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'd like to call the meeting to order and welcome everyone here this afternoon.

For our first panel of the afternoon, we have the following witnesses from Conservation Ontario: Peter Krause, chairman of the board; Dick Hunter, general manager; and Craig Mather.

We'll be viewing a presentation from the National Housing and Homelessness Network—Michael Shapcott, co-chair—together with the Toronto Disaster Relief Committee and Musonda Kidd. As well, we'll have the Urban Development Institute of Ontario. That will be the order in which they will proceed. Many of you, I think....

A voice: Sorry. Has Go Transit been added to the list?

The Chair: GO Transit has been added to the list. I want to confirm that, and it's Mr. Bill Jenkins, director, and Gary McNeil. Welcome.

That's what happens when you get missed, eh? You get special treatment and special attention; it's not such a bad deal.

Well, we'll begin with Conservation Ontario. Who will speak? It would be Mr. Krause. Welcome.

Mr. Peter Krause (Chairman of the Board, Conservation Ontario): Thank you, Mr. Chairman and members of the finance committee.

Good afternoon. My name is Peter Krause, and I am the chairman of Conservation Ontario. I am joined today by my colleagues, Mr. Dick Hunter, general manager of Conservation Ontario, and Mr. Craig Mather, chief administrative officer of the Toronto and Region Conservation Authority.

I understand, Mr. Chairman, that you have had the opportunity to meet with Mr. Mather to discuss some of the initiatives we wish to address this afternoon. On behalf of Conservation Ontario's 38 conservation authorities, I want to thank the chairman and committee members for inviting us here today to take part in the finance committee's pre-budget consultations.

Attached to my remarks is a copy of yesterday's editorial in the Globe and Mail, which speaks directly to some of the significant issues we are facing in Ontario with respect to the Great Lakes. A large part of the population in this country and our neighbours to the south are increasingly reliant on these, the world's largest bodies of freshwater, for a safe and secure source of drinking water. These lakes also provide a whole host of other environmental and industrial benefits that are at risk if we don't take immediate action to protect and restore them. Water quality is an important security issue, one sitting right in our backyards, that needs immediate attention before it becomes too late.

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I want to focus my comments today on Conservation Ontario's request to implement, in partnership with the federal government, two important and necessary programs that will specifically address the depletion of our fisheries habitat and the growing and ongoing deterioration of our country's Great Lakes.

In operation since 1946, Ontario's conservation authorities are unique community-based organizations providing comprehensive watershed planning and management activities, as well as educational and recreational programs. Outside of the federal and provincial governments, we are the only agencies mandated to manage natural resources—doing so on a watershed basis. To give you a sense of the magnitude of our responsibilities and reach, approximately one half of Canada's population is concentrated in southern Ontario in the Great Lakes and St. Lawrence watershed. “Watershed” is defined as watercourses and lakes that flow into the Great Lakes and out through the St. Lawrence River.

Through our ongoing work with the Department of Fisheries and Oceans and Environment Canada, we have a proven track record of delivering community-based practical solutions for a range of natural resource problems.

In an effort to address the very real and present risks we face in terms of degraded fisheries habitat and the declining quality of Canada's Great Lakes, we have developed two programs to respond these growing environmental concerns. The particulars of these proposals have been provided to the committee.

The first program is a $30-million fish habitat restoration endowment fund. There is an urgent need to restore degraded fisheries habitat in the Great Lakes basin. Canada's commercial and sport-fishing industry, which generates revenues of approximately $7 billion annually, half of that in Ontario, is being serious threatened. Major socioeconomic activity is jeopardizing the sustainability of our fisheries habitat as a result of non-point source pollutants that enter our Great Lakes system. Agriculture, housing, and industrial development continue to exert extensive pressure on watersheds and fisheries. The protection and enhancement of fisheries habitat is a constitutional responsibility of the federal government.

Virtually all conservation authorities have agreements with DFO under section 35 of the Fisheries Act, respecting the destruction or alteration of fish habitat. These agreements have resulted in an approximate savings to the federal government of $3 million to $5 million annually. There is an identified need and in fact a responsibility to move beyond already-existing habitat protection activities to undertake restoration activities as per DFO's policy for the management of fish habitat. The implementation of this fund would be modelled after the Pacific salmon endowment fund already in operation in western Canada and would apply throughout the province of Ontario, expanding in some circumstances beyond the jurisdiction of Conservation Ontario. The federal government's involvement in this initiative will serve to enhance DFO's role in and commitment to fisheries habitat restoration.

The second proposal is for the establishment of a $100-million healthy Great Lakes program that would be financed equally over a five-year period. The recently released report of Johanne Gélinas, Canada's environment commissioner, specifically addresses the need for an enhanced federal government role to combat the increasing problems associated with our Great Lakes. The protection of our Great Lakes is a national concern. The health, prosperity, and social well-being of approximately one half of Canada's population is directly linked to the quality and continued health of the Great Lakes.

Our proposed healthy Great Lakes program is a necessary extension of an already existing federal funding initiative for the restoration and remediation of areas of concern through Environment Canada's Great Lakes sustainability fund. At present, there is no established fund to deal with the associated problems outside the 16 areas of concern. The goal of this proposal would be to reduce the non-point-source pollutants that drain into the Great Lakes and St. Lawrence watershed. Studies by a number of conservation authorities indicate that up to 90% of pollutants entering watercourses in rural areas come from non-point sources.

An estimated $100 million over five years reflects the size and extent of the resource issues in watersheds located outside the areas of concern. Watershed planning exercises completed by a number of conservation authorities indicate that a fund of this size will enable us to make significant progress in ensuring the integrity of the Great Lakes, as well as significantly improving the environmental quality of Great Lakes watersheds.

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Both of these proposals can positively affect the water quality in the downstream receiving bodies, in this case the Great Lakes. These two initiatives are complementary and together form a comprehensive strategy for protecting and restoring watershed health. Support for these proposals will assist the federal government in achieving a number of its priorities, including citizen engagement, stewardship, and volunteerism. These are the fundamental principles upon which conservation authorities operate. Moreover, by partnering with Conservation Ontario, these proposals provide the federal government with the perfect opportunity to show its commitment to the environmental pressures facing our Great Lakes and fisheries habitat. Federal support for these proposals would allow for the speedy implementation and announcements of federally funded projects throughout Ontario.

Over the past several months, we have met with many of our members of Parliament to explain the benefits associated with funding these two proposals. Support for these initiatives has been overwhelming. Feedback from Environment Canada officials and Minister Anderson's office expressed clear support for the healthy Great Lakes proposal, indicating that it makes sense and is sound policy. Minister Dhaliwal and senior officials from DFO have also indicated their support for the fish habitat endowment fund. As well, Gilbert Parent, the Canadian Ambassador for Environment and Sustainable Development, is extremely supportive of these initiatives.

As noted earlier, on October 2, Canada's environment commissioner, Johanne Gélinas, issued her first annual report. The report clearly indicates that the Great Lakes are facing increasing environmental stress and strongly indicates the need by the federal government to more adequately safeguard the Great Lakes watershed from contaminated sediments, farm manure, and municipal sewage. As I am sure you are aware, a large number of Canadians are dependent upon a healthy Great Lakes basin for clean drinking water. Commissioner Gélinas' report specifically refers to the amount of manure produced from livestock in Ontario and Quebec, equal to the sewage from 100 million people, which can enter both surface and groundwater. Without clear and decisive action, the potential exists for more catastrophic and tragic E. coli outbreaks like what occurred in Walkerton, Ontario, last year.

Ms. Gélinas has called on the federal government to renew its commitments to Canadians who, as noted by the commissioner, “rely on the environmental health of the basin for clean air and drinking water, food and shelter, good health, employment and recreation”. She has recommended the formulation of long-term plans and clearly defined commitments from the federal government to deal with these noted threats to the basin's sustainability. Our request for funding provides an opportunity for the federal government to partner with Ontario's conservation authorities to effectively address these issues and deliver these commitments.

Conservation Ontario recognizes the serious economic and social issues that our government leaders have been forced to confront following the tragic events that occurred only one month ago in the United States. While the fate of our Great Lakes and the future of our fisheries habitat might seem inconsequential in comparison, the reality is that without a healthy and sustained environment, clean air and clean water, the social and economic well-being and health of all Canadians is in question.

As Prime Minister Chretien has stated in recent weeks, we have a country to run and the government must continue to move forward to deal with those issues that touch the very fabric of our existence—an environment that includes clean air and clean water. These important goals are not a privilege but a right that all Canadians deserve.

In conclusion, we therefore ask that the finance committee recommend in its pre-budget report to the Minister of Finance its support for these necessary initiatives and allocate the appropriate funds to allow for a one-time $30-million fish habitat endowment fund and a $100-million healthy Great Lakes program, financed equally over five years, to be implemented in partnership with Conservation Ontario. We have the infrastructure to work with the federal government to design and implement valuable projects in an efficient and timely manner. The pressures being put on our environment are very real and increasing. We must plan for the future and act now to address these very real problems.

That concludes my remarks. My colleagues and I will be happy to answer any questions you may have. Thank you.

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

We'll now hear a joint presentation from the National Housing and Homeless Network and the Toronto Disaster Relief Committee, with Mr. Michael Shapcott and Musonda Kidd.

Ms. Musonda Kidd (Administrative Assistant, Toronto Disaster Relief Committee): Thank you for this opportunity to make a joint presentation on behalf of the National Housing and Homeless Network and the Toronto Disaster Relief Committee.

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My name is Musonda Kidd. I'm on the staff of the Toronto Disaster Relief Committee. We are a group of social policy, health care, and housing experts, academics, business people, community health care workers, social activists, AIDS activists, anti-poverty activists, people with homelessness experience, and members of the faith community.

We have worked with homeless people, studied homelessness, served on numerous committees and task forces, and watched the homeless crisis worsen daily. We have bandaged the injuries caused by being homeless and have attended the funerals of many people.

Mr. Michael Shapcott (Co-Chair, National Housing and Homeless Network): Mr. Chair, my name is Michael Shapcott. I'm co-chair of the National Housing and Homelessness Network. The Toronto Disaster Relief Committee is one of our community partners. We're an alliance of provincial and regional groups from British Columbia to Newfoundland.

We're pleased, Mr. Chair, that your committee has sent us an objective this year, and I'll quote, “to create a socio-economic environment where Canadians can enjoy the best quality of life and standard of living”. We were last in front of your committee about two years ago. There have been a number of developments in the two years since the last round of pre-budget hearings.

There are two major developments the committee should be aware of. First of all, Canada's nationwide homelessness disaster and housing crisis has grown measurably worse, to very desperate levels. Secondly, the federal government still does not have a national housing strategy. But before addressing these domestic issues, we're going to raise, on behalf of our members and supporters, the strongest possible objection to federal participation in the United States war in Afghanistan. In particular, our members oppose the use of tax dollars and other resources in this military adventure.

Attached to our presentation, which has been handed to you, is a statement from the Toronto Disaster Relief Committee, which the national network has endorsed, in response to the events of September 11, 2001. We want in particular for this committee to underline three key points.

First of all, we have joined of course with everyone in condemning the criminal acts of September 11. We believe that those who were responsible should be brought before a competent international tribunal for prosecution and punishment. We want the committee to note that as of October 4, a total of 42 nations, including Canada, have ratified the international treaty on the International Criminal Court. Only 18 more countries are needed before that treaty can be brought into effect and the court can be properly constituted.

We think the Canadian government should be using its financial resources to support the establishment of this court as the proper venue to deal with brutal crimes such as those of September 11. If I can say this without being too partisan, our members appreciate the work of the New Democratic Party in terms of raising these issues in the House of Commons. We think this is very important, and we want to bring that concern to this committee as well.

Secondly, we are opposed to the decision of the federal government to join in the U.S.-led war, which was made without reference to Parliament. There are many reasons why we oppose it, but we want you to know that in the last week of the war, the United States military has adopted some disturbing new tactics. It started dropping 1,000-pound cluster bombs in Afghanistan. These are weapons whose use has been condemned by the International Red Cross and many other humanitarian agencies. You will remember the outcry when these were used in Kosovo. Now the American military is using these as of late last week in Afghanistan. So we raise that concern to this committee.

Thirdly, we want to call on the federal government to honour its international obligations and immediately increase funding for social development and humanitarian relief. In Afghanistan there is already a catastrophe of immense proportions taking shape. The World Food Programme of the United Nations estimates there are already six million Afghanis on the brink of starvation, many of them forced to live on locusts, animal fodder, and grass. The United Nations estimates another 1.5 million will be displaced as a result of the U.S.-led war. And that is not the only region in the world with immense needs.

We also think there are some implications regarding this military adventure in terms of domestic issues and particular concerns we want to bring to this committee in housing and homelessness. We have been deeply concerned to read statements attributed to the federal finance minister and other government officials suggesting that funding for this war may come from cuts to social spending.

We wrote in September to the minister responsible for Canada Mortgage and Housing Corporation, Minister Gagliano, asking him to clarify whether the $680 million promised for new national housing program was in fact secure, or whether that was going to be cut as well in order to support the bombing in Afghanistan. We have received an acknowledgement of our letter from the minister but not a substantial response. You'll find our letter in the information with you.

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I want to turn attention now to three sobering facts that we think illustrate what's happened in the two years since we last came in front of your committee, Mr. Bevilacqua, in terms of the nationwide housing crisis and homelessness disaster.

First of all, in terms of the housing crisis, there are now more than 1.7 million tenant households, which equals about 4.6 million people in Canada, in core need of affordable housing, according to Canada Mortgage and Housing Corporation. This includes more than 2.25 million Canadians in more than 833,000 tenant households living in overcrowded, unaffordable, or substandard rental housing. They're living on the brink of homelessness. Last November, when Canada Mortgage and Housing Corporation released its annual statistics on the rental vacancy rate, they reported the rental vacancy rate was the lowest since they started their current measurements back in 1987.

Second, there's a deepening homelessness disaster. More than a quarter of a million Canadians, including tens of thousands of infants and young children, will experience homelessness this year. There have been a growing number of homeless deaths in Canada. Homeless shelters in places like Calgary, Edmonton, Hamilton, Kitchener, London, Barrie, Montreal, Ottawa, Regina, Peel, Toronto, Vancouver, Winnipeg, Halifax, and many other communities have all reported huge increases in the number of people turning up at their doors.

