FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, November 24, 1999

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[English]

The Chairman (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I would like to welcome everyone here this afternoon.

Members, this afternoon we have the pleasure to have with us representatives from the Saskatchewan Canola Growers Association; the Saskatchewan Farm Support Review Committee; the Pro-West Rally Group; the University of Regina Faculty Association; and the Manitoba Farm Delegation. However, we also have the pleasure to have with us the Honourable Dwain Lingenfelter to kick off this session.

Minister, welcome.

Hon. Dwain Lingenfelter (Minister of Agriculture and Food, Government of Saskatchewan): Thank you very much.

I just want to say how very pleased I am that the House of Commons Standing Committee on Finance chose to come here at this very appropriate time. I think it is a very appropriate time to be in Saskatchewan for a number of reasons, not the least of which will be the topic I will present to you on behalf of the farm income coalition.

I wish to introduce Ray Hilderman, vice-president of the Saskatchewan Canola Growers Association; Harry Bastness, who is the chairman of the Saskatchewan Farm Support Review Committee; Ralph Rein, from the Pro-West Rally Group; and I think Neil Hardy, the first vice-president of Saskatchewan Association of Rural Municipalities, is seated in the audience.

Neil, I don't know whether you want to move up in case there are any questions.

I want to start out first of all by saying it is interesting that we are here today, because prairie farmers are facing a very serious income crisis, as you will have heard. This happens from time to time because of drought and floods and severe weather. We are living in a community where the weather can vary between plus 40 degrees and minus 40 degrees. From the early days when it was first settled by our first nations people, this has been a tough area climate-wise.

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But the major reason we have this problem today is not because of natural disasters or those kinds of problems that often face prairie farmers. Today's decline in farm incomes comes about as a result of low commodity prices that are very much artificially affected because of the huge subsidies being paid by Europe and by the United States, our main competitors, and the lack of those same supports in our country of Canada. For example, in Europe the subsidies for wheat are six times the level they are in Canada, and in the United States they are four times our level.

Mr. Chairman, I will pass out to the committee this chart that graphically explains the situation in the European Common Market, where 56 cents of every dollar a farmer gets for wheat come from their national governments. In the United States, the number is 38 cents of every dollar. In Canada, only nine cents of every dollar comes from the national government.

I will ask one question of the committee: Can you imagine any other industry in this country—whether it be steel, automobile, or lumber—that, given the fact of exporting into the world market, would survive for more than a few weeks if it were told to export natural gas into the United States with the understanding that it would be at a 30% disadvantage when compared to producers of natural gas in the United States? What about lumber going into Japan from British Columbia if lumber companies were told the American producers were going to get 30% more and the Europeans 50% more, but the Canadians had to go out there and compete with the rest of the world, and good luck to them? There isn't another industry in this country that is told to compete on this kind of a playing field except for western grain farmers. That's the point I want to make to the committee today.

Obviously our farmers—all of the ones here, and I'm sure everyone else—would prefer to make their living directly from the marketplace without subsidies. We are not asking for a handout. This is not an idea that we need handouts. But we cannot compete with the farmers of the United States and the United States Department of the Treasury without the same kind of support from Canadian taxpayers and through our federal government.

I would add that the federal government is responsible for negotiating international trade agreements. We didn't get adequate trade rules in the last round of World Trade Organization negotiations, and we can't afford another round of WTO meetings at which Canada fails to effectively advance the exporting interests of prairie agriculture, particularly in the area of subsidy reductions. Saskatchewan certainly can't accept a WTO outcome unless it provides a balanced benefit to all parts of the Canadian agricultural industry.

Don't get me wrong. We are not asking that other farmers reduce their incomes somehow or that they give up advantages they have in order to bring all farmers to the lowest common denominator. That isn't our request. Our request is that our agriculture be brought up to the same level of protection that farmers in Quebec and Ontario receive.

If you look at the playing field between Canada and the United States in milk, cream, cheese or ice cream, the playing field is level. The subsidies that exist in the United States on those commodities—commodities that are the basic principles of agriculture in Quebec and Ontario—are the same in Canada and the United States. We're not asking anyone to give up protection. We're asking for fairness so that our grain farmers are treated with the same respect that farmers in these other parts of Canada have demanded and have received.

We say the federal government chose to cut our agricultural programs without ensuring that Europe and the United States would do the same. I make the argument that it hasn't always been this way, where we have been on this unlevel playing field. In the last round of negotiations the Canadian government was involved in on behalf of all farmers, and certainly on behalf of our farmers in Saskatchewan, there was agreement that everyone would reduce their subsidies on the export of grain. Lo and behold, our federal government came home and reduced subsidies. They reduced the Crow benefit, taking $320 million out of the pockets of Saskatchewan farmers. They took out safety net reductions of $80 million for Saskatchewan farmers. There is no sharing of the rail productivity that allows railroads to keep $100 million that we believe rightfully should be passed back to farmers. And our federal government ended the two-price system for wheat, which took $125 million in subsidies for farmers in Saskatchewan.

The federal government then looked over its shoulder at Europe and the United States and there was no reduction in subsidies in those competitor countries. In fact, look at what the Clinton administration is doing going into the WTO in Seattle next week. As announced last month, the U.S. has just pumped another $8 billion into agriculture to drive the contest up between Europe and Canada and to say to the Europeans that the U.S. is coming to this negotiating table in a position of power.

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In the meantime, our federal government has said we're reducing our subsidies, so good luck and best wishes to the farmers in Saskatchewan; go out there and compete at a disadvantage of 30% to 50% on the income side, at the same time when you're buying the John Deere combines and the chemicals and are paying the taxes at the same level as everybody else in the world. Folks, it simply cannot work, it won't work, and it has never worked in the Canadian context. This is a manipulative game that we are being told to play, with rules that are absolutely stacked against the farmers of Saskatchewan. The result is less agricultural support in Canada while Europe and the United States, I say again, have increased their programs.

Saskatchewan farmers are facing a $1 billion net farm income shortfall for the years of 1998-99. People ask where we get the $1 billion. Do we just pull it out of the air? How does that work? The $1 billion figure is the difference between the five-year average between 1993 and 1997 and what the net farm income will be in 1998 and 1999. It is interesting to note that this gap in income is exactly equivalent to the subsidies that have been removed, we would argue, far in advance and in boy scout style, I might say, without any consideration for the same consequence occurring in Europe and the United States.

So Saskatchewan farmers are facing a $1 billion income shortfall for those two years of 1998 and 1999. Obviously the 1998 realized net income was about 35% below the five-year average—it was between 30% and 35%—and this year we're expecting the net farm income to be near zero. And the outlook for prices in the year 2000, according to the Globe and Mail today, predicts that wheat prices will still be below $3 next September on the Chicago Board of Trade.

I might add that as long as these subsidies occur in Europe and in the United States, world grain prices are going to remain severely depressed. That means no option for Saskatchewan grain farmers. And this already includes the crop insurance payments, NISA, agricultural income or AIDA. All of these numbers and programs are factored into the net minus $48 million income for Saskatchewan farmers this year.

I want to say that at a community forum held recently in Carlyle I sat on a panel alongside the representatives from other farm organizations, and I had the opportunity to answer a number of questions that were being put. I listened to stories about farm residents being forced off the land, depression, phone calls, and much, much worse, which I won't go into today.

There was one individual there named Trevor Doty, a young farmer I talked to. I asked if I could use his quote at the meeting, and he said he would be very pleased if I would share it with the committee. This young farmer from the Carlyle area described to the crowd in attendance that night—a jam-packed hall of over 350 people, overflowing out into the streets—how he felt after coming home on October 28, after our group appeared in Ottawa, and hearing that the federal government would not be offering any financial assistance to the province's farmers. I'll quote what he said at the meeting:

When I got home from my off-farm job that day, the first thing I did was take down the Canadian flag that had flown at our farm since before I can remember, and I will never put it up again.

I am sure this was the feeling many shared in that hall that night.

Mr. Doty's comments concluded with a positive note, though. He said “Make me want to put up our Canadian flag. Show us that you care.” It was a powerful message that said to me that this is not a farm family that does not like Canada. This is a young farmer who believes so much in Canada that he has flown the flag over his farm every day of his life, his family believes in the country that much. This is not a young farm family leaving or not liking Canada. This is a sensation about a Canadian government that has left him and is not serving his needs any more.

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This is not someone who has made up his mind that he doesn't want to be here, but who has a sense that someone has left him, that someone has taken away some of the privileges and rights that have been there historically in terms of transportation subsidies.

Believe me, if you were to come out to rural Saskatchewan to listen to the town hall meetings, you would know this is not just a story I'm making up. This is how they feel. This is how they believe.

In all surveys, of all the provinces in Canada, Saskatchewan has been the most supportive of Confederation and of our country. But Saskatchewanians also feel slighted and they feel they are not being heard in Ottawa, which is why I am so proud today to be here on their behalf. I am also very proud that the committee has chosen to come here to listen firsthand to the stories and to be involved in this.

The impact on farm income problems is not only being felt in our province, obviously. We export $4.2 billion worth of primary products. In 1998 that represented 38% of all the agricultural products exported from this great country. There are literally tens of thousands of jobs across this country that rely on a healthy agricultural entity here in Saskatchewan and in western Canada. Agricultural input suppliers, the service industry, and the transportation sector all have a significant stake in ensuring that our farming economy and industry remain competitive in the world.

I might add that I just returned late last night from a day in Vancouver, where I met with the CEO of the Vancouver Port Corporation, Captain Norman Stark, as well as union members from the ILWU and the grain handlers' union. I can assure you that they are supportive of the need to treat prairie grain farmers in the same way we treat other industries. They are taking to their union meetings next week in Vancouver petitions that are being signed by farmers here in Saskatchewan. They will be signed by many union members in British Columbia. The port authority is well aware that if farmers cannot grow wheat here any more, the jobs of 800 men and women in Vancouver will be affected directly. Those are the 800 men and women who handle the grain that flows through that port. The other issue is that about $6 million is paid in taxes to the local government in Vancouver, based on the grain terminals that are located in Vancouver.

I want to tell you that this is not an issue that's going to go away. I intend to go to Calgary next week to deal with oil companies and to ask them to support our position, because they drill on the land in Saskatchewan and they understand the farm situation. We are going to be explaining to everyone who will listen, and to any media that will print this story, that we are being treated differently than any other industry as it relates to competition in the world market.

I want to say that of the 3,000 people who work at the cargo and cruise terminals in Vancouver, about 800 are involved in the grain industry. That's about 27% of their staff. I might add that grain constitutes about 20% of the volume shipped through the Port of Vancouver, and about 35% of all the products shipped through Prince Rupert. This is a big, big issue, not only for Saskatchewan, but for the rest of the country.

Because of the serious impact this situation is having, in conjunction with representatives of farm-related business and government leaders from the province and the three political parties, farm leaders have joined together in a very unusual coalition to support one call. That call is for an interim return to the supports the prairie farmers have had, while other countries begin to lower their subsidies. I say again, though, that Saskatchewan farmers do not want handouts; they want a level playing field. Until the playing field is levelled, however, we are insisting that the federal government come to support this industry.

Western Canadian agriculture made a significant and painful contribution to assist in the elimination of the federal deficit. There's no doubt the government had to deal with that deficit. Canada reduced much of its domestic support for our farmers through the elimination of the Crow and the safety network in an effort to balance the federal budget, possibly in the naive belief that in reducing subsidies, our neighbours and friends in the other parts of the grain-growing world would reduce theirs.

The federal budget is now balanced and is in fact projected to run a surplus of $95 billion over the next five years. The federal government now has a degree of flexibility. I know how tenuous it is, and we don't want to go back to a negative position on the budget. So we are asking our federal government to step forward now and to provide the supports that our farmers need during this difficult trade issue time. It happens in the European Union and it happens in the United States, so surely grain farmers in Saskatchewan should be able to expect no less.

We're not asking for any more than farmers in other parts of the world. The arguments that we are poorer, that we don't have the money, or that farming is less important in Canada than it is in Europe or the United States simply will not be left unchallenged by the farmers of this province.

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Saskatchewan farm families, to offset the loss of low commodity prices, bought into some of these ideas of giving up the Crow rate. Organizations that supported it at the time believed the federal government when it said other subsidies would be reduced in other countries.

There is an issue of trust as well. They were told that these subsidies would be removed and that if they bought into the idea our federal ministers would ensure that the commodity supports would be removed in other countries. There is a breaking of trust that has occurred on that point—big time—and many farmers feel that. Farmers expect to feel that they are part of the deal given the contribution in terms of balancing the budget.

I want to say that we need your committee's support in helping us make this pitch in Ottawa and in other parts of Canada, because you are a key committee in our Parliament.

Again, on behalf of all producers in the province, I want to express our appreciation to you for being here.

The Chairman: Thank you very much, Minister.

I would also like to thank Mr. Hilderman, Mr. Bastness, and Mr. Rein.

We will now hear from the University of Regina Faculty Association, with Mr. Paul Gingrich, chair. Welcome.

Mr. Paul Gingrich (Chair, University of Regina Faculty Association): Thank you, Mr. Chair and the committee.

I am the chair of the University of Regina Faculty Association this year. We usually call ourselves URFA and we have used that acronym throughout our brief.

You should have a copy of our brief. There is a French translation on the back of the pages.

With me is Patricia Fleming, who is our executive director.

We represent about 800 academic and other employees associated with the University of Regina. There are three federated colleges as well: Luther College, Campion College, and Saskatchewan Indian Federated College. If you do have a little extra time, we're just a few steps down the street from here. We'd like to have you come by the university to visit if possible.

URFA is a trade union under the Trade Union Act of the province and we represent the employees of the university. We are also a member of the CAUT, the Canadian Association of University Teachers.

Maybe some of you had visits from CAUT representatives last week. Several members went to Parliament Hill to talk about increased federal support for post-secondary education. Earlier this fall, CAUT made a presentation to your committee; that was the statement regarding the 2000-2001 federal budget.

One thing we would like to do is to support that brief. The CAUT recommended that the federal government act decisively to create an education fund to invest more in post-secondary education. In terms of an immediate request, I think the CAUT request is that the federal government consider devoting up to one half of one percent of the gross domestic product to post-secondary education, so that would mean an increase of about $2.7 billion a year to the post-secondary sector from the federal government. This certainly would help to increase accessibility to universities and would ensure more quality for the Canadian university system. It would restore the level of federal funding to where it was at the end of the 1970s.

URFA supports those recommendations and urges the federal government to adopt them.

If I may, I will just say a little bit about the University of Regina. I attached one chart along with the other document. In regard to what the chart shows, you might think that we got a big increase back in 1974-75, but we were established as a university for the first time in 1975, so we either didn't have any money before that or it was all channelled through the University of Saskatchewan up north.

If you look at the top line, what you see is that the level of government funding as a whole, in real terms, corrected for inflation, has its ups and downs, but basically it's a little lower than it was late in the 1970s, and it has certainly not increased. On the other hand, if you look at where the increased revenues have come from, the bottom line shows that it is basically the students, through their tuition and fees, who have been paying for their education in increased amounts, so that by now student tuition and fees actually account for a fair chunk of the total university budget.

During that time, the number of full-time students at the University of Regina has more than doubled. At the same time, the number of full-time faculty members has actually declined slightly. So in some senses, I think the university has been relatively efficient at providing post-secondary education, university education, but the decline in the level of funding really does threaten to hurt the quality of the education.

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We know that education is a provincial responsibility, but we think there also needs to be a federal presence in post-secondary funding. Certainly there is already, and we're grateful for that, for the funding of the three research granting councils that support research at the universities. Also, there are the Canada millennium scholarship fund and the chairs of research excellence initiative. At our university, there have been some special initiatives. The Saskatchewan Indian Federated College has had funding from the federal government, of course, and there are also funds for petroleum research.

One of the problems, though, is that while that special funding is really helpful, it doesn't do anything for the core operations of the universities: keeping libraries, expanding libraries, maintaining and operating the physical plant, paying faculty salaries, and providing services for students. It's in that area that universities have generally pared down to the bone over the last few years, and the University of Regina is no exception. But I think some of these are at the level now where this really does threaten the quality of university education unless there is more funding.

In terms of a federal presence, I think one thing we have to recognize is that young people from Saskatchewan are highly mobile. Some attend university in other provinces, and we certainly know that a lot of our graduates from the University of Saskatchewan and the University of Regina find jobs in other provinces after they graduate from here. So the benefits of that university education we provide here benefit Canada as a whole, and we think the costs as well as the responsibilities for providing university education should be shared between the provinces and the federal government.

We'll be meeting with the provincial minister early in December. We'll certainly encourage the provincial government to ensure that any federal funds targeted for post-secondary education actually get to the post-secondary sector.

In conclusion, I will just say that we urge the committee to recommend that the Canadian health and social transfer be expanded to provide a strong federal commitment to post-secondary education.

On behalf of URFA, I would like to thank the committee for letting us appear and for hearing us.

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

We will now hear from the Manitoba farm delegation, with Mr. Andy Baker of the National Farmers Union. Welcome.

Mr. Andy Baker (Representative, Manitoba Farm Income Delegation): Thank you very much.

With me today is Maxine Routledge. She is with the Manitoba Women's Institute, and she farms with her husband northwest of Brandon. I farm just to the north of Winnipeg.

On behalf of the Manitoba Farm Income Delegation, we would like to thank the committee for the opportunity to bring our concerns on the severity of the current farm income situation to the federal government.

At this point I would like to say that the Minister of Agriculture from Saskatchewan did a good job in putting forward the plight of the farmers. I would be repeating a lot of what he said, so I am just going to try to make my presentation shorter. Maxine will finish it up. I do have a full presentation; it has been passed out to the committee members.

