FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, October 4, 2001

• 0933

[English]

The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call the meeting to order and welcome everyone here this morning for meeting 45 of the finance committee. The order of the day is pre-budget consultation, and we have the pleasure to have with us the following individuals: from the Appraisal Institute of Canada, Mr. John Clark, president elect; from the Building and Construction Trades Department, Robert Blakely, director of Canadian affairs, and Phil Benson; from the Canadian Construction Association, Michael Atkinson, president, and Jeff Morrison, director of communications; and from the Canadian Development Institute, Nicholas J. Patterson, executive director.

Many of you have appeared in front of the committee before. You know you have approximately five to seven minutes to make your introductory remarks, and then we get into the Q and A session. We will follow the order as it appears on the agenda; therefore we'll hear from the Appraisal Institute of Canada first.

Mr. Clark, welcome, and good morning.

Mr. John Clark (President Elect, Appraisal Institute of Canada): Thank you very much.

• 0935

My name is John Clark and I am the president of the Appraisal Institute of Canada, also known as AIC. On behalf of the members of the institute, I want to thank you for the opportunity to appear before you today.

AIC was founded in 1938, and is a national authority on real estate valuation. The organization represents about 4,500 professionals across Canada. Our goal is to serve the public interest by advancing high national standards of practice in the analysis and valuation of real estate. The users of our services include courts, mortgage-lending institutions, government, and private individuals.

As a Canadian authority on real estate values, the institute and its members can provide this committee with a unique perspective.

Property values have a significant role in our national economy. All governments and most companies hold major property portfolios, and property assets make up a large portion of the value of many companies. In addition, housing starts and prices are considered major economic barometers by analysts and all levels of government.

I believe the clerk of this committee has already distributed copies of our submission to you, so I will highlight our main recommendations.

To start, I would like to express our understanding that the government's priorities may have shifted dramatically since the shocking events of September 11. I recognize some of our recommendations may now fall outside the government's priorities. I will, however, take a few moments to outline our main recommendations, as we believe these are important to stimulate our national economy and should be implemented as soon as economic conditions allow.

As many of you are aware, there is a critical shortage of affordable housing in Canada. Many of you may be seeing the effects of this shortage in your own ridings. AIC recognizes the primary role of the provinces in housing, but believes the federal government needs to take a leadership role in this area.

The government has made some progress in recent years, including the continued funding of existing programs and the recent offer of $680 million to help the provinces build additional affordable housing units. But more needs to be done.

The government should consider programs that provide a mix of flexible housing options that include financial contributions to existing provincial programs and direct grants to new housing programs. Programs that provide assistance to a greater number of low-income tenants, like shelter allowances and rent supplements, should also be considered.

I would also like to stress that the diversity of needs across Canada, particularly those in smaller communities, must be addressed in the government's housing policies. This also means programs and funding should be coordinated among all levels of government to help build local solutions to meet local challenges.

The next aspect of our submission concerns the funding of municipal infrastructure. AIC endorses the recommendations of the Federation of Canadian Municipalities in this area. Specifically, we believe the federal contribution to the national infrastructure program should be increased when economic conditions permit. This would allow strategic investments to be made in infrastructure areas like water and waste water systems, solid waste management, energy management, and transportation.

You will notice a section in our submission is devoted to the environment, and you may be wondering why appraisers would have an interest in environmental matters. Our interests are with the environmentally sensitive lands themselves, as members of our institute undertake appraisals of these sorts of properties. The AIC has been very active in assisting the federal government by sharing its expertise with regard to environmental legislation in recent years.

The institute is consulting with Environment Canada on the current Species at Risk Act. Our members will be called upon to appraise property when it is decided that the use of the land must be restricted to protect endangered species. The legislation provides for compensation to the landowner. That's the good news.

The bad news is the government is considering a proposal for compensation that may be unfair and inadequate—that there be no compensation at all on the loss of the first 10% of market value, and after that, compensation would be at only 50% of fair market value. While that may be acceptable in certain circumstances, it's unreasonable to apply such a blunt formula to all land use restrictions.

• 0940

We appreciate that compensation will involve government spending. The Species at Risk Act, we are told, will take a cooperative approach. Therefore, legal enforcement will be rare, and if that's true, the expenditure involved will not be large. The government must, in our view, be vigilant to protect property rights of Canadians, and the cost of proper compensation for owners who are adversely impacted by SARA will be fully justified.

I'm running out of time for my presentation, but there are other things we want to make you aware of in our brief. We have discussions on corporate and personal income taxes, on an issue regarding retirement savings funds, and on debt reduction, which we feel is a high priority for both Canada and the government.

This concludes our presentation. Again, I would like to thank you for allowing AIC to participate in this important process. This is the first time we have participated. We hope to become a regular participant in the pre-budget consultations in years to come. I would be happy to field any questions you may have on this, and I thank you for your time this morning.

The Chair: Thank you very much, Mr. Clark, and we also look forward to your participation in the future.

I'm sure that during the question and answer session some of the points that were raised later on in your presentation will be addressed.

We will now hear from the Building and Construction Trades Department.

Mr. Robert Blakely (Director of Canadian Affairs, Building and Construction Trades Department): Thank you very much, sir. We very much appreciate the opportunity to come here and make a presentation.

It's really quite appropriate that you've grouped us with our employer partners, the Canadian Construction Association. We represent the largest single industry in Canada. Our 450,000 members work for their members, and unlike a lot of labour-management relationships in this country, we have a good, solid relationship that is based on the fact that we need each other in order to make our business go. We don't have the same interests as our employers do, but I think you'll find from our presentations that we have a number of common interests and a number of common things we think ought to happen in this country.

We view budgets and the budgetary process as something other than a year-to-year process. We would like to see your process become much longer-term.

We exist in an industry that now is going through the same demographic crisis that the public service is going through, that universities are going through, and that most industries are going through. The average age of the highly skilled people in our industry is now in the upper reaches of 40, and in some cases it is past 50. This means that in demographic terms we're going to replace nearly 100% of our industry personnel in the next seven to ten years. We need long-term planning to allow us to get the bright young people into our industry we're going to need if we're going to continue to build the country.

We would suggest to you that it is appropriate to forget about tax cuts for a while. There will be governments in this country who will beg money from you and then will go out and give people tax cuts, thinking they're stimulating the economy. We don't think that is necessarily in everyone's interest. Debt is a priority. If the national debt is a mortgage, then like any other prudent householder, we tell you to pay down the mortgage but to do so at a reasonable rate.

In the material you circulated in looking for comments, you talked a lot about the new economy. There is an old economy in this country, the bricks and mortar and the construction of bricks and mortar. Construction accounts for 11% of Canada's GDP and 8% of all employment. When the water doesn't work and when you can't get enough power to boot the computer up, you are not going to call for someone from the new economy to fix it. You're going to call us, the old economy.

Bricks and mortar are an important aspect of Canadian society and provide the structural underpinnings for that society. Young people today who had been planning on a high-tech career are being laid off. We need those bright young people in an industry that is well-paying and that gives high-quality and rewarding jobs.

We support infrastructure funding. We would ask you to very carefully think about where and how infrastructure funding is going to be spent.

This country has a very significant hidden deficit, that is, the pieces of public property and the public buildings where, in the interests of economy, maintenance and ongoing upkeep is not being done. Sooner or later we're going to pay for that. An infrastructure program like a national highways program or affordable housing is a pay-me-now or pay-me-later situation.

