FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, October 16, 2001

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[English]

The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I call the meeting to order and welcome everyone here this morning in Toronto.

The order of the day, pursuant to Standing Order 83.1, is pre-budget consultations. The finance committee is travelling across the country seeking public input on issues of importance to Canadians as we begin to prepare a report to the House of Commons and to the Minister of Finance.

We of course have benefited a great deal over the years from the input of Canadians, providing us with their expertise on a number of issues.

Today it's our pleasure to have with us from the Hospital for Sick Children Foundation, Manuel Buchwald, chief of research at the Hospital for Sick Children; and Dianne Lister, president and chief executive officer. We also have representatives from the College of Dental Hygienists of Ontario, Kathy Walker, president; from the Multiple Sclerosis Society of Canada, Deanna Groetzinger; from the Ontario Hospital Association, David MacKinnon, president; and from the Group Health Centre, David Murray, president and chief executive officer of the Sault Ste. Marie and District Group Health Association.

These are the individuals for now, although we are waiting for BCE Emergis Inc., Ronald C. Loucks, executive vice-president.

Many of you have appeared before the committee apart from this meeting, and you probably know how this operates. You have five to seven minutes to give us essentially a synopsis of the brief that many of you have already filed with the committee back in August, and then we'll engage in a question and answer session.

We'll begin with the Hospital for Sick Children Foundation. Good morning, and welcome.

Dr. Manuel Buchwald (Chief of Research, Hospital for Sick Children and Hospital for Sick Children Foundation): Good morning. Thank you very much for having us speak to you.

The topic of our presentation, a combined presentation from the Hospital for Sick Children and the Hospital for Sick Children Foundation, is the urgent need for increased research funding. While I could say that research funding across the board is necessary for the future of Canada, I'm going to speak about health research, which is of more direct relevance to our institutions.

You may not be aware that the Hospital for Sick Children has a very large research establishment as part of its mandate. It's the largest hospital-based research institution in this country and the top research facility devoted to children in this country—we believe it's one of the top three in the world.

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Our peers are really not national but international, because knowledge, especially knowledge about health care of children, really transcends boundaries. There is no such thing as Canadian discoveries.

On the other hand, discoveries that are made anywhere in the world need to be brought into this country, and the only way you can do that is by having an expert workforce. At the Hospital for Sick Children we have more than 1,600 individuals who participate in research—from scientists, through trainees, to technicians, and covering all the varied professions, including physicians, nurses, physiotherapists, and so on.

There's a very broad-based health research agenda at the hospital. We have 700 trainees, many of whom will go on to careers not just in Toronto but across Canada. Many of them will enter the biotechnology sector and help in the development of the economic power of this country.

Last year we received slightly over $20 million in funding from the federal government through its various programs, in particular the Canadian Institutes of Health Research and the Canada Foundation for Innovation. On behalf of the researchers both at the hospital and throughout Toronto, Ontario, and the country, I'd like to thank the federal government for this kind of investment that has really changed the way in which our community views research in this country.

Our success rate in these types of peer review competitions is second to none in this country and reflects the kind of investment that has been made in the hospital. In one way, you could think of the Hospital for Sick Children as an example of how the government's research agenda is succeeding, because it's allowing us to pursue our work.

I would like to reiterate our thanks for the investment that has been made in the Canadian Institutes of Health Research. This has had tremendous impact and has allowed us to recruit many Canadian, American, and international scientists to Toronto. I can also say that we have not lost a single research scientist from the Hospital for Sick Children to institutions in the United States, and that is a reflection of the increased investment that has been made.

My colleague, Diane, is going to speak about another major decision that the government has taken, which is to allow the continuation of the federal special tax assistance for charitable donations. However, notwithstanding the fact that the federal government has increased its investment in research, Canada as a whole is falling further and further behind the rest of the advanced G-7 world.

For example, if we compare ourselves with the United States, which is really our benchmark—and the reason it's our benchmark is that it's very easy to move south of the border if you're in a profession they want—in 1990, on a per capita basis, Canada spent about $8.70 on health research through its MRC, Medical Research Council, and during that time the United States spent, through NIH, about $39.70. Ten years later the investment in NIH has gone to $86, so it has basically more than doubled, whereas the investment in Canada has gone from $8.70 to $9.50. So there has been an increase, but relative to what has been going in the United States, we're falling further behind.

That essentially puts enormous pressure on other ways of funding research, if we're going to remain competitive. I know this government has made the commitment that they will continue to increase federal funding for research, but we need to recognize two things. One is that the decision to increase federal funding for research needs to be continued, needs to be reiterated if we're going to maintain the cadre of expert scientists, physicians, nurses, and physiotherapists that we have in this country.

Secondly, the federal government, unlike the federal government in the United States, is not paying the full cost of research. The HayGroup did a study in Canada about the amount of money it costs to spend a dollar of federal health research. A dollar of health research costs institutions about 40¢. The reason for this is that the federal government pays the direct cost of research, and not the indirect cost—the heating and lighting, salaries of the researchers, computers, support staff, and so on. There are a lot of regulatory things. For example, if you do work with animals, you have to have certification; if you work with radioisotopes, you have.... All these kinds of things are not covered by the grants to the individuals. I think we've been fortunate in being able to cover that cost, but it's becoming increasingly impossible to do so as pressure on the hospital itself becomes bigger and bigger.

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Health research is not just a luxury that Canada needs to do because it feels like a nice thing to do. It brings enormous benefit. It improves the health of citizens, it creates a brain trust of expert individuals who can adapt discoveries anywhere in the world, and nowadays, as you know, it's also building the new economy.

I believe, as we have shown at Sick Kids, if the investment is made, we can compete internationally. Our peers are international scientists, all over the world. As a result of our work, children in Canada have access to the latest discoveries much sooner than would be the case if we didn't have this kind of research establishment. Furthermore, we train the next generation of expert clinicians and scientists. It's this combination of investment in training and in research that is the tremendous benefit to this country, and without it, we'll fall further and further behind.

I'll now turn to my colleague.

Ms. Dianne Lister (President and Chief Executive Officer, Hospital for Sick Children Foundation): Good morning. Thank you for entertaining the Hospital for Sick Children this morning.

For those of you who think I was here yesterday, yes, I was. I was really with the Association for Healthcare Philanthropy, which represents all the hospitals across the country.

I think it's important this morning to make a couple of key points. Sick Kids, because of its scope and its international leadership, the cost of its operation, the size of it, and the number of people trained at it, is without comparison in the country. The hospital is 127 years old. It has over 6,000 people working in it. It fits 1,600 researchers, 700 trainees from across the world.

We talk about Sick Kids in very simplistic terms as one of a kind, as a national treasure, and so on. One of the reasons Sick Kids has been able to exceed benchmarks in many areas across the world and be first, second, or third out of all pediatric health science centres in the world is due to the support the government has given it, but also because of the support of philanthropy.

The foundation was set up in 1972 and accepted $35 million from the hospital, which had been accumulated over the first 100 years, representing gifts from the community. The intent at that time was to prevent the provincial government from easy intermeddling with charitable gifts from the community, and to make sure that the provincial government had its feet held to the fire to support the clinical side of the house. There was never any constant source of funding for research at the hospital.

In the late 1980s, when government funding for the province became very tight, government scrutinized the provincial hospital budgets to make sure there was nothing being hidden in there or subsidized that really related to the non-clinical side of the house.

When I came to the Sick Kids foundation in 1990, we were given what was called a “research deficit grant” to the research institute of about $5 million a year. What that reflected was that actually some money was able to be garnered from the global budget provided by the provincial government to sustain the research enterprise, and the deficit was what the foundation was asked to fund.

It's completely different 10 years later. There is no money in the global budget from the province, which relates to the enterprise that Manuel leads, and all the infrastructure costs for that come from philanthropy.

One of the problems is that although we've been wildly successful in the last decade, the success of the foundation has masked the public policy issue. We have grown the foundation from giving a grant to the research institute of $6 million a year to almost $30 million a year. We have grown our fundraising revenue from $10 million a year to $46 million a year. That's not pledges; it's cash in the door. We have quadrupled the endowment fund from $100 million in 1992 to $400 million this year.

We have one of the best fundraising organizations in the country, and our foundation is now the third largest in Canada by asset base. The J.W. McConnell Family Foundation in Montreal, the Vancouver Foundation, and Sick Kids are the top three foundations in the country. We don't have the wealth in Canada of the Gates and Rockefeller foundations, and all the other private foundations. It's quite astounding that a public foundation affiliated with a hospital has the third largest asset base of any foundation in Canada.

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There are 110,000 donors a year who support this hospital. That's 2.5 times more than any other hospital in Canada. There is not a hospital in the United States that comes close to that. Boston Children's Hospital and Chicago Children's Hospital have about 40,000 donors a year. We benchmark best-of-class internationally in our fundraising practices. We have essentially, by our success, masked the problem.

The foundation is not capable of growing its endowment to the size it needs, in order to support the enterprise at Sick Kids. On August 20 there was an announcement at the provincial government level that our foundation will now match, dollar to dollar, $7 million this year, an additional $14 million next year, and $20 million in the third year, in perpetuity, to fund a new compensation program for the clinician scientists at the Hospital for Sick Children. This is in addition to what we're currently funding for the research institute and our academic chairs.

In 1996 there were no endowed academic chairs at the Hospital for Sick Children. Every benchmarked academic health science centre in the world has academic-endowed chairs affiliated with their teaching hospitals. We now have 22. The price tag of each endowed chair is $2 million. One of the key reasons we have not had any brain drain is that we have a recruitment and retention strategy based on philanthropy.

We would have to grow our endowment—and our chairman, Jim Pitblado, said this to our board in September—to $1 billion to have enough income, which is spun off at 4.5%, to fund the current commitment to the Hospital for Sick Children. It isn't feasible.

So the only way we can address this is to go back to the two main granting responsibilities the foundation has to the hospital—one, for the clinician scientists' compensation, which was approved in August, and two, the major grant for the infrastructure—and ask you to reconsider whether you want to have an internationally renowned, number one facility for children in Canada, with benefits across the country and the globe, funded by golf tournaments, galas, direct mail programs, and marathons. That isn't the way to fund international research.

Thank you.

Dr. Manuel Buchwald: In closing, I'd like to make two recommendations to the federal government.

One is that the government stay the course and increase the budget available to scientific investigators through the Canadian Institutes of Health Research to $900 million, as has been promised, by 2005.

Second, we recommend that new funding be provided to cover the indirect costs, the infrastructure costs, of 40% on top of the direct research projects. We recommend that this new funding be attached directly to existing grants rather than be administered through a separate fund. That'll have the advantage of being clear and transparent, and won't add any further obligations to monitor or administer these funds.

Thank you.

The Chair: Thank you very much.

We'll now hear from the Multiple Sclerosis Society of Canada, with Deanna Groetzinger.

Ms. Deanna Groetzinger (Vice-President, Communications, Multiple Sclerosis Society of Canada): Thank you very much.

I have copies of my speaking notes, if that would be helpful. If not, they're here if someone would like to have them.

Good morning. I am Deanna Groetzinger, vice-president of communications for the Multiple Sclerosis Society of Canada. I'm very pleased to bring to you this morning several issues that are vital to Canadians who have multiple sclerosis.

The MS Society is the only national voluntary organization in Canada that supports both research and services to people with MS and their families. The dual purposes are captured in our mission to be a leader in finding a cure for multiple sclerosis, and enabling people affected by MS to enhance their quality of life.

We do this by raising funds from individual donors and corporations, with virtually no government support. We are also proud of the fact that 80% of our net expenditures go directly to program areas that either fund MS research or enhance individuals' quality of life.

The MS Society is a major funder of MS research and supports the need for increased government funding of research in Canada. However, today I will largely speak about income support issues that affect people with MS directly.

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For most people, quality of life is associated closely with having an income. That's something that becomes of vital importance for people with MS because of the high level of unemployment. One study found that 25% of people are unemployed within five years of diagnosis, 50% within ten years, and 80% within 20 years.

The unemployment rate is high because of the nature of the disease. MS is a chronic disease in which the immune system attacks the protective myelin covering of the brain and spinal cord. This results in injury to myelin and the underlying nerve fibres, and causes widespread loss of nerve function, resulting in a multitude of unpredictable symptoms. These may include impaired strength and coordination, problems with vision, bladder, and bowel problems, and cognitive difficulties that may include, more frequently, the ability to remember, and less frequently, the ability to carry out complex tasks.

A major symptom that is not well understood, but impacts greatly on employment possibilities, is the development of an overwhelming fatigue, which is quite unlike the fatigue that comes from just carrying out physical abilities.

An estimated 50,000 Canadians have MS, with women affected twice as often as men. It often strikes between the ages of 20 and 40, with the average age of diagnosis at 30. This is, obviously, when people are starting their careers, beginning families, and deciding what they want to do for the rest of their lives. The individual courses of MS are widely variable and unpredictable, although after 20 years most people need some kind of mobility aid to walk.

MS takes a terrible toll on individuals' ability to stay employed. Often the most serious difficulties for unemployment are not the symptoms that are visible, such as the need to use a wheelchair, which could perhaps be assisted by a ramp or a lift, but invisible symptoms, such as that overwhelming fatigue and problems with cognition.

For people with MS, these strange and unpredictable aspects impact their ability to qualify for CPP disability benefits. According to Statistics Canada, in 1999 more than 10,000 people with MS were receiving CPP disability benefits. For most, this is their only source of income, and many of these people are in their thirties and forties—not the age at which we usually think of people needing to receive disability pensions.

The MS Society is grateful for this support from CPP disability benefits. However, many people with MS have told us about their difficulties in accessing a program they have contributed to, many for years. There are difficulties in determining whether a person is disabled enough to qualify. The qualification criteria requires that the illness be severe—making the applicant incapable of regularly pursuing any substantial occupation—be prolonged, long, and continuous, and of indefinite duration.

Because MS can be unpredictable, symptoms can and do improve spontaneously. People with MS are often told their condition is not severe and prolonged. In addition, severity may also be difficult to quantify if the symptoms are mainly overwhelming fatigue or cognitive problems.

We also worry that HRDC officials need to know more about MS. One woman told us she was denied benefits when she began taking one of the disease-modifying drugs. Her file was marked “Cured of MS”. Unfortunately, MS cannot be cured. This lack of understanding may help explain why many people, who were often denied benefits at the first application, are later granted them upon appeal to a review tribunal.

We have made several recommendations we hope the committee will consider. We have also offered to work with HRDC staff so they can better understand this complex and unpredictable disease. Specifically, we recommend that a fairer definition of disability be introduced to recognize explicitly cyclical or episodic disabilities such as MS, by including the word “recurrent”, as has been done by the Government of Ontario.

We also suggest that the 15% drop-out rule be changed to include people who have contributed to CPP for at least five years, and decreased from the current ten years. This would benefit many young adults who have developed MS and can no longer work.

We also suggest that there be more flexibility to allow recipients to work part time without risking eligibility for benefits that are available to some people under private disability insurance.

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Very quickly, I would like to touch on two other issues raised in our brief to the committee. Many people with MS have told us of their problems in qualifying for the disability tax credit. This is a similar problem to that involving CPP disability benefits. We believe it could be solved by allowing people with a substantial physical or mental impairment that is continuous and recurrent and expected to last one year or more to qualify for the credit.

As a leading health charity, the MS Society is funded almost entirely from donations from individuals and companies. We believe the incentive for charitable donations should be enhanced for Canadians whose total donations are $3,000 a year or less. There have been enhancements in the past several years. This is greatly appreciated, but I think it's an area that could be revisited.

We also suggest the committee look at the tax receipt model used by the U.S. Internal Revenue Service, in which charitable organizations are not required to issue receipts for donations under $250. This model would yield a cost saving for charitable organizations and be in line with current government practice of not requiring individuals who e-file or file by phone to provide tax receipts unless requested.

The MS Society is pleased the government recognizes through various committees and through its Speech from the Throne the need and unique role it plays in enhancing the quality of life of Canadians with disabilities. Ensuring secure and adequate income is the foundation for people with MS to fully exercise their rights as citizens and be part of the Canadian mainstream.

Thank you for this opportunity to present here today.

The Chair: Thank you very much.

We'll now hear from the College of Dental Hygienists of Ontario, with Kathy Walker. Welcome.

Ms. Kathy Walker (President, College of Dental Hygienists of Ontario): Good morning. As you stated, my name is Kathy Walker, and I am the president of the college.

The college is the regulatory agency for the 6,500 dental hygienists who practice their profession in the province of Ontario. Our mandate is to regulate the practice of dental hygiene on behalf of the public and to advocate for quality, affordability, and accessibility in oral health care. There are more than 14,500 dental hygienists across Canada who daily educate the citizens of this country in ways to prevent oral disease and thereby lead healthier lives.

Dental hygienists are most often the first point of contact in the oral health care system. They assess, plan, implement, and evaluate preventive and therapeutic services. The mouth has been referred to as the gateway or mirror to the body. Consequently, dental hygienists are often the first to recognize conditions that may pose additional health risks and eventually place an even heavier burden on the federally funded health care system.

The College of Dental Hygienists of Ontario was disappointed to note that the section on health care within the December 1999 report, Budget 2000: New Era...New Plan, was sparse, and related only to the health care system that the government currently funds—in other words, the existing medical system. Once again, the emphasis appeared to be on rendering the treatment rather than on the prevention of disease. This is a reactive policy, not a proactive one.

We noted with great interest, however, the July 2000 announcement regarding the awarding of a five-year $9 million contract to the Saskatchewan Indian Federated College to manage a dental therapy program. This award indicates the federal government is indeed aware that oral health is an integral part of overall health for aboriginal Canadians. While health matters for the majority of Canadians are deemed to be a provincial responsibility, we urge the federal government to continue a dialogue with the provinces and to recommend amendments to antiquated and restricted health care legislation. These actions would enable all Canadians to receive preventive health care services that are both affordable and accessible.

On page 117 of Budget 2000: New Era...New Plan, the standing committee emphasized that the federal government must continue to reduce the consumption of tobacco products, particularly those aimed at the onset of smoking among youth. Oral cancer represents approximately 3% of all cancers, with the single biggest risk factor being the use of tobacco products. The most common site of oral cancer is on the sides of the tongue, an area routinely observed during dental hygiene visits. Early detection of oral anomalies related to the use of tobacco products is an area in which dental hygienists can assist. They have been educated to aid their clients in choosing an effective tobacco cessation program. The elimination of tobacco use would prevent many oral diseases and many related illnesses, thus reducing the financial burden placed on the health care system.

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Periodontal diseases are bacterial infections of the supporting structures of the teeth. They are the most prevalent of human chronic diseases. When the mouth is unhealthy one has difficulty eating nutritious foods, communicating verbally, and even smiling.

The result is that disease in the oral cavity contributes to poor oral and overall health and directly impacts on important aspects of life, including attendance and performance at work and school. When treated early, the effects of gum disease are completely reversible. Good oral habits developed in childhood and continued into later life will go a long way towards contributing to a healthy life.

Dental hygienists play an integral role in the establishment of good oral hygiene. Canadians take pride in their universal health care programs. However, when it comes to oral health care the Canadian system can in no way be described as universal. Archaic provincial legislative practices have intensified the problems of achieving accessible and affordable preventive oral health care.

The federal government has stated that it does not believe in a user-pay health care system, yet that is exactly how oral health care is paid for in this country. Canadians would dearly love to have preventive oral health care as part of the funded system. To date, public policy-makers have ignored medical evidence that clearly indicates oral disease directly impacts upon the rest of the body.