As you know, a delegation from Manitoba, consisting of farmers and officials from farm and municipal organizations and all provincial political parties, presented our case to the federal government on October 28 and 29. I think it's really important to point out that when you can get all those people together in a room and they all agree on how severe this problem is, people should stand up and take notice.

We felt the request was reasonable: $300 million in additional funding to deal with the severe farm income situation. Our rationale for the request was founded in several facts. The source of the problems is primarily international trade. The scope of the problems faced by producers can only be called severe. Current safety nets are simply unable to deal with the scope and nature of the problem. Finally, the massive reductions in federal support for prairie agriculture have meant that producers have less ability to deal with these issues.

We must say that we were extremely disappointed with the reception we received in Ottawa from the Minister of Agriculture. We felt extremely hurt by his use of the “phantom numbers”. They were used in a misleading manner that minimized the situation we all face.

Minister Vanclief described his policy position on this issue as “tough love”, in that he is prepared to see farmers leave if current programs do not allow them to deal with current problems. This position is indefensible, given the source and nature of the crisis and the reduced federal support to prairie farmers.

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We feel we have contributed our share to the reduction of the federal deficit. We feel that now we should be part of the benefits of the so-called fiscal dividend. Prairie agriculture and the very lives of farm families should count for something.

Manitoba producers are facing a severe farm income situation. The recent forecast of October 21 from Agriculture and Agri-Food Canada placed Manitoba's total net income at $48 million, a drop of $287 million from the previous five-year average.

At this point I'd like to clarify the so-called phantom numbers that Minister Vanclief used when we were there. In the meeting with the premiers, he stated that instead of facing a negative $100 million total net income for 1999 as developed by the AAFC July income forecast, the situation had improved to the $200 million level in the October 21 forecast.

Unfortunately, the figures Minister Vanclief referred to mixed apples and oranges. The $200 million referred to realized net income, which does not take into account drop in inventory anticipated from the 1999 crop, a major issue in a year such as 1999. Manitoba focused on the total net income, the bottom line for our industry, which includes the 1999 inventory reduction. To illustrate the difference in these two figures, an analogy may be in order, that is, Eaton's would have had a high realized net income figure because of their inventory sell-off and lower expenses in 1999. However, their total net income would have shown reality—a bankrupt company.

The farm income situation is more severe when individual sector figures rather than aggregate figures are examined. In aggregate data, good prices in one sector can mask the impacts on another sector. Manitoba has estimated that the overall value of production for the crop industry will drop by around $350 million in 1999.

The current farm support programs are inadequate to deal with the full impact of the current farm crisis. Under current prices, crop insurance coverage, even at 70% or 80% levels, is unable to meet producers' operating costs. NISA balances show that 30% of Manitoba farms have NISA balances that can supplement the farm's income by less than 11% of their farm's gross margin, too little to effectively assist in the current problems.

AIDA is intended to provided support to many producers. However, many producers who have large drops in income will not receive assistance because of AIDA design flaws.

Because it was mentioned previously, I won't go over the causes of the problems or the figures about subsidies in other countries, in the U.S. and Europe. I'd just like to say that if my farm were 70 miles south of where it is, just for my wheat crop alone this year—I farm with my brother and the wheat crop represents about half our production—I would get a cheque from the U.S. government for $81,000 Canadian. That's backing it off to my farm, and it gives you an idea of the subsidies that we have to go up against. Those are just the American subsidies. They're low compared to the European ones. I just thought I'd like to try to put a more personal face on what is happening out there.

Now I'd like to turn it over to Maxine.

Ms. Maxine Routledge (Representative, Manitoba Farm Income Delegation): We'd also like to make the point that with the 1995 federal budget, deficit reduction became a priority. Federal termination of the Crow benefit, along with changes to the Canadian Wheat Board pooling system, meant a virtual tripling of transportation costs to our producers. That budget also drastically reduced federal safety net support and introduced a sharing formula among provinces that disadvantaged Manitoba and Saskatchewan. Federal expenditure reductions affected all provinces, but Manitoba suffered the equivalent of the drop for all of the non-prairie provinces.

This crisis is a federal responsibility. Its primary origin is international trade problems, an area solely under federal jurisdiction. Federal governments for other countries, such as the U.S. and the European Union, have recognized this responsibility. The federal government withdrew from Manitoba $350 million in safety net and transportation support since 1987. Manitoba requires a minimum of $300 million in payments to producers to offset the total net income drop of $287 million and the disproportionate reduction in federal expenditures in Manitoba as compared to the non-prairie provinces.

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

We will now hear from Mr. Neil Hardy, vice-president of the Saskatchewan Association of Rural Municipalities. Welcome.

Mr. Neil Hardy (Vice-President, Saskatchewan Association of Rural Municipalities): Thank you very much for allowing the Saskatchewan Association of Rural Municipalities to speak before your committee.

We represent all the rural municipalities in Saskatchewan, 297 of them, and represent all the producers within those municipalities.

I think our deputy premier has laid out the farm crisis in Saskatchewan fairly well. I will just touch briefly on it. I want to talk a little bit about our road structure, which also has a lot of problems.

Saskatchewan is facing a farm crisis that will have long-term financial implications for years to come. I guess we are all part of a great country, and we all call it Canada. And I think every one of us in Saskatchewan, or nearly every one of us anyway, is proud to be Canadian. But I guess right now we are calling on Canadians through the federal government to come to our assistance.

When Quebec had problems with the flooding down there, they came to their assistance—and we agree, totally agree. When Ontario and Quebec had the ice storm, Canada came to their assistance, and Saskatchewan did too, and all of Canada did—the way it should be. Right now we also know that Ontario and Quebec, when you come to voting—and a lot of what happens around the House of Commons is voting—are seventeen to one. But really more important than all that is that we are Canadians and we are proud to be part of it. So what we are doing is asking Canada to come to the assistance of our farmers out here. That is very, very important, because we have a great country, and it's a great country only as long as we stick together.

I guess that is what Canada is all about. The farm crisis out here in Saskatchewan is just pulling us all down. Statistics Canada's report in September said from September 1998 to September 1999, Saskatchewan lost 10,000 farm-related jobs. That's a real impact on a province like ours. What is going to happen next year? We haven't even hit the crunch yet.

We have farmers out there right now who don't know how they are going to pay any of their bills. We have them leaving. We have people just having tremendous family problems, all due to financial stress. We, as a province and as part of the municipal association, say to each one of you that we need you to come to our assistance.

Our farms are in crisis, and the crisis is due to a couple of things. First, our transportation costs because of the changes in the Crow rate have increased about a dollar a bushel. That makes a big difference to us as farmers. That would probably get us through. At the same time, we have been facing a price crunch. The deputy premier did a fine job of telling you how that price crunch affects us.

In the EU and the United States, their subsidies are almost unlimited. Every time I pick up the paper it seems there is another subsidy. They find a way around making it green. We met with some of the people from the justice department a couple of days ago, and they said most of them are amber, but how do you challenge them? I am not interested in challenging them. I am just saying we need a level playing field, and that level playing field is something only Canada can do. The province alone cannot do it. Municipalities cannot do it. It will be up to you as our representatives for our country to take a serious look at what you can do to help us.

Forty percent of all our jobs in Saskatchewan are related to agriculture. That just tells you how important agriculture is to Saskatchewan.

I think the deputy premier covered most of the rest of what I wanted to say, so I will just go on. I want to talk about the second area of concern we have, and that is our road system and the lack of any federal dollars to assist us. I believe in the year 1998 and 1999 there were no dollars allocated to Saskatchewan for the road structure that interconnects across Canada. We in the RM have about 160,000 kilometres of municipal roads that we look after. There are about 26,000 kilometres of highways. We are going through a consolidation of elevator systems, the loss of many of our branch lines. Our local communities are just dwindling away and disappearing, and that means businesses go with them and it means jobs go with them. We are hauling a longer and longer distance to our markets.

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I think it is fair to say that our highway system is in much need of repair as well. Some of our municipal highway systems in the rural part are not much better than our municipal road structure.

I know the province has limits to how many dollars they can spend. But if you look back at what the federal government takes out of taxation in fuel taxes just from this province each year—I think last year it was $175 million—in their 10-cent fuel tax, and if you multiply that over the last 10 years, from 1988 to now, they have spent $35 million in Saskatchewan on our road structure; that is federal dollars. I think there's some room there for them to put some more money into it, whether it is through an infrastructure program—I know they are looking at that—whether it is through a type of program like we had, the Canada agri-infrastructure program, or whether it is some other type.

I can't speak for the province, but I am sure they are in the same boat as we are. We need to look at how we are going to deliver our product, even through the consolidation of the grain companies and through the loss of our branch lines. So we'll have to look at that. We do need some dollars and we do need some help from the federal government, whether they do it through agriculture, whether they do it through our road structure. I know some assistance is needed here in Saskatchewan.

As RMs we spend about $100,000 on keeping our local roads as they are, but most of them were built 40 years ago, and 40 years ago we built roads a lot differently. We built them to handle a three-ton truck, not to handle the semis and the super-Bs and all the rest, and the heavyweights.

As a province, and certainly with the changes in the transportation as it is coming today and what we are looking at tomorrow, we have to take a serious look at how our infrastructure program is going to be. I believe Justice Estey recognized the road impacts, and he said the federal funding for a grain-related road network should be provided, given the federal government's direct interest in transportation in agriculture.

A Saskatchewan road impact analysis prepared in October 1999, a month ago, through the Urban Municipalities Association, the Rural Municipalities Association, and the Government of Saskatchewan identified that the average haul distance will increase by 250% over the next three years, based upon rail line abandonment and elevator consolidation to date. That is just what we know to date. Incremental road impact costs are already at $50 million annually. The analysis further indicates that should the grain handling system consolidate to its most efficient size—and I am not sure what that is—then the annual road impacts will be probably in the neighbourhood of $85 million annually—additional, on top of what we are doing now.

There have been things done at the federal level that are affecting us down here in rural Saskatchewan. I know elevator consolidation will happen. It is happening all over Canada, but we are feeling a tremendous impact out here.

I had some other things, but I think the deputy premier has covered it very well. I just want to thank you for listening to the people of RMs of the province of Saskatchewan.

Again, I want to say we believe in Canada and we are proud to be Canadians, and we know Canadians will be there for us when we need you. So I would like you to take a serious look at that.

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

We will now proceed to the question and answer session. We will have the following questioners: Mr. Epp, Mr. Nystrom, Mr. Jones, and Mr. Cullen. It's going to be a seven-minute round.

Mr. Ken Epp (Elk Island, Ref.): Thank you, Mr. Chairman.

I appreciate you all being here. A number of the people are familiar, because we met with you when you were in Ottawa and had, I think, a very good briefing of the situation in Saskatchewan, although being from the west we are aware of it to a certain degree to start with.

I have a first question for the minister. All of you are saying you want immediate help. I think we probably all recognize that is necessary in order to just weather the storm for this year. You also want to have a long-term solution, which includes particularly Canada taking a very strong position at the trade organization talks. I think that's probably, if I am not wrong, your highest priority.

I am just wondering what form that short-term help should take. Are you thinking of an acreage payment? Are you thinking of a payment like AIDA, which is based on past performance? Do you have specifics on that, or is it just a cry for something to be developed?

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Mr. Dwain Lingenfelter: The request from the delegation that went to Ottawa is for an acreage payment that would be based on cultivated acres at a rate of $20 per acre. If you look at most of the subsidies being paid in our competitive nations, the United States and Europe, these are not targeted programs. In North Dakota, for example, farmers who produce durum receive about $8.70 a bushel for every bushel they produce. Every bushel is subsidized. That's what our farmers are competing with.

To say we're going to target this to the farmers who are losing the most and then treat everybody else differently does not put us on a level playing field. It penalizes the most efficient farmers.

This has to be looked at as a trade issue, not a welfare issue. We are not talking here about putting in some money to tide over a few of the farmers who are being forced off the land. This is a trade issue, which is fundamentally described by this chart. All the farmers in Europe and the United States get subsidies. These are not targeted programs where those who are making a lot of money don't get any subsidies and those who are losing money get subsidies. If we are going to have a level playing field, then that's the way it will have to work.

It would be the same as it is for milk and dairy in Quebec and Ontario. In Quebec and Ontario butter is subsidized, as are eggs and other commodities. For example, if we take milk as one of the large items that is subsidized in eastern Canada, 58 cents of every dollar a farmer producing milk in Quebec or Ontario gets comes as a result of subsidies. In the United States it's 61 cents of every dollar. These are the programs that are in place, i.e., marketing boards where the farmers are protected. You may not do it through your tax dollars, but you do it through your disposable income at the grocery store directly to the farmer.

I want to make it clear we are not arguing that we should not support our farmers in Quebec and Ontario. What we are saying is that when we're facing that same competition in Saskatchewan, the reaction of our federal government is to support our grain farmers to the tune of nine cents while the Americans get 38 cents. We're not asking for anything different from what other industries in Canada are getting. We're just asking for equality.

Mr. Ken Epp: In the last 20 or 25 years farms in Saskatchewan have really doubled in size. The total number of farmers is way less now than it was 25 years ago. It's due primarily to the fact that one farmer has bought neighbouring farms when the farmer has retired, etc. This trend is already going. Are we going to be able to stop it? Are we going to be able to prevent the large corporate farms from developing? If so, how are we going to do that?

Mr. Dwain Lingenfelter: If you look at graphs of the number of farmers in western Canada, you'll see there has been a continuum of decrease in farms in good times and bad for the last 40 years. In Saskatchewan the average is about 1,000 farms a year. I think at one time we had about 120,000, and we are now at about 60,000. Taking 1,000 farms out of the system every year has been manageable. It's difficult, and we've had to rearrange our rural communities.

But what we are talking about now with the negative $48 million net income is not losing 1,000 farmers a year but as many as 6,000, according to some estimates, and a bulge of probably 20,000 farmers in the next few years, as opposed to what the average has been when the subsidies were in place.

I think realistically we are not talking about ending or increasing the number of farms. We are talking about saving as much as a third of our farm community, which will disappear if there isn't some action by our federal government to match or to equalize the playing field we see only a few miles away across the border in Montana and North Dakota.

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The Chairman: Mr. Hilderman, did you want to speak?

Mr. Ray Hilderman (First Vice-President, Saskatchewan Canola Growers Association): Yes. Thank you.

I'd just like to talk a little about farms getting larger and why. Farmers didn't increase their land base just because they wanted to farm more land. Since I started farming, a lot of our costs have gone up about ten times. One way for us to deal with dwindling margins was to try to increase our land base and diversify into other crops, and we've continued to do that.

One of the effects of the larger farms, though, is that we end up with fewer farmers, fewer children in our schools so we need fewer schools, fewer businesses in our communities, and fewer people working there.

This farm crisis thing is not just a farmer problem, and it didn't happen overnight. But it has gotten to the point that when the federal government decided to reduce the support to farmers in Canada at a much faster pace than in other countries, with our high input costs and now lower commodity prices, it has put us in a real cost-price squeeze. Until we can get a long-term safety net in place, we feel it's up to the federal government to pay us for that difference.

The Chairman: Thank you, Mr. Epp.

Mr. Nystrom.

Hon. Lorne Nystrom (Regina—Qu'Appelle, NDP): Thank you, Mr. Chair.

I want to direct a couple of general questions to the minister or to anybody else in the delegation who wants to respond. I think the question nobody can answer, Mr. Minister, is why the Americans talk so much about being free traders in NAFTA, the WTO, the free trade agreement, and so on, and yet we have these kinds of statistics where they are supporting their farmers by a massive amount while we of course are not.

The other question is, I wonder if you could give the committee an idea of what some of the human and economic ramifications may be if there is no federal assistance above what we already have coming from Ottawa over the next four or five years. We have heard about the increase in suicides, farm stress, and conflict on the human side. We had the Chamber of Commerce from Wynyard, for example, talking about everybody on Main Street being affected by what's happening today. I wonder if you can give us a general idea as to what you see happening in those areas in the future.

If anyone else wants to jump in, such as Mr. Rein, please feel free to do so.

Mr. Dwain Lingenfelter: Let me speak very briefly, because I think it would be great to hear from some of the other producers.

I always find it interesting that the great economies of the world, Japan and the United States, are by description free traders. But when you look very closely at what that means, it means their borders are wide open with products going out and pretty darn tight on everything coming in. It's a great strategy, and it's a great way to build an economy.

If you try to export canola oil into Japan, it is extremely difficult, but it's relatively easy to export the canola seed, because it's obvious they want the jobs. Their borders are open, but they are set in such a way as to create economies in Japan in those areas.

Our Canadian government in the last round, either naively or through some deception, literally ripped away about $650 million in subsidies from the province of Saskatchewan. In fairness to them, I think they believed the Americans and Europeans would probably come along and reduce their subsidies. That hasn't happened. Historically, the highest level of subsidy to farmers in the United States was $6.5 billion. This is after we said we were going to reduce subsidies. This year alone it will be $22.5 billion to farmers. That's not Canadian dollars; that's U.S. dollars, which would amount to $35 billion in subsidies to their farmers. So at the same time as ours have come down considerably, the Americans have driven theirs up to compete with the Europeans.

You hear our federal minister saying “How can we possibly go to the WTO, having just increased subsidies? Wouldn't that look bad?” Why don't they tell that to Glickman, the Secretary of Agriculture in the United States, who has just got $8 billion extra in the last month to put into agriculture while telling the Europeans, “If we're in this game of trade subsidies, we're going to be there for our farmers”. That's the message the U.S. government is sending to their farm community: we're there for you, and we're not going to let you down.

