FINA Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Tuesday, September 23, 2003

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1535

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

Mr. Joseph Oliver (President and Chief Executive Officer, Investment Dealers Association of Canada)

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1540

The Chair

Mrs. Susan Ziebarth (Executive Director, Canadian Dental Hygienists Association)

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1545

The Chair

Mr. Ian Boyko (National Chairperson, Canadian Federation of Students)

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1550

The Chair

Mr. Blair Redlin (Director, Research Branch, Canadian Union of Public Employees)

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1555

The Chair

Ms. Anne McGrath (Executive Assistant to the National President, Canadian Union of Public Employees)

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1600

The Chair

Mr. Ken Epp (Elk Island, Canadian Alliance)

The Chair

Mr. Ken Epp

Mr. Joseph Oliver

Mr. Ken Epp

Mr. Joseph Oliver

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1605

Mr. Ken Epp

Mrs. Susan Ziebarth

Mr. Ken Epp

Mr. Ian Boyko

Mr. Ken Epp

Mr. Ian Boyko

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1610

Mr. Ken Epp

The Chair

Mr. Ken Epp

The Chair

Mr. Roy Cullen (Etobicoke North, Lib.)

Mrs. Susan Ziebarth

Mr. Roy Cullen

Mrs. Susan Ziebarth

Mr. Roy Cullen

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1615

Mr. Ian Boyko

Mr. Roy Cullen

Mr. Ian Boyko

Mr. Roy Cullen

Mr. Ian Boyko

Mr. Roy Cullen

Mr. Ian Boyko

Mr. Roy Cullen

The Chair

Mr. Ian Boyko

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1620

The Chair

Mr. Pierre Paquette (Joliette, BQ)

The Chair

Mr. Joseph Oliver

The Chair

Mrs. Susan Ziebarth

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1625

The Chair

Mr. Blair Redlin

The Chair

Mr. Pierre Paquette

The Chair

Mr. Ian Boyko

The Chair

Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.)

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1630

Mr. Joseph Oliver

Mr. Nick Discepola

Mr. Joseph Oliver

Mr. Nick Discepola

Mr. Joseph Oliver

Mr. Nick Discepola

Mr. Blair Redlin

Mr. Nick Discepola

Mr. Blair Redlin

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1635

Mr. Nick Discepola

Mr. Blair Redlin

Mr. Nick Discepola

Mr. Blair Redlin

Mr. Nick Discepola

Mr. Blair Redlin

Mr. Nick Discepola

The Chair

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP)

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1640

Mr. Blair Redlin

Ms. Judy Wasylycia-Leis

Mr. Blair Redlin

The Chair

Ms. Judy Wasylycia-Leis

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1645

Mr. Joseph Oliver

Ms. Judy Wasylycia-Leis

Mr. Joseph Oliver

The Chair

Mr. Ian Boyko

The Chair

Ms. Maria Minna (Beaches—East York, Lib.)

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1650

The Chair

Mr. Ian Boyko

Ms. Maria Minna

The Chair

Ms. Maria Minna

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1655

Mr. Joseph Oliver

Ms. Maria Minna

Mr. Joseph Oliver

Ms. Maria Minna

The Chair

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CANADA

Standing Committee on Finance

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NUMBER 070

l

2nd SESSION

l

37th PARLIAMENT

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EVIDENCE

Tuesday, September 23, 2003

[Recorded by Electronic Apparatus]

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[English]

    The Chair (Mrs. Sue Barnes (London West, Lib.)): Pursuant to Standing Order 83(1), we are continuing our pre-budget consultations.

    We are pleased to have with us from the Investment Dealers Association of Canada, Joseph Oliver, president and chief executive officer, and John Cockerline, director of capital markets; from the Canadian Dental Hygienists Association, Susan Ziebarth, executive director, and Judy Lux, health policy communications specialist; from the Canadian Federation of Students, Ian Boyko; and from the Canadian Union of Public Employees, Anne McGrath and Blair Redlin. Welcome to all of you.

    We'll start and continue in the order on the agenda. Seven minutes are allowed for each presentation. We will then go to rounds of questioning from members.

    We'll start with you, Mr. Oliver.

    Mr. Joseph Oliver (President and Chief Executive Officer, Investment Dealers Association of Canada): Madam Chair, ladies and gentlemen, my name is Joe Oliver, and I'm the president and CEO of the Investment Dealers Association of Canada.

    The IDA oversees about 200 securities firms and 25,000 licensed brokers. Our member firms employ more than 37,000 people throughout Canada and across the globe. Our mandate is to protect investors and enhance the efficiency and competitiveness of the Canadian capital markets. Efficient capital markets are crucial for growth, capital formation, job creation, and the achievement of a standard of living that makes Canada one of the most desirable places in the world to live and do business.

    Sound tax policies have an important role to play in achieving efficient markets. The IDA's pre-budget submission highlights five specific tax measures that we believe should be addressed in the 2004 budget.

    We recommend the federal government lower the inclusion rate on capital gains from 50% to 25% on new capital raised in public markets by smaller companies listed on Canadian exchanges. This will remove an impediment to capital formation by SMEs, the engines of innovation and employment in our economy. Currently, the existing federal tax incentives in support of small business financing are unevenly applied and can distort financing decisions. Companies have the choice of using either the private or public markets. Private financing for small companies is relatively advantaged over public financing by existing incentives, such as the $500,000 lifetime capital gains exemption, which are available for small private companies but not for junior companies listed on Canadian exchanges. These incentives have therefore created a bias in the tax system. They do nothing to nurture the junior public equity markets, which have been particularly hard hit in the recent downturn. We believe that the time has come to address this bias through capital gains tax relief targeted to the shares of small and medium-sized companies that are listed on a Canadian exchange. By supporting the market for IPOs, our proposal would broaden the opportunity for SMEs to finance themselves and grow in our domestic marketplace. This is essential if we are to develop and keep homegrown talent and ideas here in Canada, instead of losing them to foreign investors when they reach the public financing stage.

    Our proposal is cost-effective for government. It directs a benefit to investors who provide new money to the market, as opposed to benefiting all investments in existing stock. And it is performance based. Unless the investment ultimately proves to be worth while, generating jobs and creating wealth in Canada, there are no associated tax expenditures.

    We also recommend that the federal government lower corporate income tax rates and accelerate the elimination of capital taxes to enhance Canada's position as an attractive and viable location for investment. Data recently published by the C.D. Howe Institute indicate that even after planned corporate tax reductions are fully implemented in 2008, Canada will still have a 7.3% higher effective corporate tax rate than the United States. While the phase-out of the large corporations tax in last year's budget was a welcome development, the five-year period is too long and only delays the economic benefits of eliminating the tax.

    We recommend the government raise contribution limits for RRSPs from $14,500 to $27,000, phased in over the next two taxation years. This will help small and medium-sized business owners and their employees to save adequately for their retirement. It will also allow Canadians to save for their retirement almost to the same extent that the Americans and the British can. We fully support the recommendations of the Retirement Income Coalition, which has prepared a more detailed submission on this topic for the consideration of this committee.

    We call on the government to clarify the tax treatment of compensation payments on loans of mutual fund trusts. In December 2002 the Department of Finance issued a letter that recognized mutual fund trusts as qualified securities for the purposes of securities lending arrangements. This went partway, but it left unanswered the details of taxation on compensation payments received by lenders and paid by borrowers of trust units.

    The IDA urges the government to bring stability to this important sector of our capital markets by making the appropriate legislative changes at the earliest possible date.

    Finally, we recommend that the government increase the dividend tax credit to achieve comparability with current U.S. rates. Recent changes enacted in the United States have lowered effective taxation rates on dividends from as high as 39% to 15%, while taxes here have remained around 32%. Dividend-paying stocks are particularly relevant to the revitalization of retail demand. The government should move quickly to create a more competitive dividend tax structure.