• 0945

I alluded to the fact that our industry is of a huge size. You can't take infrastructure dollars and simply drop them into a community and expect that our industry will turn around on a dime. You can't expect us to smooth out the peaks and valleys of employment in our industry when there isn't an advance plan. Generally speaking, construction has traditionally been a case of feast today and feathers tomorrow. When you build significant infrastructure projects in a community where there is a heated construction economy, it costs more. Employment is created in short, sharp pieces, there is no smoothing out the peaks and valleys of employment, and we Canadians don't get the best bang for the buck. We think that to deal with infrastructure there needs to be a long-term, phased-in approach that talks to people like those in the construction industry.

Another item of infrastructure that isn't highlighted in our brief but is one that I think we need to speak to is the issue of what happens on a day-to-day basis with Canadian support to the Canadian Forces. You do not produce soldiers, sailors, airmen, aircraft, equipment, and ships out of the ground. To Canada's cost in two wars, we have come too late to the table, ill-prepared, and without an industry that will support Canadians who undertake the business of defence. An adequate, long-term funding level for the Canadian Forces is something that is essential.

We're part of the defence team. Our members work in the dockyards and in other Canadian Forces establishments throughout this country. We support the Canadian Forces, and we support an adequate funding mechanism, including one for the other industries that go with it, such as shipbuilding and the construction of aircraft and other equipment.

This country has a huge underground economy, and a big portion of it is found in the construction industry. A lot of people who have a roll of wire and a pickup truck put themselves into business as electrical contractors. They work for cash, don't pay taxes, and don't participate in EI, CPP, WCB, or a number of other programs.

We would congratulate the government for the steps it has taken to date: the mandatory reporting system, the definition of dependent contractor, and a will to try to get to the bottom of the underground economy. What is now required is to spend some money on a public awareness campaign to let people know that doing something for cash in the underground economy is not just short-sighted, it is also less than Canadian and in the long run works against the interests of all of us.

We believe Canada needs to have an effective employment insurance program. We need to be able to move Canadians throughout this country from areas of high unemployment to areas of high employment. At present it is probably easier to get workers from another country to come in and take jobs in areas of high employment than it is to move Canadians around the country. That is a scandal.

We have a number of suggestions to reform the employment insurance system, and we have at length belaboured you with those. I'm not going to go through them again; they're in the brief.

Together with our employer partners, we have a suggestion to reform the treatment of subsistence allowances for workers. That is in the brief, and I think Mr. Atkinson will touch on it a bit.

We're saying to reinvest in Canada, in infrastructure, in the Canada Forces, and in employment insurance, and come up with a long-term plan that involves the people who are going to undertake the tasks.

That's my submission.

Thank you.

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

We'll now hear from the Canadian Construction Association, the president, Mr. Michael Atkinson.

Mr. Michael Atkinson (President, Canadian Construction Association): Thank you, Mr. Chairman, and good morning.

Indeed, I would like to echo my friend Mr. Blakely's comments about having both the employer and employee groups here in front of this committee and to show to some extent—to use a word they're familiar with—a certain solidarity on certain issues.

• 0950

As you know, Mr. Chairman, the Canadian Construction Association represents the interests of the non-residential sector of the Canadian construction industry. The total Canadian construction industry, when residential and non-residential are put together, employs over 890,000 Canadian men and women. As Mr. Blakely said, we are by far the largest industry in Canada, in terms of employment. Our industry's gross output in Canada is projected to be around $139 billion this year, thereby making construction one of Canada's most important engines of economic growth.

I would like to debunk a myth about the industry. There is a myth that the industry is comprised of very large firms. In fact, somewhere between 90% and 95% of the enterprises working in the construction industry are small businesses by anyone's definition, with less than 20 employees. Many of them are family businesses. A large majority—something like 95% to 96%—is Canadian-owned.

We are facing somewhat uncertain economic times. The economic upswing of the last few years appears to be levelling off. The terrible events of September 11, the reporting of corporate losses, and massive layoffs in certain sectors add to that uncertainty.

We agree, however, with the government that Canada is in a good position to weather this economic storm. The government itself has pointed to lower debt levels, low interest rates, falling tax burdens, and strategic investment as the main reasons why Canada will emerge from this slow-down period without serious harm.

We urge the government to stay that course on the approach to lower debt, lower taxes, and targeted investment. In fact, we would argue that this should be accelerated.

I'm going to turn the mike now to my colleague, Mr. Morrison.

[Translation]

Mr. Jeff Morrison (Director of Communications, Canadian Construction Association): First of all, Mr. Chairman, as Mr. Blakely mentioned, in order to shore up Canada's economic position, the federal government must first and foremost continue to pay down the national debt, if not speed up the repayment process.

While the CCA applauds the strides taken by the government to curb the debt, specifically the $35 billion assigned to debt repayment over the past three years, the fact remains that interest charges of $42.2 billion are amounting annually on the overall debt of $547 billion. This represents more than the total amount awarded to the provinces in the form of transfer payments to fund the health, education and social services sectors combined.

To ensure systematic and ongoing debt reduction, the CCA recommends that the federal government set clear debt reduction targets by adopting the same approach as was taken to deficit reduction. This will ensure that debt reduction remains an ongoing, top priority.

Mr. Atkinson.

[English]

Mr. Michael Atkinson: Secondly, Mr. Chairman, taxes must continue to be lowered. There are two specific tax burdens that our members have identified as presenting specific obstacles to job creation and weakening their competitive position.

First, EI premiums must be lowered to at least $2 per $100 of insurable earnings by next year. I know this committee, in fact, and the Minister of Finance himself have announced that as a target. We're asking for an acceleration of that target.

The current accumulated surplus in the EI account will stand at some $43 billion by the end of fiscal year 2001—money that now flows into general revenues. If the government wants to be sincere with Canadians, then set premiums at a rate that meets the needs of the system. The current rate certainly does not do that.

One specific tax measure I would like to raise, as referred to by my colleague, Mr. Blakely, is with respect to so-called subsistence allowances or meal allowances that are paid to workers who are employed at special sites or remote sites away from their homes. Currently, the Income Tax Act has a disincentive for employers to bring workers into those circumstances. It's creating a hardship in many cases, where a number of workers are needed for larger jobs.

Both the building trades department and our association have had discussions with Finance officials. We have come to an understanding of what an appropriate measure of softening of that disincentive would be, to allow workers to go where the work is. We are hopeful that this committee will look at that and make the appropriate recommendation.

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The details of that particular measure are, I believe, outlined in both of our briefs. It's one thing to say that we will be facing a labour shortage crisis in Canada down the road, but when you have circumstances where our own tax laws act as a disincentive for workers to go to where the work is, that's something we should be able to fix rather easily.

The time has also come for the federal government to enhance the small business deduction. Government has often stated that small business is the engine that drives the economy, and in construction that is certainly true. However, the last time the federal government raised the small business deduction threshold was in 1982, almost 20 years ago. At that time, the deduction was raised from $150,000 to $200,000 qualifying income, but without indexation. Inflation has eroded that by some 77% of its original value.

We strongly encourage the federal government to immediately raise the small business deduction to at least $500,000, and to supplement this measure by decreasing the small business tax rate.

That particular incentive was put in place to ensure that businesses reinvested in their companies, their employees, training, and the adaptation of technological advances. However, because that has not been actively brought up to date—has not been indexed—it is not doing what it was intended to do.

Third, and finally, the federal government can help strengthen Canada's economy through directed strategic investments. We know you are faced with a large number of competing demands for investment—health care, the environment, public security, increasing economic competitiveness, and so on. But the CCA believes, as do our colleagues from the building trades department, that investment in both core municipal infrastructure and a national highway system are essential components in a multidisciplinary strategy. We must address this and begin to look at this in the long term.

