NRGO Committee Meeting

STANDING COMMITTEE ON NATURAL RESOURCES AND GOVERNMENT OPERATIONS

COMITÉ PERMANENT DES RESSOURCES NATURELLES ET DES OPÉRATIONS GOUVERNEMENTALES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 26, 1998

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[English]

The Chairman (Mr. Brent St. Denis (Algoma—Manitoulin, Lib.)): I'd like to call to order this May 26 meeting of the Standing Committee on Natural Resources and Government Operations.

On behalf of the committee I'm pleased to welcome the Minister of Public Works and Government Services, the Honourable Alfonso Gagliano. He is accompanied by Ran Quail, Deputy Minister, Public Works and Government Services Canada; Marc Rochon, President, Canada Mortgage and Housing Corporation; Georges Clermont, President and Chief Executive Officer, Canada Post Corporation; and Danielle Wetherup, President of the Royal Canadian Mint.

Welcome, Mr. Minister, along with your fellow colleagues. We appreciate the time you are taking to bring us up to date on your views on the main estimates and on the goings-on of the major department for which you are responsible.

We'd ask you to give us a presentation, and then we'll open the floor to questions from members. Thank you.

The Honourable Alfonso Gagliano (Minister of Public Works and Government Services, Lib.): Thank you very much, Mr. Chairman and colleagues.

Public Works and Government Services is the country's largest purchasing agent, contractor, and property manager. We provide the government with translation, auditing, information management and a host of other services. Most importantly, we provide a direct link between the citizens and their government through more than a hundred million payments a year to Canadians.

The department has taken a fresh look at everything we do in order to reduce costs and increase service efficiency and accessibility. I'm strongly committed to positive partnership with other levels of government, and I'm equally committed to positive partnership with the private sector.

As a textbook example, through the federal buildings initiative we use innovative contracting to fund energy conservation retrofits by the private sector. What we are accomplishing is incredibly good for the environment. It is also creating 1,200 private sector jobs, and saving taxpayers $12 million a year in energy costs. This focus on new technology and new approaches underlies work in all aspects of the department.

I would like to mention one project in particular, because it is going to be in the news a great deal in the next year and a half. That is the work on the year 2000, or if you wish, the millennium bug. We have cooperated with the business community in assuring that government operations affecting the safety, security, health and well-being of Canadians are in sound order.

There are just two other departmental initiatives I would like to mention, and I do so because I believe they merit real praise.

The employees of Public Works and Government Services Canada have worked hard to meet Parliament's demand for a contracting system that promotes accessibility, equity, openness and integrity. Through the recent launch of Contracts Canada and the introduction of MERX, the electronic tendering system, those objectives are being realized.

The employees in my department have also accomplished something else of exceptional importance. Thousands of them put in back-breaking hours during the devastating ice storm earlier this year. They did magnificent work to get cheques out on time, to protect the national infrastructure, to help restore power, and to keep government services available to Canadians.

I want to use this opportunity to salute those employees publicly.

[Translation]

With those comments on the department itself, I will move to some words on each of the Crown organizations for which I am responsible.

The Royal Canadian Mint has the mandate to produce, sell and distribute coins in Canada. It also generates a financial return for Canadians by the marketing of its minting services and coinage products worldwide.

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There has been an enormous turnaround at the Mint. The numbers speak for themselves. Revenues were up 35% in 1997. The net return to Canadians more than doubled to $3.9 million. Over one billion coins were sold to 16 different countries. And so far, the Mint has signed contracts for over 2 billion coins this year.

Make no mistake, the Mint is in direct competition with foreign government mints. There are countries that will contract only with the government mint.

The Mint needs new technology, greater capacity and greater production efficiency to continue with its success story. That is why last month the Mint began construction of a new coin-plating facility in Winnipeg. The facility will guarantee supply, cut costs by $9.5 million and generate additional profit for Canadians on the order of $3 million annually. The government is not laying out one cent of taxpayers' money for the new plant.

In Canada's private sector, we do not have the capacity we need. The Mint simply must have a secure and reliable supply of products, which is why it is building this new facility in Winnipeg.

We all want the Mint to remain on course, supplying Canadians and the globe with coins that are high-quality, cost-effective and delivered on time.

[English]

Speaking of time delivery, Mr. Chairman, it is appropriate to turn to Canada Post. During my last appearance before this committee, we had an open and honest discussion about the challenges and opportunities faced by Canada Post.

Given the importance of postal service to Canadians, the discussion is bound to be an ongoing and lively one. Following the mandate review commission by the government, key recommendations set out a firm direction for Canada Post.

The results are beginning to be seen. For example, Canadians living in rural areas are assured of new delivery standards and a tangible improvement in the speed of local mail delivery.

The latest indicators show that Canada Post has managed to improve its customer satisfaction index. That is a credit to all Canada Post employees, particularly in the light of the recent strike. Canada Post is projecting a consolidated net profit of $36 million this year.

The blunt fact is that a reasonable rate of return is essential to run a business that keeps growing by 175,000 addresses every year.

Furthermore, Canadians as a whole are entitled to some dividends after investing over $1 billion in the postal system.

I know how strongly members of this committee feel about fair competition from and with Canada Post. I hope you will keep in mind that if it did not have to return a dividend, Canada Post would have a massive and unfair advantage in the marketplace.

As we meet, Canada Post and its largest union have not yet arrived on an agreement. Given that this file is still an active one, I shall keep my remarks on this matter quite general.

As I have often stated in the past, I am a firm believer in the effectiveness of the collective bargaining process. What I would like to see is for labour and management to make common cause to respond to the competitive challenge posed by the modern world and to save what jobs there are today and jobs for tomorrow.

I have made it crystal clear that the government has no intention to privatize Canada Post. With that assurance in mind, I trust that the negotiators will continue to remind themselves that Canadians look to them to help ensure a reliable, affordable and universal postal service.

[Translation]

Over the years, of course, millions of Canadians have also looked to CMHC for reliability and affordability.

Like Canada Post, CMHC had been given a new mandate. CMHC's aim is improved housing affordability, choice and quality for Canadians through an organization that is both more modest in size and more modern in scope.

To date, CHMC has concluded social housing arrangements with five provincial and territorial jurisdictions. These arrangements ensure provincial and territorial administration in tandem with national principles. And, most importantly, the agreements guarantee that funds remain available to low-income households.

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Discussions are continuing with other jurisdictions, and we expect new agreements to be signed in the near future.

One striking success of CHMC is its mortgage insurance service. Thanks to CMHC guarantees and, of course, low interest rates, more Canadians than ever before have had the chance to buy a home for their families. As members of Parliament, we are all well aware of what a boon the CHMC guarantee is for young people needing that extra boost to owning a home.

Most members of Parliament are, however, probably not aware of CMHC's efforts to boost Canada's housing industry overseas. In fact, the Corporation has just launched the Canadian Housing Export Centre to provide direct support to businesses wishing to expand their export potential.

[English]

That is the spirit of partnership to which Canadians rightly expect their governments to be committed. It is the same spirit that is the foundation of the work of Canada Lands Company, bringing non-productive land owned by the federal government into productive use.

Canada Lands delivers a wide range of economic benefits for Canada and for local communities. In just two and a half years Canada Lands has generated billions of dollars in private sector investment, and that has led to thousands of new jobs.

Canada Lands' success comes from broad-based consultation at the community level and from an absolute commitment to private sector participation.

Just today, I met with a corporation board. This year that board announced a dividend of more than $50 million, exactly a $52 million dividend. That brings the total so far to more than a return of $80 million to Canadian taxpayers in just two and a half years.

But an even bigger dividend is being felt in vibrant new development right across the country: a world-class business park in Burnaby; a new neighbourhood that has come to life at the old barracks in Calgary; the revitalization of the CN Tower in Toronto; and the fact that there will be a movie studio, a senior citizens residence, two schools, a police station, a computer software company, and many more to come in St. Hubert.

In Moncton the residents will benefit from major recreational and residential development as well as the premier business park in Atlantic Canada.

There is no doubt that an undertaking of this magnitude is bound to bring a wide variety of views and opinions. I am delighted to be here to discuss them with you, answer your questions, and listen to your suggestions.

Thank you very much, Mr. Chairman. My officials and I will do the best to answer all your questions, and listen to your suggestions and recommendations.

The Chairman: Thank you, Mr. Gagliano. We appreciate your brief overview and your giving members an opportunity to ask questions.