    Let me conclude today by saying a few words about regulatory reform, a subject of critical interest to the IDA because it goes to the heart of investor protection and market integrity. There is an urgent need to improve the efficiency and competitiveness of Canada's capital markets. A number of alternative structures are being debated, and several federal and provincial committees will soon be presenting their recommendations. Our basic position is that without significant progress, Canada risks falling behind in a highly competitive global marketplace.

    I'd be delighted to speak with you in greater detail about these and other capital market matters. Thank you.

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

    Now we'll go to the Canadian Dental Hygienists Association. Please go ahead, Ms. Ziebarth.

    Mrs. Susan Ziebarth (Executive Director, Canadian Dental Hygienists Association): Thank you for the opportunity to contribute this brief to the discussion of health financing.

    I am Susan Ziebarth, the executive director of the Canadian Dental Hygienists Association. My colleague Judy Lux, who is our health policy consultant, is with me today.

    We're here today to submit specific recommendations on appropriate federal funding of oral health in the following areas: oral health promotion and disease prevention; the urgent needs of low-income individuals, seniors, persons with disabilities, and aboriginal peoples; and quality services through more accessible education.

    Oral health promotion and disease prevention are important aspects of public health. Oral diseases are for the most part preventable, and dental hygienists' promotion and disease prevention activities are cost-effective. Here are some examples for you. Periodontal disease is a serious infection of tissue around a tooth, and it can cause tooth loss. Almost 20% of mothers with periodontal disease deliver preterm, low-birth-weight babies. Significant public health costs can result from things such as neurological abnormalities, mild learning disabilities, and breathing problems. Dental hygiene treatment for mothers reduces spontaneous preterm births by 84%, and 45,000 fewer preterm births will save $1 billion just for intensive care. Periodontal disease is increasingly linked to other systemic health problems, including cardiovascular and respiratory diseases and diabetes, and all of these carry significant health care costs.

    Since dental hygienists can provide a viable means of health care cost containment, we recommend creation of a new public health institution to oversee increased funding for oral health promotion and disease prevention programs, including programs in schools, community health centres, and long-term care facilities.

    Urgent needs of low-income individuals, seniors, persons with disabilities, and aboriginal peoples.

    Between 20% and 51% of low-income Canadians said that cost prevented their getting needed oral health care. Some provincial programs provide oral health services for low-income individuals, but many dental offices refuse these patients because the province pays considerably less than market rates. Children from poor families have twice as many dental caries as their more affluent peers. Residents of nursing homes and long-term care facilities have a high degree of dental disease and unacceptable levels of oral health.

    Since the funding of public oral health programs and services will help to optimize the health of all Canadians, particularly the neediest, we recommend the creation of categorical federal public oral health programs for all low-income Canadians, including those working, those receiving social assistance, seniors, and persons with disabilities, and government reimbursement schedules for oral health care providers that are based on average market rates.

    Aboriginal peoples' oral health is in an appalling state. Dental decay rates are three to five times greater than for non-aboriginal populations. Health Canada's non-insured health benefits program, the NIHB, provides oral health services to aboriginal peoples, but it fails them due to underfunding, uncoordinated services, and difficulties with benefits administration. Also, few professionals work in rural and northern communities, so either services do not exist or they require lengthy travel. The program's mandate is primarily restorative treatment, with inadequate support for preventive oral health.

    The Standing Committee on Health recently addressed aboriginal peoples' oral health and in June 2003 made the following recommendations concerning Health Canada to the House of Commons: permit and facilitate a more independent role for dental hygienists, allowing them to bill directly up to a predetermined amount of $200 per client annually; undertake a new approach to oral health based on a wellness model that gives priority to promotion and prevention strategies; and improve public education and awareness on oral health as a key element of overall well-being. CDHA fully supports these recommendations.

    For the last two years the Speech from the Throne promised to close the gap in health between aboriginal and non-aboriginal communities. Budgets ignored these promises. The time to address this issue is long overdue.

    Since a large gap exists between the oral health of aboriginal peoples and other Canadians, we recommend increased financial support for the NIHB program and implementation of the recommendations of the Standing Committee on Health.

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    Quality services through accessible education.

    The federal government's 2002 Speech from the Throne emphasized lifelong learning. However, the Income Tax Act discourages employed professionals who want to study. Since continuing education is key to quality services and programs and evidence-based practices, we recommend amending the Income Tax Act as follows: tuition credits should include continuing education programs required by professional regulatory bodies; employment deductions should allow expenses for continuing education required by professional regulatory bodies; and education tax credits should not discriminate against full-time employees.

    These recommendations will positively influence the health status and health outcomes of Canadians and reduce the burden on the health system. To spend public oral health care money where it will have the greatest impact, contain future costs, and have a productive, competitive workforce, the government must focus fiscal priorities on public oral health promotion and disease prevention. Now is the time for leadership, and we're looking to you for your strong support.

    The Chair: Thank you very much.

    From the Canadian Federation of Students, Mr. Boyko.

    Mr. Ian Boyko (National Chairperson, Canadian Federation of Students): Good afternoon.

    I would like to thank the committee for this opportunity to present on behalf of over 70 student unions representing 450,000 students at public universities and colleges across Canada.

    As you can see from our brief, the Canadian Federation of Students is recommending some very broad and fundamental changes to the way the federal government approaches the crisis in student debt and university financing.

    I will build our case first by reviewing some of the most compelling and recent research on accessibility, then by critiquing the net effect of current federal measures, and then close by outlining mechanisms that can bring our system of higher education closer to the vehicle of social opportunity that Canadians both expect and deserve.

    There are three studies to which I want to draw the committee's attention today. The first is a recent report by Statistics Canada entitled “Access, persistence and financing: First results from the Postsecondary Education Participation Survey”. The survey documents the fact that those families earning more than $80,000 participate in higher education at a rate of 83%, but those from families earning less than $55,000 attend universities and colleges at a 55% participation rate. When you isolate those rates for only universities, where tuition fees are on average twice as expensive, the participation rate for the poorest 25% of Canadians is half that of the wealthiest 25%.

    These results confirm that the current post-secondary education policies are exacerbating rather than mitigating social divisions in Canadian society and that a family's socio-economic status rather than academic aspirations is a central factor in access to post-secondary education.

    For those who don't go on to post-secondary studies, financial barriers are by far the most substantial obstacles. Another study conducted by Statistics Canada, the youth in transition survey, demonstrates that the inequality of access is driven by costs. Seventy-two per cent of 18- to 21-year-olds who identified barriers to continuing their education noted cost as the primary barrier. That means that nearly 100,000 young people per year are being shut out of public education because of the price tag attached.

    On a related note, that price tag has caused approximately 21,000 students to drop out last year. All of this pressure on families and individuals to bear an increasing portion of the cost associated with an education has come during a period of stagnation or even decline in real earnings for those in the middle- and lower-income brackets.

    The 2001 census report showed no appreciable increase in the earning power of low-income Canadians in the past 10 years, whereas tuition fees, now at an average of $4,000 when adjusted for inflation, have never been higher. As user fees continue to skyrocket, most Canadians' ability to cope with this cost is diminishing.

    In response to this shrinking access to post-secondary education for low- and middle-income individuals, the federal government has introduced measures that don't really get at the heart of the problem. Many federal initiatives either help those who need it the least, that is, are regressive or do nothing to promote access to post-secondary education on the front end, or both. The millennium scholarships have failed miserably at reducing student debt. Even in provinces where they have made a small dent, first-year students still remain ineligible.

    Our brief goes into a bit of detail about how programs like the education amount tax credit, the tuition fee tax credit, and the student loan interest credit direct vast public funds—approximately $1.43 billion—toward those who need it the least.

    Last, but certainly not least, is the Canada education savings grant. With a cumulative price tag already running over $1 billion, the federal government will likely pay out almost $500 million in 2003 to families who can afford to save. This program, like the aforementioned tax measures, benefits those who need it the least.