Quite frankly, right now we don't know what the governments of this country are planning to do with the key core infrastructure in this country six months from now. For an industry that is the largest in Canada, with the largest employment, etc., if you want us to plan, do the right thing, be prudent, and work with you as partners, we must do a better job of planning.

Mr. Morrison.

[Translation]

Mr. Jeff Morrison: Thank you, Mr. Chairman.

The infrastructure issue extends well beyond simply enhancing the quality of life of Canadians, as evidenced by the events in Walkerton, North Battleford, St. John's, Newfoundland and no doubt in other communities.

The health of Canadians is affected by this issue. Steps must be taken to promote personal and professional lifestyles that are more respectful of the environment. Our public institutions must be protected and strengthened against possible attacks in the future. This has become even more apparent since the events of September 11, 2001.

Lastly, our infrastructure represents basic components of our economy and is a source of economic strength.

Investing in our nation's roads and highways is without question a key component of any new infrastructure investment initiative.

Meeting in Halifax in September 2001, provincial and territorial Transport Ministers agreed that such investment was a top priority for Canadians.

Mr. Chairman, as in the case of municipal infrastructures, investing in roads and highways is not an end in itself, but rather an integral part of a global strategy that is key to increasing economic competitiveness in the regions, to reducing vehicle emission levels and the number of highway accidents and to reducing the amount of time spent by Canadians on travel in their personal and professional lives.

You may have heard about a study commissioned in 1996 by the Canadian Federation of Municipalities. It estimated that Canada's had a $44 billion municipal infrastructure deficit. The figure is undoubtedly much higher today.

Furthermore, according to a report released in the year 2000 by provincial and territorial transport ministers, $17 billion needs to be spent to address the problems identified with Canada's national highway system.

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[English]

Monsieur Atkinson.

Mr. Michael Atkinson: Just before closing, Canada is the only G-8 country that currently does not have a national highway program. I was recently at meetings with our colleagues from the United States and Mexico and heard about the investment and planning they are doing with the essential highways in their countries. Quite frankly, it was a little embarrassing when it was Canada's turn to report on what was being done in our country, with respect to trying to form a North American highway system.

Thank you very much for allowing us to provide our views here today. We certainly look forward to the question period.

The Chair: Thank you very much, Mr. Atkinson, Mr. Morrison.

We'll now hear from Mr. Patterson, the executive director of the Canadian Development Institute.

Mr. Nicholas J. Patterson (Executive Director, Canadian Development Institute): Thank you, Mr. Chairman.

My name is Nicholas Patterson. My background spans 35 years in banking securities and as an economic consultant. For my sins I've written a good many political speeches in my day.

The Canadian Development Institute and its 20-year background as a public policy think-tank is set out in appendix B of our brief, which I think all of you now have.

My theme that Canada's profound economic decline is unmatched in the western world may seem a bit odd at this juncture, riding the peak as we are of two long decades of unprecedented, well-managed U.S. prosperity. Nonetheless, I feel we can no longer avoid coming to grips with the many decades of our own grave economic mismanagement and the most serious long-term decline in the Canadian economy, clearly visible beneath the surface of these good times. We were among the first in the country half a decade ago to document these structural changes, in a paper first published in summary form in the Ottawa Citizen.

Let me start by referring to the table of contents—you might just look at it because I'm going to go through it briefly—in our updated brief, which outlines our basic argument. It starts with the fact of our long-term economic decline and gives six irrefutable proofs. Then we set out nine causal factors—huge changes in our government policies over the last three or four decades—that we believe are responsible.

Looking at our economic decline, it shows most clearly in our nose-diving per capita income rank among nations, with 30 years of rising unemployment and declining currency, together with our collapsing health care system—those are the words used by the Canadian Medical Association to describe our health care system—and the lousy performance of Canadian stock markets compared to other countries, just to name a few of these proofs.

We see nine causal factors for this disaster, where we have made huge changes from our own former policies. To begin with, compared with the U.S. and any other highly successful economy around the world, our taxes are huge. That goes together with the vast size of our government, which is one-third larger than the U.S. on a ratio basis, which in turn links into our very heavy over-regulation.

Further causal factors include our massive debt, which is almost the highest in the west; our high unionization, which is triple the U.S.; and our very heavy immigration, which is the highest in the west, despite our huge unemployment. Other causal factors are what we call the Quebec factor—a separatist province now impoverished, dragging down our economy for 30 years—and finally, the dumbed-down public service of Canada we have running our government, ruined by three decades of linguistic, gender, and racial preferences, to the disbenefit of a meritocracy.

Let's look for a moment at the extraordinary decline in our economy. According to the authoritative World Bank, our per capita, which measures our standard of living, has dropped like a stone compared to other countries—from the third highest in the entire world, to tenth place in less than a decade—as shown in table A at the back of our brief.

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Besides our skidding income rank, other indicators of our economic decline include our heavy, long-term, rising unemployment, as shown in tables B and C; the long decline of our currency; the flight of our capital, both human and financial; the quiet sell-off of our private corporate sector to foreign investors; the cataclysmic collapse—according to the Canadian Medical Association—of our health care; and finally, the very poor performance of Canadian stocks compared to other international equity markets over the last 30 years, the clearest pointer to our lousy investment climate.

There is a question here, Mr. Chairman. Does any of this really matter? After all, many people tell me, we're still far ahead of most countries. They neglect to point out they're talking about Africa and the third world. We're certainly ahead of them.

This does matter a lot, Mr. Chairman. Clearly, going from tops to mediocre affects everyone—our standard of living, our chances of receiving adequate health care, and decent jobs for our kids. But most of all—this is the key—going from top to mediocre ruins the lives of a great many at the bottom. Why? Because of the human deprivation and social havoc, ranging from massive unemployment to homelessness, created by a stagnating, mediocre economy, such as in France, Germany, Italy, and now Canada. Going from tops to mediocre explains the new presence over the last decade or so in our downtown districts, which are rife with homeless beggars and strange-looking young people with oddly tinted hair.

Mr. Chairman, this is a grave social injustice, and indeed it is the tinder of revolution.

Mr. Lorne Nystrom (Regina—Qu'Appelle, NDP): John has tinted hair.

Mr. Nicholas Patterson: Yes.

Let me conclude by saying that this is why it is so important for governments here to refrain, as the Americans do for the most part—and as we used to do here in better times—from doing the well-known things that harm our economy: the huge taxes, the vast government, heavy over-regulation; together with out-of-line unionization, excessive EI, high immigration despite the massive unemployment, massive government debt, the Quebec factor, and finally, our dumbed-down public service, ruined by 30 years of linguistic, gender, and racial preferences. These are the ways to avoid going from tops to mediocre—avoiding all of those things, which of course, we have not done.

There's no rocket science in any of this at all—the proven policies that work and those that don't in successful countries around the world. The question is, do we have the brains and the guts to change?

In closing, I might add one point. In our brief, we discuss all these aspects in some considerable detail, providing an array of documented facts that I think substantially demonstrate each and every point. In other words, these are not just a bunch of baseless claims; they are facts.

For example, we have gone to considerable lengths to demonstrate our controversial claim about Canada's dumbed-down federal public service being a significant factor in the decline of our country—a claim that oddly enough a good many of my public service friends seem to dispute. We have, therefore, attached as a separate appendix A a long list of huge government screw-ups that we contend could only emanate from a thoroughly dumbed-down public service. We have likewise documented the rest of our claims, too.

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Our brief is very controversial, but that should not deter you from reading it. I think our brief is certainly a lot more interesting than most of the stuff you have to read as members of Parliament, and I hope you will read it because (a) you might learn something, and (b) you might even be persuaded about some things.

