[Recorded by Electronic Apparatus]
Thursday, May 11, 1995
.0907 
[English]
The Vice-Chairman (Mr. Assad): Good morning, committee members, guests and witnesses.
We have two motions before us. Since we don't have a representative of the Reform Party here, we'll keep a few minutes at the end for them. I think the motions are rather routine.
We have before us this morning officials from the Department of Agriculture and Agri-Food. Mr. Claydon, would you introduce your colleagues?
Mr. Frank Claydon (Assistant Deputy Minister, Policy Branch, Department of Agriculture and Agri-Food): Thank you very much, Mr. Chairman. I'd like to introduce Genevieve O'Sullivan, Director General of the Policy Coordination and Strategic Directions Directorate; and Gerry Derouin, Executive Director, Finance and Management Services Division. As well, there are other staff members behind me who can back us up if there are questions that require a more detailed response.
The Vice-Chairman (Mr. Assad): Thank you. Do you have an opening statement,Mr. Claydon?
Mr. Claydon: Yes, Mr. Chairman. I've provided copies to the members of the committee. I'll go through it briefly and then we can answer questions.
The Vice-Chairman (Mr. Assad): Fine. You may proceed.
Mr. Claydon: I'm very pleased to be here to answer your questions concerning the policy and farm economic programs activities in the 1995-96 Main Estimates. This has certainly been a year of transition for policy and farm economics programs with regard to the main estimates.
You should note that the policy and farm economics programs activity combines two activities from the 1994-95 Main Estimates. Those are the Farm Income and adaptation activity and the policy activity. For the first time the Department of Agriculture and Agri-Food's Main Estimates also include a three-year plan. I hope you have found this useful in your analysis of the department's estimates.
I would add here, following up on the statement by the minister when he appeared before you last week, that we'd certainly be pleased to look at our plans for the longer term and to get your advice and comments in terms of how we can best use the dollars we have available for the next few years.
First, I would like to respond to a question concerning performance indicators that was raised when the minister was here. As you will recall, last September in his presentation on a vision for the agriculture and agrifood sector the minister highlighted five key areas for measuring the department's performance. These were sustainable growth, rural development, financial security, resource and environmental sustainability, and a safe and high quality food supply.
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I have also circulated some indicators we're currently using to measure some of these areas. I would be pleased to address any questions you might have today concerning that material.
While I'm on the subject of performance measurement, I would like to inform you I've taken the lead in setting up a departmental working group on performance measures within Agriculture and Agri-Food Canada. This working group is developing performance measures on all the areas within the minister's vision. In particular, we've set up a working group to look at environmental indicators in six specific areas. These are agricultural land and soil, water quality, biodiversity, climate change, farm resource management, and production efficiency.
In addition, we're working with the provinces on performance indicators for our new safety net programs. We hope to have some material ready on that...we have a draft we're discussing with the provinces and we would certainly be glad to come back at a later date to discuss our work on performance measures with the committee, if you would like to do that.
I'd also like to provide a brief overview of some of our planned changes to incorporate the minister's vision and the fiscal constraints we have to live under. These changes will help to decrease our deficit, put decision-making back into the hands of producers, and ensure market signals are not masked. We hope these will also be consistent with our new trade obligations.
The resource requirements for the policy and farm economic programs activity are summarized by sub-activity in two tables I've also distributed for you. These tables compare 1994-95 with both 1995-96 and 1997-98. So they have a sense of where we are at the beginning of the planning period 1995-96 and where we expect to be at the end of the planning period; that is, in 1997-98.
There is also a graph that shows the decline in the branch total budget from 1993-94 through to 1997-98 as a result of various fiscal constraint measures announced in recent budgets.
In summary, the activities budget will be reduced by $242 million by 1997-98 from the 1994-95 levels. That's approximately 21%. The workforce will decline by 26%, which is about 219 positions, over the same period. A number of initiatives have been or will be implemented to achieve the overall cost reductions in this activity and they will bring the programs more in line with the future directions of the minister discussed with you earlier.
As you are aware, safety net reform is currently under way in order to design a new whole-farm income stabilization policy. Starting with the 1995 taxation year, the new safety net approach will consist of crop insurance, a whole-farm program, and companion programs to address provincial specific needs. From a funding standpoint, the federal safety net levels will drop to $600 million by 1997-98, a decrease of $250 million over the next three years.
Federal and provincial officials are currently working on a multilateral memorandum of understanding on our new approach for safety nets, based on an overall cost-sharing of 60% federal and 40% provincial, which is essentially the current cost-sharing proportions. This will also involve looking at monitoring and management processes for safety nets for the years ahead. Then federal and provincial bilateral agreements will be arranged so we can deal with the specific types of programming each province wants to do with the proportion of the safety nets we call the ``companion programming'', which is the third part, over and above crop insurance and the whole-farm component.
As well, we'll be looking at producers' usage of market mechanisms, such as options futures and other option mechanisms, as a basis to reduce risk. We currently have under investigation a pilot project for the cattle industry.
We're seeing that resources for safety nets are declining. We're looking at other ways we can provide tools for the industry so they can protect themselves against the natural kinds of variations that occur in prices and costs.
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Given the significant changes and policy reforms that will take place, it is important that government play an active role in helping producers and processors to adapt to this new environment and to respond effectively to new opportunities. We will work with the provinces and the sector to implement a national adaptation strategy that will support sustainable sectoral development, enhance growth in both urban and rural Canada, and improve the competitiveness of the sector.
From the savings identified in other areas, an adaptation fund, averaging $60 million per year in federal funding, will be created to meet future adaptation requirements in areas such as farm business management, rural development, and environmental protection. This fund will also address concerns regarding the reform of transportation subsidies in certain regions of Canada.