    Rather than offering grants to those in financial need, the CESG program aspires to do the exact opposite. Savings from eliminating the CESG program could offer twice the number of grants to needy students as the Canada Millennium Scholarship Foundation attempts to. If all of the eligible families maximized their CESG grant, the federal government would have spent enough money to reduce tuition fees in Canada by about 70%.

    All of this brings me to some key recommendations contained within the brief. Given the overwhelming evidence about the exclusion of low- and middle-income Canadians from universities and colleges, we propose that the federal government create a system of needs-based grants. I think I've demonstrated that this creation is not only much needed, but can be cost-neutral.

    While we are doing work on a daily basis to put pressure on provincial governments to adequately fund the core operating budgets of the universities and colleges, the federal government has a very strong role to play in transferring more accountable dollars to the provinces for their social programs spending.

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    I would like to go into a bit more detail about a few other recommendations, but I will end here. I'll be happy to answer questions during the discussion period.

    Thank you.

    The Chair: Thank you very much.

    From the Canadian Union of Public Employees, Mr. Redlin.

    Mr. Blair Redlin (Director, Research Branch, Canadian Union of Public Employees): Thank you, Madam Chair. Good afternoon.

    My name is Mr. Blair Redlin and I'm the director of research for the Canadian Union of Public Employees. I'm joined today by Anne McGrath, who is the executive assistant to our national president. We'll be sharing our opening remarks.

    CUPE is Canada's largest trade union. We represent over 550,000 working Canadians in 2,300 locals in almost every community in Canada. Because we represent such a broad range of workers in a wide variety of sectors, our brief covers a large number of matters that pertain to the upcoming federal budget. But I would like to particularly focus, in my portion of our presentation today, on the need to renew public infrastructure in Canada and on the importance of infrastructure both for the economy and for the services that Canadians depend on.

    Economically, of course, we've seen a recent slowing of economic growth in the country. We had an unemployment rate of 8% in August 2003, the highest it's been since December 2001. Full-time jobs are declining and part-time jobs are increasing. We had a decline in growth of 0.1% in the second quarter of 2003, the first quarterly decline since the third quarter of 2001. All of this emphasizes for us the importance of investment in the infrastructure of a modern economy to help make sure there can be follow-up growth in both the private and public sectors to accompany that.

    We are cognizant that the federal government has made a commitment to infrastructure over the last few years, certainly much improved from previous years, and we welcome that. But we want to emphasize today that not only do we need renewed investment in infrastructure, but it's important that it be a public infrastructure that's accountable to all of our communities.

    We're concerned by the increasing growth of privatized investment in infrastructure, or reliance on so-called public-private partnerships for the delivery of much of the infrastructure in the country. We're concerned because evidence around the world shows that public-private partnerships are often more expensive than public investment in infrastructure, particularly since governments have better credit ratings than the private sector and reliance on private financing. But we also feel there's a large variety of experience around the world about how privatized infrastructure fragments the system and leads to problems with operations and planning, so that we end up devoting public money to taxes and profits rather than basic delivery of services. This has been recently flagged by both the World Bank and the United Nations Development Programme, which have recently issued reports pointing out the problems with public-private partnerships around the world in terms of lack of transparency in contracting, difficulties in raising funds because of failures in the financial markets, rate increases that hurt the poor in developing countries, and reductions in public accountability.

    We want to flag, in particular, some recent developments involving the federal government that give us concern with regard to public-private partnerships. We refer to public-private partnerships, as many do, as P3s for short.

    We are seeing the advent of P3 hospitals in Canada--two hospitals on the verge of going ahead here in Ontario, both the William Osler Health Centre in Brampton and the Royal Ottawa Hospital here in Ottawa, as well as the proposed Abbotsford Hospital in British Columbia. In all of those cases there's an involvement of the federal government inasmuch as the financing for the two hospitals in Ontario and very likely for the hospital in Abbotsford is going to be provided by a company called Borealis. Borealis is a subsidiary created by the Ontario Municipal Employees Retirement System, but the role of the federal government in this is that the Canada Pension Plan Investment Board has a major stake in Borealis. We want to raise our concern with you that we don't think the pension moneys of working Canadians should be invested in the privatization of medicare in Canada. We would ask you to consider whether the CPP should not be making investments in other areas rather than privatized health care.

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    We also see the federal government making direct investments in privatized delivery of services. A recent example is the federal government's $300 million investment in the Richmond airport-Vancouver rapid transit project, which it is proposed be a privatized operation, and maintenance of that rapid transit system. That would be privatized delivery of rapid transit in that one case, whereas we have public sector delivery with the other two rapid transit lines in the lower mainland of British Columbia. We're concerned that when the federal government invests in a needed project like that it should make clear that it doesn't want to see privatized operation and maintenance.

    A third specific concern relates to federal-provincial infrastructure agreements—what was known as the Canada infrastructure works program. In many—or I think all perhaps, but certainly we know of a number of specific examples—of the federal-provincial agreements, we have the provincial government stipulating that local governments are prohibited from using the infrastructure money to directly employ public municipal employees. There's wording in the infrastructure works agreements that certainly municipalities are interpreting as requiring them to contract out delivery of any projects that are funded through infrastructure works. We want to raise that for you as a particular concern.

    We have a number of other recommendations about infrastructure, but at this point I want to ask Anne McGrath to cover some of the other points in our brief.

    The Chair: Go ahead, Ms. McGrath, please.

    Ms. Anne McGrath (Executive Assistant to the National President, Canadian Union of Public Employees): I know time is short so I'll resist the urge to speed-talk. I will tell you that the areas I'm interested in and I'm going to call your attention to in our brief are housing, social equality, child care, and health care.

    Quite clearly, the central message I think is that in all of these areas there's a question of the amount of money the federal government is committing, but there's also the issue of accountability and what that money is being used for.

    More federal money without policy leadership does not lead to effective social programming. There needs to be more money. In the area of housing, for instance, we need to look at at least $2 billion over the next three years for new housing and a flexible grants program for community-based housing organizations. We need a sustainable social housing program.

    In the area of social equality, obviously there need to be concrete measures to deal with poverty and to provide for supports for advocacy groups, particularly advocacy groups dealing with issues of marginalized communities.

    In the area of early childhood education and care, where we've seen budget after budget and policy after policy about child care and still have very few children under the age of 12 having access to regulated child care, we need to see obviously substantial increases in the amount of money available, but also in the kind of care available, making sure there are quality standards established and monitored and that those quality standards are supported by social policy at the federal level.

    In all of these areas one of the most important things is that there need to be mechanisms in place in ensure that public money is not being used to privatize services, so that, for instance, in the area of health care, where we've had some increases, provinces still feel free to spend their health transfers on for-profit health care providers and on public-private partnerships. We do need to find ways to make sure federal dollars are used for public services and that there is accountability to the public to ensure that public services are accountable, of high quality, and that accessibility is there for everybody.

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    The Chair: Thank you, all of you. I also want to thank you at this time for getting your briefs in early so that we could translate and distribute them to all the members. That's very helpful to us.

    We'll go to Mr. Ken Epp for the first seven-minute round.

    Mr. Ken Epp (Elk Island, Canadian Alliance): Thank you, Madam Chair. I really resent you giving me only seven minutes because that's my warm-up time.

    The Chair: You have a lot to learn then.

    Mr. Ken Epp: Anyway, I'm going to fly as fast as I can.

    First of all to the investment dealers, Mr. Oliver, you suggested that the RRSP limits be increased. The thought occurred to me, and I'd like your comment on it, that with generally considerably lower rates of return on investments these days, in order to provide for a cash sum to look after a person's retirement needs, clearly since less is going to come in return on investment, more is going to have to come from the contributions by the individual.

    If you look at the actual amounts I would think it would be more accurate to say that you need about twice as much to pay in nowadays to provide yourself with an equitable return for retirement. What's your response to that?

