FINA Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Tuesday, June 3, 2003

¹

1555

The Chair (Mrs. Sue Barnes (London West, Lib.))

Mr. Patrick Nephin (Managing Director, Top Box Consulting Group, As Individual)

º

1600

º

1605

The Chair

Mr. Jack Mintz (President and Chief Executive Officer, C.D. Howe Institute, As Individual)

º

1610

The Chair

Mr. John Connell (Senior Chief, Industry and Knowledge Economy Section, Economic Development Policy Division, Department of Finance)

º

1615

º

1620

The Chair

Mr. Charlie Penson (Peace River, Canadian Alliance)

Mr. Jack Mintz

Mr. Charlie Penson

º

1625

Mr. Jack Mintz

Mr. Charlie Penson

Mr. Jack Mintz

Mr. Charlie Penson

Mr. Jack Mintz

Mr. Charlie Penson

Mr. Jack Mintz

Mr. Charlie Penson

The Chair

Mr. Pierre Paquette (Joliette, BQ)

º

1630

Mr. Patrick Nephin

Mr. Pierre Paquette

Mr. Jack Mintz

º

1635

Mr. Pierre Paquette

The Chair

Mr. Roy Cullen (Etobicoke North, Lib.)

º

1640

Mr. Patrick Nephin

Mr. Roy Cullen

Mr. Patrick Nephin

Mr. Roy Cullen

Mr. Patrick Nephin

Mr. Roy Cullen

Mr. John Connell

º

1645

Mr. Roy Cullen

Mr. Patrick Nephin

Mr. Roy Cullen

Mr. Patrick Nephin

Mr. Roy Cullen

Mr. Patrick Nephin

The Chair

Mr. Bryon Wilfert (Oak Ridges, Lib.)

Mr. John Connell

Mr. Bryon Wilfert

Mr. John Connell

Mr. Bryon Wilfert

º

1650

Mr. Patrick Nephin

Mr. Roy Cullen

Mr. Patrick Nephin

Mr. Jack Mintz

Mr. Bryon Wilfert

Mr. Patrick Nephin

Mr. Bryon Wilfert

Mr. Jack Mintz

Mr. Bryon Wilfert

Mr. Jack Mintz

Mr. Bryon Wilfert

º

1655

Mr. Patrick Nephin

The Chair

Mr. Tony Valeri (Stoney Creek, Lib.)

Mr. Patrick Nephin

Mr. Tony Valeri

Mr. Patrick Nephin

»

1700

Mr. Tony Valeri

Mr. Jack Mintz

Mr. Tony Valeri

Mr. Jack Mintz

Mr. Tony Valeri

Mr. Patrick Nephin

Mr. Tony Valeri

Mr. Patrick Nephin

Mr. Tony Valeri

Mr. Patrick Nephin

Mr. Tony Valeri

Mr. Jack Mintz

Mr. Tony Valeri

Mr. Jack Mintz

Mr. Tony Valeri

Mr. Jack Mintz

Mr. Tony Valeri

Mr. Patrick Nephin

Mr. Tony Valeri

Mr. Patrick Nephin

Mr. Tony Valeri

The Chair

Mr. Tony Valeri

Mr. Patrick Nephin

Mr. Tony Valeri

»

1705

Mr. Patrick Nephin

Mr. Tony Valeri

Mr. Patrick Nephin

Mr. Jack Mintz

Mr. Tony Valeri

Mr. Patrick Nephin

Mr. Tony Valeri

The Chair

Mr. Charlie Penson

Mr. Jack Mintz

»

1710

Mr. Charlie Penson

Mr. Jack Mintz

The Chair

Mr. Roy Cullen

»

1715

The Chair

---

CANADA

Standing Committee on Finance

---

NUMBER 061

l

2nd SESSION

l

37th PARLIAMENT

---

EVIDENCE

Tuesday, June 3, 2003

[Recorded by Electronic Apparatus]

¹  (1555)  

[English]

    The Chair (Mrs. Sue Barnes (London West, Lib.)): Welcome everyone, bienvenue à tous.

    My apologies for the delay in the starting time. It was because of the votes in the House. If necessary, we can make up a little bit of time at the end of this meeting if people still have questions.

    The order of the day is Bill C-212, an act respecting user fees and the proposed policy of the Treasury Board on external charging policy.

    We have witnesses today from the Department of Finance. Helen Cutts is chief of analysis and coordination, industry and knowledge economy section, economic development policy division. John Connell is the senior chief, industry and knowledge economy section, economic development policy division.

    As individuals we have Jack Mintz, president and chief executive officer of C.D. Howe Institute; and Patrick Nephin, the managing director of Top Box Consulting Group.

    Maybe we'll go in reverse order for a change and start with either Mr. Mintz or Mr. Nephin. Who would care to go first?

    Mr. Nephin, you have approximately 10 to 15 minutes maximum, if that's okay.

    Mr. Patrick Nephin (Managing Director, Top Box Consulting Group, As Individual): Thank you, Madam Chair and members of the committee, for the invitation to appear before you today to review Bill C-212.

    Let me just explain the experience we bring to this. Top Box Consulting Group provides management consulting services to clients, many of whom are federal government departments and agencies. So we do a lot of work with government departments on their user-fee proposals.

    We've worked with organizations such as the Canadian Intellectual Property Office, Foreign Affairs, the National Archives, and the Pest Management Regulatory Agency. We've been involved in a number of aspects of user fees with departments over the last several years.

    We also work with the Treasury Board Secretariat. At the last meeting there were some references to the benchmarking study. It was our firm that conducted that study, so I can speak to that if necessary.

    Today I'd like to talk about two principal areas: the possible impacts that are related to the provisions of Bill C-212; and some comments relating to how other jurisdictions deal with some of these issues. I can elaborate on any of the issues you want.

    It's clear from the work of the committee over the last few years that members of Parliament would like to have a stronger voice in decisions relating to the establishment and amendment of user fees. They require more information on the types and nature of user fees, the amount of revenue generated from user fees, and so on.

    I think MPs are also sensitive to the reactions of their constituents who pay user fees, and to the issues they raise about the levels of service and performance relating to the activities for which their departments are collecting user fees.

    One of my concerns on how Bill C-212 proposes to address some of those issues is that it could cause government processes to become quite inefficient. Right now it takes departments 18 to 24 months to get the user fees in place. With another parallel process in place that could be even longer, and the process could end up getting bogged down.

    I think there are ways of modifying current processes that might achieve the objectives inherent in Bill C-212 without creating a separate process. For example, subclause 4(2) requires that a minister table a proposal for user fees in the House. Under the current process, departments are preparing a regulatory impact analysis statement. That statement includes much of the same information that would be required by Bill C-212.

    As an alternative, you could have that RIAS tabled in the House at the same time it gets published in the Canada Gazette. It would provide members of Parliament with information at that time. Without creating a new document, that would serve much the same purpose.

    Another example where the current process can be modified relates to clause 8 of the bill, which requires the minister to table an annual report on user fees in the House. Right now departments provide reports on plans and priorities as part of the estimates process. I think Treasury Board indicated at the last meeting they were suggesting changes to that document to include more information on user fees so it would become more of a comprehensive picture for members. When you're debating estimates and spending estimates, you could be reviewing revenue estimates at the same time, rather than in a separate process.

    I have a few comments on some of the specific elements of Bill C-212 and some of the things that were discussed at the last meeting. The 1997 policy of the Treasury Board requires that a department, when considering a user fee, take into account whether or not the activity provides a public or a private benefit. The policy suggests trying to split the cost between the public benefit part, which would be funded by an appropriation, and the private benefit part, which could be funded by a user fee.

