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37th PARLIAMENT, 2nd SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Wednesday, November 6, 2002

0900

The Vice-Chair (Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.))

Ms. Paula McGarrigle (Manager, Renewables, Clean Air Renewable Energy Coalition)

The Vice-Chair (Mr. Nick Discepola)

Mr. Les Higa (President-Elect, Alberta Real Estate Association)

Ms. Janet Poyen (Manager, Member Services, Alberta Real Estate Association)

0905

Mr. Les Higa

0910

The Vice-Chair (Mr. Nick Discepola)

Mr. Bill Gaudette (President, Canadian Mental Health Association)

0915

0920

The Vice-Chair (Mr. Nick Discepola)

Ms. Hazel Corcoran (Executive Director, Canadian Worker Co-operative Federation)

0925

The Vice-Chair (Mr. Nick Discepola)

Ms. Hazel Corcoran

The Vice-Chair (Mr. Nick Discepola)

Ms. Hazel Corcoran

The Vice-Chair (Mr. Nick Discepola)

Ms. Hazel Corcoran

The Vice-Chair (Mr. Nick Discepola)

Some hon. members

Ms. Hazel Corcoran

0930

The Vice-Chair (Mr. Nick Discepola)

Mr. Andrew Pape-Salmon (Director of Sustainable Energy, Pembina Institute, Vancouver; Clean Air Renewable Energy Coalition)

0935

Ms. Marlie Burtt (Director, Tax, Suncor Energy Inc. Calgary; Clean Air Renewable Energy Coalition)

0940

The Vice-Chair (Mr. Nick Discepola)

Ms. Beverley Smith (Individual Presentation)

0945

The Vice-Chair (Mr. Nick Discepola)

Mr. Eric Cordeiro (Individual Presentation)

The Vice-Chair (Mr. Nick Discepola)

Mr. Eric Cordeiro

The Vice-Chair (Mr. Nick Discepola)

Mr. Eric Cordeiro

0950

0955

1000

The Vice-Chair (Mr. Nick Discepola)

Mr. Eric Cordeiro

The Vice-Chair (Mr. Nick Discepola)

Mr. Richard Harris (Prince George—Bulkley Valley, Canadian Alliance)

Ms. Marlie Burtt

Ms. Paula McGarrigle

Mr. Richard Harris

Ms. Paula McGarrigle

Mr. Richard Harris

Ms. Paula McGarrigle

Ms. Marlie Burtt

1005

Mr. Richard Harris

Mr. Bill Gaudette

Mr. Richard Harris

Mr. Bill Gaudette

Mr. Richard Harris

The Vice-Chair (Mr. Nick Discepola)

Mr. Richard Harris

Ms. Hazel Corcoran

1010

Mr. Richard Harris

The Vice-Chair (Mr. Nick Discepola)

Mr. Richard Harris

Ms. Hazel Corcoran

Mr. Richard Harris

The Vice-Chair (Mr. Nick Discepola)

Ms. Sophia Leung (Vancouver Kingsway, Lib.)

Ms. Beverley Smith

Ms. Sophia Leung

Ms. Beverley Smith

Ms. Sophia Leung

Ms. Beverley Smith

Ms. Sophia Leung

Ms. Janet Poyen

Ms. Sophia Leung

Ms. Janet Poyen

1015

Ms. Sophia Leung

Ms. Janet Poyen

Ms. Sophia Leung

Mr. Bill Gaudette

Ms. Sophia Leung

The Vice-Chair (Mr. Nick Discepola)

Mr. Shawn Murphy (Hillsborough, Lib.)

Mr. Les Higa

1020

Mr. Shawn Murphy

Ms. Paula McGarrigle

Mr. Shawn Murphy

Ms. Paula McGarrigle

Mr. Andrew Pape-Salmon

Mr. Shawn Murphy

Mr. Andrew Pape-Salmon

Mr. Shawn Murphy

Mr. Andrew Pape-Salmon

Mr. Shawn Murphy

Mr. Andrew Pape-Salmon

The Vice-Chair (Mr. Nick Discepola)

Mr. Shawn Murphy

1025

Ms. Marlie Burtt

Ms. Paula McGarrigle

Mr. Andrew Pape-Salmon

The Vice-Chair (Mr. Nick Discepola)

Mr. Roy Cullen (Etobicoke North, Lib.)

Mr. Eric Cordeiro

Mr. Roy Cullen

Mr. Eric Cordeiro

Mr. Roy Cullen

1030

Mr. Andrew Pape-Salmon

Ms. Paula McGarrigle

Mr. Roy Cullen

Ms. Paula McGarrigle

Mr. Roy Cullen

Ms. Marlie Burtt

Mr. Roy Cullen

Ms. Marlie Burtt

Mr. Roy Cullen

Ms. Marlie Burtt

The Vice-Chair (Mr. Nick Discepola)

1045

Mr. Bill Lamberton (Vice President, Marketing and Sales, WestJet Airlines)

The Vice-Chair (Mr. Nick Discepola)

Mr. Richard Harris

The Vice-Chair (Mr. Nick Discepola)

Mr. Shawn Murphy

Mr. Bill Lamberton

1050

Mr. Shawn Murphy

Mr. Bill Lamberton

Mr. Shawn Murphy

Mr. Bill Lamberton

Mr. Shawn Murphy

Mr. Bill Lamberton

The Vice-Chair (Mr. Nick Discepola)

Mr. Bill Lamberton

The Vice-Chair (Mr. Nick Discepola)

Mr. Dave Bronconnier (Mayor, City of Calgary)

1055

1100

The Vice-Chair (Mr. Nick Discepola)

Dr. Jeremy Mouat (President, Confederation of Alberta Faculty Associations)

1105

1110

The Vice-Chair (Mr. Nick Discepola)

Mr. Richard Harris

The Vice-Chair (Mr. Nick Discepola)

Mr. Roy Cullen

Mr. Dave Bronconnier

1115

Mr. Roy Cullen

Mr. Dave Bronconnier

The Vice-Chair (Mr. Nick Discepola)

Mr. Dave Bronconnier

The Vice-Chair (Mr. Nick Discepola)

Mr. J.A. (Drew) Glennie (General Manager, Tax and Insurance, Tax Executives Institute Inc.)

1120

The Vice-Chair (Mr. Nick Discepola)

Mr. J.A. (Drew) Glennie

1125

The Vice-Chair (Mr. Nick Discepola)

Mr. Drew Glennie

The Vice-Chair (Mr. Nick Discepola)

Mr. John Richels (Vice-Chair; President and CEO, Devon Canada Corporation, Canadian Association of Petroleum Producers)

1130

1135

1140

The Vice-Chair (Mr. Nick Discepola)

Mr. Richard Harris

Mr. John Richels

Mr. Richard Harris

Mr. Greg Stringham (Vice-President, Markets and Fiscal Policy, Canadian Association of Petroleum Producers)

1145

Mr. Richard Harris

Mr. Greg Stringham

Mr. Richard Harris

Mr. Drew Glennie

Mr. Richard Harris

The Vice-Chair (Mr. Nick Discepola)

Mr. Drew Glennie

The Vice-Chair (Mr. Nick Discepola)

Ms. Sophia Leung

Mr. Drew Glennie

Ms. Sophia Leung

Mr. Drew Glennie

Ms. Sophia Leung

1150

The Vice-Chair (Mr. Nick Discepola)

Ms. Sophia Leung

Mr. Drew Glennie

Dr. Jeremy Mouat

Ms. Sophia Leung

Dr. Jeremy Mouat

Ms. Sophia Leung

Dr. Jeremy Mouat

Ms. Sophia Leung

1155

The Vice-Chair (Mr. Nick Discepola)

Mr. Roy Cullen

Dr. Jeremy Mouat

Mr. Roy Cullen

Dr. Jeremy Mouat

Mr. Roy Cullen

1200

Mr. Drew Glennie

Mr. Roy Cullen

Mr. Greg Stringham

Mr. Roy Cullen

Mr. Greg Stringham

Mr. Roy Cullen

Mr. Greg Stringham

Mr. Roy Cullen

1205

Mr. Greg Stringham

Mr. Roy Cullen

Mr. Greg Stringham

Mr. Roy Cullen

Mr. Greg Stringham

Mr. John Richels

1210

Mr. Roy Cullen

Mr. John Richels

Mr. Greg Stringham

Mr. John Richels

The Vice-Chair (Mr. Nick Discepola)

Mr. Shawn Murphy

Dr. Jeremy Mouat

1215

Mr. Shawn Murphy

Mr. Drew Glennie

1220

The Vice-Chair (Mr. Nick Discepola)

CANADA

Standing Committee on Finance

NUMBER 019

2nd SESSION

37th PARLIAMENT

EVIDENCE

Wednesday, November 6, 2002

[Recorded by Electronic Apparatus]

¿ (0900)

[English]

The Vice-Chair (Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.)): Good morning. Pursuant to Standing Order 83(1), we continue our pre-budget consultations this morning. This is the third day of this series of consultations. We've been in Vancouver for two days. This afternoon we're headed to Saskatoon. After that, we conclude the western section in Winnipeg on Friday. My colleague, Sue Barnes, is heading a similar group out east. In total, I think the committee will hear over 200 presentations in view of preparing a report and recommendations to the Minister of Finance in preparing his budget, hopefully in February some time. So your input is very valued.

I'd like to welcome, from the Alberta Real Estate Association, Mr. Les Higa, the president-elect, as well as Janet Poyen, manager of member services. From the Canadian Mental Health Association we have Mr. Bill Gaudette, its president. We are awaiting somebody from the Canadian Worker Co-operative Federation. She will join us shortly. As well, I'd like to welcome Marlie Burtt, director of tax for Suncor Energy Calgary, from the Clean Air Renewable Energy Coalition, as well as Andrew Pape-Salmon, the director of sustainable energy from the Pembina Institute of Vancouver, and Paula McGarrigle.

Are you representing the institute as well?

Ms. Paula McGarrigle (Manager, Renewables, Clean Air Renewable Energy Coalition): I'm the manager of renewables.

The Vice-Chair (Mr. Nick Discepola): As individuals, I'd like to welcome Beverley Smith, who's not strange to the committee, as well as Eric Cordeiro.

The format, as you all know, is roughly seven minutes, in order to allow ample time for the members of Parliament to ask questions.

We'll start with the Alberta Real Estate Association, please. Welcome.

Mr. Les Higa (President-Elect, Alberta Real Estate Association): Thank you, Mr. Chairman.

The Alberta Real Estate Association, AREA, is a counterpart of the Canadian Real Estate Association whose representatives addressed the finance committee several weeks ago. AREA represents over 7,000 realtors in the province and 11 real estate boards. In addition to participating in the federal political action days on Parliament Hill in March, members of our association are politically engaged at the provincial level. While our membership may hold a variety of political views, we speak with one voice in promoting a strong economy and a better quality of life for all Canadians.

At the provincial level this has led to major initiatives in economic development and more recently affordable housing. I feel confident in saying our membership supports the same philosophy at the federal level, and for this reason we are pleased to endorse the pre-budget submission of the Canadian Real Estate Association, also known as CREA.

We would first like to comment on CREA's recommendations, ending with one that addresses our provincial association's current area of interest: affordable housing. We hope to offer the committee further information on this topic based on our experience.

I'll turn it over now to Janet.

Ms. Janet Poyen (Manager, Member Services, Alberta Real Estate Association): Thank you, Les, and ladies and gentlemen.

I'll speak briefly to four of CREA's recommendations that you heard several weeks ago, so that there's time for Les to talk about affordable housing.

First let me address the topic of raising RSP contribution limits. This proposal has been carried forward for a number of years now, and I believe CREA has made very strong economic arguments to support it. In fact, it seems to make so much sense that we are frankly puzzled as to why this recommendation hasn't been implemented.

The next recommendation is what CREA calls the realtor view on fiscal policy, and it is essentially “Let's retire the debt as quickly as possible.” This too appears to make sense to the average citizen, as long as it's balanced with tax incentives and spending on programs that stimulate the economy and bring long-term benefits to Canadians.

The remainder of CREA's recommendations deal with tax incentives and programs that we truly believe represent a long-term investment in our country. Brownfield redevelopment, for example, has a significant impact on urban planning. The growing concern over the well-being of our urban centres--because they're the economic drivers of the economy now--underscores the need to address the problems of contaminated sites in city centres in particular. Redevelopment of these sites so that they can be designated for commercial use not only increases the tax base of the municipality but also contributes to urban densification and revitalization of the downtown core.

Round table discussions on brownfields were held across the country several years ago, and I actually attended one of them. Despite the enthusiasm generated by these meetings, not much has been accomplished to date. There are significant obstacles to cleaning up contaminated sites, liability being one of them. To help overcome these obstacles, the finance committee should seriously consider the recommendation that remediation costs be treated as a deductible expense.

The recommendation put forth by CREA's National Commercial Council also deals with tax treatment; that is, an amendment to the Income Tax Act to permit the deferral of capital gains taxes when an investor wants to sell a property in order to invest in a new one. Without getting into the specifics, as I'm not a tax expert and things like recaptured depreciation and so on just go over my head, I'd like to lend strong support to this recommendation because of the dire need to encourage growth in the rental market.

This is part and parcel of the recommendation we are here today to discuss: affordable housing. I turn it over to Les again.

¿ (0905)

Mr. Les Higa: Mr. Chairman, I'll continue first of all with rental accommodation. While home ownership is a goal for many Canadians, it's not the answer for all, and it's not the only solution to the homelessness crisis in Canada today. We cannot emphasize too strongly that the rental market is in trouble. Conversion of rental units to condominium property is rampant, and nothing is being built to replace them. In part this can be attributed to federal budgets of past years. Many housing stakeholders, including CREA, have pointed to the systematic tax barriers in the rental sector. In addition to the above-mentioned capital gains deferral, allow me to remind you that three other measures recommended by CREA would help stimulate the rental market.

First, residential rents should be zero-rated under the GST so that landlords can recover taxes paid on purchases, repairs, and improvements to their properties.

Two, rental investors should qualify for the small business deduction for income tax purposes.

Three, all taxpayers, not just companies in the business of real estate, should be able to apply capital cost allowance losses from real estate investments against other income.

Many of our members are small investors in the rental market and/or they have clients who are. They believe that such encouragement is needed in order to stimulate growth in the marketplace.

Now to look at the spending side, where we hope to give some feedback on existing programs and convince you of the cost-effectiveness of increasing funding in some areas.

The crisis in affordable housing seems to have hit the radar screen in 1999. That same year the idea of partnerships, involving the three orders of government and the non-profit and private sectors, began to take shape. We at AREA were quite intrigued. We could see that all sectors had a vested interest in improving the housing situation by committing to various projects that would effectively ensure that the funding achieved its intended purpose.

With a generous grant from the Alberta Real Estate Foundation, AREA hired two consultants to help groups in various communities develop affordable housing projects. These housing facilitators not only bring the right people to the table, but they also conduct a series of workshops that allow participants to decide on a feasible project based on their community's greatest needs. The stipulation of the involvement of an AREA housing facilitator is that an AREA real estate board, or at least one member from that local board, be involved in the project.

I will briefly describe some of the very innovative projects that have been launched and point out where federal dollars have been and will be crucial to their success.

First, projects involving new construction are especially needed in smaller communities in Alberta experiencing rapid growth: Fort McMurray, Brooks, Grand Prairie, and Cold Lake, for example. All of these projects are non-profit in nature and have wide community involvement with financial support from the private sector.

The Fort McMurray project—which will provide 40 units of non-profit housing—is particularly interesting because it is based on the concept of employers contributing equity to specific units, which will become available to their employees. Approximately 800 near-homeless households live in Fort McMurray, many of whom are service sector employees willing to pay their way but unable to afford the astronomical rents.

The Alberta Real Estate Foundation granted $100,000 in capital funding. The CMHC provided $45,000 in forgivable project development funding loans. The municipality will donate land once the province has completed a land transfer. The Fort McMurray Affordable Housing Society is applying for the $25,000-per-door funding under the bilateral Canada-Alberta agreement and a further $3,000 per door under the residential rental incentive program. Participating local business owners will contribute equity on the units they will acquire and then rent or lease to employees who are eligible under the parameters of the program.

We have further information on this project and others, I believe, in a package you have received.

Another type of project involves the renovation of existing housing stock, and this is highly dependent on CMHC's RRAP program funding. The Central Edmonton Committee Land Trust is a non-profit society that buys property, holds the land in trust, renovates the existing house, and then offers the house on a rent-to-own basis to an eligible family. The house is only affordable to a low-income family because the price of land is taken out of the equation and because the project qualifies for RRAP funding.

An Edmonton realtor deserves much of the credit for the success of the latest land trust renovation project, and AREA has been instrumental in the establishment of the Land Trust Society under the auspices of the Calgary Homeless Foundation. We are enthusiastic about the land trusts and fervently hope that RRAP funding will be increased when the program comes up for renewal next spring.

Members of the Edmonton Real Estate Board have also been working with other non-profit groups, helping them acquire suitable properties with buildings that can be turned into shared living quarters for groups that have special needs. These projects rely on RRAP funding and may qualify for other grants as well.

I must point out that we indicate to you how important the federal SCPI program is.

¿ (0910)

The Supporting Communities partnership initiative, introduced by Claudette Bradshaw in December 1999, has brought stakeholders together for a purpose and developed a housing culture in many communities. This has had a ripple effect as far as development of innovative projects is concerned. For example, as Edmonton realtors became involved increasingly with the movers and shakers in the housing field, another idea came to mind—one that we believe could be replicated across the country. Realtors and a mortgage broker developed the curriculum for a home ownership education program aimed at households that can afford just-below-market housing. The home program attempts to bring about cost savings and reduce the need for subsidies through flexible mortgage underwriting and a revolving downpayment fund for graduates of the program.