    Mr. Joseph Oliver: I take your point. We do hope, of course, that the capital market's conditions improve and that equity prices go up at some point. There is some indication that fixed-income rates will increase.

    Nevertheless, you make a strong point that reduced current returns are creating more pressure on people who need funds for retirement. This is an important social issue, and it's one that will not directly cost the government money. It's merely a deferral of income. We believe there are some million Canadians who would be able to take advantage of the increase. The reason we didn't recommend an even greater one is that we want to be realistic and we have been recommending that increases go up in stages. We certainly like the main thrust of what you're suggesting.

    Mr. Ken Epp: This is my last question to you. People say that when governments give tax credits or tax exemptions on income that's invested in RRSPs, they're putting public money into the hands of those who obviously have more money than they need. Hence, they have the ability to put money away for retirement, whereas poor people don't have any money to put into RRSPs and they don't get this benefit from the government. What is your response to that?

    Mr. Joseph Oliver: This is not primarily directed at rich people. School administrators, nurses, plumbers, librarians, and detectives are people who don't have the benefit of government pension plans, which are targeted to 70% of pre-retirement income. These are people whose standard of living could be very adversely affected when their income stops. These are the people we're targeting. As I said, a million people would be able to take advantage of this. The very rich don't need it. It's people who are self-employed and who don't have the benefit of government or corporate pension plans.

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    Mr. Ken Epp: Thank you. I could spend my whole time with you, but I want to go on.

    To the Dental Hygienists Association, why isn't dental care included in health care? One of the most important aspects of being healthy is to have a good mouth and good teeth so that you can masticate your food properly. Do you think it should be included in health care?

    Mrs. Susan Ziebarth: The Dental Hygienists Association does believe that there are certain areas within oral health care that should be included. Given the day and age we're in now, adding oral health care to the health care system does not seem to be a viable option. I believe it was at the time of the Hall commission that dental care was excluded. So that's a long-standing issue.

    Most of the dental care in Canada is a for-profit business. As any for-profit business operates, you have people who can't afford to pay for the service.

    We used to have a relatively strong public oral health care system. There were programs in schools and a number of other programs, but over the years those have all been cut. We are seeing the effects of those things in terms of increased childhood caries. One of the principal reasons for the admission of children in British Columbia is oral health surgery, which is completely preventable.

    Mr. Ken Epp: Again, we could talk for a long time, but I need to get to the students. I was an instructor at the post-secondary level for 27 years, before I came here and tried to teach these guys, but here they don't learn.

    I wanted to talk to you about some of your issues. You want the 10-year bankruptcy rule to be removed for students. If you went to a lender and told them the federal government has now increased your ability to declare bankruptcy so that you don't ever have to pay them back, don't you think you would have a harder time getting your loan?

    Mr. Ian Boyko: There are a few responses to that. The first is that the lender is now the federal government, so the federal government is chiefly responsible for that loan you're talking about.

    We have to be perfectly clear here. It's never been easy to declare bankruptcy, and we're not suggesting it should be easy. We're just suggesting that students deserve the same fairness that all other Canadians, outside of prison, have for financial solvency--as well as Industry Canada loans. The default rates for Industry Canada loans have always been higher than for Canada student loans.

    Having said that, this law is not about maintaining the fiscal soundness of the Canada student loans program. We still haven't heard a coherent argument for why this law exists, but it targets the most vulnerable people in our society--those people who are drowning in $20,000, $30,000, $40,000, or $50,000 worth of debt. We just think they have the right to appear before a judge and make their case. If the judge thinks they don't have a case, then that's up to the justice of the day. But to have a law on the books that even prevents somebody from appearing before a judge to avail themselves of the very basic right to declare bankruptcy is beyond us.

    Mr. Ken Epp: Okay. My time is up, but I want to ask one more quick question before the chair stops me here.

    You're saying to scrap the millennium scholarships and RESPs. I can't believe that. Here's a student organization saying, “We don't want the money”.

    Mr. Ian Boyko: Believe it, Mr. Epp, but you have to read a little bit more closely. We're not calling for any scholarship programs to vanish. We are calling for scholarship programs and wealth care programs that aren't working to be restructured in such a way that they actually benefit those in the most financial need.

    While I think on some level the federal government has to be congratulated for recognizing the growing student debt and the crisis it creates, the way in which the program was implemented was inherently flawed, and it was introduced without any consultation with the provinces. Within that lies the primary problem with the Canada Millennium Scholarship Foundation.

    So if we take existing money that's being spent in a misdirected way and direct it toward something that most other nations in the developed world have had for decades, I think we can really get at solving some of the student debt crisis.

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    Mr. Ken Epp: Good. Thank you. That was exactly the response I expected. I'm glad you passed my test.

    The Chair: I'm glad you received a very liberal several minutes, Mr. Epp.

    Mr. Ken Epp: Yes--eight minutes and 22 seconds.

    The Chair: I know the time.

    Now, Mr. Cullen, you will get seven minutes.

    Mr. Roy Cullen (Etobicoke North, Lib.): No, I get eight minutes and 22 seconds.

    Thank you, Madam Chair. I'd like to come back to the Canadian Federation of Students. You've made a very convincing case to turn everything upside down on its head, and I'd like to come back to that. But I'd like to go first to the Canadian Dental Hygienists Association.

    Does the FNIHB, the aboriginal program, cover any preventive dental work--hygiene work?

    Mrs. Susan Ziebarth: It does, under a dentist's supervision. There's a limited amount of funds, so if the person is already in a crisis state and requires a lot of restorative work, the entire funding for that client is used in the restorative aspect, so the prevention side is not done.

    Mr. Roy Cullen: I know this came up before with the Canadian Dental Association. The way the program was characterized then, I was under the impression some improvements were coming, but perhaps not. Is it very bureaucratic, with everyone checking everyone a dozen times, and a lot of administration?

    The argument I made to the minister was, let's redeploy those resources on administration and put them into programs that will actually help people with their teeth and their mouths, and do some audits. If you find some irregularities or some people trying to scam the system, then get them out of the system. But with everyone checking everyone.... I gather X-rays come to Ottawa and some bureaucrats look them over and decide whether it's going to be allowed. So the person has to go back to their village, and then they're called back again. Is it still operating like that?

    Mrs. Susan Ziebarth: To some extent, yes. There have been some changes. I think the limit has also increased, in terms of at what financial point the X-rays and things have to be sent on. So there has been some minor change there. But there has not been an emphasis in the program on prevention, and as I say, most oral disease is preventable. These people wouldn't need to be in such a crisis state.

    Mr. Roy Cullen: Okay, thank you. Hopefully we'll make some further progress and get some prevention and education and promotion in that part of the program as well.

    Mr. Boyko, I'd like to come back to your presentation. I have to confess--and I want to read your brief in more detail--that just from what I've heard here and quickly read, a number of your statements don't seem to be that well supported. I think you said that the millennium scholarship program is regressive, and I think you said that the RESP program is regressive.

    From my understanding, and you can correct me if I'm wrong, the millennium scholarship program is targeted at academic excellence and needs. But I may be wrong there.

    Second, the RESP is one of the most successful programs the government has ever launched. In fact, in terms of low- and middle-income Canadians, it's received huge kudos as a way for them to save for their children's education.

    I'll just put out a few more things, and then you can perhaps answer all of them together.

    You say in your brief:

...evidence suggests that education-oriented tax expenditures disproportionately benefit higher income earners, and that education tax credits as a general policy do little or nothing to improve the accessibility of higher education.

I don't see where you've proven that, although it's hard, I admit, in seven minutes.

    You also state:

...changes to federal non-refundable tuition fee and education tax credits have actually done very little to offset the soaring tuition fees and increased living costs students have faced....

    Now, some of this is perhaps terminology...or the way it's worded, but I don't imagine you'd expect that those policies would actually have the direct result of lowering tuition or lowering student costs other than to help defray those costs. But in your figure 2, you say, “Growth of Ontario tuition fees versus federal tax credit increases”, as though to make the case that the tax credits are meant to intrinsically just make up the difference between tuition increases and....