    The draft policy Treasury Board is working on suggests some changes to that. Instead of trying to make that kind of split, it suggests that a user fee could be implemented where a service provides the recipient with benefits beyond those enjoyed by the general taxpayer. So the notion of trying to split it into a public benefit and a private benefit is a very difficult one. Sometimes it's not very practical to do it.

º  (1600)  

    I have a couple of examples of how other jurisdictions deal with that issue. In the United States, their general policy on user fees refers to “special benefits beyond those provided to the general public”, in which case the user fee can be implemented. That means, for example, that in the area of regulatory programs, a fee can be charged to a company to recover the costs of regulatory activity relating to the costs that are being incurred by the government departments.

    It's interesting to note a comment made by the chair of a congressional committee discussing this issue in 1989. He said in their case:

User fees and regulatory fees are paid by choice in that the party paying the fee has the option of not utilizing the government service or avoiding the regulatory activity and thereby avoiding the charge. Furthermore, fees are collected merely to compensate the government entity for providing the service, or for expenses incurred in regulating the activity.

    Australia has taken a similar approach, in that there are only limited cases in which they've actually tried to identify whether or not there was a public versus a private benefit. They have some examples that are in there.

    On the issue of reporting to Parliament, I think there are some interesting examples from other jurisdictions that can be looked at. In the Province of Manitoba, for example, whenever the Minister of Finance tables his spending estimates he tables the revenue estimates at the same time. There are detailed lists of all the user fees the departments in Manitoba are intending to have. That's maybe one example of how another government deals with that type of issue.

    The final point I'd like to talk about is benchmarking against trading partners or against OECD countries. Bill C-212 has a requirement that user fees be benchmarked against all OECD countries. I understand that's going to be changed to significant trading partners.

    The draft of the Treasury Board policy suggests comparison to “the practices of other jurisdictions for comparable activities under comparable circumstances”. It's a relatively common practice now for government departments to actually do that, particularly in regulatory programs, or programs that have similar activities in other countries. Our consulting firm, for example, has done that for a number of departments.

    Departments now tend to look at countries that have some type of affinity to the kinds of services they provide, or they look at where they can get value for the work they're going to do. There tends to be certainly a cost involved in doing that type of benchmarking, and departments tend to limit the number of countries they look at, based on the cost and the type of value they intend to get out of it. It's not a trivial case to do that type of benchmarking.

    One of my concerns is if there's a legislative requirement to do that kind of benchmarking it puts everything in the same boat, and you end up with some relatively trivial examples, like the National Archives wanting to institute a fee for photocopying. Would they have to do that type of a thing?

    Out of the $4 billion of user fees that are collected, about 20% is collected by the RCMP from provinces for policing services. It wouldn't make much sense to do a benchmarking of that against what other countries do, simply because it wouldn't be relevant.

    So I think there are a number of areas in the bill where you can look at some modifications to remove some of those practical kinds of difficulties.

    Those are my remarks. I'd be happy to reply to questions.

º  (1605)  

    The Chair: Thank you very much.

    Now we'll go to Mr. Mintz, please.

    Mr. Jack Mintz (President and Chief Executive Officer, C.D. Howe Institute, As Individual): Thank you very much, Madam Chair. It's a pleasure to once again be before the House of Commons Standing Committee on Finance. I am pleased to have been asked to appear to discuss Roy Cullen's proposed legislation on user fees.

    I should say right from the outset that I support the main intent of the bill of improving parliamentary oversight in determining user fees that are now $4 billion in revenue at the federal level. My arguments are somewhat different from what has been presented in the past at some of the hearings, and I think you might be surprised by some of my conclusions. However, I do feel the current system is not working properly in the interests of Canadians, nor will it if we only have ministerial responsibility for setting user fee policies. Greater parliamentary oversight is needed.

    I first wish to begin with some discussion of the principles for determining user fees. First is efficiency and fairness. User fees are a fair and efficient means to fund public services. Those who benefit from public services should contribute more to their costs. User fees should not be charged if services to a person cannot be identified, or if public objectives such as distributional effects, health, defence, etc., override the objective of achieving a fair and efficient means of funding public services through user fees.

    Second is transparency of the process in determining user fees. User fees should be set to cover no more than the cost of providing a service. Costs are notoriously difficult to measure, so a process that makes sure that Canadians understand the nature and size of costs incurred in the delivery of a service should be made transparent. Further, if other public objectives are involved, fees should be established below costs. The implication of this principle is that user fees are set in accordance with public objectives that include not just cost recovery. These public objectives should be stated clearly when determining user fees.

    Third is incentives for rate setting. In markets, prices set by businesses for goods and services must cover costs. However, if a business is not operating properly, competitive pressures will push businesses to cut costs and improve delivery to meet demand. In the case of government user fees, usually there is no competition from private producers. Governments are monopolists, so competitive pressures are absent in encouraging efficient behaviour. Instead, only the political process can help create incentives for the efficient delivery and pricing of public services.

    Let me turn to perhaps my most provocative comment. Treasury Board officials and perhaps politicians have created an egregious impression that the only Canadians who should be consulted on user fees are the so-called stakeholders. I don't understand what is meant by the term “stakeholders” but I would suggest that all Canadians are stakeholders. This is the basis of my view that parliamentary oversight of some sort is needed.

    Since 1996, government departments have been free to set user fees to recover costs. Some oversight in the process is provided by Treasury Board, but it is clear from the statements of Treasury Board officials that standards and the process might vary by department. Efforts are made to consult with groups that must pay the user fee.

    However, it is wrong to assume that the only Canadians affected by user fees are those who pay them. All Canadians are affected by user fee policy for two reasons. First, public policy objectives are involved, and clearly Parliament has a role here in scrutinizing decisions of the government. Second, user fees are an alternative to taxation. Changes to user fee policies impact on how much taxes are paid by Canadians.

    Thus, in my view, it is wrong to think that only ministerial responsibility should be considered in determining user fee policies. I believe there is a role for Parliament in scrutinizing user fee policies. User fees could be akin to taxation without representation, unless some parliamentary involvement is provided.

    Let me contrast our user fee process with tax policy. The Minister of Finance is responsible for bringing legislation to Parliament to debate. Legislation deals with tax rates and bases, although considerable interpretation is left to regulation developed by the Department of Finance and the Canada Customs and Revenue Agency. The key point is that parliamentarians are involved in the process of approving tax legislation.

    In contrast, user fee policy operates somewhat in a vacuum. There is some consultation with those directly affected, but it is wrong from a public policy perspective to think this is the only approach that should be used for consultation. The minister then determines the user fee charged by a department, and is accountable to Parliament only if a question arises in the House or a committee. Otherwise, Parliament has little direct role in reviewing user fee policies.

º  (1610)  

    Given the important public policy objectives involved in determining user fees, it seems that a minister should be responsible for determining user fees, but some role should be given to Parliament to review legislation implementing user fee policies, to achieve greater transparency and effectiveness. Policies include the setting of standards for determining user fees; the review of service delivery; and information regarding costs and the impact of the user fee policy.

    Transparency means that all Canadians, not just so-called stakeholder groups, have an opportunity to review the policy. I believe Mr. Cullen's bill is in the right direction. We should have some sort of parliamentary review of the user fee process, to make sure user fee policies are operating in the interest of Canadians.