These funds will be in addition to amounts set aside for WGTA adjustment, $300 million, and feed freight assistance adjustments, $62 million. As well, within the safety net envelope there is scope for some of the safety net moneys to be used for GATT green kinds of adjustment and development mechanisms, which will also help the industry to adapt to future competitiveness.
In 1995 we will continue to work to develop a post-GATT orderly marketing system. This will include an examination of the federal dairy subsidy. To help meet our deficit targets, this subsidy will be reduced by 30% over the next two dairy years, a decrease of $68.5 million by 1997-98. Extensive discussions with the industry will be undertaken immediately to determine how the balance of this subsidy can be best used in future years.
I'm sure you know that one of your own members, Lyle Vanclief, will be in charge of undertaking those consultations.
As well, the transportation sector in Canada is undergoing significant reform. I guess that's an understatement. As you are well aware, the decision to eliminate transportation subsidies means that the impacts of reform will be felt in the agricultural and agrifood sector, as well.
In 1995 western grain transportation will be reformed to remove inefficiencies and impediments to diversification and value-added activities in western grain-producing regions, as well as to meet our international trade obligations in a more effective manner.
Additionally, the feed freight assistance program will be terminated in 1995-96 and discussions will be held on various alternatives available for adjusting out of the feed freight assistance program.
The department, in particular the policy branch, is also exploring other cost-cutting measures, such as privatization. We are moving toward establishing an independent and privately operated organization to provide selected economic and policy analysis services. Discussions are also currently under way to identify innovative new ways to further reduce costs and improve service levels of the NISA; for example, by outsourcing, privatization, or alternative delivery mechanisms. As well, we are looking at offsetting a portion of the costs of NISA and crop insurance through revenue-generating administration fees.
The financial plans I have outlined are only one tool in addressing the challenges facing us. Ongoing consultations on orderly marketing, safety nets, grain transportation, and marketing will continue to provide a forum for decisions about the future. These dialogues can provide very concrete suggestions on the best way to manage change in the sector as a whole and within various subsectors and commodity groups.
Agriculture and agrifood has always been a partnership between the federal and provincial governments and industry. In moving forward on the changes I have outlined, this partnership will be more important than ever. Certainly we are going to be very involved in consultation processes with both the provinces and the industry.
On files such as safety nets and market development, we will emphasize our flexibility and continue to work closely with the industry and the provinces to build solutions that will fit their needs.
Thank you very much. I look forward to your questions.
The Vice-Chairman (Mr. Assad): Thank you.
We will begin with Mrs. Cowling.
Mrs. Cowling (Dauphin - Swan River): You mentioned that there are going to be a great many changes within agriculture, and that there will be performance indicators under safety nets.
With respect to cost-sharing and the 60-40 share, it was my understanding that with the previous program, GRIP and NISA, that was a one-third/one-third/one-third sharing. My question is what would the producers' share be in the arithmetic that's outlined in the program?
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I'll stop and allow you to answer that first question.
Mr. Claydon: Mr. Chairman, in terms of the previous safety net system, and even currently, there is a variety of cost-sharing arrangements for different programs. For example, with the current NISA program, the cost-sharing arrangements are that the producers pay 50% of the premiums and the two levels of government each pay 25% of the premiums, adding up to 100% in total.
For the 1995 year that will change such that the producers will still pay 50%, but the federal government will pay two-thirds of the government portion and the provinces will pay one-third. Essentially what's happening is we're moving from a 1% federal contribution matched with a 1% provincial contribution, and a 2% industry contribution to a place where we have a 1% provincial contribution - that would be unchanged - but the federal contribution will double to 2%, and then the producers will match that total 3% from governments. So it's an increase in the level of support for the industry overall, with the federal government putting a greater share into the whole farm program. So that's on NISA.
On crop insurance, for the last number of years the cost-sharing has been 50-50, with the provinces and the federal government each putting in 25% and the producers 50%.
On GRIP, which is one of the major programs that most provinces are now phasing out, it was a complicated arrangement where the provinces paid 25%, the producers paid 33% and the federal government paid 41 2/3%. Don't ask me to explain how we got there, but that's where we ended up.
But if you take all those programs together, basically the cost-sharing works out to approximately 60-40, and that's across all provinces; it's very similar in terms of the proportions.
In terms of where we're going on the producers' share, I would say that in terms of crop insurance and NISA, which are the two well-defined programs as we head into the future, what's seen there is a 50-50 cost-sharing on both of those programs between producers and governments. There is flexibility, though, on what we call the companion programs, which are the other part, the third leg of the stool of the new safety nets, and which can be a variety of arrangements in terms of producers' share. I know Ontario, for example, is looking very much at changing the current GRIP program they have into what they call a co-insurance program, which would have no premiums for producers, for example.
So there's flexibility there, and in terms of how different provinces want to implement that, I think we can see producers ending up with somewhat less than 50% in terms of their share of the overall safety net resources.
As well, Alberta is looking at a program that would have no producer premiums as their companion program component. So I would see probably the producers' share perhaps being somewhere between a third and half as we evolve over the next few years.
Mrs. Cowling: My next question is with respect to the various producer groups. I'm not sure if it has been decided at this point, but I'm wondering how many of those people - we're looking at various commodities - will be under the umbrella of whole-farm support, whether we're looking at the complete agricultural industry as fitting under that umbrella.
.0925
My next question is the timeframe as to when the program will be up and running; and my other question is around the whole-farm support program and a trigger mechanism for disaster assistance, for extraordinary conditions that may well occur and do happen quite often within the agricultural sector. Is there going to be a trigger component that would work outside the crop insurance component?
