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]

Thursday, April 22, 1999

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[English]

The Chairman (Mr. Brent St. Denis (Algoma—Manitoulin, Lib.)): Good morning, colleagues. Good morning, all. I'm pleased to call to order this meeting of the Standing Committee on Natural Resources and Government Operations.

On behalf of all members, I'm pleased to welcome to the committee the Honourable Alfonso Gagliano, Minister of Public Works and Government Services Canada, and with him an auspicious group of presidents and deputy ministers, including the Honourable André Ouellet, president of Canada Post; Marc Lafrenière, executive director, Canada Information Office; Danielle Wetherup, president, Royal Canadian Mint; Marc Rochon, president, Canada Mortgage and Housing Corporation; and Ran Quail, deputy minister, Public Works and Government Services Canada.

Welcome to you all. Sorry for the delayed start, but that happens to us from time to time.

I asked the minister how much time he had, and he has been very generous. We'll do the best we can within the hour, and then if we need a couple of extra minutes, we'll go from there.

Mr. Minister, we invite you to start, and thank you for that.

[Translation]

Hon. Alfonso Gagliano (Minister of Public Works and Government Services, Lib.): Thank you, Mr. Chairman.

I appreciate this opportunity to appear before you today as you review the Government Estimates for the current fiscal year. With your permission, Mr. Chairman, I'd like to introduce the people here with me: Mr. Bucholz, President of the Canada Lands Company; Mr. Ross Nicholls, President of Defence Construction Canada;

[English]

Jim Stobbe, assistant deputy minister; and Bill Mulvihill, who is the vice-president of Canada Mortgage and Housing Corporation.

[Translation]

In my remarks I will provide an overview of the various initiatives now underway in my department, and in the Crown corporations I am responsible for.

As you know, Mr. Chairman, Public Works and Government Services Canada provides a broad range of services to the many branches of the federal government, as well as to individual Canadians and Canadian businesses.

My department is the nation's largest purchasing agent. Every year, it buys close to $7 billion in goods and services.

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We provide office accommodation for 160,000 public servants and parliamentarians. The department manages a real property portfolio of some 350 buildings, worth more than $6.5 billion.

And finally, my department provides other services, including translation and interpretation, management consulting and audit, standards, publishing, compensation, and several others.

[English]

In a real sense, the portfolio of the Minister of Public Works and Government Services is where the theory of government policy takes material form. It's where plans and strategies become tangible reality. It is a heavy responsibility and it is one my officials and I take very seriously. With it comes the parallel responsibility of managing the funds entrusted to us efficiently and effectively.

My department has made many changes in its organization and service delivery, from downsizing its operation by more than one-third to increasing our use of private sector partners for the delivery of services. Looking to the future, we are involved in a number of important initiatives that will benefit Canadians. For example, we are developing infrastructure to support more efficient and secure methods of electronic commerce and delivery. We are providing real property and information management support to Canada's newest territory, Nuvavut. We are on target to ensure that all our critical systems and services, from central accounting and compensation, through to procurement and facilities, will be Y2K ready. We are developing the central accounting system that is the backbone of the financial information strategy. This is a government initiative to strengthen its financial and business management process and improve accountability to Parliament.

[Translation]

In all our endeavours, we seek to achieve three fundamental goals. First, the department is dedicated to finding new, cost- efficient ways to carry out its responsibilities. Second, my department offers a range and a caliber of services that are unmatched by any other government body or private sector player. Finally, through its visible presence in communities across Canada and its efforts to preserve our national heritage, PWGSC works to promote Canada's identity.

Cost-effectiveness, essential and exceptional services, and the promotion of our national identity—these are also the hallmarks of the Crown corporations and government agencies for which I am responsible.

The first such organization I would like to discuss is the Canada Information Office. Responsibility for this agency was transferred to my portfolio within the last year.

The Canada Information Office was established to help Canadians learn about their country, their fellow citizens and the work of their government.

At the same time, the CIO works to ensure that Canadians are provided with important information about the many government services and benefits available to them.

[English]

Currently, the office is working with other departments to improve the Government of Canada's 1-800 and website services. It is also working on a guide to federal programs and services. Recently the office played an important role in distributing information to Canadian households on how to make homes and offices Y2K compliant. In the coming year the CIO will continue its work to improve our communication capacity. Our goal will be to improve the government's dialogue with and relationship with Canadians.

Mr. Chairman, another organization I'm proud of is the Canada Lands Company. Annual returns from the company have continued to increase, growing from $11.8 million in 1995-96 to $20.4 million in 1996-97 and $52 million in 1997-98. Obviously these profits, which benefit all Canadians, are a very positive benefit of the work being done by the company. However, I also want to stress that CLC has another equally important focus, and that is enhancing the quality of life in the communities where they conduct business.

[Translation]

For example, at the former CN shops in Moncton, Canada Lands has directed one of the largest brownfield remediation projects in Canada, possibly the largest. Over the past 18 months, Canada Lands has successfully decontaminated a large part of this property to a state that it can be put back into productive use.

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Once again, CLC has employed a wide public consultation process, including a community round table. For its work in Moncton, Canada Lands recently received the prestigious Environmental Award from the Greater Moncton Excellence Awards program.

There are other equally important redevelopment projects at the St-Hubert Garrison near Montreal, and the Downsview site in Toronto. Both emphasize public consultation on the use of the land, and both have resulted in important investments and job creation in the surrounding communities.

[English]

Canada Mortgage and Housing Corporation is another success story. Since its inception over 50 years ago, CMHC has been involved in every stage of the housing process, from building homes, to planning communities, to financing home buying, to conducting research into materials and building standards and housing export development.

CMHC mortgage loan insurance enables many Canadians, in every region of Canada, to buy a home with as little as a 5% down payment. Thanks to CMHC, more Canadians are able to fulfil the dream of home ownership. The corporation's research results in better housing know-how, better building practice, and higher-quality homes. And through the Canadian Housing Export Centre, CMHC is helping Canadian firms open up new markets abroad.