Thank you very much, Mr. Chairman.

The Chair: We'll now go to the question and answer session.

Mr. Epp.

Mr. Ken Epp (Elk Island, Canadian Alliance): Thank you very much, Mr. Chairman, and thanks to all of you for being here.

I want to start off with the Appraisal Institute. One of the very first items you mentioned was the issue of affordable housing, and I wonder whether you have any suggestions as to what we should recommend to the Minister of Finance for the next budget—which is the purpose of this exercise—to increase the supply of affordable housing in Canada, especially for the poor people.

Mr. John Clark: We feel the programs that are in place are appropriate, but the institute feels there also should be a study of the economics behind affordable housing—the affordability factors and what makes it unaffordable. I don't think that has ever been fully reviewed. How to create an economic interest in housing is an issue. You need to have the owners and occupants of housing having an interest in it in some way, and that is not always created. We would like to be a participant in a study that would see that happen.

Mr. Ken Epp: So you don't have any immediate answers, but you think we should work on that.

Mr. John Clark: It's not an easy solution.

Mr. Ken Epp: We need to talk about that a lot, I think.

The next question I have is with respect to the value of property and the Species at Risk Act. You suggested it was inadequate to go by the formula currently being proposed. What formula do you propose? Should we get independent, objective appraisers to appraise a property, and give a person 100% of what it's worth? How would you evaluate the potential of that property in the future? For example, I live some distance out of the city of Edmonton, but civilization is encroaching on me in the woods there. It could be that after 50 or 60 years, I might be in the middle of a residential area. So my property right now is worth about $20.30, but maybe then it would be worth several hundred thousand dollars. How would you suggest that be handled?

Mr. John Clark: We feel the process should be similar to that done in the eco-gifts program. In that program, a taxpayer can donate property and get a tax receipt equal to the value of the gift. Under the Species at Risk Act, where there is a partial taking or an easement taken over a property, the value of that easement and the effect of that on the remainder of the property can be determined. The process is in place under the eco-gifts program to determine what the 100% value change would be. We feel the compensation should equal that 100% number.

Mr. Ken Epp: Okay.

A number of you indicated you thought we should reduce taxes. There were all sorts of suggestions, such as eliminating capital gains tax and reducing employment insurance, because the rates are too high. We agree with that, by the way, and so does the Auditor General and the chief actuary of the EI fund. It's been quite a substantial contribution to our present fiscal well-being in the country, and it comes from a very select group of people. We have other questions—a small business deduction, and so on. Yet, at the same time, I'm hearing you all say increase infrastructure spending. And beefing up the armed forces was mentioned, and all these other things.

How do you balance that? How can you cut taxes in all these different areas and still increase the spending? That could take us into a deficit situation, and I think probably most of you would not like that. In fact, Mr. Atkinson of the Construction Association mentioned specifically that we should continue to reduce the debt and reduce taxes.

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The Chair: Mr. Atkinson.

Mr. Michael Atkinson: Nobody says it's easy, but part of the approach to that problem is long-term planning. I think my colleagues would support me in saying that one of the problems we often see is that there isn't long-term planning. I'm not talking just in terms of fiscal budgeting, etc. The current government has made strides to try to do that on a longer term. But I think that's what's needed in this country. We have to look at our infrastructure, for example, because as Mr. Blakely said, it's not a case of whether or not we're going to be reinvesting in our infrastructure. I've never heard anyone at any level of government ever say, no, let's let the roads wash away, let's let the bridges collapse, let's allow our waste water treatment facilities to become ineffective. Nobody has ever said that. So it's not a case of whether we're going to reinvest or not; it's a case of when and how much.

From that point of view, it takes planning. If there are certain upswings and downswings in the economy that are going to affect your plans for what you want to do, at least you have a plan and you can make modifications to it.

I think that would be my first comment, the need for planning, long-term planning. Unfortunately, and I'm not pointing any fingers, in the political lives of most of our governments the next election is an eternity away. We need to get in this country to the point where we are actually looking at planning, especially for our physical infrastructure, our essential physical infrastructure, on a long-term basis. We should be doing the same thing with our tax situation, etc.

One of the things business hates the most is uncertainty.

Certainly I think one of the kudos I would give to our central bank is that, if anything, they are consistent and very certain. One of the things they are constantly looking at is certainty, so that we know where inflation is going to be and we know what's going to happen if inflation gets beyond a certain band, which is that interest rates are going to be affected.

So we do need certainty, and the more certainty we have in looking at what the government is planning to do.... Even in situations where somebody has to say, for example, no, we can't go ahead with the rehabilitation of that particular infrastructure this year, there are those factors; let's look at how we might have to modify that plan—at least there's a plan. That allows an industry the size of ours to also make modifications to ensure that we have the trained workforce there to in fact do the work. I would argue that one of the ways to do that is through more long-term planning and not just looking at 12 months at a time.

Mr. Ken Epp: So you would look at long-term planning not only in the case of our physical infrastructure but also the human development part of our country, namely education, training of students, and training them in the trades, etc.

Mr. Michael Atkinson: That's all part of the same piece of the puzzle. You can't have improved environment in this country, you can't have improved health care in this country, and you can't have improved training facilities for people if our physical infrastructure is not up to speed.

The Chair: Mr. Blakely.

Mr. Robert Blakely: We didn't say cut taxes, but Mr. Atkinson's point about planning is a really important one. The idea of planning and how we're going to do things.... Social housing, affordable housing, is a subject near and dear to my heart. We spent a lot of time with Minister Bradshaw's office trying to fix some of those ills.

We have three levels of government that all have their oar in the water on affordable housing. The result is our canoe is going around in a circle because we're all paddling on the same side. If you look at the question of a national highway program and a number of infrastructure programs, all levels of government are participating in it, which means we're out of sync.

We need a plan that everyone is going to buy into, and some long-term planning for things like affordable housing, infrastructure, or a national highway program. That will get us a long way.

I didn't realize in fact until I came here that we, the unions and the kids with spiked hair, have ruined the country, and I'm sorry. But if we had a plan, maybe we wouldn't be quite in that position.

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

Madame Picard.

[Translation]

Ms. Pauline Picard (Drummond, BQ): I have a question for Mr. Atkinson.

Mr. Morrison, I appreciated very much your addressing the committee in French. I'm the lone Francophone on the committee and when a witness speaks French, I'm especially appreciative. Thank you.

• 1020

You said something earlier that struck me, since I represent a region experiencing healthy economic growth, a region often referred to as the driving force behind the growth of SMEs in Quebec. We currently have a serious problem on our hands, namely a shortage of skilled workers. Each year, we find ourselves in the position of having to organize job fairs to fill between 1,000 and 1,500 openings in our local job market.

You recommend that the government introduce certain initiatives to cover moving costs or to attract people from regions where there are fewer jobs. The Bloc Québécois members felt that it might be a good idea for the government to provide a tax credit to cover transportation, accommodation and moving costs. How do you feel about this idea? Have you any other suggestions you would like to make?

[English]

Mr. Michael Atkinson: First of all, there is an incentive that in fact I think both the Building and Construction Trades Department and ourselves fought for a number of years ago and did get, and that was the so-called special site.

If the particular construction site that those workers are employed on is a special site within the definition of the Income Tax Act, then the living-out allowances for food and lodging that are paid to the workers engaged at that site are not taxable; they're not part of the T4. This was to encourage a worker who had to leave his family, leave his home, and go and work for a lengthy period in another area—essentially have to set up a second residence. So there is that.