Mr. Claydon: Mr. Chairman, I'll take those in order.
In terms of the commodities that would be under the whole-farm program, at the current time in terms of NISA the coverage is quite broad. It varies a little bit by province. For example, in Alberta for 1994 the red meat sector has not been added in. It was added in in 1994 by other provinces as we phased out of the NTSP program, so that's one anomaly.
In the province of Quebec, they have had a stabilization program in place for a number of years as a separate provincial initiative, and there has been agreement among all the provinces that the province of Quebec would work towards coming into a common program by 1999. In the interim, NISA is only used for the horticulture sector in the province of Quebec, but all the provinces are working towards being able to find a common approach that may require some modifications to the programs that are currently on the books, as we see how our trade obligations develop and exactly how certain new rules under the World Trade Organization are going to be implemented.
The most important exception to coverage under whole-farm is the supply-managed sector, where basically they have a set of regulatory measures that give them controls at the border that other sectors are not eligible for. So basically the supply-managed sector is not included and has not indicated any interest in being included at this point in time.
In terms of a timeframe, I guess 1999 is a fairly important date in terms of our heading towards having a common whole-farm program by that time. Certainly the Province of Quebec is looking at various alternatives. The UPA, the Quebec provincial farm organization, is looking at the implications of whole-farm approaches, so there's a lot of work going on. Other provinces, Alberta for example, are also interested in looking at different models of whole-farm approaches so that we can end up with the best possible model by 1999.
In terms of triggers for disaster, within the crop insurance and NISA programs there are some minor triggers in crop insurance for certain limited kinds of disasters. In general, though, those are meant to be general programs that don't provide special benefits in any particular disaster situation. The whole idea behind NISA is that accounts build up, so that if there is a disaster the producers have got support. The accounts in NISA are growing pretty quickly. We have about three-quarters of a billion dollars in NISA accounts now, and that's before we get the contributions from the very good 1994 crop year, so we're expecting that NISA may have over $1 billion in its accounts within the near future.
Certainly there is flexibility within the companion program component to be looking at disaster type of assistance. Certainly that's the way Alberta is looking at their companion program approach. They are trying to see how it could be seen as a component that would provide support when there are very significant downturns in farming activity and prices.
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[Translation]
The Vice-Chairman (Mr. Assad): Mr. Landry, I should have put you second on my list, but I had chosen Mr. Steckle. It won't be long. You have no objections?
[English]
Mr. Steckle (Huron - Bruce): I'll let him go first.
The Vice-Chairman (Mr. Assad): Mr. Landry. No? Okay, Mr. Steckle then.
Mr. Steckle: Thank you, Mr. Chairman.
Dr. Clayton, I'm pleased to be able to be here this morning just to question a number of things. On the second-to-last page of your comments this morning, you talked about the department cutting costs, about privatization, about moving towards an independent and privately operated organization. When we look at some of the numbers behind that principle - and we're looking at ninety people comprising the component of employees to that department - how far have we gone in terms of developing a business plan for that? Are the ninety people who are going to be employed there among those who we have considered as having been removed from that number of 2,069 personnel? Have we lost them or are they included in that grouping?
Mr. Claydon: To answer your specific question first, the ninety people are included in the 2,069 who are going to be outside of the employment of the department by the end of 1997-98.
In terms of our planning for implementation, we've set a target date of April 1, 1996, to have this operation up and running and separate from the department. If it takes us a bit longer than that to do it, we have the flexibility to allow it to happen. Basically we have assumed that over the three years of our fiscal plan the department will be spending the same amount or will have the same resources available to spend on that activity as it currently has. We don't have to cut back in terms of our support for that activity over the period to the end of 1997-98.
We would like to get this thing up and running because we think there are a number of advantages to having this operation. But we want to take our time. We want to consult with the industry, we want to consult with the provinces, and we want to make sure we're doing something that meets the needs of the industry and that's sustainable over time. We don't want to create something that is simply going to wither and die in a couple of years and leave the department without the kind of economic information it's going to need in the future.
Mr. Steckle: I guess the reason for asking that question is that we sometimes talk about reductions and then we see these people shifted from one department to somewhere else. We're basically, by the same government, supporting these people. What if there's a failure at this department? Are these ninety people lost then, or will these ninety people find themselves back in the government system? There are always questions.
I guess the whole understanding of this, as I see it, is to involve private moneys. What guarantees are there that the private component of this is going to actually be there? I asked a colleague of mine because I had to leave the other day, but there doesn't seem to be the complete commitment of private enterprise to be part of that, whether it's in R and D or or whether it's in this. Do we know it's there? If it isn't there, what happens to this concept that we have? Is it going to be there?
I guess a supplementary to that is, are we not competing with organizations such as the George Morris Centre in Guelph by setting up another area? We're talking about duplication, about overlaps. How does this all factor in? I think we need some answers on some of these questions.
Mr. Claydon: In terms of what happens if the organization fails, I think that's why we've set aside a good year, and perhaps even longer, to plan this. We have to get out to make sure the business case is there in terms of demand for the kinds of things we're doing. We see that over time this organization would be more dependent on revenue from outside of government. We would hope that over time some of its costs would be covered by other people wanting its services.
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In terms of the question of whether it's competing with what others are doing, we're already providing these kinds of services in a very significant way. A lot of it is picked up and used by people outside the department now, so we don't see that there's going to be a big increase in services available outside. To the extent that there is, we see that this organization is going to have to make it on its own and be competitive. It's not going to have some special advantage in terms of being linked into government and getting its costs paid somehow. Over time, we want to have some kind of contractual arrangement, just as anyone else would with this kind of an organization.
