FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 23, 1999

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[English]

The Acting Chair (Mrs. Karen Redman (Kitchener Centre, Lib.)): Good morning. Welcome, and thank you for coming to appear before the Standing Committee on Finance. As you probably are all aware, we've hit the road again this year to travel across Canada to hear the input and advice concerned Canadians have to share with us as we advise the minister on the next budget.

This morning we welcome the College Institute Educators' Association of British Columbia, the Confederation of University Faculty Associations of British Columbia, the Canadian Association of Student Financial Aid Administrators, the City of Vancouver, and the University Presidents' Council of British Columbia. One witness is not with us this morning. We will proceed.

For your information, I'm Karen Redman; I'm not Maurizio Bevilacqua. He's been called back to Ottawa on business, so it's my pleasure to chair the meeting this morning.

We will start with Cindy Oliver, secretary-treasurer; Maureen Shaw, president; and Roseanne Moran, communications and research staff representative, from the College Institute Educators' Association of British Columbia.

Welcome.

Ms. Maureen Shaw (President, College Institute Educators' Association of British Columbia): Good morning. My name is Maureen Shaw. I'm president of the College Institute Educators' Association. I'll be speaking on behalf of my organization. I'd also like to introduce the secretary-treasurer, Cindy Oliver, and the communications and staff representative, Roseanne Moran.

The Acting Chair (Mrs. Karen Redman): Just before you get started, I see our other witness is here.

Welcome, Mr. Chudnovsky.

Mr. David Chudnovsky (President, British Columbia Teachers' Federation): Thank you very much.

The Acting Chair (Mrs. Karen Redman): We'll take you after we hear this first group.

Mr. David Chudnovsky: Okay.

The Acting Chair (Mrs. Karen Redman): Each of you has five minutes to give your presentation, after which we will have time for questions and answers.

Ms. Maureen Shaw: Okay, thank you very much.

I noticed a recent Department of Finance document outlining the choices ahead for the federal government stresses the need for investing in skills, knowledge, and education. The third plank of that promise is developing a highly skilled and highly educated workforce by encouraging lifelong learning. That is what the college and institute system in British Columbia is all about.

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Our system consists of over 100 campuses throughout the province, with programs offered in 93 communities. In 1999-2000 we offer over 1,000 full- and part-time post-secondary education and training programs to 83,842 full-time-equivalent students. We also provide an additional five million hours of continuing education programs in communities throughout the province. We offer a wide range of education and training opportunities for citizens of British Columbia.

But this system cannot continue to deliver all its services and all it's able to do throughout the whole province of British Columbia without increased funding. We argue this morning that if the federal government wants to live up to its promise, it needs to spend some of the budget surplus it has identified on improving the base operations of Canadian post-secondary institutions.

Problems increasingly are plaguing our post-secondary education system, and these problems relate to the underfunded base operations. Our institutions are all having a more difficult time offering students the range of programs and courses they need. Students are not able to access the institutions in a timely manner or to find the courses they need.

Measures have been taken, which we applaud, that have done something to address some of the problems for students, such as the millennium scholarship fund, the education tax benefits, and added research funding. However, these programs are not enough, and to a certain extent these programs do not assist the students we serve in our system. They also do not address the issue of core funding for our institutions.

The B.C. provincial government has attempted to shield the province's post-secondary students from the impact of federal cuts, but the lost federal support has limited the province's ability to expand the system to meet pressing social and economic needs.

Last week in Ontario we heard about a private conglomerate, the Apollo Group, which owns the University of Phoenix and which is looking to open up Canada's first secular private university. We also heard about Ralph Klein in Alberta proposing to open up private hospitals with public funds. In British Columbia we have a proposal from ex-UBC president David Strangway to open up a private university in Squamish.

Why are these proposals coming forward now? Our message is that unless there is a meaningful reinvestment in Canada's public post-secondary education system, we risk losing one of the most important things to Canadians: a public education system.

We can link this drive to privatize to the reduction in federal support for post-secondary education and training. The loss to British Columbia in cash transfers was $1.5 billion between 1994-95 and 1998-99. That is larger than the whole post-secondary education annual budget.

We notice that the government has indicated a reinvestment on a number of fronts. While the recently announced program, 21st Century Chairs for Research Excellence, will assist in many areas, it will not assist the college sector. None of the endowed chair seats will go to the colleges.

The research funding to the college and institute system is meagre at best. We deliver programs and education to students throughout this province, and unless we see an increase to the core budget of these institutions, we will not be able to provide the access we do.

I also want to briefly touch on some of the problems with the training strategy of the federal government. As of July 1999 there is no longer any provincial-level purchase of training for individuals in receipt of employment insurance training benefits. Instead of the previous system, in which training was planned and seats were purchased, the new training regime sees individuals with essentially a voucher. The training voucher in British Columbia is called the skills development employment benefit.

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We are concerned that rather than increasing the level of integration of services for those in need of training, we will see chaos instead. Trainees are sent off to plan different training programs and options with little understanding of how the system works or how to access the institutions. So we remain very concerned as well that the voucher system in place will undermine the ability of the public college and institute system to provide the type of programming unemployed people need.

We also note the other ways in which our institutions are unable to provide what students need. The underfunding has hit the library services, the counselling services, and the technology access for students.

We therefore urge the federal government to consider the budget surplus it has and the needs of our citizens for access to quality post-secondary education. We ask that the federal government ensure that a significant portion of what was lost is put back into the system.

Thank you very much.

The Acting Chair (Mrs. Karen Redman): Thank you very much.

Now we'll hear from Mr. David Chudnovsky, president of the British Columbia Teachers' Federation.

Welcome.

Mr. David Chudnovsky: Thank you very much.

Good morning, Chairperson and guests. I'd like first to thank the committee for this opportunity to speak to you this morning.

The British Columbia Teachers' Federation is an organization of over 44,000 teachers who work in the public schools—that is, the kindergarten to grade 12 system—of British Columbia. We have 72 locals in the 60 school districts of the province and represent the economic, professional, and social interests of our members.

The most significant reason we come to you today is that we're aware that budget decisions in the mid-1990s to cut transfer payments to the provinces for health care and post-secondary education had a dramatic impact on this province's continued ability to adequately fund the K to 12 public education system.

We call upon the government today to develop a strategic plan for rebuilding Canada's public financing capabilities that includes a systematic approach to job creation, a policy of reduction of interest rates, ensuring that corporations pay their fair share of taxes, increased taxes on wealth, debt repatriation, and regulation of cross-border capital transfers.

The benefits of investment in a well-educated citizenry are well known. As teachers, we understand the need for an adequately funded quality education system. We need to guarantee access to a high-quality post-secondary education to more young Canadians and to eliminate the current expectation that they must assume a huge debt in order to obtain an education.

If we are to support a knowledge-based economy, we have to assume the responsibility for providing the infrastructure and educational services to students so that they can become active participants in that economy.

The BCTF supports the establishment of national child care initiatives that would provide funds necessary for child care services that are regulated, comprehensive, affordable, and universally accessible. A program of quality child care would be a major investment in our children and hence in our future.

The B.C. Teachers' Federation believes this budget should mark the beginning of a major assault on poverty. Ten years ago Canada's Parliament committed itself to the elimination of child poverty by the year 2000. We are a long way from reaching that goal. In fact I think it's true that we're further from reaching the goal than we were ten years ago.

The BCTF supports the concept of a guaranteed yearly income, which could become a key element in an anti-poverty strategy. Federal funding for housing to address the problems of homelessness in this country should be another component of this overall strategy.

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I've talked about two issues of education that on the surface haven't much to do with the K to 12 system—namely, child care and post-secondary. I think it's worth mentioning why we care so much, as teachers in the K to 12 system, about these two areas.

With respect to a national child care program, the evidence is pretty clear that readiness for school and success in school in the K to 12 program are clearly linked to a quality child care program. That's one of the reasons, but only one, that we support national child care.

With respect to post-secondary, and the burden that's been placed on students in post-secondary, I think it's important to know that we care deeply about the students we teach. Many of them end up, and we hope more and more, in the post-secondary system. Teachers across this province are saddened and hurt by the notion that those students we prepare for post-secondary education are burdened, and will continue to be burdened if something isn't done about it, with enormous debt when they go to colleges and universities.

Thank you, Chairperson, for this opportunity to speak to you today.

The Acting Chair (Mrs. Karen Redman): Thank you very much.

We'll now hear from the Confederation of University Faculty Associations of British Columbia, Dr. Jim Gaskell and Robert Clift.

Welcome.

Dr. Jim Gaskell (President, Confederation of University Faculty Associations of British Columbia): Thank you, Madam Chair.

CUFA/BC represents 3,500 professors, instructors, academic librarians, and other academic staff at Simon Fraser University, the University of British Columbia, the University of Northern British Columbia, and the University of Victoria.

Our general mandate is to advocate for a system of high-quality public post-secondary education and training that contributes to the social and economic development of Canada and provides opportunities for all citizens to develop their intellectual abilities and skills.

Canada has an enviable reputation for high-quality post-secondary education, but the quality on which that reputation is based is slipping away. Let me give you some examples.

At the University of British Columbia, the faculty of science has made many first-year lab courses optional, and has cancelled many other lab courses. At a recent faculty forum, a fourth-year student in cell biology and genetics complained that she was not able to gain enough lab experience at UBC. As a result, instead of proceeding immediately to graduate school, she is doing a fifth year at another university where she can get the necessary hands-on experience. That's not the way to the knowledge-based economy.

At Simon Fraser University, the faculty of business administration decided that all third-year courses had to enroll at least 170 or more students in order to go. That's despite an enthusiastic response from students for an experiential third-year business course in teamwork. The course was cancelled because it could accommodate only 80 students.

We now have classes at our universities so large that there's no space to put all the students. They sit on the floor or go to another room to view the class by one-way television. That is not the way to develop critical-thinking skills.

The quality of our universities depends on our ability to mount teaching programs for the next generation of nurses, doctors, economists, business people, and scientists who will lead Canada into the knowledge-based economy. This requires both an environment that is conducive to learning and engagement with excellent faculty. It also depends on our ability to conduct research programs that will contribute to our cultural, social, economic, and material development.

We appreciate the government's recent increases in funding to the national granting councils, the initiation in infrastructure grants, and the creation of research chairs. These increases, though, only bring Canada back to its 1994 level of investment in research.

Compared with our major economic competitors, this is a poor record. Compared with our major G-7 competitors, only Italy is below us in terms of total expenditures on research and development as a percentage of gross domestic product. Only Italy is below us in terms of the investment by business in research and development. Increasingly, the private sector has relied on public universities to do their research for them.

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Federal cutbacks in funding programs that make money conditional on private sector partnerships have led to restrictions on research that is not immediately “commercializable”. This is likely to have long-term consequences in terms of basic research that will produce the equivalent of the internal combustion engine while others are working on better buggies.

John Polanyi, Canada's Nobel laureate in chemistry, said last week at a royal society symposium;

At a certain point...we don't have universities any more, but outlying branches of industry. Then, all the things industry turns to universities for—breadth of knowledge, far time horizons and independent voice—are lost.

While there have been some recent improvements in investment and research, there has been a continued deterioration in core teaching programs. This is where there is a desperate need to restore breadth and choice in academic programs for students; to reduce class sizes, especially in the third and fourth years; to increase graduate student enrolments to educate the future university teachers and researchers; and to recruit and retain faculty.

In the next decade, Madam Chair, there will be a 50% turnover in faculty as the baby boomers retire. As I'm sure you're aware, the academic market to replace them is international. Let's look at our international competitors' investment in public post-secondary education.

This map provides a comparison of Canadian provinces with U.S. states in terms of public funding of public post-secondary education.

By the way, we'll circulate a copy of this map to all committee members.

Although it is in colour, it's not a pretty picture. I'll draw your attention to the primary green, light green and dark green, in the United States and the one light-green Canadian province, Saskatchewan. These are states or provinces that have increased the public investment in public post-secondary education over the last three years. The red are decreases of 7% or more.

It's stark in Canada. Look at British Columbia. We had a modest increase of 1% over the last three years, but look at our nearest competitors—Washington, plus 15%; Oregon, plus 20%; California, plus 42%; Florida, plus 36%; and Massachusetts, plus 30%. We're not in the same league.

The consequences are higher salaries for professors in the United States, increased research opportunities, and improved opportunities for teaching. This investment leads to improved programs for students and improved access for students. We can afford to do no less.

Last year the health care system was seen to be in desperate straits, and the government responded with a series of initiatives to address its needs. The post-secondary education system is in a similar serious crisis today. The students and faculty who have so much to give society need your help to make it happen.

The premiers have made a commitment, as they did with health care, to flow additional CHST funds through to post-secondary education. We respectfully suggest that an additional $2 billion for 2001 and 2001-02 would begin to address the needs I have outlined.

Thank you for your attention.

The Acting Chair (Mrs. Karen Redman): Thank you very much, Dr. Gaskell.

We'll now hear from the Canadian Association of Student Financial Aid Administrators. Ms. Jennifer Orum is vice-president and the coordinator of financial aid and awards at the University of Victoria. Ms. Lori Nolt is secretary-treasurer and director of student awards and financial aid at the University of Victoria.

Welcome.

Ms. Jennifer Orum (Vice-President, Canadian Association of Student Financial Aid Administrators): Thank you, Madam Chair, and members of the committee.

The Canadian Association of Student Financial Aid Administrators represents professional and administrative personnel from Canadian universities, colleges, and technical institutions who administer student financial aid and awards programs.

I'm Jennifer Orum, vice-president of CASFAA and financial aid administrator at the B.C. Institute of Technology.

With me is Lori Nolt, secretary-treasurer of CASFAA and student awards and financial aid director at the University of Victoria.

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CASFAA acknowledges that the 1998 federal budget included initiatives that are significantly enhancing accessibility to post-secondary education in Canada. These include the Canada study grants for students with dependants, expansion of the Canada student loans interest relief program, tax relief for Canada student loans interest payments, broadening the education tax credit to part-time students, the Canada education savings grant program, and the Canada millennium scholarship fund, which this year begins issuing both need-based general awards and merit-based scholarships for exceptional students.

Those initiatives, together with the harmonization discussions currently taking place between the federal and provincial governments aimed at improving the existing Canada student loans program, will reduce many of the barriers to post-secondary participation in Canada. While these developments will go a long way toward reducing student debt and loan default issues that have emerged over the past decade, CASFAA believes there are other measures that could further enhance accessibility to higher education in this country.

As input to the planning for the forthcoming federal budget, CASFAA would like to focus on one such initiative, a national work-study program. Work-study refers to a need-based program of student job creation that provides part-time employment opportunities for students while they are attending classes. It is different from but complementary to other effective strategies, such as cooperative education and summer employment programs.

Work-study has been funded at the provincial level for many years in Ontario and British Columbia, and this fall it has been introduced by the Province of Quebec. In work-study programs, students with high financial need and the necessary skills are given part-time jobs on or off campus. Positions are related to the student's study program and/or career direction. In addition to offering students an alternate financial resource to limit debt or cover shortfalls in their other resources, work-study can provide work experience that will enhance their employability at the completion of their post-secondary studies.

Work-study is not a make-work program. In addition to assisting students, an effective program can be of substantial benefit to post-secondary institutions through research and project-oriented positions. There can be significant benefits to communities at large if off-campus work-study components are established in cooperation with business and non-profit voluntary organizations.

A national work-study program addresses two of the themes outlined by Minister Martin as the foundation for the government's economic framework for Canada. First, it can assist in making the economy more competitive through innovation and research and development, and secondly, it can support the government's goal of providing security and opportunity for Canadians by investing in their skills, their knowledge, and their capacity to learn.

Work-study can assist in strengthening Canada's infrastructure in increasing the chances that Canadians will benefit from the challenges of the new economy and in enhancing productivity. Work-study is a type of program that can have a major multiplier effect, contributing to many public policy goals simultaneously.

CASFAA therefore recommends that a national work-study program be established as an integrated part of the government's student financial aid assistance program in Canada.