Third, there is a growing affordability crisis. Rents are rising in every one of Canada's 26 metropolitan areas, usually faster than the rate of inflation. Meanwhile, tenant household incomes are falling. When you have rising rents and falling incomes, you shouldn't be surprised to hear that there are growing evictions. In fact, last year in Ontario landlords filed almost 64,000 applications for eviction, almost all of them for non-payment of rent or arrears in rent, while in Quebec 40,000 households faced eviction. What that means is that in those two provinces alone an average of about 400 households are being evicted every single working day because they can't pay their rents.

Ms. Musonda Kidd: I want to highlight some of the consequences of the disaster in Toronto. Three main concerns have arisen in the two years since we last appeared in front of this committee.

First, we have a severe shelter crisis. At least 60,000 homeless people have been admitted into shelters in Toronto in the past two years, more than 12,000 of them children of whom 4,000 thousand are under the age of four. The city's shelters are overcrowded, substandard, and unhealthy. Many don't even meet the basic UN standards for emergency shelters. Our report, State of the Disaster—Winter 2000, which is attached, gives more details. It's in the package I've sent to you. To point to the deadly consequences of the homelessness disaster, TDRC has added the names of 84 people to our list of confirmed homeless deaths since we last met in front of this committee.

Second, we have an affordability crisis. More than 54,000 rental households have faced eviction in the past two years, almost all of them because they can't afford to pay rent. Average rents in Toronto have increased at more than double the rate of inflation in the past two years. This has pushed the cost of housing out of the range of a growing number of low-income households. The number of low-income families and singles continues to grow in our city. The average weekly wages are growing at a much slower rate than the increase in rents.

Third, we have a supply crisis. While a handful of new rental units has been added to the city supply in the last two years, thousands of units have been lost to demolition and conversion, leading to a net loss of rental housing in Toronto at a time when new units are desperately needed. The rental vacancy rate remains dangerously low.

Clearly the 40% of Canadian households that live in rental housing are not able to enjoy the best quality of life and standard of living—the very goal of this committee—as they suffer through the growing homelessness disaster and housing crisis.

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We want to acknowledge that the federal government has made two significant announcements since we last appeared in front of the committee in 1999. First, the federal homelessness minister, Claudette Bradshaw, announced in December 1999 a new homelessness strategy. We welcomed the plan to spend $753 million over three years as a start to providing much-needed relief for those who are already homeless, but all the money was earmarked for services or temporary shelter. Many of the projects funded by the homelessness strategy, including the supporting community partnerships initiative, have been valuable. However, the spending is geared to assisting the homeless and not to addressing the root cause of homelessness, which is a national housing crisis. The federal homelessness strategy will help make some homeless people more comfortable, but it won't make them any less homeless.

During the 2000 federal election the Liberal Party sought to correct this serious flaw with a promise to fund $170 million a year for four years for a new national housing program. The federal housing minister, Alfonso Gagliano, re-announced this promise during the federal, provincial, and territorial housing ministers' meeting in London, Ontario earlier this year. He promised that negotiations on a new program would be complete by the time the ministers meet again this November in Quebec City.

Mr. Michael Shapcott: Mr. Chair, I want to conclude by saying that we intend to hold Minister Gagliano to his promise. I should just say that the minister was kind enough, when we had a meeting with him in London, to have a picture taken of the national network meeting, with the minister and everyone smiling on his announcement of the $680 million over three years for housing.

The Chair: Do you want me to get that signed for you?

Mr. Michael Shapcott: Well, the minister was kind enough to send me a copy of the picture. It was a government photographer who did it. We certainly hope that on November 30 there will be more smiles there as well.

We want to say in conclusion, in terms of this promise, that the total number of units is going to be well short of what is urgently needed. We estimate the federal program will fund no more than 3,000 to 4,000 units a year for the entire country. That's the amount that Dr. Golden, in her report for the Toronto mayor's homelessness action task force, recommended for this city alone.

Many groups, including the National Housing and Homeless Network, the Federation of Canadian Municipalities, and others, say the federal target should be about 30,000 new social housing units annually. We want to say that for the federal government to invest in 30,000 new social housing units will create many benefits beyond just the housing.

I see Mr. Cullen is leaving, but I wanted to give him a little bit of credit here, because we've had meetings with Mr. Cullen, and—

Mr. Roy Cullen (Etobicoke North, Lib.): I'm just going for more coffee.

Mr. Michael Shapcott: We appreciate the meetings we've had with you, sir.

One of the issues we've taken up at our meetings with you is the economic spinoffs that investment in new social housing brings. I just wanted to acknowledge that this is an issue that's important to us as well as to you, sir. We know that investing in 30,000 new social housing units annually would generate about 24,300 person-years in direct employment and about 36,000 person-years in induced or indirect employment in a number of other industries.

That's the kind of target we should be setting. And that target, if I may say so, is ten times what the Gagliano plan will provide for. This 30,000-unit target is in the same range as the number of social housing units Ottawa used to fund in the 1980s, before the election of the Mulroney government, which set in place a decade of housing cuts and then cancelled the national housing program entirely.

Therefore, our central recommendation to this committee is that the federal government create a new national housing program by restoring funding of $2 billion annually to finance new social housing. It's important that this money flow to community-based social housing such as non-profit and cooperative housing.

Canada has a very successful record in funding social housing. There are more than 650,000 households that live in government-funded social housing projects throughout Canada. It's cost-effective, especially when compared to private sector alternatives.

We oppose, incidentally, the plan that's coming from some provinces to put public funding into luxury, private, rental housing with the idea that the benefits will trickle down to low-income households.

If I can end my comments to this committee, Mr. Chair, I'd like to read back to you comments from your last report to the House of Commons following the previous round of pre-budget hearings two years ago. We were pleased, I may say, to see a reference in your report where the committee said it

...strongly supports the work of the Minister of Labour on the issue of homelessness. We await her report and we urge the federal government to review its findings and recommendations and to act on this issue as soon as possible. Furthermore, we endorse any social investment to better understand and address these problems of homelessness in Canada. We feel that all levels of government—federal, provincial/territorial and municipal—must collaborate to solve this problem. The Committee recognizes that additional resources will likely be necessary, but we cannot make specific recommendations until that report is made public and examined.

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Similarly and with respect to the broader issue of affordable housing, the committee shares the view of witnesses that all Canadians should be housed adequately and affordably from coast to coast. We feel this issue should be tackled by all levels of government, along with local organizations.

We understand, Mr. Chair, that the committee was somewhat cautious in its last report as it was waiting for the report of Minister Bradshaw on the federal homelessness strategy, but now we've had that. We've seen that rolled out in the last couple of years. We now know that the national housing crisis and homeless disaster is growing measurably worse: the number of homeless people who are dying on our streets is increasing, the number of households being evicted is swelling to unacceptable levels. So we call on this committee in this report to make a very strong statement about the need for a fully funded new national housing strategy.

Thank you for the opportunity of making these remarks today.

The Chair: Thank you very much, Ms. Kidd, Mr. Shapcott.

We'll now hear from the Urban Development Institute of Ontario, President Neil Rodgers and Chair Paul Mondell. Welcome.

Mr. Paul Mondell (Chair, Urban Development Institute of Ontario): Thank you, Mr. Chairman.

Good afternoon to the members of the standing committee.

My name is Paul Mondell and I am the chair of the Urban Development Institute of Ontario. I am also a member of the board of directors of UDI Canada. Joining me this afternoon is Mr. Neil Rodgers, who is the president of UDI Ontario.

The Urban Development Institute has acted as the voice of the real estate development and building industry in Ontario for almost 50 years. The industry is a non-profit organization supported by its members. These members include firms and individuals who are engaged in all aspects of planning and development of communities and the construction of residential, industrial, and commercial projects. UDI serves as a forum for knowledge, advocacy, and research on land development and urban affairs.

We appreciate the opportunity to appear before this committee especially at a time when the federal government is in the midst of considering its relevance within Canada's urban agenda and defining its strong cities agenda through the Prime Minister's task force on urban issues.

The issues being considered by the task force are fundamental to the continued economic prosperity of our country's urban regions. Urban regions are the economic engine of this country and the greater Toronto area alone accounts for almost 25% of Canada's GDP. For this reason it deserves appropriate federal investment, legislative and regulatory treatment to permit urban regions to be competitive in the global economy.

The development and construction industry plays a vital role in the economy of our country. As of January 2000 construction in Canada accounted for almost 6% of the nation's GDP equating to just over $44 billion of all industries and that's in 1992 dollars according to Statistics Canada. Every new housing start, commercial and industrial project creates significant levels of employment and spinoffs in the general economy. And as development and construction tend to be highly visible, increased levels of activity contribute greatly toward improving public confidence in the economy, something that I think we would all agree is in short supply these days.

I would like to focus my remarks on two specific issues this afternoon that are of interest to our members and must become part of the federal agenda. The first is urban transit and the second is affordable rental housing.

Let me first start off by talking about urban transit. UDI has not historically advocated a position with respect to public transit. However, there is a direct relationship between a healthy economy and a strong land development industry.

As part of the Liberal Party's Campaign 2000 document entitled Opportunities for All—The Liberal Party Plan for the Future of Canada, the government recognized that “there is an urgent need for reinvestment in public transit”.

Congestion has the potential to restrict economic growth and is a negative to attracting business and investment. The federal government must acknowledge the correlation between strong transportation infrastructure, the efficiency of our national trade routes, and the challenges to remain competitive on both the economic and productivity scales. Canada's and Ontario's trade routes—the 401, the QEW—are at risk as a result of gridlock, which is threatening productivity and a host of other socio-economic and environmental factors that are always in federal jurisdiction.

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The facts we submit are indisputable. Fifty percent of Canada's GDP in 1999 depended on exports, most of which move on roads, and 92% of Ontario's exports go to the United States. Ontario's trade to the U.S. is expected to double over the next five years. Quebec ships considerable freight through Ontario's border crossing points; about 40%, or $13.5 billion, of Quebec's exports move through Ontario roads. Every day we see 16,000 truck movements across the Ontario border to and from the United States, at Windsor, Niagara Falls, and Fort Erie, making their way through the greater Toronto area.

The issue that's at hand here is that our national trade routes are also our commuter routes. The need for public investment in strategic urban transit solutions is therefore urgent. The federal government must acknowledge the transportation infrastructure deficit in this region and must be a partner financially with the province and local municipalities, and in fact, our industry, on strategic interregional transit solutions. Failure to do so places the economic heartland of this country in a very fragile position.

On September 27 of this year, just a few weeks ago, the Province of Ontario announced that they are taking back responsiblity for GO Transit from municipalities and creating a new operating authority that coordinates services, freeing up an immediate $100 million a year for GTA and municipalities to deal with their local transit systems. The province also announced an investment of $3 billion over 10 years. This commitment was significant, but it requires the equal participation of the federal government.

As part of our presentation today, we are making a recommendation to your committee, Mr. Chairman, that the federal government, as part of their 2002 federal budget, agree to participate in funding their one-third share in the greater Toronto area region with an expected matching contribution of $300 million annually over 10 years with respect to GO Transit capital needs. This recommendation and action will also be consistent with other stated objectives within the federal government's mandate, especially with respect to clean air, clean water, and climate change. Furthermore, renewed investment in this sector will stimulate the economy and promote job creation and tax revenues. This is a strategic investment that will pay dividends for the country as a whole for decades to come.

The second area I'd like to get into, Mr. Chairman, is dealing with a national rental housing strategy. There is a strong correlation between a vibrant economy, dynamic regions, a strong quality of life, and the need for an adequate supply of rental housing in the country's major urban centres. The federal government has recognized through Opportunity for All—The Liberal Plan for the Future of Canada that “Canada's urban regions are experiencing a severe shortage of affordable rental housing.”

UDI submits that long-term sustainable changes to the business and investment climate are needed to restore business confidence such as will lead to the creation of new rental housing supplied by the private sector. A comprehensive approach from all levels of government is required to remove barriers from various legislative, regulatory, and financial obstacles that are disincentives to the development industry's ability to increase affordable housing supply. Enough studies have been done, the issues are defined and clear. The time to act is now.

The federal government, through changes to federal tax policies and CMHC lending practices, can play a major role in creating new rental housing supply. In Ontario alone over the next 20 years the private rental housing supply needs to increase dramatically to meet CMHC's estimated requirement for 16,000 new rental units. If we fail to act now, the shortfall will have significant socio-economic implications for the country and provinces. We are aware of ongoing discussions with Minister Gagliano and provincial housing ministers with respect to federal housing programs to subsidize the construction of purpose-built rental housing.

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Mr. Chairman, I would submit that without understanding the economic fundamentals related to the financing and construction, and the approvals, of rental housing in our urban regions, a financial subsidy such as this would do little to stimulate new construction and would not achieve the long-term desired results.

When you've got a moment, this would be a good time, I think, to make a note that in our presentation package, in appendix 2 on page 9, we have created a chart entitled “The Impact of Government Tax Policy on Private Rental Housing Starts”. This shows, from 1970 through to 1999, various changes in federal tax policies and how they affected the supply of rental housing. It's absolutely critical that your government and this committee understand that it's not just money that needs to be thrown, there have to be some fundamental changes in how we finance and how we administer our businesses if we're going to see the private sector creating a new supply.

Any federal initiatives in rental housing must consider the long-term sustainable approach, rather than creating another program. The rental housing industry and the provincial housing ministers are calling on the federal government to take a comprehensive approach to this issue, such as, as I said earlier, changes to federal tax policy and lending practices of CMHC.

The federal government needs to establish a level playing field and set its priorities in the context of the need of the country, and especially urban regions. The land development and housing industry in Ontario are asking your government to level the playing field with, as an example, the aircraft manufacturers on issues of tax opportunities, not programs, that will rejuvenate the confidence in our industry and in the economy in order to house Canada's urban population.

I just wanted to point out a couple of statistics I became aware of that I think are a case in point. A new jumbo jet costs about eight times more than the cost of a new 200-unit, what we're calling medium quality rental apartment building in the greater Toronto area, but the airline industry can claim 45 times more capital cost allowance than the owners of a rental building. While depreciation provisions have become more restrictive on new rental projects, with the effect of lowering returns and investment in new rental housing, airlines are able to write down the value of their assets at a significantly faster rate.

