FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, October 8, 1998

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[English]

The Chairman (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call the meeting to order and welcome everyone here this morning in Calgary.

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As you know, in accordance with its mandate under Standing Order 108(2), the committee resumes its study of the report of the Task Force on the Future of the Canadian Financial Services Sector, known in our business as the MacKay report.

We have the pleasure to have with us representatives from the Alberta Women's Enterprise Initiative Association, Amherst Consultants Limited, Bolt Supply House Limited, Hi-Alta Capital Inc., Peace Hills General Insurance Company, and World Sceptre Challenger.

You will have approximately five to ten minutes to make your presentation. Thereafter we will engage in a question and answer session. We will begin with the representative from the Albert Women's Enterprise Initiative Association, Ms. Corinne Tessier, executive director. Welcome.

Ms. Corinne Tessier (Executive Director, Alberta Women's Enterprise Initiative Association): Good morning, ladies and gentlemen, and thank you for the opportunity to present.

The Alberta Women's Enterprise Initiative Association is a non-profit organization led by a board of independent business people and entrepreneurs in the province. Our mandate is to help Alberta women succeed at both starting and expanding businesses. We provide financing, business information, one-on-one business counselling, links to professionals, business planning workshops and networking groups.

We've responded to over 10,000 women pursuing business opportunities in the last three years. The clients we serve typically have fewer than five employees, and many are home-based. They represent a growing sector of entrepreneurs in the marketplace. Initially, these women have few resources to pay for business expertise and development. They also tend to have limited management skills and networks of business support. Thus, they have less savvy as they enter the marketplace. They look to organizations such as ours and the Canadian banking system to provide support for success in their business ventures.

The women in small businesses are expressing concerns and fears regarding the possible merger, which I will outline. It's interesting to note that these fears are specifically countered by facts and promises from the Royal Bank and the Bank of Montreal, although few small business people seem to be aware of this, or else they don't believe it.

The one expressed concern is that a merger will improve the bank's bottom line but not their own. Banks proposing the merger have promised to actually lower service charges. If in fact the merging banks can increase their economies of scale by combining development dollars for technology and service innovations, there is justification in their ability to keep costs down.

Connected with this concern is the fear that there will be less competition and fewer banks to choose from. In fact, with the new regulatory changes planned for the financial industry, we will see the influx of many foreign banks into the Canadian market, and people will have more financial services to choose from than ever before.

Women in business are concerned that the banks will cut personnel and there will be fewer real people to deal with; they will just get more numbers to dial. As finances are a large part of their businesses, these women need to talk to people. The Royal Bank and the Bank of Montreal have indicated that they will not be cutting personnel, other than through normal attrition. I would suggest that merging banks retain a strong commitment to personal service if they want to satisfy the needs of small business people.

Another key fear is that branch locations, especially in small towns, will be closed. One promise that the Royal Bank and Bank of Montreal have made is that no small town, rural area, or remote location will lose service as a result of the merger, and there will be no reductions in service levels.

These concerns are so pronounced that some businesswomen are prepared to move their businesses elsewhere if Canadian banks merge. I think the reason for their fears and concerns, in spite of the facts and the commitments from the banks, is that banks and media are not communicating effectively with small business people. Small business people deserve to know exactly where they stand with the upcoming merger, so they can make informed choices. Banks have an obligation to communicate to small business people in a direct manner.

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Based on our organization's experience with the needs of small business people, I am personally concerned that these fears without accurate information might unfairly sway the government's decision on the merger and create a situation that is detrimental to the Canadian business community and Canadians. In fact, the very things these people fear might happen without the merger, if it doesn't go through.

Statistics indicate that small business is growing and their need for financing and business support services is only increasing. The small business sector has the potential to be the mainstay of the Canadian economy, but they need strong banking support. For strong banking support you need strong banks that are committed to the Canadian economy.

When foreign banks penetrate the Canadian markets they will be interested in skimming the cream off the top of the market, taking the easy profits. With a huge customer base at home and the ability to invest heavily in technology, they can offer single-line services at a very low cost. Examples are Fidelity, Wells Fargo and Countrywide Credit Industries.

If the Canadian banks are hampered in developing their strength and competitive edge, they might be edged out of the lucrative product line that helps pay for their less profitable ones. In effect, they will not be able to offer a full range of services, including very important but less profitable ones that support small business. Financing and services to small business do not represent the cream in the financial industry.

Canadian banks have been committed to Canada and have contributed significantly to the tax revenues of the country. As Canadians, we're often all too ready to transfer our profits south, as in the case of the takeover of Canadian Airlines by American Airlines. Indeed, a merger might also help our Canadian banks grow on an international basis, thereby bringing in new revenues to support our tax base.

If we are going to open up the financial market to foreign companies in the grand business spirit of increasing competition, we should at least not restrict our own banks' ability to compete. A strong Canadian banking system with a commitment to the Canadian economy will ensure small business in Canada gets attention.

There is no need to fear a merger, as government legislators have the power to ensure that Canadian banks meet their post-merger promises. One way to ensure that Canadian banks continue to support the needs of small business is for them to ally with organizations like ours to ensure comprehensive support services are available to fledgling businesses.

In our organization we do a lot of cross-referral with banks, helping their small business clients become prepared for bank financing. In turn, they send us people who do not fit with their lending criteria. This is very good for clients because it provides them with the comprehensive support they need and some alternatives.

I don't believe we could establish the same relationship with foreign banks, who are not as interested in growing our economy or in realizing the lower profit margins associated with serving the small business market.

Royal Bank and Bank of Montreal have promised that they will keep service costs down, ensure rural locations are not without service, and provide a full range of service and support for small business. I think we should support them and hold them to their promises rather than display mistrust in their motives. Trusting those who have supported Canada all along can provide us more opportunity for gain than shifting our dependence to foreign banks who have no real commitment to the Canadian economy or loyalty to Canadians.

Thank you.

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

We'll now move to a representative from Amherst Consultants Ltd., Ms. Lois Mitchell, president. Welcome.

Ms. Lois Mitchell (President, Amherst Consultants Ltd.): Thank you very much.

I'd like to take a few minutes—this is not actually in the brief—to impress upon you a few other facts.

One of the main reasons I think this merger is so important is in the area of community relations. The Royal Bank Financial Group and the Bank of Montreal have already shown their commitment to building these relationships to the members of the community, which include the customers, community stakeholders, employees and shareholders. The Royal Bank Financial Group is already leading the way, with over $76 million in the past five years. The Bank of Montreal is somewhat smaller. If the proposed merger goes through, they have publicly committed to $250 million over the next five years. This means a much greater involvement in the community.

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What are some of the effects? First of all, the customers and shareholders feel connected to the community and are proud to be part of building a strong community, especially when the bank is focusing on the areas of education, health, and research. What's the effect on the employees? It has a tremendous impact on employee morale, and it fosters leadership and a strong sense of commitment.

Finally, I'd like to impress upon the panel that all the community-based activities are taking place in a very competitive and growing international marketplace. The proposed merger, with double the money, would make all our communities healthier and a better place to live.

Thank you.

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

We'll now move to Bolt Supply House Ltd., Mr. John McCann, president. Welcome.

Mr. John McCann (President, Bolt Supply House Ltd.): Thank you.

Mr. Chairman and honourable committee members, as a person involved in small business, I wish to say I firmly believe in allowing the banks to merge. We live in a global marketplace, and we must face the fact that competition is now worldwide. Although we view our Canadian banks as being big business, they're facing global competition that is much larger in depth and scope, relatively speaking. I believe it is in the interest of small business to allow free enterprise to work and to allow our banks to become stronger and larger, which will give them the ability to focus more on small business.

In the last two years my two major Canadian competitors have both been acquired by large U.S. companies, backed by big American banks. I have been approached to sell to both United States and German competitors. My point is that as a small business we face international competition, and the stronger my Canadian bank can become, the stronger my business lungs are to compete locally with the global forces now in my backyard.

As Canadians, we can often be accused of expecting a social safety net and making unreasonable requests of our large institutions. We need to look at the larger picture and to be wary that the social safety net does not become a hammock of complacency and that our shortsightedness doesn't lull us into avoiding the inevitable.

Global competition is here to stay and, like Canadians, it is playing to win. Please don't try to make our banks disadvantaged by not allowing them to merge. Allow them the size to compete on a level playing field internationally. Let free enterprise prevail, and Canadian business will in turn prosper both at home and globally.

Thank you.

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

I'll move to Hi-Alta Capital Inc., Mr. Scott Tannas, president and CEO; and Mr. Ken Hughes, director and chief financial officer. Welcome back. It's nice to see you again.

Mr. Ken Hughes (Director and Chief Financial Officer, Hi-Alta Capital Inc.): Thank you, Mr. Chairman.

Thank you for the opportunity to join you here today. I'll lead off, and then I'll turn it over to my colleague Mr. Tannas for some observations and a wrap-up.

Just to give you a bit of background as to where we're coming from as a company, Hi-Alta Capital is a network of insurance brokerages that are located across rural western Canada. We are expanding rapidly. We are currently based in 21 communities in Alberta and British Columbia, and we're looking to establish ourselves right across the west. It is a publicly traded company on the Toronto Stock Exchange. The business strategy is really based upon building that important trust relationship between the leader in the community, who is the insurance broker, and the customers based in that community. So we're a very customer-oriented company.

One of the advantages we see in the emerging world is the opportunity to offer other services to our customer base and to provide other financial services and banking services through these brokerage networks.

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In general, we cautiously endorse the direction and themes of the report of the Task Force on the Future of the Canadian Financial Services Sector.

We'd like to speak today more to the broader issues identified in the report as opposed to dealing with one issue, and that is the merger, which seems to be the concern of many other people. We expect there will be mergers throughout the sector. That's the natural evolution in the business community.

We certainly welcome the opportunity to compete with banks in the provision of fully integrated financial services, but we really want to ensure that the guidelines, legislation, and regulation required is in place in order to ensure that this is a fair competition.

With respect to enhancing competition, we completely endorse the stated goal of facilitating new entrants to the market. In fact, we are one of those emerging entrants to the marketplace in providing financial services in our target market. Our market, Mr. Chairman, is the secondary market. This means smaller communities and communities where some of the larger financial institutions have more difficulty serving the community. We're there, and that's really our base.

We endorse the recommendations in the task force report with respect to ensuring that the regulation of the administrative burden affecting new financial institutions should be reflective of the size and the nature of the business activities of new entrants. Clearly, it would make no sense to have small new entrants to the financial services sector have to go through the same loops as the Royal Bank. You would kill them from day one if you did that.

We concur as well with the recommendations with respect to a streamlined and time-limited approval process within the OSFI mandate.

Just as a note, this came up as one of the recommendations in the report: clearly, we believe that public policy should reflect reality. The tax on capital is not an efficient tool of taxation; a tax on profits is a preferable tool. I realize that there are political issues around that, but from the perspective of economic efficiency, let's try to make our economy as efficient as possible.

Now, if the Government of Canada and the Canadian financial services sector are determined to proceed with retailing insurance by deposit-taking institutions, then we believe that the legislative and regulatory environment should be established with all possible haste to allow smaller institutions to get into the game right away to retail insurance through branches. Clearly, a critical precondition is to ensure that the legislation regarding privacy and tied selling is in place as well. Providing a lead time to the smaller players is one way to provide a fair and more level playing field once everybody is out there competing against each other.

With that, Mr. Chairman, I'd like to turn the mike over to my colleague Scott Tannas, who is the president and CEO of Hi-Alta, for some wrap-up comments.

The Chairman: Thank you, Mr. Hughes.

Mr. Tannas.

Mr. Scott Tannas (President and CEO, Hi-Alta Capital Inc.): Thank you.

I just wanted to add a little bit of a perspective not only as the CEO of a network of what we consider to be the best and brightest of the rural insurance firms in western Canada, but also as a small town businessman who is facing the future of competing with the banks in the insurance business. Also, thanks to the strength of our network and our capital base, we're looking at the potential of competing with the banks in banking.

I have a lot of concerns, obviously, with respect to the banks' strength, and so on, and the initial establishment of a fair and clear playing field, but I also look forward to competing with the local bank manager. I live in my community. I was born and raised there. My bank manager in this small community and his wife are looking forward to the next promotion out of town to the next biggest centre. I think I can do a good job of retailing services and serving customers provided I've got a level playing field on which to compete.

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I have two observations that I would like to leave you with.

First, say the banks could choose to only serve profitable segments of the insurance market, specifically “cream the market”, as it's known in the insurance industry. As an individual who is in a small community and who is dedicated to serving and must serve all members of that community—I live with them and see them every day—I don't have that luxury, and the banks shouldn't have it either.

Second, one of the key things about the banks in our communities is that they have bank branches fully built with a vault and counters and all those kinds of things. If we see a merger, there will be some redundant bank branches in our small communities. You must understand—I'm sure many of you do—that in a rural community there's not a lot of downtown real estate that comes up and is available for new businesses to come into. We want to make sure that the banks make available any redundant bank branch real estate to potential new entrants so that they don't specifically direct real estate agents to lease or sell the branches to anybody but a competitor.

Those are really two of the issues. We leave it to your wisdom as to whether or not the Government of Canada is going to proceed with the recommendations of the MacKay task force report. We continue to ready ourselves to meet whatever competition comes, but we want to make sure it's fair competition.

Thank you.

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

Now we'll hear from Peace Hills General Insurance Company. Diane Strashok is its president and CEO. Welcome.

Ms. Diane M. Strashok (President and CEO, Peace Hills General Insurance Company): Thank you very much.

I appreciate the opportunity to be here this morning. I want to focus my remarks today on the recommendations put forward by the task force that banks should be able to sell insurance through their branches and to use bank customer files to market insurance.

I know the report contains some 124 recommendations, many of which merit your consideration. However, its proposal to expand insurance powers to banks would seriously devastate the property and casualty insurance industry, and I feel compelled to be here before you today.

Before I proceed, I'd like to tell you a few things about our company. Peace Hills General Insurance Company was established in 1982. It's owned solely by the Samson Indian Band, which is located in Hobbema, Alberta. It's the first native-owned insurance company in Canada. It's licensed to sell property and casualty insurance throughout western Canada and the Northwest Territories, with Alberta and Manitoba being our most active markets.

Last year, our premiums exceeded over $50 million. We employ almost a hundred people directly in Alberta and in Manitoba. We have three offices. They're in Edmonton, Calgary, and Winnipeg. We're represented by approximately 150 independent brokers throughout western Canada. These brokers are mostly in rural areas.

As you can see, I'm not here representing one of the major financial institutions. Rather, I'm here as a spokesperson representing the bedrock of the property and casualty insurance industry in Canada.

There are some large property and casualty insurers in Canada, but those in no way dominate the industry. We have, however, 230 property and casualty insurers actively competing in Canada. Most of these companies compete for less than 1% of the total industry's premiums. Many of them are small companies that serve a very specific region or niche market. We succeed because we are very close to our customers.

Most of the companies in our industry distribute their products through independent insurance brokers, who are small, entrepreneurial business people on their own and who are established in the rural communities.

The issue of banks retailing insurance through their branches has already been dealt with by Parliament in 1992 and again in 1997. Each time, MPs of all parties in the House of Commons voted to keep the current rules in place and say that banks in the insurance industry have to compete on the same basis as other insurance companies.

Yet here we are again, less than two years after Parliament dealt with this question, with a task force recommendation that gives the banks all they've ever wanted in insurance. Yet nothing in the task force report itself adds anything to the debate, which has been going on for over 10 years.

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The reason banks have not been given the power to sell insurance in their branches and to my customer list is quite simple. The banks have not been able to build a convincing case on four key fronts: the threat of great bank dominance in financial services, the incidence of tied selling, the abuse of personal information, and the loss of jobs.

Do we want major banks to dominate the only financial service sector they do not already control? I certainly don't have to remind you there's only one major independent trust company left in Canada and only one national investment dealer that is not owned by a bank. I don't want a similar thing to happen to our industry, yet this is exactly what does happen every time the banks are given unrestricted access to any financial industry. Why give the banks control of an industry, such as the property and casualty insurance industry, that is highly competitive and is serving the customers well? The whole issue of dominance has been completely overlooked by the MacKay report.

That leads me to the issue of job losses. There are 100,000 people working in the property and casualty insurance industry across Canada. Over 10,000 of those are in Alberta. More than half of those jobs in our industry are located among the independent insurance brokers. They are found virtually in every community in Canada, and they are part of the fabric of small-town Canada. They are one reason there is such strong competition in the P and C industry today. A company that wants to get into the auto or home insurance business, for example, doesn't have to go to the huge expense of setting up a sales task force. It simply signs a contract with the brokers, and in no time it's selling its product across Canada or in the niche markets it wants to serve. Consumers are well served this way, with brokers finding the best insurance coverage for their customers among any of the different insurers they represent. Yet the insurance broker sector is the one that will be most hurt if the MacKay task force proposals are accepted by the government.

The Insurance Bureau of Canada has conducted a survey that showed at least 20,000 jobs would be lost in the P and C insurance sector alone if banks were given expanded powers, with the bulk of these job losses being among the independent brokers. Banks would create some new jobs in the insurance sector, but these would be nowhere near the number of jobs lost. Past experience suggests that banks' insurance jobs would be created in centralized call centres located in the major cities, not in the small towns where the many jobs will be lost. This point has been clearly overlooked by the task force.

Finally, Mr. Chairman, the MacKay task force failed to shed any new light on the current status of banks' ability to retail insurance. Banks have been permitted to sell insurance through a separate company since 1992. They have not been given, for good reason, the unfettered right to do so through their branches or to access and fragment bank customer lists. The whole issue was looked at in 1992 and again in 1997, and the MacKay report offers nothing new.

I would urge your committee to recognize the key omissions in the report and to move on. The P and C industry is working well, and we would ask you to allow it to continue.

Thank you.

The Chairman: Thank you, Ms. Strashok.

We'll now go to the World Sceptre Challenger, Mr. David Peddle. Welcome

Mr. David Peddle (Founder, World Sceptre Challenger): My name is Dave Peddle, and I represent World Sceptre Challenger. I am the founder of that organization, which is a loosely knit organization of hundreds of like-minded people doing research into the flaws and fallacies of banking in North America and internationally.

To give us only 10 minutes of your time to go into research that has been compiled over the last 50 or 60 years is really a discredit to yourselves and of course to my membership. It cannot be handled in such a short period of time.

The Chairman: Your brief is pretty complete, is it not?

Mr. David Peddle: Yes, it is.

The Chairman: And we'll be reading it.

Mr. David Peddle: I certainly hope you will, and that you'll be able to get back to me with any questions.

I just received notice on Friday to attend this meeting. Then we were given the wrong address. I was not advised of who would be on the panel in front of us and that we needed a certain number of submissions but were hardly given the time to do that.

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But I guess in the long and short of it, if we're looking into banking and the MacKay task force, is that none of its recommendations should be taken very seriously at all. The whole question has been steered and orchestrated to achieve the ends that the bankers want to achieve.

I have asked Information Canada how banks are chartered. I have a letter from them stating that banks have never been chartered, they've been created under statute. This means a charter can only be given by a country that has sovereignty, that is a nation and owns the land. We have found, through our research, that Canada has never been legally constituted, it has never been confederated. And we have documentation given by MPs. We have documentation from Walter Kuhl, an MP from Jasper—Edson in 1945, confirming that. We have personal research by Elmer Knutson, who went to England to do the research on the BNA Act and everything leading up to that and after that, proving the same point.

We have other research going back to 1935, the Alberta experiment on banking and economics. We have another booklet called Alberta Has the Sovereign Right to Issue and Use Its Own Credit, the author being R. Rogers Smith, the author of the Statute of Westminster. The Statute of Westminster gave sovereignty to each and every province in Canada—sovereignty, ownership of the land—meaning that each province in this country is a nation unto itself. We have never confederated because there has never been a constituent assembly in which to separate the powers for central and provincial governments. And it is only from the people, the provinces that own the land, that a central government can have sovereignty, making its laws, its treaties and international agreements valid. And it can only get that from the province, as I say, even if it's only enough land in which to house a flag pole.

That's what makes legislation lawful rather than legal. Legality of legislation is no different from me, as a person in my home, setting the rules for my youngsters, for my wife or myself. But if I try to impose those rules on my neighbour, on the community, then they are unlawful, whereas it is legal for me to do anything in my own home, practically.

We also have research from Billions for the Bankers, which is something like the third edition written over the last forty years. The American counterpart, by no association, The Money Trick, on the frauds of banking and the deceptions of banking. We have Social Dynamics, written out of Australia. We have the Guernsey report, which is an economic study over the last 181 years of a country that was using, for all infrastructure of that little country of today, 60,000 people, without any of what they call natural mineral resources, which is completely tourist and a banking industry, being able to do all its infrastructure without debt and without paying interest. We have from a noted author, Tim Madden, who is an economist, Banking on Crime. We have, from the Michael Journal, “A New Conception of Economics.” That's out of Montreal. We have, from Tim Madden again, Interest, Courts and the Law.

This is research that has a very broad spectrum of credibility to back up each and everything in my report, and that is why I'm mentioning it at this time. I am were not making this report off the top of my head, but from factual researchers.

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The most important thing is to understand the banking industry and how it operates. If we go to the Bank Act, which I think we must understand, it says under sanctions of the Bank Act, section 561:

Every person who, without reasonable cause, contravenes any provision of this Act or the regulations is guilty of an offence

Section 566 says:

Every person who is guilty of an offence under sections 561 to 565 is

(a) in the case of a natural person, liable

(i) on summary conviction, to a fine not exceeding $100,000 or to imprisonment for a term not exceeding twelve months

They set down rules for the bankers to follow, but the bankers do not follow this. If we go to part II of the status and powers in the Bank Act, section 15, a bank has the capacity of a natural person. You cannot give an entity, a non-living entity, the right of a living person, but they do it. We, as individuals, don't know this, of course. It says that subject to this act a bank has the rights, powers and privileges of a natural person. Further, it states:

(2) A bank shall not carry on any business or exercise any power that it is restricted by this Act from carrying on or exercising, or exercise any of its powers in a manner contrary to this Act.

But, gentlemen, if we go to section 16:

No act of a bank, including any transfer of property to or by a bank is invalid by reason only that the act or transfer is contrary to the bank's incorporating instrument or this Act.

So you have contradicting legislation that is happening right now, and it's happened for the last 50 years and more. It means that a bank does not have to comply to the rules set up by Parliament, you gentlemen and ladies.

We have interpretation of legislation by Driedger, who states that the meaning is inevitably understood not only from its written expression but also from its context, which includes the statute's purpose and its relationship to the relevant facts.

If we go on further to the Bank Act, the most important thing is disclosure, so you and I, as individuals, know what we're bound to, but also what the bank is bound to. That is the purpose of the Bank Act; it's so that its customers aren't taken advantage of.

It is through this disclosure that if we have a problem with the bank and we cannot settle the grievance, we're supposed to be advised that we can contact the Superintendent of Financial Institutions. He is supposed to work on our behalf. I have requested this from the superintendent and have not received a reply over the last three years.

A bank shall, in the prescribed manner, provide customers of the bank who have complaints with respect to their deposits account, or payments, credit or charge cards, for the disclosure of the manner of calculating cost of borrowing with respect to a loan, with prescribed information on how they may contact the Office of Superintendent of Financial Institutions. You will find on any charge card agreement that this is not made available whatsoever.

The notice of inquiry would be to have a published notice and serve the parties with the notice. The notice refers to the subject section; the date, time, and place of inquiry; the purpose of the inquiry; the name of the presiding officer; and such other information as the superintendent considers valuable.

In disclosure probably the most important thing is how they calculate interest. Interest is calculated in the financial institutions in Canada and in the U.S. on what they call a nominal basis, meaning it's an approximate, it is not arithmetically correct, it is not actuarially correct. The bankers should follow and they should know, under the Canadian Institute of Chartered Accountants handbook, they represent the problems concerning interest.

Nominal interest is dividing the annual rate by 365 days a year to get a per diem. On a monthly basis, of course, you divide it by 12. This rate, if you pay more frequently than once a year, amounts to a greater interest than the annual rate, and yet the Bank Act says the payment must be stipulated as the annual rate and that is what you should pay.

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To give you an example, an annual rate of 5% collected monthly should be calculated at 4.89%. The Bank Act states that the banker can make an error of 1/8th of 1%. Since mathematics is an exact science, they can therefore calculate the exact amount of interest that is due at any one time. If you calculate 5% minus 4.89%, you'll find, of course, that it is a greater percentage than 1/8th of 1%. It's a rate that goes into the pockets of the banker and not its customers.

We have had actions with a bank. If the board here wishes to investigate all banking fraud, it is stipulated in the Court of Queen's Bench—and you can get the file 9301-01147. I cannot disclose the party or the bank this action was commenced against, but those are public documents, so if you wish to pursue them you most certainly can.

In connection with the issuing of credit cards, it says there should be no charge to a customer in a transaction fee in respect of credit card transactions or an annual user fee, except in the case of an annual user fee in respect of a premium card. What is a premium card? It does not describe a premium card.

If you have a credit card and it's giving you an advance letter of credit up to a maximum amount, it's a facility to get you to use your card at 16%, 18% or 20% compounded interest. But under the agreement of those credit cards, it does not stipulate what simple or compound interest is or how it affects the customer.

This special mail-in application that went out to thousands of Canadians from the Royal Bank states that there's an annual fee of $120 for this card. As a special bonus, if you sign up and you give them all your confidential information now before you get all the terms and references of the agreement that binds you to this bank, you will get 10,000 air mile points. Now, this is quite something. Here's what we have. We have 1.5¢ per point. They give you 10,000 air miles and they're worth $150, so you're paying $120. Whatever you're giving, you're buying the air miles yourself. This is some of the fraud and deception we have.

Here we have some research. The Bank of Canada was instituted in 1934 by the federal government to regulate credit and money in the best interest of the nation's economic life. The 27 million Canadians accuse the monetary policy of the Bank of Canada, which should be and is, in reality, the bank of Canadians. The Bank of Canada alone has the power to regulate credit and money in the best interest of the nation's economic life, but it does not do this and has never done this since 1934.

The Chairman: I think you've given us enough information. I'm sure the members of the committee will probably want to ask you some questions related to these issues.

Mr. David Peddle: I am not through yet. I would like to use my time and the time the other witnesses have not used, if I may. This is an important issue. I have spent many years compiling this information with other people, and if it doesn't go before this board now, it will never go before this board. It will be put under the table.

The Chairman: Mr. Peddle, you stated to me earlier that all of this information is found in your brief.

Mr. David Peddle: Not all of it. I'm just making sure the research backs up that information.

The Chairman: Can you table the other material that is not part of this brief to the committee so we can review it? The issue here is that we have many witnesses who have presented their cases and I'm sure the members of the committee would like to ask them questions as well.

Mr. David Peddle: There will be plenty time in which to do that.

The Chairman: Well, Mr. Peddle—

Mr. David Peddle: If we as a group don't know the problem, how can we get solutions?

[Translation]

The Chairman: Mr. Desrochers.

Mr. Odina Desrochers (Lotbinière, BQ): Mr. Chairman, I would not want Mr. Peddle's presentation to penalize the other witnesses. I think that he has been given enough time to state his views. He has given us a brief. It is now time to move on to the questions because there are other presenters. We are now penalizing the other witnesses.

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The Chairman: All right.

[English]

I will give you a minute to wrap it up and then we'll get into the question and answer session.

Mr. David Peddle: This is a disservice to the members and most certainly a disservice to me for the importance of this case.

As I say, Canada has not been legally constituted. Under section 91 it is the Government of Canada, under 14, 15, 16, 18, 19 and 20, that has complete control over currency. It does not have the right to set up private banks in this supposed constitution we have, and I think that is most important.

I would like very much to meet with the decided representatives who are determining the task force and their recommendations before something is done. I could make this material available, but without it being spoken to the members a lot is really missed and glossed over, because we have so much information that is detrimental to Canada's economy and citizens.

The banking system is a system designed to fail the country as a whole and to rob and steal the wealth of the people who make this country. That is not just in Canada, gentlemen, that is on an international plane. It is only a nation that has sovereignty, and a nation can exercise that sovereignty only if it has control over its money system and monetary system. No banker looks to foreigners for money. They do not buy money from the Bank of Canada or from foreign interests; they create money out of nothing, absolutely nothing. Interest is a payment for the use or rent of another's property. Money is not property.

The Chairman: Thank you, Mr. Peddle.

Mr. David Peddle: Thank you.

The Chairman: Mr. Kenney.

Mr. Jason Kenney (Calgary Southeast, Ref.): Thank you, Chair. I'd like to thank all of the witnesses for their thoughtful and well-researched presentations and for coming before us today.

My first question goes to Mr. McCann. As a small business entrepreneur, I'm interested to hear that you endorse the direction of the approval of the bank mergers. Many other independent entrepreneurs have indicated they're concerned that the mergers would lead to less competition, less availability of capital, and more centralization of the decision-making process in financing ventures like yours. So I wonder if you could comment on why you don't share these concerns that seem to be broadly shared in the independent business sector.

Mr. John McCann: I think those concerns are really based on speculation, and I have a belief that if you make a business more efficient it's better equipped to serve its customers. If our Canadian banks don't do it, other banks will come in and do it. I see it's in their best interest to continue to do it. They don't want to lose the business they have.

Mr. Jason Kenney: Thank you.

I'd like to move to the question of insurance. We had a couple of presentations on that. I was quite intrigued to hear Mr. Tannas and Mr. Hughes speak in favour of the recommendations for allowing eventual full entrance into the insurance retailing market on the part of the banks. I was surprised, because this is not an opinion widely held by those representing small and independent insurance retailers, particularly rural ones.

I wonder if you could comment on why you feel so many in your industry are so strongly against these recommendations. Why do you feel more optimistic with respect to your ability to compete? That's my first question.

On my second question, Mr. Tannas said he'd want to make sure competition with the banks was on a level playing field so they couldn't just cream the more profitable elements of the business. What exactly did you mean by that? What kind of regulatory framework would have to be in place to ensure that the banks picked up all aspects of the insurance business?

Any other panellists would be welcome to comment on that as well.

• 1150

Mr. Scott Tannas: We realize and understand that our appearing here today and the points we put forward contradict those of our colleagues. We sure wish you wouldn't proceed with allowing banks to retail insurance from their branches. What we specifically said is if the government's will is to go this course, then we have some things to say about it.

We support the efforts of our industry association, and we really share their concerns. This issue has come up again and again, and like many issues that continue to come up, eventually the other side prevails. So Hi-Alta Capital was formed really as a way in which we could unite strong independent insurance brokers to deal with this eventuality, to give us some size and strength and access to capital, and a way in which in rural markets we might position ourselves not only to protect our jobs and serve our customers better, but also to take what we see to be inevitable and to turn it into an opportunity.

Mr. Jason Kenney: I'd like to ask for some clarification. In your written presentation you said you welcomed the opportunity to compete with the banks in the provision of fully integrated financial services, which is something you said in similar words during your oral presentation. But I think I just heard you say you're not in favour of the banks entering this marketplace, but if they do, you simply want certain regulations to be in place. When the researcher draws up the columns of who's for and against, you need to be clear about which position you're taking.

Mr. Scott Tannas: On balance, if we are given a level playing field, we're confident we can be successful. So to that extent we endorse the MacKay report. We don't suggest how a level playing field might be created. We're outlining our concerns and asking you to please deal with them.

Does that clarify our position?

Mr. Jason Kenney: Sure, that's helpful.

Ms Diane Strashok: I don't quite share Scott's positive nature about a level playing field, because from an insurance industry standpoint, I don't know how it could possibly be level. The banks have financial information on their clients that we simply would never be able to have. For example—and this is just pulling an example out of the air—if a bank received a claim from a business that burned down and the bank knew that business was not financially sound and wasn't going to be around for another year, why wouldn't they just drag that claim out for a year? Why would they pay it if they knew this business wasn't going to be in business anyway? Why would they put insurance on an automobile if they knew a person had a bad credit rating?

We don't have that opportunity. I write insurance for all kinds of people, and we allow them to bounce one or two cheques before we send them a letter and tell them we're going to cancel their insurance. But in our industry I would never have the ability to see their financial statements, to know how much money they have in their account and if they are a good financial risk. A person who is financially secure is a better insurance risk. People who don't have mortgages are better insurance risks. People who are struggling financially quite often aren't a good insurance risk. But we still have to write all of them, and we don't have that information. So I don't know how you would ever have a level playing field.

Scott mentioned creaming the market. The banks would have an opportunity to cream the market and to insure only the most financially secure. We wouldn't have that opportunity. Also, we would be left writing what's left, which means our rates are going to have to go up in order for us to insure the poorer part of the community.

So it can't be level unless you allow us somehow to have full financial information, and I don't know how you can do that.

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

Mr. Dick Harris (Prince George—Bulkley Valley, Ref.): Yes, I have a question, Mr. Chairman.

Thank you, panel, for coming today with your presentations.

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My question is for Ms. Tessier. It's with regard to the entrance of foreign banks into the market. We call this foreign-branch banking. It was recommended that we get under way with this in the MacKay task force report. In your brief, you stated that if we're going to open the financial market up to foreign companies, in the grand spirit of business and increasing competition, we should at least not restrict our own banks' ability to compete. Of course everyone agrees with that.

I guess the question is this. Most opinions say that we should get that foreign-branch banking legislation done first. It would be before we begin to consider the merits of any proposed bank merger. Most opinions are saying that we should not do it in concert because foreign-branch banking can be done very quickly. We should get that done so as to ensure that the opportunity for more competition is already in place before we start to consider mergers. By doing the mergers first or in concert, we may in fact see a decrease in competition without the other opportunity.

How do you see that this should be done? Should it be foreign-branch banking first, and then a consideration of the mergers? Do we do it together, or does it matter to you?

Ms. Corinne Tessier: I think a lot of the foreign banks have a lot of clout and an ability to move very quickly when they want to. A lot of them are poised already to move in. They understand the product lines they're going to use and the pricing structure.

I think that by opening it up to foreign banks first you don't give the Canadian banks the kind of lead time they need to position themselves in order to compete effectively. With the complexity of the whole merger issue, it could take some time before it's actually finalized. It might be several years beyond that before Canadian banks could effectively orchestrate a merger and position themselves in the market to deal with foreign banks. By that time, foreign banks would have a couple of years of lead time and be able to offer these one-line, monoline services at a really low cost, and banks would already be at a disadvantage when they tried to compete.

So I see no reason to give them a head start if you aren't going to do the merger right along with it.

Mr. Dick Harris: Okay, thank you. Do I have time for one more question?

[Translation]

Mr. Odina Desrochers: To begin with, I would like to thank you for having come here today to tell us about your comments, suggestions and fears concerning the possible bank mergers.

My first question is for Ms. Tessier. You represent a women's association, and we know that the banking and insurance sector employs a great many women. What recommendations should we make to protect this sector, which is extremely vulnerable to mergers and the disappearance of some branches?

[English]

Ms. Corinne Tessier: I think one thing that would really support small business, particularly women who are entering the business market and need a lot of comprehensive business support and capital, is for regulation to be put in place to ensure that banks hold to their promise of keeping service charges down, continuing to offer a full range of service for small business.

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Personally, I think it might be very effective for banks to ally with organizations, not just ours but many like ours, who are very much serving the small business market, just to ensure that very comprehensive support is in place to help them on their way as they get started. These people have a lot of ability to succeed in business, but without the strong support and the financing they just don't get going. They're the first ones to be ignored if you're only seeking profits.

So I think regulations could be put in place to ensure that service costs are kept low, that a full range of services to support small business is in place, and perhaps there should be a consideration that banks ally with organizations that can provide an entry-level type of support, not in a dictatorial way but just as an encouragement of this co-operation.

[Translation]

Mr. Odina Desrochers: Are you currently satisfied with the services provided by the banks to meet your needs?

[English]

Ms. Corinne Tessier: We work with many women who are not able to access the banking financing at this point because they are in start-up businesses. They're often in service and knowledge-based businesses where they don't have a lot of collateral to pledge. They often don't have established credit ratings that fit within the risk tolerance banks are able to offer. That's why organizations like ours exist.

What we have found most effective is that we work in co-operation with banks. We very much complement each other in that we can help prepare a person to qualify for bank financing and get them on the road. In turn, banks can offer people an alternative if they can't immediately serve their needs.

I don't think the banking business can be everything in terms of supporting small business. There is a whole lot of time and effort involved in helping people develop the management skills they need to ensure they pay back their loans. So I don't think the banking industry can be everything. I think we're in an economy where you can't be all things to all people, and so working in co-operation with those who have specific services is more appropriate.

So are we satisfied with what the banks do? We're here because the banks can't do everything and we think it's more effective for all of us to work together.

[Translation]

Mr. Odina Desrochers: I have another question, which I will ask Mr. Mitchell this time.

Mr. Mitchell, you seem to be afraid that bank mergers and the disappearance of branches constitutes a threat to the community. What do you think of the current U.S. legislation that requires a commitment to reinvest in the community whenever there is a bank merger?

[English]

Mr. Scott Tannas: I really don't know. I guess, being from a small community, I have a little bit of an extra helping of cynicism when it comes to this kind of thing. Once banks have determined they are going to leave the community, we should tell them to pack their bags and get out, and those kinds of things, I don't think, are helpful.

What we really need are long-term players committed to the community. I don't think parting gifts like that are fruitful.

[Translation]

Mr. Odina Desrochers: Thank you.

[English]

The Chairman: Mr. Riis.

Mr. Nelson Riis (Kamloops, Thompson and Highland Valleys, NDP): Thank you very much, Mr. Chairman.

I must say, this is a most fascinating set of presentations. I particularly want to welcome to the table Ken Hughes, who not many years ago would have been sitting around the table as a very dedicated and contributing parliamentarian. It's good to see you, Ken.

The banks have indicated that their interest in merging is to enable them to compete more effectively internationally. The Royal Bank has said that they're looking at putting 40% of their efforts into offshore and so on. So the reason they're doing this is to put themselves into a more competitive position in international financing. And therefore—for Ms. Tessier and Mr. McCann—I'm really puzzled when the banks state this is their intention.

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I guess, Mr. McCann, you're arguing that the bigger the bank, the more efficient it is. This argument that larger is more efficient is an interesting one.

And for Ms. Tessier, talking about women entrepreneurs, saying that the present banks are not necessarily allowing access to women entrepreneurs and you're...

[Editor's Note: Technical Difficulties]

Ms. Corinne Tessier:

[Editor's Note: Technical Difficulties]...they will have certain product lines they can be quite profitable on, which allows them to offer the lower margin lines to those in small business. And I think because the Canadian banks have a commitment to growing the Canadian economy, they will be paying attention to this sector, because it's this sector that's going to provide them with the more profitable business later on. So I think they have a vested interest in small business.