Thank you very much.

The Acting Chair (Mrs. Karen Redman): Thank you very much.

Representing the City of Vancouver is Mayor Philip W. Owen. Welcome, Mayor.

Mr. Philip Owen (Mayor of Vancouver): Good morning, and thank you very much.

First of all, I'd like to say I support those here today who are talking about youth, because for intercity youth, particularly in large cities, it's very crucial. Ongoing education certainly equips them for future involvement in their community and in local government, and it's essential that the quality at all educational levels be maintained. So I am certainly encouraged by what the previous speakers have said.

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I'd like to thank you very much for the opportunity to be here to speak to you today. As you know, there are issues around infrastructure, services and programs, housing, and so on. There has been a big loss at the municipal level. There has been a tremendous amount of offloading, and that has caused us great difficulties. We hope that will soon come to an end.

We do balance our budgets, yet we have increased populations moving into urban centres. Increased demands and reduced programs make it very difficult for the services to be maintained and to enhance the quality of life for the people who are intending to move into the cities across Canada. Indeed, large cities all over the world are getting larger and larger.

To touch briefly on the issue about the federal surplus and what approach you take regarding servicing the debt or reducing taxes, I think some portion of the debt has to go into those two areas. I'm not sure what the total is, but whatever is taken, that has to be addressed. We can't leave the debt hanging there forever.

When you continue to increase personal income tax, you leave less discretionary money in people's pockets, so less money goes into the economy. It has been proven, when you think of England, which at one time had personal income tax at 80%; it's now down a little below 40%, and their economy is booming. It has happened everywhere. People tend to spend the money they have, and that creates economic stimulus and opportunities for everybody.

Whatever portion is set aside, in my personal view, I would like to see perhaps 40% of the surplus go to total debt and 60% put aside for personal income tax reductions or corporate income tax reductions. Whatever happens, something has to go to those two areas.

Because I have only a few minutes, I have outlined in a paper, which you have in front of you, seven different issues that are before us. I am encouraged by the federal government's commitment to infrastructure. Urban cities right across Canada encourage and support that. There have been two infrastructure programs, and the Prime Minister has announced that they're looking forward to renewing that again at the end of the year 2000-2001.

The Federation of Canadian Municipalities meets every June, and the big-city mayors, of all cities with populations over 300,000, meet twice a year. We're meeting in Vancouver this weekend, and I know the national infrastructure program is something they support strongly. That's one-third federal government, one-third provincial, and one-third municipal. That is a perfect program.

I hope the federal government will continue to pay its fair share of property taxes. I think that's in hand now.

The ongoing funding for crime prevention, drug treatment, and community safety programs is good. The City of Vancouver applied for some money from the national crime prevention program, and we got a commitment of $5 million, a million dollars a year for five years. As a result, along with Hedy Fry from the federal government and Jenny Kwan from the provincial government, I signed a draft, the Vancouver agreement, which is some long-term sustainable funding to keep programs going through different elections and different governments, whoever is in power, dealing with social problems in inner cities, crime, and drug- and alcohol-dependence issues and programs. So that national crime prevention program is a really good one.

Homelessness in Canada's urban centres is a major problem in Calgary and Toronto. We haven't quite the problem here because we are in the social housing business in a big way. The provincial government has stayed in, and in the last four years we have built an average of 350 non-market social housing units in the city of Vancouver. That's 1,400 units, and 1,100 are planned for this year and next year. That's primarily the provincial government and the city. Minister Bradshaw has been here. I've met with her a few times, and she's looking at that, and we're looking forward to some results from Ottawa when she finishes her recommendation. It was stimulated by Toronto's major problem.

One of the other two issues is social services to aboriginal people living off reserve. It's a big problem in Vancouver, and I know it is a problem in the prairie cities. That is one of the areas we're using some of our national crime prevention money to address, but it is a major problem.

The other issue is the cultural sector. We welcome the government's recent renewed commitment to culture after many years of decreasing that funding. We'd like some attention paid to the per capita funds that are assigned to the various provinces. It's not particularly good for British Columbia when you look at the per capita grant program for culture, but culture certainly is a thing that we have to keep alive. The creative area is absolutely essential. We are very interested in someone paying a little attention to that because it's not quite equitable.

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With that, I'd like to thank you very much for the time. I know we want to keep this all very compact. I thank you for this opportunity to speak to you, and good luck in your deliberations.

I admire federal government people. We just had a municipal election in Vancouver. I drive to city hall and I go home, then I drive down here for a few minutes, go back to city hall and get home easily. I think of you people travelling around the country doing this. I admire you.

I admire people from British Columbia particularly who run for office, the MPs who have to travel back from Vancouver to Ottawa and then get committees and move around the country day in and day out, week in and week out. So thank you for being here and listening to me.

The Acting Chair (Mrs. Karen Redman): Thank you, Mayor Owen. I have to tell you, I'm from southern Ontario, and whenever I'm feeling sorry for myself, I think of my colleagues like Sophia Leung over here and I realize that my commute is a whole lot less than theirs. So thank you for your kind words.

Mr. Philip Owen: They go to the airport on Sunday afternoons, fly back to Ottawa, and then fly out Friday night and go to the constituency office Saturday, and then try to go back on Sunday. It's not much of a life.

The Chair: Thank you.

Next we'll hear from the University Presidents' Council of British Columbia, represented by Don J. Avison, president; Dr. Jack Blainey, president, Simon Fraser University; and, Dean Goard, secretary to council.

Mr. Don J. Avison (President, University Presidents' Council of British Columbia): Thank you, Madam Chair. I'm Don Avison, and I'm with my colleague Dean Goard today. As of this point in time, Dr. Jack Blainey from Simon Fraser University has not managed to cross the threshold of the door, so I don't think he'll be with us this morning.

My dilemma this morning was that there were so many interesting and I think useful things said over the course of the last 40 minutes, and I have managed to scribble so many notes about the points made by my colleagues, that my notes are now virtually not subject to being deciphered. So bear with me.

I want to take some time to draw together a couple of the threads that were talked about during the course of the presentations here this morning to try to give you a sense of what I believe the real issues are here in British Columbia. They are the issues that ought to motivate you in your deliberations to come to the conclusion that education and post-secondary education ought to be a key part of the foundation for the construction of the upcoming federal budget.

I suspect that over the course of the recent weeks since you began your deliberations you have heard many references to the significance of the approaching millennium and the choices that need to be made if we are going to properly position ourselves for the future. That's the only reference I'm going to make to it this morning.

I think it is essential to try to give you an idea about the British Columbia perspective of where the difficulties are. I was struck by the things that were being said by Mr. Chudnovsky this morning about the perspective of teachers who have the responsibility for the education of children who are currently in the kindergarten to grade 12 system in this province. It's a very significant burden that teachers carry. I take seriously the point he made about the nature of the fiduciary obligation that teachers believe they have to the students who are in their care and custody.

I was very much struck by the point he made in relation to the significance of rising levels of student debt and the burdens that students will experience when they come into the post-secondary system. The reason I'm struck by this is that I share the concern, but I'm more concerned about whether it will be possible for the students who ought to have access to the system to get through the door of the post-secondary institutions at all.

In British Columbia we're already turning away significant numbers of students who are entirely well qualified to have the benefit of a post-secondary education at a time when there is a rising level of understanding about the importance of post-secondary education and the importance of a knowledge-based economy. The University of British Columbia turns away substantial numbers of people every year, and that's the same situation that exists with the other universities, and with the colleges and institutes in the province as well.

There are other very significant systemic issues that need to be addressed. Access has been a priority in British Columbia. Many of the impacts of the reductions, of the withdrawal, of money from the CHST by the federal government were to a degree moderated by the provincial government in British Columbia, but they came at a cost. Access was the premium that the Province of British Columbia wished to pursue, but there is a rising level of concern about access to what.

You heard from Mr. Gaskell the concerns about things we used to take for granted when we had the benefit of a post-secondary education. A four-year program would take four years. Increasingly, we see students who are taking five and six years to complete four-year programs. That's not a wise way, in fact it's a bad way, to position ourselves to take advantage of the movement towards a knowledge-based economy.

On the access issue, in British Columbia we face even more profound challenges over the course of the coming years. You've heard about some of the issues about the rising level of class sizes, and that's an issue in every university in British Columbia, and increasingly it's an issue in provinces elsewhere as well.

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We face a number of competing demands and competing impacts. British Columbia right now has the fastest growing level of youth population in the cohort ages 18 to 24, and over the course of the next decade that youth cohort will increase by 14%. When I say there will be a 14% increase, that's not the British Columbia 14% increase; that's the national increase: 14% of the national increase will be in this province.

On the capital side in universities right now in this province, nothing is going on. We have had the benefit of cyclical maintenance to preserve the capital infrastructure that now exists, but the level of capital activity that is underway is almost non-existent.

Mr. Chudnovsky talks about the need—and it's a very significant need—to ensure that we consider and prepare for the needs of the students who are in the system now. The point I want to leave you with, which I think is more significant than any other this morning, is that we are not ready. We will not be ready. We don't have places to accommodate the needs of those students. We don't have the space and the capacity to adequately accommodate the needs of the students who are there now. That's an issue not only for British Columbians, but it is a profound issue of national significance if we are going to be nationally competitive into the 21st century—I promised I wouldn't do it again; that's the second one.

You saw from Mr. Gaskell and from Mr. Clift what I think is a compelling piece of demonstrative evidence about the situation now with the investments that have been made in education elsewhere. The impact in the United States is particularly significant. It's almost at twice the rate that U.S. governments, both at the state level and nationally, are investing in research and in education. In British Columbia we show a 1% increase, but in real terms, when you consider the cost-of-living impact, we are in decline. And that's the case through much of the rest of the nation as well.

So I say to you that there is a national obligation. There's an obligation on the shoulders of both senior levels of government as you make choices for the future, as we build bridges to the future, that we don't build the bridge only halfway, that we have a clear sense of where it is we need to get to, and that you make the investments that will help to get us there. Right now, that bridge is only being built halfway to the future and that's not good enough.

Thanks very much.

The Acting Chair (Mrs. Karen Redman): Thank you very much to all the presenters for your thoughtful presentations.

We're going to start a five-minute questioning round from the members of the committee and we're going to start with Monsieur de Savoye.

[Translation]

Mr. Pierre de Savoye (Portneuf, BQ): Thank you, Madam Chair.

Thank you for coming here this morning to share your concerns with us. Most of you are concerned about the education sector. Mr. Mayor, of course, is interested in the municipal sector.

First of all, I would like to focus on the concerns with respect to education. Mr. Mayor, I have a question for you, later on.

There is one thing that costs more than education itself, and that is not investing in education. The facts that you presented to us are similar to those that have been reported in other provinces by people in the teaching profession. Since 1994, the cutbacks have hurt a great deal, and the table that was shown to us earlier clearly indicates that Quebec, unfortunately, has not escaped this problem.

You talked about the predominant concern here in British Columbia, which is accessibility. The funding for post-secondary establishments comes from two sources: money that the government gives to the establishments and tuition fees that students have to pay.

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If tuition were increased, the institutions would obviously have more money, but fewer students. If, however, tuition costs were lowered, the students would have better access to these establishments, but as someone said earlier, what would they have access to? To underfunded teaching institutions.

You are asking the federal government to reinvest in education through transfer payments. I have two questions, which several of you will no doubt wish to answer.

First of all, in your opinion, what type of balance must be maintained between the bill to be borne by the student and the money that is to be provided by the State in order to fund post- secondary education?

Secondly, given that the federal government's report card with respect to post-secondary education is, as in the case with health, not very edifying, and that the federal government is not maintaining a stable a level of funding, would it not be better if the federal government were to decrease its portion of taxation and enable the province of British Columbia to collect a little bit more taxes in order to, in turn, look after education itself?

Those are my two questions. I'd like to hear what you have to say.

[English]

Mr. Don Avison: Perhaps I will address one of the two questions and then leave it to the others to endeavour a response to the second question you raised.

First, in relation to the issue of tuition costs and what the balance ought to be, the situation in the province of British Columbia is not dissimilar to the situation that exists in the province of Quebec, where a policy decision has been made by the provincial government to limit the costs on tuition. There has been a tuition freeze in place in British Columbia now for four years, and I believe it's accurate to say that there has been a similar freeze in place in the province of Quebec for some significant period of time.

That's not the situation in other provincial jurisdictions. We have seen quite a different approach in Ontario, for example. The limits on tuition have been significantly relaxed over the course of the last year or so and that has resulted in a dramatic increase in the level of tuition. It is a legitimate policy decision for governments to take, based upon the desire to secure and maintain access and affordability, to limit tuition costs.

The major issue here in British Columbia is not really so much what the balance ought to be, but if those decisions are made to maintain tuition at what it was at levels four years ago, there must be adequate levels of compensation so that the core budgets of the universities—and I'm sure it's the case with other institutions as well—are then capable of providing the educational experience that students ought to expect. And that has not been the case here. You've heard from others about the implications of the decline in the quality of programming as a result of adding students.

We've been adding students in British Columbia at a level of approximately 2,900 students per year with what effectively is the same level of money, and the arithmetic is pretty simple to do. If you're adding 3,000 more students each year, and if you consciously elect to freeze tuition, it will mean higher class sizes and some decline in the educational experience.

So that's the real issue that needs to be addressed in British Columbia. The bottom line is that there needs to be sufficient amounts of money in the core budgets to be able to accommodate the needs, and if the need is only to be on the backs of students through higher tuition levels, that in itself is not a sufficient answer.

The Acting Chair (Mrs. Karen Redman): Mr. Gaskell.

Dr. Jim Gaskell: I would like to address both those interesting questions, and I appreciate Mr. de Savoye's characterization of the situation.

In the past we've had a situation where we have had high-quality education in Canada with reasonable access through reasonable tuition fees. The situation has become out of balance, especially since 1994, as the federal government has withdrawn money from the CHST that goes towards funding quality programs—and that means good teaching opportunities and higher access for students. Canada has had a good record of access for students, which has come about because the federal government has assumed a strong role in post-secondary education. That is failing.

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Our past experience has been that we have had the appropriate balance of good access and high-quality education, coupled with sufficient funds from the federal government and reasonable tuition fees from the students. What we are calling for is a return to that situation.

I don't think simply giving tax points to the provinces will do that. In the past, Canada has had an enviable reputation for having a fairly uniform standard of education across the nation. No matter where you went to university in Canada, you were assured that you were going to get a good education.

In recent years, the differentiation between universities has begun. I think the federal government has to assume a role in re-establishing the conditions whereby we have a uniform standard of quality education across the country, with, of course, due regard for the responsibilities of provinces within that system.

The Acting Chair (Mrs. Karen Redman): Ms. Shaw.

Ms. Maureen Shaw: Thank you very much.

On this first point about tuition, we in this organization support the tuition freeze and would support the elimination of all tuition for students. We see that tuition is in effect a form of taxation on students, on those who must try to get their education. We see that the benefits of education and training accrue to all of society; therefore, all of society should bear the cost.

On the second point, we see that, again, it is a national responsibility to provide education and training. I just want to point out that the federal government does have an obligation in the area of training, in assisting both those who are unemployed and those who are new immigrants. I did not have time in my presentation to point out the federal programs that in the past have assisted those who have come to our country with insufficient language skills. The federal government has done a great deal to ensure that there are dollars put into programs for immigrants who need English or French language training. We are seeing that those dollars are also under threat, and therefore the immigrants who are coming to our country are not able to access the classes as they once were.

We would ask the federal government to ensure that training programs across the country are also fully funded in order to meet the needs of both the people within Canada and the people who are coming to this country to achieve new opportunities.

The Acting Chair (Mrs. Karen Redman): Monsieur de Savoye, do you have a question for the mayor?

[Translation]

Mr. Pierre de Savoye: I do, of course, have a question for Mr. Mayor. I had promised to ask you a question, Mr. Mayor.

With respect to social housing, I read in your brief that two of Vancouver's main shelters had to turn away 4,000 people last winter owing to a lack of space.