Mr. Chair, UDI this afternoon is recommending on this issue two things: that the federal government, as part of the upcoming 2002 federal budget, amend key provisions in the Income Tax Act to stimulate rental supply, such as, but not limited to, the ability to roll over capital gains taxes and the amount of allowable annual capital cost allowance deductions; and that the federal government, through CMHC, amend its underwriting policies, which have created unfavourable lending practices related to new rental housing construction.

In conclusion, Mr. Chair, UDI will continue to take a proactive approach to offering assistance to the federal government in any initiatives that will support new investment in our urban regions. We are having considerable discussions at both local and provincial levels on these issues as well, because without their cooperation in these matters, it's not going to be successful. As significant stakeholders, we are committed to advancing the vision of strong cities.

Thank you, Mr. Chair.

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

We'll now hear from GO Transit, Mr. Bill Jenkins, the director, and Gary McNeil, managing director.

Mr. Gary McNeil (Managing Director, GO Transit): I'd like to thank the committee for allowing us to make a presentation today.

GO Transit is the greater Toronto and Hamilton area's people-mover. GO ridership on an annual basis is approaching 45 million people, with an average trip length of close to 32 kilometres. This is close to 1.5 billion people-kilometres of travel in the region. Without GO, the City of Toronto core would have required four additional Don Valley Parkways and four additional Gardiner Expressways, or roughly 48 highway lanes, to handle the volume of cars that would be going into the core. In fact, since the sixties downtown growth has largely been accommodated by GO Transit. But the reality is that without GO, it is unlikely that the downtown core would have grown in the manner it has. It may very well have followed the inner city United States model of the 1960s of a hollowed-out city core.

Although much press is given to the importance of goods movement in Canada, it is people who fuel the economic engine that is the greater Toronto and Hamilton area, and GO is an important link that gets people to and from home and work. GO provides enhanced quality of life to millions of people who choose to use the system, and this frees up road space for goods movement and for other trips that can't be provided for except on the roads.

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As a result of our popularity and our limited funding, the ability to provide new services is no longer available. Trains, buses, and parking lots are filled beyond their capacity in the critical peak hours, and growth and expansion are necessary. This situation is also being repeated in Montreal and Vancouver, where the popularity of commuter transit services is not being matched by the necessary funding commitments.

GO provides its services with a strong business case approach. We effectively use public-private partnership at every available opportunity. Our operating cost-to-revenue ratio is 87%. In other words, for every operating dollar spent, 87 cents is recovered from the fare box. We are one of the best performing systems in the world.

The question is, is there a need for federal involvement? The response to this question is, yes. The next question is, why? The first response to this question is that it is in the public interest. This relates to improved quality of life, air quality, environmental concerns, road congestion, and ensuring the economic vitality of the urban centres that drive our economy. Federal involvement in expanding the GO system will help Canada compete in the global marketplace and level the playing field with our neighbours to the south. It is well known that the United States federal government has recognized the importance of their urban centres and is supporting these centres through major investments in public transit. Since September 11 this commitment is being reinforced to an even greater extent. The lesson learned was that was when all transportation systems are operating at capacity, chaos ensues when one of the elements is temporarily removed from service.

For GO Transit, over 70% of our ridership is based on heavy rail on conventional railway corridors. This aspect of the service allows the expedient movement of masses of people. The system sounds simple, and it is. The advantage of this system is that it capitalizes on existing and established rail corridors, therefore maximizing current assets, and avoids further environmental issues of new corridors or wider highways. The national-based railways that largely control these corridors are federally linked through the regulation of the Canada Transportation Act. They also link the country economically on a national scale and through their historical federal legacy. Their control and interests affect the economics, efficiency, and capacity of the GO rail system. Rail infrastructure and operational issues can be expensive for GO and can have national importance for the railways. Improvements to rail corridors can benefit the railways in their intermodal operations and strengthen our national economy, while directly enhancing large urban centres.

GO Transit has developed and pioneered a unique technology that is Canadian-based and manufactured and now widely exported. The best example is the innovative bi-level passenger railcars presently manufactured by Bombardier and now in use throughout the United States and Canada in commuter rail operations. Federal support can continue to help this manufacturing sector to flourish. Components of these railcars are manufactured throughout Canada.

On the rail infrastructure side, improvements to rail corridors and Union Station will provide more capacity and safety to national railways, including VIA Rail. GO's ten-year refurbishment and growth plan allocates $1.8 billion of capital investment. Municipalities have contributed to this plan, and the Province of Ontario has also recently seen the benefits of reinvesting in this plan. We feel it is now time for the federal government to also provide leadership in the growth and vitality of our major urban centres by supporting financially the capital improvements that will keep the GTA and other major urban centres strong competitors in the international community. At the same time, there is a strong message of the link between transit use and the health of our citizenry and countryside.

We are not here to suggest how the federal government should support our capital needs. Various methods are available from tax concessions, dedicated gas tax revenues, or direct project support. Our growth needs are approximately $100 million per year. Sustained funding or funding support from the federal government has been identified by our funding partners at a minimum of $34 million per year.

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In summary, we are the interregional transportation solution for the greater Toronto and Hamilton area, addressing the quality of life, environmental congestion, and competition issues. We know what must be done, we have a proven business case approach. We have garnered support from the private sector, the municipal sector, and the province. What is lacking now is the financial support from the federal government in order for us to move ahead. All levels of government should share the burden to move towards a vision of healthy urban centres in the 21st century and beyond. No longer can any single level of government be expected to absorb the major investment costs of mass transit. Federal support will set GO on track for today and moving into the future with a strong vision.

Thank you.

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

We'll now proceed to the question and answer session. It will be a five-minute round for the following members: Kenney, Nystrom, Murphy, and Cullen.

Mr. Jason Kenney (Calgary Southeast, Canadian Alliance): Thank you, Mr. Chairman, and thank you to all the panellists for the time you've taken to come before us today.

Listening to each other's presentations, you can imagine what it's like for us to go through this every day. It's not an easy job to assimilate the information, and then to make the difficult trade-offs and policy choices we have to as legislators, the government, in particular the finance minister, in the upcoming budget. So I'm trying to keep track of the various requests that are being made.

For instance, just from this panel—correct me if I'm wrong—first, the UDI, in talking about need for investment in transportation infrastructure just in the GTA, mentioned a $300 million federal share annually times 10 years. If that's just in the GTA and it's to be applied proportionately across the country in urban areas, it will be roughly four times that, which is a bill of about $1.2 billion a year, times 10 years—$12 billion. One can make an estimate of how these things add up. GO Transit is suggesting, I believe, an additional federal share of $34 million annually—is that correct? And if I'm not mistaken, the representatives of the Ontario conservation board are suggesting a $100 million additional investment in the Great Lakes program, plus $4 million to $5 million, I think, in another program?

Mr. Peter Krause: Over a five-year period, yes.

Mr. Jason Kenney: Over a five-year period, I see.

I may have missed it, but did the Homeless Network present an additional figure beyond what's being committed in federal spending?

Mr. Michael Shapcott: We recommended $2 billion annually, which is a figure the Federation of Canadian Municipalities and other groups have also endorsed.

Mr. Jason Kenney: These are all not just worth while, but many have made the argument that they are compellingly necessary public investments. The challenge—and I just want to throw this out for you to recognize the macro perspective—is that the federal government is on the line between deficit and surplus in the next year or two. Some, such as the Bank of Nova Scotia, are projecting an actual deficit next year of up to $5 billion. And that's before we take into account the additional security needs implied by September 11, which some suggest could be in the range of $7 billion a year. Add in also potential for a recession and a downturn in revenues. And take into account the fact that 80% of the federal budget is on autopilot: debt servicing, transfers to persons, transfers to provinces for programs like old age security and health care.

So that's the scenario we're looking at. The theme here is increased investment in infrastructure, housing, the environment. Would any of the panellists care to comment on whether they think, given the macro framework I've just outlined, that we ought to be prepared to go into a deficit to finance these additional requirements? Should we raise taxes? Should we forestall proposed tax cuts? Or should we reduce spending in other lower priority program areas? I assume none of you are fiscal policy specialists, but maybe you would care to comment on that dilemma we're facing.

The Chair: Mr. Shapcott.

Mr. Michael Shapcott: I'd be happy to. Thanks for the question.

• 1430

I want to say first, Mr. Kenney, that starting in the 1980s, and then into the 1990s, deficit, tough times, and the need to cut have provided the excuse for the steady erosion of national housing programs, and their elimination in 1993. I think our presentations spoke fairly compellingly to the consequence of that in 2001—the fact that in this city alone, 84 homeless people have died since the last time we appeared in front of this committee, two years ago.

I would like to bring to your attention, though, that the federal government does a lot of polling on these issues, and they engage companies such as Environics. Canada Mortgage and Housing Corporation does an annual poll for Environics and asks the very question you put. You might be interested to know the question they put is: “Are you prepared to have more money put into housing for homeless people, even if it means raising taxes?”.

This past year, which is the most current year they have provided polling information, 67% of Canadians right across the country said they were prepared to see increased spending, even if it meant increased taxes. So I certainly think that's the answer. We've seen many other polls that suggest the same thing. Our own group says that after all these years of the deficit and debt and the need for fiscal restraint as an excuse to not invest in housing, we've seen the consequences. Now we have to start to restore that investment.

The Chair: Thank you.

Paul Mondell.

Mr. Paul Mondell: Thank you, Mr. Chair. I will preface my remarks by agreeing that I'm not an expert in these areas.

First of all, I don't think you should assume that what the greater Toronto area needs is necessarily going to be replicated across the country. A comment was made to me some time ago that the greater Toronto area runs off its transportation routes—its highways. In Alberta, it's pipelines. So there are significant differences between regions. I'm not trying to minimize them by saying there aren't congestion issues in cities like Vancouver and Montreal, because I know there are. But I think you also have to look at the cost of congestion. What is the cost of the loss of productivity?

One of the examples I like to use is an appliance manufacturer in Hamilton that used to be able to take a loaded truck out at seven o'clock in the morning and be back at one o'clock for a second load. The load that leaves at seven o'clock in the morning is now coming back at three o'clock in the afternoon. So that truck is sitting idling on highways, and the cost to the company is that they either don't put the second load out, or the drivers aren't getting back until eight o'clock in the evening.

There is a cost to the economy that you can't necessarily put a figure on, but a figure was put together that showed that in 1989, the cost of congestion and lost productivity to the economy of this country was something in the $2 billion range. I can't imagine what that number might be today.

We're asking for strategic investments that will have spinoffs in the economy. The more we get people working, the more productive we will be. It will encourage more investment, and presumably more people will be paying taxes.

I appreciate the dilemma you're in, but I think we have to look at it within the context of the impact of cities on the economy of this country, and the role the federal government is playing in those urban areas. I would suggest to you that up to this time the federal government, in the issues we talked about today, has not been playing a significant role.

If we don't start acting and dealing with some of these issues, my fear is we're going to start losing a lot of the companies that have a huge impact on the region's economy. They just won't be able to compete because they won't be able to get their trucks in and out.

The Chair: Thank you, Mr. Mondell.

Final comments for Mr. Kenney, Mr. McNeil.

Mr. Gary McNeil: Yes. What I'm going to say is probably blasphemy, but I'm not sure why there is this hesitancy to go into deficits. As a private individual, we're often encouraged to go out and buy a car and a house, in order to spur the economy along. We don't do that by just dipping into our savings account; we typically go out, get a mortgage and borrow to make those purchases.

Likewise, when you look at what all of us are proposing here, it's really an investment in the country. Typically, on the private sector side, you borrow money to make an investment in your company because there's a payback from that. We tend to use, in government circles anyhow, the word “deficit” all the time. I think that's simply because the government keeps showing the money on the books and is afraid of saying it is actually an investment.

Our strongest trading partner to the south, the United States, has no fear at all of deficits, and it's one of the strongest economies in the world. Why are we so afraid of deficits in Canada?

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Mr. Jason Kenney: May I make just a quick comment, Mr. Chair?

The Chair: You have two seconds.

Mr. Jason Kenney: I'll pose an answer. The reason could be that we already have a mortgage of about $550 billion, costing $40 billion in interest. It is the second-largest in the developed world, as a percentage of GDP, and it's about twice as large as that of the U.S., as a percentage of GDP.

I have a very quick question for a very quick answer. Would those of you proposing advanced infrastructure payments be prepared to have more of the costs levied on the users—i.e., toll roads and additional costs for public transit users?

A voice: Our industry is already contributing a significant share toward this infrastructure.

The Chair: Okay. Thank you.

We'll head over to Mr. Nystrom for five minutes.

Mr. Lorne Nystrom (Regina—Qu'Appelle, NDP): Yes, I want to welcome everybody here this afternoon.

I have a couple of questions. The first one is to the National Housing and Homeless Network. You mention 60,000 people in Toronto in shelters over the last two years. You are a national organization, so I'm curious about the rest of the country. You talked basically about Toronto in your brief. I'm concerned about not just the big cities, like Montreal and Vancouver, but the smaller cities as well—sort of a quick snapshot.

Mr. Michael Shapcott: There are no comprehensive national numbers, I regret to say. The Ontario numbers are there simply because the City of Toronto does a very good job of counting. We believe the federal homelessness minister, as part of her mandate, should in fact be doing some sort of number on that. But there is no reliable national number.

Many people think about a quarter of million people experience homelessness over the course of the year, based on some extrapolations and a number of cities, but that's merely an estimate and there's no reliable national number.

Mr. Lorne Nystrom: Is Toronto the biggest challenge, on a per capita basis? We hear an awful lot about Toronto's homelessness in the papers, but maybe it's just publicized more in Toronto. Is it equally difficult for people in Regina, Vancouver, Montreal, Moncton, etc.?

Mr. Michael Shapcott: It's a nationwide problem, a rural problem, a remote problem, an on-reserve problem for first nations communities, and a big-city problem.

In per capita terms in Ontario, which is the province that's been studied the most on this, the city of Peterborough actually has the highest percentage of households on the brink of homelessness. Peterborough is higher than Toronto and many other places. In fact, places like Barrie, North Bay, and Sudbury all have higher percentages of households on the brink of homelessness than Toronto.

If I could throw out one other fact, in an Ontario study of the increase in shelter use and the number of homeless people going to shelters, the city of Barrie had the biggest increase of any municipal area in Ontario—again bigger than Toronto, and so on.