I have highlighted the involvement of our Edmonton realtors in particular because it is a powerful example of how one step leads to another. One contact leads to an expanding network of stakeholders, and a variety of projects spring up at the same time.

We know the housing crisis cannot be solved by federal funding alone. The solution lies in bringing stakeholders together to promote and plan a wide range of projects—small scale or large scale—carried out by the grassroots or by sophisticated organizations and based in communities with different needs and resources. But we also want you to know that federal funding must provide the stimulus for this to happen.

Thank you for the opportunity to speak on behalf of Alberta realtors today. We will be pleased to answer any questions you may have.

The Vice-Chair (Mr. Nick Discepola): You have been very indulgent; you're over time by about 30%. I'd ask the other presenters to maybe make up for your overtime. In other words, we won't have enough time to have members engage in questions and answers.

Mr. Gaudette, would you continue, please?

Mr. Bill Gaudette (President, Canadian Mental Health Association): Thank you, Mr. Chairman.

First of all, good morning. I welcome you and the members of the committee to Calgary. As you've indicated, my name is Bill Gaudette, and I am the national president of the Canadian Mental Health Association. I'd like to start this morning by thanking you for this opportunity to speak to the needs and concerns of the mental health community during your pre-budget consultations

By way of background, the Canadian Mental Health Association, or CMHA, is a national voluntary association that promotes the mental health of all people. We are represented across Canada through 12 divisions and 135 branches in communities throughout the country. CMHA provides support to people with mental illnesses living in those various communities. We also actively promote the mental health of all Canadians.

We are here today seeking your support for a commitment to ensure the development of a national strategy on mental health and mental illness. For too long, mental health has taken a back seat to other issues on the political agenda. Mental health promotion and prevention have been placed near the bottom of the priorities undertaken by all levels of government in our country.

This has been evident in the lack of resources and programs that are in place to deal with ensuring good mental health for all Canadians at the federal, provincial, and territorial levels. As an example, Health Canada has some 100 staff dealing with a national strategy for cancer control, while mental health promotion garners less than 10 public servants in that department.

Mental illness is the single largest category of disease affecting us as Canadians. Up to 20% of our population will experience mental health problems at some time during their lifetime. Not dealing with mental health issues has great consequences.

A 1998 Health Canada study indicated that mental health problems placed a $14.4 billion burden on our Canadian society. This comes a close second to cancer, which is at $14.5 billion, in burdening a health system that is buckling under these costs.

The failure to adequately address mental health issues results in an increasing number of homeless people with mental illnesses. Families, friends, and co-workers are stretched and distressed to the limit.

In addition, large numbers of people with mental illnesses are languishing in our jails throughout this country. If all of those in prison suffering from mental health problems were hospitalized today, there would not be a free bed in any hospital in our country. At the present time, 86% of those who are mentally ill are cared for in our general hospitals. There is indeed no room in the inn.

Mental health problems are not restricted to the ones we hear about most often, like schizophrenia or bipolar disease. The former Minister of Finance, Michael Wilson, has observed that mental health issues are the basis for 30% of the absenteeism in our workforce. Graham Lowe of the Canadian Policy Research Networks showed that the knowledge economy has contributed to poor mental health through longer working hours, higher demands, and greater stress. This has been harmful not only to the individual employees, but to business and our economy.

Given the federal government's declaration that knowledge is the source of our competitive advantage, high-stress workplaces put these industries at risk, particularly when the employers neglect these mental health concerns.

The lack of a national strategy on mental health and mental illness means that the system won't be ready to deal with the depression and poor physical health that are associated with downturns in our economy. For instance, because of the layoffs and job losses associated with the high-tech industry, more Canadians are dealing with increased financial strain, as well as a sense of loss of personal control. These can lead to depression and poor health.

Poor mental health does not only mean mental illness. Healthy people under work-related stress face twice the risk of death from heart disease. Demanding jobs that offer few rewards have been known to trigger heart problems. Heart problems are also associated with those suffering and being treated for depression.

At a time when our government is concerned about raising taxes, potentially, to pay for the present health care system, prescriptions for antidepressants have increased dramatically in Canada. University of Toronto researchers have recently indicated that prescriptions have risen from 3.2 million in 1981 to 14.5 million in 2000, an increase of 353% over 20 years. Put differently, Canadians have increased their use of antidepressants annually by 16.8%, while the Canadian population increased during the same period of time by just under 1% annually. The cost of these medications increased from $31.4 million in 1981 to a staggering $543.4 million in 2002. If this trend continues, researchers project these costs could exceed $1.2 billion in 2005.

¿ (0915)

There is a significant cost to Canadian society and its economy if mental health is ignored. Assuring good mental health should be an integral part of government policy. At the present time, resources are limited to a small sector of Health Canada. Not only must these resources within the health policy area be increased, but mental health issues need to be integrated into the development of all government policies.

The Senate Standing Committee on Social Affairs, Science and Technology affirmed the need for substantial resources dedicated to health research. Unfortunately, when we look at health research at the present time, with regard to mental health issues, it garners less than 4% of those available funds.

The benefits of increased mental health research would extend beyond the boundaries of mental health and mental illness. For example, researchers at the University of Toronto and the Centre for Addiction and Mental Health have found that an interaction between two brain proteins can be regulated to prevent the death of brain cells. New anti-psychotic medication may be designed to modify cell-to-cell interaction to prevent abnormal receptor activity that can induce schizophrenia-like symptoms. This research holds promise, not only for mental health patients but also for stroke victims.

Unfortunately, few private research institutions fund mental health research, and universities tend to favour placing their fundraising dollars into physical health and illness research. We need funds to foster an interest in mental health research.

In conclusion, we believe there is an urgent need for a concerted effort to ensure a balanced mix of services, with support being equally available at similar levels of quality across our entire country. There is a need for a plan similar to the Australian national mental health strategy that will promote public education and awareness, to reduce the stigma associated with mental illnesses in Canadian society; ensure the impact of mental illness and mental health is considered in the development and implementation of every federal policy and legislative initiative; increase the level of research into mental illness and mental health; and create a national public health surveillance and reporting program, in collaboration with other stakeholders.

Just as broad-based strategies are in place to deal with HIV/AIDS, cancer, and diabetes, we are asking for a similar strategy for mental health and mental illness.

Thank you for your attention. I will certainly be free to answer any questions that may arise.

¿ (0920)

The Vice-Chair (Mr. Nick Discepola): Thank you, Mr. Gaudette.

We'll now turn to Hazel Corcoran, executive director of the Canadian Worker Co-operative Federation.

Welcome.

Ms. Hazel Corcoran (Executive Director, Canadian Worker Co-operative Federation): Thank you.

I'm very pleased to be here today to make this presentation on behalf of the Canadian Worker Co-operative Federation, and I appreciate the committee taking this time to provide our organization this opportunity.

I also made a presentation to the committee last year on behalf of the Conseil canadien de la coopération, where I'm a volunteer board member representing the franco-Albertan community. I just want to note that the funding we were seeking at that time for technical assistance for co-op development has, in large part, been committed by Agriculture Canada, and we really appreciate that commitment as well.

The CWCF, or Canadian Worker Co-operative Federation, is the national non-profit organization representing worker-owned cooperatives across Canada. The CWCF has been serving the developmental needs and representing the interests of worker co-ops in Canada for over ten years.

It is the organization in Canada committed to developing employment through the cooperative model. Worker cooperatives enhance the skills of groups of people to enable collective self-employment and support their community's capacity to achieve long-term sustainability.

The vision of the CWCF reflects our purpose. It is to develop and support an integrated network of democratically controlled worker cooperatives that provide a high quality of work life and that work together to support the development of healthy and sustainable local economies based on cooperative principles.

All cooperative businesses are based on the following principles, of which there are seven: voluntary and open membership; democratic member control; member economic participation; independence; education, training, and information; cooperation among co-ops; and concern for community.

There are many different types of cooperatives in Canada. Many of you on this committee may be members of consumer-owned retail co-ops. You may meet your financial services needs through member-owned credit unions. You may live in a housing co-op or you may receive health services through a health care co-op.

In total, there are over 10,000 co-ops and credit unions in Canada providing services to 10 million Canadians. Worker cooperatives are a part of that family.

Worker cooperatives allow groups of people to pool their resources collectively to address employment needs they are experiencing. Not everyone has the tools to be an individual entrepreneur. Co-ops allow for collective entrepreneurship, so the shared skills of a number of people can be applied to the task of entrepreneurship.

Workers can share the risk of capitalization of their business. In this time of economic uncertainty, especially in rural areas of Canada, with people facing job loss in many sectors and the need for economic diversification in communities traditionally dependent on resource industries, worker cooperatives are a very effective approach to creating and maintaining jobs.

It is the role of the CWCF to support those groups and provide them with the resources they need to build successful cooperative enterprises. The CWCF provides support for feasibility assessment, business planning, training and education on board skills, marketing advice, and facilitates information exchanges between and among individual co-ops.

The full potential for positive change contained in the worker co-op model has not been achieved for a number of reasons. Most significantly there is a lack of capital specifically committed to developing worker co-ops.

In countries such as Italy, France, and Spain, where public policy has been developed to support the creation and capitalization of worker co-ops, the model has been very successful in economic terms. Thus, in western Europe, with the concentration in the three countries mentioned, there are over 49,000 worker co-ops employing nearly 700,000 people.

In the Emilia-Romagna region of Italy, there is the highest concentration of co-ops than any region in western Europe. There, three out of four people belong to at least one co-op, and co-ops account for 45% of the region's GDP. Emilia-Romagna has climbed in the last 20 years from third from the bottom of all 20 regions in Italy to become the top-performing economic region in the country and the 10th highest in western Europe.

In Canada, the existing pools of money available through venture capital funds, public programs, and commercial financing have not supported the development of worker cooperatives. Shares of worker co-ops are not traded publicly. The shareholders of worker co-ops invest in their own current and future employment, not for financial return.

The CWCF has been mandated by the federal government through Human Resources Development Canada to manage a pilot project with the purpose of supporting the development of worker co-ops in Canada. The fund, despite its small size for a national program--$1.5 million--has been extremely successful.

The CWCF fund has forged formal linkages with people or groups in all provinces in Canada, including Quebec, and has made investments all across the country. It is a truly national organization.

There are two reasons that we, as a primarily anglophone organization with offices in Calgary and Kentville, Nova Scotia, have been able to work successfully in Quebec. One is our capacity to work in French. The other is the 10 years we have spent laying the groundwork with the strong Quebec worker co-op sector.

Lastly, the fund that HRDC has provided us with has caused significant interest in our organization in Quebec.

¿ (0925)

[Translation]

We are, therefore, a truly pan-Canadian organization.

[English]

Sorry. That's the only sentence I was going to say in French.

The Vice-Chair (Mr. Nick Discepola): The translators have to translate and you're going too fast for the translators.

Ms. Hazel Corcoran: I'm sorry.

The Vice-Chair (Mr. Nick Discepola): And I don't think they were ready.

Ms. Hazel Corcoran: Okay.

The Vice-Chair (Mr. Nick Discepola): If you're going to continue in French--

Ms. Hazel Corcoran: I'm not going to continue in French.

The Vice-Chair (Mr. Nick Discepola): All right then, false alarm.

Some hon. members: Oh, oh!

Ms. Hazel Corcoran: The CWCF has created a network of worker co-op developers that has a presence in every region with the skills and resources to work with groups to develop worker co-ops. Based on projects submitted to the CWCF, there is a potential for 130 new jobs to be created. Two-thirds of all projects supported by the fund are in rural communities so far.

The fund is currently in contact with projects that, if the resources were available, could have an impact on well over 500 jobs. New contacts and projects are coming in weekly. The volume of requests for information and support has exceeded the original expectations for the project and is straining the resources of our three full-time-equivalent staff members in dealing with the demand. The number of jobs that could be created given a larger fund would be limited only by the imagination of Canadians.

The type of businesses in which the fund has invested are diverse and reflect the creativity of Canadian citizens when faced with the need of job creation and maintenance. I've listed them in the document I've submitted, so I won't read them off again.

Investments in some of these businesses have saved the jobs of employees who were to be victimized by the closure of the business in which they worked, whereas in other cases the investments enabled start-ups or expansions of existing co-ops.

The financial and technical support provided through the fund allowed the employee to develop and finance business plans that have assisted the enterprises to operate as profitable businesses. Despite the high-risk nature of developmental lending, all of the co-ops that have received an investment are still in operation.

In addition we have built our developers' network through the resources of the fund. Where we originally expected to have about 10 or 15 people involved in our developers' network, we now have 38 members, and it's growing constantly.

The ability of the fund to have a greater impact on the employment needs of Canadians is limited by the size of the fund, which, as I mentioned, is currently capitalized at $1.5 million. We project that the CWCF fund capitalized at $16.5 million would be self-sustaining and the potential for employment creation much greater.

A detailed proposal in support of the self-sustaining $16.5 million fund has been prepared by CWCF and was submitted to HRDC, leading to the funding of the worker co-op fund pilot in the year 2000. No decision has been made by HRDC as to how to proceed after the completion of the pilot. However, it should be noted that it does not necessarily have to be HRDC that would provide the resources for the self-sustaining fund.

We are faced with this question: where do we go from here? In some sense, the CWCF fund has been too successful. With the projects in hand, it is likely that all the capital will be placed in the near future, at least for the initial placement. However, operational support for the management of the CWCF fund ceased on October 31, 2002. Thus the CWCF is now running the fund on our own limited resources.

There are lingering concerns to be dealt with. How do we deal with the increasing demand for financial and technical support? This support is required for the creation of new cooperatives for which the resources are not otherwise available. It is also required for ongoing business advisory services to the new and existing worker co-ops already operating.

The $15 million fund being provided over five years by Agriculture Canada will provide some assistance in this area, but this $3 million per year is for the development of all types of co-ops in every region of the country. So only a small amount, if any, would likely benefit the small worker co-op sector.

In the Speech from the Throne, The Canada We Want, it is stated that the Canadian way recognizes that economic and social success must be pursued together. Co-op businesses, based on the principles stated above, are the embodiment of marrying economic and social objectives.

The Government of Canada is committed to help build local solutions to local problems. Cooperatives are developed when a group of people identify shared needs and apply their creativity and resources to meet those needs through a cooperative effort. Co-ops are owned and controlled locally, and the democratic decision-making at the heart of co-ops ensures that they remain responsive to local needs and problems.

I want to impress upon the committee the depth of the opportunity that exists. We have taken the resources that we have been given, limited as they are, and transformed them into a national network of dedicated developers--real, new enterprises that are creating significant employment and generating wealth that is staying in the communities where the wealth is created. We have started the process, created expectations, and delivered a success. The danger that exists is that the efforts get stalled, that expectations go unmet, and that potential jobs are not created.

We have an opportunity to create a self-sustaining development fund that can unlock the emerging potential being demonstrated in the current response to the CWCF fund. We are at a crossroads. We can choose to head in the direction of Italy, France, and Spain and build on the success that our pilot has demonstrated, or we could let it die.

As a truly national cooperative organization, the CWCF is prepared to be a willing partner with the Government of Canada to help ensure that every region, every province and territory, every community, and every citizen has a strong voice and can contribute to building our nation.

To bring the benefits of our prosperity to all communities, whether urban, rural, northern, or remote, to promote innovation, growth, and development in all parts of our economy, including our agricultural and resource sectors and our manufacturing and service industries, we are requesting that the federal government place funding in the amount of an additional $15 million to enable the worker co-op fund to become self-sustaining.

¿ (0930)

We hope the House of Commons Standing Committee on Finance will recognize the infrastructure that worker co-ops in Canada have put in place and the opportunity it is creating, and act to enhance the capacity of our organization in its work to improve the quality of life for Canadians.

Thank you for your attention.

[Translation]

The Vice-Chair (Mr. Nick Discepola): Thank you very much for your presentation, and congratulations on the quality of your French.

[English]

We're taking up an enormous amount of time, and we're going to run out of time shortly. I'm going to try to discipline myself, not you, and encourage you to stick to eight minutes. My difficulty as chair is that when I allow someone to exceed their time, everybody else wants to do the same.

Next, please, is the Clean Air Renewable Energy Coalition. Who will make the presentation?

Mr. Andrew Pape-Salmon (Director of Sustainable Energy, Pembina Institute, Vancouver; Clean Air Renewable Energy Coalition): Good morning. Thank you for travelling to join us today.

The Clean Air Renewable Energy Coalition represents an important multi-stakeholder partnership of business, environmental organizations, and municipal governments. It was formed in December 2000, and together we are a new voice calling for policy changes to support the renewable energy industry in Canada.

We recognize, in the last year, the leadership from the federal government through the wind power production incentive and the market incentive program for consumer education and marketing. In fact, last year and earlier this spring we made a presentation to the committee.

Today we appreciate the opportunity to present several new policy proposals, in light of Canada's commitment to ratify the Kyoto Protocol, the continued barrier to the implementation of renewable energy, and the immense untapped opportunity to advance renewable energy in Canada.

Low-impact renewable energy resources, if developed in a substantial manner, as many of our trade partners have already done, can provide numerous economic, environmental, and social benefits. Currently there is no large-scale manufacturing of renewable energy technologies in Canada, yet many of our competitors have that.