We'll start the questioning with Mr. Gouk, please.

Mr. Jim Gouk (West Kootenay—Okanagan, Ref.): Thank you, Mr. Chairman.

Before I get going, could I get some idea of what kind of time we have? I have quite a number of questions I'd like to prioritize, depending on what time we have.

The Chairman: You can probably count on at least one and a half hours.

Mr. Jim Gouk: Okay, excellent.

I have several subjects. The minister touched on quite a bit, but given that we have representatives of both Canada Post and the Mint here, perhaps I could start with those two areas.

First, with respect to Canada Post, these are old bites, but I didn't get an answer last time, or at least I didn't get an answer that seemed to make sense to me, so I'll try again.

The first one deals with the reference to how it is necessary for Canada Post to pay a dividend, because it would be unfair in the marketplace if it didn't. I would assume that's obviously relating to the courier business where all kinds of accusations about cross-subsidies are coming in.

So I would like to ask once again why the government isn't prepared to let the Auditor General, who is the person, after all, who does most of the watchdog activities for the government in financial matters, do an audit of Canada Post. That would be with the specific mandate to determine whether or not there is cross-subsidization of the courier business.

I reject the notion that a statement from Canada Post, included in their audit statement, saying that they're not cross-subsidizing is proof that they're not cross-subsidizing.

Mr. Alfonso Gagliano: Well, first, I don't think it's up to me or the president of Canada Post or the board of Canada Post what to tell the Auditor General. I think the Auditor General has the mandate and authority to audit anything he wants.

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Every year Canada Post has gone to a national auditing firm. I don't think that you or the committee is suggesting that this firm is not— In every audited statement the firm is stating very clearly that there is no cross-subsidy. I think this was the answer I gave you last time—

Mr. Jim Gouk: Yes.

Mr. Alfonso Gagliano: —and this is the answer I'll give you this time, unless Mr. Clermont would like to—

Mr. Jim Gouk: Could I just add one thing, and then maybe you can comment on that at the same time. The amount of undeclared or uncategorized expense for Canada Post is abnormally high. In fact it is far beyond abnormally high. It is incomparable to any private corporation I've ever seen. Normally, they're in the 5% to 6% range. They put everything into various departments, and they have 5% or 6% that sometimes they can't categorize. I think it's running in the 40% to 45% range at Canada Post, and that's absolutely absurd.

I'm not questioning the competence of the auditor. The auditor is simply reporting on income overall, and categorizing it where it has been done so by Canada Post. Given that huge amount of uncategorized expense, there is no way to tell whether or not there's cross-subsidization, except by the statement from Canada Post. And that's all the auditor for Canada Post provides.

Mr. Alfonso Gagliano: Let me clarify one thing. It's not the statement of Canada Post. It's the statement of the auditor, and this auditor's report. An auditor doesn't report only the income; he reports all the expenses. When you do an audit you do an audit on all the affairs of the corporation. At least that's what we were doing in my other life when I used to practise public accounting.

The CEO can answer better than I can, since I'm not in the accounting field any more.

Mr. Georges Clermont (President and Chief Executive Officer, Canada Post Corporation): Well, Mr. Minister, you know more about it than I do, but I can only repeat what I said last time. The annual report, which was published last year, has three indications of the annual cost study.

First, there is an opinion from KPMG, the experts on regulatory accounting. They expressed an opinion that they have examined the annual cost study and contribution analysis that they have gone through, and it is quite according to the norm of regulated utilities. I don't think you can compare a regulated utility such as ours with any normal private sector corporation.

Then there is a statement by Deloitte & Touche company, auditors of the corporation, to the same effect. Then in this annual report, for the first time in Canada in any private or public sector, there was a total analysis of contributions by product line. I think that demonstrated quite clearly to everybody's satisfaction that there was no cross-subsidization.

This aggregated accounting we used was for the first time in Canada.

Mr. Jim Gouk: The statement you referred to categorizes the revenue, but not the expense. I didn't bring the statement of the auditor with me today, but I have read it into the record before. It states “in accordance with the figures provided by Canada Post”, or words to that effect.

Mr. Georges Clermont: They have looked at that, and the annual cost study is a study of costs, not of revenue. So when you say— Costs are expenses. So it's the study of expenses.

Mr. Jim Gouk: Yes, but it's where you categorize them that tells the story.

At any rate, if I could go on to the other one I've also asked, I direct this specifically to the minister. When referring to Canada Post, the minister goes on about how he's a supporter of the collective bargaining system and he wants to give everybody a fair chance to reach a settlement and he believes in the effectiveness of the bargaining system.

Then I would ask once again, when he appointed an arbitrator—I assume that the government has faith in the arbitrator they appointed—why did they not give that arbitrator the mandate to deal with the wage, instead of the government arbitrarily imposing it at a rate lower than Canada Post had offered?

Mr. Alfonso Gagliano: Well, I think I have said that many times. We believe in collective bargaining, but after 11 days of a strike and in the national interest, we decided to put back-to-work legislation before the House.

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We wanted to make sure that we did two things. First of all, we wanted to make sure that there was at the end of the process a contract that wouldn't start all over in six months' time. I believe it was a three-year contract. Secondly, we wanted to make sure that the postal wage guidelines were respected so there was some stability in the system. And we did it, we explained it then, and that's the only reason we appointed a mediator.

The mediator had 90 days to come up with an agreement. There was an agreement between the parties to extend that 90 days, and we are hopefully waiting for an agreement between the parties or a settlement that is imposed by the mediator who was appointed by the government.

Mr. Jim Gouk: I don't fault you for legislating them after 11 days, except that it took you 11 days too long. I do fault— As you say, given that we have faith in the arbitrator, that we believe in the collective bargaining system, I still cannot understand, by your own explanation, why you decided to impose a wage settlement deliberately lower than what Canada Post had already offered.

Mr. Alfonso Gagliano: Let me also say that the Government of Canada imposed on Canada Post a freeze on increases of its stamp price. Therefore when you tell the corporation that you cannot close a rural post office, you have to keep a rural post office, you have to pay a dividend, and you cannot increase a stamp price for the next two years, and after two years you can increase it, but below the inflation rate—

We definitely want to make sure it was clear that the wage increases have to be in line with postal guidelines. The difference between what Canada Post offered— And let's not forget that what Canada Post offered was an offer. They wanted to avoid a strike. The strike took place after 11 days, and I believe the cost of that strike to the corporation was over $100 million.

Mr. Jim Gouk: In other words, you thought the Post Office was irresponsible offering that much, and you had to ensure that it came in lower than this. You felt that was the maximum sustainable to maintain the service, to maintain the price of the stamp, and if it had gone at the amount Canada Post had recommended, it would have been too high.

Moving on to the Mint, because I do want to get some—

The Chairman: We're going to come back, okay? I'm going to give you more time.

Mr. Jim Gouk: Okay.

The Chairman: Let's go to Roy Cullen.

Mr. Gerry Byrne (Humber—St. Barbe—Baie Verte, Lib.): Mr. Chairman, there are members in the room who would really like to question the witnesses. If we could have some fairness in the distribution and allocation of time, I would appreciate it.

The Chairman: Yes.

Roy Cullen.

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

Mr. Gagliano, thank you.

I had a question, first, with respect to MERX. A number of members of this committee had a briefing with the MERX and a demonstration of the MERX system. From my perspective, having had some exposure to the OBS system, which is basically what MERX replaced, I thought it to be quite an interesting and useful enhancement to the old system. I'm just wondering how the private sector has reacted to MERX. Are they finding it more user-friendly, more useful, or have you had any feedback from the private sector on the MERX system?

Mr. Alfonso Gagliano: I will ask the deputy. I'm sure he has more comments than I do about it. People I've met during my travels are satisfied, are happy with the system. I have to admit it took a while to get it going. We wanted to make sure we could parallel the other one until we had it functioning okay and people were satisfied.

Not only do they find the federal procurement in this system, but they have seven provincial governments, hospitals, school boards, municipalities— So really when they're going there, they are opening a market of procurement that is immense.

As I said in my opening remarks, the government operations committee in the last Parliament did a marvellous job of addressing this procurement issue. We have the MERX and we have Contracts Canada, which I think really answers that work of the committee.

So far, so good. Let's hope that more provincial governments join the MERX, and also the NAFTA countries, so that whenever people go into that service they have as large a procurement opportunity as possible.

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Mr. Roy Cullen: Good. Thanks.