The latest research continues to support a relationship between gum disease and cardiovascular disease, respiratory disease, osteoporosis, and diabetes. Poor oral health has also been directly linked to babies of low birth weight, and affects the quality of the pregnancy. Small size and thinness at birth are associated with coronary heart disease, hypertension, and diabetes later in life.

All of these health problems cause undue strain on the social and economic fabric of the nation. The poor, the infirm, and the housebound, whose need for care is the greatest and who will benefit the most by the interventions of oral health care professionals, are the ones least likely to have access to such services.

So while science tells us that oral health care should be a regular part of the health care system, government funding, taxation policy, and provincial regulations continue to push it outside of the system. This is further complicated by the following facts.

The Canadian public perceives that if the government doesn't fund a health care initiative, then that initiative isn't really health care. It is a luxury, and relatively unimportant. Nothing could be further from the truth. A new creative and cost-effective model of health care must include oral health measures and broader access to affordable care and treatment.

The provinces, including Ontario, continue to deny citizens the preventive services that will decrease the overall need for medical interventions and their associated costs. The CDHO believes that any increased health funding should be linked to higher expectations regarding access.

The health care model must therefore shift from a medical treatment model to a wellness/prevention model. A strong economy is built on a healthy workforce. Good oral health care today saves significant health care costs tomorrow. Therefore the CDHO recommends the following:

1. That the tax system be modified to allow greater tax incentives for health care practitioners, such as dental hygienists, who are willing to work with under-serviced groups.

2. That tax credits be implemented for those families that do not have dental insurance. The current medical dental allowance is inadequate and has such a high deductible margin that it is only useful for major medical conditions and does not encourage prevention.

3. That a wellness incentive be implemented for those individuals who have demonstrated the desire to achieve a healthy lifestyle by maintaining their overall health.

4. That the goods and services tax on basic preventive health aids such as toothbrushes, dental floss, and therapeutic toothpaste be eliminated.

5. Finally, that any increases in transfer payments to provinces be dependent upon regulatory reform that will ensure access to preventive care and the efficient use of all health care professionals.

The College of Dental Hygienists of Ontario is committed to ensuring that Canadians have access to affordable oral health services, as it has been proved that improved oral health contributes to total health and well-being. This in turn impacts on the productivity of the workplace, and thus the economy of the nation.

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The college appreciates this opportunity to provide input to the Standing Committee on Finance's pre-budget consultations. I thank you for your kind attention.

The Chair: Thank you very much, Ms. Walker.

We'll now hear from the Ontario Hospital Association, with Mr. David MacKinnon.

Welcome.

Mr. David MacKinnon (President, Ontario Hospital Association): Thank you very much, Mr. Chair. I should say that this is the fourth or fifth time I've come here over the years, and we very much appreciate the effort involved in the committee's travelling to make it easier to make the presentation.

Today I will be tabling a new study of the Ontario hospital system that we've done and that we hope will assist the committee in its work. It assesses the hospital system in Ontario relative to the rest of Canada in several major respects. I hope you will find it a useful support for the comments I am about to make, which deal, I think, with some fairly fundamental issues.

The first issue, which I think is something we talk about each year at this forum, is the unrelenting cost pressures faced by hospitals in Ontario and Canada generally. In the province of Ontario, the population grows by about 1.2% a year—that is a Prince Edward Island every year. An aging population increases demand by a further half per cent a year. Inflationary pressures add another 2% to 4% a year to those costs. So generally speaking, our system, as it is presently constituted, needs an increase of about 6% annually to maintain the current level of service. That figure is broadly comparable to British and U.S. experience.

We think we need, every day, to face those issues. I don't think we ever argue that the solution is simply more and more money. But what I would argue is that we cannot solve the money problem by constantly squeezing the system further and making more and more demands on front line staff, particularly the physicians and nurses in the front lines. The evidence available to us is that the era of constant cost-cutting as a way of responding to these financial pressures is over, and the era of social choice in dealing with them needs to start in a very fundamental way.

The second comment I'd like to make is that because of the funding problems and others, hospital capacity in Ontario has declined significantly, and we are concerned about our ability to maintain current levels of service. The total number of hospital beds has dropped by more than 35% from 1989-90 to 2000-01. Much of that was possible due to technological change, but the system in Ontario is now operating at very high-capacity levels. On March 31 this year, southern Ontario was operating at about 97% of its in-bed capacity—well beyond the level generally considered to be appropriate. I visited one hospital that had been operating in excess of 110% of its in-patient capacity for 45 straight days. We have significant capacity problems. The system is stressed. Every year that shows.

The third issue is perhaps a new one, and it's more fundamental. We have—as you would expect—been doing a great deal of research on some of the fundamental issues attached to the financing of Ontario's hospitals. There are some issues relating to the federal government and the structure of the national financial system that I would like to draw to your attention.

First of all, notwithstanding last year's accord, federal health care spending has remained constant since 1992-93, while provincial spending has gone up 28.5%. Not only have there been significant issues with respect to federal funding for health care not keeping pace, but there have also been issues relating to the capacity of Ontario to fund its public institutions, given the scale of the transfer system in place. At the moment the net transfer of resources from Ontarians to the rest of the country is roughly equivalent to Ontario's total spending on health care, some $22 billion a year.

These issues really have several particularly significant quantitative impacts, which I'd like to draw to your attention. For example, per capita spending on hospitals in Ontario in 2000-01 is 6.1% below the national average—a very significant discrepancy given the challenges we face in rapidly growing areas of the province where the sense of community is not as well developed as it is in other jurisdictions.

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Second, very significantly, the number of acute-care beds in the Ontario hospital system is 75% of the national average. I've outlined some of the consequences of that in terms of the occupancy data I've summarized.

These issues are not limited only to hospitals; they cover universities as well. Spending on universities and community colleges in Ontario is now 20% below the national average, and if you calculate the extent to which Ontario itself determines the national average because of its size, that discrepancy is huge. In an era where knowledge is the traded commodity in the world, operating a university and community college system at funding levels below almost every jurisdiction on the continent and well below the national average has obvious and serious risks.

We think that problem really needs attention from the federal government—I'll come back and make a specific recommendation in the conclusion of my remarks—but we do not, on the basis of our research, think it is in the national interest, in any respect whatsoever, that core public services in the province, which is the major funder of the transfer system, should be underfunded and less accessible than in the other jurisdictions that are on the receiving end of those funding flows.

There are many who think that issue relates to tax adjustments the Ontario government has made over the years. We have looked at that data. The patterns I'm describing have been evolving over many years, and at the moment, Ontario is taxing at the national average when measured on a per capita basis. As I say, the development of these trends has been evident for many years, but perhaps insufficiently noted.

We are, as I indicated earlier, at a point where basic social choices need to be made about the system, for all the obvious reasons. Many of them are described in detail in our new paper, which I recommend to you. We're very encouraged by the recent statements of Mr. Romanow, Senator Kirby, Premier Harris, and Mr. Clement, the Minister of Health in Ontario, that the only option off the table is the status quo, and surely, given that agreement from several fairly different points of view, we think a broader consensus on that issue should be possible.

The association, working with its members, is embarking on quite a fundamental program of research relating to lifestyle, demand management, various insurance systems, various fee issues, and so on that we hope will allow us to make the recommendation to Mr. Romanow that will put our system on a much different track, and a more sustainable one than is described here.

We are, I think, already doing our part to ensure a more accountable and sustainable health care system. We are at the forefront of accountability through our report card system. We produce a report card for each hospital in Ontario that is comparable to every other and measures clinical performance, financial performance, consumer satisfaction, and the process of change.

We are of certainty and can demonstrate that we are much more cost-efficient as compared with most of the other provinces and most jurisdictions in the United States, and we have, as I mentioned, undertaken a very aggressive program to try to chart out and assist governments in planning for the health care system of the future. We will be releasing that research in several stages over the next six months to a year, and we expect to make quite a significant formal presentation to the Romanow commission early in the year, following extensive discussion with our members on the very new, for us, research we are doing.

I'd like to conclude with a couple of requests of the committee, to ask you to do two or three things, if I may.

The first is that we have made a major investment in producing a balanced report card system. It has in academic circles been very much welcomed as a groundbreaking effort, and we are having extraordinarily great difficulty in getting that system adopted in the other provinces of Canada.

Now, for us, that's important, because the more comparatives we have, the better. But we have a unique situation here in that we have done all the pioneering work necessary to report fully and completely on the hospital system. It's basically adaptable to the other provinces, and none have done that.

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We would like the committee to consider whether it could assist us in getting that system, now in place and being further developed, in place in the other provinces of Canada within the next year so that Canadians across the country can have a really comparative view of how their hospital systems are performing.

There has been much discussion of accountability, much discussion of the need for this kind of public reporting. I think the committee can certainly help us make the existing system more useful by doing everything it can to ensure that it is adapted across Canada.

The second thing I'd like to suggest to you is that there has been much research done on the financial side of the public transfer system that is in place in Canada. What I would suggest to the committee is that it might want to look at the accessibility and the funding, and the value, the quality, and the other issues attached, on a comparative basis across Canada, so that the real presence of public services in different jurisdictions is assessed, to offset the purely financial calculations that are made and that underpin much of the existing system.

If that were done, I believe there would be more concern focused on the health of the core infrastructure in this province. I think more focus of that kind is urgently needed, if Ontario is to continue to play the economic development role in the federation that it has played historically.

In conclusion, I believe you'll find our study useful. Again, we appreciate the forum very much. If you could perhaps assist us on the report card issue and on the funding issues I've mentioned, and on the transfer payment, on the accessibility to public services request I've made, I think it would help us move forward in the future in a substantial way.

Thank you.

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

We'll now hear from Mr. David Murray.

Mr. David Murray (President and Chief Executive Officer, Sault Ste. Marie and District Group Health Association; Group Health Centre): Thank you, Mr. Chairman, and members of the finance committee, for allowing me the opportunity to speak to you.

Today I'd like to do three different things. First, I want to share with you some of the things we do at the Group Health Centre in Sault Ste. Marie. Secondly, I'd like to engage your support for our particular model of delivering health care. And lastly, in the upcoming budget I'd like you to consider committing greater federal resources for primary health care.

The Group Health Centre is a health care facility that has operated in Sault Ste. Marie for almost 40 years. The focus is on the delivery of care and health promotion to almost 50,000 rostered members. The goal is to keep people well by detecting illnesses early and decreasing reliance on hospitals.

We believe the Group Health Centre stands apart from traditional Canadian health care delivery models, because unlike traditional health care, our community and our physicians guide us in what services we provide. We tailor our services to meet the needs of our community and our patients, and we realize efficiencies and achieve better health outcomes for our population.

You may be asking yourselves, why not let the provinces deal with the issue of health care delivery, especially primary health care delivery? I'll answer with the words of Minister Rock himself, who stated that “Primary health care is fundamental to the renewal of Canada's health care system.”

We applaud the minister's view. We think it's the basis for going forward on health care reform in Canada. Ultimately, the federal government is involved already, and it must continue to be involved.

At the Group Health Centre, we're unique because of our partnership. We have a partnership of a not-for-profit association, which owns the building and employs the support staff, the Allied Health Professionals, and the Algoma District Medical Group, which is an independent partnership of 65 physicians—34 general practitioners and 31 specialists. It's this partnership that allows us to deliver primary care in a very unique way.

It's something that's not very well known, because Sault Ste. Marie is a bit off the map in Ontario and perhaps nationally. We don't get much press. But there are others who do find that our way of delivering health care is quite unique.

As a matter of fact, Commissioner Romanow visited us early in his deliberations. He was very impressed by the way we delivered care, and he found a number of things quite unique. He coined a phrase that we'd like to use; he called us the “best-kept secret in Canada” as far as health care is concerned.

One of the unique aspects of the way in which we deliver health care is our electronic medical record. It's the most comprehensive installation of electronic medical records in all of Canada, dealing with 50,000 primary care patients. It's the cornerstone of every intervention we have. Each time somebody visits their physician's office or sees one of our allied professionals, or gets lab results, it's all done through the electronic medical record.

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The other benefit of the EMR is that it allows us to do research into chronic disease management. We have templates and protocols that our physicians use in dealing with diabetes and with congestive heart failure and other chronic conditions. The electronic medical record has also allowed us to save space, reduce costs, and the running of paper, running charts around, and so on. Those are savings we've been able to put directly into patient care.

The evidence has shown that the EMR provides for greater accountability, greater efficiency, and more doctor-to-patient time. The bottom line is that the EMR allows us to serve patients better.

We believe the EMR is a key tool, and we've used it to improve health outcomes for our patients. It's another example of why our health care facility can show leadership in this area, and we think it's something that could be adopted across the country.

Our vision is not completely new, however. In fact, the creation of the concept began almost 40 years ago. In 1962, John Hastings, a medical professor at the University of Toronto, spoke at the groundbreaking of the Group Health Centre. He said:

This century has been one of scientific and technological advance....In no field has its impact been greater than that of health.

The paradox of the scientific and technological revolution is that it has diminished relatively the capacity of the individual doctor to meet man's health care needs at the same time as it has vastly increased the capacity of medicine as a whole to do so.

Somehow the general practitioner and the specialist need to be brought together in a cooperative group which preserves the intimacy and the interest in people.

For the patient, group practice means that care is available at all times, including the advice of specialists, when required.

That sentiment is the backbone of what the GHC is today.

We believe the Group Health Centre is a model that can work for others in Canada to improve health outcomes. Our primary care model emphasizes the front end of the health care system—health promotion and illness prevention—rather than the back end—emergency rooms and hospital visits. This is crucial for sustaining an efficient and effective health care system for all of us.

With health care costs soaring, there is a need to explore alternative funding arrangements and other health care delivery models. We know in recent years the federal government has invested in primary care. We applaud those measures, but you should not stop there. You need to continue to invest in primary care this year, next year, and in years to come. I implore you to work closely with your provincial counterparts, your federal colleagues, and your constituents to ensure that new approaches to health care, like our primary care model, remain on the top of the government's priority list.

I also encourage you to continue to encourage innovative primary care models like ours and continue to fund them appropriately. Together, we will make sure that not just patients at home in Sault Ste. Marie, but across Canada, can benefit.

Lastly, I also want to offer an open invitation to all of you and your colleagues in the House to come and see the Group Health Centre in Sault Ste. Marie.

Thank you very much.

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

We will now proceed to the question and answer session, with a five-minute round for all the members.

Mr. Brison.

Mr. Scott Brison (Kings—Hants, PC/DR): Thank you, Mr. Chairman, and thank you to all our presenters today for your important interventions.

You can sometimes judge an establishment based on repeat patronage and customers. So based on some of you being here quite frequently this week, we must be doing something right. I guess the report will determine that in the end.

My first question is in terms of the biotechnology environment in Canada and your perception of Canada's technology transfer and commercialization environment as compared to the U.S. It strikes me as a very important issue that we in Canada have the best possible environment for technology transfer and commercialization that we possibly can. There have been some impediments to that in the past that might hold us back and have an extraordinary impact on revenues for our Canadian hospitals and universities in the future that would hurt us significantly.

I'd appreciate your feedback on that.

Dr. Manuel Buchwald: I would say, relative to the United States, we're still significantly behind, though in the last five to ten years we've made significant progress.

In several of the investments that the federal government has made, including the Networks of Centres of Excellence, some of those centres of excellence have specifically focused on the transfer of knowledge from the academic to the private sector as a partnership model. More recently, here in the province of Ontario, the Ontario Challenge Fund has similarly done so. The most recent program of the federal government, the Genome Canada program, is also based on that model.

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What is holding us back? I would say it is a lack of private investment. I don't think there's sufficient investment from the private sector, especially entrepreneurial investment.

Secondly, we're still lagging behind the United States in terms of our trained workforce. I think we're catching up. I still believe we don't have a sufficiently large workforce.

I think it's also an issue of culture. In the United States, it has become an established expectation that not all of the academically trained researchers are going to end up in academia. Many of them are going to go into the private sector. It's beginning to happen in Canada. Again, it's a question of having sufficient choice so people don't feel they're stuck with a very small range of choices.

Thirdly, if you think of investment in the context of the pipeline model, in a sense there has to be some initial investment to create the intellectual property that's going to become the industry of the future. As I mentioned in my presentation, we're not quite as heavily invested as the Americans are or, in fact, as many of the Europeans are.

It's a combination of things. I would say the trajectory is going up, but we still have a way to go.

Mr. Scott Brison: When we're north of capital markets, with the nature of the U.S. with their breadth and depth, I think we have to address some capital market issues in Canada as well.

There's a demographic time bomb looming in Canada. While we're all focused on health care over the next year, two years, and five years, we have a twenty-year issue relative to a huge increase in a population that will need an extraordinary amount of health care, and a shrinkage in the working population supporting it, the tax-paying population or the most productive population at that point.

I would appreciate your insight or suggestions. Some have even suggested a movement toward the same sort of model as an RRSP with a registered health savings plan. Of course, it implies a private sector role and perhaps a change relative to the Canadian view of a single payer, completely government funded, or an evolution toward individual payment that is, of course, controversial.

Whether it's that approach or some other one, I think we're ignoring a huge and looming problem. I'd appreciate your insight. What would you suggest we do, as policy-makers, to address it pre-emptively?

Mr. David MacKinnon: Working with member hospitals, I hope we will be able to make some more specific suggestions on it in six months than we can today. I think the clear view of most hospitals in Ontario is we have to be open to entirely new directions, including many of the ones you describe. It has to be safe for everyone to talk about them, without being unfairly and inappropriately labelled, as a consequence, for raising them.

I think opinion is changing very quickly on this. We have to look at the private sector as potential partners in the major national enterprise of rebuilding and reconfiguring the health care system, and not as someone on the other side of a divide that makes the partnership impossible. In fact, if you think of the scale of the enterprise, it's going to require the talents of all Canadians wherever they're located. In particular, we certainly can't modernize hospitals without a vastly broader technological partnership with the private sector.

Our members have increasingly asked us to talk about alternate sources of funding, alternate sources of delivery, and alternate sources of new forms of partnership. We have been.

By the way, I do agree with David's presentation. In Sault Ste. Marie, and in other parts of Ontario, we were evolving with fundamentally different partnership models. We have to create an environment and a public discourse where it can all take place without blame and without undue ideology.

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All of the possibilities you've mentioned, sir, are ones that we have strongly suggested to the provincial government in Ontario should be on the table. I think public opinion is changing quickly enough that it's probably going to be possible, given the financial realities we face.

Ms. Kathy Walker: There is one thing that comes to mind, since I am a health care professional and deal specifically with the prevention of oral diseases. It would seem to me, when we're talking about money, it needs to be spent on health care, especially when you mention there's going to be a top-heavy layer of people who are going to be accessing services. They're going to be retiring, mainly, and are the baby boomers. I'm one. It scares me in the sense there might not be funds when and if I need them.

The main point of the College of Dental Hygienists of Ontario is we need to be spending the money on prevention. Periodontal disease is a chronic disease. It's one of the most prevalent in our society. The members of my generation are keeping their teeth. This is a disease that can be prevented. It needs to be prevented because it has been proven there are links to other diseases. It's going to cost lots of money to provide medical treatment.

I believe there needs to be a fundamental change in the thinking from reactive policies, spending money on what's going to be there, to spending some money on prevention so the diseases do not occur. Then we have a healthier top-heavy layer that still might be able to contribute to society and produce income for other problems we haven't been able to solve yet. I think it's very important.

We do have some pamphlets relating to this that I failed to mention earlier. I would like to leave them with the committee. Oral health does matter, from head to toe.

Mr. Scott Brison: Thank you.

Ms. Dianne Lister: One of the matters we discussed yesterday was other incentives for accessing and growing the philanthropic marketplace. Professionals in my field are looking at a $3 trillion transfer of wealth in the next 20 years. It's very important, before we start creating a set of tax incentives, to encourage people to give philanthropically.