What we find particularly with women in small business is that the banks, contrary to what the media are saying, have been very co-operative with us in trying to serve them. So we might have a woman who would have trouble walking into a bank because she's not used to the traditional business language. She's probably home—

Mr. Nelson Riis: I understand the argument that you're making, Ms. Tessier, but can you explain this? The largest small-business organization in Canada is the Canadian Federation of Independent Business. They represent tens of thousands of firms. They're so overwhelmingly opposed to this, and you are, on behalf of your entrepreneurs, so enthusiastic about it. I'm just curious how these two perceptions could exist. Do you know something about the banks that the Canadian Federation of Independent Business doesn't know in terms of providing services to their clients?

Ms. Corinne Tessier: I think many of the fears of small business are in fact countered by the real facts.

Mr. Nelson Riis: So the CFIB is probably wrong in their perception?

Ms. Corinne Tessier: I don't think they're wrong in perceiving that their membership base has fears and concerns, because ours does too. The fears and concerns are definitely there. What I'm finding, though, is that if you examine each of those fears and analyze them, you realize the commitments the banks are making are exactly the opposite to those fears. I think it's an awareness thing.

I know the Canadian Federation of Independent Business approached our organization and wanted us to be a member and support that. We felt strongly that their approach of trying to restrict banks to provide a certain amount of money so that banks have to invest in community economic development and other issues takes away the spirit of co-operation we've experienced with banks. We have a complementary relationship that is a mutual gain for our clients, and I see no reason to turn that into an adversarial position.

Mr. John McCann: Mr. Riis, I see economies of scale by being able to specialize more. The banks have made commitments that they will focus on small business more through these economies of scale. I believe them. I think if they need to go internationally to be more profitable and competitive, it makes them stronger locally, and I firmly believe this.

Although I agree with a lot of the opinions of the Canadian Federation of Independent Business, I don't agree with all of them. And it doesn't poll all the business people in Canada, just some of the members who respond.

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So I don't think our view is entirely different. I see the banks being able to focus. And with that focus, they've earmarked small business as something they really want to grow. We see it as an engine of the Canadian economy. Just in the pragmatic way of approaching business, small business will be good for the banks in the long run, and they won't want to run away from that.

Mr. Nelson Riis: I think what I'm hearing from both of you is that with your faith in the banks in terms of cross-subsidization, if they do very well internationally, they'll be more inclined to give favourable profit—that's the term I think you used—or let's just say there would be less concern about profit at the local level if you're making good profits internationally.

My other question is to Mr. Hughes. Let's say that you don't get your wish. Let's say the banks are allowed to offer insurance services, and there are not the major changes to the regulatory system that you asked for today, and you're competing directly with the banks. When one walks into an office of one of your members seeking insurance or one goes to the local bank branch to seek insurance information and service, what would be the obvious difference? The banks are making the claim, of course, that they're convenient—they're everywhere—and that they can offer the same range as anybody else. Yet the independent insurance brokers say they offer something much different. Could you help the committee by explaining what would be noticeably different if our chairman walked into your office as compared to walking over to the Royal Bank's insurance desk?

Mr. Ken Hughes: Let me start, and then I'll turn it over to Scott Tannas, who I know will have some observations from his own personal experience.

First of all, Hi-Alta is a company that is about three years old. It was formed to respond to the opportunity and evolution in the financial services and insurance system that we saw coming. It was a way to help provide support to independent insurance brokers to ensure that they were able to compete whether the banks came into the game or not.

So what you have here is a selection of small business people from smaller communities across rural western Canada who have seen the evolution. They see that this is not a static circumstance that we face over the next decade in Canada in small communities in financial services. We anticipated the change that was coming, saw that the glass was half full as opposed to half empty, and saw the opportunity to find some way to work together in order to compete and take the banks head-on if they stepped into the marketplace.

So what you see here is a group that is certainly respectful and shares a lot of the concerns that the insurance industry in general anticipates in the changes that are coming. We are responding by saying that we think there's an opportunity here to provide a better service to our customers.

The difference is that in small communities you won't have as many banks around. They have bricks and mortar out there that they're not going to continue to support. It's a fact.

Yet we will be there in the community for a long time, because our people live in the community. Scott Tannas is a good example. His family has done business with Hi-Alta Agencies in High River for three generations.

Mr. Nelson Riis: Ken, let me be more specific. You know that I come from Kamloops, and people in the bank branches there have been there for a long time. Some of them have lived in Kamloops all their lives.

Mr. Ken Hughes: But not all the managers have.

Mr. Nelson Riis: I'm talking about the person I'm going to buy my car insurance from. Well, you can't do that in B.C., but I would get my property insurance, life insurance, or whatever from them. These are people who live there. They have lived there all their lives. We chit-chat on the streets and have coffee. I'm going to go in to see them. Now they're going to be able to offer insurance if this goes ahead. I can also go to my friend who runs an insurance business and go to see him.

What I'm trying to understand is what would be the difference? Presumably you're making a case that it would be better to keep the insurance. I think you're indicating that if you had your wish, the banks wouldn't go into insurance, which is what your colleagues are saying. I'm trying to understand what the benefit would be to our chairman as a client going into one office instead of the other.

Mr. Scott Tannas: First of all, the difference really revolves around the way in which you choose to conduct business yourself. Do you prefer to deal in a boutique or do you prefer to deal in a department store? That is one thing. The other thing is that the banks will offer one product, which will be controlled by the banks, and in order to capture efficiencies I assume they would have the same decision and control mechanisms that banking does—loans and so on.

• 1215

One thing a broker is able to do is exercise a great deal of local control over the transactions and give the customer some leverage with the large institutions by way of being a broker for a number of competing product providers. That is something the banks will not be able to offer. I guess this is why, as a rural person, I'm not that scared about the banks being in insurance in the long run, provided it's fair, and provided they're not pumped up on steroids when they join the competition and just use their muscle to beat us down and eliminate us. But in the long run, I can hardly wait for a customer who is out on the street in their underwear, waiting to make a homeowner's claim on a burned-down house, and they have to turn to the bank manager because there is a little wrinkle in the claims process, or whatever. That will travel like wildfire through our community.

So we think in the long term the banks in insurance will be as popular as the banks are in banking in our communities. In the meantime, that's the biggest difference. It is not personalized.

On commercial insurance we think, similarly, that we will be able to have more local expertise and more local control and be able to fit the customer better by virtue of having a number of competing products as opposed to one.

Mr. Nelson Riis: Now I'd like to make just a short comment. I appreciate your explanation of the difference, and as I say, I don't see it as a vast difference. If you're saying that because of the broker nature and the variety of products that you'd be selling...I guess what you imply is that you would be able to offer a better deal than the banks, because they would be restricted in their—

Mr. Ken Hughes: Or a more appropriate fit for the customer, a better fit than what he would get if he bought something off the shelf from the bank.

Mr. Nelson Riis: Thank you. Thank you, Mr. Chairman.

The Chairman: Mr. Tannas, I know you care a lot about consumers, obviously, because you say you can give tailored services and can really take care of them better. But as a consumer, why don't you give me the choice of going to a bank and getting my insurance...? If you really care about consumers, one of the things you should give them is a choice. Let them choose.

Mr. Scott Tannas: I agree wholeheartedly. As I said, we endorse the changes. Hi-Alta Agencies, the firm I was president of prior to forming Hi-Alta Capital, started in 1905, and I'm a fourth-generation client of that very same firm. We do care about our clients and we do believe they should have a choice. The issue becomes whether the banks can use their strength, the strength they've gathered through years and years of protection, to force us out.

There are a number of issues, I think, that realistically we're asking you to confront. One that hasn't been mentioned here, which also struck me, is this tied selling. The MacKay report talks specifically about coercive tied selling. One of the other issues is non-coercive tied selling, which involves cross-subsidization. If we are going to create integrated financial services providers out of the banks in our communities and the competition that's left in the communities is monoline financial services providers, one of the simplest and most effective ways to drive us out of the business, if we are going to leave the consumer the choice—because the consumer will choose on price if you hammer them long enough and hard enough about it—would be cross-subsidization, where the bank manager says, well, you have a discretionary pool of dollars through which you can discount mortgages and insurance and so on; why wouldn't you just discount the insurance and leave your mortgage rate at the highest rate you can get—because there's limited competition in that area—and effectively force out the monoline service provider?

So those are some of the issues that—

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The Chairman: You have beneficial cross-selling when you give percentages off your auto insurance if you have home insurance with the same company. You do that, don't you?

Mr. Scott Tannas: Yes.

The Chairman: How is that different?

Mr. Scott Tannas: Well, how it differs right now is that we're not selling banking products.

The Chairman: I know, but you're selling insurance products and you're cross-selling.

Mr. Scott Tannas: Right. So if this is a sideline business or a new business for banks, what we're concerned about is that they will, again, use the strength of their current balance sheets to subsidize their insurance operations—

The Chairman: And provide people with lower—

Mr. Scott Tannas: —and provide people with lower costs in the short term, and then when we're all gone, we'll then see what.... Arithmetic rules in insurance; it costs what it costs, and so eventually the prices will have to come back to the level they are at right now.

Mr. Ken Hughes: We're just arguing against allowing them to use insurance as a loss leader.

Mr. Scott Tannas: Yes, particularly in an environment where the vast majority of their competing providers are monoline service providers.

The Chairman: So you're saying that banks would essentially use other capital to get into your business, and then they'll beat you down and then they'll raise the prices.

Mr. Scott Tannas: Sure.

The Chairman: So let me understand how that works. If then you decide that you're going to lower prices, if price is so important and quality of service is so important, you would think people would recognize that.

Mr. Scott Tannas: Let's say you went to the bank, and you had your house insurance with us and you're paying $300 a year. That's probably on average—and Diane could help me out here—what it costs to insure a house here in Alberta. You're going to negotiate a $75,000 mortgage, and the bank always has the ability to adjust the mortgages. What if they offered you house insurance for $100? What if they threw it in for free instead of giving you half a point lower on your mortgage? I can't respond to that. I can't give you half a point off your mortgage currently because I'm a small town insurance guy. So I've lost the business. The costs are still the same. The economics of the insurance transaction are still in there. They've just been hidden from the consumer.

So that's not coercive tied selling, but it's still tied selling. That's one of the areas we have a concern about as well, that we'd like you to think about.

The Chairman: Mr. Gallaway.

Mr. Roger Gallaway (Sarnia—Lambton, Lib.): Thank you, Mr. Chairman.

Ms. Tessier, I just want to know this. You represent 8,000 individuals or businesses?

Ms. Corinne Tessier: It's 10,000—

Mr. Roger Gallaway: Sorry, 10,000.

In your presentation today, did you pass it by the board, or did you take a poll of the members, or is it your opinion?

Ms. Corinne Tessier: It's a combination of all that. I did do a canvass of some of our clients—we call them clients, not members—who are operating businesses, so I did ask them about their concerns. I also asked all of the staff who are dealing directly with clients what they have been hearing about this. I also polled the board members on any comments they had about the merger. I've also personally undertaken to find out some of the actual facts about the merger. My personal opinion is that I fear that the very concerns of the clients are the things that might happen if the merger doesn't go through. Their fears are if the merger goes through, but I think if the merger doesn't go through their fears will be more realized. So it's a combination.

Mr. Roger Gallaway: One thing you mentioned—and I don't want to dwell on this—is that your group is by and large in favour of the merger, and your position is that, once you learn the facts, there's no reason for that. One of the facts you mentioned, I believe—and I don't want to put words in your mouth—is that there would be an influx of foreign banks. Is that correct?

Ms. Corinne Tessier: Yes, with the regulations and the financial institute plan, it would open up the field more for foreign banks to offer services in Canada.

Mr. Roger Gallaway: Do you think we have an open bank market at this point, then, for foreign banks to come in, forgetting about the present report before us?

Ms. Corinne Tessier: Sorry, could you ask that again?

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Mr. Roger Gallaway: Do you think foreign banks are actually, in a real way, in the Canadian marketplace now?

Ms. Corinne Tessier: To a small extent, but not as much as they will be with new regulations.

Mr. Roger Gallaway: All right. And with this new influx of foreign banks that you foresee, do you think they're going to be opening branches, or is this going to be an electronic presence?

Ms. Corinne Tessier: I'm not totally familiar with all of their strategies, but I think a lot of it can be electronic. Wells Fargo is already offering some single services. I'm not sure if they plan to open branches.

Mr. Roger Gallaway: Now, you're dealing with 10,000 entrepreneurs. Do you think Wells Fargo is offering services simply because they want to be in Canada, or do you think they're filling a niche that Canadian banks are failing to meet?

Ms. Corinne Tessier: I think they have a strong base at home to support their offerings, and like many companies who go international, they're able to take a few of their product lines that they can offer at a lower cost and really come in and get a gain from the volume. It doesn't affect their home markets at all, but they're able to capture a whole service line at a very low cost.

I think that will reduce the banks' ability here to offer the full range of services, because they make a lot of money on some of their services. As for supporting small business, especially with start-up loans and things like that, they don't make much money on that, and I think that if the banks aren't able to retain the profitable areas, they won't be able to support fully the less profitable ones.

Mr. Roger Gallaway: Have you worked for a bank, Ms. Tessier?

Ms. Corinne Tessier: Actually, when I was about 18 to 23 I worked for a bank—many, many years ago—but not in a lending capacity.

Mr. Roger Gallaway: Well, I'm not going to follow up on any questions about that, then.

Mr. Hughes and Mr. Tannas, I thought your presentation was tremendous. You raised a couple of points that I want to explore very briefly with you.

On the issue of the privacy of tied selling, you referred to those provisions of the MacKay report that I think I referred to as consumer empowerment. The notion that these could be in place and actually in some respects make life fairer if the banks.... I'm not talking about mergers now, I'm simply talking about expanding the field in both directions from your insurance sector and from the banking sector, some sort of convergence.

First, on the privacy issue, the Toronto-Dominion Bank already has shared all of its information with its aligned or subsidiary companies. How do you get the eggs back into the shell? In terms of the Toronto-Dominion Bank, how do you then compete with them when they've already done this?

Mr. Scott Tannas: That's a difficult question, and one that we see getting worse as banks get deeper and deeper into insurance, as Diane mentioned with her example, where the interests of the bank might override the interests of the consumer in a claim. Those are all very, very difficult issues that we're very concerned with, and for which we really don't have the answers, and obviously that the MacKay task force report.... We're the same as they are; we identify them as concerns and have no idea how you solve them.

Mr. Roger Gallaway: As you know, at the moment there is very limited prohibition on banks' sharing information with subsidiary companies. In fact, there was talk that another one of the major five would in fact proceed in a like manner to the TD Bank. Certainly in this age of computers there's instantaneous downloading to aligned corporations of all the information. And certainly in your business information gathering is a large portion of your overhead. So I just raise that as an issue in terms of privacy.

• 1230

The other matter you talked about was tied selling and trying to make the distinction between coercive tied selling and the line where it becomes what banks call bundling of services. Where is the line in all of this? If I go to a bank for a mortgage, they have this menu of goods, and as you pointed out, $300 worth of fire insurance—which is required—becomes $100 because it's discounted. They have deep pockets. Where does this all end? Is it coercive tied selling that is the problem or is it tied selling?

Mr. Scott Tannas: I think it's both. The MacKay report talked about coercive tied selling. We all know the pitfalls of that, and I think you can come up with ways to deal with that. They didn't identify specifically this idea of bundling and cross-subsidization.

At the end of day the insurance industry has costs. Maybe the way to do it is to make sure, in both the short term and the long term, that insurance operations are profitable on a stand-alone basis when viewed as an insurance operation—without hocus-pocus too. If there are ways in which an independent audit can be conducted, and there are, it would be one way we could really shed some light on where the subsidies are.

Mr. Roger Gallaway: The other issue you raised that I thought was interesting was this idea of what some people refer to as cherry-picking—I kind of dislike that term—or skimming the cream. As we know, in the insurance business there's a lot of products you sell from time to time that are little known. I'm thinking of perhaps an estate bond or a construction lien bond, and I can't imagine going to a bank to buy that. I might be wrong, but I just can't foresee the banks providing that kind of expertise.

It would seem that a bank could easily sell car insurance, as an example, to middle-class Canadians, whoever they are. Are you advocating, then, that if banks are going to sell insurance they must offer the full spectrum from A to Z? How do we guard against that sort of thing?

Mr. Scott Tannas: I'm advocating that bank insurance subsidiaries, to the extent they want to sell insurance to consumers, must make it available to all consumers and not just selected groups of consumers that, using their information or other means, they deem to be fabulous insurance risks. They shouldn't take the heart out of the insurance pool and leave those who are at the margins even further at the margins.

The Chairman: Mr. Gallaway.

Ms. Diane Strashok: There's one point I want to make about this discussion around the table. I don't want the committee to fail to remember that the banks are already very much in our business. They already compete very strongly with us, and they do that right now very fairly. We don't have a problem with the fair competition of the banks that are in our industry today. It's the unlevel playing field and the access to information we don't have that are the major concerns we have, or certainly that I have.

You can go to your bank to buy insurance today; you just can't go to your bank branch to buy insurance. You can buy Scotia insurance and all sorts of other insurance that's available from companies owned by banks. It's the unlevel and unfair competition—they have information we don't have access to.

The Chairman: Thank you.

Ms. Leung.

Ms. Sophia Leung (Vancouver Kingsway, Lib.): Thank you, Mr. Chairman. Thank you all for your fine presentations.

I have a question for Diane Strashok. I was very interested to hear you say yours is the first native insurance company. Congratulations, that's great. Obviously you have accomplished a lot in three years.

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You commented about concern for job losses and unfair competition. I think my colleague already asked a lot of questions. If that merger occurred, how would you prevent so-called unfair competition?

Ms. Diane Strashok: I can't comment on the merger of the banks. That's not an issue I'm in a position to comment on today. The only issue I have is on the unfair competition of the banks with regard to buying insurance at their branches. I don't have any recommendation to the committee to put any legislation in place that would look after that, other than to leave it as it is today. Today it works fine. The banks are in our industry. The banks sell insurance but they do so on a fair, level playing field with us.

So I think it should just be left as it is and not be expanded to give the banks more opportunity to expand into selling in their branches. They compete fairly right now. They have to answer to exactly the same rules and regulations as we do, and that's fair. Competition is healthy, but if you're going to give one side or one player in the competition more of an advantage, it becomes unfair, in my opinion.

Ms. Sophia Leung: Who are your clients, mostly?

Ms. Diane Strashok: Everyone. We write mostly personal lines, with 75% of our business in homeowners' and personal automobile insurance and 25% of our business in commercial insurance. Our business includes a wide spectrum of Albertans or western Canadians, so we don't key into any one particular group.

Ms. Sophia Leung: To Mr. Hughes and Mr. Tannas, I'm very interested that you serve a lot of the rural community. I think it's obvious that you meet their needs. For that reason, can you educate your consumers in the many different ways of competing with the banks?

Mr. Scott Tannas: I think we have a bit of an advantage, in that in the communities in which we operate our firms are led by well-known, well-entrenched community business leaders who have good relationships with their clients. They know most of their clients and most of their clients know them. We have a lot of credibility in presenting products that compete with the banks—both insurance and banking products from providers that don't currently and will not have a branch structure in our communities.

Hi-Alta Capital was formed as a way in which we might help capitalize our own competing financial institution. So as long as we are allowed or enabled to compete on a level playing field, we'll be fine. I relish the opportunity to compete on a sales basis with the local bank manager, as long as he's not carrying some of the clubs he potentially could be carrying if we can't deal with some of these issues.

Ms. Sophia Leung: Thank you.

The Chairman: Ms. Bennett.

Ms. Carolyn Bennett (St. Paul's, Lib.): I am from Peace River. In your presentation there's an assumption that the information will be shared, and I guess what MacKay has said is that they want the privacy and things sort of ratcheted up at least to what they have in Quebec now with proposition 188, or whatever it is.

Are you saying you just don't believe that's going to happen, and that if they have that information, even if it's supposed to be to different individuals and all that, it will be really impossible to regulate the sharing of information?

Ms. Diane Strashok: I really believe that. As a business person, I think it makes sense that when our brokers sell insurance to their insureds they offer them a spectrum of their products. It's like going into a restaurant and the waiter asking you if you want dessert. It's all part and parcel. When you go in to buy your mortgage, you are asked if you want life insurance. When you're asking the banks to give you the money to buy a home, you're in a very intimidating position, and when they start offering you other services, quite often you want to please the bank because you want the loan. I just can't believe it could be separate, and I don't know how you would police that.

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My report—and I apologize for the fact that your copies haven't arrived yet—mentions a survey in which consumers have already advised that banks have done tied selling, but no one has complained. It only takes six people, I believe, to make a complaint to the commission and they would investigate it. Six people haven't complained. I think tied selling would happen all the time, and no one would comment on it.

Ms. Carolyn Bennett: But when they did the polling, they found a lot of people felt they have experienced it in a subtle, power differential kind of way.

Ms. Diane Strashok: Exactly.

Ms. Carolyn Bennett: There seems to be some concern that MacKay is lumping together life insurance and property and casualty insurance in the same sentence, and that bugs your industry in some way. Would both of the insurance people explain to me why that is?

Ms. Diane Strashok: It's because we're two totally separate industries. As far as the property and casualty insurance companies are concerned, we operate totally separate from the life insurance companies. We're separate companies with separate ownership. We're two different industries.

From a broker's standpoint, I think they'd have the ability to sell both life and property insurance. But as far as the actual insurers are concerned, Great-West Life doesn't own property and casualty insurance companies, and certainly very few property and casualty insurers own life insurance companies. There are certainly a few, but they keep them very separate.

Ms. Carolyn Bennett: I think your presentation about your personal situation in High River has been extremely instructive for us, and it shows that having ties in a community is a competitive advantage. If this should happen, you are saying you would like it levelled. Governments are better at dealing with solutions than problems, so it would help if you were to do a road map for us about what you would want to see in what order in order to get this level, such that your advantage of living in the community and all of that is taken into account, as opposed to the manager who has just joined the Rotary Club when he's moved out. How would you do that?

Your answer to the other question helped in terms of the independent audit, because all insurance could be thrown in as a loss leader with every other line. Is that correct?

Mr. Scott Tannas: Yes.

Just to give you a sequence, first of all, I think time is important, and the recommendations of the MacKay task force are quite thoughtful on that, the idea of allowing time and encouraging smaller financial institutions. I think the nub of this is that consumers have said they can see certain advantages in dealing with integrated financial services providers, and that's what we're headed towards here. There are no small banks or small trust companies operating in our communities, other than credit unions, and so time to allow smaller financial institutions such as ours to develop an integrated financial services platform would be, I think, the most important thing.

The one concern I have about the MacKay report is that it gives a date by which the banks should be allowed to jump in and then kind of says hurry up and get some legislation in place that encourages these other guys. I like the idea of saying that once appropriate legislation is in place that will foster and encourage small financial institutions, there would be x number of years after that before banks could expand into their own branches. Something like that would be great.

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Second, again, consider this whole issue of the cross-subsidization such that each line of business should stand on its own, particularly in an early environment where the small competitors are all monoline service providers. It's too easy the other way.

And there are some pretty stiff penalties. It's not just, gee, we caught you on that, so you have to stop. There are some pretty stiff penalties that say that if you use predatory pricing as a means by which to eliminate competition, there will be very severe consequences.

The third thing is again from a small town point of view. Where there are mergers in which premises and so on are involved, the banks cannot use their real estate advantage to shut out competition.

Ms. Carolyn Bennett: Okay. My last question is for Ms. Tessier, and Mr. McCann, if he wants.

Like the previous questioners, I have some concerns. Is Alberta that different that small business is almost apologizing for the banks not taking risks? The banks have big profits. Small business is concerned that they're not taking any risks. You have to be collateralized. You have to have been in business 20 years. I guess I'm still unclear as to whether you think the banks have been cozying up to you in the last year. Then all of a sudden their policy has been changed, and they understand that in order to get this merger, they've got to be nice to you?

The banks are promising this committee a lot of things: jobs and locations. They say they're going to be nice to small business, and the lines of credit will be the same for small business. I guess I want to know this. CFIB has a pretty serious way of polling their membership and getting real stuff. I guess I'm just worried that your presentation really isn't speaking for those 10,000 people because it's so different from those in the rest of the country.

Also, look at community reinvestment and accountability in communities. MacKay is very clear that we need to bump up the accountability of the communities, like the CRA Act in the States and all of that. You're sort of saying we shouldn't do that because it would be adversarial. I guess I'm a bit astounded that you guys are sort of apologizing for the banks.

Ms. Corinne Tessier: Well, thanks for giving me the opportunity to speak again.

Roger Gallaway's comment was about my saying that their fears were all unfounded and he asked who I had polled on this. I think I need the chance to say that when I did poll people, the opinions coming across weren't all about the fears and concerns of the banks; it was very much a balanced opinion that I was getting from the different people.

I think the market we're dealing with is very, very, very small business. These are people who in many ways are not even classed as small business yet in the Canadian economy. A lot of them are home-based. One person working in it is typical. So this is a very emerging market.

Look at the banks' lending continuum. Banks are on the far left end. They only do a low-risk kind of lending. That has been their traditional place in the market. They tend to shy away from start-ups.

Ms. Carolyn Bennett: The membership has accepted that?

Ms. Corinne Tessier: Well, our membership is finding that it's not just that the banks won't serve them. They very much need specialized services for the kinds of needs they have in the market.

The banks aren't in the business of providing months' worth of management skill building and a business planning process in order to get them to the point where they could succeed in business. So we see our clients as, in many ways, not even ready to tap into the total support of the banking community. However, after we work with them for a while, when we pass them on to banks, we graduate them into that kind of financing. They very much need the support of the bank's structure through bank accounts and other services that support their businesses.

So when I say—

Ms. Carolyn Bennett: Maybe I'm missing the word “association”. Do they pay you a fee for that?

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Ms. Corinne Tessier: We're actually either at no cost or very low cost. We are actually funded by the Department of Western Economic Diversification, a department of the federal government. We're here to serve the women in business who can't afford the high professional services and all the training that they would need to get going.

So we're dealing with a market of people who actually don't even enter into the definition of a lot of small businesses in Canada. They can't access at this point—they really aren't ready—the mainstream kind of banking services that are available.

However, when we help them get to that point, the bank is very much needed to kick in and provide the support for small businesses in the Canadian Federation of Independent Business, as a lot of the members they represent are in that mainstream.

So I think we're talking about two different markets here. We're finding that for a lot of the women we deal with, banking is not the primary issue at that point. They get to that point once they're getting going and are really entering the marketplace.

Ms. Carolyn Bennett: So where do you find these people their financing now?

Ms. Corinne Tessier: We lend them money. We actually lend them money. We lend money where banks could not even get into that. It's because a lot of these people have no collateral to pledge, a very low credit history, and they're in retail and restaurants, which banks find to be of a very high risk.

So you see, for us, working with the banks in cooperation provides that next level for our clients that they need to go to. When I say—

Ms. Carolyn Bennett: So if banks did this, then you wouldn't need to exist.

Ms. Corinne Tessier: Well, again I don't think that banks can provide the kind of one-on-one personal service on a long-term basis and the kind of resources you have to dedicate for this. It's not profitable at all. Even at the level they serve with a lot of small business, it's not their most profitable line.

Ms. Carolyn Bennett: What's the success rate of your clients? Do you lose a lot of money on your clients?

Ms. Corinne Tessier: We actually have a 3% loan-loss ratio right now. We're doing very well. Our auditors recently told us they think it's because of the strong support network we provide. But as for that strong support network, you can't give that and make money on it. That's why we're funded by the federal government. You can't make money giving these fledgling businesses the kind of support they need to get started.

So when I say that I don't want to take an adversarial position, I guess what I'm saying is that I don't want to make the assumption that banks are the enemy and we better restrict them in what they do. From my experience, we work with clients who are very happy with banks. We work with clients and banks all the time. I would rather have an encouragement for them to ally themselves with organizations like ours so that there's always that ground-level, grassroots support for people entering business. Then they're closely connected into the banking community and people can just move into it.

Ms. Carolyn Bennett: And how's your relationship with the Federal Business Development Bank?

Ms. Corinne Tessier: Oh, very good. Yes, we do a lot of cross-referrals with them too, and also with AOC.

On our databases, in fact, we have hundreds of what we call “friendly bankers”. In fact, we have a lot of horror stories whereby women say that the banker was terrible with them. We'll often make a proactive effort to talk to the bank and say that these were the issues that were happening. We say that they weren't explaining the reasons why they declined the loan and that they shouldn't just send these people away. We try to educate banks.

Mr. John McCann: Our concern is if we hobble the banks in going forward. We say they're going to make 40% of their profits going into the future from offshore and these kinds of things. What's your alternative if we don't allow them to do that and they become weaker on the home front? Are we under the illusion that this will strengthen small business and that there will be funds there for small business?

My feeling is that “strengthened” will allow them to be strengthened at home.

Ms. Carolyn Bennett: I guess “hobble” is a word that the Canadian public yet hasn't been convinced of in their business case. I guess that's what we're out to find out.

The Chairman: Mr. Harris.

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

I have a question for Mr. McCann. I listened to your brief. I think the basis of it was that you're in favour of the market sorting out competition in the banking industry. I want to talk just about foreign-branch banking and allowing the recommendations of the MacKay task force to go ahead.

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From your particular position as a businessman, what do you see to be an enhanced benefit of opening the doors up to foreign-branch banking in Canada? I guess that's the basic question.

Mr. John McCann: Well, I think increased competition forces all of the competition to be better at what they do; I think when there's more competition for the customers, those that currently have the customers have to work harder at keeping them. I think it's an advantage.

Mr. Dick Harris: I'd also like to get your perspective on the insurance angle. I know that's not your business, but I assume you're quite familiar with the way that business operates.

There is a big fear that the banks will use their huge databases to a heavily weighted advantage over the independent insurance brokers and the people who are in the business now. Mr. Tannas and Mr. Hughes have spoken about how there has to be a level playing field. How do you suppose a level playing field could be achieved, given the huge databases the banks have and their access to the market, as opposed to what could be considered a far more limited access to opportunity in the insurance company?

How do you think the level playing field could be achieved? Maybe Mr. Hughes or Mr. Tannas could respond.

Mr. John McCann: I would think that, first of all, when we're talking about tied selling and the bundling, it has to be very clear what is being charged for what, as opposed to offering a group of packages. It has to be a lot more thought out than I can elaborate upon now, but I also think some very strong regulatory consequences would have to be in place so that there couldn't be abuse of the system—but I don't know enough to give you an intelligent answer.

Mr. Dick Harris: Thank you.

Mr. Tannas, or Mr. Hughes, and also Ms. Strashok, given the fact that these huge databases do exist in the banks' property, how could you level that playing field?

Mr. Ken Hughes: I think we have to keep in mind that we're in an evolving situation. It's going through this evolution. Maybe we should think of it in a couple of phases to try to understand what we're talking about.

There's where we're at today, and then there's the evolutionary period leading to the whole new world, which probably will be integrated financial services offered by a wide range of providers. Hi-Alta might be offering the same services as the banks do in Kamloops, or other small communities in rural British Columbia.

If that's the end result, there's a period to get between here and there; and in that period the banks might kill Hi-Alta, or other brokers in rural western Canada, if they're allowed too much competitive advantage to use the information they have.

So I think we have to look at some kind of stringent measures to restrain the use of information within the banking sector through the evolutionary period, and at the end of the game we're prepared to compete head-on, because we think we'll do a lot better than they will in rural markets, because they don't do it as well as we do.

Mr. Dick Harris: But I don't think there would be any way that you could regulate the banks to not use their existing database.

Mr. Ken Hughes: We do it now.

Mr. Dick Harris: Pardon?

Mr. Ken Hughes: We do it now in some ways, maybe not well. TD is showing that nothing's 100%.

What we've set up in Canada is an artificial set of barriers on how the financial services sector is split up, and that artificial set of barriers creates a problem for us in trying to dismantle it. It's like trade barriers that are set up between countries. These artificial barriers create economic interest in and of themselves, and as a result, you have to be careful how you dismantle.

Mr. Dick Harris: Well, right now the regulations say that the banks can't share information with any of their subsidiaries without the express consent of their bank customer. Now as long as the insurance business operates outside the branch, possibly you're able to regulate this, but once it becomes an in-branch thing, retailing in the branch, there is no way you can protect the use of that information.

Ms. Diane Strashok: I can't see how you can protect that information when it's operating internally within one branch. I know that tied selling is not allowed in the insurance industry, either. If we said to an insurer that we wouldn't write their automobile unless they gave us their homeowner's, then the superintendent could certainly call us up on the carpet. But it happens, I'll be honest with you. It happens in a very subtle way.

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Mr. Dick Harris: There's a fine line between tied selling and cross-selling, as we all realize.

Ms. Diane Strashok: Exactly. That's right.

Mr. Dick Harris: It seems to me it would be just an unmanageable regulation to try to forbid a bank that has in-house retailing of insurance to use its database.

Mr. Scott Tannas: I think there are two issues around the privacy thing, as well. One is the whole issue of segment marketing by using private information that the banks would gain from. I think there are ways around that. Forcing banks to offer insurance to all comers would be one way. That's been fooled with a little bit in Ontario, and Diane's probably shuddering that I'm even talking about it. That's one issue.

The other issue is using private financial information as a way in which to assess an insurance risk or gain some ongoing advantage. We in rural markets have an advantage over a city broker, because we see how the guy looks after his house and we know if he's drinking in the bar and we know all those things. I think you could wind up becoming obsessed with those kinds of knowledge advantages, and at the end of the day I don't think they're as important as the issue of the banks using their information to pluck the very best customers. It would be a simpler solution to focus on finding ways to make them deal with every customer in every community that they want to do business in.

The Chairman: Thank you.

Have you any further questions, Mr. Harris?

Mr. Dick Harris: No.

The Chairman: Okay. I'm going to extend this session because I have two more questioners, Mr. Riis and Mr. Valeri.

For the members, just this reminder that if you want to ask a question, kindly signal the chair.

Mr. Riis.

Mr. Nelson Riis: Thank you, Mr. Chairman. I have three small questions for Mr. McCann.

In his presentation he referred to the fact that he was obviously a very strong supporter of free enterprise. My interest in looking at this bank issue is that we're looking at a sector of the economy that has had a privileged environment for almost its entire life. It's one of the only sectors that said it was going to take steps to disallow any competition from outside Canada. So no banks were allowed to come into Canada and even the few that are here now are very restricted.

I'd be curious about his view on that. Is there another sector of the economy that has been so protected by government policy? As a result of having decades and decades of that protection, shouldn't we expect something more from our banks than we do from other industries? They are very profitable and we're thankful for that. They are very stable, they are very big and they do a great job, but they've done that because they've grown up in a non-competitive environment as compared with every other sector in Canada. As a result, don't they have some obligation now to serve Canadians? I suppose it's simply that level playing field you referred to in the world of competition.

Mr. McCann: I think the banks are owned by Canadians and other investors. My feeling is that they have been accountable. They've been good community citizens. They've contributed a tremendous amount to Canada.

I, for one, would not own my own business if it wasn't for the banks taking a risk on me. I didn't come from a privileged background and the banks took a chance on me. I'm now able to go from two employees to eighty.

I think they have given a lot and continue to. They're great community supporters. They've really enhanced our society. I see all kinds of examples throughout our communities where the banks have been a big contributor to society.

Mr. Nelson Riis: But so have the forestry companies. So have the oil and gas companies. You could say that about almost any of the major economic players in Calgary. They're great corporate citizens. They're helpful. They've built our country. But the banking sector has been able to grow protected from competition. Would you even agree with that?

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Mr. John McCann: I haven't really followed the history of how the banks have been situated, so I really don't feel qualified to talk about it. But I think that as we talk here, going forward, we are seeing where this protectionism is dropping. Canada has operated in protectionism. We had people fighting free trade. We saw the results of that, how Canadian companies became inefficient by not competing. I think the protectionism is gone and it's opened up.

So I'm looking, Mr. Riis, at going forward. I don't feel qualified to comment historically.

Mr. Nelson Riis: Thank you.

The Chairman: Thank you, Mr. Riis.

Mr. Valeri.

Mr. Tony Valeri (Stoney Creek, Lib.): Thank you, Mr. Chairman, first of all, for extending the session. I'll attempt to be as brief as possible.

I wanted to go back to two specific areas of the MacKay report. Essentially the MacKay report is looking forward, as you, Mr. McCann, just commented. I wanted to look at the MacKay report in the context of the banking ombudsman. There is a recommendation in the report that talked about a financial institutions ombudsman so that you would have the insurance sector and all the other pillars come under that ombudsman, and I wondered whether I could get a comment. The report talks about the government establishing an office of the ombudsman, a mandatory office of the ombudsman, and right now we have essentially a self-regulated or a volunteer system in place.

The Canadian Bankers Association president, Mr. Protti, was before the committee and he essentially said that the system was working well and there really is no need to change that. I wonder if I can get some comment on the existing system and whether you agree with the recommendation that we should establish a mandatory ombudsman that cuts across all of the financial services sector so that property and casualty insurance companies, life companies, all of those institutions would come under that ombudsman office.

Perhaps Mr. Hughes could answer.

Mr. Ken Hughes: I'll take a crack at that.

I think the role of an ombudsman can be, in terms of helping to protect the public interest, as a focus, a node to protect the public interest, a useful venue to do that. When you look at it and see where an ombudsman has been used at provincial levels or other levels of government, the challenge becomes that the ombudsman becomes the collector for all the lint and dust and all of the concerns people have about everything related to the whole sector.

This will be a hell of a big job for somebody to take on and try to manage. What it does is take away perhaps from the focus of.... One of the roles, as all of the members here know, of a member of Parliament is to perform a role as an ombudsman on behalf of constituents with a wide range of issues. So I think parliamentarians have to ask themselves whether they want to set up another venue for people to express their concerns about the financial services sector.

Maybe other people here who have deeper roots and experience in the insurance sector might like to speak to the impact on the insurance industry in particular, but as somebody who's been through the life of a parliamentarian and has the experience in public policy, I think you want to be careful about what institutions you set up, because that takes a role away from other institutions that you already have set up in society.

It's probably not a bad idea in some cases. You want clearly some kind of ongoing public interest oversight and insight into what's going on in the sector. I'm not sure I'd strongly endorse an ombudsman as a way to do that, but you clearly want to create some mechanism that keeps an eye on this whole crowd.

Mr. Tony Valeri: You wouldn't go beyond the existing office, which is a voluntary, sort of self-regulated body within the banking sector.

Mr. Ken Hughes: That's an industry eye on the industry. I think you may want to look at something that is a public interest eye on the industry.

Mr. Tony Valeri: So you would support the recommendation in this case.

Mr. Ken Hughes: Yes. Without having given it any great considered thought, I think that you probably do want, particularly in an evolving situation, some kind of an eye into this with an ongoing role, whether that's an ombudsman or the oversight of the finance committee through the evolution.