Mr. Steckle: At such time as we determine that it's not effective, how are we able to conclude and terminate the operations? How do we measure the success? How do we determine that it should continue on? Who makes that determination?
Mr. Claydon: That's a really good question, and we've been wrestling with it ourselves. Certainly I think part of it is in terms of the level of independence the organization would be able to develop over a couple of years in terms of its ability to generate revenues outside of government.
As well, if we find out that government is not getting the service it previously had in terms of having an internal operation, or if in fact we're ending up paying more for those services than what it was costing us when it was internal, then I think those are some of the criteria we would apply. Certainly those criteria are going to be part of the initial set-up of the organization, so we'll be able to say explicitly how we see this succeeding. If it doesn't succeed, then we're going to have to make a decision within the next couple of years to say no, I'm sorry, this is not working.
I guess in a sense there's a bit of a leap of faith. I want the staff who are going to be involved to feel that we want it to succeed, so I want to put the emphasis on success and making it work and having the background, the fact that we have to measure its success. I want to put the emphasis on making it succeed and not on putting roadblocks to its success.
The Acting Chairman (Mr. Pickard): The general direction seems to be that you will have some flexibility within that program, and if there are efficiencies that can be built in as you move along, that's exactly the process you're going to be going through.
Mr. Claydon: Yes. For example, we're expecting that this organization would be out from under the Public Service Employment Act, which means that there can be incentive pay and all kinds of interesting things. A lot of people who are among the ninety people are very excited by the kinds of arrangements that could come with that sort of flexibility.
The Acting Chairman (Mr. Pickard): Thank you very much.
Paul, is that all?
Mr. Steckle: Actually, I'm always concerned about overlap. I think we're all concerned, particularly in these times when we have to make sure that our dollars are expended most wisely.
The department has a communications branch, as I understand, with an expenditure of about $5.2 million or something to that effect. But the policy branch has within itself an internally managed communications division with a staff of 17. What's the cost of that? Is there not an overlap there?
I think there's lots of opportunity for us to look at some of the overlaps. Are we aware or should we be more aware of what's going on? Ultimately, what we do has to impact to the ultimate benefit of rural Canada, the farmers of this country. If it doesn't do that, then basically we're not serving the very people we're here to serve.
[Translation]
Mr. Landry (Lotbinière): I am happy to be here this morning to discuss the stabilization policy.
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I'll summarize this in a few words. It is said that beginning in the 1995 tax year, the new approach for guaranteed income will include elements such as crop insurance and an agroglobal support program, as well as companion programs adapted to each region of this country.
I would like you to explain this to me in a more concrete fashion so that I can better understand all this.
[English]
Mr. Claydon: About the funding arrangements, we're still in discussions with the provinces about exactly the amount of funding that will be available in total for each province out of the federal safety net resources, which have been defined in the budget to decline to $600 million from $850 million over the next three years. On the total level of resources available in each province, there's still some negotiating to do. So I can't be definitive about, for example, exactly the share of the $600 million Quebec would have in 1997-98.
About the programs themselves and how they fit together, the crop insurance program is more or less the crop insurance program we currently have. The provinces have agreed to a federal-provincial review of crop insurance. We think there may be some efficiencies to be gained there; maybe the program can work better across the country. Some provinces think it's working fairly well for them. Others would like to see some changes. The United States is moving into a different kind of crop insurance program altogether. There's interest in looking at that as a possible alternative. We see the crop insurance component more or less remaining as it is, but subject to this federal-provincial review.
That in total, of the $600 million...the crop insurance is going to cost $160 million to $180 million a year, on an ongoing basis.
When we look at the whole-farm component, the best we can do currently is to assume the program would be something like the NISA program we have, in its cost. That's going to be around $220 million to $230 million a year when we get the full NISA program with the 2% federal contribution in place.
Now, I say that recognizing that we're into a lot of interesting discussions about the trade implications of various types of safety net programs. It may be that by 1999 we'll have a better feeling for the kinds of programs that are going to be most acceptable on a trade basis, both with the United States as our major trading partner and, more generally, through the World Trade Organization, with other countries.
That part of it is subject to negotiation and change as we go. Certainly in Quebec there's an awful lot of interest in exactly what that program will look like and how the province might move from the kind of more commodity-specific program it currently has towards a more whole-farm approach.
The third component, which is in the range of $200 million, is what we call the companion programs. What we see there is the provinces having a fair degree of flexibility to establish the kind of program they want.
We have set some guidelines on that. For example, if a province wants to continue some of the existing programs, such as the GRIP program, that's certainly something they can do as a companion program. If Quebec wants to continue the ASRA program as it is, then that's certainly possible within their share of the funding that's left over. If a province wants to add some money to extra crop insurance or extra whole-farm premiums, that's also seen as something that can be done.
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Finally, if they want to take some of the safety net money and, rather than paying it out as direct payments to producers, use it in programs designed to, in a sense, help the producer to improve his ability to manage his own risks through farm business management and better marketing programs that help him get a better dollar for his product, then those kinds of opportunities are also available in terms of using the companion program moneys.
There is a fair amount of flexibility, and the provinces have wanted to have that in using that component of the program.
[Translation]
Mr. Landry: You said also in your document that savings in other activity areas will allow you to create a $60 million adaptation fund to meet future adaptation requirements in areas such as rural development and environmental protection.
Which areas have been cut to get those $60 million?
[English]
Mr. Claydon: It's $60 million a year into the indefinite future. We see that money essentially as being constrained only by our imagination. We want to be able to do the best things possible in helping the sector to adapt.
We haven't set any boundaries in terms of it having to be a certain amount for particular provinces. We haven't set any boundaries in terms of it being a certain amount for particular commodity sectors. We wanted it to be open to the best ideas.