My question is simple. Where did these people go and what were the consequences of the situation in human and financial terms?

[English]

Mr. Philip Owen: We have 300 permanent shelter beds and we add 100 extra in two different parts of the city, with provincial help. In severe emergencies, we have community centres, the downtown east side Carnegie Centre and the Avalon Salon centre, which offer various services. They have the ability to set up temporary facilities for people. We also have people who are moving throughout the city to make sure that those who are outside—a lot prefer to be outside—are fine and well and that food is taken to them when they say they don't want to go into the shelter.

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It's not as big a problem as it is in Calgary and Toronto, where the weather gets really cold and it becomes a very severe problem. We can accommodate on a temporary basis—not in a fixed room, not in a shelter with adequate facilities, but with temporary facilities. They can be accommodated.

Mr. Pierre de Savoye: So about those 4,000 people that were turned away. What exactly happened to them? Did they find temporary shelter elsewhere or did they just stay in the streets?

Mr. Philip Owen: Well, some stay in the streets and others find shelter elsewhere.

That's 4,000 over a long period of time.

Mr. Pierre de Savoye: Yes.

Mr. Philip Owen: They figure there may be 200 to 300 a night. There are maybe 100 people who refuse to go in, and if they're no harm to themselves or anybody else, you can't force them into a shelter.

Mr. Pierre de Savoye: My point here is to understand whether there is a hidden cost in all of this. Would these people eventually turn up at a hospital because their health would have degraded or something like that?

Mr. Philip Owen: Yes, possibly, and it becomes an ongoing thing. If we don't provide for them at the beginning, it just multiplies the problem and becomes an ongoing and increased financial pressure and an increased cost to society.

[Translation]

Mr. Pierre de Savoye: Thank you very much.

[English]

The Acting Chair (Mrs. Karen Redman): Thank you.

The honourable Lorne Nystrom is next.

Hon. Lorne Nystrom (Regina—Qu'Appelle, NDP): I have a couple of questions and, first of all, a comment.

I noticed on the chart that was handed around that my little province of Saskatchewan does pretty well.

Dr. Jim Gaskell: Congratulations.

Mr. Lorne Nystrom: It's actually pretty good, because a few years ago Saskatchewan had a humongous debt that was left by the previous government, under Grant Devine, and they've done very well in terms of reinvesting in education and health care.

Anyway, I have a couple of questions. I wanted to ask some of the people across the way about their vision of education in this country 10 years from now if there's no more federal funding. You're talking about private schools. You're talking about more private sector investment in education. Will we have McDonald's University and Coca-Cola College? What is the vision? What is this going to look like in about 10 years' time?

If we follow the advice of some people and put no more money into education and health—in other words, if we put it all into reducing the debt and tax cuts and so on—what is that vision? What is that picture? I think it's important for us to know that from people like yourselves who are experts in the area.

The Acting Chair (Mrs. Karen Redman): Ms. Shaw.

Ms. Maureen Shaw: We're already seeing the effects of privatization in this province. What we can see is a two-tier—or even many-tier—education system that would allow education for the rich and perhaps no education for those of lower-income families. Right now the community college system provides regional access throughout the province to many students and to families who have never before had anyone in their families attend post-secondary education.

If we are to go the route of privatization of education, we would see very high tuition. The cost of education would be borne by the student. Therefore, only those of very wealthy families would be able to go on to post-secondary education. We would therefore have few people able to access the so-called knowledge economy. We would perhaps see the institutions crumble; perhaps there would not be the quality of education, the consistency of education, that has been and is now provided throughout British Columbia for its citizens.

The Acting Chair (Mrs. Karen Redman): Mr. Chudnovsky.

Mr. David Chudnovsky: Thank you, Chairperson.

I'd like to make two points in this regard. The first one is that it seems to me that the history of education in Canada is the history of a public trust, that is, education is seen to be a community responsibility.

The increasing encouragement of privatization and commercialization at all levels of public education is a concern, not just because it's uncomfortable to see a Nike sign in the middle of the gym floor, although that's uncomfortable and it's something we need to be concerned about. It's a problem because at what point do policy, curriculum, and our broader notion of what it is we are doing in schools become driven by private concerns and are taken away from the public trust it has been historically? That's the first concern I would express: to what extent does curriculum and policy become driven by those who pay the shot and taken away from us as a public trust?

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The second comment I want to make comes from the kindergarten-to-12 system. It's maybe not immediately relevant to your deliberations, but I want to make the point anyway, because I think it's important. It has to do with equity.

I worked in an elementary school for nine years where, when we did fundraising, we waited until the week after the welfare cheques came, because the people who sent their kids to that school couldn't afford to help with what was going on in the school except until after the welfare cheques came. So what are we saying about the opportunity students have to further their education and to have the things we would want them to have in school when one school—or university or college, it doesn't matter—is able to raise funds easily and quickly from a relatively wealthy community and another isn't?

It's a question of equity, to the extent that we see schools, colleges, and universities as private institutions. To that extent we run the risk of not having an equitable system.

The Acting Chair (Mrs. Karen Redman): Dr. Gaskell.

Dr. Jim Gaskell: Thank you, Madam Chair.

I just want to point out some of the additional consequences of a system of very stratified education, such that Maureen Shaw articulated, which I think would result from the withdrawal of federal funding from post-secondary education and education in general.

I think we have to look at our neighbours to the south to see one of the consequences of that. Although there has been significant funding in public education, there are an enormous number of private degree mills in the United States. If an employer in Canada is looking at a list of candidates for a position who have a degree from a Canadian university, the employer knows that no matter which Canadian university they have a degree from, it's a good degree. In the United States you have to know the institution they got the degree from. Everybody recognizes Harvard, MIT, Berkeley, and so on, but an awful lot of degrees offered in the United States aren't worth very much.

A system would develop where the employers are not going to be advantaged, because you're likely to run into a situation where many of the graduates of these institutions that are not well-funded do not have the kinds of skills the employers are asking for.

We've done some research in other countries in the Commonwealth to look at what happens when you begin to privatize universities. In Britain, under the Thatcher government, the University of Buckingham was set up as a private institution. They had great hopes. So far it's the only institution in Britain that has gone that way, because they found that in fact it doesn't pay. It quickly had funding problems, and the first programs they cut were the expensive programs, such as science.

We see that happening in British Columbia where the science labs are being cut in order to save money. If we're talking about a knowledge-based economy and the importance of science in contributing to our economy and in order to be competitive with our G-7 partners, that's just not the way to go. You need those labs, and you need engineering. Employers are asking for those skills from our graduates. This just isn't the way to go.

Thank you.

Mr. Lorne Nystrom: I'd like to ask a question of Mayor Owen, if I may. First of all, congratulations on your win here. I think it was on Sunday, just a few days ago.

Did I hear you correctly when you said that of the federal surplus coming down, about 40% should go to pay down the debt and 60% for tax cuts?

Mr. Philip Owen: No, whatever portion you put aside for those two things, I assume you.... This is just me personally speaking. If you have $40 billion, you might say, we're going to take 20% of our surplus every year and put it aside for either debt reduction or tax reduction. If it was, as I say, 20% of $40 billion, you would have $8 billion, and 40% would go toward paying down the national debt and 60% for tax reduction. It would be 40% and 60% of that $8 billion, not of the total $40 billion.

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Mr. Lorne Nystrom: I see.

Mr. Philip Owen: Just pick a percentage of the total $40 billion, maybe a quarter, say, and divide it up accordingly.

Mr. Lorne Nystrom: How much would you spend on program enhancement? What's your recommendation to the committee as mayor of Vancouver? Should we spend around half of the surplus in terms of reinvestment in education, health, homelessness, farm aid programs, and social housing?

Mr. Philip Owen: I think it has to be spread around. That's why I said take a percentage, and I think I'd rely on the professional staff of the minister. I haven't worked on or talked to my staff about what the recommendation would be. I think that after you reduce the debt and taxes, the remainder should be spread to various areas. The cities in this country have been hit very hard in the past five years, and it's going to get worse, not better, because there's more demand, more pressure, more people moving in, and more requirement for social services. We have the whole issue of drug addiction, alcohol dependency, and the education issue you heard about this morning. I think we have to address a multitude of services. I haven't thought about what it specifically should be. I'd have to do some homework on that.

Mr. Lorne Nystrom: Could I ask just one more question?

The Acting Chair (Mrs. Karen Redman): You may. Make it short.

Mr. Lorne Nystrom: This is a totally different question, and it's a bit off the wall, Mr. Mayor. I apologize for that. Peter Lougheed was quoted in the National Post yesterday as expressing concern about the tremendous number of foreign takeovers of our economy because of the low Canadian dollar and other problems. It was really quite newsworthy to see Mr. Lougheed do this. He has been on the board of about 15 very large Canadian corporations. There's also a big story in the National Post today where some federal ministers are anonymously quoted as saying they share Mr. Lougheed's point of view that our economy is gradually being sold out on an increasing scale.

Do you share that point of view in terms of what's happening in British Columbia? Is that a problem you've had in this province? For example, MacMillan Bloedel, a very prominent, long-time Canadian company, was purchased by Weyerhaeuser, an American firm, just a little while ago.

I have the same concerns, by the way, and when Peter Lougheed starts raising these concerns, I think it's something we should take note of.

We just left Alberta yesterday.

Mr. Philip Owen: I personally don't consider it to be a major problem. We have this global economy going on, and the banks have tried to get into the global world. Our resource-based industry in this province has suffered terribly in the last three years because they can't be competitive and they can't get into the world markets to buy, sell, and trade products and so on. So I'd probably fall on the side that it's the market forces and it might not be such a bad thing.

I'm sorry that somebody didn't buy Eaton's, for example, Federated or Nordstrom's. It went under, as did Woodward's. Birks got into trouble. The retail sector has suffered terribly in this country. If it's going to go into the tank or be saved by some foreigner who will maintain those jobs and those traditional retail outlets, then I would not have difficulty with that.

Mr. Lorne Nystrom: Does anybody else want to comment on that, or does everybody agree with the mayor?

Mr. Philip Owen: There are tens of thousands of people losing their jobs and pensions, and suppliers are getting 10¢ on the dollar. That has a huge, crumbling effect on our economy. It affects a lot of people and government revenue and everything when organizations such as Eaton's and Woodward's fold up.

Mr. Lorne Nystrom: I think I see a hand up over there.

The Acting Chair (Mrs. Karen Redman): Ms. Shaw, quickly.

Ms. Maureen Shaw: Education is being seen more and more as an industry. We're very concerned about foreign takeover of our education system, because it is seen as a profit-making venture. There is the recent example I cited of the Apollo Group looking at the University of Phoenix establishing a place in Ontario. I think there are other incursions from other countries, because they can see education as potentially profitable, and that certainly worries us.

The Acting Chair (Mrs. Karen Redman): Thank you.

Ms. Leung.

Ms. Sophia Leung (Vancouver Kingsway, Lib.): First of all, I'd like to say I'm happy to be home. It's not raining. It's great to see so many of you.

I would like to congratulate Mayor Owen on his third-term election victory. I know he has worked very hard for our city on many different issues. He has been instrumental in setting up the coalition project work for the downtown east side. I know, because I was involved in working with him.

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I have a couple of questions for all of you, the mayor first. As you know, the Liberal government has proposed a 50-50 approach—50% to pay for the debt and the other 50% for tax cuts and social spending. I just want to get some feedback from all of you. Maybe the mayor could start. We did discuss that earlier.

A voice: Sophia, are you saying of the total surplus?

Ms. Sophia Leung: Yes, 50% for debt and tax cuts and 50% for social spending.

Mr. Philip Owen: That is the total surplus. Assuming it's $40 billion, you'd take the total $40 billion and—

Ms. Sophia Leung: Yes. Right.

Mr. Philip Owen: Well, I haven't studied it in detail. I'd like to see that some goes to debt, some goes to tax reduction, and that there's something to build the support services needed that have been cut—the ongoing pressures that we've heard about today in social programs, and so on.

Ms. Sophia Leung: Right.

Mr. Philip Owen: If that's the number—50%—let's try it and see how it works, as long as the surplus goes into various areas throughout the economy.

Ms. Sophia Leung: I also heard them mention a figure of $2 billion—I think it was Dr. Avison—so I just want to be aware of how we are going to divide the pie.

In that vein, as a member of the post-secondary education committee—some of you know I have been on that—I want to say that last week we met a group, the president and executive of AUCC. We discussed quite extensively the transfer and how we're going to put more into post-secondary education. We have no difficulty, you know that. We all support it, especially the committee.

The question is, as you know, when the transfer goes to the province, there are no terms. We cannot dictate access or how they allocate the funds. I just want to put the question to you: how are we going to manage that?

Mr. Don Avison: Let me thank you first for the elevation of my academic standing, but let me also give credit to Dr. Gaskell for being the individual who mentioned the $2 billion number. I support him.

I'd also like to address a number of the issues you've raised about where the money ought to go. There is an issue over what the respective division ought to be. I want to deal with this issue of whether there are going to be amounts that will be transferred to support social infrastructure, emphasizing the need for the transfer of that money to specifically support education and post-secondary education.

The reason I say that is that given the pressures that continue to exist in other areas of activity that eat up a lot of money, to put it as bluntly as I can—and health care is probably the most significant one—that's an issue that received a considerable amount of attention last year as a result of the events that surrounded the annual premiers' conference and was at the very heart of the deliberations that took place in the social union agreement that had a corresponding health accord negotiated along with it. As a result of that, the Government of Canada and Minister Rock dedicated significant amounts of money to health care. The issue of education was not addressed at that time and remains unaddressed now.

There were a series of other events that took place in the intervening period of time between when the money was provided by the federal government and targeted to health care and the events that are developing as we make our way to the next federal budget for 2000 and 2001.

Some of the most significant ones were the meetings of the western premiers' conference that took place in, I believe, June of last year, where post-secondary education was identified as one of the key priorities, and where western premiers, at that point in time, invited the federal government to target the funding to post-secondary education.

So is there a capacity to ensure that the money gets to the right place? I say to you, absolutely, the federal government has the capacity to do so.

Also, in regard to the annual premiers' conference, many had the same indications about the identification of education as a priority, and rightly so, and many had the same musings about the willingness to receive those funds on a targeted basis.

So my submission is really quite simple. Identify education as the key priority in developing those choices that need to be made for this budget year. Target the money. Ensure that it goes to the places where it is needed the most, not just to accommodate the needs that exist in the provinces, but to accommodate the national needs. We know we're losing ground to other OECD countries, not only on access, and significantly on the research front, but we know we're losing ground most significantly with our competitors in the United States.

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And if I can come to the question that was raised some time ago, the amounts of money that are being dedicated there to research specifically and education generally significantly elevates the threat to the Canadian economy. We're not preparing to respond to that. We will be in a much better position to do so if we've educated the next generation of students that ought to be making their way into the post-secondary system, if we've even made the places for them, and we're not doing that now. This should be an easy choice and it ought to be easy for the federal government, using the social union framework agreement, to make sure that money gets to the right place and that the proper accountabilities are in place.

Ms. Sophia Leung: I just want to say, as you know, we took the social union route for health care. That was a very excellent piece of work. It's not as simple as it appears, so it's going to be quite an effort.

The Acting Chair (Ms. Karen Redman): Sophia, Dr. Gaskell wanted to respond as well.

Dr. Jim Gaskell: I think Mr. Avison has covered most of my points. I just wanted to reiterate that all the major national stakeholders in post-secondary education have signed on to the $2 billion figure, so it's not simply a figment of my imagination. The AUCC, the students, the community college national organizations, etc., have signed on to the $2 billion figure. Rather than get tied up in a particular formula—50-50, or whatever—I think what we need to do, as Mr. Avison has pointed out, is identify the key priorities and find mechanisms by which the moneys can be directed to post-secondary education.

Our figures—not CUFA's, but the national figures—show that investment in education pays off. A dollar invested in post-secondary education pays off as much or more than a business dollar invested in a capital venture. It's a worthwhile investment, not just for the students involved, but for everybody in Canada. It pays off as a social investment.