It seems to me I saw something cross my desk the other day establishing an ombudsman in Canada Post. I just wondered, Mr. Clermont or Mr. Gagliano, if you could comment on the rationale behind it and on what you're expecting to accomplish with the ombudsman's office. It seems to me to be a positive development.

Mr. Alfonso Gagliano: Let me say that this was one of the commitments after the mandate review that the government put in the new mandate of Canada Post. Canada Post implemented it last year. It has now been in place over six months. It is a positive development.

I'll let Mr. Clermont give more detail. So far I receive less criticism of the situation and I receive less correspondence because now the ombudsman is getting some of the correspondence that I used to get as a minister.

Mr. Georges Clermont: Mr. Minister, I don't think there's much more to say. It's a positive development, a request of the mandate review. The ombudsman is well equipped to answer any problems consumers might have.

Mr. Roy Cullen: Thank you.

The Chairman: Thank you, Mr. Cullen. Let's have Mr. Bernier and then Mr. Byrne.

Mr. Gilles Bernier (Tobique—Mactaquac, PC): First, I want to thank you all for coming in front of this committee today.

My question would be for Minister Gagliano. The minister will recall that in 1993 his government introduced a policy called “Getting Government Right: A Progress Report”. It required federal departments and agencies to review a variety of items and programs they offer and to divest those items that could be better provided by another level of government or by the private sector. In other words, it is an official use of scarce government resources to try to compete with other jurisdictions. The federal government should try to stay out of those areas.

Just last Wednesday Secretary of State Jim Peterson referred to the government's continued commitment to getting government right policy by divesting federal entities that do not play a public policy role and that can operate more efficiently in the private sector. This is a good policy. My understanding is that the minister was instrumental in introducing it, and he should be applauded for that.

Having said that, my question is this. Mr. Minister, do you support this policy? And if so, why would you allow yourself to be persuaded by the Royal Canadian Mint that it would be a good idea to risk $30 million to build a plant to manufacture coin blanks when Westaim provided the Mint for 35 years with a secure and competitively priced supply?

Mr. Alfonso Gagliano: First of all, I thank you for the question, because I welcome and believe in social policy. My own department was putting this in practice even before I arrived in the department. We privatized the printing branch. We just signed at the end of the month, and we will be taking over the privatization of the maintenance service in Public Works and Government Services, which has been welcomed by everybody. We were not only able to do it for less, but all our employees were also able to find a job in the new contracts.

In terms of the Mint, I'll let the president of the Mint give you a more detailed answer. As a minister, I approve of such projects. First of all, we need a secure supply, and the only supplier we have in Canada, and I am referring probably to Westaim, cannot necessarily supply our requirements.

Secondly, as I said in my opening statement, foreign countries that have a governmental mint like to deal with a governmental mint. I think Westaim indicated in the past that they were getting out of that. It was not their core business. So it's important for the Royal Canadian Mint that they have a security of supply.

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I had occasion to meet the president of Westaim, and I offered, and I think the president of the Mint also offers, that we should join together in the international market and compete against the French, the Germans, and the British, and not compete against each other. They turned it down, though. As I told them, it's their decision, but I support the decision of the Mint. It's important that we have secure supplies. It's not costing the taxpayer a penny, and for the Mint, they will repay the loan in two and a half years, and that's another fact—it will pay more dividends to Canadians, and the private sector can continue to operate in what they're doing now.

I'll let Mrs. Danielle Wetherup add to that if she wants to, and I'm sure she will.

Ms. Danielle Wetherup (President, Royal Canadian Mint): Thank you very much, Minister.

I think the most important point the minister has made is that the Mint competes with other national mints. My biggest competitors are the British mint, the French mint, the German mint, and the Austrian mint. When countries want coin, they go for tender, and then we bid along with these mints to see who is going to get the tender.

We have suppliers. Westaim is one of many suppliers. The business we gave to Westaim last year was $11.3 million. We gave $54.7 million in business to other countries—United States, Germany, and Great Britain are good examples of suppliers of coins.

Second, if Canadians were to find themselves without coin for trade and commerce, you would definitely be a very annoyed group of people. When in 1996 Westaim signed a memorandum of understanding with the Mint—and we have these documents saying that they were vacating, that they were leaving, and that we were going to have a smooth transition because they were leaving the business—my biggest fear at that particular time was that I could not supply one-dollar coins to Canadians because they had a patent. So we stockpiled one-dollar coins. I have one-dollar blanks until the year 2002.

Basically my decision at that particular time, to recommend to the minister that we should have a plating facility, was to protect Canadians, to ensure that we will always have a secure supply of coinage for trade and commerce. That was the most important part of the decision.

Mr. Gilles Bernier: From the information I received from Westaim, they told us they would supply your company for years to come with all the demand that you want.

Now, I don't want to make you feel that I'm better than anybody else; maybe I'm worse than everybody else, but I tell you this. I've been in business for 18 years. I started three businesses. One of them is a corporation, and very successful. I've always been against government getting into direct competition with the private sector, because I believe that's not the role of government. Government has a role to play. Jobs will not be created by government. They will be created by the private sector. The government's role is to create a climate and help the private sector create those much-needed jobs in Canada, and that's not done by going into competition with them.

Having said that, have you people been in business before? If so, how can you get into a business where— An example is the new European coin. Their demand will be dropping by 50% by the year 2001. I know for a fact that if I want to acquire business of any kind, when I know that the market is not there I'd be crazy to go into that business. I'd choose something where I can get a return on my investment. As for this, it doesn't look as though there's much return on that investment. Where is the business logic in it?

Mr. Alfonso Gagliano: What is the logic? First of all, you cannot compare the Mint to a regular business. You have to provide for use, and ensure Canadians that we have the material to produce the coins.

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In 1996 this Canadian firm signed a memorandum saying that they were getting out of this business. The Mint had the responsibility to make sure that they had the capability to produce those blanks. Now, after the decision was made, all of a sudden there was a change. They said they wanted to stay in business and do it. But I think we cannot— This is a question of securing the supply. The Mint is not any other business that can turn around tomorrow to find another supplier. This is the situation that the Mint has to live with in fact.

Besides all that, the Mint and I met with the president of Westaim. We said we had no intentions. I said we should sit down to find a way for us to work in the international market. They said the international market won't be as busy as it is now. We didn't agree, but even if that were so, we said we should work together. They said they would only sit down and work with us if we would stop the project.

We cannot stop the project. We have a responsibility, the Mint and I, to make Canadians secure that we always will be in a position to procure the supplies of any coins that the government and the Minister of Finance ask us to make. That's our responsibility.

The Chairman: Gilles, we'll make time for you at the end. I've got you down here for later on. Thank you, Gilles.

Thank you, Mr. Minister.

We'll go to Gerry Byrne, then back to Jim Gouk.

Mr. Gerry Byrne: I promise I'll only have five or six questions to ask, and I promise I'll only take about ten minutes with my colleagues.

Mr. Minister, the Canada Mortgage and Housing Corporation, I believe, and your department recently unveiled an extension to the residential rehabilitation and assistance program. Would you or the president of the corporation be able to enlighten the committee about exactly what the status is of discussions with the provinces and the implementation of that extension of the program? That's the first question.

Mr. Alfonso Gagliano: Let me say briefly that we extended this. It was a program that was being renewed on an yearly basis. We wanted to make sure there was stability in the market. Therefore, we extended the program for five years with $50 million of funds for every year. Therefore, that's $250 million. I think it was welcomed by all the stakeholders.

In terms of negotiations with the provinces, I'll let the president of the CMHC give the details. I know that some provinces signed in and some indicated they will sign in. I think there is a good disposition with the provinces with this.

Mr. Marc Rochon (President, Canada Mortgage and Housing Corporation): Thank you, Minister.

Is your question related to the negotiations with the provinces on RAP, or the negotiations with the provinces generally?

Mr. Gerry Byrne: It's just generally. I'd like to get an overview of the status of the program and any problems or opportunities you're seeing.

Mr. Marc Rochon: I think it's a program that is very well received. Our negotiations with the provinces are going well. The partnerships that existed are still in existence, and it's been the status quo of success as far as I can tell.

Mr. Gerry Byrne: Could you outline this just exactly? Have all ten provinces and the territories now formally participated? I understand that it is partially cost-shared.

Mr. Marc Rochon: Yes it is, and it varies between provinces and territories, but I do not have the details of the percentages for each one of them. We do have understandings with all of them for the delivery of this program.

