giving them in a tax credit?

Ms. Elizabeth McDonald: The difficulty in all of this—and we have an Ernst & Young study that we could provide you with that looks at the differences in the two programs—is that the production services tax credit is fairly new, so there is no estimate.

Ms. Carolyn Bennett: The estimates flying around here are around $55 million. Is that...?

Ms. Elizabeth McDonald: It indeed may be true, at least conservatively—small “c” conservatively. The issue that we all know in the industry is that the amount of activity that's been generated is incredible.

Ms. Carolyn Bennett: The fact that B.C. production companies, that Canadian production companies can't get crews....

Ms. Elizabeth McDonald: And Toronto as well, and Montreal the same thing.

Ms. Carolyn Bennett: If that $55 million was spent on investing in Canadian production, wouldn't those people still be working?

Ms. Elizabeth McDonald: Absolutely, no question, and they would be much happier working in that environment with Canadian companies.

Ms. Carolyn Bennett: So if the tax credit was removed and put into a fund for Canadian features, the unions should stay happy, shouldn't they, if these people are still working?

Ms. Elizabeth McDonald: Absolutely. I think the other issue is that there's one thing I don't think this could rectify, and that is the differential in the dollar. It's extremely attractive for Americans to work with a 65-cent dollar in an environment where their language is understood, where it could be either in the New York or the L.A. time zone, and where the crews are outstanding. I don't think they would all get in their Mercedes and BMWs and go home.

Ms. Carolyn Bennett: With the status of the Canadian dollar right now, it would be a good time to go for it.

Ms. Elizabeth McDonald: Absolutely.

Ms. Marie-Josée Corbeil: If I may add to this, this production services tax credit for foreign production was implemented in replacement for an existing tax shelter system for American studios. It was supposed to yield to the American studios more or less the same percentage as the previous tax shelter system. Removing that system could prove to be difficult because of the free trade agreement. That's one issue.

What we are rather saying is not necessarily that it's necessary to remove that new services tax credit but that it is crucial to make sure that the credit for Canadian content production is far more advantageous than the production services tax credit. What we have suggested in our two submissions is the 8.5% or the 6% or 7% as opposed to the 5%. As Elizabeth mentioned earlier, with our dollar going down and down, this 5% seems like a real bargain for the Americans.

Ms. Carolyn Bennett: In terms of the museum indemnification, what dollar sign would you put on that?

Mr. John McAvity: Zero. It will not cost the federal government anything other than a minor bit to administer. This is on the presumption that we are able to operate an indemnity scheme as successfully as other nations. The United States, for example, has had an indemnity program for about 15 years. They've saved $90 million.

Ms. Carolyn Bennett: This is because of insurance premiums that the museums would have had to pay.

Mr. John McAvity: That's right. There have been only two claims in 15 years. Those two claims have not exceeded $100,000. The same thing is the case in England, Germany, France, Norway, Singapore, New Zealand, and Australia. We're the odd man out in not having such a program. It makes economic sense and it facilitates the international lending of works of art.

• 2025

Ms. Carolyn Bennett: All three of you suggested income averaging. It sounds as if you feel you've been...having tried it a couple of times and not having been listened to.

What I want to know from Merilyn is, is this copyright income deduction a second choice? If you could actually get income averaging that would make...?

What I want to know from Jean-Philippe is, in Merilyn's suggestion, what happens to actors and dancers and those people who may still work in a sort of episodic fashion, although they don't create in the same way?

Ms. Merilyn Simonds: Their incomes don't fluctuate to the same extent. It's the people who are in the creative arts that have the fluctuating income problem.

I think the targeted income averaging is a good provision and a very broad provision for a lot of Canadians. This is not a tax break. That was something that actually Mr. Gallaway mentioned, and I want to make sure it's perfectly clear that the income averaging has nothing to do with tax breaks; it has to do with correcting a basic flaw in the system that has been penalizing low-income Canadians. Low-income self-employed Canadians are the ones who are paying more than their fair share of tax, more than any other employed Canadians. So that's one thing.

I'd like to see both. The copyright income deduction is a way of supporting creators within the Canadian context, because they, in turn, generate a huge amount of industry within the cultural sector.

Ms. Carolyn Bennett: Do visual artists have a copyright?

Ms. Merilyn Simonds: Yes, of course—visual artists, even choreographers and musicians. Any kind of intellectual property is covered by copyright.

The Chairman: Ms. Borgal.

Ms. Philippa Borgal: I'd like to add to Merilyn's other suggestion that, if indeed income averaging is to be examined by the Minister of Finance, there be artists and creators as part of the consultation process. That way, whatever is decided will indeed serve the entire cultural community and not just certain individuals within it. I think that's a very important part of Merilyn's proposal.