Our government's commitment to social housing is coordinated through CMHC. In all, we provide $1.9 billion, which supports some 645,000 units across the country. CMHC is also investing $300 million over five years in renovation programs. These funds help bring homes up to health and safety standards and help upgrade accommodation for low-income Canadians, those at risk of becoming homeless, and persons with disability.

Mr. Chairman, CMHC offers many other programs to help house Canadians. The corporation plays an important role in helping to make Canadians one of the best-housed people in the world.

[Translation]

Another organization that plays a vital role in the lives of Canadians is Canada Post.

Canada Post offers all Canadians universal postal service anywhere and everywhere in Canada at an affordable uniform rate.

The Corporation must maintain universal access across a delivery network that keeps growing by an astonishing 170,000 addresses a year.

Canada Post has been able to fund its ever-expanding commitments without taxpayer support since 1988.

To continue to do so, a target of 11 per cent annual return on equity has been set to ensure that Canada Post has the ability to re-invest in its network, while keeping its promise of universal service.

No doubt the most significant event of the past year was the conclusion of a multi-year financial and service framework for Canada Post. The establishment of this framework marks the end of the debate on Canada Post's future. The Corporation will have to meet very specific objectives in the areas of service standards, pricing, financial performance and investment.

I would like to address the aftermath of the 1997 postal strike. Today, the arbitration process is still ongoing and Judge Richard will table his report at the end of the procedure.

As I am not part of this process, I want to express the hope that both parties will come to an understanding which addresses the reality of the modern world, and make a choice that will benefit Canada Post and its employees for the long-term. I also hope they do it soon.

Lastly, I wish to mention that the franchise network is doing well. Canada Post has worked hard to assist dealers; as a result, there has been no rise in franchise closures or turnover compared to previous years.

Also, Canada Post achieved one of the best overall employment equity records last year in terms of representation rates for women, aboriginal peoples, persons with disabilities and visible minorities. I am pleased to note that the Corporation maintained an "A" rating for the second year in a row.

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[English]

Mr. Chairman, the last organization I would like to discuss today is the Royal Canadian Mint. The Mint is a commercial crown corporation whose mandate is to produce coins for Canada and other nations and operate for a profit. The Mint's global business, which represents 80% of its revenue, helps to reduce the overall costs of Canadian circulation coinage. The Mint not only covers its cost, it's profitable. The profit for 1998 is in the order of $4.5 million.

Last April the Mint began construction of a new coin-plating facility in Winnipeg. I'm pleased to report that construction is on time and on budget. When operational in 2000, the plating facility will guarantee a reliable, cost-effective supply of plated coinage for Canada, produce an annual saving of $9.5 million to the government, and generate additional profits of $3 million.

The Mint is a Canadian institution that plays a vital role in preserving and promoting our national symbols and, through that, our identity, values, and culture. The commemorative circulation coins program, which is a celebration of the new millennium, is a good example. Over the course of this year and the next, Canadians will see 24 new designs on their 25¢ coins, a new one every month. Designed by individual Canadians, the coins celebrate the past that has helped shape Canada and look forward to human endeavours in the next millennium.

I would also like to mention the amendments I introduced to the legislation governing the Mint last year. I want to thank you for your support in Bill C-41, which received royal assent in March. The amendments will help the Mint compete more effectively in the global marketplace for the benefit of all Canadians.

Mr. Chairman, in my remarks today I have attempted to give you and the members of your committee a sense of the many initiatives under way with Public Works and Government Services Canada, the Canadian Information Office, and the many crown corporations I'm responsible for. I beg your indulgence, Mr. Chairman, for taking quite a bit of time today. You will understand that every corporation and agency within my portfolio deserves to be recognized for the good work they are doing for Canadians.

In conclusion, I'm certain that the organizations I'm responsible for will continue to work toward the three important goals I mentioned at the outset of this presentation: pursuing a cost-effective approach to government services; providing unique and essential service to our many clients; and promoting Canada's national identity.

With that, Mr. Chairman, thank you very much. I and my colleagues will try to do our best to answer all your questions.

The Chairman: Thank you, Mr. Minister.

I have a comment before we start the questions. We're going to try to get everybody on today, as we always try to do, so I'll ask members to come to their points and their questions quickly and efficiently.

We'll start with Werner, please.

Mr. Werner Schmidt (Kelowna, Ref.): Thank you very much, Mr. Chairman.

I thank all of the individuals who came, especially Mr. Minister. It's good to see you, and all the officials of the various crown corporations and the department itself. It's good to have you here.

I'll start off with a real simple question, and then I want to have a series of perhaps not quite so simple questions. What is the annual payment by CMHC to the government?

Mr. Alfonso Gagliano: Mr. Rochon?

Mr. Marc Rochon (President, Canada Mortgage and Housing Corporation): At this point in time we do not pay the government a dividend until our legislation is passed.

Mr. Werner Schmidt: Secondly, could you explain, Mr. Minister, the relationship between the mortgage insurance fund and the consolidated revenue fund?

Mr. Alfonso Gagliano: Marc?

Mr. Marc Rochon: Yes, we manage a schizophrenic agency, Mr. Schmidt. On the one side there's what we call the minister's account, which is basically the social housing affairs that are managed within that account; that amounts to $1.9 billion, as the minister mentioned. Then you have the mortgage insurance fund, which is a self-sustaining fund. We're running an insurance company, insuring mortgages that are let by financial institutions in the country. So they are very distinct funds and there's no communication between the two.

Mr. Werner Schmidt: So there's no relationship between the consolidated revenue fund and the mortgage insurance fund?

Mr. Marc Rochon: At this point in time, no.