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Mr. Tony Valeri: Okay. Does anyone else want to comment?

The other area I wanted to touch on very briefly is that we're not looking at the mergers that are out there today. We're looking at the MacKay report essentially, and included in the MacKay report is a process of how to look at mergers that might present themselves. One of the things the MacKay report recommends is a public interest review process for large mergers, through which the merger proponents would be required to table for review and comment a public interest impact assessment or statement about the costs and benefits of this impending merger. Can I get some feedback on that? From your perspective, how should we be looking at mergers in the future, based on what the MacKay report has said?

The Chairman: Mr. Peddle.

Mr. David Peddle: Perhaps I could comment.

When the MacKay task force was set up, it did not have a mandate to look at bank mergers. In view of the fact that bank mergers have just arisen in the last year, I think an entirely separate task force should be set up. I have pointed out to the Minister of Finance that each and every member, except one, of the MacKay task force has a conflict of interest in making any decisions on banking. Their committee members have a conflict of interest.

Mr. Tony Valeri: Thank you.

The Chairman: Would anybody else like to comment on that? There are no further comments. Do any other members have questions?

On behalf of the committee, I would like to thank you very much for your instructional panel. We certainly bring different perspectives to the issue, but that is really what this debate is all about. We want to hear different views and different approaches to this particular issue. Once again, thank you.

We're going to take just a two-minute break, and we will be back with pre-budget consultations.

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The Chairman: I call this meeting to order and welcome everyone. As you know, we're doing the pre-budget consultation, as we get ready to make recommendations to the Minister of Finance as to what the priorities should be for the upcoming budget.

We have the pleasure to have with us, from the Alberta School Boards Association, Mr. Roy Wilson, president, and the honourable David Anderson, executive director. Welcome.

Mr. David Anderson (Executive Director, Alberta School Boards Association): Thank you. As you can see, I am not the Minister of Fisheries and I'm not an honourable. But thank you for the instant promotion.

A voice:

[Editor's Note: Inaudible]

Mr. David Anderson: Perhaps some of you would like to send him there.

The Chairman: So, Mr. Anderson, are you saying you're not honourable? We'll keep that in mind as you make your remarks.

We also have representatives from Kids First, Cathy Perri, president, and Cathy Buchanan, national secretary. Beverley Smith and Heather Gore-Hickman will also speak, as individuals. Is that correct? Everybody is here. Wonderful.

We'll begin with Mr. Wilson and Mr. Anderson.

Mr. L.J. Roy Wilson (President, Alberta School Boards Association): Thank you very much, Chair.

First of all, I'd like to mention that because I also am a teacher I will have to leave slightly before the end of the session, because my students will not tolerate even such an important meeting as this to overtake what they're doing.

What we have to say—and we do have a brief—is for many of you information that you read all of the time in the daily press. So there's nothing fantastically new here in terms of what you understand about the concerns we have from a school board perspective.

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I'm speaking today on behalf of the Alberta School Boards Association, which represents all of the school boards here in this province. This includes our public boards, our separate boards and our francophone boards, all of whom are members of the association.

As you travel across Canada you will notice that in other provinces as well, school boards will be speaking to you about a matter that is of pressing concern to those of us who work in schools with children. That is, of course, the impact of poverty. Unfortunately, the House of Commons had a very ambitious task just a few years ago to address poverty, attack poverty and perhaps eliminate poverty by the year 2000. We're hoping that is still a mission of the House of Commons, of the leaders of this country.

We're here to remind you, as you will hear across the nation, that as far as we're concerned as school people, as people who work in and with children, we see it every day affecting the quality of the work we're able to do.

There are statistics—and you are aware of all these statistics, I'm sure—that currently tell us that the number of children in poverty is increasing. In our own province of Alberta we estimate, in terms of recent statistics, there are perhaps 156,000 living in a state of poverty. As we look at these statistics really carefully, we realize that perhaps the horror of this is that some of those statistics address poverty with very young children—our most vulnerable part of the population.

We estimate that maybe 35% of our children under the age of seven are living in a state of property here. We're very worried about this and we're also worried when we see this increasing. We also know, as you know too from the literature, there are certain characteristics of these children. They tend to be from single-parent families. That's not always the case, of course. There are many families that have come into poverty because of some circumstance or what have you.

We also know, from the work we do and daily living with children in our classrooms, the tremendous impact poverty has on the lives of these children. The illnesses they tend to have, the emotional and social skills they're equipped with, the injuries, the susceptibility to drug use, and the incidence of child abuse and neglect are all things we see daily as we work with children.

Those things don't just apply to poor children, of course, but remarkably large numbers of those children are showing up with some of these serious problems that make it difficult for them to learn. Many of these children don't do as well in school. Their attendance records show they're not as positive. They don't seem to get along as well with their teachers and their peers. They're the children, in many cases, we're worried about in terms of violence.

If you look at the overall impact of poverty, you can see—and we've listed them for you on the second page of our brief—a number of things that are really obvious to everyone in this room that are happening and that we can witness. If I could just point out one or two of them to you from the list on page 2, there is the lack of nutrition. That's why we have school feeding programs throughout this province in many of our schools. There is illiteracy and low achievement. We've instituted in this province an excellent early initiative program to help some of these kids who are just coming to school unable to read at a level that's sufficient. Once again we see the interaction patterns that some of these children have with their teachers and peers. We've tried to respond to school boards with what we call safe and caring schools to help children learn to deal emotionally with the state of their lives.

If you look at the economic side of this thing and estimate the number of children who probably will be dropping out of our school system, I think you could attribute that as well in many cases to poverty. You start adding up the impact of dropping out in terms of lost revenues, lost earning power and what have you. I think that's a sobering statistic to really think about.

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So there is a cost of poverty for all of us, in lost government revenue, increased government expenditures on social programs, our decreased ability to be competitive in the global market, and the decreased ability to provide sufficient health and social programs. All of these things you know about. We're here, Mr. Chair, just to remind you of these things so this voice is not lost. I know you're hearing many voices tell you how to develop this budget. We're saying to you that if you do not listen to the voices of the children and of those who speak for the children, then I think you're missing something really very important.

We're not here with solutions. We don't deal with solutions. We deal with the children of this country. We're looking to you people to recommend some solutions. There are a couple, of course, that are before you right now, such as the national child benefit program. We commend how this program has worked. In Alberta the transfer arrangements have allowed our government to provide health care benefits to children who otherwise would not have received those benefits. I think that has been a tremendous benefit to the children of Alberta in terms of the way that program has worked.

That is not sufficient. Of course, you always hear this from educators, don't you? It's never sufficient, ever. It isn't sufficient, but it is something that's worth while. I'm disappointed to see that perhaps the amount will not go up, because from our point of view spending on something that works so well should be increased. That would be a really worthwhile investment.

We also like the feature of that program where there's such good cooperation between our government levels in terms of making that work. I think that's really positive for the state of the nation.

We also want to refer to the interest we know you and our provincial politicians have in the national children's agenda in this country. This is a shared vision, I think, among all Canadians at all levels to enhance the well-being of our country's children. I have to say once again that in our own province we've made tremendous strides in terms of coordinating children's services. We have a long way to go, but there's so much we've been able to do. We just urge you in every way we can to keep that momentum moving at the federal level.

The federal government can affect the lives of children by supporting early intervention and education for children and parents, by creating jobs for families—of course, that's something we strongly support—by providing child care programs so parents can go back to school or to work, by providing proper benefits to parents who are ill or who have been laid off, and by working with the provinces to enforce and collect support payments, which will enable our children to flourish. These are not new words; these are old words. But we come with a really heavy burden to lay before you on behalf of the children of this province and then of the entire country. You'll be hearing it everywhere you go.

I just want to say a word as well about the employment insurance fund you've been hearing so much about. You've been receiving all sorts of good advice about what to do with that huge fund that's sitting there collecting interest. We'd like once again to remind you of something you know. School boards in this country are huge employers. We're also employers who do not use the employment insurance. Teachers do not tend very often to get laid off. We're a very stable industry, and we are big contributors to this.

So our suggestion would be, however this could be worked out, to lower premiums, which would be a tremendous benefit to school boards. If you were to lower those payments, it would give school boards a little more flexibility under restricted budgets to maybe target children at risk and in poverty with the money that would be available.

Child poverty has become a priority issue for many people across this country, not only for those of us in schools but also for those in our communities, and you're hearing this. It's heartening to see politicians and governments committed to improving the lives of children. It is now important to ensure there's action behind these words, that we turn this willingness into cooperation and this desire to help our children into programs that will make a difference in the lives of children.

The brief is fuller. I simply touched on some of the highlights. I look forward to a discussion of these things, Mr. Chair. That is my opening statement.

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

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Now we will hear from Kids First, and Ms. Perri and Ms. Buchanan.

Ms. Cathy Buchanan (National Secretary, Kids First Parent Association of Canada): Thank you.

Dear Editor:

I was quite incensed about a comment included in the front page article [of the Lethbridge Herald of July 13, 1995] entitled “Day-care Operator Fends Off Criticism.” In reference to stay-at-home moms the question was posed, “Is it better for a mother to be at home watching soap operas all day than to be a contributing member of society?” It is comments like this that perpetuate the generalizing stereotype of “Mom” sitting at home eating bonbons and watching soaps all day. No wonder this job is held in such low esteem!

I am not out to attack day-cares, for I know first hand that there are ECE workers committed to their profession and the children. In fact, I think it's a profession that staff are not paid highly enough for the responsibility they assume. What I ask for, of society, is that my choice to stay home to raise my own small children (and the subsequent sacrifices) be regarded as viable and honourable as any other career choice. I ask that my job as homemaker be seen in the esteem it deserves, rather than as a pea-brained non-contributor to society. Isn't raising our future citizens one of the most valuable jobs, regardless of who does it? It would seem that our government doesn't think that way with the way the taxation operates.

For the record, I have to say that I despise soap operas, and haven't the time or interest to waste on them. I would much rather be involved in activities with my children, in conquering household tasks, connecting with other parents, or doing volunteer work. But so what if mom does watch a soap opera—maybe it's one of those rare moments in her 12-14 hour day that she finds to relax and “veg out”!

That letter was from Lethbridge, Alberta.

This letter to the editor, from Vancouver, B.C., was printed in our summer 1997 newsletter:

Thank-you so much for the information you sent me. I was thrilled to hear an organization like yours existed! We have two beautiful girls aged 4 years and 4 months. We are baffled by the inequities of the present tax system. No only do we sacrifice monetary gain by choosing for me to stay at home, but we are again hit by unjust taxation. We struggle to pay for my daughter's preschool. She has just as much a right to be there as do working parent's children.

And another from the same newsletter, this time from Shearwater, Nova Scotia:

After some 17 years in a non-traditional workforce (finance and administration within the Canadian Forces), I left my job to stay at home with my then two-and-a-half-year-old daughter. My intent at the time wasn't so much to become a stay-at-home mum, per se, as it was to move on to something different and more flexible. It wasn't long, though, before I became a converted stay-at-home mum. I was, and still am, appalled by the lack of respect and support that exists for stay-at-home parents and their families. It's become very clear to me that this is an area and issue that needs much more work and public awareness.

This one is from our Spring 1998 newsletter, and it's from Windsor, Ontario:

I am a new member of Kids First, and recently received your newsletter. I was appalled to find out that the Canadian government plans on assisting those who stay home to care for sick and disabled relatives, but not those who stay home to care for their own children. In addition, I had not realized how single-income family is at such a disadvantage in our taxation system. Thank-you for shedding light on these issues; I have already begun to make others aware of them.

Even though my husband and I have to watch every penny we spend, the most difficult problem for me as a stay-at-home mother is overcoming the social pressures to return to work. I have two university degrees and a teacher's certificate; I keep hearing comments such as “Why did you go to school all those years if you're just going to stay home and have babies? What a waste.” or “When are you going back to work?” or “When are you going to wean him?” I feel like asking, “Why is early weaning and returning to work the natural thing for mothers to do in our society?”

In future newsletters, could you please offer advice and support to mothers like me who have relatives cutting out jobs from the want-ads for them? What can we do to help change people's attitudes about the importance of a strong parent-child bond and the value of parenthood as a career? Perhaps in each newsletter, you could make it a point to quote research which has proven the long-term benefits of having a parent stay at home with young children.

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And from Dieppe, New Brunswick:

I am a 37-year-old work-at-home mom (SAHM) with three young children (5, 3, and 1). I'm a strong believer of one parent being the main caregiver of one's own children. I am a married woman of 12 years with a graduate degree (BSW, MBA) who gave up a senior management position with a higher income than my husband to be home with our children. Once you decide to have children as we did, your love, time and attention should be focussed on the children and not a career and material things.

As a caregiver of a girlfriend's two-year-old daughter who spends more than ten hours a day, six days a week with us, calls me mom and prefers to remain with us than go home every night, my heart breaks for her. She should not have to be placed in this situation. I try to mother her as best I can.

I hope to hear from you in the near future with additional information on your organization.

Ms. Cathy Perri (President, Kids First Parent Association of Canada): These are samples of letters we receive on an ongoing basis. The binders you see before us contain over ten years' worth of newspaper clippings on this issue alone. This collection was compiled entirely by volunteers, by parents at home.

Kids First Parent Association of Canada has been working on the issue of tax discrimination and the single-income family for years. Just ask our kids. As my daughter asked yesterday, aren't we ever going to be listened to? This discrimination has been documented and acknowledged by chartered accountants, provincial governments, the federal tax court, and by the federal finance department itself—which, incidentally, commissioned a working paper on this issue in 1996, at the request of several provincial governments. That working paper clearly illustrated the blatant penalties levied against families with a parent at home.

Sadly, the Liberal government has continued to bolster this misguided discriminatory approach with the caregivers' tax credit introduced in the last budget, a nice little token gesture aimed at recognizing the unpaid caregiving work that Canadian families perform—all kinds of it, except caring for infants and pre-schoolers. In addition, the child care expense deduction was increased 40%, from $5,000 to $7,000, for children under the age of 7; and by 33%, from $3,000 to $4,000, for children aged 7 to 16.

So why does the federal government continue to defend its tax policies, all the while admitting its discriminatory aspects? Mr. Martin is on record as saying that the status quo must be challenged, that the federal government must ensure fairness and equality, and that frugality would never be used as an excuse to deny fairness. Yet frugality has been used to justify a refusal to correct discriminatory policies. Now that the federal government has achieved a balanced budget, Kids First expects some action: communication and collaboration between government departments, and an end to destructive tax policies that have a huge impact on families because of the child care choices they make.

In Canada, we support students in their efforts to educate themselves, through student loans and special dispensations and recognition that although their market value is low, this is a sound investment in the future of the country. We support seniors through pensions and old age security in recognition of their valuable past and continuing contributions to society. It is indeed tragic that we do not extend this philosophy to young parents wishing to commit themselves to the full-time care of their children during the critical developmental years of birth to 6.

A family of two or three children, spaced two or three years apart, means full-time parenthood for ten or twelve years at the most. It should surely be possible to plan for this short segment of the life cycle, which represents less time than most able-bodied people spend in retirement, for which increasingly lavish provision is made. Some of the thought, planning, and financing that now go into the construction of pension schemes and student loans needs to go towards the re-creation of tax policies that will support parents at the most heavily loaded point in the life cycle.

We need to go back to the traditional principle of ability to pay, which assumes that taxation should not only reflect the levels of income but the number of people dependent upon it. Otherwise, taxation becomes an instrument of poverty. The majority of single-income families exist at the lower income levels, with average incomes $26,000 below that of double-income families.

• 1340

According to the Canadian Council on Social Development's report, The Progress of Canada's Children, many parents go to extraordinary lengths so that one can be at home when the children are young, often living below the poverty line to do so. We know the number of young families who have simply left the country, young professionals who can't improve their standard of living, because one of them stayed home for a few years when their children were small. They felt they had no other options.

Single-earner families have seen their income fall 10% between 1989 and 1994, while two-income families saw a drop of only 2.5%. In addition, the child care expense deduction is available only to those using outside receipted child care. It has an inverse relationship to need and unfairly benefits the wealthy. The Liberals had the audacity to raise the age limit of this deduction to age 16 in 1996. Given that no day cares accept 16-year-olds, how many kids' hockey camps and artistic endeavours are we subsidizing?

Taxation policies are not neutral; they are used to direct behaviour, to encourage people to make certain choices. One would assume, therefore, that if the behaviour encouraged was beneficial to Canadian society, consistency in all government policies would be the norm. This, however, is not the case. We were told repeatedly that the individual must be used as a unit of taxation. Allow income-splitting? Heavens, no. The child tax benefit is calculated on family income. Calculate tax on family income? Preposterous. Reform the Income Tax Act? Silence.

Health Canada promotes the importance of breast-feeding. It stresses the immense value of parental bonding and nurturing and counsels women in dealing with high levels of stress to re-evaluate and reassess their lives, recommending lifestyle changes that may include choices involving jobs or home situations. In its 1997 committee report, Towards Well-Being, Health Canada urges the finance department to provide equivalent tax benefits to families who choose at-home parental care to those with caregivers for their children. Human Resources Development, via the National Longitudinal Survey of Children and Youth, points to the importance of resiliency in children at risk, resiliency that derives mainly from the experiences of positive parenting, thereby stressing the tremendous protective factor positive parenting provides to children.

The Human Resources study surprised many when it also showed that only 35% of children ages 0 to 11 have both parents in the paid labour force full time, yet Canada's taxation policies are clearly designed to benefit this group above all others. The justice department acknowledges the link between parental attachment in the early years and reduced levels of crime. It emphasizes the ability of parents to provide a secure and nurturing environment for their children.

The Hon. Anne McLellan, Minister of Justice, in correspondence to Kids First this year, states: “Economic issues including taxation policies are also relevant to a broad discussion of crime prevention”. Status of Women, in their statements, have committed themselves to valuing unpaid works done in the home. It has noted the extremely high levels of stress experienced by full-time working mothers of pre-school children in their attempts to balance working families, as has the Vanier Institute of the Family, but remains deeply concerned about the economic disadvantages women incur when they choose to be home with their preschool children. A tax system that assumes women at home are submissive, unproductive dependants requiring the constant fatigue, high levels of conflict and stress, great pressure and overload—oh, pardon me, I meant to say liberation here—of paid full-time employment outside the home when their infants require breast-feeding and their toddlers need nurturing is ignorant of the developmental needs of children and the reality of how current tax policies damage our children and the families in which they live.

The idea that the economy must be operating below capacity if women are caring for children rather than earning wages neglects the fact that those children are the generators of future wealth and that their productivity depends upon a considerable investment by parents in their upbringing. Moreover, whereas an adult can retrain or revitalize their vocational skills, there may be no second chances where children's development is concerned.

Dr. Paul Steinhauer, with Voices for Children and Toronto's Hospital for Sick Children, will be in Calgary in two weeks speaking on the attachment needs of infants and brain development in the first year of life and will discuss with foster parents in our community how to manage children who have been diagnosed with attachment disorder. Dr. Steinhauer has stated that: “After genetics, nothing influences a child's development more than the quality of parenting they receive especially during the first three years.”

• 1345

Dr. Margaret Clarke of the Alberta Children's Hospital has been promoting the Healthy Start initiative in this province. It's a program based on the recognition that parents are the key to ensuring the healthy development of children. The National Crime Prevention Council has identified the crucial importance of children's early experiences in preventing later deviant behaviour. It is a blatant contradiction to stress the importance of nurturing, promote its benefits and protective factors, and then punish parents, via biased taxation policies, who choose to make a full-time commitment to it.

Kids First is currently offering our support to Calgary homemaker Beverley Smith, who has filed an official human rights complaint with the United Nations citing Canada's unfair treatment of homemakers, many of whom are at home in order to care for children. The UN has committed to a serious investigation of her complaint. How sad that a citizen of Canada must now turn to the international community in a quest to end discrimination against at-home parents.

Since the 1970s, when government began to use the tax system to discourage families from having a parent at home, Canadians have called for fairness. Senate committees, members of Parliament, provincial legislatures, and child care experts have drawn attention to the damage being inflicted upon Canadian families by shortsighted tax policies.

Dr. John Millar, British Columbia's chief health officer, has gone so far as to demand tax incentives for parents to stay home and ensure a nurturing experience for their infants. No, a general tax cut will not do. Kids First Parent Association of Canada asks you yet again not to argue why it is justifiable to continue tax discrimination against single-income families but to examine how fairness can be achieved for Canadian families who make the choice to do what all the research tells us is best for our children, to have a father or mother at home providing parental care during their children's early years.

Thank you.

The Chairman: Thank you very much, Ms. Perri and Ms. Buchanan.

We'll now hear from Ms. Smith.

[Translation]

Ms. Beverley Smith (Individual Presentation): Thank you. Because we live in a bilingual country, I prepared a speech in both French and English, but as I have noted that no one here needs me to speak in French, I will carry on in English if that's all right.

[English]

I'm a high school teacher here in Calgary, but I appear before you today to speak for a group of which I was a member for over 20 years: homemakers. It is my contention that current tax policy ignores the contribution of over three million homemakers in Canada and that this tax policy should be changed. It has long been admitted that dual and single-earner households are taxed unequally on the same total household income, and it has been noticed that parents using day cares can deduct costs of child care that mothers using other arrangements cannot deduct.

These inequalities cannot be denied. What is to be questioned is why they exist. I feel we should eliminate these inequities for three reasons.

First, when we are talking about the raising of children, a child is a child. There is no reason to favour one child over another. A tax policy that subsidizes children raised in day care up to $7,000 per year and gives no help to children raised at a grandmother's or at home discriminates between children. This is unfair. In 1970 the Royal Commission on the Status of Women recommended that any person raising a child could deduct child-raising expenses, no receipts required, because all children are equal in value and raising a child is equally useful to society, wherever it occurs. I endorse that recommendation, but the Government of Canada ignores it.

Second, if we are a society that truly values women's work, we have blinded our eyes to some aspects of this work if we only recognize paid labour. Women who work outside the home have made great strides in entering the corporate sector, government, and professions as diverse as medicine, law, and space exploration, but until we also recognize traditional roles of women, we have not really recognized all the work that women do. To neglect the unpaid caregiving work women have for centuries done marks us as a country that still does not truly value women. Dr. Isabella Bakker of York University has prepared a paper showing how federal budgets have for too long undervalued this third sector of the economy while fully using its services as a well that will never run dry.

Ignoring this sector could in fact cost us money. If we force all women out of the home, this work will still have to be done and the state will be forced to pay for home care of the sick and elderly, after-school care of children, and social work in the community—and at great expense. However, more importantly, when our budgets severely discriminate against any person, male or female, who chooses to raise children at home, we have created a tax system that deprives people of a basic human right, the right to a choice of career in a free and democratic society.

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When we actively discourage any career, we are depriving those who do it of the dignity of feeling like they are a part of society as working individuals. We are denying them the full participation in society that most adults have, such as the right to get credit at a bank; to be listed in Statistics Canada documents; to buy life insurance; to contribute to the Canada Pension Plan; to be consulted about laws that will concern them.

In other words, when we say that a woman or man raising children in the home is not working, and that government documents all say that, this word choice alone slanders three million people. We insult those parents who work part-time outside the home—who prefer not to work full-time outside—just so they can be with their kids. We also deprive of recognition tag team parents who take turns working shifts outside the home so the child may always have a parent nearby, but who then get no child-raising benefits under current tax laws.

The present law is outdated. It is no longer perceived to be fair. It denies free choice to Canadian families about how best to raise their children. By requiring that parents use day care in order to get deductions, and requiring that most parents work outside the home in order to be considered working parents, we have straitjacketed the Canadian family into few options, when in a true democracy the family should have a wide range of options.

I speak in favour of diversity. Each of us knows best what is workable for our own children and careers, schedules, and personalities. These priorities may shift as the kids get older, as job locations shift, as illness strikes. It is not the business of the Government of Canada, nor, thankfully, do you have the time or money, to try to arrange day care 24 hours a day, seven days a week, for every child in this country to meet all of our ever changing needs.

We the people can be trusted to make arrangements best suited to our needs. The job of the government should only be to ensure that in tax law all options are equally valued. This is a free country.

Whether families choose to have dual or single incomes is also a personal matter. Most people will shift this decision as they age. Women want to feel free to enter and exit the paid labour force several times in their lives as their personal situation demands. The Government of Canada must not penalize such movement in pension or tax law.

Homemakers are proud of what they do. These women have worked for years fighting subtle put-downs from clerks, fighting tax forms implying they don't work, and fighting poverty for the sake of their kids. I too endured this social stigma and the incredible financial sacrifice. I will not personally benefit if this law is changed because all of my children are now adults, but I passionately believe that this law must be changed for future families raising small children.

It is for this reason that I appear here, and it is for this reason that I lodged a formal complaint at the United Nations. The complaint has already received international support. When one woman is oppressed, none are free.

The Chairman: Thank you, Ms. Smith.

Now on to the question and answer session. We will begin with Mr. Kenney.

Mr. Jason Kenney: Thank you very much, Mr. Chairman, and all of the panellists for their very heartfelt and creative presentations this morning. It's great to have a way to break out of the usual pattern here. I only wish we could have had Kids First on the same panel as the National Association of Women and the Law yesterday in Vancouver. That would have made for some really interesting fireworks, I suspect.

I would like to begin my questioning with Mr. Wilson from the Alberta School Boards Association. You're the president of the association, sir. Are you a school board member?

Mr. Roy Wilson: I am, yes.

Mr. Jason Kenney: Which board?

Mr. Roy Wilson: Medicine Hat.

Mr. Jason Kenney: I see. You came all the way in from Medicine Hat. Welcome.

In your presentation, you said the poverty rate for children in Alberta was 150,000. What definition of poverty...? Is that children who live in families who are under the StatsCan low-income cut-off line, LICO?

Mr. David Anderson: If I could answer that question, Mr. Kenney, we used the Canadian Council on Social Development statistics. We recognize that you can use a whole variety of statistics, and we certainly don't want to really get into a debate about how many children there are in poverty, because we think that's a fruitless exercise. We know from our school system that there are many.

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Mr. Jason Kenney: It is important, however, that we try to assess the extent of the problem we're addressing here. There are different definitions, and I was just trying to figure out which one you're using here.

No doubt we all agree, as do all Canadians, that child poverty is a bad thing and government has some role in trying to alleviate it. But our real function as a committee is to try to identify remedies and to make recommendations. You clearly outline education as the key, and I would certainly agree. That, of course, comes under provincial jurisdiction. You've said the federal government can affect the lives of kids by supporting early intervention and education for children and parents. I was just wondering what exactly you mean by that and to what extent you believe the federal government should involve itself directly in provincial jurisdiction when it deals with education.

Secondly, you mentioned providing child care programs so parents can go back to school or to work. Now, providing those child care programs would clearly cost the federal government serious money. Your estimates range from $1 billion to $5 billion. This is money that would be raised through taxes and paid for by many families such as those represented on the panel here who choose to raise their children at home. Many of those families actually are under the income cut-off line.

I have two questions. First of all, how do you square your call for federal intervention in education with the fact that it's a provincial responsibility? My second question is, do you not think a preferable approach to supporting child care would be to make it more possible for parents who choose to do so to provide that child care at home? Many low-income families right now actually pay taxes, but they're based on a regressive tax system. I wonder if you could address those two points.

Mr. Roy Wilson: Maybe I'll speak to the second one first, and then I'll ask Mr. Anderson to respond to the first.

We don't have any quarrel with our neighbours here in terms of what they propose.

I think our concern is when these children enter school, however many there are, whatever definition one uses—and we've used just one definition—we look into their eyes and we see the problems they bring with them and the difficulties they have in learning. So in terms of the tax regime, I think that's a problem you have to sort out. You've heard a strong appeal today to consider the role of families in all of that. So we really are not interested in how that's worked out, other than the fact that the children will have more opportunity, because the children I'm talking about here just do not have an opportunity to compete successfully. I certainly agree with you that the two overlap considerably in terms of the discussion you need to have.

Perhaps Mr. Anderson could respond to our call for intervention, or the definition of our intervention.

Mr. David Anderson: It would be a horrible misrepresentation for us to call on the federal government to intervene in provincial education responsibilities. We would never take that position.

We really see the federal government being able to assist in addressing the child poverty issue. There are many pieces to that. The key one is to ensure a strong and vibrant economy that's producing jobs for our citizens. That's an absolute fundamental cornerstone. Another one is to keep money in people's pockets, particularly those of low-income people. There are too many low-income people who are currently paying taxes. We really believe that wherever we can we should be leaving that money in the pockets of low-income people.

However, we do not feel those two in combination will address in totality the issues of child poverty and will lead to an implementation of the unanimous House of Commons resolution in 1989 to eliminate child poverty by the year 2000. Just those two actions alone will not work. We've had a very vibrant economy and we still have child poverty.

We do need targeted spending. Provinces alone cannot provide the revenues for that target. They're in the best position to determine where it should be spent. I think the social policy renewal and the framework discussions that are going on are leading us in that direction, where a province together with its local communities can best determine the types of initiatives that are funded. But certainly the federal government needs to play a role in providing the financial resources.

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Mr. Jason Kenney: That does address one question I was going to follow up on, which is if there's tax relief, you believe the priority should be to target it to low-income people, probably by raising the basic exemption, and there were other suggestions on how to do that.

I have just a caution about definitions. I asked which definition you were using for child poverty precisely because the standard definition of the low-income cut-off used by Statistics Canada, referred to as the poverty line in common parlance, actually precludes the possibility of ever eliminating child poverty because it's a relative measure, and there will be always be people under the line.

I just have one question for the representatives of Kids First. You made a very strong and compelling presentation about the inequities that exist in the system, your ongoing frustration with them, and why the government ought to remove these inequities. But you didn't give us specific policy recommendations about how to do that.

Basically there are two approaches. One is to allow income splitting, which is a pretty fundamental change in our tax policy. The other approach is to address the various credits and deductions to equalize them by, for instance, taking the child care tax deduction that the government recently enhanced and converting it into a refundable credit available to all parents, regardless of what their day care choices are. But that still doesn't address the problem that the two-income family gets more RRSP room and deductions and ends up with a lower bottom-line tax situation than an equivalent family with a single income. So which of those two basic options of income splitting or tinkering with the tax code do you prefer, or is there a third option you would recommend?

Ms. Cathy Perri: Our recommendations have always been to either allow income splitting or to base taxation on family income. We proposed those two because our line has always been that we don't care how you fix it, we just want it fixed.

The government has the experts, the money, the financing, and the time to do this. We're stay-at-home parents and our first priority is our families. Our recommendations have definitely included that. They've included changing the deduction to a credit. We've looked at homemakers' pensions and increasing the personal exemption and the spousal deduction right now because it's inadequate and inequitable. You can claim more for yourself under the personal exemption than you can for your dependent spouse. We don't even like that term “dependent” because it conjures up the notion that somehow we're oppressed and submissive and don't do anything of value.

The fact that the individual is used as the basis of taxation, as the taxation unit, creates the most problems and inequity within the tax system. You can change a deduction to a credit and those types of things, but you're still going to have—

Mr. Jason Kenney: Excuse me. You make an interesting point that I hadn't considered before, even though I've addressed this issue. The child tax benefit is calculated on family income, so the policy-makers in the Department of Finance seem to have created a bit of a precedent there.

Ms. Cathy Perri: I think it's where they see they're going to get the most revenue, so they base it on family income. They're looking at it in terms of the fact that it won't cost them as much to base it on family income in this instance, but if they base it on the individual in this instance they're going to raise more revenue. I think it depends. They kind of play whichever is going to benefit them the most.

The Chairman: Mr. Harris.

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

I want to stay on the subject of two-income families, as opposed to the one-income family, and some of the social problems that have developed. Perhaps you can both help me out with this. It's my personal opinion that the tax regime we have in this country began, a number of years ago, to drive the second parent out of the household into the workforce in order to continue to meet the basic demands of raising a family. It's also my personal opinion that that has contributed in a huge way to the many social problems we have today, particularly the problems kids have.

It's also a myth that only the very wealthy can afford to have the second parent home. In fact we know that tens of thousands of families make huge sacrifices to keep the second parent at home. Some of them live near the poverty line because of it.

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The question I have for the Kids First group is this. It's inconceivable that governments have not recognized this before now and have not addressed a fair tax system that would help alleviate a lot of the pressures having one parent at home creates. Why do you think it hasn't been recognized? Surely there have been enough studies done to show that the nurturing kids get in their early years from a parented home is so vital to their lives. Why has this not been recognized until now?

Ms. Cathy Buchanan: I think I'll answer that, since I've always done it.

I've been a full-time working parent with an infant, which is something that, with the knowledge I have now and the research I've read, I wouldn't do.... I went back to work when my first child was two months of age. However, I think I was fortunate in that I had a wonderful informal caregiver, I might state here, who just found it less of a hassle to not go through the formal regulated child care system in operating her day home.

I've also worked part-time outside the home, and I've been at home full-time at various times. That's probably typical of many families. I think it depends largely on your support network.

In my particular instance, we're a family who emigrated from Ontario. We don't have a support network. We have no family here. If I had grandma living around the corner, I think that would be a very healthy substitute.

The point here that the research describes is that there should be one—possibly two, but at least one—main, primary caregiver who will be consistent, who has a passionate interest in that child, and that's where the nurturing will take place.

We know now that during the first year of life this is really critical. We didn't talk about that today because we focused on the financial end of things, but that's something we've called for.

The downside of being a full-time, at-home parent, of course, is that there isn't a comprehensive system of support for at-home parents, and that's a very difficult career choice. Many women find, after a few months, that the isolation is more than they can bear, and they're only too eager to go back to their familiar surroundings, which may be in the workplace. But then perhaps they haven't been educated on the nurturing needs of the child, on breastfeeding.

These supports are really haphazard across the country. The problem is that government taxation policy has chosen one form of child care to promote, and really our view is that it should be a family decision—and families will know whether they have the support to make the two-earner project work, or whether they themselves would prefer, and would find it more beneficial for their children, to have a mother or father at home.

Single parents don't have a choice in Alberta, because the parenting work is totally devalued, and yet we know that children coming from that type of family have a disproportionate number of problems later on. We don't think it's important for a single mother, for example, to be there during the first year of a child's life to do the nurturing work.

I think what we're trying to get across is that our taxation policy is very much at odds with what other government departments are saying. It probably falls into line with the thinking that we must have two parents earning income so that women in particular don't suffer the economic disadvantages later on should the marriage break down or should the partner die.

We know that women in poverty in their senior years is a big problem because of the difficulty of their being at home for a number of years and of not being able to have access to a homemaker's pension plan. We would argue that they are suffering the penalties the tax system itself imposes on them.

Mr. Dick Harris: I guess you know that the single-parent household, this situation, is certainly a huge concern in itself, but the case of a two-parent household where both parents are out working because the tax system is so unfair that it does not provide a tax break for a parent to stay home—I guess that's the situation I was trying to address.

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Why do you think the government has failed to recognize the value of allowing, through the tax system, the second parent in a two-parent household to stay home and raise the kids? They're willing to provide money for all kinds of child care if both parents are working, but if one parent chooses to stay home, if that's a family decision, there's a real inequality in the tax treatment.

Ms. Beverley Smith: I'd like to introduce Heather Gore-Hickman, who is a chartered accountant and a mother at home. She's also very familiar with the Canadian situation and can put it in context with the American situation.

Ms. Heather Gore-Hickman (Individual Presentation): Thank you.

The government is aware of the differential, which is the terminology used. The paper that Kids First referred to, drafted by the Department of Finance in 1996, is entitled Family Income Taxation: Summary of Issues. In that paper they identify that only 17% of Canadian families actually took advantage of the child care expense deductions. That was based on 1993 statistics.

Based on the census information that was just released in 1998, that percentage is actually now just 10% of Canadian families. Out of a total number of 7.8 million Canadian families, including lone-parent families, 812,000 families claimed the child care expense deduction. Of those families, 55% are two-earner families, but we only have 10% of families in Canada claiming that deduction, so a lot of those 55% of two-earner families are rejecting commercial care. They are choosing to cobble together tag-team parenting, home-based businesses, telecommuting, and grandma for free, and all of those choices are being discriminated against. Those families are paying a financial penalty just as surely as are single-income families.

Mr. Dick Harris: Thank you very much.

My last question is to Mr. Wilson and Mr. Anderson.

Talking about the challenges kids face, whether it's a single-parent family or a two-parent family working as opposed to having one parent at home to give the kids guidance, have any studies been done at any level to look at the differences in attitude between the kids who have a parent at home and those who don't have a parent at home? And are there any results or conclusions you can tell us about?

Mr. Roy Wilson: I'm not aware, Mr. Harris, of that kind of study. It would be an interesting study. I don't know how objective you could make it.

What's interesting about the research coming out on this question is that some of the research is saying perhaps it's not even the issue of who raises the child that counts; it's the quality of the care rather than the person who does it. If all the research were really clear on this, it would be a lot easier for you parliamentarians to make decisions, but it's not all terribly clear.

I'm really glad these people have brought up the issue of the tax. That's critical for you people to address. But the problems we're dealing with regarding children are much more complicated than that. They're just not going to be fixed by fixing this one piece. This has to be fixed, surely, but it's a lot more complicated than that. We're a society driven by certain values. No matter what the tax break, we're still going to be behaving in ways that are unacceptable in terms of the welfare of children.

So we have some big problems to fix here. We should start perhaps with the ones that can be fixed, but that's only the beginning. I'm afraid that if we just think that is going to solve our concerns.... I'd say it's a start. It's just a start.

But I don't know of any research. I don't know if you've run across anything of that particular type, David.

Mr. David Anderson: No.

Mr. Dick Harris: All right.

Thank you, Mr. Chairman.

The Chairman: Mr. Riis.

Mr. Nelson Riis: Thank you, Mr. Chairman.

I just have one question, but with a little bit of a preamble.

Mr. Wilson, you mentioned the motion of Parliament in 1989—and I seconded it, actually—to eradicate child poverty by the year 2000. I don't have to remind anybody sitting at this table that we haven't come close to doing that. As a matter of fact, it's a lot worse than it ever was, and I suspect it just continues to get worse, in spite of some initiatives taken by all levels of government.

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All of the witnesses today describe either a tragic situation that's unfolding or obviously very serious inequalities and unbalances in the way we approach raising children and support raising children. I don't think anybody around this table would deny the fact that what happens to a young person in those first few days or months or years is absolutely crucial, not only to that individual, but to society as a whole.

When we introduced that motion in Parliament, a Conservative government was in office. They didn't do much. Now we have a Liberal government; they haven't done much. I'm not going to suggest that if we simply replaced the government, this would change, because we can look across at the provincial governments, and we have serious problems.

