FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, October 3, 2001

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[English]

The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): Order. I welcome you all here this afternoon. As everyone knows, the finance committee is doing its pre-budget consultations, pursuant to Standing Order 83.1.

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It is our pleasure to have with us the following organizations and their representatives: from the National Anti-Poverty Organization, the president, Bonnie Morton, and the executive director, Bruce Tate; from the National Research Council of Canada, Dr. Arthur Carty, president; and from the North-South Institute, Roy Culpeper, president.

Welcome, all. I believe most of you have appeared in front of the committee. You have five to seven minutes to make your introductory remarks, and then we'll engage in questions and answers.

We'll follow the order in which the names appear on the agenda. Specifically, we'll start with the National Anti-Poverty Organization.

Ms. Morton.

Ms. Bonnie Morton (President, National Anti-Poverty Organization): Mr. Chairperson, committee members, thank you for the opportunity to make a few urgent points on the impact of the next federal budget on poor people.

For 30 years the National Anti-Poverty Organization has represented poor Canadians. We are the national voice of the poor, because all of our board of directors, including me, have lived or do live in poverty.

Today much of the talk around federal policy in general, and fiscal priorities in particular, is about security. We are here today to talk about security as well. In its most simple sense, security means “untroubled by danger or fear”. Regardless of the need for the federal government to concern itself with the security and safety of Canadians from external threat, millions of Canadians every single day, simply because they are poor, have their security threatened—security of food, security of housing, security of employment, and security of income. In turn these insecurities lead to problems with health, education, family, and community.

A Canadian Press article from ten days ago states:

Finance Minister Paul Martin has conceded some haven't benefited from the 1990s prosperity and said earlier this year the gap must be addressed.

Income inequality is the single most important statistic for you to take note of in the context of your committee's objectives. There is currently no equal opportunity to succeed and no socio-economic environment in which all people can have the best quality of life and standard of living. According to Stats Canada, the richest one-fifth of Canadians enjoy over 45% of all income in Canada while the poorest fifth endure with less than 5%. This is simply outrageous in a country like Canada.

We speak not of specific rights but of human rights. They are not only for the poor but for all of us. We should all be able to experience greater peace, justice, and freedom through the maintenance of a comprehensive and universal support system that guarantees opportunities and choices to everyone encountering difficult moments in their lives.

How often we hear about peace but how seldom we hear about how to achieve it. Back in the 1940s, when several states worked to create the United Nations, much of the intent was to deal with unemployment rates and increased poverty. Leaders understood at that time that peace meant more than just being free from war. Peace also requires freedom from poverty and exploitation. These rights play an essential role in moderating the destabilizing effects of the free market system. Without social and economic rights, disparities in wealth and power expand well beyond the limits of fairness.

While I urge you to read our full brief, I will highlight a couple of our recommendations.

This committee should recommend to the Minister of Finance that this government should make and follow through on a firm commitment to eradicating poverty in Canada; undertake fifty-fifty cost-sharing with the provinces of all social programs in this country; commit to working directly with poor people, their representatives, and the provinces to address the severe problems of homelessness, joblessness, underemployment, and poverty; allocate a minuscule additional 1% budgetary revenue to basic housing requirements; and ensure that poor people participate fully in economic and social decision-making and implementation processes that impact on their lives.

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In closing, I would like to leave you with the following thought. In August 2001, Kimberly Rogers, eight months pregnant, was found dead in her Sudbury apartment, where she had been carrying out a six-month term of house arrest, after pleading guilty to welfare fraud for collecting student loan and welfare payments at the same time. NAPO is presently working on this case right now.

If there had been federal responsibility and accountability, Kim Rogers might not have died. If we neglected our families like Kim Rogers was neglected, we would be charged with abuse and neglect. But when governments neglect people in this manner, it is often called balancing budgets.

I thank the committee for the opportunity to make these comments, and look forward to your questions.

The Chair: Thank you very much, Ms. Morton.

We'll now hear from the National Research Council Canada, Dr. Carty. Welcome.

[Translation]

Mr. Arthur J. Carty (President, National Research Council of Canada): Good afternoon Mr. Chairman, and members of the committee; thank you for inviting me to speak to you today.

[English]

In August, the National Research Council of Canada, like many interested organizations, responded to this committee's invitation to submit proposals for consideration in the next federal budget. This is our submission, which I think you have.

In our submission, we urge you to support a specific limited set of national priorities, in the context of the government's innovation agenda.

[Translation]

Among these priorities are nanotechnology, photonics, genomics and biotechnology, a long-range plan for astrophysics and support for innovation in businesses and regions throughout the country.

[English]

We stand by this submission, as the most pressing science and technology issues for you to consider. But the 9-11 event, as it's now being called, of three weeks and one day ago has dramatically changed our world, and it has also changed our message. I think that event caused all of us to pause and question our basic assumptions, our priorities, and the future of our country.

Today, Canada is surrounded by uncertainty and daunting challenges that magnify the complexity and the seriousness of the decisions that this committee, and the government as a whole, must take in the coming weeks and months.

Within this environment, I believe that we at NRC might be most helpful to you by focusing on one overriding point this afternoon. It is the single most important lesson we have learned as an organization—an organization that has served Canada with distinction for nearly a century. This is the crucial need to maintain our vision and confidence by investing for the long-term future, while responding forcefully, creatively, and collectively to the urgent issues of the day.

I could recount many stories of noteworthy NRC scientists who have made critical discoveries, or who have saved Canadian lives. But in each case you would see that their achievements were a function of decisions and commitments made by a government and our organization many years and even decades earlier. When a national emergency or a major crisis strikes, there is always a widespread realization that the technological resources the country needs to respond depend upon decisions that were made, or should have been made, 10 or more years ago.

Today, for example, NRC's latest bio-sensor technologies for the detection of biological warfare agents, its vaccines against biological weapons, its intelligent diagnostic systems for real-time monitoring in aircraft, its technologies for anti-fabrication and counterfeiting, its fire suppression techniques, and its world-leading 3D laser scanning vision systems for facial recognition and vehicle identification, not to mention its Canadian Police Research Centre, can play important roles in new and innovative national security efforts.