Toronto is the biggest city in the country, so the numbers tend to be big there. That tends to skew the focus of it, but certainly our network has active members in places like Parry Sound and smaller communities across the country, and they experience severe problems there.

Mr. Lorne Nystrom: What about the trend over the last 20 to 30 years? Has it been going up? Has it been sort of a jagged trend line? Is it becoming progressively worse, or levelling off?

Mr. Michael Shapcott: All the trend lines are worse on the two fundamentals of the housing and homelessness issue. The one fundamental is supply. That is the actual amount of affordable housing that's available to low-income households.

Second is the issue of affordability—the amount of income those households have. For instance, Dr. David Hulchanski, from the University of Toronto, issued a research bulletin a short while ago that showed, in terms of owner household incomes versus tenant household incomes from mid-1980 to 1993, that tenant household incomes dropped by three percent, when adjusted for inflation. So the trends are all going the wrong way.

Mr. Lorne Nystrom: I have one more question for the Go Transit organization. You mentioned Peterborough. A few weeks ago I had to speak in Peterborough. I arrived at Pearson Airport, got a rental car and left there at 3:30. I saw a sign saying it was 150 kilometres away and thought I'd be there by about 5:30, at the very worst. I got there at 7:30. It took me four hours. So I'm starting to realize the importance of more investment in public transit in big cities.

You mentioned in your brief there's a lot more investment in big-city urban transit in the United States. How much more? Can you give us a comparison? How far behind the world are we? I know Europe has a lot more investment than we do. What about Australia and New Zealand? How do we compare to other countries that are members of the OECD?

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Mr. Gary McNeil: Actually, the Canadian Urban Transit Association has done an estimate that indicates about $9 billion will be required in Canada over the next five years just to meet the transit infrastructure needs.

When you look at money that's being spent elsewhere in the world, we're probably the only country in the world, at least in the G-7 nations, that does not have any federal involvement in urban transit. In the United States, they're investing right now $6 billion in one year for transit systems, and the Senate and House are now looking at a bill that will increase that by approximately $3 billion, as a result of the September 11 occurrences. That's for urban transit.

In European countries, the level of federal funding is much higher. In France, I believe they fund 55% of all capital costs of the systems.

Australia has now gone into a public-private partnership scheme with a lot of transit systems down there. Most of the infrastructure was built with federal money, actually. The current level of public-private partnership is hard to decipher because they tend to bury a lot of the money in miscellaneous budgets, so you really don't know how much money the government is really paying for transit down there.

The Chair: Thank you.

Thank you, Mr. Nystrom. Mr. Cullen actually said next time you should drive a little bit faster.

Voices: Oh, oh.

The Chair: Mr. Cullen.

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

Thank you to the presenters. Thank you for the quality of all of your briefs. There's a lot of material here, a lot of good stuff to go through.

I want to get into affordable housing in a moment, but I first had a question for Mr. Krause.

When I first came to Toronto I lived in the east end, so I used to go up and down the Don River quite a bit. I was never terribly impressed with the quality of the water, though the ambience and all that was great. Then the Humber River—I'd go up and down that a fair bit and I'd see the odd fish, or people trying to catch fish.

What is the quality of those watersheds? Could you help me understand the dimension of what you're trying to accomplish here? I know you do a lot of good work, but are those rivers...? I see them as a kind of proxy for.... It's not necessarily that we want a lot of fish in them, although we might, but if there are fish in there and they can swim and prosper, then chances are the water is in reasonable shape.

Mr. Peter Krause: Perhaps I can make reference, Mr. Cullen, to some international recognition that some of the conservation authorities receive as a result of their efforts in managing the watershed resources, particularly the water. The Grand River Conservation Authority won an international award last year for the significant improvement in their water. The Humber River authority was given an award of distinction, an acknowledgement of its improvement in the water quality.

The reality is in most conservation authorities and most watersheds, the water has improved significantly over the last generation. The opportunity to improve the water quality is still there on the watershed basis, but it does require financial assistance from various partners, including the federal government.

Mr. Roy Cullen: Is it just an impression that the quality of the Humber River water is slightly better than the Don River? Is that just a figment of my imagination, or...?

Mr. Peter Krause: I'll refer you to Mr. Craig Mather, who is with the Toronto and Region Conservation Authority.

Mr. Craig Mather (Chief Administrative Officer, Toronto and Region Conservation Authority): Thank you, Mr. Chairman.

I think your observations are correct. The Humber does have a better quality of water. It isn't great, but it's a better quality of water than the Don, and there are some basic reasons for that. The Don is almost 100% urbanized, and on the Don, for example, our major source of pollution is urban runoff. A large portion of the Don watershed itself does not have the most up-to-date storm water management techniques that the newer developments in the northern parts of the watershed enjoy.

The difference, though, is that both the Don and the Humber are the beneficiaries of some federal funding under the RAP program—the AOC or areas of concern program. So we do get some funding from the federal government to put toward the kinds of programs that are in the packages today.

What we're saying is that the watersheds that are not within an area of concern have no federal funding. Yet the commitments to the Great Lakes still remain, so this package is directed at those other watersheds, which are pretty much the entire province.

Mr. Roy Cullen: Well, keep up the good work, and maybe we should be doing more to help you.

• 1445

Now, on affordable housing, the UDI.... I always think of UDI in the context of Rhodesia, but.... There have been a number of presenters who keep repeating the affordable housing and homelessness issues, so it obviously reflects the seriousness of this problem, particularly in the GTA, but also beyond the GTA. One of the things I've heard from developers is that if you create tax policies that are supportive of development, builders will build the full range of housing—high quality to to low quality. But it's a bit of a gamble. I'm not sure I buy the argument.

If we have limited resources, clearly, it seems to me, we should be focusing on those tax policies or any fiscal policies that will encourage the development of affordable housing. When I drive up Yonge Street along Bloor Street I see a lot of housing, but it's not the kind there are shortages of.

In your brief, and I must say there are some excellent ideas in here, are there any policies that are differential in the sense they would be focused more on affordable housing stock? Because it's a bit of a gamble for the government if it says it's going to have certain tax policies because if you have tax policies that support the development of housing generally.... If it doesn't happen, it's a kind of misuse of scarce resources, so you can probably see my point—or maybe you can't.

Do you want to comment on that? Are there any differential policies in here that would really target affordable housing?

And maybe Mr. Shapcott and Ms. Kidd, you might want to comment on that as well.

Mr. Paul Mondell: Let me begin. I do understand your point, and we certainly recognize there are scarce resources. We are not looking for new programs. We want to create an investment environment in which the private sector gets back into the business of building rental housing.

I can tell you that just recently we went through an exercise looking at a piece of land, and putting in absolutely nothing for the land, we were looking at a 4% return on our investment. With all due respect, unless interest rates continue to keep dropping—then maybe 4% will look good—under the current circumstances, why would anyone go through the time and the risk for a 4% return versus leaving it in the bank? That's what you have to understand.

That's why in my remarks I wanted to point you to that chart in appendix 2, which said create an environment in which our industry will get back into the business of building rental. If there are dollars out there, focus them on the people who are in need and give them the tools to go out and rent units in the private market. If they can't afford $1,000 a month, give them the subsidies through federal or provincial dollars, if that's what it takes to get them down so they come in.

It has been proven time and time again the government should not be building housing. It doesn't know how to do it very well. We do. But if we can't get a return on our investment.... And if you look at other jurisdictions—we talked about the U.S. earlier—things like the roll-over provision create a huge amount of capital that's out there looking to be invested, and it's moving it into instruments like rental housing.

I think it's very clear that if there is the ability to attract capital through CMHC—because banks aren't lending on rental—if you create an environment that restores a climate, and it's long term, there isn't this cloud on the horizon where the next government could come and shut the door on you.... And it's not just federal—let me be clear about this—it has to work with municipalities and with the provincial government. There has to be a comprehensive approach to this thing. Whether we're building apartments that are going to be $1,000 a month, $1,200 a month, or $800 a month isn't the point. We need new supply in this part of the world, and it's not being built right now.

I would suggest to you, as we've said to our provincial counterparts, you have to give the subsidy to the renter, not to the person building the building.

The Chair: Do you have any comments, Mr. Shapcott?

Mr. Michael Shapcott: Mr. Cullen, thank you for the question.

I want to say, first of all, I think there's a rare moment of agreement between my colleagues to the left in the Urban Development Institute and those of us on the right here in the National Housing and Homeless Network, and that is we both agree the government shouldn't be in the business of building housing. We agree on that. And the government, in fact, by and large hasn't been in the business of building housing since before 1973. In 1973 the government realized it wasn't very good at doing that and it embarked on a national housing program that endowed community-based groups, non-profit groups, cooperative groups, the local Rotary clubs, and church organizations, and said to them, “You know the communities best. You can do a good job. You build the housing, and we'll support you.”

• 1450

Those are the kinds of programs we support. I think your question hits the nail right on the head. In a time of scarce public resources, whether we're talking about the tax side of the equation or the spending side, how do we maximize those kinds of public resources?

I just want to say to you, Mr. Cullen, we've met on these issues before and talked about this, but I'll give you some newer statistics. In Canada there are about 4.8 million renter households. I'm quoting now from a study from Dr. David Hulchanski, of the University of Toronto Centre for Urban and Community Studies. In roughly half of those households, the median household income in 1999—the most recent year—was $20,947, which means half of that 4.8 million, or 2.4 million households, made more than that and 2.4 million made less.

To give you an idea of the kind of housing we'd have to build to accommodate the 50% of Canadian renter households below $20,947, we'd need a monthly rent of about $580 or less to meet a conventional definition of affordability. It's our submission that offering roll-overs or other incentives to the private sector will certainly stimulate some form of housing, but we have seen in the past when the government has tried to use tax policy for things like MURBs and other programs that, yes, it has generated housing, but it hasn't been housing that's been affordable and specially targeted to those 2.4 million households that have $20,000 or less every year to spend on everything, including housing. That's why we say a targeted program is the program that is needed.

If I may say so, Mr. Cullen, this is the point that was hotly debated at the federal-provincial-territorial housing ministers meeting in London in mid-August. The federal minister, Minister Gagliano, came to that meeting with an argument saying, “If we have an investment-style program along the lines we've heard from the Urban Development Institute, we can actually get more units built, because it goes further.” If you have less subsidy per unit, you get more units.

That's an interesting argument, but, of course, the units you get are not the units you need, and at a time when people are dying on the streets for lack of housing, for the government to be investing scarce resources in high-end rental housing is simply unconscionable. That's why, at the London meeting, there was actually unanimity right across the board. All the provincial ministers and even Minister Gagliano were brought onboard to agree with the notion: target the money and make sure it goes to the households that need it most.

The Chair: Thank you, Mr. Shapcott, and thank you very much, Mr. Cullen.

Mr. Murphy and then Mr. Brison.

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

I just want to go back to Mr. Mondell and Mr. Rodgers on the issues Mr. Cullen raised, and I'm talking about housing here. I want to follow up on your recommendation on CMHC's 5% premium for high-risk rental housing. Is that a risk-weighted fee or is it some kind of...? Are there losses to the extent that they have to charge a 5% fee to break even in the marketplace? It seems awfully high to me.

Mr. Paul Mondell: There's obviously some kind of formula that's being looked at right now. The reality is that right now conventional banking is not lending on rentals. CMHC then becomes a source of revenue. Its lending practices are not conducive, for companies like ours, to going out to borrow money. We are looking at the equity markets, if you will, or the lending markets out there to help support us through our construction.

You have to look at the amount of time it takes to get approval, buy the land, and construct the building before you start to see any revenue. The lending part of the equation becomes very important. If they are not friendly to the environment that we're looking for.... CMHC is basically the lender of last resort and is just not there right now. The premium it's asking for, as I understand it, is too substantial. Frankly, it should be more reflective of the policies of this government.

Mr. Shawn Murphy: Isn't that one of the problems that is not in your brief: that about six or seven years ago the chartered banks withdrew from real estate lending in Canada, and CMHC is a government method to assist private-sector developers? I'm not aware of losses being to the extent of 5% losses in the housing market.

• 1455

There's been nothing tremendous such as we saw back in the early 1980s, when we saw the total wipe-out of the real estate industry in Canada. We haven't seen that since then. There have been a few isolated problems in various regions in Canada. I don't believe there's been too much of a problem in the greater Toronto area.

I think one of the areas that really isn't addressed is lending to the real estate industry. That's non-existent. How do we get the lenders back to the table?

The Chair: Mr. Rodgers.

Mr. Neil H. Rodgers (President, Urban Development Institute of Ontario): The answer to your question is yes. A 5% fee at a certain time and level of risk would have seemed appropriate, maybe in 1981 when we were in the depths of a recession, or 1991. But at a time when the economy and the real estate industry is so buoyant, one would question it.

Those recessions also took a lot of fly-by-night operations out of the system. The people who want to build rental housing, the people who are our members, are the triple-A credit-rated developers who have excellent and long-term track records.

If the Bank of Nova Scotia or any one of the chartered banks were here, they would say you have to give us a certainty in the legislative and policy and regulatory regimes. That certainty doesn't exist at some levels of government, whether it be on the provincial side in terms of rent controls or on the investment side through tax policies. You guys in the federal government have to create the climate. Create the climate and the market will do the rest.

Mr. Shawn Murphy: But don't we have to create the climate to get the lenders back? Lend—that's my point. I don't think you're going to get certainty in the regulatory environment when a lot of your regulations come from the municipalities. I don't see that ever happening.

I guess my basic question is how can we get lenders back lending to the real estate industry?

Mr. Neil Rodgers: I was having this conversation with a number of people who are interested in this subject. I think even prior to September 11 there were a lot fewer investment vehicles for private institutions, private lenders, to put their money in.

Real estate can be a very attractive opportunity. I don't have any very specific recommendations beyond those we've put into our brief, Mr. Murphy. The key is confidence. The federal government in 1970 created or had such an investment climate and took it away from the industry for a whole host of reasons, among which was to end the speculation in the housing industry. What it actually did was cut the feet out from under the industry, to the point now where nobody is wanting to build unless the returns are significant, or at least appropriate.

Mr. Shawn Murphy: I realize that.