Thank you.

Ms. Sophia Leung: I have a question for Jennifer.

I'm interested in your proposal, your initiative for the national work-study program. It's an excellent one. As you know, the federal government is already supporting the high school students' summer training program. Is this a similar program for the college students? We are very successful at that. We've all been involved and we see glorious reports. Would you like to expand on that?

Ms. Jennifer Orum: Actually, that is an important point. There are some very excellent existing programs. Some are employment programs, cooperative education programs that allow students to alternate academic terms with work terms.

This is a different concept. Work study is a type of student aid. It's directed to students who prove through government assessment criteria that they are in need of money, that they are not getting sufficient assistance from the other existing programs.

What it does is it provides part-time employment opportunities while the student is in class. It is limited in hours, obviously, not to impact on their studies. But as we pointed out, it can be set up in such a way as to allow institutions—universities and colleges—to have more research positions. It can, if taken into the off-campus sector, be used to create positions for students in voluntary organizations. It could create positions in three levels of government. It's a very flexible program.

One of the things I didn't have time to mention in my brief is that there is a fairly substantive amount of research done on the impact of work-study programs on the retention of students in the post-secondary system. What they found is that students who have a connection to the institution through a work-study program, through a part-time employment program, definitely persist longer and better toward completing their education.

So we feel this could not only address public policy issues relating to accessibility for students who may not be able to pay the cost, but it also can add to the initiatives relating to research and innovation, as well as many of the issues in the outside community relating to the services provided by volunteers, organizations, and the government.

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The Acting Chair (Mrs. Karen Redman): Ms. Shaw, did you want to add something?

Ms. Maureen Shaw: Yes, if I could. Thank you.

I just wanted to say good morning to Ms. Leung. We met in Ottawa last week and were able to talk about some specific issues in post-secondary education at that time.

I just wanted to go to the issue of tax cuts versus social spending. Although I understand the federal government's need to get its financial house in order, I am concerned about the tax cut route. If taxes are cut, that means there is less for social spending. In our analysis, we have seen that spending cuts by the federal government have outpaced the increase in taxes by almost three to one. I think the balance needs to be restored in that regard. We could foresee that if taxes are cut, students will have to pay more of the cost of their education. We're very cautious about that route and would see the need for restoration on the social spending side.

Thank you.

The Acting Chair (Mrs. Karen Redman): Mr. Cullen.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Madam Chair, presenters. I sit here and think what a shame it is that the members of the official opposition of the House of Commons weren't here to hear these very important points. Perhaps Mr. Grubel will convey their concerns.

I had a question for the mayor. I don't know if he's disappeared or if he's coming back.

I also have a question in the context of federal transfers and education. I know you're here today to present your views to federal MPs, and I can quite understand that. I know in Ontario, where I have studied the numbers quite carefully—I haven't done the same here in B.C.—the tax cuts made by the Ontario government, for example, were five times larger than the reductions in federal transfers. Clearly, the Ontario government has made choices.

The situation here is quite a bit different, of course. The economy has not been performing very well. There are deficits, so I don't know what priority the government here is setting on education. Maybe you could comment on that yourself.

While recognizing that we take responsibility for the impact that federal transfers have had, what choices is the B.C. government making here? What is their fiscal capacity to invest in post-secondary education? Last year, we invested $11.5 billion in the health care system, basically to top up some of those cuts. That really robbed us of some other priorities that we wanted to address. What is the fiscal capacity of the government here, realistically, and what is the priority that they attach to post-secondary education?

Ms. Maureen Shaw: The provincial government in British Columbia has made education a priority. To a great degree, our post-secondary system has been insulated from some of the worst effects of the decline in transfer payments. It has been a priority to ensure that tuitions are kept low, that access is increased, and that funding has remained somewhat stable. However, funding has not kept up with the cost of inflation, nor with the increased cost of providing those extra spaces.

I will point out that Ontario, too, has a deficit, and it probably far exceeds that of British Columbia. The Harris government has made its choices and the choices have meant that students are paying tuition fees that are 25% higher than they were in some cases. The number of spaces has decreased, and the institutions in Ontario are facing an even more severe burden than the institutions in British Columbia.

The Acting Chair (Mrs. Karen Redman): Mr. Avison.

Mr. Don Avison: I think I can help to answer at least part of the question. An examination of the finances of the Province of British Columbia and the budget decisions made here over the course of the last several years, particularly since 1996, will reveal that health care and education have been identified as clear priorities. In fact, an examination of those budget decisions through those fiscal years will demonstrate that other areas of activity that are traditionally supported by governments at the provincial level have been in decline as a result of difficult decisions that have been made to focus attention in education at the K to 12 level, and also at the post-secondary level.

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There is an issue about how much more can be done. The provincial economy cannot sustain the continuation of the provision of additional resources at that level without the restoration of funding from the federal government. When you take that and the extent to which those commitments have been made, and then look at the access gap—the gap that needs to be made up between the degree production level of activity and the numbers of students who are in the system—and the incredible wave of students who are coming into the system over the course of the next 10 years, it can't be done. It won't be done unless both senior levels of government undertake the responsibility.

But I think it's fair to say that the provincial government here has taken on board the responsibility to make education a significant priority.

Mr. Roy Cullen: Governing is about making choices, and Canadians actually don't really care much about governments scrapping amongst themselves. With post-secondary education, there is a case to be made for doing something with the CHST, along the lines of what we did with health, but we have to understand that the surpluses have been projected forward in the next five years by eight of Canada's leading economists. They assume only spending in line with demographic growth and inflation and they assume the tax policy from today forward. In 2001, you're looking at $5.5 billion, and $8.5 billion in 2002. We have an infrastructure program request from the mayor. Social housing could get up to $2 billion or $3 billion a year very quickly. We have had a $2 billion number thrown out here. And in terms of the brief on bringing back the CHST, it actually gets up to $4 billion a year very quickly. But this is our job and we accept that.

I had questions for the mayor on the homeless and on the relationship between affordable housing stock and mental health issues. Unfortunately he's left, so I'll save it for another day.

Just very quickly, in relation to Lorne Nystrom's comment about takeovers in Canada if you like, if you actually look at the data over the last 10 years—as I'm sure you've done—the Canada-U.S. foreign direct investment patterns have been roughly equal. In fact, there were more Canadian companies investing in the United States in 1998 than the opposite.

I lived out here for 12 years and I've seen MacBlo being gobbled up by Weyerhaeuser, and it concerns me as well, but I wonder why the NDP government here didn't stop it. I remember when the CPR wanted to buy MacBlo in the mid-eighties, but the government said no. Now suddenly Weyerhaeuser comes in. The B.C. government has or did have the capacity to stop that.

In any case, I'll have to move on, Madam Chair, because I had a question for the mayor and he's not here. Thank you.

The Acting Chair (Mrs. Karen Redman): Dr. Gaskell would like to respond, although I don't know if it's to the last comment or a previous question.

Dr. Jim Gaskell: I just want to respond to the issues of the choices that do have to be made, and of the stresses on the federal government, which are recognized.

In terms of thinking about that, or as a way of thinking about that, I think the important thing to realize is that we're talking here about education as an investment. What we're concerned about is the kinds of investments that will grow the economy so that we can have more of our top priorities.

I want to draw your attention back to the little visual aid I gave everybody. The United States has recognized the importance of education as an investment. I think that is one of the reasons why its economy is doing so well, why innovation in the United States is thriving. Not to invest in education in Canada is a very costly choice, as was pointed out by a colleague. I think that is a crucial decision that you need to make in terms of the future. This is an investment that will pay off. Every single study that has been done in terms of the economics of post-secondary education shows that it pays off. For the cost of the education of one person, that person will pay that off many times over in terms of the taxes they pay. It's a worthwhile investment to make.

Thank you.

• 1030

The Acting Chair (Mrs. Karen Redman): Dr. Gaskell, before I recognize Mr. Jones for his questions, I've been very interested in the map you handed out. I have two universities in my community, and I notice that my whole province is very bright red here. I'm wondering if you have the statistics for what this map would look like if we had used other indices—perhaps spending per capita; spending per student; spending per person, assuming that the age range of students is 18 to 24 years; or spending as a percentage of the GDP. Is it possible to get a map that looks like this with those kinds of indices on it?

Dr. Jim Gaskell: We'll see what we can do, because I think it is. This comes from Council of Ontario Universities data. The council puts it out every year. But we'll do our best and we'll get it to you. I think it would probably be somewhere.

The Acting Chair (Mrs. Karen Redman): Mr. Goard.

Mr. Dean Goard (Secretary to Council, University Presidents' Council of British Columbia): You have a very good point there about the question of expenditures. The graph only shows provincial government grants to the universities, to post-secondary. What's not included is the revenue available through tuition. When you look at the impact of a tuition freeze like the one in this province for four years, the revenue available to our universities relative to that of Ontario has now declined below the Ontario level. In a way, the graph only shows what the government has done. The government in this province has “protected the students by freezing tuition”, but it's been at a cost. It's been at a cost to the income available to universities to offer quality programs and to offer the number of spaces that are available.

So, yes, there will be a different picture if you add in the revenue of tuition.

The Acting Chair (Mrs. Karen Redman): Just as a footnote, WLU is in my community. I met representatives from there last week, and I think the tuition has gone up 123% since 1991.

Mr. Jones.

Mr. Jim Jones (Markham, PC): Thank you very much to all of you.

My question first is to the University Presidents' Council of B.C. If you were given $1 billion or $2 billion, would you wrap that in the traditional bricks-and-mortar type of education, in the hands-on type of classroom, or are there other ways to deliver effective education other than just the traditional classroom type?

Mr. Don Avison: Thank you. That's an excellent question.

The reality is that over the course of the last several years, as the strains have begun to develop and the post-secondary system—both universities and other educational environments—has had to adopt as many innovations as it can to be able to accommodate the needs.

Certainly the strategy is towards the future. Moving towards a knowledge-based economy will require the utilization of as much innovation as possible to ensure that the levels of access are as high as they possibly can be. The utilization of technology certainly has to be part of that. That on its own is not a sufficiently complete answer, however, because the bricks and the mortar are relevant to parts of this as well.

As I mentioned during the course of the presentation, there has been almost no activity in the universities in British Columbia over the course of the past several years. Cyclical maintenance is one of the areas in which the Government of British Columbia has identified a priority. That's a wise investment to make, but there is not the capacity to continue to provide for students in the kinds of numbers we're going to see.

I think it's also fair to say that this province has done really quite well in utilizing available technology in expanding the level of educational opportunity as much as is reasonably possible.

So in answer to your question of whether there are other options that need to be considered, yes, absolutely. But the conventional ways of providing the educational opportunity for students on the campuses in this province will be and must be part of the equation for success into the future. In finding the balance, it has to be really as a consequence of providing for all of those things.

Mr. Jim Jones: Technology is becoming very important as we enter the new millennium. As university presidents, what are you and your colleagues doing with the business sector and the government to make sure you are working on the needs of what the business community needs?

Mr. Don Avison: It's an issue for each of the universities. In this province, the established universities have been involved in working directly with the business community in identifying its needs and its expectations. Some of the new universities that have been established in British Columbia have much more direct working relationships with industry and with business. That's an issue that might be the subject of a comment from others. It's been raised as an issue during the course of some of the presentations here today.

But let me come back to your original question about innovation. I think the evidence demonstrates that in British Columbia there's been a very significant effort not to remain locked in the status quo, but to continue to explore opportunities with the conventional established universities and with the new universities, including the technical university that has been established here and is in the process of development.

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Mr. Jim Jones: I hear people talking about privatization, and one of the things a few professors at universities in eastern Canada told me is that if there was going to be privatization, maybe they should privatize the arts-type programs and the government should stay in the ones where there are government standards, like engineering, medicine, science, and those types of things. That way we would probably lessen the impact on the costs of education in this country, making sure that where we need to put the money it would be properly channelled. What do you think of that idea?

Mr. Don Avison: If I may speak bluntly, not much. In the reports that were made earlier on about the difficult choices that will be made, the reality that tends to emerge all too often is that programs that are significant ones are compromised and choices are made to eliminate those programs. Decisions that would move in the direction of taking the funding support from the kinds of areas you identify I think almost certainly would result in the reduction in the level of the activity. It wouldn't improve the quality and it would diminish the level of activity within the universities. And based upon the comparative levels of information about the kind of support we see for education from business, for example, in the United States and what we see in Canadian jurisdictions, I'm not as confident as perhaps some others might be that the gap would be filled and that the public interest would be met.

So looking for answers that may be too simple in nature may ultimately result in a significant compromise to the public interests, and those prices would be too high to pay.

Mr. Jim Jones: My question now is to David and the British Columbia Teachers' Federation. In your brief here you talk about the new economy. What is your vision of the new economy? What do we have to do as we're going to enter this economy? You say in the brief that the best way for government to ensure that Canadians will be in a position to benefit from opportunities provided for the new economy.... What is the new economy, and what do we have to do to position ourselves for that new economy?

Mr. David Chudnovsky: It seems to me that there are two factors that could be identified immediately as being characteristic of the new economy, both of them fraught with danger and challenges. One is increasing technology and the second is increasing globalization. I think both of those are realities, and the challenge of meeting those realities is to find a way to engage the technology and engage the increasing globalization, without compromising the needs of communities and the needs of citizens.

Mr. Jim Jones: Is that it?

Mr. David Chudnovsky: That's it.

Mr. Jim Jones: Was it Ms. Shaw who mentioned that tuition is a society problem?

Ms. Maureen Shaw: Yes.

Mr. Jim Jones: Do you feel that maybe university-type education should be free versus the point that the students should at least have to invest something in their own continuing education?

Ms. Maureen Shaw: Yes. The policy of our organization is to support the elimination of tuition fees. In this country, we have made K to 12 education free for everyone, and we would say that policy should be extended into post-secondary education and that all of society benefits from a well-educated populace. Similarly, students do pay taxes, both while they are supporting themselves in jobs to support their education and as graduates working in our economy. They more than pay back what they have received in a post-secondary education. So we see tuition as just an unnecessary burden for students, and I think there is a benefit in ensuring that as many as possible can access post-secondary education without the barrier of tuition fees.

Mr. Jim Jones: Thank you.

The Acting Chair (Mrs. Karen Redman): Thank you, Mr. Jones.

• 1040

I would like to thank all the panellists for their really thoughtful presentations. Certainly we will take this all back with us. It will form part of our considerations in our report to the Minister of Finance.

Before I smack the gavel to adjourn, we have had a request by Ms. Moran for a picture. For anyone who's amenable to having their photograph taken, perhaps you would stay in your seat after we have suspended. She would like to capture you for posterity.

Thank you.

• 1041

• 1046

The Acting Chair (Mrs. Karen Redman): I'd like to bring this meeting to order. I thank all the witnesses for coming to give us advice as we travel across the country. It's wonderful to hear individual voices bring forward concerns and solutions as we contemplate our report to give to the finance minister.

At this meeting we'll hear from the Indian Taxation Advisory Board; the British Columbia Chamber of Commerce; the Business Council of British Columbia; the Pacific Corridor Enterprise Council; the Vancouver Board of Trade; and Professor Herbert Grubel, as an individual. Thank you one and all for coming.

We ask you to keep your presentations to five minutes, and then we will give the members of the committee time to ask questions for clarification and comments from you.

The first presenter is Chief Clarence Jules, chairman of the Indian Taxation Advisory Board. Welcome.

Chief Clarence (Manny) Jules (Chairman, Indian Taxation Advisory Board): Good morning, Chairman and members of the committee. My name is Chief Manny Jules and I am the chair of the Indian Taxation Advisory Board. I appear today before you to speak about the evolution of the Indian Taxation Advisory Board through the creation of the first nations tax commission. This is an important legislative initiative for Canada and for first nations and warrants the support of the Standing Committee on Finance.

The creation of the first nations tax commission, through the passage of appropriate legislation, will establish a new service agency responsible to Parliament and to first nations, the first such aboriginal institution based in statute. This initiative is being proposed by the Indian Taxation Advisory Board as part of its mandate to make recommendations to the Government of Canada respecting the future of first nations governance in the area of real property taxation.