Unfortunately, what happened to the employer who was paying that particular allowance to those workers is that when the meal and entertainment deduction limitations came along, Revenue Canada went after the meal portion of those allowances and started to say to employers, “Fifty percent of that is a personal benefit, it's T4-able, and you can't deduct it.”

It has caused us grave concern in areas where workers are desperately needed. We know they're there. They are in other neighbouring provinces sometimes and would like to come to work, etc., but it makes it very difficult for employers and for owners/developers to get people to go when there's a certain disincentive to go.

The other thing I would look to is this is another example of the internal barriers we have to labour mobility in this country. We would, perhaps, not have the dire predictions of labour shortages from so many different industry sectors in this country if we took a hard look at trying to improve mobility in this country.

Certainly in the construction industry, with respect to certain trades through our red seal program, we have tried to encourage labour mobility across this country, but there are a number of other areas where I believe governments can be extremely helpful in trying to address that problem.

[Translation]

Ms. Pauline Picard: Thank you very much.

[English]

The Chair: We have this five-minute round for the following members: McCallum, Barnes, Murphy, and Cullen.

Mr. John McCallum (Markham, Lib.): Thank you, Mr. Chairman.

I'd like to compliment two of the presenters for their forbearance and understanding that money might be short in the short term, and I think you make a lot of good points. I'd echo what Mr. Epp said. Paul Martin says often if you have too many priorities, you have no priorities. If you tell us to cut taxes, reduce the debt faster, and spend more, I'm not quite sure how far our information is advanced.

My main comment, Mr. Chairman, and I emphasize it's a comment not a question, is directed to Mr. Patterson, who says he's spoken and written much in the past. This is the first time I've heard of him or heard him speak. First of all, I would say, as one who's lived most of my life in Montreal and taught for five years in French, I find his anti-francophone bias very disturbing.

Mr. Nicholas Patterson: That's the usual name calling—

Mr. John McCallum: This is not a question; it's a comment.

My comparative advantage lies in facts, and I'd like to just point out a few areas where his presentation is riddled with factual error.

He says, first, that our taxes were lower than the U.S. in the mid-1960s. That's not true if one talks about total tax burden; it may be true for individual tax.

Mr. Nicholas Patterson: The OECD disagrees with you.

• 1025

Mr. John McCallum: He talks about us having among the highest tax rate levels in the western world. The OECD puts us in the middle of the pack among G-7 countries. He talks about modest tax reductions in the last federal budget. In fact, these were the largest in Canadian history, and bigger proportionally than the U.S. tax reductions. He talks about the huge size of government. In fact, at the federal level, which is our level—

Mr. Nicholas Patterson: I'm talking about all governments.

Mr. John McCallum: —the best way of measuring size of government is program spending relative to the economy, and the size of the federal government today is lower than at any time in my lifetime. So it's not exactly huge.

My point—this will be the end of my comment, and I emphasize that it's not a question—is that this kind of brief, apart from its biases, which many of us won't share, is so riddled with inaccurate facts that I don't think it advances our cause one iota. Thank you.

The Chair: Thank you.

Mr. Nicholas Patterson: Mr. Chairman, I would like to respond. There were so many questions.

Mr. John McCallum: It was not a question.

Mr. Nicholas Patterson: Obviously, Mr. McCallum is just trying to make a whole bunch of statements contradicting what I'm saying, without giving me the opportunity to answer them one by one. However, I will try to recall what he said.

He said I was biased. I'm a Montrealer and I speak perfect French. I've taught in French. Does Mr. McCallum think it is not true that the standard of living in Quebec has declined very seriously?

Mr. John McCallum: Not true. It has gone up.

Mr. Nicholas Patterson: It certainly is true, because there was a survey of 17 of the largest cities in North America about five or six years ago—I think it was Fortune magazine; unfortunately I don't have a copy of it at hand—that said, among the 17 largest cities, Montreal was the most impoverished. I don't think Fortune magazine makes up stuff. That's what they said, and I believe them with the evidence of my eyes and of their statements. So I don't agree with you at all. And people who go down St. Catherine Street and see all the boarded-up windows and broken windows, and so on, don't agree with you either.

You also said the OECD—

[Translation]

Ms. Pauline Picard: You're exaggerating. You just said you spoke French.

[English]

Mr. Nicholas Patterson: No, I'm not exaggerating. I'm just saying if you go down the main street—

[Translation]

Ms. Pauline Picard: Speak French, since you claim to master the language so well.

[English]

Mr. Nicholas: —of Montreal, you will see a lot of boarded-up, vacant—

[Translation]

Mr. Roy Cullen (Etobicoke North, Lib.): Speak French.

[English]

Mr. Nicholas Patterson: I'm not allowed to speak English here?

Mr. Roy Cullen: You can speak any language you want.

Mr. Nicholas Patterson: Then stop telling me what language to speak.

Mr. Robert Blakely: Excuse me, we came here to have the views of our members put forward, and whatever this chap's issues are, I would rather talk about the issues that surround the economy of our country, because that actually affects a lot of people.

Mr. Nicholas Patterson: I have been invited here—

The Chair: Mr. Patterson.

Mr. Nicholas Patterson: —and Mr. McCallum has made a lot of serious charges against my facts—

The Chair: No.

Mr. Nicholas Patterson: —and I think I deserve some opportunity to respond to them.

The Chair: I think you have. His five minutes are up, so we have to move to the next member.

Ms. Barnes.

Mrs. Sue Barnes (London West, Lib.): Thank you very much.

Mr. Blakely, I think in your original presentation you talked about not going further on tax cuts. I'd like to give you the opportunity to clarify, and for my own information I want to make sure you're not saying we shouldn't go forward with the tax cuts already announced.

Mr. Robert Blakely: No, I didn't say that at all.

Mrs. Sue Barnes: I realize that. I just wanted to correct the record there.

Mr. Robert Blakely: There are a couple of things—and I suppose I spoke out of both sides of my mouth a little bit. I support Mr. Atkinson completely on the small business deduction and the issue of the subsistence allowance. Those are small tax cuts that may provide incentives to industry to actually invest money and to get things going.

Overall, we're saying you've announced some tax cuts; don't go any further. We need to have some money in the bank. And if the economy does go a little south, don't cut taxes. Ronald Reagan proved it is not a great incentive to an economy.

What we're really saying here is we need to pay down the debt, we need to fund programs, and we need to be able to have enough money in the bank to do what any prudent householder would do: We have to figure out when we're going to have to replace the roof and when we're going to have to repave the driveway, and as long as we're going to do that, let's leave the money levels where they are. It can sort itself out further down the road when we actually have our house in order.

• 1030

Mrs. Sue Barnes: Okay.

There was a little bit of talk about the underground economy. In the brief from the Canadian Construction Association, I note that you talk about Revenue Canada and, I presume, the tax fairness and audit process.

Mr. Blakely, you talked about education coming from government. I would submit to you that the primary education has to come from the associations to their members. There is a responsibility on all Canadians to pay their fair share.

Mr. Robert Blakely: Yes, and we certainly do distribute that to all our 455,000 members—

Mrs. Sue Barnes: Yes.

Mr. Robert Blakely: —in both official languages.

Mrs. Sue Barnes: I also want to talk about this audit process, because it was my understanding that Revenue Canada did a huge reach out to the construction association and did coordinated, voluntary....

Let's talk about that for a minute, because that flies in the face of what you're saying here. This is talking about targeted and expanded audits, when I happen to know for a fact that this is not the way that Revenue Canada—

Mr. Robert Blakely: That's CCA's brief, not ours.

Mr. Michael Atkinson: You've misunderstood our point.

Mrs. Sue Barnes: Okay.