Mr. Paul Mondell: It's a risk-reward scenario. If, pro forma, it's showing a reasonable return on equity, you will get the banks back into the business. They're very skittish about this, for a whole host of reasons. So much legislation has been targeted by various levels of governments to the landlord and the owner of apartments buildings tha it's a frightening proposition to be going to capital markets with the prospect of a new apartment or rental building, knowing it's probably going to be two, three, or four years before you start to see one nickel of money coming back in. The world can turn on its head in that period of time.

Mr. Shawn Murphy: My last question is to Mr. Shapcott, and I'll be very brief, Mr. Chairman.

On this whole affordable housing play, I agree with you. It has taken much longer than it should have. I understand it's been bogged down in negotiations with the different provinces. Different models have been put on the table—and I agree with you, the federal government should not be involved in building apartment buildings—but from your past experience of different models such as the MURBs and the cooperative houses, what model works the best and what model should the federal government be pursuing in discussions with their provincial counterparts?

Mr. Michael Shapcott: We think the best model, of course, is one that actually delivers housing in a way that's the most cost-effective administratively, very easy for the government to deal with, and as I say, ends up creating units. The government used to have a program under the National Housing Act called the 34.18 program—just to throw out a number, which will mean not much—which essentially provided a fairly simple form of capital support for the construction of the units.

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In the case of housing co-ops that were built under that, it was partially repayable. It also provided for a stream of subsidy to low-income households that could demonstrate need. It was a fairly simple program to administer. It was a program that delivered the units, so we think that's a good model.

We don't think the kinds of programs that we saw recently at the federal level, or indeed in some of the provinces, including Ontario and Quebec, are good models, because quite frankly, they're administratively very difficult, and we think there are more cost-effective ways.

So essentially, combining up-front capital support and rent supplements, or rent geared to income support, is the way to go.

The Chair: Thank you, Mr. Shapcott.

Thank you very much, Mr. Murphy.

The final questioner is Mr. Brison.

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

Mr. Shapcott, you spent some time discussing the legitimacy of Canada's participation in the current military activities against Afghanistan as part of a NATO operation. I just wanted to make the point that we balance investments as a government. The finance committee plays a role in that, but ultimately, the finance minister makes decisions as to the balance of spending to meet the priorities of Canadians. National security is a priority for Canadians. We live in a huge country with long borders that are almost impossible to defend, even if we commit a lot to our military.

We invest less in national defence than any of our NATO partners, with the exception of Luxembourg, so I would say our NATO investment is actually a pretty good deal. When we occasionally have an obligation to participate as a NATO partner, we are not in a position to shirk that responsibility. In fact, historically, we benefit significantly as Canadians. Individual citizens and Canadian taxpayers benefit from our NATO participation.

I would appreciate your feedback on whether you feel that's justified.

Mr. Michael Shapcott: I think you and I would agree that global security and national security are both very critical issues, especially in these times. Where I think we would disagree is over what route we take in order to achieve them. We think that with global security, as I indicated in my presentation, there are a couple of measures Canada can and should be taking leadership on, in the global movement towards an international criminal court, for instance, where 42 countries around the world, well-respected countries, including Canada and Britain, support that as the appropriate forum for this type of initiative to bring justice for the horrible acts that happened on September 11.

You mentioned military expenditure. I think it's well known that Canada, in its spending on international development right across the scale, is well below where it should be and well below where many of our other partners are. So we think those are areas where the government should be exercising its right to make choices.

Mr. Scott Brison: As to those initiatives, the notion of Canada, as a middle power, playing a role in the development of supranational institutions, whether it's the world court or something else, I don't disagree with, but the fact is that when we are called on as a NATO partner in circumstances like this, there are times when we have to act. And as one further point relative to a world court, you need to have someone to bring in front of a world court, and I suspect that Osama bin Laden may not be amenable to that type of participation.

Mr. Michael Shapcott: Mr. Milosevic wasn't all that keen about being brought before his tribunal, but he was brought. The people who were brought up in Nuremberg were not all that keen either, but they were brought. There's plenty of precedent here, and I certainly support the idea of a police action in order to bring people who are indicted in front of an appropriate tribunal. So we agree on that. But are we any safer as a world, are we any safer as a country because the United States is dropping cluster bombs on Afghanistan? Our position would be, no, we're not.

Mr. Scott Brison: But we are safer as a country with the U.S. as our neighbour, and in a position where we don't spend much on our military and benefit from the relative security of our powerful neighbour to the south.

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As to the general housing issue, we've got an economic situation with extremely low interest rates and, of course, commensurately low borrowing costs, from the perspective of investment. Significant demand for low-income housing is demonstrable. There's a question of how much can actually be paid, but there is a significant demand. You have some Canadian companies.... In fact, a former member of this committee, Nelson Riis, has developed a company constructing low-income housing for developing countries.

With the right tax vehicles, could not a market-driven solution be found to address this issue in a way that would be sustainable? We just seem to have to all the fundamentals in place right now for some sort of market-driven strategy. The biggest fundamental positive, frankly, is from a monetary policy perspective. You don't have rates at this level in the U.S. or Canada very often—or we haven't had for an awfully long time. Why is there not some sort of market-driven strategy proposed? If it's not possible now, I really wonder whether it would ever be. But is it possible? And what are some of the proposals we could look to?

Mr. Michael Shapcott: Thank you.

Mr. Brison, I think you've hit on exactly the right question. If I can use that old cliché, the fundamentals are all there in private sector housing, except that there's one very fundamental issue, that renter households in Canada are very poor, and they're getting poorer. I mentioned to you that half of the renter households in Canada—that's 2.4 million households—have $580 a month or less that they can afford to spend on rent. No matter how low the interest rates go, no matter how all the other fundamentals are, it's still impossible in most big cities and many other parts of Canada to acquire the land, to get the financing, and to build and manage housing for $580 a month.

Mr. Scott Brison: The problem is not necessarily a lack of housing, it's a lack of investment on a social level. There's not enough money, whether it is provincial welfare spending or whatever. It strikes me that when we are talking about a low-income housing crisis, the problem is not necessarily the housing side, it's the low incomes. Perhaps we should address that vehicle, as opposed to treating housing differently from the way we would treat food or something else. Shouldn't we be working on the income side of it and individual transfers, as opposed to trying to develop some sort of housing infrastructure approach?

Mr. Michael Shapcott: I think you're absolutely right that the income side of things has to be addressed and there has to be a comprehensive policy on that. But we still won't get away from the fact that the reason housing is different from other market commodities is that if you don't have housing in Canada, it's not simply that you're deprived of a market commodity, but you will very quickly die. That happens in the summer, it happens in the winter. It's a basic human right, it's a necessity, just like food, just like health care. Therefore, we think there is a real and proper role for government on the supply side.

I think it's an important point to make that here in Ontario at the provincial level, the Ontario government, when it was elected in 1995, thought that it would go exclusively go to a market-driven policy. It introduced a number of measures, some modest tax policy changes at the provincial level, a $2,000 per unit grant in lieu of PST, and a number of other changes. What they've succeeded in doing in the six and a half years of their market-driven supply policy is ensuring that on average, 2,000 or fewer new private units have been built a year across the province. We've actually lost more than that number of units through demolition and conversion of existing units to condominiums and other uses. So we're actually farther behind now than we were when the Ontario government started on this policy.

I would say to you, with the greatest of respect, that while incomes issues, issues of assistance, issues of minimum wage, and all those are very important issues for the government to address and are part of the puzzle, the other part of the puzzle is supply, and we think the reason we're in the problem now is that the government decided in 1993 to stop funding the community-based supply programs.

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

On behalf of the committee, I want to thank the panellists for this session. We touched upon three major issues—the environment, housing, and transit—and the economic and social benefits of those three issues.

Of course, this committee needs to remain disciplined, in the fiscal sense, as we address the number of requests we hear. This is only one panel. We'll probably have nine panels by the time we're out of here, even more. This is just one city. It's Toronto.

I also want you to know that members of Parliament will be holding town hall meetings across the country to hear from their own constituents, and they will also have demands.

The point I'm making is that there are demands we have to, of course, take into consideration, but one thing you can rest assured of is we're going to be focused on the three issues and achieving the three ultimate goals we cited in the letter we sent to you prior to August. We're very focused on that approach, and we want to thank you for adding much value to the debate.

Thank you.

We're going to take a five-minute break.

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The Chair: I'd like to call the meeting to order and welcome everyone here this afternoon. This is actually our last panel in the city of Toronto, as the committee heads on to Montreal and Halifax this week, then to Vancouver, Edmonton, and Winnipeg, and then back to Ottawa, where we'll get ready to write the report to the House of Commons and to the Minister of Finance.

We have the following witnesses with us this afternoon: the Association of Canadian Pension Management, the National Professional Association Coalition on Tuition, the Canadian Association of Not-for-Profit RESP Dealers, an individual, Mr. Joseph Polito, and Canadian Ecumenical Justice Initiatives.

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As you probably know, you have five to seven minutes. I hope you'll stay within that timeframe because we'd like to have time for everybody to make their brief presentation, and then we'd like to have lots of time for questions and answers.

We'll begin with the Association of Canadian Pension Management: Priscilla Healy, chair, advocacy and government relations; and Keith Ambachtsheer.

Mr. Keith Ambachtsheer (President-Elect, Association of Canadian Pension Management): Thank you very much. Good afternoon.

The ACPM, the Association of Canadian Pension Management, represents private and public pension plan sponsors and related stakeholders in Canada. Our membership represents about 400 pension plans across Canada that probably cover the vast majority of the 7 million Canadians who are members of registered pension plans.

Our mission is to promote the growth and health of Canada's retirement income system by championing the principles of clarity in pension legislation, regulation and arrangements; good governance and administration; and balanced consideration of stakeholder interests.

Let us briefly give you our views, in the context of the upcoming budget.

This country has a three-pillar retirement income system: Pillar one is the OAS/GIS base; pillar two is the CPP/QPP middle piece; and then we have the much larger voluntary registered pension plan and RRSP sector.

Compared to other countries, we believe in fact Canada is in a relatively good position; however, with the looming retirement of the large boomer generation, we would be foolish to rest on our laurels. Our retirement income system will be challenged as never before.

In this context, we have been espousing a four-point program. The first one is greater financial literacy among Canadians. If Canadians are to prepare themselves properly for the retirement years, they need to understand how our system works.

The second is to promote good governance in how Canada's pension and retirement savings plans are managed. Good governance is critical to ensuring that pension promises can be met at reasonable costs.

The third is to promote movement towards a regulatory regime for pensions and retirement savings that is balanced, uniform, transparent, and cost-effective. The current patchwork of federal and provincial regulations is far from being able to meet this test.

And the fourth one is to promote greater financial self-sufficiency in retirement through increased workforce coverage in pension plans and increased income replacement rates in our voluntary retirement RPP and RRSP arrangements. Serious disincentives and impediments embedded in current federal social policy and tax law now stand in the way of this goal.

In the remaining few minutes, here are some of the concrete things that we propose.

We have been working with HRDC on the whole education side and can expect to continue to do that.

We're working with OSFI and its provincial counterparts on improving pension fund governance practices.

We are also working with OSFI and its provincial counterparts individually and through the Canadian Association of Pension Regulatory Authorities, CAPSA, to create a regulatory regime for pension and retirement savings that is more balanced, uniform, transparent, and cost-effective than the one we currently have. We believe we are making progress. Among the things we are doing is taking a proactive role, encouraging uniform pension legislation, considering the regulation of employer-sponsored savings plans, and considering the federal investment rules. We were pleased to see the creation of the Joint Forum of Financial Market Regulators and their work. We now need a meeting of all the ministers responsible for pensions across Canada to consider these pension issues. The support of the House finance committee in these endeavours would be appreciated.

Another specific issue where you could be helpful is to advocate the complete removal of the 30% foreign property rule on tax-deferred savings. While it has little practical force, this rule continues to signal an interventionist attitude by the Government of Canada, both to foreign investors and to Canadian fiduciaries responsible for investing pension fund and RRSP assets.

And finally, ACPM has made a number of representations over the years to this committee, to HRDC, to Department of Finance officials, and to the Minister of Finance himself on the ways in which current social and tax polices impede the growth of voluntary pillar three pension plans in this country.

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The basic problem is that the current system provides serious savings disincentives to Canadians with incomes below the pension plan and RRSP contribution ceilings of about $75,000 and denies tax deferral room on income above this ceiling. One result of these perverse policies is that Canadians have accumulated significantly lower pension assets per capita than such countries as the U.S., the U.K., the Netherlands, and Switzerland. This places Canada at a competitive disadvantage and creates proportionately greater reliance on tax-financed OAS-GIS component.

Two measures that would do a great deal to ameliorate the cited problem are, one, cap the effective—including the clawbacks—tax rate on pension income at a maximum of 50%; and two, double the income ceilings on which RPP and RRSP contributions can be made—in other words, from $75,000 currently to $150,000.

That concludes our introductory comments. We look forward to your questions in the discussion.

The Chair: Thank you.

We'll now hear from the National Professional Association Coalition on Tuition, Mr. William A. Easton, chair. Welcome.

Mr. William A. Easton (Chair, National Professional Association Coalition on Tuition): Thank you, Mr. Chair and members of the committee.

Before I begin, I would like to take this opportunity, on behalf of all members of the National Professional Association Coalition on Tuition, to acknowledge the tragic events that have recently overtaken the world's attention. Like everyone else, we were terribly shocked by this tragedy, and our thoughts and sympathies are with those who have lost their loved ones.

We recognize Canada's new commitments in response to these events, along with the forecasts for a slowing economy. The daunting task before this committee will be, then, to make recommendations that address the pressing current situation, and recommendations that will address the long-term security of our nation. We believe and are confident that the federal government's continued and sustained investment in post-secondary education will indeed contribute to the future economic security and well-being of Canadians. That's why we're appearing before you today.

My name is Bill Easton and I'm a Toronto-based surgeon. I'm pleased to be here today to speak to you on behalf of the National Professional Association Coalition on Tuition. NPACT comprises nine national professional associations, representing architecture, dentistry, law, medicine, nursing, pharmacy, physiotherapy, veterinary medicine, and the Canadian Federation of Students.

In May 2000 these associations joined together out of shared significant concern that high tuition fees in professional programs create barriers to access to education, and as a consequence, threaten the supply of professionals required to serve the needs of the Canadian public. My brief presentation to you this afternoon will outline some of the reasons why we urge the federal government to, one, increase its funding of post-secondary institutions to alleviate some of the pressures driving tuition fee increases; and two, increase its financial assistance to students.