Canada is well-positioned to attract new capital investments in manufacturing facilities. I want to point out that every electron of renewable energy produced in Canada will reduce greenhouse gas emissions in this country at various magnitudes, depending on where it is located. This positions Canada to compete in the global carbon-constrained energy economy, Kyoto or beyond. In addition, improved air quality and reduced human health impacts will accrue from developing renewable energy sources.

Players in this innovative clean-energy economy, if it is launched in Canada on a large scale, will invest in research and development into new technologies that could position Canada as a leader in the development of the next generation of renewable energy technology.

Further government action is required because Canada is currently still lagging behind other countries with respect to renewable energy production. The capacity of wind power facilities grew by over 35% per year in the late 1990s and over the last two years. The total installed capacity of wind power worldwide is 27,000 megawatts, well over Alberta's capacity, while Canada is currently at around 215 megawatts and Germany is over 10,000 megawatts. So that puts everything into perspective. We have a slide with charts that show how Canada shapes up against other countries in wind power capacity.

We need a supportive policy environment to attract investment and growth. That worldwide growth is happening. It could be brought to Canada if we create the right environment.

The wind power production incentive, which was the single largest investment of the federal government in wind power in recent history, is still quite a bit smaller than the equivalent mechanism in the United States. So we're competing with the U.S. for these investment funds, and it is not a level playing field. Also, the wind power production incentive only applies to wind power, yet we're sitting on a wealth of other renewable energy resources, such as biomass, small hydro, solar, etc.

There's a financial gap on the retail side of the equation--the cost required to educate and engage consumers in the purchase of green power. The market incentive program is a good first step toward dealing with that particular gap, but it's only a pilot project.

Finally, we're lacking important knowledge about where the key wind energy resources are in this country. We don't have a wind resource atlas, like many of our competing neighbouring jurisdictions.

We have a seven-point strategy for increasing the size of the renewable energy industry, and I'd like to pass it on to Marlie Burtt to explain our seven points.

¿ (0935)

Ms. Marlie Burtt (Director, Tax, Suncor Energy Inc. Calgary; Clean Air Renewable Energy Coalition): Thanks, Andrew.

We have, as Andrew indicated, seven primary recommendations. The first is for Canada to take the lead on a federal basis to establish a national renewable energy target that would focus the policymakers' attention, in all the provinces and territories, towards reaching a common goal.

There are numerous industrialized countries around the world. We have a table attached in our presentation that shows some of the targets that have been set by other countries.

In conjunction with this, we would recommend a national renewable energy certificate or green-tag trading program be implemented to create a dynamic market for environmental benefits, to try to keep the costs down and ultimately to remove the requirements for the subsidization the credits provide now.

Various provinces are considering some of the initiatives, but would support a national initiative on that basis. Many states in the U.S., like Texas, have a very effective system that would be representative of what works.

In terms of the WPPI program, which is the producer incentive, we would strongly recommend the federal government increase the level of incentive to harmonize it with the U.S. Currently, the U.S. incentive is worth four times more. We are very concerned about leakage of investments in this industry to the U.S.

Capital costs are increasing for wind power resources because of the Canadian dollar, in terms of the wind turbines. The current WPPI level isn't adequate to attract producer investment. Since it has been announced, at 1.2¢ a kilowatt hour for the first year of the program, there has been very little take-up. I believe, even from the most recent announcements, very few of the wind farms in Alberta will qualify for the higher level of WPPI.

The concern I've heard from the federal government, on one side, is there is an over-subsidization of what may be economic wind development. Our view is, with the work we did with Enercon and the government to develop the recapture rules to prevent over-subsidization, there are recapture rules to ensure we don't actually use taxpayers' dollars to subsidize anything that's already economic.

With respect to the renewables, on a broader basis, we consider it very important that renewable energy resources other than wind also be eligible for the incentive, similar to the wind power production incentive that was introduced last year. This would also help to ensure meaningful participation by the provinces and territories endowed with the resources, I think, as they begin to understand the components.

Lastly, we've made some recommendations in terms of increasing the market-side incentive to $30 million a year from the current $25 million over five years. We understand, through the climate change policy announced by the government, they appreciate the importance and need for this education and marketing initiative on the demand side.

We'd like to thank you for your attention today. We have included brochures that go into our proposals in more depth.

¿ (0940)

The Vice-Chair (Mr. Nick Discepola): Thank you very much.

I'd like to now ask Beverley Smith to make her presentation, please.

Ms. Beverley Smith (Individual Presentation): Hi. Thank you.

Mine's short; I timed it.

There's been a lot of talk lately about the career-family balance, high stress levels among adults, and increasing behavioural disorder in children.

Though I have personally submitted a 200-page report—which someone has just called the baby book—if I have one thing to recommend, it would be for you to value the unpaid care of others in the next budget. This will best meet the throne speech's goal to leave Canada a better place.

Most adults at some point have to take care of someone young, sick, handicapped, elderly, or dying. Traditionally it was a woman's role. This meant that it was unpaid or low paid. The fact alone of the low pay explains the feminization of poverty, low wages for all caring professions, and the real problem with administration of pay equity. Though men can now do caregiving, there is still a problem—the role itself is devalued. Some even feel the role—part-time, full-time, or occasional—is being punished, whoever does it. This is causing much hardship, even poverty.

Your goal of economic prosperity depends on the paid worker not being distracted constantly by such concerns—which also addresses the mental health issue mentioned earlier.

Someone has to do this caregiving work. Yet if you pay a huge paid workforce to do this work professionally, it will break the state. Your goal of future productivity absolutely depends on today's good care of the young. Yet we must not assume only one type of institutional care is good care. We can save money and be fairer if we remember one tenet of democracy—let the people choose how to live.

The throne speech notes the global economy, our need to respond to change, and to be Internet literate. I urge you to notice that the solution is already at hand. People are working more from home offices, doing odd shifts on the net at any hour. We have telecommuting, flex time, and job sharing, to let people meet their life obligations as well as earn money. People are voting with their feet. Yet past budgets have assumed one lifestyle of paid employment outside the home from 7 a.m. to 5 p.m.

We can save a lot of time if we just value care of others and stop worrying about marital status, gender, or income of the caregiver's spouse to qualify. We need to value caregiving itself.

A truly creative budget would recognize this shift has already happened and would provide benefits for Canadians that are as flexible as their new options. Instead of targeting care of the elderly in institutions only, have the benefits flow with the person receiving care.

The throne speech proposal to give tax breaks to those caring for the dying or handicapped is a good start, but it still excludes most caregiving. I urge you to let people choose how to provide the care and where, and whatever financial support the state does give, give it without strings. Do not tie it to paid labour. Taking care of the baby or grandma isn't useful because last month you earned money, it is useful in itself.

I agree with the throne speech that we need to value lifelong learning, the best education possible, and review use of catalysts for change. But let us not forget that children are born ready to learn. Early childhood education happens wherever there is a child—at grandma's knee, or dad's, or the nanny's, or in the day home. I suggest that you do not give preferential funding to any one style of care, because, as the throne speech said, the times are changing. Let the people choose. Fund them equally. Many European nations are already valuing and funding the fuller range.

Our birth rate is falling, most recently to 1.4, versus the replacement level of 2.2. We need more people. We can fix this by immigration, as we're doing. But we must remember that immigrants die. We need children.

The throne speech said no investment has greater payoff than money spent on children. I agree. But we should not just fund certain kids; we must fund all kids. Let the benefits flow with the child. Maternity benefits should have only one condition: the birth of a child. Child-rearing expenses happen everywhere. Let all parents get a refundable tax credit or allowance.

The throne speech spoke at length about democratic participation, hearing from the voluntary sector, including people such as myself—whose views are often excluded—and about sharing prosperity by all and lifting every family and every Canadian. It aimed at inclusion. Surely such glowing terms suggest that the next budget should be the most inclusive ever, at last valuing unpaid caregiving. We need it included in pensions. We must not assume single mothers with small children are best away from the child. We must stop saying an adult taking care of a loved one is not working. We must live up to the 1995 UN commitment to value unpaid labour.

The care sector of the economy is a pillar under the bridge of the nation. It is crumbling. Yet you can build it up again if you value its work. As the Romanow commission is noticing, home-based care saves billions of dollars in the health budget. We must not discourage it.

I urge you to create a budget that respects the diversity of the nation and lets people maintain their own language, culture, and traditions as they choose, rearing their young and caring for each other as they choose. Canada, as the ultimate democracy, should only say to this wide range of choices: we support what you do.

¿ (0945)

The throne speech aimed at a partnership between government and Canadians, and I recommend this as the partnership.

The Vice-Chair (Mr. Nick Discepola): Thank you, Beverley.

I'd like to conclude our presentations with Mr. Eric Cordeiro, please.

Welcome.

Mr. Eric Cordeiro (Individual Presentation): Good morning, ladies and gentlemen, and thank you for this opportunity for making my feelings and thoughts known to members of this committee.

I speak not only on behalf of myself, but I think also on behalf of millions of my fellow Canadians, who I believe are caring and compassionate people with a conscience.

It is regarding our battle against world poverty, hunger, and disease. I call it the anti-PHD battle. I will take an opportunity of making a formal presentation, as I have laid out already, but I will digress in my recommendations on page 2.

My name, of course, is Eric Cordeiro. This presentation is a request—

The Vice-Chair (Mr. Nick Discepola): Do you have a written presentation? We don't have a copy of it. Okay.

Mr. Eric Cordeiro: We ran several copies outside. I brought four copies with me.

The Vice-Chair (Mr. Nick Discepola): Go ahead.

Mr. Eric Cordeiro: This presentation is a request to increase the rate by which our foreign aid funding should be restored to historical levels of 0.49% in 1993 from the dismal figure of 0.23% of GNP just this last year.

I'd like to start with a quote from one of our MPs, Dr. Keith Martin. He said “There are millions of people out there living lives of quiet desperation. They don't have a voice. It is our job to speak for them.” I hope I can speak for them this morning.

The enormous silent suffering experienced by millions of the poorest people in the world escapes the notice of many of us, yet this suffering is very real and most of it is preventable. All that is needed is the will to prevent the suffering. I might add that I've been there and I've seen that.

In the throne speech, which opened Parliament on September 30, the Liberal government set out plans for the second half of its mandate. In part, the speech said:

Canada has a long history of contributing solutions to global problems. ... We will double our development assistance by the year 2010, and earmark at least half of that increase for Africa as part of Canada’s support for the New Partnership for Africa’s Development. As of January 1, 2003, Canada will eliminate tariffs and quotas on almost all products from the least-developed countries.

This is a good start, I may say, right here. It reaffirms Prime Minster Chrétien's commitment earlier this year to increase aid 8% annually, which would indeed amount to a doubling by 2010, in the unlikely event that this increase is not discontinued over the next eight years. However, even this would be quite inadequate to make up the cuts to Canadian aid over the past decade. We have cut our aid from some 0.49% of our gross domestic product in 1992-93 to a dismal 0.23% just this last financial year.

As you know, Canada fares very poorly in aid levels compared with some of the other wealthy industrial countries of the world. The recent United Nations human development report shows that Canada is ranked just behind Norway and Sweden as one of the top three countries in the world in which to live, taking into account income, education levels, life expectancy, and, I may add, the quality of life. However, comparing levels of generosity to the world's poor, it's a very different story.

Norway and Sweden are both among the most generous countries in the world, each with foreign aid levels above the international target of 0.7% of GNP. Canada, on the other hand, saw its aid fall again to 0.23% of GNP just last year, an all-time low, bringing Canada's ranking among 22 top countries to number 18 out of 22. This has fallen from number 6 in 1995, and it's a steep fall, I might add.

The decline in generosity is despite numerous examples of very successful, highly regarded aid programs such as Canada's international immunization initiative, which has saved hundreds of thousands of lives. I understand it has saved some 125,000 lives, the United Nations said just last year, and this is a mandate running from 1997 to 2003. It's a five-year mandate instituted in 1997 where our government, I believe, is giving $10 million to one of the UN agencies, possibly UNICEF, for an immunization program. Now this immunization program, the Canadian international immunization initiative, is very definitely saving 125,000 lives. That is a very commendable achievement.

¿ (0950)

I am saying that what is needed is an increase of 20% per year for the next five years, as opposed to the 8% that has already been slated.

One of the major obstacles to meaningful increases in aid, both in government and in the public, is the perception that much aid is ineffective or wasted. This obstacle can be overcome if aid is directed to programs that demonstrably are effective--basic education, for one, basic health care, clean water and sanitation, and microcredit for the poorest. Microcredit is the concept espoused by Dr. Muhammad Yunus, who has been decorated and given an honourary Ph.D. by the University of Toronto. He was the founder of the Grameen Bank in Bangladesh in the mid seventies and the founder of the concept of microcredit or microfinance.

On September 25, 2002, Minister Susan Whelan released CIDA's new foreign aid policy, “Strengthening Aid Effectiveness”. The new policy contains a number of positive elements, including better alignment between CIDA's internal policies and priorities, and Canada's external commitment to the millennium development goals. This change is a good indication that Canada's aid, as it is increased, will be very well used.

As a concerned Canadian, I request that this committee consider and implement the following course of action. Canadians consider themselves to be a generous neighbour to the developing world, and I believe wish to continue to think of themselves that way. Unfortunately, our government spending on aid does not reflect Canada's wishes. Perhaps I might offer a couple of specific suggestions. One is increasing our aid from the present 8% over the next 10 years, or 8 years, to 2010, which I believe will only take our total to 0.35% of our GNP. I suggest we go with the 20% increase per year for the next five years, and that, I believe, will bring us from our 0.23% of GNP back to the 1993 levels of 0.49% to 0.5% of GNP.

I might add that these increases are still off from what Lester Pearson originally promised of 0.7% of GNP, and is the standard, at least, for all the developed countries of the world.

There are two very specific recommendations I have here--I will digress from my presentation. One is the immunization initiative. I believe its mandate is running out as of March 2003. We have an excellent opportunity. In the past, $10 million per year has been allocated, resulting, as I said, in the saving of some 125,000 children's lives each year. I recommend, suggest, and request that we raise this to $10 million per year for the next five years, for a total of $200 million. This would still be a very small fraction of the $1.2 billion our federal government, Mr. Chrétien, has allocated only for Africa. I believe he has allocated some $6 billion over the next five years, which is $1.2 billion per year. This $40 million per year is going to save 500,000 children's lives--half a million lives--and we are going to make, as Canadians and as a country... I feel very strongly about this because Dr. William Foege, who is presidential distinguished professor at the school of public health in the United States at Emory State University, has said--I will just take a moment here and quote him very briefly. I'll just paraphrase it. He says it's a very, very good cost-effective measure. You couldn't come up with anything more cost-effective. As a small business person myself, I believe in that--immunization for about $16 to $20 per child. A child can be immunized against the six major diseases of childhood, resulting in the saving of millions of children's lives every year. Eleven million children die because of lack of immunization in our world every year; that's 30,000 children a day.

¿ (0955)

Secondly, I have a very short, specific recommendation to this committee. That is, we're all talking about our increased health costs. There is a program, I understand, of some 44 countries that are breadbasket cases, to take off the tariffs completely as of January 1. I believe the country of Thailand is not on that list.

I might add that because I'm in the business of latex gloves... Malaysia and Thailand are the worst countries because of all the natural latex that is grown there. I urge this committee to consider, if not completely removing the 15% duty that the Canada Customs and Revenue Agency charges on importation of these gloves... that this tariff be removed from the countries of Thailand and Malaysia. I recommend that wholeheartedly. This is going to serve two purposes. It's going to help those poor countries like Thailand to export their gloves and their products to Canada, and it's going to be a big--

À (1000)

The Vice-Chair (Mr. Nick Discepola): I'm going to have to ask you to conclude; otherwise we'll have no time for questioning.

Mr. Eric Cordeiro: Okay. Those are my recommendations, and I thank you for the opportunity.

The Vice-Chair (Mr. Nick Discepola): Thank you very much.

Colleagues, we don't have very much time, so I'll invite you to split the nine or ten minutes for yourself, Mr. Harris, and the balance of the time amongst the three Liberal members, and congratulate you on your re-election as vice-chair. We had a secret ballot.

Mr. Richard Harris (Prince George—Bulkley Valley, Canadian Alliance): Thank you very much, Mr. Chairman, and thank you, presenters, for your presentations today.

I have questions for three of you.

I do want to applaud Beverley Smith for your work over the years. It's a cause that you've championed. You're not there yet, we're all not there yet, but I applaud your work, and I'm looking forward to reading your very lengthy submission.

I have a question for the Renewable Energy Coalition, Mr. Pape-Salmon and Marlie Burtt.

I understand there are some wind power facilities in Canada now that are selling electrical power into the provincial grids already. If I'm correct in that, are they profitably operating as private companies?

Ms. Marlie Burtt: I'll ask Paula McGarrigle to deal with that. She's in the renewable group with Shell, so she'll respond to your question.

Ms. Paula McGarrigle: The current 215 megawatts that exist in Canada today are wind farms that are producing efficiently but are heavily dependent on very high premiums to the retail customer. For example, most of the power that's sold in Alberta is done through ENMAX or EPCOR, which in turn charge the retail customer a fairly substantial premium. So they are dependent on very small markets that can afford a premium price.

The other wind farms are done through the government 20% procurement program. In Saskatchewan there was a small 11-megawatt wind farm and a 9-megawatt wind farm in P.E.I. Those two were done through the federal-provincial program.

The largest one is 100 megawatts, which is done through Hydro Quebec. The power is sold into the grid. I believe it was started as part of the export into New England. It was a requirement to have wind as part of the export.