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The message we get from our federal government is, hat in hand, “What can we do?” and “Woe is me, we can't compete with the treasuries of the United States and Europe”. Why can a country like Denmark, with seven million or eight million people, defend its farmers, and why has this wonderful, large country, which has always taken the position of defending farmers, changed now so that our federal government says that farming is so unimportant that we don't have to worry about it any more?

I think this is a scenario for disaster. While you might say that the percentage of farm production as a level of GDP is less—in our province it's at 14%—it's like saying that the pilings under this building are only 10% of 14% and therefore don't matter very much. But in our economy—and the Americans believe in their economy—one of the fundamentals is agriculture. The Europeans absolutely believe that food and agriculture is a fundamental of their countries. And to say of Canadians that somehow this doesn't matter very much and we are going to let it go is very bad public policy.

The Chairman: Mr. Hardy and Mr. Baker.

Mr. Neil Hardy: I want to answer Lorne's question in a different way. I think the deputy premier has put into place the farm subsidy. I just want to look at it at a local level.

Crop insurance has identified that fewer than 9% of our producers are under the age of 35 and that over 50%, almost 60%, of our producers are age 60 or better. The average age of our producers right now is 58. What that tells us is that, talking about consolidation of farms, many farms are as big as they can get now. They can't even really operate them now. They are at their maximum. We're going to end up with farmland not even being able to be farmed out here. There are no young people left out there; they drift away from the farms. And communities aren't built on older folks like me; they're built on younger people who have families, who build communities and who build businesses. We're not getting that.

What we need in place, as I believe was said a minute ago, is a short-term strategy to get us through and a long-term strategy to take us through over the next whatever number of years. I know it will change, but without doing some of that our province will suffer greatly.

Numbers of farmers are going to start going, whether they want to go or not, because age will just delete them from our communities. Our communities and our towns and our businesses will certainly be those to suffer from that reaction. We need young people back on the farm badly. We need to have some kind of assistance there or programs—I don't say it must be assistance—that will get them through when there is a difficult time. Up to now we haven't had it in the last number of years. I think it is time to give really serious consideration to what would be a reasonable long-term producer-government type of a program. If we don't do that, band-aids will only work on a temporary basis.

The Chairman: Thank you, Mr. Hardy.

Mr. Baker and then Mr. Rein for a final comment.

Mr. Andy Baker: My comments go back a bit to Mr. Epp's question about corporate farms. I think that if the federal government wants to ignore the situation that is out here now, this would be the result of what will happen. I would like to state my personal feelings and my personal experience on the farm.

If we allow corporate farms to take over, they have one person to answer to, and that's their shareholder. If we don't care that much about our renewable resource, the land we farm on, fine, let's go that route, and in 20 or 30 years, when the shareholders say they want a return, it will be the land that will be mined and there won't be anything left of it.

We took our one hundred and first crop off our farm this year. I can honestly say that land has better productive capabilities now than it did 101 years ago. We should remember that if we want that capability to produce 101 years from now it will take the farmers who are out there to do it. I will definitely not have my sons farm if the situation doesn't improve. I wouldn't put them through that. If my sons aren't on that farm, it may be somebody who isn't going to take care of the farm. Right now I have my father, my grandfather, and my great grandfather to answer to on how I manage that land. We should remember that.

The Chairman: Thank you.

Mr. Rein, do you have any final comment?

Mr. Ralph Rein (Pro-West Rally Group): I would like to touch on a few problems that relate to what's been said.

There are further problems on the horizon for us, and some are existing problems. For instance, in our area there is a lot of land from the native land claims settlements that's left unfarmed because the farmers cannot afford to farm it. It not only hurts us, it hurts the natives.

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We have a real urgency in getting our agricultural house in order, because the European Union is expanding. Hungary is coming on board. Hungary has 75% of their land base that is agricultural, and they will be getting into the subsidy. At present they are two and half times more efficient than us in western Canada in what they can produce. Poland will probably be coming in, and God help us if the Ukraine comes in. That's the former breadbasket of Europe.

We have to do things like expand our value-added, and that comes only if our existing farm situation is corrected. We do need the value-added. That's our only future. We can't continue to ship all our product offshore. The market isn't there, or it won't be there.

The Chairman: Thank you, Mr. Rein.

Mr. Cullen.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you very much, Mr. Chairman, and thank you, panellists.

First of all, Mr. Lingenfelter, I think you make—as all of you do—a very clear and convincing case. For a Toronto MP it's sometimes hard to relate to what goes on, not being there at the table when many families are wrestling with these very painful decisions. But we are trying.

I know that our Minister of Agriculture has been there. He lost his shirt, I guess would be the way to describe it.

I have one technical question and then one political question for you, sir. The technical question is this. We've heard from you and others about the negative impact on wheat prices as a result of these large subsidies in the U.S.A. and Europe. To the extent that this is happening, clearly that's a subsidy to consumers, not to farmers. Obviously there is not a one-to-one relationship, but if it were it would seem to me that the solution would be quite simple: let's stay out of it and prices will rise. So it's obviously not that simple.

What is the relationship between the subsidies worldwide and the dampening effect it has on wheat prices?

Mr. Dwain Lingenfelter: There is no perfect science in that, but what we do know is that as the subsidies have gone up in those two major grain-exporting areas, the United States and Europe, the world price for grain on the Chicago market has gone down.

I think there's a pretty logic that goes if you're paying huge subsidies in Europe based on the number of bushels you produce for export, there will be land seeded to wheat that without the subsidies would not be seeded. Large amounts of land in Europe and other parts of the United States have shifted into wheat because of the attraction of the subsidies. So you get an artificial market that means there's actually more grain being produced.

When you have our component, which has no subsidies, you can imagine the hurt that occurs absolutely immediately as the subsidies drive the price down. There's no impact economically on the farmer in the United States and Europe because their income is maintained and the more grain they produce the more subsidy they get, whereas in Canada obviously it doesn't matter whether you grow a lot of grain or a little grain, you're not making any money. We are just in a different world as it would relate to our competitors.

I forget what your second question was.

Mr. Roy Cullen: I'm coming to that now. As a politician in Saskatchewan and myself being a politician in Toronto, maybe you can relate to the question I'm going to put to you.

If the federal government topped up the close to $1 billion to the level of $1.3 billion, or whatever the number is you're looking for, what do I say to Mr. Knud Simonsen, who is a constituent in my riding who started a business, with his wife, from scratch, built it into a world-class business manufacturing equipment that's used in slaughterhouses? He got a bit overextended and made a few mistakes, and on a multi-million-dollar business the banks pulled the plug and he has nothing.

What do I say to Mr. Lazzarino, another constituent in my riding? He and his wife started from nothing, and built a business manufacturing shopping carts for supermarkets. They had a new account manager, the bank pulled the plug, and he and his wife have nothing. What do I say to them if we top up the aid we have already provided to western farmers?

Mr. Dwain Lingenfelter: What I say to my business people in the chamber of commerce.... The reason they support this subsidy in general—and the chambers of commerce do not usually support subsidies—is because they say that if the federal government were subsidizing your business friend down the road to the tune of 30 cents on the dollar, and that was the reason he went broke, then we would argue it would be your fault.

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The fact of the matter is that if we were on a level playing field with the Europeans and Americans and were getting that kind of money, and some farmer was going broke, I would agree with your analogy. But that's not the reason they're going broke. They're not going broke because they can't compete with other farmers in the United States or Europe. They're going broke because they can't compete with the treasuries of the United States and Europe.

The analogy, although valid in one way, isn't valid at all, because your business person is competing with another business person who has no government subsidy, and if they can't make it, they can't make it. We all understand that kind of competition. But what we can't understand is competition where as a Wheat Pool delegate, Alan Balfour said.... He farms along the U.S. border at Climax, Saskatchewan. He looks across the fence every morning because his farm is against the Montana border. He uses the same John Deere combine, the same chemicals, and pays the same taxes. The reason he's going broke is because the farmers across the fence get 30% more from their product, not because they're more competitive, but because they get it from the treasury of the United States. For me, it's not an analogy at all.

I have an easy time explaining to my business people who asked exactly the same question six months ago. They have now come onside and said that's a very good point, we accept it, and in this one case we're coming with you to argue for subsidies, which is actually against the philosophy of the chamber of commerce in a general way.

A voice: We are talking about a whole agricultural industry.

Mr. Dwain Lingenfelter: I would like to comment on one other point about the ministers or people in Toronto and Vancouver not understanding. The problem for our cause is that there is no reason why the people in Toronto and Montreal should understand this, because it's not there in their vocabulary. It's not in the newspapers. It's not on TV.

That is part of our dilemma as farmers in western Canada, and especially prairie farmers who grow export grain: getting the message to people who matter in other parts of Canada. And that's everybody. It is not just the minister. It is the people who buy a loaf of bread or go to work every morning with the best intentions in mind and can't get their minds around what it is we're talking about. That's why when we invite Mr. Vanclief or the Prime Minister to Saskatchewan.... When Mr. Vanclief came last time, we all made a commitment. We have no intention of embarrassing the minister or hurting the Prime Minister. That's not our goal in any sense.

Mr. Hermanson, Mr. Melenchuk, and our premier would welcome Mr. Chrétien to come, and we would treat him with the greatest of respect so there would be an education process. Because we believe that if everyone understood the plight, that it's different from other businesses, they would come to the understanding and say “For God's sake, why didn't you say that sooner? We would have been there for you.”

I think Mr. Vanclief in his last trip out here would say that he was treated with the greatest of respect, because we mean no ill intent to anyone, and we have given up all our politics. Neil was a minister of the Conservative government. I was in opposition and was the House leader working to defeat him. We've given up our politics to come here today to say this isn't about politics.

Mr. Hermanson, the leader of the Saskatchewan Party, within days after the election set aside his politics and said “We're going with the premier of the coalition government and with Mr. Melenchuk to Ottawa to say the same thing, because we feel so strongly about this”. That's why we're having a hard time understanding where our message is not getting through to the right people. That's why your committee is so important to us.

The Chairman: Mrs. Redman.

Mrs. Karen Redman: I actually had two totally different questions, but I will switch, because you make a very compelling argument, as have previous witnesses.

Minister, I would tell you it's absolutely all about politics. But we're talking about international politics.

We talk about being a global village and global economy. It's been quite eloquently pointed out right here that Canada tends to be boy scouts. It is one of the reasons why we enjoy the international representation we do, whether it's being peacekeepers or going into underdeveloped countries. We don't make announcements of moneys two and three times in a row and not expend them, the way our neighbour to the south sometimes does. When we make an announcement we follow it.

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You make a compelling argument. I am from southern Ontario. I have an absolutely urban riding. Everybody in my riding eats three times a day. I have lots of farmers. We have small townships. It's the Kitchener—Waterloo area, for any of you who are familiar with it. It is a way of life, and I do buy the argument that there's a lot more at stake here.

We go back to the WTO, and we say we said what we meant when we said we would do away with subsidies. So if we make this investment right now, where are we going with this?

Mr. Rein, I think you brought a really important element to this whole conversation, that there is an immediate problem and a long-term problem. When you talk about value added, if in its wisdom the government is able to avert this crisis, if the government is able to solve this, whether we look at AIDA or whatever mechanism is employed, where does it stop? Where do we go? If these other countries come on board, will we continue to up these subsidies? Where is this going to stop?

Mr. Ralph Rein: The whole area of subsidies, whether it is wheat or coal or lumber, is a very interesting international trade debate. Having been involved with Michael Wilson as we went through the whole process, meeting after meeting on trade policy, of removing barriers between provinces, I had a great opportunity to be involved with some of the best in the Liberal cabinet, talking about trade subsidies and trade-distorting issues.

The fact of the matter is, this will end when we get a level playing field and subsidies start coming down.

We should try to get to the understanding of how it would relate in Ontario. The analogy I like to use, because I have a lot of friends who work in the auto manufacturing industry, is what if tomorrow a trade war broke out where the Europeans said they were going to subsidize the auto industry, Mercedes-Benz, to the tune of 50 cents on every dollar that Mercedes-Benz gets in income, and the Americans responded by saying they would up that, and they're going to give as much? Would the Canadian government's reaction be to ask if we should give a handout to the auto industry in Oshawa? Not for a moment. We would be there. I know we would be, because we'd have to. We couldn't let that industry go down.

If IPSCO in Regina were told that the Americans had a 30% extra duty on importing steel into the United States, a trade war would break out with the Americans immediately to protect our steel industry.

When Bombardier was treated inappropriately, I think, in Brazil on a contract, we intervened. We went there and said you can't do this to one of our companies, because we need those jobs. We did what we had to do, and I think we did the right thing.

What we can't understand is when we portray this in all the graphic detail of how we're being treated differently from any other industry, the response is deadpan from the federal cabinet.

We don't understand whether we're not making our case, whether people don't understand it, or whether they don't care about us. A young farmer in Carlyle has decided, I hope wrongly, that the federal government has just said to him they don't need him.

I am from rural Saskatchewan, and when we go to the picnics and the barbecues and fall suppers or go to the bars, too many farmers and my friends and family look at me and say “When will you make up your mind that they just don't care? When will you quit beating your head against the wall and understand that Ontario and Quebec don't give a damn about Saskatchewan?”

That is a common view that is growing by leaps and bounds, which I wish we could work together to try to get rid of, because as a Canadian, I don't like it. I would like to try to help them, first, but there is also another agenda, which is called Canada.

I want to give one other example. In Fargo, North Dakota, last week I spent three days with 150 American farmers from Minnesota, North Dakota, and South Dakota, 50 farmers from Manitoba, and 50 farmers from Saskatchewan. Some of those people are in this room. We broke into panels to talk about the issues.

There was a huge discussion about how farmers in the United States in the Great Plains and in Canada are just left out. There is a lot of talk about common currency and what they can do together to set up plants, marketing, shipping north and south, and building highways. There was a huge amount of excitement because these people are finally starting to see maybe there's an agenda where we can have some control over our destiny.

What I would like to think is that we could have that same kind of exciting conversation with our federal politicians to create the excitement that was there many times in the history of this province, when the railways were being built, when we had a national transportation policy. We feel that we don't have any of that any more.

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The Chairman: Thank you, Mrs. Redman.

Mr. Jones.

Mr. Jim Jones (Markham, PC): I have a question for Mr. Baker.

When you said your wheat crop was worth $81,000 U.S., what was the equivalent in Canadian dollars?

Mr. Andy Baker: I'm sorry, I meant to say $81,000 Canadian. I thought I did.

Mr. Jim Jones: Okay. What is the equivalent of what you got from Canada?

Mr. Andy Baker: That's what I would have gotten. I'm saying what I get from Canada is now built into my price, if we agree with those numbers. It's built into what I get now.

Mr. Jim Jones: So if it were in the U.S., you would have got $81,000?

Mr. Andy Baker: If I were farming in the U.S., for the amount of wheat I grow on my farm—

Mr. Jim Jones: So what is it worth here?

Mr. Dwain Lingenfelter: If I could clarify what he is saying, he sold his crop in Canada and got a certain amount. Had he been able to sell it in the United States and get the subsidy, he would have got $81,000 more.

Mr. Jim Jones: I thought you meant how much you would have gotten if you had grown your crop in the U.S. and sold it.

Mr. Andy Baker: No, I was saying if I took my farm the way it is now and put it in the U.S., I would get that cheque from the government.

Mr. Jim Jones: That $81,000.

Mr. Andy Baker: Yes.

Mr. Jim Jones: What did you get in Canada?

Mr. Andy Baker: For my crop?

Mr. Jim Jones: Yes, from the government. Is it $20,000? What is it worth in Canada versus the U.S.?

Mr. Andy Baker: All we have to do is take the numbers we used on that sheet, 9% in Canada and 38% in the U.S. That's where I got my numbers from. So you'd have to add another 9%, or it would be the difference between the 9% I get here and the 38% they get in the U.S. Do you understand how I got that? I took the total value of my crop here and added the difference, 27% more, to it.

Mr. Jim Jones: I'm trying to figure it out. If you get $81,000 in the U.S., you'd get $50,000—

Mr. Andy Baker: No, I was saying I would get $81,000 more in the U.S.

Mr. Jim Jones: More?

Mr. Andy Baker: Yes.

Mr. Jim Jones: Okay.

Mr. Minister, you said, for example, milk gets a 58-cent subsidy, eggs get 24 cents, and poultry gets four cents. Is that provided by the Canadian government, or the governments of Ontario and Quebec?

Mr. Dwain Lingenfelter: In terms of the farm support we have here, the numbers come from the OECD. They are not our numbers. These are subsidies that are evaluated and monitored. They would include all the programs farmers get.

When you do the analysis—and I will provide a chart for you of the taxpayers' contribution to provincial agricultural programs, because it is another interesting chart—on a per capita basis in Saskatchewan we have many farm programs, Ontario has many, and Quebec has many. In Saskatchewan, per capita, our taxpayers pay $300 a year toward farm programs. So if you have a family of five, three kids and mom and dad, they would pay $1,500 in provincial taxes that would be flowed through to farmers. In Alberta it is $150 per capita. I believe in Manitoba it is about $150 per capita. Then it goes down from there to Ontario and Quebec, where they pay something in the area of $100 per capita toward provincial farm programs.

So the argument that Saskatchewan can pay more and that we should put more money into these programs is like asking the guy dying on the side of the road to give a blood transfusion to himself. We're already at double the taxation that any other province puts into agriculture on a per capita basis, the reason being that we are an agricultural province. We have 44% of all the cultivated land in the country. We export more than 50% of all export grains.

So when you say to yourself that we have this unlevel playing field in one area—that is, export grain—and by the way, 60% of it comes from one province and that province has only one million people, so go get the tax dollars from those one million people to pay for that program, that doesn't work very well.

Mr. Jim Jones: Mr. Minister, all I'm trying to find out is whether the 58 cents for milk is being provided as a subsidy by the Ontario government or the federal government to the farmers of Ontario.