Mr. Werner Schmidt: The mortgage insurance fund last year showed a revenue of over $600 million. Where is that money now?

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Mr. Marc Rochon: That money is with us. There was a profit generated and some taxes have been paid, and we also invest in reserves. If you run an insurance company, you need to have reserves for bad days.

Mr. Werner Schmidt: Mr. Chairman, I would like to ask as well whether the mortgage insurance fund would cover the liabilities that are the result of the leaky condos in Vancouver.

Mr. Marc Rochon: This has been a thorny issue. The minister may want to comment on this. The minister has been very heavily involved in this, and I think he would be more eloquent than I would be.

Mr. Alfonso Gagliano: Yes, definitely. Since the beginning CMHC has been very helpful, not only in continuing to insure those who had their mortgage insurance with us, but also we offered openly to insure the mortgage for anybody else who would like to refinance their property. We responded to the Barrett task force report; we contributed $75 million, with the Government of British Columbia, to have a special fund so that people could borrow through that fund.

Yes, we believe we should continue to insure the mortgages. Our mortgage system, as the president said, has some good days and some bad days, but overall that's why the insurance fund is run; it's really an insurance fund, separated from the operating budget of the corporation.

Mr. Werner Schmidt: Has the Government of British Columbia taken the Government of Canada up on the $75 million bridge financing?

Mr. Alfonso Gagliano: Yes, it has. Right now we are having discussions with the Government of British Columbia. About a month ago I met with the minister responsible for housing in B.C., and they asked that the $75-million loan that we are offering should be at no interest or at a very low interest rate. I asked for a report on the fund, what the requests are so far. We're studying the situation, and so far the loan is with the current bank interest.

As for whether we will respond positively to the demands of the British Columbia, so far we're still looking at it and I'm waiting for a more detailed report. But I should be able, in the next couple of weeks, to have a follow-up position on that.

Mr. Werner Schmidt: Thank you very much.

The other question comes back to the changes in Bill C-66. I heard the president of CMHC say clearly that at the moment there is no payment to the Government of Canada in the form of a dividend to buy CMHC. How will the new provisions of Bill C-66 change that?

Mr. Marc Rochon: The provisions of Bill C-66 will allow us to pay a dividend to the government, and that dividend will be based on a percentage of our capital.

Mr. Werner Schmidt: Will this mean, then, that a certain portion of the surplus in the MIF fund will in fact become a dividend to the Government of Canada?

Mr. Marc Rochon: That is correct.

Mr. Werner Schmidt: What will the level be, and what will the guidelines be to determine which is surplus that will be declared a dividend?

Mr. Alfonso Gagliano: If I may, I believe that once the legislation is passed they will have to go through the same process as we went through with Canada Post, in the sense that we will ask the corporation to prepare a business plan with the new legislation, and therefore there will be discussion. Our government interest is that the corporation continue to be viable and give the many services it offers to Canadians and, at the same time, give a return to Canadians. But again, we have to make sure that both are compatible and that the corporation continues to exercise its leadership role in housing in Canada.

Mr. Werner Schmidt: I understand that, Mr. Minister.

The other question I have is for clarification. On page 10.14 of the Public Accounts of Canada there's an interesting footnote, and I'd just like to read what it says here, Mr. Chairman. It says that:

Canada Mortgage and Corporation (CMHC) administers three funds of which the Mortgage Insurance Fund (MIF) and the Mortgage-Backed Securities Guarantee Fund are active. The MIF provides insurance for a fee, to private sector lending institutions to cover mortgage lending on Canadian housing. Besides establishing a framework of confidence for mortgage lending by private institutions, the Fund facilitates an adequate supply of mortgage funds by reducing the risk to lenders and by encouraging the secondary market trading of mortgages, to make housing more accessible for Canadians.

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Now, here's the point, Mr. Chairman:

An actuarial study of the MIF as of September 30, 1997 disclosed that the Fund had a deficit of $6 million. The Mortgage-Backed Securities (MBS) program was implemented in 1987. For a fee paid by approved financial institutions, CMHC and ultimately the Government guarantee timely payment of principal and interest to MBS investors who participate in a pool of MIF insured first residential mortgages which have been repackaged by the financial institution into investments of $5,000 denominations. Since 1984, the corporation has also operated the Mortgage Rate Protection Program (MRPP). As premiums collected by CMHC...

Now, Mr. Chairman, it seems to me that we need to ask ourselves why is it that actuarially the MIF was shown to have a deficit when in fact it showed a profit in terms of the other part of the Public Accounts? Could you explain that?

Mr. Alfonso Gagliano: Mr. Chairman, we have here the vice-president responsible for financial affairs. Maybe he can explain that.

Mr. Bill Mulvihill (Vice-President of Corporate Services and Chief Financial Officer, Canada Mortgage and Housing Corporation): There are three funds and each are accounted for separately. The mortgage insurance fund is reviewed annually by our actuaries, and as I think has been referred to, it's a number that can move up and down from time to time, depending on recessions or whatever in the country.

The mortgage-backed securities guarantee fund is another separate fund. That fund has had very little claim on it, because—

Mr. Werner Schmidt: That's right, it's very different.

Mr. Bill Mulvihill: —the main projects there are already NHA insured. The interest rate protection plan is a program that was very little used and was announced back many, many years ago, when interest rates were as high as 20%. It's not a fund per se; that is, the moneys went into the government, and any claims—there have been none—would be paid directly out of that.

The Chairman: For the record, for the transcript, we need your name and title.

Mr. Bill Mulvihill: I'm Bill Mulvihill, and I'm the vice-president of corporate services and chief financial officer at CMHC.

The Chairman: Thank you, Mr. Mulvihill.

Mr. Werner Schmidt: We need to say one thing, though, that the MIF showed a surplus of $19 million in 1997, and yet the actuarial account says they had a $6-billion deficit. That's a $25-million difference. How do you explain this?