But we are only able to consider this role today because decades ago wise people made commitments in the midst of other pressing issues that could have easily eaten away at our vision for the future.

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For those of us in research, it is easy to see how today's new investments in nanotechnology can lead to new temperature- and stress-resistant materials, or how work in photonics will increase the Internet's bandwidth and capacity, and lead to ultrasensitive detection system.

We know we cannot afford to sacrifice our national capacity for creativity and innovation—and I want to make that point very strongly. As the only national research and innovation organization that maintains active teams of researchers in its own laboratories over the full spectrum of technology sectors of current and future importance to Canada and that also operates national technology assistance and information networks and that works with thousands of innovative companies all across Canada, NRC has a unique capacity and a major responsibility to the nation and the people of Canada.

We, like you members of the committee, must act in times of crisis with all of our ingenuity, energy, and devotion to Canada. But we must absolutely, at the same time, look beyond immediate problems to new possibilities, a positive future, and the interests of our children's children. We must, in short, do both, and at NRC we will.

[Translation]

I urge your committee to do the same, and wish you godspeed in this important work. Thank you.

[English]

Thank you very much.

The Chair: Thank you very much, Dr. Carty.

We will now hear from the North-South Institute, the president, Roy Culpeper. Welcome.

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

Like my colleagues on the panel today, our institute's brief was drafted before September 11, the day of the fateful terrorist attacks on New York and Washington. In my remarks, I'd like to take into account the possible impact of the attacks on the government's decisions in the coming year, and factor that into the brief we've left with the committee.

Canadians and our partners in the developing world need to be assured that despite the urgency of apprehending the terrorists and bringing them to justice, the Canadian government will continue to maintain the vital importance of development cooperation. By development cooperation I mean not only the aid program, but our trade links with developing countries, our investment links with developing countries, and our debt relief to all developing countries. All of these links with the developing countries would be subsumed under the rubric of development cooperation.

Tackling global poverty must remain a key objective of Canada's foreign policy. Therefore, we believe strongly that funding from the Canadian aid budget must not be diverted to fight terrorism, or worse still, diverted to engage in a larger-scale war in the Middle East. We should endeavour, in all our responses to the horrific acts perpetrated by the terrorists, to make the world safer and more equitable. One way of doing that is to continue and indeed heighten our efforts to eradicate poverty through international development cooperation. To reduce these efforts would only be to increase human insecurity and possibly broaden the base for future terrorist activity.

Interestingly, our brief, since we drafted it prior to September 11, warns against a fortress North America mentality, in urging the government to address the global issues of world poverty, financial instability, sustainable development, and climate change.

As host of next year's G-8 summit, it is imperative we insist that such issues remain high on the G-8 agenda. For example, African leaders this summer launched an initiative to focus attention and make significant progress on Africa's manifold development challenges.

The institute has already signalled to Canadian officials our intention, in collaboration with our African colleague in the run-up to the summit next year in Kananaskis, to identify practical ways in which progress can be made on the daunting challenges in Africa. Again, it would be tragic if these incredibly difficult challenges fell off the table because of other pressing needs.

Our brief exhorts the government to reaffirm its commitment to the 0.7% target for the ODA-to-GNP ratio, a ratio that was established by the late Prime Minister Pearson—and in fact, to get to the halfway mark of 0.35% within the next five years.

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As you know, Mr. Chairman, the ODA-to-GNP ratio measures the relative generosity of aid donors. It should be noted that we have slipped from 12th among the donors in 1999 to 17th last year. A decade ago we used to be among the top five or six.

On this issue, Mr. Chairman, I will reiterate my remarks to the Honourable Maria Minna at her consultations last week on CIDA's new directions. I said to her that Canada should be ashamed of this abysmal performance. Certainly, if they were still alive and with us today, prime ministers Pearson and Trudeau would both be astonished and terribly disappointed at the state of affairs.

In light of the crisis, we will urgently need, for example, to increase our humanitarian and emergency assistance as a direct consequence, because of the plight of up to five million Afghan people suffering from a long drought and starvation. Their plight and that of millions of their compatriots can only be made worse by the dislocations caused by impending war, adding to an already unsustainable refugee population in Afghanistan and Pakistan.

Here I would like to recognize that the government has already made some commitments in this direction. Six million dollars has been committed by the government towards the refugee problem in Afghanistan. We have also announced debt forgiveness to Pakistan. I would like to suggest that while these are welcome measures, at this point they are only token measures that only begin to address the problem we are looking at. I would argue that unless Canada and its allies act swiftly and decisively to resolve this impending human catastrophe, even if the terrorists are apprehended and brought to justice, we will be reaping a bitter harvest of anger, resentment, and political instability in the region.

Finally, our brief says that when facing the challenges posed by global development, Canadians must be better served through more coherent policies. Our aid program has to work in tandem with our trade, investment, and debt reduction policies, as I was mentioning earlier. For example, we would do well to follow the European Union's everything-but-arms proposal and remove all tariffs on all imports from the least developed countries.

Another example is health. When contemplating the resource requirements of the Canadian health sector, we need to include global needs. The global health fund to fight HIV aids, tuberculosis, and malaria announced by the UN calls for a Canadian contribution of $291 million U.S. per year. So far we have committed only about $50 million per year towards this effort. The importance of global health to Canadians is simple. Health pandemics will not stop at our borders, whether or not we have a security perimeter.

So the North-South Institute enjoins all the members of this esteemed committee to think about the global dimensions of the problems facing Canada and Canadians today. The interests of our children and their children are very much at heart.

Thank you.

The Chair: Thank you very much, Mr. Culpeper.

We will now proceed to the question and answer session. There will be a ten-minute round. We will start with Mr. Epp.

Mr. Ken Epp (Elk Island, Canadian Alliance): Thank you very much, Mr. Chairman.

Thank you to all of you for giving us your presentations today.

I would like to also go in the order in which you appeared here, so we will start with the anti-poverty people. How do you define poverty, and is the present definition used by Stats Canada satisfactory, in your estimation?

