[Recorded by Electronic Apparatus]
Thursday, June 15, 1995
[English]
.1106 
The Chairman: Order. I see we have a quorum.
We're going to have a couple of witnesses today and then we're going to move into clause by clause, or rather, we're going to move into ``clause''. There's one clause to this bill today.
We're going to try to keep our first witness to 45 minutes and our second witness to roughly 30 minutes so that we can then go into dealing with the bill.
Our opening witness is Pierre Moncion. He is the president and general manager of the Canadian Federation of Independent Grocers.
You're welcome to begin at any time, sir.
Mr. Pierre Moncion (Member, Canadian Federation of Independent Grocers): Good morning, everybody.
I'm here this morning both as a representative of the Canadian Federation of Independent Grocers and as the owner of the independent grocery store called Pembroke Foodliner West, located in Pembroke, Ontario.
CFIG appreciates the opportunity to offer its views and advice to the Standing Committee on Government Operations. As an association representing small businesses across Canada, CFIG supports the efforts of the federal government to reduce spending and pursue cost reduction measures.
As grocery retailers, we experienced a difficult economic period in the 1990s, and we are still coping with a slow recovery. We therefore understand the importance of cutting costs and reducing expenditures in order to be viable in the future. But we ask that the government's efforts in this area not be carried out at the expense of small businesses like my own. We would ask that before moving forward with the new coin, more consideration be given to the impact it will have on businesses.
The Canadian Federation of Independent Grocers is a national non-profit trade association founded in 1962 for the purpose of furthering the unique interests of independent grocers in Canada. Our organization has a voluntary membership base of more than 3,800 independently owned and operated grocery supermarkets across the country.
Our members include such franchise banners as IGA, Super-Valu, Knechtel's and Your Independent Grocer. Regional members of the committee may also recognize names of strong full independents such as Thrifty Foods, Penner Foods, Stong's, Gaynor Foods, Galati Brothers, Commisso's, Lovsin's, and Coleman's.
We are a grassroots organization dedicated to working with both government and industry to develop effective solutions to common issues. CFIG consulted a variety of members from across Canada to gain their input on making the conversion from the $2 bill to the $2 coin. CFIG also consulted a number of equipment companies to determine their level of awareness of the issue and their ability to respond to this change.
From these discussions, the following key concerns were identified regarding the introduction of the $2 coin.
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There will be costs to the grocery retailers. These costs will also be borne by all businesses that have cash registers or operate with coins.
The cash register tray currently in use is not designed to accommodate an additional coin. I invite all of you to have a look at this afterwards; I've brought one. Right now the slots at the front of the till are completely full. There are only areas for bills left.
The average number of cash registers for CFIG members ranges between seven and nine tills, although some independents have as many as fifteen registers or more. The cost to replace the trays ranges from $150 to $200 apiece. Therefore retailers are going to absorb a substantial and unexpected cost.
A number of CFIG members, particularly those in rural areas, indicated that they are currently paying a substantial premium to purchase coin from the banks, versus bills. I brought a briefcase to illustrate how much coin we use on a daily basis.
There's a cost to handling coins, and it's far greater than it is for bills. Although it varies by location, grocers appear to be paying $2 to $3 for every $100 of coins purchased, whereas bills are a fraction of the cost. The intended conversion of the $2 bill will add to the overall cost of handling another coin.
Most retailers currently use bill counters. It is a machine the head cashier uses to count bills. It's a very fast machine. As we move to greater usage of coins, retailers will have to invest in coin-sorting equipment as well. Coins are already bulky and difficult for employees to handle. In order to cut down on the time it takes for the staff to balance the cash at the end of the day, this investment will become inevitable with the addition of the $2 coin. Coin-sorting equipment ranges in price from $2,000 to $10,000, depending on the volume of coins handled.
The federal government's current timeframe to have the $2 coin in circulation by early 1996 is not realistic for our businesses. In discussions with major cash register companies, we discovered they have not yet given consideration to this issue. They indicated that most tray manufacturers are based in the United States and these companies are simply not aware of this proposed change and how quickly it is moving forward. Therefore the ability of retailers to handle the coin in 1996 is not realistic.
In addition, grocery retailers are currently coping with the financial burden associated with the phase-out of CFCs by the end of this year. Most retailers are in the process of retrofitting or even investing in new refrigeration equipment to accommodate the expensive new refrigerants. For many retailers this will run into thousands and even tens of thousands of dollars in order to be in compliance with the regulations by 1996. Therefore we are forced into making major investments in new equipment within a very short period of time.
CFIG would like to make the following recommendations to the committee, which will make the introduction of the $2 coin more manageable for grocery retailers.
We would urge that an additional twelve months be given before introducing the new coin in order to provide equipment manufacturers and retailers sufficient time to prepare and install the equipment needed. This will also spread out the impact of managing the cost for the CFC conversion. We would ask that the coin not be introduced into circulation until 1997.
To assist retailers who must make an investment in new equipment, CFIG is seeking a financial break for grocers similar to the one provided to retailers when the goods and services tax was introduced and new point-of-sale equipment was required. This financial break was in the form of a tax write-off that helped retailers who were forced to purchase new equipment to handle the costs.
CFIG appreciates the opportunity to make this submission. We believe these recommendations are fair, and we emphasize our willingness to work with government to find an acceptable approach to this issue.
Thank you.
The Chairman: Thank you, sir.
Mr. Marchand.
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Mr. Marchand (Québec-Est): I'm opposed to the $2 coin for reasons that are quite similar to yours, but I'm worried that the members of the Liberal Party have already decided in favour of the $2 coin. That is unfortunate, because you raise some very excellent points, like what's the rush exactly? Why is the government going so quickly when there are so many questions to be raised about even the economy of introducing a $2 coin?
I was struck by the fact that the cost of replacing the cash register trays varies from $100 to $150 apiece.
Mr. Moncion: Yes; they're very expensive.
Mr. Marchand: How many are there in Canada?
Mr. Moncion: I estimate there are 300,000 to 500,000 cash registers in Canada.
Mr. Marchand: At about $125 a piece, that's around $60 million.
Mr. Moncion: It's a lot of money.
Mr. Marchand: It's a lot of money that is going to be disbursed by retailers.
How about the cost of handling coins? You say it's much more expensive than for bills.
Mr. Moncion: The banks incorporate the charges in our service fees. They actually count the number of bundles we purchase from them on a monthly basis, and that is incorporated in our service charges.
We've been in the grocery business for a long time. I went to university and I always worked in the family business. Because we were owners of the store, I went to the bank a lot.
I want people to have an appreciation for the weight of this briefcase. This is the average amount of coin we get on a daily basis, and we have to walk about a block and a half. I know it seems extremely trivial. We could get somebody else or get Brink's. For us in Pembroke, Brink's would be an additional $30,000 a year, so we opt to go to the bank ourselves. We make our own deposits and pick up our own coin.
I would venture to say the weight of this briefcase is an occupational health and safety hazard. I know because I've injured myself carrying coin. I haven't weighed it, but it has to be at least 30 to 35 pounds. The additional weight of the $2 coin is practically going to make this thing unbearable to carry. I have to struggle with it. Now we're going to be looking at possibly going to the bank with an additional person to be able to handle the amount of coin we carry.
The cost of coins for the banks alone is going to be astronomical. They're going to be passing it on to us. We're going to incur a tremendous amount of costs in the long term. And of course those costs are ultimately passed on to the consumer. There's no other way for businesses to be viable. Our costs have to be covered.
I personally am in favour of cost reduction in the federal government. I have absolutely no problem with that, but they have to be real cost reductions. I am not in favour of cost reductions when they are passed on to somebody else. The costs still exist; they're not eliminated. Those costs will be passed on to businesses across Canada and will in turn be passed on to consumers.
Mr. Marchand: I agree with what he's saying, actually. That is why we have opposed this bill, at least to require that the government do its work, because it didn't do its work in this case. We researched this bill and discovered the federal government did not really even do adequate polling or surveys in the public. It was not done adequately.
I read only yesterday that a poll was done in the United States by U.S.A. Today, Gallup and CNN. It indicated that 77% - more than three-quarters - of Americans were opposed to the introduction of a coin to replace the dollar bill in the U.S.
In Canada we didn't even do that. We did not even do a survey. If you go through the survey that was done, it indicates quite clearly the government manipulated it to some extent.
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So there is the public objection and there is the commercial concern, which is sizeable. As you say, all these costs ultimately are going to be transferred to the consumer. It's well worth asking why they are doing this and why they are in such a hurry.
I'm curious about the bank costs, but then you wouldn't know about that.
What other costs would it involve? For example, you're changing the drawers in the cash register. There are costs in handling coins. Are there other costs, for example, in terms of personnel, or -
Mr. Moncion: Well, I would venture to say that the overall front-end operation will become less productive. I haven't done a study myself, but I've worked on cash registers before. When it's busy in my store I go on cash. Certainly dealing with change and handing out bills is more convenient and easier than handing out coin; there's no doubt about that.
As well, it's more convenient for balancing at the end of the day. Right now we have bill counters; we don't have coin counters. It's very cumbersome.
I don't know if any of you have that jar of change at home. You dump it out every couple of months to count it and put it in your kid's bank account. That's in essence what we do at the end of the day every single day at the store. Every girl that comes off cash gets balanced. Everything gets counted.
Mr. Marchand: But counting coins would be easier than counting dollar bills, because all you have to do is weigh it.
Mr. Moncion: No, because we have a machine.
Mr. Marchand: You just weigh it and it says exactly how many coins there are in there.