    So I guess I have this question for you: Where is the role for the provincial governments in terms of their contributions to post-secondary education? What are they doing to properly fund post-secondary institutions so that tuition fees can be contained?

    I've just thrown out a few things there, but if you could at least respond, I'd appreciate it.

º  (1615)  

    Mr. Ian Boyko: Yes, and I'll take the questions in chronological order. Hopefully I can give you all the answers you're looking for.

    In terms of RESPs being a very popular program, that is the unfortunate truth, but what we're talking about is a social program, jointly administered by the federal and provincial governments, that has skyrocketing user fees. To address those user fees, the federal government has come along and said, “We're going to reward only the people who can already afford to save.” That doesn't do anything to improve access on the front end, and I defy you to find a poverty advocacy organization that would give you kudos for introducing the RESP program.

    Mr. Roy Cullen: When you say “only the people who can already afford to save”, if you're planning to do post-secondary education, and your family wants you to do that, somewhere along the way someone has to put some money away, whether you're a poor family or a medium-income family.

    I mean, I asked the students' association, when you were here last time, if there was a cost benefit to post-secondary education still, and I'm still waiting for that study, which was promised.

    Mr. Ian Boyko: But people aren't getting in the front door, and I think that's the problem I'm trying to underscore here. There are people who aren't even getting in the front door, and it's because the federal government is spending resources to reward those who are in a better position to save than others.

    The RESP program is bad policy on a number of levels. One of those levels is that we're shifting the emphasis on funding post-secondary education onto the back of the individual rather than treating it as a collective responsibility of society. It was recognized earlier on in this century that your education up to grade 12 should be something that's accessible and free because of the rewards and the importance in terms of nation-building and building a strong economy, and we're at a point today where you can probably say the same thing about post-secondary education in universities and colleges.

    So why is the federal government moving away from its responsibility to define higher education and provide needs-based financial assistance, not wealth-based but needs-based? Why is it moving in that direction and not towards making sure we have a universal social program to fill the goals set out in the skills agenda, to fill the goals set out in the innovation agenda?

    In terms of tax credits--

    Mr. Roy Cullen: By the way, just on that point, I don't think you've made the case that it's a wealth-based program.

    Mr. Ian Boyko: It is. Something is defined as progressive if it helps those along the income scale based on their income and doesn't give help to those who don't need help, and that's exactly what the RESP program does. If a wealthy family sets aside 10%, a family in the upper quartile sets aside 10% of its household income for savings, and a lower-income family in the bottom quartile puts aside 10% for savings, sure, they both made the so-called choice to put aside money for education, but who's going to benefit? The family in the upper quartile putting aside 10% of its income is going to benefit more from public dollars than is the low-income family.

    I don't know how we're missing each other on this point, but--

    Mr. Roy Cullen: Well, I think you're getting warmer there.

    Mr. Ian Boyko: --I want to go on and answer some of your other questions with respect to tax credits, because--

    Mr. Roy Cullen: That's the kind of thing you need to put in your brief, not just generalities.

    The Chair: I can hear only one person at one time, so I'm going to give the floor to Mr. Boyko to answer the questions.

    Mr. Ian Boyko: In the field of tax credits, there are a lot of questions wrapped up in your question. I'll say you're right, I don't think the philosophy behind tax credits is, on the surface, to mediate in the same fiscal year against tuition fee increases. Some of them are. Some of them you can claim in the year for which you paid those tuition fees. However, what we're trying to illustrate with figure 2 on page 7 is that if the federal government is trying to take credit for trying to cushion the blow of student debt, or trying to cushion the blow of increasing tuition fees through back-ended tax credits--they can be transferred to your parents, by the way, or wait until you graduate when you won't necessarily need them any more--we're saying there's a gap growing between maximum tax expenditures per person and maximum tuition fees, or average tuition fees, in this case in the province of Ontario. So even the tax measures are not keeping pace with the spiralling costs of education.

    I don't know if that gets to your question a little bit.

    In terms of tuition fees, that's a very good question, and a bit beyond the scope of this next federal budget, but it is within the realm of this committee's deliberations to figure out a way in which to transfer more money to the provinces for their social programs so they can do some of the things you're talking about--freezing or reducing tuition fees, for instance, as they've done in Manitoba, British Columbia, Newfoundland and Labrador, and Quebec. There are provinces that have shown some political leadership that way, but the federal dollars have to be there in order for that to happen, in order for us to be successful at our provincial level.

º  (1620)  

    The Chair: Thank you very much.

    If we keep our questions and answers a little shorter, we will stay within our time. If I have extra time at the end of the session, I will allow some extra individual questions.

    Mr. Paquette.

[Translation]

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

    First off, I want to apologize for my tardiness. I was addressing a gathering on mad cow disease and our government's callousness in the face of the crisis that our cattle farmers are currently experiencing.

    Nevertheless, I did have time to review your recommendations. I have only one question for you. Let me give you some background first and then you can venture a response.

    Mr. Martin gave a speech to the Board of Trade of Metropolitan Montreal and identified his priorities. We would rather he had done so in the House, but he preferred to address the Board of Trade, an institution for which I have great admiration. He identified three priorities. His first is to reduce the debt by 25 per cent. The second is to lower taxes. The third priority is social programs. Does anyone seriously believe that there will be any money to do all of this?

    Each and everyone of you has identified his or her priorities, whether it be education, reinvesting in infrastructures, lowering business taxes or reinvesting in health care, with emphasis on oral hygiene. However, there is no link between these priorities and debt reduction. I'm curious as to whether you think reducing the debt by 25 per cent should be a government priority. Let me remind you that in 1995, the debt represented 70 per cent of GDP. Of course, debt is always measured against our collective wealth. If I paid $100,000 for my home and my yearly income is $100,000, it's not as worrisome to me as if I earned only $25,000 a year. In 1995, the debt level represented 70 per cent of our GDP. That percentage dropped to 46.5 per cent in 2001-2002 and the level is projected to drop to 40 per cent next year. This lower figure can be attributed to economic growth, not to debt repayment, which has been minimal.

    My question is directed to all of the groups. Is reducing the debt to 25 per cent of GDP as important, in your estimation, as your stated priorities?

[English]

    The Chair: Well, then, we're going to have to have short answers from everyone.

    I'll start with Mr. Oliver, then Ms. Ziebarth, and then the next hand I saw was Mr. Redlin's.

    Go ahead.

[Translation]

    Mr. Joseph Oliver: Debt reduction is a priority, but not the number one priority. With your permission, I'll continue in English.

[English]

    The measures we have been advocating are designed to create a more dynamic and growing economy, which increases the GDP, which by itself reduces the proportion of debt to GDP. It's the ratio that is more significant than the actual absolute dollar amount.

    The measures that enhance capital formation and improve the efficiency and vitality of capital markets are not theoretical constructs. They go to promote employment of individual Canadians. They increase the national wealth. We believe these measures are positive measures that will over time reduce the proportion of debt to equity. As well, they will help individual Canadians cope with the debt and be able to attain a better standard of living both while they're employed and after, when they become retired.

    So our focus is on these measures and on tax reduction. While we think the level of debt is an important one and we still have with all levels of government combined about twice the level of debt to GDP the Americans do, although it appears they're starting to narrow that gap somewhat, nevertheless it is an important issue. We must never lose sight of it.

    As we mention in our brief, we've commended the Government of Canada for putting Canada's fiscal house in order because we are now enjoying the benefits of the sixth consecutive year of budget surplus, and I think it's extremely important that this continue.

    The Chair: Ms. Ziebarth.

    Mrs. Susan Ziebarth: We're not advocating increasing funds as opposed to redirecting funds. Prevention of disease has been proven time and time again to be cheaper than actually trying to fix something that's already broken or providing care after the disease is already in place. We believe there are enough studies and evidence-based data right now that we can see that with specific prevention programs the cost for acute care will actually decrease and decrease significantly. Also, with a healthy workforce, we're also going to have a more productive contributing workforce as well.