My question to you, as people who obviously are extremely interested in this issue—to the point that you've provided us with great background material and you've taken it to the United Nations to try to bring some resolution to this, giving up your own personal time—is why do you think we, as a nation...? And let's face it: we around this table, as elected representatives, simply reflect the people of this country. It's not that we have one view and the people have a different view, because otherwise they'd replace us. So I'm talking about us as a nation.

Other nations have taken this issue much more seriously than we have, and consequently they have eliminated poverty of children, because they've eliminated poverty of adults. There is no poverty in some countries, but in our country it's huge. Other countries have taken all sorts of bold initiatives to care and to provide parental support for young children. We have not to the same extent.

Without blaming politicians and governments, why do you think we as a society have failed to deal seriously with what is obviously a critical issue for the future of our country? Why have we been so cavalier, so uncaring, so callous—put in whatever name you like? Help us understand why we have not done what we obviously should have been doing a long time ago.

That's not an easy question.

Ms. Beverley Smith: Well, that's the big question. You're asking me to explain a government policy?

Mr. Nelson Riis: No.

Ms. Beverley Smith: Okay.

Mr. Nelson Riis: You obviously care—

Ms. Beverley Smith: Oh, society, okay.

Mr. Nelson Riis: Yes, because we represent society. Society doesn't elect politicians who don't represent their interests. We do.

Ms. Beverley Smith: Okay, so here's my take on it.

We're caught up, historically, in a massive movement. We've had the first wave of feminism, which got women into the Senate. That was in the 1920s. And we got the right to vote, which was a big deal; it was very important.

We got caught up in the second wave of feminism in the 1960s, which was a wonderful movement letting women into the paid labour force in all professions—law, medicine, engineering, and so on. It involved breaking the glass ceiling, trying to get pay equity, and so on, which we all endorse.

The women who are currently at the top of the women's movement are these second-wave feminists, who were actually very active in the 1960s and 1970s and did great things, but they've lost touch with the next generation, which is the women who are now 20 and sometimes were raised in day cares. These women say, “Just a minute here. If you said we have value doing whatever we want, why can't we be homemakers? Why do you exclude that one?” So the second-wave feminists have kind of gone into shock, because oops, they're just so afraid we'll stay back in the home now.

So we have a third-wave feminist movement coming through right now, and these are the young women. Personally I think society is still back in the second-wave feminist movement, which is a good movement, but we have to move on. We have to recognize women's value everywhere.

So you're dealing with women lobbying you, powerful women, who are from the second wave, and they're just a little bit out of touch with the third wave.

Ms. Heather Gore-Hickman: May I add to something Bev just alluded to at the end of her comments?

In terms of failing as a society, the day care lobby is a well-funded, well-oiled, well-financed lobby. Most of the parents on whose behalf we're speaking are busy raising their families. They don't have unlimited resources and they don't have corporate backing, so it's very difficult to get the ear of politicians to argue against things such as the justifications the government presents for maintaining the discrimination.

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An example is that unpaid work in the home isn't taxed, so therefore homemakers are in fact enjoying a tax benefit. Another example is that parents at home enjoy more leisure time. These are documented justifications for maintaining a system that is grossly disproportionate to reality.

The day care lobby works on behalf of the 10% of families that enjoy this child care expense deduction. As for the reference earlier to quality day care, in the political spectrum, that's typically looked at as referring to caregiver ratios, licensing requirements, and whatnot. But developmental experts refer to quality child care as consistency of caregiver and time spent cuddling and talking to a child, which is impossible given the caregiver ratios that end up being licensed.

I, as well as Bev, support freedom of choice. I'm not one for driving women back into the home. I worked very hard to become a chartered accountant. I work part-time. I cobbled together, as all of us have done, different arrangements throughout my parenting years. We don't want the government penalizing us for one choice over another with respect to the care we choose for our families.

Ms. Cathy Perri: I would agree with what Bev and Heather have said.

What we've experienced within Kids First and within this whole movement of supporting parents—not necessarily just women at home, but parents at home—is that we really have a block, even when it comes to the media, on this whole issue. We can't get the word out. It's very difficult to have our voice heard, because no one wants to discuss this. As soon as you start talking about supporting parents who are at home, in particular women who are at home, instantly there's labelling. You're labelled and then you're silenced. You're labelled as being anti-women, anti-equality, or anti-day care, and then you're basically silenced.

So it's very difficult to get the word out, to educate people about the importance of nurturing and bonding with children. It's very difficult to get that word out and to get all this diversity of opinion heard and respected. That's what we have come across with Kids First.

We also find that most of the resistance, unfortunately and quite sadly, comes from the women's movement itself. It's very sad that our choice to be at home looking after our children, however we choose to do that, whether it be part-time or full-time or whether we tag-team parent, is basically looked down upon.

We are not included in anything. We are actively excluded from any discussions on child care. We are excluded from any discussions on women's issues, because we're seen as somehow trying to force all women back into the kitchen, barefoot and pregnant. We can't get past that label, as hard as we've tried. And we have tried, let me tell you, to get past that label, to get the word out there, and to support these women or men who are at home looking after their children. We can't do it.

Ms. Cathy Buchanan: I'd just like to add that an American study done a few years ago pointed out that one of the most disenfranchised groups in society is at-home parents, young parents who are busy preoccupied with care. I'm sure any of you who have been parents or who are parents know that when you have an infant, your first priority is meeting the needs of the infant, not sitting down and writing a brief to present to a pre-budget finance committee.

We have talked about this the last couple of days. I have an ill child at home. I wasn't expecting to be here today, but somebody came in at the last minute so that I could be here today. There's the whole problem right there.

Also, children do not vote.

So you have here a group that really is effectively silenced because of the primary preoccupations in their lives at that time. Because my youngest child is now six, maybe I have more time, but hey, my youngest child is six and I would like to return now to my career, perhaps part-time or full-time, to earn pay, after the years of going without pay.

So there you have it, a group of young mothers who we encounter all the time. When you have three or four pre-school children, is it really a priority to you to lobby the government to please change the laws that are making your life painful?

We get calls like, “Gee, I just found out that my child is in the lunch program at school. I can't claim that, but my neighbour can. How come they can claim it?” It's those kinds of things. I think government doesn't realize how they affect people and their families. My sister has claimed, for six years, all of the benefits. We're not able to. If we're at the same income level....

I get the postcards from other people, from their exotic vacations. I'm not trying to distort the picture here; I'm just saying it's a question of fairness, and it creates tensions within families and within neighbourhoods. If we discussed our finances more with our neighbours, it would probably create more problems, but it's kind of like religion. You don't really say how much tax you pay, so a lot of people don't know it. It's when they become aware. And that's difficult, as Cathy mentioned, to get out.

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The Chairman: I just want to ask you a question in reference to a comment you made—if I may, Mr. Riis.

You said children do not vote. Don't you think that people around this committee table take that into consideration? Don't you think that children's health and children's poverty and all those issues are issues that we deeply care about?

Ms. Cathy Buchanan: I think you do, but I think there's also an educational lag here. Many MPs have no idea what the real-life implications of the taxation policies are on families. We live in a community where the average income is $40,000, and there are a lot of at-home parents. How do they do it?

The Chairman: So I guess your belief, going back to a comment Mr. Riis made, is that indeed the elected officials don't represent the population. Is that what you're saying?

Ms. Cathy Buchanan: I think perhaps they represent the population they hear from the most. If you get 20 letters from business owners on an issue, you're going to be aware of that issue and you're going to pay attention to it. Is a stay-at-home mom who's had two hours of sleep every night for the last four nights going to be writing you a letter about the tax system?

The Chairman: Would it comfort you to know that I'm a parent of two children?

Ms. Cathy Buchanan: Yes. Have you tried having a parent at home?

The Chairman: Yes, I have.

Ms. Cathy Buchanan: Okay, so you must be aware of the situation then of what happens the minute you go from the two-earning situation to the one-earning situation, and what the tax penalties are.

I guess it would depend on your income level too. If your income level is high enough that you don't really notice it, then it doesn't become an issue, or you figure it's not a big deal for you. You're not going to mobilize with those parents for whom it is a struggle.

Ms. Cathy Perri: Talking about the government not caring, we see that the government does care when it comes to other departments. As I just mentioned in my brief, Health Canada, Justice, Human Resources, and other departments are talking about the importance of parenting, the quality of nurturing, and the quality of caring for our children, and that is great. That is exactly what we have been saying, and the ever-expanding body of research supports that.

Our problem is this. These messages, which are wonderful, are being delivered by these government departments, promoting breast-feeding, dealing with stress in women, women's health, etc. But then we have the finance department, where if you choose to do these things that the other departments are recommending or suggesting you do, you're penalized for it.

So I do believe the government does have its heart in the right place. I would never believe the government would actively say they want to go out and destroy children's lives or they want them to all grow up to be deviant and antisocial. Of course not. What we're trying to say is you have government departments over here, saying all the things we have been trying to say about supporting parents, looking at children, and giving them the best start in life. And then you have the finance department, which says, “Okay, if you do that, then we're going to ding you. You're going to incur all these tax penalties with what you have done.”

That is where our problem comes. We are right onside with what Health Canada and Justice have been saying. It's just that we can't seem to get Finance to collaborate and come together and support those other departments through their tax policies.

Mr. Roy Wilson: I'd like to respond to Mr. Riis as well from a public education perspective.

Mr. Riis, you probably shouldn't have seconded that motion when you did, because I don't think we have the values context in this country to achieve what you wanted. Maybe it's good, though, to have it there as a goal for us to all work toward.

What I see happening in some countries is much more of a conflict of community than we have here. What I see happening in Canada right now—and I'm hearing the word all the time from my friends at the table here—is that we have a conflict between choice, in a sense, and community. Those of us who support very much the existence of a public school education for children, to provide opportunities, on the other hand hear voices saying, “But we want choices.” As long as we provide that and we all say choice is valuable, then we provide the opportunity for people to choose, to make mistakes, to create their own communities.

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When you have such a frayed social environment, it's really hard to achieve the kind of success people have achieved in other countries, where they're able to somehow get beyond the fragmentation. We're very fragmented.

All I can say is you'll have to fix the problems you can fix that have been presented here, and then hopefully we can work together to build more of a sense of community. As long as people feel that poverty is something that some people deserve, we're not going to get beyond it, because we just think that poverty in some cases is deserving and healthy for some people.

Mr. Nelson Riis: I see some inherent conflicts in the positioning at this table. Some people are calling for more individual choices and other people are calling for more of a community approach. Some really important issues have to be discussed.

I have a last question to Ms. Smith.

You gave us a very comprehensive brief, and we'll have a chance of course to look at it in detail, but would you point out, from your experience, any place in the world that we could look to as an example of a country that has come to grips, more effectively than we have, with some of these issues you've raised?

Ms. Beverley Smith: I don't particularly like any of the solutions I've seen yet. Norway is giving money to women to be home with their children. A few of the Scandinavian countries are working on that one. Italy is giving pensions to homemakers; that's good. The United States and several other countries have the option of income-splitting; that's good. We have to work out our own solution. My goal is mainly to get you to address the problem.

I'm so concerned that we've alienated you, Mr. Bevilacqua, because I never want to hurt anybody who makes choices different from mine. Whatever your personal arrangement is, I know that all parents love their kids and everyone is doing their very best for their kids. This is no insult; it's no challenge to anybody's choices. We're just trying to open up the area.

Somebody asked if there had been a study. The Senate did a study called Child at Risk. The important elements of raising a child are that they should have the same caregiver for three years and it should be someone who loves that child. It does not have to be the parent. It can be a grandparent; it can be neighbour; it can be anyone the kid knows, really. It just shouldn't be a series of strangers. If you have found a day care arrangement, a nanny arrangement, or whatever works for you because it gives you those things, perfect.

Ms. Heather Gore-Hickman: To follow up on Bev's comment, that's one of the things the day care industry has been unable to provide. It has historically had something like a 40% turnover rate. So while the facility might be very nurturing in appearance, often there's a high caregiver turnover, and children just get attached to somebody and then they're gone.

I'm sure there are arrangements that are fine and the continuity is there, but I object to families being penalized for going through hoops to try to cobble together arrangements where they can earn two incomes and have a parent at home, or single-income families.

The Chairman: Ms. Leung.

Ms. Sophia Leung: Thank you, Mr. Chairman.

I appreciate all your presentations. My first question is to Mr. Wilson and Mr. Anderson.

By the way, I know Minister Anderson. I'm from B.C. I know you're different.

Anyhow, you discussed child poverty. The Vancouver School Board has designed a very extensive proposal on how to combat child poverty. It's called Windows of Opportunity. Actually I myself am involved in trying to see how we can approach that.

I just want to make a couple of comments for you to maybe comment on back to me. As I understand, we come from different cities and provinces to listen to your ideas and concerns so that we can take them to Ottawa. Our purpose is to seek some of your suggestions and ideas.

I don't quite agree that we the government should provide all the solutions. That would be a dictatorship you're talking about. We are in a democratic system. We come to you, the people. We respect your suggestions and ideas; that's why we are here. Would you enlighten me on that? Do you want us to go back and decide everything for you?

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Mr. Roy Wilson: Thank you. By the way, I want to commend you for mentioning the Vancouver program. We have, as Canadian school boards, produced a publication that identifies best practice all across the nation in terms of what some jurisdictions are doing—and there are some very exciting things—to address the need. That is under way.

When we approached this particular committee, knowing that your task was pre-budget, we were thinking primarily in terms of the financial piece of this thing. That's why we focused on the child benefit. We did not come before you bearing solutions, because once again, we thought your role was rather limited here. We would be happy to do that, and we continue to advocate at the national level in a broader way for all the things that would help, in young offenders and you name it. We're not averse to providing you with that. Once again, we saw this as a very narrow window of what you were looking for, so we didn't bring that to you.

We're saying to you, “The provinces need financial help to do some of these things. That's your role. Work with us on that.” But I really appreciate that we need to as well help you understand what those solutions would be, and we would be prepared to do that.

Ms. Sophia Leung: We will welcome you. Especially as the newly elected chair for the northwestern caucus, I would like to encourage you from the west to speak up and not just wait for Big Brother to give you the solutions. Okay?

Voices: Oh, oh!

Mr. David Anderson: Far be it from an Albertan ever to look to Ottawa to come up with all the solutions.

Voices: Oh, oh!

Mr. David Anderson: We would certainly never propose to do that. We have been working on many solutions in our schools and in our school systems at the local level. Many of them are working tremendous miracles with very scarce resources.

We know some of the pieces of the puzzle that need to be put in place at the local level. What we need from the federal government is specific support for the national child benefit program. We need the commitment that the premiers called on—$2.5 billion worth of investment by the year 2000—to be fulfilled, and we'd really like that piece of the action in the budget to support those local initiatives.

Ms. Sophia Leung: Thank you. Good.

The Chairman: That's your priority, right?

Mr. David Anderson: Correct.

Ms. Sophia Leung: I want to address the ladies here, Ms. Smith and Ms. Perri.

You're very well informed, and it was very worth while for us to hear your presentation. I just want to make a couple of comments and ask you a question.

I heard you say you feel women at home are being alienated and also have low esteem. I find that extremely difficult to accept. This is a social perception as you interpret it. In some cultures it's reversed: the working mother is perceived with disapproval. I myself have gone through that. It was very simple: you do not work, because your role is purely to stay at home. You have more esteem and more respect if you stay home, because that's the traditional role. So I don't quite see this.

Of course there are always different situations. Perhaps individually you have low self-esteem for many reasons, but you cannot say this applies to all women at home, that they're being looked down upon as misfits.

Ms. Cathy Perri: We speak on behalf of thousands and thousands of at-home parents across the country. We get letters and phone calls on a daily basis.

On the whole issue of self-esteem, I personally don't have low self-esteem. I'm very proud of what I do. What I'm doing is best for me, best for my family, and best for my children. I don't have a problem with that.

But we do hear from other women who do have that low self-esteem, because it is out there. You see it in media portrayals, where every time they have an article on a stay-at-home mom, they show her in front of the television set eating a bonbon. Or you get it when you go into schools, where they expect that when you're at home, you're just waiting by the phone for someone to call you to come in and volunteer at the school. It's definitely out there.

We deal with it all the time in advertising. We have established a media watch group that monitors the media, and it's coming not just from Canada. It comes from the United States. Heather Gore-Hickman used to be with Mothers At Home in the United States, which speaks on behalf of thousands of at-home mothers there.

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The social stigma is out there in our culture and in our society that when you are at home, you are unproductive. On a daily basis you'll get questions such as, “What's a smart woman like you doing at home?” or “Why did you bother going to school if you're going to stay home and have babies?” We get those all the time.

Ms. Sophia Leung: I'm sure, but if you believe that is what is important for your family—we go back again to free choice and family choice—it doesn't matter what others say. If you decide to be a teacher, a doctor, or a social worker, that's your goal. I'm not going to go into that. We could go into long hours of debate.

Being a single mother, I don't quite see.... Most women can combine career and family life. We know it's very difficult. A lot of times people just take the easy way out. There are many reasons; I'm not going to generalize. I'm saying this is something that's recognized. In individual cases, you have to decide. If you want to combine both, good for you, or disregard the criticism. That's very important.

I hear over and over that you feel the government penalizes women at home. I just don't perceive that happening. It's the reverse. Part of the reason I became an MP is that I have a mission to improve life for Canadians, especially for underprivileged women and children in poverty. I see it as totally the reverse. Can you expand on why you think the government penalizes you? We are trying to support you, to recognize that women and children are suffering, and to help you.

Ms. Cathy Buchanan: My mother stayed home full-time when we were very small, but always worked part-time and then full-time later. In her generation, I think the assumption was that all women should stay at home, and women who went out to work were looked down upon and had a great deal of difficulty.

As a result of societal pressures, government policy, as is evident in the tax system and the way it's been changed since the mid-1970s, has been targeted to encourage women in particular to remain in the paid workforce. And let's face it; it's women, because it's generally women who give birth and breast-feed and take care of small children.

When I first stayed home in the late 1980s, there was incredible pressure not to do that. It's shifted a little bit. We're starting to see a shift in respect for people's choices. But when I talk to younger mothers in their 20s, I'm not so sure we've come to where I'd like to see it. You said it should be a choice, and it should. People should be respected for their choices, because their different situations mean they can make one arrangement or another. Different people require different amounts of sleep, for example.

We talked about single mothers because there's such a haphazard approach to single parents in this country; it depends on what province you live in. In Alberta, when your baby is six months of age, you don't have a choice: you must seek paid employment and you must place your children in outside care. Generally that will mean a subsidy is provided for a certain kind of care. So single mothers aren't able to have that choice.

Our argument in that area is if we really valued the parenting work and a single parent's wish to be there, particularly during the first year of life for that child, they should have that choice. We will all benefit as a society later—not that that person should be supported by society ad infinitum—if we look at it from the point of view of children's early developmental needs. Perhaps one single mother may make the choice that she would prefer to be there for the first year of life. Another one may prefer to work part-time and have a combination. Another may prefer to go into the paid labour force, because she has a really satisfactory child care arrangement. What we're after is saying it should be choice.

We have collected plenty of documentation over the past 12 years that illustrates many attacks on women who have chosen to stay at home. I don't think that's a personal thing. I don't know that any of us sitting at the table here have a personal problem with that, but many women do, and they get that message from society and from government policy. If government policy were neutral, what message would women get?

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Ms. Sophia Leung: Ms. Smith, did you want to comment?

Ms. Beverley Smith: I'm really grateful that you're here. You're voicing some of the opinions that really upset me, so it's good to hear them and have them out there.

This is such an emotional issue. Most women have to make the decision, and then they take offence very fast. A woman who works outside the home and has been criticized—I'm not saying you; I'm saying the general class of women—sometimes thinks we're saying, “Oh, you're a lousy mother. You neglect your child.” So their backs are up already. They're just so defensive. There are women who feel that way. You personally don't, I hope, but some women do feel very criticized for that role.

We just are expressing that we get the other end of it. We are criticized with, “You're useless. You don't do anything.” You even yourself said to us just now, “You don't work.” You said that to us. That's the whole reason I'm here. I work. I work long, long hours. For you to say I don't work is very hurtful.

Ms. Sophia Leung: I don't think I implied you don't work. I just said you don't work maybe in the labour market.

Ms. Beverley Smith: I do work in the labour market. I just don't earn money. That's the only difference.

Pardon me. I'm sorry; this is an emotional issue. We feel strongly about it.

You also suggested that women take the easy way out because they don't juggle the career and the home. There are women who would say taking the easy way out would involve shifting your kid off to a stranger so that you could have your coffee breaks and your holidays and your paid vacations.

We are insulting each other back and forth, and that's really hurtful. What I'm trying to do here is say let's stop insulting each other. Women are women's own worst enemies. I really respect what you have done with your career. I don't know you personally, but I am not against that. The thing is, we want our share. We are as good, pardon me.

Ms. Heather Gore-Hickman: Can I just add something? You referred to single mothers, and we talked about the fact that when their children are at the age of six months, they have to begin earning income. Under our current tax code, the single mothers who choose to place their child with their mother or choose to open a home-based business are denied a tax benefit. So when you say you don't see the discrimination, I'm confused, because surely financial discrimination is a very fundamental form of discrimination.

We also talked about self-esteem issues. When a woman is denied access to a pension, an RRSP, life insurance, and credit, that to me speaks directly to self-esteem issues for women.

Ms. Sophia Leung: Mr. Chairman, I just want to conclude on this pension issue. In Parliament actually we have a subcommittee composed of women—my colleague and I are both on the subcommittee—to try to discuss and present our position to the Minister of Finance. The Minister of Finance did listen, but he did not reform. Those things I want you to know. We do recognize and identify your concern to try to make some positive change.

Again, I want to thank you all for your comments and for helping us understand your situation and that of many other women. We welcome your input. Thank you very much.

The Chairman: Thank you. We'll hear from Ms. Bennett and then Mr. Lowther.

Ms. Carolyn Bennett: For some of us who were pushing hard for the caregivers' tax credit last year, and it being the first time the government has ever acknowledged women's unpaid work, I find it hard to believe that your approach is calling it “a nice little token gesture”, when it's a first step. There was an ability to do this at this end but not yet do it at this end. Why wouldn't you be celebrating that as the first example of the government recognizing women's unpaid work, when one in five women in this country are looking after somebody who is disabled or an elderly parent? The sarcasm and the value judgments around this are actually getting in the way of your progress.

I guess I am having a bit of trouble, because the women who are earning $20,000 a year and whose husbands are earning $20,000 a year and who also were up for the last three nights with a sick baby aren't able to present briefs here either. The women working on child poverty in the NGOs, who are just trying to get the care done, aren't able to get together to present the briefs either. The we-they stuff is actually getting in the way.

Some of those women have made a decision that they don't want to raise their kids with a balcony; they actually want a backyard. The only way they can make that choice for their kids is by going to work. There's a fair ladle of value judgments coming, and your perception as elite white women is not helping. It's not helping us do the right thing.

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I have to say that to see some of the choices women are making.... One of the reasons for that 10% of Canadian women is they don't get tax receipts for all of the informal people who are paid. If professional women or any women were able to share a nanny, which would meet the goal of a primary caregiver, and get a receipt and deduct it, that would be good for those three kids. If you were pushing for a year-long maternity leave for people to be able to stay at home and breast-feed.... There are many things that actually create jobs in this economy, with ECE graduates.

I'm just having a little bit of trouble. A lot of you do work on child poverty issues and breakfast clubs and all of that, and I don't think you're doing yourself a service by not celebrating the first movement to acknowledge women's unpaid work.

I think some of your so-called second-wave feminists have felt huge discrimination. For example, in co-op nursery schools, if I was out delivering a baby, I wasn't allowed to send my nanny to do my duty shift, because of the roles that were set up by the stay-at-home moms.

There's a lot of give and take and an unspoken war among women. In my practice there were lots of women who would have loved to have been able to stay at home but weren't able to do that, and they weren't given credit for the fact that that's what they wanted to do.

So shouldn't you be engaging the second-wave feminists to help, instead to going to war with them?

The Chairman: I think that's going to generate a bit of comment.

Voices: Oh, oh!

The Chairman: Ms. Smith and then we'll go to Ms. Perri.

Ms. Beverley Smith: If you were starving and someone threw you a crumb, would you celebrate? Tokenism is insulting. If they cut women who are raising children out of—

Ms. Carolyn Bennett: No, wait a second. It's a $120 million-a-year token. Do you want it gone?

Ms. Beverley Smith: Why do you do that? Why do you go to the opposite extreme? I am saying it's not enough.

Ms. Carolyn Bennett: I am saying that my job as a politician is to not let the desire for perfect get in the way of good. If things are moving in the right direction, my job in medicine and and my job in every campaign I've ever run is to be able to say, I have to celebrate baby-steps in the right direction.

Ms. Beverley Smith: I wrote a thank-you note to every MP when we got the little token, token, token $200 a year, to thank them personally, because I was celebrating that. But you can't live on $200.

Ms. Carolyn Bennett: Did you say “token, token, token” with that kind of sarcasm?

Ms. Beverley Smith: That's not sarcasm; that's fact.

Ms. Cathy Buchanan: Can I say something? Kids First has been presenting to Senate and parliamentary committees since 1987. What's happened to us in the past couple of years....

Oh, and by the way, we have tried very hard to work with what Ms. Smith calls the second-wave feminists. We have been rejected and turned down and shut out. We have tried many, many times, and we still have an effort. Within this group, Mothers At Home, there is a very active group out of Ottawa that does work within the feminist movement. Unfortunately—

Ms. Carolyn Bennett: What about the multicultural organizations? Are there—?

Ms. Cathy Buchanan: Just a sec, though. I really resent when you use that little dismissive phrase about the white middle class elite.

Ms. Carolyn Bennett: I said that—

Ms. Cathy Buchanan: I come from a working class immigrant background, and because my parents worked hard so that I could actually not live in poverty by the time I was able to complete post-secondary, here's the immigrant dream now being dismissed.

I grew up hearing “What kind of a name is that?” all my life. But I have a white face, so you dismiss. I'm just saying this is a general term that isn't productive. It's not accomplishing anything.

Ms. Carolyn Bennett: I'm saying there's a perception—

Ms. Cathy Buchanan: Just let me finish.

Ms. Carolyn Bennett: Governments like coalitions and they like solutions, because they want to actually be successful.

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Ms. Cathy Buchanan: As for the caregivers' tax credit you refer to—and yes, we're aware that we put in our Kids First presentation the phrase, “a nice little token gesture”—we're well aware of the process that preceded that. A Liberal MP initiated a motion. We're aware of the vote on that motion, which included those families that wanted to have a caregiver at home caring for infants and pre-schoolers. It included that group. That was the only group of unpaid caregivers who were left out of the subsequent caregivers' tax credit. So from our point of view, yes, it could be considered a first step, but it was interesting to note which group was selected to be omitted from that gesture.

We know who voted on that motion and we know that all of the cabinet ministers were directed to vote against it. That speaks volumes to us. However, the fact that all the backbenchers from various parties combined were able to pass that motion was hopeful to us. When the Liberal Party took that motion and developed it into a budget feature, they chose to exclude that group.

So from our point of view, was it worth celebrating or was it another slap? To us, it was another slap, because of the groups selected. If you'd also left out those who care for the disabled and the elderly, who were mentioned in the motion, then I guess we wouldn't have taken it as a targeted measure.

We have tried very hard to celebrate small steps in this and we have tried very hard to work with other women. At Kids First, one of our common regrets is that, despite our efforts continually, women and women's groups seem to be their own worst enemies. They'll agree with you on this point, but because you say that, they don't like you or whatever. We've tried very hard for many years. We've been excluded from Status of Women conference calls repeatedly, after being promised by the former minister that we would be.

We've explored every angle possible. We went to court at our own expense. Why? Because LEAF refused to give us any kind of assistance. We tried approaching Status of Women for a grant initially, in the late 1980s, and we were told we were being regressive.

So you sit there and say, “Why don't you work with other groups?” Well, we have tried. “Why don't you include ethnic women?” Well, today the Asian member from Calgary, who was our contact for years, wasn't available, because she's now back at work full-time running her own business. We don't ask our membership what their ethnic, religious, political, or other affiliations are. If they agree with us, they can join our organization. That's how we function.

Ms. Cathy Perri: I also want to note that within the Kids First organization, we have women and men who come from very diverse groups. We have women who come from very wealthy families. We have women who are very poor and at poverty level. Single parents belong to Kids First; our past president was a single parent, and our contact in Edmonton was a single parent. Day care workers and day care operators also belong to Kids First, and they write to us and say they will support any measure that will allow parents to have choice and to spend more time with their children.

We went to court in 1993 and challenged section 63 of the Income Tax Act, which dealt with the child care expense deduction. We challenged it under section 15 of the Charter of Rights and Freedoms, and we lost that case on a technicality. It was agreed that yes, we were discriminated against, but we were not a discrete and insular minority, which means we were too diverse. We came from all backgrounds. The only thing we had in common was that we were stay-home parents.

Ms. Cathy Buchanan: We spent thousands of dollars out of our own pockets.

Ms. Carolyn Bennett: I guess my frustration is the broadness of it, because in pre-budget consultations, obviously what would be helpful is what everyone is interested in: a solution is the best thing for government.

Ms. Beverley Smith: My brief had solutions in it.

Ms. Carolyn Bennett: But what is the line item in the budget you'd like to see? And it's not really in the brief.

Ms. Beverley Smith: Well, keep reading. My brief has 12 tear-off solutions at the back of it—not the thing I read you, because they only gave me five minutes, but in the longer presentation.

I'm sorry; I have to go. I have a class to teach. Thank you.

Ms. Heather Gore-Hickman: I would just like to make a couple of comments. You sort of dismissed the 10% figure. There is a huge common ground here between the 55% of low-income families and the single-earner families, all of whom are being discriminated against in favour of the 10% of families that are claiming the child care expense deduction.

• 1500

Ms. Carolyn Bennett: I'm just saying there are lots of working women, and they all have their formal relationships, a lot of which are paid, but in the underground economy.

Ms. Heather Gore-Hickman: Well, we don't have those statistics, and all of those people are breaking the law. I'd like to think we don't have a preponderance of Canadians breaking the law, and ultimately those people are still subsidizing the 10% who are getting the advantage of the child care expense deduction.

I say why penalize parents for the choices they make in child care? I celebrate that women go through hoops to cobble together arrangements with family members or someone who has a vested interest in their child, and yet the government will only reward the single choice of using commercial care. That's unfair to the freedom of choice that is celebrated in a free country.

The Chairman: Thank you, Ms. Gore-Hickman.

Ms. Bennett, we'll have to move along.

Ms. Perri, you wanted to make a comment, and then we'll go to Mr. Lowther.

Ms. Cathy Perri: What I wanted to mention too is that Kids First has always supported increasing maternity leave and parental leave. That's always been a really major recommendation of Kids First. We've also looked at setting up registered maternity savings funds so that families could put money aside so that one parent could be at home with that child during the early years. Very much that's always been a part of our recommendations.

Ms. Carolyn Bennett: With the current EI situation, it would be a good year to put that in your brief.

I just wanted to ask you, Mr. Anderson, about the CAPC program. It wasn't mentioned in your brief, and we think that would be an easy way or a good way for the government to help on this issue.

Mr. David Anderson:

[Inaudible—Editor].

Ms. Carolyn Bennett: Okay, thanks.

The Chairman: Mr. Lowther.

Mr. Eric Lowther (Calgary Centre, Ref.): Thank you, Mr. Chairman, and thank you to the committee members for allowing me to ask a question. I just arrived here and I won't be able to stay for the whole committee meeting, but I want to take the opportunity to ask a couple of questions.

Thank you to the witnesses. I appreciate the comments of Ms. Smith and some of the others here as well as the people from the education side. Everybody recognizes that we want to respect the right of both parents to make choices that meet their personal needs.

But I'll reveal my own biases, and I can support them with some of the data out there. My own personal bias is that I think the more parental involvement there is in the lives of children, the better they actually do. I can quote a number of statistics from Statistics Canada that point out that children with a single parent, for example, have half the chance of completing high school and twice the chance of behavioural problems.

Coming to town here today, I was reading a current article that talked about home schooling. You could argue that there's a lot of parental involvement in a home schooling area. They were saying that the studies are showing that their marks and the standard of their grade points are actually quite a bit higher.

So under the premise that more parental involvement in the lives of children is better, I'd like to ask all the presenters this. I'd like a perspective on whether our current tax regime, the programs of the government, etc., encourage or discourage greater parental involvement. Which way does it work? It seems to me you could easily make a case, with the studies and the stats out there—and I have a number of them here—that greater parental involvement works better for children.

There's a great mantra in the House of Commons and in the government today: we need to be concerned about the best interest of children. If the best interest of children is more parental involvement, are the current policies encouraging that or are they discouraging that?

I'll stop there.

Ms. Cathy Buchanan: I'll just answer quickly, because we have to leave.

Different families have different resources to draw upon. We mentioned that. Many two-income families spend a lot of time with their children and are very involved in their children's lives. It just depends on their situation and circumstance.

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Yes, more parental involvement obviously does result in better outcomes for children. At Kids First, we wouldn't say it's impossible to do, or that the only way is this way. All we're saying is families should be able to make those decisions for themselves, and government taxation and social policy shouldn't direct their behaviour.

Mr. Eric Lowther: Do they today, though?

Ms. Cathy Buchanan: Deciding for them that they will be able to do this better under this situation.... Families themselves know, and that's a separate issue apart from a financial issue, because really what you're talking about is something that's likely best handled through Health Canada, in initiatives that are educational, that inform parents.

I know school boards do a wonderful job of informing parents, and I'm sure anyone who has a child in school gets a little pamphlet home every year about how you can make a difference in your child's educational success. So that kind of thing is being done, but it ultimately is a family or personal decision as to how it will be arranged, and it should be.

Ms. Heather Gore-Hickman: I would like to make a brief comment. Two of the iron laws of social policy are that you get more of what you subsidize and you get less of what you tax. To the credit of Canadian families, I've observed in the statistics I have looked at that in the 1994 census, 17% of families chose to take advantage of the child care expense deduction, and that number dropped from 17% to 10% in this most recent census.

So families are basically ignoring the tax penalty, to their financial loss, and following what they feel is best for their family's arrangements. Whether they have a second income or a single income, they are thinking about what best meets the needs of their children in making their decisions.

The Chairman: Do you have any further questions?

Mr. Eric Lowther: Did Mr. Anderson have a comment?

Mr. David Anderson: I won't comment on the tax system and how it affects it, but you're absolutely correct: more parental involvement or more constant caregiver involvement with children definitely improves performance in school. There's no doubt about that.

The Chairman: Thank you, Mr. Lowther.

Ms. Bennett, you have a final comment?

Ms. Carolyn Bennett: I'm thinking of Marilyn Waring's work on the fact that our economy is really all based on GDP at the moment instead of on all the kinds of unpaid work that go on and that actually knit our society together.

I wonder if there's another way we can come at this, because we're losing the real gist of your piece by looking at, “Give it to me and take it from them.” What we as a committee are going to have to say is, if we did this, what would we take away? Or is it a whole paradigm shift, that in a three-, five-, or ten-year plan, we have to move to more of Marilyn Waring's view of how we actually put value in our communities?

Ms. Cathy Buchanan: We have Marilyn Waring's text in our library, and—

Ms. Carolyn Bennett: Is there something in Marilyn Waring to prepare for our committee, or is there a paper you would like to send us to show the value of the stuff that doesn't show up in the GDP?

Ms. Cathy Buchanan: Have you had contact with Mothers are Women yet in your hearings? Because they've done extensive work on the unpaid caregiving work of women.

We at Kids First have never, ever asked for something to be taken away from somebody else. We have only ever asked for fairness—not even preferential treatment, just fairness.

Ms. Carolyn Bennett: Unfortunately that's the way it works, right?

Ms. Heather Gore-Hickman: You're right. It's almost impossible to come up with neutral tax policy, but we could take baby-steps towards something that would be more fair to 90% of Canadian families.

This paper prepared by the finance department identified that full income-splitting would cost $4 billion. Partial income-splitting at 80:20 would be $3 billion. The most recent census information for the child care expense deduction was $2.1 billion. So we're talking about a $2 billion difference here in a government where the billion-dollar surplus numbers just keep climbing, as far I'm concerned. If we're looking at a solution of full income-splitting costing $4 billion, that would go a long way towards achieving some equality.

Now, that paper was prepared in 1996, so that number may well have changed, but none of the other numbers have changed substantially, so it would be nice if that number didn't change too much either.

• 1510

One of the other propositions would be a child tax credit that does not look at the activity of the parent but is just attached to the child. After all, this system discriminates in favour of some children over other children, and I don't think any government would deliberately choose to do that.

The benefit of a child tax credit as opposed to a deduction, as it is now, is that you're not going to unfairly benefit the high-income earners over the low-income earners. Under the current arrangement, statistically, of the 10% of families that are taking advantage of the child care expense deduction, 60% earn over $50,000. So it's welfare for the rich. The median income earned by women is about $18,000. How many of those women are going to have a child care expense deduction of $7,000?

There's a lot of common ground. I'm sorry that I'm the last one here. This has deteriorated into a “we or thee” thing.

Voices: Oh, oh!

The Chairman: The Honourable David Anderson is here.

Voices: Oh, oh!

Mr. David Anderson: Do you want to talk fish?

Voices: Oh, oh!

Ms. Heather Gore-Hickman: I feel there's a great opportunity for common ground.

The third thing I'd like to see the government do—because you've asked for specifics—is expand the child tax benefit. It doesn't go far enough.

The Chairman: On behalf of the committee, I want to thank you very much.

Ms. Gore-Hickman, I just want to make sure you're clear on the surplus. I know that reading some newspaper articles and what have you in the past may have led the Canadian people to believe there's going to be this huge surplus.

I also want to bring to your attention the fact that if we were to try, in a few days on the road, to address all the concerns—and I'm talking in monetary and fiscal terms—and try to please everybody who came in front of our committee, we'd probably be spending in the neighbourhood of $30 billion by today. I doubt very much that the surplus is going to be that large.

The point I'm making is that as we make recommendations to the minister, we have to also be responsible and realistic about what can in fact be achieved. We have people who want $5 billion to go back to the EI premium cuts and raise benefits, we have people who want $6 billion to go to health, we have and we have and we have. So we have to be focused on our approach and be responsible.

Ms. Heather Gore-Hickman: I'm aware of that, and there are always going to be competing parties for limited resources. It just appears to me that so many families could benefit from a $4 billion expenditure—7 million families, based on your numbers—where currently 812,000 families are benefiting from a $2 billion expenditure. A lot of taxpayers could be made very happy by introducing some equitable tax treatment.

I know high-income earners are going to vote. I'm sure the legislators are very aware, when they make public policy, of how they're affecting people of various socio-economic categories. I put it back to you. How many people do you want to benefit through social policy and taxation? To me, that would be a cheap way to achieve some substantive equity.