Mr. Moncion: Those machines aren't as accurate as they pretend to be, and most stores right now do not have coin counters. The coins have to be sorted. I realize they're sorted now, but with some of these machines, you just dump them in, they spit out and add up the coin, but those machines are $10,000 apiece.
Mr. Marchand: That would be added cost.
Mr. Moncion: I don't need a coin counter right now. It means more costs.
Mr. Marchand: Right. What you're saying is that basically counting coins right now involves more time, involves labour. Somebody has to do it.
Mr. Moncion: There is no doubt about it.
Mr. Marchand: You have to pay this person to do it.
Mr. Moncion: Absolutely.
The Chairman: Just before we go to Mr. Epp, let me try to get something straight, if I can.
You're not opposed, at least in principle, to the introduction of the $2 coin. You also seem to indicate that you're prepared to incur the costs that are involved, but you're saying that as an industry, as a business, you would be in a better position to absorb the costs by 1997, as opposed to 1996.
What is so magical about those 12 months? I'm not using ``magical'' in a pejorative sense. What is so significant about that timeframe of 12 months? Why is it going to be so much easier for you to make the conversion if you have an additional 12 months?
Mr. Moncion: Well, first of all, to get a tray like this that will accommodate another coin...you can't buy them.
The Chairman: You can't buy them?
Mr. Moncion: You can't buy them.
The Chairman: So you're saying it's not a matter of cost; it's a matter of availability.
Mr. Moncion: It's a matter of availability. When I discussed this brief with the person at CFIG who actually prepared it, we had fundamental differences. She doesn't run a supermarket.
I told her I didn't really oppose it as opposed to saying it was okay. She basically told me it was a non-issue, it was in the works, impossible to change, a budgetary item, and at best, we could hope to get the timeframe changed.
As I said here, personally, as an operator of a business in Canada, I am 100% opposed to it. I would prefer to see the $2 bill completely eliminated, as they have done in the U.S., and stick to the loonie before I would even like to have a $2 coin. Ultimately I would prefer it to be the same, to have the $2 just simply remain. If I had a choice, I'd rather see the $2 bill completely eliminated.
The Chairman: Beyond availability, what other -
Mr. Moncion: There are costs right now we're incurring because of the transformation of our refrigerants. If you walk into the supermarket, which I'm sure you all have done, there are freezers and coolers. The gas that is currently in place has to be changed because it hurts the ozone layer. There's a significant cost that a lot of retailers right now are incurring to transform the refrigerants into the proper non -
The Chairman: So you're trying to spread out the capital costs?
Mr. Moncion: Yes, exactly. That was one of her points, not to have it all within the same year.
The Chairman: Thank you.
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Mr. Epp (Elk Island): I'm sorry, but I came in furing the middle of this. Once again, I can't be at two places at once.
I'm curious about a couple of things. Is the proposed change of the metal content of the coins of any concern to you at all?
Mr. Moncion: No, it isn't.
Mr. Epp: I didn't think so.
The other question I have is, do you have any idea of how many $2 bills you process?
Mr. Moncion: Yes.
Mr. Epp: Is it the largest denomination you have?
Mr. Moncion: We don't take in $2 bills. We usually take in $20s, $50s and $100s, and we use the $2 bills for change. The largest denomination we deal with is $20s, but those are coming in. One of the largest...in the assortment of change would be the loonie. The $2 bill would be about equal to that. We get about $1,000 a day in $2 bills.
Mr. Epp: If you had no $2 denomination at all, in other words, if the $2 bill were to disappear, but it were not replaced with a $2 coin, what would be the implications for your industry?
Mr. Moncion: We'd certainly have to handle more loonies - there's no doubt about that - but I still think we wouldn't have to go to a coin counter. I still don't think we'd have to change and retrofit our trays.
In that case it would reduce the expenditure on the government side of going to a $2 coin.
It's a viable option. It would require some additional study, but as a business person I would be prepared to accept the fact that the $2 bill would simply be eliminated if it causes that much expense.
Mr. Epp: I don't know whether you're prepared to answer this, then. Compared with a $2 bill being retained or lost, which would you prefer?
Mr. Moncion: I would prefer to keep the $2 bill.
Mr. Epp: You would prefer to keep it?
Mr. Moncion: Absolutely.
Mr. Epp: What would be your reason for that?
Mr. Moncion: Well, we have it in place now, and again, I would prefer to hand out one $2 bill rather than two loonies.
Mr. Epp: I'd point out to you that we don't have a 2¢ coin. In the pennies we go 1, 2, 3, 4, and then we have a 5¢ denomination.
Mr. Moncion: Right.
Mr. Epp: Would that not work just as easily in the dollars where you get one, two, three, four loonies -
Mr. Moncion: As I said, I would be prepared to accept that option. I think the industry as a whole would be prepared to accept that option.
Mr. Epp: Unfortunately, I wasn't here for your opening statement; I presume you made one. Did you talk about, and if not, will you answer a question about, the extension of the time line? I'm not clear on why you need an extension on the time line if there is to be a change.
Mr. Moncion: As I explained, these trays here do not currently accommodate a $2 coin. That means the coins would have to go in this square box; that's for bills. At this time we cannot buy trays that will accommodate additional coin. How long that will take to develop, I have absolutely no idea. Most of these trays are built out of the U.S.
As an owner of a business I would not be comfortable having a $2 coin come into my store, have a $2 bill eliminated and have to work with these trays. I'm sure it can be done, but it would be cumbersome and would cause some problems and heartache.
If it's going to proceed, it would be nice to allow businesses to prepare adequately to accept the use of the $2 coin.
Mr. Epp: The last question I have has to do with possible future changes. It's been about seven or eight years since the loonie was introduced, and it's possible there will be more changes coming again.
In view of the fact that the currency changes, is your industry going to the smart card idea, the debit card? To what extent is that going to take over? Do you perhaps see that coinage will disappear entirely in the near future?
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Mr. Moncion: No, I don't think you'll ever eliminate money.
Referring to the debit card and all businesses of a substantial size, I know our two supermarkets in Pembroke changed to the debit system as soon as it was available. That is costing me $100 a month for the phone line; $32.00 a month per machine, and as I have 10 cash registers, that's $320 a month for the rental of the machines; and 10¢ per transaction. To handle the debit system, right now we're incurring a cost of about $1,000 a month.
The reason we did it so quickly was to reduce NSF cheques, to reduce fraud, and to eliminate the handling and the use of cash, because there is a use. When analyzing the whole thing, we figured $1,000 a month is worth it.
As a whole, yes, our industry has moved incredibly quickly to use the debit card. To a certain degree it is taking off. I would say that about 10% to 15% of the purchases presently made are with a debit card; far short of what would be fantastic. I would prefer to see about 75%.
People still live from pay cheque to pay cheque. They still come into the grocery store the night before their cheque gets put in to cash a cheque so that they can buy the groceries one day in advance and get that additional day. What can I tell you?
Mr. Epp: One last question. On a scale from 0 to 10, how important is it for you that we maintain the status quo and not change from a $2 bill to a $2 coin?
Mr. Moncion: I would say 7.
The Chairman: I have one question before I go to Mr. Duhamel. I hope this is not a dumb question, but I'm sure you people are rich in imagination.
Until you're in a position to buy a new tray, would it be possible to take one of the sections of the tray, partition it, and use one of the sections for two separate coins?
Mr. Moncion: I don't know. That thought has crossed my mind. When I look at the tray, I think it would be quite narrow if you had to split one of these boxes. First of all, we'd have to get somebody who is going to make the partition. It would have to be something that's professionally moulded, and I think the compartment would then become too small.
The Chairman: You think so.
Mr. Moncion: I think before I would venture to go with that option, I would use one of the bill slots.
The Chairman: Okay.
Mr. Duhamel (St. Boniface): Thank you for your presentation. Just before we get started into the specifics, with respect to the refrigerants you need to accommodate to, do you have a feel for the costs? How much are we talking about? I'm just interested.
Mr. Moncion: We're talking about between $2,000 and $10,000. It depends. If you're a large chain store, they walk in and boom, everything gets done. Their cost would be around $10,000 to covert.
Mr. Duhamel: How do you feel about this change? Is it annoying, or necessary, or what?
Mr. Moncion: Sure, the CFC change is necessary, if we want the long-term benefit for our children. We don't have our heads in the ground.
Mr. Duhamel: Just a minute, I wasn't suggesting that for one moment. I was asking you from a business perspective how you felt about that.
Mr. Moncion: I don't like spending money unnecessarily.
Mr. Duhamel: How do those costs compare with the possible changeovers if that coin comes in? That's the issue I wanted to get a sense of. I know there are additional costs, and if you're a business person, obviously you want to minimize them. I appreciate that, but I wanted to have a sense of how they compare. Is it possible?
Mr. Moncion: I would say that the $2 coin is by far more expensive than the conversion of the CFCs, and I'll give you the reason why. The conversion of the CFCs is a one-shot deal. Once your mechanics come into the store, replace the refrigerant, change the oil in the compressors, it's done. It's business as usual.
I feel the introduction of the $2 coin will have long-term negative impacts on business. They will have to deal with the cost of handling this coin forever.
Mr. Duhamel: Okay.
The Chairman: I think I'm correct in what I'm about to say, and someone will correct me if I'm wrong. Virtually everyone so far has been supportive of the introduction of the $2 coin. They've had some concerns about the implementation date, because of perhaps not having sufficient lead time to accommodate. I take it that's because it's an entirely different kind of business. They see some potential profits in it and you see some potential costs with the introduction.