I agree with David MacKinnon's point. The public policy debate on the roles of government, the private sector, and the third sector have to be figured out at the front end so we're not just putting a finger in the dike. As public policy develops, those who are involved at the front end with philanthropy will help you at the front end. It's going to have huge and comprehensive ramifications.

Mr. Scott Brison: Thank you.

The Chair: Thank you, Mr. Brison.

Dr. Bennett.

Ms. Carolyn Bennett (St. Paul's, Lib.): Thank you, Mr. Chair.

I'm delighted the Group Health Centre is here at the same time as the Ontario Hospital Association in that, yet again, I'm disappointed the Ontario Hospital Association thinks they operate in a vacuum when so many of the concerns raised are on the integration of the system in terms of the community. When the Ontario Hospital Association was before this committee in the fall of 1998, I think there was a feeling it really wasn't about money. It was about faulty planning. And that was good news, because planning could be fixed. It's three years later, and the lack of capacity in the community....

What I want to know is, the bed space problem, that was a problem in terms of how many....

First of all, we should congratulate you. I think you are hugely efficient. I mean, you are cut to the bone. I think the issue is, in a system-wide way, aren't there things we should and must be doing but cannot do if we only focus on the hospital sector? If we're looking at emergency visits rising, how many of the visits shouldn't be emergency visits? How many of the people in your beds are “bed spacers”? Are we able to track readmission rates in terms of the quality of the home care or the lack of home care?

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I guess the whole thing around medical error is hugely interesting to lots of us in terms of our developing a culture of reporting rather than a culture of cover-up. So when we see the Fyke commission saying that 30% of the system may be unnecessary, I think we look to Professor D'Cruz at the U of T business school, who feels that this was what the Japanese car makers called muda before they started doing quality first, and decided to actually get it right the first time.

So the appropriateness of care is something I would like to know about. If 80% of the people going for neuroradiology at Sunnybrook are there for a headache.... How can we decide whether we need more MRIs or more CT-scans if we don't know whether those people should have had that investigation?

So from the group health point of view, how do you feel the Ontario Hospital Association is doing in terms of your integration with the hospital sector, and the appropriateness of its use? Are there lessons we can use for that?

I understand that only one in a thousand Canadians in a tertiary hospital ends up in an acute care hospital. How can we help to plan the health care system for the other 999, if there isn't more integration between the various parts of the system?

The Chair: I don't know how many questions are in there, but try to answer them all, please.

Mr. MacKinnon.

Mr. David MacKinnon: Perhaps I could comment briefly, and then David may comment on the relationship between the hospitals and the group practice in the Sault, which is a good one.

First of all, if I may say so, Dr. Bennett, I violently disagree with the observation that the Ontario Hospital Association operates alone and isn't involved with the other issues in community care.

Ms. Carolyn Bennett: There is not one word about integration in your report.

Mr. David MacKinnon: No, there isn't, but there is much information in our report cards and all our other public documents.

For example, as you would know, we are measuring how the people of Ontario rate their discharge to other care providers after leaving the hospital. We publish those data annually, and you can see how rapidly it's changing. We also publish data on how effectively hospitals link with outside physicians in terms of new electronic data systems—and again, that's growing rapidly.

All the evidence in the latter part of our report card—which is measured by many variables—suggests that Ontario's hospitals pay a great deal of attention to other parts of the provider, and are making major progress. The most important single thing we do is give a voice to that progress.

Secondly, I should say that we had a health services restructuring commission in Ontario for many years, which put forward many ideas on integrating the health care system. Unfortunately, almost none of the numbers it produced on the restructuring of Ontario hospitals are relevant today. I suggest that if it had spent less time visioning the future of the system, and more time on statistical research on hospitals, our situation today would certainly be dramatically improved.

But my first comment is, frankly, the notion.... That observation you made is one that I don't think is supported by the evidence. We're members of the health provider alliance. Our relationships with all the other health providers are good. At a local level, as David will indicate, the relationship in the Sault between the hospital and group practice is good. All over Ontario, incredible leadership is being shown in terms of relating hospitals to the rest of the health care system. Our published data and reports do focus on that issue in measurable ways. This allows the public to judge for itself on some of the most important issues.

Ms. Carolyn Bennett: I'm just asking whether or not you...whether it's the appropriateness of emergency room visits. Is that done? Could you not, therefore, apply pressure to...? I mean, if 50% of the GPs in Toronto sign out to an answering machine that tells people to go to the emergency department, how can we feel the emergency departments are actually being used wisely?

Mr. David MacKinnon: I want to give David a chance, so I'll only comment very briefly on that. We have announced our intention to undertake a full report card on emergency services in Ontario, and are currently working on it.

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Look, if I can make one plea to the committee in its deliberations, it's that the most important thing with regard to health care in Ontario, or across Canada, is that we have to measure. We cannot just allow a generally supposed opinion to be our guiding light of the day. We have to measure if we're going to manage.

As you'll see in the emergency report card—which responds to the needs you've mentioned, Dr. Bennett—we believe our starting point is adequate measurement, not well-meaning suppositions. I think you'll find our emergency report card useful. We have been active on all the emergency issues you mentioned. In 1998 we completed one of the most detailed studies of emergency systems ever undertaken in this country, and we made it public.

Sometimes we have to cut through a lot of our predetermined opinions on some of these issues. What we have to start doing much more of in Ontario, and in the Canadian health care system, is measure. If we measure well, and make the results public, then everybody can manage better.

The Chair: Mr. Murray.

Mr. David Murray: Perhaps I can give you a brief background on what goes on in Sault Ste. Marie. In the past, there have been a lot of turf issues between the Group Health Centre and the hospital, but over the last few years, the public has let both organizations know they're not willing to put up with that any more. So we've entered into a joint executive committee with the hospital, we're rationalizing services, and I feel we have a very good working relationship. This is saving a lot of public resources, and allowing them to be used where they're most needed.

One issue you brought up is physicians whose answering machines instruct people to go to the emergency rooms. So I think we really have to rethink primary care. We have to look at getting physicians into group practices, and support them with electronic medical records.

I think those are the two most important ways to make sure primary care works. What we have now is a very fractured system, in which the hospital has to pick up the pieces when the primary care system fails. We're choosing the most expensive way to deal with our shortcomings. If we do primary care right, I think a lot of the other problems in health care will be taken care of.

Ms. Carolyn Bennett: You said there were some efficiencies in terms of ramping up your electronic medical records. How long did it take you to find the efficiencies and get it going?

Mr. David Murray: They probably thought about it for about three years before they finally took the plunge. It took six months to implement. They had a plan that was very well thought out. Of the 64 physicians involved, they took those who were most against the idea and put them in charge of implementing it. Today, all 64 use it.

One doctor who threatened to quit the group over the installation is an oncologist, and very outspoken. He told Cancer Care Ontario recently that if he has to leave the group, the one thing that has to go with him is his electronic medical records. He has gone from being an opponent to a great supporter.

The system works, and makes doctors' lives easier. But obviously, we haven't been able to do this across the entire province of Ontario. I think it will take federal government help to make sure we get physicians' offices all using EMRs.

Ms. Carolyn Bennett: Regarding David MacKinnon going national with his report card, what's the process for continuing to fine-tune it and make it as good as it can be? Are family doctors satisfied? How do you do that so that we can actually help sell the measurements?

Mr. David MacKinnon: We're expanding it to include different types of hospitals. For example, it doesn't perfectly fit specialty hospitals such as Sick Kids, because we currently measure clinical procedures that are standard in all hospitals. Specialty hospitals need more attention, and we're expanding the system to include them. We also want to focus more on emergency room issues. We need to include a broader range of clinical procedures, many of which aren't common to all hospitals. There are obvious issues with that.

I think it is really critical here that the perfect not be the enemy of the good. We have an embryonic structure that generates huge interest every year, and is used all across the systems as a benchmark. We have regional sessions, local sessions, everything to use it as an overall performance management tool.

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I think it's fine on its own as a starting point. The province has been very helpful in funding its further development with us. But I think we can start with what we have and gradually evolve it. It's important not to wait for a state of perfect completion and perfection to get started.

Ms. Carolyn Bennett: In the premier's deal, there are going to be some report cards. Is there pressure to make sure that the measurements around having the existence of a hospital report card, the existence of primary care reform...? How would you suggest that in that fed-prov deal...or what are some of the things you would like to see measured?

The Chair: MacKinnon, Murray, and Buchwald.

Mr. David MacKinnon: We'd like to see clinical performance, consumer response, the rapidity of change and how it's taking place—I've quoted some of the things we're measuring now in that area—and finally, financial performance. It needs to have all four quadrants, and it needs to be carefully based on good numerical research. If we start with the four quadrants that we're measuring, applicable all across the country, I think that would be a very good start. We will evolve it as we go along.

Ms. Carolyn Bennett: Is the readmission rate one of those?

Mr. David MacKinnon: Yes, it is, as is the complications rate.

Ms. Carolyn Bennett: Even if it's a different hospital?

Mr. David MacKinnon: Yes.

Ms. Carolyn Bennett: Okay.

The Chair: Mr. Murray, do you want to comment?

Mr. David Murray: I think if you do develop an EMR and the database that comes from it, you can start measuring outcomes. At our local hospitals, we measure outcomes for readmission rates for congestive heart failure. The project we did managed to reduce readmissions by 68%. It cost us about $0.25 million, and saves the health care system about $2 million a year.

In our diabetes management, of ten things, three have to be done by a physician, and the other seven can be done by a nurse. We tracked those on 2,500 diabetics. Those are the sorts of outcomes we measure on an ongoing basis and allow us to know that we're delivering quality care.

Another aspect I think we should measure system-wide is access. For instance, how long do you have to wait for an appointment, or on the waiting list, etc.? But we should also apply it to primary care—not just how long we have to wait for a procedure in hospital, but also how long we have to wait to get access to primary care.

The Chair: Mr. Buchwald.

Dr. Manuel Buchwald: I just wanted to emphasize two points that have been raised. One concerns electronic records. Children constitute about 10% of health care clients. The Hospital for Sick Children, together with partner hospitals throughout metropolitan Toronto and even outside the greater metropolitan area, has established an electronic child network.

The principle of this network is that electronic transfer of patient information is really the only effective way for families to feel they're getting optimal care, irrespective of where they are. The idea is that care is delivered at the most appropriate and convenient place for the family. So it doesn't have to be downtown—it could be in Scarborough, North York, Orillia, or in partner hospitals.

The second point I want to emphasize—Mr. Murray made it, and Mr. MacKinnon as well—is that research is a necessary component of delivering health care. I may have remarked about technology, because that's a long-standing issue. But the health research agenda, in which we would like the federal government increase its investment, is really a health research agenda across a broad spectrum—from genes to population. In terms of the impact of this research on the health of Canadians, I think it's important to maintain a broad research agenda, and to involve as many participants as possible.

The Chair: Thank you.

Mr. Guarnieri.

Ms. Albina Guarnieri (Mississauga East, Lib.): Thank you, Mr. Chair.

Every sunrise, each of us becomes a day older—and statistically much more expensive to the health care system, as Ms. Walker has already observed. The average cost of health care for seniors is thousands more per year than for the average Canadian. It seems inevitable that we will face a looming crisis in the next 20 years. In conjunction with this, we see pharmaceutical costs rising much faster than the rate of inflation—indeed, far faster than increases in funding.

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To Mr. MacKinnon, with more expensive patients and certainly more expensive drugs on the horizon, where do you see funding levels to be in the next 10 to 20 years? Does your organization have any projections for us?

Mr. David MacKinnon: We will have. As I mentioned, we're looking into many of those in a very fundamental way now. I expect we'll come up with some fairly significant suggestions for public policy-makers at all levels.

Perhaps I would say, based on very partial data and strictly a personal interpretation at this point—particularly with a member hospital in the room, I need to exercise great care—that I imagine the solution at the end of the day would be a health care system where there are different revenue streams coming into it. One part of this is that it would be publicly funded to a very large degree.

Another part of it might well be that certain sorts of insurance services that are insured, because only in that way can you really start to get at some of the lifestyle issues, which get beyond.... One of the real problems we're facing, frankly, is the tidal wave of issues that are very largely related, in significant elements, as Dr. Bennett I'm sure would observe, to lifestyle, and how we live. We need to get at that. Probably the only way we can get at it is with some part of the total being insurable.

Third, probably we'll need a greater source of revenue from a broader range of health management and wellness services that probably are right outside the system now. But there's certainly some real possibility that people would be willing to pay for some wellness information or related services and so on. And I would imagine a healthy system at the end of the day, 10 or 15 years from now, to use your timeframe roughly, would be one where you had all those revenue sources where on balance the system tilted somewhat away from complete entitlement for everything and somewhat more toward protection from catastrophic or grave risk but somewhat less than complete full entitlement.

That's what I would imagine, based on the data we have now, but that's strictly a personal view.

Ms. Albina Guarnieri: We like to think there is no hostility on this committee, except probing minds.

You did say “hostile”, did you not?

Mr. David MacKinnon: No.

Ms. Albina Guarnieri: Oh, okay. Sorry; I was wondering. What were you referring to?

Mr. David MacKinnon: I think I said “hospital”.

Ms. Albina Guarnieri: I thought you said “hostile”.

Mr. David MacKinnon: No, there was no intention to convey any of that.

Ms. Albina Guarnieri: I should be using my earpiece here. Senility is becoming rampant here.

Please go ahead.

Ms. Deanna Groetzinger: I'd like to respond to your earlier question, maybe from more of a consumer point of view. You'd mentioned that the cost on the pharmaceutical side is growing much faster, it appears, than other health care services. This is something that people with MS can certainly relate to in the last several years, because for the first time there have actually been drugs that have some effect on this disease; never before has there been.

So, yes, there is a cost there. On the other hand, with drugs for MS and with other conditions, there may be more utilization on the pharmaceutical side, but balanced off, we hope, down the line with less utilization on the hospital side, on the home care side, and many of the other very expensive aspects of having a disabling disease.

So I agree with you that's what the trends show, but I wonder if there will be cost savings in other areas. I would suggest that we not just silo costs but look at them as an integrated part of an entire system.

Ms. Albina Guarnieri: Do either of you have any projections in terms of what the tab will be if we continue at this current rate?

Mr. David MacKinnon: We could supply some of those. We have looked at it, as you would expect, and we'll do an inventory and make sure we get them to the committee clerk.

Ms. Albina Guarnieri: Thank you.

Mr. Murray.

Mr. David Murray: I was at a session yesterday where the Ontario Minister of Health was speaking. Their estimate, if it means anything, is that by the year 2010, nine years from now, they'll be spending $45 billion as opposed to the $22 million they're presently spending. So that's what they're looking at.

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Ms. Albina Guarnieri: When faced with this impending crisis of more expensive older patients, it would seem to me that we really can't turn our back on any measures to reduce the cost of treatment that do not reduce the quality of care at the same time. And of course I'm referring to generic drugs and whether regulations should be changed to permit earlier access to cheaper generic medicines or not.

Is it the OHA's position that regulations should be altered to increase availability of cheaper generic drugs? Or do you recommend continuing regulations that keep those medications off the market for a longer period of time?

I ask the question because you mentioned that you've been establishing working groups to explore additional ways to increase efficiencies. Does that compute in your discussions?

Mr. David MacKinnon: It will be a part of what we are looking at, quite fundamentally, in some form. But at the moment there has not been a general decision by the association on working with its members on this issue. There is no overall current position.

Ms. Albina Guarnieri: I gather there wouldn't be widespread disagreement that increased access to identical and cheaper drugs would actually save the health care system tremendous amounts of money? Or would there be agreement on that point?

Mr. David MacKinnon: From the point of view of the research in new drugs and so on, the trade-off between access and intellectual property issues is hugely complex. For today, I would not be able to comment in any detail on it other than to say we're clearly aware of the essential nature of that trade-off, and it is an issue.

You'll find, by the way, that the rate of growth is actually described in our presentation. It would help to suggest that certainly the issue you've raised is one we need to pay more attention to than we probably have.

Ms. Albina Guarnieri: It seems to me there could be no greater priority than to find a way for Canadians to afford quality health care as we all check into our nursing homes in a couple of decades.

We look forward to your recommendations.

Thank you.

The Chair: Mr. Murphy, a five-minute round.

Mr. Shawn Murphy (Hillsborough, Lib.): Thank you very much, Mr. Chairman.

Ms. Groetzinger, I want to probe a little further on your recommendation on the definition of disability in the Canada Pension Plan.

It's my understanding, having worked on quite a number of these cases, that what the act contemplates now is that the disability be permanent, that it be severe, and that it prohibit the person from having any type of occupation. And that basically is a decision made by the physician. In MS patients it's certainly severe; it's permanent. From your statistics, and from my knowledge, there will be a point at which the person will be unable to work.

But it seems to me it's unlikely that the government would open up a special category for MS if they want to deal with everyone the same. And when it comes to the time that the patient is unable to do any type of work, then the patient would and should qualify for CPP disability benefits. So I'm not clear why the change, what the rationale is.

Ms. Deanna Groetzinger: I agree with you entirely. No, we're not saying there should be a special category for people with MS. The disease ranges from being very benign—someone would not be affected much at all, and one would not be able to know that the person had MS—to being very severe. And I think the recommendations we would like to see, adding something along the lines of “recurrent”, would apply to other conditions, including people with cystic fibrosis and people with mental disorders as well.

The issue tends to be the muddy middle. I don't think anyone would doubt the criteria applying to someone who is severely physically disabled. It's when someone also has the kind of fatigue that barely allows them to get out of bed in the morning, or has some cognitive issues, memory problems, that it becomes difficult to quantify. It's difficult for an adjudicator or for perhaps someone at HRDC to actually say, yes, this is really severe enough. In many cases, their physicians have supplied this information and the physician's opinion is overruled.

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So the difficulty of having a cyclical disease—it gets worse, it gets better—we think might be solved by having some kind of wording that would capture the fact that this is a permanent illness. It's recurrent. It probably will come back and when it comes back, it's going to be worse. But I think there are some issues around the severity part of it in the less obvious symptoms of the disease.

Mr. Shawn Murphy: But the overriding determination is whether or not the patient can do any type of work, and really that comes primarily from the physician. I know there have been situations where his or her opinion is overruled, but the physician has to come to that determination. In the whole scheme of an MS patient, there will come a time, I assume, that the decision is made.

I think by adding this you're muddying the middle, and it then becomes very confusing not only for MS patients but also for mentally ill patients. If somebody has mental illness maybe once a year, is that recurrent enough for him or her to qualify for permanent disability benefits? I think it would add a whole layer of confusion to the act, which right now is difficult enough to—

Ms. Deanna Groetzinger: I appreciate those comments. The key to it as well is whether he is regularly able to perform work of a substantial nature. The “regularly” part of it seems to be the part that perhaps is not adjudicated clearly, or perhaps we might even say fairly. If someone, because of fatigue level or cognitive issues, takes an inordinate amount of time to prepare for work, to get to work, to carry out a task, is that actually being able to carry out work on a regular basis? We would say no, in these cases.

I'm very happy to clarify for you the fact that we're not saying there should be any kind of special category for people with MS because of the vast array of ways this disease affects people and the unpredictable aspects of it. I think we do need to work with HRDC, whether it's in the definition of the disability or just in terms of more knowledge about what this disease can mean. That can actually make the process work better.

I think the more telling part is when we are looking at people who are turned down at the first level, and then go on to appeal at the review tribunal and then further on to another appeal. I think it's a bureaucratic waste of time at one level, at the HRDC level. And this is not to mention the stress that's put on people who may eventually be found to qualify but who were not seen to be unable to work at that first level.