º  (1625)  

    The Chair: Thank you.

    Mr. Redlin.

    Mr. Blair Redlin: It's a truism that government is about making choices. To make a choice to pay down the national debt at an accelerated rate at this particular time seems a completely backward priority to us, especially at this period when we have relatively low interest rates, when we are generating surpluses in annual operating budgets.

    It would be one thing if we did not have massive and worrisome surgical waiting lists in our health care system across the country, if we had hired sufficient nurses and doctors to provide accessible health care to everyone, if we had a public early childhood day care program across the country, if there was full accessibility to post-secondary education, and if the many needs Canadians have consistently identified had been met. Then we might consider a priority of accelerating the paydown of the national debt. But it seems a completely skewed priority to our members to be looking at that as the top priority for public spending at this time.

[Translation]

    The Chair: You have one minute remaining.

    Mr. Pierre Paquette: Several groups proposed post-secondary education legislation. Obviously, I'm referring to the representatives of university students' federation. We also heard from university professors. We have a Canada Health Act and I would imagine you're thinking about an education act along similar lines. The problem is that the Canada Health Act never stopped the federal government from unilaterally withdrawing from health care funding.

    Do you have in mind education legislation that first and foremost would be aimed at ensuring the federal government upholds its obligations and assumes an agreed upon share of expenses? Or, do you have in mind legislation like the Canada Health Act that has no teeth and that absolves the federal government of responsibility?

[English]

    The Chair: Mr. Boyko.

    Mr. Ian Boyko: Well, yes, that's a very good point. I'm not going to sit here today saying it's going to be an easy road to achieving a balance between respecting jurisdictions and some federal accountability for federal dollars transferred. However, I disagree slightly when the suggestion is made that the Canada Health Act has no teeth or that recent developments with provincial-federal collaboration for health care spending have no teeth either.

    I think there is some room there, and there's certainly a public appetite for a collaborative approach to solving high tuition fees or high student debt. I think it's something where the federal government has historically a record throughout the 20th century right up until the CHST in having a more direct funding mechanism for transfers to the provinces. But I also think that within the last 18 months there's been work done and movement on both sides of the federal-provincial jurisdictional line about collaborating in terms of having agreed priorities for spending of federal dollars.

[Translation]

    The Chair: Your time is up.

    We'll now go to Mr. Discepola.

    Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.): Thank you very much, Madam Chair. I have two questions for the witnesses.

[English]

    One is for Mr. Oliver. You seem to heap praise on the U.S. initiatives, but I don't share that giving of praise because if I were to ask the question outright, nobody would want to go back into deficit financing. Notwithstanding the appearance of lower corporate tax rates and the reduced dividend tax credits in the United States, it was done to the tune of 674 billion funded deficit dollars in the United States, and I don't think we want to go back to that. I would never make that recommendation.

    One of the recommendations you did make...and I find it frustrating as a committee member because we too are frustrated when we make continual recommendations year after year after year, but we're pretty happy when they finally get implemented. One of the questions was the capital tax, and again you're coming to the table saying five years is not enough. I'd like you to stipulate with just one number between one and four what that reduction should be.

    I can't agree with you on increasing the RRSP limits. We've made recommendations year after year on increasing the RRSP limits, and $27,000 means you have to earn $150,000. There are really not enough Canadians taking up that room. Though I share your quest to help the self-employed, I'm wondering, would it not be more beneficial for this committee to make recommendations on expanding the definition of qualified income for RRSPs? I don't see how increasing the limit for small businesses is going to help small business people when many of them are...for example, dividend income, which many of them do use to compensate themselves, doesn't qualify. I'd like you to elaborate on that.

    I'd like you to leave me enough time to ask CUPE a question also, please.

º  (1630)  

    Mr. Joseph Oliver: First of all, I wasn't praising the United States. The reason I cited the United States was because that's the competitive market in which we must operate. The Canadian capital market is about 2% of the global market; the American market is 50% of the global market. There's a tremendous attraction of capital into the United States because of liquidity. Canadians can invest in U.S. companies and Canadian companies can invest in the United States. U.S. companies can invest in Canada. We are living in a regional economy at the minimum and we're living in a global capital market without any doubt, so we must look at what's happening in the United States.

    I also, as a matter of fairness, look at how much the retirement savings program is in the United States--more than triple ours--and what it is in the U.K.--perhaps double ours--and talk about the fairness issue as well. But it's primarily a question of competitiveness. It's not to praise the United States, nor is it to bury them; it is to say what we have to deal with.

    In terms of the capital tax, we're happy the capital tax is being eliminated. Everyone agrees that it's illogical and unfair; it's a tax on capital, which in our industry is a little bit perverse because we impose capital requirements on financial institutions to make sure they're healthy enough, and there is a systemic financial risk; then to penalize companies for that seems a bit perverse. Everyone agrees it should be eliminated, so why not do it immediately? That's our point there.

    In terms of RRSPs, as we said, the estimate is that about a million Canadians would be able to take advantage of the increase, and it's really a million families. That's a pretty significant number of people.

    Mr. Nick Discepola: How does that help your small business people?

    Mr. Joseph Oliver: Well, it's because a lot of them are small businessmen.

    Mr. Nick Discepola: As I said before, my suggestion was that we look at what qualifies as earned eligible income for RRSP limits as opposed to just increasing the limit. I think you'll be able to help a lot more small business people than opposed to just increasing the limit to $27,000.

    Mr. Joseph Oliver: Sir, there are a number of ways of getting at the issue, and I can't respond to your specific idea because I just don't have the data.

    Mr. Nick Discepola: I'd like to move on, but I know Ms. Minna will come back to it because I think she's interested in RRSP limits also.

    My question is for CUPE, and I've just done a quick calculation: $6 billion for a national environmental infrastructure investment program, half a billion dollars for a national infrastructure investment authority, $1.25 billion for a Kyoto implementation fund, $2 billion for new housing, and $19 billion over three years for health care. Where are we going to get the money?

    Mr. Blair Redlin: There are various sources. But another figure we noted in the brief was that the unemployment insurance surplus account is going to reach $50 billion this year.

    Mr. Nick Discepola: There's no surplus account sitting anywhere where you can go and get $50 billion. It's all in general revenue. Did you know that? It's all spent.

    Mr. Blair Redlin: It's an example of making choices. In that case, that money should be spent on unemployment insurance benefits for workers. As opposed to considering new proposals to reduce capital taxes and other corporate taxes, we could be taking a hard look at a fair taxation system in this country.

    There are various places where money is being spent now that we would identify should not be spent. Yes, government is about making choices. But we're generating surpluses in Canada, and many of those surpluses were created through reductions in transfer payments to the provinces for services such as health and post-secondary education. Our fundamental message is that it's time to start restoring the basic services Canadians expect.

º  (1635)  

    Mr. Nick Discepola: But we responded. In 2000 the premiers sat together and said they needed $20-some billion. We gave it to them. In 2002 they said they wanted $34 billion; the Prime Minister gave it to them.

    What concerns me is your recommendation. I'll get right to the bottom of my concern. I raised this question with the Minister of Finance last year in Halifax, that I've noticed, notwithstanding our tremendous sacrifices in program review in 1995 to reduce spending, we have crept up and increased spending. I don't like that trend.

    I noticed we should have been saving money because of our deficit and low interest rates, and you come here with a proposal to increase spending. Quite frankly that bothers me, because it goes contrary to the sacrifices we've made as Canadians. I think we have to make targeted choices and continue probably a permanent program review, but to categorically come and say “We have to spend...”—and I just stopped counting, as you know—I think is not the right approach. It goes, in my opinion, against the sacrifices Canadians made for the past four or five years.