Have I got that straight?
Mr. Moncion: That's correct, but I also believe there's a fundamental shift in the thinking of Canadians today. They're supportive of reducing the deficit and reducing costs, and it's difficult for anybody in business to stand here and oppose something that is a cost-reduction measure of the Government of Canada. I don't feel comfortable doing it.
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I also want to point out to this gentleman who asked me if there would be any other costs involved that most supermarkets like my own have one or two vending machines. I understand you've had other submissions. I believe the cost of changing those will be between $1,200 and $1,500 apiece that the store is going to have to obviously bear.
We have a machine that dispenses President's Choice soft drinks. We own that machine, so we will be bearing the costs of that one. We have another machine that dispenses Pepsi. I don't know if they'll be handling that, or whether we'll be paying for it as well.
Mr. Duhamel: Do you have a sense, a ballpark figure, for the estimated cost of the changeover for the whole of the industry that you represent?
Mr. Moncion: It'll be far beyond the savings. I read in the newspaper today that the savings are $250 million over 20 years. Is that correct?
When I first understood this, I was led to believe it was $250 million per year. I was shocked when I read that.
The Chairman: Let's get it straight: there are two tsavings. There's the saving of the introduction of the coin, which is $254 million over 20 years, but then there's the matter of seigniorage. That's going to come to $0.5 billion perhaps as quickly as 18 months. So there are two sources of revenue here.
Mr. Moncion: I certainly don't have the resources, and I don't believe CFIG has the resources either, to do a fundamental study and hire consultants to really know the impact of the cost of this thing over a long term.
I don't know how many retail businesses there are in Canada that are even my size, but my judgment, from what I can see at my store, is that this is going to have a continuous cost to my store of a minimum of between $10,000 and $15,000 a year.
Mr. Duhamel: How does that compare, sir, with the moneys you've spent with respect to changing your systems to the electronic use of money? I don't know what the proper term is; it's the debit card and things you were discussing a short while ago.
Mr. Moncion: The cost of that is about $12,000 per year, but as I indicated with that, there are cost savings to the store. We eliminate the handling of cash, so therefore our staff is more productive; and we reduce the NSFs, non-sufficient funds, so we've reduced the time it takes for people to call on that. It happens every day that someone goes to use their debit card and it's rejected, so these would theoretically be NSF cheques we'd be chasing down.
You can't really compare the two. The debit card system is helping our businesses become more cost-effective.
Mr. Duhamel: No, but I think it's fair, providing you do it correctly.
If I understood you correctly, what you're really saying is that the expenditure for changeover is, in ballpark figures, roughly the same, but in one particular case there's a saving to you, as you can recoup some money. That's the point I wanted to make.
Mr. Moncion: That's right.
Mr. Duhamel: Okay.
[Translation]
Mr. Marchand: I would like to come back to the savings involved because it's always a delicate question. With this bill they say that the government is going to save money. As you mentioned, nobody objects to saving money. In this case, we're talking about saving $254 million but over 20 years. It is quite certain that if the government eliminated the $2 banknote, we would be saving money.
However, to come back to what you said earlier, in introducing the $2 coin, we will be adding a huge cost across the system. In your industry, you talked about a cost of several million dollars. It is estimated that the cost of converting the vending machines would be $160 million and we do not know yet the costs that will be incurred by the banks. This represents a huge cost that would ultimately be transferred to the consumer, who will be penalized. There will be no savings for the consumer, the taxpayer.
Do you see any savings in all this?
Mr. Moncion: No, I can't.
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Mr. Marchand: In fact, there won't be any. The federal government claims that they will save money, but that won't be the case. Theoretically, there will be a $254 million savings over 20 years for the Royal Canadian Mint.
But, ultimately, this will affect all the industries, the banks and even the municipalities which will have to change their parking meters to accept the new coins. Extraordinary costs will be involved in the change over of vending machines. In the long term, as you have said, it is the consumer who will have to pay even more than he does now. So there won't be any savings.
We shouldn't be shy about saying that we are opposed to this bill and suggest to the government that, if it's so concerned about saving money, it could just do away with the $2 bill.
[English]
The Chairman: Who's the witness, you or him?
Mr. Marchand: He's in agreement with me.
[Translation]
If we eliminate -
[English]
The Chairman: Out of courtesy to the witness, Mr. Marchand -
The man takes time to provide us with information and he's getting a monologue from you.
Mr. Marchand: Yes, but you're taking my time now.
The Chairman: Go ahead.
[Translation]
Mr. Marchand: It is true that there won't be saving and that the cost will be passed on to the consumer. Some people are supporting you, but they are not necessarily on the government side when you say that it would be more cost-effective to do away with the $2 in the long run, even if it's not what you would like right now. If we were concerned about the consequences for your industry, and therefore for the consumers, we would wait at least one year to allow you to adjust the trays and train the staff. At least, you would have the time to adjust to a change that you don't really want.
I must say that I don't understand, and this is my problem, what would be the positive aspects of this bill. I don't see anything positive in it.
Mr. Moncion: I would also like to remind you that when the costs are high, our profits go down and we pay taxes on our profits. So if the profits decrease, we pay less taxes.
[English]
Mr. Bryden (Hamilton - Wentworth): I just want to thank the witness for a very excellent presentation. I think you argue your case very well.
I'd like to ask one question, though. You've been in the business for a long time. In order to get around the problem, why cannot you eliminate one point from the tray? For instance, you could purchase dimes and make change only with pennies, nickels, quarters, loonies and the $2 coin. What's to stop you doing that?
Mr. Moncion: I guess nothing is stopping me, but again, I don't see it as a viable option. If the option for me is to stop using nickels, then why don't we eliminate nickels Canada-wide, if that's a viable option?
Mr. Bryden: Maybe that's actually where we're going, because the purchasing power of our small denomination coinage is decreasing continuously.
I point out to you that one could easily make change only in nickels. You have four nickels to two dimes. I just don't understand. If it's such a problem, why can't one do that? I can't see the expense; I can't see why the personnel wouldn't be able to handle it. I'm really having difficulty here seeing why something as simple as that can't be done.
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Mr. Moncion: The monetary system now in place has been put there because it works. It works; there are pennies, nickels, dimes, quarters and loonies. But if you eliminate the dimes, you're handing out two nickels. Well, that's double the handling, in essence.
Mr. Bryden: I also point out that my Bloc colleague was talking about the Americans not liking to go to coinage, but I have to make the observation that France has been using this kind of high-denomination coinage for years, as have Britain and many other European countries.
Again, I can't understand; if they can do it in France, why can't we accommodate such a thing here? Have you actually made a comparison with European countries?
Mr. Moncion: No, I haven't.
Mr. Bryden: Okay.
Mr. Moncion: The system we have in place right now works. It really does.
Mr. Bryden: I don't doubt that.
Mr. Moncion: I guess what we're looking at is this: what are the benefits of the change that is actually occurring? Over in Europe you're talking about hundreds and hundreds of years of culture and history with their money. I really don't know the logic behind their having so many coins.
But there is no doubt in my mind that in my business, the introduction of an additional coin will cost me money. That is unequivocal.
Mr. Bryden: All right. Thank you very much.
The Chairman: We'll try to wrap it up with Mr. Epp.
Mr. Epp: What would be the implications if we scrapped and took the pennies out of circulation? That would make a spot available in your tray. It would take away one type of coin. We'd not have to have prices to the nearest nickel, to the nearest 5¢.
Mr. Moncion: I would say that eliminating any of these coins will cause us tremendous heartache. We will undoubtedly be giving out more in change than what is owed. If the consumer is owed 3¢, we will be giving them a nickel; that will be a cost to the consumer.
I cannot envision a senior citizen or any hard-earning person - and there is a variety of people out there - coming up to the till, expecting 98¢ in change and receiving 95¢, and that this would be acceptable.
I have 10,000 transactions in my store per week. That means that till is opening 10,000 times. People are frequent shoppers. So if I lose 3¢ on every transaction, it's going to amount to a lot of money at the end of the week.
Mr. Epp: Okay, but what saying is that you'd change your prices. Every one of the prices in your store would be to the nearest 5¢. You would only accept to the nearest 5¢ in denominations.
I mean, it would require an act of the government to take the penny out of circulation. There would be an announcement: after such-and-such a date, the penny is no longer legal tender.
Mr. Moncion: I would then say to you, sir, as well, that we have over 10,000 items in our stores. That would require that we change prices on over 10,000 items.
As well, a lot of the items we sell are weighed. We have no control over what the price is going to be until the consumer buys it. We sell meat in our stores. It's sold by weight. Do we round it up or do we round it down?
You wouldn't believe how finicky the inspectors are who come into our stores and weigh our trays to make sure the tare is accurate. Those amount to cents, pennies.
We wrap chicken in our stores; there's moisture. They'll come into our stores, unwrap it and weigh the chicken after the moisture - the moisture is in the tray - penalize us and accuse us of trying to take advantage of consumers.
The Chairman: Fortunately, this bill doesn't create that problem.
Mr. Moncion: Thank heavens for that.
Mr. Epp: I have another question. I know that many stores now have change-makers. As far as the coinage is concerned, it comes down a little chute and the customer can just take it.
Do any of your members have that machine? How much would that cost?
Mr. Moncion: Those items were introduced. The problem with those things is that they weren't 100% accurate. I believe they caused more heartache than efficiency.