There is going to be a set of consultations across the country over the next few months to ask the industry about the kinds of uses they'd like to see that money put to.
Some of the funds have already been allocated from the $60 million, at least for the next couple of years. For example, we are going to continue the farm business management program, which is $10 million a year. We are going to make a contribution of $1 million a year into a Canadian farm safety program, which is a new initiative that has been strongly supported by the Canadian Federation of Agriculture and I think is very positive.
There are a number of other smaller initiatives, which add up to $17 million, and that has been allocated. But for the rest of it, we very much want to see the ideas that will come from the sector.
As well, I should say that some of that money is designed to help various regions of the country to adjust to the impacts of transportation reform. Here I'm thinking in particular of the reform of the feed freight assistance program, which affects mainly B.C., eastern Quebec, and the Atlantic provinces, as well as the reform of western grain transportation, which has some impacts in eastern Canada.
So part of the purpose is to try to find ways to help those areas of the country to make those adjustments, but to do it not simply to provide compensation, but in a positive sense of meeting some of the needs of those parts of the country to make adjustments in order to be competitive in the future.
Mr. Kerpan (Moose Jaw - Lake Centre): I'd like to spend a couple of minutes talking about the crop insurance program, as well as the NISA program.
In your opening statement you say: ``NISA and crop insurance will be offsetting a portion of its costs through revenue-generating administration fees.'' I know from my experience in Saskatchewan that if most of the farmers and producers who are involved in the crop insurance program have a complaint, it is that the premiums are too high. If you take into account obviously the provincial share and the federal share, it is a fairly expensive insurance program.
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My question, then, would be in regard to these revenue-generating administration fees. How much will they be, and who will they be billed to?
Mr. Claydon: Let me speak about crop insurance in particular. I know that particularly in the province of Saskatchewan the premium load has been very high, particularly because the crop insurance program in Saskatchewan is in a significant deficit and there's some premium loading to help overcome that deficit.
In terms of the level of cost recovery fees that would be looked at, we're looking at introducing fees for the 1996-97 year, and the current estimate is that there would be a fee of about $100 per participant.
I should mention that we're also launching into a federal-provincial review of the crop insurance program. The thing we'd like to do is not to have to put on that kind of fee. We'd like to be able, as part of this review, to look at something that's simpler and easy to administer so that we can bring the cost down.
The costs of administering the crop insurance program are, I think, approximately 15% of the premiums. That's not out of line with the costs of other insurance programs, but it's still one heck of a lot of money in terms that it's not going into the producers pockets; it's going into administration. So if we can bring the cost down, then I think we can make those fees smaller.
In terms of NISA, there is already an administration fee of $30, and that generates about $5.5 million of revenue. We think, as the uptake for the NISA program improves over the next couple of years, we're going to get more revenue generated, even at the same fee, and we think a large part of the extra revenue we need will come from that, just from greater usage.
But we also think we're probably going to have to raise $2 million to $3 million in extra revenue through higher fees, which might mean that we'd go from $30 to $40 or $45 in terms of the NISA administration fee.
There as well, one comment to make, I suppose, is that the other thing that's happened to the NISA program is we've simplified the application forms for NISA incredibly. I think most farmers would now not have to use their lawyers and their accountants to be able to fill out the forms, so there's some savings there that probably offset the increase in the fee.
Mr. Kerpan: On the NISA program, certainly you'll get no argument from me. I do believe it is a reasonably sound program. I think the problem has been, again in my province of Saskatchewan, that many producers have not had the extra cash to put into the NISA program, and that has been the slow start of the NISA program, at least in western Canada.
Actually, a question would be, can you tell me how many producers are actually involved in the program and what the average NISA account might be? You mentioned there is $750 million in that account. I agree with you. It would be my thinking, or I'd be quite suspicious, that a large part of that NISA account would be held by relatively few producers. Do you have that?
Mr. Claydon: I know that approximately 125,000 producers are in the program. In terms of the average amount, I have to check that. There's 125,000 producers and there's $750 million - I think that can be worked out.
Mr. Kerpan: Thank you.
Mr. Claydon: We're expecting that to grow to over $1 billion net by this year.
.0955
Mr. Kerpan: Has the department ever looked at the option of some partial or full privatization of either the crop insurance program or the administration of the NISA program? It's my opinion that perhaps the private insurance companies could offer an all-risk crop insurance program that may in fact be the same type of product at a much-reduced cost.
Mr. Claydon: In terms of this review of crop insurance that we'll be going through with the provinces, that's obviously something we have to look at. In a way, it would be nice to think we could run the NISA program with a little credit card and it would be linked to the normal financial institutions. We already have 25,000 producers who have accounts holding their own NISA moneys in financial institutions. We're also working to try to integrate the NISA program with the normal tax records.
You can see over time that this could be something that would just run all on its own and we really wouldn't need a large NISA administration to do it. Then we can get rid of those administration fees, which I'd love to do.
The Acting-Chairman (Mr. Pickard): Lyle.
Mr. Vanclief (Prince Edward - Hastings): Thank you very much, Mr. Chairman, and I thank the officials for coming this morning.
I'd like to get some clarification on the third chart of the small handout you gave us. This is a summary for planned expenditures for 1997-98. In the safety nets it's $801 million, and when you bring in the revenue it's about $805 million. The adaptation is $116 million. Would you tell us what are in those two figures compared to the figures of $600 million and of $60 million in your opening comments this morning?