The proposed legislative initiative has received a resolution of support from the Assembly of First Nations and also has been endorsed by the leadership of 74 first nation governments currently exercising property taxation jurisdiction under section 83 of the Indian Act.

As we continue to obtain support for the proposed legislative initiative, the Indian Taxation Advisory Board has been undertaking consultation with first nations, governments, taxpayers, and other interested parties to ensure that the final form of the first nations tax commission meets the needs of all who may be affected.

I have used the term “evolution” to describe the essence of our proposal. This is deliberate.

In 1985, prior to the establishment of the Indian Taxation Advisory Board, there were very few first nations property tax regimes in this country. Virtually all revenues coming into first nations government coffers were in the form of federal transfers. Any services provided the leaseholders on reserve came out of the lease rentals and not property tax. More profoundly, there was a legislative vacuum respecting property taxation on leasehold interests on reserve lands.

In some provinces such as British Columbia, the provincial government moved in to tax those real property interests but would provide no services to them unless reimbursed by the federal government. This uncertain and confusing situation was not acceptable to many first nations governments and led to a national lobbying effort seeking amendments to the Indian Act.

The passage of Bill C-115 in 1988 amended the Indian Act to clarify the reserve status of lands designated for leasehold purposes. Since then, 74 first nations governments have entered the real property tax field, raising more than $30 million in annual revenues for an improved infrastructure service delivery to the real property taxpayers. This has led to the creation of more than 1,000 person years of employment on reserve, improved administrative capacity, and greater economic opportunities for first nations communities. The Indian Taxation Advisory Board has been an instrumental part of this phenomenal growth.

• 1050

The Indian Taxation Advisory Board was established by appointment by the Minister of Indian Affairs and Northern Development in 1989 to provide advice on the passage of real property taxation legislation on reserve.

Over the past 10 years, the Indian Taxation Advisory Board has gained much experience in an area where the federal government has little or no experience in real property tax. This experience has shaped its views on the future challenges to be faced by first nations real property tax systems. In many respects, the proposed new first nations tax commission is the answer to those challenges. It is a considered response to the need to reconcile the interests of the first nations and their real property taxpayers, to ensure the continuance of reasonable tax rates, to respect the need for a reasonable degree of autonomy for first nations governments, and to ensure the maintenance of certainty, fairness, and stability for first nations real property tax systems.

The principle objective of the first nations tax commission is to enhance the integrity of first nations tax systems and thereby increase the value to first nations and taxpayers. This will be done by ensuring administrative efficiency, preventing disputes, and generally reconciling the seemingly divergent interests of taxpayers and the first nations tax authorities. A core function of the first nations tax commission will be to fully realize the potential of reconciliation.

The interests of property taxpayers, investors, the federal government, and first nations tax authorities are all served by essentially the same strategy: building an attractive investment climate on reserve. New investment means new taxpayers, increases in the value of the tax base, higher lease revenues, and, perhaps more importantly, the social and economic improvements resulting from new jobs and investment opportunities. This strategy also demonstrates the benefit of first nations jurisdiction and hence builds a sound political base for self-government.

The guarantee of quality of services at a fair price over the life of their investment is precisely what taxpayers want, but property taxpayers also want to become actively engaged in the decision-making process concerning tax regimes and related expenditures.

The design of the first nations tax commission accommodates this. The commission serves both first nations' and federal interests because it creates jobs and economic self-sufficiency in first nations communities. It also creates benefits for all Canadians by first reducing the social cost of first nations poverty, and second, by creating new investment opportunities. It promotes improved accountability because ensuring tax dollars are spent properly is the only way to provide taxpayers with the reassurances they require.

Regulatory harmony is also in the interests of both the first nations tax commission and the federal government because it enhances the first nations investment climate.

The core strategy and rationale for the first nations tax commission is to bring reconciliation of interests and to allow first nations property tax systems to be used as a lever for the economic development of first nations communities. We believe the commission will lead to higher property values, more incentives for stronger taxpayer communications, and, ultimately, a stronger, healthier first nations community. These are goals of the first nations taxpayers and the federal government as articulated in Gathering Strength. And, as demonstrated by reconciling interests, the first nations tax commission will serve all of its clients.

The first nations tax commission will add to an enhanced policy of development process, regulatory powers, and regulatory changes to its current methods for dispute prevention. This will help create the certainty required to prevent disputes. When disputes do arise, the first nations tax commission will apply appropriate dispute resolution methods and have an available roster of qualified mediators to respond and resolve issues in a manner less costly than litigation. The first nations tax commission will also have specialized bylaw appeal processes to ensure less costly due process than is provided by the ordinary courts.

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In conclusion, if you support open and accountable governments, administrative efficiency, citizen engagement in decision and policy making, economic opportunities and employment on reserve, and the establishment of national standards to strengthen the social and economic union, all of which are consistent with the principles of Gathering Strength—Canada's Aboriginal Action Plan, then I strongly urge you, members of the Standing Committee on Finance, to support the establishment of the first nations tax commission in the budget for the year 2000.

The Acting Chair (Mrs. Karen Redman): Thank you, Chief.

We'll now hear from the British Columbia Chamber of Commerce, represented by John R. Winter, president, and Mr. Andrew Wynn-Williams, manager of policy development. Welcome, gentlemen.

Mr. John R. Winter (President, British Columbia Chamber of Commerce): Thank you very much, Madam Chair. First let me say how pleased we are to be here this morning to be able to make this presentation. It is with a little shock, unfortunately, that we arrived with a 15-minute presentation to learn we had five minutes. We've scrambled a little bit to find the most pertinent and germane aspects of our presentation to bring to your attention. But certainly there is enough material in our presentation for further reading.

By way of introduction, the decisions the government is going to make in the next few months about budgeting, spending, and tax reduction will have a huge impact on the Canadian economy as a whole and on the British Columbia economy in particular. Please bear in mind, as we go through this presentation, that we, unlike most of the rest of the nation, are in recession here in British Columbia. Our business community is not thriving, and in many cases is struggling to survive.

There is no blame attached to that statement. We are not looking backwards and saying that this government or that government or this business or that business should have done this or that. We are looking forward and we are seeking solutions. We are trying to determine what can be done to turn this economy around.

Having said that, we believe government is facing a curious dilemma. The recent report from the Minister of Finance indicates that we can expect quite a fiscal dividend over the next several years. The dilemma the government is faced with is what to do with that money. Doubtless this is a more pleasant challenge than trying to reduce the deficit. Nevertheless, the urgency of the competing priorities only serves to highlight that Canada still faces severe fiscal challenges.

The choices are clear. Does government put the money towards debt reduction, rendering our fiscal position more sound? Does government put the money to tax reduction and provide the impetus to an economy that is to a large extent only driven by the low dollar? Or do we put it to spending, for which there are many important priorities, from transportation to health care to children?

We at the B.C. Chamber of Commerce understand the keenness of this dilemma. Our members have always understood and made clear to us, both to us and to government, the importance of debt reduction. Since the elimination of the deficit, they have now added to our plate and yours the importance of tax reduction. Now because of the dire economic situation in this province, many are looking to government to alleviate these economic difficulties with spending priorities, be they highways or other forms of economic development. In other words, we have faced the same dilemma in developing our policy that you now face in developing yours, albeit on a smaller scale.

The challenge posed by these competing priorities is magnified, because for a government that believes all these issues to be important, the temptation will be to try and implement all of them. The result might be that none of them get done particularly well, and we hope to help you in your decision-making process by defining for you the position we have developed.

First, spending levels. One of the primary arguments for increased spending revolves around the need to restore what has been taken away. Much has been said about the fierce program cuts and belt tightening that Canada has had to endure in order to eliminate the deficit and balance the budget. Indeed, there have been cuts in some areas, but to a large extent the balanced budget has come about as a result of a substantial increase in government revenues.

Furthermore, program spending has recently been on the increase. Of particular concern is that for three years in a row the federal government has indulged in a surprise, year-end spending initiative like the millennium fund. Backloading future spending into current budgets through this sort of clever accounting artificially lowers the yearly surplus. Furthermore, such last-minute spending is not always well thought through and does not always involve full public consultation.

The point we're making is that increases in spending are not required. The most recent ceiling of $113.2 billion is high enough. If there are government spending priorities that must be addressed, then government must work within that particular envelope. New initiatives must be funded by efficiencies from elsewhere.

• 1100

Secondly, in regard to tax reduction, for the first time in several years, our members are telling us that debt reduction is now not the sole budgetary priority of the federal government. In fact, many now believe that tax reduction is an even higher priority, and there are several reasons for this. One is the brain drain. There is little doubt that high taxation rates are a key contributor to the brain drain. In the interest of time I will skip over the evidence that we have in our report to support that position, but hopefully it will be read.

We have highlighted the brain drain because its prominence on the national stage has created a certain amount of controversy in regard to its relevance as an issue. We felt the need to revalidate it as an important reason for tax reduction. Justifications for tax reduction, however, particularly income tax reduction, go well beyond the issue of the brain drain.

Reducing taxes is extremely important from the standpoint of international competitiveness. Although Canada's relative tax burden is in line with some G-7 countries, this is definitely not the case when compared with the United States.

Comparisons to the U.S. are particularly important because of the extent of economic integration between our two countries. Canada's total taxes-to-GDP ratio is nearly 10 percentage points higher when compared to the U.S. This tax burden gap is negatively impacting Canadian competitiveness.

More importantly, real disposable incomes in Canada have not increased in over a decade, resulting in a stagnant standard of living for the average Canadian during this period, in part due to the high tax burden.

Although there are many strong candidates for tax reduction, the highest priority at this time should be placed on the reductions of personal income tax. PIT is a larger fraction of GDP in Canada than in any other G-7 country.

With the personal income tax category, priority should be placed on reducing the insidious phenomenon of bracket creep. It almost seems an oversight of the federal government. Given that it has added approximately $10 billion to federal coffers since 1986, and given that other organizations such as the Canadian Chamber of Commerce, the Canadian Taxpayers Federation, and, most importantly, the International Monetary Fund have already expressed concerns about this issue, the government must be fully aware of it.

Inflation has been so low in the past few years that it has not crossed the threshold that triggers indexation of tax brackets. Consequently, as the average person's wage has increased over the long term, tax brackets that apply to them have remained static.

Wage earners are finding themselves taking home proportionately fewer real dollars in comparison to the cost of living. The result has been a revenue windfall for government. The size of that windfall is accelerating, as bracket creep could add up to $1.5 billion to federal coffers by 2002.

Consequently, we believe that the federal government has two key personal income tax issues to address. First, it must stem the brain drain by reducing income taxes and eliminating the 5% deficit reduction surtax on high-income earners.

Second, it must address the issue of bracket creep by immediately increasing the personal exemption and fully indexing tax brackets to inflation. This is particularly key for low- and middle-income earners.

Another issue of concern is our uncompetitive business tax rates.

Tax cuts, whether they be personal or business, will boost economic growth, create jobs, and in the long run will result in higher revenues for the government in order to sustain social programs in the future.

Very quickly, I have a couple of comments on debt reduction. I said earlier that debt reduction was not the only priority. We must clarify, however, that it is still a priority. The federal government must continue its policy of restraint, at least until the debt-to-GDP ratio drops below the 50% mark.

I must emphasize once again the last-minute spending initiatives mentioned earlier. Such spending decisions that eliminate a potential surplus show that the government's feet are not being held to the fire at all. It is time for the government to introduce a long-term debt reduction plan, with a line item in the budget for debt reduction.

Lastly, on spending priorities, we would like to close by stating where the B.C. business community would like to see some current spending directed to better serve the needs of our flagging economy. The key priority for us is to upgrade our transportation infrastructure. Every region of Canada needs an efficient and safe highway system. Ninety percent of trips are taken by automobile. Canada's two largest economic sectors, trade and tourism, rely on an efficient and safe highway network.

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The federal government's own research has clearly shown a net benefit to a national highways plan. Lives are saved, private sector production increases, taxes are collected, and more than 200,000 direct and indirect jobs are created. The quality of our roads also influences corporate decisions regarding location, capital investment, production methods, relationships with suppliers and customers, location and availability of inventory, and access to labour.

The Acting Chair (Ms. Karen Redman): Mr. Winter, could you close?

Mr. John Winter: Yes, I will. Thank you very much.

Other countries are making sizeable investments in their respective national infrastructures. In closing, let me just say that it's time the Canadian government redirected some of its current spending to the long-term national transportation investment strategy.

Thank you.

The Acting Chair (Ms. Karen Redman): We'll now hear from the Business Council of British Columbia, represented by Mr. Jock Finlayson, vice-president of policy; and Mr. Tim McEwan, director of programs and policy.

Mr. Jock Finlayson (Vice-President, Policy, Business Council of British Columbia): Thank you, Madam Chair, and welcome to Vancouver, members of the committee. We're pleased to be here today and we're delighted to be on the same panel as a former member of your committee, Professor Herb Grubel.

The Business Council is an industry association representing larger companies engaged in business in B.C. We are multi-sectoral; our members are drawn from all of the different industries that comprise the B.C. economy: roughly one-third from the resource sector, one-third from service industries, and one-third from a variety of other industries. Our member companies and affiliated associations represent roughly one-quarter of all jobs in British Columbia.

We have a 16-page written submission that I will obviously judiciously quote from, but which I believe all members of the committee have a copy of. We've organized it around three themes. One is the economic setting for the 2000 budget. The second is the fiscal benchmarks and policy choices. The third is the identification of some priorities for tax cuts.

The economic setting for Canada clearly is favourable. The Canadian economy is on a roll. It looks like real GDP will increase roughly 4% this year, on the heels of 3% last year. We believe the Canadian economy is poised for several years of quite good economic performance, which is propitious, because we need it after the lousy track record through much of the 1990s.

Unfortunately, though, as Mr. Winter indicated, the outlook for B.C. is a little bit different, much more subdued. I think it's important for legislators who are not from British Columbia to realize that the bloom is very much off the rose of the B.C. economy.

There was an excellent article in yesterday's Globe and Mail by Bruce Little that identified just how poorly the B.C. economy has been performing in the decade of the 1990s as a whole. We've had actually a 10% decline in real disposable income. Now that is a very sizeable reduction in our standard of living here in B.C. It's significantly greater, as we've shown on a chart on page 3 of our submission, than what other provinces in the country have experienced.

So I would echo Mr. Winter's plea that the federal government jettison its traditional complacency about British Columbia and the British Columbia economy and realize that we are in serious trouble out here. Our economy is structurally underperforming the rest of Canada. It's not something that Ottawa can fix, but it is certainly something that Ottawa needs to be more aware of and reflect in its policy decisions.

Turning to the question of fiscal policy choices, I want to commend the Department of Finance on the economic and fiscal statement released on November 2, 1999. It was a good document. It laid out, I think, a lot of very valuable material to help structure the discussion around fiscal policy choices in the post-deficit era. I think, again, that is the kind of document we'd like to see published on a regular basis prior to federal budgets.

The fiscal plan that is laid out in that document includes an assumption that program spending at the federal level will increase by roughly 2.8% a year. In our view, that is the benchmark that should be chosen to guide and discipline spending through the entire five years that is laid out in that fiscal plan. In other words, the federal government should adopt a target, in our view, of limiting program spending growth to somewhere between 2.7% and 3% a year, rather than adding on all kinds of new and additional program spending initiatives. If that is done, our fear is there'll be no room left for meaningful tax relief.

So that is one plea we would make, having read that document—to urge the federal government to adopt a fixed and very disciplined program spending growth target to guide fiscal policy choices through the coming years of significant surpluses.

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As emphasized in the International Monetary Fund's recent report on Canada, the best way to improve the long-run prospects for the Canadian economy is to devote a significant part of the fiscal dividend to finance a series of tax cuts and also to reduce the outstanding debt, particularly to bring the debt-GDP ratio down. Although a 50% debt-GDP ratio makes sense, over the next three or four years we're going to have to go beyond that, given the certainty of the baby boom generation retiring in 12 to 15 years' time. The debt-GDP ratio we should be aiming for in 10 or 15 years is probably more like 30% to 35%. So 50% would be very much an interim debt-GDP ratio, in our view.