Mr. Bill Mulvihill: First of all, the actuarial study is done as at September 30. The liabilities of the fund are in the order of hundreds of billions of dollars; that is, we have insurance, of course, of several hundred billion dollars. I would say that the difference of a few million dollars, up to $25 million, is not material, given the size of the fund that we deal with, and would amount to accounting treatment between the study and the production of the annual report. Given the amount of transactions in the fund, that's a very small amount of money indeed.

Mr. Werner Schmidt: Are we done, Mr. Chairman?

The Chairman: I'll come back to you, Werner.

Mr. Werner Schmidt: Okay. I've only started.

The Chairman: Okay, I'll put you back on the list.

I will again remind members... I always get excellent questions from the members of this committee.

Marlene Jennings, please, and then Francine.

[Translation]

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you, Mr. Chairman and Mr. Gagliano.

I have several questions, but first, I'd like to thank Marc Rochon, the President of the Canada Mortgage and Housing Corporation, for responding so quickly to the request submitted to his agency at the very start of the ice storm. He took no time getting back to me and verifying to see whether any of his agency's housing units were vacant and ready for occupancy, and whether they could be made available to Quebeckers forced to leave their homes. On behalf of all Quebeckers, I'd like to thank you very much. You did an excellent job and your efforts reflect the changing philosophy of our government agencies and the fact that they are much more attuned to the needs of Canadians.

Mr. Ouellet, during his presentation, the minister mentioned that there had been no rise in franchise closures since the new policy went into effect. I'm curious as to the actual number of franchise closures and the turnover rate.

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The minister also mentioned that Canada Post had an excellent employment equity record in terms of representation rates for women, aboriginal peoples and visible minorities. Could you supply us with the exact figures for each region, specifically for the Greater Montreal Area, for each category of worker? If you cannot do so at this time, perhaps you could get that information to us a little later.

What types of policies or programs have you implemented to celebrate or mark the International Year of Older Persons?

Hon. André Ouellet (President, Canada Post Corporation): Very briefly, I can tell you that in 1997-1998, 29 new franchises were opened, whereas there were 36 franchise closures, for a net loss of seven. During the past year, since the announcement of our new policy, there have been 30 franchise openings, and 33 closures. Therefore, there were fewer closures during the last fiscal year then there were during the previous one. Two years ago, the net loss was seven, whereas last year, it was three.

Ms. Marlene Jennings: Fine. Thank you.

Mr. André Ouellet: The figures relating to our efforts in the area of employment equity appear in our annual report, but I could arrange to provide you with a regional breakdown. The figures appearing in our annual report are overall statistics, but since the member has asked for a breakdown by region, I will see to it that the committee gets this information.

Finally, to mark the International Year of Older Persons, Canada Post has, at the request of the Minister of Health, decided to issue a commemorative stamp. The official launch of the stamp was attended by representatives of the Canadian Coordinating Committee for the International Year of Older Persons which will hold a series of cross-country meetings throughout the year. As you know, the committee is co-chaired by former External Affairs Minister Flora MacDonald. Members of the Canada Post Heritage Club, an association of retired employees, were invited to attend the formal launch ceremonies at Government House.

Mr. Alfonso Gagliano: On the same subject, the Royal Canadian Mint will be announcing very shortly its plans to mint a new coin to commemorate the International Year of Older Persons.

Ms. Marlene Jennings: That's an excellent initiative.

Mr. André Ouellet: Yes, the Minister's announcement is interesting because the new stamp and the new coin could prove to be a happy pairing indeed. The Royal Canadian Mint has hired the same graphic artist as Canada Post did. Both the coin and the stamp will bear the same design and interested parties can acquire both of these items marking the Internal Year of Disabled Persons.

Ms. Marlene Jennings: Congratulations. I'd like to repeat a suggestion that I've already made to officials from your agency to mark this special occasion. Issuing a commemorative stamp is an excellent idea, but if your mandate allows it, perhaps you could consider implementing a policy for a brief period of time whereby seniors or organizations working with seniors could be exempt of having to put postage on their mailings. You could limit the number of eligible mailings. I think your should seriously consider this suggestion. If you find a way to follow through on it, I know people would be very appreciative. I'll leave you to think about it.

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Mr. André Ouellet: Canada Post, like other Canadian businesses, has set up a program whereby subsidies are awarded to various agencies. It has decided to focus on programs aimed at eliminating illiteracy. Of course, there are many ways to help non- profit organizations or community agencies, but since our resources are rather limited, despite everything, we have decided to focus our efforts on literacy issues. Therefore, we can't be as generous as we would like to be toward other agencies making requests like this.

Ms. Marlene Jennings: Thank you.

[English]

The Chairman: Thank you, Marlene.

[Translation]

Ms. Marlene Jennings: Mr. Rochon, as I understand it, the government fully insures mortgages. Your main competitor is GE Capital Mortgage Insurance Company, which insures mortgages up to 90 per cent. Would you object to the government setting the same guidelines for the two agencies, given that you both operate in the same field?

Mr. Marc Rochon: That's up to the government to decide.

Ms. Marlene Jennings: Yes, but you must have some opinion, considering that you are in direct competition with this company.

Mr. Alfonso Gagliano: Ms. Jennings, pursuant to the relevant legislation, the Canada Mortgage and Housing Corporation has a mandate to get involved in marketing and business activities. This is a decision that would have to be made by the Minister of Finance, on behalf of the government. Government policy dictates that CMHC should compete with private sector players. Therefore, we are not opposed to the private sector benefitting from the same conditions as the corporation.

Ms. Marlene Jennings: Thank you very much.

[English]

The Chairman: Thank you, Marlene.

Francine Lalonde, then Reg Bélair. Go ahead, Francine.