Mr. Claydon: In terms of the breakdown of the numbers for the 1997-98 period, and the $789 million in the safety nets, the numbers we have are $100 million for NISA, $200 million for GRIP, $180 million for crop insurance, $9.7 million for the feed freight assistance program which is being phased out, and $160 million for dairy subsidies. We've moved a bit of the money forward from 1995-96 because we weren't sure we were going to be able to spend it all that year. We wanted to save it and not give it back to Mr. Martin, although I shouldn't say that.
We've moved $20 million forward into 1997-98 to make sure it is available when the industry needs it. We have $120 million as part of our envelope that still has to be allocated in terms of enhancing the NISA program and in terms of determining the nature of the companion programs.
So it's all there, and as I say, there's the $20 million we've brought forward plus the $120 million. That's $140 million that we have to work with in terms of enhancing NISA and developing companion programs with the provinces.
Mr. Vanclief: Thank you. What I want to clarify is that in your opening comments you say federal safety nets will drop to $600 million and then on this chart it says safety nets are at $805 million. You've explained that. That's what I -
Mr. Claydon: I should explain that dairy subsidies and the feed freight assistance program are not part of what we call the safety net envelope.
Mr. Vanclief: But they are on that line in this chart.
Mr. Claydon: But they're in that line because they're basically contribution programs.
Mr. Vanclief: Okay. I have just a couple of other things, Mr. Chairman.
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I wonder about two things. I'd like to have some comments on one of the graphs in the larger handout; but before we do that, when we're talking about safety nets, there has been some criticism and comments made by farm groups as far as their participation and reception of their comments into the discussions on the whole farm safety net process are concerned, and as to how the process is being developed. I wondered if Mr. Claydon himself, or someone else, could explain the process that has taken place and the consultation.
From some parties there have been some fairly critical comments about the development of that and the participation of the primary producers in that development.
Mr. Claydon: The discussions around safety nets have not been easy. When you're talking about hundreds of millions of dollars, it's something that gets people's attention and they tend to get edgy if they think they're not getting a reasonable share of the dollars.
I can't say it's been an easy set of discussions, but we did have full consultations with the industry through a national safety net committee that worked all through last year and ended up making recommendations to the federal-provincial ministers at their meeting in December 1994. It was a rocky road that we travelled. We often had various groups of producers upset at what was happening, but we had interesting meetings with all the provinces represented - all the producer groups as well as the federal government, and I must say it was not always pleasant.
But I think it's fair to say that in terms of the results we achieved in December, there was a high degree of satisfaction from the farm community, and in fact all of the recommendations that were made by the farm members of the national safety net committee were adopted. I think it's not a pretty process, but it's fair to say that the farm representatives were extremely influential in terms of their effect on the discussions, both in terms of what the federal government's position was and where the provinces ended up coming out.
We're into another set of discussions now that deal with more of the details of how the provinces and the federal government are going to manage the whole safety net agreement over the next four or five years. This brings us into questions such as how much flexibility are provinces going to have in the next couple of years to do some experimenting with the components of the safety net program to try to get towards some objectives? For example, Alberta is very keen on trying to get towards a really GATT green safety net, and there are concerns from a number of producer organizations that it may put in jeopardy some of the work they're trying to do in other areas.
We've taken a less formal approach with the farm organizations in terms of their involvement, but certainly there's a lot of discussion going on with them. The documents that are being developed are being shared with them, and my sense is that again we're going to go through a bit of a messy process, but I think that in the end we will have the necessary discussions to make sure everyone is on side.
In fact, I'm supposed to be talking to Jack Wilkinson this afternoon about a follow-up process. I know their concerns. I think it's right for them to be voicing those concerns and it's important that we hear their views. They're never shy about saying what they think, and we're very cognizant of what their concerns are.
The Acting Chairman (Mr. Pickard): Lyle, you had a chart there. Which chart was it, so that everybody can refer to it?
Mr. Vanclief: In the larger handout; it's towards the back. It's the one on the average age of the principal farm operator versus the general working population.
The Acting Chairman (Mr. Pickard): On average age.
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Mr. Vanclief: That's right. Some of us have just been chatting about this type of chart and what it tells us and how it leads us to think. Mr. Claydon, maybe you could comment on it. I'm not saying that the figures or the information aren't correct, but I question whether we're comparing apples to apples because we're comparing the average age of the principal farm operator. If I could think of a father-son or a father-daughter situation, probably the parent would be listed as the principal farm operator. I don't know what happens in a case where there's a legal partnership or corporation. In the grey part of that graph we're talking about the average age of the general working population, which could mean assembly-line workers, and I don't know whether that would include all of the farm operators.
I know when I was operating Willowlee Farms I was the principal farm operator and I had five full-time people. The oldest of them was 15 years younger than I am. We're not comparing apples to apples.
What we indicate here, when the person takes a quick look at this, is that the operators of farms in Canada are considerably older than the general workforce. My guess is that the owners of businesses in Canada, if you took only the owner or the principal operator of businesses in Winnipeg or Belleville or whatever, and you compared them to the general working population, you would see a similar thing. What we do with this type of chart is we send a message that farmers are a much older group of people. The owners may very well be older than the general working population, but I think it's probably the case everywhere.
The other thing that I think is interesting here is that really I don't think there's been any significant change during the last 20 years in the average age of the principal farm operators. From time to time we hear the statement that farmers in Canada are getting older. If you draw a line across there, there is a bit of a change but not a significant one. I don't want to use the word ``misleading'', but this type of chart doesn't leave the right impression.
The Acting Chairman (Mr. Pickard): You made your point very clearly. I don't know that Dr. Claydon wishes to comment too much on that. I think his point is very well taken.
