FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 4, 1997

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[English]

The Chairman (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.): I call the meeting to order. Welcome to everyone this afternoon.

As you know, pursuant to Standing Order 83.1 the finance committee is holding hearings to get input from Canadians vis-à-vis the upcoming federal budget. We've travelled across the country and have received some valuable input from various groups, organizations, and individuals as to measures we should take to perhaps improve the quality of life for Canadians.

This afternoon we are going to hear from the Federation of Canadian Municipalities; the Coalition to Renew Canada's Infrastructure; the Canadian Association of Oilwell Drilling Contractors; the Canadian Construction Association; and the Ontario Professional Fire Fighters Association.

Many of you have attended meetings like this one before. You have five minutes to make your presentation, and thereafter we will proceed to a question and answer session.

We will begin with the representatives from the Federation of Canadian Municipalities, Jae Eadie and Gilles Vaillancourt.

Welcome.

Mr. Jae Eadie (President, Federation of Canadian Municipalities): Thank you very much, Mr. Chairman, and members of the committee.

I am president of the Federation of Canadian Municipalities and deputy mayor of the city of Winnipeg, Manitoba. I am accompanied by my colleague, Mayor Gilles Vaillancourt, of Laval, Quebec, just two days into having been re-elected to his third term of office as mayor of his city. Mayor Vaillancourt is chair of our standing committee on municipal finance.

The Federation of Canadian Municipalities has been recognized as the national voice of municipal governments in Canada since 1937. Some 630 municipal governments in every province and territory are currently members, representing a combined population of over 20 million people. In addition, the 16 major provincial and territorial municipal associations are members and are represented on our national board of directors.

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Given the time, I'm going to get right to the main point of our presentation.

In discussions on the long-awaited federal budgetary surplus and fiscal dividend, the greatest omission has been what municipal governments considered to be an ongoing priority: reinvestment in municipal and transportation infrastructure following years of fiscal restraint, federal withdrawal from transportation, and offloading of costs to municipal governments.

The FCM appreciates this government's record on municipal infrastructure renewal. Indeed the FCM-inspired Canada Infrastructure Works Program has proven to be a major success in terms of job creation, the renewal and creation of community assets of lasting value, and the demonstration across the country of workable Canadian federalism and intergovernmental co-operation.

The Federation of Canadian Municipalities believes a long-term tripartite strategy on municipal infrastructure is required to address the remaining municipal infrastructure deficit and the need for new facilities owing to rapid population growth under federal immigration policy.

A McGill University study concluded that over $40 billion in work remains in order to bring municipal infrastructure to adequate levels of repair. Under current intergovernmental fiscal arrangements and the epidemic of federal-provincial-territorial offloading in virtually all policy areas, municipal governments simply cannot keep up. This should be of concern to everyone. Citizens, industry, trade, commerce, and all orders of government are affected by the deterioration of basic infrastructure and the lack of facilities to accommodate growth.

[Translation]

The Chairman: Mr. Gilles Vaillancourt.

Mr. Gilles Vaillancourt (Chairman, Finance committee, Federation of Canadian Municipalities): Thank you, Mr. Chairman.

Communities across Canada have been hit hard by the federal government's unprecedented withdrawal from transportation. Those outside of the Quebec City - Windsor Corridor have been hardest hit.

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At FCM we are witnessing a growing backlash in the Atlantic, West and North against the federal government's offloading of airports, seaports, fishing harbours, rail line abandonments, VIA Rail service reductions, and highway deterioration. These measures are fuelling regionalism, alienation between rural and urban Canada.

Just as municipal infrastructure is critical first to the economy and then to our quality of life, so too is national transportation infrastructure. FCM is seeking recognition that strategic reinvestment in transportation infrastructure may be appropriate in certain circumstances. Reinvestment must be assessed from an environmental and social perspective, but above all, from an economic point of view. In particular, FCM supports a federal- provincial/territorial National Highway Program because of its importance to commerce, trade and tourism. The importance of this issue grows as railway rationalization and offloading of federal airports and seaports continues. Freight and passenger loads on highways are increasing. This impacts on municipal and provincial road costs as well as the environment. This trend is now practically unsustainable.

Environmental issues: FCM believes that Canada must live up to its commitments on global warming. Municipal governments are obvious and key players in relation to climate change and are prepared to cooperate with the federal government, but cooperation must be a two-way street.

We support the recommendation of the House of Commons Standing Committee on Environment and Sustainable Development and the Liberal Party Red Book that it is incumbent upon the Government to ensure that environmental policy is not hampered by fiscal policy. Unfortunately, the federal government continues to refuse to join with other industrialized countries in making employer-provided transit passes a non-taxable benefit. Under federal income tax policy, employer-provided parking benefits are officially taxable but most employees qualify for exemptions. Employer-provided transit passes, on the other hand, are fully taxed, providing an estimated $570 per year federal tax advantage to the average car commuter over the average public transit commuter. When combined with the average annual value of an urban parking space and GST avoidance, the result is an average $1,726 annual financing incentive to commute by car rather than public transit.

Making employer-provided transit passes a non-taxable benefit would eliminate as many as 300 million kilometers annually of urban car travel within ten years, reduce by 35% the expected growth in peak-period travel to Canada's major urban centres, save billions of dollars in road construction costs, prevent tens of thousands of tons of greenhouse gas emissions per year and relieve traffic congestion, thereby reducing transportation and health costs and enhancing economic efficiency. FCM urges this Committee to support making employer-provided transit passes a non-taxable benefit as in the U.S. and Europe.

The preservation of heritage buildings is important for cultural as well as environmental reasons. The terminal loss provisions of federal income tax law encourage demolition of buildings that potentially have heritage value. FCM wishes to support Income Tax Act amendments which would promote the retention, restoration and donation of heritage buildings.

[English]

Mr. Jae Eadie: FCM and its member municipal governments are recognized around the world as leaders in international municipal co-operation. With the support of CIDA, FCM manages municipal partnership and training programs with municipal governments in Africa, South America, Asia, and eastern Europe. Canadian expertise at the municipal level is in ever greater demand, particularly since many countries are engaging in decentralization and democratization programs, which call for local authorities to assume more responsibilities for waste treatment, land use, and other related fields.

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International municipal co-operation leads to the development of trade and diplomatic relationships of importance to the Canadian government and businesses.

This is also exemplified by the fact that over the last few years the Prime Minister has invited municipal leadership in Canada to accompany the Team Canada trade missions that have been taking place in various countries of the world.

The Federation of Canadian Municipalities urges the committee to support greater funding for CIDA in support of international municipal co-operation.

In conclusion, reinvestment in municipal and transportation infrastructure, following years of fiscal restraint, is seen as an ongoing priority by municipal governments in Canada.

Finally, the federal tax system should support, rather than hinder, environmental sustainability.

Thank you, Mr. Chairman. That's our presentation.

The Chairman: Thank you very much. It was a very interesting presentation.

We now move to the representatives from the Coalition to Renew Canada's Infrastructure: Mr. John D. Redfern.

Mr. John Redfern (Chairman, Coalition to Renew Canada's Infrastructure): Mr. Chairman, committee members, thank you for this opportunity today.