    My one concern is whether each and every user fee, of thousands set each year, should be reviewed by some parliamentary committee. This could be quite cumbersome. I think there is a point in allowing the estimate process to evaluate user fees as part of that. We review the expenditure lines, and it makes sense to include user fees, which are really cost recovery of those expenditures.

    We need some sort of legislation to set out the principles and general process for the implementation of user fee policies, and this should be passed by Parliament. A transparent process should then be used to review each department's policy procedures by a committee of Parliament, or perhaps just the public accounts committee that reviews expenditure programs. All Canadians would then have an opportunity to make presentations before a parliamentary committee on a particular departmental process in setting user fees by departments.

    The process could involve a method by which disputes could be resolved. In my view, the dispute mechanism should not be left solely to the department, since it would be the prosecutor, judge, and jury at the same time. Instead, the dispute should follow another procedure by which the user fee could be reviewed by an independent tribunal operating under legislation, and perhaps with the right of appeal to a parliamentary committee or the cabinet. Costs would be assessed on those who brought frivolous claims to the tribunal.

    Thank you very much.

    The Chair: Thank you very much.

    Mr. Connell, go ahead, sir.

    Mr. John Connell (Senior Chief, Industry and Knowledge Economy Section, Economic Development Policy Division, Department of Finance): Madam Chair and members of the committee, I want to thank you for this opportunity to appear before the Standing Committee on Finance on Bill C-212, an act respecting user fees. With me today is Helen Cutts, who is chief of the policy and coordination unit in my division.

    I want to begin by describing the duties and responsibilities that Helen and I carry out in the department, which will frame the comments we'll have to make on external charging policy. I'm afraid that you might find the comments overly general, given the detailed discussions you've had to date and the comments that have been made by the two previous witnesses. I want to make you understand why that's necessarily the case, from the Department of Finance's view.

    To begin with the basics, our branch is responsible for advising the Minister of Finance on policies and issues related to key sectors of the economy and regions of the country. We also exercise a central coordination function with respect to issues before the cabinet committee for the Economic Union. In general, the branch undertakes analysis and provides policy advice and support of three main objectives.

    First is ensuring that expenditure proposals and contingent liabilities are managed within the government's fiscal parameters and financial management structure. Second is assessing and developing initiatives and framework policies conducive to economic growth and job creation. Third is furthering the government's agenda in the areas of commercialization and privatization involving government-owned or government-managed agencies, such as crown corporations.

    We're therefore a small branch, and the six operating units into which we're organized cover off various areas of economic policy pertaining to, for example, transportation, agriculture, and the environment.

    Helen and I concern ourselves mainly with industry and microeconomic policy issues; that is, examining some of the non-macroeconomic conditions under which Canada can build competitive advantage in the global knowledge-based economy.

    I want to acknowledge the importance of the committee's work in this area, particularly in some of the prebudget consultations that were held. Recommendations from the committee in your last report on the priority of productivity and innovation had an important impact on initiatives announced in budget 2003. These measures are further to the focus that the government has maintained in all recent budgets on productivity growth as the foundation for long-term economic development. Your significant attention to this priority has done much to get that priority right, and we thank you for that.

    Turning to cost recovery policy, I want to convey that we've been monitoring, to the best we possibly can, the deliberations of this committee, the positions taken by various stakeholder groups, and the draft Treasury Board policy. That said, we are by no means experts on arrangements for cost recovery, nor are we a department that has extensive experience in charging for services rendered.

    From the Department of Finance's perspective I would like to make three key observations. First, we believe strongly in cost recovery. We think that governments should recover costs through user fees for services that convey benefits primarily to private persons or organizations. To do otherwise would be unfair to taxpayers who have no need for the service. Moreover, it would forego price signals to users, who thereby could demand too much from the government. It would also forego the same signals to program managers, who need to know the appropriate level of service to provide. In short, charging for the use of government services by persons or organizations that can be clearly identified as the users is good economic policy.

    Secondly, the generation of revenue for the government is not an objective in and of itself, and is not a priority for the Department of Finance. To be crystal clear on this point, I want to emphasize that there is no interest per se in seeing departments and agencies generating increased revenues to fund existing or new priorities. Rather, we want to see charges that are appropriate for services rendered and determined consistent with such principles as accountability, openness, and transparency.

    The government does realize significant revenue through cost recovery--about $4 billion in 2001-02--but that represents only about 2% of total government revenues. The $4 billion breaks down roughly as follows: $1.4 billion from provincial governments for policing services provided by the RCMP, and from members of the military for housing; $0.5 billion in Citizenship and Immigration fees; $0.5 billion in spectrum licence and other fees for the Department of Industry; $0.7 billion in airport fees, broadcast licensing fees, and consular fees; and the remainder, about $1 billion, in other fees.

    As you know, cost recovery fees have a separate status in the government's fiscal framework. Unlike taxes, which are implemented through the Budget Implementation Act, fees can be established through an act of Parliament or through orders in council, with fee revenues accessed by departments according to Treasury Board rules and criteria. Herein lies the nub of the debate surrounding Bill C-212, with key questions concerning whether parliamentarians should have a greater role when fees are introduced or increased, and resulting implications for ministerial responsibility.

º  (1615)  

    In this connection, it's relevant that as part of improving expenditure management and accountability, budget 2003 made reference to the intention of the President of the Treasury Board to issue a revised policy on external charging. Specifically, the budget highlighted that the new Treasury Board policy will recognize the importance of consultation, service delivery, and results in all user-charging activities ranging from optimal to regulated services. Enhanced implementation requirements, including the annual reporting of revenue and performance information directly to stakeholders and Parliament, underscore the significance of parliamentary oversight and ministerial accountability.

    This brings me to my third key point, which is that Finance Canada looks to leadership from the Treasury Board Secretariat in developing a “whole of government” view on these matters and, moreover, the specifics of external charging. The issues are extremely complex, and require a close working relationship with line departments to be properly understood. We know that the secretariat has been striving to develop a policy approach that is both practical and workable for departments. They have also sought to advance the interests of users of government services for improved performance and accountability, while protecting the taxpayers' interest in the user-pay principle.

    To sum up, we support cost recovery policy as key to efficient allocation of scarce public resources. We think that getting the policy right is important to Canada's global competitiveness. Users need certainty that government goods and services will be efficiently provided at the lowest possible cost. Government departments and agencies, in turn, need certainty that they have the revenue base over the long term to meet the needs of Canadians, in respect of both private and public interests.

    The position of the committee toward the draft policy and Bill C-212 is, of course, entirely for you to decide. I know that you'll be guided by public interest in finding the approach that represents the best overall policy for all Canadians, and builds on the productivity and competitiveness advantage for Canada that you have recommended be created through related measures and initiatives.

    I wish you much success in your deliberations, and look forward to your report.

    Thank you.

º  (1620)  

    The Chair: Thank you very much. Thanks to all of you.

    Now we'll go to our first round, which may be the only round, of eight minutes. We'll start with Mr. Penson, followed by Monsieur Paquette.

    Mr. Charlie Penson (Peace River, Canadian Alliance): Thank you, Madam Chair.

    I'd like to welcome our guests today to discuss this important issue. I don't think there is too much opposition to the concept of user fees, but we are seeking to make sure those user fees are not onerous on the people who have to use them.

    Mr. Mintz, you're suggesting it's not just the people in the industry itself, but the consumers of whatever product it might be. Mr. Connell has talked a little bit about our productivity and competitiveness.

    If it's not done properly, do you think user fees can be a cost to business in trying to keep competitive? What competitive pressures would come from those user fees?