    Mr. Blair Redlin: I guess it's a matter of who's making the sacrifices. I think we would differ on who should be making them. Perhaps we think people who have the means are better able to pay taxes and aren't making their fair share of sacrifices, but poor people in this country, people waiting for surgical waiting lists, first nations people—those are the people who have been asked to make the sacrifices.

    The provincial governments are coming back to the federal government and talking about restoration of the transfer payments for health care because their argument is that the transfers have not been made up; that the amount of the transfers that were cut over the last 10 or 15 years has still not been made up.

    So while there is very significant new money for health care, we still haven't dealt with the deficit in health care that was created through the reductions in transfers to the provinces over those years. The provincial taxpayers sacrificed; people who need health care sacrificed; pensioners sacrificed; first nations people sacrificed. I think there are some other people in our society who could sacrifice as well.

    Mr. Nick Discepola: So increased spending by the government doesn't bother you?

    Mr. Blair Redlin: Coherent, intelligent choices about increased spending? We think there's lots of room for the federal government. The federal government has retreated from a whole variety of fields it was previously involved in and has left that ground to the municipalities and to the provinces.

    Mr. Nick Discepola: Should there be guidelines that this committee should be giving the Minister of Finance in terms of new spending? Should it be based on population? Should it be based on inflation? Should it be based on something?

    Mr. Blair Redlin: Yes, certainly; I think that's your mandate. I think you need to be looking at economic growth projections and the surpluses we're generating and fundamental questions about things like the unemployment insurance surplus. Yes, you should be providing those guidelines. We're not saying, and I don't think any Canadian would be saying, “full-scale, holus-bolus spending in all areas”. But we're identifying for you where we think some of the priorities should be made—as opposed to corporate tax cuts, as opposed to defence spending, or as opposed to a variety of the other choices the government has made.

    Mr. Nick Discepola: Thank you.

    The Chair: Thank you very much.

    Ms. Judy Wasylycia-Leis.

    Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP): Just to carry on from that last exchange, speaking to Blair and Anne from CUPE, it seems to me that what you're saying in your brief is really—I hate to say it—Liberal policy as enunciated in the last election, when Liberals promised this country the surplus dollars would be split, between spending on government programs and public infrastructure, and tax cuts and debt reduction on the other hand. What did we end up with, a 50-50 split? No, we ended up with a 90-10 split, and it's well documented: 90% of surplus dollars going to debt reduction and tax cuts. So I think it's only fair that we treat this representation from CUPE with respect and as consistent with promises made by Liberals.

    My question to you, Blair and Anne, is, given the needs you've identified—I see we've rattled a few cages over there—would it not make sense for us to recommend as a committee in advance of this budget, which will come some time after Paul Martin becomes Prime Minister--and who knows what he believes in after his Chamber of Commerce address in Montreal--that as a bare minimum we go back to the 50-50 split and ensure that investment in public infrastructure, in natural capital, which has all kinds of payoffs for economic growth and for the GDP, is our first priority?

º  (1640)  

    Mr. Blair Redlin: Certainly, that would be a very credible recommendation. It would be great to see even one federal budget meet that target that was promised in the last election and on which the government was re-elected.

    Ms. Judy Wasylycia-Leis: You also said in response to Nick that there are areas where we can save money, and I think you touched on one with respect to the whole issue of PPPs, the public-private partnerships. As a former health critic, I know of some of the problems, but I hadn't realized that government is in fact dipping into pension funds to pay for private enterprises that will benefit the profit margins of private companies that are already also receiving huge benefits from tax cuts. I had not realized that, so I think it would be important for you to give some evidence to this committee about what is actually happening.

    Mr. Blair Redlin: The reason we say public-private partnerships are more expensive is because they propose to rely on private financing. They go to a private sector entity to borrow money for a public purpose. As we know, private financing is more expensive than public financing. The public sector generally has a much better credit rating than private investors do, so there's an increment that has to be paid for at some point over time. The way the magic of PPP arranges it is that that extra cost is paid out over a longer period. They enter into these multi-decade contracts.

    One of the things in terms of accountability and choices for decision-makers is that we should understand that these privatized hospital contracts that are proposed in Ontario, Brampton, and the Royal Ottawa are for a term of 30, 35, 40 years, very long-term contracts, very hard for future governments to try to get out of. They are more expensive as well because the private sector investors pay taxes to the local government whereas a public sector entity would not do that. They have to account for a profit that's paid to the shareholders that are investing, and that's money that could otherwise be spent directly in care for patients.

    Therefore, for a whole variety of reasons, they are more expensive. Yes, as we've identified for you, it gives particular concern to see that the source of that financing in the case of the two hospitals in Ontario is the Canada Pension Plan Investment Board, which has a very major stake in this company called Borealis. Borealis is the entity that's part of the consortium called the Health Care Infrastructure Company of Canada. The Health Care Infrastructure Company of Canada has been a successful bidder for both the Brampton hospital and the Royal Ottawa Hospital. The financing portion of those partnerships comes from Borealis. The sources of funds for Borealis are the Ontario Municipal Employees’ Pension Plan and the Canada Pension Plan Investment Board. We would hope this committee might recommend that the Canada Pension Plan Investment Board look for other places to invest the pension money of Canadians, other than in privatized health care.

    The Chair: Yes.

    Judy, you have two minutes.

    Ms. Judy Wasylycia-Leis: I have a comment for Joseph Oliver that he may like to respond to, and then a question for Ian.

    My comment is that my information suggests that Canada's debt-to-GDP ratio is now much better than that in the U.S. We're sitting at about 36%; the U.S. is speculated to be at 48% next year. We're said to be the best of the G-7, and it seems to me that if we're looking at priorities, it sure wouldn't be putting any more money against the debt.

    My question to Ian is, given that scenario, if you have $3 billion in the contingency fund that the government will put down against the debt--and it will cause very little movement in terms of the debt-to-GDP ratio because in fact, as Mr. Oliver said, you really see the movement when the economy grows--that $3 billion would probably make a heck of a lot of difference to students accessing post-secondary education, paying off big loans and trying to make a go of it.

    I'd like you to comment on that because I think Roy Cullen might have forgotten what it was like when we went through university. At least in my own case, as someone from a family of six, my family couldn't put money aside even if there had been an RESP. We got there because tuition was reasonable and because there was a student assistance program that looked at your...it was a universal program that gave you some money and adjusted the loan-grant portion based on your circumstances. That's what we're missing today.

    That's my question.

º  (1645)  

    Mr. Joseph Oliver: I think your numbers on the Canadian debt aren't accurate. The appropriate comparison is to combine all levels of debt, federal, provincial, and municipal. Perhaps I don't have an exact number, but it's around 70%. In the United States, the combined number is somewhere in the high twenties. They are now increasing their debt rapidly, but they also have an immense economy. So we are considerably higher in Canada.

    Ms. Judy Wasylycia-Leis: I'm just referring to OECD studies on this.

    Mr. Joseph Oliver: I think they may only reflect the federal number.

    The Chair: Mr. Boyko, do you want to add something here?

    Mr. Ian Boyko: Yes, just very briefly.

    Students could certainly use that $3 billion for needs-based grants, but I really want to drive home the point that the federal government is spending at least that on programs that don't get at financial need.

    I have tried to define the problem with accessibility today as one that excludes people based on their socio-economic status. I didn't mean to include the millennium scholarships in my regressive comment—even if I did—but most of the programs we have today are not needs based and are disproportionately benefiting those in the higher-income quartile. Money we're spending now could better be spent on needs-based assistance, period.

    In terms of transfers to the provinces, when you account for inflation, we're only now starting to get to the levels of 1994 and 1993. So we would even be satisfied if the federal government made small incremental commitments to surpass the 1993 levels and started to pay back some of the $3 billion it owes the post-secondary education sector over time. It doesn't all have to come in the impending federal budget, but certainly transfer payments are only now getting back to the levels they were before they were cut.

    The Chair: Thank you very much.