The Chairman: My answer is as many as possible.

Ms. Heather Gore-Hickman: Yes, sure.

The inequity has just become bigger and bigger. I'm sounding like a broken record with these statistics, but they are there, and there's common ground between two-income families and single-income families. It's about choice.

Thank you.

The Chairman: Thank you very much. It's been a very interesting panel.

The meeting is suspended until 2.05 p.m.

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• 1614

The Chairman: I would like to call the meeting to order and welcome the witnesses here this afternoon.

As you know, the finance committee is travelling across the country seeking input from Canadians from coast to coast to coast, so that you can help us with first of all outlining what the priorities are and secondly what types of recommendations we should be making to the Minister of Finance.

This afternoon we have the pleasure to have with us Mr. Garry Benoit. Is that correct? And you represent the Canadian Dehydrators Association. Is that correct?

We also have, from the Coal Association of Canada, Mr. Ken Myers, treasurer of Fording Coal Ltd., chair of the economics and taxation committee. Welcome.

Further, we have Mr. Mark Anielski, senior fellow, Redefining Progress, as an individual. Welcome.

We will begin. Just to let you know the way we operate here, we give you five to seven minutes to make your presentation. Since there are only three witnesses, perhaps you can take up to ten minutes and thereafter we will engage in a question and answer session.

We will begin with Mr. Benoit.

• 1615

Mr. Garry F. Benoit (Executive Director, Canadian Dehydrators Association): Thank you, Mr. Chairman.

I think you all have my written presentation. The detailed one we sent in August, of course, has the full details. More recently, I have the speaking notes I'm working from and some overheads that I had just in case there was an overhead projector here. That's attached. I've reduced them down under one page. I also have an attachment dated October 8 that focuses particularly on a European subsidy issue that's hurting us big time right now. With that, I'll read through my presentation and I'll be glad to answer questions after.

This is the third year the Canadian Dehydrators Association has participated in the pre-budget consultations. This opportunity to present our views comes at a critical time for Canada's alfalfa processing industry. We have 29 member processing plants in rural Canada that create more than 1,000 jobs worth more than $13 million in direct wages. Indirect spin-off benefits are worth more than $67 million a year in rural communities.

In areas of this province from the Peace River to southern Alberta or in the northeastern region of Saskatchewan our members contribute significantly to the regional economies. Very often in these small towns such as Falher we're the major employer and the major industry in town.

The association represents 90% of the alfalfa pellets and cubes produced in Canada, and 85% of that production is exported, so you can see we're a very export-dependent industry. The annual exports are about 700,000 tonnes, worth between $100 million and $130 million. At least they were until the impact of the EU subsidies coupled with the Asian downturn hit our industry with a vengeance.

We had often been singled out by governments as a model value-added industry in western Canada. Mr. Chairman, as I speak, this western economic success story is in jeopardy. It's no exaggeration to say that jobs in rural communities are on the line. The markets we have worked so hard to develop and grow are threatened by highly subsidized products from the European Union. International market prices for processed alfalfa are now well below the Canadian cost of production. The European subsidies of well over $100—they've been as high as $180 a tonne—are often higher than the Canadian price. The subsidy-created surplus has caused a downward spiral in prices and is now displacing our product in Japan and other markets. Of course you have the U.S. subsidies, which are greater than Canadian subsidies when it relates to feed ingredients and crops such as ours, which also make it difficult for us to compete, even though we are the most competitive if we are given a level playing field.

This unfair competition comes at a time when rail transportation costs have doubled and service has often been undependable. Last year in our submission to this committee we stressed the need for government action to ensure improvements to our rail system. This is still a major priority. What we're talking about here is a system that has some true competition in it where some of the problems get sorted out. The way it is, we don't have competition driving improvements.

Of course the Asian economic crisis is reducing the ability of our customers to purchase our products. As I mentioned, Mr. Chairman, we are the lowest-cost producer in the world. We think we could weather the Asian flu if we did not have the continuing threat of the European subsidized product.

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On several occasions the federal government has raised our concerns with the Europeans, but there is no reason to think these representations will lead to quick solutions. Governments and the industry are preparing for the next round of trade negotiations under the WTO. We all know these negotiations take years to complete. Even if they lead to further reduced subsidies, if current market-wrecking activities continue this industry won't be around in 2004, or whenever it is that the improvements come through the system as a result of the next trade negotiations.

By participating in the pre-budget consultations, we have been asked to provide industry's views and advice to government in the light of the current fiscal situation. In recent days the Prime Minister and the Minister of Finance have said the new focus of fiscal policy will be to strengthen Canada's economic performance and raise living standards. I have read that no requests for spending will even be considered if they do not meet the test of helping Canada to be more successful to compete internationally. If we are provided with the level playing field, we can be the world's most competitive and we can compete.

Mr. Chairman, we are asking for a made-in-Canada solution to our problem. We are asking the government to build a bridge so our plants can survive to compete in the new trade environment we hope to see in 2004, or whenever. We are deliberately not being dogmatic about the elements of the solution, but we do insist there must be a solution. We feel we have contributed our share towards balancing the budget. With the demise of the Western Grain Transportation Act to help eliminate the deficit, our industry was left completely unsubsidized and vulnerable to subsidized European competition.

In our written submission, we call for low stable interest rates, a reduction in employment insurance premiums, reduced taxes and improvements to the rail system. Such measures are important, and could produce economic benefits. These are the directions in which we want to see you pushing in the future, because as an industry we must sell internationally to survive and we are sensitive to current global financial problems.

There's been a lot of discussion about the EI premium surplus and what to do with that. Lower EI premiums would help us now, which would be important. If there's a trade-off that has to be made, low and stable interest rates are probably more important. But we really feel that both low and stable interest rates and lower EI premiums are achievable, and this should be the immediate goal.

Mr. Chairman, we agree with the government's priority of making Canada more competitive. We ask that the alfalfa processing industry be included in that priority, and we urge the committee to support a fair solution to our EU subsidy-created problem in its recommendations to government.

We are not the only part of western agriculture that's hurting because of EU subsidies, but we're probably the most extreme situation right now. If you calculated the subsidy that processors are getting, it's not only equal to our price at our processing plant, it's far higher. If you move it back on a per-acre basis to the farm level, it would be far higher than others.

So we have a particularly bad situation, and governments have decisions to make: Do they keep industries that deserve to be around and would be able to survive and be the world's most competitive, or do you just let them disappear after many years of building them up, while we wait for trade solutions?

Thank you.

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

We'll now hear from the representative from the Coal Association of Canada, Mr. Ken Myers. Welcome.

Mr. Ken Myers (Treasurer, Fording Coal Ltd.; Chair of the Economics and Taxation Committee, Coal Association of Canada): Thank you, Mr. Chairman and members of the committee. I'm glad to be here today to speak on behalf of the Coal Association.

In our presentation I'd just like to give a bit of background to the coal industry's contribution to Canada, because I think sometimes it's overlooked, and then address some of the tax issues the Coal Association feels are required for Canadian industry and the coal industry specifically to be competitive on an international basis.

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The coal industry makes a significant contribution to Canada's economy, both directly and indirectly. There are 73,000 individuals employed in the coal industry in Canada. The coal sector currently accounts for about $6 billion of Canada's GDP. Metallurgical and thermal coal exports from Canada are valued in excess of $1.5 billion per year. They represent one-fifth of the total tonnage loaded for export in Canadian ports. In fact, coal is the single largest commodity shipped by rail in Canada, surpassing iron, wheat, containerized freight, and lumber. So both the port and rail systems are heavily dependent on the coal industry in Canada.

In addition, coal-fired generating stations in Canada produce electricity consumed in Alberta, Saskatchewan, and Nova Scotia. In these provinces, coal-powered electricity accounts for 88%, 72%, and 73%, respectively, of the electricity generated. Nationally, coal contributes about 15% of the electrical power generated in Canada, second only to hydro as a source.

Coal mining today is large-scale surface mining that employs a skilled workforce trained to operate and maintain a new generation of highly sophisticated mining equipment and processing facilities. Most of the direct employment and a significant portion of the indirect employment is located in rural communities where other employment opportunities are limited. However, even though these jobs are located in rural communities, these employees now receive annual average incomes and benefits in excess of $73,000. We're not talking about unskilled, low-paying jobs; we're talking about well-paid opportunities.

At the coal association and in our member companies, we strongly believe that the health and education priorities identified by Canadians in the 1998 pre-budget consultation process are attainable and can be preserved on a long-term basis. To achieve and maintain these social goals, the federal government must implement sound fiscal policies aimed at securing long-term economic gains and the creation of skilled jobs. The 1999 budget should focus on fiscal policies directed at improving Canada's international competitiveness, which will in turn generate new investment and create new employment opportunities while protecting current jobs.

When we look at the revenue base of Revenue Canada, a large portion of the income comes from individuals on the street, from taxes is paid by individuals—taxes paid by individuals who are working, and taxes paid by individuals who have high-income jobs. In addressing the issues posed by the committee, with the budget now balanced, what message do we wish to send to the government as to priorities to be set forth for the fiscal dividend? Our message is clear and simple: reduce debt and reduce taxation.

Priority program expenditures should be met by a reallocation of the prior year's program funding commitments. The government needs to develop long-term policies that would systematically pay down the national debt, establish a competitive corporate tax structure that would provide internationally competitive tax rates, and create an environment so as to retain in Canada those individuals who are highly skilled and educated. Debt reduction will reduce debt servicing costs. In turn, this will enable the government to reduce taxes, thereby providing companies and individuals with the opportunity to create economic growth.

While recognizing that the federal government's spending has been reduced in recent years, the major reduction has come in the form of reduced transfer payments to the provinces. The Coal Association feels that to meet the priority spending requirements for health and education—which are a requirement—it is recommended that departmental program spending in other areas be again scrutinized so that additional savings may be identified.

Secondly, what are the appropriate, new strategic investments and changes to the tax system that would allow the government to best achieve those priorities? In April 1998 the Technical Committee on Business Taxation issued the Mintz report. The Mintz report is a review of the overall tax structure in Canada. Where should that tax structure go?

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While Coal Association members are not in agreement with a number of the recommendations made in the report, we are of the view that Canada cannot compete in a global economy unless its rate of corporate taxation is competitive. This is also the view of the Mintz report. In conjunction with business, the government should assess the proposed changes and adopt the recommendations that would make Canadian industry more competitive internationally. Changes that benefit the international competitiveness of Canadian companies will encourage both Canadian and foreign investors to invest in Canadian companies.

The Mintz report commented on environmental taxes. We are seriously concerned that the arbitrary adoption of a carbon tax or other such environmental taxes would cause significant harm to the international competitiveness of Canadian companies. Climate change and other environmental concerns must be resolved by global efforts. The taxation of any Canadian companies should not occur without a comprehensive economic analysis and serious consultation with industry.

How can we help Canadians prepare to take advantage of the opportunities offered by the new era? In the coal industry, we see the new era as a world in which the flow of goods, capital and brainpower will be dictated by international markets. Goods of a specified quality will be sourced worldwide and will be purchased at the most competitive price. Investment capital will flow to where the highest after-tax rate of return is attained given specified risk. Individuals who are highly educated or who have demonstrated skills will move to jurisdictions where they can secure a better lifestyle or a better standard of living.

The Canadian government can assist Canadian resource companies by ensuring that our rates of corporate taxation are competitive with those in the United States and other resource-based economies. In setting a competitive Canadian tax policy, the government must assess payroll, property, capital, sales, and other forms of taxation. This requires consultation and participation with the provinces. A lower debt and a competitive tax structure will provide an environment that will enable existing companies to be internationally competitive, while also attracting new capital to generate more job opportunities.

Canada has again been recognized by the United Nations as being the top country in the world in which to live, yet our youth are leaving the country. The reason is again primarily a tax matter. The government should reduce both the top marginal tax rate and the tax rate on capital gains in order to lighten the tax burden in order to retain in Canada those Canadians who are well educated and skilled.

On the issue of employment income programs, the government should not view EI premiums as a general tax. EI premiums are paid by employers and employees as a premium to fund pay-outs during periods of unemployment. Any surplus should be reduced through the assessment of lower charges to employers and employees.

The final question was what the best way might be for the government to help ensure that there is a wide range of job opportunities in the new economy for Canadians. With a manageable debt and an internationally competitive tax system, Canada will become an attractive economic environment for new investment for both business and individuals. As a result, Canada will benefit from new jobs that require new skills, thereby creating new opportunities for all Canadians.

The Coal Association of Canada is pleased that you have offered us the opportunity to provide input to your committee. The committee needs to convey to the government the need to understand that excessive taxation in any form is counterproductive to both industry and government. Excessive taxation and high debt service costs negatively affect Canadian industries' national and international competitiveness. It is the responsibility of government and industry to work together to resolve Canada's problems, and to position the country for a prosperous future.

Thank you.

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

We will now hear from Mr. Anielski.

Mr. Mark Anielski (Individual Presentation): Thank you, Mr. Chairman, ladies and gentlemen.

By way of introduction, today I'm presenting as an independent on the issue of new measures for measuring Canada's societal well-being, the recommendation being a genuine progress indicator.

Just by way of background, I am an economist by training. I was formerly a senior adviser with the Alberta treasury in the area of government performance measurement and business planning. I'm currently senior fellow with the economic think-tank Redefining Progress, in San Francisco and Washington, and I'm working on the development of the U.S. genuine progress indicator as we speak.

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Barry Marquardson, my cohort from Lethbridge, was unable to attend today, but he certainly has been a champion of advancing this subject in the media of late.

The Gross National Product includes air pollution and advertising for cigarettes, and ambulances to clear our highways of carnage. It counts special locks for our doors, and jails for the people who break them. GNP includes the destruction of the redwoods and the death of Lake Superior. It grows with the production of napalm and missiles and nuclear warheads... And if GNP includes all of this, there is much that it does not comprehend. It does not allow for the health of our families, the quality of their education, or the joy of their play. It is indifferent to the decency of our factories and the safety of our streets alike. It does not include the beauty of our poetry or the strength of our marriages, or the intelligence of our public debate or the integrity of our public officials... GNP measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile.

I wish I could take credit for that quote, but it was Robert Kennedy who made those comments several years ago. They're still applicable today.

With much of the world in the midst of financial and economical angst, many are now suggesting that it is time to re-evaluate and even redesign our fifty-year-old financial and economic systems, which have been in place since World War II. Indeed, we might scrutinize the key indicator of our economic growth and prosperity, GDP, or gross domestic products.

While GDP may be a good measure of the economic prosperity of a nation, measuring the collective transactions for goods and services in the economy, it is a poor measure of genuine development or the well-being of society. GDP does not consider environmental human or social capital as assets, nor does it consider their depreciation. Not accounting for the stock, flow, and value of depreciation is akin to Bombardier not accounting for the depreciation of its plant, its equipment, and its machinery.

GDP does not account for income inequality, pollution, damage to people's health, investments in education—our intellectual capital—natural resource depletion, or the impact of crime. It treats crime, divorce, and other elements of social breakdown as economic gain. Every time a woman is treated for breast cancer, GDP goes up. Every time an environmental disaster strikes, GDP goes up. Every time a couple divorces, GDP goes up. In fact, GDP makes the nation's economic hero a terminal cancer patient going through a costly divorce. This current model of “progress” is cheating on ourselves, other countries, and future generations.

We need to redefine progress and devise a more complete measurement system that accounts for our nation's genuine development and well-being. We need to develop new national accounting systems that measure how our public policies truly deliver a better quality of life for all, and provide genuine returns on public policy investments. We need performance indicators and total wealth accounting systems that look at the quality of economic activity, not just the quantity.

Alternative measures and new accounting systems that measure societal well-being are being developed, the most advanced being the genuine progress indicator, or GPI, and its predecessor index for sustainable economic welfare. The GPI is a pilot measure of the well-being of a nation as expressed in economic terms. It was first developed in the U.S. by the economic policy think-tank Redefining Progress, of which I am senior fellow.

GPI includes the values of both market and non-market activity within a single comprehensive framework, and it has a long-term perspective that the GDP lacks. Where GDP only looks at the flows of expenditures in the economy, the GPI takes account of the depletion of natural and social capital. In so doing, it provides guidance to whether or not current modes of economic activity can be sustained over the long term.

Like the GDP, the GPI begins with the nation's personal consumption, makes adjustments for income distribution, and adds and subtracts a variety of elements that represent social and ecological costs or benefits. Activities that harm the environment, deplete natural resources, and impact health and quality of life are measured as costs assigned as negative or depreciation values to adjust GDP. In addition, adjustments to GDP are made for income inequality, unsustainable natural resource depletion, loss of farmland, and cost of crime. Activities such as volunteer services, unpaid housework, child care and elder care are counted as positive benefits and are added to the GDP. In this sense, GPI is much closer to a common sense accounting system a household would use.

• 1640

The GPI estimates for the U.S. are revealing. As the graph shows, from 1950 to the mid-1970s per capita GDP and GPI were growing in tandem. However, since the mid-1970s GPI per capita has lagged GDP, actually declining to below 1950 levels. A GPI estimate has also been made for Australia, which shows similar results.

No official GPI for Canada has been developed, though a new group called Atlantic GPI, headed by Professor Ron Colman, on leave from St. Mary's University, has formed a team to develop the GPI methodology and to account for Atlantic Canada's genuine progress, in the hopes of developing a GPI for Canada with some assistance from Statistics Canada.

Statistics Canada is also engaged in the development of pilot natural capital accounts for our forests and petroleum resources, but thus far it has not extended this accounting to include social and human capital.

The GPI, while not perfect, represents an opportunity to take small steps towards a new national well-being accounting system that measures genuine and sustainable development of our society, economy, and environment. Honest national accounting would inject a large dose of accountability into budgeting, policy development, and the political process. Better accounting methods might not guarantee better policy, but it is doubtful we'll have better policy without them.

If we measure something, count it, and assign it a value, then we draw attention to the changes in its state, thus bringing it to the policy arena, which then may lead to action. It is time to seriously consider developing a broader set of economic, social, and environmental capital accounting systems that goes beyond simply adding up the transactions in our economy.

I'd like to present four recommendations to the Government of Canada with regard to developing new accounting systems:

(1) That the Government of Canada consider developing a more comprehensive national well-being accounting system, using the GPI or modified GPI framework as a starting point. This account would increase the awareness of the nation as to the state of our economic, financial, social, human, and environmental capital wealth.

(2) That the Government of Canada consider the use of the information contained in these new societal well-being accounts to assist in budgeting, business planning, program review, and public policy development processes.

(3) That the information contained in the expanded Canadian societal well-being accounts be made publicly available on an annual basis.

(4) That as an initial step towards a revised system of national well-being accounts the Government of Canada engage in the development of a pilot GPI for Canada that would include a complete inventory of the environmental, social, human, and financial and economic capital stocks, flows, and their monetary values, which are of critical importance to Canadians, and that the results be presented to the House of Commons in the year 2000.

Thank you very much.

The Chairman: Thank you much, Mr. Anielski.

We have some very interesting presentations to comment on and to ask questions about. Mr. Harris.

Mr. Dick Harris: Thank you, Mr. Chairman, and thank you for your presentations, panel. I have a couple of questions for each one of you, and I'll try to make them as brief as possible.

First of all, for Mr. Benoit, I don't pretend to know a whole lot about agriculture, but I did want to ask you a couple of general questions. You had mentioned that at the present time the production costs for alfalfa producers are far greater than the sale price, thus making it an unprofitable industry to be in right now. Is this a very fast turnover, cyclical type of thing—that is, the prices go up and down in a condensed period of time, or are the downs and ups more sustained? What would be the number one determining factor that would put the profitability either low or high?

Mr. Garry Benoit: Certainly in agriculture you do get ups and downs of a cyclical nature, and we are impacted by the overall global glut of grain and low feed grain prices. But really what's new here for our industry is the extreme program in Europe, which was aimed at self-sufficiency.

• 1645

The Americans cut them off soybean meal. Actually, I was with the embassy in Washington, D.C., when that occurred, covering the agricultural slot back in the 1970s. The Europeans took a deliberate policy of building their self-sufficiency in these kinds of protein needs, and they just got their program too rich.

It had been building an industry on a curve like that, and all of a sudden, for the first time—we were monitoring this concern—they knocked us out of their markets and then in North Africa. They would claim they really didn't want to export, but now they had a mountain of surplus that had been created by too rich a subsidy program. They're dumping it on our Japanese markets, which takes 70% of our production.

Their surplus is equal to Canadian production, and we have a 98% market share in the product they have a surplus in. This is just to try to give you some of the impact. This is a new factor that's very serious that has been thrown into the pot of agricultural cycles and surpluses.

I guess what I'm saying is that we've been dealing with ups and downs, because we're tied to all of agriculture, but I think we have to really realize the magnitude of some of these subsidy problems. This is such an extreme one that this is why I'm here today. I think governments have to deal with some of these things through trade negotiations or whatever.

Mr. Dick Harris: Okay. Just quickly, in a perfect world, would there be no subsidies?

Mr. Garry Benoit: In my mind, absolutely. Our industry would rather compete with.... We know we could be the most cost-competitive, and that's exactly what we would like to see. All we're looking for, I suppose, is more attention to getting the job done on the trade negotiation side.

Mr. Dick Harris: Right.

Mr. Garry Benoit: Until that happens, you have to make some decisions as to whether you keep a competitive industry around to bridge the gap of this extreme program.

Mr. Dick Harris: Okay. Thank you.

Mr. Myers, I don't know the coal industry either, but I've got some generic questions about taxation. I want to see if you can tell me a little bit about this. We'll just use the Canada-U.S. relationship. What are the comparative taxation values between Canadian coal processors and their U.S. counterparts? What kind of a competitive disadvantage or advantage does our tax regime how? How does it compare?

Mr. Ken Myers: I have a couple of broad statements. The general corporate tax rate in Canada is about 10% points higher than in the U.S.

Another significant point is the write-off of capital equipment especially on the rail side. If you understand the Canadian export coal industry, about 50% of our cost is rail. To write off a rail car in Canada, you probably get about 80% written off over a twenty-year period; in the U.S., you get 100% written off in about an eight-year period.

Mr. Dick Harris: Consider a same-size company comparison between the U.S. and Canada. What would be the difference in production costs between us and a U.S. company of comparable size?

Mr. Ken Myers: I guess that differs depending on the company, but Canadian companies are very efficient at producing coal.

Mr. Dick Harris: I guess what I meant to say is that if we could really compare apples to apples in exactly the same type of production system technology, how would the production costs be influenced in terms of say wages and taxes and things like that?

• 1650

Mr. Ken Myers: I'm not quite sure if I'm answering you, but Canadians are efficient coal producers worldwide. It's a recognized fact that we compete with the Americans and Australians, but when we look at the tax base—this means the property taxes, payroll taxes, sales taxes, and income taxes we're paying—Canadians have a healthier tax burden than that of their competitors.

Mr. Dick Harris: Okay. I believe transporting the product to market plays a significant role in your profitability as well.

Mr. Ken Myers: That's very significant. Canadians look to Australia as being a primary competitor. We're about 1,600 kilometres inland on average when you look at where the Canadian mines are compared to maybe 100 kilometres or 200 kilometres inland for Australia. When you think that 50% of our cost structure is rail, we're at a significant disadvantage even before we get to the tax issue, but we overcome that rail component by the productivity gains we have in Canada versus those of Australia.

Mr. Dick Harris: I've heard it said that if you had a Canadian coal company five hundred yards from the U.S. border—say it was right in the very centre of the east and west coasts—and you had an option of using a rail line through the U.S. and shipping out of a U.S. port or going through Canada out of a Canadian port, your costs for going down the U.S. side would be significantly less than for going across Canada. Is that correct?

Mr. Ken Myers: That's absolutely true. I'll give you an example. Our particular company exports about 15 million tonnes of coal per year, and the sales in Canada are about 500,000 tonnes. We do not sell to Canadian companies as a rule. We do not sell to U.S. companies. Our markets are in Asia, Europe, and South America. We can compete once we get to the coast, but we can't compete going across Canada.

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

I have one more question for Mr. Anielski, Mr. Chairman.

I guess I won't be the first one to borrow Robert Kennedy's words. That's the first time I've ever seen them, and they're quite profound. I don't suggest I completely understand what you're talking about, but I can tell you that I am going to take time to read the paper.

I just had one question. I think we can probably all agree that the GDP measurement is imperfect at best when we're trying to get a general picture of just how we're doing as a nation. But when governments at every level make decisions that are, in a large sense, based on financial aspects—of course those decisions reflect the GDP of a nation—when we spend the money, aren't we in effect trying to do, in our best judgment, what the best thing is for the country anyway? I understand what you're talking about in your GPI measurement, but even though we don't record it, aren't we actually trying to get there through the decisions we make anyway on how we spend our resources and through our decision-making?

Mr. Mark Anielski: I think that's a fair comment. In fact the GDP, the whole system of national accounts, was developed with all good intentions after World War II to account for the rebuilding of our shattered economies. So the focus was clearly on jobs and economic output. So we shouldn't apologize for the focus being what it was then. But what we've been left with, in a sense, is an inertia and a continued sort of myopia on economic growth, with the focus simply on the exchange of moneys for goods and services.

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At a critical point, we are now faced with some possibilities of constraints to our natural capital, which in the case of Canada is extremely important. We see signs of these constraints all around us. The point here is we have to consider our accounting system in a more holistic fashion. That is, while the GDP is still a useful metric for economic prosperity, we need to be serious about the fact we are not just managing our financial and economic capital but that the human and environmental capital, which actually gave rise to our prosperity, is as important in terms of accounting for its fate, its health. That's where we currently fail in our systems.

Having been in government for many years and having sat at the Treasury Board table, it would be unfair to say GDP is the only measure considered by elected officials, because clearly it is not. As you suggest, it's part of a series of indicators. Having been with Treasury Board, though, I know the importance that is placed by traditional economists on this metric, and therefore it does tend to get more attention than these other assets.

Mr. Dick Harris: Would it be fair to say that if the GPI measuring mechanism were made as good as it possibly could be, it would probably still be as imperfect as the GDP measurement, but it might be a good idea to use a combination of both to get a better understanding of just where we are?

Mr. Mark Anielski: Absolutely. My experience with developing performance indicators for government here in Alberta suggests we're never going to have a perfect system. In fact, we have to acknowledge with some humility we incrementally improve our accounting system, because what we're really doing is trying to empower ourselves with better information, upon which we can then make better policy decisions.

Mr. Dick Harris: Thank you very much. I will read that.

Mr. Mark Anielski: Thank you.

[Translation]

The Chairman: Mr. Desrochers.

Mr. Odina Desrochers: I will begin by thanking you for the efforts you have made to state your point of view during this pre- budget tour. It is always interesting to hear the points of view of different agencies when we are about to learn about the position of Mr. Martin, the Minister of Finance, with respect to budget policy for the 1998-1999 year.

I have a few questions for N. Myers. You seem to be somewhat ill at ease when there is discussion of the possibility of levying taxes relating to ecology or environmental protection. I would therefore like to hear your position about the agreements signed in Kyoto. Then, as you are no doubt aware, we are asking everyone, and in particular those whose endeavours may cause atmospheric pollution, to make a special effort. Who do you feel should pay for this? Are you in favour of the polluters paying, or a tax levied on another sector? The fact is that some form of collective effort is needed to address and correct the problem.

• 1700

[English]

Mr. Ken Myers: On the issue of the environmental taxes discussed at Kyoto, the Canadian heavy industry agrees in principle we should be controlling the emissions. The problem we have is that decisions are being made arbitrarily that will impact certain sectors of the economy and certain countries so that the competitive base is not consistent across the world.

With regard to the Kyoto decisions, major countries were excluded from that process. If all of a sudden some of those countries we compete against get a significant economic benefit that impacts industry here in Canada, that will not only affect one company. As I indicated with the coal industry specifically, if it affects the coal industry, it affects the rail system and the ports in Canada.

On the issue of pollution, Alberta has been probably a leader in the cleaning up of pollution, such as with the Swan Hills plant, where industry and government worked together to create solutions in order to resolve the problems. The cost of that cleanup has to be borne by the users of the product, such as on the electrical side, and every industry uses electricity. If it's a coal company that produces steel, those costs have ultimately to get added to the cost of the final steel products.

But pollution has to be cleaned up. It just can't be permitted to exist. I agree.

[Translation]

Mr. Odina Desrochers: You are saying, Mr. Myers, that everyone should pay. Wouldn't an environmental protection tax be equitable, then? You said on the one hand that all users of your products should pay. On the other hand, your arguments appear to indicate that everyone should pay. Wouldn't an environmental tax in that case be an equitable solution?

[English]

Mr. Ken Myers: The issue around an environment tax involves the implementation of the tax. If it applies to all of the competitors on a worldwide basis, then yes, it's fair. If it applies only to certain countries, then it is not fair.

In addition, I think economists have to look at the impact on countries such as Canada in the northern hemisphere. Because we operate in a cold, harsh environment, we will use more energy to get to the same net position as companies that operate in warmer hemispheres. So those issues have to be addressed. We're coming up with the solution before we've gone through the analytical process and asked how that decision is going to impact Canada.

[Translation]

Mr. Odina Desrochers: I have another question about the environment, for Mr. Myers again. You said that if this kind of tax were levied and a number of measures taken to combat pollution, you would have trouble remaining competitive with other countries. I would like to know which countries, and just how much you would lose if proactive measures were taken to protect the environment.

[English]

Mr. Ken Myers: If it were applied only to Canada, it would be catastrophic. Especially within the last nine months, the world economy has become very competitive. Steel production is down. If we were given a tax that countries like Australia or Russia weren't given, we would be significantly disadvantaged.

[Translation]

Mr. Odina Desrochers: I agree with the position you take in your response, Mr. Myers, but it lacks precision. I asked you to name the countries you had in mind. You mentioned Australia and another country. When you say catastrophic, do you have a percentage in mind? Can you give us projections over two or three years, for example?

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[English]

Mr. Ken Myers: Mr. Desrochers, I think you're looking for specifics that cannot be readily given. That information can be readily provided to you if you are willing to spend some time and analyse the issue, if you're serious.

[Translation]

Mr. Odina Desrochers: I take my work very seriously, Mr. Myers. Our party and other parties worked very hard to have the Kyoto agreements signed. When I meet people who perhaps do not share my opinion, I like to be able to add some depth to theirs.

On that note, I thank you Mr. Chairman.

[English]

The Chairman: Thank you, Mr. Desrochers.

Mr. Riis.

Mr. Nelson Riis: Thank you very much, Mr. Chairman.

I first want to say, Mark, I welcomed your presentation. I think it concerns a whole new set of values in evaluating how well we're doing as a society, as a country, as a government, and as a Parliament. I applaud the initiative. I'd like to see it, maybe as one our our millennium projects, come to life by the year 2000, as you say. So I simply say well done and that it's very refreshing to see your presentation.

I have one question to share between Mr. Benoit and Mr. Myers. Both of you are—I guess I can use the term—well exposed in the Asian market and you say are into Central America. I suspect we can only predict what's going to happen at least in the next little while in those two areas: it's probably not that encouraging in terms of market development. Other countries will probably be joining in to again seek more intense competition in those areas.

I have two questions. Could you give us your best guess of the next six to twelve months in both of your industries in terms of what you know about the factors out there now? And secondly, what has been the role of our currency situation in terms of your viability? Neither of you mentioned the value of the Canadian dollar, and I suspect it must play some role in how things are going for you today.

Mr. Ken Myers: To answer the last question first, on the value of the Canadian dollar, I think in the short term the low Canadian dollar theoretically benefits the industry. The problem is a large portion of the industry probably has their exchange rates hedged, so they're not gaining the full impact of the lower rates. I think over the longer term a low Canadian dollar is not good for Canada or not good for the industry at all.

The impact of the Asian market on our industry over the last six months has been significant. For Asia, which is a big steel producer, we're seeing their volumes down. We're seeing a significant reduction in internal use of steel within Asia, so mills that were basically serving domestic markets are now exporting their products. We're seeing a disturbance of production in South America, specifically with the Brazilian mills. We're seeing start-up operations in countries like Bulgaria and Romania having major difficulties because of their technologies not being necessarily up to date. They are struggling to begin with with the vast amount of product being put on the market. They're suffering.

So the Asian flu has not been restricted to Asia; we're seeing worldwide ramifications with that. In fact, within the last couple of weeks we saw a steel mill in the U.S., Acme Steel, go into chapter 11. We're seeing, right in our own continent, the impact.

Mr. Nelson Riis: Thank you.

Mr. Benoit.

• 1710

Mr. Garry Benoit: Certainly the value of the Canadian dollar, the low Canadian dollar as compared to the U.S. dollar, does help us, and I'd hate to see any quick movement in either direction actually. But the Japanese yen has gone down an equal amount, so the buying power of the customer has been weakened. So it balances out somewhat. And as I say in my presentation, we think we can handle the Asian flu if it was just the one thing, but you load on top of it the European subsidy and it becomes quite a load.

I think, looking down the road, the Japanese are going to continue to require our types of products to feed their dairy cattle. Right now they're able to sit back and whittle the price down on us. With the European mountain sitting there, they just bring in the odd shipment. They'll get most of the product from Canada, but they have exactly what they want now, the lever to get us down in price, and they've done that very effectively. They bring in the occasional shipment from Europe just to make the point that they want our prices way down. So we'll continue to supply most of the Japanese market, for example, at reduced prices, and they'll squeeze all they can out of our industry. It remains to be seen how much of our industry will survive. We've already had cutbacks in production because the market signal is not there, but you can only cut back so much and not lose your plants.

In the Korean situation, Korea is our second-largest market, and the impact was quite extreme there, in that our sales were cut in half or somewhere in that magnitude as a result of their currency situation and the fact that they could turn to other markets for their product.

The U.S. certainly had quicker and better responses from their export financing programs. EDC programs just didn't compete, so the Americans were able to get some market share out of the deal because their programs were just stronger and better understood by the Koreans, and more effective. And they're definitely taking some market share from us because of their export programs, so I think that relates to this committee as well. EDC programs are just not as cost-effective or as effective as what the Americans have to compete with.

Looking down the road, I was at a major presentation on the Japanese situation, and it looks as if it's turning around. I think it will be a long haul. It will be several years before things strengthen there to the point that their buying power is like it was a few years ago.

Mr. Nelson Riis: Under the circumstances at the moment you have these subsidies coming in in terms of competition with you, the depressed market but nevertheless a market. My friend Mr. Harris asked about that line in your presentation where you said that international market prices were now well below the cost of production. Does that mean that the cost your producers are receiving is actually higher than the prices they're getting? If that's the case, how long can this go on? We hear this with other sectors as well, but can you last a couple of years doing this?

Mr. Garry Benoit: Many in our industry are telling me no, that something has to give here within the next...the sooner the better.

Mr. Nelson Riis: But what could possibly give, Mr. Benoit? I can't imagine the Europeans backing off and saying they're concerned with the Canadian sector. The U.S. sure as hell aren't going to back off in the election year and so on. The situation in Japan, as you say, and in Korea is not going to change in the next little while. What on earth could change to turn this around in the next year or two?

• 1715

Mr. Garry Benoit: We are working hard in direct contact with our counterparts in Europe to let them know how unfair we feel it is. I know they are leaning on their industry to not export into our markets, because they realize it will bring more pressure to bear on their program for the long-term future. This is my concern. You don't get a quick fix then in trade negotiations.

The Europeans had such an extreme program that when they reduced what was required in the last trade negotiations, they're still GATT-legal with their program. There's got to be more precision in the trade discussions. There was a lot of focus on export subsidies last time, and if we're going to give up all of our chips.... Like the GATT deal required a 36% cut, basically, and export subsidies we gave 100%—you know, just bang.

In our case, it's a subsidy as a processor on every tonne processed. That wasn't in the category that was worth paying attention to, but that acts just like an export subsidy once you get a surplus. It's very trade-distorting and damaging. There has to be more precision when we go into these negotiations to really look at the impact of that kind of subsidy and make some progress on that.

In the short term, our government is making formal protestations on the subject, and there are some tinkerings that could go on in Europe to help with their program to try to make it less damaging, because they have a problem too. They're creating a surplus and wrecking their own price.

How long? You know, we'll lose some plants over this. How many? Our production has certainly been cut back. Plants just sold off their material they would normally process, because if they're going to lose money processing it, they can cut their losses by just closing their doors, as they did for periods of time this summer. Their inventory, their storage, was full, because the market is wrecked.

So it's a very tough time out there. We're going to lose some plants, and the quicker something can be done here....

I guess if we were given say 20% of the support the Europeans are getting, it would probably bridge us through the next three or four years. If we hadn't given up what we had, bang, that possibly would have been enough to hold a high percentage of our industry around, versus letting it go down the tubes.

The Chairman: I'd like to thank you, Mr. Benoit. We'll go to Mr. Valeri.

Mr. Tony Valeri: Thank you, Mr. Chairman.

I'm going to ask of Mr. Myers and Mr. Benoit to take your sector hats off for a second and start a bit broader discussion. You commented—and certainly it's impacted your own particular sectors, but in a more general way—on the Asian flu, the situation in Russia and Latin American, Greenspan saying just yesterday that the outlook in 1999 for the U.S. economy is weakened measurably, so there's some concern there.

We've just balanced the books. We've committed to continue to stay in balance. There's a commitment to pay down debt. We're left with a comparatively small surplus, the numbers continually being downgraded by private sector analysts. The last number that I saw, I think, was something between $5 billion and $7 billion, including a $3 billion contingency fund. That's sort of the range we're talking about.

What do we do? That's why we're here today, so that we can hear from individuals like yourselves and get some feedback. Given the context that we are in globally, given our own domestic situation and the numbers we've got to work with, what are the priorities?

• 1720

I notice that a number of your briefs say to cut taxation, pay down debt, do EI, do corporate tax, and do personal income tax. Unfortunately, as parliamentarians, we have to engage in trade-offs. So I guess I'm asking for some greater focus on what the priorities should be for this committee when we deliver our report to the Minister of Finance.

The Chairman: Mr. Myers.

Mr. Ken Myers: Generally, your concern is that the surplus you generate is going to be gone if the economy deteriorates.

Mr. Tony Valeri: No, I think we'll have that surplus. What I'm saying is that the surplus is within a box of $3 billion, I would say. I guess my question is: what do we focus on?

Mr. Ken Myers: I guess industry's view is that lower tax rates do not mean lower tax dollars. If we have a competitive structure, that gives more employment opportunity to Canada. It enables us to compete with higher employment. Revenue Canada can well increase their tax take.

Look at what we've seen just in the last couple of years. Even though we had the increase in employment income premiums as the economy was moving forward, the program, because more dollars were being paid into it, created a surplus. So I think that if the tax structure is put in place to make industry competitive and to keep....