Mr. Gerry Byrne: So there actually hasn't been any implementation as of yet for the extension to all provinces.

Mr. Marc Rochon: Yes, that is in train.

Mr. Gerry Byrne: Here are my other questions, Mr. Chairman. I would like to ask the minister and his witnesses who are presenting with him basically what role the department has the role with the renovations on Parliament Hill.

It's a very important topic, I think, for us as parliamentarians, because we want to make sure that there's consistency in the activities of Parliament and that they are being safeguarded. There's a lot of activity in terms of renovations that are scheduled to occur in the next short while extending into the long term.

Could you give this committee some details as to the role that the department has and also some of the safeguards that you're enacting to make sure that parliamentary affairs and parliamentary business are not interrupted in any way?

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Mr. Alfonso Gagliano: Well let me just give you an idea, because I think work on the parliamentary precinct is an ongoing event and will continue for a few years to come.

The reason is that in 1992 the Auditor General audited the parliamentary precinct, the Senate and the House of Commons, and his statement was very severe in the sense that for years we neglected the historic buildings. Therefore, he urged the government and the parliamentarians of the day to look at the seriousness of the issue.

In 1992 Treasury Board approved an overall plan. Since then, we did the Peace Tower stonework. We did the front walls of Centre Block.

Right now—it should be finished before July 1—there are the underground— We didn't have all the storage necessary to store our electrical generators and all the computers and new wires that were needed. So we're doing that.

As you know, we had a report a few years ago on the asbestos problem in the West Block. We therefore passed a decision for the Justice building to become part of the parliamentary precinct. So we moved Justice to another building. Now we're starting to prepare the Justice building for offices for members of Parliament.

When that is done, we will vacate the West Block and redo its interior. We'll create a temporary House of Commons and Senate because then we'll have to do the Centre Block. So when I say there will be an ongoing issue for many years, definitely, there is a long-term plan.

Also, you saw in front of the Centre Block that we had to do all the main water and sewer lines. We just finished it while we were recessing last week. There's the piece going to the Confederation Building down the Hill, which is supposed to be finished before July 1.

A few years ago, there was an incident whereby a truck ended up in the front of Centre Block, so there was a security measure report. We'll be installing some bollards in front of Centre Block. The main entrance will be fixed. Now we have cement pillars. We'll have these bollards fixed.

The entrance, whether it's the west, east, or south side, will be movable. Therefore, they will be down all the time, but in case of emergency, with a switch, they will go up and therefore close the area to vehicles on Parliament Hill. So those will be done, hopefully, and finished by the end of the year.

There are other projects, such as the Library of Parliament. But again, we want to make sure that Canadians in 2000 can come and celebrate the new millennium. This is their Parliament Hill, so we're trying to do as much as possible before 2000. There will be no construction in 2000. Then we'll start again in 2001.

Because of the West Block, we will be closing the cafeteria. There is already cafeteria space provided in the East Block. We approved the construction of a tunnel between Centre Block and the East Block so that even in winter, tourists can visit the historic 1910 wing that was finished last year.

I'm giving you a summary. We can have a meeting only on that. But there is a lot of activity going on, and this started it with a report from the Auditor General.

Mr. Gerry Byrne: Thanks, Mr. Minister.

I have one final question—

The Chairman: Just a short one.

Mr. Gerry Byrne: —which would more directed to the president of Canada Post Corporation.

Could you could provide for the committee an update on Canada Post's presence in rural Canada? Of course, we enacted a policy of no rural post office closures. Could you just update basically what the current Canada Post policy is?

Mr. Alfonso Gagliano: Before I give the floor to Mr. Clermont, I want to add that Canada Post had a pilot project in rural Canada to try to have the local mail sorted and delivered locally. For the last two or three months, we have been gradually implementing that policy. I have been receiving positive comments on not only not closing rural post offices, but also to improve the rural mail delivery service.

• 1615

Mr. Clermont.

Mr. Georges Clermont: Thank you, Minister.

As the minister has just said, we have divided the country into 90 trading areas where, by definition, all of the local mail within an area is sorted in the main city or town of the area. This has generally been well received and has obtained results of up to 98% or 99% on-time delivery within the region.

The forward mail, the mail that goes outside the region, is still sent to mechanized plants in 21 major centres. So that is definitely a big improvement, and by the end of this calendar year we should have rolled this out completely.

Mr. Gerry Byrne: So you can state to me categorically that our rural post office, our presence in rural Canada, is solid and consistent?

Mr. Georges Clermont: Yes, very much so.

Mr. Gerry Byrne: Thank you.

The Chairman: That was a very good question, Mr. Byrne.

Mr. Epp, Paul Steckle, then Joyceline.

Mr. Ken Epp (Elk Island, Ref.): Thank you.

I'd like to begin my questioning by giving a compliment, if I may, Mr. Chairman.

I have received in the last year not a single complaint from the people in my riding about the post office service. The only complaint I've had was from the postal workers themselves. I have a number of these small rural post offices in my riding, and the postal workers get frustrated because they can't take a piece of mail and deliver it—now you're saying that's changed—without sending it first to Edmonton for sorting. Then it comes back in a day or two. So if you're solving that problem, I'd like to compliment you for that, because that is the only complaint I've had.

I have one question for the post office, and then I want to get on to other things. I see from time to time a Purolator truck making deliveries at the post office in Fort Saskatchewan. Could you explain that?

Mr. Georges Clermont: Purolator is 75% owned by Canada Post, of course. Sometimes Purolator, as other courier companies, do not deliver everywhere in the country—perhaps five north or other areas. In this case, they turn it over to Canada Post.

The same thing happens with UPS, FedEx, and Dynamex for places where they don't go. They pay the postage and we deliver for them.

Mr. Ken Epp: Thanks for that explanation. I'm glad to have that on the record.

Now I want to talk about the Mint. First of all, if the Royal Canadian Mint makes money, where does the money go? These, by the way, are short quickie questions, so I just want quick answers.

Does the Mint make a profit? Where does the money go?

Ms. Danielle Wetherup: The money returns to the taxpayers.

Mr. Ken Epp: Okay, and specifically how does it do that?

Ms. Danielle Wetherup: It does that sometimes by dividends and by seigniorage.

Mr. Ken Epp: Okay, it's by seigniorage, I understand that. By dividend, is there actually a cheque written to the Receiver General for Canada?

Ms. Danielle Wetherup: Yes.

Mr. Ken Epp: Okay.

Now, if the Mint forgoes the potential of a profit, or an efficient way of earning a profit, who takes the loss in that potential profit?

Ms. Danielle Wetherup: The taxpayers.

Mr. Ken Epp: The taxpayer. Right on. Thank you.

I think you know exactly where I'm going. If the proposal to build a new coin-plating plant in Winnipeg could be shown to cost the taxpayers, by loss of revenue, $50 million, would you cease and desist?

Ms. Danielle Wetherup: I think I would have an awful lot of questions.

Mr. Ken Epp: You would have questions about that.

Ms. Danielle Wetherup: Yes.

Mr. Ken Epp: Well, I'll just throw the numbers out to you. The first estimate for the cost of that plant was $30 million. Subsequently, we understand it's been escalated to $38 million. Add to that $9 million savings, which you're forgoing until the plant is on stream, and that will take at least two years, so that's another $18 million. The way I add $38 million and $18 million, it comes to about $56 million. So there's a potential cost plus lost savings of $56 million. Is that true or false?

Ms. Danielle Wetherup: It's false.

Mr. Ken Epp: Why is it false?

Mr. Alfonso Gagliano: Could I ask you a question? I'm interested in the information. I'm the minister. I'm wondering who is giving you that.

Mr. Ken Epp: We're getting that from your own documents, sir, from your own press releases and things like that.

Mr. Alfonso Gagliano: All we talked about was a $30 million cost. By the way, it's not a new plant, it's an addition to the Winnipeg plant.

Mr. Ken Epp: But it's a new facility being added.

Mr. Alfonso Gagliano: Yes.

Mr. Ken Epp: And it's costing a total of $56 million.

Mr. Alfonso Gagliano: Where?

Mr. Ken Epp: I just told you, but let's not waste time.

• 1620

Mr. Alfonso Gagliano: But I would like this to— I don't want the statement that we have $56 million when—

Mr. Ken Epp: Then let me switch with the minister. The minister, as far as I can tell, has told this committee to deal with this question in camera because we don't want to deal with this issue. We don't want to know the facts.