Mr. Michael Atkinson: First of all, both we and the Building and Construction Trades Department work with Revenue Canada on bringing underground initiatives into our industry to try to ferret out lawbreakers, and we absolutely support that. In fact, if anything, I might say they didn't go as far as we probably were recommending as what we wanted to see, because we are absolutely against that.

The kind of audit by ambush I'm talking about is where CCRA takes a different view in its audit approach in the interpretation of a law that our people have been trying to abide by, perhaps one that's grey.

For example, for years the subsistence allowances were being paid to workers at special sites. The employer was allowed to deduct 100%. Nobody was giving them a problem. All of a sudden, somebody in Revenue Canada one day said, ah, there's a meal portion there. Instead of coming to us and saying, hey, people, we're going to start going after 50% of that meal portion deduction, so you had better get out and start telling your people that maybe at an effective date, come January 1, we want to see 50% of the meal portion not appear in that deduction, they give our companies an audit and say, aha, gotcha.

Mr. Robert Blakely: The same thing happened with the exact same issue, the subsistence allowance, on whether or not it attracted CPP and EI. As a result of a number of audits, some bright spark said, oh, this attracts CPP and EI—much to the chagrin of both the Department of Revenue and the Department of Finance when they all got together and said, no, we didn't intend that at all.

Mrs. Sue Barnes: My point was, with respect to the underground economy, you are actually very satisfied and you were engaged.

Mr. Robert Blakely: Yes, and if you look at the underground economy, our contractors and members compete for every job we get. We're in construction; if we don't have the lowest bid and can't perform the best, we're not on the job. Somebody who doesn't pay income tax, who doesn't pay the CPP, who doesn't pay EI, who doesn't pay WCB, cheats us out of work. So the underground economy is an ill that needs curing.

Mrs. Sue Barnes: Do I have any more time, or should I pass?

The Chair: You can take more time if you like.

Mrs. Sue Barnes: Okay.

With respect to the appraisal, with recent tragic events on September 11, I happened to be talking to some of my local real estate people last weekend, and they were saying the first-time homebuyer market is definitely still there, but they are finding already that in second, third, and fourth buy-ups, it's stalled. From an appraiser's perspective, if this was a short blip, how long would it take before you were affected and how long would that type of aberration have to hold for values to climb?

Mr. John Clark: It's far too early to tell, because this whole tragedy is only three weeks behind us and there's no way of knowing yet how people will react in the near to longer term. People may have behaved in a different manner over the last few weeks, but it really depends on how the world reacts over the next months and how our economy reacts as to whether we continue to grow as we have during this year. It's far too early to react.

• 1035

I can say that the institute is partners with four American organizations in an organization called the Center for Advanced Property Economics. We undertook a study, starting yesterday, on the impact not on the housing market but on the commercial market, in the office market in particular. That study may even be finished in a month or two, and we'd like to share the results with you at that time.

Mrs. Sue Barnes: I'm curious, because life does go on, and in the immediate aftermath there are still appraisals being done.

Mr. John Clark: Yes.

Mrs. Sue Barnes: Is there any protocol you have in place, or is everybody just operating as if the event hadn't occurred? I ask because that could affect people's ability to mortgage and finance, all these other things where your work is used on an ongoing business relationship.

Mr. John Clark: Absolutely. An event like this hasn't happened before, so there is no protocol. What an appraisal consists of is looking at the most recent market evidence and relating that to a property that's being valued. The markets are continuing, people are still behaving with rational economic behaviour, and there is activity. Whether Canadians behave differently in the future is too early to tell.

Mrs. Sue Barnes: Thank you very much, Mr. Clark.

The Chair: Thank you, Mrs. Barnes.

Mr. Murphy.

Mr. Shawn Murphy (Hillsborough, Lib.): My first question is to either Mr. Atkinson or Mr. Morrison.

I realize your submission was written in August, prior to the events of September 11. Yesterday, as you're probably aware, President Bush made a major announcement about stimulating the economy, looking after workers, and providing construction relief. It's a multi-faceted approach that, from my reading of the media, would involve deficit financing. Your proposal is for debt reduction, tax reduction, and a limited infrastructure program. Have your views changed any as a result of the events on September 11?

Also, I should add that this issue is going to be on the public agenda, and I would assume it's going to be on the public agenda question period this afternoon. There'll be some expectation for the Canadian government to follow the lead of the American government in coming forward quickly with a stimulus package to stimulate the economy and to restore consumer confidence. Do you have any comment on that?

Mr. Michael Atkinson: First of all...and I'm speaking specifically to physical infrastructure and the need for planning. Again, I think the terrible events of September 11 show us, as Mr. Blakely said, the importance of having some kinds of plans and some state of readiness in place, in having some money in the bank, and in having the resources in place to be able to react and to put strategies together to address those issues.

I quite frankly am not one who likes the idea of trying to stimulate the economy by just throwing money into infrastructure. I think it creates short-term jobs if it is not put together with a plan that is really looking at how we are going to manage our infrastructure, which is so important to our economy down the road.

My first statement would be to respond to the question, how do the events of September 11 change things? I think they underscore even more dramatically the need for long-term planning, to have a strategy in place. We do not have a strategy in place for our national highway system. We do not have a real strategy in place for our municipal infrastructure, and we need to have that plan, that strategy. What in Canada are we going to be doing? Right now we don't know six months out.

Mr. Jeff Morrison: Mr. Murphy, I could add to that as well.

I think perhaps the best kind of spending that governments can do—and this partially addresses a question asked by Mr. Epp and Mr. McCallum—is spending that is holistic and that not just meets one particular need but meets a whole range of government needs. When you look at infrastructure spending, as we mentioned in our comments, you're not just looking at short-term economic competitiveness or a short-term boost to an economy such as that which is probably required after September 11. You should also meet public security concerns. If you put money into infrastructure that deals with border crossings and airport security, it meets other needs governments have. It addresses your health concerns, as we mentioned, such as with Walkerton, St. John's, and North Battleford. It meets environmental concerns.

There was a great article in The Globe and Mail today about a study done in Italy that looked at the costs of implementing the Kyoto Accord. What the study revealed was that once some initial investments were made, the payback to the Italian economy was in the order of $35 billion. Infrastructure has the same sort of multiplier effect on meeting the other needs of government, not just simply giving a short-term economic boost.

• 1040

Mr. Shawn Murphy: The next question is for Mr. Clark, and it deals with the whole issue of affordable housing. I like your comments. I believe Mr. Epp touched on the issue, but this really hasn't been resolved yet. There are meetings going on between Minister Gagliano and his provincial counterparts.

As to what methodology is used, there are different forms. There's direct ownership, there's the old tax regime or the old MURBs we had back in the 1980s, and there's the co-op. Are the people in your organization leaning one way or the other as to what direction you would like to see this government proceed?

Mr. John Clark: Well, there are a number of ways of funding housing, but we don't believe there's been an adequate study of how to make this the most viable operation it can be in terms of creating an economic interest in it. Do we have regulations governing the construction of housing that are excessive? Are we building at the minimum level housing units beyond what the low end of the market requires? I'm not saying there should be slum housing, but do we have standards that prevent people at the low end from being able to afford housing? Then there's the long-standing discussion on a guaranteed annual income as opposed to direct subsidies. Is that an appropriate...I'm not saying one or the other, but how do you create an incentive?

I know there is an example in this city, where in the past provincial welfare provided a maximum housing allowance for a single person of $450 a month. As a result, all the rooms in the rooming houses in Ottawa rented for $450 a month. They then lowered that limit to $350 a month, and then all the rooms in the rooming houses in Ottawa rented for $350 a month. The market was not coming to play.