We've been asked to provide input into the three questions asked of this committee: what economic assumptions should be used for the budget, new strategic investments, and how can the government assist in broadening the range of job opportunities?

It is the opinion of CRCI that answers to these questions can be found in a long term, federally led national highways program. It is important for governments to govern in a manner that is compatible with creating an economic climate conducive to investments. Competing for business investment today has changed. Canada must offer a climate that reflects world-wide realities. Business must now be prepared to compete with companies world-wide.

Providing necessary basic infrastructure is critical for any government that aspires to promote economic growth and job creation.

As the collective voice for a broad-based coalition representing all areas of the economy, we are greatly concerned about the deterioration of our highway network and its negative impact on Canada's economic growth and job creation.

When the current Liberal administration was in opposition, a Liberal task force on infrastructure recognized the importance of highways in our economy. It recommended a federal commitment to rehabilitate and expand the Trans-Canada Highway. What that task force said then is valid today:

...the economic consequences of poor roads is staggering. Studies reveal that the productivity of a region is very much dependent upon its transportation system. Traffic congestion increases the cost of transporting materials reducing the industry's competitiveness. Bad roads...also have a negative impact on tourism, an important sector of the Canadian economy.

This was confirmed when the report of the House of Commons Standing Committee on Transport this year came to the same conclusion. This committee report said:

...an efficient competitive highway system is one of the fundamental requirements of an healthy economy. It has been demonstrated beyond any doubt how important a safe and competitive highway transportation system is to trade and tourism.

Our full brief outlines the built-in returns on investment, including tourism, lives saved, increased productivity, unity, and tourism. The special infrastructure project conducted by Transport Canada reaffirmed these returns.

The federal government has been directly involved in the design and make-up of the national highway system along with the provincial governments for some nine years. In addition, Ottawa has participated in highway and other infrastructure programs projects since 1919.

The federal government is also currently involved in seven bilateral programs.

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Given these realities, CRCI recommends that the federal government adopt a national highway policy that would be long term in nature and where necessary would oversee rehabilitation and expansion of Canada's national highway system.

To do so, one question remains unanswered: how do we pay for the necessary work? When governments examine how infrastructure investments are made, it is attractive to look to the private sector for assistance in the form of public-private partnerships. Co-operative ventures of this nature require creative solutions and a willingness to be open to non-traditional methods.

If asked, the private sector will participate in the design and implementation of a national plan for Canada's national highway system. However, the federal government must take a leadership role and commit to a long-term program. As stated by the Standing Committee on Transport this year, the federal government must make a long-term, secure, sustainable funding commitment to the rebuilding and maintenance of the national highway system.

On a number of occasions the provinces have indicated their eagerness to move ahead on such a co-operative venture. As recently as June of this year the western Ministers of Finance presented the federal Minister of Finance with a paper outlining their priorities. A national highway plan was the number two item on the list.

The building and maintenance of Canada's national highway system by provincial and federal governments was and is paid for from tax revenues. There is no direct link between what the federal government collects in gasoline taxes and what it invests in our national highway system, as opposed to the current system in the United States. The federal government collects 13.7¢ per litre in gasoline taxes. In 1996 Ottawa collected $5 billion in excise taxes from the sale of gasoline. Transport Canada will spend only 5% of this revenue.

The quality of Canada's highways influences corporate decisions on location, capital investment, production methods, relationships with suppliers and customers, location and availability of inventory, and access to labour. A long-term plan such as the one laid out by the national highway review policy report would carry out construction of our highway system with maximum efficiency and create a larger economy. To borrow a quote from a Globe and Mail editorial of August 24, 1996:

The quality and appeal of a region's highways are among the most important factors in maintaining prosperity and attracting visitors and investment; their well-being should be carefully managed.

I will end here. I look forward to our discussion this afternoon. I hope to have an opportunity to make some closing remarks later.

The Chairman: Thank you very much, Mr. Redfern.

I'll now move to the representatives from the Canadian Association of Oilwell Drilling Contractors, Duane Mather, president, Colin MacDonald, counsel, and Don Herring, managing director.

Welcome.

Mr. Duane Mather (President, Canadian Association of Oilwell Drilling Contractors): Thank you, Mr. Chairman. We have provided a written submission for your consideration and the consideration of the members of the committee. I do not plan to read it but I do wish to speak to it directly in summary form here this afternoon.

First I would like to tell you a little about our association and our members. We have a membership of 98 companies, employing more than 15,000 people. Our member companies operate more than 1,200 drilling and service rigs and drilled a total of 12,700 development and exploration oil and gas wells in western Canada in 1996. We expect to drill a further 16,000 wells this year. Our members not only drill oil and gas wells in western Canada but are active in the Yukon and the Northwest Territories, in Quebec and Ontario, and in the east coast offshore.

We are truly a national organization with a proud history of helping to develop our natural resources in this country. Our members are using cutting-edge technology in the drilling of horizontal wells and provide our client oil and gas companies with the world's best available drilling rigs to exploit our natural resources in the most cost-effective manner possible.

For example, this new technology has allowed our industry to reduce significantly the so-called greenhouse gas emissions from our operations. The CAODC and its drilling contractor member companies are participating in the Voluntary Challenge Program following the signing of a memorandum of agreement last year with Natural Resources Canada. Our results to that point showed a 30% reduction in fuel consumption and thus emissions. We expect an equally significant result following the roll-out of this program to our members from the well servicing companies. This means there is some significant measurable progress on reducing emissions using the Voluntary Challenge Program.

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On the macroeconomic side, as we indicated in our submission, our membership is delighted that the Government of Canada has addressed its huge deficit problem over the last four years, which has allowed interest rates to remain low in this country and which in turn provides real incentive for investment in the natural resource sector. Our advice in this regard to the government, through your committee, is to stay the course.

We have one specific matter that we are recommending to the Minister of Finance for budget consideration, and that has to do with the treatment of subsistence allowances in the Income Tax Act.

Allow me, if you will, Mr. Chairman, to describe this issue as it affects our individual member companies and their employees.

Our member companies pay a subsistence allowance in the order of $60 to $80 per person per day at remote drilling locations. This allowance has traditionally been a fully deductible cost to the drilling company and has been received by the employees on a tax-free basis. It is intended to offset some of the costs for accommodation, transportation, and incidental expenses that are incurred by such employees living away from home.

Two or three years ago Revenue Canada began taking a position that a portion of the allowance should be attributable to food and that in turn only 50% of that food component would be eligible for a tax deduction. This position is a new interpretation by Revenue Canada in respect to such allowances.

The full deduction of subsistence allowances by companies had not been challenged over the past ten years by Revenue Canada. The change in policy has resulted in an assessment against most of our member companies and will amount to a tax cost to such member companies in the order of at least $10 million.

We believe this interpretation of the relevant tax act provision by Revenue Canada to be unfair, as their interpretation of the law was not clarified until an interpretation bulletin was published in April 1996. We believe that all assessments prior to that time ought to be dropped on the basis of fairness.