Mr. Alfonso Gagliano: Mr. Chairman, I never—

Mr. Ken Epp: When I've asked questions in question period—

Mr. Gerry Byrne: I have a a point of order, Mr. Chairman.

As a member of this committee, I'd like to mention that it is the committee that decides the business of this committee, and that the instruction is given by no government. This is a House of Commons standing committee, and the committee itself will decide and does decide the business of the committee.

The Chairman: Order, order.

Mr. Epp, Mr. Byrne's point was going to be my point—

Mr. Ken Epp: I apologize.

The Chairman: Maybe we can let Ms. Wetherup attempt to answer your points, and if you could provide the committee with an explanation of where you get the $56 million, that would be helpful.

Mr. Ken Epp: Sure. Gladly.

The Chairman: Ms. Wetherup, please.

Ms. Danielle Wetherup: I have business case highlights that I would be very happy to give you as a reference point.

The saving to taxpayers is $9.5 million per year. The additional profit will be $3 million in foreign circulation business annually. The investment is $31 million for the plating facility. It has been borrowed through a banking interest. The pay-back on the $31 million investment will be two and a half years. The savings reflect the inclusion of interest and borrowing and depreciation.

The return on the investment is 40%, and we had three detailed engineering studies to support the business case. The business case incorporated the impact analysis of metal prices, volume and alternate approaches, and the borrowing obtained from commercial sources through Scotia Capital Markets. These are the business highlights.

Mr. Ken Epp: Would you be willing to debate these things in a public forum?

Ms. Danielle Wetherup: They are facts. I would be willing to give you the facts—

Mr. Alfonso Gagliano: Look at what we are doing today—this is a public meeting.

Mr. Ken Epp: What I'm frustrated about, and I ask the minister whether he would favour being able to have this committee actually examine the details, because if everything here is solid, then of course you would welcome the opportunity to have this—

Mr. Alfonso Gagliano: I was called here and I came. The chairman asked how much time I had and I asked how much time the committee has. I'm here and we're here today. I brought the chief executive officer, the president. We're taking all the answers. I want you to know that I met the president—

Mr. Ken Epp: I know that.

Mr. Alfonso Gagliano: —of the Westaim. The president took two hours with him. We have nothing to hide. The facts that I just stated, we stated right from the beginning when the business case was announced publicly. If the committee decides today that we should come back and answer questions—

But if you're suggesting that I or Ms. Wetherup should engage in a public debate with Westaim—no. I will answer committee questions any time you want. I will be here day and night as long as you want, but I don't see why I or the president of the Mint should debate. We met them and we made our case and they made their case.

It's a free country. They can hire the best lobbying firm and go around and make statements that are not true. That's their business. This is a free country, but I'm won't engage myself or the corporation in that kind of public debate.

Mr. Ken Epp: But when—

The Chairman: Mr. Epp, stick with the facts.

Mr. Ken Epp: Okay, I want to ask Ms. Wetherup another question. Is the cost of the pilot plant included in your $31 million?

Ms. Danielle Wetherup: There's no pilot plant. We had a testing process and we did the testing in Westaim's facility, and in other plants' facilities—

Mr. Ken Epp: So you're not building a pilot plant in Winnipeg?

Ms. Danielle Wetherup: We're building a plant, but not a pilot plant. The plant is being built right now.

Mr. Ken Epp: Okay. Are you proposing to do some pilot work before you go into full production?

Ms. Danielle Wetherup: Anybody in manufacturing—

Mr. Ken Epp: And is the cost of that included in your $31 million?

Ms. Danielle Wetherup: The $31 million is for the building of the facility, the purchase of the equipment and for the test line.

Mr. Ken Epp: And for the test line?

• 1625

Ms. Danielle Wetherup: We're testing a line in the higher capacity.

Mr. Ken Epp: Okay, so that is included.

Ms. Danielle Wetherup: Yes, it's covered by the expenses of—

Mr. Ken Epp: That was my question.

I'd also like to know—

The Chairman: You have just enough time for a short one, Ken. We can come back to you after. But you can get a short one in.

Mr. Ken Epp: I still have one minute here.

I'd like to ask you about the financing of it. There's a bill before the House right now that proposes to give the mint the ability to borrow money from the consolidated revenue fund.

Ms. Danielle Wetherup: No.

Mr. Ken Epp: That's my understanding of one of—

Ms. Danielle Wetherup: No. The bill in the House is to amend the legislation of the mint, which is very dated. In it we are asking to raise our borrowing level. When we consulted a banking institution and so forth, we were told that for the size of our company, our borrowing limit was not high enough for the revenue and the assets that we had. As a corporation, Rothschild Investment told us that we should raise our borrowing authority to the limits that we put in the proposed legislation.

When I took this business, it was in trouble, but now it's very successful. The first thing I had to do was to go to the bank to borrow to pay my payroll. I never get a sou from the government. I am as independent with regard to my problems as any small or large business in Canada. The government never comes and helps me.

Mr. Ken Epp: But in a pinch you could borrow from the consolidated revenue fund.

Ms. Danielle Wetherup: No, from the banks.

Mr. Ken Epp: According to this you can. I think you can.

The Chairman: I've got you on the list, Ken. Thank you for sticking to the facts.

Paul Steckle, then Jocelyne and then Carmen.

Mr. Paul Steckle (Huron—Bruce, Lib.): Thank you, Mr. Chairman.

It is as a new member to this committee for this afternoon only, I have two questions. Coming from a region in Canada where our communities are largely driven by small business, we're always looking for opportunities. Mr. Minister, what has your department done to increase the access of small and medium-sized enterprises to government procurement possibilities? Can you cite an example of where you have made some changes and how small business might be able to procure some of the possibilities?

Mr. Alfonso Gagliano: Yes, and I think a chunk of the credit should go to this committee. In the previous Parliament it was this committee that looked at our procurement system and said— And I agree totally, because I'm a small-business person myself.

Last October, after reading the report of the committee and working hard with the private sector and all of our stakeholders, we launched what we call Contracts Canada. At the request of a group of associations and even members of Parliament, when we announced a package to all the members of Parliament that if they want a briefing in their riding— It is called “How to Do Business with the Government of Canada”.

My objective as minister is accessibility and fair access. Today in the global economy we can no longer guarantee regional quotas of government procurement. But what I'm guaranteeing from coast to coast, and for every individual Canadian no matter where they are, is that they have total access and all the information that everybody can get. They don't have to open an office in Ottawa to do business with my department. They can do it from their office, their home or their kitchen through the Internet.

This Contract Canada system not only posts all the business procurement that the Government of Canada is looking for, it also posts all the previous information. When the government bought chairs previously, the type of chair or whatever procurement was necessary, the details, the products, who won the competition and the price they paid— Big firms don't need that service because they're big enough to have their purchasing department. They have professionals here on the Hill who can give them the information.

• 1630

With this Contract Canada program, small businesses, again from their kitchen with a laptop, can just hook into the system and get as much information as they have. This was implemented in October and we have reports that it's working well, that people are happy. Again, I offer to the members of this committee and all members of Parliament, that if you want to organize a seminar or an information session in your riding, let us know and we'll provide the documents and the people to explain it to Canadians. We want more and more Canadians to use this system.

Mr. Paul Steckle: My second question relates to the fact that we're now one and a half years from the year 2000, and this is a big problem facing a lot of industry in Canada. In your statement you briefly alluded to the fact that we're ready for the year 2000. Can you give full assurance that all departments are ready for the year 2000? Can you assure us that when we reach that point, we're not going to find ourselves with a bug we hadn't anticipated, so that we are truly ready for the new millennium when it comes?

Mr. Alfonso Gagliano: I will answer and then turn to my deputy, who will give you more detailed information. We believe we're going to be ready, but I don't say that easily and I don't say don't worry. I invite everybody, government and the private sector, to work hard and take it seriously. It's a serious matter and should be taken so.

We established a year 2000 procurement office to manage the contract. We are a common service department. It is not only for our own department, because I'm also I'm the Receiver General. I want to be sure I'll be able to issue all the cheques to pay suppliers, pensioners and all the other people, and to make sure people pay their tax and remittance, and all the services.

So we are committed. We make sure because this is a problem where we think there is a shortage of experts, so we had authority from Treasury Board to make sure we had a certain number of companies that were expert in this field, and they were hired so that we can answer all the demands that will come—not only my department, but all the line departments that we have.