So how do you bring in market realities? How do you bring market forces into play? We don't have the answers, but we see some of the questions.

Mr. Shawn Murphy: Mr. Chairman, my last question is for Mr. Patterson, and I'm not going to get into questions or comments, but just to—

Mr. Nicholas Patterson: I beg your pardon?

Mr. Shawn Murphy: Yes, it's just for you, sir.

Just so this committee can determine the weight to be to given your submission—

Mr. Nicholas Patterson: Right.

Mr. Shawn Murphy: —are you able to file with the committee a list of the members of your institute and the donors to your institute?

Mr. Nicholas Patterson: We have over 150 people who have donated to our institute, and we do not publish their names.

Mr. Shawn Murphy: You're not in a position to file with the committee a list of the members—

Mr. Nicholas Patterson: No, because you might tell them they're a bunch of dumbbells instead of just me.

Mr. Shawn Murphy: Thank you very much.

Mr. Nicholas Patterson: By the way, I did want to add one thing. I would challenge Mr. McCallum to provide a written and properly documented critique of the bits he's critical of in our brief so we can have this on a proper basis. I would then be happy to respond to his critique.

Mr. John McCallum: I'm not interested in doing that.

Mr. Nicholas Patterson: Oh, well, that's good. So I hope you'll withdraw these baseless charges you're unwilling to document.

A voice: If you're prepared to withdraw your baseless charges—

Mr. Nicholas Patterson: I don't know why this guy's constantly intervening in my questions.

The Chair: I just want this meeting to proceed with some form of decorum.

Mr. Nicholas Patterson: Tell him not to interrupt me all the time.

The Chair: Well, you're interrupting me now. I wouldn't advise that.

Mr. Nicholas Patterson: Could I just—

The Chair: Could you what? I haven't recognized you yet.

I'm going to Mr. Cullen.

Mr. Roy Cullen: Thank you, Mr. Chairman. Thank you to the presenters.

I fully support the comments of Mr. McCallum. In fact, Mr. Patterson, I could add about four or five others, but I think I'd like to concentrate on the other witnesses with something of more substance.

I have a couple of questions for Mr. Clark, but first, Mr. Atkinson and Mr. Morrison, you mentioned the small business rate, and there hasn't been a change in that since 1982. I recall that in Budget 2000 we moved from $200,000 to $300,000, so the 21% clicks in at $300,000 now instead of at $200,000.

• 1045

Mr. Michael Atkinson: We could certainly check that, but my understanding is that the rate had changed over that amount but that the threshold had not changed.

Mr. Roy Cullen: The threshold went from $200,000 to $300,000.

Mr. Michael Atkinson: Perhaps you could provide that to us.

Mr. Roy Cullen: Sure. I'll send you a copy of Budget 2000.

Mr. Michael Atkinson: Mr. Chairman, I should mention that we are asking for it to go to $500,000.

Mr. Roy Cullen: The committee will take that under advisement.

With regard to infrastructure, Mr. Murphy picked up on a theme that I was going to get into a little bit. We're looking at our borders and the north-south corridors, and the amount of investment that you encounter in the United States probably could be throughout in terms of the national highway system. But I know they're doing a lot in the north-south corridors.

Mr. Cauchon has brought before the House the modernization of customs, which is a policy and procedure. We've talked to a lot of business people in Windsor and Sarnia, and they say we need some infrastructure investments there, whether it's more lands, technology, whatever it is. I'm not an expert by any stretch.

It comes back to whether you'd use this kind of stimulative spending to get the economy going. The critique has often been that the lead time is so long. We could start the planning now, and by the time they're digging the sod, the downturn will be over.

I wonder if you could comment on the corridor issue and the lag, if you like.

Mr. Michael Atkinson: Trying to get a national highway program together, quite frankly, has been a bit of a ping-pong match that has been going on between levels of government. The federal government says that constitutionally it's a provincial matter. The provinces say that the federal government has all the tax dollars from the excise taxes on gasoline. So I think it would involve both levels of government getting together. Recognition by the federal government that they do have a stake in our national highway system, particularly with regard to international crossings, would be a step in the right direction.

You may recall that Mr. Alcock, when he was chair of the transportation committee, came out with a report that suggested the creation of a highway authority that would involve a partnership of government to look at that.

What I'm saying is that perhaps stimulus is required and there is some immediate need for, if you will, some emergency type of infrastructure injection particularly into our border crossings, etc., but at the same time there is still this bigger need. There is still this need to ensure that what we do invest is done in a strategic manner and that we maintain that and don't lose that.

I don't want to give the impression that I'm saying you can't do anything that needs a quick fix when a quick fix is required. Unfortunately, though, that has been our record of experience. We wait until the bridge falls down and the water goes bad, instead of being proactive and trying to ensure that doesn't happen.

Mr. Roy Cullen: Thank you.

Mr. Clark, if we have time, I want to talk about species at risk and habitat and compensation valuation.

But a topic a little more dear to my heart right now is the issue of affordable housing. In Budget 2000 we did something with the GST, the rebate, to put rental housing on a more level footing with other types of housing. But there has developed a valuation issue. We've been hearing from rental property owners and developers. In looking at evaluation, of course there are different ways of valuation—market, discounted cashflow, etc. For example, if someone is building units for the purpose of rental, in the short run, let's say five to ten years, on a discounted cashflow basis it might have a lesser value in the market. But the owner-operator wants to put it into rental housing and maybe convert it into condos or sell them as condos ten years later. Revenue Canada seems to be interpreting it as you go to the highest and best use, which might be market. I don't know if you've heard about this issue. I'm working with the revenue agency to try to clarify it as best we can.

Mr. John Clark: Does the question relate to the GST payable on a rental project?

Mr. Roy Cullen: Yes.

Mr. John Clark: My understanding of the legislation is that you're deemed to have sold the property once it's occupied and there's GST payable on its then market value.

Mr. Roy Cullen: Is that the self-supply rule?

What some of these people are saying is that the obvious question would be if the value is less on a discounted cashflow basis for rental, why wouldn't you just flog it into the condo market? Some of these people are saying, we'd like to put it in a rental for awhile, but under the self-supply rule, you go into valuation immediately, and it's highest and best use, which is typically market. I've heard from some developers on this. I don't know if you're aware of the issue.

• 1050

Mr. John Clark: You would look at the present value under its highest and best use. By definition that's the use that creates the highest value as of today. If selling them as individual units was the best use, then it's no longer a rental project, in my opinion. But you would look at the best use today and what valuation method would be indicative of the value of it today. If it's a rental property, you would look at either a one-year cashflow or multiple-year cashflow as a way of valuating.

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

The Chair: Yes. You have one minute.

Mr. Roy Cullen: Just in general terms, the species at risk legislation and the designation of habitat, conservation areas, etc., are raising compensation issues involving 100% or 50%. To me, 100% makes more sense, but there's a cost to that. Are there going to be valuation issues in terms of remote areas, rural areas, partial easements, etc.? I just heard that some issues might arise out of the valuation aspect on setting compensation and values with regard to habitat areas.

Mr. John Clark: Some assignments are more difficult than others. The ease or difficulty of an assignment is based on the available evidence for a value estimate. Most of the activity in the eco-gifts program is in Saskatchewan. I'm not sure why that is, but that's the case. The ease or difficulty of completing an appraisal assignment is dependent upon the volume and quality of information. The partial taking does not represent a real problem. I have seen a number of these appraisal reports for the eco-gifts program, and they're being handled capably. There's no real problem there. More remote areas would represent a challenge. But that's the normal day-to-day work for our members. So I really don't think that'll represent a big challenge.