Mr. Richard Harris: I guess my question is whether it is a viable business venture for an investor or investors to get into the wind power business as into any other business. Can it make money, and would it make money without being subsidized to some extent by any level of government? Just as someone would invest in a hotel or a manufacturing plant, is investing in wind power facilities a good investment on its own at this time?

Ms. Paula McGarrigle: The difficulty right now is that Canada is blessed with very low power prices. Renewable energy does cost more than traditional sources such as hydrocarbons or large hydro, so by comparison renewable energies require subsidies or incentive levels.

Today Shell and Suncor are interested in investing in renewables. Canada is difficult for investing compared to other countries where there are more incentives. So it's difficult on a global basis to see Canada as a fruitful place to place your investment because in comparison with traditional power sources it's so low.

Mr. Richard Harris: I would think there would be a great opportunity in the province of Ontario to try to sell their power privately these days, electricity prices being what they are.

Ms. Paula McGarrigle: Deregulation certainly has opened up opportunities for wind farms, for example. I know in Ontario there's starting to be some interest.

One of the things about Canada is that we are blessed with a fantastic wind resource. So we should actually develop where the resource is best and bring it to the load, similar to our hydrocarbon business, rather than trying to invest in wind resource that is poor because it's beside the load.

Ms. Marlie Burtt: I'd only add that, ultimately, countries like Denmark and Spain have built a sustainable industry. There's a critical mass required and then it absolutely can be sustainable. We will find we need to be able to develop our own industry with respect to manufacturing in Canada.

Currently, we're at a significant competitive disadvantage. I would say currently it is not sustainable. We're hoping, through the short-term, over the next five or six years, with support from the government, we can create a sustainable industry.

À (1005)

Mr. Richard Harris: Okay. I'll look forward to studying your submission a little more.

Mr. Gaudette, with the Canadian Mental Health Association, I have a couple of questions. I know your organization champions the cause of mental illness in Canada.

What is the amount of federal funding that goes to this issue, currently, in all forms? Forget about transfers to provinces for health care and treatment.

Mr. Bill Gaudette: Thank you for the question.

As we've indicated in our brief and in my comments this morning, I can't quote you a dollar figure, but I can certainly go back to the comparison we made in our presentation.

If we look at cancer promotion, which is really, I think, an appropriate role for the federal department to be involved with, they have over a hundred staff dealing with that issue. When we look at mental health promotion, which again we think is a very appropriate activity for the federal level of government in this country, fewer than ten staff members are involved in that. Yet when you look at the relative costs of those two disabilities to our Canadian economy, they're very comparable.

Mr. Richard Harris: Notwithstanding even the comparison, surely you would think that an issue like mental health and the number of people who suffer from it in Canada would demand more than ten individuals at the federal level who deal with it. I guess that's why you're here, eh?

Mr. Bill Gaudette: You have captured the essence of our point, Mr. Harris. When we look at the prevalence of the disease, one in five of us in this room will probably suffer mental illness during our lifetimes. The numbers are consistent across all socio-economic groups. In fact, they're very consistent around the world. When we look at the level of prevalence, we certainly don't see the focus reflected at the federal level or, quite frankly, at the provincial level.

Mr. Richard Harris: How much time do I have?

The Vice-Chair (Mr. Nick Discepola): You have two minutes.

Mr. Richard Harris: I have a quick question for Ms. Corcoran. I appreciated your submission, and I understand what you're trying to do.

I need you to help me out a little with a problem that has come up over the last ten years in my riding, where a business has been established. I'll give you a specific example, a small restaurant in a small town in my riding. A husband and wife started it 25 years ago. They scrimped and saved and worked night and day in their business. They are not getting rich, but just making a living. About three years ago a couple of people applied to the government under some program to get a grant to start a business, and they chose to start a restaurant and compete directly with the mom and pop business. The new business failed after about a year and a half, but in the interim it caused a lot of concern to the mom and pop who had spent their lives trying to build their business and were just making it.

The question they asked me was, how can the government give money for this new venture when we're not eligible to get any type of funding from the government--nor do we want it--and this new business competes with us? They were asking me how that can happen, and I don't have an answer for them. Can you help me out?

Some of these businesses could fit into the type of situation you have listed here.

Ms. Hazel Corcoran: One point is that the program we're running is not giving grants to the businesses. We're assisting in giving loans to them, which they could not otherwise receive as cooperatives, which aren't speculative in any way. So they cannot basically tap into even small amounts of venture capital.

Basically what we're talking about is a situation where if the competing business in that scenario were an ordinary business, in many cases they would be able to start up with capital they acquired from various types of sources. If they are starting up as a cooperative, they aren't going to be able to tap into as many sources.

That's a difficult problem, and what we're saying is we're not advocating grants to those businesses; we're advocating loans so that there is a level playing field for our type of enterprise.

À (1010)

Mr. Richard Harris: I have one more little one, Mr. Chairman.

The Vice-Chair (Mr. Nick Discepola): We're going to have to have another secret ballot here.

Some hon. members: Oh, oh!

Mr. Richard Harris: If mom and pop restaurants wanted to get a loan, they would have to put up security for the loan. How would a cooperative put up any security for a loan from--

Ms. Hazel Corcoran: Well, in the same way as any other business. The business side rules are basically the same for cooperatives as they are for business corporations in terms of finding security.

Mr. Richard Harris: But to get the money in the first place--

The Vice-Chair (Mr. Nick Discepola): You may want to elaborate on this question in response to someone else's question.

Sophia Leung, please, seven minutes.

Ms. Sophia Leung (Vancouver Kingsway, Lib.): Thank you, Mr. Chair.

I want to thank you all for your very fine presentations. I'd like to start with Ms. Smith.

Welcome back. I've seen you before. I know you have been a strong spokeswoman for women, children, and family issues. Congratulations for this report.

I'd like to ask you this. On your page 173, you have many proposed changes. I thank you especially for urging us to recognize the caregiver's contribution. I think we are quite aware. I'm glad you caught our attention further.

On the 12 points you propose for change, you mention, for instance, in number 10 that we already fund maternity benefits through...etc., even though we already have doubled the time for leave from six months to twelve months. Among your 12 points can you point out some priorities perhaps that we can look into and focus on?

Ms. Beverley Smith: There, you caught me. I have to look it up now.

Ms. Sophia Leung: Page 173.

Ms. Beverley Smith: Page 173, sorry. Number one would be our top priority.

Ms. Sophia Leung: Is that all you ask for?

Ms. Beverley Smith: The definition of work--you will find that a lot of things will flow from that.

In terms of what you've done for maternity benefits, I certainly appreciate that although that is still tied to a very small segment of new mothers, that is tied not only to just mothers within the paid labour force, it's tied to employees, not employers, not self-employed. It's tied to a certain number of hours of paid employment last year. So there are a lot of women who had a difficult pregnancy who didn't get in that number of hours, as they were at home. It's exclusive, in terms of, yes, you're doing good things, but it's not enough, of course.

Ms. Sophia Leung: Thank you. Keep up the good work.

To the AREA group, I'm very interested in a lot of your innovative programs, specifically the Fort McMurray project--it's excellent--and also your central Edmonton community land trust.

I'm also very happy to hear that you find our homelessness program and support very useful. Can you more or less give me some idea of how you find our federal government's partnership through the homelessness project, how that flows, and whether we can look into perhaps doing a little bit more to support your group?

Ms. Janet Poyen: You're asking us to say why the support is so important?

Ms. Sophia Leung: No, we already gave you as much support, right?

Ms. Janet Poyen: Yes.

Ms. Sophia Leung: But is there any more innovation we can do?

Ms. Janet Poyen: I believe the system is working quite well the way it is; it just needs more funding.

I'd like to emphasize the SCPI funding that came through Claudette Bradshaw. When we said there seemed to be a housing culture being developed, there's a whole group of people in every community who talk in a sort of shorthand. They talk about PDF loans, RRAP funding, and SCPI communities. This whole culture is growing, and everybody's trying to work harder at creating these innovative projects. It needs that local involvement and people working on a volunteer basis, attracting funds from the private sector, to make it work.

We don't want to go back to the old system, where money was thrown at developers and investors and it was just lining their pockets. All those schemes failed. It's working now, with everybody working together--the three levels of government, the private sector, and the non-profit groups.

For example, what are SCPI communities? They are the ones that have been targeted for the major amounts of money, and they have to develop three-year, long-term plans before the government will give them the money. The money flows from the federal government through the provincial governments, and the provincial governments set up the parameters for what funding will be received by whom. So developing these plans has made everybody work together, has increased their awareness of what works, and has led to more innovative ideas.

Does that answer your question?

À (1015)

Ms. Sophia Leung: So you're really saying the federal government started the motivation, but the local partnership is very important.

Ms. Janet Poyen: It's very important. Then the local group lobbies the provincial group.

Ms. Sophia Leung: Okay.

Mr. Gaudette, I'm very interested in mental health. In the early years I was involved in work with mental health. I know how sometimes you really feel like a foster child.

But I'm just wondering, the cancer and heart and stroke associations do a lot of fundraising on their own, privately. I've never really heard that mental health goes to 200% to do that. Is it partly because there's still guilt and shame attached to that? Why don't you have the force to run a campaign on that? Can you answer that?

Mr. Bill Gaudette: Thank you for your question.

There are many mental health and mental illness organizations throughout Canada. I can only speak for our organization, but I think our experience is probably similar to that of other organizations. Unfortunately, mental illness, to be very specific, is not a particularly sexy thing to raise money for. It is very difficult, to be quite frank. Certainly at a local level here in Calgary, and at other local levels across the country, we make our best efforts to raise funds and provide part of our income and our budget base that way, but it is a very difficult struggle. It is not one of those topics that readily attract large amounts of money, unfortunately; there is a whole lot of stigma. I suppose people feel quite ill at ease when we talk about mental illness. Just the fact that we're here talking today is great for us, but it's one of those issues that as a society we still struggle with. Because of that it is difficult to do fundraising.

Ms. Sophia Leung: Thank you.

The Vice-Chair (Mr. Nick Discepola): Thank you. Mr. Murphy.

Mr. Shawn Murphy (Hillsborough, Lib.): Mr. Chairman, I too, like my other colleagues, want to thank everyone for their presentations here today.

My first question is to the representatives from the Alberta Real Estate Association. I just want to explore the whole issue of the housing industry in Canada and why the private sector hasn't responded to what I consider to be a perceived need. This is not only in Alberta; we see it very much in Toronto, Ottawa, and other centres, where you look at a situation of interest rates being at an all-time low, demand or vacancy rates in a lot of the centres I assume you're talking about being extremely low, and other investment opportunities--the stock market, the bond market--not giving any great return on equity.

I know you've mentioned three recommendations--zero rating the GST, the loan losses, and I forget the third one, but it will come to my mind shortly. Is there anything specific we as a government can do? I can't understand why the market isn't responding to these situations. The third was that rents are high. Is there anything specific we as a federal government can do? Of your three recommendations, which one would you prioritize?

Mr. Les Higa: Thank you for your question.

In response to that, I believe in terms of the rental accommodation being part of the homelessness problem, we need to get more than just the corporations involved in this; it has to come from the grassroots. And with the budgets of the past and the removal of the MURB program, as it was called, where the capital cost allowance or depreciation on properties was allowed to be offset on other income.... When that program was taken away--and I was a realtor back then, too, in 1980, and this happened in the early eighties--I saw a significant drop in my community and across the province in the willingness of investors to get into that marketplace because of that.

I guess maybe it's a trend that hasn't been turned. You asked about whether the housing market can respond because interest rates are lower and there seems to be a demand. We're trying to do that, but because of that demand the market also sets prices.

In many cases we're talking about rent controls that were in place that limit the amount of returns that investors can get on revenue-type properties. With the housing boom that is happening in this province and in parts of Canada, the amount of land available that can be brought on at any specific time is limited, and that creates a higher value on land. The cost to produce, the labour involved and whatnot--all those costs have increased, so that's what has created the problem for us in the industry.

We want to make sure we protect the industry, but at the same time we want to make sure we're also housing those who can't reach the prices that are there. We're hoping that with some adjustments to the budget we can create a better investment.

À (1020)

Mr. Shawn Murphy: The next area I want to pursue is with the Clean Air Renewable Energy Coalition. This is in respect to the wind power initiative.

I know 25 years ago we were starting a technology cluster with wind power here in Canada. We let it slip and it went to, I believe, Denmark and Germany.

What is the cost in those countries as compared to Canada, where I think the technology is more advanced?

Ms. Paula McGarrigle: I'm sorry, what was your question?

Mr. Shawn Murphy: The technology in wind power, I believe, is more advanced in Denmark and in Germany. What is their cost per kilowatt hour as compared to our cost?

Ms. Paula McGarrigle: Obviously, it depends on how many megawatts you buy at any time. If you buy a small amount, it can be as high as $1,700 Canadian a kilowatt and as low as $1,200 Canadian a kilowatt for installed capacity. What's happened is the previous Canadian technology did not further advance and the Danish and the German technology has taken over. So that technology is now exported worldwide, and that is the technology's choice, which is a horizontal access three-bladed turbine.

Now the costs have come down substantially. They've come down, on average, 4% a year, and we expect in the next 20 years they'll decrease a further 20%; therefore, they will be able to compete with other traditional sources. The problem is in the short term.

Mr. Andrew Pape-Salmon: I think it's important to add that with the exchange rate fluctuations we're a victim of the daily changes in the value of the dollar. So having manufacturing capacity in Canada creates that stability for a long-term price that's going down at the rates that Paula suggested.

Mr. Shawn Murphy: What public policy instruments were used in Denmark and Germany to stimulate this sort of development?

Mr. Andrew Pape-Salmon: In those countries they chose a premium price approach where they have a flat rate for wind power purchases. It's stable over many years. It's close to the retail price of electricity, so it's quite high.

Mr. Shawn Murphy: Would the balance be subsidized by the governments of the day?

Mr. Andrew Pape-Salmon: That's right.

Mr. Shawn Murphy: And what percentage of that is compared to what we have to deal with here? Is it high? It's still quite high in Denmark and Germany.

Mr. Andrew Pape-Salmon: Yes. Denmark is switching to a market-based mechanism--a quota--which is what we're recommending as number one. The U.S. is going in that direction as well--a portfolio standard approach where you set a vision for renewable energy in the future and then there's flexibility within the market to reach that target. Denmark had switched to that system, but it started off on a premium price system.

The Vice-Chair (Mr. Nick Discepola): Last question.

Mr. Shawn Murphy: There's no question that in the next three or four years there's going to be a lot of developments in wind power in Canada. I'm convinced of that in my own mind. But from your experience, what is the mood of the Canadian public if we went to them? I know there has to be public participation in all levels of government, but if we went to the public and asked them to pay an additional 15% or 20% above and beyond what they're paying now, are they receptive? Is there an appetite for that sort of proposal?

À (1025)

Ms. Marlie Burtt: There's certainly a green power goodwill element that people are prepared to pay, and that has been shown from the take-up from EPCOR and ENMAX in Alberta, for example, but the take-up is quite small. We've had 2% response from the ability of the market demand for people willing to pay a premium. I think there's a measure of goodwill, but it's limited when it comes to dollars.

Ms. Paula McGarrigle: The market is actually divided into three sections. We call the first transformer the dark green; the next ones are the sprouts. Dark greens and sprouts make up 49% of the market. The other 51% are not interested in paying a premium or even if it was the same amount. A significant portion of the market is very price sensitive. As the price of green power decreases, there's more of an incentive to switch over.

Mr. Andrew Pape-Salmon: I think it's important to add that in the Texas style of a quota for renewable energy, in which the cost is shared between all consumers, that may impact $1 per month for an average household, whereas the Calgary approach is ten times that. It captures a much smaller percentage, but the costs are borne by the upper middle class, who are aware of these issues and concerned and willing to spend their money on that. There's a big difference.

The Vice-Chair (Mr. Nick Discepola): Thank you.

I'd like to conclude this questioning now with Mr. Cullen, please.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Mr. Chair.

Thank you to all the presenters. I have a whole bunch of questions. There won't be time to get to them all, but I'd like to start with Mr. Cordeiro.

I certainly agree that we should be doing more to help those in developing countries help themselves. One of the big challenges, as you know, is governance. I'm working with other parliamentarians, with the Global Organization of Parliamentarians Against Corruption. It's a big job.

If you look at countries in Africa, in South America, in Asia, and everywhere, this is a huge challenge. How do we make sure we get the bang for the taxpayer's buck, and that the money isn't going into Swiss bank accounts for the leaders of these countries?

Mr. Eric Cordeiro: I couldn't agree with you more. There are some very corrupt governments in a lot of these developing countries.

We have a very good model based on the Grameen Bank of Dr. Muhammad Yunus in Bangladesh, which is the whole concept of microcredit and microfinance. And this is very appealing to me as a small businessperson. Modest loans of $50 to $100, perhaps $200, are advanced to the women and the families, and they are able to go out and buy chickens and develop their small microbusinesses. We have any number of experiences and models now, so this is turning out to be one very effective way of going directly to the people, not having to give the money out. We've given a lot of money in the past to these great megaprojects involving governments, involving a lot of corruption.

This is a very effective tool, to use microcredit going directly to the people. Dr. Muhammad Yunus currently has a program where he's trying to reach 100 million families within the next five years.

I believe if we can get CIDA on our side to look into this...and I believe there are already two studies being done, including one in Canada on the effectiveness of microcredit, and that is a very effective tool.

Mr. Roy Cullen: I agree with you on microcredit. In fact, I just wrote to the minister to ask her to push microcredit more. In fact, there was a big conference recently.