    Mr. Jack Mintz: We have to remember that taxes impact on the cost of doing business, and certainly user fees will have that impact as well. I sometimes look at user fees really as part of the overall revenue policies of the government. I don't think it's a very healthy thing if only those who are affected by user fees are being consulted, in determining user fee policy.

    We have to remember that if we decide not to charge user fees, the taxpayers will be asked to pick up the cost of providing that service completely. Certainly their interests are involved because they're going to end up facing a higher cost of doing business as well, or at least potentially. So I think it makes a lot of sense if we try to look at these things a little more generally.

    I also don't think competitiveness is the only objective or the only issue involved in setting user fee policies. There are some other issues that we do worry about, such as the distributional effects of a particular policy. It might hurt, for example, very low-income people who are unable to pay the fee, so we might want to take that into account.

    We might also want to make sure people are undertaking a particular action because we feel it's very vital that they do it, and if you charge too high a price you might discourage those actions being taken. For example, vaccination policies are very important to make sure that contagious diseases are not going to be transmitted through the whole population. If we charge a high price every time someone gets a vaccination and they have the right to say no, that could be a problem for all Canadians. We often provide vaccines free of charge because we want to encourage people to be vaccinated against contagious diseases. That's why I think there are some important public issues or objectives that might override the desire to look simply for cost recovery.

    This doesn't mean you should have no user fees at all. In many situations there may be at least partial cost recovery, but that becomes a decision of governments and the public in supporting governments, because this really becomes a political decision that has to be made.

    Mr. Charlie Penson: So you're suggesting that the same sorts of behavioural patterns that taxation might cause would be the same result of user fees.

    I live in a border town in Alberta in Grande Prairie. It's 50 miles from the B.C. border. On the weekend we see nothing but B.C. cars there because of the 7% sales tax. It's the old, “a rational man will do whatever he needs to do”.

    Are you suggesting that if you have policy objectives that would override user fees, something has to be put in place to recognize that and lower the cost of the user fees so those decisions don't get altered?

º  (1625)  

    Mr. Jack Mintz: We do it all the time. I teach at a university, and tuition fees are charged in Ontario basically to recover about a third of the costs of education. We've taken the attitude that the other two-thirds should be covered by the government, particularly at the undergraduate level, and not including the professional programs anymore.

    Clearly there was a political decision made that a certain portion of the costs should be covered by the government and the rest should be covered through user fees, which in this case are tuition fees paid by students to universities. Those are conscious decisions we make as a public, and I think there's a need at times for debate to deal with that.

    My other concern, of course, is that governments are monopolists in choosing their user fees, and I really worry about the absence of competition in sort of penalizing bad behaviour. This is not to say that bureaucracies are badly behaved; I don't believe they are. It's just that there is a pressure that competition brings about that forces people into worrying about service delivery and trying to keep costs down in a competitive market. When you have a monopolist operating, it's quite possible that costs may be set too high.

    Mr. Charlie Penson: Isn't it also necessary to be able to respond quickly to market conditions? Committee members have heard me tell this story before. When the NDP went in twenty-some years ago, I recall that the housing industry in my local area basically went from going very strongly to about 10%. But the provincial government didn't lay off the gas inspectors and the building inspectors for the residential areas. So we had this infrastructure in place with a system that didn't respond quickly. Not only were the remaining 10% paying all the fees, but they were subject to a lot closer scrutiny from the remaining inspectors because they had to justify keeping their jobs. It was very problematic for those people.

    I'm just wondering if your suggestion of it coming to a parliamentary committee to look at the estimates would be a help in responding quicker in situations where there are some problems.

    Mr. Jack Mintz: That's why I think there's some need for an appeal process. So if a fee is set and those affected are not happy about it, they have the opportunity to appeal that fee. It shouldn't be up to the department alone and some procedure there. Therefore I don't think having something in the parliamentary procedure to deal with that would be such a bad thing; it could be quite a positive thing. It also might put some pressure on departments to make sure they don't set user fees that are well above what is appropriate, and also to think about their own costs in determining those fees.

    Mr. Charlie Penson: So there would be the judge and jury sort of scenario you were talking about earlier.

    Mr. Jack Mintz: Exactly.

    Mr. Charlie Penson: The department that sets them may not be willing to respond.... They're the ones who set them after all, so there needs to be some kind of process outside of that.

    Mr. Jack Mintz: That's right.

    Mr. Charlie Penson: That's helpful. Thank you very much.

[Translation]

    The Chair: Mr. Paquette, you have eight minutes.

    Mr. Pierre Paquette (Joliette, BQ): Thank you, Madam Chair.

    I want to begin by saying that it is regrettable that we have none of the documentation in French. It is really too bad, since the documents are extremely interesting. I wanted to point that out.

    My first questions are for Mr. Nephin. At the end of your document, there are some comparisons. I think that you have put your finger on a reality, because it is extremely difficult to compare user fees from one country to another, given the differences in history, culture and values. Take taxation, for instance, I am always surprised that everyone in France who has a television has to pay a tax. From what I understand, 98 per cent of people in France pay that tax voluntarily. The tax is not even collected for them; they send in their cheque. I have a hard time imagining how that kind of measure could be applied in North America.

    It is somewhat the same thing with user fees. I also find that it is hard to make comparisons. Even though the government often has a monopoly in a given sector, there will have to be some points of comparison. But you end your presentation by saying that you feel that those in charge need some flexibility to determine when benchmarking would be necessary. I would have liked you to go a little further and give us an idea of what types of comparisons would be possible and what should be compared, given that this type of benchmarking is so difficult.

    I would also like you to describe the connection between the difficulty posed by such comparisons and the idea put forward by the committee in 2000 that there should uniform, common standards for all departments and agencies, so that explanations could be sought where those standards were not adhered to. That might be another way of defining standards for comparison purposes: we could have our own system and do our benchmarking within that system instead of comparing ourselves with other countries. Do you think that it would be preferable to compare Canada with other countries, in particular those that have fairly similar economic and social structures to ours?

º  (1630)  

[English]

    Mr. Patrick Nephin: Perhaps I'll just give you a couple of examples.

    Last year we did a review with the Canadian Intellectual Property Office, and patents, trademarks, and so on, to compare the user fees in the United States, Britain, France, and Japan with those in Canada. We asked some of the Canadian firms and those getting patents in Canada if a user fee for a patent application in Canada were this amount, and if it were that amount in the United States, how they would draw the comparison.

    They looked at it from the point of view of value. The United States has a much bigger market, so they were actually quite willing to pay a higher fee in the United States to get a patent application registered than in Canada, because the Canadian market was lower. They also looked at it from a service perspective. If it took a certain period of time in Canada to get that application processed, how long would it take in the other countries to do it? So there was a question of service level versus the fee as well.

    On whether or not there are standards, certainly there are benchmark standards for how you go about doing a benchmarking exercise--how you get information, how you compare it, and so on. The question just comes down to judging the particular circumstances you're comparing against. You can't just compare the user fee per se; you have to look at it in terms of the value and the service that goes with it at the same time.

[Translation]

    Mr. Pierre Paquette: Thank you.

    My next question is for Mr. Mintz. In your presentation, you compared taxes and user fees. I certainly agree with you that user fees should be treated somewhat like taxes as a whole, when it comes to the implementation process for the finance minister's budget.

    Let us take it a little further. We also know that the federal government has created all sorts of foundations over the past few years, with the result that the funding involved—and this has been criticized by the Auditor General—is not subject to scrutiny by Parliament. In the interest of transparency and accountability, should the legislation as a whole not be applied to these foundations which were created with taxpayers' money, as well as to—this goes without saying— government departments and agencies?