We also object to Revenue Canada's position that a portion of the allowance must relate to food. Our recent surveys have shown that our present $80-per-day allowance does not fully cover the cost of hotel, transportation, and incidentals, let alone food. Food is a cost that is over and above the allowance in our estimation, and the deeming of the portion of the subsistence allowance for food and in turn the reduction in the deductible allowance to such companies is not only unfair but inappropriate.

In addition, the way in which subsection 67.1(1) of the Income Tax Act works at present is that if a company were to have a camp kitchen or if they were to make arrangements with a local restaurant or diner to pay such food costs for all of the employees at such work sites, those food costs would be fully deductible. However, if one pays such costs by way of an allowance, for some reason the interpretation of the act by Revenue Canada says that such costs are only deductible to the extent of the 50%.

We believe that the original intent of Parliament in dealing with allowing a portion of food to be deductible for meals and entertainment makes good sense. However, we do not believe that such food costs at a remote working location ought to be treated in the same way as those in downtown Calgary or Ottawa, nor do we think Parliament ever intended that to be the case.

We have made direct representation to the Department of Finance and to Revenue Canada on these matters and are still engaged in discussions with both departments.

We have proposed specific recommendations in our submission that we have also made to those departments, and we hope to put them to you today for your consideration and hopefully your support.

We are not alone in dealing with this issue. Our colleagues from the Canadian Construction Association have also raised this issue in their brief for your consideration. We share the same frustration as their members and submit to you that our member companies and those of the construction association should not be treated unfairly when it comes to the application of this provision of the Income Tax Act.

Ultimately it is our 15,000 employees who will be forced to bear this burden if this provision of the act is not amended or its interpretation not changed.

Mr. Chairman, thank you very much for the opportunity to participate in today's round table discussion.

The Chairman: Thank you very much.

We'll now hear from the representatives of the Canadian Construction Association, Mr. Michael Atkinson, president, and Mr. John DeVries, vice-president.

Welcome.

Mr. Michael Atkinson (President, Canadian Construction Association): Thank you very much, Mr. Chairman and committee members.

The Canadian Construction Association represents some 20,000 firms who work in the non-residential sector of the construction industry, an industry, Mr. Chairman, that is Canada's largest in terms of its contribution to the Canadian economy and that as an employer directly employs some 750,000 Canadians.

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The Canadian Construction Association welcomes this opportunity to present its views concerning the forthcoming federal budget. You have asked witnesses to address three questions. We believe those questions have been addressed in the written brief you have before you. We certainly are encouraged by the steady progress achieved to date toward the elimination of the federal deficit and support a similar approach regarding the cumulative federal debt. At the same time, however, the association believes this must not be achieved through tax increases.

An example of a tax increase is also a situation where the government, for whatever reason, begins to disallow deductions. You heard from the Canadian Association of Oilwell Drilling Contractors about Revenue Canada's recent unfair treatment with respect to subsistence or living-out allowances. It is certainly an area that has caused very much concern in our industry. As this country's largest employer, you can well imagine what this can do to dampen employment. Mobility of labour in our industry is absolutely imperative.

To have a situation in which, out of the blue and without warning, there is a different interpretation put on the act, which causes our contractor members to no longer be able to deduct 100% of these allowances, causes us grave concern not only from the perspective of paying additional taxes but also in terms of the impact this will have on employment, on labour mobility, etc., with respect to our industry. So it is a very critical issue for us.

To echo the comments made by my colleagues from the oil well drilling contractors association, this was not the legislators' intent. Certainly the legislators' intent was to get at the “two-Martini lunch”, as it was called, or business meals. In fact, some of the early literature that Revenue Canada and Finance put out on the 80% measures referred to “business meals”.

Subsistence allowances being paid in our industry and in our colleagues' industries with respect to providing workers with bare-bones necessities to find their own room and board while they're away from home working, not exactly in the most pleasant circumstances or environment, in many cases...and to say that they should be treated the same way in those circumstances as the two-Martini business lunch, is a travesty. For our industry it is a serious problem.

With our colleagues we recommend that this committee look at that area very closely and hopefully make a recommendation back to the finance department to make sure that the intent of the legislators in writing that legislation in the beginning is in fact put in place.

The other disturbing aspect of this particular approach that Revenue Canada is taking to these provisions in the act is that it's a very discriminate approach. Our member firms are being hit in certain areas of the country and not in others whatsoever. In fact, there is often nothing said about the same allowances being paid by the same employer in certain areas of the country.

The areas that are hit—northern Alberta, northern Ontario, the province of Quebec—are areas where our industry is starting to see at last the light at the end of the long tunnel of low volume, low work, etc. This kind of inappropriate application of the Income Tax Act couldn't be coming down on our industry at a worse time.

I mentioned that we would like to see government stay the course in approaching the cumulative federal debt, and to do so without increasing taxes. We also believe there is room for some strategic tax relief, particularly in one area, which I'd like to address very briefly, and that's with respect to employment insurance premiums.

We are calling, with a number of other business groups, for the federal government to reduce EI premiums from $2.90 per $100 of payroll to $2 per $100. The EI fund is projected to have a cumulative surplus of some $12.8 billion by the end of 1997, and will reach $14 billion in 1998, even with these recommended reductions. Those are based on government's own estimates. Surely a $14-billion surplus in the EI fund is more than enough for any rainy day reserve.

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A reduction of that magnitude would inject some $6.5 billion back into the economy. We believe this reduction is especially warranted when one recalls that EI, then UI, premiums were substantially increased in 1989 to provide funding for training programs, the so-called UIDU fund or Unemployment Insurance Developmental Uses Fund. The premiums were specifically increased then to pay for such things as apprenticeship training, which is near and dear to the hearts of us in the construction industry—to pay for this through the UI or now EI system.

However, the federal government announced last year that it is withdrawing funding for such programs. So in essence, the UI fund is being built up partly on the basis of collecting funds for the purposes of spending and investing in training programs such as apprenticeship training. But now the federal government is phasing out of funding those programs, yet the premiums stay at that level.

So we in the construction industry feel we have a double argument, a double reason for wanting to see reductions in the premium.

My colleagues from both the Federation of Canadian Municipalities and the Coalition to Renew Canada's Infrastructure have spoken to you about the dire need—and I use those words very intentionally—for long-term strategic national infrastructure policy in this country. Our infrastructure is at the point now where it is our second deficit. It is an infrastructure deficit that is reaching alarming proportions and is just as deadly and threatening to Canada's future prosperity as is our fiscal debt.

The federal government must adopt a leadership role. Our nation's critical infrastructure is too important to our future prosperity to play silly pass-the-jurisdictional-buck games or to partake in partisan party politics.

We urge government to adopt the February 1997 report and recommendations of the House of Commons Standing Committee on Transport with respect to the rehabilitation and maintenance of the national highway system.

We urge government to adopt, as my colleagues from the Federation of Canadian Municipalities have stated, a long-term national infrastructure policy and program with respect to our municipal infrastructure.

The question is often raised, how can we afford to do this? I would suggest to you that the question is really, how can we afford not to do this?

I've never heard anyone at any of the meetings or the thousands of committees that have been invented to study how bad our infrastructure is say, well, the heck with it; let's let our infrastructure deteriorate to the point where we can't use our highways, our roads, and our bridges, and the water doesn't run properly in the cities any more, and we can't get rid of our waste water. I've never heard anybody say, “who cares”.