So obviously there are some difficulties with the system right now.

Mr. Shawn Murphy: I firmly agree with that statement, because my understanding is that they turn everyone down at the first level.

Ms. Deanna Groetzinger: I've heard that.

A voice: It's 64%.

Mr. Shawn Murphy: My next question I want to direct to Mr. MacKinnon. We talk about “hostility”. Well, one area I see hostility in the whole health care issue—and I first come to you, because I'm not an expert on it—is the whole area of federal-provincial relationships. Every time this issue is raised, the provincial governments will say the feds aren't putting enough money in. The feds say they are, and it just goes around the circle. At the end of the discussion or debate, there doesn't seem to be anything accomplished.

It's good that we're having this national debate through the Romanow commission, through the Kirby commission, and hopefully there will be some constructive recommendations, and not only recommendations but some action at the end of the day.

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It's been said to me, and some of the discussions here today might support this, that if the best practices being followed were adopted and implemented right across Canada, which I think you're trying to do, not only in the hospitals but right in the health care system, there would be enough resources in the system. Whether that statement is correct or incorrect, I have no way of ascertaining.

The big stumbling block is, and will continue to be, this whole federal-provincial relationship. Is it not time to perhaps put on the table the notion that health care should be a federal responsibility, on a Canada-wide basis? That would require extensive negotiations, perhaps a transfer of tax points. It's certainly out-of-the-box thinking.

When you try to take some of the models you're developing, and that have been developed in Sault Ste. Marie, to other provinces, I can just tell you what the reaction is going to be. Nobody in Toronto is going to want a made-in-Saskatchewan or made-in-Prince Edward Island health care system. And we don't want somebody in Toronto telling us how to run our health care system. That's going to prolong the debate, agony, and grief for another 15 years, without any positive outcome.

I just throw that on the table. Is it something your association would ever consider recommending to Romanow or Kirby to go forward? I think this whole issue requires some out-of-the-box thinking.

Mr. David MacKinnon: There are fundamentally two issues there that perhaps I should respond to. On the first question of whether there would be enough money in the system if best practices were followed everywhere, the answer—and it relates to our previous discussion-is almost certainly not. This is not a problem you can reorganize your way out of or hypothesize your way out of, or anything like that. The issues are very real and the growth in costs is common to most developed jurisdictions of the world.

We have to manage them, and I don't think there is enough funding currently in the system to fund the package of services that have been provided. That problem will only grow unless we make some basic choice.

On the federal-provincial issue—and I made some very focused commentary in my initial presentation—at the end of the day, the fact that every major core area of public program delivery has been funded at a far lower level in Ontario than in the provinces on the other end of the transfer system is an absolutely fundamental issue.

In our province, I'm particularly concerned about universities and colleges, because teaching hospitals are seated within the university system. The notion that Ontario can thrive with per capita spending on universities and colleges that's 20% below the national average, which in turn is itself inflated by Ontario's presence in that national average, is very troublesome.

I don't want to go beyond our competence, in terms of what we know, but the argument I would like to make to you is that we really have to look at not just financing for public services, province by province, but access, productivity, and other factors. You'll see, as you go through this, some fairly alarming stuff from that point of view, to be honest.

It shows a very significant and fundamental disparity between what is going on in Ontario's hospitals, and to some extent Ontario's health care system generally, and what is going on in most of the other provinces, as measured by the Canadian average.

I think we need to think about the implications of that, because they'll be very serious if this trend continues.

The Chair: One comment by Mr. Buchwald.

Dr. Manuel Buchwald: I just want to say that one area of health where the federal government clearly has an essential role is in health research. If you look at health research in its broadest context, from genes to populations, there can't be provincial health research. All the questions really transcend the country. They're really international.

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

Thank you very much, Mr. Murphy.

On behalf of the committee, I want to thank you. This is a very difficult issue, placing all sorts of various pressures. But I'm sure if there's a national will to succeed in the area of health care, we have to really focus on the fact that we want the best possible results for our client base, which is, at the end of the day, the Canadian taxpayer. We should always be mindful of that.

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Above and beyond that, we can't be ideologues about health care and how we deliver it. I think the debate needs to be had, and it should be a no-holds-barred debate, where everything gets put on the table. The people with the best ideas and the best results are the ones who are going to win, and that's the way it should be.

We will reflect on these issues, as we do with all the issues that appear in front of the committee. You certainly have given us great insight into some of the challenges you face, and I thank you very much.

I'm going to take a five-minute break so we can set up for the next panel.

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The Chair: I'd like to call the meeting to order and welcome everyone here this morning. This is the second panel for today, Tuesday, October 16. As you all know, you're here for pre-budget consultations.

Before we begin, I'd like to thank you very much for your attendance. We certainly count on your input as very valuable information as we deal with the writing of the report and the recommendations to the House of Commons and indeed to the Minister of Finance.

You all know that I don't like to interrupt people, but I will tell you that you have five to seven minutes to make your presentation. Please be mindful of the fact that there are other people who would like to speak as well.

The same thing goes for the members of the committee. Please keep your questions short so that we can get in more questions to the panellists.

We have individuals representing the following organizations: the Toronto Board of Trade, the Canada Council, the United Brotherhood of Carpenters and Joiners of America, the Direct Sellers Association, the Greater Toronto Homebuilders' Association, and the Co-operative Housing Federation of Canada.

We'll begin with the Toronto Board of Trade, with Elyse Allan. Welcome.

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Ms. Elyse Allan (President and Chief Executive Officer, Toronto Board of Trade): Good morning. Thank you for the introduction. It's a pleasure to be here.

I'm president and CEO of the Toronto Board of Trade. With me today is Terri Lohnes, our chief economist. We appreciate the opportunity to present our priorities for the 2002 federal budget.

There's certainly been a profound and permanent change in the global economy in the wake of the tragic events in both New York and Washington. Like other nations, Canada faces unprecedented economic challenges in terms of security, movement of goods and people, and bolstering business and consumer confidence in a time of extreme vulnerability and volatility.

The concern over the performance of the Canadian and global economies has elevated the need for a new federal budget that restates our national fiscal priorities. The federal government must use the budget as an opportunity to address these concerns and offer a short and longer-term vision for Canada's economic health.

The federal government faces a demanding task of tabling a budget with less fiscal flexibility than had been available in previous years. Priorities will have to be set that demonstrate a commitment to prudent government expenditures—expenditures that translate into economic growth.

Prior to the events of September and the further slowing of the economy, the Toronto Board of Trade had advocated strongly for the federal government to take the lead in fostering urban competitiveness. This role remains not only appropriate, but even more necessary than before. Recent events have highlighted both the vulnerability of cities and their importance to national and international economies. Now more than ever the federal government must show its leadership and support for city regions.

Canada's seven largest urban areas account for roughly 46% of the nation's GDP. The Toronto region alone accounts for almost 20%. Employment in these cities represents close to half of the national total. They are the leading centres for industry clustering. They are the drivers of economic growth.

When urban centres thrive, government benefits through increased revenues and the associated ability to pursue a range of public policy priorities. If this vitality diminishes, so does government's ability to meet broader priorities. Simply put, strengthening our cities benefits all Canadians.

It is not true, however, that all levels of government benefit from economic growth in our cities. Over the past decade, while federal and provincial revenues were escalating, revenue in Toronto remained flat. Wealth was being generated in Toronto, but little remained here. The city has not benefited proportionately from the wealth it created.

Businesses that contribute to the success of Toronto, and by extension the success of the country, expect that government will in turn support the competitiveness of the city, creating a virtual cycle of success. Businesses will not invest in Toronto if governments are not prepared to do the same. Failure to invest on either part will set in motion a vicious circle of decline.

The Toronto Board of Trade urges the standing committee to support strategic investments in all our city regions. The board believes investment must target infrastructure renewal, support the liveability of our cities, and create a positive fiscal environment.

On infrastructure, the board urges the federal government to invest in transportation, transit in particular. In a Toronto Board of Trade survey of senior executives across the GTA, reliable and efficient public transit was considered very important to the competitiveness of the city. Yet few thought our system was excellent. There is a clear divergence between what Toronto has and what it needs to support business and hence economic growth.

More than 2.6 million more people are expected to populate the GTA over the next 30 years. Congestion will worsen unless the federal government, in partnership with other levels of government and the private sector, invests in roads and public transit. For Toronto this would mean federal support for TTC and GO. Investment in public transit was a Liberal election commitment last fall and is an election commitment that must be fulfilled.

Toronto's waterfront also cannot be ignored. The federal government must follow through on its $500 million commitment to revitalization, and provide leadership in moving this incredibly important initiative forward.

Last, lack of affordable housing continues to be a pressing concern that diminishes urban liveability—a concern also raised in the government's election platform last fall. Yet Canada has not moved forward on developing a national housing strategy in response. The rental market in urban cities across Canada, Ottawa and Toronto in particular, is increasingly constrained across all income scales. Clearly without improved access to affordable housing, the attractiveness and liveability of our cities will erode further.

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We call on the federal government to initiate a national housing strategy with specific emphasis on urban centres. This is critical to our continued economic success.

I'll close with what the board considers the linchpin recommendation—the need for continued competitive fiscal policies. These will ensure our cities and our nation have the best foundation possible to manage economic uncertainty and build future prosperity.

The board's competitiveness survey identified taxes as the top competitive disadvantage for business growth in Toronto and also cited it as a number one area for government action. I want to take the time to thank this committee for supporting tax reductions in the past and also acknowledge the commitments made by Minister Martin in his mini-budget last year to further reduce this burden.

What we have heard back from senior business leaders suggests we aren't quite there yet. We are definitely in the pack and we're competitive, but we are by no means leading the pack.

Our members have told us quite convincingly that taxes do matter to their businesses. It is encouraging to see the government take further actions to address this competitiveness killer. I strongly urge this committee to recommend that the government continue to reduce taxes for businesses and individuals.

The board does recognize the challenging circumstances the government is facing in light of recent world events and a slowing economy. We know this means the fiscal flexibility of the past is reduced, and we continue to support the government's objective of balanced budgets. So setting priorities for this budget cycle is a Herculean task indeed, but the immediate challenges should not inhibit the government's ability to set out longer-term priorities for the economy.

The board believes strongly that the federal government should and must do this, and that investment in our urban centres must be part of that priority setting.

Our cities are at a difficult juncture. While they are not the top-ranked cities in the world, they are nonetheless strong contenders to be at the top, but only if the right investments are made, if the right economic and tax environment is created, and if their citizens are engaged in a fulfilling and stimulating urban environment. I believe the federal government can make this happen for the benefit of all Canadians.

Thank you.

The Chair: Thank you very much, Ms. Allan.

We will now hear from the Greater Toronto Home Builders' Association: Patrick O'Hanlon, president of GTHBA and president of Angus Glen Developments; Peter Gilgan, president and CEO of Mattamy Homes; and Jim Murphy, director of government relations. Welcome.

Mr. Patrick O'Hanlon (President, Greater Toronto Homebuilders' Association): Thank you very much. It's a pleasure to be here representing the industry that's keeping our economy going.

My name is Patrick O'Hanlon, and I'm president of the 1,100-member Greater Toronto Home Builders' Association. To my right is Peter Gilgan, CEO of Mattamy Homes, the GTA's, Ontario's, and Canada's largest builder of new homes. GTHBA's director of government relations, Jim Murphy, is also with us.

I would like to use the short time provided to us to speak about one issue, and the biggest issue that's impacting our industry here in Toronto. That's the federal goods and services tax on the new home building industry.

First, a little about our contribution of our industry to the GTA, Ontario, and national economies. According to CMHC, every new home generates 2.8 jobs. This means that for each of the last two years, our members generated over 100,000 person-years of employment for just the GTA.

New home construction in the GTA in 2000 accounted for $6.2 billion of activity. We are, quite simply, one of the largest industries in this country. Because we do not build or manufacture at one assembly plant, but rather at literally hundreds of sites across the GTA and thousands across the province, our economic contribution and importance are often taken for granted.

You should all have before you a report entitled The Effects of GST on the New Housing Market in the Greater Toronto Area. Peter and I will highlight some of its key findings, and I will address our three recommendations. I strongly encourage you to read this report—you've probably already read it—because it is the most thorough report undertaken on the GST and the new home building industry.

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In 1991 construction of new homes was included as part of the GST. While buyers of new homes did receive a 2.5% rebate on the GST to try to account for the impact of the former federal sales tax, or FST, the 2.5% rebate did not truly reflect our industry's tax environment under the FST.

Land and labour were not taxed under the old FST. Under the GST, they are. In such high cost centres as the GTA or the lower mainland of B.C., this has a dramatic effect. In fact, our study notes that the effective GST tax rates on new homes in the GTA is 5.6%, while for the rest of the country it is 4.7%.

What is worse from our standpoint is that the 2.5% rebate applies only to homes priced up to $350,000, with a clawback provision provided for homes priced between $350,000 to $450,000. The rebate is reduced on a sliding scale, so for homes priced above $450,000, there is no GST rebate.

In 1989 the Department of Finance stated that government would review this threshold at least every two years and adjust them as necessary to ensure they adequately reflect changes in economic conditions and housing markets. More recently, in response to a GTHBA federal election survey last year, the Liberal Party stated that a new Liberal government would be open to reviewing the current thresholds to determine whether they are appropriate.

Since 1991 there has been no review. There has been no indexing of either the clawback provision or the $450,000 maximum. We are here today to ask that this be done. Today the GTA accounts for 16% of Canada's population, and 23% of all housing starts in this country, but a whopping 31% of GST revenue on new homes. Last year, $1.2 billion was generated nationally from the GST on new homes, nearly $400 million in the GTA alone.

I would like to have Peter make some comments now on the unfairness of the tax and how it is applied.

Mr. Peter Gilgan (Representative, Greater Toronto Home Builders' Association): Thanks, Patrick.

I guess the first thing to understand about the GST is this idea of the clawback provision. We don't know where the thresholds originally came from in 1991, the $350,000 and $450,000. What happens is that, effectively, the rate of GST taxation on a home priced between $350,000 and $450,000 is actually 15.75%. That's the effect the clawing back of the rebate has on homes in that price range.

It's clearly not a progressive tax. For a home priced up to $350,000, the effective GST rate is 4.5% or 4.25%, something like that. Then between $350,000 and $450,000, the effective rate jumps to 15.75%. Thereafter, it drops back to the 7% rate.

To use one example of what that means, if you take a house at $350,000, the net GST after the rebate is $15,750. It's $15,750 worth of GST payable on that home. If you raise the price by only $10,000, to $360,000, based on the sliding scale, the GST is now $17,325. So the marginal tax rate paid on that $10,000 is $1,575, or 15.75%.

Of course, that's more than double the rate that people think it is, of 7% on new homes.

What's the impact? Who cares? What's happening is we've seen over the last 10 years that the market has moved away from new homes priced above $350,000. The market has in fact moved toward the resale market.

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In that really stimulating pamphlet we handed out, there's a little bar graph on page 6. It indicates that in 1991 there was a relationship between new homes and resale homes in that price bracket in that new homes accounted for about 80% as many sales as resale homes in that “middle management” price bracket, if I can use that word here in Toronto to describe that price range of $350,000 to $450,000.

What that ratio is now is that for every resale, there are only 40% as many sales of new homes. Clearly the market has figured out there's too much tax in new homes and they're moving toward resale homes. Of course, a resale home creates something like three-quarters of an hour's worth of employment when it's sold. A new home, as Patrick has pointed out, creates 2.8 person-years of employment. So we think—and we have a prejudice, of course—new homes are a little better for our economic activity.

Generally, what happens over the longer term is it affects our housing stock, and in a NAFTA world, it affects our competitiveness to attract new industry. I know from personal experience that when people are coming to look at locating in a region, the decision-makers, frankly speaking, probably can afford homes above $350,000. The people Intel sends to suss out the reasonableness of locating a new plant here in the GTA can probably afford a home over $350,000.

I know of one very clear example where in Milton we lost an investment opportunity for a substantial number of high-paying high-tech jobs, in part because the decision-makers were not impressed with our new housing stock availability or pricing for themselves and their families.

So we would suggest that over the longer term, there is a real impact. Let's call it what it is. It's a luxury tax. The fact that GST is 7% on homes at any price range...but compare it with what the FST rate was. The net effective rate on housing in Toronto before 1991 was about 2.5%. So it's raised to 4.25%, 4.5%—fine. And if we want to tax homes over a certain price point—half a million dollars or whatever—at a luxury rate, great. But we suggest that to take that really medium price of $350,000 to $450,000 and have that very regressive rate of tax of 15.75% is really something that is not for this country.

Mr. Patrick O'Hanlon: Thank you, Peter.

I'd just like to quickly summarize with our three recommendations. I'll go right to them.

First, we recommend the current clawback provision for homes priced between $350,000 and $450,000 be eliminated.

Second, we recommend a new threshold of $500,000 be established. We have provided two options for application—that those homes priced below $500,000 receive the full 2.5% rebate, and homes priced above $500,000 receive a rebate for the amount below $500,000, or that there be no GST rebate for homes above $500,000.

Our third recommendation is that the new threshold be indexed annually, just as the federal and provincial governments have done with the personal income tax system.

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You will see under question 9 the financial impact of our recommendations. We strongly believe they speak to tax fairness and to a truly progressive tax system.

Thank you very much for your attention today, and we hope you buy a new home in Toronto.

The Chair: Thank you very much.

We'll now hear from the Direct Sellers Association, with Mr. Paul Thériault and Mr. Jack Millar. Welcome.

Mr. Paul Thériault (President, Direct Sellers Association of Canada): Good morning, Mr. Chair and members of the committee. Thank you for hearing us this morning.

Jack Millar is with me. He is a tax counsel to the Director Sellers Association of Canada, and I'm the president of the association. We will be making one presentation.

The Direct Sellers Association of Canada, the DSA, was founded in 1954. It is the national association of direct selling companies and their independent sales contractors, which we call ISCs. The mission of the DSA is to further enhance trust, confidence, and growth in the Canadian direct selling industry through self-regulation and ethical conduct.

[Translation]

The association has 50 member companies as well as 47 associate member companies, all of which are committed to following the exacting standards of our code of ethics and code of business practices. These codes, which apply to direct selling practices used in the marketing of products and services, provide an extremely high level of protection for consumers and the general public.

[English]

In Canada ISCs sold more than $1.6 billion of retail goods and services during the last year. The direct selling companies and their ISC market distribute a wide variety of products and services such as cosmetics, personal care items, home appliances, houseware specialties, household cleaning products, candles, natural health food products, toys, educational products, and telecommunications services, just to mention a few.

[Translation]

The association shares its expertise with all levels of government. For example, in terms of public policy, briefs and comments were submitted on bills, regulations and policies concerning finance, revenue, health and international trade at the federal level, concerning consumer protection and labour standards at the provincial level, and concerning municipal by-laws as well. In addition, it strives to make people aware of the principles established under the Competition Act through its link to the Competition Bureau.

[English]

More than one million independent sales contractors across Canada use this business opportunity to promote and sell products and services offered by our member companies. Of these, 75% are women, and 50% are employed part- or full-time in addition to their involvement in direct selling. The strength of direct selling lies in its tradition of independence, its simplicity, and its commitment to a free market system, providing accessible business and career opportunities to people whose entry is not restricted by gender, age, education, or previous experience.

It is a significant fact that direct selling is a manageable economic opportunity that can further family income with minimal disruption and minimal investment. This opportunity is accessible to all women and men everywhere in Canada whether they live in urban or rural communities.