Ms. Bonnie Morton: For the definition of poverty so far we have only Stats Canada that we can follow. There's no legal definition. At this point, if somebody's living in poverty, they don't have... We are seeing many people across this country who don't have homes. They are spending more money on shelter, which they are having to take out of providing for food. That is poverty. We also have people living in poverty who are homeless. So the measurement of poverty we have at this point of is the low-income cutoff line, until we have an actual poverty line.

Mr. Ken Epp: The definition Stats Canada uses I think is that if your family income is less than half the median income, then you are by definition living in poverty. Is that correct?

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Ms. Bonnie Morton: We'll have to get back to you with the exact figures. It's not exactly half.

Mr. Ken Epp: Okay. The reason I bring this up is that I am an amateur mathematician, and if you have a definition like that, no matter what you do to bring wealth to people, you are always going to have one half or 40% or whatever it is, a certain number of people who are going to be in the bottom percentiles. You never will eradicate poverty, even if they are all making over $100,000 a year. So the definition, in my view, needs to be looked at very seriously.

Ms. Bonnie Morton: At $100,000 a year, people would be able to put a roof over their head and food in their bellies.

Mr. Ken Epp: Oh yes, but by the current definition they could still be living in poverty if, for example, the median income was $200,000. So I think we need to be a little careful about that.

The other thing is, I'm sure you are interested in fighting poverty around the world, not just in Canada, as our members from the North-South Institute indicated. I'm just wondering how you compare poverty in Canada with poverty in other parts of the world?

Ms. Bonnie Morton: There are different kinds of poverty around the world. You have your really severe poverty—we're seeing countries that are war-torn, poverty in that sense. I don't think it's a really fair comparison. Yes, we do talk and we do support the elimination of poverty around the world, but poverty in every country is different. We're supporting international human rights for elimination of poverty worldwide, but at the same time, we as Canadians, not just the National Anti-Poverty Organization, are calling for the eradication of poverty in other countries. We're seeing the deepening of poverty in our country, so making a comparison in that sense may not be fair, but let's look at what's happening in Canada, where poverty is actually deepening.

Mr. Ken Epp: When my son was in southern Sudan about eight or nine years ago now, he wrote us a letter saying that in the little town where they were working they were losing about 150 children every day through starvation, and he said, “Our presence here has reduced that to 50 per day, so we are making great progress”. Then he put in brackets, “But by Sherwood Park standards”—that's the community where we live—“we haven't quite yet met the standard”.

I think we need to talk a little about people who look at foreign aid and helping starving people in other parts of the world. It seems to me their situation is truly distressful, and I frankly don't know of anybody in Canada who needs to die of starvation, because if they are truly hungry, there are places in every community where you can get food. Is that not true?

Ms. Bonnie Morton: Yes, there are places in Canada where people are starving. Many people must have a home to get food. We have food banks, and that is inadequate in a country as rich as Canada, where we have to take people and allow them to live on charity. Charity only goes so far, charity does not cover everybody. Everybody in Canada assumes that because we have food banks... These have just been around since about 1984, and they're increasing, but all food banks are doing is subsidizing governments that should be doing the right thing.

So we're looking at job creation, we're looking at raising minimum wages, and when there are no jobs, we're looking at increasing social benefits. We have places in Canada where people can go to a food bank and they only receive a food bank order maybe once every three months. Does that stop people from starving? No. We assume that we have it better in Canada, and yes, we agree that we need to be doing things overseas, but we cannot ignore poverty in Canada and the reality of what it's doing to people's lives.

Mr. Ken Epp: I don't want to in any way minimize the plight of people who are unemployed and who are poor. I think we live, indeed, in a society where our compassion reaches out to them, and there's nothing I would want to say to minimize that. Yet at the same time, I have a problem when we talk about people actually starving to death in Canada. I think there must be none or very few, and I'm really quite serious about that question. As I said before, I don't think that anybody in Canada is away from food before they starve to death, with the exception being that there are some cases of parental abuse—those hit the newspapers—in which the parents lock up the children for fourteen years and don't feed them, or that type of thing. That can happen, but that's a different matter. Just in terms of straight needs, I think they should be met.

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Mr. Chairman, I forgot to look at my watch when I started, so you'll stop me, okay?

I have one final question for you, and that is with respect to housing. It seems to me that the present government, in looking at homelessness, is spending a disproportionate amount of money on temporary shelters and not enough on permanent housing. I wonder whether you would agree with that.

Ms. Bonnie Morton: Yes, we would.

The solution to homelessness is not always shelters. If we're to stabilize people and communities, the solution has to be permanent housing, with more money going into the area of social housing. Some of those funds that we're seeing right now that have been given into communities has not necessarily gone directly into housing. Some of them have gone into referral agents and stuff like that, so they're not a direct benefit for the homeless. Let's face it, you could spend all the money you want on studies around homelessness and people are still going to be sleeping out in the streets.

Just to get back to one of your other questions, you were talking about the charity model and people not going hungry. You should know people are denied food banks, and people are turned away from churches. If somebody can't get somewhere to pick up a food bank order, then they're cut off for so many weeks. We are denying people food in this country. Hunger is a problem.

I know my co-worker also would like to say something.

Mr. Ken Epp: Go for it, please.

Is my time up? It is? Okay, then if there's time, I'd like to come back in another round.

The Chair: Yes.

Mr. Ken Epp: Thanks.

[Translation]

The Chair: Mr. Crête, you have the floor.

Mr. Paul Crête (Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques, BQ): Thank you, Mr. Chairman. I would first of all like to apologize on behalf of my colleague Mr. Loubier who had to leave to give an interview.

I quickly read through the briefs presented by the National Anti-Poverty Organization and the North-South Institute, and even though your primary interests are somewhat different, that is to say, poverty within Canada and world poverty, I have a question for both groups.