I'm going to have to move on to other realities, unfortunately.

Not to be sexist or reverse sexist, one of the things we find too with microcredit is that women do very well with microcredit, better than men in fact.

Mr. Eric Cordeiro: Absolutely. The retention rate is some 98%, and it's all based on the village concept, peer pressure, etc., and it's a working model there.

Mr. Roy Cullen: Thank you very much.

I'd like to go to the Clear Air Renewable Energy Coalition. Our government just came out with their draft plan on climate change. They have set some targets in terms of renewables. I'm wondering how that stacks up against your targets.

I also had another question on the big promoter of landfill and on capturing methane. I'm told that methane is about 20 times worse than CO₂ in terms of greenhouse gases. The government has suggested a way of maybe using that in the emissions trading system, for those who are capturing methane.

Can I just throw in another one? Where do we place our emphasis with the whole business of consumer incentives versus production incentives? We won't be able to do everything. Consumer incentives have a demand pull. If you create production incentives and there is no market... But consumer incentives will create a demand pull that will incentivize producers. Where do you see that sawing off?

I'm sorry to throw a bunch of questions at you, but if you could respond...

À (1030)

Mr. Andrew Pape-Salmon: On your first question, to target 10% of the growth of electricity supply from green power is a fantastic step. It's slightly smaller than what we provided in the example. We didn't actually specify a target, because we recognize that each jurisdiction would have its own interest.

That target does match the BC Hydro target, which is currently the largest in Canada. You can see in the charts that it's quite a substantial impact.

The key is, how do you define green power? We want to ensure that it's narrowed to low-impact renewable energy. On our website, we have definitions of what we consider low impact, including landfill gas.

Ms. Paula McGarrigle: Landfill gas clearly has a huge ability to reduce emissions, by converting methane into CO₂, and also by generating power that then offsets other hydrocarbon power sources.

Some of the problems with developing landfill gas in Canada include the fact that, with landfill gas, it's best to put generators on a very large landfill with a good lifespan, to be able to get some capital return. The problem in Canada is that our population is spread out so far, there are only a few landfills that would actually qualify as economically viable to develop them into power. As for the rest of them, collection systems can be used to collect and then flare the gas. But to put the turbines on to convert them to power is actually quite pricey and difficult to get an adequate return on.

Mr. Roy Cullen: Just on that point, there's a company in Ontario that has a patented technology—an anaerobic process—that basically obviates the need for landfills. They just take the garbage, convert it to methane and into electricity, into the grid, etc.

Ms. Paula McGarrigle: The issue with that is that source separation is required because it must be organic rather than a mixture of organic and inorganic--

Mr. Roy Cullen: What about the consumer or producer...

Ms. Marlie Burtt: I can respond to that one.

If we had to prioritize where we get the biggest bang for the buck, I would say, to Andrew's earlier point, the broader the base you can spread for consumers to acquire green power, the less the cost for the retail piece.

I think then it becomes really important, from the producer perspective, to make the green power cost competitive with the fossil fuel power, again, in the next few years while we're still trying to get the critical mass.

Mr. Roy Cullen: Where do we then put the emphasis?

Ms. Marlie Burtt: We would put the emphasis on the producer incentive.

Mr. Roy Cullen: The emphasis would be on the producer incentive.

Ms. Marlie Burtt: Provided the utilities will spread the cost of green power across the whole consumer base, it has very little impact.

Is it a broad-based cost that consumers should bear? If it's done in that way, there's less consumer incentive required and more of a focus on education.

The Vice-Chair (Mr. Nick Discepola): Thanks very much. I would like to thank our panellists for a great presentation on each and every one of your parts. We've run over time, and I guess there are still questions many members would like to ask, including myself.

Thank you once again. You've given us a lot of information that we will absorb and put into our report. You've defended your policies and positions quite well, I think, and I'd like to especially thank our two individual presenters, Mr. Cordeiro and Mrs. Smith. It's not often we have individuals making presentations to this committee, and I think you should be congratulated for your input.

I would also ask each and every one of you if you could give us some feedback. This is the ninth year we've had these types of sessions. If you have any suggestions, please forward them to the chair of our committee. We can always improve, and I think we should improve and maybe change things. If you have any suggestions to that end, I'd welcome them.

Thank you very much. We'll suspend, colleagues, for a short break of four minutes.

À (1035)

À (1040)

The Vice-Chair (Mr. Nick Discepola): Resuming our pre-budget consultations according to Standing Order 83(1), I am pleased this morning to welcome our second panel to accommodate our requests.

I'd like to introduce Mr. Bill Lamberton, vice-president of sales and marketing from WestJet Airlines, who'd like to go first because of time constraints.

I'd also like to introduce, from the Tax Executives Institute, Inc., Mr. J.A. Glennie, general manager, tax and insurance--and also, I believe, from Shell Canada.

From the Confederation of Alberta Faculty Associations, we have Dr. Jeremy Mouat, its president.

From the City of Calgary, we have His Worship David Bronconnier, the mayor.

From the Canadian Association of Petroleum Producers, we have the vice-president, markets and fiscal policy, Mr. Greg Stringham, and also the vice chair, president and CEO of Devon Canada Corporation, Mr. John Richels.

Go ahead, Mr. Lamberton, please.

À (1045)

Mr. Bill Lamberton (Vice President, Marketing and Sales, WestJet Airlines): Thank you, Mr. Chairman, and thanks for the opportunity to go first this morning.

Generally, what I would like to do is update the committee on some traffic drop-off and traffic statistics since the implementation of the ATSC, and on the impact it has had on short-haul air transportation and travel within Canada--certainly on the network we operate--since the implementation of the tax.

We've seen a substantial depression in the number of people who are travelling on what we call “auto-competitive routes”. Throughout Canada we have a number of ultra-short-haul routes that have been impacted disproportionately by the flat fee nature of the ATSC, which was implemented in April.

Generally in our routes throughout Canada this year we've been basically flat. We've been growing at a rate of 45%. Our load factor, the amount of people per flight, has been off by about 1% this year. It is almost flat.

In short-haul markets, such as Calgary-Edmonton, Kelowna-Vancouver, and Hamilton-Ottawa, we have been off in the neighbourhood of 9% to 12%. We've actually taken moves because of that to reduce capacity on short-haul routes throughout Canada. We have improved our position somewhat, but there is a concern that we still need to rectify a drop-off.

For WestJet Airlines, we'd like to bring to the attention of the committee that we certainly think there is a need to look again at the way the collection is done on the security charge.

In the case of the airline, we have choices and opportunities. There's a large infrastructure in our industry around short-haul air transportation. If we fly three 150-minute segments in a day versus nine 45-minute segments in a day, because of the flat fee nature of the fee structure within the ATSC, it means airports will eventually lose short-haul traffic. Airports need short-haul traffic to generate volume and revenue. It is also a revenue generator for the ATSC.

As we've outlined in the past, our position has been that a revenue management approach be taken to the ATSC. It means airports will have the benefit of competing in all markets, the tried and competitive markets, as well as long-haul markets.

Probably the rollback is not such a concern for the airlines that are flying short-haul. The biggest concern is we've stalled any expansion in short-haul markets that used to be up for consideration. Markets across Canada, such as London to Ottawa, Fredericton to Halifax, and Kamloops to Vancouver, are routes that used to be on our plans for expansion. They're now not getting a lot of consideration because of the deteriorating opportunity on the short-haul fly versus drive markets.

Our position is it's an industry that has taken quite a blow in the last year and a half. Perhaps there should be a different approach to the method of collection. It should be given due consideration in the months ahead.

The Vice-Chair (Mr. Nick Discepola): Thank you very much.

I understand you have to leave by 11 o'clock. Maybe I'll allow two short questions.

Dick, if you want to go ahead, then Shawn is after you.

Mr. Richard Harris: Mr. Chairman, I don't have a question. I'm pretty familiar with what Mr. Lamberton has presented here today. I appreciate his presentation.

The Vice-Chair (Mr. Nick Discepola): Thank you.

Mr. Murphy, please.

Mr. Shawn Murphy: First of all, Mr. Lamberton, I agree with everything you're saying. I've been on record on this for some time now.

I take it WestJet has abandoned the earlier proposal of the ad valorem charge and now recommends the government consider a three-tier approach.

Mr. Bill Lamberton: Yes, we did an ad valorem suggestion on a model when we presented last time. That got mixed results on feedback, so we actually suggested a three-tiered model. We actually took a position in July that we had some of the fees under our control and we changed our collection on Nav Canada fees to a three-tiered model, which is $5 for ultra-short-haul, $10 for mid-haul, $15 for long-haul. That was a change led by us.

We found that we are very revenue neutral in the collection, that is lowering the fees for short-haul and increasing the fees for long-haul. Again, we've given an example now that, as far as collection on the revenue side, if there is a revenue management approach and a make-sense approach, certainly the collection of the ATSC can be neutral.

À (1050)

Mr. Shawn Murphy: I would like one clarification, if I may, Mr. Lamberton. On the statistics you gave us, specifically talking about Calgary-Edmonton, your load factor for the period went from 72.1% to 51.9%--a very significant drop. You also talk about a reduction in capacity. I want to make sure we're comparing apples and oranges here.

Mr. Bill Lamberton: Good point. The last time we presented, which was in mid-July, we had seen a drop-off at 16% on the Calgary-Edmonton route. In July we took a capacity reduction of 25%, so we're now off 10% since April 1. But it's also a result of our capacity reduction, which has not been good for the industry and not good for the transportation mode between Calgary and Edmonton.

Mr. Shawn Murphy: It's not good for the communities you serve. My point is that I think it would be much more beneficial... We have to call attention to this point that if perhaps we had the number of deplane-emplane passengers on that particular route, we could see the drop. You can keep your load factor high. It's very easy to do. All you have to do is reduce your capacity and your load factor will automatically, I assume, go back to 72%, if you drop the number of planes flying.

Mr. Bill Lamberton: We have tried to improve that position on the route by reducing capacity, but....

Mr. Shawn Murphy: If you don't mind, perhaps we could get from you, sir, for the same period, the number of deplaning and emplaning passengers.

Mr. Bill Lamberton: I can get the committee that.

The Vice-Chair (Mr. Nick Discepola): If you will forward it to the clerk of the committee, we'll make sure every member gets it. The committee is split up right now; half is here and half is out east. I also think you should be aware that our committee...well, even the former Minister of Finance undertook to review the implementation of this tax, and I believe it would have fallen to the responsibility of this committee to do that. We've had a motion informally by Mr. Murphy and others, and I think there's a general consensus among committee members.

Once we get back to Ottawa, we'll discuss it with the chair and the other committee members to undertake the review as quickly as possible, with a view to making a recommendation before next February's budget. I don't think we'll be able to include it in this fall's report, which we're committed to here, but that probably will be reviewed by the committee sometime after discussion with other members.

I would like to thank you, and I hope you don't have a flight to catch by 11 o'clock because that's only five minutes from now. Thank you very much again.

Mr. Bill Lamberton: Thank you, Nick. Thank you, Shawn.

The Vice-Chair (Mr. Nick Discepola): Thank you very much.

We'll continue now with His Worship, please.

Mr. Dave Bronconnier (Mayor, City of Calgary): Good morning, Mr. Chair and members of the committee. I would like to thank you and the members of the committee for making your stop here in Calgary. I appreciate the opportunity you have afforded me and other citizens in our community to share our ideas for the up-and-coming budget and for the future of our country.

First I think it's appropriate that we give credit where credit is due. The City of Calgary supports the federal government's commitment to sound fiscal management. We commend its performance to date to balance the budget and reduce our national debt. The government is to be credited for moving our country's finances from a deficit to a positive surplus, but we must continue to be fiscally responsible as a government and as a country as we embark upon the journey to develop a shared vision for Canada that will give Canadians the Canada we want.

The continued prosperity and opportunity envisaged by the Government of Canada happens in cities. We are aware that the government's economic and social policies work together, hand in hand. Today, 80% of Canadians choose to live in cities, to raise their families and build their businesses. Cities have become the enablers of our country's success.

I appear before you today as the mayor of one of the fastest growing cities in Canada. In Alberta, the two big cities, Calgary and Edmonton, represent more than two-thirds of our population in this province and over 64% of the gross domestic product.

In the last federal census, the Calgary-Edmonton corridor had the largest growth rate of our country. It outpaced the other urban regions of Ontario's golden horseshoe, Montreal and its adjacent regions, and British Columbia's lower mainland and the southern end of Vancouver Island. This growth, however, is putting tremendous pressure on our city and all cities in Canada. Canadian cities are not sustainable without a long-term commitment and reinvestment by the Government of Canada.

I wish to share with you today two points that we ask the Government of Canada to consider during its budget deliberations for 2003: first, changes to the fiscal policy; and second, sustainable funding for social programs.

Canadian cities need an enhanced fiscal capacity that will allow us to sustain our urban regions and materially contribute to Canada's prosperity. As the economic engines of this country, cities require a new financial arrangement and a revenue-sharing opportunity with the Government of Canada that recognizes both growth and inflationary responses.

Due to the strong growth pressures and uncertain fiscal climate for municipalities, we have developed a municipal capital investment framework to better coordinate our capital projects and priorities for our city over the next five years. Calgary's tax-supported capital investment for 2003-2007 is currently $1.4 billion and is projected to be $1.8 billion for the 2008-2012 fiscal period. We are doing our share.

In the 2003 budget we've identified some $190 million in unfunded capital requirements. We are funding $54 million of that this year through our increased borrowing capacity at the municipal level. Earlier this year, Calgary city council changed its fiscal policy framework to take on more debt to manage our capital demands. This was a difficult argument that we had to grapple with to accommodate the pressures of growth within our own limited fiscal alternatives. This was a strategic use of debt aimed directly at Calgary's sustainability.

There are two changes the Government of Canada could make to this fiscal policy that would create the sustainable and fiscal capacities of cities. One, which is not new to this committee, is a share of the current federal fuel tax that is being collected in every municipality in this country. The City of Calgary requests that the Government of Canada allocate 5¢ of the federal fuel tax currently being collected in the city of Calgary and dedicate those funds specifically for public transportation reinvestment infrastructure.

À (1055)

The throne speech spoke of the need for efficient, environmentally friendly, and responsible transportation systems. Calgary's light rail transit system is both. It's efficient, moving over 188,000 people every day, and it's environmentally friendly, as it's fueled by wind power. With the assistance of the federal government, as well as the Province of Alberta, we have now embarked upon the largest windmill project in Canada: 73 megawatts in the Pincher Creek area, about an hour and a half drive south of this city.

Another example of a new fiscal arrangement is full municipal exemption of the goods and services tax. The City of Calgary currently receives a refund of just over 57% on its municipal purchases. If a full refund were available for this municipality alone, or a GST-tax-free status, in 2001 it would amount to in excess of $17 million more available for this municipality to reinvest in our shared vision. The City of Calgary is requesting the same opportunity that it is currently afforded to other orders of government.

The second point I wish the committee to consider in the up-and-coming and future budgets is the social well-being and the economic well-being of Canadians and Calgarians. This speaks directly to our standard of living and the quality of life the Government of Canada is committed to improving.

The federal government must invest in sustainable funding for social programs. The City of Calgary has funded and entered into a number of program partnerships with the federal government, as well as the provincial government: affordable housing, homelessness initiatives, urban aboriginal programs and youth programs, just to name a few. However, as this city fast reaches a population of a million people, it's becoming increasingly difficult to meet the needs in these areas and it's increasingly more difficult to meet the needs at the local level. We want to ensure we are a partnership that is consistent with the roles and responsibilities of cities and the resources made available to us.

Mr. Chairman and the committee, these two requests, changing fiscal policy and sustainable funding for social programs, would be a huge step towards building the kinds of competitive cities and healthy communities identified in the throne speech. As you and your committee engage Canadians in this national dialogue, I would ask you to consider the role Canadian cities have played, and will play, in securing our future economic prosperity and the quality of life we all enjoy in this country. Canadian cities have not been shy in pleading for reinvestment by the federal government in our cities. We've been advocating for years. We've been saying to the federal government it's time to reinvest.

Mr. Chairman, I appear before your committee today to say this is what cities can do. What does the government want from its Canadian cities?

Thank you, Mr. Chairman.

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The Vice-Chair (Mr. Nick Discepola): Thank you very much.

I'd like to continue now with Dr. Jeremy Mouat from the Confederation of Alberta Faculty Associations.

Dr. Jeremy Mouat (President, Confederation of Alberta Faculty Associations): Thanks very much, and my thanks to the committee for making a space for the Alberta Faculty Associations to bring to you our concerns and to listen to our submissions in committee.

I'm sure a committee like yours must spend many hours in hotels like this listening to supplicants who want you to believe in their dire need for adequate funding in order to continue to carry out our various businesses and enterprises. I suspect this leaves you with at least two challenges as committee members. One would be avoiding a sense of déjà vu--if you listen to each one of us, we'll tell our particular tale of woe--in thinking, here we go again, and also to suppress a sense of cynicism as you listen to yet another tale of hard times, of virtue in need of reward.

I'll begin by saying, brace yourselves, I'm going again. Universities--and we're unashamed of our advocacy--along with our colleagues in colleges, in Cegeps, and in the K to 12 sector have been thrown into crisis by chronic underfunding over the past decade. There's no other word to describe what's going on in education, as in health care. At a time in which our future--our economic future, our future as a society, and our future in Canada--demands that education receive unequivocal support from all layers of government, federal and provincial, we've seen our university budgets continue to shrink, and this simply cannot go on. We want you to take back to Ottawa the concern of Canadians that education, like health care, is an issue that calls for consistent, ongoing, and adequate support. And when we say support, we mean money.