Our deputy minister, Mr. Quail, has been out front on this from day one, and he can give you more accurate detailed information than I can.

Mr. Ran Quail (Deputy Minister, Public Works and Government Services): Thank you, minister.

Mr. Chairman, as the minister pointed out, we have perhaps four roles in the department that we look after in terms of the Y2K challenge. The first one the minister talked about is the one on procurement in terms of the retainer that we have with contractors in the country to be available for other government departments to provide services to them to solve their Y2K problems from start to finish. We also have the procurement office that he's spoken about.

In addition to that we have a number of mission-critical systems in terms of pay, the compensation in terms of our cash management on behalf of the Receiver General, etc., and we have a very detailed program and group to make sure that we will be up and running on January 1, 2000.

In addition to that, we have the embedded systems group as part of our accommodation, which is just what it talks about: it's the embedded systems that we have in our buildings across the country. In that sense, we worry about how we can be assured, and we have a team in real property to do the work, to deal with suppliers, and to put in place fixes so that we will be operational at that time.

We are also providing leadership capability to other government departments in labs around the country as to how to deal with the embedded system problem. So we have procurement, Receiver General and the telecommunications group, which supplies all of the computer parts to our own department and to a number of other government departments around town. So they have a dual role, including the role dealing with telecommunications, and they're the function and the focus for the government dealing with the telcos relative to the year 2000.

• 1635

Internally, we've set aside $60 million to deal with this. It's spread over a number of years, with a high proportion this year and the remaining part next year. We certainly have it as our number one operational priority in the department and also in other government departments around town.

The Chairman: Thank you, Mr. Steckle.

We move to Ms. Girard-Bujold and then Carmen and Jim.

[Translation]

Ms. Jocelyne Girard-Bujold (Jonquière, BQ): I always enjoy hearing the honourable Minister talk about Canada Post, he always makes it sound as if things are going absolutely beautifully. He makes it sound almost magical. However, there is always a flip side where Canada Post is concerned.

I am not hearing the same thing from the Corporation's employees. At the present time, there is mediation going on. I would like to have an update on what is currently happening. A few weeks ago, the Union challenged the mediator, and the union negotiator said that there is no mediation at the present time. Have certain items of the mediation almost been settled so that we can put certain specific things on the table to bring the negotiations to a close?

The Honourable Alfonso Gagliano: Obviously, I never said that things were perfect at Canada Post Corporation. Nothing is ever perfect. So, there are some problems. There was a negotiation that did not yield the desired results, and there was a strike. During the strike, there was conciliation, that also did not work. Finally, we adopted back-to-work legislation and appointed a judge- mediator.

As I said at the beginning, due to the fact that the issue of the mediator is currently before the courts, you will understand that I cannot comment on this. I will leave it up to the parties and the court to decide all of that.

But, as Minister, I am interested. I would like this negotiation and mediation to be resolved as quickly as possible in the interest of the employees and of the consumers, Canadians, the clients. Obviously, we know that after a protracted negotiation and a strike, there will always be scars and we will try to heal them as much as possible. However, unfortunately, I cannot intervene until this negotiation has been completed. Nor do I want to be accused of interfering in something that does not concern me.

I assume that Mr. Clermont, also, will not wish to refer to the mediation issue. However, he might tell us where the negotiations stand.

Mr. George Clermont: I believe that everything is at a standstill until the issue of the judge-arbiter has been settled by the courts. No, I cannot, like the Minister—

Ms. Jocelyne Girard-Bujold: Yes, but before that?

Mr. Georges Clermont: Before? I think, Ms. Girard-Bujold, and I told you this the last time, that there is a big difference between what the employees think and what the union representatives think. Personally, I meet thousands of employees each year. I continue to meet thousands, to visit the letter carriers' routes, and what I hear from the employees is that they hold the union more to blame for the strike than the Corporation. There are two different versions. You mustn't be fooled by that.

Ms. Jocelyne Girard-Bujold: No, I am not very gullible by nature.

Mr. Georges Clermont: Neither am I.

Ms. Jocelyne Girard-Bujold: I can tell you that if you meet people, we also meet people.

Mr. Georges Clermont: yes, but I meet thousands.

Ms. Jocelyne Girard-Bujold: Workers.

Mr. Georges Clermont: I spent the night before last in Toronto—

Ms. Jocelyne Girard-Bujold: I have other things to do.

Mr. Georges Clermont: —and I met 500 people.

Ms. Jocelyne Girard-Bujold: I am not disputing the fact that you meet people, but we also meet people. We are not a party to the issue, whereas you are a manager of the Corporation. Since I am not responsible, the workers may perhaps be more open with me. The redistribution of letter carrier routes that you carried out eliminated jobs. In my region, the number of jobs was reduced.

• 1640

Mr. Georges Clermont: For the restructuring of the letter- carrier routes, we established a system of direct consultation with the employees. We had a terrific response. So many letter carriers came to our meetings that the union went to court to try to stop those meetings, because it did not want us to speak directly to the letter carriers. It's a fact, and I can give you the case number, that the union went to court, before an arbiter, to stop the consultations that we were carrying out on the pretext that we did not have the right to speak directly to individuals.

Ms. Jocelyne Girard-Bujold: That does not change the fact, Mr. Clermont, that the restructuring of letter carriers' routes resulted in a loss of jobs.

Mr. Georges Clermont: It did remove some jobs, but these displaced letter carriers found jobs elsewhere in the Corporation, because they have complete job security. A letter carrier is removed from a postal station because there is one fewer route. Since all the routes were lengthened because there were fewer addresses or volume had decreased, the letter carrier in question would have been transferred to another station, because he or she has full job security. No one has lost their job.

Ms. Jocelyne Girard-Bujold: I will come back to that. I will send you a note on that.

Mr. Georges Clermont: Give me the name of the person who was laid off and I will—

Ms. Jocelyne Girard-Bujold: Second, you are still saying that you have a moratorium on increasing the cost of stamps; however, in the meantime, you have increased the cost of priority parcels. You've increased the cost of everything that has anything to do with stamps. You should not hide that fact.

Mr. Georges Clermont: We are talking about competitive products. We keep pace with the market prices. When you send your parcel, our cost is lower than that of UPS. The price should be the same, but ours is still lower. But it has been increased.

Ms. Jocelyne Girard-Bujold: People are not stupid. They are saying that there have been price increases at Canada Post Corporation.

Mr. Alfonso Gagliano: People are not stupid, Madam, because we have not hid our price increases. We announced them in a press release. Consequently, everyone was aware of this. We froze the cost of stamps, because the Corporation has a monopoly on first class mail. However, since there is competition for all the other products on the market, we must be competitive.

Ms. Jocelyne Girard-Bujold: I know I do not have much time left. How long has the Canada Post Corporation had an ombudsman?

Mr. Georges Clermont: I think the ombudsman arrived in September.

Mr. Alfonso Gagliano: Since last fall. I don't have the exact date.

Ms. Jocelyne Girard-Bujold: So, we have had an ombudsman since last fall. You say that since that time, no one is sending anymore—

Mr. Alfonso Gagliano: No, no. I have fewer.

Ms. Jocelyne Girard-Bujold: Has the ombudsman received many complaints? Has there been a significant volume of complaints? Do you have any figures on that for us?

Mr. Alfonso Gagliano: He operates independently. It might be a good idea to have him appear before the committee, if you wish. I cannot tell you how many complaints he has received. This is relatively new, he has been in place since the fall, and not everyone knows about this. I think he has made some efforts to make his presence known. He has a staff and an office. I know that since the office opened, the volume of correspondence we receive has dropped. So I imagine it goes to him, but he does not report to me. He functions independently, and will in fact be submitting an annual report.

Ms. Jocelyne Girard-Bujold: I have a brief question about the CMHC. You say the negotiations with the provinces are going well. I would like to know how the negotiations with Quebec are going. Is there a timetable for the negotiations?

Mr. Alfonso Gagliano: The negotiations with Quebec are irregular. I had a meeting with Minister Trudel and we agreed that we would make an effort. The negotiators from the two sides have met, but the positions remain unchanged. Recently, Minister Trudel wrote to tell me that he would like to meet with me to see whether we could make some progress at our level. I got his letter and am preparing a response with a view to setting a date for the meeting.