So really, Mr. Chairman, it's not a question of whether we should be reinvesting in our infrastructure; it's a question of when and how much it's going to cost. As you all know, the longer you put off fixing that leak in the roof, the more it's going to cost you in the long run.

I thank you again for the opportunity to share our views with you, and I certainly look forward to the forthcoming questions and discussion.

The Chairman: Thank you, Mr. Atkinson.

We'll now move to the representatives from the Ontario Professional Fire Fighters Association, with Mr. Rick Miller.

Mr. Dale Kinnear (Labour Analyst, Canadian Police Association): Thank you for the opportunity to appear before you to explain our view on an issue that we feel the government's next budget should address.

With me today are Sean McManus, the Canadian director of the International Association of Fire Fighters, representing 17,500 Canadian firefighters; and Rick Miller, from the Windsor fire department, station number 5, who is the Ontario Professional Fire Fighters Association pension committee chair and a member of the Ontario Municipal Employees Retirement System, OMERS, board of directors.

My name is Dale Kinnear. I'm a labour analyst for the Canadian Police Association and a member of the Ontario Provincial Police. I represent 40,000 Canadian police officers.

We're not here to address the three items that were on the list for consultation. We're here to deal specifically with an issue for consideration that relates to our pension benefits.

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As you know, the Income Tax Act creates the designation “public safety occupation”. Police officers and firefighters are included in that definition. The act provides public safety occupations special dispensation from normal retirement age provisions applied to define benefit registered pension plans.

Given the nature of the work we do as the front line of emergency response, we believe we are deserving of more than just the opportunity to retire a few years early and not be penalized. We are asking you to consider a change in the legislation that would allow our members an annual benefit accrual rate higher than the 2% currently allowed for registered pension plans. The only cost to the government would be a slight loss of revenue on the extra amount of money our members would be allowed to deduct under registered pension plan provisions on personal income tax returns.

Police officers and firefighters experience more line-of-duty deaths than any other public safety occupation. Firefighters die needlessly in fires deliberately set or as the result of a careless act. Just last week the Ottawa fire department was involved in a fire on Somerset Street that had the potential to wipe out several city blocks. Evidence indicates arson was responsible for that fire.

There's no way to identify, let alone record, the myriad of hazardous materials and toxic combustibles a firefighter may be exposed to in a career. Police officers in recent months and years have been assassinated because of the office they hold and the duties they are sworn to carry out. The Criminal Code decrees its most serious penalty for the murder of a peace office. No other occupation is subject to violent death at the hands of a third party.

The death of a firefighter or police officer is an occupational hazard like no other in the Canadian workplace. For that reason we ask you to consider the following request in your deliberations for the 1998 budget. I'll ask Rick Miller to explain our position.

Mr. Rick Miller (Chair, Pension Committee; Ontario Professional Fire Fighters Association): Good morning. Before I start I would like to wish the municipalities good luck with the roads, because I would definitely enjoy driving a fire truck down better roads. The only benefit of bumpy roads is that people seem to see our lights flicking a little more.

I would like to elaborate on the summary sheets that you in the committee have with you. I will address four points that our firefighters and police officers are going to be affected by.

First of all, in terms of the proposed Canada Pension Plan changes, the reduction of the new pensions are going to be calculated based on the last five years instead of the current formula of three years. This new change in the calculation is going to cause a reduction in our members' retirement income. Also, once our member does pass away, the spousal benefit is 60% of that reduced calculation, the new amount.

Increased contributions for the next number of years...approximately 9.9% is what the eventual cap will be. That is going to take money from the professional firefighters and police officers right now. Freezing the yearly basic exemption will again take money away from our members. These are the three major items of the proposed CPP changes in Bill C-2 that we are concerned with. Due to the nature of our occupations my question is, how do we make up this reduced retirement income as well as the working income we're going to lose, with no opportunity to work longer due to the mandatory retirement age?

The 1997 budget will reduce eligible RRSP room by $400 per year, which amounts to $10,000 per member over 25 years, plus the tax deduction on that $400, plus the growth and compounding effect of those moneys in an RRSP portfolio. This is another opportunity closed to our members.

Retirement allowances. In the 1995 budget the finance department chose to cap the benefit of retirement allowances at your years of service accrued to December 31, 1995. Our future members therefore stand to lose to the tax man up to 50% of their allowance at their date of retirement. Our members use this allowance to help supplement their pensions at retirement because of our shortened careers. With this option slowly winding down, our future retirees will again take a hit in retirement income and will not have the opportunity to make up this lost income.

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In the proposed seniors' benefit in the year 2001, they are proposing the elimination of the pension income and age credits, which will again affect our retirees' income when they file their income tax returns. Old age will be based on combined income, rather than the current individual income by which you can have your calculation done. Most defined benefit pension plans were set up in the 1960s, with the CPP integration at age 65. A reduction is applied at 65, but old age kicks in; therefore, it's lessening the reduction our members would take.

Again I ask how our members make up some of this lost income.

The Income Tax Act recognizes our professions as public safety occupations. Exactly as the name states, public safety, that's why it's there. The government, years ago, recognized the risks, the dangers, and stress of our occupations for the safety of the public. They have a provision in the Income Tax Act that allows us to exit the workforce earlier, but we must do so with the same benefit accrual as all other occupations. These provisions are highlighted in your handouts.

What are the problems we face?

In 1986 a human rights case upheld our occupation as a bona fide occupation to enforce mandatory retirement at age 60, and several expert witnesses from both sides recommended a much earlier retirement age for our profession. They, as the government, recognized the risk to public safety and upheld 60, with an earlier age recommended.

The Hamilton fire this year and the Kitchener chemical fire are examples of our profession taking the risk for public safety. Now we suffer the health and mental effects from these incidents, resulting in not only shortened careers but death. How are our members to make up some of this reduced income with poor health and five fewer years to work, as other professions can?

In a letter from the finance minister—I'll read a couple of his lines—he states:

I would like to note that I am very sympathetic to the pressures that public safety personnel face each day, and I do understand that, due to the burden that their profession places upon them, many fire and police officers have shortened careers.

This is a letter from the Hon. Paul Martin in 1995.

Because of these changes our members who are physically and/or mentally able to stay to age 60 are going to work to age 60 to try to make up some of this income as a result of these changes I've just gone through, and those members who were hired after, for example, 25 years of age, are going to be forced to retire at age 60 with a reduced pension. They have no opportunity to make up this lost income as a result of these cuts because they've been forced to retire at 60. If I am a school teacher, or in another profession, I have a window between 60 and 65 where I can decide to stay longer and make up that lost income.

The worst result then, as the experts testified in the human rights cases, is that the public and fellow members in our profession...the risk goes up with the potential of the cost of life.

For the sacrifice our members make, plus for the safety of the public, we ask the government to amend the Income Tax Act regulations for our professions from the current 2% benefit accrual to 2.3% accrual.

This will allow our members to contribute more to their registered pension plans, which will use up their RRSP room and in the end make up some of this reduced retirement income and maintain or even improve public safety. Other professions have a choice to work longer, but we don't. We deserve an equal opportunity.