At this point perhaps your inner cynic may be whispering to you, well, he would say that, wouldn't he? But it's not just university faculties or university faculty associations across Canada that have this concern. Six weeks ago our sister federal organization, the Canadian Association of University Teachers, CAUT, commissioned a Decima poll on Canadian public opinion on post-secondary issues. The polling results demonstrate that an overwhelming majority of Canadians want the next federal budget to focus on more spending for social programs: not tax cuts, not debt reduction, but more spending for social programs. Specifically on university issues, the results show that many Canadians are anxious about access and affordability, and further that these Canadians believe governments generally have done a poor job when it comes to those key issues of access and affordability.

It's not just polling data that is evidence of a concern over the fate, the future, the rankings, and the prestige of our university system. Two weeks ago today theGlobe and Mail ran a special supplement on universities, and Maclean's is about to produce its annual ranking of universities. That the national media are engaged in such exercises underlines the significance of universities to Canadians. How are we doing? What are the universities like? Should I send my children to this university or that university?

We're not doing that well, and that's what I really want to underline. If we step back and compare Canadian universities in international terms or at least if we compare our university system to that of our neighbour to the south, the news is not good. We're slipping.

Paul Davenport, an economist, former president of the University of Alberta, and now president of the University of Western Ontario, recently had a piece published by the C.D. Howe Institute in a book called Renovating the Ivory Tower. Davenport pointed out that university budgets across Canada have declined while those of state-funded universities south of the border have grown. He calculated that “during the past two decades, real public operating funding per student in public universities has fallen by 30 percent in Canada and increased by 20 percent in the United States”.

In the U.K., on the other side of the Atlantic, the Chancellor of the Exchequer announced a 6% increase in the education budget during the summer, although as the Guardian editorialized gloomily following Gordon Brown's announcement in the Commons, “Since the 1970s funding per student in the UK has halved, while funding in the US has doubled.”

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Now it would be rude not to acknowledge that universities have indeed enjoyed some modest windfall funding over the last couple of years. In the last annual budget, the federal government sent some $200 million in support for the indirect costs of research. It was passed along through the agency of the three federal granting councils.

We acknowledge the support gratefully, but it was one-time support. The one-time nature makes us nervous. This kind of support needs to be ongoing.

Universities are suffering the long-term consequences of chronic underfunding. Our buildings are desperately in need of maintenance. Our classes are too large. Our teaching staff is overworked.

We have to reverse the trends. If you listen to students, university administrators, and of course faculty association representatives, you'll hear a surprising unanimity. All of us are singing the same tune. Our message is unequivocal: we need help and we need it now.

Since the unique demographic fact of the baby boom, this fact forced a dramatic expansion in universities, in the university system, across Canada in the 1960s and early 1970s. The result was a wonderful university system in this country. We've all benefited from the expansion in many ways, as a society, as a country, and in the quality of all of our lives.

The cuts we've suffered over the last decade have put the system at risk. It must be saved. The salvation must start now and in the next budget.

That's the pitch. In our submission, we make eight recommendations. I'd like to quickly go through them with you.

The first recommendation is our need simply for more money, for an increase in base funding to make up for the erosion over the past decade.

We recommend a joint federal-provincial initiative on post-secondary education to look into the crisis I'm describing and to recommend solutions. We also request a stop to what we call “boutique” programs and envelope funding that have unintended consequences.

We recommend ideally a federal post-secondary act analogous to the Canada Health Act. We recommend a continuation of the funding of the indirect costs of research that I mentioned.

We need significant increases to the three funding councils, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, and the Canadian Institutes of Health Research.

We welcome things like the innovation agenda. We want to emphasize that if you're going to put more things on the plate for us to do, send along the money at the same time. We strongly recommend a comprehensive review of student tuition and student debt be undertaken by the relevant stakeholders.

Thanks a lot for the time. I appreciate your listening to our concerns. At the end of this I'd love to answer any questions you might have.

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The Vice-Chair (Mr. Nick Discepola): Thank you, Dr. Mouat. I'm sure there are questions.

I understand there has been another change in the programming. Mayor Bronconnier has to leave by 11:30 a.m., I believe, if you weren't aware.

We don't have too much time, but maybe I can entertain two questions again.

Mr. Harris, are you okay?

Mr. Richard Harris: I'm okay.

The Vice-Chair (Mr. Nick Discepola): Mr. Cullen, please.

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

I have a question for Mr. Bronconnier. When we were in Vancouver recently, Mayor Philip Owen was there and spoke quite positively about some of the changes he described in terms of federal participation in mostly social programming--affordable housing, the homeless, crime prevention programming, some programs out of Heritage Canada--and he saw that as being very positive.

You talk about sustainable funding for social programs. Is your concern more about that than the fact that the federal government should be doing more generally? Or is it more a question of sustainability?

Mr. Dave Bronconnier: From my perspective, and I do want to say, that of Philip Owen and I think most large city mayors in this country, we share the same thanks to the federal government for dealing with some of the social challenges we face. The east side drug program, for example, in Vancouver is now going to be used, I believe, as a model for other Canadian cities, so I don't want to miss the opportunity of saying that I too share with his accolades for addressing some social issues we have—homelessness being one.

It was the federal government, through Madame Bradshaw, who came forward and used the example here in Calgary and I believe was instrumental in the $67-million program over the next two years.

When I reference sustainability, I mean ongoing support for current programs that are already there. We are tasked right now with the urban aboriginal challenge that all municipalities--not all, but particularly Calgary, Regina, Saskatoon, and to a lesser extent Montreal--are facing. Those programs need additional support, because what's occurring is that the provincial government, of course, is not providing its sufficient share. The federal government does the same, and at the end of the day it stops at the municipality, and there are only so many property tax dollars available to support social programs.

I believe the cities have a very key role to play in assisting the Government of Canada with those programs, either bilaterally or trilaterally, to ensure that they continue to be developed. But if there isn't sufficient funding, the Government of Canada can't expect municipalities or cities, or this city, to pick up on that and fund it.

So the sustainability means ongoing long-term support to address those social programs. It doesn't mean just inventing another program. I think it would be a step backwards, candidly, for the government to do that. I think there are great examples of partnership, and I'll use the one that has been announced in and around affordable housing, because it has encouraged the provincial government to meet their mandated obligation as a result of housing.

The challenge with that is that you have other Canadian cities that provincial governments look at, and they try to encourage, or I use the word “seduce”, cities to get in the business of businesses we ought not to be in, which means that the federal government will provide $67 million in housing, the provincial government may provide it, and gee, why doesn't the city provide it too?

That's what I'm saying. We need to be clear on programs that are announced. Let's not introduce a new program that has an effect on cities if it's just that you're going to provide one third and you ask the city to provide that. We can't go and continue on the basis of the cities getting into more and more programs without sufficient resources.

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Mr. Roy Cullen: Thank you, Mayor. I have another question, if there's time.

Mayor Owen ducked the question, and perhaps you will too, when I asked about whether we need a new deal for municipalities. I gather that the Canadian association is working on that, but we've heard a lot of chatter about it. One program that I didn't mention in my little list is the infrastructure program, which I think worked quite well.

You talked about basically dedicating some of the fuel tax revenue to municipalities. Senator Kirby has come up with an idea of dedicating some money, some tax--call it a tax for health care. He's talking about increasing, but if you're able to make that revenue neutral...the point is, it's kind of a dedicated tax, and the government would have a number of different players looking for dedicated taxes. That's why I think the Minister of Finance says pretty consistently, stay away from that one.

But is there a new deal for municipalities that should be there, apart from the kind of work that's being done in infrastructure and these social programs? Where do you sit on that?

Mr. Dave Bronconnier: Firstly, the Canada or the old national infrastructure program, we now call ICAP, Infrastructure Canada Alberta Partnership, is a very good program. It has worked extremely well in this community. We've benefited from it. It was, and is, a great partnership between three orders of government.

The challenge with the ICAP program is that there is not a long-term plan in place for it and there are not enough resources. When I suggest revenue-sharing, does there need to be a new deal for Canadian cities? Absolutely, either on a bilateral or a trilateral basis.

Your direct question, sir, I think relates in terms of dedication of taxes. I want to say that both the federal as well as the provincial government currently enjoy dedicated fuel taxes. Only one of the governments, the Province of Alberta, currently in this province, dedicates all of those resources back to transportation improvements—not in the areas, I might add, where the revenues are being generated or even close to it. Having said that, we do have an agreement with the Province of Alberta that 5¢ out of every 9¢ collected do go back to the two large cities. Both the city of Edmonton and Calgary enjoy that. These are the only two cities in Alberta. The only other city that I'm aware of in the country that has a revenue-sharing agreement is the Province of British Columbia and the City of Vancouver with that province for fuel tax.

I believe that's the way of the future and I think it's an opportunity for the federal government to look at dedication of specific taxes, as long as it's transparent to the taxpayer. Particularly as it relates to the federal fuel tax, I can say with certainty that in this community the federal government collects very close to $200 million a year. They re-invest back in, whether it's through highway programs or other, something under $20 million per year.

The Vice-Chair (Mr. Nick Discepola): Thank you, Mr. Bronconnier, for giving us some excellent suggestions. I come from the province of Quebec, where they have a law on their books that prevents the municipalities from dealing directly with the federal government. For giving us suggestions on how to circumvent some of the constitutionalities of the orders of government, I thank you, because the jurisdiction fuel exemption, for example, I think would benefit even the small rural hamlets. That's an excellent suggestion.

I'm not going to take up much more of your time because I don't want you to get a speeding ticket on your way back. Thank you very much, again, for making your presentation.

Mr. Dave Bronconnier: Thank you very much, Mr. Chair.

The Vice-Chair (Mr. Nick Discepola): We'll now continue with Mr. Glennie, please.

Mr. J.A. (Drew) Glennie (General Manager, Tax and Insurance, Tax Executives Institute Inc.): Thank you very much.

My name is Drew Glennie. I'm the general manager of tax and insurance for Shell Canada in Calgary. I am here today in my capacity as international president of an organization called the Tax Executives Institute, Inc.

I don't think we're in an environment where we should be talking about raising taxes. I'm here to suggest to you that we have an existing tax system that can be more efficient, that will allow for growth in the economy, and I have three or four suggestions along that line that I will get to.

In the meantime, I'd like to introduce three of my colleagues: Glenn Wickerson, the Canadian vice-president for TEI, employed by British Petroleum in Calgary; Monica Siegmund, chair of the Canadian Income Tax Committee of TEI, employed by Shell Canada; Timothy McCormally, the fellow with the salt and pepper beard, is the executive director of the TEI and is from Washington, D.C.

You asked for feedback. Let me start by giving you a little feedback, because the last time I was before this committee was the year 2000. I'm dealing in income tax, and we had a real issue with the bureaucrats in the Department of Finance on some proposed legislation around penalties, third-party penalties to be specific. We had basically come to loggerheads with the department, and after meeting with this committee there was an amenable change to the legislation that allowed us to go forward. So I thank you very much and I hope for the same sort of thing for the three or four suggestions I have today.

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The Vice-Chair (Mr. Nick Discepola): These are different members of the committee, though.

Mr. J.A. (Drew) Glennie: We can go back and look at the minutes.

TEI is the pre-eminent association of business tax professionals. We have 5,300 members. We work for 2,800 of the largest corporations in Canada, the United States, and Europe. Our membership includes representatives from a broad cross-section of the business community, with members employed in all major industries and sectors of the economy. In that sense we are unique. We do not represent a particular group or industry.

Canadians make up roughly 10% of the membership, with the balance being from the U.S. and from Europe. We have four chapters in Canada. Starting from the west, we go Vancouver, Calgary, Toronto, and Montreal.

We're responsible for managing the tax affairs of businesses by which we are employed, and we must contend daily with the provisions of the Income Tax Act, which almost on a daily basis becomes more complex.

We're convinced that the administration of the tax laws in accordance with the highest standards of professional competence and integrity will promote the efficient and equitable operation of the tax system.

That's what I'm going to say. We try to work with the Department of Finance to ensure that the tax policy and the laws that are enacted are the best for the country, and we work with CCRA to ensure that the administration of those laws is as efficient as possible. You're not going to find this comment in the paper, but in a sense we are our own worst enemy when you look at the tax system at the federal level and the tax system at the provincial level. They operate in some cases in directly opposite ways.

We meet often with the CCRA and the Department of Finance and their counterparts at provincial levels to discuss important tax developments and ways to improve the policy. I told you that we appeared last time in the year 2000 and the result of that appearance.

In 2001 the federal government began a phased reduction of the corporate income tax rates for most sectors of the economy. Regrettably, the resource industry did not benefit from the reduced rates. Lower rates are extremely beneficial to the economy because they enhance the attractiveness of Canada as a place to invest money, which is good for the economy. It's good for you and it's good for us, and it's good for eastern Canada and it's good for western Canada. It doesn't show any favourites.

Increased capital investment in Canada in turn increases productivity, provides added employment, and promotes sustainable growth. Indeed, the wisdom of the government's course can already be seen in the expansion of the Canadian economy even as the U.S. economy proceeds with slow or no growth.

As Finance Minister Manley pointed out recently, for the first time in more than twenty years the Canadian economy outperformed the U.S. in an economic downturn. And we just had the Deputy Minister of Finance, Kevin Lynch, address our annual conference in Toronto in October, and he has a number of slides that show how well Canada is doing vis-à-vis the U.S.

We believe Canada's competitive tax rates are one reason. We urge the government to stay the course of reducing the corporate income tax rates for all sectors of the economy, including resources. Indeed, we say full speed ahead.

In connection with the reduced corporate tax rates there are some changes that are required to other parts of the act. They're detailed in the paper and I won't address them here.

TEI urges the government to eliminate the large corporation tax or the LCT under part 1.3 of the Income Tax Act. The LCT, as with all capital taxes, is regressive, it's insensitive to profits, and by its nature imposes a disproportionate burden on capital-intensive companies and industries. I think as a country we should ask, are we going to promote service industries in the country or are we going to promote, in addition to that, capital-intensive industries as well?

While the scheduled reductions in the corporate income tax rate and modifications to the income tax base will enhance the international competitiveness of the Canadian tax system, the LCT is counterproductive to that goal. It discourages incremental capital investment by domestic and especially foreign investors. As importantly, the economic cost of the LCT is greatest when corporate income and cashflow are diminished during recessions, thus the LCT can perversely exacerbate an economic downturn.

Look at what's going on in the provinces. By and large the provinces are more dependent on capital taxes than the government is and yet there have been announced eliminations or substantial reductions in capital tax by British Columbia, Alberta, Ontario, and Quebec.

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Clearly the provinces are moving toward reducing the capital tax burden and we believe the federal government should follow suit. I'm serious about this. It's a minimum tax that has no basis in our tax system.

The Vice-Chair (Mr. Nick Discepola): You don't have to elaborate on it.

Mr. Drew Glennie: All right. Very good. I'll put a tick beside that one.

We have a paranoia in this country about Canadians investing offshore, and there is being introduced some extremely complex legislation under the heading of foreign investment entity, or FIE, and non-resident trusts. I don't get involved in any of this, nor does my company, but I have read that legislation. It's an incremental 100 pages of legislation in an Income Tax Act that is already that thick, with extremely thin paper and small print.

To me, the rules are simply unworkable. They are unworkable from the point of view that I don't believe CCRA will understand them enough to impose them upon taxpayers. I don't believe taxpayers will understand them enough to know that they're caught in the web. It seems to me that it's simply a counterproductive exercise, and we should be looking at devising, if there is a real concern, legislation that addresses that concern and that is not all-encompassing, the way these rules are designed.

There have been three or four amendments. The latest came out in October and it is substantially different from before. The suggested timeframe for implementation is the first of 2003, so we have basically a two-month period to study this to try to understand it. It is just too complex. It's just unworkable.

Our strong recommendation is that we withdraw this legislation and go back and target legislation to exactly what the concern is. If that is not acceptable to this committee and the government, then at least we should extend the implementation period to give us time to analyse this legislation, which, as I say, is virtually incomprehensible.

I will leave it at that, and I welcome your questions afterwards.

Thank you.

The Vice-Chair (Mr. Nick Discepola): Thank you very much.

Now, to conclude, we have the Canadian Association of Petroleum Producers.

Welcome.

Mr. John Richels (Vice-Chair; President and CEO, Devon Canada Corporation, Canadian Association of Petroleum Producers): Good morning, Mr. Discepola.

First of all, thank you very much.

As you mentioned, my name is John Richels. I'm president and chief executive officer of Devon Canada Corporation. I'm also vice-chairman of the Canadian Association of Petroleum Producers. With me today is Greg Stringham, who is vice-president of markets and fiscal policy.

Thanks for the time this morning and the ability to address this committee.

By way of background, the Canadian Association of Petroleum Producers represents 140 companies that explore for development and produce about 97% of the crude oil and natural gas in Canada. We also have about 125 associate member companies that provide a wide range of services to support the upstream oil and gas industry. Together the members and associate members are a very important part of what has become a $60-billion-a-year national industry that affects the lives of about half a million Canadians.

The industry is both national and international in scope. As you know, it's a high-tech industry in a global market, with investment and activity all across Canada, from Alberta, British Columbia, Saskatchewan, and the west to a number of provinces in the east and the Maritimes, and also to the Northwest Territories, the Yukon, and north of the 60th parallel.