We see a lot of our young graduates today who are leaving the country. We're spending large dollars to educate students. One of my sons has just come through the program. He's doing his master's right now, and he's looking at job opportunities. He's in the computer area. The dollars are higher and the taxes are lower in the U.S.; the lifestyle is better in Canada.

A lot of these young kids are going down to Los Angeles. Disney pays them phenomenal salaries to go down there and work in that area. The quality of living down there is not what they're used to. They would rather stay here in Canada, but with their student loans and the lower taxes in the U.S., they have to generate dollars to pay off those loans. So I think their initial thought is that they will go down there for five years, get a base, and then come back to Canada.

The problem—

Mr. Tony Valeri: Can I just work with what you said?

Mr. Ken Myers: Sure.

Mr. Tony Valeri: You talked about Revenue Canada increasing their take if taxes are lowered. I'm just going to go back to this box, because it's a box we have to work with. So there's $3 billion with which to decide what to do. It's a given that $3 billion out of that $6 billion—I'm going to say it's $6 billion for the sake of the argument—is going toward either ensuring balance, a balanced budget, or if it's not required to balance the budget, it will go to pay down debt. That was one of your recommendations, so we can put that one aside. So we have $3 billion left.

You say that if we reduce corporate taxes, then Revenue Canada could increase its take. The challenge is that when you start to reduce taxes, you have to do it within your box. We can't say that we are going to reduce taxes by $10 billion when we have $3 billion to play with in the hope that we will gain more revenue. So that's sort of the box we're in.

So it's $3 billion. You talked about corporate tax and personal income tax, right? Young people are looking elsewhere and the taxes are less in the United States. If it was corporate tax, personal income tax, or EI reduction, which of those three would give the biggest bang for the buck, given the box we're working in and the global economy we have to deal with?

Mr. Ken Myers: It's a tough scenario to answer. But I guess if you're putting more money in the short term into the hands of individuals, you're going to get an immediate kick to the economy. If you're putting a lower tax structure in place for corporations over the longer term, you're going to generate more jobs.

• 1725

Mr. Tony Valeri: Okay, I would agree with that.

So say I compare personal income taxes with a reduction in the employment insurance, for instance. A personal income tax reduction would affect approximately 14 million Canadians. An employment insurance reduction would affect about 8 million Canadians. So based on that logic—I don't want to put words in your mouth—are you suggesting that a personal income tax reduction would put more money back into the economy than an employment insurance reduction?

Mr. Ken Myers: I think there are two distinct issues. If you're talking about taking the employment income surplus and using it for a general revenue stream, there's concern out there that we're paying user fees. Those fees should be for specific purposes.

Mr. Tony Valeri: Okay, can we spend a few minutes on that?

Mr. Ken Myers: Sure.

Mr. Tony Valeri: Back in 1986 the Auditor General required the government to consolidate the employment insurance premium into consolidated revenues, because at that time the employment insurance program was underfunded. So when the government was stating its deficit position at the time, it was actually understating it by about $6 billion. So the theory was that if the government stands behind a program—say they're going to take money out of general revenues to pay for a program—then you have to include that program within your overall calculation.

I'm not disagreeing with you in terms of the understanding of the program that's out there, but the challenge is that when you decide to do anything.... When I talk about that $3-billion box, I'm also talking about this so-called surplus or revenue that people feel is there in the employment insurance fund. So whatever you decide to do ends up being a complete trade-off with all of these things. When I talk about personal income taxes versus EI, although I appreciate your argument in what you're saying, the trade-off is still there.

Mr. Ken Myers: What you're saying is that there aren't enough dollars to solve all your problems at the same time.

Mr. Tony Valeri: Absolutely.

Mr. Ken Myers: But you have to put in place a structure and policies to deal with them on a longer-term basis.

Mr. Tony Valeri: Absolutely. I think the first step was obviously to try to balance the books. There's a plan in place to deal with debt in terms of a longer-term strategy. The long-term strategy is about maintaining balance, but what we're really talking about now is what are the priorities today as we move forward over the next couple of years with respect to this surplus that is emerging that is small in retrospect when you compare it to what most private sector analysts thought it would be maybe six months ago?

Mr. Ken Myers: I guess if we could create more employment, then we could create more surplus.

Mr. Tony Valeri: I think that's an underlying principle of any government. We certainly want to create more employment, but how do you go about doing it? Whether it's personal income tax, EI premium reduction, or providing subsidies to various sectors that may be feeling a downturn because of the global economy right now, these are all questions that need to be answered. What I'm asking you is which do you feel would be the priority for you?

Mr. Ken Myers: I would think that it would be a lower corporate tax structure.

Mr. Tony Valeri: Lower corporate tax. Okay. Mr. Benoit?

Mr. Garry Benoit: I guess I'd like to see them all lower—

Mr. Tony Valeri: Me too.

Mr. Garry Benoit: —corporate, EI, and personal taxes. Exactly how you balance that, I'm not sure. I'm not really competent to tell you.

I think the direction should be toward lowering them all. My point-form sheet that I had on my overheads said that federal spending on agriculture should be fair in relation to the importance of the industry. It's very low, I think, right at the present time. I don't know if it's 2% or what.

• 1730

When it comes to spending some money, we certainly would rather not see support programs. But when you've taken away all that we had overnight, when the GATT didn't require that.... My last point there is an EU subsidy offset program. I'm just talking about a short-term program to keep the alfalfa processors that create jobs in rural communities and contribute to the tax revenue. You've got to make some decisions as to whether you do some targeted short-term EU subsidy offset program stuff to both strengthen your hand in the next round of trade negotiations and to keep some jobs around, or whether you let the value-added processing industries, which is a priority of government, go down the tubes unfairly.

We shouldn't be here. You know, let's bite the bullet and close the doors. But when you know you should be here, you maybe have to spend a little bit there. You took such a whack with the Western Grain Transportation Act. Transportation is hugely important to our industry, and you took all of that very quickly, much beyond what was required, because of a budget deficit problem here.

I applaud you fully for trying to start to tackle the deficit and the debt. I think there are a lot of places where probably you can cut government and cut expenses, but let's also try to be fair about it.

Mr. Tony Valeri: I'm a big believer that government needs to allocate resources effectively, but when you look at the budgets and you really see.... I mean, there are three expenditures that really take up almost all the money, and that's transfers to provinces, transfers to persons, and the interest on the debt. When you talk about government spending, in terms of departmental spending, you're not going to really save a lot of money, probably not enough money to fund sort of an EU offset program by cutting staplers and scissors and staples out of departments. That's a challenge we continue to face.

I've got another question. I don't know whether you want to comment on the first part, Mr. Anielski, in terms of the multiple-choice questions.

Mr. Mark Anielski: Well, in fact multiple choice constrains the answer.

As an economist and having worked in the treasury in Alberta and having experienced this question of what to do with the so-called fiscal surplus or dividend, it seems logical to do some type of cost-benefit analysis on the options on the table and determine where the biggest financial benefit will come from. Maybe it's personal income tax reductions. Maybe savings on the interest payments on the debt by paying off foreign bond holders will create the largest fiscal sort of a dividend, which can then be redistributed in the form of a corporate tax or a personal tax reduction. So from a pragmatic approach I think that's what I would recommend.

Mr. Tony Valeri: Okay. I have a second question for you. It's kind of a hypothetical question, but I'm interested in seeing your answer.

Using the GPI measurement in today's global context, what is it that we would be doing differently, if in fact we were able to have this measurement in place? Is there something that sort of comes to mind to you, based upon your experience and your research so far?

Mr. Mark Anielski: I think what we would be doing differently is in the process of developing policy and the budget process we would have a set of accounts of these various forms of capital in front of us. We'd have some evidence as to the status of the financial health, the economic health, the social and environmental health. In terms of natural resources, we would actually look at the stock of those resources and the flow. That is, how much are we actually producing on an annual basis? Is that sustainable in the case of renewable resources like forestry or agriculture? In the case of non-renewable resources, like coal, oil, and gas, what does the reserve life look like?

• 1735

I think this would be similar to a balance sheet or an income statement of a company. The national income accounts are currently biased toward financial economic information, so we're arguing here that we need an additional set of accounts, call them satellite accounts, which the United Nations is using—and the World Bank is doing similar work here—on environmental capital and human social capital, so we have what is coined as three bottom-line accounts or balance sheets. This information would of course be part of the discussion within the development of the budget and policy discussions. I don't know if that makes sense.

I used to be in the audit business with an accounting firm and we would go into the steel yards and count rebars. Then we would determine whether the steel company fairly set the market value of those rebars. The same thing goes for our nation. To be smart about doing business, we have to do an inventory of all forms of our capital that give rise to our prosperity and also, where it makes sense, attach the market values to them. That's what we're arguing.

The Chairman: Thank you, Mr. Valeri.

Ms. Bennett.

Ms. Carolyn Bennett: In your recommendations that this be ready for the House of Commons by 2000, how much would that cost?

Mr. Mark Anielski: I won't say how much I'm getting paid by the U.S.—and it's in U.S. dollars too, which is nice. In terms of a project, I mentioned Ron Colman, and I'm going to wave his flag, because he's out there. He actually took a leave from the university. The political side is that this is how attractive this idea is to lay people. My friend Barry from Lethbridge is a commercial real estate developer. He caught wind of this stuff and he thinks it's great. So it's attracting laypersons' attention.

There are some economists in Pacific Canada who have been working on pieces of this, like environmental natural capital accounts—Econnections, it's called. So there are pieces of this already under development.

In terms of completing the task Ron Colman is doing for Atlantic Canada, it would conceivably take about a year. It took us a year to develop this for the U.S., and we did the account all the way back to 1950. This account is also being done for Germany, Austria, the Netherlands, and Australia. So in terms of costs, it would take about a year of work, with some assistance from the government in terms of putting the inventory together.

The beauty of all this stuff is that one of the inventories already exists. It's just a matter of pulling it together in this framework to make sense of it. An analogy is the weather. We have a robust set of indicators that tell us how it is outside.

Ms. Carolyn Bennett: Obviously, in trying to do some of the measurements we're asking for now in terms of health care or accountability in the health care system, the numbers don't exist. It will obviously be a huge project to start measuring those numbers. It is very attractive.

We had the Kids First group here, who in their challenge to the UN have Marilyn Waring as an authority. Economists are looking at this sort of human capital and the fact that the GDP-GNP is just not a good measurement of actually what's going on in our society. So what kind of help or cooperation are you getting from groups such as the volunteer sector or the voluntary roundtable on unpaid housework, child care, and elder care? All of these groups would be very advantaged by having the kinds of accounts you're talking about measured and valued.

• 1740

Mr. Mark Anielski: I'm glad you mentioned the input of others. Whether it's the Coal Association of Canada or the volunteer or independent sector in the U.S., there are a lot of groups that monitor parts of the GPI account, so we can quickly draw on those resources, including our statistical agencies that have historically collected this data. We also want to kind of deputize those folks to encourage their work, because it all feeds nicely into the inventory we're taking.

A lot of the data is available through those sectors and organizations and should be drawn from them. In fact that's what we are doing in the U.S. case. We go to the various sectoral groups or associations for the data set.

Ms. Carolyn Bennett: So you would need a commitment from the Canadian government to say this is a good thing for us to be doing, and that's what you're recommending.

Mr. Mark Anielski: Yes. The recommendation here is that the pilot GPI be taken under advisement. Countries are reluctant to adopt this new accounting system because they don't want to be the first, but that doesn't mean we can't consider it as a pilot, as a point of consideration. I think that's where we're coming from. As I said, it's not really an onerous exercise to actually go through this and develop it.

Ms. Carolyn Bennett: Can you just help me with the child poverty example you gave? Would you just explain how child poverty would be measured in the GPI index, in terms of unpaid women's work?

Mr. Mark Anielski: I think child poverty is a very complicated issue. The Atlantic GPI work has already looked at the value of household work, for example, namely the time spent by women who choose the household as their place of work, the hours spent and the value of that time. That is one approach to looking at child poverty.

Child poverty in terms of the matrix is somewhat complicated, and to actually put a value on that is complicated. But it strikes me that one of the best approaches is to first look at the so-called inventory of the incidence of child poverty and what it's costing us in terms of longitudinal studies. Does child poverty translate into a future cost in terms of crime, health, and all those things? Those are very complicated issues, requiring longitudinal studies. Some have been done in Canada and the U.S. on the issue of low quality of life in the early years of development.

The approach here would be to look at the human capital loss from people or children living in those conditions, and whether those actually translate through experience into these other social costs.

Ms. Carolyn Bennett: When the countries that are already doing this come to their budgeting process, do they end up having approaches to all of the accounts, and not just the GDP?

Mr. Mark Anielski: The country that's probably most advanced is the Netherlands. A lot of this stuff is being done by independents, academics or independent research groups like Redefining Progress. Some countries like the Netherlands and Norway have done various forms of accounts for natural resources and human capital, and it is actually considered as part of their policy decision-making framework in a process that I don't understand at this stage. Nevertheless, one can envision how indicators of that nature get brought forward to the policy-making table.

The Chairman: Thank you, Ms. Bennett.

• 1745

I just have a very straightforward question in reference to the budget. Would you, as an individual Canadian and representative of your organization, accept a budget speech that had basically two lines in it? It would say that $3 billion will be directed toward the debt because there's a commitment to that through the contingency reserve fund, and anywhere between $3 billion and $5 billion, depending upon how large the surplus is, will be directed toward EI premium reduction or increased benefits for EI. Would you accept that? And do you think Canadians would rally behind a budget that would have just those two items?

Mr. Ken Myers: Would you repeat the last part?

The Chairman: If the Minister of Finance got up on budget day and said he was going to give $3 billion of the contingency reserve fund toward national debt, and because of the wants and wishes of many people, including all the opposition parties, $3 billion to $5 billion would be dedicated to EI premium reduction and/or increasing the benefits of EI, would you agree with such a budget, and do you think the people of Canada would rally behind that budget?

Mr. Ken Myers: All those multiple choices.

The Chairman: It's pretty straightforward, actually. It's more like true or false.

Mr. Ken Myers: I think they would like a little more elaboration.

The Chairman: Seriously, a lot of pressure is being placed on the federal government because of the EI surplus, and I'm sure you're aware of the debate. Basically people are limiting the choices. If we were to follow the advice of those who advocate this proposal, the issues of personal income tax, corporate tax, and anything else would not be on.

Mr. Ken Myers: The budget sort of goes forward on an annual basis, and I think we have to really look further down the road than one year. We have to set policies that say “Here's where we want to be and here's how we're going to get there. Here are our targets. Once we hit those targets, here's what we're going to implement.”

I think everyone's realistic in the sense that we realize we're not going to get everything tomorrow. If we didn't have our debt.... It's like once you pay off your mortgage all of a sudden you have extra cash to do the things you really like to do. When you're young and newly married that mortgage payment is big, and it comes every month, but after it goes there are other things in life you can do.

In Canada we've built up the situation where we have high debt. Mr. Valeri just indicated that was one of the principal payments we're making. So we have to have a long-term plan to get that debt down and reduce the tax structure so Canadians have more dollars in their pockets.

The Chairman: I agree with that. I think it's important to set targets, but we also have to write a budget speech for 1999, so I will ask the question again. Do you think Canadians would rally around a speech that has two lines and says $3 billion will go toward the debt and $3 billion to $5 billion will go to EI? Canadians, get excited about this. Do you think they will?

Mr. Ken Myers: They may not get excited about it, but it's reality.

The Chairman: So you wouldn't mind the fact that no measures would be taken to reduce personal income tax or invest in health care or all the other lists that we get?

Mr. Ken Myers: I think for Canadians some of the priorities are health care and education, so to say we're going to give two lines, it's not that simple a problem.

The Chairman: But from a fiscal point of view, and I'm talking about actual dollars, we would only be able to do those two things—the $3 billion and the $3 billion to $5 billion EI premium reduction or increase in benefit. I'm referring to the debate that is going on now about EI.

Mr. Ken Myers: But you've excluded a reallocation of funds from the existing programs.

• 1750

The Chairman: So are you saying there should be further cuts in programs so that we can give further tax cuts?

Mr. Ken Myers: No. I think we need more money in health and education.

The Chairman: So would you forgo a premium cut for that kind of investment in EI?

Mr. Ken Myers: I guess the problem I have with forgoing a premium cut in EI is that the rationale for increasing the EI was to provide an insurance program for people. Now it's almost like someone's coming in and scooping the funds because they weren't needed. You pay your employment income tax above and beyond your regular taxes, and people really look at it effectively as an increase in their tax rates.

The Chairman: What about the advocates who now say we have to return all the money to employers and employees? Where were they when we were in a debt position and the government was financing it? In the debate, they were active back then. As a matter of fact, if I recall correctly, they were criticizing the government because we were in a deficit position.

Mr. Ken Myers: I don't know the details of the program, but the question is why the program was in a deficit position. It's like the pension program. You have to take a long-term approach to these. If they are not set up properly, they are going to be in a deficit position.

The Chairman: What do you expect from an EI program?

Mr. Ken Myers: Basically, it's there to provide insurance for those people who are really employed on a long-term basis, when they have difficulties. It's there to provide a cushion. It's not necessarily there for people who are in and out every six months.

The Chairman: So if the benefits are guaranteed, then you don't see a problem?

Mr. Ken Myers: In the Mintz report, they deal with the employment income issue. To a certain extent, they almost look at it like WCB. If you are in an industry that has very few lay-offs, you get a low premium. If you are in an industry that has a lot of lay-offs, you have a high premium.

The Chairman: Experience rating.

Mr. Ken Myers: Experience rating, exactly. That makes a lot of sense.

The Chairman: So you would be happy with a speech that had two lines in it, is that what you're telling me?

Mr. Ken Myers: No, I don't think I'd be happy, but I think I could understand it.

The Chairman: You could understand it? To be only two lines would the easiest thing.

Thank you, Mr. Myers.

Mr. Anielski.

Mr. Mark Anielski: As the owner of a private household, I would certainly support such a speech on the basis that I would probably do the same thing if I had a debt. I do have a debt, of course, my mortgage being the only one that I have. If and when I had the flexibility of surplus, I would do the same thing with my household.

However, as an economist—and also as a policy adviser—I would also suggest that along with that speech should come some articulation of what is in fact the rationale for the choice. It should also examine what types of further goals and objectives the minister and the government have with respect to the savings that has now been realized on the reduced debt. To me, that's an issue that hasn't been addressed in the two-item speech. The fiscal dividend resulting from reduced debt payments then becomes the next question on which a policy position is needed.

The Chairman: Mr. Benoit.

Mr. Garry Benoit: The problem is that it has to be more complicated than two lines. What I'd certainly be interested in, though, is the fact that we have this huge debt and we're heavily taxed. Let's look at the big picture and get on with doing what we have to do to start really making progress towards debt reduction. With the little bit you have, it's a start, but we have to address programs that are out of control or that are more costly than they have to be. Do we have the right size of government? I think it's too big, and we can't afford it. We have to see something in the budget speech that's taking us down that road to debt reduction more quickly than we're going.

• 1755

The Chairman: Thank you, Mr. Benoit.

Mr. Riis, followed by Mr. Valeri.

Mr. Nelson Riis: I have a question, but first let me say that I appreciate this participation by you fellows today.

It's almost complementary in many respects, but if you were here at other times, there were other sets of interveners reminding us that we have 1.4 million children living in poverty in this country. We heard earlier that there are tens of thousands of kids living in poverty in the province of Alberta. There are thousands of people in some of the big cities with no home for the winter. And I can go on and on.

Mark, I thought I'd ask you something first. You say a government is like you, and I agree with that up to a point. We have mortgages, and we therefore want to pay down the mortgage, but our kids don't have any decent winter clothes or have really serious learning problems that we have to deal with as parents. You're not going to say “Damn it, I have to pay down this mortgage, so too bad”. I don't think you're saying that, so please tell us that you're not.

Mr. Mark Anielski: Actually, if I could say what I'm really thinking—

Mr. Nelson Riis: Always.

Mr. Mark Anielski: —I'll make this a commentary.

Part of what I think we're missing here is that part of the solution to our problem actually lies in our monetary policy, in the role of the Bank of Canada, in the whole business of how money is created in the first place.

You're right, the government—the people—are not like a household. The government has the power to literally create money out of nothing. The private banks have the same power. I think the real tragedy is that we are paying 33¢ on the dollar on a debt that was created out of a fiat currency system that was instituted largely with the establishment of the Federal Reserve System in the U.S. and obviously the Bretton Woods Conference after World War II.

The fact that we cannot see fit to exercise the legislative mandate of the Bank of Canada—which is accountable to the finance minister—in dealing with child poverty is the real tragedy, in my opinion. I tend to agree that in the case of a single mom with two kids she can't support and has to go to the food banks, clearly paying down a mortgage, even if she had one, is not a priority. It may be a priority for me, because I may be a more well-to-do Canadian.

The Chairman: Mr. Valeri.

Mr. Tony Valeri: I just wanted to pick up on that answer. I'm not an economist or anything, but given the way the global economy is now structured, what would be the impact on Canada if we were to pursue that type of monetary policy?

Mr. Mark Anielski: May I say that we can't pursue that type of policy? In a sense, it's largely dictated to us through the Bank for International Settlements, which is in Switzerland. I just came back from a Washington meeting with the World Bank and the IMF, and I know a little bit about how the rules of the game of the G-7 and the OECD work. It really appalls me most of us don't know how they work, including our elected officials.

Most people don't know how money is created. The problem of the world today is that we have a fiat currency system that is supported by no values, no assets. It's therefore a confidence game, and the confidence game is unravelling. That's what we're witnessing.

There is a solution to this. I know I sound pessimistic, but because we have this mathematical construct that we've developed and actually benefited from, this mathematical system will have to go through a natural death, in a sense. It will have to then be recreated in order to re-establish some rationality in the system, and also to bring back into effect some of the basic tenets of monetary policy that were put in place to provide greater security to the system. Included in there is increasing the reserve requirements of private banks with the federal government again. As some of you may know, those are now down to less than 1%, making the entire system vulnerable.

• 1800

So there are some basic regulatory changes that would be required, but my fear is that we are going to see the implosion of the current system.

Mr. Tony Valeri: That's interesting. You were there in Washington, and there is certainly now a sort of a rethinking of things. The word “regulation” is not an evil word right now. Considering some control on capital flows is not as evil as it was a number of years ago, so who knows what will happen in terms of the overall system.

I just wanted to make a general comment based on what the chair was also getting at here. At the end of the month, most Canadians look at their paycheques and probably say they pay too much tax, that they want value for what they pay. They don't say they pay too much EI or too much personal income tax. They just say they pay too much tax—property taxes and all other kinds of tax.

If the objective of the government is to reduce the tax burden, starting within our fiscal means and certainly continuing those reductions, should we be constrained by this EI argument? Do Canadians really sit back and say that EI is EI, and we have to find the money somewhere else? The fact is that this money all flows into consolidated revenue. It has since 1986. Whatever we do, whatever decision we make, trade-offs occur. If it's EI, it's not personal income tax. If it's EI, it's not health care. If it's personal income tax, it's not EI. Or do you do a little bit of everything? Isn't that the more balanced approach?

Mr. Mark Anielski: As an economist who studied tax policy, I think the issue is one of looking at the total tax envelope. Assess where one dollar of my taxes is going. Of that dollar, 33¢ is going to pay down interest on debt that is owed to foreign bondholders. That's a large portion, and that's what I have a concern about.

But one has to be careful not to splinter the argument. One has to look at the fact that my taxes go to pay for services, for investments in civility, good governance and good society, and for insurance premiums that support me when I fall through the cracks. I'm willing to pay for those. But I do have concerns when our government, as I said, doesn't address the more ruinous issue, the one of the monetary policy and the debt that has accumulated because of monetary policy.

The Chairman: Thank you, Mr. Anielski, Mr. Valeri.

Thank you, panellists. That was quite an interesting discussion. As always, you have provided us with a very interesting perspective.

We're going to take just a two- to three-minute break, and we'll be back with another panel.

Thanks.

• 1803

• 1813

The Chairman: I call the meeting to order.

I welcome everyone here again. We have some very interesting panellists this afternoon.

We have, to begin, from the Alberta Association of Registered Nurses, Ms. Lorraine Way; from the Alberta Association of Social Workers, Rod Adachi; from the Alberta Federation of Labour, Audrey M. Cormack, president, executive council; from the Calgary and District Labour Council, Gordon M. Christie, executive secretary/organizer; from Financial Executives Institute Canada, Mr. Peter Rollason, chair, government affairs committee; and from the Independent Insurance Brokers Association of Alberta, Ginny Bannerman, president, Mike Saunders, past president, Harold Baker, executive director, and Steve Evanson, president-elect.

Steve, congratulations, by the way.

We will begin with the representative from the Alberta Association of Registered Nurses, Ms. Lorraine Way.

Ms. Lorraine Way (President, Alberta Association of Registered Nurses): Good afternoon. The Alberta Association of Registered Nurses—and I'll refer to them occasionally as AARN, which is a mouthful to get out in itself—is pleased to have the opportunity to present our pre-budget submissions to the House of Commons Standing Committee on Finance.

We are the regulatory and professional body for over 23,000 registered nurses in the province of Alberta. The AARN exists for the interests and protection of the public. We are not in the business of negotiating collective agreements or protecting jobs. We are in the business of ensuring safe, competent and ethical nursing care to the public.

• 1815

What I want to talk to you about, of course, is recommendations or suggestions for health. If we look at financing health, look at the various funding formulas for health, or long-range budget allocations for health, we can't talk about that in isolation from the vision of health care. It is the vision that should drive the funding decisions. The AARN's vision of the health care system is one that emphasizes the principles of the Canada Health Act and the principles of primary health care where the full range of services are provided, including health promotion and disease prevention, not just a focus on illness care.

The main purpose of our submission is to draw the government's attention to a serious problem within Canada's health care system. All studies indicate that by 2011, which is only 12 years away, Canada will experience a severe shortage of registered nurses who possess the knowledge and skills to meet the future needs of Canadians.

Initial signs of this impending shortage are now being experienced in some acute-care specialty areas, such as emergency, intensive care and the operating room. It seems almost paradoxical that three to four years ago we saw nurses being laid off in unprecedented, record numbers, and now we're talking about an impending shortage.

The Canadian health care system is in the midst of unprecedented restructuring, which has been motivated by fiscal imperatives. The AARN recognizes the need for fiscal responsibility and discipline, and welcomes many of the changes taking place in the health care system. A shift away from institutionally based medical care that focuses on the treatment of illness to a community-based service delivered by multidisciplinary teams, with a broader emphasis on prevention of disease and the promotion of health, is welcomed by nurses all across this country.

However, nursing has been negatively impacted by the extent and pace of the change. Career choices are influenced by a steady supply of permanent employment, good wages and working conditions, and career mobility and flexibility. The federal Minister of Health, the Hon. Allan Rock, in his address to the Canadian Nurses Association meeting this past June acknowledged that nurses have borne the brunt of health care restructuring more than any other health care profession.

Many experienced nurses have already left practice. In Alberta alone, we experienced a 17% reduction of registered nurses in the years 1993 to 1995. We lost 3,100 registered nurses from this province. Many, as I said, left practice, and some nurses are still leaving due to the frustrations associated with practice settings. There is also a new awareness of the number of new nursing graduates who are seeking employment outside of Canada.

The shortage of nurses is compounded by several factors. Decreasing enrolments in nursing schools mean that fewer nurses join the workforce each year. We've had decreasing enrolments all across the country, and not only in the number of seats available for people to apply to; even those seats were not filled with applications from students wanting to become registered nurses.

As well, the aging of the nursing workforce means that many nurses are moving towards retirement age. The average age of registered nurses in this country is 45 years old. Over the next 12 years, retiring RNs will outnumber new grads. We know the number of new grads who are going to be entering will not equal the number who will be retiring. The nursing workforce is not replenishing itself at a pace fast enough to maintain even present numbers.

Coupled with this problem is the aging of the general population. Demand for future health and nursing services will increase as the average age of the population increases. I'm sure we're all aware, with an aging population, that this group of people tend to use health services more.

• 1820

It is estimated that the requirement for services delivered by RNs will increase by 46% by the year 2011. By the year 2011, there could be a shortage of between 59,000—and that's only if we consider population increases as the population of Canada increases—and 113,000 registered nurses, if demand for nurses increases to accommodate both population growth and the extra needs generated by the aging of the population.

Two-thirds of all health professionals are nurses. RNs play a critical role in the provision of health care. They are present in literally all aspects of health care along the continuum, from the very acutely ill in the intensive-care unit to the very well people that the community health nurses work with. They work with people from the time of conception to old age. A shortage of the magnitude projected could have a devastating effect on Canadians' access to high-quality health care.

The AARN recognizes that of course the responsibility for regulation of professionals, and the education of these professionals in health care, rests primarily with the provinces. However, the federal government does have a keen interest in this issue. First and foremost, the federal government has an interest in, and some responsibilities for, health care of Canadians by virtue of provisions within the British North America Act and the Canada Health Act.

The quality of care can only be assured if there are adequate numbers of health care professionals, specifically nurses, to deliver that care. As well, it would not be possible for the government to launch new programs of institutionally or community based care without professionals to carry out those programs, such as some of the recent discussions around a national home care program.

Thirdly, the federal government's priority of population health and responsibility for aboriginal health cannot be achieved without the primary health care that nurses are so well equipped to provide.

The federal government takes pride in the fact that health care costs are under control. Nurses play a pivotal role in the delivery of cost-effective health care. An adequate number of registered nurses ensures that people in the health care system receive the appropriate kind of care and teaching toward successful health outcomes.

On a broader scale, the federal government has always assumed responsibility for management of the nation's economy, including job creation. Therefore, federal government action on this issue, the nursing shortage, would serve to improve the Canadian economy in general. Strategies put in place today to avert a crisis in the supply of nursing professionals could create approximately 100,000 jobs for Canadians. These strategies could stop the often-mentioned brain drain by ensuring career prospects for Canada's bright young people.

The federal government must accept some responsibility for the consequences of its reductions in health transfers to the provinces and territories. The cuts may have been necessary at the time, but the federal government is now in a position to address some of the unforeseen consequences of the restructuring.

The Canadian Nurses Association, of which the Alberta Association of Registered Nurses is a member, in its pre-budget submission to this committee of the House of Commons made the following recommendations, which we support.

First, that the following amounts be allocated in the federal budget: $10 million for recruitment and retention strategies to ensure an adequate supply of registered nurses in the future. Specifically, we need to look at recruitment strategies in the whole area of recruiting more men to nursing. Less than 4% of registered nurses in this country are men. We need to look at strategies to recruit aboriginal people—we have very few aboriginal nurses—and to other groups from other multicultural groups.

We're suggesting $20 million for nursing research to improve patient care, health services delivery, and the quality of care. We need research to show the difference of different care and what that means in patient outcomes.

We're also suggesting $10 million to ensure that research findings are applied. This means the dissemination of research and assistance to put the research findings into practice.

• 1825

We see that this fund could be administered by Health Canada, on behalf of the Government of Canada, in consultation with the Canadian Nurses Association, on behalf of the nurses in Canada.

Thank you very much for your attention. I will be pleased to answer any questions.

The Chairman: Thank you very much, Ms. Way. As well, thank you for being very specific with your demands. I certainly appreciate that.

Mr. Christie, you're next, representing the Calgary and District Labour Council. Welcome.

Mr. Gordon M. Christie (Executive Secretary/Organizer, Calgary and District Labour Council): Thank you.

I seem be having one of those days when I don't know if I've been invited to the correct meeting. You'll see in my comments.

I'd like to give you a little history of why I'm here. Back in March I wrote to the Minister of Finance, shortly after they announced the first bank merger. I sent him a lovely letter on behalf of our members. He wrote back to me, telling me you'd be consulting with Canadians on the proposed bank merger. So I wrote back to him, saying next time he was in town consulting with Canadians on the bank merger, let us know, and we'd get together.

So here we are. We got invited to this meeting. I got a call two days ago, Thursday at 9.20 a.m., inviting me to come to a presentation here today.

I don't know if I'm on your agenda properly or not, but that's how I got here; 53 hours ago I got that call.

The Chairman: You're in the right place.

Mr. Gordon Christie: Okay.

I'd like to make a few comments, and I'd like to address these comments not just on behalf of the Calgary and District Labour Council, who I proudly work for, but also for the citizens of Calgary, particularly in the Bridgeland area, where I'm vice-president of our community association, one of the inner-city communities here in Calgary. I'd like to speak on behalf of those people about really what I see in federal budgets. I'll be directing some comments to bank mergers as well, because that's what I thought I was here to address.

I think what we have to always keep in mind as elected officials and as citizens is the public interest. I many times have seen in my life where elected officials have forgotten the public interest. I have seen that in the budget many times.

I was sad and ashamed last year when members in the House of Commons were so proud and happy that they were spending the least on public programs that they had since 1952, I believe it was. I think that was a sad moment for Canada. I think we always have to keep the public interest front and centre.

I find it very ironic that over the last year there's been a lot of talk about bank mergers, but I haven't heard a single word about nationalizing one of these banks, or breaking up some of these banks, things of that nature, which would really benefit the working people of Canada, not just people on Bay Street and people who have the shares in those banks, but average working Canadians. The Minister of Finance would actually be doing something that would benefit the working people of Calgary and the working people of Canada. I think that would be a very progressive move as we look into future budgets.

I think these banks should be forced. When I talk to the workers I represent, or when I talk to the citizens in my community, what do they say about banks? They talk about record profits, exorbitant fees, hefty rates, credit card rates that are just totally obscene, and the service charges they get every month—unless, of course, you have a couple of thousand dollars you can leave in your account; then you don't get service charges. But most of the workers I represent don't.

I guess what I'm really speaking about here today is the priorities of the government. I think that's what a budget is. It's a vision of priorities of where we should be going. What I don't see is fair taxes in this country. I've seen the tax burden really shift, and more dramatically here in Calgary than probably anywhere else in the country. We have what some people call the “Alberta advantage”, and what many of us call the “Alberta disadvantage”.

We've seen the rich get much richer in the city of Calgary. We've seen the numbers of homeless and the poverty grow and increase. We're at a situation where one in five working adults in this province are in poverty. One in six children are in poverty in this province.

That's a crime, and that's wrong. In one of the richest cities in one of the richest provinces in, quite honestly, the entire world, that is a crime against the people of this country.

• 1830

Our government provincially has absolutely no priorities for children. They won't even ratify the United Nations declaration on children let alone take some action on those kinds of things.

We've seen our poverty grow and grow. You hear about the booming economy, and how everything's just wonderful. Well, it may be for certain people, but poverty is growing each and every day. Our children are going to school hungry. Our classroom sizes are dramatically increasing.

When I first walked in, somebody was talking about people falling through the cracks. Well, let me tell you, the cracks here in Calgary are very wide for many people. That's sad and wrong in this society where there certainly is plenty to go around for everybody.

A lot of this comes back to the federal government, because what we have seen time and time again is that our local politicians, our school boards, say, oh, it's the provincial government. Then you hear the provincial government say, oh, it's the federal government; we're not getting those transfer payments and can't afford our hospitals, can't afford our health care, can't afford education of post-secondary. It's absolutely wrong.

I'll give you some of those effects, and how it's affected me, my family, my community and the workers I represent. This past Sunday they blew up our hospital. It had been 108 years in our community, two blocks from my home. They blew it up because they can't afford health care. The provincial government says they're not getting the money from Ottawa. Two days earlier, though, members of the College of Physicians and Surgeons were in town here to debate opening up a private hospital here in Calgary.

That is sad and that is wrong, absolutely wrong. We have seen time and time again how public health care in Canada far surpasses the private plans in the United States and other places.

What other things have they have done to my community? Well, they blew up the hospital, where there had been 3,000 wonderful jobs in a very clean environment. They closed the public library. The mayor says we don't have money for a library, so they closed the library in our community.

I went to a public forum a week ago tonight, where there were trustees running for election on October 19. Two of the three candidates were running on a platform of closing all the inner-city schools. This was way out on the eastern edge of the city, and they didn't know I was from an inner-city community. They were just going on as if it was the greatest thing that was ever going to happen to our city, closing all the schools.

So you have to realize where we're coming from. When our finance minister stands up and says, “This is just wonderful, this is the least spending we've done”, well, think about who you're representing. Are you representing the working people, who wonder where their next paycheque's coming from or where they're going to be in two weeks, or are you representing the finance minister and his $300 million? I think there are priorities.

In that next budget we should have job targets. We should have job creation. We should have programs to reduce the unemployment. Absolutely under no circumstances should we steal the UI fund. That money belongs to and came from the backs of working people. It should be used to increase the benefits.

I remember back when this government and the previous one, which was before these free trade agreements, told us all throughout the eighties and heading into 1989-1990 and the GST and free trade that UI wouldn't change; it wouldn't be like the American system; we'd still continue to have over 80% of our unemployed people accessing that fund, which they paid into for years.

And now what's happened? My understanding is that 35% or 36% of unemployed Canadians receive benefits. The other 65% receive absolutely nothing, after paying into that fund for years. Why is that not being used for the people who put it there for that use?

There another thing I'd like to comment on. We talk about these interest rates. A prior speaker in the last sitting here was talking about interest rates and the Bank of Canada. Well, we absolutely should take control of the Bank of Canada. It should have been the first priority of the government—and they were elected in 1993—to use it to benefit Canadians. The debt they love to talk about; well, that was created by the Mulroney government and our wonderful banks here in Canada.

I'd like to make a few other suggestions for our future budget. The Canada Pension Plan may need a little fixing, but it certainly doesn't need what many of the Alberta politicians are putting forward. You have to realize that many workers can't even afford an RRSP, and they're saying, well, let's get rid of this and let's have a super-RRSP or let's have this one and that.

I put it to you that the vast majority of the working people in the city of Calgary can't afford a single RRSP. The speaker I was referring to before was talking about a mortgage. I put it to you that most of the working people in Calgary can't even afford a mortgage. Forget about it. They're looking for places to rent. We have almost a zero vacancy rate here.

• 1835

I'd like to talk as well about a carbon tax. That's not a very popular thing in Alberta, but something that's near and dear to us is the environment, and we have to put people and the environment first and foremost.

We should implement immediately a minimum corporate tax rate. I understand there are more taxes owed by companies in Calgary than in any other city in Canada. I think it's sad that when we have people starving on the streets and we have homeless people, all that money is owed to the citizens of Canada.

Now, I have never been a Ronald Reagan fan, but even Reagan had a minimum corporate tax. That tells you a little bit.

I think this government's neglect for affirmative action programs is a crime. The decision a couple of weeks ago on the pay equity with regard to the Human Rights Tribunal was absolutely wrong. I think it's a crime against the workers of Canada, a vast majority of whom are women. I think that decision has to be immediately reversed, and we have to go forward in many more affirmative action programs. Just because we allowed discrimination to happen for the first 130 years in Canada it doesn't mean we should allow it to happen any more. We need pay equity legislation and we need other programs.