When horrible terrorist attacks are unleashed at an international level or when we witness lawlessness within a country, even though these actions are completely unacceptable, are they not an indication of some great imbalance somewhere in our society, and are they not the result of groups finding no other way to express themselves? I was struck by Mr. Culpeper's brief in which he warns us against creating a North-American fortress that would be isolated from the rest of the world. I would like those who fight poverty within the country as well as those who wage an international battle against poverty to please answer this question.

[English]

Mr. Roy Culpeper: If I got your question right, you're trying to link poverty and terrorism. You're asking whether they're related or not.

[Translation]

Is that what you meant by your question?

Mr. Paul Crête: Yes, I think it is an indication that the system is not working.

Mr. Roy Culpeper: Yes, I believe they are related, but it is not that clear-cut. Terrorists do not necessarily live in the poorest countries. We know, for example, that Mr. bin Laden is very wealthy. There is a very complex relationship between poverty and terrorism.

Mr. Paul Crête: There must still be some type of breeding ground for this type of behaviour.

Mr. Roy Culpeper: Yes.

Mr. Paul Crête: If people did not feel so terribly deprived in the society in which they are living, they might not necessarily see things the way the terrorists do.

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Mr. Roy Culpeper: Absolutely. I believe that if the world and if Canada demanded that we wage an all-out war against poverty, that would be very helpful, because without poverty, terrorists would have a hard time justifying their actions. But it is not that simple. The very least we can do is to help the people in the Middle East, Afghanistan and Pakistan. There is a potential for major instability and maybe even a revolution in Pakistan. It would deeply affect the stability in the Middle East and perhaps elsewhere.

Mr. Paul Crête: My question was also addressed to you, Ms. Morton. Do you think there is a similar relationship within the country, between what is happening and the uneven distribution of wealth that we have witnessed in society?

[English]

Ms. Bonnie Morton: Yes, I do, and so did Canada back in the forties. During the Second World War, while it was still going on, many countries came together to look at what kind of new system they could set up when the League of Nations no longer worked, because it was supposed to prevent war and it didn't.

When they were looking at setting up the United Nations, they realized that to develop peace meant more than just to be free from war, that to really have peace you had to have countries in the world free of exploitation and of poverty. That was the concept, and Canada took a lead role. Canada has always believed that.

We believe that as well. We are seeing what is happening today. Does poverty play a role? Look at the poverty that country has had for years. Look at the exploitation that has happened in those countries for years, for centuries. When you have countries with homelessness and hunger, and all of that breeds and becomes the daily life within those communities, what more would we expect as reasonable human beings? That people would sit there and continue to suffer like that?

I don't support terrorism, but does that kind of stuff lead to war and terrorist acts? You're darn right it does.

Mr. Bruce Tate (Executive Director, National Anti-Poverty Organization): If I may, I would say that poverty, hunger, homelessness, and deterioration of health lead to a disintegration in turn of family and community, which leads again to an overall lack of security and instability. I think while you can't draw a straight line from point A to point B, there is definitely a connection there.

[Translation]

Mr. Paul Crête: I would like to tell my colleague that in the 1970s, there was a model developed with a rather compact middle class. Even then there were people who were poorer. The choices made in the 1990s more or less caused this middle class to disintegrate. The lower middle class fell to the bottom of the barrel while those who were on top climbed even higher.

We can even hope to build a society where everyone's needs will be met. We have a role to play and I want to know—I believe this is your opinion—if you think that the government has a role to play in re-establishing the middle class. That is what I understand from your recommendation number 4, which seeks to raise the value of the GST credit and to index the GST credit to inflation as well as to raise the threshold at which Canadians begin to pay income tax and to index the income tax system to inflation. Are these not concrete steps to maintain the middle class and avoid having people fall through the social safety net?

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[English]

Ms. Bonnie Morton: So you're asking about indexing.

[Translation]

Mr. Paul Crête: Recommendation 4 deals with issues such as the increase in the GST credit, indexing the GST credit to inflation and indexing the income tax system to inflation. I believe that all of these measures are intended to try to protect the middle class or help those whose standard of living has dropped, to give them a chance to regain an acceptable level.

[English]

Ms. Bonnie Morton: Definitely.

For things like this that we're going to be putting in, we need to make sure they are indexed, so when the cost of living goes up, so do benefits or protections from the tax system.

[Translation]

Mr. Paul Crête: Thank you.

[English]

The Chair: Thank you, Mr. Crête.

Mr. Murphy.

Mr. Shawn Murphy (Hillsborough, Lib.): Thank you very much, Mr. Chairman.

I have a question for Ms. Morton on her report. I guess I have a couple of questions, Mr. Chairman.

The first question involves the perennial problem that we have in the federal government regarding federal-provincial relationships and how this money is handled. To give an example, several years ago there was a fairly significant increase in the child tax credit, and that was increased again last year in the budget.

In the province I come from, Prince Edward Island, what they've done is that for the people who need it most, the ones in the welfare system, the provincial government has taken it all back. The net result is that it costs the federal government millions of dollars in benefits, yet for the people it was meant for, there is no benefit to them whatsoever. I just want your comment as to whether there's anything that you see us doing in that regard.

The second issue, if you have a comment on it, is the whole issue of dependency and the true eradication of poverty, to try to give people a hand up and not a handout. Is there any direction or are there any initiatives your organization sees the government following?

Ms. Bonnie Morton: When you're talking about the clawback of the child tax benefit, I believed that's exactly what was happening in my home province until I found out that it's not even as simple as where every time the federal government gives an extra contribution towards poor children, the government claws it back. What is actually happening—and a prime example I will give is Saskatchewan—is that when they first came out with the child tax benefit and entered into the agreement with the federal government, Saskatchewan contributed $160 per child. Today, with the increases from this government, Saskatchewan has reduced its commitment to poor children in Saskatchewan, and they only pay $44 per child.

So it's not really a clawback. It's a full withdrawal of provincial support. When this federal government puts any money into children, just one cent of federal dollars to provinces, then you have every right to hold them accountable to ensure that they're doing what they are required to do to eliminate child poverty.

It's definitely hitting poor children, specifically those on welfare. They're not getting the benefit because either mom or dad or both mom and dad are not working so as to get that earned-income supplement that gives that rise up.