[Translation]

Ms. Francine Lalonde (Mercier, BQ): Even though I was called in at the last minute to replace a colleague who was unable to attend, I'm happy to be here, Mr. Minister. I listened to your presentation and read your speaking notes carefully.

In your expenditure plan, under the heading Optional Services Revolving Fund, we note that expenditures for the coming years are forecast to be $113 million. Surely this includes expenditures for public relations, given that a paragraph in your 1996-1997 budget stated that public relations were included under optional services. What percentage of this $113 million is earmarked for public relations?

Mr. Alfonso Gagliano: We expect to spend approximately the same amount as last year.

Ms. Francine Lalonde: And how much was that exactly?

Mr. Alfonso Gagliano: I don't have the exact figures with me. Which page are you referring to?

Ms. Francine Lalonde: To page 73.

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Mr. Alfonso Gagliano: Mr. Chairman, for the sake of expediency, perhaps we could verify that information and get back to the committee with the exact figure at a later date.

Ms. Francine Lalonde: Fine, but when you hear my next question, you'll understand why I'm anxious to get an answer from you.

You conclude your presentation by restating your department's three important goals, the last of which is to promote Canada's national identity. Considering that Quebec contributes the equivalent of about one quarter of the budget and does not receive its fair share of certain goods and services, surely you can understand why we are curious as to the cost of promoting Canada's national identity and what proportion of the bill Quebec foots. Where might I find that information?

Mr. Alfonso Gagliano: First of all, generally speaking, the Government of Canada, its departments and Crown corporations are all responsible for promoting their mandate. When I talk about promoting Canada's national identity, I'm relating this objective to my department and to the corporations for which I'm responsible. I'm not necessarily talking about the government in general. Each minister is responsible for administering his or her own budget, even though each department and corporation acquires goods and services through PWGSC.

We will look at this particular item and our deputy minister will try and dig up the information you're looking for. However, perhaps you could be more specific. Your question concerns public relations and our answer could vary depending on what takes place throughout the course of the year. All I can tell you is that Quebec does in fact receive its fair share.

[English]

Do you have anything to add?

Mr. Ran Quail (Deputy Minister, Department of Public Works and Government Services): Sure.

First of all, on the question, as I understand it, it's table 16.

[Translation]

You're referring to expenditures under the heading...

Ms. Francine Lalonde: Optional services.

[English]

Mr. Ran Quail: The operational services revolving fund. There is no money in there for communications comme telles.

A revolving fund is like a line of credit that you go to the bank for. We go and do work for other people. So if people would like us to print something, whatever it happens to be—a book, a notice, whatever it would be—we would undertake to do the printing for that department. We would enter into the contract, we would do the printing, and we would pay for it. The source of the cash would be the revolving fund, and then we'd recover the money back from the department.

So a revolving fund is a line of credit in order to allow us to do business for another department, very much like a line of credit that a company would have. There is no money in here in terms of appropriations for expenditures for communications.

[Translation]

Ms. Francine Lalonde: I'd like to focus for a moment on the 1996-1997 budget which identified optional services as one of six revolving funds which included supply, public relations and printing services.

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You only answered with respect to printing services. Are public relations still included under this budget item known as optional services?

[English]

Mr. Ran Quail: The operational services revolving fund was created in 1992 for the following purposes: the acquisition and provision of articles, supplies, machinery, equipment and other material; the acquisition of printing and publishing services; central moving and central freight; and the distribution and disposal of surplus crown assets.

That is what we use the fund for, in terms of provision of articles and supplies, printing and publishing, as I said, moving and central freight. If people want to move, we hire the movers and then get the money back. It's also for the distribution and disposal of surplus items. That's what we use the revolving fund for.

[Translation]

Ms. Francine Lalonde: Therefore, public relations are no longer included under this item, although the information I have here in front of me seems to contradict that statement.

Mr. Alfonso Gagliano: It might be a good idea to check and see if we are talking about the same item on the same page. That would make things easier. In order not to waste too much time, perhaps I could get that answer to you later, once we know exactly what budget item you're referring to. Our department provides services to and purchases goods on behalf of other departments. Before I can answer your question, I need to know for certain exactly what item and which services we are talking about.

Ms. Francine Lalonde: I understand. May I ask a very brief question?

[English]

The Chairman: Very short.

[Translation]

Ms. Francine Lalonde: I just want to point out that in the French version of your speaking notes, we read that your systems and services "seront compatibles avec le bogue de l'An 2000". Shouldn't it in fact say the opposite? I'm concerned to see that this expression comes up several times.

Mr. Alfonso Gagliano: I'm told that there's an error in the French version.

Ms. Francine Lalonde: Because this can't be possible.

Mr. Alfonso Gagliano: We'll look into this.

Ms. Francine Lalonde: Thank you.

[English]

The Chairman: Thank you.

We will hear from Réginald Bélair, then I have Peter Stoffer, Carmen Provenzano, John Duncan, and others after that.

[Translation]

Mr. Réginald Bélair (Timmins—James Bay, Lib.): My question is for my former colleague, Mr. Ouellet, the President of Canada Post, and it concerns courier services. You may recall that in 1996, the Radwanski Report strongly recommended that Canada Post divest itself of its shares in Purolator. The Corporation does not appear to have heeded this call since, on the contrary, it has increased its share holdings in the company from 75 per cent to 96 per cent. Its actions have prompted howls of protest from private courier services.

This morning, I learned from a reliable source that the Canadian association of couriers has filed a formal complaint with the Competition Bureau here in Ottawa in an effort to force Canada Post into divesting itself of its shares and to cease competing unfairly with other courier services. Moreover, the association charges that Canada Post increased the cost of mailing a letter from 45 cents to 46 cents in order to cover the cost of acquiring new shares in Purolator.

Would you care to comment on this highly controversial issue which has put you at loggerheads with other courier services?