The results of this. In 1982, Justice McIntyre of the Supreme Court of Canada stated in a case that our occupation is a young man's game. Usually, there is not downsizing in our occupation, but it is happening periodically now. This proposal would help the government create jobs for youth, the young man's game, across Canada.

Thank you for your time. On behalf of all of our members, we ask you for your help.

The Chairman: Thank you very much.

We'll now proceed to the question and answer session. We begin with Mr. Ritz.

Mr. Gerry Ritz (Battlefords—Lloydminster, Ref.): Thank you, Mr. Chairman.

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I'd like to thank all you gentlemen for your presentations today. They've opened a myriad of questions. Unfortunately we get the same five minutes you do, so I'll have to cut to the chase on a couple of them.

I'd like some comment from the CRCI gentleman and the RMs. How do we merge private sector interests and the RMs, which are the lowest level of government and actually look after a lot of the services that are passed on down—the buck stops there and that type of thing? How do we merge the wants and needs of everybody when it comes to an infrastructure program? I know last time around we heard of instances where the RMs kept it in-house, didn't tender out different things, and a little bit of disparity was created there. So I'd like to hear the two sides of that argument.

Second, the RM group commented on global warming. They stand behind the government's initiative on that. I'm wondering if the oil well drillers would like to make some comments. They mentioned global warming and greenhouse gas emissions, which contribute to global warming of course. Is there really a problem? Is this fact or fiction? Are we seeing scientific evidence to the extent that we have to go to Kyoto and sign this, or should we be taking a lot longer look at it?

Those are my two questions, gentlemen.

The Chairman: Who would like to start?

Go ahead, Mr. Eadie.

Mr. Jae Eadie: Mr. Chairman, I don't know what RMs are.

Mr. Gerry Ritz: Sorry, that's rural municipalities in Saskatchewan.

Mr. Jae Eadie: We are the Federation of Canadian Municipalities, Mr. Chairman. Our membership involves all sizes of municipalities, from the largest cities in the country to the very smallest rural communities. We represent a broad spectrum of municipal governments.

Mr. Ritz has enquired about a new program and how we merge public and private interests. There have been examples in the current infrastructure program where advances have been made in public-private partnerships. Perhaps even outside that program, I can give the example of my own city. With a public-private partnership, we built a $30 million bridge in my city, which happens to be right in the middle of my constituency. The private partnership built it and we'll maintain it, and when the city gets it back in 20 years it will be debt-free. That's an example.

There have been many success stories with the infrastructure program. In fact what an infrastructure program does and will do is involve the private sector to a great deal, because most municipalities do not have all of the expertise within their own municipal structures to get into these massive road reconstruction or sewer maintenance works. Most of that, as far as I'm aware, is tendered out to the private sector.

The infrastructure program brings tremendous advantages to all sectors of our economy, because it does put people to work and it improves the quality of life within our municipal government jurisdictions. That's why the current program has been such a success. That's why we're asking for a longer-term program for the future: to build on that success and to reduce the infrastructure deficit in this country.

The Chairman: Mr. Mather.

Mr. Duane Mather: Mr. Herring will address the question on the greenhouse gases.

Mr. Don Herring (Managing Director, Canadian Association of Oilwell Drilling Contractors): Mr. Chairman, we believe there's a great debate respecting the science behind greenhouse gas emissions, and we don't believe that at this point the science supports the conclusion that greenhouse gas emissions lead to global warming.

That said, we support, however, the voluntary challenge registry as the approach the Canadian government should follow in crafting its policy in preparation to go to Kyoto.

The Chairman: Thank you very much, Mr. Herring.

Mr. Redfern, would you like to add to that?

Mr. John Redfern: I have two points.

First, on the greenhouse gas, it's been well documented that an efficient highway system, whether it's municipal, inter-urban, or national, does quite a bit to reduce gas usage, and that in turn helps the greenhouse question. So certainly there is an environmental spillover from a good highway system.

When you look at the private-public partnerships and where a national highway scheme would go, the plan itself was worked out with two jurisdictions—the provinces and territories and the federal government—and I would think it would carry on, under those jurisdictions, in a co-operative venture.

The public-private funding, though, is an efficient way of getting funding for highways or other special projects. The techniques have been well honed. One of the advantages of a private-public sponsorship can be found in not only giving a contract to build a facility but actually requiring the contractor to maintain it. This builds in a guarantee of life expectancy for the project and therefore of value for money received.

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The Chairman: Thank you very much, Mr. Redfern.

[Translation]

Mr. Loubier.

Mr. Yvan Loubier (Saint-Hyacinthe—Bagot, BQ): I have two questions, the first one being for Mr. Herring. Would you tell us where you read that hydrocarbons would not have a significant impact on the expansion of greenhouse effect, since according to all the studies which have been reviewed, from the Rio Conference to nowadays, it's exactly the opposite which happened.

We must react quickly and drastically since according to some sources a climatic change of 2 to 6 degrees could occur in the following years. For example, only a slight tree-degree raise of global temperature would eliminate grain production in the Prairies. Then, although some people, like our friends Reformists, seem to think that there is no emergency, we urge the government, in preparation for the next Kyoto Conference, to face up to one's responsibilities and impose drastic measures to your industry and to every other industry which could contribute to increase the greenhouse effect. Where did you read that there was no problem?

[English]

Mr. Don Herring: Mr. Chairman, we believe this is an issue of scientific debate. For example, if you were to look at the evidence put forward in Canada through the Fraser Institute, or alternatively in the U.S. through observations that are made by NASA, with respect to change in global temperature, you would find it is very small indeed. In fact, over the course of time there is no particular evidence at this point that greenhouse gas emissions lead to global warming.

[Translation]

Mr. Yvan Loubier: Where did you see that there was no emergency, that there was no hurry, when since the Rio Conference we keep talking of an emergency situation and when most of the countries who then committed themselves to reduce their greenhouse gas emissions did not live up to their commitment?

You told us that there was no scientific evidence on the existence of important climatic changes, but you did not say where your analyses were coming from. Any analysis tells exactly the opposite of what you are saying. It is also crucial that the majority of countries who will be at the Kyoto Conference take meaningful commitments before we all die. It's as simple as that.

[English]

Mr. Don Herring: In addition to the comment I made earlier, the CAODC belongs as well to a group called AREA. This is an organization of interested parties in the issue of environmental change. They have information. In fact, they held a conference in Ottawa within the last two months and assembled particular information on this issue. We would be happy, if you wish, to supply this detail to the member through the chair.

The Chairman: Thank you, Mr. Herring.

[Translation]

Mr. Yvan Loubier: Mr. mayor Vaillancourt, you made a very interesting suggestion earlier about the idea of modifying our income tax policy in order to consider employer-provided transit passes as non-taxable benefits. For the information of committee members, could you elaborate on your suggestion, which I found very appealing, all the more so as it could contribute by the same token to some rebalancing at the fiscal level and to the conservation of our environment. I would like that you give us more details about that idea, Mr. Vaillancourt.

Mr. Gilles Vaillancourt: Employer-provided transit passes are deductible expenses for the employer, but taxable benefits in the hands of employees. The car used for whatever reasons by the same employee is officially taxable, but look at what that employee can get back in return. He can have free parking among other things. As long as you use your car when you are at work, your parking space benefit is not taxed.