.1150
We hold our cashiers accountable for balancing. There were shortages. I've never been comfortable with a machine dispensing change: she's short $5, $10 at the end of the week; I have to approach her and discuss that; she's going to say she's not handing out the change and doesn't know if the machine is doing it right; maybe there's a problem with the machine. It's an innovation that I don't think took the industry by storm. To be quite honest with you, I haven't seen it in very many stores.
Mr. Epp: Okay.
Those are my questions, Mr. Chairman.
The Chairman: Thank you for coming, Mr. Moncion. It was very good of you.
Mr. Moncion: You're welcome.
The Chairman: We're now going to call forward Mr. Bruce Anderson. Mr. Anderson is an individual from the Ottawa area. He has written about coins and currency. He knows a lot about the subject. He's here to talk about the introduction of the $2 coin.
He could actually talk about all kinds of other things, but since he's going to be here for only a half hour, we'd better stick with the $2 coin. After all, that's what this bill is all about.
I indicated to Mr. Anderson that if could hold his opening remarks to, say, 5 minutes, that will give us 25 minutes of questioning.
Colleagues, since Mr. Anderson will be here only 30 minutes, maybe we could keep our opening rounds to 5, as opposed to 8 minutes. That way we can give at least -
Mr. Marchand: Why?
The Chairman: If you go eight, then you're going to have one round, and that's it.
Mr. Marchand: Why limit it to 30 minutes? Maybe we'll have a lot of interesting questions to ask him.
The Chairman: Well, why don't we start with Mr. Anderson.
Mr. Bruce Anderson (Individual Presentation): Thank you, Mr. Chairman and members of the committee, for inviting me here to make this submission.
I wrote ``Coin Cost Reduction: Six Proposals for Change'' as an entry to a Fraser Institute competition. Perhaps because that paper stimulated interest among senior ministers of the previous government and now of this government, and of officials at Finance, the Bank of Canada and the Mint, in the possibilities, these hearings are convened. Certainly that paper explains my interest and certifies the following views I would share with you.
A $2 coin/note switch should be made because my estimate is that it will quickly sweep $750 million of seigniorage into federal coffers in the first 5 years.
No one should favour such a switch for the $254 million of alleged savings that is to come over the next 20 years. With this coin, as with the loonie, there are unlikely to be any savings at all for the government's costs of production.
Of course, 20 years of note production will be avoided. I put it at 4 billion pieces at about a nickel apiece, or $200 million. I'm sure you've been told a figure of something like 6¢, but that's an all-in cost. It's more than variable cost; it includes allocated costs that will have to be shifted to other banknotes.
Coin production over 20 years is also going to cost about $200 million. About half of that has to be paid right up front. And 300 million coins or 400 million coins will not replace 250 million notes for 20 years. It's going to take about a 2:1 ratio or 450-million $2 coins just to get properly started. That was the experience with the loonie and it's been the experience in other countries.
Coins don't last in circulation for 20 years. In fact, I'm not sure in what sense they last for 20 years. It seems to me that coins last for hundreds of years. But in circulation - that is, before they disappear, some of them admittedly lost, most into pots - they last about 7 years. So figure on 30 million or 35 million more for a year forever. You have to figure those costs for another 550 million to get to year 20.
I also say the mint cost estimates are suspect. They said they figure the coin will cost about 16¢. Well, they said the dollar coin would cost 10.6¢; that's what they told the comparable committee 10 years ago. And metal prices fell in the year and a half that passed between the time they made those estimates and the time they actually began to produce the coin. Yet the first coins cost 13¢. They were 50% high, in reality. So 16¢ can turn into 24¢.
.1155
Let's just assume it becomes 20¢. A billion coins at 20¢ for 20 years is $200 million. All the note savings will be spent on the expensive coin design proposed.
Of course you can have real coin savings; you can have inexpensive coins. In my pocket I have - and perhaps some of you are familiar with - the British pound or the Susan B. Anthony dollar coin. These are coins that cost a nickel or 6¢ to produce and are worth $1.40 and $2.25 respectively. If you make a coin at that price, then there are real savings in the long run. I think we ought to do that.
The real reason for the $2 coin is the $750 million net seigniorage it will raise within five years. Five hundred million coins at $2 each yield $1 billion in revenues, less a hundred million $2 notes refunded for $200 million of cost, less five hundred million $2 coins produced at 20¢ for another $100 million in cost, plus a billion notes saved at a nickel a pop for $50 million back. That's $750 million.
Deficit reduction is important. That's why I wrote the paper. Though seigniorage is a quasi-tax, it does yield important new revenues by taking small and painless amounts from all of our pockets.
Thank you.
[Translation]
Mr. Marchand: Mr. Anderson, you are here as a private citizen. The government is in a hurry, but you, Mr. Anderson, are here as an individual. Do you represent an association? No?
Mr. Duhamel: Talk about your great affection for people on the other side.
[English]
The Chairman: I've restarted the stopwatch, Mr. Marchand. I wouldn't want to gyp you of one second.
Mr. Marchand: You'd love to, though.
Some hon. members: Oh, oh.
[Translation]
Mr. Marchand: So, you are here are a private citizen and you don't represent any association. Why do you want to give your position on this bill?
[English]
Mr. Anderson: As an accident of the profession I've been practising for the last ten years, I came across a lot of information on the new dollar coin. It became quickly apparent to me that it couldn't all be true, so I began to inquire into it. I read the committee hearings. I had the assistance of the clerk's office at the time to find the complete records.
Initially I was concerned just about the dollar coin, but then I realized that in fact mistakes in our coinage had been going on for a long time. I just became a casual expert and the Fraser Institute offered me an opportunity to publish what I had come to understand.
.1200
[Translation]
Mr. Marchand: So you're only motivated by personnal interest. What are your conclusions? Could you give us a summary. In fact, there has been a lot of waste and you are opposed to the introduction of the new $2 coin.
[English]
Mr. Anderson: For 50 years it has been known that extremely inexpensive base metal coinage would be accepted as currency. The history of coins is 3,000 years old, and for a long time it was true that they had to have a sizeable fraction of their face value in precious metal content.
Canada has persisted in that tradition longer than other countries. Only in 1967 did we get rid of silver. Even then we adopted relatively expensive nickel rather than the cheaper copper and zinc that other countries use. In general I'm simply recommending that we ought to make our coins cheaper.
[Translation]
Mr. Marchand: But this is part of the Minister' objectives and also the Royal Canadian Mint. On top of this bill which is to replace the $2 note by a coin, we want also to change the metallic content to make it lighter and less expensive. Right now, as strange as it may seem, the penny costs 0,016$ to the government, which is almost twice its value. You know that this is part of -
[English]
Mr. Anderson: Absolutely. These are part of the recommendations included in my Fraser Institute paper. I totally approve of the switch to cheaper metals for nickels, dimes and quarters. I don't see why we're not doing it for the loonie. And why are we starting out with another expensive design for the $2 coin?
But certainly I approve of some of the changes entirely.
[Translation]
Mr. Marchand: Okay, Mr. Anderson, but as far as the $2 is concerned, what is your motivation? I am right to say that you are opposed to the introduction of the $2 coin?
[English]
Mr. Anderson: No, no, I proposed the introduction of a $2 coin for the object of raising a large sum of seigniorage revenue. If done cheaply enough - and I offered some specific suggestions on how that might be done - it would result in real savings, a small real saving over long periods of time. Instead, with this design we'll be committed to a long series, 50 years probably....
We can't get the coin vendors to change their machines -
Mr. Marchand: Every week.
Mr. Anderson: Well, even every decade. It's only been a decade, and this time they're not happy about it.
They ought to be happy about it, by the way; the loonie saved their bacon. You should see the growth in the coin-vending industry statistics since the loonie was introduced. I have no doubt the $2 coin will also allow them to make great further gains. Of course, it's always nice to come hat in hand for $50 million.
[Translation]
Mr. Marchand: So, if I understand you correctly, you are not opposed to the $2 coin, but you're suggesting -
[English]
Mr. Anderson: Oh, I think we should have the $2 coin for the right reason. The right reason is that we're going to get $750 million in seigniorage, we're deeply in debt in this country and we need the money.
It's a kind of tax that will fall on everyone. In fact, it's a very interesting kind of tax, if you think about it. The people who really pay the tax are people who cast $2 coins into pots.
You can always avoid the tax, the quasi-tax, that is seigniorage, by not possessing any $2 coins. Then you haven't paid any of your $2s to the government.
The truth is that across the population we'll get $750 million quickly and we'll get more every year forever after. In my view, that's a useful contribution to government finances.
[Translation]
Mr. Marchand: So, you are saying that the introduction of the new coin will in fact increase consumption which is going to generate several billion dollars in taxes for the government. Is that correct?
[English]
Mr. Anderson: Yes, of course. There will be extra spending; that's stimulative and good for the economy in one sense. But that's not the reason I favour it, and I don't think responsible officials should say there are large savings when there aren't. They should say it's good for raising $750 million.
.1205
Mr. Marchand: Merci.
The Chairman: Do you think $2 a throw into a pot is really not small change? I can see people throwing pennies, nickels and dimes. But do you really think people are that rich, if I can use that term, to stash away $2 coins?
Mr. Anderson: Let me pose it this way. They got back 150-million $1 notes. There are allegedly more than 300 million in circulation. But that only means that of all the ones we sent out, less all the ones that ever came back.... What's the sum? That's the 300-million figure. Only 150-million $1 notes ever came back.