One of the primary concerns of NPACT is that high tuition fees, along with the fear of accumulating a high debt load, will deter otherwise academically and personally qualified individuals from considering a professional career. Let's consider for a moment the case of a bright young individual interested in pursuing a career in medicine. Bear in mind that most medical schools require applicants to have an undergraduate degree before they can even apply to study medicine.

Human Resources Development Canada estimates that in 1998-99 the combined average debt load of undergraduate students from both provincial and federal loans was $25,000, not including bank loans. It's not difficult to imagine, then, that a student with this kind of debt load, especially one from a family of modest means, might be deterred from considering four more years of school when tuition fees in medicine are, on average, currently more than $12,000 per year in Ontario, and in some cases, as high as $14,000 per year. These are tuition costs only and do not reflect costs associated with pursuing studies, such as rent, food, textbooks, supplies, and so on.

Tuition fees in other professional programs are also at unprecedented levels and are likely beyond reach for many individuals. High tuition fees may also exacerbate the brain drain to the U.S. where offers from American recruiters to pay off high debt loads will increasingly attract new professional graduates to the U.S. and elsewhere. This may be particularly true for health care professionals.

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For communities such as ones in rural and remote areas that already face significant challenges in accessing professional services, high debt loads may result in fewer professionals available or interested in practising there.

Unfortunately, government financial support programs such as bursaries and loans are not increasing in proportion to students' needs because of rising tuition costs and living expenses. For this reason, high tuition fees and insufficient financial support systems will also have a very negative impact on the students themselves. In addition, many students in professional programs have limited or no opportunities to earn income while in school. As a result, the number of students who must rely on interest-bearing bank loans to help support themselves while they are in school will increase dramatically. As previously mentioned, some students have already accumulated debt from a previous degree, and for some professional programs an undergraduate degree is a requirement before an application can be made. Also, repayment of interest on bank loans cannot be postponed until after graduation.

Each of these factors, along with the stress of trying to make ends meet while in university, will undoubtedly have a negative impact on the health and well-being of individuals studying in professional programs, particularly those with a spouse or dependents to support.

Finally, another consequence that perhaps has not been considered is the effect of high debt loads on the Canadian economy. The income that newly graduated professionals would otherwise be spending on high-ticket items such as homes, automobiles, and financial investments will now need to be allocated toward years of paying off high and unprecedented debt loads.

In summary, NPACT believes that the Canadian government must graduate professionals with reasonable debt loads so they have greater incentive to remain and practice in Canada to serve the needs of the Canadian public. We have already recommended to the federal government that it work with other governments to ensure regulated and reasonable tuition fees.

We respectfully recommend the following to members of the finance committee for inclusion in the 2002 federal budget: one, that the federal government increase its funding of post-secondary institutions to alleviate some of the pressures driving tuition fee increases; and two, that the federal government increase financial support for students, in particular bursaries and scholarships. In addition, financial support systems for students should be non-coercive; they should be developed at the same time or in advance of any tuition increase in direct proportion to the tuition fee increase and provided at levels that meet the needs of students.

Thank you, Mr. Chair. I'll be pleased to answer questions.

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

We'll now hear from the Canadian Association of Not-For-Profit RESP Dealers: the co-chairs, Mr. Tom O'Shaughnessy and Mr. Kevin Connolly. Welcome.

Mr. Tom O'Shaughnessy (Co-Chair, Canadian Association of Not-For-Profit RESP Dealers): Thank you, Mr. Chairman.

First of all, I'd like to say that our message may in general terms be somewhat similar to Mr. Easton's, but some of our recommendations may be a little different in terms of the focus.

We are organizations that encourage parents to save for post-secondary education for their children, and our objective is to increase post-secondary education saving, especially among lower- and middle-income families in Canada. We currently have over $2.5 billion in assets under administration on behalf of over half a million children across the country.

I think, as everyone will realize, we're clearly in a global economy, one that requires significant development of human capital to ensure that we remain competitive in that economy.

In 1998 the federal government took a bold step in introducing the Canada education savings grant as a basis for encouraging parents to save for education and to encourage their children to go on to some kind of post-secondary education. In the years since then we as an association have been working very diligently with provincial governments to try to encourage them to participate in some kind of an incentive program as well. We have met with nine of the ten provincial governments over the last two years and have made some significant progress. I can say that in Ontario at this time there is a bill in the legislature that has passed second reading and committee review and that will potentially be introduced with a provincial budget in the spring of next year. As well, in Alberta the Minister of Learning is promoting a provincial grant for their next provincial budget, due in January of next year.

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Why do they want to encourage their constituents to save as well? First of all, encouraging personal savings reduces the demand for student loans and reduces the cost of student loan programs in the long run. In fact, we believe that some of the recommendations we're making today will not have a cost to the federal government in the long run and that ultimately those student loan programs will be reduced in cost as a result of our recommendations.

The other, perhaps more important issue is that children of parents who save for their children's post-secondary education in a registered education savings plan are twice as likely to go on to some kind of post-secondary education and also to complete that post-secondary education, whether it be for a diploma or for a degree. It's extremely important that we get as many people as possible to participate in these types of programs.

The Canada education savings grant, which was introduced in 1998, has become very popular but in our view is still not totally effective. There are a significant number of lower and middle class families in Canada that are not participating in the program. At this stage, a little over 20% of families are participating. We anticipate that with some additional incentives we can get that participation rate to 40%.

We'll never get it to a point where RESPs are the only basis of funding for post-secondary education. There will still be a demand for student loans, and there will still obviously be a requirement to fund institutions directly. However, we feel that it would be appropriate to have more incentive at the lower- and middle-income levels and a mindset where the federal government looks at all of its legislation in all areas and ensures that there's protection for RESPs, whether through bankruptcy legislation or through other legislation that could be implemented by the provinces.

We would also like to see the federal government change its legislation on RESPs to ensure that all provinces have the capability to participate in some kind of an incentive-grant program.

Now I'll pass the torch to Kevin, who will talk about some specific recommendations.

Mr. Kevin Connolly (Co-Chair, Canadian Association of Not-For-Profit RESP Dealers): Thank you, Tom.

One of the areas Tom mentioned was targeting the Canada education savings grant to incent low- to moderate-income families since they are not saving to the same degree as more wealthy Canadians. As an example, what the federal government could consider is increasing the grant, which is currently at 20% for the first $2,000, to potentially, just as an example, 30% for the first $1,000 invested. Then perhaps a consideration could also be given, as is consistent with the proposed Ontario legislation, to offer that initiative exclusively to those in the low- to moderate-income groups. It's still a generous program for those in the higher-income levels, but we should perhaps bump it up to provide more opportunity for the low- to middle-income Canadians to take part.

Tom also mentioned the issue of the proposed bankruptcy legislation. The concept behind the RESP is that the investment income in the program is really attributable to the child. If there is any way to do it, the finance department should support protection for the basic RESP under the proposed bankruptcy legislation to ensure that plans aren't necessarily collapsed if parents undergo financial hardship, because the child eventually suffers and loses the income in that plan.

I have some other recommendations as well, and one is cross-promoting RESPs to target audiences when the federal government is involved in such programs. As an example, anywhere the federal government is involved in communicating with Canadians, particularly recipients of federal family benefit programs—parents, grandparents, and students in any way, shape, or form—it could step up the cross-promotion of RESPs in their communication efforts. Again, as Tom briefly mentioned, the federal government should encourage steps taken by the provinces. We're very excited about what we're seeing happening with the provinces in the area of adding value to the federal government grant.

As Tom mentioned, we have presented to all governments except Saskatchewan, and the reception has been very positive. Tom has already mentioned where we're at in two of the provinces. If the federal government could encourage the provinces in any way, shape, or form to step up their efforts to add value to the CESG, that would be great.

Also, we recommend that the government make changes to the ITA to allow provincial grants to be a reality—that needs to be looked at—and encourage social assistance legislation changes to protect RESP savings. When parents go on social assistance, it is currently a requirement that RESPs be terminated. Again, it's a question, a concept, that the investment income in that plan could and perhaps should be attributed to the student for whom it was set up in the first place.

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Those are some specific recommendations for today.

Tom, I believe you have some summary comments on these.

Mr. Tom O'Shaughnessy: Generally speaking, in our 40 years in this industry we have seen how it's not just a financial argument, where we go through all the numbers and say yes, it's going to make sense in the long run, it will reduce the cost of student debt in the long run, and ultimately funding post-secondary education in Canada in the future will be the joint responsibility of governments and families, but it's an emotional argument too.

We've seen over and over many families who, when they do start to save, even if it's relatively small amounts, the philosophy becomes ingrained with the child from a very early age that they do have opportunities beyond high school. Ultimately, that's why you have greater participation in these programs. It's extremely important for the future of this country to ensure that as many people as possible are in these types of programs.

Thank you.

The Chair: Thank you, Mr. O'Shaughnessy, Mr. Connolly.

We will now hear from Mr. Joseph Polito.

Mr. Joseph Polito (Individual Presentation): Thank you.

I was so impressed with Bill Easton's professional radio voice that I think I should have him read mine.

The Chair: Have you asked him?

Mr. William Easton: It means I used to have a good job, sir.

Mr. Joseph Polito: This is an approach designed to increase your ability to invest in the things we've just heard mentioned today and in the three primary goals you have. It's an approach that has been advocated by some of Canada's finest economists. It's a market-oriented strategy to create a powerful bias to full employment in good times and, more importantly, in bad. These economists want to reverse a major impediment to full employment, specifically—this is the fundamental point—the structure of a payroll premium system, which creates a market incentive for employers to decrease unemployment.

This is how it works. To reduce payroll costs, employers rely on overtime, longer work weeks rather than new hires, and lay off a small percentage of employees rather than reducing the hours a little in a slowdown. To reduce costs employers will also use contract workers, who are often unprotected by employment standards acts. Employers are reluctant to accommodate employees who wish to work less or job-share because this also increases payroll premium costs. Recently, Ontario gave in to lobbying pressure with changes to its Employment Standards Act, which in effect increased the work week. Why? To save payroll premiums.

Consequently, we've gotten ourselves into a ludicrous situation in Canada where some of us, or many of us, are overworking—particularly politicians—to transfer income to the unemployed, who wish to work for themselves. Your constituency offices deal with this devastation and the social pathology of unemployment every day. Your budgets are also victims and unfortunately may be facing the same thing because of the September 11 situation.

The strategy of these economists benefits the private sector as much as the unrelenting lobby for corporate and income tax cuts. By the way, it's interesting to note that the Business Council on National Issues already says Canada has been in the top five in competitiveness for the last three years.

These experts are asking of this lobby, how will corporate tax cuts help Nortel, a company that has been suffering terrible losses? How will such cuts help the new economy firms that are years away from making profits? And that's another one of our goals. How do corporate tax cuts help hospitals and school boards, universities and municipalities, the public sector? How will income tax cuts help the unemployed? How do rising tuition rates improve the goal of equal opportunity?

To add to Mr. Easton's presentation, there was a recent report from the University of Western Ontario that said that the average income of the families who send their children to medical school had gone from $80,000 to $140,000 after their tuition was raised from $3,000 to $10,000 at that school. It's really ironic that so many of us made so many fiscal sacrifices to make sure our children's futures weren't mortgaged, and that's exactly what this tuition policy is doing. Meanwhile, in Europe they've decided that the 21st century's secret will be post-secondary education, just like the 20th century's was public education, and they're getting into all sorts of no-tuition programs.

The focus just on corporate tax cuts has obviously led to a great deal of prosperity in the U.S., but it hasn't helped to address your three goals. Business Week was shocked to find out that Silicon Valley, the finest, most prosperous place on the planet, has homeless people, working poor, soup kitchens. The Congressional Budget Office found that in the last 20 years the average income of the bottom fifth of the population had stalled at $11,000. Meanwhile, the top 20% was up 57%, and the top 1% was up 157%. All this, by the way, was during the period of Ronald Reagan's vaunted tax cuts. It's interesting to note that it was after George Bush Sr. and Bill Clinton raised taxes modestly that the U.S. had its best growth.

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You are all familiar with the Canadian economists who are promoting this: Arthur Donner, the gentleman who produced The Donner Report in 1994; David Foot, who has been so useful to the private sector as it has adapted to the demographic changes in commerce; William Scarth, a McMaster University professor, who has written for the Fraser Institute and the C.D. Howe Institute; and Frank Reid, director of industrial relations at the University of Toronto. These people believe in the free market. They want to make a change in the free market to unleash it. There are American economists who are doing the same thing.

Edmund Phelps, free market economist extraordinaire, did the unthinkable. He wrote a book called Rewarding Work asking for the federal government to intervene in the labour markets in the U.S. to prevent the extraordinary poverty and wage gap there.

The paradigm shift these gentlemen are asking for is the provision of a financial incentive for employers to create a bias to full employment, to save money by reducing hours, not employees, during recessionary periods like the one now coming up—and an example of this is what has just happened with Air Canada working with the employment insurance people—and to save money by hiring rather than relying on overtime in good times.

Three steps need to be taken. Make our payroll premium structure progressive, like our tax system, steeply progressive if possible. Apply all future reductions of EI premiums to increasing its progressive nature, and de-emphasize the cuts to income and corporate tax while allocating funds to EI reductions and restructuring CPP premiums. Again, I am all for income taxes and corporate.... I don't want to see companies pay taxes, but first things first. This will address your three goals.

Unlike so many other proposals, this paradigm shift would address far more priorities and get widespread support. Politically this is essential. All the parties in the House can support this. All Canadians can support this—namely millions of harried supermoms to whom employers won't grant reduced work hours; millions of low-income workers and students who benefit disproportionately from these kinds of changes; millions of young people and immigrants who have significantly higher unemployment rates; millions of baby boomers who want more time for family, community, and grandchildren; all firms, particularly new economy ventures, that don't make profits for years but do pay payroll premiums. That's all industries. I'm thinking of the gentleman who was talking about housing here. This would cut their cost and therefore the price of housing.