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It creates an important imbalance which can result, for any employee carrying out practically the same duties, in an average $1,726 incentive to commute by car rather than public transit.

All across Canada public transit companies are losing clients and have substantial costs. We have in that sector an infrastructure which could be more extensively used, which could be very helpful from an environmental point of view and which would allow us to avoid making some major investments in the construction of roads, bridges, etc.

Therefore, we now have an incentive to commute by car which must be offset by a reasonable incentive to commute by public transit.

Mr. Yvan Loubier: Is it a common practice among employers to provide such fringe benefit?

Mr. Gilles Vaillancourt: It will be more and more common, given the fact that our major urban centres are already congested and that it would offer an interesting option for the employee if such a benefit was non-taxable just as the other one. We think it could have a very positive impact on the use of public transport and that it would relieve traffic congestion in urban centres. The effects of the present system are self-evident. People use mostly their car because our tax system encourages them to do so.

Mr. Yvan Loubier: In your presentation, you mentioned a number of estimates concerning the impact of such a measure on the number of kilometers which will be covered by motorists in the next ten years. Could you tell us where we can find those analyses? Who made those projections?

Mr. Gilles Vaillancourt: I will give you that information after the meeting, because I don't have it with me. Those figures come from an internal study made by FCM.

Mr. Yvan Loubier: Thank you, sir.

[English]

The Chairman: Mr. Jones.

Mr. Jim Jones (Markham, PC): Thank you, Mr. Chairman.

I listened to both the oil drillers and the construction industry when they brought up the item on food, and I totally support their position on that. But this is only a few dollars you're fighting for here.

What is your position going to be, do you think...? We're just about ready to increase premiums on the Canada Pension Plan, probably over the next few years to as high as 73%. At the same time we have EI premiums that.... To sustain the EI account right now it only needs $1.85, and we have premiums at $2.80.

Without having the two offset each other, what impact is that going to have on your industries, both from an employee standpoint and from an industry standpoint?

The Chairman: Who wants to tackle a very difficult question? Mr. Atkinson.

Mr. Michael Atkinson: The first thing I was going to do was pass it off to my colleague, Mr. DeVries. But if you're asking specifically about the impact of the CPP increases—

Mr. Jim Jones: And the EI.

Mr. Michael Atkinson: First of all, I would say that any increase in taxes, particularly on something that is related to payroll, such as EI, for example.... One of the big myths about our industry is that we're all a bunch of big companies, when in fact 95% of the companies that are active in the non-residential construction industry are small business by anyone's definition. You're talking less than 20 employees, in many cases family-owned businesses, etc. So the same kind of negative impacts you would get for small businesses would certainly affect our industry in the same way. Any time you have any kind of increase in such an area it would have that impact.

Maybe I'd just ask my colleague John DeVries to say a word.

Mr. John DeVries (Vice-President, Canadian Construction Association): The only comment I was going to add was on payroll taxes. I don't think we have to talk much about the impact on job creation. Obviously, increasing taxes would have an impact.

I'd like to comment that the burden of payroll tax in the construction industry for strictly small business is a tremendous inducement for some people to get active in the underground economy. I think the higher these taxes go, and the cost of WCB and all the other levies that go on at the provincial level, it just induces more of the small, independent people who say to heck with it, I'm not going to report this. I think you always have to keep that in the back of your mind. If you're going to be putting up payroll taxes and some of these other things, I think that's true.

As to the CPP, there's a whole process established to consult, and you have to make some mandatory changes.

The EI, I think, should come down. In all fairness, $14 billion, even with a $2 premium, is more than enough to stand any rainy day.

I'd like to pass on the message about the underground economy.

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The Chairman: Thank you.

Would anybody else like to answer that question? Mr. Atkinson.

Mr. Michael Atkinson: Mr. Chairman, there was a comment in the prologue to the question about it not being a lot of money we're talking about—subsistence allowances. That is not the case necessarily. I know of one individual company in our industry where the additional tax bill is $1.5 million from these measures. That is just the additional tax amount, without even getting into penalties or interest.

The Chairman: Thank you.

Mr. Szabo.

Mr. Paul Szabo (Mississauga South, Lib.): Thank you, Mr. Chairman.

Thanks to all of you for the presentations. I'm particularly favourably disposed to the public safety officers. Yesterday I gave a statement to the House that ended by saying we should consider some special initiatives to acknowledge their service and called them our everyday heroes on the front lines from sea to sea to sea.

The CPP is the issue I want to deal with, because I think this is extremely important. I don't think anybody here wants to say I don't want this and stop there, because to be against something is to be for nothing. We have to be for something.

The CPP came in in 1966. It was primarily set up to deal with the then seniors who'd come through two wars and the depression years and who had not had an opportunity to provide for retirement. That led to the pay-as-you-go system, where today's workers pay for the retirees of the day. At that time, there were eight workers for every one retiree. Today, it's five to one; by year 2015 it's going to be three to one. Clearly the CPP is not sustainable. The chief actuary has made it clear that it is not sustainable if we don't deal with it.

Consultations across Canada basically established a consensus, where the fed and all the provinces, all the constituents, said they would not touch existing beneficiaries, current seniors or those receiving disability. If we change the name of the game after the game is over for them, they have no way to recover. That means the rest of us are going to have to pick up the slack.

The current trend line is that rates will have to go up to 10.2% by 2013 and to 14.2% by 2030. That means that around the table we are going to continue to pay around 5.85%, split equally, and we're going to back-end to the point where our kids coming along will say, “I'm opting out; I'm not paying it because I'll get only 80¢ on the dollar out.”

So the rates do have to change. Instead of having the slow pay, we're going to get it to a steady pay rate.

I ask you to reconsider the linear response of “don't do it”, and let's see if we can find out what is fair, what is equitable, what is the right thing to do.

Mr. Michael Atkinson: I don't recall that we said don't do it. The question was, would it impact detrimentally on small business? The answer is yes. Whether it's tough medicine or not, it still tastes pretty lousy.

In essence, we have looked at the reforms through consultations and we feel that, yes, premiums are going to have to rise to a certain extent. Certainly, the position we brought before previous finance committees on CPP reform was, yes, perhaps premiums and contributions will have to change, but let's look at the whole ballgame. Let's look at the benefit structure. Is the program still carrying out its original intent or has it, like too many of our programs in Canada, become a basket for any and every other thing we want to put in?

Certainly, we understand the need to adjust contributions with respect to CPP, but it doesn't take away the fact that it's going to be a lot of pain for small business. Whether you support it or not, there's still the reality that you're going to have to live with increases in that area.

Our association some 10 or 15 years ago, when we found out what was happening to what we thought was an integral fund, when the funds were being loaned back out to the provinces for what were then pretty attractive loan rates, raised a concern about whether that fund was going to continue in that kind of situation. Really, it's a case, with all due respect to my colleagues, of turning on the water after the house has burned down.

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At least from this perspective, the question was, will it impact detrimentally on our members? Of course it will. We did not say that we are totally opposed to any kind of change to the CPP in that area.