So yes, there needs to be something seriously done there. I really call on this government and on people around this table to ensure that provincial governments can no longer reduce their commitment to poor children, and I call on these governments to put back the initial amount of money they were contributing and maybe add another 10%. That would be what I'd like.

Mr. Bruce Tate: If I may just add to that, I think the broader context, the broader tragedy, upon which some of these specific issues can be hung is that of the federal government since 1976 moving away from national standards, moving away from responsibilities in the areas, and ending the Canada Assistance Plan. It has been the federal government backing away from its responsibility that has led over time to the provinces taking more and more of the sort of actions that you're talking about, which are hurting Canadians on a day-to-day basis.

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So as part of this budget we're very much hoping this committee, and through this committee the finance minister and the government, takes to heart the need for Canada to provide leadership to ensure that there aren't homeless people in Charlottetown, in central Alberta, or throughout this country. It really is the federal government's role to start taking back that leadership role in these times.

Mr. Shawn Murphy: There was another issue. She may not want to...

Ms. Bonnie Morton: There was a second part to your question and that was about dependency. I'd like to make it understood that when we refer to dependency, that's a very negative comment towards poor people because it sounds like they choose to live on welfare. Believe me, I've been there, nobody chooses to live on welfare.

But to help people and give them a hand up instead of a handout, I think your question was, what can we do?

Mr. Shawn Murphy: Any suggestions, any comments, in that area?

Ms. Bonnie Morton: Definitely. One thing I think we need to be looking at—and it's not necessarily in our brief to you guys, but it's stuff I've been working on even at home—is we need to be looking at... Part of the best social program to get people off welfare is a job. So let's look at how we can start creating employment in this country.

The next piece of how we keep people out of poverty—even if you're working. When I worked I still had to get partial assistance because I didn't earn enough. Let's look at raising the minimum wage. We need to look at education. We need to look at health issues.

I'm going to give you things that I required to get me off the system. I raised my child the majority of his life on welfare in different provinces in this country, until I finally found a social worker who actually took the time to say, “Bonnie, there's something better. Have you ever thought of going to school?” School may not be the whole thing for everybody. I grabbed it. It was a chance to get out of that system.

I went to school, but because I had not dealt with some very basic issues, such as the fact that I had been battered and I internalized it, that it was all my fault; that I gave birth to a child with muscular dystrophy, I internalized it, and it was my problem—I buried all these things. When I was on welfare I didn't have control of my life. Somebody told me what to do; they told me what to think. So when it came time for me to have to make a decision, I didn't even know how to do it. I ended up going on drugs. I ended up being an alcoholic. They were not the cause of my poverty; they were the symptom of my poverty. But I had a nervous breakdown when I was in school. That got me the help I needed.

I don't think people need to get to that point of having those kinds of breakdowns. People need a hand up, not a handout, but there are decent ways of doing it.

First, I think every social service organization in this country, through the ministers, needs to ensure that there are proper client-worker ratios. In Saskatchewan the social worker who deals with people with disabilities has a caseload of 750. How can that man see every one of his clients once a year, let alone deal with all their needs? On a regular basis they run from 200 to 350. How do we expect a social worker...

You have to understand that when the Canada Assistance Plan was brought in—and we still function as a national sort of social service—it was understood that the caseload would be no higher than 18, so the worker could take a client from here and and work with them to get them out the back door. That concept was lost almost right from the beginning. We need to build a client-worker ratio that's doable. It's job creation, guys.

The Chair: Thank you, Mr. Murphy.

Mr. Cullen.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Mr. Chairman. And thank you to the presenters.

Just for a change of pace, I'll go to Dr. Carty, and maybe I'll come back to Ms. Morton and Mr. Culpeper in a moment.

Dr. Carty, in your report you talk about the importance of clusters, and you cite Michael Porter's comment about their importance as well. In his 10-year retrospective he said, if I recall, that at the macro-economic level Canada has made some great progress—there's still more to be done—but at the micro level there were a lot of challenges, more work to be done. That was I guess at the local government level, the industrial level, the firm level.

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What is it that we can be doing in addition to your good work, and how can we support that? But what can all governments and industry be doing to encourage clusters? What are we missing if it's not growing as fast as it should?

Dr. Arthur Carty: The short answer to that is that of course there are many elements in an innovation system and in a cluster. Government has a very large role to play in creating the environment, creating the incentives, the standards, etc., by which they can encourage innovative firms to grow and be successful.

On the contrary, if that encouragement and those incentives are not in place—in other words, the policies, the standards, and the environment—then you risk, first of all, companies not remaining in the cluster they're in, perhaps going somewhere else, including abroad. So I'm trying to get across to you that government has a major role to play. So do universities, and so do research and development organizations. One of the keys is to be able to bring all of these elements together so that they successfully interact so that you understand why and how a cluster grows, and to provide the wherewithal that will sustain it.

The role of the National Research Council is exactly that, to bring communities together, to bring our resources to the table, of course, the R and D, the expertise, the linkages and networks, the IRAP program, the Canada Institute for Scientific and Technical Information, to provide that resource in which the communities can have confidence. Working with them, we can help build this technology cluster.

As you probably are aware, we've started investing in four clusters in the Atlantic provinces as a result of the Atlantic Innovation Fund last year. That initiative is well underway now. It's been extremely well received by the communities, St. John's, Halifax, Sydney, Cape Breton, and New Brunswick, where we're active. I'm convinced that over a period of time we will succeed in building technology clusters in those four Atlantic communities.

What we'd like to do is to extend the concept to other parts of the country. We've already had successes in Saskatoon, in Ottawa here, and in Montreal. It's beginning to work in the Atlantic provinces. We think that, consistent with Michael Porter's arguments, there are many more places in Canada where clusters could grow. We believe we have the capacity to help them.

Mr. Roy Cullen: What are the federal policies that would encourage that?

Dr. Arthur Carty: For example, at the centre of all of these clusters are the innovative firms, the firms that are created, and that are nurtured and then grow. Certainly the federal government can help, for example, by improving R and D tax credits. It can provide infrastructure that helps the cluster. It can provide, of course, support to the National Research Council in its efforts to build with communities.