I'd like to spend a moment on the five main reasons we believe now is the right time for a program of significant tax cuts.

First is opportunity. According to the economic and fiscal update, the federal government is poised to post a cumulative budget surplus of somewhere between $70 billion and $100 billion over the next five years. I would argue that, particularly before the demographic changes we're going to face in 10 or 15 years' time, this provides a once-in-a-lifetime opportunity to start providing Canadians with significant tax relief.

The second rationale for tax cuts is that the tax burden is at a record high. By tax burden, I mean the burden imposed by all levels of government in Canada. That has played a significant role in dampening the growth of real disposable incomes for Canadian consumers.

The third reason, identified by Mr. Winter, is the brain drain. We have some information on that in our paper. There's a lot of debate about the brain drain. I would highlight one point. Although the number of permanent Canadian emigrants to the United States is relatively small, at 8,000 to 10,000 per year, there is evidence that the number of temporary migrants is much greater than that, possibly as high as 100,000 a year, according to the data provided by the U.S. Immigration and Naturalization Service. In other words, under NAFTA, large numbers of Canadians, mostly highly skilled people, are obtaining temporary work visas to gain employment in the United States, and there is reason to believe significant numbers of those people are staying for a long period of time. They're not coming back to Canada after two or three years. So that issue of temporary flows of people to the U.S. needs to be factored into any discussion of the brain drain. The solution to that problem is not easy, but certainly lower taxes must be part of it.

A fourth reason to bring forward a program of tax cuts has to do with business investment and business location decisions. The sad fact is Canada is not doing very well in the race to attract direct foreign investment in greenfield activities or in becoming a preferred location for corporate head offices of global businesses. Our share of foreign direct investment globally has been declining, and a number of Canadian companies appear to be leaving the country or moving functions—jobs, high-paying jobs—down to the United States. Our business tax structure is part of the reason for that. Particularly the tax burden that is imposed on service industries, large service companies, is significantly higher than not only in the U.S. but in all the G-7 countries.

Fifth and finally, the reason to go forward now with a program of tax cuts is that demographic time-bomb I mentioned a few minutes ago. Once the baby boomers retire, the reality is there will be strong upward pressure on public pension costs and public health costs. That's a reality. There's no debating it. Therefore, if we're going to get our tax levels down, we need to move relatively quickly, before the demographic window slams shut in roughly a decade.

Our priorities for tax reduction fall primarily in the areas of personal income and business income taxes. Lower unemployment insurance premiums are a lower priority, in our view. They don't deserve the same attention, because the payroll tax burden in Canada is not where we're uncompetitive. It's on the PIT rates and on the business tax structure.

In closing, I want to refer you to a table on page 15 of our submission, which identifies the effective corporate tax burden on large Canadian corporations and large corporations in all the G-7 countries as of 1999, with an estimate for 2000. The bottom part of that table shows the effective corporate tax burden in Canada on service companies is the highest in the G-7 now and is more than 10% higher than in the United States. If you want an explanation for why we're losing certain kinds of head offices and high-paying jobs from Canadian business to the U.S., I would urge you to pay attention to that effective tax burden. Yes, we need personal income tax cuts, but we cannot overlook the importance of the business tax structure in influencing corporate location and investment decisions. It is having a significant impact today.

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Thank you.

The Acting Chair (Mrs. Karen Redman): Thank you very much.

We'll now go to the Pacific Corridor Enterprise Council, Mr. Peter Fraser, president. Welcome.

Mr. Peter Fraser (President, Pacific Corridor Enterprise Council): Good morning, Madam Chair.

I endorse what has already been said by the two previous witnesses, and I want to add a few remarks from our own perspective as an organization that is regionally bound by American and Canadian business, owners and managers of small and mid-size businesses. We have been active for as long as the United States-Canada Free Trade Agreement.

Our acronym is PACE. We're ironically connected with the PACE lane at the border. It was our founders who went to Washington, D.C. and Ottawa to try to get a trial program started, which is now an institution.

Since then we have become very much involved in the western half of North America, all the way from Alaska to Mexico. With NAFTA, we have acquired Mexican members as well.

Our priorities in the year 2000 are transportation and the removal of the U.S. Immigration and Nationality Act, section 110, which I'm sure you know about, and I will leave that to probably another parliamentary committee. But the transportation aspect is really vital to us.

Our current chairman is the head of a family business known throughout the world as Speedy Auto Glass. Allan Skidmore is the immediate past chairman of the Vancouver Board of Trade. He can't be here today, but he has done his own study, and he too is making our resources available to find transportation solutions.

Where we sit is about a half-hour drive to the border, in a town called Blaine in the State of Washington. It is the fourth largest border crossing on the U.S.-Canada frontier. Those who are optimists in free trade feel that in the year 2000, approximately a million private vehicles a month will cross the border there, and some of our trucking interests feel that with the year 2000 we will find a year that will have a million commercial crossings.

The infrastructure on the B.C. side of the border is virtually the same as it was during Expo 86, and even earlier in the 1980s. Meanwhile, on the U.S. side, they have a program called TEA-21, which has well over $200 million being made available by the federal government, specifically for trade and commerce corridors going north and south on this continent. We have no program to match that on the Canadian side.

Canada is the only G-7 country without a national transportation financing program. As John Winter, another board member of PACE, has said earlier, Canada has no national highways plan.

Our board of directors will be meeting in December. Among them are people who are a good cross-section of the business community in Canada, including a first nations lady who joined our organization this fall. We have family businesses. We have five business school deans involved with PACE from both sides of the border, led by Dr. John Waterhouse, who is the dean of the business school at Simon Fraser University. We are endeavouring to do some research to illustrate even further the need to make sure that this part of Canada has the opportunity to do business south of the border, all the way to Mexico, and to prepare for the free trade area of the Americas, which is due to start in five years.

Specifically, though, and to the point, here in the lower mainland of B.C. there's a lot of high tech, which would like to be more closely related with what's going on in the Seattle area. A statistic commonly quoted in the Seattle area is that there are 156,000 multi-millionaires in the Puget Sound area, in western Washington State, who have made their money in high tech. They are now looking for venture capital. These are young people who are in their thirties and forties, who are looking for new businesses to start, and the common concern when they look north is the tax situation here.

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That pretty well expresses our concerns. Thank you.

The Acting Chair (Mrs. Karen Redman): Thank you very much, Mr. Fraser.

We'll now hear from the Vancouver Board of Trade, which this morning is represented by its director, Mr. Grayden Hayward, who is the president and chief executive officer of Carrera Ventures Ltd., and Mr. David Bassett, co-chair of the board's tax cut task force. Welcome, gentlemen.

Mr. Grayden Hayward (Director, Vancouver Board of Trade): Thank you, Madam Chair.

I am both the director of the Vancouver Board of Trade and chair of the government budget and finance committee of the board. As mentioned, David chairs the board's task force on tax cuts.

The Vancouver Board of Trade has 4,400 members, primarily in British Columbia, 80% of whom are small businesses employing under 50 employees. In the submission we sent on September 9, we did set out that we are supportive of both this prebudget process and the work of your committee in particular.

The Vancouver Board of Trade position has been quite consistent from the day Canada kicked the habit of annual deficits, and our message has been straightforward.

The Government of Canada does not have a surplus. It has an excess of revenue over expenditure brought about by excessive taxation, particularly from personal taxes on individuals. That excess revenue must not be spent—$113 billion is enough—but must be returned to the taxpayers, one-half of it directed to tax cuts and one-half to reduce our enormous debt. We've also called for the government to adopt a longer-term view, a vision that would be the result of prudent actions taken today.

At the Vancouver Board of Trade, we've done that. Our vision of what could be, a model of the benefits that would result if what I'll refer to as “surpluses” would be split 50-50 between tax cuts and debt reduction, produces outstanding results: even in very conservative estimates, $42 billion in tax cuts and $42 billion in debt reduction over 10 years.

It's the poor wage earners who suffer the most from our current tax regime. In 1980, a single individual making $10,505 a year paid no tax. Today, tax starts at $6,496. In Britain, the comparable number is $9,000 per annum, and in the U.S., $9,500. The OECD notes that Canada collects more in personal taxes from individuals than all other nations, 18% of GDP, compared to 11% in the U.S., 9.7% in Britain, and 6% in Japan.

As for the debt, taxpayers have paid $621 billion in interest payments over the last two decades. At the current rate of debt retirement, approximately $3 billion annually, we will have it paid down in two centuries.

We are at the crossroads. We have a unique opportunity in our country to return to economic relevance.

I will now ask David Bassett to give you a bit more information on the impact of our proposals and the dangers of the government's continuing course of action.

Mr. David Bassett (Co-Chair, Tax Cut Task Force, Vancouver Board of Trade): Thank you.

Based on our model, which we put together last spring, prior to the Department of Finance's release, as Grayden stated, we estimated that $42 billion could be applied to the debt and $42 billion towards taxes. At the same time, we are maintaining a rate of expenditure in line with the 2.5% that was projected in the federal finance department's release. So we're not saying no increases; we're saying keep it close to the rate of inflation. Some people portray us as hard and wanting to cut back, but we're not. We're saying just hold the line.

If we did that in the next 10 years, we believe with those tax reductions you could eliminate the 5% surtax, which, at the time it was introduced, had been promised would occur when we got out of our deficit position. We could reduce federal taxes in our models by 23%, and we could reduce the GST from 7% to 5%.

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Typically, for a family of four with a $50,000 income, this could reduce their tax burden by between $4,000 to $8,000 a year, depending on the deductions applied to them. That's a significant savings for any family in this country.

We could also reduce the debt-to-GDP ratio from 65% to 41%, which would be a start in the right direction, putting us more in line with other countries. At present, we're well above them.

In looking at the numbers that came out in the Economic and Fiscal Update, the Finance projections for the potential surplus are noticeably above ours. Our committee spent some time last week looking at these numbers and wondering why. I guess we would therefore have a question for this committee, although it's not so much saying our model is better—although our model seems to be a little closer in line with other private projections. Is the reason we're now seeing much higher surpluses available due to the fact that they're there, or is it due to the fact that the federal government seems to have a tendency to spend first and pay down debt and reduce taxes second? If that's the case, we may see the spending go forward and not the tax reductions or the debt reductions. As many speakers have stated, though, the latter are critical to our economic well-being, both as a country and as individuals.

We would ask the committee to give that some very serious consideration before endorsing any spending programs. Also, maybe suggest that the federal government should be more balanced in its approach instead of using its traditional approach to spend first and reduce taxes and reduce debt second. At least put them in an equal position.

The Acting Chair (Mrs. Karen Redman): Thank you, Mr. Bassett.

We'll now hear from Professor Herbert Grubel, professor of economics at Simon Fraser University.

Mr. Herbert G. Grubel (Individual Presentation): Thank you, Madam Chair. It's a pleasure to be back in the finance committee, even if it's on the other side of the table. I sympathize greatly with the work and stress you're under, travelling the way you do and listening to what often seem to be interminable presentations from special interest groups.

I should correct you in that I have just turned 65 and therefore was forced by the Supreme Court of Canada to be a professor emeritus at Simon Fraser University. Strangely enough, age discrimination is okay here. Making professors retire at 65 is in the public interest, according to the Supreme Court. My American colleagues and European colleagues cannot believe this is something Canada has done to itself, especially when there's great concern over productivity.

I'm employed half-time by the Fraser Institute. I have no formal connections with the Reform Party. I have some informal contacts occasionally, mostly social, with former members of my caucus.

My real boss is Adam Smith, who you'll notice here on my tie. I carry on his tradition of speaking out on issues when I believe the government is doing the wrong thing and that by policy change the welfare of Canadians could be improved, leading to higher incomes and often to better income distribution. In this spirit, you have in your possession—at least, certainly in your office, but you may not have seen it because probably your assistant has stolen it—the book called How to use the fiscal surplus:, published by the Fraser Institute. It contains some information that I'll refer to in a moment.

Recently, you may also have seen my paper, “The Case for the Amero”, a proposal for monetary union among North American countries. I urge members, especially those on the Liberal side, to follow the recommendations of the opposition and all the other parties in the House that it is a topic worth studying at greater lengths. The Senate has done it, but I do believe both the Department of Finance and the Bank of Canada ought to have input on a broader basis than they have had thus far as to what is the merit of this policy. I'm sure it will take place in the next 10 to 15 years, and maybe earlier.

Just imagine it. If we had a common currency in North America, our interest rates would fall by one percentage point. Before too long, the debt for just the federal government would cost $6 billion a year less. And you can add to that the cost of debt issued by the provincial government. Think of the lower cost of mortgages. Think of the lower cost of investments. I think such a policy would indeed be very positive for Canada, and I believe the costs would be very low, even though I can't get into the arguments at this point, of course.

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I also would like to speak briefly on a point that I understand. I fully sympathize with Paul Martin's concern over the possibility that if we have a surplus, something unexpected may develop and we will be back on a deficit treadmill. For this reason I have suggested, in a paper with Michael Walker, that the government should seriously consider giving tax rebates, giving people back money on the basis of what they have already paid, as a tax rebate. In this way, the tax schedule remains the same the next year. Then, if there is in fact an adverse economic development in the following year—recession or higher interest rates—that reduced revenue would not kick in, and therefore only after one or two years should the tax cut kick in permanently.

I had a lot to say on the question that has already been addressed by my predecessors, but I just agree with all of what they said in terms of government spending and the division between deficit reduction and spending cuts and spending increases.

In this book that I showed to you, I have published a compass that suggests fundamental principles we should use in dealing with interests competing over what to do with this surplus. There is strong evidence, empirical evidence, that when government spending in Canada was at 34% of national income, our per capita income growth was the highest. Similar results have been found for other countries. There is strong historic and international evidence that this is what we should do. The fortunate situation is that with the current conditions, we can reach this level fairly easily by simply holding spending constant for a few more years and by using the surpluses for both cuts in taxes and cuts in the debt.

The reason why I'm a little bit slow mentally is that I've just flown 24 hours on a plane. I came in from Cape Town. I visited my daughter in Nairobi, where she works with the United States Agency for International Development to provide health care to Africans. While we were there, she had us out for dinner with some of her friends, and sitting next to me was a young man who worked for the United Nations. He volunteered for me something that I think is worth repeating.

As you know, the United Nations has had a tendency of wanting to increase spending on developing countries and in developing countries, because they believe the solution to mankind's problems lie in more government intervention. That young person said they have begun to realize at the United Nations that the future does not lie in more government spending. At the United Nations, they are now determined to set the conditions to provide the institutions and framework of regulation and taxation such that the private sector can provide the goods and services that the public wants, needs, and deserves.

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I believe this principle should also guide policy making in Canada. In the presentations by Mr. Finlayson, by Mr. Winter, by Mr. Fraser, and by Mr. Hayward, all have made that same point. I think this is essential. We have had our experiment with direct government spending, trying to do all the things you heard we need more money for this morning. Well, the historic evidence shows that it is not the way to the kinds of riches that all Canadians want. It is not the way to raise the living standard of the poor, except in a process that also creates serious dependence.

If I may, Madam Chair, as my final point, I would just say I'm working on a major project that probably will be out by the end of December or early January, to make a case for a cut in capital gains taxation. When I had first approached this topic, I thought it was a rather boring subject. It turns out that it is indeed a fascinating topic. How so little revenue raised by this taxation can do so much harm is totally incomprehensible to me, but I'm beginning to understand why.

I totally disagree with the evidence presented on page 111 of your Economic and Fiscal Update. It says a 5% cut in the inclusion rate of the capital gains that you make—as you know, you now take 75% of what your capital gain is for the year and then it's taxed at your marginal tax rate—would result in a $175 million loss in revenues. Well, I don't think the United States and the Canadian economies are so much different that our experience would be any different from what has happened in the United States. Cuts like that increased revenues substantially there, by wide margins and for a number of quarters. And there is increasing evidence—which I review in my paper—that they in fact reduce the increased revenue permanently. I've had this debate with a representative from the Department of Finance on that subject and he disagrees—he still needs to be convinced—but I think the evidence is very strong.