Mr. Paul Szabo: Let's shift it over to the EI then. If we're looking at accumulating about a $20 billion surplus on the notional account—because the money is not set aside somewhere—you have asked for a reduction from $2.90 to $2, which would cost us $6.5 billion annually, each and every year, all other things remaining equal. However, if we have a downturn in 1998—and, realistically, people have not thrown out business cycles—the last deficit at its peak was about $6 billion, so theoretically the EI fund could reverse itself and move into an unsustainable rate and force us then to reintroduce increases.

Does business want to have stability in their rates of payroll taxes, which are sustainable, and make those changes only when they can be guaranteed or be permanently set so we cannot put you in a situation where you continue to adjust your rates?

Mr. Michael Atkinson: I think the statement you made was, “It was your money”. Well, employers and employees in this country consider it their money, and in fact premium increases in the past, including the one I referred to in 1989 where the then unemployment insurance premiums were going up to create this developmental uses fund in the unemployment insurance system.... We had a lot of reluctance to go along with that, and government at the same time announced it was getting out of funding the UI program, period, except in the case of a deficit situation.

So we were asked as employers and employees in our industry to belly up and pay a little bit more money, but not to worry, because this money was going to training.

We eventually did, reluctantly, on the condition that we had some say in where those funds were expended. That led to the creation of the Canadian Labour Force Development Board.

Then, lo and behold—because no one seems to have any kind of corporate memory in this town with respect to these things—a decision is made that the federal government will no longer fund those programs, yet the premiums stay where they were.

So the question isn't the case necessarily of having stability in our programs, but in being told and being assured that when money is being collected under one guise it is actually expended in that particular area and doesn't go into a bottomless pit that can be used for anything and everything.

With respect to my colleagues who have called for a national highway program, who mentioned that the federal government is collecting some $5 billion in motor fuel taxes every year, I would dare say the users of highways in this country believe that the lion's share of that funding is going back into the highways to maintain them, etc. Less than 5%, I think, goes back every year, whereas in the United States, for example, those funds are set aside for that very purpose, to go back into highway improvement.

Maybe, Mr. DeVries, you could comment on this.

Mr. John DeVries: I'd like to comment on the stability question, and that is the key question.

Business, of course, wants stability in the EI premiums for a few years.

We've looked at it. We've looked at the variability over the last 15 years of the UI fund. I have the figures all here. Yes, it did get to a $6 billion deficit, cumulative, over the course of, I think, three years of deficits in the early 1990s, and then it was wiped out within two short years. Now we're tracking a $6 billion or $7 billion surplus.

The reduced EI program of this government brought in some good changes in the sense that it brought in more responsiveness to the program in active job search. We think that government, or the human resources commission, can manage the surplus within $3 billion either way. It just takes good management by the commission.

The problem is that $10 billion is excessive, in our view; $15 billion is getting a little bit out of hand. Now you're saying $20 billion. I think that's just going way too far.

The Chairman: Ms. Torsney, followed by Mr. Loubier.

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Ms. Paddy Torsney (Burlington, Lib.): Thank you, Mr. Chair.

Gentlemen, this exercise is all about balance. We have heard a lot of presentations in all parts of the country and here in Ottawa from many different organizations who have put different issues before us.

Clearly the government has done a good job in balancing and reducing the EI premiums from $3.30 when we took office to $2.90 now and $2.80 in January, and we have a very small fiscal dividend coming to us.

At the rate at which everyone is asking us to make changes, however, this fiscal dividend will never be realized. We would be back in a deficit situation if we in fact did everything everyone has asked us to do so far. We have been asked to do more on job creation, on health care, on education, and on research. We have been asked today to reduce EI premiums by 90¢, which would cost us $6.5 billion. We've been asked not to invest in CPP and to do more in ODA and in training. And today we're being asked for an infrastructure program and a national highways program.

One of the things we have to do when we are weighing all these different requests is to look at what is important to a strong economy. Certainly we all benefit when we have reduced accidents, increased tourism, and better shipping costs. But we also have to strike a balance among men and women and children in our country, and I ask you what you think about making this huge investment in a national highway program or in an infrastructure program when you know those jobs are going to be disproportionately given to men in this country, when you know that there are no employment equity guidelines that go with them to the provincial and municipal governments like those that exist in the federal government, and when you know that there is an unequal distribution in how those moneys will go through our community

I encourage you to take a copy of the presentations that were made earlier this morning so that you can understand some of the things that are being balanced.

You're talking about an infrastructure deficit. We heard a lot about the social deficit in this country. I want to hear your comments. Is it more important to have a road system or a health care system? What's fair?

Mr. John Redfern: First of all, there is the sense that having a highway system is a discretionary expenditure. I think my colleague asked if we are going to do without them or if we are we going to have them. I think we must have them if we're going to have any kind of an economy, any kind of an efficient, productive system so that you can generate the funds and the profits and have tax revenues and funds to spend.

I think it's been documented that if you don't repair your highway system in a timely fashion, the cost goes up by three, four or five times. If somebody says we can live without highways and we are prepared to make that sacrifice, I think there's a point.

I think we have been putting off the timely investment in infrastructure. I think it will be essential, and with the added productivity and efficiency of the country you will have more funds to spend.

We are not talking about a lot of money. We are talking about going back to the levels of financing that used to be in the highway system. That was taken away as if we could live without it.

With respect to equity in jobs, we have women driving ready-mix trucks; we have women in cement plants. The statistics show that not only can women be heavy equipment operators, but they're better at doing it because they don't take it out on the equipment. There are opportunities for career choices there as well, but I think the main thing is that we are making a choice that has productivity goals, safety goals, and environmental goals. It's not a discretionary expenditure. We can do it now or we can put it off like we put so many things off and pay a much higher price.

The Chairman: Thank you, Mr. Redfern.

Ms. Torsney, do you have any further questions?

Ms. Paddy Torsney: I just suggest to you that women and men are paying taxes in roughly equal numbers. As you say, the benefits of the program will be there in terms of safety and what have you, but with the state the industry is in right now, you must agree that there would be a disproportionate benefit to men in this country from the program in and of itself, because the jobs are there...and yes, you can say that women are heavy equipment operators, but check the numbers. In all fairness, it's not happening to the degree that it should.

If you're saying that we should have some employment equity guidelines to govern the moneys spent there, great. I look forward to that recommendation.

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Mr. John Redfern: There are two types of jobs in any construction program such as the national highway program. There are the direct jobs in the construction. There are the spin-off jobs that go to the equipment manufacturers and to the research and development that go in. In fact, the spin-off jobs are about two to three times as many as the actual construction jobs.

Historically, construction work has not been women's work, but I think more and more you're finding it is. Particularly as you go to high-tech equipment, as you go to power-assisted vehicles, I think you're finding there are more women in this job.

Ms. Paddy Torsney: Maybe you should have a talk with Mr. Atkinson about the numbers.

Mr. Michael Atkinson: If we're talking about employment equity and not equity of results, I would love to talk about that. Unfortunately, where the focus seems to be is on the equity of results and not on employment equity.