Mr. Dwain Lingenfelter: Most of those subsidies come as the result of marketing boards, whereby prices are discussed and set, and you as a consumer would not pay it through your tax but at the grocery outlet through your grocery bill dollar.

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Mr. Jim Jones: Back when the free trade agreement was negotiated, was agriculture on the table with the U.S.? And if it wasn't, why not?

Mr. Andy Baker: I don't have it here, and I wouldn't pretend to know the NAFTA or the free trade agreement even as it would relate to the last Uruguay Round of WTO, but these items are embedded in both of those trade agreements.

One thing some of our producers are asking, in fact, and have asked us to check into, is whether or not our federal government has challenged under both WTO and NAFTA every clause where the Americans have put in their $22.5 billion. They go on to say that if our federal government hasn't challenged and you can prove it, do you have legal remedy to financial damage done because your federal government hasn't challenged?

What you have to understand, too, is this organization of farm groups is very sophisticated in what they want us to do to bring pressure to bear on a federal government that they feel is insensitive to a trade issue, because they say when Bombardier needs support, there is support and the federal government does what it should do. They are not arguing that our federal government shouldn't do that for Bombardier. When the auto industry or forestry or other areas are treated unfairly, you hear about it from our federal government. But they are asking, are you sure our federal government is doing everything in their power under the trade agreements to protect Saskatchewan grain farmers?

We are now going through the process of going through the trade agreements. We have consultants hired who are looking at the possibility to find whether at every level our federal government and our department have challenged under our trade agreements. If they haven't, I think there could be an argument that there has been financial damage done because our federal government hasn't acted on behalf of citizens. So that process is being looked at.

A witness: You had mentioned about the NAFTA, whether agriculture was involved. The one thing I do know about what happened with NAFTA is we gave up our two-price system for wheat because of NAFTA, and that was money that came from the consumer.

When the point is being made about how much the producer in Ontario gets for his milk versus how much the American gets, the point there is to show you that it's equal to what they get in the U.S., so he is not in a competitive environment where the American producer is unfairly subsidized. That was the point with that.

What is happening in our case is that the U.S. is unfairly subsidized in our industry. No matter what our subsidies are here or where they come from, the U.S. is unfairly subsidized compared to us.

A witness: I would like to make a comment. My idea of the Americans and free trade is like the dream team in basketball. When they win 119 to 19, they think that's a basketball game, but when you get close, they like to change the rules. I think we have to look closely at our agreements with the Americans. If they are truly free traders, then they should be willing to open their borders on the same rules under which we are playing.

A witness: Just on that, we too want them to play by equal rules, but where we have some control, or feel we should have some control, is not controlling Washington and Glickman, the Secretary of Agriculture, but, believe me, we feel we should have some influence with our politicians and our federal government. So what we are not going to be doing as an organization is blaming American farmers or the American government for supporting their farmers. What we're saying, as absolutely clearly and as crisply as we can, is we expect our federal government to defend us.

The Chairman: Thank you.

On behalf of the committee, I would like to express to you our sincerest gratitude for what I thought was an excellent panel. You raised some very important issues. As a result, we also have a greater awareness of the challenges you face. It will serve us well as we begin to write the report to the Minister of Finance. I am sure your thoughts and ideas will be reflected within that report. Thank you very much.

We are going to take a 15-minute break.

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• 1553

The Chairman: I want to welcome everyone here this afternoon. We've had quite an interesting day here in Regina, with many people making excellent presentations on the priorities for budget 2000. I'm sure this afternoon will be no different.

We have representatives from the City of Regina; the Congress of Union Retirees of Canada; Community Action on Poverty; Choices; and the Saskatchewan Chamber of Commerce.

We will begin with His Worship Mr. Douglas Archer. Welcome.

Mr. Douglas R. Archer (Mayor of Regina): Thank you very much, Mr. Chairman.

Good afternoon, members of the committee. I do want to welcome you to the city of Regina on behalf of our members of council and residents of our community.

You might not be aware of this, but Regina is a metropolitan area of just over 200,000 people and a place that more than 6,400 companies call home. We're also home to the provincial legislature, the Royal Canadian Mounted Police Training Academy, their national museum, the national cemetery, and the Saskatchewan Indian Federated College, the only post-secondary degree-granting college in the world that is both owned and controlled by first nations people.

As Regina mayor for the past 11 years, I know and appreciate the difficult choices that elected officials face in budget deliberations. I'm going to skip through a lot of my presentation in the interests of time.

• 1555

We're all aware that Canadian municipalities are required by law to operate on annual balanced budgets. However, when there is a funding shortfall, choices must be made among many competing demands for infrastructure maintenance. Simply put, environmental and transportation infrastructure must compete and long-term underfunding creates a local deficit in crumbling infrastructure.

In the city of Regina we have chosen to prioritize environmental infrastructure. We've developed state-of-the-art water and sewer systems that feature full cost pricing and are user pay, not supported on the tax base. Because we are virtually the only major Canadian city that is not located on a water course or a shoreline, this has made the job more difficult but it has also challenged us to do the right thing.

Our financial funding model allows us to apply user charges that not only pay operating costs but also accumulate capital funds for future extensions and upgrades. The municipality's round table addressing greenhouse gases views this as a long-term goal but has hesitated to set a timeframe for its achievement, suggesting that many municipalities are not ready to tackle this important and necessary step, which we have already taken.

That's some of the good news. The bad news is that, like all other municipalities, we have not been able to fund all infrastructure renewal. Where we have funded environmentally responsible projects we have not been able to meet all of our transportation obligations. The recently completed Canada infrastructure works program was a godsend, in that it helped us in a significant and tangible way. We were able to increase our own commitments to roadways to an annual level of $7 million, but that is compared to the estimated annual requirement of $13 million.

The unvarnished truth is that the City of Regina and other municipalities are not sustaining their infrastructure without long-term financial support from federal and provincial governments. That is why municipalities across the country are calling for the federal government to launch a quality of life infrastructure program.

I cannot overstate the importance of the government's previous infrastructure program to our community. We received about $10 million from the federal and provincial governments, enabling the city to improve roads, park systems, and city facilities and to plant trees. I can tell you that in every instance we were more than happy to give full credit to the federal government for every dollar that was contributed. I'm a believer that if you develop a partnership like that, the partnership extends to giving credit where credit is due.

That program benefited urban and rural communities all across the country. For many smaller communities this program is really a unity builder because in many instances this is the only chance that smaller communities get to work on their own local priorities with a partnership arrangement at the federal and provincial levels.

As time is short, I will highlight very briefly why three areas are important to us.

First is environmental infrastructure. As I've already indicated, Regina has chosen to move forward on its own to address environmental issues. We have specifically prioritized actions which produce economic returns as well as an environmental benefit. A partial list is noted below.

We produced a pioneering report on future steps on CO² emissions detailing actions that we can take to protect the climate. We embarked on a multi-year program to convert street lights to high-pressure sodium vapour, which reduced the city's emissions by 4%. We've embarked on alternative fuel programs for city-owned vehicles and transit buses and conducted trials using ethanol, propane, and natural gas. Now 90 city vehicles in the fleet have been converted to natural gas, with more on the way.

We've implemented efficiencies in water and sewage treatment systems which reduced emissions by 4% and implemented changes to the water supply system which cut emissions by another 3%. More recently, we have begun our own energy retrofit of 7 civic buildings at a cost of $2.5 million with estimated cost savings of $400,000 per year and emission reductions of an additional 4%.

We believe we are leaders in Canada in addressing greenhouse gases and are prepared to continue this initiative on a path of continuous improvement.

With respect to transportation infrastructure, the City of Regina is not sustaining its core infrastructure. Of our 860 kilometres of paved roadways in the city, which is roughly equivalent to the distance between here and Calgary, 26% are in poor or very poor condition.

• 1600

Regina residents are concerned about the poor condition of roads. In public opinion surveys they consistently identify improved road maintenance as the city's top priority.

The lack of funding for infrastructure renewal is not just a problem for our community. National surveys reflect the same sentiment. It is a problem for communities across the country. That has major ramifications for the federal government. As a 1996 report on the state of municipal infrastructure in Canada by McGill University and the Federation of Canadian Municipalities stated, “If Canada is to compete in international markets, infrastructure renewal is necessary”.

Any new federal initiative must allow municipalities to direct funding to core infrastructure. There is not a municipality in the country that can contemplate expanding existing services or introducing new programs until funding for their core infrastructure requirements is addressed.

Improved public transit is urgently needed as well, to reduce greenhouse gas emissions and protect the climate. Yet public transit is another area where we have been forced to cut costs and services.

In the area of social infrastructure, the lack of affordable housing and the problem of homelessness in larger municipalities have created tremendous inequities and hardships among residents of many Canadian communities. Surely a basic level of economic equity is as fundamental a right in Canadian society as our Charter of Rights and Freedoms.

Innovative mechanisms are needed to encourage the private sector to make funding available for the construction of low-income housing. This is probably the most important step to be taken in this area. There are many proposals being presented by others, and there is a wealth of experience with this strategy in the United States, so I am not going to speak at any length on that point.

I want to urge members of the finance committee to consider specific programs and initiatives that could be taken in the millennium budget to support and sustain infrastructure renewal. I respectfully suggest that these budget measures should allow choice and flexibility to enable local governments to pursue the option that fits their priorities. I want to recommend briefly two budget proposals for your consideration.

An investment in energy conservation and the environment is needed in the millennium budget. On a per capita basis, Canada has the second-highest rate of carbon dioxide emissions in the world and is the second-largest generator of solid waste. Since Canada must reduce total greenhouse gas emissions by more than 180 million tonnes by 2012 to meet international commitments, action is needed in this budget year.

The Regina city council believes that municipalities and other levels of government can and must lead by example to reduce carbon dioxide emissions and protect the climate. As I have stated earlier, our city has already taken a number of internal actions that have reduced or will reduce carbon dioxide emissions by 16%. That is compared to the 20% goal, so we are a long way down the road. We have gone 80% of the way to achieving our target.

My point here is that a transportation infrastructure option should be available for those municipalities that have already demonstrated a commitment on the environment. For Regina and perhaps others, we must now balance our infrastructure renewal with significant commitments to transportation, roadway improvements, and public transit. We will simply not be able to afford to participate in an environmental infrastructure program if it is a single-track strategy. We have already made that investment of capital funds in the environment with demonstrated success, and we must move on to transportation. We should not be penalized because we have already done what national governments have been asking us to do.

I want to take a moment to thank members of the committee for including Regina as a stop on your very busy trip across Canada. I know that you have had a busy morning, and it will continue on through the day, and I appreciate the opportunity to address you on behalf of the City of Regina.

The Chairman: Thank you, Your Worship. We appreciate your presentation.

Mr. Douglas Archer: If you don't mind, I will switch hats, because I am president of the Trans-Canada Highway association.

The Chairman: Sure. Go ahead.

• 1605

Mr. Douglas Archer: Okay. I've cut down some of my presentation as well, in the interest of time.

The Chairman: So that everybody is clear, the mayor is now speaking on behalf of the Trans-Canada #1 West Association, scheduled for the 3 p.m. meeting.

Go ahead.

Mr. Douglas R. Archer (President, Trans-Canada #1 West Association): It is our understanding, as members of the Trans-Canada #1 West Association, that one of the pre-budget hearing's themes is productivity. We submit that the productivity of Canada, and specifically western Canada, is being negatively impacted by the deteriorating state of our highways. We wish to address the sorry state of Canada's main street, the Trans-Canada #1 Highway.

We represent municipalities, associations, and businesses interested in the Trans-Canada #1 Highway and the economic well-being of communities along that route. One of our goals is to have a twinned and upgraded Trans-Canada Highway between Ontario and British Columbia.

The prairies are well known for their vast distances. Highways are the link between prairie communities and are essential to moving people and goods. Whether it is raw materials, processed goods, or manufactured goods, the region uses the Trans-Canada Highway for its economic well-being. This is not just a regional or local roadway. The Trans-Canada Highway is our only road link to the national economy.

As traffic volumes increase, the Trans-Canada may become less safe in the deteriorating and untwinned sections. If the Trans-Canada Highway becomes known as a dangerous highway, then tourism and commercial traffic will seek alternate routes, likely on U.S. highways. We have already seen this happening with commercial and private vehicle traffic diverting through Niagara Falls, Windsor, and Sault Ste. Marie rather than using the Trans-Canada Highway.

The prairie provinces are investing in the Trans-Canada. Alberta has twinned its portion of the Trans-Canada, with the exception of the westernmost leg in Banff National Park. Manitoba has small sections on the east and west sides of the province to be twinned. However, Saskatchewan has over 240 kilometres yet to be twinned.

Before the recent twinning of 27 kilometres, the last twinning was in the 1970s and 1980s. Since that time, transportation on the southern prairies has dramatically changed with the decline of the grain transportation system and the elimination of the passenger rail service.

The Saskatchewan government has announced a 15-year plan to twin the Trans-Canada. Manitoba has not indicated a timeframe to finish twinning. This timeline, or lack of a timeline, is really unacceptable given the increased traffic flows, greater domestic and international tourism, and the continued diversification of the prairie economies. We believe the trend to diverting traffic to U.S. highways will cause fundamental and irreversible changes in the routing of commercial and recreational traffic.

Much has been said about our deteriorating and antiquated highways. The poor state of our highways is not merely an inconvenience. There is huge cost to all Canadians in lost lives, higher costs, lower productivity, and even unnecessary pollution. It hurts our competitiveness as a country. Now is the time for the federal government to act.

Our association believes the current system of bilateral agreements on highways has created an inequitable distribution of federal grants and a patchwork approach to our highways. This year no province west of Quebec received any federal support for highways. Yet Ontario and the four western provinces account for the majority of national highway kilometres in the country.

Bilateral funding agreements did reflect changes in the transportation network, particularly in the maritime provinces. However, no similar adjustment occurred when national passenger rail service was eliminated across the southern prairies or recently with rail line abandonment. What we need as a country is a national highways strategy.

No Canadian is interested in highways that are unsafe, and I'm sure that applies to all members of the committee here. No business is interested in declining highways that increase costs and reduce productivity. For a vast and export-dependent country, poor Canadian highways are not an option.

A proposed $4 billion program over five years is likely manageable for cost-sharing with provincial treasuries. The federal investment would only be a small portion of the expected $25 billion in fuel taxes to be generated over the same five years.

In 1997 the House of Commons Standing Committee on Transport concluded, and I quote:

An efficient competitive highway system is one of the fundamental requirements of a healthy economy. It has been demonstrated beyond any doubt how important a safe and competitive highway transportation system is to trade and tourism.

Yet Canada is one of the only western countries without a national highways program.

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The United States obviously sees highways as an economic tool. The U.S. federal government is investing $217 billion in transportation over the next 5 years; $175 billion is for highways alone.

What does that mean for Canada? Goods and people will see time and cost advantages in using U.S. highways to travel across the continent. That is missed tourism revenues and lost business revenues. That means even our larger cities will become spokes on a U.S.-based system and not hubs on a North American highway system. Without a federal government investment, Canada will not even have one four-lane highway across the country linking Canadians coast to coast. This will affect jobs and the economic well-being of our nation.

It is said the best time to plant a tree is 30 years ago and the next best time is now. Canadians cannot wait to find out what will be lost in our nation's productivity due to our deteriorating highways. We need a national highways strategy now.

Thank you again for your attention.

The Chairman: Thank you very much. I guess in this case it's Mr. Archer, right?

Mr. Douglas Archer: Right. I have a different hat on.

Ms. Joan Johannson (Community Action on Poverty): Excuse me, sir. I have to leave at 2:30 to get the plane back, so would it be possible for me to speak now?

The Chairman: I think everything is possible. Let me rephrase that: within reason. Go ahead.

Ms. Joan Johannson: I've been sort of thrown in here as a pitch-hitter for Community Action on Poverty at the last minute. I apologize if I have to talk and run.

This morning I talked about a one-way mirror where we can see you but you can't see us. This afternoon I want to talk about some of the people behind the mirror and their concerns, the people who are suffering and the people who struggle desperately with little resources to alleviate the suffering.

Last week I was at a CAP meeting. Community Action on Poverty is a support and networking organization that represents about 30 agencies and grassroots groups. I asked them what they wanted me to say to the finance committee. Well, the number of issues raised was an overwhelming litany of the problems caused by the destruction of the social safety net.

At the top of the list were income security and housing. This was followed by issues such as child care, home care, and medicare. Concern for the aboriginal peoples was also strongly expressed. We did not presume to speak for aboriginal people, but only wished to show our concern and solidarity with them.

There were five issues the committee was concerned about. Number one was the budget making process. I guess the fact that I'm here rather than those 30 people at the meeting reflects the flaws in the process. Each one of the people at that meeting had a very important issue that they wished to bring to the committee, but we realized that none of the people knew about the meeting. Even if there had been adequate notice, it was not going to be possible for most of those people to organize their lives to come to Regina.

Every one of them had a target for the budgetary process and believe me, none of those targets included debt reduction. The targets they have focus on creating a healthy community where every Canadian has the basic necessities of life.

Number two was tax reform and relief. Over the years I have heard numerous experts give suggestions to reforming the tax system, from Neil Brooks at Osgoode Hall Law School to the Choices' alternative budget, which I'm assuming you're going to hear soon. There are ample suggestions as to how to make the taxation system fairer.

The issue is never how to; the issue is always who to. Who gets to keep most of the money in the country? Does a mother with preschoolers, who's doing the most important job in the world, or a day trader receive the benefits of this wealthy society? Only when those questions are answered do the how to questions begin. Unfortunately, I think I know the answers of this government, as reflected in previous budgets.