Finally, let me say that one of the main reasons or justifications for high capital gains taxes is that it is paid by the rich. Something like the top 2% pay 50% of all the capital gains taxes. This is a highly misleading number. It's been found to be so in the United States as well. But I now have produced evidence at the Fraser Institute that these taxes are not paid by the super-rich. What you see is that if somebody has a capital gain, that person is in a high-income bracket in that year because of the realized capital gain.

A best example is my assistant at the institute. His parents used to have a restaurant. They needed some cash when they retired, so they sold their restaurant. In that year, they showed up as having huge capital gains and a huge income. But they were not rich. All their lives, they put their money into their restaurant so they could retire on it. If you take out the income that is due to capital gains and see what the income people normally have is, you see that well over half of the capital gains taxes are paid by people with incomes of less than $50,000. The argument that we need the capital gains tax for equity is terribly faulty.

That is the end. Thank you.

The Acting Chair (Mrs. Karen Redman): Thank you very much, Professor Grubel. It's been most interesting.

I'm going to ask that the finance committee members contain themselves to five minutes. We're going to start with questions from Mr. de Savoye.

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[Translation]

Mr. Pierre de Savoye: Thank you for taking the time to meet with us this morning in order to share your opinions and concerns. Your thoughts help us to broaden our knowledge and we hope that this will enable us to reach better conclusions.

I would also like to take this opportunity to greet my former colleague, whom I still view as my friend, Professor Grubel, whose presentations always give us food for thought. Although he has reached retirement age, I see that this hasn't stopped him from continuing to think and to share his comments with us.

I listened to your presentations. You more or less talked about the same things, in the same terms. Your presentations did, however, contain certain slight differences, which may or may not be as slight as all that. I'll try to ask my question within the following frame of reference.

According to the working hypothesis, tax reduction and debt reduction are to be carried out on a fifty-fifty basis. This hypothesis is based on a ratio, but then again, we have to know the real amount of the surplus, not the announced surplus but the real surplus, because in the past, Mr. Martin's projections have had a tendency to be vastly different from the real situation. Consequently, we have to know what the real amounts are in order to establish priorities.

One way to do this, and I would like to hear your comments on this, would be to give some thought to first of all reestablishing the transfer payments that were reduced, particularly in the fields of health and education. I believe some of you were interested in this approach. I believe that others were of the opinion that there was already enough money currently in the fields of education and health. These people felt that we simply had to be more efficient. My question is, should we reestablish these transfer payments?

Secondly, once this has all been resolved, I would like to know whether or not you think we should approve additional spending. Once again, I detected that you were of two minds: no new additional spending; however, if current spending was to be increased, then this increase should be limited to between 2.7 and 3 percent, which would be a tiny slice of the surplus.

There is also talk about reducing taxes. This is a very good thing, however, we also have to think about paying down the debt. Should we first of all set ourselves a debt reduction objective, using the surplus to draw down taxes, or should we first of all set ourselves the objective of reducing taxes and then use the surplus to reduce the debt? If I were in my friend Mr. Grubel's shoes, I would say: first of all, let's reduce taxes, which will generate more revenue and enable us to deal with the debt more easily. If I were more conservative, I would say: let's begin by paying our debts, and then after we can reduce taxes.

Could you put some order in this? This is no easy task, but perhaps you can shed some light on the matter. Thank you.

[English]

The Acting Chair (Mrs. Karen Redman): Who'd like to go first? Mr. Hayward.

Mr. Grayden Hayward: Our proposal was quite specific. Our model does in fact allow for increased expenditures based on population growth and inflation. What we are saying is that with the amount of money available at $113 billion, the government has to determine its priorities and make the best use of that money. We recognize that programs cannot be fixed, that the government has to have flexibility and has changing priorities. But those can all be accomplished within the $113 billion.

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I would like to reiterate the point that we don't see the surplus as being a surplus in the traditional sense but rather that it has resulted from an over-taxation particularly of individuals, who have a right to get that back. You're in the business of judging public sentiment more than we are, but public sentiment is in fact swinging daily toward demands for tax rebates and not new programs.

Mr. Jock Finlayson: Just to follow up on that, our view is that the most effective way to get the debt burden down is to use the contingency reserve—provided it's not required for other purposes—to make small annual payments against the debt, as has happened in the past two years. Then that all-important ratio of debt to gross domestic product will quite quickly decline so long as the economy grows. It is important to have a growing economy in order to make the debt burden manageable.

In our opinion, the question that should be asked about the division of the fiscal dividend is not whether we should put half of it into new spending and half into debt reduction and taxes. The question that should be asked is, what mix of tax and spending measures will do the most to improve the real incomes of Canadian taxpayers in the long run? That's a question that hasn't been asked by the government, as far as I'm aware.

I don't know where this 50%-50% split came from. I guess it was an election promise, and if you're a politician, of course you have to pay some attention to it. But I've never heard an intellectual rationale or justification for that rather arbitrary division, and it's not one we support.

The Acting Chair (Mrs. Karen Redman): Chief Manny Jules.

Chief Manny Jules: One of the things I want to make very clear here is that in our original presentation to the finance committee, the Assembly of First Nations did call on the committee to ask for a round of transfer discussions between the provinces and the federal government that involved first nations. If we're ever going to deal with accountability and the impoverishment the majority of our people in this country face, that definitely needs to happen, particularly when you're talking about provincial responsibilities such as education and health.

If we're ever to break the cycle of poverty we find ourselves in, we're going to have to look at investing in our youth right now.

We had a baby boom in the 1970s. Precisely when the majority of Canadians will be retiring, myself being one of them, we'll need a highly skilled workforce to look after us in our elderly times. I feel first nations are positioned to be able to do that. As first nations we need investment in our youth so that we can be part of the economy and contribute, as we should, not only to the Canadian economy but also to the global economy.

The Acting Chair (Mrs. Karen Redman): Mr. Williams.

Mr. Andrew Wynn-Williams (Manager of Policy Development, British Columbia Chamber of Commerce): I'd just like to refer you to the appendix we've included, which is the tax deduction strategy proposed by the Canadian Chamber of Commerce. It essentially says put the $3 billion contingency fund toward debt reduction, base a tax reduction strategy on the most conservative of estimates, and then apply any unanticipated surpluses to the debt, along with the contingency fund.

The Acting Chair (Mrs. Karen Redman): I'm being very lenient. I'm going to allow Mr. de Savoye one last question, very quickly.

[Translation]

Mr. Pierre de Savoye: Thank you, Madam Chair.

Chief Manny, your presentation on Aboriginal taxes is extremely interesting, and I believe that Parliament will be dealing with an amendment to section 83 of the Indian Act next year.

Now, could you tell me how things could vary from one band to the next? Will the principle apply across the board or will every band deal with governance in its own way?

[English]

Chief Manny Jules: The approach first nations have used in relationship to this particular issue and many others is one of enabling first nations...giving the tools to the first nations at the community level to do the job that's expected of them.

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As you know, first nations approach taxation from very many different viewpoints.

One of the problems we've had is that we were essentially legislated out of the business by parliamentarians in 1918. The short story behind that is that when first nations were beginning to move ahead to try to settle the land question here in British Columbia, as well as in many other places across the country, we were legislated against raising our own funds. The parliamentarians stood up in the House and said, we don't want first nations or Indian people to be raising their own revenues. We're going to take that responsibility away.

The other thing that happened is that the same legislation, which is called the potlatch law, outlawed us from having the local authority to make our lives better.

So one of the challenges Canada faces is recognizing its history and also making sure there are enabling tools for first nations to do the job and to help this country come to terms with its history. You know the importance of the recognition of our rights as well as your rights within the Canadian mosaic. We all have something we can offer. It's a challenge. Merci beaucoup.

The Acting Chair (Ms. Karen Redman): Thank you.

Lorne Nystrom.

Mr. Lorne Nystrom: Thank you, Madam Chair.

I'd like to ask three very quick questions.

My first one is to Professor Grubel. I don't have the honour of knowing you. I took a sabbatical from the House of Commons when you were there. Now I am back at the time you're taking a sabbatical because of ageism from the Supreme Court.

I don't suspect we'd be ideological soulmates—that probably wouldn't surprise you—but I want to ask you a question about your philosophy in terms of poverty and so on. You seem to espouse a lot of values that are similar to what's happening in the United States, but the United States is the country with the highest poverty rate in the developed world. Why is that the case when they are doing many of the things you're advocating in terms of taxes and socioeconomic policy? There's tremendous wealth in the country but a growing inequality. It has the highest poverty rate of any country in the industrialized world. Isn't that an abject failure in what you are saying?

Mr. Herbert Grubel: I'm reminded of a paper I gave in India once where somebody tried to take me on on capitalism versus socialism. I don't think it can be settled in this context. I think that's what you're challenging me to do.

May I just say that the poverty measures being used are relative poverty measures. If tomorrow we had in Canada 10 times the per capita income, including 10 times the per capita income of the bottom quintile, the currently used measure in Canada would still show the same level of poverty.

I've recently read in the kind of literature I read that poverty in the United States means having a colour television set, a car, and an apartment.

I think we must get ourselves over this notion of defining the success of an economic system on the basis of how equal the income distribution is.

What I think we should take care of is the truly needy in our society. I think we're taking pretty good care of them. I think the benefit from leaving incentives to work and trying to make it, and not relying on welfare for the rest, outweighs the momentary benefit of them enjoying a higher income for a while.

Mr. Lorne Nystrom: In terms of the truly needy, I represent as part of my riding the inner city of Regina, where many aboriginal people live in abject poverty. We have homeless people, food banks, and a tremendously high crime rate. I don't think they would agree with that point of view.

I would also ask a question of the board of trade. Your recommendation to us is very radical: 50% on the debt and 50% in terms of taxes. I sympathize in terms of tax cuts.

I support the point of view taken by the Romanow government in Saskatchewan, where we were left with a tremendous debt by the very conservative government of Grant Devine of a one-third, one-third, one-third formula.

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We've had very few people coming to us and saying let's spend 50% on reducing the debt—very few people. That is certainly not the public sentiment. I don't get mail to that effect.

I'm really surprised that you'd make that kind of a recommendation to us when we have poverty amongst the aboriginal people and a health care system that's had radical cutbacks. In fact, most of the deficit repayment in this country has come because of massive cutbacks in social programs. We have homelessness, we have education...in my province, we have farmers who are suffering because of massive subsidies from the U.S. treasury to American farmers and from the treasury in Brussels to European farmers.

How can you advocate zero, other than the inflation-demographic increase, in terms of social programs when we're hearing the opposite for most people in this country, even including chambers of commerce in different parts of Canada?

Here you're sitting next to a chief who has many of his people suffering because of massive cutbacks.

I'm surprised.

Mr. Grayden Hayward: Thank you for your observations. I'm in the residential real estate development business in British Columbia, which puts me at the poverty level under our current economy. The reality is—

Mr. Lorne Nystrom: Would you agree with that, Chief?

Mr. Grayden Hayward: We're good friends. We share a lot of points of view.

Maybe in British Columbia we're looking a lot harder at things than the rest of Canada is, because we know something major has to happen to turn the economy of the province around and to turn the economy of the country around. Rather than look at the United States, we've looked at Ireland, New Zealand, and England, and at what's happened by getting things under control, at what impact that has had on the economy.

The reality is that we have a major problem in Canada: $621 billion worth of interest payments over two decades. There's a little bit of health care and a little bit of education that could have been covered by that. We have an annual cost in interest of $42 billion—or maybe it's getting down a little closer to $40 billion—which are funds that could be used.

We're at a position that is, as John Winter, I believe, or the B.C. Business Council referred to it, the opportunity of a lifetime. We use the phrase “crossroads”.

We have to make some tough decisions. They're not as tough as the decisions on where to get the debt under control, but if we make those tough decisions now and just reallocate the money we have, it won't be very many years down the road when our economic prosperity will be such that we can start to solve those problems. There are examples of that around the world. You don't have to look just at the U.S.

We firmly and honestly believe that the road of additional expenditures, of not dealing with the issue of taxes and not dealing with the issue of expenditures, will take us further down the road to economic irrelevance.

The Acting Chair (Mrs. Karen Redman): Mr. Nystrom, you said you originally had three questions. You're out of time. Are you out of questions?

Mr. Lorne Nystrom: No, I have one more question, if possible.

The Acting Chair (Mrs. Karen Redman): If you could do it quickly, please.

Mr. Lorne Nystrom: Maybe I can go back to Professor Grubel again. Peter Lougheed—and I asked this of the previous group—made a statement a couple of days ago saying that he's concerned about the sale of our economy, the takeover of Canadian corporations, particularly by the Americans. Peter Lougheed, of course, is no raving socialist, so it's interesting that he would say this. He has been on the boards of directors for about 17 companies, many of them big, and he's concerned about this. In the National Post this morning, there are indications that some of the ministers in the federal government are concerned about it as well.

I wonder if you share the sentiment of Peter Lougheed that this is a concern the finance committee should be looking at.

Mr. Herbert Grubel: Not because I believe there should be any obstacles to free exchange of assets, liabilities, and goods, and for that matter, people. I think everybody benefits from that in the longer run.

What I think is disturbing is that our policies have resulted in a depreciation of the currency, which makes our assets an unreasonably good buy. This is an economic distortion, and economic distortions tend to produce results that I, as an economist, believe are not in the interests of society.

Madam Chair, might I say just one last thing?

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Mr. Nystrom, I am always appalled—and people don't believe me, including, once, a very distinguished member of the cabinet of the present government—when I present them with the following information. The federal government, at the moment, spends approximately somewhere over $10,000 per native per year. For a family of four, that means $40,000. There are no income taxes due on that money spent.

Do you know the average income of a working stiff, a full-time employee working in manufacturing in Canada? Less than $30,000.

Now, I wonder whether we are spending enough on natives and the problem stems from something else. I just raise that issue with you. I have been through the mill from the media on that subject, but I do believe that these basic facts deserve some answers.

Mr. Lorne Nystrom: I think the chief wants to answer that, Madam Chair.

The Acting Chair (Ms. Karen Redman): Mr. Bassett liked that question so much that he also wanted to—

Mr. David Bassett: I think it would be more appropriate if we asked the chief.

The Acting Chair (Ms. Karen Redman): The chair has been most lenient with the presentation time. Everybody's gone over their time.

I'm going to ask you to be very succinct with your comments, and then we'll go to Ms. Leung. We'll hear from the chief and then from Mr. Bassett, very quickly.

Chief Manny Jules: After the failed Charlottetown accord, we conducted a very intensive study that looked at all the expenditures right across the country. Mr. Grubel is right. There's approximately $10,000 per capita spent in first nations' names—the same as you and me. There are virtually the same expenditures for all Canadians.

The problem we have is that most of the revenues spent in our name don't reach first nations communities. As a matter of fact, 80% of the moneys that come into our communities immediately leaves. We call that “bungee economics”. Part of the problem we face in our first nations communities is that we don't have the jurisdictional tools at our disposal. That's why I related the story about 1918. Two things happened there. One is that our jurisdiction was taken away by Parliament. We're endeavouring, still, to try to get that back. The second is that it limited and destroyed our ability to raise our own revenues.

That goes right to the point Mr. Grubel was talking about. Right now we can't do it, and we're just starting to change that. So you have about five or six generations of first nations that now believe it's somebody else's responsibility to raise revenues. In fact, we had that authority, Parliament took it away, and now we're coming to the finance standing committee with the suggestion of changing that relationship fundamentally so that in the next millennium we don't have to be coming here, cap in hand, asking parliamentarians to do the right thing when in fact we should have the tools at the community level to do it.

The Acting Chair (Ms. Karen Redman): Mr. Bassett.