They've been replaced by 750-million loonies. Where are they? Start counting cash registers. It's not hard to get numbers on stores and estimates on how many tills there are. Figure out what the bank inventories are and you can't come even close. They're in pots, just like the pennies, just like the dimes and just like coins of all types. It is the fate of all coins to end up sitting in pots for most of their lives.
The Chairman: Send out the posse; we could come back with a lot of money.
Mr. Epp: I'm interested in this seigniorage idea. Your understanding of seigniorage is that it's simply the difference between the amount of coinage that's issued versus the amount in circulation.
Mr. Anderson: No. Seigniorage is the profit that arises to the government on the issuance of coinage. If it cost the government 20¢ to issue the coin but they sell it for $2, they get $1.80. That $1.80 is called seigniorage.
Now, in the calculation of net seigniorage in this case, you also have to take into consideration that some $2 bills will have to be refunded. I think that figure can fairly be put at between 100- and 110-million pieces.
Mr. Epp: You said people could avoid this seigniorage by just not possessing the coin?
Mr. Anderson: Yes.
Mr. Epp: That really isn't true, because somebody has it. Once the government has issued it, it is somewhere.
Mr. Anderson: No, indeed, the government only issues it when someone agrees to purchase it. For example, the Royal Bank says, ``Give us $10-million worth'', and the Royal Bank turns over $10 million. Then it gets the $10 million from guys like this chap, the merchant. He then hands it out from his till and gets it back from the customers.
If there were no market demand for the coin, and there have some instances.... The Susan B. Anthony was a spectacular failure; 550 million of the original 1979 production are still sitting in the vault. There simply wasn't a market demand for the coin.
Mr. Epp: If we were to take your argument, then, what we ought to do is produce not only $2 coins but certainly $5, $10 and $20 coins, because the seigniorage on those would be much greater. I mean, the cost of production of a $20 coin would only be marginally greater than a $2 coin, but look at the seigniorage.
Mr. Anderson: I have the planning documents from the mint that show that is the plan. You'll note that the Bank of Canada doesn't put holograms on anything smaller than a $20. It's not going to happen tomorrow, but in 10 years we'll be back here for the same debate.
Mr. Epp: That's very interesting.
The Chairman: Let's hope we're still here in committee 10 years from now, right?
Mr. Epp: Well, I'm planning on it; I don't know about you, Mr. Chairman.
The Chairman: It's certainly in my plan, yes.
Mr. Epp: Then we'll both be here.
Mr. Duhamel: And you'll still be on the same side.
Some hon. members: Oh, oh!
Mr. Epp: Well, I guess we can always change it so that the government side is on this side of the table.
The Chairman: All right, let's get to the business at hand.
Mr. Epp: I'd like to ask you about your estimate of the cost of production. Why should we believe your estimate on what it costs to create a new coin versus the one that's been given to us by the Mint and the departmental officials?
Mr. Anderson: I think a reading of the record of the $1 coin hearings does create the scepticism that I reflect. Of course, I don't know what this coin will cost. I haven't seen this coin.
That's an interesting question: why haven't we seen this coin? There's another interesting question: why doesn't the mint publish the figures for the costs of the regular coins? The mint used to publish the total sum it was paid for all the coins. It no longer even publishes that.
But I do know as a fact -
The Chairman: We saw the coin the other day.
Does anyone in the room have a coin to show Mr. Anderson?
Mr. Anderson: I know you have seen it. I'd love to see it.
The Chairman: Well, Mr. Anderson, this lady here is going to show it to you right now - or later.
.1210
Mr. Epp: On prototype -
Mr. Anderson: But the only point I was making specifically was that mint officials advise 10.6¢. Metal prices fell such that 9¢ would have been appropriate; 13¢ was the real cost that was publicly reported.
Mr. Epp: Okay. Those are the total costs.
I'm also curious about your statement that coins don't last twenty years as claimed. I have many coins that I've checked, and it seems as though twenty years is a good average number. What I would like to know from you is whether you have any hard statistics - or is it just a gut feeling on the longevity of the coin?
Mr. Anderson: Actually, one of the very first things I did was to conduct a very extensive sampling of coinage. I was careful to gather it in small quantities from many communities across eastern Canada, and to the extent my travels permitted, to some extent in western Canada. I gathered coins of all types and found to my amazement that coins of all denominations consistently had an average of about seven years. I communicated this to some officials at the Bank of Canada, who then began their own casual study and later confirmed they had found the same thing.
Mr. Epp: In your study, have you done any work on the cashless society and the replacement of all coinage and paper denominations by smart cards and debit cards?
Mr. Anderson: I've done no serious work on it. I'm only broadly familiar with it.
Mr. Epp: I was just wondering whether you anticipate with your crystal ball that it's going to come about quickly in this country.
Mr. Anderson: I think the problem is who would be the holder of the float. I think if the Bank of Canada were aggressive and introduced a small-amount vehicle and was the holder of the float - that, of course, would put Canada as the beneficiary - I think it could be introduced. Whether the bank would have such aggressive plans to intervene in the way the world operates, I don't know. There will certainly be serious players like the major banks, Visa, MasterCard and American Express, all of whom would lust after the huge float that would be represented by a casual-purchase card.
They exist in special applications like the transit system of San Francisco. The National Research Council issues such a card for the purposes of its photocopy machines. But they're all single-purposes use. You have to have a universal card.
I'm not an expert.
Mr. Epp: Okay.
My last question has to do with your statement that you will have to have twice as many coins to replace the current bills in circulation.
Mr. Anderson: That's the standard ratio used by most analysts.
Mr. Epp: Why is that?
Mr. Anderson: Pots. It isn't really 2:1, you see, it's really 4:1, which is the amazing thing. When you only get 150-million $1 bills back, what it means is the 600 million initial loonies actually replaced them 4:1. You just can't account for it except by pots. People cast coins into pots.
Mr. Epp: Mr. Chairman, I yield the floor to other interesting questions.
Mr. Bryden: I'm just fascinated by the pots factor, because instinctively one feels you are on the right track there. Let me ask you this. It would appear that through seigniorage the government can gain quite a bit by this propensity to keep coins in pots - or to hoard coins, which is really what you're saying - which goes back to the beginning of coinage. Would the design and quality of the coin in question not be a factor in hoarding?
In other words, if the coin is made of crummy metal, which you are proposing as a cost-saving measure, people wouldn't want to hoard it. But if we produce a very fine coin, of which you'll see a sample here, will that not lead to hoarding and lead in turn to more seigniorage and more profit for the government?
Mr. Anderson: That's a very good question, and I think the trick is the word ``hoard''. People hoard things they find to be of value. So you're saying that as compared with an ugly 5¢ lump of metal like the British pound, worth $2.40 or whatever, a nice 24¢ Canadian $2 coin, an Ezekial's wheel of magic proportions -
Mr. Bryden: Something with the Canadian flag on it, perhaps.
Mr. Anderson: Excellent. Well, let's put them in pots.
But that's not why coins go into pots. I'm not saying that at the margin you're not right. You probably are. There would be some people who would hold on to them because they're pretty. No doubt there were some people who held on to those special Canadian quarters that were issued, one for every province and territory. But coins mostly go into pots because they're being left behind. You go home at the end of the day, you empty your pants pockets, maybe you pick up a couple of quarters for a phone call or whatever, and the rest go into the sock drawer.
.1215
Mr. Bryden: I point out to you - I'm sure you will agree - that the silver dollar, which was a very fine Canadian coin, was hoarded. They've gone completely out of circulation and people are holding them. So I would just repeat my point that perhaps the government is very right to invest fairly significantly in the design of the $2 coin from a financial point of view.
Mr. Anderson: I believe it's unfair to say the Canadian silver dollar ever circulated, period. It was purchased by grandmothers as gifts for grandchildren. In other words, it was purchased for the purpose of hoarding. You might make a better case with the 50¢ piece.
Mr. Bryden: I was going to say that, yes.
Mr. Anderson: It did in fact circulate and did gradually fall by the wayside.
Mr. Bryden: It didn't fall by the wayside, it was collected. I remember the 50¢ piece.
Mr. Anderson: It was collected out of existence.
Mr. Bryden: Everyone wanted that 50¢ piece because it was such a beautiful coin.
Mr. Anderson: If there was market demand, you just have to believe the banks would be passing them out, but I don't know. It's hard to get information on this subject. Believe me, I've tried.
Mr. Bryden: Thank you.
The Chairman: Mr. Duhamel, do you have a question?
Mr. Duhamel: If I may, it's very brief.
First of all, I'm told the cost of production for coins is indeed available. I'll check it out, because I think you made the point that you were interested in it. Wasn't the cost of production for Canadian coins a point you raised previously?
Mr. Anderson: Yes, the annual series is missing for the last three years.
Mr. Duhamel: The question I'm really most interested in is the question of seigniorage. Is there seigniorage in 1¢, 5¢, 10¢, 25¢, 50¢, $1, $5, $10 or $20 coins? Do you have a ballpark figure for how much there is to be made from all of those denominations?
Mr. Anderson: Speaking broadly, the Canadian penny has been in the negative seigniorage category for twenty years. It costs more to make than it's worth when sold for face value.
Again speaking broadly, the nickel has hovered around no seigniorage. What it costs to make and distribute it is roughly what it's worth, although I think there have been years when some small seigniorage was gained. Certainly dimes, quarters and 50¢ pieces....
Mr. Duhamel: Do we have a proportional increase, such as twice as much from dimes as from 5¢ pieces?
Mr. Anderson: It depends on the cost of the coin. I must say the numbers no longer pop to mind. I think dimes cost 4¢ or 5¢ to make; quarters, as I recall, are in the order of 8¢ or 9¢ to make. We're speaking here now of the nickel pieces. So it depends.