[English]

    Mr. Jack Mintz: I think that's a very interesting question. Let me first start by trying to correct something. I did not suggest that user fees should be treated in the same way as taxes, as a process. I was trying to compare taxation and user fees, in terms of the way they are handled.

    Right now we look at user fees as a recovery of the costs associated with expenditure programs. So I'm quite willing to accept the idea that user fees should be treated as a negative expenditure, in a way. In other words, there should be a process in Parliament that would review user fees, just like the expenditure line of governments. I'm willing to accept that as a different approach than what we've used for taxation policies.

    I recognize that another way of approaching user fees is to bring them in as part of the whole revenue function of government and be treated as part of the tax policy of a government. I certainly don't mean to argue that user fees have to be treated as another form of tax policy, even though I believe there's a connection between the two. But I don't think the process for determining user fees right now is sufficiently guarded to make sure there is an appropriate parliamentary procedure that deals with user fees, unlike even the expenditure lines of governments. I think that's where some changes are needed in what we're doing right now.

    On the foundations, I'm not sure I want to get into that debate at this point. I have expressed my point of view on foundations and accountability; in fact, I wrote an article last year for the National Post that I'd be happy to send to you. It will give you a very clear idea of what I have to say about that subject.

º  (1635)  

[Translation]

    Mr. Pierre Paquette: I will be satisfied to read what you have to say if I cannot hear it. What an issue!

[English]

    The Chair: Okay, thank you.

    To be clear, Monsieur Paquette, any unilingual brief will be immediately sent to translation. You will have it in your office within a day or so--as fast as we can get it done for everyone. Thank you very much.

    Now we'll go to Mr. Cullen for eight minutes, followed by Mr. Wilfert for eight minutes.

    Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Madam Chair, and thank you to the presenters.

    This may be the only round, so I'm going to make a couple of comments just for the record. Then maybe we can get into a dialogue.

    It's interesting, Mr. Mintz, you talk about the thousands of user fees set each year. The Treasury Board Secretariat at the last meeting said there were maybe 12 a year, and I think they understated the volume. Maybe it's somewhere in the middle. My conviction is still that the volume can be handled by the House of Commons.

    It's interesting also, in terms of consulting, not just with stakeholders but with a broader group than that. I don't know if you'd agree, but I think my bill does that, in the sense that once you get into the parliamentary domain it becomes very public and anyone is free to comment.

    I'd like to come back to Mr. Nephin. Bill C-212 doesn't really contemplate a duplicate process. If the new policy proposal by the Treasury Board Secretariat is adopted by government, I think my bill would fit nicely into that sort of process, in terms of the requirements, the benchmarking, the business impact tests, the comparisons, and the consultation process. I would see that material tabled in the House of Commons. The committee might decide to do some independent research on that or question some of that work, but I don't see a duplicate process just from that particular point of view.

    It's interesting too that with benchmarking it is never easy. When I was in the private sector we used to benchmark our plants against all the plants in North America. We knew where we were on the cost curve--as does every auto plant in North America--and whether we were a high-cost plant or a low-cost plant. In terms of revenues, assuming it wasn't a commodity product, we knew how our prices stacked up against the competition. Sometimes it was difficult comparing apples with oranges because it depended on the whole service package--customer support, packaging, etc. So to say we don't do benchmarking because it's difficult--I'm not sure that's what you're saying. That's certainly not where I would come from.

    Defining public versus private benefit is a difficult task. It seems to me the whole raison d'être of user fees is to come into play when there's an advantage to a user. In fact, an amendment I have defines that. It says:

“direct benefit or advantage” means a benefit to the client paying the user fee with that benefit being either unique to that client or distinct from and greater than benefits that could also accrue to any other person or business as a result of that user fee being paid.

    That doesn't mean this would still be a difficult area.

    Mr. Nephin, maybe I'll break off at this point and ask you a question. I know you've done some work in Australia. They seem to have a very progressive policy, in the sense that if the departments don't meet their performance standards the fees are reduced--sometimes by 25%. So there's clearly an incentive for the departments to meet their performance standards.

    If I heard you correctly, that seems to be a positive way of handling this. In fact, when they do that the departments usually meet their performance standards. Is that the same jurisdiction that would say, “We're not going to get into the question of defining public versus private benefit because it's too tricky”? Maybe I misinterpreted it.

º  (1640)  

    Mr. Patrick Nephin: Perhaps I can respond to the three points.

    I agree absolutely that benchmarking is important and should be done, but I was making the point that there are a lot of cases where it's not required and it's going to be just in trivial examples. If you say in legislation “thou shalt benchmark”, that was the issue. I agree with benchmarking; it's just that every case doesn't require it.

    On the public versus private benefit, your amendment is great. I think it sort of deals with it. On the current policy of Treasury Board where it talks about a public benefit, I think there were a lot of times when people said, “Well, the thing we're doing is for the public good. If we have a new drug, a new pesticide, or a new veterinary chemical, obviously the public is going to benefit. Therefore if the public benefits, we shouldn't pay a user fee”. It gets to be a very controversial type of thing. The amendment you're suggesting would deal with that quite nicely, so that wouldn't be an issue.

    In reading the minutes from the meeting last week, there was some reference made to the case of Australia. I went back and looked at the policies for Australia--new policies on their website, and so on. I couldn't find any actual reference to that. Their general government policies don't include any type of drawback or penalty if they don't meet those targets. So there may be some specific cases.

    For example, in the United States several years ago, when user fees were being introduced, an agreement was negotiated between the Food and Drug Administration, Congress, and the users that they had to meet certain targets in return for certain fees. But I'm not familiar with the Australian case you mentioned.

    Mr. Roy Cullen: I have a reference here. In Australia, the Therapeutic Goods Act, 1989, provides legislative penalties for missing performance targets.... Maybe my information is not correct, but when we come to benchmarking performance standards, if you look at the pharmaceutical industry, for a start, I'm told it takes them roughly 700 days to get a drug approved under normal circumstances. In the United States it's about 500 days; and in Europe it's about 200 or 300 days--and the fees are comparable. Is it not an important element of benchmarking to look at our fees and our response times in relation to our major trading partners?

    Maybe I'll also put the question to Mr. Connell. In terms of our innovation agenda for our government, if our drug companies--I'll use the same example--are not able to get their drugs to market as quickly and efficiently as their major competitors, isn't that stifling innovation in Canada?

    You can start first.

    Mr. Patrick Nephin: I think most of the regulatory agencies--at least the ones I've dealt with--are very cognizant of those kinds of standards and are always doing those kinds of comparisons. Whether it's 700 days, 500 days, or so on, they're quite clear on it.

    With most of those types of products the companies tend to go to the United States or Europe to get them registered before they actually come to Canada. Canada seems to be sort of a secondary market, in the sense that the bigger markets are more important to them. But getting the products into Canada is important as well.

    Mr. Roy Cullen: But I contend that happens more frequently because they can't get the response times here in Canada that they would like.

    Mr. Patrick Nephin: Yes. I know of a few cases where user fees have been looked at as a means of trying improve services, in order to improve their performance.

    Mr. Roy Cullen: Mr. Connell, would you comment on the innovation agenda and how this fits or doesn't fit?

    Mr. John Connell: Certainly. I think this goes somewhat to the question of regulatory frameworks generally. A world-leading regulatory approach in Canada is unquestionably vital for innovation in this country. I think it's been recognized as such by the government, with respect to setting up an advisory group on smart regulation.