Ms. Elizabeth McDonald: I'd like to add to this. You said it's unusual for the CFTPA, which is the employer, to speak on behalf of ACTRA, which is the employee. However, I think actors and actresses—or actors, as they're now called—do have very fluctuating incomes, and perhaps the largest part of their incomes comes from waiting tables. So I presume they would actually also support some sort of income averaging.

Mr. Jean-Philippe Tabet: Going back to what we are talking about here, it's really dealing with issues related to a workforce that is mainly self-employed. That is why we are struggling to put forward a proposal that we look at measures to help those who are self-employed—and they are growing.

One of them, in terms of taxation, is the income averaging system. Another one we are pushing for, because it's important for the self-employed, is to maintain those skills.

Everybody here mentioned how Americans are attracted to Canada. Certainly it's not for the weather, except if they are perhaps shooting The X-Files in Vancouver. I don't know; that's part of the cachet. But they are going back to Los Angeles, as far as I understand.

The question for me is that we have in Canada a very highly skilled workforce. Last year, we lobbied very hard to have the cultural training institutions be stabilized in their funding so that we will not lose that. It's what Jack said, in a way: when you lose it, you lose it.

So the next step now is to look at the self-employed and find ways by which we could help them invest in their own professional development activity, through, for example, what we call a registered lifelong learning plan. It's not EI legislation, but it's a way by which we would help those who are in that situation to really stay at the level they require. This is true for writers and dancers. It is true for self-employed persons in general. There are inequities here in Canada not only in the tax system but also in the training system. Most employees would have an employer that would pay for their professional development activity. This is not the case for the self-employed. They have to invest their own time and money. So in a way we are pushing to help you find new initiatives that will deal with that workforce.

• 2030

The Chairman: Thank you.

Ms. Carolyn Bennett: ACTRA, I believe, has a fund that HRDC contributes to in terms of helping actors learn accents so they can work on American films, for example. But I'm sure actors are involved in other professional development as well.

Mr. Jean-Philippe Tabet: What you are mentioning is very interesting. It's of course one of the programs that Cultural Human Resources developed a couple of years ago. This idea of helping those who are in the workforce to maintain their skills is not new. We have gone through it, and we have developed a few things. Elizabeth, you will let me know if I'm wrong here, but I think the CFTPA and some film producers are working with ACTRA to try to include as part of their contracting agreement some kind of training fund for the professional.

Ms. Elizabeth McDonald: We're about to go into negotiations with ACTRA, so I don't think I want to talk about it. It seems an inappropriate forum.

Mr. Jean-Philippe Tabet: But what I'm saying is that there are ideas about this.

Ms. Elizabeth McDonald: There are many ideas about training among unions, guilds, and employers.

The Chairman: Mr. McAvity.

Mr. John McAvity: When looking at who you're speaking with today, I'm struck by the fact that there are not very many artists around the table. With the exception of Merilyn, most of us are really representing institutions or organizations.

I know this is in the Canadian Conference of the Arts' report, but I think it's worth repeating, and that is that many of the national service organizations for artists have really been decimated and are barely in existence. In my own field of the visual arts, the national association for visual artists barely exists. Their funding has been eliminated, and there's nobody really left to speak for them. ACTRA is in a different position. But it's the same thing, I'm sure, in the dance field and in other sectors. It's something I want to bring to your attention, because I really think it is a loss and that it would be a useful voice for you to hear.

The Chairman: Thank you, Mr. McAvity.

Ms. Merilyn Simonds: That's very true.

Something that wasn't said here today is that it's very important that Canada Council funding be maintained and that in fact funds be increased so that they can reinstate operating budgets.

Our union operates only on our fees. A writer earning $3,000 a year pays $100 a year. That's why we don't have a larger organization. We work entirely on a volunteer basis, and that's why there aren't more creator organizations around this table. It's why we don't have the statistical backup for our arguments, because we don't have the skills ourselves, and we don't have the budgets to produce them.

The Chairman: Madame Borgal.

Ms. Philippa Borgal: As John McAvity pointed out, we did indeed have that in our brief.

I also just wanted to say that although funding to those art service organizations has been cut, our recommendation was that when the five years of additional funding to the Canada Council is finished, the Canada Council should not go back to its reduced funding levels, but rather the Government of Canada should maintain its funding levels with this increased money. Otherwise, what we think is bad now is going to be a whole lot worse in another three years. So yes, we want the Canada Council to look again at funding art service organizations, but it's very important that the Canada Council funding levels be maintained where they are now and where they've been promised for the five years and that they not be reduced at the end of that time.

The Chairman: Madame Tremblay.