Mr. Roy Cullen: I think we're doing a lot of those things already, but I'm sure we could be doing more.

Mr. Culpeper, I had a quick question, and then another follow-on. When you look at ODA, do you include the HIPC—the highly indebted poor countries—relief? Do you include that in your ODA number?

Mr. Roy Culpeper: Yes, that's usually included. Whatever is disbursed by way of debt relief is included in the figure.

Mr. Roy Cullen: I had a question, if I may. Maybe it's slightly off topic, but with you here I wondered if you could share your insights. It's on the whole question of north-south and the environmental standards and labour standards.

We have the forest industry, for example, and many other industries looking at international codes of stewardship. The kinds of codes that we would look for here, let's say in the north, or in the industrialized world or more developed world, might be more stringent than those that would be allowed in places like Brazil or Indonesia in terms of labour standards and the usual list of issues.

How do we balance those competing interests off? What should we do?

Mr. Roy Culpeper: That's a very good question. It's one the institute has focused on recently.

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We're doing some research on labour rights. As you know, a couple of years ago the ILO, with Canadian leadership, launched a campaign to ensure all country members of the ILO observed the core labour rights. This is actually much easier said than done.

For example, take the issue of child labour. On the one hand it may seem quite pathetic to us to see children at work—and God knows, they work under some pretty dire circumstances. But the answer to those kinds of issues isn't necessarily always to get the children out of the factories. It may be, first and foremost, to ensure they get a decent wage and tolerable working conditions. That may be far superior to disemploying them and depriving them and their families of an income they may be relying on.

One needs some subtlety and flexibility in the way one approaches these things. It cannot be a one size fits all. I think at the end of the day, people everywhere do want to have acceptable working conditions and decent living wages, and they will work together with us and with each other to ensure that comes about. I'm referring here to environmental standards as well. But in order for that to happen you need a whole bunch of other things too. You need income opportunities. On the environment and on labour you need enforcement infrastructure; you need officials who actually visit places of work to inspect and enforce the provisions of the laws.

It's simply not enough to say “Thou shalt do this”. You have to do a whole bunch of other things to make sure they happen, and that they're also consistent with the capabilities and the resources of the people with whom we're trying to work.

Mr. Roy Cullen: Do I have time for one quick one?

The Chair: One more question.

Mr. Roy Cullen: Thank you.

Ms. Morton, on affordable housing, in the province I come from, in Toronto especially, there's a real deficiency in the stock of affordable housing. Other than direct federal investments in social housing, which is I'm sure something you would probably say, or might... In fact, the government is trying now. We've made some commitments to do some cost-shared direct delivery of affordable housing, but it's bogging down in Ontario, for obvious reasons, I guess. Are there any other instruments the federal government could use to encourage the formation of the inventory of affordable housing stock?

Ms. Bonnie Morton: Are you talking about looking at seeing what's there, or helping to develop it?

Mr. Roy Cullen: Not just an inventory. What are the instruments that would encourage the building of affordable housing units?

Mr. Paul Crête: Money.

Mr. Roy Cullen: Money, yes.

Ms. Bonnie Morton: Yes.

Mr. Roy Cullen: Money is the root of all evil, though.

Ms. Bonnie Morton: Yes, look at the evil it's causing because of the lack of it.

The whole thing is, in this country we're not just provincial and we're not just federal. We are a community of Canada. In the past there's been both provincial and federal commitment to all social programs in this country, and social housing was part of that. Then back in the early 1990s there was this deficit scare, and the biggest part of the deficit was not social programming. Only 6% of the deficit was from all social programs, and housing would have been in there.

But where did we do all the cutbacks? We did the cutbacks at that end of it. We did the cutbacks on social programs, on social housing and all that. I think it's time we went back and looked at it, because it was not those areas that were the big maker, but they are the big breaker, and that's starting to show up in our country today. When we can't provide housing for all the people we have... I mean, I definitely wouldn't support tent cities or anything like that, but it's a social responsibility of both the federal and provincial governments.

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I think there needs to be money from both federal and provincial governments. Possibly what you could look at as well is that you're going to need companies to work at doing it, and they can be looking at hiring people. Give them some tax breaks for building social housing and creating employment, but don't darn well give them those tax breaks until they can prove they're going to create employment.

Those are some things that could be happening, but the federal government has to recommit funding back to all social programs. In our written presentation to you we've asked to have that 50-50 put back—and that would include social housing—or to look at the 1% solution, putting 1% into housing. That would make a big difference.

The Chair: Thank you very much, Mr. Cullen.

We're going to have three final questioners. Each has a five-minute round. It's Mr. Nystrom, Mr. Brison, and Mr. Epp.

Mr. Lorne Nystrom (Regina—Qu'Appelle, NDP): Welcome to everybody here this afternoon. I'd like to ask a couple of questions of a couple of different witnesses.

First of all, Ms. Morton, the gap between the rich and the poor seems to be widening again. For a while it was narrowing—in the sixties, seventies, and eighties. In the last decade it seems to have been widening once again. One of the arguments the government gave for their $100 billion tax cut at the federal level was that it would help stimulate the economy, and also help low-income people. I'd like to know what your response to that is.

Ms. Bonnie Morton: In our written presentation, on page 8, we've shown that Ekos Research Associates did a survey of Canadians and asked them exactly what they wanted and how they wanted the budget to be addressed. Fifty-five percent identified putting more money back into social programming. Only 19% asked for tax cuts. If we have over half the country calling for a shot in the arm again for social programs, why are we moving the other way for tax cuts?

Our recommendation around tax cuts would actually be to raise the value of the GST credit. You'd index the GST credit to inflation. You'd also raise the threshold at which Canadians begin to pay income tax—that would also help with the lower middle-income people, whom this gentleman asked about earlier—and you would index the income tax system to inflation.