Here is a summary of our recommendations. The DSA believes the following recommendations will assist the committee in preparing a pre-budget report that ensures that Canada remains a major player in the current economy, provides Canadians with an equal opportunity to succeed, and creates a socio-economic environment where Canadians can enjoy the best quality of life and standard of living.

The first recommendation is for maintaining competitiveness by reducing taxes. The DSA recommends that additional personal and corporate tax reductions be implemented immediately, that corporate tax rates be cut 6% immediately as opposed to the proposed 2% per year over the next three years, and that personal income tax rates be further reduced 1% for each marginal tax bracket.

These actions would contribute to the long-term strength of our economy, and, as acknowledged by the Honourable Paul Martin, will also provide stimulus in the short term, when we need it, by putting more money in the hands of Canadians by spurring business, sparking investment, and creating jobs.

The second recommendation is for ensuring Canadians are adequately saving for retirement. The DSA recommends the introduction of retirement savings plan alternatives such as the tax-prepaid savings plan, which is called a TPSP, and increasing the current RRSP contribution limits to $17,500.

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Unlike many employees in the public and private sectors, self-employed persons such as independent sales contractors do not have company or government pensions to rely on to satisfy their retirement needs, and they rely entirely upon their own savings. Currently, the only government-sponsored retirement savings alternative available to most Canadians is a registered retirement savings plan with a maximum yearly contribution of $13,500. Recent studies have shown, however, that the current RRSP system is not adequately or effectively enabling Canadians to satisfy their objectives of providing themselves with a secure retirement.

The third recommendation, as stated here, is “Job Creation and Transitioning to Independence”. We recommend that existing social programs be amended to allow transitional relief for all individuals moving from a position of dependence to a position of independence by operating his or her own small business. We believe it is important for the government to understand that the direct selling industry is a vital part of this small business sector in Canada. We have a tremendous capacity to create jobs, to reduce dependence on social assistance programs, and to provide accessible earning opportunities with little or no investment required for a broad spectrum of Canadians.

The accessibility of these earning opportunities is highlighted by the fact that 57% of all ISCs have only a high school education or less. One of the cornerstones for success in the direct selling industry has been the quality and availability of training for independent sales contractors, who learn to properly present the products, guarantees, and business opportunities of the companies they represent. We truly believe the business opportunity provided by the direct selling industry is an antidote to poverty.

Recommendation four is for providing GST/HST relief for natural health products. The DSA recommends that the Excise Tax Act be amended immediately to zero-rate all natural health products. Unlike food products and prescription drugs, which are zero-rated under the Excise Tax Act, natural health products are generally subjected to GST/HST. Given the benefits these products possess, the DSA recommends that the Excise Tax Act be amended to zero-rate all natural health products. This would effectively lower the cost of using such products and encourage more Canadians to manage their own health and dietary needs, preventing unnecessary illness and ailments and freeing up Canada's provincial health care system for more productive and efficient use.

Under Health Canada's 2001 proposed regulatory framework for natural health products, natural health products will no longer be regulated as food or drugs under the Food and Drugs Act. Rather, these products will be subject to a separate set of regulations designed especially for natural health products.

The fifth and last recommendation concerns the GST/HST and the direct sellers mechanism. The DSA recommends that the direct sellers mechanism be expanded so it will be equally available to direct sellers and ISCs who operate on a sales agent basis. Currently, only direct sellers and ISCs who operate on a buy-and-sell basis may use the direct selling mechanism.

The direct selling mechanism is a classic example of government and business working in partnership as they have developed a policy that is beneficial to consumers, the government, the direct selling industry, and more than one million ISCs across the country. This mechanism is based on the prior collection of GST/HST on the suggested retail price, with the result that there is a cashflow advantage to the government and that there is no underground economy with respect to GST/HST in the direct selling industry.

The direct selling mechanism has significantly reduced government administrative costs by negating the need for ISCs to be GST-registered while maintaining the same level of GST revenues and allowing more tax bang for every administrative buck.

The Direct Sellers Association of Canada appreciates the opportunity to appear before the committee and believes its recommendations are consistent with the committee's objectives in preparing a pre-budget report. As always, the Direct Sellers Association of Canada is prepared to provide support to the government to help achieve these goals.

The DSA and all its members wish to thank the Standing Committee on Finance for allowing us to participate in the 2002 budget-making process.

[Translation]

Thank you for your attention.

[English]

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

We will now hear from the Canada Council of the United Brotherhood of Carpenters and Joiners of America, with Eddy Thornton and Charles Calligan, president. Welcome.

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Mr. Bud Calligan (President, Canada Council of the United Brotherhood of Carpenters and Joiners of America): Good morning, Mr. Chairman and committee members.

My name is Bud Calligan, and I am president of the Canada Council of the United Brotherhood of Carpenters and Joiners of America, as well as the secretary-treasurer of the Carpenters' District Council of Ontario. With me today is Mr. Eddie Thornton, executive director of Carpenters' Local 27 Training Centre.

The Canada Council of the United Brotherhood of Carpenters and Joiners of America represents over 45,000 individuals across Canada, with members in all provinces. Our membership is made up of the following trades: carpenters, drywallers, acoustics mechanics, millwrights, floor-covering installers, caulkers, pile drivers, and industrial and shop workers.

We are pleased to be part of this year's pre-budget consultations and to have the opportunity to speak to you about how we can secure Canada's place in the new economy and ensure an even better quality of life, with equal opportunity for every Canadian.

The proposals we bring forward to this committee touch on each of these themes and are based on investing in people and industries that drive our economy. The recommendations we put forward deal with financial incentives to support skills development; further improvements to employment insurance; financial support for the Red Seal program; infrastructure renewal, including environmental retrofitting; affordable housing; and cross-border trades mobility. They speak to stimulating our industry and providing valuable employment for our workers, and address key components of Canada's infrastructure.

I would like to focus the time I have on an area announced by the federal government in the throne speech, the skills agenda, which is of great concern to our industry. First, I would like to acknowledge the government's response to a number of issues we have addressed in the past.

On the elimination of the EI intensity rule and the clawback, both of these measures had a punitive effect on our members, and have served no purpose for the government.

On the re-establishment of the Canadian shipbuilding policy, we appreciate that the government has heeded our advice and acted. That said, there is much more work that needs to be done.

The Minister of Human Resources Development, as well as a number of our cabinet ministers, have acknowledged the critical skills shortage facing our industry that we've been talking about for some time now. In fact, the minister has pointed to a Conference Board of Canada forecast that predicts Canada could be short one million skilled workers by 2020.

The answer to this crisis is not as simple as opening the door to increased immigration of skilled workers. The answer is to provide opportunities for the many Canadians who would like the opportunity to pursue careers in the trades.

We welcome the government's renewed interest in skills development. However, we need action today on the skills agenda to ensure that our industry remains competitive and that there are training and employment opportunities for Canadians in the construction industry.

Addressing the mounting skill shortage is made very difficult due to three sets of obstacles that have prevented people from securing training opportunities in the trades: one, the lack of financial support to provide the training programs; two, the lack of income support for individuals seeking training; and three, a failure to understand the unique characteristics of the construction industry in program design and delivery.

We believe the federal government's legislative withdrawal from training was a mistake. The changes to EI and labour market development have eliminated much of the government funding and structures previously in place to support training. The problem is most pronounced here in Ontario. We acknowledge that the federal government is hesitant to hand over training to the current Ontario government, but this has left an absolute void of government-sponsored training.

The government is unable to uphold its partnership role, leaving it to tradespeople to carry the burden of the industry. We know for a fact that millions of training dollars were returned to HRDC this past year, instead of being used to help address the skills need of our trade and the industry.

As it stands now, industry foots an even greater majority of the costs of apprenticeship training, with little or no support for new entrants. This breakdown is outlined at the end of the brief. In this light, we invite the federal government to use the full extent of the tax system and the EI Act to step into this void and support skills development.

As we've explained to the committee in the past, we have a well-developed training infrastructure in place to manage the skills needs of our tradespeople and our industry partners. Our members make a per-hour rate contribution to a training trust fund. These deductions apply to all workers, as long as they're employed in their respective unionized sectors. These funds are designated for the subsidization of in-class apprenticeship training and other specialized journeyperson upgrading.

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The government has repeatedly announced its desire to renew Canadians for saving towards lifelong learning with a matching contribution. Our trades people are already doing this. We would ask the committee to recommend that the federal government establish a program to match the contributions of tradespeople to training trust funds recognized by Revenue Canada.

In past partnerships with government our training infrastructure has opened the door to persons who might otherwise not be able to enter the trades through the traditional route. Through pre-apprenticeship programs we have been able to provide opportunities to underemployed persons, youth at risk, aboriginal youth, and others disadvantaged by the standard entry process. But these opportunities are increasingly rare because of a lack of training funding and income support for the potential trainees. Many pre-apprenticeship opportunities are weeks in length with no income support. It is only after a person secures an apprenticeship that they receive a portion of a journeyperson's wages. Many of these individuals fall through the cracks in the EI system. Either they don't have the required attachment to the workforce for EI benefits or they are currently employed and are automatically disqualified under the voluntarily leaving employment provisions of the acts.

Section 29 of the EI Act allows for persons otherwise disqualified from receiving EI income benefits by virtue of voluntarily leaving their employment to qualify if they are directed to a course of instruction referred by the EI commission to promote training and upgrading skills. We have a number of young Canadians who are waiting for the opportunity to enter pre-apprenticeship programs to then secure apprenticeship opportunities, but they currently don't qualify for income benefits, and there's no funding available for us to run the programs. We are prepared to be part of the solution if government is willing to pay its share of the costs. We cannot, nor should our industry partners be expected to, foot the bill.

We would ask this committee to recommend to the government that the rules and interpretation of the provisions of EI income benefits for those voluntarily leaving their underemployment to pursue a career in the skilled trades be exempt from the provision.

In addition to this, we would ask that the two-week waiting period for apprentices during their in-school term be removed.

These two measures are both within the jurisdiction of the federal government and will be valuable pieces in attracting new people to the trades.

The third obstacle is a lack of recognition of the multi-employer structure and the collective initiative approach that characterizes our sector. HRDC has chosen an individual base model that has proven to be extremely onerous and administratively unmanageable for both training entities and employers in the construction industry.

We propose that a similar model be retained for some sectors, but allowances must be made for collective initiatives, such as through training trust funds. For instance, assistance should be provided on behalf of a group of individuals through the training trust fund, rather than having each potential trainee negotiating separately with HRDC officials. The same should apply in relation to construction employers and the wage subsidy, as an example. The funding would cover the same cost. The result would be a more efficient and cost-effective route to employment and training.

Mr. Chair, we feel we will never meet the challenge of our skills shortage unless the federal government takes bold steps to work in partnership with the construction industry. We don't need moral support. We need financial support and workable programs that don't marginalize our workforce and those attempting to secure a career in our trade.

Thank you, and we would be pleased to answer any questions you have.

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

We will now hear from the Co-operative Housing Federation of Canada, senior consultant Mark Goldblatt and board member Donna Charbonneau. Welcome.

Ms. Donna Charbonneau (Board Member, Co-operative Housing Federation of Canada): Thank you very much.

I'm the regional director for CHF Canada representing Ontario. I'm also a member of the executive committee and the treasurer for the federation.

Today our remarks touch on the need for affordable rental housing, the role non-profit housing co-ops can play in meeting that need, the necessity of direct intervention by the federal government, and the importance of any program introduced meeting the needs of aboriginal households living in urban areas.

Canada is in the midst of a full-blown rental housing crisis. This crisis has two faces. First, there is an absolute shortage of rental housing. Second, there is an affordability crisis being experienced by moderate- and low-income households.

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The shortage of rental housing is known by everyone trying to find a unit to rent. Vacancy rates are at an all-time low in many parts of the country. For 22 of Canada's 26 major urban centres rental vacancy rates dropped in 2000. The vacancy rate in Ottawa was the lowest at 0.2%, a figure that for all practical purposes is zero. Even in cities with a history of healthy rental markets, such as Montreal, the vacancy rate dropped sharply in the past year, from 3% to 1.5%.

Early in the 1990s, when federal government financing for social housing was terminated, the private development industry claimed they could pick up the slack by building rental housing both faster and cheaper. In the end, the private development sector has produced only a handful of units. In fact, in some of the cities growth in rental housing has been negative, as a result of the demolition of existing rental stock, as well as conversions to condominiums. The private development industry has defended itself by saying that it cannot make any money by building rental housing for any but the very high end of the market, if at all. We in the non-profit rental co-op sector agree. It is not possible to build rental housing today in Canada without government assistance. With the private development industry now asking for subsidies in one form or another, it is clear that for the foreseeable future senior levels of government in Canada have to come up with supply subsidies if new rental stock is going to be supplied at market rents.

I want to move on to the more pressing problem of the affordability of market rents by moderate- and low-income households. Over 800,000 Canadian households find themselves paying more than 50% of their monthly income for rent. This is the face of poverty. These households cannot get through the month without visiting a food bank. The federal government has pledged to address the issue of poverty in Canada, especially the issue of child poverty. Faith leaders and others have identified affordable rental housing as one of the key factors that can lift people out of poverty. The government needs to address the affordability crisis by funding a long-term rent supplement program that provides rent geared to income subsidies for low-income households that cannot afford market rent.

Mr. Mark Goldblatt (Senior Consultant, Co-operative Housing Federation of Canada): The next major issue we wanted to touch on is how the affordable rental housing program will be delivered when it is introduced.

In the past such programs have been delivered primarily by the not-for-profit housing sector. We understand that the federal government is contemplating opening up the new program to delivery by the private sector. It's hard to understand the thinking behind this or how it can be justified. Both the private and non-profit sector basically face the same capital costs and the same operating costs, although the private sector must build the developer's profit into their cost structure. Therefore, the subsidy requirements will be the same or somewhat lower for non-profit developers.

But there is a clear difference in the benefits delivered. Non-profit rental co-ops and other types of non-profit housing provide rental housing at cost on a permanent basis, something no private developer could agree to. In addition, rent supplements for low-income households living in non-profit housing are cheaper over time, because the subsidies needed to bridge the gap between what low-income households can afford and break-even rents is lower than the subsidies needed to keep up with market rents in the private sector. For this reason, we feel that at least half the budget under the new program should be set aside for delivery by the non-profit housing sector.

We feel very strongly that provincial governments need to participate in the creation of affordable rental housing. This is not just a federal issue, but we know that not all provinces will be able to afford or be willing to match federal funds made available. In such situations the federal government must be willing to act unilaterally. Where provinces do not participate, the federal government should not be expected to raise their expenditure in those provinces, thereby rewarding them for not participating, but the promised level of federal spending should still be delivered. The result would, of course, be fewer units, but it would see the federal government being willing to step up to the plate and do its share.

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Our final issue relates to how the new program will serve people of aboriginal ancestry living in urban areas. We know from the success of housing cooperatives targeted to aboriginal households that they can provide affordable housing and a measure of self-government. We urge the federal government to consult with aboriginal organizations to ensure that the new affordable rental housing program meets their needs.

We would like to close on a positive note. There are 2,150 non-profit housing cooperatives across Canada, which own 92,000 units. All of our co-ops are dedicated to serving people of moderate and low incomes. We have achieved this result by combining our own efforts with expenditures by the federal government and the provinces. This partnership has put Canada in the forefront of countries with a national housing program. Our members already have affordable housing and we know what a difference it can make in people's lives. We don't think the issue facing us today is what policy direction the government should take, but whether the federal government and the provinces have the political will to extend a solution that already works.

Thank you.

The Chair: Thank you very much, Mr. Goldblatt, Ms. Charbonneau.

Now we'll proceed to a question and answer session. There will be a five-minute round for Mr. Kenney. Then I'll go to Mr. Nystrom and Mr. Cullen.

Mr. Jason Kenney (Calgary Southeast, Canadian Alliance): Thank you, Mr. Chairman.

Thanks to all of the panellists for your thoughtful presentations. It's challenging for us, the committee, with so many issues, to follow all of them. Certainly a lot of very detailed issues were presented to us here this morning.

As I only have a couple of minutes, I'd like to focus. We have to look at all of these things in the context of the scarce fiscal resources the government has available, of course. It goes without saying. In some submissions it did go without saying, unfortunately.

I'd like to direct my comment in particular to Ms. Allan from the Board of Trade. In your submission you called for additional tax cuts, which I strongly support as necessary to increase our standard of living and competitiveness. But you also called for increased infrastructure spending, which of course is important.

Let me say frankly that I think a special responsibility rests with representatives of the business community when they ask for additional tax relief, because they understand the importance of it, especially if they ask for targeted spending in particular areas. There's a special responsibility to tell us how we're going to pay for that, because the government is looking at a fiscal situation affected by the very serious possibility of a recession. This means a declining revenue picture, additional social expenditures. About 80% of the federal budget is on autopilot, that is to say, its entitlement programs or major transfers to persons or provinces can't be touched and are on automatic increase year after year. There's very little discretionary spending in the federal program spending envelope, once you take out debt servicing, OAS, CPP, GIS, CHST, equalization, and all the rest of it.

This isn't just directed towards the Board of Trade, but other panellists as well. You all have your own particular priorities, but as taxpayers, how would you advise us as parliamentarians and how would you advise the government to maintain a balanced budget, accommodate the imperative of renewed security spending, which I think we all agree is a new imperative post-September 11, and also accommodate all of the various requests for additional funding for social housing and training and new tax expenditures and infrastructure? This is a dilemma that we as parliamentarians in the government face.

My question is initially directed towards the Board of Trade, but anybody else could comment on this. You did say it's a herculean task. That's true, but that's a bit of a cop-out. Somebody has to actually do it. It's a human task. We have to make choices. What should they be?

Ms. Elyse Allan: As we said, we do appreciate that you have so many challenging priorities. Never understanding all the ramifications, what we can try to provide are maybe some guiding principles and share with you the information we have.

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Certainly when we go back to business and ask what critical things they need, what are the priorities that would drive our urban centres, whether it's here or anywhere across the province, to be competitive, we get information on that. Of course, if you ask business people if taxes will come up...it's interesting that it did come up yet again.

With taxes, I think what's important to note is that we are better than we were. There was a time, years ago, when we weren't even in the competitive realm, and we are now in a competitive bracket. So while we are not leading, we are at least in the game. I think that's very important.

Our comment on taxes, recognizing all the competing priorities this year and the unexpected ones, is that what we have to do is simply stay in the game. The business community is saying make us number one, make us number two. We're saying do what needs to be done to keep us competitive, relative particularly to our U.S. benchmarks. In that respect, we're somewhat competitive now, but to the extent that they keep moving, if they keep moving, we can't stand still. So we're not looking to be the best or first; we're looking to stay in the pack and keep our relative positioning, if not continue to improve it slightly.

Another very important comment with respect to infrastructure—and we've had these comments certainly with the Ministry of Finance, on several occasions, as well as with Minister Collenette—is that there is an incredible amount of capital in the private sector, and we continue to offer access to that capital so that we can leverage government dollars with public and private partnerships. We fully understand that there is not sufficient government funding available at the provincial or federal level to deal with the gaps that we see in infrastructure, particularly in the areas of public transit and transportation. That's certainly true in the city—I can't speak to other urban areas.

We recognize that, and as you look at investment in this area, we certainly encourage you to look at how you can leverage your investment through public and private sector partnerships, and find vehicles, and create easy vehicles, to get access to the private capital that's out there. We have brought the pension funds. We have brought all the banks to different meetings in Ottawa. We have had them down to Toronto, talking about different vehicles that could be created that would allow for more capital investment from the private sector. So I don't think you can ignore the area of infrastructure, but you can certainly leverage your investment much more if you think creatively about ways to include the private sector.

I'll stop there.

The Chair: Mr. Goldblatt, and then Mr. Thériault.