• 1615

Number three was the social infrastructure. Everyone, including the United Nations, knows that the social infrastructure of Canada has been torn apart. How there could be any question as to what to do with the surplus astonishes me.

To quote the United Nations in 1998:

The Committee recommends that the State Party

—that is Canada—

consider re-establishing a national programme with specific cash transfers for social assistance and social services that includes universal entitlements

—I underline universal entitlements—

and national standards and lays down a legally enforceable right to adequate assistance for all persons in need, a right to freely chosen work, a right to appeal and a right to move freely from one job to another.

This statement isn't even dealing with the theft of the money in the EI account from the unemployed.

Two other morally wrong decisions have to be addressed. The employment insurance money has to go to the unemployed and the child benefit money has to go to all children. Please let us return to the principles of the family allowance, not the principles of the 19th century where families are labelled as deserving or undeserving.

I heard the Minister of Human Resources and Development on CBC News on Sunday. She said that we need to build a platform for our children and our families to stand on, just as we did for our senior citizens. We know how to alleviate poverty. Heck, we've done it. So the only question is whether the government intends to build that platform for our children.

The new economy means people are working harder and harder for less and less money. It means more and more people standing outside the economy looking in. Who will protect the average Canadian in this new economy? Does the government even see this as its role?

In the past it was the churches and labour who spoke up and demanded protection for the people, and governments responded. That's how we got these programs in the beginning. Today, the government seems to feel its role is to let the invisible hand of capitalism work its magic. Let me tell you that invisible hand is holding a vacuum cleaner that's sucking up all the wealth to the top. The government stands by and says “Not my problem.”

Next is productivity. Economic growth and enhanced productivity mean the rich get richer and the poor get poorer. Economic growth and enhanced productivity mean destroying the planet. Just as people are behind the mirror, so are ideas and concepts that don't fit into your world.

Our only hope is to make the bold move of considering other concepts, other models, other paradigms as some might say. We need to move to concepts of community, of inclusion of all people. We need to move to concepts such as the common good and to expand the common good to include the planet.

Finally, my hope is that there is some connection between your world and my world. My hope is that there is some common goal and purpose that we can discover. My hope is that somehow all Canadians can once again belong to the same country.

Thank you.

The Chairman: Thank you very much, Ms. Johannson. If you're about to leave, have a wonderful trip, a safe trip. You're going back?

Ms. Joan Johannson: Yes, I'm going in ten minutes, if somebody wants to ask me something before I leave.

The Chairman: Any questions? Mr. Nystrom, maybe you will ask a question.

• 1620

Mr. Lorne Nystrom: Just very generally, the part of Regina I represent includes the city core, the inner city. We have a lot of problems in terms of single parent families and poverty. We have a food bank in the city core and a lot of aboriginal people. I suppose this reflects a lot of what you see in Manitoba as well, in terms of the city core in Winnipeg.

I'm just wondering what specific program you could recommend for us to recommend to the Minister of Finance that might help people living in the inner city. You've mentioned a number of things. Is there anything that you would put first and second on the priority list?

Ms. Joan Johannson: The first thing would be to return the EI funds to the unemployed. As I said this morning, that money needs to go to the unemployed, not to general revenues. It's their money. What happens is that only 40% of the people who are unemployed get EI, so the rest of them end up on welfare. It's not enough to live on, so people go to the food banks.

Even the simple thing about the new child benefit.... Why have we decided that some children and families will get this money and some will not? Can you tell a child in a family, “I'm sorry, your mom and dad don't fit the parameters for how we put this program together, so you don't get the money”?

When I was both middle class and poor when I was raising my kids, every month I got the family allowance in the mail. Nobody came and asked what I was doing, whether I was working, are you a good person, are you a bad person. No. That was money for the children. So those would be my two priorities in terms of redressing some of the imbalance we have.

The Chairman: Ms Leung, very quickly.

Ms. Sophia Leung (Vancouver Kingsway, Lib.): I just want to say that most of us here understand what you're trying to say. I'm from Vancouver. I work very closely with people who live in poverty and also for the east side downtown. I do not want you to have the idea that we live in two separate worlds. We are here to represent all the people we are representing.

Before you go, I just want to tell you that we will work with you. I want you to go away with that thought. We all have the common goal of making Canada a better world for our children.

Thank you.

Ms. Joan Johannson: Thank you. I hope we can work together. It's my dream that we can work together.

The Chairman: Now we'll get back on schedule with the Congress of Union Retirees of Canada. Mr. Al Cerilli.

Mr. Al Cerilli (Executive Board Member-at-large, Congress of Union Retirees of Canada): Thank you, Mr. Chairman. Certainly I want to thank you for allowing us to come here, but we're disappointed you didn't stop over in Manitoba. On behalf of our 500,000 union retirees across Canada, some others would have appreciated speaking to you as well.

I'm going to dedicate this presentation to the traditional family, parents and grandparents and all their grandchildren, because certainly the future is looking worse and worse, as you will see by our presentation.

In a previous presentation to the committee, the congress asked you to direct the federal government to stake out a new direction for Canada toward involving all Canadians in a secure future for all generations, particularly due in this year of the United Nations Year of the Older Person. Today is the anniversary date of child poverty and when we committed ourselves. I guess it's timely that I was asked to come here to Regina to present this. That's the reason for my dedication. May we take advantage of your five themes and extend them to the extreme.

A number of factors kept hounding CURC as we prepared to come before your committee to show that not everyone is as happy as the federal government. In fact, things are worse for those trying to scrape by on a level of income below, at, or just above the poverty level. We fear that the downstream effect of these Canadians and their families, particularly the children, will keep them in the poor cycle of Canadian life for generations. Action is called for right now.

A couple of presentations ago, we referred to the fact that there is a decreasing number of people being enrolled in company pension plans. In fact, the 1993 figure of 45% is now 42%. And that is going to affect us, because people are not paying into the pensions, and part-time workers are not paying in their full amounts to the Canada Pension Plan. It is an area that really concerns us about the future and where we are going.

• 1625

Since the federal government tried to dismantle a strong central government and handed jurisdiction after jurisdiction to the provincial and territorial governments, poverty as a whole has increased in the numbers of children, adults, and seniors. The figures are staggering. The latest figure is that 500 food banks are now in existence across Canada. It's a shame.

The recent report of the National Council of Welfare in the spring of 1998, the poverty profile of 1996, highlights, on page 10:

One type of poverty statistic published by Statistics Canada gives the number of poor people and poverty rates for people as individuals.... In 1980 the number of people living in poverty was just over 3.6 million.... Instead of improving after the recession ended...poverty rates continued their upward trend.... By 1996, the number of poor people was nearly 5.2 million and the poverty rate was 17.6%....

Child poverty peaked in 1984 following the recession of 1980-81 and declined through the rest of the decade. Following the recession of 1990-91, the trend appeared to be strongly upward. In 1996, the number of poor children was at a 17-year high of nearly 1.5 million...

—In our last presentation we said it was 1.4 million, but that is the revised figure that we have received from different groups, including Statistics Canada—

...and the poverty rate was 20.9%, the highest in 17 years....

Pensions have improved...the number for the elderly has fallen...since the first poverty statistics were published in Canada in 1969.... The number of poor seniors dropped from 731,000 in 1980 to just 655,000 in 1996.

Can you imagine that? We have 655,000 seniors still in poverty.

It is the view of CURC that unless the cycle of poverty is eliminated in a reasonable period of time, another generation of children will be lost. During our presentation to your committee on October 21, 1998, in Winnipeg we highlighted that the minimum wage and low-wage jobs in full-time or part-time does nothing for the 5.2 million poor family members at levels of income that vary from family incomes from all sources. Good-paying jobs and benefits is a proper approach toward a healthier life for Canadians and an economy that benefits all Canadians, and the present family mental stress relates to job uncertainty.

I mentioned a couple of sessions ago that there were 47% of Canadians that were suffering from mental stress because of pressures. That figure has gone up again, Mr. Chairperson. It is really unfortunate.

Of the estimated 3.6 million seniors, the 655,000 seniors presently living in poverty can be helped by increasing the guaranteed income supplement, GIS, of old age security, OAS, by (a) increasing the maximum amount of the GIS by an immediate 10% simply to catch up, followed by 5% in each of the next two years, and (b) exempting the first $2,000 of other income from the calculation. This reduces the GIS. Then amend the present rate of reduction from the first dollar for other incomes to the last dollar. There is an attachment to the brief that relates to that.

I might add that in our previous presentation we talked about bracket creep and fair taxation. I think those issues still have to be addressed.

We have another attachment in the brief about discrimination against women who have been divorced or have been separated from their husbands, who are in the range of 60 to 64, and who do not get a widower's allowance. That is an area the committee should look at. The attachment is in the brief as well from Murray Smith. He wrote the piece for us.

The role seniors continue to have in society they have left for your generation to maintain and improve for future generations. It is a goal to ensure that our environment, social services, and education levels are improved, supported with a health care system that does not really rely on the income status of those who need medical attention.

• 1630

Also in the brief you received yesterday is the Health Coalition letter signed by other dignitaries, such as Allan Blakeney, previous premier of Saskatchewan, to the Prime Minister calling on him to stop Klein from this two-level health care system he has embarked on.

I think the federal government has to take this on. I'm telling you that if you don't, Canadians will suffer tremendously.

So that future generations can look toward retirement worry-free and income-secure, you are entrusted to protect and improve the present old age security, guaranteed income supplement and related benefits, the Canada Pension Plan, and the Quebec Pension Plan, and to improve private pension plan legislation for workers and retirees to share in the pension plan surplus and be appointed to pension boards by their pension plan members.

We know all about those arguments. The surplus was built up by the contributions of workers. It is appalling that we are grabbing and allowing the corporations to grab millions of dollars out of the surplus, and it is not going to the people who are in poverty. That is another area that has to be recommended by this committee. It all costs money. As a result of that, you have to look at sources that can help people. Those surplus funds are not the government's or the corporations'. They belong to the plan members.

History records that since the introduction of the old age pension in the Pension Act of May 1926—and J.S. Woodsworth was the announcer of that in the House of Commons—and of the CPP and QPP in 1966, poverty has declined among seniors. But now with this unemployment and poverty cycle, with 5.2 million people out of work or underpaid, they are not contributing to their pensions, and we're going to see the consequences downstream.

Seniors continue to help society as volunteers in many areas. The latest Statistics Canada report shows that as governments cut back on social and other services, an aging population needs stronger support structures. I can say that 26% of seniors age 55 or over offered their services to voluntary organizations in 1997.

Because of the pressure being placed on government by corporate empires nationally and internationally for more global free trade, open-border agreements, the free movement of business relocation, untaxed international monetary transfers, and trade agreements that allow these foreign corporations to sue the Canadian government for passing laws that restrict the corporations from using materials that are dangerous to the environment as well as for being restrictive in exporting Canadian water, Canadians are asking if Canada's health care is at risk. If so, what is medicare protection? These areas may be a cost to Canadians that has not yet been calculated, and it is first and foremost on the minds of Canadians.

We have to start reinvesting in job creation. We mentioned this to you before with regard to the infrastructure of this country. Not only the infrastructure but also VIA Rail could create thousands of jobs immediately. The fact is that many of these essential infrastructures are in need of replacement, and there is a need to construct modern facilities for the treatment of sewage and water. The government must designate transfer payments directly to the other two levels of government to use in this infrastructure renewal.

I heard what the mayor said, but I can tell you that 12 years ago the cost to repair and maintain the highways was $8 billion to $10 billion. It is now up to $17 billion. Every year we ignore the infrastructure, the cost for our treatment plants for clean water, sewage, and everything else is going to be horrendous. I think we have to take action now.

It is worthy to bring to the attention of this committee that the quality of Canada's surface and underground water is at risk. Its use is also a future threat to the health of Canadians, and that will add cost to the health care system.

• 1635

The threat of water privatization is another real concern. In financing the repair and rebuilding of the water and sewer infrastructure, provisions must be put in place in legislation to keep this water resource public, not only for this generation of young Canadians but for all future generations of Canadians. The provinces must not be allowed to act alone, and neither must the federal government, in protecting this resource.

During our CURC presentation to your committee in Winnipeg on October 21, 1998, we debated the nature of wealth in Canada and how to share our country's wealth more evenly. In order for young Canadians to be able to share in this wealth, the federal government now must set the rules and standards instead of allowing the province to set a minimum wage. Simply that you got out of the minimum wage and standards does not mean you don't have a role. There are people in the country, like Conrad Black, who are threatening everybody and are telling the government to get rid of unions and minimum wages. If you have read some of his speeches, they're frightening. We can't tolerate that kind of attitude in a democracy.

The market system is not working for everyone. Those who have no bargaining power are being left behind and will remain behind at retirement. In many cases, their children will remain behind. Will this trend of financial void create or contribute to more violent crime, hatred, marriage breakups, spousal abuse, child abuse, and lives of crime? What is the social cost to society going to be? Is our democracy at risk? Will Canada even meet the commitment of the UN to stop poverty? I don't think so.

Mr. Chairman, there are lots of questions here that we can deal with later, but certainly that's why we dedicated this to the traditional family: parents, grandparents, and their children.

The Chairman: Thank you very much, Mr. Cerilli. I would also like to thank Mr. Walker and Mr. Norheim.

We will now hear from Cho!ces member George Harris.

Mr. George Harris (Member, Cho!ces: A Coalition for Social Justice): Thank you.

It is good to be here in Regina for two reasons. The first is that even though we had to travel, it's always good to see Regina. And the second one is that I grew up on a mixed farm in Manitoba, so it was good to hear all the conversation around agriculture this morning. I felt very much at home, not necessarily with all the things that were said, but certainly with the tenor of the discussion. It was certainly a very interesting one.

I only have five minutes, and it's hard to figure out what you can do with five minutes. I brought papers with me. The first one is the alternative federal budget document, and copies of it are circulated to you as information. I want you to just take it as information that you can read into the work you have before you. The second one is a paper that was prepared by Dr. John Loxley, of Cho!ces. It compares the 1999-2000 federal government budget to our alternative federal budget. If you would take those pieces of information, that would be good.

I decided that what I would want to do in five minutes is first say something about the surplus and talk only about taxation. That's not to say the other issues are not important, it's just that the time is limited.

The first thing is about the surplus, and I would put “surplus” in quotation marks. The good thing about the letter we received is that under tax relief and reform, it makes reference to fiscal surpluses. I'm happy that such a qualification was there, because what we have right now is a situation in which we have eliminated the deficit on the fiscal side, but there are all kinds of other deficits that are becoming worse within our society. We can talk about social deficits and all the things that are happening in health care, in education, and in income support. These things are causing critical problems, and I just wanted to flag that particular one.

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We have heard also about the infrastructure deficit. This was mentioned the last time at your meetings. In Winnipeg, I think quite a number of people brought this matter forward, and we've heard more about the infrastructure deficit again today.

From an environmental point of view, the whole issue of the environment has to be looked at very seriously. We can't continue to do what we're doing to our environment, and I want to put that in the same category as another form of deficit: We think we're getting away with something today, but we're going to pay for it in the future.

We could go on with looking at all of the various deficits that we are creating within our country. We got rid of the fiscal deficit, but some serious problems are happening elsewhere.

I work in a social service agency, called the AIDS Shelter Coalition of Manitoba, in Winnipeg. We see on a daily basis the devastation in people's lives, whether it is in the form of people being put in rooming houses while they are living with HIV and AIDS; whether it's income support that is being eroded so that they cannot support themselves; or whether it's the need to access food banks. We see the whole range of things. I'm very conscious, on a daily basis, of the various forms of deficit that we're creating in our country.

Going to taxes, I left with you a document that was prepared by Murray Dobbin for the Canadian Centre for Policy Alternatives. We hear an awful lot about taxes right now, and the desire of people to decrease taxes. The big thing we keep hearing about is certainly a decrease in personal income taxes.

That causes me great concern from two perspectives. First, if you decrease personal income taxes, who benefits the most? Of all of the people I work with on a daily basis—and I am talking about those in my workplace, those people who have been driven into poverty as a result of their illness—there are very few who will benefit at all from a decrease in personal income taxes.

The thing I would like to suggest around this one is something for when you're considering a measure such as any adjustment to the tax system. It might be a very interesting thing to divide the population into quintiles and to go from the top to the bottom, saying that this tax relief is going to be a $25-billion tax relief. You then find out or compute exactly where that $25 billion is going to go in the whole list. You go down through the quintiles and then present that to the public, along with a proposal, and see how the public responds to it. But this kind of tax relief is certainly not going to end up benefiting a lot of the people who have been terribly devastated over the past few years by the government cutbacks.

So I would urge you to take a look at the documentation that has been presented here, and I will close on one final note. In 1991 Statistics Canada produced a report—I refer to it as the Mimoto report—from which an examination of the current situation that we have with regard to debt and deficit in the country was taken. In that report, it was identified that 6% of our debt and deficit problem could be attributed to spending on social programs. That report disappeared from public discussion. It came out but never received much attention. Certainly, according to some writing I have seen, it was actively discredited by the Department of Finance.

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In that same year, 1991, it was rather interesting that the same Department of Finance was involved in discussions with Revenue Canada around the movement of funds out of the country. There were $2.2 billion worth of assets moved to the United States, and that was done tax free. There is a case about it before the Federal Court right now, and we're involved in it.

I know the government cannot comment on that case because it's before the courts. However, it was rather interesting that on one hand there was a department that actively wanted to silence the discussion around how much of the debt and deficit was related to social program spending. Even if 6% was not the right figure, even if it was 10%, then the fact is that social program spending was not the principal culprit in what happened with regard to our debt and deficit.