Mr. David Bassett: Just in response to Mr. Nystrom's previous question about our proposal in terms of 50% to debt, 50% to tax reduction, part of the reason you may not be getting a lot of demand for that from the public is maybe due to the fact that, as noticed here, the media seem to have left right after the presentations on expenditures; they didn't stay for those presentations about where we need to have cuts. The information may not be getting to the public.

The position of the board of trade is this: we believe we should put forward the policies that we believe are economically appropriate and viable for all Canadians, not just what's popular.

The Acting Chair (Ms. Karen Redman): Thank you.

Ms. Leung.

Ms. Sophia Leung: Thank you, Madam Chair.

First, I want to thank you all for your very thoughtful ideas and your concerns.

As you know, I'm an MP from Vancouver. I'm always happy to be home and warm and dry.

Voices: Oh, oh!

A voice: One out of two isn't bad.

Ms. Sophia Leung: Unfortunately, I only have a few hours here. I live out of a suitcase and couldn't even go home, but it is a pleasure to see all of you.

As a matter of fact, I share a lot of your concerns for the B.C. economy. On November 2, I expressed the concerns to Minister Paul Martin. I think he is very well aware and he's on our side, to see what we can do.

Now I have a couple of questions. Some of you talk about infrastructure. That's something we have talked about a lot in Ottawa. I have a question for you. Any of you can answer.

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As you know, a few months ago the Minister of Transportation called a meeting in Ottawa. I was there. Representatives from each province attempted to try to develop some kind of cohesive plan. That's a good start. Now, as you know, infrastructure can be very costly for our budget. Do you have any ideas of what the financing package should be? This is one part. Again, Mr. Fraser, I think this is also related to transportation programs. It's all very important for us. I want you to know that. We have discussed it on different committees.

I'd like to see what kind of ideas you have for planning this financing package.

Mr. Peter Fraser: Madam Chair, we too have had contact with the transportation minister at the federal level. An annual meeting that PACE put on this past summer was with the Vancouver Board of Trade and the B.C. Chamber of Commerce, and the transportation minister was invited to be the keynote speaker.

We had invited him personally when he was here last spring. Unfortunately, he didn't make it. Very often this is the case with federal ministers. They don't make it to British Columbia. It's so dry and warm here, I don't know why they don't show up.

We had instead a middle-management Transport Canada person who gave us a canned speech, an AV. It appears that Transport Canada is very involved with airports. Its interest seems to lie in getting better roads to airports. In free trade matters, we have found that our airline members are really saying not to fix anything in free trade, that open skies is the best thing that ever happened. They don't have any problems.

Yet we have trucking...we have a state here on the border of British Columbia where the governor claims that Canada is his number one customer. He leads a state that is number two in the United States in exporting, not just because of Microsoft and Boeing; there are a lot of other things going on in Washington State. There are numerous opportunities there and they are seen every day to be practically coming to a halt because of the need for infrastructure on border crossings between British Columbia and Washington State.

The Acting Chair (Ms. Karen Redman): I believe Mr. Winter wanted to respond to that as well.

Mr. John Winter: Yes, I have a very quick response. In our brief we suggest that there is $5 billion collected annually in the form of fuel and excise taxes and from road user fees and the like, and a little less than 4% of that actually finds it way back into road construction and maintenance. So as an advocate of user-pay, we certainly see that as a very significant opportunity for the government to invest in infrastructure.

The Acting Chair (Ms. Karen Redman): Ms. Leung, do you have another question?

Ms. Sophia Leung: Yes. In the past we had two very successful infrastructure projects with financing of one-third, one-third, and one-third, from different levels of government. I would like to hear any comments on that. I also heard that some cities with a lack of resources found that package difficult. Mr. Hayward, would you like to comment?

Mr. Grayden Hayward: I'll refer that to Mr. Bassett.

Mr. David Bassett: I think we may pass on that one, only because infrastructure was a separate committee, and I'd hate to make a specific comment in that area when our committee may have dealt with it in more detail. But we will happily refer that to them to get back to you.

The Acting Chair (Ms. Karen Redman): Mr. Finlayson, and then Professor Grubel.

Mr. Jock Finlayson: One piece of infrastructure that will be important to the future of the lower mainland, and indeed all of B.C., is the expanded Vancouver trade and convention centre, which has been caught up in some federal-provincial wrangling over the past number of years. But that's an area where I think the studies I've seen would show a very significant payoff for government, including the federal government, from putting some resources into assisting in developing an expanded trade and convention centre. Significant tax revenue would be generated from that, for Ottawa especially. So whatever infrastructure program is put together for B.C.—and it's not something we've looked at closely—that should certainly be a piece of it going forward.

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The Acting Chair (Mrs. Karen Redman): Professor Grubel, then the chief, and then Mr. Hayward.

Mr. Herbert Grubel: At the risk of being unpopular among my colleagues here, I think user-pay is a principle that should also be applied to infrastructure. I'm disappointed that in my former riding the political representation nixed the idea of having the Lion's Gate Bridge widened and paid for by users. I just see no sense in natives paying taxes or poor people in Mr. Nystrom's region paying taxes so that the rich west Vancouver people can go across a convenient bridge for free. They should be able to pay for it themselves.

The Acting Chair (Mrs. Karen Redman): Thank you.

Chief.

Chief Manny Jules: One of the dilemmas that first nations have, and this is part of our earlier submission to the standing committee, is that we need a number of institutions developed. One of them is a national institution to look at this very issue—a first nations finance authority—so that we can go to the same markets that municipalities and provincial governments use to access our own sources of revenue, so that we can access limited dollars.

Right now, all of the infrastructure programs aimed at municipalities and provincial governments pass first nations by because we cannot come up with the one-third. Without the proper infrastructure in our communities, we can't be on the same competitive footing in terms of attracting business, creating job opportunities, dealing with water, sewer, bridges, and the like. If we don't have our own sources of revenue, we won't be able to participate in these areas. That's why we've been advocating the development of national first nations institutions to help facilitate infrastructure programs and the like in our communities.

The Acting Chair (Mrs. Karen Redman): Thank you.

Mr. Hayward.

Mr. Grayden Hayward: Just briefly on the transportation issue, we have many task forces. We have an excellent transportation task force that has made excellent recommendations. We have another task force on child care development that has made excellent recommendations. But in all cases, the final recommendation of the Vancouver Board of Trade has been that any of those changes must be accommodated within the $113 billion envelope.

The Acting Chair (Mrs. Karen Redman): Ms. Leung, do you have a concluding remark?

Ms. Sophia Leung: I have a short comment. I believe the board of trade produced a very good study on the child care agenda. I just want to remind you, if your formula is going to be 50% to debt and 50% to tax, how can we implement your plan? I'd like you to keep that in mind. You don't have to comment. It is a very important social program we would like to do.

Thank you.

The Acting Chair (Mrs. Karen Redman): Mr. Cullen.

Mr. Roy Cullen: Madam Chair, I don't know if the witnesses need to leave. We said 12. I'd like to ask some questions, but I'm not sure if....

The Acting Chair (Mrs. Karen Redman): We actually have you...and Mr. Jones has not had a chance. It's the chair's intent to finish by twenty-five after, if at all possible, if everyone can stay with us until then.

Mr. Roy Cullen: Okay. Thank you.

As I said earlier, it's unfortunate that the official opposition of the House of Commons decided not to be here to listen to these very interesting views.

I think I'd like to approach with the attitude Mr. Winter expressed: let's look forward and look for solutions. But there are some items in here that, factually, I need to respond to.

To the Vancouver Board of Trade, I think it was Mr. Bassett who said the government has a habit of spending first and then asking questions later. In fact, we ran in 1997 on the 50-50 approach to budgetary surpluses, and that's 50% to tax cuts and debt reduction, 50% to investment in social and economic programs. We're going to roughly meet that. As Mr. Finlayson said, you could debate whether that was a good number or not. Of course, it's a good debate as we move forward, and it will be part of our platform, whatever we decide.

Mr. Bassett also mentioned—and unfortunately he has left—the $50,000 family income. Of course, the measures we've introduced in the last three budgets have reduced the federal income tax payable for a family of four by about 16%. That's on page 98 of the book. Of course, we can do more. We will do more. But some of the numbers that were quoted ignored the GST rebates and the child tax benefit, which often people do mistakenly, and it has a big benefit on the terms of the net tax payable.

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Mr. Grubel, again, you provided some very interesting and thoughtful debating points. On the capital gains tax, I think most people would agree that in the short run, clearly, it's more or less revenue neutral as people liquidate assets. I guess the more important question is over the medium to long run, as these tax reductions get priced out of the assets and properties, the impact on government revenues in the medium to long term.... Maybe you've done some additional work on that.

I would like to come back to Mr. Finlayson—and unfortunately he has left too. In his tables he talks about...I thought he said large corporate tax rates, and I agree that that's problematical. In terms of small business, I think we have the smallest rate in the G-7 for small business. What the limit should be is another debating point.

Now that I've got that off my chest, let me come back to a point that some of us touched on, and that is the notion that as we move forward, we set forward a multi-year tax reduction plan. I guess the question is, should we put in place a multi-year expansion restraint plan? There is some unease about if we make tax cuts conditional...or, on Mr. Grubel's point, we need to be careful about committing to tax cuts unless they're sustainable. Should we put an expenditure plan in place, and how do we commit to that? Would it be by legislation? Would it be by regulation? Would it be by political commitment? What sort of level should that be at? In the book it's around 2.5% to 2.8%, which is demographics and inflation, but there are huge expenditure pressures, some of them right in this room—infrastructure. There are other pressures, like defence spending, for the RCMP, etc., and program spending is really low in relation to the GDP. So there are things we can be better at, but the amount of funds we're talking about I don't think is there, unless we severely cut back on some major programs.

So I guess my question is, should we have an expenditure restraint plan? Should the government put in place an expenditure restraint plan? How would we do it and at what level?

The Acting Chair (Ms. Karen Redman): Who would like to respond first?

Mr. Hayward.

Mr. Grayden Hayward: I think everything I've said to this point says yes, and that expenditure restraint program, in our view—it's in our presentation, and it's in our presentation from the transportation task force and it's in our presentation from the child care task force—is that yes, there are demands on government, but you do need a restraint program. How long that program has to be, we will have to wait and see, but if we don't grab the opportunity today, we'll lose it. The way to accommodate those new demands is by phasing them in, by substituting other programs and trying to work within that envelope of $113 billion.

The Acting Chair (Ms. Karen Redman): Professor Grubel.

Mr. Herbert Grubel: Just quickly, I urge you to read the comments made by Stockwell Day in this book about the merit of having had precommitment that once there was a surplus in Alberta, it would not be used for increased spending but for the benefits they are now enjoying.

The Acting Chair (Ms. Karen Redman): Mr. Winter.

Mr. John Winter: I would just like to point out that here in this province we have a government that's carrying on some rather reckless spending programs, and it's getting us into deeper and deeper trouble as time goes on. We're in the situation now where it's costing more and more to pay off the debt. Thirty cents of every dollar goes to debt payment. If we had some programs, such as you're suggesting, in British Columbia there's no way we would be in this particular problem.

The Acting Chair (Ms. Karen Redman): Chief Jules, did you want to respond as well?

Chief Manny Jules: The dilemma governments face today, and you can see it all over the world, is how to deal with these types of issues. Unfortunately, when the expenditures started to come fast and heavy in the seventies, it was a result of the baby boomers. Now we're going to be having a large number of baby boomers retiring right at the time when you need reinvestment in Canada's infrastructure, in Canada's social programs.

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So the dilemma that parliamentarians have is, how are we going to prepare ourselves as Canadians for the next millennia and the next century? Be conscious of that when you're making these very tough decisions and recommendations to the finance minister and ultimately to cabinet and the rest of the country.

Just a reminder: first nations have been shut out, and we need to participate any time you're talking about restructuring fiscal dividends or the makeup of fiscal policy in this country. If you leave one segment out of this country, it affects all.

Mr. Roy Cullen: Could I have just one more quick question, Madam Chair?

The Acting Chair (Ms. Karen Redman): If it's concluding, because we have to get Mr. Jones in.

Mr. Roy Cullen: Yes. Mr. Finlayson talked about the disproportionate tax burden on the service economy. It sounds suspiciously like Mintz. Have any of the presenters read the Mintz report?

Mr. Andrew Wynn-Williams: Are you discussing the report on business taxation?

Mr. Roy Cullen: Yes, by Professor Mintz. Mr. Winter, Mr. Hayward, and others, basically what Mintz said is that we should be rebalancing the corporate tax burden between the service economy and the goods and manufacturing economy. We haven't as a government moved on that report. Would you support the Mintz report? I wanted to explore it more with Mr. Finlayson. You're familiar with the report. Do you have any views on it?

The Acting Chair (Ms. Karen Redman): Mr. Wynn-Williams.

Mr. Andrew Wynn-Williams: The report made a host of recommendations about the issue of fairness, but it was stated in its mandate that any review of the corporate tax structure must be on the premise that revenue should be revenue neutral, and we don't think that was the appropriate mandate for that task force. So those kinds of issues, whether or not they should be rebalanced, are placed within the context that they had to find a way to keep the revenue neutral.

Do we agree with Mintz's conclusions? To an extent. There is an unbalanced nature to our corporate taxation system.

Mr. Roy Cullen: What about as we move forward?

Mr. Andrew Wynn-Williams: As we move forward, I think as a country—and the Canadian Chamber of Commerce also said this—you should take the comments in that report to heart, the idea of rebalancing or addressing the balance between the service economy and the manufacturing economy. But by the same token, you should re-examine those recommendations in that report within the context of them not being revenue neutral, because it has been shown in the long term that actual tax cuts create revenue down the road.

The Acting Chair (Ms. Karen Redman): Thank you very much.

We're going to go to Mr. Jones now.

Mr. Jim Jones: A lot of the people I wanted to ask questions of have already left.

I would also like to remind Mr. Cullen that in 1993 his government promised, as an election promise, that they were going to eliminate the GST and also tear up the free trade agreement. So I don't expect that they should even feel they have to honour their 50-50 promise.

The Acting Chair (Ms. Karen Redman): Did you have a question, Mr. Jones?

Mr. Jim Jones: Yes, I do.

It seems that the British Columbia economy is very anemic. Beside you there is Alberta, which is booming, but also south of you is the state of Washington, which is booming. If you had to do one thing with this surplus, what would help this economy the best? Business tax cuts or personal tax cuts? What would you do?

The Acting Chair (Ms. Karen Redman): Mr. Wynn-Williams.

Mr. Andrew Wynn-Williams: Personal tax cuts. Does the answer need to be longer?

The Acting Chair (Ms. Karen Redman): No. I like short answers at this point.

Would anyone else like to respond? Mr. Hayward.

Mr. Grayden Hayward: I'll second that.

The Acting Chair (Ms. Karen Redman): Chief.

Chief Manny Jules: I wish we all lived in a life where it was simply yes or no or this or that. Unfortunately, we don't live in that kind of a society. The society we live in is very complex. We all recognize the role of government and what government has been able to do, as well as the power of citizenship.

In this particular case, what we have to begin to recognize is that here in British Columbia you have to have a fair and just settlement for the land question, so that you get rid of uncertainty, so that there can be economies of scale here, so that there can be more investment. Obviously, some of the studies have clearly shown that there's about $1 billion a year that doesn't come into British Columbia because of the unsettled nature of the land question.

Nationally, what we have to do is review the Delgamuukw situation, so that first nations, on a national basis, can get involved in the economy and real revenue resource sharing.

When it comes to whether or not there should be a cut personally or elsewhere, that's the context in which we have to look at that question.

The Acting Chair (Ms. Karen Redman): Mr. Jones, do you have any additional questions?

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Mr. Jim Jones: No, not really.

The Acting Chair (Mrs. Karen Redman): I'd like to thank the panel very much for coming and staying over the allocated time. Rest assured that your thoughtful presentations will form part of our report that we take to the finance minister to deliberate for the budget.

Thank you all for coming.

We will reconvene at one o'clock.