Mr. Mark Goldblatt: I'll be very brief.

In response to your question about how to pay for these kinds of initiatives, we want to say that we agree totally with the Greater Toronto Home Builders' Association that each unit of housing that is generated creates 2.8 jobs. So you get a ripple effect there in the economy in terms of jobs provided, and you get the positive impact on government revenues.

Mr. Jason Kenney: If I could ask a quick follow-up to—

The Chair: Mr. Thériault wanted to comment very briefly.

Mr. Jason Kenney: Excuse me.

Mr. Paul Thériault: Yes. Three of the five recommendations we made have little or no cost. The one concerning the direct-selling mechanism is just a way to get the tax. Right now, we know the mechanism works. We just want to broaden the scope of where it's being applied. So there's no cost to government in applying this recommendation.

As to the other one, concerning GST relief for natural health products, more and more people are starting to understand the value, but we still need to educate a lot, educate the population about the use of natural health products to help their health. So along the road, it will make it more beneficial and less costly for the health care system.

The third recommendation, ensuring Canadians are adequately saving for retirement, is based on a report by the C.D. Howe Institute. It's prepaid, actually tax-free. So in that sense, there's no cost for government.

Mr. Jason Kenney: My comments weren't directed at your submission, which didn't propose new program spending, but as one quick comment, I think any organization that comes here proposing new spending and tax cuts has a responsibility to tell us where to cut, because money can't come out of thin air. Organizations that want to be taken credibly in their submissions to us should tell us where they believe the trade-offs are.

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I have a quick question for the social housing coalition. You said in your submission that the private sector isn't generating enough new rental housing, and I agree. Investors in the rental housing business, apartment owners and investors, tell us that one of the principal reasons for that is the locking-in effect of capital gains taxation. The Canadian Real Estate Association, among others, proposed allowing an exemption from capital gains for investing in a similar property. So if you sold an apartment building, you could then put that money into a new one without losing 30% of it in capital gains on the way.

Would you support tax incentives of that nature to create a greater likelihood of private sector investment in rental housing?

Mr. Mark Goldblatt: At this point in time, we do not have a position on the taxing of capital gains. Perhaps our colleagues in the Greater Toronto Home Builders' Association might have a position on that.

Ms. Donna Charbonneau: It's an interesting subject that we could definitely bring back to the board—absolutely.

If I can add to some of what Mark was saying, when you house someone in affordable housing and fill that basic need, it also has a ripple effect on the human side. If you're housing a family, and they're well housed, then there's likelihood that they're not going to have to visit the hospital as often or have social problems. So it's not only a ripple effect on the dollar side, but also on the human side.

Mr. Patrick O'Hanlon: Could I comment? I'll be very brief.

We would be supportive, obviously, of the policies you're talking about. There are a number of federal tax policies in terms of depreciation, capital cost allowances, and what not, that many people who want to build new private rental construction will tell you are disincentives to doing that.

Part of that is, if you sell a profitable small unit, rolling that over into another rental unit is not allowed for, but under previous federal tax regimes it was. There are a number of policies and initiatives, and I know the federal government and the Department of Finance are very familiar with these. A lot of them are also coming to be part of the discussions around the affordable housing program, the $680-million program that has been talked about, particularly in terms of differences and how it should be spent between some of the provinces in terms of their agendas and how they feel the money should be spent and where it should be focused.

Mr. Jason Kenney: That's interesting.

The Chair: Mr. Nystrom.

Mr. Lorne Nystrom (Regina—Qu'Appelle, NDP): I would like to welcome everybody here this morning.

I have a couple of questions for the carpenters union.

Politics and governing is all about choices and priorities. Recently the federal Liberal government decided to make tax cuts a big priority, about $100 billion over five years. Also, they paid off billions of dollars on the national debt.

What kind of money do you think has to be spent in this country in terms of the housing industry in general, and social housing in particular, in terms of stimulating the economy and providing jobs? The co-op housing association might want to comment on that as well.

The other thing I'd be very interested in is the problems you mentioned about training in Ontario, in terms of the provincial government. You made reference to the current government in Ontario. The current premier may not be premier very long. I understand there's a press conference this afternoon, and there may be a change. But—

The Chair: I want to confirm that in fact the Premier of Ontario has resigned. On behalf of the committee, I'd like to thank him for the service he has given to the people of Ontario for many years. We wish him the very best in all his future endeavours as he returns to private life. Public service is extremely important, regardless of which party you may belong to, and for his service, we're indeed very grateful.

Mr. Nystrom.

Mr. Lorne Nystrom: Thank you very much, Mr. Chair.

I'd like you to comment on the problems with training regarding the current provincial government in Ontario. Is that a problem you're seeing right across the country, in other provinces as well, in terms of the transferring of power from the federal government to the provinces for training, or is it peculiar or particular to the province of Ontario?

Mr. Bud Calligan: I'd like to speak largely for the province of Ontario. It has created a major void here. Considering that we have the largest population and the largest number of apprentices, that has become a major problem with us, because there is no labour market agreement.

We are not necessarily in support of a labour market agreement. In the past, we seem to have had good partnerships with both the federal and provincial government when it comes to working together towards training. That seems to have evaporated. There has been absolutely no funding available for us in the last little while.

Eddie can probably speak more directly to that because he runs the largest training centre in Canada for the carpenters union.

Mr. Lorne Nystrom: Okay, thank you.

Mr. Eddie Thornton (Executive Director, Local 27, Canada Council of the United Brotherhood of Carpenters and Joiners of America): Thank you.

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My involvement in training and apprenticeship has been since 1979, and it was always very reasonable to work with the federal government up until three years ago. They got out of training and transferred agreements to respective provinces in Canada. Still to this date they have not signed an agreement with Ontario, and in the absence of an agreement, there's no provision for training of anybody of any dollars, other than for youth at risk, and with that there's too much administration involved, and it's not suitable for the construction industry.

We're still receiving some sort of apprenticeship funding from the province, but while the Province of Ontario claims they want to increase the number of apprentices, as recently as the past month they took away extra seats from us for the month of October, so we're caught in a dilemma. There's no federal funding, and the provinces are taking away seats, instead of increasing the number of seats they're funding.

The Chair: Mr. Goldblatt.

Mr. Mark Goldblatt: In answer to part of your question, from the Co-operative Housing Federation of Canada's point of view, Mr. Gagliano has tabled the proposal for a new federal affordable rental housing program of $680 million over four years. We appreciate Mr. Gagliano's going in that direction, because this is the first time in eight years that the federal government is returning to non-profit housing co-op development, but the actual number to address seriously the affordable rental housing Donna referred to would be roughly—we've called it the 1% solution—between $1 billion and $2 billion of increased spending by the federal government and a similar amount managed by the provinces. So we've called the $680 million, while it's very welcome, basically a down-payment on the need that's out there.

Mr. Lorne Nystrom: When you say $1 billion to $2 billion, is that over four years as well, or is it a different period of time?

Mr. Mark Goldblatt: Per year.

Mr. Lorne Nystrom: Oh, per year.

Mr. Mark Goldblatt: And we also talk about ramping up to that high level over a period of three to four years, not having that amount in the next federal budget.

Mr. Lorne Nystrom: How many jobs would that create in the country, roughly? Do the carpenters union people have an idea on that as well?

Mr. Mark Goldblatt: Per unit it's 2.8, regardless of who is building the unit. A unit is a unit, so it's 2.8 per unit, regardless of whether the private sector builds it or we do—the same ripple effect, the same stimulus to the economy.

We did talk, you might recall, in the sixties and seventies about pump priming, using the housing sector to stimulate the economy. That was an entrenched point of view in the sixties and seventies, but it's not been in the forefront of federal housing policy. Perhaps we should reconsider that position.

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

Mr. Murphy, final comment.

Mr. Jim Murphy (Director of Government Relations, Greater Toronto Home Builders' Association): I think Patrick is going to talk about our GST.

Mr. Patrick O'Hanlon: I wanted to commend the federal government. The Greater Toronto Home Builders' Association has entered into an agreement with both Minister Stewart's office at HRDC and Minister Caplan's office at Citizenship and Immigration for a temporary foreign workers program to meet some of the shortages we have in the construction sector here in the greater Toronto area. So I wanted to commend the federal government, and those two departments and ministers in particular, for moving that project along.

We still have the shortages. In the greater Toronto area, last year was a record level for us in sales. This year will be one of the top five in sales. So over the next couple of years there will still be a lot of building activity as a result of the sales figures we have.

We still have some shortages in certain trades, so training, obviously, hiring Canadians, and promoting jobs to Canadians in our schools are important and should be the number one priority. Historically, our industry has depended upon immigration, so we wanted to commend the federal government for that.

On the issue of jobs, obviously, our view is that through the tax system you can create affordability. Mortgage rates are at an all time low—keep those lower. That's part of the overall fiscal policy, which is staying debt-free, reducing taxes, putting more money into people's pockets to buy things like homes, which are their largest purchase. Our issue is just one of fairness. For the Toronto area there are larger costs and more things included in the GST. Since it's been done with the federal income system, we think it should be extended to other taxes that are in place, such as the GST on new housing.

The Chair: Thank you, Patrick.

Mr. Peter Gilgan: Going back to Jason's and Lorne's comments about job creation and government stimulus to the economy, there's nothing that can stimulate the economy more than tax incentives to keep housing affordable. Every $5,000 decrease in a housing unit creates 3,000 more potential buyers.

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What we're trying to do is keep our housing affordability at an all-time high, unlike the situation during the recession of the early nineties. We're doing this by several methods. First, we have doubled the number of builders we had in the early or mid-eighties. Also, in Toronto we have doubled the number of sites. We now have around 600 sites across the GTA, making it a very, very competitive marketplace. There's no place to increase profit margins because of the competitiveness.

What we're trying to do is not increase our prices such that we shut people out of the marketplace. We're trying to take it from another approach, and that's through taxation. With 40,000 starts last year and another 40,000 projected for this year just in the GTA alone, we are still going at a very strong pace, unlike the high-tech and car-manufacturing sectors. The demand is there, and we're asking the government to keep the stimulus going and thereby help the whole country.

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

Now we'll hear from Mr. Cullen.

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

The Chair: You're going to use up just five minutes.

Mr. Roy Cullen: Five minutes? Yes, I have received the message. Thank you.

He's a very tough chairman.

I have a question for the carpenters and joiners—if we can get to it in a moment—on energy efficiency, but I have a general question I'd like to put out to the panel, to anyone who would like to have a go at it.

Here we are in Toronto, which is generally considered a high-cost, high-priced centre, and there are others as well. My question is, do you think the federal government should pay more attention to benefits, programs, and services that recognize the different cost and pricing structures?

I'll give you the reason for my question right now. We talked to the question of a clawback, which was a national issue, but the impact was particularly acute here in Ontario. There were members on this side who pushed hard for that. The intensity rule is important here, but it's more important out in Atlantic Canada. It was of particular benefit to the Ontario workers because the clawback was particularly burdensome if it was going to be limited to the level it was. When you talk to the home builders about your clawback, the $350 to $450, in many markets that's probably not an issue. I don't know.

So I guess my question is in that context, that as a general rule the federal government has avoided recognizing cost differences and pricing differences, perhaps because of complexity and regional squabbling. I wondered if any of you have any further views, because it's come up a couple of times roughly in that context and I'm wondering if we should be more sensitive to those particular differences across Canada.

The Chair: Who would like to start?

Mr. Patrick O'Hanlon: We were at a meeting last night on the issue of building an LRT system in Markham and extending that across the northern portion of the GTA all the way to Brampton. It was a very enlightening meeting, and it was extremely well done. There were people there from London, England, who had just gone though this process in several counties. The ability to add to the infrastructure of cities, to enable the movement of people, and to improve livability is a very important issue that's hitting our cities.

A person there who came up to me was from Local 183, one of the biggest unions—and we're proud to be here with Local 27 as well. They've sent a letter to the federal government asking that the government create a new department for urban planning and urban centres, seeing that about 80% of our population live in five regions in our great country. We have to approach our urban centres much more diligently. These are the cogs of our economy. In Toronto we have to make ourselves competitive, not just with the rest of our builders, but also with the rest of North America. We're seeing a lot of our trades, a lot of our people, moving to the States, and they're not coming back. These are the areas we have to concentrate on.

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Mr. Roy Cullen: Are there any other takers?

Mr. Mark Goldblatt: I'm not sure I understood your question completely, but I'll just say very briefly that I'll answer the question I didn't understand.

Mr. Roy Cullen: In a nutshell, there's old age security, the CPP, veterans affairs.... There are certain standard benefits. I haven't studied it extensively, but generally there's one benefit across Canada, whereas someone might live in a higher-cost jurisdiction or region.

Mr. Mark Goldblatt: Currently, when we talk about rental housing, we're talking about an issue that deals almost exclusively with our major urban areas, and that's because rents are high. They're high to begin with, and they're climbing faster than in any other non-urban areas. That's basically what our non-profit rental co-op housing issue focuses on, specifically those large urban centres.

The Chair: Thank you very much for your question, Mr. Cullen.

We'll have a final comment from Mr. Calligan, and then we'll go to Mr. Brison for the final question.

Mr. Bud Calligan: You had asked about some of the effects of the clawback. One of the other issues we had brought up was regarding the two-week waiting period for the apprentices. You heard the home builders say that we're losing some of our trades people. Both we, the industry, and the government invest an awful lot of time and money training people during an apprenticeship program. If we can't provide programs that keep those people's skills upgraded so they are more employable and if we don't provide incentives to get young people to come into the trades and stay in the trades.... As I said, we have a lot of unemployed young people in this country. We need the incentives there.

One real disincentive is the two-week waiting period for unemployment insurance. That's ridiculous. We ask young people to take an apprenticeship program, then we say as part of your apprenticeship you must go to trade school. So they have to leave their employment to go to trade school to get their training, and then for two weeks we don't give them any subsidy. In today's economy that's just not viable. Young people who have a young family and a mortgage to pay can't afford to go for two weeks without employment. That was never the case before. They used to get that two weeks, and now it's been clawed back.

It's really disproportionate the way we fund university students, the way we fund college students, and the way we don't fund apprenticeship training in this country. At the end of the day, the young people from apprenticeship programs are just as employable and just as important to the economy and to the well-being of the citizens of this country as people with a university or college education.

The Chair: Ms. Allan.

Ms. Elyse Allan: Thank you. I'll try to be brief because I know a number of people have commented.

Other than that, I think that on some basis salaries are commensurate with costs in urban centres as well. With respect to the people and their earning potential in many cases, if you look at GTA salary levels relative to other areas, you have people who have a greater earning potential, and therefore they are being covered in those earning years. But I do think that we have to focus on the attributes of a city in terms of who it attracts, what the competitiveness is there, and how we make sure that those people are productive and competitive. To that end, I think we need to ensure that we are dealing effectively with people who are immigrants to cities and that we are not only trying to offer subsidies to attract the immigrant population and to ensure that we can get them productive as quickly as possible.

Second, we would agree with many of the concerns raised about skills gaps, that is, shortages with respect to the number of skilled workers trained and the requirements cities have—and that gap is growing.

And third, there is the issue of housing. You can put all the support services in place you want, but if people don't have a home where we can deliver those services, many of the programs we offer become ineffective. To that extent, I think cities have a requirement that focuses on ensuring that people have homes and on ensuring that they have skills so they can be readily employed.

Rather than sort of levelling out other issues, I think that if as a government we focus on what the needs of urban centres are, we will find there are commonalities of needs across the country. How you then prioritize those needs might vary from Vancouver to Montreal, but if you ask anyone what the top four or five issues that confront a big city are, they'll be the same and they will be different from what perhaps confronts other areas of the country. If we can get those straight and then focus on a few of those areas, we can make great headway in keeping our cities competitive and therefore in getting return on that investment.

The Chair: Mr. Brison.

Mr. Scott Brison: The first question is one on urban policy in general.

Mark Twain once said that a bad job is one with lots of responsibility and no authority. That kind of applies to any leader of an urban centre in Canada right now, because you have at the end of the day the responsibility to meet some of the most important and most basic needs of an electorate or a constituency within a municipality or urban centre, but they don't really have the ability to raise the funds.

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I'd appreciate feedback as to whether you've considered, from the Board of Trade perspective—perhaps others have views on this too—the notion of a tax-free municipal bond approach as one vehicle for municipalities to better meet the increased levels of demands in their cities at a time when provincial and federal roles have been shrinking.

Ms. Elyse Allan: Over the past year and a half we've actually had an infrastructure financing task force where we brought together the leaders of all the major pension funds, along with the financiers from all five major banks as well as the business development bank and others. They've been meeting for about 18 months trying popularize this type of thinking.

There are many creative financing tools. Absolutely, the tax-free municipal bond is one of them. In Canada we have tended to use various forms of pure project financing, which quite honestly is beneficial to many of the banks but is limited in terms of its application, its breadth, in terms of the projects it can be used for. There is an opportunity to use tax-free municipal bonds as well as for other creative forms of financing.

Particularly in this province, many cities take issue with the Municipal Act. We've been lobbying aggressively to try to get changes to the Municipal Act simply to allow this type of creative thinking to happen, because right now people don't see it. It's not within their reach. You don't even get to this kind of thinking, because more creative forms of financing would be precluded by legislation. Changes are being made that would allow for more thinking like that.

Mr. Jim Murphy: To relate your comments to those of Mr. Cullen in terms of unique features about urban areas, as Elyse has said, we have not had a history here in Ontario with some of these tax systems.

The provincial government has just introduced brownfield legislation that allows for something called tax increment financing—which is very common in a number of U.S. cities—where property rates for a certain geographic area are frozen and then people can borrow against that. As Elyse also indicated, the provincial government will probably be coming out with a new Municipal Act this fall that will speak to some of the taxing powers of the municipalities also and probably provide some more flexibility.

Getting back to Mr. Cullen's point, federal tax policy obviously directly impacts on urban centres, particularly those like the greater Toronto area. Something like the GST on new housing, for example, may not have an effect in certain parts of the country, but in large urban centres like Toronto or in Vancouver and the lower mainland of B.C., it would have a distinct impact. Sometimes the uniqueness of our urban centres is necessarily reflected in overall tax policy. People in the Department of Finance in Ottawa want things to apply equally across the country, but there are unique circumstances in each urban centre.

The Chair: Mr. Goldblatt, final comment.

Mr. Mark Goldblatt: I'll comment very briefly on the fiscal capacity of municipalities.

The Conservative government in Ontario is in the final stages of downloading its non-profit housing programs to municipalities across Ontario. But as you said, they don't have the fiscal capacity. So a crisis is being created in here where the expense is being transferred to municipalities across Ontario, but they don't have the fiscal capacity to pick up those expenditures. Hopefully the rest of the country will not take this route. It will be replicated right across the country, because, as you say, the fiscal capacity is simply not there.

The Chair: Thank you very much.

Mr. Brison, did you want to ask one final question?

Mr. Scott Brison: One final question.

The Chair: He gets many final questions

Mr. Scott Brison: I have a quick question for the home builders.

In the last few months we've had an unprecedented reduction in prime rates, both in the Federal Reserve in the U.S. and the Bank of Canada. Isn't it true that no other fiscal stimulus would have as great an impact on your industry as this one provided by the monetary policy of both the U.S. Federal Reserve and the Bank of Canada, based on the degrees to which people finance their homes through mortgages?

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Mr. Patrick O'Hanlon: You're absolutely correct. Mortgage rates are one of the biggest stimulants for our industry. However, we have been going, over the last several years, with unprecedented rates. This is why you're seeing the level of sales and starts across the country that we're all experiencing. This is one thing we want to keep in policy. However, we have to keep going, because the world is changing. The economy is changing. Just to sit on one single rate or one single direction is not going to keep us at the top.