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[Translation]

Ms. Suzanne Tremblay: You have spoken a great deal about low- income self-employed and freelance workers. It is not only in the cultural sector that these can be found. They are in all sectors of society. Are you asking for a Status of the Artist Act, as in Quebec, for example?

On another point, Mr. Stoddart, are you speaking about the French-language book industry, or does what you say cover only English-language books?

[English]

Mr. Jack Stoddart: First of all, we have an ongoing relationship with ANEL, which is the French-language publishing association. Outside of prices, there's not a significant difference in the positions we take. Price is only the price of books. We're talking about writing and publishing and bookselling. Some of the rules are a little different in the two language groups—the way retailing happens, and so on—but aside from that, there's no significant difference.

They're aware of what we are producing, and as far as an evening like this goes, they chose not to come and asked us to represent them at the same point in time. So we've been very careful, especially when we work with the Department of Canadian Heritage as much as we do in the developmental programs, that it's really a three-part program, which is ANEL, ACP and the Department of Canadian Heritage. So it's a fully integrated discussion.

[Translation]

Mr. Jean-Philippe Tabet: With respect to the Status of the Artist Act, this is a very important objective for us. It is important because the cultural sector in Canada, which consists primarily of self-employed workers, has no representation in labour law legislation. This is one area in which Quebec has made considerable progress. We now have an Act respecting the status of the artist. The other Canadian provinces do not have such a statute.

It would therefore be very important for provincial governments to be able to look at such legislation on the status of the artist in order to be able to give due regard to the realities of working in the cultural field. The Canadian Conference of the Arts also supported this initiative. It is one of our priorities, particularly under the Act that made it possible for training to devolve to the provinces.

[English]

The Chairman: Mr. McAvity.

Mr. John McAvity: I think, though, when government does legislate new rights for a sector—and let's take the artists as an example—it's very important that the impact and the consequences of those be taken into consideration on the employer institutions, if I may say that.

The museums and art galleries are, as it were, employer institutions, and we've had a case in the first round of copyright where a brand-new right came into the law and there were quite large financial implications for that, and yet there was never a funding mechanism put in place.

Museums are not like businesses. We cannot simply pass that cost along to the end consumer. We're non-profit charitable activities, and the implications of some of those rights were enormous.

So my point is simply that it's fine and very beneficial to give rights to people in the sector, but along with it, the government has a responsibility to ensure that those rights are properly financed, otherwise it's simply diminishing and taking away from already starving institutions. In fact, it has the danger of creating a division within the artistic or cultural community between who's starving the most, and we need to be working together in a constructive way.

The Chairman: Ms. Bennett.

Ms. Carolyn Bennett: I just realized I had a question for Mr. Stoddart.

On the Ontario $100-million textbook program, how does it happen that we end up with American textbooks in our Canadian schools, and is there anything we can do about that?

Mr. Jack Stoddart: Federally, I don't think so. Ontario just decided to change the rules overnight. The Ministry of Education didn't even know about it. It was a political decision.

Although most of the textbooks this year were in fact Canadian-authored because there wasn't enough time to adapt some of the American programs, if they do change the rules, it will in the future be a bigger program. But it was a really bizarre way for any Canadian government—a provincial government in this case—to have reacted. They did something in a very unusual way.

• 2040

Ms. Carolyn Bennett: But it gave the multinationals a competitive advantage because you didn't have enough time to ramp up to what the curriculum was. Or was it that you just didn't have books available?

Mr. Jack Stoddart: That's right, yes. Basically, they said we had three weeks, I believe it was, to put together all these new books that were coming on curriculum and put it to them for review. We had four weeks to review them, and the schools had three weeks to buy them, which is a process that normally takes a year, not inappropriately. It was the dumbest thing you could possibly do.

The only good thing, and a very good thing.... Ontario as a province has not been buying textbooks for almost a decade. Most of the textbooks in schools are at least 10 years old—it's awful. That is just unacceptable.

Ms. Carolyn Bennett: Right. There are three kids for one math book.

Mr. Jack Stoddart: So at least there is a positive, that in some disciplines there are new textbooks. But I think it is a comment that although education is a provincial matter, when one province—or some provinces perhaps—gets so far behind that the majority of the textbooks are at least 10 years old, it is also a concern of the federal government.

The Chairman: Thank you, Ms. Bennett.

On behalf of the committee, I'd like to thank the panellists. Every year you provide us with great insight. We have been very sensitive to your message, a message that, may I say, is always loud and clear and unequivocal. You're a very important part of Canadian life and really a cultural expression of who we are as a people. Not only do you feed our soul and the spirit of the country, but you're also great when it comes to the economy, and you make business sense. So when you strike that perfect balance, you get the type of support you have had over the years from this committee.

So on behalf of the committee once again, thank you.

The meeting is adjourned.