Mr. Duhamel: So there are potentially huge amounts to be made in larger denomination coins.
Mr. Anderson: If you can get people to buy them, absolutely.
Mr. Duhamel: Thank you. I was just very interested in that.
[Translation]
Mr. Marchand: Mr. Anderson, I've been learning number of things about coins. It's a bit like stamps. I gather that the point you are making, and which I had a bit of trouble understanding, is that the government is making a profit from the prodution of coins that may cost a quarter or a tenth of the sale price. They're distributed on a very large scale and the government ends up making money in this way. That was a point you made at the beginning.
[English]
Mr. Anderson: I wish it were true that the government was making coins at 10¢ on the dollar. Unfortunately, we have chosen not to do so. I recommend that we do so.
[Translation]
Mr. Marchand: I see. I don't quite understand where you get your figure of one quarter or three quarters of a billion dollars of revenue generated for the government from the production of these coins. How do you come up with these figures?
[English]
Mr. Anderson: I guess you'll get a transcript of this, but I'll just repeat it for the record. There will be something in the order of 500-million $2 coins issued in the first five years. The government will get two dollars for each one, so that's $1 billion. It will have to pay 100-million times for $2 notes; in other words, 100 million notes will be refunded at two dollars each.
That means it will have to pay out to Canadians about $200 million. It will have to produce those 500-million $2 coins at a cost, I'd say, of 20¢. That's another $100 million.
.1220
So we have $1 billion in, we've spent $2 billion, and we've spent another $1 billion, so we're down to $700 million. But we won't be printing the $2 note, saving $50 million, so we're back up to $750 million.
That's the calculation I offer. Obviously the numbers may vary slightly. If the mint is able to do it for 16¢, it will only cost $80 million or whatever the number is.
[Translation]
Mr. Marchand: Would you say this a hidden tax on the public, on consumers? In general, consumers are not aware of that seigniorage. Would you say this is one way to tax people?
[English]
Mr. Anderson: I learned only as I entered the room that the idea of substantial seigniorage was already before the committee. Coming down here, I thought I might be bringing good news.
Mr. Marchand: I see.
Mr. Anderson: The media has not conveyed that this is what's happening. The media has conveyed that what is happening here is that a new coin is being introduced, setting the stage for a savings of $250 million over twenty years. That's false. One of my purposes in being here today is to make sure you understand it is false.
It's not that you can't have some savings, but you'll have to have a cheap coin and then you can have $100 million in savings. You can't have $250 million in savings. You'll have to make a whole lot of coins no matter what you do.
The Chairman: Would it be safe to say that the significance of seigniorage is not lost on Mr. Martin, who I think is probably salivating at the thought of that kind of money coming into the coffers?
Mr. Anderson: Absolutely. I believe that's why the committee is here today, but I haven't heard anybody who would know say so. I've had no acknowledgement of what is going on.
The Chairman: Mr. Martin certainly indicated in his February budget that this was what he was looking forward to.
Mr. Anderson: Did he say there that he was looking for big seignorage?
The Chairman: Oh, yes. This is a budgetary item. It's right in the February budget.
Mr. Anderson: Great. Well, I missed that too.
The Chairman: Thank you, Mr. Anderson. I appreciate your coming.
Mr. Anderson: My pleasure. Thank you for having me.
The Chairman: Mr. Moncion, although your time has passed, if you like....
Mr. Moncion: I'd just like to comment on this seigniorage, because I wasn't really aware of it. My accounting expertise would say the seigniorage is not really a profit or a revenue for the government. It would actually be a loan. There's revenue for the government only because the coins in circulation increase. Ultimately, it's still responsible for those coins, and as they are cashed the government has to pay two dollars for them. So my accounting sense is that the seignorage is actually a liability to the government and not a revenue.
I'm wondering if someone could comment on that.
Mr. Anderson: I actually have the answer to that.
No one has the right to give the coins back. You have the right to give back banknotes, and indeed you're exactly right. Banknote accounting deals with the seigniorage in a different way. It is a liability. We earn interest on the money while we have it in our hands. It still results in benefit to the government and to Canadians.
But with coins, it is the case that once they're sold there is no actual legal right to take them back in, therefore in an accounting sense it is in fact recognized properly as a profit or revenue at the time.
The Chairman: That's why the banking industry is hardly dancing in the streets over the introduction of the $2 coin.
Mr. Anderson: I don't see how they gain. They just have to pass them through. They can't duck it.
Some hon. members: Oh, oh.
Mr. Anderson: They owe you so much on all other accounts, don't let them give you any grief.
The Chairman: Mr. Anderson and Mr. Moncion, thank you.
.1225
Colleagues, I think it's time to get to clause-by-clause study of the bill.
Let the record show that Mr. Epp has just fallen off his chair.
Are you all right?
Mr. Epp: I would like to make a statement. That is, if we could trade $700 chairs for $20 ones, I would appreciate that.
The Chairman: Is this relevant to Bill C-82?
Mr. Epp: It's relevant to the government.
The Chairman: Let the record show that Mr. Epp looks peeved.
On clause 1
The Chairman: To trigger the discussion, I think I had better ask the formal question. Shall clause 1 carry?
Mr. Epp: I would like a copy of the bill, Mr. Chairman. And could we just have a few moments here for regrouping? I would appreciate that.
The Chairman: Let me say that given the fact that this bill only has one clause, I don't think it gives us much scope to do things as a committee. What is the scope? The scope is that you either support the bill as is or you reject it. I don't know what there is in the middle.
There's no doubt we've heard some concern. We've heard concern from the grocery industry; we've heard concern from the vending machine industry; and so on. As I hear it, the main pleading is to buy time. They want more time. They want a delay in the implementation of the introduction of the $2 coin.
I guess we have to ask ourselves about what advice we can give to the government. It seems incumbent upon the government to introduce a $2 coin with as little pain as possible, to work out an agreement that would be very suitable to all parties concerned, to all the stakeholders.
If we give support to the bill, I would hope the government will have heard the concerns of the witnesses and will be hearing from us that what we want is a very smooth transition. After all, we have to be concerned about small business. A lot of small businesses are involved in this, and one would hope that we could achieve this in the most amicable, businesslike way.
[Translation]
Mr. Marchand: I gather from your remarks that you have taken note of the witnesses' concerns and that you would be open to a delay of perhaps a year for the implementation of this Bill. This strikes me as being quite reasonable since all witnesses, with the possible exception of the Minister himself, had been opposed to it and do have apprehensions.
I think it would be perfectly reasonable to delay this measure. There's absolutely no reason justifying such haste on the part of the government to introduce the coin by the end of 1996. It would in no way detract from the Bill to delay its implementation for a year and this might enable us to win some points with the associations that will unfortunately have to grapple with this measure.
If that is in fact your opinion, then I am in full agreement with you. I think it would be perfectly reasonable for us to suggest that the government delay the implementation of the Bill for a year.
.1230
[English]
Mrs. Chamberlain (Guelph - Wellington): With due respect to the Bloc, Mr. Marchand was unfortunately not here on the days of the other hearings to hear the support. They also did indicate a preference for a time-lag.
I'm caught on the horns of a real dilemma here. I think we do have to be responsive to small business and to industry. There is no question. We have to think about those things when making decisions.
I also know we've made a promise to the Canadian people. One of those things in the budget is this very issue. It must be dealt with. We do have to weigh the facts of what the gains to the government will be as well as the realization of being able to hit our budget targets, which is important. I don't think anyone around the table would want the government not to do what they said they would do for the Canadian people. There's no question that in the election that was one of the things they wanted. They want this budget deficit reduced. This will be one of the moves to help us do that.
Mr. Chairman, I don't know the answer to this. Is there any sort of...and obviously we did talk about it the other day. Subsidies are not in the cards. We just cannot entertain subsidies. If we move on this is there a statement or anything we can pass on to indicate our concern over the issues we've heard, so that it is taken into account with the implementation of this coin?
I also want to say, because there was a lot of discussion on the look and the type and the weight and the metallic content, that the coins we saw really are quite beautiful. Whatever our logo ends up being remains to be seen, as Mr. Bryden knows. I really think they're quite beautiful.
I would look for us to at least be able to make a strong statement through this committee. We have heard the concerns of small business and of big business. These serious concerns about the implementation have to be relayed to the minister.
As far as being able to hold it back, I don't think we can. I think the reality is that there is a commitment made through this government to move on the coin and the seigniorage.
The Chairman: Before Mr. Bryden speaks, I want to say that in some ways I think a committee of this kind is put in a tough spot because we're not the government, we're a parliamentary committee. We hear testimony. We hear testimony to the effect that there's nothing really very wrong with the principle of the introduction of a $2 coin. The question is, all right, if there's really nothing wrong with it in principle, how is it introduced in an equitable, sensible way that does not bring harm to the major stakeholders?
Is that our business as a committee or is that the business of the government? After all, it's there to administer the affairs of the country. I hope if we were to make some kind of a statement the government would be hearing what we've heard and would take into account that this implementation of the coin should be as smooth and as equitable as possible.
Mr. Bryden: The more I sit on committees, Mr. Chairman, on all sides of the fence, the more I realize when I hear evidence that the evidence is really points of view, not hard evidence. It's not evidence that I can make absolute decisions on.
For instance, we've heard here that there are some negative impacts on the introduction of the $2 coin, but we've also heard that there are going to be some positive impacts. I'm talking about the business community, not the government's benefits.