    Just before I go to Ms. Minna, I want to clarify that when the Canada Pension Plan Investment Board does its investments, it is at arm's length from the government board. This committee last year did the legislation that gave the board its investment powers. The board is not like the federal government. I didn't want consumers or viewers out there to be confused about that. I don't think it was totally clear when people were talking about it, so I'll just make that clarification.

    Now we'll go to Ms. Minna.

    Ms. Maria Minna (Beaches—East York, Lib.): Thank you, Madam Chair.

    I wanted to say at the outset that while I understand that the Canada Pension Plan is independent, does its own investments, and all of that, I do agree with the fact that private hospitals built by private entities are much more expensive to the health care system in the long run. The government is going to continue to pay rent forever, rather than owning its own building and having all kinds of.... It's not a feasible way to go. Certainly, the fact that the Canada Pension Plan is independent doesn't prevent me from calling them and finding out what they're doing. I'll just say that, because I don't agree with you on that.

    With regard to your presentation, the only other thing I'm going to say here is about the issues of housing, health care, and child care. These are social issues that we have to address. We've been talking about them for some time, and we mentioned the issue of child care and housing in the last report. It was all there. I've been involved with these issues for some time, and we cannot afford to continue not to make a real commitment to them.

    I understand the need to target. I think my colleague is saying that rather than spending everywhere, you have to focus. That's fair, because money is limited. But I think there are certain prime areas in which to invest. Child care for me is not much different from university, high school, and elementary school, because if you don't invest in early learning, you're actually denying children the opportunity of ever getting there. On the one hand, you may deny it from the point of view of investment, and on the other hand, you may deny it from the point of view of developmental ability. So both of them are fundamentally important.

    I'll just say that rather than getting into....

    I do want to go back to some of the discussion with Mr. Boyko and Mr. Oliver. With respect to the RESPs, I must tell you that I have always had some difficulty accepting tax credits as the best tool to deliver social policy anyway. I don't believe that tax credits are always the best way to go, because they affect.... I understand what you're trying to say with respect to the RESPs and the problem that may be inherent in them, because I know there's no way my family would have put money away in RESPs. In the end, I went to university as a mature student, so you're quite right that it doesn't help everybody.

    I know you made some suggestions, and my question to you is twofold. One has to do with both the RESP and the millennium funds. You would collapse them, but what would you do with the rest of the programs we have? Would you do a complete review of all of the post-secondary funding, whether loans, or whatever exists, and completely review the whole package? Have you done that, and do you have an overall proposal in addition to your specific recommendations in specific areas?

    My other question has to do with your talking about having a national strategy on tuition and fees for post-secondary education. Of course, you know there's provincial jurisdiction. Mr. Paquette didn't say it, but I would have expected him to have said at some point that it's not something we're supposed to put our fingers on. But have you had any discussions with your Quebec counterparts and other levels as to their sentiments or feelings toward a national approach to this? I believe we do need a national approach to our issues, but we don't do it because there's constant bickering and fighting over jurisdiction all the time.

º  (1650)  

    The Chair: Mr. Boyko.

    Mr. Ian Boyko: Yes, in terms of a broad-based approach to refining student financial assistance and what's needed. When the Canada student loans program was implemented in 1964, tuition fees were a remarkably different story, and that's probably obvious to anybody here. It was not designed to handle the kinds of stresses it does today, and it kind of rubs up against the bankruptcy legislation. People aren't any more irresponsible today; they're just carrying debt loads of tens of thousands of dollars more than they have in the past.

    When we're talking about reviewing the entire system of student financial assistance, I think--and there's some appetite, I think, in HRDC to do this--there is a wholesale review of student financial assistance needed. I think part of that strategy has to be a shift away from saddling people who happen to accidentally be born in the east side of Toronto versus the people who were accidentally born in Yorkdale, and to realize that when you saddle one family with $25,000 worth of debt, that is not equivalent access--letting other families not accrue any debt over the career of their education.

    The loan system, although it helps some people from disadvantaged groups get through the door, doesn't create a fundamental level playing field on the front end. That is something we need to address through a more comprehensive system of grants. I think there is an appetite and a need to review all student financial assistance, including the loans program that wasn't necessarily mentioned today.

    In terms of the national perspective, nobody's denying that it's a quagmire. Nobody's denying there's going to be jurisdictional wrangling there. I think I've said before that there's a history of the federal government having both a direct and somewhat indirect role in financing universities directly and then later on through the provinces. We've moved away from that. I think it's fair to all Canadians in all provinces that the federal government needs to take both credit and responsibility for funding dollars that are trickling down in transfer payments.

    I think it's not going to be easy. It wasn't easy with health, but we came up with some sort of accord.

    Ms. Maria Minna: I'd like to go to Mr. Oliver now, just before we run out of time and I get cut off. I see the chair looking at me.

    The Chair: Yes. I'm going to allow this last question.

    Ms. Maria Minna: In terms of RRSPs, this has been a bee in the bonnet. I opposed the increase recommended in our last report.

    I'm going to say that 10% of the population or less--I know, Mr. Oliver, you say it's one million Canadians--use up the whole space we had before the last budget. Those were the stats I had from the finance department. Now we've increased that. You're coming back saying you want more of an increase. What do we do with Canadians who are not part of that less than 10%, who are using the whole space, who have absolutely no...? They use RRSPs but they can't use them to the max, therefore they're not benefiting.

    My understanding from talking to a number of economists is that the average Canadian saves under $100,000 on RRSPs, which doesn't do them any good. If you don't have well over $100,000 saved you might as well cash them in before you're 66, because you're going to end up paying most of it in tax anyway. We have a ton of Canadians who are subemployed because that's an increasing direction people are working in nowadays, from one job to the next, and in small businesses, and they're not able to put away anywhere near the kinds of dollars you're asking to increase.

    So I would like to know from you, if you say this is a social policy issue, wouldn't a social policy issue be to look at the overall pension system we have, and how it is meeting or not meeting the needs of the majority of Canadians?

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    Mr. Joseph Oliver: Well, I grant you that those who have not put the full amount in are not the people who are being targeted for the increase. I didn't say this was a plan that would affect 30 million Canadians; I said it was a plan that would affect one million Canadians.

    If you target a reasonable ratio of post-retirement income to pre-retirement income at 70%, which happens to be the number that a long-time employee of the federal government earns, then the break point income is over $70,000 or $80,000. So that's the group of people.

    That is not to say there shouldn't be other plans or other programs, but what we're talking about is a whole group of people who don't benefit from government or corporate plans, people who by no stretch would be considered wealthy Canadians, but who do need the money and will need the money for their retirement. We believe a reasonable proportion of them would take advantage of that. That's really what we're focusing on.

    I think it is relevant that the number in the United States is so much higher. It's about $56,000. In the U.K. it's about $38,000.

    Ms. Maria Minna: It also has a program for those people who cannot take advantage of our types of RRSP at the top. There is another program--I forget what it's called--for people who are sort of medium income, which we don't have.

    Mr. Joseph Oliver: The government talked about a tax prepaid savings plan, which of course would target that area. I think the government should look into that as well.

    Ms. Maria Minna: I don't have a problem comparing ourselves to the U.S. some of the time, but we compare ourselves to them for everything. When we compare, we don't say that people don't have to pay for health care in this country, which they do there. There are all kinds of other services we provide that are not provided in the U.S. Sometimes we compare apples and oranges, but at some point we also have to say, okay, we've increased RRSPs and there is a small percentage who benefit from that. They are not filling the full space as it is. Let that go on for a while and then let's address some of the other areas.

    If we're going to spend money, and we're talking about finite dollars, I think we've done our bit for increasing RRSPs at this point.

    The Chair: With that, as our time has elapsed, I'm going to thank all of the participants today, on behalf of all the members of the committee here.

    Thank you for your briefs, thank you for your appearance, and thank you also for answering our questions.

    We are adjourned until tomorrow afternoon.