    Certain measures have been announced to date by the government. Some of this has been covered in the Speech from the Throne, as far as the government's intention to look at these questions. So regulatory efficiency and comparability with our competitors, our main trading nations--certainly this is an area in which we want to advance.

º  (1645)  

    Mr. Roy Cullen: Thank you.

    I'd like to come back briefly to another comment, Mr. Nephin, on photocopying. There's an amendment I've tabled that you might not be privy to. It basically says my bill would come into play in regulated industries where the person being charged didn't have any other option. In other words, I took the example of a federal park where there was a fee to get into the park. That would come under my bill's rules, but with this amendment you'd have other options on firewood. You could bring in your own firewood, burn boxes, or whatever. You would have options, so that tries to deal with that particular question.

    Mr. Patrick Nephin: I used the example of a photocopy at the Archives, for example, when there's no other option. If you want to photocopy an archival document, you have to do it there.

    Mr. Roy Cullen: Yes.

    Mr. Patrick Nephin: That's a trivial example, but--

    Mr. Roy Cullen: I suppose it's trivial unless you're at the Archives a lot and paying fees to copy things all the time.

    Mr. Patrick Nephin: Yes, but if it's a 10¢ or 15¢ fee.... You could argue it's in the public interest to provide those copies. On the other hand, they're faced with such a volume.... I think it's the same example Mr. Mintz raised about partial cost recovery, where you have some fee to cover part of the cost.

    The Chair: Okay. Thank you very much.

    We've just gone a couple of minutes over there.

    Mr. Wilfert, go ahead for eight minutes.

    Mr. Bryon Wilfert (Oak Ridges, Lib.): Thank you, Madam Chairman.

    Representatives from the finance department say they support cost recovery, and that the charges for services rendered are reasonable. As far as they're concerned it's something we have a right to do and doesn't seem to be a problem. But it's my understanding--if the people who have indicated are correct--that people aren't getting the service for the fees that are charged.

    I don't know if this is really for Treasury Board, but where can we find what performance standards we have in various departments and what the levels have been, in terms of meeting those standards? If we say something is going to happen by x date and it doesn't happen, do we know how many cases are involved? Do we know why?

    Mr. John Connell: I'm sorry, Mr. Wilfert, the question is beyond me. I think it properly rests with the Treasury Board.

    Mr. Bryon Wilfert: So we support the principle of something, but we don't really know what we are getting.

    Mr. John Connell: I think we're saying we support cost recovery, in principle. It leads to an efficient allocation of resources, and prevents government from providing too much of a service that would otherwise be free. It leads government program managers to know what they should actually be providing, with the questions around the pricing of those services, the efficiency of government operations left to line departments responsible for those programs and services, and Treasury Board with an oversight role on the policies.

    Mr. Bryon Wilfert: Fair enough.

    I think it's unconscionable that we charge fees for something when we know we're not delivering services in certain cases. In fact, the Australian model very much tied fee with service. There has to be a hammer. There has to be something to say to people--unless a very unusual circumstance is negotiated ahead of time--there is some penalty to that department.

    It bothers me that we don't seem to be able to provide what kind of accountability targets we have. I think it's unconscionable. It's a tax, in my view. You're charging somebody for something, but you don't have the intent of delivering until whenever. We see this often, particularly in what I'm familiar with in the drug industry in approvals. I just think that's unacceptable.

    Mr. Cullen is proposing here that we need greater oversight. I agree, but the problem is that the culture and the bureaucracy are saying this is just the way business is done, and if we don't deliver.... There are no penalties. We need to be able to tell people, if we're going to charge them something, either we deliver or we don't charge them.

    I have a bit of a problem with Mr. Cullen's bill because he wants a parliamentary committee to be the oversight. He's going to raise expectations, in my view. People will say that if they're going to raise a fee it will be debated in this committee, and they'll presumably have to justify why this fee should be raised. I understand from Mr. Cullen's bill that it will then be reported to the House one way or the other. We either agree or disagree. We bring in the appropriate officials, etc.

    Can anyone tell me, on average, how many fee increases we look at on a yearly basis? What kinds of fees are we looking at? How would we administer that in Mr. Cullen's bill? How would you execute that to make it workable? Anyone?

º  (1650)  

    Mr. Patrick Nephin: I think it's a question for the Treasury Board.

    Mr. Roy Cullen: We asked that at the last meeting and they said there were 12 a year.

    Mr. Patrick Nephin: No. There are a lot more.

    Mr. Jack Mintz: I've been told that 12 a year is--

    Mr. Bryon Wilfert: Maybe there are 12 a month.

    Mr. Patrick Nephin: There are several thousand user fees. How many of them change each year is unknown. Because of the length of time it takes to actually get a change in place, departments normally review the fees every two to four years. There have to be several hundred changes per year. I'm not sure what the actual number is.

    Mr. Bryon Wilfert: Can either of you gentlemen give me your view on the hammer Mr. Cullen has presented to make sure departments are accountable and made to deliver on what they promise?

    Mr. Jack Mintz: I'm very much in favour of measures that would encourage accountability. We're not comparing this to competitive markets, where a business is operating in an industry and has other people competing with it.

    You need procedures in government to encourage behaviour in which people will provide good services at a low cost. If you don't have some sort of accountability measures and don't penalize people for not following through appropriately, you won't be able to achieve the kinds of efficiencies you are looking for. You'll also undermine the confidence of people who have to pay for the service, in terms of delivering it.

    I think it's very important to have some mechanism by which people are rewarded and penalized for their behaviour, in setting these policies.

    Mr. Bryon Wilfert: Do you think this is an effective mechanism and one that could be applied in an appropriate manner?

    Mr. Jack Mintz: I guess it goes back to my earlier comments. The question is whether the parliamentary committee wants to get into that kind of micromanaging. But this is not to say there's no role at all for some sort of parliamentary scrutiny of the process, including dealing with dispute mechanisms if appropriate.

    In fact, I think there's a very strong role for Parliament to agree to legislation that makes very clear exactly what standards and accountability mechanisms should be outlined, in general principle. There should be legislation, and a committee should examine that legislation in the setting of user-fee policies. It shouldn't just be left for each department to determine on their own, without any appropriate standards.

    Mr. Bryon Wilfert: I mentioned the comment last week that the Minister of Finance announced, for more accountability and transparency, that we reallocate $1 billion in the bureaucracy. Some departments in the bureaucracy weren't happy about that, naturally. Everything they do, of course, they don't want to touch. So there had to be a hammer and a hammer was placed, and it's the role of Treasury Board to make sure the hammer comes down.

    Part of the problem I see is that you have that internal resistance, even in terms of reallocating within departments. People are not prepared to work within existing envelopes. Their response to the Minister of Finance is to ask for more money, outside of the envelope we just passed, to which they already had input. My response is “Look within your own envelope and prioritize”.

    We're having difficulty, even on what I consider to be a fairly simple process, because of the size of the bureaucracy and size of the budget of the Government of Canada. If you can't reallocate $1 billion you have a real problem.

    In this case we have a situation where people are being asked--basically in a monopoly situation--to pay for something with which they in many cases seem frustrated. They don't mind paying. I haven't had anybody tell me they don't want to pay, but they want the service. We have half the equation. We have the fee, but we don't necessarily have the service.

    When I ask them to show me the accountability, the performance standards don't seem to be available. I want to know about each department. I'm led to the conclusion--I may be wrong--that they either don't have them or they're so dismal they don't want to show them.

    Would that be a fair statement?