The millions of Canadians concerned about environment can support this shift. Reduced unemployment means more investment in labour-saving, energy-efficient technology. Support will come from the millions of university and college students suffering tuition shock, who pay EI and CPP, and from the countless public sector workers whose employers become cash-strapped; from the cash-strapped and debt-burdened provinces, who wind up second federation for want of money, the money grab. Canada's 80,000 registered charities have found the trend of over-employment has robbed them of a million volunteers, as was just reported in the Globe and Mail. They will support this.

The impact would also further another major goal of this government, this Parliament, and all the parties, to reduce child poverty. It gives lower-income workers more money than an income tax cut and keeps young parents working. Young parents are the first ones cut in a time of layoffs.

According to UNICEF, the U.S. has the worst poverty rate of any of the G-8 nations relatively and absolutely—22% for child poverty. Sweden has 2.6%. The Dutch have 3%. Those two countries are focused on creating a bias to full employment, along with other programs.

It reduces unemployment costs yet improves the quality and balance of employees' lives. It increases global competitiveness through reduced costs and reduced interest rates. It increases R and D through reinvestment of payroll tax savings. It maintains low interest rates. If you reduce the payroll cost, you reduce prices, you reduce inflation, and the Bank of Canada likes that. It keeps interest rates down.

Canadian Nobel economist Robert Mundell says it was high inflation that caused our economic woes. He talked specifically about John Crow's policy leading to the collapse in 1990. Astonishingly, Statistics Canada says the median family income is still not as high as it was before John Crow's monetary policy.

It reduces the brain drain, because most young people left Canada when there was no suitable work. It unifies the nation and reverses past errors with distinct communities, because it's in periods of high unemployment that the marginalized get really upset. It reduces the impact of sales taxes. Some employers' payroll tax reductions would reduce prices. And it reduces the devastating impact on Canadians' federal finances.

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Finally, for those concerned with government spending, the bias to full employment would substantially reduce the $30 billion to $90 billion we spend, in all levels of government, directly and indirectly on the unemployed.

I would add that in the handout I gave you, in part two, there's a series of charts and graphs that dispel a lot of economic myths used by those who unrelentingly lobby for corporate tax cuts. You can look at those at your leisure.

Thank you very much.

The Acting Chair (Mr. Roy Cullen): Thank you, Mr. Polito.

I'll now turn to the Canadian Ecumenical Justice Initiatives, Maylanne Maybee and Dennis Howlett. Welcome.

Ms. Maylanne Maybee (Co-Chair, Canadian Social Development Program, Committee of KAIROS, Canadian Ecumenical Justice Initiatives): Thank you.

KAIROS is a newly constituted coalition of Canadian churches, church-based agencies, and religious organizations dedicated to promoting, from a faith base, human rights, justice and peace, viable human development, and universal solidarity.

Most of the organizations and individuals you've heard today have been making recommendations about the manner in which the government should raise its revenues, and how those revenues should be allocated among its various activities and responsibilities.

On behalf of KAIROS, Dennis Howlett and I would like to talk instead about the principles that we believe should guide those decisions. The actions we have seen of the federal government following the horrific and tragic terrorist attacks of September 11 have demonstrated to us how quickly, where there is political will, the means can be found to subsidize airlines or launch military action. Meanwhile, longstanding commitments to ending child poverty or increasing international development assistance languish because there is no money.

Moreover, there's also a danger that Canada's new security agenda will crowd out funding commitments to health, education, and social spending. Indeed there are some who have exploited this tragedy and its aftermath to advance long-standing agendas that include tightening our refugee and immigration policy, dismantling the public health and social infrastructure, and increasing military spending.

The shock and grief Canadians feel about the terrorist attack of September 11 on the U.S. arise out of our horror that innocent and vulnerable lives so close to home were cut short by sudden and violent death. We want to condemn the action, show compassion to the victims and survivors, bring the perpetrators to justice, and take every measure possible to ensure that such attacks are never repeated and never played out in our own cities and communities.

It is therefore natural that we would want to pour our country's resources and energies into this dire situation. But at the same time, we are here to remind you we must never forget that innocent and vulnerable lives are continually being cut short, not necessarily by sudden and violent death, but often by a more gradual and less dramatic, but nevertheless equally devastating, submission to life-threatening conditions.

Mr. Dennis Howlett (Team Leader, Canadian Justice Cluster, KAIROS, Canadian Ecumenical Justice Initiatives): In the terrorist attacks in New York and Washington on September 11, 5,000 people perished. This is a horrible number, but it's important to put this number in perspective. On September 11, 35,000 of the world's children starved to death; 16,000 people die prematurely each year in Canada because of air pollution; and unacceptable levels of poverty in Canada also cause unnecessary deaths. There would be 6,000 fewer Canadian deaths each year from heart disease if we didn't have the disparity in wealth that we have.

Unlike the terrorist attacks in Washington and New York, these were all wholly preventable tragedies, even though they did not get live television coverage. The real threat to our security and well-being are the thousands of children and their families who live and die unnoticed in refugee camps around the world; the millions of Canadian children who lack the means and support to grow into strong, productive and engaging citizens in this country; and the hundreds of adult Canadian poor who die unnecessarily on the streets or in our overcrowded emergency room hospital corridors.

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Cutting humanitarian aid, eviscerating health and other human infrastructure, and refusing to address the causes of environmental degradation, in order to increase so-called security spending may well result in far more unnecessary deaths than the security measures and military actions are intended to prevent.

In the end, millions of dollars spent on beefed-up airport security only leaves you with beefed-up airport security. Spending the same millions on human infrastructure would not only be a moral and just choice, it would also produce far wider ranging and longer lasting improvements in global security.

Ms. Maylanne Maybee: Canadian churches have gone on record as supporting the need for increased security measures to protect our communities against acts of terrorism, but they have also warned that our security can never be ensured primarily through military means. We cannot let the events of September 11 undermine our collective commitment to values of equality, human rights, and social and ecological justice.

Some adjustments to the federal budget will be required to account for the anticipated downturn in the economy and to pay for some legitimate increase in security measures. But we must not allow the events of the past two months to erode our commitments to improving child welfare, ensuring quality universally-accessible health care, redressing injustices against aboriginal peoples, reducing greenhouse gas emissions, and creating affordable housing.

For many years, Canadian churches have also advocated a human security approach as the best way to ensure our collective safety and well-being—an approach that strengthens political, social, and economic conditions and institutions that are sustainable and have the confidence of the people they are intended to serve.

The dimensions of the term “human security” are expressed in article 25 of the Universal Declaration of Human Rights passed by the United Nations General Assembly in 1948, to which Canada is a signatory. It begins:

Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing, medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control....

The current terrorist threat is not a short-term crisis. We believe it is best addressed in the long term by addressing the deeper conditions and realities that underlie terrorism: reducing global disparities in wealth and providing increased resources for human development in troubled societies.

These we believe are the measures most likely to eliminate the support and incentive for terrorists.

The Acting Chair (Mr. Roy Cullen): Thank you, Ms. Maybee and Mr. Howlett.

We're now going to have a question and answer period with five-minute rounds, starting with Mr. Kenney.

Mr. Jason Kenney: Thank you, Mr. Chairman.

I think all the panellists can see the difficulty we have in keeping our eye on so many disparate issues, although there are a couple of commonalities in this panel, which I'm sure we'll be pursuing in the question period.

I'd first like to address my remarks and questions to the KAIROS representatives, in part because they're the first organization to direct the substance of their submission to the fiscal consequences of September 11, which are certainly in the front of my mind, and I suspect in the minds of most members.

I must say, very frankly and with respect, I find offensive the basic predicate of your submission, which is some kind of very peculiar moral equivalence between a direct and enormous act of moral evil—the murder of several thousand people—and the consequences of disease—respiratory and heart disease and ailments—which you characterize as environmental degradation and the like. To suggest that there's some kind of equivalence, and to create a dichotomy, in terms of public resources, that to spend more public resources on maintaining safety and security somehow is in competition with ongoing public policy priorities such as health care and the environment I think is entirely the wrong way to look at this.

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I also would challenge you to a response. You also predicate your entire submission on your closing paragraph, that the current terrorist threat is best addressed in the long term by addressing the root causes of terrorism, by reducing global disparities in wealth, and by providing increased resources for human development.

On what factual basis do you predicate this assertion that recent acts of terrorism are the result of global disparities in wealth? This is unrooted from any of the facts that have been presented about the nature of the fanaticism, the ethnic hatred that motivated these acts. And I would suggest, with respect, that you reconsider what Canada and the rest of the western world are facing and what sort of policy response we need. You say that increasing airport security will just increase airport security. It may save lives. Is that not the first priority of a national government?

Mr. Dennis Howlett: Key here and the reason for using the examples of the numbers is that I feel there needs to be some careful consideration given to cost-benefit analysis. If the increased security measures and particularly the open-ended commitment that Canada seems to be getting into in terms of military action, which who knows how much that's going to end up costing, ends up resulting in cuts to other areas of government spending, we may very well end up with more people dying.

Now, this is not to impute a moral cause; it's not equivalent in that sense. There is a danger in which government not thinking through the result of their choices may have unintended consequences. I think there would be good evidence to show that more people may die, more Canadians may die as a result of cutting health and anti-poverty spending than would be saved if that money were spent on so-called security measures.

This is particularly true in the case of the military spending. Some of the increased airport security and so on is justifiable and the churches have supported that. Of particular concern to the churches is the open-ended commitment we may be getting into in terms of military action, which could be extremely costly and undermine the government's stated commitments to pursuing social spending goals.

Mr. Jason Kenney: I suppose you're applying the logic that perhaps if we had saved the resources that we spent on the military operations in the Second World War and applied it to health care and environmental spending, we would have had better human outcomes. I fail to follow the twisted logic of this.

My second question is a more mundane matter directed to the Association of Canadian Pension Management. You've addressed some sensible and modest changes to the pension regime. One idea you've been associated with in the past, which has merit and I'd like you to comment on, is the idea that has been brought up today by other witnesses of tax prepaid savings programs, which is like an inversion of the RRSP program. I wondered if you could comment on that.

Mr. Keith Ambachtsheer: The issue here is the concept of tax expenditure associated with facilitating retirement savings. One word the association objects to actually is the concept of tax expenditures, where in fact we really should be talking about tax deferral, where money not paid in taxes now but instead saved through RRSPs or registered pension plans ends up being taxed later, when it does become income. The Minister of Finance on a number of occasions has suggested that may well be true, but we still can't afford the missing cashflow today that was associated with increasing the ceilings, for example.

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It is in that context that a very sensible alternative is in fact to propose, at least up to some limit, that people who want to save more for retirement do so by paying the taxes on the savings now, and not being subject to taxes later on when they are on retirement income. It is like reversing the flow.

The association very much supports that concept. We also point out that it may in fact end up being very good public policy to move some of the tax collection associated today with not raising the ceilings to raising the ceilings and having those taxes come due later on, 20 years from now, when all of us know the demographics are going to imply higher social expenditures and a higher need for taxes.

It is not a cut-and-dried issue, but certainly we're going to support and look at both approaches.

The Chair: Thank you.

We'll go now to Mr. Murphy.

Mr. Shawn Murphy: I want to pursue one area with Mr. Connolly and Mr. O'Shaughnessy. This is on the RESP and your recommendation that the 20% grant be increased to 30% for low-income Canadians.

First, I believe this is an excellent program. It's good public policy. I'm glad to see that the provinces are thinking about supplementing it. I think it's an initiative that in the long run will save governments at both levels money in that it hopefully may address some of the concerns that Mr. Easton raised in his presentation.

Again, I want to probe this a little further. I'm not sure that raising the level to 30% will be the answer. You have people who, in today's economy, are struggling. They have children. They want to save for their education but they don't have the cash to put away. Has your association done any studies to indicate that this would actually work, and if so, can you share them with us?

A witness: I'll respond to that one.

First of all, as we said in our presentation, we don't anticipate that this program would be the be-all and end-all. There will still be a requirement for a student loan funding program that would deal with families that just aren't in a position to be able to save.

With the introduction of the grant in 1998 we saw that the people who were saving at income levels below $50,000 a year actually rose quite significantly from their participation rates before the 20% was put in place. It's our evidence, based upon our studies for some of the provinces, that in these particular provinces anyway, we anticipate the percentage of people who will participate will increase significantly.

It's not going to be a total answer, but there will be an increase from the current over 20%, and we expect potentially over 30%, and ultimately up to 40%, if we can get a federal government top-up for the lower income level, combined with a provincial top-up for the lower level.

The Chair: Is that it? Okay, thank you.

Mr. Solberg.

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

I have a couple of questions. First, Mr. Howlett, in your presentation you stated that 16,000 people die prematurely every year in Canada because of air pollution. That seems like an outrageous number. I know you footnoted this, but can you unravel that number for me, please? Is there any independent verification apart from the David Suzuki Foundation?

A voice: The Ontario Medical Association had a smog report that would be in keeping with those numbers.

A voice: The witness is right.

A voice: I'd be happy to get it for you, Monte.

Mr. Dennis Howlett: The study is quite a detailed and authoritative study by several prominent researchers and doctors that was done for the David Suzuki Foundation. It has the numbers for Canada as a whole, but there was a similar study done by the Ontario Medical Association, which has quite consistent figures for Ontario. It also spelled out what the health costs are in terms of unnecessary admissions to emergency wards and so on. It is quite a detailed study. They had a follow-up study again this year that provides more detail. So there is quite a substantial body of evidence on that one.

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These are just a few examples. I could have actually cited a number of other studies showing the different ways in which choices about budget spending do have an impact on who dies and who lives, in Canada and in the world.

These are very serious kinds of moral choices that are before you. It's a request that you put some context, some proportionality, in terms of considering the best way to ensure security for the most people in the world.

Mr. Monte Solberg: That's fair, but it's also a fact that Canada has seen the longevity of its citizens grow almost with every passing year. We spend as much on health care as almost any country in the world, except perhaps the United States. We're fifth or something in the world in terms of the amount of money we spend on health care. So we do devote a tremendous amount of our resources to health care and social programming in general.

In the last 10 years we've probably spent, between the federal and provincial governments, $300 billion or $400 billion on these sorts of things. We spend a lot of money. I don't think people should suggest that somehow we've fallen way down the list in terms of what we're trying to do for our citizens.

I'm concerned, like my colleague Mr. Kenney, about how.... I must tell you, I think in some way you're trading a little bit on the tragedy of September 11 to make your case, when I think it's pretty clear that Canada already does a tremendous amount. It doesn't mean we can't do more or we can't do better. But to suggest by beefing up security we're somehow going to damage our commitment to health care and dealing with serious issues like poverty I think is just not credible.