Mr. Alfonso Gagliano: Mr. Chairman, before we hear from Mr. Ouellet, I'd just like to point out that this isn't the first time we've received complaints of this nature. A similar complaint was filed in 1998.

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After investigating the matter, the federal Competition Bureau found that no subsidies had been awarded for the business or commercial service over which the corporation held a monopoly. Furthermore, each year, we ask an auditor to review these practices and we report these findings in our annual report to Parliament. I don't believe our actions are deserving of any criticism. I'll let Mr. Ouellet explain to you in greater detail the status of the relationship between these competitors.

Mr. André Ouellet: Thank you, Minister. While this association claims to represent several private courier services, I'd really like to know who it represents and who funds its activities. According to the information I received, it would appear that one of our major competitors is behind all of this. Its attitude seems to be: Lie and worry about the consequences later". All of the charges repeatedly made against us are false and have been clearly proven to be false. As the minister just said, complaints were filed with the Competition Bureau and the charges proved to be unfounded. I have here a letter addressed to our attorney in October 1998. Allow me to read an excerpt from it:

[English]

In summary, our examination did not reveal any evidence of cross-subsidizations between the letter main service of Canada Post and its courier operations, or courier operations of Purolator.

[Translation]

The Competition Bureau carefully reviewed all of the charges made by these individuals who were seeking to discredit us and concluded that these charges were baseless. We are accused time and time again of the same thing, perhaps in the hope that if these charges are repeated often, maybe people will start believing them. The activities of Canada Post were thoroughly scrutinized by the Competition Bureau and now, the Corporation finds itself , following a government decision, in the position of having to hire an accounting firm to do an annual audit, just so that it can report annually that no cross-subsidization is occurring.

Moreover, I submit that a handful of competitors are giving us a hard time because they want to destabilize our operations. However, we're not scared a bit. We do not own 100 per cent of Purolator's shares. If that were the case, this company would become a Crown corporation. We are the majority shareholder in this company. Canada Post is the first postal service of its kind to acquire this type of courier service. Today, the British, French, German and many other postal services are following our lead.

I will admit that Mr. Radwanski reviewed this matter and asked us to justify our involvement. We explained that we felt it was important to...

Mr. Réginald Bélair: Mr. Chairman, he went so far as to ask the corporation to divest itself...

Mr. André Ouellet: Yes, but that was his own personal opinion. Upon concluding his review, he submitted a series of recommendations, one of which called upon the corporation to sell its shares in Purolator. Since the government of Canada is the shareholder in this case, it responded that this was out of the question. We're grateful the government made this decision several years ago. At the time, a different administration was in office, but the decision was later backed by the current administration.

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Two successive governments have recognized that if Canada Post is to earn revenues and to continue providing universal postal service to the Canadian public, it must be allowed to compete in sectors that generate profits. The corporation will never make a profit delivering mail to the most remote regions of the country. Only by moving into profit-generating sectors can we continue to ensure universal postal service.

It's not our monopoly on mail delivery that subsidizes our competitive services, but rather it's the profits generated by our competitive services that allow us to provide universal postal services.

Obviously, if our shareholder ever ordered us to sell our shares in Purolator, then we would comply, but for the moment, I respectfully submit to those responsible for this communiqué that the decision has been made. A study was done, Mr. Radwanski filed his report and issued a personal opinion and the government rejected his recommendation. As far as we're concerned, the matter is closed. We intend to continue operating in this sector and we will, of course, give private courier services some healthy competition.

Mr. Réginald Bélair: You mentioned the Competition Bureau here in Ottawa. I have a number of questions about this agency. Every two or three years, complaints are filed against the multinational oil companies. Each time, we're told that yes, there is competition and that everything is just fine. You appear to be saying the same thing. Yet, as a resident of a rural region where premium gasoline is 67 cents a litre, compared to 48 cents a litre in Toronto, I don't understand at all why the Competition Bureau makes such claims. The situation at Canada Post seems somewhat similar to me. At least, that's my opinion.

Mr. André Ouellet: I can't speak for the Competition Bureau or for the minister, but I can tell you one thing: the day Canada Post no longer provides postal services to rural and remote regions is the day you can be certain that the courier services making these charges against us will start charging much higher rates that we presently do.

Mr. Réginald Bélair: Thank you.

[English]

The Chairman: Thank you.

Peter Stoffer.

Mr. Peter Stoffer (Sackville—Musquodoboit Valley—Eastern Shore, NDP): Thank you very much, Mr. Chairman. I also wish to say I'm replacing my other colleague, Angela Vautour.

First of all, I want to thank the minister and Canada Post for extending my coin collection. It's a very diverse collection and it's moving on. My sister is an avid collector of stamps, and I want to thank you for the ones on the celebration the other day of the Sikh Punjab region. That was very well done and I want to thank you for that.

Now on to the questions. I have rapid-fire questions. You can write them down as I go along.

I've heard through the grapevine, Minister, that you want to put the Canada symbol on CBC-televised newscasts. I just want to know if that is still an issue.

I noticed in your brief that you said Moncton gave Canada Lands a prestigious environmental award. I don't think Sydney will be giving you one for the tar ponds. I would definitely recommend, since it is federal lands, that as quickly as possible we reconvene all the troops and clean up the worst environmental mess in Canada, if not North America or the planet. They're toxic, they're making people sick, and they need to be cleaned up now. No more studies; just do the job and put the money toward it. Maybe one day we can sit here and say the community of Cape Breton is giving you an award as well.

You mentioned $300 million for housing over five years. I wonder if you could possibly give me a breakdown, maybe not now, on exactly where that money is being spent across the country. As you know, CMHC and the federal government have got out of a lot of cooperative housing projects, for example, in the Maritimes. Although we feel very angry about that, we wish to have a complete breakdown of how much money is actually going into the provinces for CMHC.