We had a volunteer employment equity program for some time in our industry. We went out and recruited young women in grade 7 and grade 8 to try to get them turned on to construction careers. We had a full-time employment equity officer working with us. We were interested in ensuring that our firms had true employment equity, where gender, colour, etc., had nothing to do with opportunities for working.

What we don't agree with is what has happened to our neighbours to the south, where all the concern is with so-called equity of results. It's not employment equity they are after, it's quotas. Give us the quotas. If you can show the quotas on the payroll, then you're okay; it doesn't matter what you're doing as far as your own employment opportunities go and the equity in that sense.

So if it's employment equity you're truly talking about, we are 150% behind it and do have programs to try to attract not only women but youth and anybody else, quite frankly, because we have a major concern about where our future workforce is coming from. From those perspectives we are very much employment equity employers. But we really want to stress that it's equity in opportunity. Equity in results is just numbers.

Ms. Paddy Torsney: Thank you, Mr. Atkinson. Of course the Canadian employment equity system is, as you say, based on employment equity of opportunity. It's wonderful to have the comparison to the United States, but it's completely irrelevant in this context. Still, in your industry there are more jobs—many more jobs; exponentially more jobs—for men versus women, and there needs to be some comparison.

Finally, to the firefighters, absolutely, we hear you, and certainly we'll consider it in the CPP discussions as well. You've made some suggestions specifically pre-budget, but there are others we would consider.

The Chairman: Mr. Loubier.

[Translation]

Mr. Yvan Loubier: Thank you, Mr. Chair, for that last question which is going to cost me, I think, $20. No, it was a joke.

Mr. Atkinson, I share your dismay and your frustration in view of the squandering of employment insurance fund. I want to remind you that, next year, the accumulated surplus should normally reach if not exceed $17 billion dollars. This is money which has been paid by employers and employees, because the federal government no longer contributes to the fund. However, the minister of finances blithely draws from that fund.

Talking about that fund and the surplus accumulated, I wonder if you agree with those who propose the creation of an absolutely separate fund, in which employers and employees contributions would be put, a kind of actuarial fund which would be separate from government's books.

My second question is related to a suggestion which was made by the auditor general and which could allow us to follow the fluctuations of the fund and of the needs in relation to that fund and underemployment in Canada.

If you were to reduction the contribution rate, which is now around $2.90 or $2.95, to what level would you bring it in order to have a significant impact on employment?

[English]

Mr. Michael Atkinson: First, your point about having some kind of independent integrity to that kind of fund is bordering on the whole concept of dedicated taxes, a concept that does not seem to be very popular with any federal government, it doesn't matter what party they are with. Certainly our colleagues pushing for the national highway program have talked about tying motor fuel taxes to, for example, road reinvestment, as they do in the United States.

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Maybe I could have Mr. DeVries comment on your questions and comments with respect to figures.

Mr. John DeVries: Rightly or wrongly, I think the perception exists that employers and workers believe the EI fund is a separate fund. Perception is one thing and reality is another, but their belief is that the EI commission controls the premium rate processing. We all know that the process in the last few years has not been adhered to. The finance minister has made it part of his deficit-fighting campaign, and it has produced some results on that side.

As an industry, we kicked this around at the policy and human resource committees in the days when the whole thing was being reformed. It's something we didn't come to a conclusion on, but there was enough favourable opinion about getting this whole thing separated, letting industrial sectors take care of their own benefits structure and labour management. There was that willingness.

We don't have a formal policy position on it, but I can tell you, people around the table said that if we gave them the tools, they could develop their own program to develop a system that would fit their industry versus another sector. There was that type of favourable disposition to it.

[Translation]

Mr. Yvan Loubier: You are talking of a separate fund apart from government's books. Right now, surpluses which are accumulating in the employment insurance fund are not put in a reserve in case of recession or future economic downturns, but they are recorded as revenues like any other levies or taxes.

Our proposal, which was also made by the auditor general, was to create a separate fund in which employers and employees contributions would be placed. That would be an actuarial fund which would be used from year to year to answer the needs of the unemployed. The minister of finances would be required to set separate accounts, one for its general revenues and one for the employment insurance contributions. This would also prevent the minister of finances from stealing from employers and employees contributions. I think that you were confusing that with an employment insurance private fund, which is a different thing.

Would you be in favour of a fund which would be separate from the government general revenue fund?

[English]

Mr. Michael Atkinson: We certainly haven't spent a lot of time talking about that concept. It's something we would very much like to look at. I think one of the advantages it also would have would be to put back some control in the hands of the contributors to the fund as to where the funds are going to be expended. I think that's key as well.

It's one thing to say you're going to separate it from government's books, but at the same time, it would be very nice if the contributors to the fund had a real stake in saying how the funds were expended.

[Translation]

Mr. Yvan Loubier: Thank you.

[English]

The Chairman: Mr. Atkinson, before I conclude this meeting, I was just listening to some of the comments made by Mr. John DeVries vis-à-vis the development of your own program. There was sort of an agreement amongst various sectors that they would like to develop their own type of employment insurance program.

I would like to know from you what kind of program you can develop that is better than the employment insurance program for the construction industry, who for every $1 they put in take out $3.73.

Mr. Michael Atkinson: That's always been a big complaint from other business groups, other sectors, and maybe that's exactly the point you have to address. If the industry said, all right, under legislation you can devise your own program, and it would be 100% funded by the industry, then the benefits would match it. There wouldn't be any of this cross-sector subsidy.

But I should caution you about using those numbers. It varies from one region to the other. Obviously you can't build roads in northern Canada, but in some parts of the industry it's 100% in, 100% out, where they can do construction year-round and they don't have high seasonal factors.

That's the type of discussion we had a few years back, when the whole UI program was up for reform. There was a lot of criticism about the subsidy going to construction. Fairly or unfairly, in an insurance scheme someone has to pay more and someone has to pay less. I guess on a group pool basis we're the ones who receive more, but if you did go to a sector-by-sector basis, then as long as we are given the policy tools to play with as to the structure of the benefits, I think the industry people would support something like that—as long as it wasn't taken away from us as soon as it was developed.

The Chairman: The point I'm making, though, is that when you're developing a national strategy and you're dealing with a national economy like Canada's, one based on variables, including the regional components we have to deal with, the answers are not as simple as people may believe.

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So when sectors come up with these ideas that they can develop their own program better, this case is yet to be proven. I've dealt with this issue for over four years. It's a difficult issue to resolve, simply because of the nature of our country.

Having said that, as you know, the task of this committee is not a very simple one. The fiscal dividend is actually more difficult to deal with than dealing with the deficit, because when everybody's trying to reach the same target, everybody's pulling the same way. It's only when you start having some funds available for dividing the pie that various interests come out. Of course, everybody wants to share in the fiscal success we've been able to achieve thus far thanks to the hard work of millions of Canadians.

I simply want to say to you, particularly to the individuals who presented in reference to the infrastructure program, that there's no question that to develop a competitive society, a competitive economy, you need a strong infrastructure. Many studies have stated that throughout the world.

You can rest assured that the many views and opinions expressed today will find their way into the final report to the Minister of Finance. You've given us great insight. The information has indeed been very useful. We'll utilize it in the best way possible.

Thank you very much, and good afternoon.

The meeting is adjourned.