I have a question for Mr. Easton, also, with respect to university tuitions. In your comments, you suggested the government needs to help out in a couple of different ways to deal with the issue of tuition. What you didn't say is what you thought would be an appropriate level for students to spend every year in terms of their education. And second, do you think it's appropriate for students to have some personal financial stake in their own education? Should they be paying some of their own tuition, in your judgment?

Mr. William Easton: Let me answer your second question first. The short answer is yes, not just because it makes sense in terms of the commitment and motivation of the student in whatever professional faculty they may be in, but because it will be inevitable into the foreseeable future that assistance programs, be they privately or publicly funded, will not be sufficient to support the entire cost of a professional education. So students will participate in a private way in their education, and probably should.

My concern is that at this point we are rapidly approaching, at least in Ontario...and there's no reason to believe the Ontario formula will not—forgive me—metastasize to the rest of the provinces, given the extraordinary stresses that the universities are under on an economic basis.

I think the federal government has some responsibility in terms of the genesis of this difficulty, in terms of the changes through the CHST, the provinces—again, particularly Ontario, which is the one I know the most about because I live here. Obviously the universities and the professional faculties felt they did not have sufficient funding flowing through the federal and provincial governments to the universities to continue to support the professional, academic enterprise at a sufficient level. With deregulation of tuition in Ontario in 1998, we saw tuition in medicine and dentistry effectively double. It went up by 250% from 1995 to 2001.

So on your second question, the bottom line is yes, students should participate. How much? I don't know. But they are going to be participating, and at this point we're rapidly moving toward education for the affluent.

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There are several layers of concern here. As you know, again in Ontario, but all across the land, there is a rapidly developing crisis in the availability of health human resources. People can't get a family doctor in Pickering, let alone downtown Toronto, let alone Timmins or North Bay. If we expect the citizens of Canada will be served in the future by made-in-Canada professionals, we have to find a way to allow all suitably qualified Canadians have equitable access to a professional education.

We know for sure the young people who come from rural and isolated communities and educate themselves in a professional faculty are far more likely to go back to the community from which they came. If we are moving, as I said, to education for the affluent, it is much less likely that those from downtown Toronto will subsequently locate their family medicine practice, or even less likely, their specialty practice, in Timmins or some other such community.

I don't know if I've addressed your first question.

Mr. Monte Solberg: Well, yes, my first question was that you don't have any figures in here with respect to what the government should be doing.

Mr. William Easton: I think that's difficult to plant a number on, because the numbers vary all across the country. If we were addressing the federal government, as we are today, the situation for professional faculty students in Ontario is very, very different from what it is in B.C., even if you look at only tuition. They're orders of magnitude different in those two jurisdictions.

Regarding dollar amounts, I don't think we have one. I don't think we've gone through the exercise. We're looking at this largely as a process problem, rather than a number problem. The reason the nine organizations got together...which I must tell you is in itself unique. These are organizations that don't normally sit around the same table and agree with each other, as you know. There is some government precedent for that. But we are concerned on a process level the young people of Canada are being denied access to professional education at many levels, and it's a matter of concern in terms of service to the Canadian public down the road.

The Chair: Thank you, Mr. Solberg.

Mr. Brison.

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

My first question is for Mr. Polito. You suggested reductions in corporate taxes may not lead to the greatest level of economic growth and opportunity. I'll point to just one example.

Ireland's tax strategies have been largely focused on the corporate side—in part. There are other policy decisions that have played a role in this, including affordable education, which is a longer-term strategy. But over a 10-year period, they had a 92% growth in GDP per capita, and during the same period, Canada had 5%. So corporate taxes can make a significant difference.

In terms of profit-insensitive taxes, you talked about one, which is the payroll tax side. I'd appreciate your views on capital taxes, because in the same way that payroll taxes, particularly the regressive payroll tax system we have in Canada, will discourage companies from hiring people, capital taxes will discourage companies from investing in the types of productivity enhancement that can make a difference. I'd appreciate your views on the capital tax side.

Mr. Joseph Polito: Ultimately, I think what these economists are saying—and these aren't really my views, I'm just the medium to these economists—is that any of those reductions will help the private sector grow. They all come off the bottom line. If it's a reduction in the payroll costs, the corporate taxes, or the capital taxes, all those things will help.

By the way, Ireland also went to a zero-tuition policy. That was another part of their new-economy strategy.

But I think the theme here from these economists is not only is it the actual nature of the tax, but it's the structure. It's just like we tax cigarettes or alcohol. Those are ways of reducing those behaviours. They said the way our payroll premiums are structured is that they actually increase employment, and they wanted to change the structure just by itself. Mr. Scarth actually called his first paper a policy for government's without any money. He was just going to change the structure.

Now that there's a little more money in the system, they want to see that structure become much steeper. It will also save the corporations money, just like the corporate tax will, just like the capital tax will. And it will produce full employment, unlike the other two items. But they're all great measures.

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I've talked to a number of businessmen who say “I love this, I love reductions in payroll taxes, that's just as helpful to me—let's go for it”. The difference is that it also helps to meet the three goals of the committee.

As I mentioned, in the U.S. they have those things in spades. They're the most prosperous nation in the world, and they have these other social pathology problems, which that tax thing does not help. That's really their approach here, but yes, capital tax is great too.

Mr. Scott Brison: I have a question for Mr. Easton, and others may wish to comment as well. Some groups that have presented to the finance committee have been suggesting that there ought to be tuition caps in Canada, and I just want to posit a real problem with that idea. I'll give you an example.

My riding in Wolfville, Nova Scotia, has Acadia University, which Maclean's magazine has rated for the last two years, I believe, the most innovative undergraduate university in the country. Acadia also has the highest tuition for any undergraduate university in Canada now, and yet every year the enrolment is going up. So you have a university that has improved the curricula and the delivery mechanisms significantly on campus. They are investing significantly in the university. Tuition is going up, as is enrolment. So I guess I'm expressing a real concern with a national strategy designed to try to cap tuition. That's a top-down approach, because I think we do have the potential in Canada to have some very innovative higher-end universities, and we shouldn't be trying to discourage that sort of experimentation and innovation.

Mr. William Easton: Again let me respond to your second point first. I agree that Acadia is very highly rated, but I think the difficulty in the professional faculties is not one of available enrolment. There's a kind, quality, and number argument here. All the studies that have been done recently indicate that there is virtually a bottomless pit of potential enrollees in many of the professional faculties, but the kind of individual who is seeking enrolment in the professional faculties is changing.

I think it's quite reasonable to say that you could raise the medical or dental faculty tuition to $25,000 or $30,000 or $40,000, and there would still be no shortage of applicants for those positions. Our concern is that those applicants would be coming from a very different pool, and that down the road, when these people enter professional practice in whichever faculty they choose, their location of service provision will be affected by where they came from. So the issue of equitable access is not dealt with by the amount of the tuition.

I think you have, appended to our submission, the position paper from NPACT, which in point two says that any tuition increase should be regulated and reasonable. How it is regulated is something I'm not sure I'm able to put forward to you today, but there must be some sort of rationale, some sort of argument to say that this level of education will be accessible to the vast majority of suitably qualified Canadians, who will then be expected to provide service in a broad range of communities. It must be reasonable. What is reasonable I don't know, I don't have a number, but I do know that we are now at the point in some of our professional faculties where it is not reasonable for highly qualified young Canadians to enter that faculty for purely economic reasons.

That's the reason our group came together. We think it's getting out of control in some jurisdictions and that there is a need to look at exactly the questions you raised. What is reasonable? What is the threshold? How can we provide preferential and targeted assistance to the provinces? Through CHST? I don't know how you do it—you know more about that than I do. But there's a concern that this is becoming education for the affluent, restricted access for those with limited means, and it's going to have a downstream impact on the availability of service for Canadians.

The Chair: Thank you very much, Mr. Brison. Thank you, Mr. Easton.

Dr. Bennett.

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

I just wanted to follow up on Dr. Easton's point. I was wondering what you thought of Mr. Polito's reasonable indicator, the income of families of medical students, because the Canadian Federation of Students brought a graph showing that was dramatically up. I think we dragged the Prime Minister over in the lobby to show him that this is probably not a good trend for a country that is trying to create access. Whether or not it's abolishing tuition for university, which seems to have been very effective in Ireland, at least one of the things we are supposed to be committed to in Canada is having programs of comparable quality and access.

Measuring that indicator across the country, the income of the parents of students, obviously, would be a way of figuring out whether we are deterring good people because of their perception of debt or the things you're saying. Is either of you aware of any numbers that compare the provinces now in regard to, say, the average income of medical students, or is it mainly the Ontario data we've got, which we know are going to be bad?

I think that as we start to look at the Social Union Framework Agreement, we are very big on outcome, we are very big on how you measure transparency, accountability, programs of comparable quality. So if in renegotiating SUFA, or if there were some extra dollars we could be negotiating with provinces in the area of post-secondary education.... It really is that our universities have been underfunded, in certain provinces particularly, and they've had to jump the tuition. We give the CHST, they decide not to fund the university, we don't have any controls.

The Canadian Federation of Students asked for something like the equivalent of the Canada Health Act for post-secondary education—access, portability, all the same criteria that are in the Canada Health Act. Would that help?

Mr. William Easton: I think something of that nature would help. I think you're absolutely right, Dr. Bennett, that Canadian academic enterprise has been seriously underfunded in the last several years, and the exponential increase in tuitions we have seen since deregulation in 1998 in Ontario simply reflects the need the faculties have for that amount of money to continue operating at a reasonably high level the professional programs they offer.

When NPACT was first formed, we received a number of letters of pointed concern from the deans of professional faculties across the land, and it took a while to reassure them. We do not believe the universities are the culprits. As a matter of fact, we would like to help the universities alleviate their funding problems and thereby alleviate the need to escalate tuitions to limitless levels. There's still no cap on where they would go. I don't know if there should be or there shouldn't, but they will keep going up.

The data from Western, as you know, indicating changes in family income relative to the first-year entrance class in the faculty of medicine, are thus far anecdotal, but it seems to be a reasonably widely supported anecdote. Some of the best data on this issue are likely to come forward from the Canadian Federation of Medical Students, who are currently completing a cross-country survey on this kind of information. The CMA houses the secretariat for NPACT, and I'm sure we could undertake to contact CFMS and provide that data, if we can.

Ms. Carolyn Bennett: Thank you.

The Chair: Thank you.

Mr. Polito.

Mr. Joseph Polito: Another possible source of information in that regard might be the census. I believe they do track what percentage of the family goes to post-secondary education, and I have seen some statistics showing that the fastest increase was from the higher quartiles of income in going to post-secondary education over the last decade. I'm sure you can get the goods from them and Statistics Canada.

Ms. Carolyn Bennett: Thank you.

The Chair: Thank you, Dr. Bennett.

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We'll go to Mr. Cullen for a final question.

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

I have a question for Mr. Polito, but before I do that I just want to put on the record that I didn't have the same reaction to the KAIROS presentation as my colleagues opposite.

I took away two messages: one, a life is a life is a life; and two, in our push to deal with the national security agenda, which we must, we need to be mindful that there are still some other serious problems we need to deal with.

Mr. Polito, my fellow Etobian, you probably haven't seen the proposal by a number of stakeholder groups—the Canadian Food and Restaurant Association, the tourism industry, a whole range of industry associations—that are promoting the idea of a yearly basic exemption for EI. They basically argue, along the lines of your proposal, that it acts as a disincentive for employers, and especially the restaurant business, the hotel industry, students.... They basically try to avoid these payroll taxes, and it's a disincentive for job creation. Do you think that idea has any merit?

Mr. Joseph Polito: Yes. It's a variation on the theme. At one point, the finance department indicated to me that an exemption is a little problematic because, technically speaking, these are premiums as opposed to taxes. But it's the same concept of a steeply progressive format.

William Scarth of McMaster quoted what was going on in the States, and economist Gene Epstein of Barron's, which is obviously a famous business-supportive periodical in the States, said we should “Eliminate the payroll tax on the first $10,000 ($15,000 in Canadian dollars) of wages. Since this levy falls especially hard on the working poor, it's the cruelest of all, and cutting it...would put several hundred extra dollars into paychecks of those who need it most.”

Mr. Phelps' approach, which is kind of similar, was endorsed by The Economist magazine.

So again, this is a very market-friendly approach. It does the same things as corporate taxes, and so forth, but promotes high employment and reduces the income gap.

It should be noted that in the United States right now, almost the first choice of the American policy-makers to stimulate the post-September 11 economy is to cut payroll taxes.

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

On behalf of the committee, I'd like to thank the panellists at today's last session here in Toronto.

I do want to say that we've had hearings in Ottawa before we commenced our travel to Toronto. We'll be going to Montreal, and after that, to Halifax, Vancouver, Edmonton, and Winnipeg, and then back to Ottawa.

If I can do a little wrap-up here for you, there's a sense out there that we have to remain fiscally prudent and responsible. There's no sense, that I can detect, that people want us to go back to a deficit position or anything like that. People have understood that it would be a serious blow to the confidence of both consumers and businesses.

There's also a sense that people want us to remain committed to the $100-billion tax cut. That has been pretty widespread. Of course, the focus on discipline has always been underlined.

Having said that, as a committee we are committed to a pro-growth agenda, not just because we like growing, but because we understand that while it's not an end in itself, it's only through the creation of wealth that we can then redistribute this wealth.

So when you look at fiscal discipline, at low interest rates, at all these pro-growth measures, we continue to focus our attention on how best to improve the standard of living for Canadians and generate the type of wealth that will allow us to provide those social programs that Canadians have treasured for many years. By that, I don't mean we maintain traditional programs, because even social programs have to change with the times.

But having said all that, we are very committed to the three objectives contained in the letter I sent you to invite you to appear. They remain very much the core of what this committee stands for. There have also been some issues that have emerged that we feel we should look at, the whole issue of this emerging North American community that has taken on greater importance during these hearings.

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I hope I gave you a sense of where we're going. But one thing I'm often impressed by is the dedication of individuals like yourselves who really give their best to the community, and indeed to the country, and year in and year out amaze this committee with the insight you provide us. Thank you very much.

The meeting is adjourned.