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In terms of the post office—here we go again—I love what you said here: “in Canada at a uniform rate”. As you know, the three provinces of Newfoundland, New Brunswick and Nova Scotia pay more for their stamps than the rest of Canada because of the dreaded HST, which was put upon us by the federal government in capitulating, at that time, to the Liberal provincial governments. I would put it to you that if you want to create equality, start reducing that HST on our stamps so people in Atlantic Canada, especially in the three provinces that are part of that, can pay a uniform rate, as you say.

You talk about uniform service. In my riding of Lower Sackville, Nova Scotia, one subdivision gets postal service to their doors, while right across the street they have a superbox. That superbox is not covered. It's out in inclement weather, and I've seen elderly people in their seventies go there with their walkers, in the rain, to try to get their mail out of a superbox. It's just absolutely scandalous that Canada Post, such a proud tradition in Canada, would allow that to happen. If anything, at least cover them up so people don't get wet when they take their mail out of the boxes.

You say there's 11% annual return. How much of that goes back to the government in terms of a dividend? I find that most disturbing. You should be reinvesting that money into the corporation so that instead of putting up superboxes, you could hire more people and give the services to the Canadian citizens that they demand and deserve.

Our population is getting older, and that's one of the services people want—to have their mail delivered to their doors. It's said time and time again. For any federal government to use it as a cash cow is absolutely incorrect.

The last question I have for you is about the rural route carriers. They're not covered under the Canada Labour Code. Right now a lot of their contracts are coming up and they're going to the lowest bidders. I have reports at home, and in many cases people are working all these hours and end up making about $2.75 an hour. They're not covered under the Canada Labour Code and there are approximately 7,000 to 9,000 of these people across the country, especially in rural Canada.

I'll put it to you, sir, to try to allow these people to work with some sort of dignity, with some decent salaries accorded to them. Don't put so much pressure on the race to the bottom, because it's more and more difficult for them to do it.

I have many other questions, Mr. Chairman—

The Chairman: That's probably enough for now.

Mr. Peter Stoffer: —but I'll let them carry on. I thank you.

The Chairman: Thank you, Peter.

Mr. Alfonso Gagliano: Mr. Chairman, how much time do I have to answer?

The Chairman: The minister has indicated he could stay as late as one o'clock but would have to leave then. We'll just see where we are.

Mr. Alfonso Gagliano: I'll try to answer the major points, especially those that concern me directly, as Minister of Public Works and Government Services.

The word mark symbol is a Treasury Board directive that applies to all the crown corporations.

In terms of the Cape Breton environment problem, my colleague, the Minister of the Environment, is responsible for that. I know she's very concerned and working very hard to see what we can do there. But it's not land that's under Public Works.

Mr. Peter Stoffer: It's a crown corporation, though.

Mr. Alfonso Gagliano: Yes. It's not one of my corporations. I don't want to give you a government position; I'm trying to...

With Canada Post, as I said in my opening remarks, 170,000 new addresses are being added every year. In the 1980s, we had the debate about the super-mailboxes. That debate has gone on for many years now. We're trying to give service to everybody. For example, for rural Canada we made a decision in Canada Post, I believe two years ago, where local mail is sorted and distributed. I think there is quite an improvement in the service.

In terms of rural delivery, when the crown corporation was created, Parliament decided—and rightly so, I believe—that rural delivery should be done in a different way. Within two months of my mandate as the minister responsible for Canada Post, I met with the union. They made their requests, and I went back and looked at the legislation. The arguments that were given then and the arguments that are given now—there is no change. Those are independent contractors. I would like to remind everybody that the people who have the contract not only can deliver the mail, but they can deliver other things, and they do. It is not only that person who gets the contract, but a member of the family can deliver the mail while they do something else. It's really a contractor.

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I asked the chairman of Canada Post to look at how we can improve the contracting process, and I think they're looking at it. I hope in the near future we can announce that the contracting process will be improved more. It will represent a response to the concerns our people have. And yes, as a crown corporation we have the responsibility to be open and transparent. So the process has to be open, but I think it has to be fair too, and that's what the corporation is working on.

In terms of CMHC and the RRAP program, naturally we are continuing discussions on social housing. We have already transferred social housing to five provinces and two territories. We are negotiating with other provinces. In Ontario, for example, we have discussed it with the co-op movement and we took from the negotiating table with the co-op movement...

In terms of the $300 million I mentioned in my remarks, that's the RRAP program. I announced a year and a half ago that $50 million a year—and this year, the year that just finished, I even put in an additional $50 million. This is a program that is working with the provinces and municipalities. I don't have the breakdown of how much per province, but I can assure you that every province gets its fair share. I will send the committee the breakdown, unless we have it here. If we have it, we can give it to you right away.

It's an important program, a program that helps handicapped people, aboriginal people, and anybody else we can restore property to, and we make sure it's available for people with housing needs. It's a program that works very well with the provinces. Unfortunately, some of the provinces have not joined the program, but we don't penalize the people in that province; we continue to deal directly with the people and the organizations in need in the provinces where we have no agreement. For those where there is an agreement, the provinces are delivering the program and it's working very well.

We also have a program called the Canadian Centre for Public-Private Partnerships in Housing. Last year we created more than 2,500 units, and we hope to create 3,000 new affordable housing units. We look forward... and assume we have more available. We had $50 million. We put it in the RRAP program at the end of November, beginning of December.

I think I have answered the major points of your question.

The Chairman: If you don't mind, I know you have to leave soon, maybe the minister could follow up with you, Peter.

I'm going to go to Carmen right now.

Mr. Carmen Provenzano (Sault Ste. Marie, Lib.): Mr. Chair, my question is to the minister, or any one of the wide array of witnesses who have attended this morning.