I am also appalled at this Alberta government. I know it doesn't directly affect you, but in many ways it does, because it creates downward pressure here. Up until eight days ago we had the lowest minimum wage in Canada. Here we are again, sitting in one of the richest cities, and workers were getting paid $5 an hour. This government also has many waivers where employers hire people in this province, thousands of people, below the minimum wage. Every week in Calgary 49,000 workers are forced to work unpaid overtime. This is our Alberta advantage—Alberta labour laws.

Then we can talk about the MLAs. They're going to give themselves a raise. They just voted on it a couple of days ago. I was really impressed with that one. It was these same MLAs who set the minimum wage.

Let's go back to 1977 and let's compare the minimum wage and MLA salaries in Alberta. If the workers making minimum wage got the same percentage of raise right now, they would be having a minimum wage in Alberta of over $9 an hour. It's a crime at $5.40.

My biggest concern these days is for young workers. We have the most highly educated and skilled workforce in the history of Canada and we have an unemployment rate among our youth of 16%. I think that's absolutely wrong.

I would like to take a couple of moments and focus on the banks. I certainly feel there is need for competition in the banks. Let's divide up some of those banks and let's nationalize some of those banks. For years here it's been a great agenda to privatize things, and we've seen how that has failed, so let's do something positive for a change. Let's stopped the deterioration of services and let's put some controls on credit card rates, on the fees and on the service charges. Let's protect those workers who work at the banks.

I understand it could be up to 30,000 workers. If look at past experiences, at how mergers have worked in the past, there could be 30,000 job losses if we allowed those two bank mergers to go ahead. Even if they say they're going through attrition, well, that's wrong. Just because somebody retires and somebody leaves that job, does that mean all of a sudden our community and our city and our neighbourhoods no longer need those jobs? That is absolutely wrong.

Banks never have been my favourite employer. They're very discriminatory toward women. These figures are a little bit dated, but 95% of employees are women and about 95% of management are men. I'm sure they have some rationale for that somewhere, but....

On the banks themselves, we have to have public hearings in every community across this country. I don't think it's right. I know the report came back a couple of weeks ago and gave the finance minister more powers, things of that nature, but in reality it's the people of Canada who matter. We have to have hearings in every single community, particularly in those communities that are going to lose the banks.

I talked about our hospital being blown up, and our schools threatened with closure. Well, not only did the hospital close but also the credit union across the street closed and the bank down the block closed. So it's already happened without the mergers.

I'd like to conclude by saying that the primary responsibility of the banks is to assist Canadians, to assist consumers, to assist communities—not their shareholders. That is sad and wrong, and they need to be regulated, because their past records are terrible.

• 1840

They can set record profits year after year, but let's think back ten years or so. They came running to us, as taxpayers, to bail them out, but I haven't seen it the other way around.

A little-known fact as well—and it's changed slightly this year—is that for years and years Alberta had the highest number of bankruptcies in Canada. It has a lot to do with the trends of our government here as well.

So I feel for those workers at the banks and I feel for the workers in our communities under the current structures. There are more important things to Canadians than the Minister of Finance standing up and bragging about how little he's putting into public programs.

Thank you for your time.

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

The next speaker will be Mr. Peter Rollason from Financial Executives Institute Canada. Welcome.

Mr. Peter Rollason (Chair, Government Affairs Committee, Financial Executives Institute Canada): Thank you very much, Mr. Chairman.

Financial Executives Institute Canada is a group of financial people in a variety of companies across the country. We've appeared before the committee in the past and would like to make our comments this year.

I understand our brief, which we submitted, hasn't gotten to everybody. I apologize for that. I wasn't aware of that and didn't bring extra copies with me. I'll try to highlight what was in that.

You have copies? Okay.

First of all, I think it's appropriate to say that it's taken awhile, but it's nice to see the deficit behind us. Now we're in a position to be able to tackle debt and other issues that are before the government. But there are some critical issues, so we can't rest on our laurels, obviously.

From our perspective, first, we don't believe that on an overall basis spending should be increased. There's a pot, if you like, of expenses there, and there are some important initiatives before the government, and we think they should be served, but at the expense of other initiatives. It's not to say that we would be sacrificing valuable services. It just may be that the time has come that some of those services are no longer required, or no longer required in the way they've been funded in the past. So it takes a bit of imagination.

We must not confuse the fact that we no longer have a deficit and the fact that we're in the clear. We are not. We have debt in excess of $600 billion, and annual servicing costs in the neighbourhood of $40 billion. That's money, coming out of all our pockets as taxpayers, that's going to serve the debt but could be used for a lot of other purposes, which I will get to in a moment.

So we're promoting a very vigorous debt reduction program so that funds can be made available in time for the types of services Canadians require.

It is also required because we have noticed in recent days, or in recent months, how Canada as a nation has become somewhat under attack with our currency and our lack of competitive stance in the world through our exports, and basically how we are structured.

It is important, if we want to protect our standard of living, that we be a competitive country vis-à-vis our partners around the world. There's no magic ratio, but we feel we should be targeting somewhere in the range of 40% to 45% as a debt-to-GDP ratio.

Taxes: none of us like taxes. They're a burden to all taxpayers. That's bad enough by itself, but to think that we are, in the broad sense, one of the most highly taxed nations in the world is just not sensible, not when we're trying to achieve a lot of things. Because high taxes ultimately inhibit initiative and growth.

We cannot afford to have a tax system that is not competitive with our key economic partners. Therefore, we must look at lowering tax rates, and try to do so by reducing both program spending as appropriate and debt servicing, and receive the benefits, hopefully, of increasing tax dollars just through the expanding economy, and the effect that has.

So we should be looking at indexing of tax brackets. We should be looking at the removal of surtaxes. We should be looking ultimately at lowering tax rates.

This is a complex subject and can't be dealt with in a cavalier way, but these are things we should keep in mind.

• 1845

I guess we're all familiar with what we read in the newspapers about the fact that the government is considering ways to redirect the EI excess contributions to general revenue. I think we all know that EI is a tax on workers and employers, and I think there's a perception out there of accountability of the government; in essence, that the EI is a quasi-fund and the funds will be available for future needs.

Since we have deemed that we've reached an excess contribution level, and that's the level necessary to provide for the next recession, we feel the government then should start to reduce the EI premiums. This is fair. I think it's honest. I don't think any other choice really meets these standards.

However, there's a reality here: There really isn't a fund. It's what I would describe as a so-called maximum notional reserve. The fact is, all EI funds are part of the government operations and are part of the annual deficit or surplus calculation.

We haven't thought it through thoroughly to think ahead to such time as perhaps we might have a recession again. What happens when that comes along? In a recession, the government's bottom line may well be put into a deficit position, because it's required to fund the EI benefit payments in excess of the contributions received. We have very short memories. That's happened in the past and will happen again at some point in time, and to have that situation arise isn't sensible. There has to be a better way, and I think we as Canadians have to spend a lot more time thinking through this whole EI surplus thing.

We've talked to you before about the RRSP limit. It's been frozen for a long while. It is a method of encouraging those Canadians who can afford it to provide for their own retirement and not rely on the government.

I guess to sum it up, the focus we would like to take is that of trying to do things that enhance the competitiveness of Canada versus its neighbours. Because if we can become more competitive, we are going to raise our standards of living and we are going to have a healthier economy. It doesn't take much to see that this ultimately means higher tax revenues from a bigger economy for the government and a lot more flexibility to handle a lot of necessary programs.

Mr. Chairman, thank you very much.

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

We will now hear from Ms. Bannerman.

Ms. Ginny Bannerman (President, Independent Insurance Brokers Association of Alberta): Thank you very much, Mr. Chairman, and thank you for the opportunity to address this committee today.

It is my privilege to be here today as president of the Independent Insurance Brokers Association of Alberta, representing our 4,000 members. Accompanying me are our president-elect, Steve Evanson; our executive director, Harold Baker; and our past president, Mike Saunders.

I am Ginny Bannerman, and I own and operate an independent insurance brokerage in the city of Calgary.

We are very pleased that this committee decided to stop here, and I'd like to welcome to you to what I think is a very beautiful city. Bienvenue.

Since arriving here this afternoon, Mike and I have been sitting at the table, taking a look at our notes. I'm sure you'll be very pleased to know that we have reduced our presentation to half of what it was initially. We're hoping you will think back on this favourably when making your decisions in the time to come.

The Chairman: It's a good strategy.

Ms. Ginny Bannerman: We could actually stop now if it would make a really big difference to you.

Some hon. members: Oh, oh.

Ms. Ginny Bannerman: We are here today to ask the Government of Canada to maintain its commitment to small business by ensuring that a fair marketplace exists for the insurance industry in Canada.

[Translation]

Mr. Mike Saunders (Past President, Independent Insurance Brokers Association of Alberta): I was asked to provide the translators with some work today, so I will speak French.

Insurance brokers work for their clients, who are consumers. We are independent businessmen. We are not employees of insurance companies. One of the important roles we perform is to buy insurance for our clients. We also determine the risk presented by clients and check on the coverage they want. We offer clients choice in the insurance market, help to settle claims, offer a form of loss prevention service and defend consumer interests, particularly in new product development. We also keep consumers informed about insurance.

• 1850

[English]

Ms. Ginny Bannerman: The MacKay task force had a mandate to provide the federal government with a blueprint to enhance job creation and economic growth in the financial services sector. As insurance brokers, we feel that this report has overlooked the important roles we play and the contributions we make to the economy. As a result, we feel that the conclusions of the report are biased in favour of the banks.

Independent brokers welcome beneficial changes in the financial services sector. Competition is normal, and it's a part of how we do business. We're not afraid of competition. In fact, the property and casualty insurance industry is by far the most competitive sector of Canada's financial services industry. Albertans and Canadians enjoy the benefits of one of the most solid, competitive and cost-effective property and casualty marketplaces in the entire world.

[Translation]

Mr. Mike Saunders: Consumers have a great deal of choice. They can arrange for home and automobile insurance in many different ways: in person, by telephone, by mail, by fax and through the Internet. They can use an independent broker like us, or a captive agent working for an insurance company. Here in Alberta, the consumer can choose from over 200 insurance companies.

[English]

Ms. Ginny Bannerman: What happens if the banks are allowed to sell insurance directly from their branches, and why are we so concerned? Well, to us, it means we will be forced to compete, head on, with the very institutions that provide us with the financial services upon which our survival depends. Because we're obliged now to provide banks with lienholder and mortgagee copies of our clients' policies, we are giving them all of the information they need to put us out of business. These banks will be marketing their insurance products to the same customers we depend on for our livelihood.

As small businesses, in order to obtain a loan or extension of credit we must share all our private and business financial information with our banks—and that includes our business plans. We're not aware of another industry where this unfair business practice exists.

[Translation]

Mr. Mike Saunders: Recently, one of our members attempted to obtain financing from the bank he had been using for a long time. The bank denied the loan on grounds that he would soon be in competition with the bank because they would be competing for the same clients. The bank felt uncomfortable lending him money because the competition could cut into their own revenue. This is not an isolated incident; it is happening across the country. This type of situation was not anticipated in the MacKay report.

[English]

Ms. Ginny Bannerman: The report does, however, suggest putting in place rules to prevent tied selling and the use of coercive sales techniques. We are concerned about the practicality of enforcing those rules and the usefulness of any penalties that would be imposed. For example, a $1,000 fine has a much greater impact on a small business like mine than it would on a larger corporation.

The Independent Insurance Brokers Association of Alberta believes the real issue is that marketplace dominance exerted by the banks will be at the expense of small businesses, and to the detriment of insurance consumers.

In conclusion, our association is opposed to the positions contained in the task force report, as banks would be given unfair competitive advantages that will put at risk the future of hundreds of small businesses, and ultimately thousands of jobs.

[Translation]

Mr. Mike Saunders: To conclude, our association is opposed to the positions set out in the task force report, which would place the banks in a position of unfair competition, endanger the existence of hundreds of small businesses and, ultimately, put thousands of jobs at risk.

[English]

Ms. Ginny Bannerman: We are fighting for our survival.

[Translation]

Mr. Mike Saunders: We are fighting for our survival.

[English]

Ms. Ginny Bannerman: The government's policy has been to support small business.

[Translation]

Mr. Mike Saunders: The government's policy has always been to support small business.

[English]

Ms. Ginny Bannerman: We would ask that you reinforce this policy and that you prevent the devastating impact large, centralized banks could have on consumers, small insurance brokers, and local economies.

• 1855

[Translation]

Mr. Mike Saunders: We ask you to reinforce it and prevent the disastrous impact that the large centralized banks could have on consumers, insurance companies and local economies.

Ms. Ginny Bannerman: We thank you for giving us the opportunity to explain our concerns to you.

[English]

Mr. Mike Saunders: Thanks for letting us be here to express our concerns.

The Chairman: That was a neat switch there, at the end.

Now we'll have questions and answers, beginning with Mr. Harris, followed by Mr. Desrochers and then Mr. Riis.

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

Thank you to the presenters. I enjoyed your presentations. I have some questions for all four organizations.

Mr. Christie, I want to address some of the comments you made earlier. In your presentation, you called for the government to provide increased funding for programs, for a massive change in the government's attitude toward programs for people who were in the social safety net and who had to rely on government programs for their survival.

You know, I come from the province of British Columbia, and we have so many programs in that province we have programs to support programs. In fact, the provincial government, since 1991, I guess, or 1992, has been doing pretty well everything you have talked about today.

There is one little difference, though, between the province of Alberta and the province of British Columbia, where I live. The fact is, while the province of Alberta has pretty well a balanced budget and is making some big gains on their debt, in British Columbia, where we've had this utopia of programs that you've been talking about today, we have a massive debt that is almost uncontrollable. We're expecting a deficit this year of approximately $1 billion. We have massive unemployment in our province.

As a matter of fact, I come from Prince George, a city that has been proud of the fact that we've always had a lot of jobs and a very vibrant community. We have an unemployment rate of about 17% right now.

Our province is in the midst of a very deep and prolonged recession. As a matter of fact, we are losing all our good, skilled tradespeople to the province of Alberta, because there are lots of jobs over here.

In short, I have trouble rationalizing your call for the Province of Alberta and the federal government to enhance all these programs you're talking about when right next door in B.C., where we've had all this, our province is in an economic disaster. So I don't know how you rationalize that what you're suggesting is going to fix everything.

By the way, we also have a huge number of people, probably as many, or more, living in poverty in British Columbia now. We have some incredible social programs in spite of all the money that's been spent in programs within the social safety net.

Mr. Gordon Christie: I'd certainly like to respond to that.

Welcome to the home of user fees.

Mr. Dick Harris: We have user fees in B.C. as well.

Mr. Gordon Christie: Okay, but just let me finish.

We have these things called health care premiums here, and we also have the longest waiting list in Canada, of any province, if you want to get major surgery or minor surgery, or any other form of specialized treatment in this country.

Then there is our class sizes. To give you an example, at the Southern Alberta Institute of Technology here in Calgary, the class size went from an average of 12 per administrator to 20 over the last four years. That's quite a drastic increase.

If you look at our junior highs and our high schools here, you'll see the class size is drastically increasing.

I put it to you that it's a crime. We here in Alberta, in 1990 dollars, put less into education than any other province in Canada. And it is wrong.

Let's go back to the health care cuts. Prior to 1992...because Don Getty did all kinds of health care cuts long before Klein got famous for it. When we look at 1992, the only province in Canada that paid less per person into health care was Newfoundland. Then you take over 25% out of our budget? That's a crime, that's sad, and that's wrong, and that's why our people are dying. That's why our people are unhealthy. And that is wrong, absolutely.

• 1900

That's why we have governments. We don't have governments to take care of banks and multinational corporations. We have governments to take care of the people.

Mr. Dick Harris: My point, Mr. Christie, is that all the things you've talked about today the Clark government in B.C. has been doing over the last six or seven years, since they've been in office.

Mr. Gordon Christie: We have two neighbours, you know.

Mr. Dick Harris: Despite all that—

Mr. Gordon Christie: We have actually three neighbours.

Mr. Dick Harris: —we have the massive unemployment, the poverty, the homelessness. Despite all the money that's been...we still have that.

Mr. Gordon Christie: People go there for the warm weather when they're freezing out here, because they can't find a home in Calgary.

Remember the 1935 On to Ottawa Trek?

Mr. Dick Harris: Didn't quite make those years.

Thank you, Mr. Christie.

Mr. Gordon Christie: Thank you.

Mr. Dick Harris: Moving on, I want to talk to Mr. Rollason of Financial Executives Institute Canada.

I appreciated your comments on the EI surplus, or the so-called surplus. I think it's important that we as the finance committee hear from someone outside the government that in fact there isn't a $20-billion sack of money sitting in some basement in Ottawa but simply an IOU, because the money, as we know, is in the Consolidated Revenue Fund.

Now, the government has operated under guidelines, I guess set down by the EI commission, that say you can retain a certain amount for a rainy day fund for the sustainability of the fund, and anything over that must be returned to the employers/employees in the way of EI premium reductions.

Of course, the buzz in the news these days is that the government is trying to, or planning to, or perhaps they're going to, introduce legislation to change that decision so that they can put their hands on the extra $6 billion sitting there right now. As more Canadians find out about it, they're forming opinions, like the one you presented today. I think you appropriately described it as a payroll tax on both employers and employees, and that's rightly what it is.

If you had a message to give to this committee—and I think I'm looking for you to reinforce your message once again—as to how the government should handle that surplus portion above the allotted reserve, what would it be? Can you just give us that message again so that all of us here can get a good handle on it and make sure it's in our report?

Mr. Peter Rollason: First of all, I think it's a very complex issue, and I think it's bigger than just the EI fund itself. I think Canadians are expecting that their taxes should be coming down in some fashion, at some time. Taxes in fact have been going up over the years, and that impacts everyone at every income level in Canada.

The EI tax is somewhat unique in that it is levied on workers and their employers. I know it's difficult to say, okay, we want tax reductions, and, oh, by the way, we also want the EI rate to be reduced. I think that's a difficult thing to measure. But I think we should address, in isolation, first of all, the concept of EI and the perception that in fact it is a separate fund. I've been contributing for years, and subject to limits on benefits, I expect that the money is there. If the risk could be run that in tough times the money isn't there, then where do we stand?

Part of the problem, I guess—and as an accountant, I'll throw out generally accepted accounting in terms of financial statement presentation—is that in recent years, the government has been forced to include the surplus or the deficit in its operating income. That in itself is a little bit of a problem, because it's not a fund.

A rhetorical question I'd ask at this point is whether in fact it should be a separate fund, and I'll leave that with you. Because then you would manage the fund based on the actuarial requirements of what you would expect the fund would need. The premiums would float up and down, as appropriate, and would be levied on those people who ultimately would benefit from it. But I don't think you can do it in isolation from considering the general income tax levels as well.

• 1905

I understand where the government's coming from. I think they're pushing the wrong button in this particular case, and are going to probably offend a lot of people who think they have an interest in those funds.

Mr. Dick Harris: All right. Thank you.

Ms. Bannerman, I was quite interested in your comments. Incidentally, I personally support your position on the banks and the insurance business.

But we had an interesting thing happen this morning. Two representatives from Hi-Alta Capital were here, and it looks as though members of their organizations are independent brokers as well, or independent insurance people. In fact, they led us to believe that their group, even though they had some concerns, was not resisting the banks' entry into the retailing of insurance through the bank branches.

There's obviously a difference of opinion right here in this province. Do you have any comments on that?

Ms. Ginny Bannerman: Would you like to comment, Harold?

We've paid Harold's airfare from Edmonton, so we'll get use out of him.

Mr. Dick Harris: Thank you.

Mr. Harold Baker (Executive Director, Independent Insurance Brokers Association of Alberta): That's a good point. In every marketplace you will always have diverging opinions, and there will be some who will believe they can succeed in a changed marketplace.

We're not sitting here saying that we have 100%, total unanimity in and amongst our members. Clearly there are some brokers who feel they can compete.

In talking to Hi-Alta today, I think they feel the matter is a fait accompli, and the decision has been made. Now they're looking to the next step. They want to proceed to determine how they can compete in a marketplace that has banks retailing.

We're saying we don't believe the fight is over. We believe the issue is still on the table, and we believe the marketplace would be better served if it was left as it is today, the way it was developed in 1992.

Mr. Dick Harris: Thank you very much.

Mr. Chairman, I have one small question left, if I may, to Mr. Christie again.

You know, Mr. Christie, I acknowledge that there are a lot of people who are in the social safety net, and the circumstances may dictate that they will always be there. And we have a social responsibility to ensure that they have the basics of life—food, shelter, health care, etc. No one denies that. There are also a number of people in the social safety net who, if given the opportunity, would be out of there and back in the workforce.

I have a question for you. I ask this question because I drive to work past a social services office every morning, and there is always about 20 or 30 people outside the door. The interesting thing is, they all appear to be under the age of 35 and in relatively good health. Most of them look as though they would be pretty able to work if given a chance.

I know—or I can tell—you certainly wouldn't support a form of workfare. That's been tried with limited success. But would you support a mandatory education/training program for someone who is on social assistance as a condition of continuing to receive social assistance? It would be education and training to the extent that over a period of time they would be better prepared to get a good-paying job.

Would you support a program like that?

Mr. Gordon Christie: I have a couple comments about that. In the organization I represent, one of the things we always strive for is increased public programs in education for our working people. But I find your comments kind of ironic. You talked about workfare. Well, workfare has a 2% success rate and a 98% failure rate, but we don't talk about that.

That's going back to the original one, way back, in New York—

Mr. Dick Harris: No, I acknowledge—

Mr. Gordon Christie: But let's look at it. If you're talking about the UI program and you're talking about other programs, such as welfare, we have about a 2% to 3% abuse rate and a 97% success rate. I find it really ironic that you like to talk about the 2% or 3% of failures and not the success of our social program.

• 1910

Yes, there probably are about 2% of those people who are able-bodied individuals collecting social assistance, who shouldn't be. The other 98% are struggling because not only are minimum wages so poor here, but the rates are based on the minimum wage. So it doesn't take a lot to figure it out.

Mr. Dick Harris: My question again was whether you would support a program, for those who were able to participate, that would demand they enter a mandatory education and training program to better prepare themselves for employment as a condition of receiving continued social assistance. Would you support that?

Mr. Gordon Christie: I guess I have a problem with the words “mandatory” and “demand”.

Mr. Dick Harris: Well, in other words, if you—

Mr. Gordon Christie: I think you have to look at each individual and the circumstances that are involved.

Mr. Dick Harris: Unless you had some circumstances that would forbid you from being in there such as—well whatever the circumstances were—you would have to—

Mr. Gordon Christie: Let me comment on that.

As long as these services are coming from general revenues and not out of the UI fund.... Do you remember how we took the $5 billion years ago and stole that from the UI fund to put into this training and this little labour force—labour development—board, which the Alberta government refuses to participate in? We don't have those in Alberta. They take the money, but we don't participate. We as a labour body are not allowed to participate; nobody does.

So if you're taking moneys out of the UI fund for that, I think it's wrong. I think the training and education of the Canadian workforce should come from general revenues, paid for by all, based on ability to pay.

Mr. Dick Harris: So you wouldn't support a mandatory...?

Mr. Gordon Christie: Not under your circumstances, no.

Mr. Dick Harris: Thank you.

[Translation]

The Chairman: Mr. Desrochers.

Mr. Odina Desrochers: I will begin by thanking you for having come here today to make your comments. We are being pampered. Thanks to the flexibility of our Chairman, we are able to cover two topics at the same time, namely the pre-budget consultations and, of course, everything surrounding the future of Canadian financial services.

My first question is for Mr. Christie. You presented a long list of things that were not going the way you wanted them to here in Alberta, and of the foregone revenue in various sectors. What do you think about the recent social contract signed by the provincial premiers here in Saskatoon? Do you feel that the federal government should return to the provinces the money they took away when they cut the transfer payments? Or would you prefer that the federal government introduce a new program to help with the current situation in the sectors you are defending?

[English]

Mr. Gordon Christie: I have to admit I'm not totally 100% up to date on the social contract that was signed. But I can make a general comment on that.

What I've seen as a resident of Alberta...I get very scared without federal controls and cash transfer payments with strings attached. I'll go back to the situation here in Alberta a couple of years ago. We're the kings here of private health care. I'll put to you that there's more private health care in Calgary than anywhere else in Canada. And you know, the past federal government had to impose penalties—I may be wrong in the figure, but I think it was $400,000 a week—against the Alberta government because we refused to go through with the programs we should be providing to our citizens and things of that nature.

I may be a little off on the figures, but quite honestly, I have to say the Alberta government's goals and objectives aren't to provide health care and education. They're not the priorities in this province. It's sad, and I don't like to say that about the province I am proud to live in. I was born and raised in Nova Scotia, but my working life has been in Alberta. It's sad—the programs here.

When I moved to Alberta, we had the highest minimum wage. We now have the lowest, or just had the lowest.

In my work, we had the highest health and safety standards. What I really noticed when I became a representative of the working people is that throughout the standards—whether they were working standards or all the different standards of provincial governments—during the seventies and eighties, Ontario, Alberta, and British Columbia had the highest of all the provinces. And I put to you now, Alberta in most categories is eighth, ninth, or tenth. As I said, it being one of the richest provinces, I think that's a shame. It really and truly is.

• 1915

[Translation]

Mr. Odina Desrochers: Am I to understand from your comments that you believe the situation is attributable solely to the budget cuts made by the Government of Alberta? Is the federal government not partly responsible, given that in every province of Canada there was, at a certain point, a serious revenue shortfall in health, education and social services?

[English]

Mr. Gordon Christie: Excuse me, I can't speak French. I'll learn.

No, you can't give all the responsibility to one government. Quite honestly, as I said, the Alberta government's priorities weren't for people, but a lot of the responsibility has to come back to the Ottawa government—the transfer payments. I look at the legislation in the Mulroney government—Michael Wilson still has things being cut from 10 years ago. So to say it was all Ralph Klein's agenda is not true at all.

We look at the funding in health care as an example. I believe it used to be something like 50-50, and now it's federally down to about 25% or something of that nature. I know it's gone down drastically. I may be off in those figures a bit.

No, we can't give Ralph all the credit for the poverty and the mistreatment of human beings here. Certainly a lot of it is because of the transfer payments from the federal government.

A lot of those decisions are out of the hands of the provincial governments. They don't have the abilities to do some of the things the federal government does. They can't control the Bank of Canada. They can't control the interest rate. I said all along, through the seventies and eighties, when Chrétien was first elected, the first thing he had to do was take control of the Bank of Canada and get control of Canada again, get back to the citizens of Canada. I didn't see that happen. He's still got a chance to do it, though.

[Translation]

Mr. Odina Desrochers: Ms. Way, you were saying that the federal government should now restore transfer payments to their previous levels. Would you like to see all the amounts that were cut restored in their entirety or would you prefer to start this year with a new agreement between Canada and the provinces?

[English]

Ms. Lorraine Way: First of all, I don't think I said it should be restored to previous levels. What I talked about is how quickly the changes—the reductions and the restructuring—occurred, and how registered nurses bore the brunt of that. We welcomed some of the driving forces behind why we needed the change. Yes, we recognize the fiscal issues, but we also welcomed moving from...and those fiscal reasons helped push us to a health care system where we do support a move to a community-based service.

So whether it should be restored to the previous levels, I'm not sure. I think HEAL provided some recommendations. They talked about the baseline—the floor. Unfortunately, that floor has become the target now rather than the floor.

[Translation]

Mr. Odina Desrochers: I will now return to the MacKay report. Your brief seems to indicate that you are generally opposed to the proposals of the report. You say, for example, that the banks have no business selling insurance and you are opposed to bank mergers.

What would you say to changing the regulations and allowing brokers to offer all financial services, with all the privileges currently conferred only on banks? In other words, what would you say to establishing equity for everyone working in the financial sector? Could this help you to get used to the idea?

[English]

Mr. Harold Baker: It would be fine if we had the financial resources of the banks to start up a financial institution and to offer the financial products. We would assume, then, that the banks would help us do that, although I believe it would be with great reluctance.

We would accept the challenge. We're not afraid of the challenge. You can tear down the barriers. It's whether we have the capacity as individual business people, small independent business people, to be able to provide those services. Where do we get them from? How do we come up with them? Where do we go to find the financing to be able to put in place the resources to put in a bank? Can we buy a bank? Can we buy the credit union? I hear the treasury branch is for sale in Alberta. I'm not sure we can compete. I don't believe those are viable options for us.

• 1920

Mr. Mike Saunders: To add a comment to that, I don't believe that if you took the net assets of the entire insurance community in Canada and lumped them all together we would come anywhere close to the smallest of the banks in Canada as far as assets go. I don't believe you could do that with all the assets of the insurance companies either.

We're small, independent businessmen. In my office, with my partner, Steve, there are five of us. I can't compete against the mammoth CIBC-TD or Royal Bank of Canada-Bank of Montreal mergers. I just don't have the capital to compete in that kind of a venue.

[Translation]

Mr. Odina Desrochers: So what should the federal government do to protect your businesses if the bank mergers are approved, and in particular if the banks are allowed to sell insurance?

Mr. Mike Saunders: I was involved in writing the 1992 regulations and I believed at the time that they stated clearly that the banks were not authorized to sell insurance. Now, a very different interpretation is being given to these regulations.

[English]

I don't believe you can create regulations or laws and put them in place that will not over time be pushed to the maximum edge of the envelope by the banks to their own benefit. I watched those things happen. I sat through all of the committee hearings and all of the testimony from 1990 to 1992—it went through to 1996 actually—and I've seen those regulations perverted, if you will, to the benefit of the banks.

At the time they were done, I thought they were very clear in the prohibitions against what they were to do. Those prohibitions are like a sieve: water runs right through them.

[Translation]

Mr. Odina Desrochers: Mr. Saunders, you are no doubt aware that in Quebec, Bill 188 has gone some way towards correcting the situation, and that it allows the Mouvement des caisses Desjardins to retail insurance. Do you find this acceptable or would you prefer to see the federal government go further and pass similar legislation?

[English]

Mr. Mike Saunders: I think I will let our current president answer that.

Mr. Harold Baker: If we look at the history in Quebec from a broker's perspective—that is the way we're going to look at it—we saw a reduction in 10 years of more than 75% of the independent broker network in Quebec with the allowance of the credit unions to retail insurance. We saw a loss of more than 6,000 or 7,000 jobs in Quebec when the government allowed them to retail insurance.

Mr. Mike Saunders: Oddly enough, le groupe Desjardins is the only insurance company in Canada that I know of that has its own association of victims of le groupe Desjardins. No other insurance company in Canada has that privilege. It demonstrates to me that this is not the way to go.

Mr. Harold Baker: I think Quebec shows us that allowing banks to retail is not going to do what the MacKay task force believes it's going to do in terms of creating jobs or small business. We see it doing quite the opposite. The evidence is there. It has been proven over the last ten years.

Ms. Ginny Bannerman: I could add to that. I believe that in the late 1980s, when le groupe Desjardins entered the marketplace, their rates were quite a lot lower than those of other companies in the marketplace, and they were held artificially low for a period of time until, as Harold stated, small business was out of business.

Those businesses have not returned to the community. Once they're gone, they're gone.

Their rates are now above the median. If those are the resources that le groupe Desjardins have, then certainly I think the big banks have even further resources.

[Translation]

Mr. Odina Desrochers: Thank you, Mr. Chairman.

The Chairman: Mr. Riis.

• 1925

[English]

Mr. Nelson Riis: I'm tempted to respond to some of the comments made by my friend, Mr. Harris. Suffice it to simply say that as a result of the serious curtailment of transfers from the federal government to provincial governments, there were few provincial governments that actually infilled to enable the funding for health care and education to be maintained at past levels. British Columbia was one of the provinces and I think Quebec was one of the provinces, but the other provinces didn't do that. We've seen the erosion of health care and post-secondary education as a general result. I won't get into that discussion, however.

I would simply say this to Mr. Christie. When you refer to the minimum wage in this province and the working people you represent, what percentage of the workforce, in your judgment, would rely on an income of $5 an hour?

Mr. Gordon Christie: The actual number of people working at minimum wage isn't that great. I believe the last figure was around 20,000, but the reality of it is that there are people in this province who work for less than the minimum wage. This government loves to give variances to employers for things of that nature.

But the biggest problem with this is that our minimum wages are set up to keep people from living and working in poverty. Flipped around, it's just the opposite. So until October 1, with our $5 minimum wage, which was the lowest, the biggest problem was that it created downward pressure on other wages. So employers can make themselves think they're doing the world a favour if there's a minuscule $5 minimum wage and they're paying $5.25 or $5.50. They think very proudly that they're paying 10% more than the minimum wage when in reality it should have been $7.60, $7.70, or $7.80 an hour, which was the cut-off line in the city of Calgary. At least in 1997, it was $7.62, and I believe it's going to $7.80 this year. That's somebody working 44 hours a week.

The other problem we had with the people working at minimum wage is that they're mostly working in part-time positions with no benefits in any way, shape, or form. They don't get health care or any pension or any of those kinds of contributions paid for by the employer. In reality, they're going from a part-time job where they work six or seven hours here, and then maybe another fifteen hours over there, and then they're stopping at the food bank on their way home. The use of the food banks in Alberta is phenomenal.

So if you compound this, you end up with obviously both parents working many, many hours. I put to you that many workers in Alberta work far more hours than they should have to.

Mr. Nelson Riis: It's just hard to conjure up an image of a family relying on an income of $5 or $6 an hour to raise any kind of a family or having any kind of a life.

This leads perhaps to my next question for Peter and his comment about the EI system. Can you tell me if I'm wrong? You've been in this business a long time. I know that if you took out fire insurance premiums and then your house burned down, or partly burned down, you would then file a claim and presumably be reimbursed.

I realize the insurance fund is set up in a different way, but it's basically a fund. I certainly think people's minds see it that way. Mr. Christie tells us that some 60% of people who pay into the EI fund are unable to collect benefits when they lose their jobs because of the provisions of the act. Is there a difference in those two scenarios?

Mr. Peter Rollason: I think so. I think we're talking a little bit about apples and oranges. I think your ability to collect from the fund in the past has not been related to the amount of money in the fund, but whatever the rules of the game are—

Mr. Nelson Riis: I think it's primarily for the premium payers. Say you pay a premium for a service. In this case, it's insurance against job loss, yet the vast majority of people who lose their jobs don't collect after paying into this fund.

Mr. Peter Rollason: Well, I don't know that. What I understand is that in many cases, initially, you have the ability to collect, but the changing rules of the game have made it such that this ability has been tightened up to a certain degree and then you can't collect for as long as you used to.

Usually, when you have insurance on your house and it burns down, you've already determined what the prescribed value of the house is. If you haven't done that, you're in trouble.

I don't think that exactly the same rules apply with EI. It's much harder to understand.

• 1930

Mr. Nelson Riis: Ms. Way, we appreciate your very succinct commentary on the situation for the nursing profession and on the rather alarming figures in terms of the shortages that are around the corner. I guess it gives some incentive to a lot of people to consider the profession of nursing once again, as well as your very succinct and, I suspect, very modest request for the committee. I'll just leave it at that. It was an excellent presentation.

To the insurance folks who are here, you are confirming what others in your profession have been telling us along the way. As my friend has indicated, there are some exceptions here in Calgary, and they're a bit puzzling. I think they just assumed it was a fait accompli, and in light of that they figured they might as well make the best of it. But it's not a fait accompli, as your brief suggests—and it's a very thoughtful brief at that.

I don't have anything to say other than that I support the point you make. I can't argue against the point in terms of the special privileges the bank would have to compete with you folks, and to therefore compete unfairly. But I'd like you to comment on where this is leading. As we know, banks now do very little banking. Most of the things that banks do are not traditional banking as we would normally define it. They're into various kinds of insurance and so on already, as you know. Now they also want to get into insurance directly in the branches, as well as auto leasing, which presumably means financing leased fleets and so on.

Where will this end? Will this lead next to the banks getting into running funeral parlours or pizza parlours or video stores? Should we care? Already the banks have moved far beyond banking. They're now going into your business, and into auto leasing if they get their way. Does this just continue to lead into education then? Why not get banks into management training? Why not get banks into all sorts of activities that relate to a lot of the work that they do now?

Mr. Mike Saunders: They've reduced it down to the idea that they should own supermarkets; they've brought it down to that level. I guess the concern we have as independent business people is that we currently have four of five major institutions—with there to be three major institutions given the proposed mergers—that will control over 80% of the financial transactions in this country. By collapsing the fourth pillar, that being insurance, and by allowing them to basically put many of us out of business, we turn over to them the other 20%. I think it is a scary thing when you can have three major institutions controlling that much of the financial services sector of any country. I don't think the concentration is that high in any other country in the world.

Mr. Nelson Riis: Thank you.

The Chairman: The same thing is true when you look at the concentration of life insurance companies. In his report, I think MacKay says the top five life insurance companies represent 59.1%, and banks are at 58.1% or something like that. Nevertheless, they're pretty concentrated industries. Do you think we as a finance committee ought to be looking at all industries in the financial services sector in order to find out who is in fact the most concentrated? Once we find out, what do you think we should be doing about it?

Mr. Harold Baker: I'm not so sure you want to look at what the concentration is in terms of dominance. All businesses want to be dominant in the marketplace. They all want to have their fair share. I think what you have to look at is everything that goes downstream. As you have the dominance of the bank, what happens to those things that are happening downstream? Look at what will happen to property and casualty insurance—where we are coming from—if they move in the direction in which they have publicly stated they want to move. The Canadian Imperial Bank of Commerce has publicly stated that it wants 30% of the property and casualty business. If you give CIBC 30% and you give the Royal Bank 30% and you give somebody else 30%, all of a sudden you have a dominated marketplace.

The question we had a little earlier was what we need to do to survive if some of these things start to happen. That's what you have to look at. You have to look at it from the bottom up. I think you need to look at the bottom of the stream or at the bottom end of the food chain—and that's really where we are in many instances, because we're the distributor for the product—to see what's going to happen to us, what we can do to strengthen our market, our business, and who we are. We are small business people and we represent small business people. That's where the concentration should be and where your efforts should be.

The Chairman: Some people suggest you would lose up to 20,000 jobs. Is that correct?

• 1935

Mr. Harold Baker: In their study the Insurance Bureau of Canada has indicated that they feel there's a possible loss of 20,000 jobs in the broker community across this country. If we look at what's happened in Quebec, we would suggest that there's a distinct possibility of it being a lot higher.

The Chairman: If you're not doing that, who would be doing that business?

Mr. Harold Baker: The banks would suggest that they should be doing the business.

The Chairman: Are you telling me that if they're doing that business of still carrying on with customers...they would have to have customers, right? Obviously to do business you need a customer.

Mr. Harold Baker: Right.