I would like to see somebody go ahead and do what I would refer to as a follow-up report on that, by doing an analysis today to see who paid for eliminating the deficit. I'm very confident that you would come to the conclusion that the people who paid for the deficit were certainly not the cause of it. There is a major equity problem when it comes to this kind of thing.

I will end on that note, but I would say it is important to examine very carefully who is going to benefit when you're talking about tax reduction or tax reform. All of the suggestions I've heard so far are going to benefit the wealthiest people within this country. From a Canadian point of view, I certainly find it totally unacceptable that the wealthiest people will be the biggest benefactors of all of this.

I leave it at that, and I'm sure there will be more discussion around this.

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

We will now hear from Mr. Norm Halldorson, chairperson, and Mr. Kelly Mitchell, vice-chair, both from the finance committee of the Saskatchewan Chamber of Commerce.

Mr. Norm Halldorson (Chairperson, Finance Committee, Saskatchewan Chamber of Commerce): Mr. Chairman and members of Parliament, we welcome the opportunity to make a presentation to your committee on behalf of the members of the Saskatchewan Chamber of Commerce. Our members are people involved in businesses of all sizes and shapes in locations throughout the province. In many cases, they're leaders in our local communities and are very involved in programs that help to provide some of the social safety nets. They certainly play a leading role in job creation, and their activities very much contribute to security and opportunity for everyone in our society.

It has been interesting to listen to the presenters in the few minutes we've been here, and I note the diversity of demands that any administration has to address. I've noted a few of them as I've sat here, including things like the social safety net, infrastructure, job creation, security, and opportunity, which are all very valid requirements in our society.

The one theme we hope to shed some light on is that the long-term, sustainable method of looking after all of those demands is to have a healthy and growing economy. With a healthy and growing economy, we have opportunities for employment. That activity creates wealth. The spending of that wealth creates more opportunity, and there's an assured revenue stream to governments to fund these programs. In our submission, we point out that in order to get this economic activity, we feel it's very necessary to implement tax reform.

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It's interesting to hear people talk about tax cuts on the basis that the purpose of the tax cuts is to increase the wealth of the wealthy. We would suggest that the purpose of tax cuts is to provide a competitive environment for our businesses. A lot of them are small businesses whose earnings are, in their initial set-up phase, less than the minimum wage. But they want a level playing field where they can compete in a global economy and have opportunities to grow their economic activity.

If they can grow that economic activity, and if tax cuts help them do that, we see tax cuts as essential to getting the economic growth to ensure the sustainable funding for all of these demands, rather than competing with these other demands.

In our written material we talk about personal income taxes being too high in Canada, some of the dampening it is causing on economic activity, and the fact that tax brackets need an overhaul. To try to illustrate that point, we have three charts in our material. We thought a chart would bring thing into perspective better than words.

The first chart, headed “Taxation in Canada”, gives a very simplified outline of our personal income tax system as it currently stands. On the vertical axis on the left, we have the rates of tax that apply on various levels of income. On the horizontal axis at the bottom, we have the levels of income.

We can see that in our Canadian tax system our taxpayers do not pay personal tax on approximately the first $7,000 of earnings, because it's offset by personal exemptions and credits. From that $7,000 up to approximately $30,000 is typically what is referred to as the low rate of taxable income. On average, the combined federal and provincial taxes across Canada are approximately 27% on that level of income.

Once a taxpayer's earnings go beyond the approximately $30,000 level, they move into the mid-tax bracket, which extends from $30,000 of earnings up to $60,000 of earnings, and the total combined federal and provincial rate is approximately 43%. Once earnings exceed $60,000, they are at top rate, which is approximately 50%. That varies a bit by province, but on average that's a fair approximation.

The second chart, headed “Taxation in the United States”, shows the combined federal and state taxes for our neighbours to the south. Their tax system has a lot of similarities to ours. Again, the tax rates are on the vertical axis and the income levels are on the horizontal.

There are similarities initially, where the first $6,000 or $7,000 is offset by credits and the low rate starts at about $26,000 of income, so it's not much different from our $30,000 level. But you can see that it moves up in more gradual steps and at much higher levels of income. The move from the low bracket to the middle bracket is at $26,000. The move from the middle bracket to the next one is at $62,000. It moves again at $132,000, and it doesn't get to the top rate until earnings are at $283,000. It's progressive but at a much slower rate.

I think the third graph is the one that really gives the picture that our business people are struggling with. In this graph, entitled “Comparison of Canadian and U.S. Tax Rates”, we have taken the two previous graphs and just laid one over the other, but expressed it in the common denominator of U.S. dollars. By doing that, a couple of things are very apparent.

Our rapidly progressive system—and we've heard other speakers here today say that the brackets need to be overhauled—moves our people up very rapidly, where they are at the top rate at earnings at approximately $40,000 U.S. I think in the global economy that can be challenged as not being a particularly high level of earnings to entice risk-takers to put their capital in our economy.

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If you look at the difference between the red line on the graph at the top, representing the combined Canadian rate, and the blue line, which is the combined U.S. rate, you can see that the difference is the competitive disadvantage our businesses and our economy as a whole have in retaining talent in this country.

This country can be justifiably proud of its educational institutions and the work ethic of its people, but more and more we are hearing—and it is pervasive through our economy—that we make the investment in training our talented youth only to have them exported and make their career contribution and pay their taxes through their working life in some other jurisdiction.

On behalf of the members of the Saskatchewan Chamber of Commerce, we would like to urge your committee to consider reform in the area of pushing back the bracket in which rate increases occur, to try to narrow that divergence between us and our major competitor to the south, and also consider the top rate or all rates coming down.

Certainly we have seen an increased awareness of that in a number of areas, but we are proposing it not as a measure that we need to view as being in competition with all these other legitimate demands. Instead, we would see it as an essential step towards a solution of having growing economic activity, a healthy economy that will provide the ongoing funding to look after all the other needs that have been outlined by your other presenters.

I now turn it over to Kelly.

Mr. Kelly Mitchell (Vice-Chair, Finance Committee, Saskatchewan Chamber of Commerce): I'd like to speak on corporate income tax. I have listened to many of the presenters, and I do realize that there are many problems. I do not envy the position of your committee in balancing out the social pressures, the deficit, the accumulated deficit pressures that haven't gone away, and the fact that people like us are asking for tax breaks. You are getting it from all sides, and I do appreciate the difficult position.

I know the proposal I will give right now isn't going to be a popular one, but I do see it as a potential solution to some of the fiscal strains you have.

What I would propose for Canada is to take a course from Ireland. What Ireland has done is reduce their tax rates on corporations, which isn't a very popular thing. But what it has done is stimulate economic activity to the point where they have very low unemployment and burgeoning surpluses, to the point where their real problem in Ireland now is that they cannot get enough skilled labour and their housing prices are going up too fast.

I think those kinds of problems are ones we need to have in Canada, not the problems we have, such as people on the streets without shelter. If we had funds, if we had economic employment, if people were paying their personal income taxes, if that's the way we could do it, by a corporate income tax reduction, to be not just meeting but beating the United States, I think Canada would have a lot of things to offer.

Year after year, the UN votes us as the most favourable country in which to live. That's because of our educational system and our quality of resources, and if we could just have the economic activity, I think a lot of these other problems would be taken care of.

I want to go into some detail. I have the economic overview from Ireland here, and I will read you some of the statistics that have fallen out.

From 1993 to 1998, their gross national product was £39 billion. Now it is up to £57 billion. Their unemployment was at 12%, and now it's at 6%. They were in a huge deficit year after year, and now they're in surplus positions year after year. They did it with one major incentive, which was to reduce corporate income taxes to a point where they were uncompetitively better than every other European country. What it has done is stimulate enough economic activity and enough new taxpayers to wipe out all their problems, except that their problems now are in getting skilled labour and cheap housing. Those are problems we would have to deal with if we were in an economy where everybody was employed who wanted to work.

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Right now, we have an opportunity to do that, because we have such a popular country. People do want to live here. I think all it would take is a few head offices of major corporations like a Bristol-Myers to move from the United States to Canada. That is what's happening in Ireland right now. The manufacturing facilities are being opened up in Ireland, and you'd have to say that their political climate isn't quite as stable as ours right now. If they can attract that kind of economic growth, I think we can.

Thank you.

The Chairman: Thank you, Mr. Mitchell and Mr. Halldorson.

We have just been joined by two organizations, the Saskatchewan School Trustees Association and the Saskatchewan Urban Municipalities Association. We will hear each of their presentations, and then we will have a question and answer session for everyone.

We'll begin with the Saskatchewan School Trustees Association, the president, Gary Shaddock.

Mr. Gary Shaddock (President, Saskatchewan School Trustees Association): Thank you very much. I am Gary Shaddock, president of the Saskatchewan School Trustees Association, and with me is Craig Melvin, our executive director.

First of all, I want to thank you very much for the opportunity to meet with you this afternoon and present our brief. I know we are under some tight time constraints, so I will cut my presentation down somewhat to allow for questions.

We are pleased to be provided with this opportunity to share our priorities for the 1999 pre-budget consultations of the Standing Committee on Finance. The social and economic future of Canada in a knowledge economy depends directly on the intellectual capacity of the children in school today. School boards of Saskatchewan and across Canada continue to be alarmed by the growing number of children who are limited in their ability to learn by health and social influences beyond the school.

Our interest is focused primarily upon your third theme, the social infrastructure. We would strongly urge the government to place its first priority on rebuilding the social infrastructure, in particular as it impacts our children. Canada's place in the new economy and improved productivity will only come from the investment we now make in our children's well-being.

Of particular interest today, it was reported that since this initiative was undertaken in 1989, an increased number of children are now living in poverty as compared to 1989. The Saskatchewan School Trustees Association has expressed strong support for the national children's agenda introduced by the government and provinces and territories. The health and physical safety of children must be a priority for the Government of Canada and the finance committee in its budget planning.

Hungry, fearful children cannot and will not learn unless and until they are fed and safe. To this end, a number of our schools in the province have started food programs in their schools so that the children feel safe and are starting the school day on a full stomach.

There is a profound link between children's social environment and success at school. We have learned that the most beneficial focus of our efforts has been early intervention. Creation of a healthy, socially nurturing, and intellectually stimulating environment for children before they reach compulsory school age has the greatest impact on their future academic success. Most regard early intervention programming as an investment in our future that will result in savings in the long term. It is imperative that governments act and act now. Research indicates that for every dollar spent up front, more than $7 is saved down the road.

The specific challenge that children living in poverty present can be met in several ways.

First, we feel that Canada and the provinces must express their strong support for the children's agenda. This can be done in two ways, both with vocal support and financial support.

Second, specific initiatives appropriate to levels of funding and time lines with targets for success must be established in conjunction with a budget development process this year.

Third, the initiatives should embrace local community-level direction and control of program development and delivery, and encourage flexibility of response to local issues and concerns.

Lastly, Canada's commitment to the national child benefit should be increased.

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There is no more significant problem before Canadians at this time than the welfare of our children. Children and youth are our future, and it is our duty to nurture them to ensure their full intellectual development and, in this way, to secure our collective social and economic destiny. Shortchanging our children now will result in all of us being shortchanged down the road.

On behalf of the school boards in Saskatchewan and the children we serve, I would like to thank your committee for giving us the time to present our brief.

The Chairman: Thank you very much.

Now we will hear from the Saskatchewan Urban Municipalities Association, the president, Mike Badham. Welcome.

Mr. Mike Badham (President, Saskatchewan Urban Municipalities Association): Thank you very much, Mr. Chair.

We welcome this opportunity to make a presentation to you today. Our association represents some 500 towns, cities, and villages throughout Saskatchewan. In turn, our member councils represent about three-quarters of the total population of this province, or some 750,000 people.

Unlike our neighbouring prairie larger cities, Calgary and Edmonton, or Winnipeg, each one of which may equal our total urban population in this province, we're spread across the fabric of this province. We therefore appreciate that your committee has added a stop in Saskatchewan as part of your public hearings.

Like other groups you are hearing from today, I want to emphasize the need for federal government assistance in infrastructure funding. But I also want to start with support for another funding priority, dealing with the farm income crisis, which also impacts our entire province. We in urban centres may not experience the farm income crisis as directly as most farm families, but the impacts do come to town in many different ways.

If we indeed are on the brink of losing many of our farm families to bankruptcy, then we will truly be tearing holes in the economic and social fabric of this province and in the fabric of a federation based on mutual aid in times of crisis. While there are no easy solutions to fixing the farm income crisis, one step that can be taken is to admit to the immediacy and the magnitude of the problem. We hope your committee will share this perception.

SUMA has been proud to be part of this coalition in the province. We participated in Ottawa and continue to be part of the group that you may hear from continually from this province.

Just as modern farmers depend on expensive equipment and other new technology, our urban communities are built on a network of essential infrastructure that is required to sustain economic and social development. Productivity, which is one of your primary budget themes, cannot be encouraged without renewing our municipal infrastructure. As we have further outlined in the attachment to these notes, we are falling behind in our investment in several types of core facilities, including water and sewer systems and urban transportation systems.

The new economy, another consultation theme, is equally dependent on urban infrastructure. The information highway, as much as the asphalt one, requires substantial investments in transmission facilities that flow through local utility corridors. The need to renew this hard infrastructure is also an important part of developing our social infrastructure, another of your budget areas.

Our health care and education facilities do require renewal, but we should not take for granted the more fundamental municipal services on which they too are dependent.

All of these expenditure pressures make it more difficult to achieve general tax relief and reform, yet another of your budget themes. The municipalities are more experienced than any other level of government in holding the line on taxes, but part of the tax relief agenda must come to focus on property taxes, as well as on other types of tax reduction.

In Saskatchewan we have been struggling for more than a decade to achieve school tax relief, but finding a provincial solution has been handicapped by cuts in federal transfer payments.

Finally, the process of budget-making is also relevant to infrastructure renewal. Competing expenditure needs must be balanced, to be sure, but there must also be a balance among the three levels of government in overseeing program implementation. Your committee will have already heard many presentations on various infrastructure needs from municipal associations in other provinces, from our Federation of Canadian Municipalities and other members of FCM, including cities.

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As an introduction to our more specific arguments and examples of urban infrastructure needs, I would like to conclude by briefly summarizing our policy position through the Saskatchewan Urban Municipalities Association.

Partnership among levels of government is the foundation of this nation, even though municipalities, as the first order of government, are not formally recognized as autonomous entities in the Canadian Constitution. We are looking to the continuation of the partnership on infrastructure financing for as long as the waterworks flow and the street lights shine. We could also say for as long as the crow flies, but there is now a certain sensitivity, as you are aware, to such phrases as that in our province.

Urban municipalities in this province, and in Canada more generally, have suffered more substantial cuts in transfer payments from senior levels of government than any other public institutions. The result has been mounting pressure on the property tax base and a growing backlog in unmet infrastructure needs.

We have been working with the Federation of Canadian Municipalities for well over a decade to secure a long-term commitment to a tripartite infrastructure renewal program. The Canada-Saskatchewan infrastructure works program created more than 6,000 jobs in the 1994 to 1998 period, with more than 2,500 projects completed, for a total value of more than $360 million.

While we support FCM's quality of life approach to a broader and more flexible definition of infrastructure needs in communities across Canada, our SUMA members want to ensure that federal contributions also reach the hard or core infrastructure needs most closely related to environmental protection, public safety and economic development. We estimate the continuing need for annual expenditures by urban municipalities in Saskatchewan to be equivalent to as much as $300 per capita, just for core infrastructure projects. On a tripartite shared-cost basis, satisfying this need would require up to $75 million annually from each of the three partners.

In 1999, Saskatchewan showed leadership in making a commitment to an ongoing municipal infrastructure program in the expectation that the federal government would soon be again contributing as a third partner. SUMA continues to look for equal partners, given that municipalities still contributed more than half of total project costs, under the recent Canada-Saskatchewan infrastructure works program I referred to. Municipalities also want to be equal partners in the planning and implementation of flexible program criteria, to ensure that local needs are met.

There is an appendix to my remarks, and you will have a chance, I know, to look through that, to see what the needs of urban centres are in this community. I note that the City of Regina, where I am also a city councillor, has made a presentation to you today to give you an indication of the needs of an urban centre. We have other cities, towns, and villages in this province, and we have made some comments on them.

The last comment I would make is on the last notation in the appendix, referring to special needs in northern communities. As we represent all communities in the province, we want to note that there are some special considerations there as well, because they face higher costs and have smaller local tax bases than do southern communities.

We thank you very much for your attention to our concerns, and we look forward to participating in the rest of the session.

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

We will get to the question and answer session now. We will have a 10-minute round for this session.

Mr. Epp, followed by Mr. Nystrom.

Mr. Ken Epp: Thank you very much.

Thank you all for coming here.

I want to ask a question of those of you who are involved in the municipality...in local governments. I dare not call them sub-provincial, but in the grand scheme of things we have the federal, the provincial, and then the municipal governments.

I'm really quite impressed that none of you mentioned—maybe it's in your reports, and I haven't had a chance to read them all—anything about the EI fund. I don't know whether you have done the arithmetic, but if you look at the amount of tax money that's collected from taxpayers, the bulk of it goes to federal taxes. The next amount goes to provincial taxes, and then there's the smallest amount, most of which is property taxes collected by the municipalities. Yet from that smallest part, the municipalities are required to send a whole bunch of money to EI. If I remember correctly, a total of about $156 per employee per year is in overpayment right now.

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I'm surprised that none of you have raised that issue, because it's siphoning money directly from the property tax base into the federal government coffers. There it is not used for employment insurance purposes, but it's sucked into general revenue. Are you not concerned about this, or did it not, in your grand scheme of priorities, fit the time limit?