º  (1655)  

    Mr. Patrick Nephin: There are service standards that exist. I think your latter conclusion is probably the more accurate one, but the issue of service standards goes beyond just user fees. Mr. Connell referred to the 2%, so it's an issue for the total government.

    The Chair: Mr. Valeri, please.

    Mr. Tony Valeri (Stoney Creek, Lib.): Thank you, Madam Chair.

    I don't think we need to make a case for greater scrutiny. Whether it's user fees or any government action by Parliament, I think there needs to be greater scrutiny. I want to focus on the “how”. I just want to be clear about the terms we're using in relation to Bill C-212.

    Essentially I'd like to go back and focus a bit on the hammer, as many people refer to the motivation to get departments to do what we're looking for them to do. I'd be interested in your definition of the hammer in Bill C-212. Where do you see the hammer in this bill?

    I see the hammer in this bill as asking Parliament to approve a user fee; to approve a change in a user fee. I'm looking for a reaction to this because I'm interested in your perspective as experts. The approval of the fee is different from the oversight that committees and parliamentarians should be applying to the issue of user fees.

    So in your opinion, is there a need for Parliament to approve new user fees and changes in user fees, or are you suggesting that Parliament should be engaged in greater oversight of the user-fee process and performance standards, and its traditional ongoing oversight?

    I just want to get clarity on where you land on this thing, based on your experience.

    Mr. Patrick Nephin: I guess I'd look at it the same way you look at a corporation. It has a board of directors and it has management. It's really management that's going to look at what fee is charged for a copy of the Windows operating system, and so on. It's going to look at the overall standards and the big picture, in terms of financing--where the money's coming from, the return on investment and so on, and oversight on the issues. That might be a similar type of a model for the committee, in looking at the existence of standards.

    Committees are looking at the estimates and what the government is spending, but you could tie user fees into that same process. Then you'd get a total resource picture of the department, including what it's spending through appropriations funded by taxpayers, and what's being funded through user fees paid for by direct clients.

    Mr. Tony Valeri: So you're for oversight and not necessarily approval by Parliament in setting of user fees or the amendment of user fees.

    Mr. Patrick Nephin: Yes.

»  (1700)  

    Mr. Tony Valeri: Okay.

    Mr. Jack Mintz: My view is very similar. I don't think a parliamentary committee should be evaluating every user fee, passing it, and agreeing to every change. I still believe that would be a somewhat cumbersome process, although I do think there should be an appeal process that should ultimately go to Parliament or a parliamentary committee to review it.

    I agree with Mr. Nephin that it's quite appropriate to think of user fees as part of the process in evaluating the expenditure line in government through the estimate process. But I would add the concept of having some sort of clear legislation that spells out the circumstances in which user fees are to be charged, the process that would be used, the procedure for evaluating them, and the dispute mechanism that would be allowed.

    Mr. Tony Valeri: I just want to be clear on that, because you're suggesting that the process should be driven by legislation. That's actually my next question. Should it be legislation, or are you comfortable with policy?

    Mr. Jack Mintz: I think it should be legislation.

    Mr. Tony Valeri: Okay.

    Mr. Nephin.

    Mr. Patrick Nephin: I don't have an opinion on it.

    Mr. Tony Valeri: So you wouldn't care whether it was legislation or policy.

    Mr. Patrick Nephin: If you put in legislation you can define the standards, but when you get into some the specific cases, that's where some of the issues of whether it's workable or not come in.

    Mr. Tony Valeri: Legislation's obviously a lot more rigid. You don't have a lot of flexibility when it comes to legislation.

    Mr. Patrick Nephin: Exactly.

    Mr. Tony Valeri: But you're comfortable, Mr. Mintz, that legislation is required.

    Mr. Jack Mintz: Again, it's required for determining the process, not for defining every user fee. That could be subject to regulations or--

    Mr. Tony Valeri: So legislation should outline the--

    Mr. Jack Mintz: Process.

    Mr. Tony Valeri: --business impact test, the comparisons that are required, and that sort of thing.

    Mr. Jack Mintz: Exactly. In other words, it should outline the standards for determining user fees and the process for some dispute mechanism.

    Mr. Tony Valeri: Okay.

    Mr. Nephin, can you tell me a bit more about the Manitoba example? I think that was in your document.

    Mr. Patrick Nephin: As I understand it, when their main estimates are tabled by the Minister of Finance each year, he tables a separate document on the revenue estimates. It essentially lists by department each type of user fee they have and the amount of revenue they expect to generate from that user fee. Both documents go to the estimates committee so they can be reviewed.

    Mr. Tony Valeri: In Manitoba, when a department may not be meeting a performance standard what kind of remedies have you seen?

    Mr. Patrick Nephin: In the documents I've seen, they simply list the user fees and the revenues. There are no performance standards that are tied in with it.

    I'm not sure in that case, but the documents don't include it.

    Mr. Tony Valeri: Okay.

    I just want to go back to the hammer, in the last couple of minutes I have here.

    The Chair: I have no one else on my list. I can put Mr. Cullen on, so I'll let you go a bit longer.

    Mr. Tony Valeri: If you're suggesting that approval is not what Parliament should be doing, with Bill C-212 the approval is really the hammer. If you are not complying with what is laid out in the legislation the committee tables this in the House, there's a vote, and Parliament supports what the committee has said. You could not bring forward a user fee that would in any way contradict what the committee has said and Parliament has voted on.

    So if you're suggesting that approval is not required, what in your opinion is the hammer? What is the incentive for departments to adhere to performance standards and do what they say they're going to be doing?

    Mr. Patrick Nephin: I'm not sure that committee approval is going to be the hammer you're suggesting it might be. For example, if a department proposed a user fee it would come to a committee, the committee would agree to it, the department would sort of identify what its performance targets were going to be, and it would be put in place. But what's the mechanism then if they don't meet those performance standards? That's where the hammer comes in.

    Mr. Tony Valeri: I think Mr. Cullen will speak to this as well, but I think the legislation would say, in what was being asked of the legislation in advance of it going into effect, that if there was something lacking approval could be withheld. That means you could not introduce it. You wouldn't get to assess the performance of your standard because you wouldn't be able to introduce the actual fee.

»  (1705)  

    Mr. Patrick Nephin: There's a risk associated with that, from the service point of view. Let's take the regulatory agencies. A lot of these issues deal with the regulatory parts of it rather than other types of services. If that agency didn't have the resources to carry out their process, the service standards would deteriorate even further. It's a complicated issue, and I think some study obviously needs to be made.

    Mr. Tony Valeri: That's why you're here today; we're studying it. I was hoping you could add to that.

    Mr. Patrick Nephin: I don't have a clean answer, in terms of addressing that.

    Mr. Jack Mintz: In response to your comment about the hammer, in my view the hammer becomes the dispute resolution mechanism. If a department sets a user fee and there are people who are unhappy with that user fee, there is a process in which that user fee could be appealed. This is part of the hammer. Therefore the areas where there's significant debate about those user fees will ultimately go to a parliamentary committee to be reviewed in some way. So that is part of the hammer I'm thinking about.

    The other part of the hammer is the process a parliamentary committee would have to review user fees; to see if the policy that sets user fees is complying with the legislation. That's another part of the hammer, and that gets to the accountability measures that could be used to evaluate how departments are implementing the user fee policies.

    Mr. Tony Valeri: I agree with everything you've said, from the standpoint of the oversight being part of the hammer. But combined with what you've described is it feasible and workable to have a system in place where user fees are paid according to performance standards? How do you react to that? If you're hitting 95% or 99% of your benchmark or standard, is it fair? Is it a workable system to have your user fee dictated by your performance level?