Mr. Claydon: Mr. Chairman, I won't comment very much. We'd very much like to get some apples and apples comparisons. We appreciate these kinds of comments. We'd very much like, if you have time in your schedule, to come back and talk about some of these indicators, because it would be nice to have some things about which we all say, yes, that's a good way of telling what's happening. We'd very much appreciate sitting down and going through it with you.
Mrs. Cowling: Dr. Claydon, you mentioned earlier that we were meeting our trade obligations. There seems to be a sense in the community at large that Canada is winding down its programs fairly quickly and that we are maybe doing it more rapidly than other parts of the country. In my view, that tends to be a false perception, but just for the record, can you clarify that we are meeting our trade obligations? I'm hoping that we're doing it at the same pace as other countries - for instance, the U.S. and the European Community and what not - because there isn't any question in my mind that we can compete in that world agenda. We could do it very well, but I think we need to send a message to the community at large that if we are all doing this at the same time it's fair. It seems to be a perspective that maybe we're doing it a little quicker than other countries.
Mr. Claydon: It's a bit difficult to make all the right comparisons in that, in terms of how you measure the speed. One thing I think is true is that if you look at the flexibility Canada has in providing subsidies to our industry, we haven't used all of the flexibility we have. There's something called the ``aggregate measure of support''. That is a measure of the constraint on how much support Canada could provide to its farm population. The most recent information I have is that we're not using all that room.
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So there's more we could do. I think that has to be tempered, though, by looking at what's fiscally possible. That's the constraint we're under: how many resources are actually available to provide this support. My sense is as that starts to bite, in terms of how much we can use, we also have to look at how we're using it. My sense is that a lot of things can be done in making the best use of what we have. In a perverse way, you begin to ask those questions about how to use what you have more pointedly when it looks as if you have less of it.
I think, for example, this crop insurance review could be an extremely useful activity. What we're trying to do with the cattle industry, using the futures market, has incredible implications for the producers being able to help themselves in protecting their income. There are an awful lot of things we need to look at, and in the future the measure is not going to be the dollars, the measure is going to be the effectiveness of those dollars, which is even harder to compare in looking at other countries.
Mr. Reed (Halton - Peel): I don't want to belabour a graph here, but I think it is significant, and I think Mrs. Cowling and Mr. Vanclief did expose something here. I have just a suggestion. I wonder if it might be more explanatory if you would divide this graph into two and you might take the average age of the principal farm operator versus the average age of the principal business operator, and then take the average age of the general working population and the average age of the farm working population. Maybe that would present a clear explanation. It's only a suggestion.
Mr. Claydon: We appreciate any and all suggestions. We'd really like to work on these and refine them.
The Acting Chairman (Mr. Pickard): I think your point is well taken. I believe all three members have pointed out the significance of information which may have a slight imbalance one way or another. I think your suggestion, Doctor, about us getting together some time and looking at the basis on which we set graphs and put statistics together may be a pretty valuable exercise.
Allan.
Mr. Kerpan: I'm going to try to rush three things into very short sentences. Just to finish off, probably my colleagues on the other side of the table are right when they talk about some imbalances in the average age. One of my concerns obviously is I'd like to see some information on how many young people are getting involved in the business of agriculture, as opposed to how many are what the age of the owner of that particular farm might be.
The second point I would like to ask is this. Is it possible for your department to provide this committee - it doesn't have to be today - with a breakdown, if possible by province, of the NISA program: how many producers in each province are involved, how many dollars are in those accounts, and what the median of those accounts might be?
You also talked in your report about a pilot project for the cattle industry. I'd like you to inform us a bit on what that would involve and how much it would cost. I'll just leave you with the thought that I do know from talking to cattlemen in western Canada that they are of the opinion that the more the government stays off their backs and out of their pockets the happier they'll be.
Mr. Claydon: About young people coming into agriculture, one of the reasons we put this graph together was essentially to show that regardless of the absolute age of farm operators versus the rest of the population, essentially farmers didn't seem to be getting old relative to the average population. We know the whole population is getting older, but there's been a lot of discussion about young people not coming into farming, and therefore in a sense the farming population is getting older faster than the general population. So that was one of the things we were trying to look at. Is it true that the farm population is getting older faster?
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We'll take your comments and we'll work on this some more in terms of trying to get at that. It gets back to the point that if we're not attracting young people, then we would expect the farm population to be getting older faster than the general population. So we'll work on that.
In terms of NISA, we'd be very glad to provide you with those statistics. In fact, we'll provide the latest NISA statistics to the committee as a whole and we can have those distributed.
In terms of the options pilot project, I'm very pleased to be able to tell you a bit more about that. Basically this is a very new approach where what we're trying to do is provide the producers with an instrument that combines the normal price variability of the cattle sector with the exchange rate variability of the U.S. dollar.
In the past it was possible for cattle producers to essentially buy options for the price variability and options for the exchange rate variability, but you had to buy them separately and it was quite expensive. If you have something that puts them together, then to the extent that they offset one another, which is quite significant, the cost to the producer is significantly lower because they sort of cross-insure one another. If you get a big increase in the exchange rate, you're not necessarily going to get a big decrease in the price.
So this is a very exciting opportunity. We're not getting into that business at all. We want to stay out of that business. What we're involved in is trying to provide some dollars to help the training of the industry so they'll learn how to use the instrument and be able to use it on their own. We think the cost is going to be about $3.5 million this year to do the training. We expect it may end up being a two-year involvement, but after that we expect to be completely out of it. We don't see an ongoing government role in this at all.
The Acting Chairman (Mr. Pickard): Dr. Claydon, Ms O'Sullivan, and Mr. Derouin, we very much appreciate your coming before the committee today and helping us with future plans and directions in the department. We will look forward to following up with many of the discussions here today. Certainly they'll be an integral part of this committee's work in the future.