Mr. Roy Cullen: Okay. Thank you.

The Chair: Thank you.

Mr. Nystrom, you have a five-minute round.

Mr. Lorne Nystrom: I'd like to direct a question to Mr. Blakely, if I could, please.

Mr. Robert Blakely: Yes, sir.

Mr. Lorne Nystrom: I know a little bit about your association. I have a brother-in-law who until recently was a business agent with labour's international wing in Regina.

I want to ask you a question similar to the one Mr. Murphy asked your colleague across the way. The headline in the Globe and Mail this morning is “Bush wants $60-billion for revival of economy”. It's actually $60 billion to $65 billion when you read the article. That's in addition to the $40 billion Congress has already voted to deal with the emergency. It's in addition to the $15 billion that's going to help the airlines in the United States. When you put that all together, it's well over $100 billion.

There has been agreement in the House of Commons among the four opposition parties that we should have a budget before Christmas. My contention is that a budget should be one that stimulates the economy, uses a multi-faceted approach, and puts a lot of money into infrastructure, with jobs being the priority. I think infrastructure, transportation, housing, and ways to kick-start the economy are very valuable to workers in your association and so on. Would you agree with that general thrust? Would you have any suggestion for the committee as to how much more money we need injected into the economy? If we take the United States as an example, we would be looking at a lot of dollars.

Mr. Robert Blakely: If you look at the general rule, to get to Canadian, divide by 10.

Here in Canada there are a number of areas where the construction economy is perking along really well. There are a number of other areas in which the perking can't even hope to start. In Atlantic Canada they just finished a couple of oil projects. In New Brunswick they're waiting for the power generation jobs to come on. There's talk about the northern pipeline, hydroelectric in Manitoba and Quebec, and Churchill Falls. None of these things is really being planned. We seem to go from a spike to a super-heated construction economy, down into the sewer, back up to the spike.

• 1055

We need to find a way to plan our economy a little better. If the workers could flow from job to job—from the tar sands job in Alberta, to the hydro job in Manitoba, to the hydro job in Newfoundland, to the chemical plant in New Brunswick—we would have an industry capable of employing thousands of people at well-paid jobs for a long period of time. Instead, we end up with a superheated economy and then nothing.

In connection with this whole idea of where we're going and how do we plan things, the construction unions in this country spend more money on training than anyone else, with the sole exception of government. In my province, Alberta, we have about $45 million invested in training infrastructure, and we spend about $25 million a year training people. That's in an industry of about 50,000 people. We spend a lot of dough on this. Unions make the workplace safer and more productive, not less.

Mr. Lorne Nystrom: A pet project of mine for years has been that we should have a set budget date in this country—every February, in the second or third week, whatever it is, the federal government must have a budget come down. You could then, therefore, do some planning. The provinces can plan in accordance with it—the cities, the municipalities, the construction trades, what have you. There's a sense of organization. Does this make sense to you?

Mr. Robert Blakely: Most of the effective democracies have a budget day.

Mr. Lorne Nystrom: Yes, and in terms of parliamentary reform it's a budget date, a fixed election date, a fixed date for throne speeches so one can have the plan and the blueprint is out there. This is simple common sense.

That takes a lot of power away from the Prime Minister's Office. I see my colleagues across the way; they won't be there forever. I'm talking about improving the system. It would make an awful lot of sense.

Part of the problem we have in this country in terms of coordinating things with the provinces is that we are a very unique federation with overlapping jurisdictions and unique jurisdictions and separate jurisdictions. For the people who work in your industries, how can we improve planning in terms of better cooperation with the provinces?

Mr. Robert Blakely: There are four parties that need to sit down and figure out where construction goes in this country.

One party is government in the largest sense, because the largest purchasers of commercial construction are federal, provincial, and municipal governments. The second party is made up of a number of industrial concerns—the Syncrudes, the potash corporations, the pipeline companies. Third and fourth respectively are the construction contractors and the providers of labour.

You are looking at an industry that is the largest one in the country; yet, to date, I don't remember the last time anyone asked us anything about whether or not we'd have people to do a job until that job was in the ground. Planning for us consists of someone saying—once the shovels are in the ground—where are the stuccoers? The next thing you know, we're trying once again to pull a rabbit out of someone's hat. There does need to be a national level of coordination, and there have to be a number of provincial subsets.

Mr. Lorne Nystrom: I have two quick last questions, Mr. Chair.

Would you divide this number by 10 then for a rough estimate of what we should be spending?

Mr. Robert Blakely: I'm not an expert, but that seems to be the rule of thumb for everything else.

Mr. Lorne Nystrom: My last question is, why are your associates so old? You were saying you're very old.

It sounds like the Saskatchewan farmers. The average age of a Saskatchewan farmer is about 57.

Mr. Robert Blakely: It's the same for construction workers in Saskatchewan.

Why are they so old? In 1983-84, the world collapsed. Everyone looking for a career realized construction was not the place to be. They realized that you can't make a living working 800 hours a year. They went somewhere else. We lost a generation of apprentices.

By the time the world got a little better, around 1990-91, we had just enough work to keep the people who were there going. Construction companies, construction unions, did not say, “We need to replace people”. By the time 1998 rolled around and a fair amount of work was happening, a number of people realized, “Oops, where did the people go?”

But to keep going in a competitive business such as the bricklaying business, where it's low bid, you want the guy working on the wall who can put as many bricks up in as short a period of time as possible. If he happens to be a 52-year-old bricklayer, he's the guy you want. You don't want the 22-year-old kid, looking at the bricks and mortar and trying to figure it out.

We've done a huge disservice to ourselves by, one, not planning, and two, having an economy that went into the tank and then hoping it was going to get better, without saying that we need to plan to replace people anyway, because they are going to get older.

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Mr. Lorne Nystrom: In the building trades, what is the rough gender breakdown now? I know it's more male than female, but has there been a change in the trend line in the last 10 to 12 years?

Mr. Robert Blakely: A number of females are now taking up trades such as bricklayer, instrument mechanic, welder, some types of iron work, scaffolder. We've gone from 0% to maybe 5%, which doesn't sound like a lot, but in terms of the evolution of our industry, we've gone from the amoeba to the creature crawling out of the ooze.

Mr. Lorne Nystrom: A very local question for Saskatchewan, Manitoba, and Alberta: what about the aboriginal people? Are more of them now working in the building trades?

Mr. Robert Blakely: It depends on the province. Each of those provinces have said, look, if we don't involve the aboriginal people in the work, where else are we going to get workers from? The demographics say that in Saskatchewan they are going to be a majority of the people available to undertake this sort of work.

Mr. Lorne Nystrom: Absolutely.

Mr. Robert Blakely: What, in ten years?

Mr. Lorne Nystrom: In about 20 years.

Mr. Robert Blakely: At Syncrude, the aboriginal demographic is 13%. We meet it on a constant basis. We have a huge number of people we've been training for the pipeline, for the facilities work, for the hydro work in Manitoba. So aboriginal people have a place, if they're interested in it.

The Chair: Thank you, Mr. Nystrom, for your three “last” questions.

We have another round table coming up. I would have loved to have asked you some questions, but members had some very insightful questions to ask and you provided us with some very insightful answers.

Needless to say, the challenge we always face is in the tradeoffs. One can't reduce the debt, reduce taxes, and increase spending in certain areas without making the tradeoffs that we all have to make. Those are the challenges this committee faces, but they are challenges we have faced in the past as well. We try to reflect what you say, but more importantly we interpret what you say and try to address it through our recommendations. So, once again, thank you very much.

This meeting is adjourned.