The industry is challenged to grow competitively in its current basins and also to continue to expand into some of the new areas, such as Atlantic Canada, the north, and oil sands. Canada is also a major player in the global oil and gas industry. It ranks third among natural gas producers in the world and about thirteenth among crude oil producers. The industry is highly capital intensive and employs a highly educated and skilled workforce.

Last year, the Prime Minister addressed the oil industry in Calgary in April 2001. At the time, he said “A strong energy sector is not only a pillar of the Alberta economy, it is absolutely fundamental to Canadian prosperity”. Our appearance before you today is meant to highlight some of the key issues we believe need to be addressed to maintain the pillar supporting this Canadian prosperity.

It has now been over a year since we last appeared before you. While much has changed around us, the major tax and financial issues facing the oil and natural gas industry still remain unresolved.

While there are a number of issues out there, we're going to direct our comments today to one that we currently consider the most important. It has already been raised by Mr. Glennie. The issue facing the oil and gas industry is when and how the industry will be put on the same path of income tax reductions as other parts of corporate Canada have been receiving for almost three years.

In a short time, actually eight weeks from today to be exact, the corporate income tax rate for all other sectors in Canada will be 23%, whereas the resource sector will still be at 28%. It means a gap of 5%. It is actually a 22% higher rate for our industry.

In last year's budget, the finance minister committed to extend this lower rate to the resource sector. In his “Budget Plan 2001”, on page 134, the minister said the following.

Finally, as noted above, a key element of the Government’s long-termplan to encourage economic growth and job creation throughout Canada isits tax reduction plan. As part of that plan, the general corporate income taxrate is being reduced. In this regard, the Government has engaged inextensive consultations on means to extend the lower corporate tax rate toresource income while at the same time improving the tax structure for thisimportant sector. These consultations are continuing.

For several months following last year's budget, CAPP worked extensively and cooperatively with the Department of Finance and their consultants to resolve this long outstanding issue. In that regard, we were told in February that Finance was determined to have a resolution by spring. When spring rolled around, the message had been modified somewhat to something coming out for consultation soon. After that, of course, we had a change in the finance minister and were again assured of a pending resolution.

Here we are, a year after last year's commitment to consult and almost three years after the rate reductions were announced, and we're still waiting to reach a successful conclusion on the issue.

Last year's committee report highlighted a number of statements CAPP made in both a written submission and in our presentation to this committee. Specifically, we believe our comments on prudent spending, staying committed to announced tax and debt reductions, ensuring the fiscal health of the nation, and maintaining fiscal competitiveness with our trading partners are as true today for the country as they were a year ago.

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One comment of ours quoted in last year's report, Securing Our Future: Report of the Standing Committee on Finance, highlights our ongoing concern with the tax issue. It says:

As one of the few sectors of the economy that is generating economic growth, the oil and gas industry needs to be included in the announced schedule of rate reductions, the same as the rest of corporate Canada. This is of utmost importance to ensure that Canada does not lose out in maintaining and attracting significant amounts of globally mobile, job-creating investment capital.

In our written submission this year—which I believe you have—we discuss at length how to address, at a macroeconomic level, the finance committee's objective of how to assure greater levels of economic prosperity. We discussed the significant contribution of capital investment and trade to Canada's national accounts and GDP growth, and the oil and gas industry's substantial portion of both of those areas.

That report to you also discusses the gap in per capita income between Canada and the United States, and Industry Canada's assessment that increasing productivity across the country is paramount to closing the gap. We highlighted the oil and gas industry's contribution to raising the overall national level of labour productivity by pointing out that—by Industry Canada's own assessment, on a sector-by-sector basis, in a Canada versus U.S. comparison—Canada's petroleum and natural gas industry exceeds the productivity of the U.S. oil and gas sector by 35%. The same ranking places the industry as Canada's most productive sector relative to the U.S.

We need to continue to encourage industries like the oil and gas industry, which are significant contributors to what Industry Canada terms the three main drivers of productivity growth—trade, investment, and human capital formation.

There's a popular misconception about the oil and gas industry's profitability, with a double-edged implication that the industry doesn't need a lower tax rate and that the industry can afford any new government initiative that might increase industry costs, such as ratification of the Kyoto Protocol, which, of course, is a hot topic these days. I'd like to address these two misconceptions.

In a recent third-party analysis of our country's financial performance, they examined the cashflow cycle of our industry. I believe you have that graph before you. The Canadian oil and gas industry generates revenues of close to $60 billion—actually $59 billion, to be exact. It's particularly important to note that almost all of that revenue is re-injected back into the Canadian economy.

I won't go through that graph in detail, but just to give you the highlights of it, of the $59 billion in revenue, $27 billion goes to capital spending on exploration, development, and land spread throughout Canada; $12 billion is spent on operating costs, such as labour, chemicals, and transportation—much of that spent in rural Canada, in aboriginal communities, and on supplies, much of which are manufactured in Ontario and Quebec; $15 billion goes to governments, in the form of royalty and taxes; $3 billion goes to general administrative costs, such as salaries and rent; and about $2 billion is returned to the shareholders.

So $57 billion of the $59 billion goes right back into the Canadian economy. Continuing a higher rate structure or putting on additional costs are clear disincentives for generating the economic activity that fuels the Canadian economy.

In the area of costs, I already raised the issue of Kyoto a moment ago. As I said, there's much public discussion on the merits of ratifying Kyoto. Our written submission discusses that at length and the potential conflict with the finance committee's objectives of ensuring a broad-based economic prosperity and quality of life. It would not do a subject as complex as climate change any justice to reduce it down to a sound bite level. We could probably sit here and talk about this subject all morning. But I will make a point.

Our industry has a significant track record in minimizing our environmental impact, both on our own initiative and in collaboration with various levels of government. This includes reductions in flaring and venting, leak detection and repair, energy efficiency, and CO₂ capture and storage. We take climate change seriously, and we're willing to work with governments to develop a policy that will lead to reduced greenhouse gas emissions.

However, Canada should not ratify a protocol that will lead to higher costs and diversion of capital. That would clearly conflict with the finance committee's objectives of prosperity and quality of life. Instead, it's our submission that Canada should make its contribution to the global effort to reduce greenhouse gases on the basis of a growing, innovative economy, one that will invest in R and D to develop new, more efficient, and lower emitting technologies. This needs to come from a plan that's designed for Canadians, by Canadians.

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In conclusion, CAPP urges this committee to understand and support our industry's need for certainty. The Canadian oil and gas industry supports the federal government's objectives to create an attractive business climate in Canada. The economic activity, capital investment, trade surplus, productivity, and high-tech, high-level job formation of the industry is directly aligned with assuring greater levels of national economic prosperity.

For our industry, what's required now is urgent action. This income tax issue has gone on far too long. It has eaten up valuable resources in both industry and government, resources that could have been better used to create a stronger economy and a stronger Canada. The continuing and growing tax gap is perpetuating a level of uncertainty that's clouding the industry's ability to contribute even more to the bright economic future we know this country can have. We urge this committee to recommend that the minister resolve the issue with due haste.

If I can just add one thing, outside of the CAPP area, if I can give a bit of a personal or corporate comment--and I'll be very brief with this--Devon, our company, is among the top five oil and gas producers in Canada. We're a company that's based in Oklahoma City. We like to be in Canada. We're here and we've made a big investment in Canada because we think it's a great place to be. But just to build on or give you some examples of what we've talked about here, the Canadian basin is not the easiest or the cheapest place to carry on business. We have to work hard as Canadians to stay competitive with the oil and gas industry elsewhere in the world, and also with other industries, because we're all competing for a finite pot of capital, and that capital moves around the world, moves globally, very quickly. So there's a high degree of competition for capital, and the competition is very intense.

So as companies look around, any of the global companies, they will move money, and we have to be very careful that this doesn't occur. For fear of sounding like a Molson's commercial, I'm a Canadian; I'm not from Oklahoma City. I make this comment with a nationalistic view and with a view of how our country and our industry will fare in the future.

With that, I will wrap up our comments. Mr. Vice-Chairman and members of the committee, thank you very much for your time this morning. We appreciate it, and Greg and I would be happy to answer any questions you might have.

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The Vice-Chair (Mr. Nick Discepola): Let's do that right away, then, with 10-minute rounds, please.

Mr. Harris.

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

And thank you for your presentations.

I would think that Mr. Glennie and Mr. Mouat would have a lot to talk about: I don't want tax cuts; I do want tax cuts. Perhaps you'll have a coffee and find a compromise on that.

Mr. Richels, first of all, as you stated, in eight weeks the tax structure differential is going to be about 5% between the resource sector and other corporations. And despite the work that's gone on to try to bring everyone in it together at the same rate, have you been able to identify any rationale on why the resource sector would in fact be penalized this extra 5% under the tax regime?

It sounds like a penalty, but I'm sure the government must have another reason. I'd be curious to know what you've been able to determine.

Mr. John Richels: Certainly we don't think there's any rationale not to include the oil and gas industry in the rate reduction. Greg can answer the question on all of the issues that have come up, but I will give you some of the issues that have come up in the past, just so you have the background.

There's been a suggestion, for example, that the resource allowance, which the industry gets, is a mechanism that already gives us a tax preference of some kind. And we take umbrage with that because it ignores why that resource allowance was put in place in the first place.

The resource allowance was enacted because the royalties that were levied by the provinces--it's the provincial share or take of production--were not deductible. And presumably that was put in place this time because the federal government didn't want the provinces to be able to jack up royalties at the expense of the federal government. It was made non-deductible, but it comes right off the bottom line for us. So for the non-deductibility of royalties, we were given a resource allowance.

You can't now say the resource allowance puts us on the same footing as other industries on a tax basis since it's really a different issue.

So that's probably been the main contention over time.

Mr. Richard Harris: Thank you.

The hot-button issue these days, of course, is Kyoto. For the oil and gas sector in Canada--and I say this tongue in cheek, I suppose. In view of all the information the government has given out on the Kyoto plan and how they're going to implement it, and so on, has your sector been able to determine what kind of cost impact that's going to have directly on the oil and gas industry in Canada, or even an approximate idea?

Mr. Greg Stringham (Vice-President, Markets and Fiscal Policy, Canadian Association of Petroleum Producers): Let me answer that one. The difficulty in trying to put a number around all of this is we really don't know what the entire plan is, and as you said tongue in cheek, if we were able to see what the plan was, our companies and associations would go back and say, this is what we think the cost associated with it would be. But it's so far-ranging right now between where the targets might be or what might happen, what has already been done and what is left to be done, it's really very difficult to do any analysis.

We are trying to, with the most recent, I'll call it, quasi-outline that has come out from the federal government, but we are trying to get more detail behind that so we can come back and say it does mean this and here's what our analysis shows for individual companies.

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Mr. Richard Harris: That leads to my third question. Your industry figures very prominently in this whole greenhouse gas Kyoto plan, and of course we all want clean air, clean water, and clean earth to live on for the generations that follow. Since we heard about Kyoto four or five years ago, how much opportunity has your industry had to give direct input into the government, to the Minister of the Environment? How much opportunity have you had to play a Canadian role in what we now know as the Kyoto plan and what Canada wants to do?

Mr. Greg Stringham: From that perspective, it was five years ago. During that timeframe we maintained a relationship back and forth with the federal government. However, not until the very active discussions over the last several months has there been any plan to say, this is what we're going to do--so establishing the direction--or this is how we're going to do it. So from that perspective, it has been very rushed. In trying to come to some plan, it's just been, well, here's what this says and here's what that says.

Let me also say that from that perspective, we've been working within our industry to already proceed with some greenhouse gas reductions. Many companies are working on renewable energy. Many companies are working on trying to be more efficient, on trying to use less energy to produce some of the oil and gas in Canada.

Finally, the important aspect important to us is that right now the production of oil and gas in Canada makes up about 20% of the carbon dioxide emissions. The other 80% comes from the consumption side, and that dialogue has not even begun yet.

Mr. Richard Harris: Thank you.

I just have one more little comment, Mr. Glennie. I certainly would be way down the scale for understanding foreign investment entities and non-resident trusts. But after today and after hearing you say that it's very complex and that even some of your people and the CCRA's people don't understand it completely, I'm going to make it a personal challenge to try to understand it somewhat.

Mr. Drew Glennie: If you like, I could send you a copy.

Mr. Richard Harris: I was hoping to find someone who understands it who can explain it to me in grade 8 language or something like that.

The Vice-Chair (Mr. Nick Discepola): I would caution you that either your beard's going to go grey or your hair's going to go grey.

Mr. Drew Glennie: I don't think that's possible.

The Vice-Chair (Mr. Nick Discepola): Now we'll go to Sophia Leung.

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

I want to thank you for your presentations.

My first question is for TEI, Mr. Glennie.

I'm very happy you work closely with CCRA. By the way, I'm the parliamentary secretary for CCRA.

I want to clarify, if you have any concerns, you should directly channel them to the commissioner of CCRA.

You expressed some concerns from the auditors with the fourth operation.

Mr. Drew Glennie: We're concerned there with respect to the proposed legislation on foreign investment entities and non-resident trusts. It's so complex that not only the taxpayers but CCRA won't understand it.

Ms. Sophia Leung: Yes, it's very complex. It's why we have experts, specialists, or whatever, in the CCRA. I do want to address and clarify it, if I can facilitate or help you with it.

Mr. Drew Glennie: Thank you very much.

Ms. Sophia Leung: I'm saying, for all of us, we'd like to clarify it.

I have a question for Dr. Jeremy Mouat.

I'm glad you mentioned you graduated from UBC. It's my alma mater. I don't know why you transferred to Alberta.

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The Vice-Chair (Mr. Nick Discepola): There were cheaper taxes.

Ms. Sophia Leung: Exactly. I didn't want to say it. I wanted him to say it.

Mr. Drew Glennie: There were lower taxes.

Dr. Jeremy Mouat: I'm an historian and we go where the work is.

Ms. Sophia Leung: I see. Okay.

I think you have several recommendations. As we all know, this government in the last two budgets heavily supported education. We don't have to recite...such as R and D and CFI, the foundation for innovation. In the meantime, we have put in a lot of research chairs, and we have constantly and regularly given grants to the three councils, as you describe.

I will call your attention to the fact that last year our budget allocated $200 million for the indirect costs to health. So I guess your fairly long list of six...but I call your attention to all that we have addressed. I'm pleased you are reminding us. In other words, you want more, right?

Dr. Jeremy Mouat: While we certainly appreciated the $200 million, our concern, as I alluded to in my talk, was the one-time nature of that support.

Some of the other funding--the CFI, the Canadian research chairs, and so on--we have concerns about, because of the nature of the requirements for matching funds with CFI, and the CRCs are, to some extent, a boutique program.

The reason we have concerns about that is we think it's great to recognize excellence in scholarship and excellence in research, and that is what's going to maintain the quality of our universities and the scholarships at the universities, but regarding interventions and nudges in particular directions, universities are jealous of their autonomy as self-governing communities and we want the freedom to be able to push academic and intellectual inquiry in the ways in which it naturally ought to go.

For example, who would have said 10 years ago that one of the outcomes of digitization and increasing use of computers would be that librarians, information scientists, would become a key part of the university community? They have. Librarians are way more important now than they were 10 or 15 years ago, but 10 years ago everyone thought books were going to become irrelevant and we wouldn't have libraries. Exactly the opposite has happened, and it's kind of an example of...whatever we might guess today about what universities might need now and in the next five years, unless you really listen to the universities, your answer might be wrong and you might be encouraging us or pushing us with the boutique programs to go in particular directions. That's why we're jealous of our autonomy and would rather see base operating grant increases that allow us to grow in the ways in which it's obvious we ought to be growing.

That isn't to say, hold the money. We want increases that are going to basically restore our funding levels, because we're way below what we used to be at. We're trying to get base operating support as opposed to boutique programs.

Do you understand?

Ms. Sophia Leung: Yes.

As you know, the federal government does a large chunk of transfers, and the provincial governments are responsible for health and education. As you're already aware, we're at the top, and the federal government has done tremendously well in supporting education. I don't know about Alberta, but the B.C. provincial government should approach them for more assistance.

Dr. Jeremy Mouat: That's my job. I agree with you wholeheartedly about those constitutional realities; nonetheless, as I think many Canadians have been discussing over the last year or so, we have a Canada Health Act, even though health care is a provincial jurisdiction. The Canada Health Act maintains certain standards across the country. That's why we would like to see a post-secondary equivalent.

Our students move around across the country, and it's wonderful for them to be moving around. A post-secondary act would guarantee the same kind of standards that Canadians want and expect in terms of health care. That's why we're trying to address it that way.

Ms. Sophia Leung: I have a small one for CAPP.

I'm very pleased to hear that $57 billion of the $59 billion contributes to our economy. That's really very good. Also, I'm very pleased to hear you are a Canadian from the States, even though the workforce is an American company. But I think that's always supported--you know, trying to help recognize the needs of our Canadian economy. I just want to comment that I think your industry is supporting very well. Thank you.

Thank you, Mr. Chair.

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The Vice-Chair (Mr. Nick Discepola): Thank you. Mr. Cullen.

Mr. Roy Cullen: Thank you, Mr. Chair. Thank you to all the presenters.

I have a number of questions for the oil and gas and the tax executives, but just coming back to Mr. Mouat for a moment, do you have any data that sort of compares the amount of state subsidy of post-secondary education in Canada with other countries? Clearly, it has shrunk in Canada.

The problem I always have is that we hear from students that they're accumulating all this debt, and it's true that's an issue, but is it a generational thing? When I took my undergraduate degree, it was all the buzz that we were really getting a great deal, because the federal government or the provinces were subsidizing a lot of that.