The Chairman: So some people would suggest that they perhaps would have a more efficient system of distribution.

Mr. Mike Saunders: My comment on that is if we look at the case of Desjardins in Quebec, it is really not the case in that after a certain period of having much lower rates than the marketplace to capture a significant chunk of it, their rates are now slightly higher than the medium.

Insurance does not funnel down sometimes like other commodities in that it is your best guess at how much money you're going to lose or pay out in claims in any one year. So your loss experience is based on the demography of your clients. To say they run a more efficient system and a more cost-effective system is a doubtable one.

All it does is move the concentration of jobs into regional areas. Alberta would stand to suffer substantial job losses as it became a telephone commodity out of another province, possibly.

The Chairman: If you were to say that this is the case, then some people may argue that if they're not efficient and not cost-effective they probably wouldn't last in the business very long.

Mr. Mike Saunders: That's a valid point. However, in the interim, between the time they get into business and have artificially low rates and the time it takes them to put most of us out of business, they can survive that. Once we're all gone, does efficiency matter? You've captured 30% of the marketplace. There are only three major players doing it. You've eliminated most of your competition in the small business world. I don't know about the rest of you, but I can't stand to lose money for five consecutive years and still stay in business.

The Chairman: Now the CIBC is in the insurance business, right?

Ms. Ginny Bannerman: You actually mentioned the CIBC. Dwight Lacey recently announced that their operating expenses for CIBC insurance were 37%, I believe. The industry average is less than 30%, so it's a case where centralizing has not generated lower costs for the CIBC. As Mike has said, they have greater resources than we do. We couldn't add in that case 8 or 9 points of expenses or take 8 or 9 points off our bottom lines and survive. They have deeper pockets in the long term than any of us do.

I think as a result they have moved their telemarketing into the United States now and have contracted with an American company.

The Chairman: They do it through subsidiaries, is that correct?

Mr. David Anderson: CIBC General.

The Chairman: I'm trying to understand this. Why aren't they really lowering their prices now with the subsidiary? Why aren't they driving it to the ground so that...if in fact what you're saying is correct?

Part of the banks' corporate strategy would be, we shall destroy independent brokers and thereafter we will control the entire market. If that's the case, then why aren't they doing it now with subsidiaries, or are they doing it?

Mr. Harold Baker: Actually they did that when they first came into the marketplace in Ontario and then into Alberta and now the Bank of Nova Scotia here in Alberta. They came in at extremely competitive prices and they captured a fair amount of the money, but they didn't understand the insurance marketplace. With insurance you're covering somebody now for something that's going to happen down the way and you have to keep your profits available for you so that when those eventualities hit you, you can cover your expenses.

So all of a sudden when they sat down and looked at their bottom line, they determined that they undersold the market. They didn't understand the market and they didn't understand their risk, so they went back and asked the government for a further rate increase. They, the Canadian Imperial Bank of Commerce, have gone back three times and have now applied for the fourth time for a rate increase because they didn't understand the insurance marketplace at all. They thought it was all based on bottom-line price.

The insurance marketplace is far more complicated and the end product of insurance is far more complicated than a price. We add far more value to that than a price.

• 1940

The Chairman: But doesn't that give you a competitive advantage over banks? You understand it well, I gather.

Mr. Harold Baker: As we indicated in our opening comments, we think what happens is that you can drive the price. And if they all get into the business and they're all in the business driving the price, we can't compete and the eventuality is there's less choice.

In Alberta, as an example, for rating of automobile insurance you have to be able to justify your rates and justify your rate increases and all of the discounts you get to try to have a reasonable marketplace with reasonable prices. Are the banks prepared to do that? They didn't even want to come to the Alberta auto rating board. They didn't want to have to appear in front of the automobile rating board here in Alberta when they originally got into our market because they thought, “We're a federal institution”.

The Chairman: Let me understand something here. I hear many arguments and many of them are valid ones. The first one is I think corporate concentration, too much power in the hands of a few. That's key, right? Then there is the jobs argument. But in terms of the jobs argument per se, I don't want to sound cold about it, but we've seen downsizing, we've seen restructuring in every part of the economy. The corporate concentration argument and corporate power I think is the argument to really go on, because you don't want this entity to have so much power. On the jobs issue, if I went to my local bank and I needed auto insurance or home insurance and it was a pretty simple, straightforward—although I'm sure you don't think it's straightforward because there are all sorts of things you have to deal with. But if it's your standard form, I walk in, probably like I do with my broker now anyway, I sign, I pay my whatever, and that's the only function that takes place, provided the individual who is selling that policy to me is qualified, right? There's a body that you have to respond to, right?

Mr. Mike Saunders: In Alberta there's an Alberta insurance council that regulates the licensing of brokers and agents. If they're employees of a company, they're not required to be licensed according to the provisions we have in Alberta right now.

The Chairman: That's interesting.

Mr. Mike Saunders: The company ultimately is responsible for the conduct of its employees that way, the insurer. That does create a different playing field in and of itself.

You also talked about job creation, and I do agree with you. It does concentrate jobs in a specific area. Being from a community of 7,000 people, if I want a loan from the Bank of Montreal right now I have to drive 35 miles to the next major city to get it. By putting me out of business and the next broker out of business in my community, where will my clients have to go to get insurance? They can't get a loan at a bank without driving 35 miles. I'm not sure there will be anybody there to handle the insurance, because they're going to concentrate those jobs in other areas. We're concerned about the damage it will do to small communities across Canada. That's where the job losses will be.

The Chairman: Could I ask you a question in reference to branches? From an economic perspective and a financial perspective, do you think a branch has a better chance to survive if in fact that branch has more products to sell? We're all concerned about branches closing.

Mr. Mike Saunders: It's a question that, not being an economist, I couldn't answer. Maybe Harold has a comment on it.

Mr. Harold Baker: Why are they closing branches now? If we look at rural Alberta—and I'll use southern Alberta as an example, in the area of Drumheller, which has been hit by three branches leaving—what they have left.... Did they have more financial products to sell? No. I think the bottom line was that they felt they could sell their products through the Internet, they could sell their products through ATMs, and they could sell them through 1-800 centres. They're selling their insurance products now through 1-800 centres. So I don't think the issue for the bank is staying in the community and having a presence in the community based on the amount of products they sell.

• 1945

It's still the bottom line. Is that branch going to be operationally effective and is it going to bring in dollars? Quite clearly, if you close up and can do all of your business through some other facility and in some other manner, you're going to close up. That's what they've been doing.

From our point of view, the bank is now in our business. The bank is marketing insurance. What we would like the government to do now is not necessarily make the next jump to retail, but allow this thing to settle and see what happens. We'll continue to compete. We're trying to compete, but it's very difficult for us to compete in some situations.

Alberta is a little different from any other province. We don't have government insurance here. It's a free enterprise system here. We don't have high volumes and mandatory insurance. We have very minimum requirements in terms of mandatory insurance, so it's a very different province and a very competitive province. Let them compete as they are now. Judge it in four, five or six years down the road to see what's happened.

The Chairman: As a committee we're very interested in the public interest of Canadians, of course. That's what we're trying to assess here. MacKay must have a reason why he's saying that by 2002 they should be allowed to retail insurance and lease light vehicles. What's the benefit to people for banks to be in this business?

Mr. Mike Saunders: I think the benefit to the banks is, as you say, more products—

The Chairman: It's the people I'm talking about. What's the benefit for Canadians?

Mr. Mike Saunders: I'm not sure at this point I see one in the long term. In the short term there may be some reduction in rates, but in the long term I don't believe it'll be a significant benefit.

It's not that any of these areas are underserved, although I don't believe there's a lack of capacity within the property and casualty insurance industry to service the needs of Canadians right now. How does that benefit Canadians? I don't know.

Mr. Harold Baker: We had the opportunity to listen to Mr. MacKay's speech and we asked him how this will help consumers down the road, from his view and that of the task force. He said it will give the consumers one-stop shopping and more choice. In our report, we've commented on what we believe is choice. We believe there are lots of choices out there. What the banks are saying they want to do and how they want to market through retailing isn't providing new choice and it isn't really providing one-stop shopping, because one-stop shopping would mean I could go into a community and buy at a branch. Some banks are moving out of the rural communities, not only in this province but across Canada. I don't know where he's coming from. I can't honestly answer that. When we asked him the question, those are the two answers he gave us.

The Chairman: If a person wants to buy life insurance...or are you property and casualty?

Mr. Mike Saunders: We're property and casualty.

The Chairman: By the way, that's an issue here as we debate—life insurance and property and casualty. MacKay focused much of his text on life insurance, which is kind of unfair in some ways to people in property and casualty insurance. If I walked into a bank and saw these posters and the marketing associated with life insurance, for example, I'd actually think about buying some. Mr. Valeri has failed to sell me some in all these years.

It would perhaps increase the number of policies that would be sold or the amount of life insurance sold if the marketing were so direct. Do you know what I mean? You walk into a branch and, like everything else we get bombarded with, if you're bombarded with the marketing of life insurance or property and casualty insurance, it might actually increase the market, because there would be more buyers. Do you buy that?

• 1950

Ms. Ginny Bannerman: That could be true with respect to the life insurance industry, but with our industry the government has created the market for us with respect to auto insurance. They have said if you drive a vehicle, if you license a vehicle, you must carry at least these minimum prescribed coverages.

If you have a loan or a mortgage on your home or business, the banks as lending institutions will require that you insure your property. So it's a very different thing. If the system is functioning as it should, 100% of all vehicles are already insured. Having two more places where you can buy insurance won't change the number of insured vehicles.

The Chairman: What about leasing? Think of yourself as a Canadian consumer for a second. You walk into the bank and get into leasing. Is that kind of convenient?

Mr. Mike Saunders: Not particularly.

The Chairman: How do you know that?

Mr. Mike Saunders: I already have that opportunity at the dealership where I buy my automobile. I have that opportunity from the guy three doors down from me. Maybe it provides some convenience for some people.

An issue we missed here with this whole thing that concerns us greatly is that when our clientele walk into the bank and are renewing their mortgages right now.... I'll give you the example of my own bank branch. I went in to renew my mortgage and as we were filling out the mortgage application, she said, “I don't suppose you'll want life insurance”. I said “I don't know. Why don't you explain it to me?” She said “Well, if you die your mortgage will be paid.” I said “That's good. Who's the beneficiary on the policy?” She said “Just a minute.” She ran out and got the assistant manager. They huddled over a book for ten minutes and when she came back she said “We're not sure; we'll have to phone on that.” I said, “Let me enlighten you. You're the beneficiary of my insurance policy if I die.”

The people who are marketing these products have no expertise. She was going to put an X in the box, charge me $7 a month more for my mortgage insurance, and she knew nothing about it.

If I buy an automobile and go to my bank for financing and they're allowed to sell directly to their bank branches, am I going to get the same expertise? If I really need that loan, will I get out of there without buying the auto insurance? It's virtually impossible to police those types of subtle coercive sales techniques by regulation. If I'm sitting there and I want to buy this brand-new car and I need this loan really badly, I'll buy the insurance from them if I can get the loan and they put that kind of pressure on me. Who am I going to tell? I don't want to lose my loan.

That's what we are seriously worried about as brokers. There is also the fact that every time a client of ours has a loan on his car or a mortgage on his house, we are obligated to give the bank a copy of the insurance policy that tells them the address of the house, the amount of the insurance, and the expiry date of the policy. It wouldn't take a rocket scientist to put me out of business in about six months by just underpricing everything I have, because they can buy a book with all the prices in it. That's the concern we have. That's a really serious threat to us and one that I don't believe you can police through regulation. There are just some things that don't belong within the bank branch, for the protection of the consumer and small business in general.

The Chairman: You don't like banks, do you?

Mr. Mike Saunders: Not particularly. I've spent a lot of time lobbying.

The Chairman: Why is it that nobody likes banks? It's kind of interesting. Throughout the country nobody likes these banks, but when they're shutting down their branches everybody's up in arms. Do we like punishment or what?

Mr. Mike Saunders: It's because they're a necessary evil.

The Chairman: They're a necessary evil.

Mr. Mike Saunders: You have to use a bank. You can't put it in a sock under your bed.

The Chairman: How long have you been in business?

Mr. Mike Saunders: I have been in business for 22 years.

The Chairman: You've always had a bank?

Mr. Mike Saunders: Over the last ten years my partner, Steve, and I have bought my father's business from him. We had to go to the bank to arrange financing for that. We have to do those kinds of things. As much as I may not like them, sometimes I have to deal with them.

The Chairman: Why don't you go to a credit union or a community bank?

Mr. Mike Saunders: In the province of Alberta the credit unions are trying to get into our business as well. There are no community banks. There's the Alberta Treasury Branch. Everybody wants to take my business away right now in the banking industry, and I find that hard to take.

The Chairman: I think I've had more than my share of questions.

• 1955

Ms. Ginny Bannerman: We need to remember that consumers now have the choice to deal with CIBC insurance or Scotia Insurance if they really want to deal with a bank subsidiary. We are saying that the two functions, banking and insurance, should not be combined under one roof because it opens up the possibilities of coercive sales techniques, as Mike has stated.

The Chairman: Okay, thank you.

Mr. Peter Rollason: I would just like to comment as an individual who deals with these institutions. I wouldn't like to see things happen to the extent that I didn't have choices available to me. Price becomes a very important factor in choice, so I don't want to see destructive pricing occur.

As an individual I also don't want to put all my eggs in one basket, so I personally don't buy the one-stop shopping thing. Some people might find it convenient, but I like to seek out where I can get the best service, the best price, and the best deal. The MacKay report eliminates tied selling, but coercive tactics are hard to prove.

From the consumer side there are some real questions, and as an individual I don't want to see everything end up in a limited number of hands. Whether it's the banks or the insurance companies, I really don't care. I just want to have competitive choices available.

The Chairman: Then you're in favour of banks retailing insurance.

Mr. Peter Rollason: Yes, if it provides a good competitive marketplace for the product.

It's just like in the stock brokerage industry where everyone thought it would all go to hell in a hand basket when the banks took it over, but it spawned a lot of the small niche brokers. So I have to think there may be other opportunities out there in these fields. They would know their business better than I do. I can't judge what they feel about that, but as a consumer I want good choices. If it takes the banks getting into the business, fine, but I just want to make sure I'm getting good, fair prices.

Mr. Mike Saunders: Do you feel underserved now in this marketplace?

Mr. Peter Rollason: No, I have a variety of choices now.

The Chairman: It's interesting you say that, Mr. Saunders. Most of the people I talk to use the phrase, “The status quo is not an option”, but when we get right down to it the status quo is very much what people talk about. I guess people are just happy with the way things are.

Ms. Ginny Bannerman: The way things are is so new to the marketplace now that we're still adjusting to the changes in 1992. We should give it some time to see how those changes shake out before we make more changes. The status quo itself is a real moving target at the moment.

The Chairman: As we study the issue we get to know it better and better. When you look at the four pillars, for example, and the financial services that existed five or ten years ago, it's no longer the case. When you look at mutual funds and the growth they've had and bank deposits dropping, change is occurring all around us, yet when many people appear in front of us they recognize change, but they're quite comfortable in their own sorts of positions. Everybody has a right to their opinion, but I'm just wondering how long we can stay status quo if all these things are around us.

Mr. Riis.

Mr. Nelson Riis: There is a built-in assumption in a lot of this that change is not only inevitable but must occur. In your marriage you don't assume it must change; there are some things that are just good the way they are. I guess what I'm hearing from these folks is “If it ain't broke, why fix it”. Everyone's happy and things are going along, but in a lot of the work we're doing we just assume we have to change everything and change will be better, when in fact maybe it won't be.

Mr. Mike Saunders: Very well put.

Mr. Harold Baker: This is very good actually. On your question of why Canadians don't like the banks, if you look at the history of the banks, they have always only been there for the good people—those who they think are the better credit risks. There has been a whole subsidiary market put into place through companies like Avco Financial Services, Beneficial Canada, and the kneecap-breaker industry in terms of the loan sharks.

• 2000

Banks would not come to the fore when there were economic conditions within a province that prevented growth. Credit unions were created and the Treasury Branch was created here. It was all because the banks didn't do their job, nor did they want to do their job.

So governments had to create, here in Alberta, the Alberta Opportunity Company. We had to create the Federal Business Development Bank. We've had to create places to go when the banks didn't want to provide a service. Now all of a sudden they want into some other marketplace. What happens when they decide they don't like that one and people want service and there's nobody around to provide it?

The banks have had their way. We, as Canadians, have to find different ways when they don't like having their way.

If you look at the Bank of Nova Scotia here in Alberta—I've talked to employees who have left it—it's very clear. Their mandate is they want the cream of the crop. They don't want the bad risk. They don't want the high risk. Where are these people going to go?

They're going to come to us, but we're not going to have a mortgage for them. The marketplace is going to get to the point where there is no market for them. And this is the difficulty. So all of a sudden we have to create an artificial market because the banks wouldn't provide the service.

This has been traditional. If you look at history in Canada, every time something is created it's because the banks don't want to be in the business any more or they just want the cream of the crop. As a person in small business, when I walk into the bank they look at me and they weigh out my capacity to repay, and I've got to sign away my first-born.

So at some time you have to say to yourself, well, I can't deal with her any more. So the Alberta Opportunity Company is created. And that's the difficulty. I think this is why Canadians look at the banks with jaundiced eyes. They say they want all these things. They talk about creating jobs.

I watched the president of the Bank of Montreal speak to the House of Commons committee. He said, “You're going to have to trust me when I tell you there will be no jobs lost.” Well, I'm sorry sir, I don't have a lot of faith and I don't have a lot of trust, because I only have to look at your history to know there should not be this kind of faith or trust put into the banks.

The Chairman: Ms. Bennett or Mr. Valeri.

Ms. Carolyn Bennett: We'll save the best for the end.

Some hon. members: Oh, oh!

Mr. Tony Valeri: Put me on tomorrow at about 3 p.m.

Ms. Carolyn Bennett: I was just going to ask a question of the Alberta Association of Registered Nurses.

There are two things going on at once. One is that all the nurses have been laid off in the hospitals. Everybody thinks we want the hospitals to be able to hire more nurses. We want more nurses in the community because we want home care. All these nurses have been laid off and yet we're talking about a nursing shortage. We're not talking about many nurses out of work.

So it's very difficult to explain if you're going to try to have a youth employment strategy. You're saying there is a decreasing enrolment in nursing school. What's the matter?

Ms. Lorraine Way: I think in nursing, historically, we've experienced these swings of oversupply, undersupply, and demand problems.

In the early 1990s, the Canadian Hospital Association, along with the Canadian Nurses' Association, conducted a study looking at future needs of nurses. Because of the aging population, the population increases, and the aging population of registered nurses themselves, we're predicting a shortage by the end of this century.

In 1997, the Canadian Nurses' Association commissioned a study to again look at what's going to happen and this is why there is the prediction of the shortage.

The lay-offs experienced in Alberta in 1993-1995 were very severe. As I mentioned, there was a 17% decrease in the number of registered nurses. Those who were still registered shifted their registration status from full-time employment to part-time casual work. During those years, there was much publicity in Alberta and then later on in some other provinces, more recently in Ontario. The publicity about the lay-offs turned young people away from even choosing nursing as a career. Then in the various provinces, the enrolments were also dictated: “Cut back on you're enrolments. We've got too many nurses.”

• 2005

It takes four years to prepare a registered nurse. Now we're experiencing all of those effects, such as people not choosing nursing and enrolment cutbacks. As I said, in our province we lost 17%. We estimated in Canada we lost 10,000 nurses who either left the country to go and work elsewhere or left nursing altogether.

What we're trying to do now is to say we don't need to wait until the year 2011 to be in this severe nursing shortage. We need to put some things into place to head off this shortage, because to have this kind of shortage will be devastating to this country's health care system.

Ms. Carolyn Bennett: I'm looking at a budget. Do you think it is going to cost $10 million to explain to the young men and women of this country that there will be jobs if they pick nursing?

Ms. Lorraine Way: I think it's much more complex than just saying to young people, “Choose nursing”. There are some real problems in the recruiting. Fewer than 4% of registered nurses are men. Nurses are, predominantly, women. When we look at women's role, they're the ones who carry the babies and have to raise the infants. This causes nurses to have to leave their work for periods of time.

Talking about the gender issue, other faculties such as medicine, engineering, and law have been much more successful in getting some balance. They've done some things in terms of student grants and this kind of thing to help women go through those programs. Also, when we look at aboriginal people, we recruit very few nurses from this population, and yet aboriginal people represent a significant percentage of recipients of health care. We need to look at how to get student grants. So this $10 million isn't just for telling young people nursing is a good career. It's looking at strategies and student grants.

Then we have to look at the issues of retention. This $10 million is for recruiting and retention. Why do nurses leave nursing? I've had many nurses tell me they love nursing but hate their jobs. I think we need to look at some of those factors that cause nurses to throw up their hands and leave.

Ms. Carolyn Bennett: This summer we were in the north, in Nunavut. There is obviously a huge problem in getting nurses of any sort, from nurse practitioners to RPNs. Anything would be better than what they have in terms of numbers.

In terms of strategies, are you talking about continuing education and respite, having somebody replace you? It seems impossible to expect somebody to work 50 weeks straight.

In terms of overall health care dollars, if they had two nurses at Grise Fiord they could keep a patient with pneumonia there for the three or four days to be looked after instead of shipping this patient out, with huge transportation costs. Their overall health care budget would be reduced.

Are you talking about that kind of money with your $10 million?

Ms. Lorraine Way: You're talking about retention, about how to keep nurses in, and part of this—

Ms. Carolyn Bennett: Well, I'm talking about bringing them out.

Ms. Lorraine Way: That's right. Also, we are talking about how to provide continuing education opportunities so there are more nurses who are prepared for a nurse practitioner to be able to take some of the responsibilities you've just described. That's what we talk about. We talk about recruiting and retention strategies. We need to be clear about why nurses leave. It isn't only because they're not getting enough money. As we know, when it comes to motivational factors, money isn't the bottom line. It's not being able to get holiday time. It's the frustration they experience in the workplace, the sheer workload, the feeling they're not able to provide the kind of quality patient care they know they want to provide and can't because of some of the stress.

So that's what we're talking about.

Ms. Carolyn Bennett: In the research piece, and in the research you've applied, have you seen Dr. Friesen's proposal for the institutes of health, and are you satisfied there would be sufficient multidisciplinary nursing research in the model he has proposed?

Ms. Lorraine Way: I'm more familiar with what the Canadian Nurses Association has put forth in terms of the virtual information, virtual library. I think we have to be really cautious. Interdisciplinary work is good, but because of the services nurses provide, there also needs to be research specific to the discipline. We need to know more about what services make a difference and what services don't, and how to get this information to the practitioners.

• 2010

We have a fair amount of research going on, but there's a lot of trouble getting up to Inuvik to be able to assist nurses to implement some of those findings. This is what the last—

Ms. Carolyn Bennett: In terms of multidisciplinary research, I would hope there would be research in health care delivery, the best person at the lowest price. We actually need research in this, though.

Ms. Lorraine Way: You and I have a different understanding of what multidisciplinary research is. Certainly we support—

Ms. Carolyn Bennett: I mean health care delivery research. Is that right?

Ms. Lorraine Way: Okay, you're talking about how you deliver the best service and what the role is of each of the health providers in this. Absolutely. That's part of it.

Ms. Carolyn Bennett: Okay.

The Chairman: Thank you, Ms. Bennett.

Mr. Valeri.

Mr. Tony Valeri: Thank you, Mr. Chairman.

The Chairman: You're allowed a question.

Mr. Tony Valeri: You did say “a question”, didn't you? I'm not going to pursue the banking discussion since I think it was exhausted a few minutes ago.

I just want to go back to a broader question that has to do with pre-budget and the pre-budget consultation. I just want to paint some context and then I'd like to hear some feedback.

Obviously you've been reading the paper, and recently you read about what's going on around the world—the global economy, Asia, Russia, Latin America. Yesterday, Greenspan said 1999 looks like it's going to be a slower year for the U.S. than expected. So you've got some moderate slowdown there.

We as a government, in fact, have just balanced the books. There's a commitment to keep the books balanced. All of the forecasts have gone the other way in terms of what this surplus would be.

The most recent numbers floating around out there are anywhere between five and seven in terms of an actual surplus, including a $3 billion contingency fund, which leaves an actual surplus of about $2 billion to $4 billion.

What do we do? The reason we're going across the country is to try to get some feedback from Canadians as to what those priorities are. With this dividend or surplus that we've got to work with, what are the priorities, in your minds?

Perhaps, Mr. Rollason, you would like to start.

Mr. Peter Rollason: That's a very difficult question. Your $2 billion to $4 billion with respect to the needs is like throwing a pea out in the middle of this room.

Mr. Tony Valeri: I'm with you.

Mr. Peter Rollason: I probably have a different perspective than others do in that I would say we should pay down the debt. I recognize we have to start doing this to give ourselves ultimate space. By itself, $4 billion or $10 billion isn't going to make a significant difference in one year. I think we have to start doing it.

Part of the problem we've been having more recently is we are perceived to be not as good a bet as the U.S. Hence the run on our dollar. I think we have to look at ourselves as a country and ask how we can be more competitive in the world markets. Therefore, we have to do a few things that start us down the road so the perception is that Canada is working that way. One of them is dealing with the deficit. I think we've done this.

It's very hard to spread this little bit of money around, but I think we have to come to grips with the EI problem. We have to come to grips with the fact that taxes have continued to increase. I don't think a continued increase in taxes is acceptable, given the circumstances. Then there's the necessity to deal with some of the issues that have arisen, because in some cases we've really cut and burned and slashed.

I don't think we should just sit back and say we've done all our cost-cutting and we don't have to do any more. I know from my business career one can never really be finished with cost-cutting because times change, initiatives change, and programs have a sunset clause at some point in their lives.

So I think we have to look at how we deliver our services, and the government has to look at how it delivers its services and better ways to deliver them. When it comes to this $4 billion surplus, maybe a hole could be carved somewhere by delivering some other services better so there's actually some money freed up. This money could be devoted to the things Canadians are interested in.

Mr. Tony Valeri: When you look at the books and you look at the kinds of expenditures out there, essentially you have three areas where you really have your major expenditures. One is transfers to provinces, transfers to persons, and the third one is really the interest on the debt. Certainly, I would agree with you that we have to get some type of debt repayment in place, and there's where the $3 billion contingency fund comes in. When it's not required to balance, it goes automatically to the debt. We have a continued debt-to-GDP ratio that's declining.

• 2015

But in the world of trade-offs, what is it we should be focusing on with this surplus? Is it personal income tax, EI premium reduction, or investment in health care? It's a tough question, but essentially that's the question we're faced with.

Mr. Peter Rollason: I think Canadians deserve the indication the tax bite is going to go down and not continue to go up. Even though the tax rates haven't changed, we've had inflation creep in on the basic levels.

One could argue that whether you reduce taxes or EI, perhaps economically you're going to achieve the same benefit of putting more money in people's pockets. The EI thing, in my mind, is a little different, because I think there's a bit of a credibility problem with changing the rules on that. That's maybe something you people are going to have to deal with. You're getting lots of information on that.

But I do think Canadians deserve some indication that taxes are going down, that they're going to have more money in their pockets, because it does affect a lot of things. People don't expect taxes to go from 50% to 20% in one swipe, but if a trend is committed to, then I think Canadians would understand that.

Mr. Tony Valeri: Okay. Does anyone else wish to comment?

Mr. Mike Saunders: I'd like to make just a general comment. That's a complex issue for anybody to jump on, so I feel sorry for you.

You mentioned lowering taxes. I think lowering taxes creates an incentive for employers to expand business and create jobs. To me that makes more sense than throwing it at another program where it will not generate job opportunities or future tax revenues. In the short term it may look a little ugly, but at the end of the day, if you create more jobs and more tax revenues, you've won all the way around. I just don't know how you do it.

Mr. Tony Valeri: Are there any further comments? Mr. Christie.

Mr. Gordon Christie: I'd like to make a comment on that. We certainly seem to be focusing on the financial deficit. Because governments represent people, I think we really and truly should come back to the human deficit. You mentioned we always have to compete with the U.S. I hate to compete with the U.S., because they have the biggest discrepancy between the rich and the poor and the highest rates of poverty.

As to where we should put this money, I think there is a simple answer. I think you'll find governments put most of their spending into health, education, and social services, and that's where this money should go.

I've heard here this afternoon and I've heard from my former employer when I worked for the Alberta government about this trickle-down effect. I heard it from Peter Lougheed and from everybody since. Workers in this province have been waiting for 25 years to be trickled down on, and it hasn't happened. From 1983 to 1998, over those 15 years, workers in Alberta have lost 15% between what we earned then and what we earn now when you take inflation into account. So we've been getting kicked every year. This has occurred during the booming times, the bad times, and the in-between times. We've lost each and every year. We're still waiting to be trickled down on. As a government employee and an employee in the private sector, I haven't seen it.

But I can tell you people are desperately crying for health care, education, and social services.

Mr. Tony Valeri: Could I get some reaction to that? I hear it in all parts of the country. I just wondered if the answer is a bit of balance. Would you agree with doing some personal income tax, with ensuring the debt-to-GDP ratio continues to go down, and doing some health care? Is that the answer? If that was the budget, what would your reaction be?

Mr. Mike Saunders: We're dealing with a debt of $4 billion.

Mr. Tony Valeri: Obviously, those investments wouldn't be very large. They couldn't be. But over the first year you may have some personal income taxes in a very minor way, again to build on the last budget. You may have a little investment in health care in some manner. They're not large. We're not dealing with a big pot of money. There is always the understanding, and it's certainly the underlying principle, that you have to stay balanced, because you cannot possibly go back into deficit.

• 2020

Mr. Peter Rollason: I think balance is the critical thing, because we're not just a country of business people, we're not just a country of workers; we're also retired people, we're youth, we're all sorts of things, all with our different interests. Yet when you look at it, there is a dichotomy in what people would like. We need more health care programs, we need more of this and that. Yet on the other hand, a lot of those very same people are saying “My taxes are too high”. It's like talking out of both sides of your mouth at the same time in this thing. Therefore, I don't think there is a right solution, but there has to be a trend toward dealing with both.

I look upon it a little bit as the government being like an orange that's had most of the liquid squeezed out of it. There's nothing much left, so they don't have too many options. So maybe one way around it, other than shuffling the chairs on the deck of the Titanic, is to try to push something back into the orange, so it's a bigger orange and it can do more.

I think no matter what we do, we have to try to ensure the Canadian economy grows throughout the piece. If the standard of living of Canadians goes up, that in itself to me indicates a lot of things are happening that not only deal.... I mean, if it goes up, it probably means unemployment is going down. It probably means a lot of other things are starting to be taken care of. I think there's one thing everyone will understand and that is the standard of living of Canadians has been going down since some time in the 1980s, through inflation and a lot of other things. And it's about time we corrected that.

Mr. Nelson Riis: I think it is supplementary to Mr. Valeri's question, or just maybe to add to it.

Tony.

Mr. Tony Valeri: Well, I think there was another....

Ms. Lorraine Way: I don't have the answer to your question, but I think one of the things we have a high value for in this country is egalitarianism; in other words, people are viewed as equal. When I think about health care, one of the grave concerns of nurses across this country, particularly in Alberta, the birth bed of privatization, is that we are afraid of seeing the very foundation of the Canada Health Act—the principle that people's access to health care is based on need and not on ability to pay—crumble with some of the privatization initiatives. As nurses in this country, we are very concerned. And one way, certainly, to plant the seeds of privatization is to really underfund the publicly funded system. Then there's the push for this.

We will never, ever, in a publicly funded system, provide everything to everyone that everyone ever wanted in health care. That is for sure. But I think we want to make sure we maintain the principles of the Canada Health Act, which was based on each human being having access to health care based on need, whether it's a mother and a child up in Baffin Island or a businessman in downtown Toronto. That's one of the things.

I think the quality of life, while I don't know a lot about some of the economics, is based on people's education, their ability to get meaningful employment, and having reasonable access to health care. I'd just like to offer that.

The Chairman: Thank you.

Mr. Riis.

Mr. Nelson Riis: Assuming that what Mr. Valeri is saying will take place, that our surplus is in the $5 billion to $7 billion range, with a $3 billion contingency fund.... Just setting aside the EI issue, assuming that something has to be done with that, we're talking $2 billion or $3 billion at the outside. If we did an across-the-board income tax cut with that, it would be maybe $75 a month. A lot of people don't pay income tax at all because they don't make enough money, so the people that are the hardest pressed won't benefit from this at all, or will benefit very little. Yet no one has mentioned the one tax we all pay every day—kids, old people. That's the GST. If you're interested in stimulation, in other words putting money in people's pockets tomorrow morning, that would happen. It probably would be at least $175 a month on income tax for those who pay income tax. Why doesn't anybody ever talk about phasing down the GST in terms of sending a tax message and providing a stimulative effect to every economy in the country?

• 2025

The Chairman: Who's interested in reducing the GST as a viable option?

Mr. Mike Saunders: If it makes sense, yes.

Mr. Peter Rollason: Someone else would have to come up with the numbers, but if you went down by 1%, I think we're talking about a lot more money than $2 billion.

Mr. Nelson Riis: It would perhaps be about $2.5 billion.

Mr. Tony Valeri: I think the other point I would make, Mr. Riis, is that the number between five and seven is really a private sector number. That's what McCallum is using today.

When you talk about what it is you need to be doing and you believe globalization is occurring and that a country needs to be competitive—and I'm not just saying with the United States but so that you can continue to improve the quality of life—and you look at your taxes, you'll find most countries are going with a value-added tax.

The payroll taxes in Canada are competitive with our other G-7 partners. Our personal income tax is not. We're the highest of our G-7 countries. So in that mix you ask yourself where it is you must move first. I'm not saying you wouldn't move on the others when the opportunity arises, but you have to look at where you are uncompetitive and then try to make your move there initially. That's really the reason I'm trying to bring that to your attention and to get your feedback as to whether or not I'm on the right track. If I'm not on the right track, I really want to hear from you.

Mr. Peter Rollason: I think you are, because taxes are taxes, so first of all we'd all be pleased with any sort of cut. The advantage of dealing with the income tax thing is we do have a brain drain problem, and some of that is said to be related to tax levels. So that's one way of dealing with that.

No matter how you deal with the tax thing, as long as taxes go down, you are putting more money back into people's hands. From my perspective, I think because of the creep that has gone on in income taxes year in and year out, we need to deal with that. I'm not saying that's the total focus, but I think your government should be dealing with that.

I think they also should be dealing with reducing the EI, because that one affects workers and businesses. Workers generally do pay taxes, so that's a benefit to them in several ways.

The Chairman: Mr. Christie.

Mr. Gordon Christie: I'd just like to make a quick comment. I don't agree with the comment that all taxes are equal. I find the GST very aggressive, because whether you make $1 million a year or $10,000 a year, you're still paying. It you go out tonight and buy a pizza, you're paying the same tax. I think that's absolutely unfair. Yes, our income tax system does have to be looked at, and taxes should be made much fairer, that's a fact. But the most regressive taxes, the flat taxes, user fees, Alberta health care premiums, and things like that, those are the taxes that affect the working poor and working people the most, and those are the ones we have to address first and foremost.

Mr. Tony Valeri: There's also a GST rebate below a certain amount of income, so you do have to take that into account. Certainly, the regressivity of the tax was taken into consideration when that rebate was put in place.

Thank you, Mr. Chairman.

The Chairman: Thank you very much.

Mr. Harris, do you have a final comment?

Mr. Dick Harris: Yes, I have a final comment. Thank you, Mr. Speaker, for letting me go last.

I promoted him.

The Chairman: I'll take it as a draft, but I'll decline.

Some hon. members: Oh, oh!

Mr. Dick Harris: I'd like to make a closing comment, and if you wish to comment on it, that's fine. When we're approaching how we're going to fashion our budgets, it's absolutely essential we never lose sight of history. I think we can all acknowledge that since the mid-1960s, when our governments have been basically telling the people you can have anything you want if you simply vote for us, and those that wanted to be government would say, you ain't seen nothing yet if you vote for us...the results of 35 years of that engineering have left us with almost a $500 billion debt and a $43 billion annual interest payment on that debt. If you can imagine what $43 billion would buy in health care, in education, in social programs, as well as tax cuts to help alleviate what is the highest tax rate in the G-7 countries....

• 2030

I think we have to always keep history in mind in our planning when we go into a new budget year. Certainly, there are sacrifices we have to make and we have to get our spending priorities very straight. It's time to begin to just simply stop spending in the areas of little need and start spending in the areas of more need.

I want to make this one comment. I don't want to pick on you, Mr. Christie, but you're wearing a T-shirt that says “Pay Equity Now”.

Mr. Gordon Christie: Yes, the problem is ten years old. It was pay equity ten years ago. Honestly, I got this at a convention of this union ten years ago. That's the problem.

Mr. Dick Harris: Now that government is looking at a $5 billion demand based on a decision made by an unelected, unaccountable, quasi-judicial body—a $5 billion demand. Can you imagine how much health care $5 billion would buy? Can you imagine how much education and funding for some of our social programs $5 billion would buy?

I really think we have to give our head a shake about some of these demands that are being made on our governments. We simply don't have the money any more. We have to get back to basics and get this country back on track.

Mr. Gordon Christie: I do want to respond to that. You must have been reading my Labour Day message here because the Canadian Human Rights Tribunal requiring the federal government to rectify 14 years of gender-based discrimination of 200,000 public service workers is a crime. The Chrétien appeal of the pay equity ruling is a refusal to respect human rights, a refusal to stand for women's equality, and a clear refusal to uphold the law, which undermines the confidence Calgarians have in the federal government's responsibility to fight discrimination and uphold the Canadian Human Rights Act.

You should have read my Labour Day message.

Mr. Dick Harris: Just a final comment. For centuries the market has determined the value of jobs in this country, as well as in most every other country in the world. The market will probably continue to be the dominant factor in determining job values. I think it's a huge backward step when that role is taken away from the marketplace and placed in the hands of people who are basically unaccountable to the market and to our country as a whole.

Mr. Gordon Christie: So you support 130 years of discrimination? What can I say.

The Chairman: Thank you, Mr. Christie, and everyone else, of course. Thank you very much.

Mr. Gordon Christie: I have a community board of directors meeting at 7 p.m. I have other priorities.

The Chairman: Thank you very much for staying. I appreciate it.

As you could probably tell, this was a very interesting panel. I think the mix between MacKay and pre-budget consultation was quite good. I might try it again.

I sincerely thank you. You obviously noticed from the questions we've asked and the answers you've given that we're challenged by the many choices that exist and the trade-offs that exist when making recommendations to the Minister of Finance vis-à-vis the budget. But your contribution has been excellent and I'm sure it will help us find our way for both the MacKay report and the pre-budget consultation.

The meeting is adjourned.