Mr. Lorne Nystrom: How much would it cost to house the homeless in this country? The federal government is spending $100 billion on tax cuts over the next five years. What figure do you have—either Mr. Tate or Ms. Morton—in terms of housing the homeless in this country through social housing programs and so on?

Mr. Bruce Tate: While we don't have a specific figure, I can just think of the homes that $100 billion would be able to put all Canadians in. Clearly, if you look at financial commitments the Canadian government has made over the past 20 years, what it would take to provide adequate housing for Canadians—which is what we're talking about—is an enormously small drop in the bucket.

How I would end the response is to take a step back again. This government in 1995 in the United Nations World Summit for Social Development in Copenhagen committed Canada to one of the three real prongs, one of the three tenets, of that summit—which was marginalization. Unless poor people are part and parcel of developing the answers to these problems, those answers will never be found. The Canadian government was certainly signatory to the documents produced at that UN summit. We'll never find solutions to the lack of housing and to homelessness in Canada without involving those people in substantive ways in the solutions. Otherwise, it's just going to be a continuing parade of governments taking shots in the dark, some of which will work better, some of which won't.

Mr. Lorne Nystrom: My last question is to Mr. Culpeper. I wonder if you can tell us what you think the appropriate level of foreign aid should be by Canada, and how we compare to other countries of comparable size and comparable economies. I think of Australia, for example, which might have a comparable economy to ours, even though there are fewer people.

The other part of the question would be that a couple of years ago the House of Commons passed a motion to endorse the idea of the Tobin tax, a small tax on speculation in international currency. I wonder what your opinion of this is in terms of how that might help in international aid and development. It would create a fund of several billion dollars. You could actually start a modern-day Marshall Plan in Europe and Afghanistan and other poor countries around the world.

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These are the two questions I would like to have a comment on.

Mr. Roy Culpepper: Thanks. In our brief we've joined with others, such as CCIC, the Canadian Council for International Cooperation, to urge the government to move halfway up to the 0.7% target; in other words, from 0.28%, which is where we are now, to 0.35% in the next three to five years. That's like adding 25% to our current aid levels. That's another $500 million to $600 million per year right there, over the next four or five years, and that only gets us halfway up to the target and would put us in the same ballpark as countries like Australia.

But we have a longstanding commitment to reaching the 0.7% target. Much to our dismay, in the most recent iteration of documents coming out of CIDA, this target seems to have slipped away. It doesn't exist any more. We were quite concerned that it had disapeared from the agenda. I made the point to Madam Minna that it's a rather great concern to many of us, and we should put it back there and work towards it over the longer term. I hope this helps to answer your first question.

On the Tobin tax, we've done some work on it at the institute and we're hoping to do some more. In fact the world needs to look at a range of different funding measures. A carbon tax, for example, is another such international tax. It was recently endorsed by the Zedillo panel commissioned by UN Secretary General Kofi Annan, as a way of preparing for the high-level meeting, the conference, next March in Monterey, Mexico, on financing for development.

On the Tobin tax in particular, while in theory it's a good idea, in practice it would be very difficult. It would require the assent and active cooperation of countries such as the United States and the United Kingdom, and both of them are opposed to it. Some countries in Europe—Germany and France, for example—have lately bought into the idea that it should be studied, and definitely it should be studied. But the issue here is twofold.

First of all, the Tobin tax was invented, so to speak, by Nobel laureate James Tobin to try to arrest the financial instability in capital markets. This was the principal reason for it. Again, there are many things we really need to do better here. The current issue is to look at the line of terrorist influence through the financial markets and to try and eradicate their supply lines. Certainly this should be done.

But whether a Tobin tax would help to stabilize financial markets and arrest speculation is still a matter of some controversy. In fact, not all speculation is necessarily bad. The kind of speculation we want to get at is the kind that involves hot money flowing in and hot money flowing out of countries and destabilizing them, as we saw in Asia in 1997-98.

So we need to consider an array of policies, including the Tobin tax as well as other measures now being looked at, through supervision and regulation in the financial markets, in order to try to arrest that kind of destabilizing, speculative activity, to various taxes on financial instruments—including, but not restricted to, the Tobin tax, and the carbon tax is another one—to try to generate the kind of funding we need.

And by the way, the Zedillo panel came up with a very crude estimate of the amount of funding needed to meet the international development targets that have now been universally subscribed, most recently at the Millennium Summit. Prime Minister Chrétien was there and signed on to this. They estimate we need to at least double the flow of ODA, from $50 billion to $100 billion—and that's a minimum estimate—to reach the international development targets of reducing the level of poverty worldwide by one-half by the year 2015, as well as meeting a whole bunch of other social targets, such as increasing enrolment to universal primary education by 2010, and reducing infant and maternal mortality by sometime between 2005 and 2010. These have all been set out in the international development targets as attested to by the Millennium Summit.

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In short, the orders of magnitude are fairly large. We are only just starting to focus on this, and the sooner we go from just focusing on it to actually doing something about it, the better it's going to be, not only for the people in need, but for the world as a whole. And this is what I was trying to say in my remarks about world stability.

The Chair: Thank you very much, Mr. Culpeper.

Mr. Brison.

Mr. Scott Brison (Kings—Hants, PC/DR): Thank you, Mr. Chairman.

Thank you all for your interventions.

My first question is for Dr. Carty and it is on the commercialization or technology transfer environment in Canada as compared to the U.S. I'd appreciate your insight as to some of the differences.

There's a sense that our post-secondary institutions or our university network in Canada are not doing as good a job at commercialization as they do in the U.S., that there may be a different approach to intellectual property on our campuses. This approach may not be leading to the type of growth in opportunities we would like to see. I'd appreciate your feedback on this.

Dr. Arthur Carty: Thank you. That's a good question.

What you've said is probably correct, that the technology transfer between public institutions and industry has been better managed in the United States. It's a complicated problem. One aspect is culture and entrepreneurship. Americans are more aggressive and more entrepreneurial, so they have more of a culture of entrepreneurship than we have had in Canada when it comes to making this happen. But it's beginning to grow in Canada, and there are some mechanisms we can put in place to help it along.