It still probably pays, in terms of the cost benefit, to get a post-secondary degree and a post-graduate degree. Is there more debt burden? Yes, there is. Is that fair? I don't know. But how do we stack up in terms of state subsidies of post-secondary education compared with other countries?

Dr. Jeremy Mouat: Well, it depends on who you compare it with. I have a graph in front of me that I'd be happy to pass over to you later.

In terms of our students, about ten years ago, 80% of the cost of their education was covered by operating grants to the universities, and they were assumed to be picking up about 20%. Now it's 30% and growing. I'm sure student groups will be coming, if they haven't already come, before this committee to tell you about the debt burdens and the increasing debt burdens.

There are jurisdictions in Europe where university education is free to the student. It still is in Scotland. Fees have been brought into the U.K., but full fees are paid by only one-third of U.K. students. The other two-thirds still get some form of subsidy.

I did both my BA and MA in New Zealand. Although I'm a native Canadian, I lived down in New Zealand when I was in my twenties. Actually, I paid fees the first year because I simply couldn't believe that anyone would not pay fees. In my second year I actually realized, no, if I fill out this form, I really don't have to pay fees. In my first year it just hadn't made sense to me, and I was probably the only student in New Zealand who did pay fees.

I would never have been able to do a PhD if that had not happened. The debt burden would have been unreal. My sister, who is a practising lawyer now, calls her student debt her “first BMW”. She has yet to buy the second.

But debt is part of the crisis of accessibility. And when we compare ourselves with the public universities south of the border, which is the main comparator, we look poorer, and increasingly poorer.

Mr. Roy Cullen: If you have any data you could share with the committee on the amount of government subsidies for post-secondary education, benchmarked against others, I think it would be useful.

Dr. Jeremy Mouat: Sure, I'll get that to you.

Mr. Roy Cullen: Mr. Glennie, Mr. Richels, and Mr. Stringham, on the 28% and 21% corporate tax issue and the oil and gas industry, we had an update from the mining industry when we were in Ottawa recently. I agree with you, there must be some uncertainty attached to this. I think you need an answer at some point.

In the mining industry, I know the government department wants to get rid of the resource allowance. As I understand it, the resource allowance in the mining industry is, on average, greater than royalties. I don't know how it compares in the oil and gas sector. Of course, the argument that's always used is the reason you didn't go to 21% is because you have all these other gadgets—the exploration allowance, the accelerated CCA, and the resource allowance, assuming that...That leads me to conclude that the resource allowance on average is better than the royalties. Maybe it isn't, but...

The quite convincing point I heard was that you're not the only industry or sector in Canada that has certain tax incentives. The film industry is one, and there are many others.

But at this point in time, maybe you could tell me what's the position of the oil and gas industry. You're basically taking a pretty hard-nosed position that there was going to be very little negotiation. It was 21%, and you're not prepared—maybe rightly so—to give up any of the other allowances. Is that still your position? Maybe you could elaborate on some of these issues.

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Mr. Drew Glennie: Can I just address that from a tax perspective?

Mr. Roy Cullen: Sure.

Mr. Drew Glennie: If you go back to 1973 and 1974, the resource issue became a political issue between Pierre Elliot Trudeau and Peter Lougheed. The first salvo was to make crown royalties non-deductible, and the second salvo—the response, if you will—was the introduction of the resource allowance.

Now at that time the oil and gas industry was essentially the western base. What we have seen develop since then is quite a substantial investment in the offshore—billions of dollars on the east coast—and substantial investment in the oil sands. We're talking in terms of billions of dollars for each project.

If you look at the resource allowance and royalties, royalties on conventional production by and large exceed the resource allowance. For both the offshore and the oil sands, the resource allowance exceeds royalties for a period of time until payout—as defined under the various agreements.

So if we were to eliminate the resource allowance and go back to, say, deductibility of royalties, we're jeopardizing not only the existing investment on the east coast and oil sands, but also further investment in these areas. As a country, why would we want to jeopardize further investment of billions of dollars?

Mr. Roy Cullen: But isn't the bottom line that the resource allowance is on average greater than the royalties?

Mr. Greg Stringham: I'll take this one.

We've done analysis recently that has shown, over the last decade, that the resource allowance for the whole industry and the royalties paid by the whole industry are very close. It depends what happens exactly with prices. They're not exactly the same base, but they are fairly close over time for the entire industry. As Mr. Glennie explains, it depends on what part and what you have in the industry.

Mr. Roy Cullen: Sure. The issues are then more the exploration allowance and the accelerated TCA.

Mr. Greg Stringham: In our written submission to you, in fact, we put in a little table trying to identify what people have called them, how they compare, and what meaning they have. We don't see them as being significant preferences that would preclude us from being treated as equally as the other industries in Canada.

Mr. Roy Cullen: Yes. I think it would be useful--I think this request went out before--if you could provide the committee with information on other sectors and the kind of tax preferences they achieve, because I think if you look at the resource sector--at oil and gas, mining--and at the project duration, the risk, I think there is an argument there. But the argument always comes back that that sort of compensates for that, but the rebuttal to this is to say that, yes, we do have some unique tax incentives, but there are a whole pile of other sectors that do as well, and I think it helps to bring the argument closer to resolution, at least in my mind. Our researcher can dig it all out, I suppose, but it would be useful I think to have that in our information.

I'd like to come back to Kyoto for a moment. First of all, I'm going to ask you if you as an industry support energy efficiency, energy conservation.

Mr. Greg Stringham: Absolutely, and it's been demonstrated by our actions. It makes sense.

Mr. Roy Cullen: I know that in the United States there was a bit of buzz when they came out with their energy policy. There was not a lot of discussion of energy conservation and energy efficiency, though maybe there was some. But as a Canadian industry, you're saying you support energy efficiency.

I wonder if you could comment on two aspects. I think energy efficiency is part of the equation, but I've had difficulty over time with a couple of ideas that are thrown out. Maybe you could provide some objective analysis, or as objective as you can be, given that you have certain corporate and sectoral views on it. One is that there is this growth in the new economy--I'll call it the new economy, with technology, innovation, and all these products and processes--and that it will sort of counterbalance the hits to what I'll call the old economy, even though we know there's a lot of new economy embedded in the so-called old economy. I've argued that this is somewhat mythical. The more that can happen, it's good, but to build a business case on that is something I have a bit of a problem with.

Second, it is argued that environmental measures will enhance performance. My experience is that some of them will and some of them won't, and we need to be careful around that point. Some environmental measures do not enhance performance and productivity.

Could you give me a brief outline of your views on those two areas?

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Mr. Greg Stringham: Sure. Very quickly, on the efficiency side of things, being very familiar with the U.S. energy policy when it came out, it had two chapters on energy efficiency. It did get overlooked a little. They're supportive of working in that direction as well.

Many of our companies have done very well in reductions of energy efficiency in order to try to improve the economics of the more costly basins. As we move further north and farther away from services, it becomes more expensive to develop. From that perspective, the industry as a whole is very much supportive of moving in that direction and has already started doing so.

I think I need to repeat what I said before. The energy industry, the oil and gas industry, in Canada is not against greenhouse gas reductions. In fact they're working to try to do so.

It's a question of how to do it and still permit growth to happen over time. From that perspective, you don't want to put a cap on growth because, as Mr. Richels said, people will look at the evaluation. If they can't grow here, where do they make the investments?

Mr. Roy Cullen: What about the issues of the old economy, new economy, and environmental performance enhancement? Do you have any thoughts on that?

Mr. Greg Stringham: I'll answer that part of it, and then I'll turn it over to Mr. Richels.

Definitely our industry is an implementer of great high technology. As you know, with the 3-D seismic, we have more powerful computers in downtown Calgary than many other places in the world. We're pushing the edge of technology in order to try to develop these resources, to reduce costs, to be more environmentally sensitive, and to get access to resources that weren't there before. From that perspective, I think you'll see that there's much high tech, as you said, embedded in the oil and gas industry right now.

The philosophy we've been coming to the table with is that if you put in requirements to reduce emissions to something below what is technically possible to do today, it doesn't matter what attitude you have. If you say here's what the best technology is and we want you to reduce to here, you can't do it. You can spend money on research and development and try to narrow that gap over time, but no one can predict technological breakthroughs.

Our companies are working on moving down to having employed the best and the highest technologies that are there. The worry we have about imposing a Kyoto or an external target is that it may set that target below what is achievable in today's environment.

Mr. Roy Cullen: Even with incentives, economic instruments, you just can't get--

Mr. Greg Stringham: You can only get to where the technology is, and then you can spend money on R and D to try to move that technology down. We're willing to do both of those. The worry is that if there's still a remaining gap, which we think we've already identified in there, how do you solve that? Is it by going out and buying credits from other parts of the country? Is that what we want to do, or do we want to spend that money on research and development here in Canada?

Mr. John Richels: That's really the point. I don't think I can really add a lot, but I think the industry is very committed to that. I can give you an example. Our company started two years ago, with participation from Technology Partnerships Canada, pioneering a technology to reduce the emissions from the normal steam-assisted gravity drainage projects in every oil production area by some 85%. It'll be wonderful if it works, but we won't know that for 15 years.

We did this long before Kyoto was a hot topic. We're putting a lot of money into it. The federal government's putting some in, the industry is putting some in, and the Province of Alberta is putting some money into that. So we're doing those things all the time.

You asked if we are in favour of some kind of reductions--we all are. I have kids. I go hiking in the mountains. We're all in favour of that. We just see the Kyoto plan as the wrong plan. It's the wrong way to get to it. It's going to funnel money, which we ought to be spending here, out of Canada into other parts of the world.

We have to keep in mind we're in a country that is growing rapidly, from a population point of view and from an economy point of view. When you compare our population in Canada in 1990--the benchmark--to what it will be in 2010 or 2012, there will be a fairly significant increase. So we want to pursue a responsible policy on greenhouse gas emissions. We just don't think this is the right way to do it.

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Mr. Roy Cullen: Just as a final question on Kyoto, do you think some negotiated solution is possible? We've heard a lot about the made-in-Canada solution, but I don't think we've seen all the details. It talks about pushing the targets and the timing out a bit--maybe quite a lot. But is there a compromise solution that could be achievable, that may not be quite where Kyoto goes, but may ask corporate Canada and Canadians to push the envelope on how we can get there?

Mr. John Richels: I think there is, and our association is putting forward a plan on how that could work.

Greg, you could probably add to that.

Mr. Greg Stringham: I agree with what John has said--but in five weeks, no. Over a longer period, we can look at what's technically feasible and make that. But the two don't meet yet at this time, and a deadline has been set.

Mr. John Richels: That's one of our real concerns. An artificial timeline has been put on this.

Questions were asked here by Mr. Harris, I think, about the consultation we've had. I can tell you that just about this time last year I was sitting in Minister Anderson's office in Ottawa--the PMO's office--talking about this. Virtually no consultation had occurred up to that point. When the Prime Minister made his announcement on September 2, or whatever the date was, there was a lot of scurrying.

Mr. Glennie and his company have spent more time on public consultation on this heavy oil initiative than the federal government has spent with the public of Canada on this. We're putting this into such a truncated timeframe that we have every chance in the world here to make a big mistake.

The Vice-Chair (Mr. Nick Discepola): Thank you.

I'd like to conclude now with Mr. Murphy, please.

Mr. Shawn Murphy: Thank you very much, Mr. Chair.

I have a few questions for Dr. Mouat. You can see from the discussion here today some of the difficulties and the challenges this committee is faced with. And you're quite right. At least two of the major student organizations have addressed this committee and very forcefully argued about the whole issue of accessibility of education and that there has to be more government funding put into that end of it, the student end of it. You're arguing that there has to be more money put into the other end, the infrastructure or sustainable funding.

The government has, over the last four or five years, perhaps rightly or wrongly, taken an approach that they would...you call them boutique programs, the CFI, the research chairs, the NSERC, you name it. They've all increased very dramatically at every university. Whether it's to benefit or not, there's been a lot more money that has gone into the research.

Having heard the discussion here this morning I take it your submission is for more federal government funding to go into the universities. As you know, the universities are under the jurisdiction of the provinces, and I know about your recommendation for an act and all that, but you can see the difficulties the Canadian government is faced with.

I don't know what the situation is in Alberta, but there have been provinces that, when these increases come about, are taken off the table. They don't get to the university gate.

So I'm putting the question out. The gentleman on your left is looking for corporate tax reductions. We have the biggest issue that the Canadian people are telling us about. They want health care and a lot more federal money going to the health care issue. We have the Kyoto issue, our greenhouse gas reductions issue.

I throw these issues out there. How do you see it fitting in? Do you see where we can cut back in some areas to fund universities? Are you advocating tax increases to fund universities, or a dedicated tax? I don't see everything being possible.

Dr. Jeremy Mouat: It's a hard problem, I know. I remember that years ago I was advocating with my colleagues in the educational sector, and our slogan was, “If you think education is expensive, try ignorance”. I think that still resonates.

Just before we started, my colleague Drew and I were talking about the oil sands up in Fort McMurray. Over half the employees up there have university degrees. If we're going to advance on Kyoto, we're going to need really good university research; we're going to need great graduates.

We're worried about exporting money with the implementation of Kyoto. I would imagine that students, certainly academic staff, are worried about exporting our university expertise south of the border. It's like the NHL: they pay in U.S. dollars down there. It's a competitive situation for universities. If you don't keep us competitive, our dollars are going to go too; our human capital is going to go, whether it's the student capital or the professoriate. We need the money to stay competitive.

So how do you do that? That's why we're recommending something analogous to the Canada Health Act for post-secondary. We want the provincial governments to give us the money they receive. The federal government did start giving the provincial governments less money too. That's where the cycle of underfunding began as far as we're concerned, and it's really put us in a tough place.

I know Mr. Harris mentioned that I was in favour of tax increases and that my colleague was in favour of tax cuts. That's not quite what I said. I said that what Canadians are saying, what the voters are saying if you ask them and as they were asked six weeks ago, is that they want the social programs beefed up. They want the Canada Health Act beefed up, and they want our universities to be accessible and affordable.

I don't have a magic solution to point you to the seven superfluous programs you can now cut money from to guarantee for our base operating grants. All I'm saying is, you have to give us the money if you want our university system to be maintained and to be competitive, and it's absolutely vital that we do.

I don't think we're arguing. All my colleagues here would say that excellent geophysical and scientific research is critical to their industry. I don't know. They might not say, give them all the money they need.

I know they've benefited. The oil sands were originally cracked by government inventions, government R and D, here in the 1920s and the 1930s in Alberta. Research always pays back; it's just that we don't know when it's going to happen.

That's rambling, and I'm sorry I don't have a magic bullet solution for you.

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Mr. Shawn Murphy: I just want to point out the problem we face as a government.

Having heard the answer to that question, I have a last question to you, Mr. Glennie. I agree with you 100% on the large capital taxes. The committee has made that recommendation, and I assume we're going to make that recommendation again this year. Hopefully at some point in time we'll see it implemented. It's a regressive tax, and we agree 100% with your submission.

But having said that, and knowing full well the pressures that this government is under in health care, and knowing that under no circumstances should we go back into deficit financing and the other pressures, and given the corporate cuts that had been announced and are in the process of being implemented... And I don't have all the figures in my mind, but I believe if we're not now we're certainly going to be very competitive with most of the northern states once the corporate taxes that were announced a year and a half ago are implemented.

I know corporate tax cuts are probably the best bang for the buck for economic development. I know that, but given all the pressures that this country is under, are further corporate tax cuts—I'm not talking about the ones that are announced, they have to be implemented—a practical reality given the circumstances?

Mr. Drew Glennie: I think as a country, both at the personal and corporate levels, given our proximity to the U.S. and given the flight of capital and personnel, we need competitive tax rates at both the personal and the corporate levels. I would not as a Canadian citizen advocate that Canada become a tax haven. I think we need appropriate tax rates to fund the government and appropriate tax rates so that we don't lose our human capital to the U.S., and we need appropriate corporate tax rates and a corporate tax system that allows for Canadians to further invest in their own country or, indeed, attract some foreign investment in our country. That's how I would address that. I'm not saying we have to be 5% or 10% below the U.S., but we sure as hell can't be 5% or 10% above.

Our economy is moving along quite well relative to the U.S. over the past 18 months, and I would say not a small part of that is due to corporate Canada and the fact that we actually have, except for the resource industry, more money in our jeans that is being reinvested in the country. You know, it all goes around, from my perspective.

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The Vice-Chair (Mr. Nick Discepola): Thank you very much. Are there no further questions?

All right. Thank you to our presenters. I know the panel dwindled, but the quality of the presentation, I think, improved. Maybe I shouldn't say that, because the first part was good also.

We're faced with tremendous challenges. I don't think our job is easy, but it's made easier by presentations such as yours. You may not see your recommendations reflected in our list of priorities as we report in a few weeks. The minister laid out the ground rules for us. I think the most significant challenge for us is the health care costs that are going to have to be injected. We'll know better in a few weeks how much that's going to entail.

The minister also stated clearly last week that notwithstanding our robust growth in comparison with the United States, the anticipated surplus is only $1 billion next year. So if we take a look at all the demands that are required, and the uncertainties of some of the decisions we have to make with respect to Kyoto, which haven't been factored into those demands, we have significant challenges ahead of us as a committee.

But your presentation certainly has added a lot to our dialogue. Budgeting is an art of making choices and setting priorities for Canadians, so I hope we'll do that and represent your views as well. I would like to thank you again for your representation today.

We move on from Calgary to Saskatoon.

Thank you very much to everyone. We adjourn until tomorrow morning at nine o'clock.