Mr. Douglas Archer: You're raising the issue in the context that might suggest it's an issue for municipalities more than anybody else. In fact it's an issue for municipalities because we are employers, not because we are local governments. When you have five minutes to make a presentation, you focus on your primary task. Our primary task is not to debate employment insurance; it is to address the needs of our municipalities, which in this case are the infrastructure problems.

The issue has certainly been raised in our municipality. We have supported concerns that have been expressed, and we have supported the position that we need to see some improvements to the benefits that should be paid. In response, that's where our municipality has taken a stand.

The Acting Chairman (Mrs. Karen Redman): Excuse me. Mr. Badham wanted to make a comment.

Mr. Mike Badham: I certainly agree with Mayor Archer. That very topic is on the agenda of the SUMA Board of Directors this weekend, so appropriate letters will be forwarded. But we're talking in a different setting here.

I can say there is serious concern by municipalities, not about what is being paid as employers but about the effect on those people in our community who are not able to access EI funds as they had been. There are some statistics—I don't have them at present—that in this very province, particularly in the larger cities of Regina and Saskatoon, access to the fund has diminished considerably in recent years. That is a concern of communities. As I indicated, we will be discussing that this weekend and could certainly provide to this committee, if they wish, our position on that.

The Acting Chairman (Mrs. Karen Redman): Mr. Cerilli.

Mr. Al Cerilli: Thank you. I think the question is very broad. It sounds simplistic, but it has a lot of ground to cover. I really don't know if the Saskatchewan Federation of Labour and the Canadian Labour Congress were invited to this meeting here today. I know that the Manitoba Federation of Labour was not invited.

Coming from labour and making our presentation, including previous ones, I'm sure you've heard from the Canadian Labour Congress on the EI fund. I think the EI fund is there, and has always been there, for the purpose of retraining and getting people through the process of unemployment and hardship. The fund is there not only to benefit the family of the unemployed. As a retired person, I spend a heck of a lot of time in the high schools with young people who really don't know what training they will get, what company will be training them, or who will be training them when they hit the labour force.

We have a program called the Workers of Tomorrow on health and safety. We also throw in training and what their options are. Our recommendation, as retired persons coming from the labour movement, was that the federal government should sit down with employers and the labour movement to determine what to do about the complaints we hear from the business community that there is a shortage of skilled workers, and all that stuff.

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We have had ten or twenty years of decline in the training process. Before I retired ten years ago, it was mandatory for me to go to a bargaining table and to put on that table the retraining of workers. Now if we do that we're called Bolsheviks and God knows what else by certain groups.

The fact of the matter is that the EI funds are there, collected for a purpose. I can appreciate where the municipality is coming from. It's too bad they weren't here when I made the presentation on infrastructure renewal, creating jobs in that kind of situation in which people could be trained for all kinds of skills: carpenters, welders, cement mixers, and you name it. Those are the kinds of things I would like to see going on with that.

Mr. Ken Epp: I appreciate your answers, but my time is slipping away and I have more questions, so I need to interrupt.

I think it's probably unanimous around this table that you don't agree with EI as it is now, because either there's an overpayment in premiums and those premiums should be reduced, or the benefits should be increased. Some of you are saying the benefits should be increased—I think I know who you are—and the rest of you seem to agree with that in this province. That's good. We've heard different messages in different parts.

I want to talk about debt. We're here on a pre-budget consultation. We're talking about the government's plan to manage the financial affairs of the country. We have a huge debt. In fact, since 1993, we've added about $100 billion to the debt that we had then. None of you have shown any interest at all—or have shown any priority, I should say—in reducing that debt, in paying some of it off. I find this particularly interesting from people who are from the spectrum that doesn't want the debt to be reduced.

Generally, what debt does is transfer money from poor people—and we know this government takes $6 billion in income taxes from people who earn less than $20,000 a year. That money is then transferred in interest payments to those who have more than they need, hence their ability to buy Canada Savings Bonds and things like that. So I'm really surprised that there is support for maintaining the debt and maintaining that transfer of wealth. Are none of you concerned about the fact that we should address the debt problem?

Mr. Norm Halldorson: We appreciate your comment, and that is part of our written submission. We do recognize that debt reduction is a priority. In our written submission we state:

Debt reduction must be a priority in developing the budget for Canada. The interest charges associated with our national debt is holding back funds that could be used on tax reduction, investment and programs.

By using surplus funds to accelerate the pace of debt reduction, more money is made available in the long run. Reduction of yearly interest payments results in increased funds for the future.

It is not fair to burden future generations with the debt that was generated by the current generations.

So our members in the Saskatchewan Chamber of Commerce are very much aware of the issues that you've raised. We simply tried to live within the time constraint in our previous comments, and we didn't get to that part of our written submission.

Mr. Ken Epp: Thank you. I have the same problem. I'm out of time as well.

I have many other issues to discuss, but my ten minutes are up, Madam Chair.

Mr. Wes Norheim (Representative, Congress of Union Retirees of Canada): Just as an aside, Mr. Epp, debt isn't a stranger to us in Saskatchewan either. We have our provincial debt and we've been struggling with that. It has affected our ability in the public sector to do the tasks that we would have otherwise done except for the large provincial debt. We have our agenda to work on that debt.

So it's not a stranger to us. We know there's debt at the national level, but you always see the one that is closest to home.

The Acting Chairman (Ms. Karen Redman): Mr. Badham.

Mr. Mike Badham: I have a very brief comment.

We would suggest that our infrastructure needs are really what we would call a hidden debt. It is a debt, and people talk about future generations having to pay for it. We would like to get at that now. Hence our comments on infrastructure from a municipal perspective, as well as from the perspective of municipalities that must balance budgets. It's a requirement from year to year.

Mr. George Harris: I just have a quick comment. As far as debt is concerned, within our alternative federal budget, we have actually done a good job in managing debt. The problem you have—and the reason we come from an organization called Cho!ces—is that you have to make choices within a whole process of budget-making and all that. That's part of the challenge of the government.

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As others have mentioned, it is a very difficult issue of balancing all of the various needs. I understand that. But the problem many of us have with debt and the focus being entirely on debt is that it is basically a clear-cutting of society. We deal with that clear-cut. I deal on a daily basis with the people who have been clear-cut by our total preoccupation with the financial end. When you have that unidimensional approach toward things, without any apparent concern—I say any apparent concern because maybe there are people who are concerned—for what happens to the people who are devastated, I have a big problem with that approach.

Our alternative federal budget does take debt into consideration.

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

Before I allow the Honourable Lorne Nystrom a chance at questioning, if I'm not eroding anyone's time, I would like to welcome Mr. Mark Wartman, MLA for Regina—Qu'Appelle Valley, who joined us after we started questioning. He wanted to respond to Mr. Epp's question, and I would like to give him that opportunity now.

Mr. Mark Wartman (Member for Regina—Qu'Appelle Valley, Legislative Assembly of Saskatchewan): Thank you very much. I'm happy to have the opportunity to be able to address the questions you raised.

You asked two questions that I believe are tied together. The first one is around employment insurance, and the second one is around debt. One of the problems we have when we focus on debt or deficit and really put all our resources toward those, is that the people on the bottom end really do suffer. When we look nationally at this picture, we're seeing a province that has basically been a have-not and has suffered significantly as the federal government has focused on deficit and debt.

Over $46 million has gone out of the Regina area's economy because of the change in the benefit structure of the employment insurance program. I was appalled to hear federal Minister Martin suggest at our meetings in Ottawa that our employment insurance is really just a source of revenue for the federal government anyway. It left me wondering what the “I” stands for in that.

On the second part of that, when we see this kind of money coming out of our economy on insurance and then the next side of that dealing with our agriculture issue, we look at a unilateral decision that simply puts us into market competition that we can't deal with, that being a 30% differential in trade. I have to say that focusing on debt really is the wrong emphasis. We have some needs in this province that just have to be dealt with if we're going to care for our poor, and if we're going to care for building the economy in this province. We can't have that focus on debt. It just costs the people on the bottom end way too much. We want you to be good stewards, we want debt paid down, but not at a cost to the people in this province.

The Chairman: Thank you, Mr. Wartman.

Mr. Nystrom.

Mr. Lorne Nystrom: Thank you, Mr. Chair.

I think George Harris said the whole thing is about choices. The Minister of Finance said one of the things he will pursue will be a tax-cutting agenda. What advice do you have for us, Wes Norheim, George Harris, or whoever, about the choices in terms of tax-cutting? A few years ago we heard an awful lot about cutting back on the GST and opposition to that. In a poll about a month ago, it was still the most popular choice of the Canadian public in terms of a tax cut. I think 55% wanted the GST eliminated or cut back, and personal income tax was number two. Yet we've heard very little talk about that. What are the choices in terms of the tax cut side of what we are looking at today?

Mr. George Harris: As far as tax-cutting is concerned, again we are making choices ourselves in not putting tax cuts very high on the agenda. It is better to look at.... I hear this from time to time from individuals. There are parts of our society that are being taxed very heavily. There's no doubt about that. But we can't look at saying we're going to deal with that by handling it across the board.

• 1730

The problem with across-the board personal income tax cuts is that if you're going to solve the problem for the middle-income people, if there is a problem.... Certainly with the cutbacks in services from the federal government, there is an increasing justification for the middle-income people to say, gee, it's awful that we're being taxed this much, but that's another discussion. But to solve the problem for the middle-income people, if that's where the problem is, you're giving whacking big benefits on the upper end.

I found the presentation by the Saskatchewan Chamber of Commerce interesting, that there may be a problem with where the brackets are rather than necessarily the levels. We'd have to look at that kind of suggestion. Certain high income tax rates kick in very early, so that discussion would certainly have to take place.

In the alternative budget, we do a certain amount of changing with the brackets, but we also add a couple of brackets to bring about a different shape to the burden.

The GST is certainly an area that would be of direct impact right across the board, so that is an option that should be looked at seriously.

The challenge we have right now is the amount of revenue, and if that revenue is forgone, you have to start looking at what the options are. But a lot of work has to be done there.

Mr. Lorne Nystrom: The great thrust must be to give relief to the people at the low end of our income scale in Canada; there can be no escape from that. If a person is earning $200,000 a year, frankly the GST that person pays on a television set doesn't bother that person very much. But if you are of average or less-than-average income, where all your take-home pay, all your disposable income, is going for shelter or food, every bit of that is affected by your decisions.

You folks have the capacity to know what percentage of the GST people spend at different income levels. You have the researchers; you can find all that out. The thrust must be to help the people at the bottom end of our economic ladder. The people at the very top who make over $100,000 are going to survive; I promise you they will. It is the people whose incomes are very low that I am concerned about.

A witness: If you look at the purpose of a tax cut, to allow our entrepreneurs to compete on a more level playing field with some of the strong competition in neighbouring jurisdictions, it is important to be aware of some surveys that were done both by the Province of Saskatchewan in their provincial action committee on the economy and by the Chamber of Commerce. The purpose of the survey was to find out from the decision-makers, who decide on whether they are going to risk their capital to build a plant in Saskatchewan or in Canada versus some other jurisdiction, what factors are most influential in their making that decision.

So if we look at a program that is intended to grow the economy by getting more economic activity here, the response that came back was that the largest single factor affecting the decisions for location of investments of long-term capital projects to provide meaningful employment and economic activity was the level of personal income tax.

The Chairman: Mr. Cerilli.

Mr. Al Cerilli: I have a couple of comments. First, I think all of us are experienced in that when you offer people a dollar, they are going to grab that dollar. Our experience in negotiations was that it didn't matter what you put on the table and what you got; the bottom line was the end result of the dollar raise, or whatever the case may be. When we talk about GST reform, I think you might want to take a look at that as it would affect a lot of middle-income people with regard to what is being done.

We deliberately stuck with the family debt, if you like, and our children, our environment, and so on, anything that would create a job. For those young people, that's what we're looking for, otherwise we're going to lose another generation.

• 1735

The debt is one thing and the tax reform, the tax cut, is another, but the fact of the matter is people are built that way. All of us are built that way. When you offer us a dollar, we're going to take the dollar. But does that really mean the other points that were made around the table on family stress and the uncertainty of the job are not real? What happens to those 5.5 million people who are out there on that level? Are they looking for a dollar in a tax cut, when in fact they're not going to get one anyway, because their income is not there or they're unemployed?

The GST might do something for you. You might want to take a look at reforming that.

The Chairman: Mr. Nystrom, go ahead.

Mr. Lorne Nystrom: Mr. Mayor or Mr. Badham, can you elaborate a bit more on the impact of the farm crisis on the city of Regina or on the other urban centres in the province? We've heard a lot about the impact of the farm crisis on the farms themselves, but it's much more than that.

Mr. Douglas Archer: I'm sure Mike will talk about the broader provincial context and the impact on all municipalities, but I can tell you it is really demeaning when you have some of the richest farmland in the world all around the city of Regina here, and you have this circumstance where you have people really in a state of despair. It's hard to build a community and move forward when there is this state where somehow they end up being reduced to begging.

I say this with a healthy respect for the complexity of the issue. It's not an easy issue. If it were an easy issue, somebody would have solved the problem quite some time ago. The fact that it hasn't been solved reflects some of that complexity.

It does have a significant impact. Our city has grown, and we do have the benefit of a solid employment base here, which helps us to weather some of the impact. But I know a number of businesses—car dealers and machinery dealers, for example—are very directly impacted on in a negative way.

Mr. Mike Badham: Picking up on the last comment Mayor Archer made, looking at individual businesses, at this stage in my mind I only have them anecdotally, but we will definitely be getting some further data on it.

In smaller communities, some of the small manufacturing of farm machinery, used not only for the consumer in this province but also throughout the farmland area of the Prairies, is being cut into, together with the manufacture and also the sales. People who are in farming have fewer expendable dollars, and hence, again, those dollars are not being used in local businesses.

You could do an accounting of the business aspect or the economic concerns of this, and you could get some actual numbers, dollars and cents. But a social hole has been created as well in many communities, where there are pressures on families and pressures on individuals. That's showing up in support groups and agencies.

I'll make a personal observation. It may also be pitting, if you will, some of the rural people in Saskatchewan against urban people. It's creating a rift. You can look about at recent events, and you might see that in this province. People are angry, and they look at some way to display that. It is somewhat divisive when you start looking at the discussion of tax revolts on property tax, and then it gets into education.

• 1740

So I think a general unhappiness does manifest itself in some tangible economic situations. And as I say, you can't articulate them as well or list them, but there are social concerns as well.

It's tough. It hasn't affected me as directly as it has some of the people who sit on my board of directors of SUMA, who are involved in smaller communities and are entrepreneurs in those areas. I know that will continue to be a point of discussion, as I mentioned at a board meeting we had this weekend.

The Chairman: Thank you, Mr. Badham.

Thank you, Mr. Nystrom.

Mr. Cullen.

Mr. Roy Cullen: Thank you, Mr. Chair.

Thank you to all the presenters today.

I have a question to the mayors and others representing municipalities in Saskatchewan. There's obviously a lot of interest in an infrastructure cost-shared program. Yesterday in Vancouver we heard from a couple of mayors who said if the municipalities in B.C. are not involved in the priority-setting exercise with the province, then their advice to us is to say, no infrastructure program at all.

I don't know what the experience has been here in Saskatchewan in terms of the municipalities working with the province in the priority-setting exercise. The mayors in B.C. said last year it was a bit of a struggle. I know in Ontario it's a struggle to get the province to work in the municipalities in the priority-setting exercise.

Maybe Mr. Wartman would also like to comment. Could any of you comment on that? Should we really play hardball in that sense and say if the municipalities aren't involved, no deal?

Mr. Mark Wartman: Well, I would certainly urge you to do that. That has been our position as a municipality for many years. And I have served for eleven years on the board of the Federation of Canadian Municipalities, and we have taken that position very strongly.

At some point you have to decide whether you're going to fish or cut bait. Perhaps they're a little more well fed out there, but I would rather have a dollar in hand than the prospect of some other time getting some. That's a difficult situation we would be placed in.

It's time for municipalities to have a more legitimate place vis-à-vis the provincial governments. There's an air of paternalism and colonialism that is unbefitting a modern society. It's time to move well beyond that.

So I think you should be pushing it. I don't think it costs provinces anything in position, prestige, or anything else to develop a more mature relationship with municipalities.

Mr. Mike Badham: In the appendix of my presentation, I make the comment that funding should be available with considerable flexibility and municipal planning and involvement.

In our observation of the Canada-Saskatchewan infrastructure program, in the second phase we found Saskatchewan municipalities were the recipients of pretty well all the dollars and were involved in the discussions and in the distribution.

I can say that last year, Saskatchewan developed an infrastructure program with municipalities, and we partnered on that. It was limited—it was only $10 million in this province—but it generated an additional $16 million from municipalities. It was almost totally a municipal decision on how the money would be expended. Those decisions were made, and we were pleased with that in Saskatchewan.

It is my opinion that the Saskatchewan government is not a holdback or going to be a drawback in any way to a tripartite program. In fact discussions I've had here with the Minister of Municipal Affairs certainly indicate that we are together on this. They do provide that autonomy and want to see dollars going to municipalities.

• 1745

I think we're in pretty good shape. As for other provinces, I can't speak for them, but municipalities have to be involved and have a direct say in where they go in determining the projects.

A witness: I'd encourage you to add schools to the list if we are going to deal with the infrastructure issues in this country.

Also, if the province, particularly this one, tells you that by assisting with municipal infrastructure that is somehow going to free the province up to assist with the school infrastructure, I would encourage you not to believe them. It didn't work last time.

Anything you can do to put those resources towards schools will help us. The schools in this province—it is difficult to speak for others, but I think the problems aren't much different from those here—are crumbling, and we must invest in them, there is no question.

The Chairman: Mr. Cerilli.