The Chair: Thank you.

On behalf of the committee, I want to thank you very much for your input. I want to say to you that this committee is going to remain very focused and disciplined on making sure sound economic fundamentals are held.

If there is anything we learned in analysing data over the years and over the past three decades, it's in fact to make sure that the economic fundamentals are sound. By that I mean not going back into a deficit. As you probably would know, going back into a deficit would have a negative impact on consumer and business confidence, not to mention the impact it would have on interest rates, which would have a direct impact on many individuals who appeared this morning.

One thing that was certain from your presentation is that you obviously have the best interests of Canadians, and indeed our country, at heart, as we do. I also believe that some of the issues raised, in reference to the creation of the type of human capital that is required in order to build a strong economy, have been duly noted, as have the comments about infrastructure.

Having said that, we have many trade-offs to make. The resources are limited, as you all know. We are not going through a recession, as some of the members have advocated. We may be going through an economic slowdown, which means that we have to look at trade-offs.

As you reflect upon what you have offered us, we also have to reflect upon what that is going to give. By that I mean we have to look at maybe delaying, deferring, or reallocating resources. These are going to be tough choices, but at the end of the day it's the only thing we can really do, because deficit financing is certainly not an option to this committee.

I want to thank you very much for your great contribution, as always, and for the great insight you have provided the committee. Thank you.

I am going to suspend for maybe five minutes and we will be back with out final morning session.

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The Chair: I'd like to call the meeting to order and welcome everyone here who's participating on panel three of this morning's session on Tuesday, October 16, 2001, here in Toronto.

We have the following organizations: Campaign 2000, Star Navigation Systems, Canadian Lightweight Materials Research Initiative, and Best Medicine Coalition.

As you know, I don't like interrupting people when they're making their presentations, but be very cognizant of the fact that we have allocated five to seven minutes for your presentation, and there are a number of individuals who would like to participate in this. Equally important is the fact that members of Parliament are really interested in asking you questions. So if we can keep to a tight time schedule, everything will work out just fine.

We'll begin with Campaign 2000, national coordinator Ms. Laurel Rothman. Welcome again.

Ms. Laurel Rothman (National Coordinator, Campaign 2000): Good morning. I'm glad to be here.

For those of you who may not be familiar with us, we're a broad coalition of more than 85 groups across the country. I always like to say there are not very many tables where autoworkers, faith leaders, housing providers, and health care workers sit around the same table. We're fairly diverse and we're all committed to continuing to keep the feet to the fire of various governments to the commitment to end child poverty by the year 2000, which as most of you know was the unanimous resolution by the House of Commons in 1989.

Let me also say we were quite encouraged by the recent commitments and statements by the Prime Minister in the Speech from the Throne that our goal should be that no child be excluded from opportunity because of the debilitating effects of poverty. So the commitment has been around, but the issue and child poverty is quite persistent. It was one in seven children living in poverty in 1989, and it still hovers at one in five. Unfortunately, we're still waiting for our most recent data from Statistics Canada. We expect it within a month.

It's probably important to put an international perspective on this, as well. Canada still ranks pretty high internationally, unfortunately. We're 17th out of 23 in the proportion of children living in poverty, according UNICEF.

I have a couple of more facts, just to remind you. We're talking about 1.3 million children living in poverty, many of whom have families in the workforce. More than 580,000 children live in families in which the parents together had a full year of employment, yet they were still poor. So I think we have certainly a long way to go, and I was intrigued and interested by the earlier conversation from the previous panel around training, housing, and labour-market issues, which we see as all integral to what's needed to significantly reduce child poverty. Indeed, we know it can be done. Many of the Nordic countries have done it, have brought the levels down to lower than 5%.

I also want to make a couple of other comments. There is ample evidence through population health research that income levels are strongly associated with factors that are critical to health and well-being. We have some specifics.

Children in low-income families are more than two and a half times more likely than children in high-income families to have a problem with one or more basic abilities—vision, hearing, mobility, and speech—and they're the kinds of barriers that carry on through life and need ongoing support. They're also twice as likely to be living in poorly functioning families than those of high-income families, and more likely to be living in problem neighbourhoods and substandard housing. So that gap between the rich and poor is a serious one.

What we've done is outlined in somewhat fuller detail some proposals we've worked on. One is a more comprehensive child benefit. I should certainly note that the introduction of the NCB, which will be up to about $2.7 billion by its full implementation in 2004, is slowly beginning to make a difference. We know the labour force is also a serious factor in what will make a difference.

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I also want to add one other quote from the Prime Minister, when he acknowledged that a generation ago Canadians set a national goal to eliminate poverty among seniors, and we've made significant progress. Now we must undertake another national project to ensure that no child suffers the debilitating effects of poverty.

Let me say we continue to need three things. We need a comprehensive child benefit, which will be in the area of $4,200 maximum per low-income child. We sketch out how that compares to what we do for a lone parent and one child in big cities versus a senior couple in cities, and you'll see there's a tremendous gap. We've sketched out what it might look like over time, the comprehensive child benefit.

I also want to add that we know that quality child care and affordable housing, which you heard about earlier, are also critical supports for young families. We are looking to the federal government to take leadership on those issues.

I'll stop there.

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The Chair: Thank you very much.

We'll now hear from Star Navigation Systems: Hilary Vieira, president; Viraf Kapadia, chairman and CEO; and Reg Tanner, who is manager of network services, MFP Financial Services. Is that correct?

Mr. Reg Tanner (Manager, Network Services, MFP Financial Services; Star Navigation Systems): That's right. I'm basically a partner with Viraf and Hilary on this project. They've asked me to speak on their behalf.

I'd like to thank you, Mr. Chairman, and the honourable members for inviting us to come and meet with you today.

Because of the shortness of time, we're going to show a very short four-minute video clip that will give you an idea what the Star systems will do. I'll follow it up with a very quick and short dialogue that will talk about some of the new developments on the product since September 11. We'll conclude at that.

[Video presentation]

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The Chair: We've never have had so much music at the finance committee.

Go ahead, Mr. Tanner.

Mr. Reg Tanner: Thank you, Mr. Chairman.

When the in-flight safety monitoring system patent was applied for over a year ago, additional functions were included in the patent and slated for future development. Since the attacks on the United States of September 11, these additional functions have been re-prioritized, a weight factor has been assigned with completion dates, and they have now been activated. It has become clear that the Star team sees these functions now as a priority.

There have been many statements made in the press about how to make the skies safer and get the travelling public comfortable with flying again. Star Navigation believes it can address some of these statements.

Here's what we are hearing. President Bush suggested that audio and video cameras be in the cabin and in the cockpit. He also suggested that there should be a way of flying or controlling the aircraft remotely; that with things like bacterial and viral threats, there should be a way to monitor cabin air quality; and that we should fnd a way to put the black box information on the ground in real time. The Star Navigation solution will result in the in-flight safety management system being able to deliver cabin and cockpit audio and video live to the ground.

The ISMS, as it's called, will be able to give carriers access to the cockpit and fly the plane remotely from the ground and take the controls out of the hands of terrorists.

Bacterial and viral fingerprinting are now under way to assist in containing and cleaning these agents and keeping passengers safe when they fly.

Remote real-time ground-based monitoring is available now, putting the black-box information in the hands of the carriers.

Fleet management by real-time monitoring of the aircraft components will help in parts replacement and reduce delays and cancellations on the ground, thus putting money back into the carriers' pockets.

This solution—the Star solution—is ready. Star Navigation technology is prepared to respond with a positive “yes” to these questions.

How will Star Navigation provide and deliver solutions that will support all these complex pieces? Partnerships are in place, with a global satellite communications provider named Global Star, high-speed ground-based access through MCI WorldCom, and financial programs for the airline industry through my company, MFP Financial Services. Star Navigation's own team of software and hardware engineers have completed the development of the products for certification.

Star Navigation has met with Transport Canada and Mr. David Collenette to discuss the certification of the ISMS system. And we'll have a very important task completed by the end of the year. We envision that we will be installing the first ISMS in an aircraft by the end of the first quarter of 2002. Star is on target to meet all of its deadlines for delivery of this ISMS.

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How do we implement this solution in an overburdened industry? Here is where it becomes important for the federal government. The airline industry needs to demonstrate to the travelling public that it is taking steps to improve airline safety. It needs to rebuild confidence.

The airline industry has come to the federal government asking for assistance to the tune of billions of dollars. Star Navigation believes it can help, with the ISMS system, to rebuild this confidence and get this system into the aircraft, through programs that they're working on with their financial partners, without the federal government spending millions of dollars.

Thank you.

The Chair: Thank you very much, Mr. Tanner, for the very interesting presentation.

Now we'll hear from the Canadian Lightweight Materials Research Initiative, Dr. M.J. Wheeler, chairman, industry steering committee, and Mr. William Harney from Magna International. Welcome.

Dr. M.J. Wheeler (Chairman, Industry Steering Committee, Canadian Lightweight Materials Research Initiative): Good morning. Thank you for this opportunity to talk to you today.

I'd like to advise you that you have three packets of information, one of which is the text we will address in this presentation. That will be given by my colleague, William Harney. The other is an expanded version of what was originally presented to the auto caucus back in May this year to bring them an awareness of the Canadian Lightweight Materials initiative. The third package is a summary of the letters of support that have been sent to the government on this program. Your chairman in fact has a copy of the letters themselves. We haven't burdened you with those copies.

With that, I'd like to pass it to William to take you through our short presentation, and then we're happy to answer questions and elaborate when you ask questions.

Mr. William Harney (Director of New Product Development, Magna International; Canadian Lightweight Materials Research Initiative): Thank you, Mike.

We didn't bring any music, and hopefully you won't hear the same old song today. The good one we'll keep singing.

Mr. Chair and honourable members of the committee, my name, as Michael pointed out, is William Harney. I'm a director of product develoment for Magna International. I'm a member of the industry committee of CLiMRI. Together with the government secretariat, we essentially lead CLiMRI's actions and review projects for funding.

I'd just like to point out that CLiMRI has been in place since approximately 1998. It is a proven national program and at present receives funding in the order of $800,000 annually. We feel that for CLiMRI to make a significant improvement and have a significant strategic impact on the automotive industry and the development of vital human capital, this funding level needs to be increased by at least an order of magnitude to approximately $8 million. Really that's the point of our being here today: to talk briefly about why we think that's the case.

Just to go through the points, there are seven slides we'll go through quickly. CLiMRI is an industry-led partnership with government. It involves the materials producers, the auto assemblers, and the supply chain in between. The goal is to reduce vehicle weight by developing and utilizing advanced lightweight technologies and materials, with the aim of reducing the environmental impacts of transportation products—throughout the world ultimately—and to improve our economy through creating jobs related to high skill use.

CLiMRI also involves the entire spectrum of materials producers—the entire value chain, including small and medium-size enterprises, automotive parts manufacturers, materials suppliers, and the auto assemblers themselves.

Through CLiMRI, we feel the projects will accelerate the deployment of new technology throughout the industry, not only in Canada but globally. What we're really talking about is beyond technology development. It's innovation. We feel that lightweight technology development is really a byproduct of innovation, and we're trying to harness the spirit of innovation within Canada.

Admittedly there is a fairly healthy environment within the automotive industry and transportation industries today, but we feel the system needs to be strengthened to the benefit of both industry and society.

Obviously the automotive industry, which is a very significant part of our economy—and through recent events it has been made very painfully obvious how important it is for the health and welfare of this country—employs a significant number of people. Combined with the other transportation sectors, the total GDP contribution of the transportation industry is over $44 billion per year. Directly and indirectly it employs over 460,000 Canadians.

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Unfortunately, much of the industry and many of the jobs are not protected by defensible intellectual property. The jobs, moreover, are so-called bill-to-print or contract manufacturing positions. The jobs in that economy are extremely vulnerable to change.

Capital, of course, can flow across borders without any conscience. Tools and means of production can move quickly, as we've seen in many cases. Certainly some of the announced plant closures are evidence to that fact.

We feel very strongly that innovation will be vital to the Canadian auto industry in the future. It can not only be robust and strong, but could obtain a global competitive level of performance.

What is CLiMRI going to do in terms of developing technological excellence? By funding, coordinating, and identifying critical projects in this area, we feel CLiMRI will develop and retain engineers and knowledge workers in the industry, and prevent the erosion of what is now a very fragile human capital asset in this area. Through CLiMRI, we'll also enable engineers, scientists, and companies to be engaged and participate in world-class research projects with other players around the globe from Germany, Japan, the United States, and emerging nations in this area.

CLiMRI will also provide clear leadership and guidance to university research projects, including the National Research Council's networks of centres of excellence program, entitled AUTO21, of which CLiMRI indirectly provides guidance as the materials manufacturing leading coordinator.

We also feel that through investing in these critical projects we will create nodes of excellence for future research projects, thereby growing around researchers groups of understudies and eventually entire nodes of technology in these areas.

Ultimately, I think the key thing is the actions of CLiMRI, when engaged with industry and government participants, will generate the critical and necessary defensible intellectual property, patents, trademarks, and know-how that will be used and exploited in Canada to generate economic returns.

Why must the government invest in CLiMRI? We feel the government is already investing. We think the track record to date is excellent, in terms of the outcome of the projects, and also the growing participation of various players right to the value chain. However, beyond that, we feel the infusion of greater amounts of funding will allow us to involve many more players throughout the entire production chain, the entire value chain, and provide a framework to allow small and medium-sized companies to engage in this very important work, giving them the exposure and access to the technology they need to grow themselves.

Clearly, the risk associated with developing so-called pre-competitive research is very high. It has been shown around the world there is a role for governments to play in supporting this type of activity. Small companies can't do it alone. There are also very clear public benefits. We'll touch on those at the end of the presentation.

Many of our competitor industries and competitor countries, including Australia, Germany, the United States, and so on, are investing significant amounts well in excess of Canada's contribution to date. Australia, for example, invests over ten times our current annual spending.

In conclusion, we feel the need for increased funding is critical and urgent. At present, CLiMRI receives approximately $100,000 a year in funding. We feel there's a need to move that to $8 million next year, in order for us to have a significant and lasting impact in this area.

With this support, we feel CLiMRI will help the Canadian industry. Canada in fact will improve its competitive position by delivering significant environmental benefits and positive climate change impacts that will accrue from lightweight technologies and vehicle mass production. It will position us as a globally competitive and robust automotive player. It will also provide areas for technology leadership in Canada, a continuation of what is an excellent industry-government partnership, and will establish traditional key partnerships throughout the supply chain.

Finally, this is where I think most of us in the committee feel most strongly. The ultimate benefit is we will create a pool of engineering and scientific expertise. We'll develop and retain the knowledge workers, the human capital required for us to be strong in the future, and to attract these high-value jobs.

In closing, I'd like to point out some estimates of the potential impact or benefit that would accrue from the seven to eight projects currently in the CLiMRI business plan, taken forward on a ten-year basis. This is to provide a quick snapshot of what we feel are some of the clear economic and social benefits of funding these types of projects.

Thank you very much.

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The Chair: Thank you very much, Mr. Harney and Mr. Wheeler.

We'll now hear from Best Medicine Coalition, Ms. Pat Kelly.

Ms. Pat Kelly (Best Medicine Coalition): Thank you.

I don't have a new song, an old song, or a dance for that matter. It used to be that the definition of an expert was a guy away from home with slides, but now it seems to be getting into movies.

I come from a very different perspective. We are a coalition of grassroots organizations that are concerned about access to medicine in Canada.

Before beginning the presentation, I have to say that as a representative of citizens concerned about federal spending and taxpayers' dollars, we acknowledge the current urgent priority of our government is to balance the immediate crisis of managing the threats of global terrorism with the long-standing gap in progress toward a safe, efficient drug review system.

I'm here today as a member of the Best Medicine Coalition. We were formed in 2000 by a diverse group of patient-based disability groups and advocacy organizations, including the Canadian Treatment Advocates Council, the Cancer Advocacy Coalition, the Colorectal Cancer Society, and the Arthritis Consumer Experts. We are now expanding our network to include the Canadian Lung Association, Heart and Stroke, the Arthritis Society, and the Canadian Diabetes Association, among others.

Our organizations have united with one common goal, and that is to improve the federal drug review system to ensure that Canadian citizens have timely access to evidence-based medicine.

As early as 1985, Canada's drug approval process was recognized as being slower than that of most other industrialized countries. Today Health Canada has one of the longest approval systems for medicines in the world, and the waiting is getting worse.

A recent study by Dr. Nigel Rawson, published in the CMAJ in February 2000, demonstrated that during the period between 1996 and 1998, when Australia, the U.S., the U.K. and Sweden were able to decrease median waiting times, Canada continued to have a significantly longer wait than its own target of 355 days.

In 2000, the average time to review and approve new drugs was 743 days—152 days longer than the 591 days recorded the year before, and the third time in six years that the average approval time for new drugs has increased. Two breakthrough therapies for rheumatoid arthritis took in excess of 800 days to review, even when one was given fast-track approval status—and fast-tracking is supposed to take 180 days.

The first summit aimed at improving these waiting times, called “Prescription for Performance”, was held in May 2000 in Ottawa. The goal was to ensure implementation of 29 recommendations regarding reform of the drug review process and the development of a post-market review system for safety.

The then director general of Health Canada's therapeutic products program branch, Dann Michols, spoke at the summit about the urgent need for reform. He told the government, “If you want a significant reduction in review times, there has to be significant increase in resources”. They have managed all of the efficiencies capable within that department.

He also said it was a mistake for provincial drug formularies to continue to hold up the listing of promising new drugs because of doubt as to whether or not they'll be cost-effective. He said:

Either you pull products off the market or you broadly disseminate information about them that they don't go anywhere.

He added that processes should be either enhanced or the products pulled if they don't measure up to expectation. But you cannot assess this until the drugs are on the market.

The lengthy delays for access to new treatments means that many Canadians with cancer, AIDS, arthritis and other debilitating diseases wait longer for medicine than citizens in Australia, Sweden, the U.K. and the U.S., not because there are no effective treatments available, but because the approval process takes longer than in other comparable nations.

Since 1995, the number of deaths from HIV/AIDS in Canada has dropped by nearly 75% because new drug therapies have played a key role in survival. In breast cancer, the significant reductions in mortality that have been realized have not been attributed to improvements in screening, radiation and surgery. These therapies have been around for some time, without dramatically reducing deaths. It is progress in chemotherapy and hormone therapy that has offered the greatest benefits. We cannot afford lengthy delays in getting innovative therapies to people who need them the most.

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The continued, albeit unsuccessful, efforts of the federal government to improve the review system and post-market safety illustrate the need for additional resources to deal with the longstanding problem. Recommendations from a series of advisory panels and committees over the past 10 years have all failed to deal with the fundamental problems. This situation cannot continue if Canada is to be considered in the league of innovative, equal opportunity countries.

Our organization, which came together at the first summit, represented a breakthrough in public participation in this policy area. It was the first time a diverse group of national patient organizations initiated an event that brought us together as one voice to look at federal recommendations for reform of the review system and safety. We are now planning a second summit in Ottawa early next year to analyse and report on federal progress in this area.

Recent agreements announced at the September 2001 meeting of the provincial ministers of health have further raised concern among our members and underscored the need for ongoing monitoring of these issues by public watchdog organizations such as ours. The proposed establishment of a single common review process for coverage of new drugs, albeit not binding, adds another dimension of review to a system already behind in performance evaluation.

Canadian health and disability groups and the people we represent have not been involved in the development or direction of this public policy that appears to be driven by economics, not by people-centred ideas and values. We are concerned that cost-effective analyses alone will be used as a cost containment tool to limit access. Even if the common review system is both fair and objective, it is yet another bureaucratic hurdle delaying access even further.