For the members of the committee, we have two motions before us, so rather than packing up our books and go, I would like to get those motions on the table right now.
The first motion is that Mr. Jake Hoeppner replace Allan Kerpan as the Reform member on the Sub-Committee on Grain Transportation and that this change be effective immediately.
Motion agreed to
Mr. Kerpan: Mr. Chairman, can I just say a couple of words about that?
The Acting Chairman (Mr. Pickard): As long as you're not going to change your mind.
Mr. Kerpan: I'd like to clarify my position on this.
The Acting Chairman (Mr. Pickard): Go ahead.
Mr. Kerpan: I was under the understanding that Jake Hoeppner was originally placed on that subcommittee by our party. I understand that according to the rules and procedures he could not have been on that subcommittee because he's not a member of the standing committee. So just from my perspective, I did sit in on a couple of meetings and then I started to realize that I wasn't the person who was supposed to be on those committee meetings. I'd just like to clarify that for the committee.
The Acting Chairman (Mr. Pickard): Thank you very much.
The second motion we have in front of us is that the $25,000 budget of the Sub-Committee on Grain Transportation be adopted.
Motion agreed to
Mr. Assad (Gatineau - La Lièvre): Mr. Chairman, I understand that we're going down to room 112-N in the Centre Block and we'd need quorum because we have to look over Bill...what's the number?
Mr. Vanclief: It's Bill C-75, Mr. Chairman, the Farm Improvement and Marketing Co-operatives Loans Act. It's only one clause, so it should not take us much time. It's up to the committee, but we do need quorum and it's at 11 a.m.
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Mr. Assad: We have this room until what time?
Mr. Vanclief: Until 11 a.m., but the officials who are coming will be going there and it's published to be there.
Mr. Assad: Okay.
The Acting Chairman (Mr. Pickard): On the point that is being made here, so that we can get this expedited and through, does anyone not intend to be at room 112 at 11 a.m.? Paul, okay. Then we will still have quorum if the same number of people are here.
Mr. Reed: I have a question that is probably appropriate to raise concerning this. In the last couple of weeks, time conflicts have arisen because of changes in scheduling.
I sit on two standing committees. The natural resources committee will be meeting at 11 a.m., and this committee will be meeting at 11 a.m. I would ask the chair if it could be made clear to the whip's office that they're going to have to be maybe more prudent in scheduling times, because I know I must be here at this committee, but I also know I must be at the other one. So I hope we get our business done very quickly.
The Acting Chairman (Mr. Pickard): Right, Julian. I understand your comments, and I think they're clear.
This committee is in charge of its own destiny. We can structure those meetings, either through our planning committee or through the committee itself. Quite to my liking, in the last month we have had our regular meeting time of 9 a.m. Tuesday and 9 a.m. Thursday, which makes this committee function 100% better, and there's no question that every member knows that and can be here.
This happens to be an extra meeting to get a piece of legislation in place, and I guess this is not a regular happening. But staying on the plan we have, it's really up to committee members to insist on that. I think that's where it is. The whip's office...forget it. I think we carry our own destiny here.
Mr. Reed: Mr. Chairman, I know the scheduling of 11 a.m. for the natural resources committee was also a regular happening too. So I'm also going to raise it with that committee to make sure we're all clear.
The Acting Chairman (Mr. Pickard): Marlene, you have a comment.
Mrs. Cowling: I'm raising almost the same comment as Julian. It's been requested by the minister, Doug Young, as I sit on the transportation committee as well, which is in conflict with the timeframe of this one. I guess we're going to have to juggle the times, and it may well be my responsibility to see how I can manage my time between both committees.
The Acting Chairman (Mr. Pickard): Overlap a 9 a.m. structure...?
Mrs. Cowling: Yes, I think we sort of overlap the two of them. So if there are times I'm not here.... I'm going to have to balance my time, but I thought the committee should know it's not because I'm not interested in agriculture; it's another sector of the agriculture component that I'll be sitting in on.
The Acting Chairman (Mr. Pickard): I'll continue this discussion if members feel they would like to afterward, but I think keeping that regular time structure helps everybody immensely. It's so important for all of us.
Mr. Vanclief: Chairman, the officials present tell me that the officials for Bill C-75 are coming to this room at 10:40 a.m. They're scheduled to be here then. Now, I think we probably have to move to room 112-N. Unless the clerk knows any reason why we can't start as soon as we get there -
The Acting Chairman (Mr. Pickard): A telephone call would answer that. We can phone the whip's office and find out if this room is booked at 10:30 a.m.
A voice: Yes, it is.
The Acting Chairman (Mr. Pickard): It's booked for 11 a.m. We could get this done in20 minutes.
Mr. Vanclief: If we could move to room 112-N and be there by 10:50 a.m., if we can start a meeting ten minutes before the scheduled time, we may very well help Mr. Reed and some others.
The Acting Chairman (Mr. Pickard): Is there any objection to that by any person?
Mr. Kerpan: We have this room until 11 a.m. and the officials are coming here. Why could we not do it here?
Mr. Vanclief: It all depends. We don't want to rush.
The Acting Chairman (Mr. Pickard): Let's ask a question to the members. Does anybody have a major problem with the bill that's coming forth that will hold a discussion for a longer period of time? It is a relatively simple bill, but we should go to the other room if there's going to be a long discussion.
Mr. Kerpan: I have simple amendment that will be put according to -
The Acting Chairman (Mr. Pickard): Okay, we'll go to the other room, then, and how would it be if we schedule the other room at 10:50 a.m. rather than 11 a.m. to try to get under way as soon as possible? Thank you very much.
The meeting is adjourned.