Mr. Al Cerilli: Thank you.

In our presentation, we deliberately touched on those areas within the five minutes. If you take a look at the infrastructures of this country, since the federal government's policy change in funding they have deteriorated more, be it be schools, be it bridges, the sewers—

A witness: Libraries.

Mr. Al Cerilli: —the libraries, everything. So the core goes back to what families expect of their community—and Canada is a community.

I think what is happening here...and you are hearing from all sources and from a retired labour leader who has noticed all these things, because we had to negotiate with some of these people around this table or their predecessors. The fact of the matter is we're crumbling.

Infrastructure investment creates a number of things. It creates jobs and good taxpayers. It provides for their pensions at retirement, which will not be a cost to health care and everything else. It provides for their families and children. It provides for the communities.

The core areas of all the major cities in Canada are deteriorating. Why? Other people have taken over the downtown cores. In Winnipeg, for example, people are staying away from downtown. We're trying to do something about it now, but the fact of the matter is that the triple government action towards it has to be designated, if you like, for those areas. That's why we specifically said designated funding if it's for sewers...our water is gone. Thirty percent of our surface and underground water across Canada is polluted. It's not even mapped.

There are a number of municipal dump sites that are leaking and leaching into our groundwater system, which is poisoning us. Our lakes are polluted. We are looking for $200 million in Winnipeg to fund a water treatment plant. When we got our water from Lake of the Woods, it was the best in the world. Thirty years ago, we used to go fishing there, when my kids were small. We would take the boat, and we would drink water from the lake. You can't do that now. You'd die. The triple government system has to work here and has to be put into place.

That is why I referred to you and your committee for a strong central government standard to create that.

The Chairman: Mrs. Redman.

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

Very quickly, I wanted to ask a question of the Saskatchewan School Trustees Association.

In your brief, you support the national child benefit being increased, yet we've heard from other presenters that they weren't happy with that mechanism. As you are well aware, I am sure, the government has put a lot of money into that itself; it was support for families with children. I think in all but two provinces it is clawed back to welfare recipients; that money is clawed back with the understanding that it will be reallocated to those people. I am just wondering if you share the concerns we have heard that it is not inclusive enough, that it doesn't take into consideration the needs of disabled children, or if you still feel it's a good mechanism that the government has in place.

A witness: We've learned in this province that almost any federal program could stand improvement, AIDA being one of them, and here's another example. Our point of view here is that this is a mechanism the federal government has to direct resources to those families that we would agree are probably most in need. If there are problems in terms of maintaining the program and appropriately directing the funding, we would certainly support making the necessary improvements.

The point in our brief is that the resources, as much as the federal government can do it, need to be directed toward those children and those families that most need it. If there are improvements needed, make the improvements. Make sure there is a mechanism to direct the resources.

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The Chairman: Ms. Leung.

Ms. Sophia Leung: Thank you, Mr. Chair. In Vancouver and Calgary we heard a lot of comment on and requests for affordable housing, social housing.

I would like to start with the mayor. You did say you've received $18 million from the RRAP program. That was pretty lucky for you. Is the program still on? Did you find any other federal government program that you are using for affordable housing?

Mr. Douglas Archer: That $18 million was long-term funding and I'm sure it was dwarfed in comparison to funding for Calgary and Vancouver, which also received that kind of funding.

We found that this program was an excellent program. It really was one that was very useful in our circumstances. Our circumstances are not the same as those of everybody else. We are not a Toronto where we have a lot of homeless people on the street, but I can tell you that our vacancy rate is down around 1%, which means that we are really pushing the envelope now in terms of affordable housing. That does imply that if people of inadequate income can't find housing, they're going to be moving, and they're going to be moving to other places where they can survive on the street. So the implications are that we really do have to address housing.

I believe there are steps that can be taken by the federal government to encourage and, frankly, to mandate financial institutions to make funding available for low-cost housing and to do so in a fashion that does not require an unwarranted risk on the part of the financial institution. I'm not an expert in this area, but I've done enough reading on it to know that there are proposals around. There is plenty of experience in the United States. I know that in some states in the United States banks are required, as a part of having a state charter, to make a certain percentage of their funds available for low-income housing. There are ways to manage it to protect the investment that is being made.

As an example, the Royal Bank put up $100 million for food processing loans, I think, in the province. The feds guaranteed 10% of that on the principle that probably 90% of the loans being made were going to be repaid and that if there is place where you're actually going to ask the banks to step out where they wouldn't normally, it's at the 10% margin. The same kind of concept can be used to address social housing and figure out how to address that margin. Instead of asking government to be in there and fund 100%, we can see if we can look at how we address that margin, where there may be some risk, and allow people to fend for themselves.

The worst thing we can do is force people into a state of dependency. They don't want to be there. They want some dignity. They want some self-respect. I think there are some models around to address the housing issue. We, with a 1% vacancy rate, need housing.

The Chairman: Mr. Harris.

Mr. George Harris: This is an area that is actually part of my work with people in Winnipeg who live with HIV and AIDS, but we work with a broader coalition of low-income individuals, people with disabilities and so on, in Winnipeg. It's quite a serious problem in Winnipeg with the number of rooming houses that are being set up, whereby a house is divided into half a dozen different rooms to put people up for $200 a month, providing just a roof over their heads in incredibly unsanitary conditions. We've been involved in actually getting to the point where they have had to be closed down because they were so unsanitary. That's not what you want to do.

• 1755

So there is a role, and it is very important that the federal government and other levels of government look at it.

I appreciate the previous comment, because tomorrow morning I'll be in a meeting with the Assiniboine Credit Union in Winnipeg. We want to be engaged in discussions around that to see whether there is a way to have the credit union involved in this as well.

I appreciate the question. There is definitely a role for the government. Maybe some kind of combination role would be a good option.

Ms. Sophia Leung: I have just one more, quickly.

In Vancouver I visited a special setting, like the one you just described, for the most marginal groups, which have a lot of problems. It's funded by the three levels, and not only that, it's also funded by the private sector. This is why I want to hear what you people here are doing.

Then I'm going to bring that person... [Technical Difficulty—Editor] ...by herself, and she and two staff members look after 87 people. She is really making a record...we will also hear from her. I think it's good to hear that you are working on that. I would encourage more private sector involvement. Government can only do so much. The community should be involved.

The Chairman: Thank you, Ms. Leung.

Mr. Jones.

Mr. Jim Jones: Thank you, Mr. Chairman.

[Technical Difficulty—Editor] ...the problems we're facing, especially...we're really in a booming economy in comparison to where we were in the late eighties and early nineties. In fact, over the last eight to nine years, the U.S. has been unparalleled in growth and economic performance.

For example, in the early nineties, the government of the day in 1991 in Ontario thought the way to get out of the problems we were in was to spend their way out by putting more money into welfare and other programs. By the time they got out, they grew our debt from $40 billion to over $100 billion.

In 1995 we elected Mike Harris in Ontario. With his tax cuts, in his four-year record he created 500,000 new jobs. Four hundred thousand people are off welfare. He reduced the deficit. When the government of 1990 took over, the deficit was about $1 billion and it was growing annually at $12 billion. Now it's down to $1.5 billion, and it will probably be balanced this year. Eighty-five to ninety percent of our exports in Ontario are probably to the U.S. With the tax cuts, the province is still growing its revenue.

I am well aware of the experience in Ireland and what happened there. Do you have a business case that shows that if we did reduce both corporate and personal income taxes we would create jobs? I know that the vast majority of people in this country want to work. If the vast majority of the people in this country are working we don't need all the things we're asking for.

We have two choices here. We can continually fund programs or we can try to go the job creation route. What experience, what business case, can you provide in this area of reducing taxes?

Mr. Kelly Mitchell: On the corporate side, we have a definite business case from Ireland. This is laid out. We have their economic review here, but I also have it for 1998, 1997, 1996, and 1995. You can see when the cuts happened and you can see how the economic growth was stimulated. We have a historic record of a model to follow on a corporate basis.

On a personal basis, we would have to look at Ontario and the record of Mr. Harris and the statistics you just read. As a member of the Saskatchewan Chamber of Commerce, I can say we are trying to implement such a proposal with the Province of Saskatchewan right now, as a matter of fact.

• 1800

The Chairman: The mayor had his hand up, and so did this gentleman here.

Mr. Douglas Archer: I think most of us out west are very conscious that part of the deal of developing this country was that we had the Crow rate, and industry was developed in Ontario in exchange for things like the Crow rate to support development out west.

One of the impacts is that we didn't get the same kind of help as Ontario did, so Ontario has had some advantages over the years. That's the way life is. Life goes on. But we are in the process of eliminating a business tax. It is a 33% cut in taxes to business here. I want to say that up front. I also want to say, however, that we had the experience in this province that a government was elected in 1982 and left office in 1991, and their entire platform was cutting taxes. Well, they cut taxes, and we have a debt that is unbelievable today. We cut services as a result, and we've had to continue to cut services.

My only point is that I don't think this is a straight-line argument, that somewhere in here you have to balance where you're going and just how much of a cut will produce what. You don't always get from point A straight to point B. It's not a straight-line argument. I think there's a role for it, but it's not the only issue that has to be addressed.

Mr. Norm Halldorson: Clearly, there is a very direct relationship between spurring economic activity through making the environment more attractive by being more competitive tax-wise. We need only look to our neighbours to the west, in the province of Alberta. They've had a deliberate policy to have a low tax regime, and it has served them very well. They have been regularly attracting wealth from Saskatchewan.

In our chamber input to the tax review committee in this province, our members cited numerous examples of departures of individuals who left Saskatchewan to go to Alberta for two primary reasons. They had financial planners run the numbers for them on what the tax costs were when they sold their business, sold their farms, or cashed in their retirement savings over time, and the tax saving was so dramatic that they could purchase a luxury condominium in Alberta and still be ahead. The second compelling reason was that most of their children were already in Alberta, because they had left earlier to pursue the employment opportunities that province provided.

So we think it is absolutely essential to start moving toward a competitive environment. I think there are lots of competitive advantages in Saskatchewan. On a countrywide basis we have a lot of competitive advantages on the global scale. All we're suggesting is that if we remove some of the barriers a high tax regime can create to inhibit economic activity, we can have meaningful employment. As you say, most people are much happier when they have a meaningful job, rather than being on the dole somewhere.

In the global economy, we've seen examples where, if you stifle enterprise and try to provide all jobs from a central government, it hasn't worked—for example, the Soviet Union.

Individual initiative is a wonderful thing, and capital is very mobile. We have all kinds of talent in this country. I think the small things we need to do can give us huge returns by removing some of the impediments, so that we can get the capital to risk here. The decisions on capital are largely influenced by the return they're going to get, and one of those returns is based directly on the taxes, and the ability to have the right people to employ in that business. If we have a spread of anywhere from 10 to 15 percentage points higher taxes, federally and provincially combined, than our neighbours to the south, how do we keep the talent at home, working here in Canada as opposed to going south and driving their economy?

• 1805

The Chairman: There are two final comments. Mr. Harris and Mr. Norton.

Mr. George Harris: One of the things about working on alternative budgets that we have learned is that whatever issue you are dealing with is a very complex issue. Very often, whatever happens is not a result of one factor. There are multiple factors involved.

Actually, I've done work with numbers in graduate studies in agricultural economics, doing regression analysis and trying to determine the cause and effect of different things, and it is a very difficult thing to determine at times whether this is really the cause. There are all kinds of things.

Some people are speaking positively about the changes that have taken place in Ontario. I don't want to see it, but I fear what is going to happen to many poor people in Ontario the next time the capitalist system goes into its bust cycle, because the capitalist system is a boom-and-bust system. My fears are that once it goes through that, the devastation that will happen to people is going to be terrible.

I think it's kind of convenient that the timing of the Harris government in Ontario has been post the last recession. But that is just to say there are many factors involved in this, and to attribute it to a single factor would be misleading us. That's what often happens in political discussions. People who happen to be on the right end of the spectrum or on the left end will pick one or the other. They cherry-pick the factors that support their arguments. I think we have to be very cautious about that kind of approach.

The Chairman: That's right—because right wing, left wing, it takes two wings to fly, Mr. Harris.

Mr. George Harris: I think, Mr. Chairman, you've found the ideological line. Only two or three months ago I was debating with my friends in the chamber of commerce when the city abolished the business tax. Here today we hear the chamber of commerce saying, if only it were like Ireland. I'll bet you all of my next month's pension cheque that the chamber of commerce somewhere in Ireland is saying, if only we could have it like some other country.

They don't stop. This is where it comes down to some bargaining, and what a reasonable return and benefit is for the taxes we pay. We all accept that we must pay fair taxes.

The Chairman: You may get a chance at a rebuttal if Mr. Cullen asks you a question.

Mr. Cullen.

Mr. Roy Cullen: I just wanted to assure Mr. Harris that there are some on this side who are not as enamoured with what your brother is doing in Ontario.

Mr. George Harris: My uncle.

A voice: Uncle Mike.

Mr. Roy Cullen: I just wanted to pick up, Mr. Halldorson, on your point about Ireland. I don't argue about the need for a business tax reduction. I guess it is a matter of timing.

The question of Ireland has come up before, but is it not also true that Ireland receives huge subsidies from the EC? I guess my question is how sustainable is their plan if the subsidy suddenly stops?

Mr. Kelly Mitchell: I don't have the extent of the subsidies here, but I can certainly see that their balance of payments is going on a very favourable slope. Their percentage of GDP debt is down 25% in the last five years. I would imagine they're going to become self-sufficient at any one point in time. And they wouldn't have been, obviously, without some kind of plan to work their way out.

Since I have the mike, I would like to go over one example of a client I had who sold a series of restaurants to Scott's Hospitality Inc. and collected $33 million in that transaction. He had 177 restaurants across Canada employing approximately 1,500 people. He was 33 years old. He said to me, “Kelly, I can't afford to stay in Canada.” I asked why and he said because they would tax him too high. He said he'd have to move to Hong Kong, where he would pay a 10% flat tax on his income. Now he's in Hong Kong, employing I don't know how many people; he's not in Canada.

• 1810

People who have money do move, and the more money they have, the easier it is for them to move.

The Chairman: Mr. Cullen, have you finished?

Mr. Roy Cullen: Yes.

The Chairman: Mr. Jones, maybe that would be a good point for you to wrap up on.

Mr. Jim Jones: All I am saying is that it is really sad that we're in good times and we're not taking the opportunity now to pay down our debt and reduce our taxes, but more importantly, pay down our debt to get the wiggle room.

Yesterday we were in Vancouver. I asked the president of UBC, if we gave him $2 billion for education, would they do things any differently, other than the brick and mortar. He said no, they wouldn't do anything differently.

There is an insatiable demand out there for education, especially in the high-tech economy or environment into which we're moving. I will ask the gentleman here from education whether the only way you can deliver education is through brick and mortar, or are there alternative ways we could deliver, with an incremental cost, the education that is needed, and not always just the traditional way?

Mr. Gary Shaddock: Let me give two answers to the question. The focus of our brief is on that side of the educational enterprise that we are running into and have to address, not the academic component to which I think you want me to respond.

We are asking for the federal government to support the province or to support schools, children and family in some way that we can take the educational dollars we have now and focus them more squarely on the academic program. We're finding we have to take away from the academic program to address the social health needs that children are bringing to school. That's why we would ask this committee, in whatever influence it's going to have around the budget, to encourage the government to address that side of the picture.

In response to your question, there is a host of things we are looking at in this province in terms of exploring alternative ways of delivering education. You've heard today about what is happening to rural Saskatchewan, and in some respects we're forced to look at the technology and different kinds of opportunities to provide learning opportunities for children. We are doing that, but we are doing it in partnership in this province, fortunately, with teachers, with the province, and so on, as boards of education.

So, yes, there are things we would do differently. There are things we have to do differently. We need to partner better with business, with labour, and so on, in order to make sure we address those kinds of needs, not just for children but for young adults. We can use the school facilities in a variety of ways to meet the need for retraining and those kinds of things.

We're looking at that and exploring it, but we need the support. We simply don't have the resources here now to do the kind of job we need to do, but we're absolutely committed to doing it.

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

I would like to thank everyone here. We had a great stay. First of all, I want to thank the people of Saskatchewan and Manitoba for participating in these hearings. They're very important to the finance committee.

Actually, this is the last stop of our cross-country tour. We will go back to Ottawa and listen to some more people and organizations.

Today we heard a lot about the challenges the agricultural sector faces, and we need to be mindful of those.

As a way to wrap up, there are many issues we have to deal with. There are individuals calling for tax cuts, both on the personal and corporate side. There are individuals looking at the issue of the debt. There are people concerned about social cohesion in this country, particularly as it deals with children living in poverty. Other individuals came and spoke to us about infrastructure, and some were advocating a national highway program. Many spoke to us about a growth agenda, and they saw research and development as key to that. Other people were calling for reinvestment in social programs, and others were concerned about the growing gap between the rich and the poor. Others were looking further down the road and have come to grips with the reality of the North American economy and how we must adjust to the new reality. We also heard a little earlier today about the apparent split of rural versus urban.

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But I think when you put all this together, there's a common theme. That theme is that at the end of the day, we are all trying to improve the standard of living and the quality of life of Canadians. People come at it from different points of view, but more or less, that's what it's about.

That's really encouraging, because I firmly believe that before you can break new ground you have to establish common ground. I think there is enough common ground in this discussion for the finance committee to come up with a plan that will enjoy widespread support across the country, from a cross-section of Canadians.

Since this is our last stop, I would also like to express, on behalf of the committee members, my warmest and sincerest gratitude to the clerk, the researchers, the technical support staff, the interpreters, and all the people who make our lives a lot easier. To them from all of us, thank you very much.

The meeting is adjourned.