What we can't measure accurately, Mr. Chairman, is just how negative, how positive and what the plus or minus is on the issue. That comes to bear on my Bloc colleague's suggestion of a one-year delay.
I don't see and I didn't hear any evidence that made me think one year is the magic length of time for the delay. Perhaps six months would work for those who are having difficulty. If it's six months, that would be January of next year.
.1235
I think the way we have to go on something like this, when we lack the expertise to actually decide what the net benefits or net deficits are, is that we simply have to say that the government should hear the concerns we've heard, and try to smooth the transition by whatever means.
If it involves a delay of two months or three months, I think that's up to the government to decide, based on the reaction of the industry as we go along. It's not something we can decide here.
The Chairman: I guess one of the questions is whether we should trust the government in showing some good judgment in the transition phase.
Mr. Epp: Mr. Chairman, in listening to the witnesses, and also in considering some of the written submissions we have received from people who did not come to the committee, but who wrote either to us as individual MPs or to the committee, using my own mathematics I've come to the conclusion that this is not a saving for the taxpayer. It has a cosmetic look of savings to the government. I will accept that. It looks as if the numbers the minister came up with here are those savings. There is that revenue of seigniorage.
But as I pointed out the other day, the saving for the taxpayer is less than what it's going to cost to pay for additional costs of retooling the machines. Besides that, the seigniorage, as nearly as I can figure out, is in fact a tax on the Canadian people.
In other words, it's not a saving, it's an additional tax. Even though it's very subtle and it's voluntary, it is taking money away from Canadian people in order to provide this revenue to the government.
I also recognize, with the record we've had so far of the Liberal government, that this bill will undoubtedly pass. The Minister of Finance has said it. I say this respectfully, but it will be jammed through. In other words, the government members will all vote in favour and it will pass.
In view of that, I believe I'm going to recommend to Parliament that we oppose this bill and that we not pass it, but recognizing that it probably will pass anyway, I would like to fix it up.
I have been very frustrated because of the fact that something as important as this now needs to be jammed through with so little time. You told us yesterday that today we would be doing the clause by clause. If we had nothing else to do then certainly we could have gone to work on amendments. With that timeframe, we were not able to get access to counsel. We could not get help in proposing our amendments because of the short time line. At the same time, I have pressures and so do all of the members of our party. Since we don't have as many of them here as you do, we have multiple duties.
Now I'm informed that these amendments are out of order, for whatever reason. I have these amendments that I do want to get on the record, and if they're said to be out of order, I'm going to be very upset. I may show you the bottoms of my feet again.
But I recognize that I have to live within the rules.
The Chairman: The first amendment, Mr. Epp.
Mr. Epp: The first amendment I would like to propose is that Bill C-82 be amended by adding the following after line 11 on page 1:
- Following the proclamation of this Bill, no further changes in the Canadian currency will be
introduced within 10 years of any previous changes.
The Chairman: I can understand that, but I've been advised by committee counsel that it's out of order because it's beyond the scope of the bill. It's not our business, at least within the context of this bill, to be dictating or advising in that way.
Mr. Epp: Please help me, Mr. Chairman, if you will. Is there any mechanism I can use to appeal that ruling?
The Chairman: Appeal the ruling?
Mr. Epp: Yes.
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The Chairman: I guess there is. I'll find out in a moment.
Mr. Marchand: I'll second you on that.
The Chairman: It's as simple as this. Based on expert advice, my ruling is that it's out of order.
Mr. Epp has challenged my ruling, so it's just a question of my asking the committee whether my ruling stands.
Some hon. members: Agreed.
Mr. Bryden: I would like to comment on that amendment, nevertheless. Is that out of order?
The Chairman: No, go ahead.
Mr. Bryden: I would like my colleague to know I won't be able to support that amendment. It's simply the same mistake that's happening in the United States where governments are being hamstrung by the passage of legislation that prevents them from raising taxes or making monetary changes. We're already seeing the consequences of that in Orange County, California.
I would not want to see this government or this Parliament ever get into the situation where governments of the future have their hands tied. We cannot tie down future Parliaments. We must let future Parliaments use their own good judgments. This type of thing prevents that from happening.
Mr. Epp: I accept that, in which case I'm sure Mr. Bryden would also accept the rescinding of the Charter of Rights and Freedoms, which is tying the hands of every legislator and every judge in this country in terms of acting justly with respect to the justice system.
I have another amendment, but I agree we should not tie the hands of future governments especially on things like pension plans and all that type of stuff.
My second amendment is that Bill C-82 be amended by adding the following after line 11 on page 1:
- This Act or any of its provisions comes into force January 1, 1997.
Mr. Duhamel: I misunderstand what's being said here.
The Chairman: It's a one-year delay in this act coming into force.
Mr. Duhamel: I want to make sure. Mr. Epp is saying he is willing to have the government lose over $100 million in revenue as a result of this particular motion.
Mr. Epp: I'm willing to postpone the voluntary tax of that amount to Canadian people by one year. In order to provide for the R and D required; the production of prototypes; the development of the coin identification machines; the time required to change the tills; all of these industrial needs that have been stated to us very emphatically. I believe it's a reasonable request. January 1, 1996, is like right now. It's six months down the road. It's not sufficient time. That's what my reason is.
Mr. Duhamel: Yes, but the prototype is ready and the coinage is basically ready to go. We need the act of Parliament before we can proceed.
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Unless I misunderstood the chair, before we started the general discussions it was his intent to tell the government, first, we've heard people say there's a problem here in proceeding too quickly, and second, it has some budgetary targets, but is there anything that can be done in conjunction with those particular parties to ensure as smooth and as least-costly a transition as possible? I think it goes a long way, rather than locking people into a year. We don't know what the ramifications of a year will be. Is it possible? Is it a good idea? How costly will it be?
I guess I'm indicating I'll be voting against it.
The Chairman: Mr. Epp, do you really think it's an either/or situation?
Mr. Epp: I'm very frustrated because I'm told I cannot make it conditional on the time when the mint has the prototype ready. Obviously, from the industrial point of view, after the prototype is ready they can begin the actual design and production of the coin identification machines for vending machines, postage metres, parking metres and all of those other things. That takes time. I think it's totally unrealistic to assume that doesn't happen.
I'm told I can't make it conditional on that. Then I say I'm going to put a precise date on it and hope the mint will produce the prototypes and have the production ready so the new coin can be introduced on January 1, 1997. By then the people will be ready to accept those coins, so it will be a wonderful event and the government will end up looking good, instead of looking crappy by introducing a new coin before anyone is ready to process it, with all the frustrations that will present. If you guys just want to jam it through and let the public be damned, well, then, do that.
The Chairman: Do you think it behooves the committee to impose what you might call a one-year sentence on the government in this particular case -
Mr. Epp: Yes.
The Chairman: - as opposed to telling the government we've heard about these possible problems and it's up to government to work these problems out in such a way that all the stakeholders are reasonably happy with whatever is the outcome?
Mr. Epp: With all due respect, I think the answer to that is that this bill, if it goes in without this amendment, is going to be put through, and when will it be declared? What's the date on it? I don't see that anywhere.
The Chairman: There is no date.
Mr. Epp: There is no date. But it says the target date is January 1, 1995. I read that.
[Translation]
Mr. Marchand: Is it possible to have a copy of the amendment? We are talking about the amendment but we don't have the text. Do you have the text?
[English]
Mr. Bryden: I have a comment for Mr. Epp, because from his remarks, I think he doesn't understand something about this bill.
This is not another tax on consumers. This is essentially the selling of a product and a service. It's an essential service and it is a product.
You heard the last witness indicate there's going to be seigniorage on this and a lot of money will be created. That's because it is a product that people want to buy. It's also an essential service. It's just like postage stamps. You can't do without postage stamps. The government is in the business of marketing that particular service and getting money from the consumer, but you can't do without it.
As I said before, we can't put a time line on the government, but we do know that the people of Canada are going to see the government earn a lot of money through this product and service, and I think it's very essential to do it as soon as we can if we're going to reduce the deficit.
We have said here in debate that we've raised the concern, but don't tie the government's hands and say it has to do it a year from now because it's going to lose a lot of money. Give it the option of bringing it in as fast as it can to gain money, but bear in mind we don't want to cause any amount of distress to those in the industry who may find it difficult. But in the long run, we've also heard testimony that the business community out there will profit from it.
So I can't accept your amendment for those reasons.
[Translation]
Mr. Marchand: I haven't had the opportunity to say anything about the motion because I didn't have the text of the amendment. The witnesses we've heard, the different associations, business people, Mrs. Chamberlain, whom I respect a great deal, and Mr. Bryden, have all recognized that there are major concerns related to the adoption of this bill.
.1250
There is ground for such concerns, they are concrete and they will affect many sectors, and mainly the consumer. It is disgraceful that they should be considered of no account. In my opinion, it has not been demonstrated that the government will be making savings.
If the government does save money, it will be at the expense of the consumer. At least these are the concerns that have been expressed and the business community would benefit from a delay.
As I understand it, the business community is asking for a delay where as an actual fact, they do not want this change. So by requesting a delay they are already making a significant concession and it would be reasonable to give them a delay in view of accommodation they will have to make. IGA and Provigo will all have to change the drawers of the cash registers, etc., in a very unrealistic timeframe. The consumer is the one who will end up paying.
[English]
The Chairman: Mr. Marchand -
[Translation]
Mr. Marchand: Please let me finish. It would be a great lack of sensitivity on the part of the Committee. Even though serious problems are brought to our attention, we do not take them into account, we do nothing about it and this would call into question our role as a Committee. What actually is the reason for us being here?