    Mr. Patrick Nephin: The issue you get into is cross-subsidization. If you're going to penalize one group because of the service and therefore they pay less, then somebody else is going to have to pay more. So you have to take a look at that as well.

    There have been cases where fees have been differentiated on the basis of service. Before the new security measures to get a passport, if you wanted a passport in two days you paid twice the amount. So there are examples like that.

    There are several processes in place now where if you want to get it done faster you pay more--if an organization wants to get it done faster. There are examples where fees can be differentiated on that basis.

    Mr. Tony Valeri: Okay. Thank you.

    The Chair: Mr. Penson wants to do a second round, so we'll do a five-minute round and then go to Mr. Cullen for five minutes. Then that will be it.

    Mr. Charlie Penson: Thank you, Madam Chair.

    As we get into this it raises a few questions for me, in trying to decide what a user fee should apply to. An example of this is the airport security tax. I would just like the panel's thoughts on this whole area. It seems to be a bit of a problem because there are some things we don't charge security fees for, and other things that we do.

    This was in response to the threat from September 11, and in that case there were more people killed on the ground as a result of this terrorism than in planes. It raises the question of what user fees should apply to if they're being applied fairly. I would ask specifically, in the case of the airport security tax, whether that should rather come out of general revenues because security issues generally do, as opposed to a specific group.

    As Mr. Mintz talked about earlier, it doesn't just apply to the airlines. It's passed on, of course, and in some cases it changes behaviour patterns. So in the general area, what comes under user fees and what doesn't?

    Does anybody want to tackle that?

    Mr. Jack Mintz: Let me go back to the principle of taxation, because I think it's useful to recall it. There is an argument for taxation to be partly based on the user-pay principle that those people who benefit from public services should pay for some of the cost.

    It becomes a question of judgment as to what extent you believe there's a certain public interest--in which case there should not be a charge--and whether there is a certain benefit that a person receives from a public service that one would like to charge for.

    In the case of the airport security tax or fee, depending on what you want to call it, you could make an argument that the passengers should be responsible for it because they're the ones benefiting from travel, and therefore they should contribute to the cost of security arrangements that are of benefit to them.

    On the other hand, we also know that some of the circumstances that occurred were really not entirely a matter of the airlines or air transportation being responsible. There is a certain public interest, you might argue, and governments that wish to deal with terrorism want to make sure there's safety, not just for passengers using the airlines' services, but as we saw in the case of the World Trade Centre, for many people who are affected by a lack of security.

    I think those are the kinds of issues, and this goes back to a point Mr. Cullen mentioned to me earlier. I think there is a parliamentary role in the setting of user fees, because we have to make judgments between what's appropriate public interest and what's appropriate private interest in determining the level of user fees to be charged.

»  (1710)  

    Mr. Charlie Penson: I gather from Mr. Cullen's bill that he feels there would be a more responsive group here at a parliamentary committee. After all, we have to get re-elected. We owe our fate to the electors, and we'll be hearing from them on these kinds of issues, as opposed to a bureaucracy that does not have that same kind of response.

    In fact, if you look at the House of Representatives in the United States, it seems to me they're a bundle of nerve ends because of their two-year timeframe. They have to go back to the electorate pretty quickly, and are pretty responsive to all these kinds of issues. I don't think it's Mr. Cullen's idea that we would sort of micromanage, but I do think there is some need for better response time.

    Mr. Mintz, are you also saying we wouldn't need to have it down to minute detail, but there should be a process? That's what I've gathered from you.

    Mr. Jack Mintz: That's why I kind of like the idea of a process with some sort of dispute mechanism as an approach.

    I also mentioned the idea of a tribunal. I threw that out as a new idea, partly because I am concerned there may be a lot of technical detail that must be understood in evaluating the user fee, and a certain amount of expertise is going to be required. In order for a parliamentary committee to face that information afterwards, someone outside the department evaluating it will need to look at the appropriate things, like the actual cost of delivery, the service provided, the benchmarking, etc. Those are quite detailed and technical issues to deal with.

    The Chair: Mr. Cullen, the last five minutes are yours.

    Mr. Roy Cullen: Thank you, Madam Chair. I don't want to belabour any points, but just make a couple of comments.

    On the issue of cross-subsidization, Mr. Nephin, you talked about it in another context, but I think we also have the risk of cross-subsidization of programs in a department that are not part of a user-fee program and other programs. I can only speculate on this, but I think we've seen, under program review, some resources moved from areas covered under user fees into areas that are covering so-called public good. That's caused a failure to meet performance standards. That's a theory; I couldn't prove that.

    On the airport security fee argument, my intent would be to cover something like that. But the amendment I've tabled would give the government a one-year latitude for emergencies in matters of national defence. It's an interesting point because that whole debate took place here on the Hill in a sort of broad sense, but the fee was pretty much a done deal. I think a good discussion at committee would be to what extent that was a public and a private benefit.

    I'd like to come back to this business of the hammer. Mr. Mintz, I'm glad to hear you think the legislative approach is appropriate. Whether we agree it's my bill or something like it is another thing. But in terms of the standards, some of them are centred in my bill and are consistent now with the revised Treasury Board policy. We could quibble about whether they could be improved upon.

    On the hammer in my bill, basically the committee might report back to the House and say, “This department has no track record at all of meeting performance standards. We have no indication that they're going to meet these performance standards and this new fee, therefore we recommend against introducing the fee as proposed”.

    That is only a recommendation of the committee. To enact that, it would have to be concurred in by the House of Commons. So it could sit there, and then a department could still implement it. It would have to be concurred in by the House, so someone could raise it as a motion in the House. The hammer is kind of there, but it's only an active hammer if someone brings it in as a motion, as concurred in by the House of Commons. So that's one aspect.

    On the performance standard, you're quite right, Mr. Nephin, that with any new fee or increase in fee the committee would be guided by the track record of the agency or the department. Once you have these standards enshrined, any committee could bring in any fee and assess that fee against that standard. Over time that would happen, once they got through with the backlog of fees.

    Just a quick point, Mr. Mintz, on the independent dispute resolution mechanism, my bill calls for that. In fact, if you took what you were thinking of there would be a way of having the exception reporting process--in other words, report to the Commons committee in those cases where the independent dispute resolution mechanism was put in place and there was no resolution. It could be a way of keeping micromanagement to a minimum, by just not bringing the motions into the House to elevate them to that level, in the current construct of my bill.

    As I've said from the beginning, anyone who has some good ideas on streamlining it, in terms of the government as well, I've always been open to suggestion. I think my bill has a hammer, although it may not be as perfect as we'd like. If the idea you presented, Mr. Mintz, were incorporated into my bill it would have a similar kind of result.

»  (1715)  

    The Chair: Thank you very much.

    Mr. Discepola, do you want to say something? No.

    On behalf of all the members who have been here today, I want to thank you for your input. We are probably going to have another two days of hearing witnesses. Colleagues, I think the clerk sent around a list of names of people for legislative amendments, if you wish to utilize that.

    Just for the knowledge of people in the room, if we are going one more week past next I will do the clause-by-clause on the following Tuesday and give people a bit of space. If I discover that we're only going to the end of next week, I will move it up probably as close as Wednesday. But my preference is to give people a bit of gap time in between. That's why you're not seeing the notice for clause-by-clause.

    In fact, I will probably put out the notice for clause-by-clause on Tuesday, now that I've spoken about it here. If there's a need to cancel that and move it up, we can deal with it that way.

    So thank you very much everyone. We'll see you tomorrow. The meeting is adjourned.