• 1645

Personally, I am quite prepared to meet with him. I think that at the moment, Quebeckers are losing, because the agreement has not yet been signed. I hope to meet with Minister Trudel in the next few weeks. I hope we will be able to make some progress.

Ms. Jocelyne Girard-Bujold: Retail postal outlets have also been mentioned.

The Chairman: Thank you, Jocelyne.

[English]

Mr. Provenzano, then we have Jim Gouk and Roy Cullen.

Mr. Carmen Provenzano (Sault Ste. Marie, Lib.): I have one question for the minister.

We've had the problem of a pay equity settlement with us for 14 years. I was wondering, Mr. Minister, if you could update the committee on the department's efforts to conclude a settlement. This is something that has reached the exasperation point, I think, with a group of our employees, and it would be appreciated if we could have that update.

Mr. Alfonso Gagliano: Well, unfortunately this is the president of the Treasury Board's file. What I can tell you is what is known publicly, which is that the Treasury Board, on behalf of the Government of Canada, has been in negotiations and finally tabled an offer—I believe it was $1.3 billion—to settle all these issues. The unions rejected the offer, and I believe at this stage there are no negotiations.

We're waiting for, hopefully in the next few weeks, a decision from the Human Rights Commission, but there are already two court judgments on the issue, and I believe at least one of them has been appealed. Therefore, unfortunately the whole issue is still there.

But I would just indicate that the government offered to settle out of court and put on the table $1.3 billion. Treasury Board and the government believe that's a reasonable and fair offer. The union says it's not enough. So we'll see what the Human Rights Commission's decision is, and then the government will take a position to accept or go to appeal.

We would like to solve this problem. As Mr. Clermont was saying, individuals would get very interesting sums, but unfortunately we cannot solve it until their representatives agree to accept the $1.3 billion offer, which we believe is a good offer.

The Chairman: Mr. Provenzano, is that it for now? Did you have another question, Carmen?

Mr. Carmen Provenzano: No, it's okay.

The Chairman: Thank you very much, Carmen.

Mr. Gouk and then Roy Cullen.

Mr. Jim Gouk: Thank you.

I'd like to open, just for the record, by stating that the latest government bill, Bill C-41, states that the Mint may, for the purpose of various things, borrow from the consolidated revenue fund of Canada an amount not to exceed $75 million. I just wanted to set the record straight on that.

My first question is for either the minister or Mr. Clermont. There's a sworn affidavit, a notarized affidavit, from a negotiator for CUPW, who claims he overheard the arbitrator himself revealing details of negotiations to someone in public and indicating that in fact his mind was already made up before he had even heard the evidence.

I've written to the minister asking if they're giving any potential credence to this, at least to investigate it, and if they are going to stop the arbitration until it is determined whether there's any validity to this or not. I'm not saying there's validity to it, but I'm saying until we know, are you going to take action to stop this particular arbitrator until this is cleared up?

Mr. Alfonso Gagliano: I think Mr. Clermont answered just now. The whole issue is before the courts, so—

Mr. Jim Gouk: On that point?

Mr. Alfonso Gagliano: On that point, the union took the mediator to court to be dismissed.

Mr. Jim Gouk: The arbitrator we're talking about?

Mr. Alfonso Gagliano: Yes, the judge arbitrator.

Mr. Jim Gouk: And the arbitration is on hold while this is happening?

Mr. Alfonso Gagliano: Exactly.

Mr. Jim Gouk: Okay. That's great. Thanks.

• 1650

On Central Mortgage and Housing, one of the things you've said in here is that one of the striking successes of CMHC is its mortgage insurance service.

The banks are quite prepared in many cases to lend high-ratio money, but they're not allowed to according to the Bank Act. They're capped at 75%, unlike credit unions, which are free to go higher. There are private mortgage insurance companies available. So I would like to know why the government is making it mandatory for private institutions to come to the government to provide a service to them at a fee—which is passed on, of course, to the customer, the Canadian taxpayer—instead of allowing the bank to compete themselves and offer that kind of service without having to go to the government.

Mr. Alfonso Gagliano: Let me clear this up. First of all, we don't borrow money. We're only insuring the mortgage. It's the banks—

Mr. Jim Gouk: I realize that, but they're not allowed to lend more than 75%, according to the Bank Act, unless they come to you.

Mr. Alfonso Gagliano: Mr. Chairman, if I may finish my answer—

I want to make clear that there is a perception that CMHC is in the financing business. We only insure mortgages, and the financial institutions are very happy to do business. They have been doing it for 60 years with the CMHC.

We had a policy to encourage Canadians to have access to own a house. The government in its policy stated that they would get 95% insurance on the mortgage if the bank would— Because in order for us to insure 95% of the cost of the house built, therefore having a 95% mortgage, the banks have to make that mortgage. We can only insure. We are not in the borrowing business. And this was only limited to the first buy.

We believe that it was a good policy and therefore this year we extended to all the purchase of a home. That continues the policy to ensure that Canadians have accessibility to own a house. This is government policy.

Secondly—

Mr. Jim Gouk: We've only got so much time, Mr. Chairman, and the minister is not really answering the question I asked. He's giving me a rather long answer. He doesn't answer.

Mr. Alfonso Gagliano: You might not like my answer, but I mean—

Mr. Jim Gouk: No. The question was why is the bank forced to come to the government to buy insurance before they're allowed to lend above 75%?

Mr. Alfonso Gagliano: It is not forced. GE Capital is a competitor to the Central Mortgage and Housing Corporation to do the same insurance mortgage.

I'll let Mr. Rochon maybe give a more detailed answer. We are not forcing anybody—

Mr. Jim Gouk: So you're saying that if a bank wants to loan a 90% mortgage to someone they can do so without going to CMHC?

Mr. Alfonso Gagliano: If they want to be insured they have to come to us or to GE. They're the only two institutions that have the resources—

Mr. Jim Gouk: But they don't have to come to you. They can just go ahead and do it if they're willing?

Mr. Alfonso Gagliano: We'd be glad not to mind if they want to give that mortgage at 95% of the cost.

Mr. Jim Gouk: Maybe I'll just stop with that if I could, because I have a couple of quick questions I'd still like to ask regarding the Mint.

One of the quotes here is that the Mint competes directly with foreign government mints. Does that not mean then that by definition they also compete with Canadian private sector businesses?

Ms. Danielle Wetherup: Private sector business is a supplier, not a competitor.

Mr. Jim Gouk: Isn't the Mint going to be doing that? A supplier?

Ms. Danielle Wetherup: We are going to ensure a secure—

Mr. Jim Gouk: No. Are you going to supply coins to others? Are you going to sell coin blanks to other people who want to buy coin blanks?

Ms. Danielle Wetherup: Yes, we will.

Mr. Jim Gouk: Okay, so you are competing with the Canadian private sector?

You claim you're saving $9.5 million by doing this. Is not a substantial part of that saving the fact that you're going from solid nickel to nickel plating instead? Is it the process that's saving a lot of money?

Ms. Danielle Wetherup: It's the metal that changed this.

Mr. Jim Gouk: Aren't plated nickel coins available from Westaim and probably others? So a substantial amount of the $9.5 million could be saved without spending a dollar in new mint construction?

Ms. Danielle Wetherup: That amount, the saving that we are doing with our process, exceeds by far any saving from any other processes. Furthermore, our process is environmentally friendly: it doesn't use cyanide.

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Our process is also much better for the vending industry. It's a new technology, and a new technology that we will also export. Canadian technology in coinage is at the height of creativity, and therefore is very much in demand. The reputation of the Royal Canadian Mint internationally is exceeded by none. We have a workforce in our plant that is willing to basically accept this—

Mr. Jim Gouk: Excuse me. My question was strictly about profit. The question simply was whether or not a substantial portion of that $9.5 million was the material cost difference between using solid nickel and using nickel plating. That was the question.

I appreciate, Mr. Chair, that they have answers, but the thing is, we are restricted in time. If I ask a question about profit, I don't want to hear about vending machines and cyanide. I want to get an answer about profits.

The Chairman: Let the minister jump in.

Mr. Alfonso Gagliano: You are asking about the difference of metal, the difference on plating. You're asking a very detailed, technical question, and you have to hear the answer. You might not like the answer, but let me say this. Here again we're missing the objective of all this discussion. It's not the question— Even though the facts are there and the profits are there and the competition is there, it's that Westaim said very clearly in 1996 that they were getting out of this business.

Mr. Ken Epp: They're in business. Come on!