Undeniably, spending for prescription medications has grown dramatically in recent years. In the U.S., the number of prescriptions filled increased from 2 billion in 1994 to 2.5 billion in 1998, and was projected to reach 2.9 billion last year. More than 35% of the $100 billion spent on prescription drugs in 1998 went for drugs introduced since 1991. Canada has experienced similar increases. Studies suggest the replacement of older drugs by newer ones may be too expensive, but such studies often do not attempt to measure how much of the difference in price reflects changes in quality of life or morbidity and mortality.

According to at least one report, the results of this analysis provide strong support for the hypothesis that the replacement of older by newer drugs results in reductions in mortality, morbidity, and total medical spending. Drug costs are visible to the naked eye, but the identification of drug benefits requires careful analysis. We believe people making drug policy decisions need to consider the full range of effects and not just the costs.

Over the next 10 years our aging population will make increasing demands on our health care system. In the area of cancer, the National Cancer Institute predicts a 70% increase in the number of new cancer cases over the next 10 years, meaning 2 million Canadians newly diagnosed and expecting the best medicine. And 40 new cancer drugs are waiting now in the pipeline. We must remove the barriers to accessing these new therapies today.

We strongly believe the federal government must devote the attention and resources to this pressing health care issue. The Minister of Finance's budgetary plan seeks to create a socioeconomic environment where Canadians can enjoy the best quality of life and standard of living. Our goals are clearly aimed at this objective.

Canadian citizens banding together want to bring a clear message to our elected officials. We, as a community of responsible citizens, have determined that we do care. We have chosen the direction we must go in, and we entrust to you finding the way to make these priorities happen by ensuring implementation of the recommendations for reform.

As the former head of research at Princess Margaret Hospital, the late Dr. Ron Buick, advised, the only thing worse than research not done is research not applied. We must remove the current barriers to the best medicines for all Canadian citizens.

Thank you.

The Chair: Thank you very much, Ms. Kelly.

We'll now proceed to the question and answer session. It will be a five-minute round for everybody.

Mr. Solberg, then we'll go to Mr. Brison and Ms. Guarnieri.

Mr. Monte Solberg (Medicine Hat, Canadian Alliance): Thank you very much, Mr. Chairman.

Thank you to all the presenters. It's a pretty diverse group of presentations today.

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I want to start with Ms. Kelly. I'm very interested in what you had to say. And I'm deeply disappointed, because we seem to go through this every year on the finance committee, where we hear another report about how long it's taking to have drugs reviewed and approved. I just want to underline first of all how frustrating this is for me to see this again, and I simply want to support you in your call for a better way of doing this.

I want to ask one thing. Between 1999 and 2000 we saw a dramatic jump in the length of time it takes to approve drugs. I'm assuming that wouldn't reflect any cut in resources between those two years. I would assume that resources probably mildly increased. So there's something more than just a lack of funding, even though that is pretty obviously something that's necessary to fix the problem overall. But there are certainly some bureaucratic impediments as well. Can you touch on that and give us your hypothesis on what the problem is?

Ms. Pat Kelly: One of the greatest challenges that we face as advocates and citizens is that the process is not transparent. It's difficult to get information and explanations from therapeutic products programs. We're told it's a human resources issue. The culture within Health Canada has not enabled them to recruit and retain the best and the brightest, which is what we need.

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The innovations in the therapeutic products, particularly in the area of biologics, demand a certain level of expertise. This suggests that we need the resources to get those people on staff, so we can respond to this kind of progress. But the people who need to be doing these reviews aren't there.

Mr. Monte Solberg: Have you considered pushing the government to allow FDA-approved drugs as the standard? I think the FDA has a record of approving these things a lot faster than we do in Canada. Is there a case to be made for simply working with the FDA and using it as our approving agency for clearing drugs?

Ms. Pat Kelly: Argument have been made in favour of that and against it. I think there are pilot efforts under way to look at harmonizing Canada's drug review system with the U.S. and international systems. Those presentations were actually made at our first summit, and they'll be followed up again next year. We've asked Health Canada to update us on where we're at with the harmonization attempts. But it's also acknowledged that there have been instances when the U.S. has approved drugs and Canada has not—ultimately for good reasons.

Mr. Monte Solberg: I have a question for the presenters from Star Navigation. It was a very impressive presentation, and a pretty interesting system, but I'm not certain why you're here. I understand the benefit of it, but are you asking for something specific from the government, or are you simply here to inform us about what you're doing?

Mr. Reg Tanner: There are two reasons. One is to give you information: this organization and our products have definitely seen a spike in interest over the last month. But as well, we want to find how to get these systems into the airline industry and into aircraft. Over the course of any day, there are some 5,000 jet aircraft in the sky. Air Canada alone has close to 400. We would like to see this system in every aircraft, because of its benefits.

The issue is, right now the airline industry doesn't have any money to spend on this. It's an expensive system—though if you compare it to the cost of an Airbus A-320, approximately $90 million, it's relatively inexpensive, a minute cost. Based on some of the ways we can package this to deliver it to the industry, they're asking you for a lot of money.

What's the benefit of that money? Well, it will allow them to shore up their losses in air traffic and keep flying. Another benefit is to enable them to improve their image in the marketplace. If they can install some systems to give the travelling public a better sense of that, and get them to come back through Air Canada's turnstiles, it would be a positive thing.

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We think the federal government doesn't really have to fund this. It doesn't have to spend any money. What it could do is backstop this, guarantee its cost to the leasing company, which I represent. So it really wouldn't cost the federal government millions of dollars to fund this. This is something it can work on with the airlines as a partnership.

Mr. Monte Solberg: Of course, Air Canada does have a $9 billion debt, so that might be a little risky.

I have one question for Ms. Rothman. In your presentation, I noted that between 1997 and 1998 the level of poverty actually dropped slightly, according to your measures. Are there any other studies with respect to poverty? We have measurements for standards of living, but I wonder if any studies have been done on standards of living for people at the low end of the income scale, and whether that has improved or worsened in the last few years. Of course, standard of living is quite a different measurement from the LICO, which I assume you're using here.

Ms. Laurel Rothman: Yes. Virtually all academics, organizations, and universities that study poverty in Canada use the low-income cut-off as a guide. Your question is whether there are any studies of the standard of living per se. That's a difficult term, one we don't tend to use; there are lots of other measures we can look at.

For example, on housing, I'm actually waiting for some more recent data on that. The number of children living in unaffordable housing increased tremendously—91% from 1989 to 1996, although that's rather an old figure. We also know that the fastest-growing group of users of temporary housing, shelters, whatever you want to call it, are families with children. On any night in this country, there are at least 1,500 children living in shelters.

I think I heard our previous panel say, and I've heard other people say, “You're living in a shelter, you're really homeless.” There's a whole large group of people who are living on the edge if they don't have secure housing.

There are lots of other measures, though I'm not sure I'm addressing your question. There are also some disturbing situations in child care. There are only enough licensed quality spaces for one out of ten children under the age of twelve. The percentage of kids with access to child care spaces that are subsidized through financial assistance has actually gone down in the last five years.

So there are a number of indicators to concern us. The other important one is that the depth of poverty—that's the average income of people living below that LICO—is seriously low: about $9,400. I don't have my report card in front of me, as I should, but the cut-off for a single parent and one child, in a big city like Toronto, is approximately $21,000—so a high percentage of those vulnerable families live on more like $12,000 a year. Those are some of the other measures we usually look at.

Mr. Monte Solberg: Do you separate out people going to university, for instance, since they obviously have very little income? Or do they make up part of that measurement as well?

Ms. Laurel Rothman: If they're parents, they certainly do, and these days—

Mr. Monte Solberg: Even if they're single?

Ms. Laurel Rothman: No, no. We're talking families. Our figures are really into children, so parents with children under 18.

The Chair: Thank you, Mr. Solberg.

Mr. Brison.

Mr. Scott Brison: Thank you, Mr. Chairman.

Thanks to all who made presentations.

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I have a question to Dr. Wheeler and Mr. Harney. You're seeking an increase in the direct federal investment here. I don't necessarily disagree with that notion. But look at the way the capital markets have evolved in the U.S., and to a smaller extent in Canada, in terms of their treatment of emerging technologies—whether in fuel-cell technology, alternative energy, or biotechnology. Some of those cutting-edge technological developments have caused significant interest and investment from capital markets, and particularly from institutional investors.

Investors seem to look at this almost as they once looked at gold stocks, for instance: there's the same notion that you have to drill a lot of holes, some of which may hit something and some of which may not. There are significant comparisons to be drawn between the nature of investments.

Has your development of lightweight materials and technology been able to capture that level of interest or buzz? If not, why not? Are you trying to create that type of interest within the capital markets? The impact would be far, far greater to you than a purely federal investment.

Mr. William Harney: Obviously we're competing for equity, just like many other public companies, and for the same markets, quite frankly. Of course people view us as being locked into sectors. Lately, over the last eight months or so, there's been an increased focus on earnings. That's really been driving a lot of decisions in the capital markets.

Having said that, very clearly those earnings are grossed up through a multiplier to a large degree. We can see that companies in our peer group are doing very well in terms of having better multiples. They demonstrate arsenals of intellectual property, or have enough knowledge capital to drive them higher.

That's obviously very important for us too, as industrial players. We invest heavily in generating intellectual property. But I think what we're talking about here is raising the level of the entire Canadian space—not just some of the larger players. Your point is right on. Companies that do well in the future, that continue to attract not only people but equity, will be companies with significant technology that's protected.

Mr. Scott Brison: I would suggest that your area of specific interest—the development of lightweight materials and the technology related to that—would be better off from a capital markets perspective if it were a pure play. For instance, Magna International does a lot of things not specific to this. But as a pure play, the capital markets might look at this with the same enthusiasm they have for alternative energy, biotechnology, and some of these other things.

The pharmaceutical companies have realized this, and that's why in some ways the biotechnology sector has been more successful in attracting risk-taking capital. Some of the riskier investments have gone towards the biotech stuff. That would not have happened if it had been done under a purely pharmaceutical play.

Mr. William Harney: Very clearly, what we're discussing here in a Canadian context is what can we do together to increase the number of people who are counted in that regard. There's no question that in many cases our global competitors have all the things you've spoken of. They're extremely well positioned within their sectors, and they are pure play within the automotive parts manufacturing chain, for instance.

The question is, how many of those companies are Canadian? How many companies in Canada will ever aspire to be in those leagues? That's really the issue. I think the markets have been very discriminating, and have rewarded companies that have followed those exact paths.

One final point: the initiative is called the Canadian Lightweight Materials Research Initiative. Maybe its focus on “materials” is a bit of a distraction. I'm not talking about simply developing new alloys, or the next Klondike of sources of material for car components. We're talking about creating automotive technologies. It's the product. It's Canadians designing and developing automotive and transportation product, which includes a multi-material input stream and moves away from being in a simple secondary or tertiary refinement mode.

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We are talking about product ideas, product development, and innovation around that. Then that product, which we can protect through patents and other measures, ultimately is what we're selling. It is a pure play in the sense that it's transportation technology, it's very clearly aligned in the sectors within the equity markets today.

Dr. M.J. Wheeler: May I expand on that a little bit? I think if you look at Ballard, it has attracted a lot of capital because people can recognize this as a future power source and lose focus. But even there, that will not happen unless there is a significant investment in a lot of the infrastructure.

One of the CLiMRI proposals is for the management of the heat generator, which is very significant in a power cell and difficult to manage because it's low-energy heat, which is difficult. Many of the proposals we have used as our basis for generating the benefit relate to several different companies working together, so it doesn't have that one focus whereby someone can say if I invest in this, I am going to get a significant payback in the future.

There's a lot of hard work in bringing together a material producer, an SME who may be doing some fabrication, or a particular technology, and you still have to go to the car companies that are going to use it. And they haven't been particularly attractive for investment in the last few years.

Unless there is that stimulus and support, then many of these things are not going to happen, and we are not going to get the benefits of light weighting: improved air quality and reduced greenhouse gases.

The Chair: Thank you, Mr. Brison.

Ms. Guarnieri, you're the final questioner.

Ms. Albina Guarnieri: Thank you, Mr. Chairman.

I have a number of questions for Mr. Vieira and Mr. Tanner. First, let me thank you for a very timely and relevant presentation, especially in light of the September 11 events.

It struck me, in reading your company's accounts of your partners, that you do have relationships with Canadian companies that have been awarded various spectrum allocations. I know that each of these telecom and satellite companies are required to invest 2% of their money they receive from you and other companies into research and development.

With respect to the funding question that Monte Solberg asked earlier, have you approached any of your partners in Canada, or Industry Canada, to access those research and development funds?

Mr. Hilary Vieira (President, Star Navigation Systems): No, we haven't approached any of the partners in that because we have been extremely busy getting the product from the design stage to where we are because of lack of resources, and we have used all the people within the group, working full-time, literally for no money at all. So we haven't had that, and at this moment our accountants are looking at a few of the approaches, including the NRC and other sources.

Ms. Albina Guarnieri: It seems that would be a crucial element of the equation.

I know that it's a common complaint of the Canadian service providers, particularly satellite service providers, that if you are a Canadian company licensing a mobile terminal in Canada you have to pay what used to be called the DOC, for the old Department of Communication, licence fees. Customers could actually save money by going to a U.S. provider that doesn't have this handicap, and they don't have to charge similar fees.

Do you see Canadian people like yourself, individuals like yourself, at a disadvantage when it comes to accessing those kinds of funds?

Mr. Hilary Vieira: Not having actually investigated the issue, I would not like to make comment on it.

Ms. Albina Guarnieri: Let me ask you another question, because we are interested in trying to access funds here. President Bush, after the September 11 attacks, said he was going to invest in new technology to control planes from the ground if they were hijacked. Have you investigated where the funding would come from the U.S. side? And would you, as a Canadian company, have access to those funds?

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Mr. Hilary Vieira: We have already sent off letters to senators and the standing committees that are looking at this in the United States. We're also hoping that some of those letters that were sent off to Ottawa also assist us.

Ms. Albina Guarnieri: Would it be fair to say that you'd be disadvantaged as a company that there are no equivalent programs in Canada for you?

Mr. Hilary Vieira: Unfortunately, I would like to say yes at this point.

Ms. Albina Guarnieri: Let me ask another question, and shift gears. Perhaps you could explain the full spectrum of your system. I understand that there'd be a cost savings here for the airlines, there'd be an environmental component, an entertainment on, I gather, the use of satellites. Perhaps you could elaborate.

Mr. Reg Tanner: In the video, it talked mainly about the safety aspects of it, giving the ability to communicate from the aircraft to a satellite to a ground-based station, with monitors potentially into each of the carriers that would give them all the parameters to watch the functionality of the aircraft. So if something did go out of sorts, or went above or below a tolerance, they could be notified and corrective measures could be taken.

On the second part of it, the video on demand and the Internet access is one that is definitely going to be in the development of the product, but it maybe hasn't taken as high a level of priority now since September 11. All the other items we talked about that are in the Star patent that both Hilary and Viraf have put in have now been moved forward. These are areas where not only is it going to create a better safety factor in the aircraft, but give the carriers something back that they can deliver to the travelling public.

On the fleet management side of it, there are ways they can reduce or eliminate delays and cancellations. Some of the industry numbers for a cancelled flight are somewhere in the vicinity of $250,000 per cancelled flight. If they can eliminate one cancellation per aircraft per year, the system more than pays for itself. That's just a benefit back to the carriers themselves.

So if you look at putting the whole picture together, yes, there's definitely value to the travelling public in the safety. There is benefit to the airlines, in that they're going to be able to reduce their costs in some fashion, whether it's parts or inventory availability, just-in-time inventories. That will result in more effective use of those inventories and the dollars they spend on those inventories. The system itself will assist in developing some sort of a baseline over time that will enable aircraft operators to chart better and more cost-effective routes for delivery of those passengers from one destination to another.

Now the transpolar air flights are coming up for Canada 3000. This again is an area we're looking at helping and assisting in so that once you get above the 72nd parallel there's a black hole the aircraft goes into. We're looking at ways of having global communication transpolar so that the aircraft can be in touch at all times.

The fact that Canada 3000 is looking at this as an alternate route is going to knock hours off their air travel and make their flights more cost-effective. We just want to make sure we put as many of the safety functions and features in their hands as possible, which will enable them to make sure that 300 or 400 who are on those large jets are as safe as they can be.

So there are multiple factors and features whereby the product will assist on all sides the travelling public and the air carriers.

Ms. Albina Guarnieri: Recently there isn't a day that goes by when you don't hear about an anthrax scare. Would your system, for instance, be able to detect anthrax on a plane?

Mr. Reg Tanner: I'll maybe pass this one on the fingerprinting over to Hilary. I'll let him comment on the fingerprinting that's been going on.

Mr. Hilary Vieira: We are looking at identifying and having digital signatures for all airborne diseases on board the aircraft. So not just anthrax but any airborne virus or bacteria would be digitally stored on board the aircraft, and filtration systems would then identify these diseases. We have a Canadian doctor, Dr. Lawrence Cohen, from Sunnybrook Hospital, assisting us with that right now.

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Ms. Albina Guarnieri: Is there any additional information you feel is pertinent to enhance our knowledge of the system?

Mr. Hilary Vieira: One of the other things we have incorporated in the design is we would have the ability to monitor patients on board the aircraft. For someone who has a heart attack or allergy, we could have the person hooked up to the ECG monitor and doctors on the ground would have access to real-time information assisting the crew in diverting the aircraft or in treating the patient.

Ms. Albina Guarnieri: That seems very valuable.

After World War II C.D. Howe turned toward the private sector for ingenuity to deal with the crisis, and certainly I know that your company has the ingenuity to help us meet today's challenges.

Thank you very much.

Mr. Hilary Vieira: Thank you.

Mr. Reg Tanner: One thing I would add, just to summarize, is that the product itself has been developed over the last two years by the Star Navigation folks, and this is a Canadian company that's really starting to lead the new technology into the airlines. There's no doubt that someone else is going to come up and develop and bring to market this type of functionality that will be put onto the aircraft. I think it's safe to say that the Star team is leading that charge. They're probably 12 to 24 months ahead of any of the competitors who have talked about bringing these systems forward. So we know it's going to happen. It's just a matter of doing it now versus 12 or 24 months from now. They've done an excellent job at doing that.

I think very soon we're going to see the certification. Mr. Collenette's office did, with his Transport Canada people in a presentation that we did to him, confirm that they will move forward as quickly as they can on the certification of the program so that they can get it on aircraft.

Ms. Albina Guarnieri: It's certainly a welcome initiative to see a Canadian company leading the charge.

Mr. Reg Tanner: Most definitely.

Ms. Albina Guarnieri: Thank you.

The Chair: Thank you, Ms. Guarnieri, for your questioning.

I want to thank you, witnesses, very much for your input. And I'm sure you'll take advantage of the first mover advantage. I'm sure you know what that's all about. We'll be there cheering you on if nothing else, because yours will be one of the ideas that I'm sure we'll incorporate in our report as a way of how innovation can in fact help national security, not only here in Canada but I think it obviously will have worldwide application.

It's been a varied but very interesting panel. It goes to prove that this committee does deal with a number of issues and we have to balance them and try to always keep in mind how we make Canada remain a global player, how we provide individuals with equal opportunity to succeed, and we have to do this all within the budgetary restraints we have.

As you all know, we're not in a recession, but we are facing an economic slowdown, and that does have an impact on the nation's books. And we keep that in mind as we address the needs and aspirations of Canadians.

Once again, as always, thank you very much for your insight.

The meeting is adjourned.