Personally, I feel as if I'm talking to a brick wall. That's the impression you give me. I know that you will be adopting the bill in its present form and at the same time claim that we were concerned about the problems raised by witnesses, etc. But in actual fact, you will do nothing. The Royal Mint has already called for tenders for October 1.
Everything is underway and no concern is shown for the many witnesses who came before our Committee. Who does the government claim to serve here? Is it only concerned about its own purposes or does it take into account the wishes of the people who elected it? We are looking after the interest of the federal government. As for you, what are you attempting to protect? The Royal Canadian Mint? That's what you are doing right now. You are protecting the interests of the Royal Canadian Mint rather than those of Canadian consumers.
[English]
The Chairman: Mr. Marchand -
[Translation]
Mr. Marchand: I'd like to finish...
[English]
The Chairman: - let me just point out, though, that the amendment that we're dealing with is suggesting a time line. It's not that we're not listening to the concerns. It's not that we're not going to be telling the government that it had better be listening to these concerns so that this thing will be done properly.
The question is, if we are to try to impose a time line, then are we not, as a committee, wandering into an administrative area? The government is going to have to carry out negotiations with all the stakeholders. Surely the government isn't going to proclaim this until things are in running order. I don't know whether that will be on January 1, 1996 or June 1, 1996. I raise the question: is not when you actually will go into this more of an administrative matter that is really beyond our purview?
[Translation]
Mr. Marchand: No. In my opinion...
[English]
The Chairman: I didn't think I would convince you, but I -
[Translation]
Mr. Marchand: It's quite reasonable. However we do have a job to do here as a Committee and that is to listen to witnesses and to advise the government. Witnesses have pointed out that there are significant problems and there are also problems relating to the time period set aside for the implementation of the bill.
Not only will it be costly for consumers but changes will have to made to the drawers of cash registers, parking meters and vending machines. This will amount to half a billion dollars for the first year.
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There is no reaction from the committee itself. We'll be making recommendations to the government but they will serve no purpose. We know perfectly well that the government doesn't care a fig about our suggestions.
[English]
The Chairman: Let's try to be fair, Mr. Marchand.
[Translation]
Mr. Marchand: Just a second. I do have the right to speak, whether you agree or not.
[English]
The Chairman: Oh, I know you have the right. I know. I know you have the right. We've been hearing you, but other people want to speak as well.
Mr. Bélair.
[Translation]
Mr. Marchand: Let me finish, Mr. Chairman. I'm entitled to express my opinion. I think my point of view is quite reasonable. I'm not engaging in battle here, I'm simply expressing my point of view.
[English]
The Chairman: Please finish.
[Translation]
Mr. Marchand: Whatever we may say or do will have no effect on the final result. The Bill will be passed in its present form without any change.
As I was saying, there may be some conciliatory words but they will not change anything. There will be no constructive reaction since the Royal Canadian Mint has already called for tenders for the production of the coin for the month of October. We are showing no concern for Canadians and for business people. We are washing our hands of them. It's disgraceful, we're acting like a bunch of hypocrits here.
[English]
The Chairman: Mr. Bélair and then Mrs. Chamberlain.
[Translation]
Mr. Bélair (Cochrane - Superior): Jean-Paul, at the risk of adding to your frustration, I don't think that your argument holds up.
Mr. Marchand: [Inaudible]
Mr. Bélair: You weren't here yesterday.
Mr. Marchand: Yesterday?
Mr. Bélair: No you weren't present yesterday. It was Mr. Brien.
The two witnesses at the meeting yesterday afternoon clearly indicated that the existing mechanisms for vending machines will not have to be modified if they don't want to adapt them to the $2 coin. They will not be forced to do so. Let me finish! They won't be forced to do so.
[English]
They are not forced to do it. They can say -
[Translation]
So it will be possible to stick to the status quo as far as the vending machines go.
But with the introduction of the $2 coin, the owners will have the opportunity to make further profits. You say the cost will be passed on to consumers. Yesterday they explained quite clearly that the cost of recalibrating the mechanism is a very small one. The labour will cost money.
Mr. Marchand: Eighty million dollars.
Mr. Bélair: The figure is debatable. It's far from the 400 million dollars that you referred to.
Mr. Marchand: But that's only the beginning. Tell that to the witness from IGA who said it would cost him between 100 and 150 $ for each cash register. There are half a million of them in Canada.
Mr. Bélair: The cash register drawer that he showed you can be easily adapted without making changes to the cash register itself.
Mr. Epp has often referred to business people. They're going to have to show some kind of ingeniosity.
Mr. Marchand: No sir!
Mr. Bélair: The point I'm trying to make is that...
Mr. Marchand: He's someone involved in the trade.
[English]
The Chairman: Mr. Marchand, please.
Are you finished, Mr. Bélair?
[Translation]
Mr. Bélair: No. The owners will not be forced to make the change either today or five years from now or ten years from now. If they want to do so, the cost will be tolerable. We're talking about change and progress.
.1300
[English]
The Chairman: Thank you.
Mrs. Chamberlain.
Mrs. Chamberlain: I'm really wondering, since our colleagues have had an opportunity to speak on this, if we can't call the question.
I simply have one statement to make after the extreme statement by my dear colleague from the Bloc on what this would do to the Canadian consumer. I do not want an answer to this, but I simply put that I have to sit here and wonder what Quebec separatism would do to the Canadian consumer.
Mr. Marchand: I would love to answer it.
Mrs. Chamberlain: I do not need an answer.
The Chairman: I think that's very extraneous.
I think we should call the question.
Mr. Epp: I'm getting the sense that this will be defeated now, because the majority members are expressing that. I would like to know - and perhaps our legal counsel can help us - how we can legally either require that this be put into the bill, that there be a time line that's adequate for businesses -
The Chairman: Your amendment is acceptable, Mr. Epp. We're going to vote on it right now. The time line of January 1, 1997 is acceptable. It's on the table right now. In fact, I'm going to call the question.
Mr. Epp: It will be defeated.
The Chairman: Well, that's always a risk in politics. But it is acceptable.
Mr. Epp: I want to know how we can do it so it won't be defeated.
The Chairman: That might take other things that I wouldn't even want to think about. I would probably lose a lot of sleep.
Amendment negatived [See Minutes of Proceedings]
The Chairman: Mr. Marchand, were you abstaining? Of course the vote was not recorded anyway.
Mr. Marchand: No.
The Chairman: Now we come to the main clause, which is clause 1.
Clause 1 agreed to on division
The Chairman: Shall the schedule carry?
Some hon. members: Agreed.
The Chairman: Shall the title of the bill carry?
Some hon. members: Agreed.
The Chairman: Shall the bill carry?
Mr. Epp: Could we have a recorded vote, please.
The Chairman: All right. The clerk shall read out the count.
Mr. Duhamel: May I get a clarification, Mr. Chairman? I was under the impression - and correct me if I'm wrong - that you would, as the chair of this committee, point out the concerns that have been voiced by various people and see whether or not the various major partners can get together to try to resolve some of those difficulties. Is that correct?
The Chairman: Yes, and I'm absolutely prepared to say that. I've heard the concerns. I think they are legitimate. I think the government should be apprised of this, and of the feelings of the committee. I think it really is incumbent upon the government to sort of pull this off in a way that is fair to all the stakeholders. If that means in the final analysis that the proclamation of the act has to be delayed, then so be it. At the very least, we have served as a forum here, and the government now has received clearly the message that there are problems that are going to have to be solved before proclamation and before the act is ultimately implemented. So, as your chairman, I'm certainly prepared to make that commitment.
Mr. Bryden: I hope, too, that you could express that there has been specific concern about the time line -
The Chairman: Yes, okay.
Mr. Bryden: - because that is the major theme here. That is the issue and it should be brought forward specifically.
Mr. Marchand: I'd like to add, again, that I think it's terribly hypocritical on your part to speak in those terms and say that you're going to do or speak to - whom, I don't know, the minister - -
[Translation]
Mr. Duhamel: That's an accusation, my colleague.
Mr. Marchand: You have had your turn to speak and I have the right to talk.
[English]
Mr. Duhamel: That's out of order. It's an accusation. He's pretending some sort of intent on my part.
I will not accept that from you or anybody else, Marchand. So, no!
[Translation]
Mr. Marchand: Enough is enough!
Mr. Duhamel: I said no!
.1305
Mr. Marchand: I have the right to take the floor.
Mr. Duhamel: Of course but not to make accusations.
Mr. Marchand: Well that's evident!
Mr. Duhamel: No accusation, Mr. Marchand!
[English]
The Chairman: Order.
[Translation]
Mr. Marchand: We have the right to express the concerns of people who appear before this Committee. It won't change anything, we know that too well, and and it won't change the date chosen nor the act. We don't give a damn about the people who appear before the Committee and about their concerns. When we say that we're going to try to come to an agreement with them to soften the impact of that bill, we know that there won't be any opening, so that this is really hypocrisy. Nothing else.
[English]
The Chairman: We were in the midst....
Mr. Duhamel, before you go, the clerk is going to take the count. Let's just get this count completed. I want the clerk to call out the names.
Bill C-82 agreed to: [See Minutes of Proceedings]
The Chairman: Shall I report the bill to the House?
An hon. member: You might as well.
Mr. Marchand: Do we have any choice?
Some hon. members: Agreed.
The Chairman: Thank you. This meeting is adjourned.