Mr. Alfonso Gagliano: No, no; let me finish.

The Chairman: Order.

Mr. Alfonso Gagliano: This is a fact, and therefore we had to secure supply, and that's where we are. Now, because they planned these buildings— Also, in the past, Westaim was not necessarily able to deliver all the demands that came before the Mint. This is the reality.

Mr. Ken Epp: That's not true.

Mr. Alfonso Gagliano: You have to believe me or Westaim, whoever you choose. The facts are there. I mean, we can show you the documents.

Mr. Ken Epp: I've seen the documents.

The Chairman: Ken.

Mr. Alfonso Gagliano: Which documents have you seen? The ones Westaim showed you?

If you want a briefing, we are willing to give you a briefing. Come to the Mint. You had a briefing from Westaim. To be fair, receive a briefing from the Mint.

The Chairman: Mr. Bélair.

[Translation]

Mr. Réginald Bélair (Timmins—Baie-James, Lib.): Mr. Rochon, could you tell the committee how the negotiations with Ontario regarding the transfer of our housing responsibilities are going?

Mr. Alfonso Gagliano: As soon as we decided to transfer responsibility for social housing to the provinces, Ontario was the first province to decide to transfer it to the municipalities. At that time, we had some concerns. We wanted to ensure that the municipalities were able to comply with the agreements already in place.

The objective of the policy was to eliminate duplication, not to create more. So we wanted to transfer this responsibility to the province. Given the debate and discussions that took place in Ontario, we decided not to stop negotiating with the province of Ontario. I met with the Ontario Minister of Housing last January, I believe. In the next few weeks, we are expecting to receive two reports from two communities about the way in which this transfer of responsibility for social housing to the municipalities has been implemented. Given that Ontario has already passed legislation, once we have seen these two reports, we will decide whether we will resume the negotiations or not. So that is where we are at. We are waiting for these reports. Once they have been made public, we will study them and decide what to do.

Mr. Réginald Bélair: Thank you.

[English]

The Chairman: Thank you, Mr. Bélair.

We have some very short questions from Mr. Bernier and then Mr. St-Julien.

Mr. Gilles Bernier: Mr. Gagliano, I've always learned in life that if you want to start a business you need a business plan, and that goes also for Madam President.

Would you make your business plan available, so that you can show us what the revenues are supposed to be? We have a declining industry that is already 30% over-supplied. I'd like to see your business plan. Would you make that available?

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Mr. Gerry Byrne: I'd like to see your business plan.

Mr. Gilles Bernier: No problem at all. I'll bring it. I'd be more than glad to do that.

The Chairman: Order.

Madam Wetherup.

Ms. Danielle Wetherup: The Mint produces a corporate plan annually, and there is a lot of information in it. There is some information in a business plan that is basically part of your competitive advantage. As much as I'd love to share the details of everything with you, I don't want to share it with the British mint and the German mint and my competitors.

So I regret to say that when it comes to the details of how I run the business to make it competitive and profitable, it is definitely commercial information that would be extremely valuable to my competitors, and it wouldn't be to the advantage of the Mint to do so.

The Chairman: Thank you, Gilles. Thank you for staying within that minute.

Monsieur St-Julien, one minute, please.

[Translation]

Mr. Guy Saint-Julien (Abitibi, Lib.): My question is for Mr. Gagliano and Mr. Rochon.

It is about social housing in Nunavik. The Central Mortgage and Housing Corporation has a housing program in the 14 Inuit villages of Nunavik. Is the CMHC prepared to set up a new program in keeping with the James Bay Agreement?

We have just been travelling and, this summer, I will be visiting private two-bedroom homes. Some of the two-bedroom homes have 14 to 16 people living in them. I would like to know, Minister, whether we are going to set up a new program, in accordance with the James Bay Agreement, for the Cree. I would also like to know what the situation is for the Inuit of Nunavik.

Mr. Alfonso Gagliano: Thank you for the question. I would like to mention that two weeks ago, I had an opportunity to meet with the representatives of the Nunavik communities. We discussed precisely this issue and it was agreed, with the leaders and the officers, that there would be discussions to see what could be done.

I would also like to point out that I have met with other groups. There is the whole debate among Aboriginal people about on- reserve and off-reserve Aboriginals. There's also the James Bay Agreement. So we have to take all these factors into account.

Yesterday, we received a number of representations from various groups. Of course, we would hope that there would be some agreement within the communities, but the CMHC officers know each other, have worked together and have a good working relationship with these groups. So we agreed to continue the debate.

In the next few weeks, and probably even this week, I will be meeting with the Minister of Indian and Northern Affairs, Ms. Stewart. We will be discussing this matter. There is also the whole issue of the connection between the report of the Royal Commission on Aboriginal Peoples and the issue of Aboriginal housing. We are very aware that this is problematical. I know there is a housing shortage in these communities, and we are going to do our best to solve this problem. We think the solution will be found by working with these groups, by working together to help them out.

Mr. Guy Saint-Julien: Thank you for the work you are doing. I hope a good solution will be found.

[English]

The Chairman: Thank you, Mr. St-Julien.

I would like to wind this up very shortly. Do you promise a very short one, Jocelyne?

[Translation]

Ms. Jocelyne Girard-Bujold: Very brief. Thank you, Mr. Chairman. I appreciate that very much.

There are some outlets in my riding office, where people can buy stamps. Representations have been made in the past. These people are making a profit on the sale of stamps, but some individuals called them and said that in future they would not be making a profit on the sale of stamps. So these people are feeling insecure. I know that Canada Post Corporation has said that it would not proceed with that, that it would wait a little. Can you tell me anything about that rumour? Is it true that this is the direction in which we are heading?

Mr. Alfonso Gagliano: Before turning the floor over to Mr. Clermont, I would like to say that we have received some representations on this matter. The decision has been postponed until October. In the meantime, there will be some discussions. The Corporation had prepared a new contract with franchise holders, and there are some products on which they are going to make less of a profit, but other products on which they will make more.

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This is causing concern among our clients and our franchise holders.

Ms. Jocelyne Girard-Bujold: Very major concern.

Mr. Alfonso Gagliano: I will ask Mr. Clermont to report on the negotiations.

Mr. Georges Clermont: The franchise program, which was started 10 years ago, allowed franchise holders to purchase stamps at a 17% discount. Under the conditions of the contract, franchise holders could not sell stamps for a lower price. In other words, they could not play around with the profit margin, because we do want to protect our market. Consequently, franchise holders were supposed to sell to consumers only. In addition, they were paid a set fee for selling a parcel, express service, registered mail, and so on.

In the last 10 years, we have come to two realizations. First, there were many franchise holders—not all, but many—who purchased the stamps at a 17% discount, and who sold them at a 10% discount and made a great deal of money. This was a violation of the obligation set out in the contract. We also realized, and it was the large franchise holders who pointed this out, that the effort required to sell a 45 cent stamp is minimal, whereas a great deal of paperwork has to be completed to sell insurance, priority post or a registered letter. It takes time and it costs them more.

They therefore asked us to reduce the discount on the purchase of regular stamps—we proposed 5%—and increase the fee they are paid to sell priority post and other postal services. In addition, we give them an annual fixed fee, at the beginning of the contract, to guarantee their franchise.

We are not taking away their profit. On the contrary, they are going to make profits. Many of them are going to make less. The average revenue of a postal franchise is about $250,000 a year, but between 50 and 100 of them make over $1.5 million a year. Those are the people we must stop.

Ms. Jocelyne Girard-Bujold: But that is not what I am referring to. I'm talking about a person who sells—

Mr. Georges Clermont: Yes, yes. Right.

Ms. Jocelyne Girard-Bujold: —only stamps in a convenience store. I'm not talking about priority post. These people do not sell any such products. I'm talking about people in convenience stores who sell stamps.

Mr. Georges Clermont: If the convenience store has a franchise just to sell stamps, it must sell all the other services.

Ms. Jocelyne Girard-Bujold: I know of some that sell only stamps.

The Chairman: Thank you, Jocelyne.

[English]

Colleagues, we've kept the minister here quite some time.

We appreciate your attendance today, Mr. Minister, and that of your esteemed colleagues. It's been very helpful. We reserve the right to invite you back again someday, possibly in the fall, to pursue matters of importance to members of this committee. With that, thank you.

Colleagues, we'll just take a minute to stretch while we prepare for our business meeting.

Thank you very much.

[Proceedings continue in camera]