First of all, having seen them operate very well around the world, I'm a big believer in incubators, instruments or organizations which can help newly created companies start to grow, to survive, and to prosper. We've had some success with this in the last few years at the National Research Council. We're so convinced that incubators are an essential element of the technology transfer process that we are actually putting them in place with each of these new clustering initiatives we're developing. Some thought might be given to a national system of incubators to help the universities and all public sector organizations to spin off, start up, and foster the growth of companies.

The lack of venture capital has of course been another inhibition in Canada until very recently. Until the bubble burst about a year ago in the United States, California and the east coast of the United States were awash with money. The year 2000 saw a great improvement in the amount of venture capital available for small companies in Canada, but it has dried up substantially this year, and that is still going to be a problem in the future. And if there is no one to invest in new companies, they are certainly not going to survive.

So there are three reasons: the culture of entrepreneurship, venture capital, and incubation.

Mr. Scott Brison: I'd like your feedback on what could also be a fourth reason. It's very difficult for Canadian companies, knowledge-based companies, to attract capital when we're north of the capital markets with the greatest depth and breadth of any capital markets in the world. This makes it difficult to attract capital.

Have you looked at some tax-based strategies, particularly those relating to capital taxes, to help Canada attract this capital? If you take the Ireland model as one example—recognizing that that wasn't all tax-based, as some of it had to do with significant investment in educational infrastructure and long-term social spending—can you provide some insight as to the effectiveness of some of those tax-based measures?

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As an example, in Atlantic Canada we have ACOA, which of course you'd be familiar with through the AIF and its role there. ACOA's budget in Atlantic Canada is $380 million per year. The total amount of federal corporate taxes paid in Atlantic Canada is around $360 million. It's about the same. So you could actually eliminate federal corporate taxes in that region and get rid of ACOA. Some people think that might lead to greater levels of growth and opportunity and investment.

Dr. Arthur Carty: I don't think there's any doubt that tax incentives are a great draw for companies, both existing companies and for new ones to grow. I've heard the presentation from John Corrigan on Ireland, and it is a very powerful illustration of how you can help that happen. It has happened in some regions of Canada. In Quebec, for example, there are incentives.

I think the federal government could look seriously at tax measures that might, for example, stimulate angels and venture capital organizations to invest in parts of the country where capital is very scarce, including the Atlantic provinces. So yes, I think there are some reasons for taking a look at that kind of incentive.

The Chair: Thank you, Mr. Brison.

Mr. Epp.

Mr. Ken Epp: I'll be very brief. Thank you. I have two questions, one for Dr. Carty.

You indicated that of 150,000 new firms started up every year, only 50,000, or one third of them, survive after three years. That is an incredibly high failure rate. To what do you attribute that?

Dr. Arthur Carty: There can be many reasons for a firm failing. Some of the failures are due to inability to attract capital. Firms will also fail because they haven't done a sufficiently good analysis of the market, and they find that when they get their technology to a commercial point, there really isn't much of a market for it. In other words, they haven't done the marketing study. Firms also fail because of a lack of management, poor management, poor professional management, poor-quality staff, bad advice.

All those things can to some extent be cured—well, not necessarily cured, but you can certainly help by having in place what I would call a network incubator, where some of that advice is readily available and where firms can learn from one another about the shortfalls and the problems.

Mr. Ken Epp: Is this all firms in Canada, or only what you might call high-tech firms?

Dr. Arthur Carty: I would say this: The failure rate in high-tech firms is much less than it is from companies that do not use technology. It's very high.

Mr. Ken Epp: How does the rate compare to the United States?

Dr. Arthur Carty: I would suspect that it's probably about the same.

Mr. Ken Epp: Really? That surprises me, but it answers that question.

I have a question also for Mr. Culpeper—is it Doctor? Sorry, you didn't tell us that, so we had to guess, and I don't want to confer degrees that haven't been earned.

I want to ask you a question with respect to something you indicated here; that is, that we should continue to develop and strengthen trading and economic links around the world. Is that not really quite strong right now? Are you suggesting that it should be even stronger than it is in terms of our trade agreements and that type of thing?

Mr. Roy Culpeper: Absolutely. An issue of great contention between the developing countries and the developed countries is the fact that from the last trade round, the Uruguay Round, a lot of commitments simply have not been kept by the developed countries, particularly in the agriculture and textile and garment sectors. There's no good reason for that other than the fact that the developed countries, including Canada, have not moved as quickly as they wanted to. There are people in Canada who will be affected, and we need to look after them and make sure they don't suffer the consequences, but these are really excuses. So the developing countries really do have a point there.

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Mr. Ken Epp: Okay. And lastly, in your presentation you talked about putting some emphasis on debt reduction. Were you referring to Canada's national debt, or to the forgiveness of the debt of third-world countries?

Mr. Roy Culpeper: I was referring to the latter, because this has become an issue in the past few years, particularly with the African countries, where the debt overhang from the last 20 years has become so big that it's starting to pre-empt expenditures on social sectors and development expenditures, and so forth. Finally this has been acknowledged by the G-7 countries and by the IMF and the World Bank, and finally they're starting to do something about it. We've actually studied this and published the results, which show the kind of debt relief that has been provided to these countries has been a welcome first step but doesn't really go very far towards providing them with additional resources that they need for their own social and economic development.

Mr. Ken Epp: Well, it wouldn't, because the fact that they weren't able to pay them off means that if you say now they don't have to, really nothing changes.

Mr. Roy Culpeper: It depends. For Nicaragua, for example, which had maintained their debt servicing at a fairly high level, the debt relief was much more important to them than other countries, like Bolivia and Mali. These are some of the countries we've studied where their debt servicing was fairly low. So the debt write-off was just a recognition of reality. You're right about that.

Mr. Ken Epp: Thank you.

The Chair: Thank you very much, Mr. Epp.

On behalf of the committee, I want to thank you very much for your input. We've covered quite a broad spectrum of issues, and those are indeed the challenges we face every year as we try to balance all the issues that are presented to us. But as always, you've provided us with many things to think about, and we're very grateful for that.

The meeting is adjourned.