Mr. Minister, in your presentation you mentioned that your department is Canada's largest purchasing agent, expending in the area of $7 billion annually. You also mentioned that your department provides a lot of services to Canadian business. That's a lot of money to be spent. Do we have a program to ensure, in a proactive way, that Canadian business gets a good share of providing the goods and services that are bought by the $7 billion your department administers?

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Mr. Alfonso Gagliano: Yes, I believe we do, and we encourage any business or any person to do business with the Government of Canada. We have the biggest procurement agency. With some of my colleagues, some of my officials, we take any opportunity we have to explain to Canadians, through business associations or their Chamber of Commerce, how to do business with the Government of Canada.

It's important that the business community participate, but it's also important for Canada and for Canadian taxpayers, because the more participation we have, we believe we are more competitive and we get better service and better price. That's what the competitive world is.

Two years ago we introduced Contracts Canada. It was one of the recommendations of this committee or the predecessor of this committee. It's a service through the Internet addressed to small and medium-sized business. Through the Internet they can get access to whatever the government buys. They can get the history of the product, the price paid the last time. They can file their bid electronically, and so on.

We also eliminated our own bidding system. We joined the MERX program, where seven provinces, hospital institutions, municipal institutions, and now the federal government are into one system. We hope that one day this will be the system with the NAFTA countries, so that Canadians, just by entering through the electronic mail system, can have access.

In today's new world and with globalization we can no longer guarantee the regional parts of each procurement. What we want to guarantee is fair access. Everybody has to have access. I think those two programs are working well. We're always looking for innovative situations.

In the past, procurement for the Government of Canada was decided in a closed room by a number of officials. It was decided what the Government of Canada needed, and then they would go out and ask to have that product or that service supplied. Now we do it differently. We go out there and say “We need such and such a product. Tell us what exists. How can we...” So we have a better communication with the industry. Therefore we don't have to reinvent the wheel every time the Government of Canada decides to buy a chair. We just have to go out there and ask what chairs are available. We give the chair as an example, but any other product.

I think we created a good partnership with the industry and the communities. We're working very hard. My officials are working very hard to achieve the best price and the best quality for the Canadian taxpayer and also to make sure it's fair for everybody and everybody has access.

The Chairman: Thank you, Carmen.

John Duncan had the next question, but he had to leave for a conference call, so he's given his few minutes to Werner.

Mr. Werner Schmidt: Thank you very much, Mr. Chairman.

I'd like to ask three related questions to the minister with regard to Canada Post.

Four months have now gone by since the new fee structure was imposed on the postal franchisees. The minister told us in the House that these people would not be suffering as a result of these structures, and also that maybe some would even get more money than before. Well, some of the information I'm getting now indicates that indeed that's not the case. Their revenue has dropped substantially, and in some cases they are indeed in serious straits. I also am aware that Safeway has closed all the franchises it had. I wonder if the minister would agree that a review needs to take place here on exactly what's happening with regard to the franchisees and the new fee structure.

Mr. Alfonso Gagliano: Mr. Chairman, concerning Safeway, I believe the notice that they were getting out of postal franchises in their stores was given even a few months before the new franchise system was announced or made public. So I don't think their decision has anything to do with the new franchise package.

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Just to recall the situation, we delayed the application of the new package for two months so that Canada Post could admit as many as possible of their franchisees and explain the situation. We did that. We put it into place.

At that time we said that we would look case by case at especially those we were addressing, the small ones, with $300,000 business volume per year. So far, I believe—and I'll let the chair of Canada Post say more—every time a case has come forward they have been met and we have discussed it. If there are other cases...

The purpose of the reform of the package was that over the years there was a new system of stamp distribution that was created, and we wanted to change the system to alleviate that. In general, the package—at least by the reports I have—is being implemented, and every case has been addressed where there were any difficulties. If you have any specific case, I would like to know about it.

The chairman has more details than I have.

Mr. Werner Schmidt: I appreciate that very much, Mr. Minister, that you will respond to them on an individual, case-by-case basis. I appreciate that.

The related question has to do with the comparative numbers the chairman of Canada Post used: that there were roughly 30 new ones last year, and 30 also were closed, so about the same. Is there a difference between the number of closures since December 1 and now? Also related to that, the new outlet franchises—are those private outlets, or are those outlets that Canada Post has, corporate outlets?

Mr. André Ouellet: No. The numbers I gave earlier are franchisees. Compared to last year, the dealer resignations are down in the first three months since the retail renewal program was implemented.

What I said is that in 1997-98 we had 29 new franchisees and 36 closures, for a loss on the total of seven. For 1998-99, since we have announced the new retail renewal program, there have been 30 openings. And let me tell you that we could have had 300 openings, because there are a lot of people who are interested in becoming franchisees. So if you have some people who are unhappy, there are a lot of people down there who are ready to take their place.

So there were 30 new openings and 33 closings. Last year there was a minus seven. This year it's minus three. So in fact we fail to see where the dealers are unhappy, because if they were very unhappy there would have been many more people who closed than people who are indicating that they want to close.

Mr. Werner Schmidt: Could you answer the other question? How many of the new ones are Canada Post corporates, and how many of those are private?

Mr. André Ouellet: None.

Mr. Werner Schmidt: None are corporate?

Mr. André Ouellet: They are all franchisees.

Mr. Werner Schmidt: Thank you.

The Chairman: Thank you.

Gilles, just before the minister has to leave.

Mr. Gilles Bernier (Tobique—Mactaquac, PC): Thank you, Mr. Chairman.

I want to thank the minister and all the people for coming in front of the committee.

I'll try to be as fast as possible in my questions, because I have quite a few.

I just want to talk a little bit about super-mailboxes, what Peter talked about a while ago when he said that it's bad enough when it's raining outside and people want to go and get their mail and they have to get wet to go to the super-mailboxes.

I will go a bit further. We received numerous letters from the maritime provinces and from Quebec that say that those super-mailboxes are getting full of water. That means that now not only are the people getting wet, their mail is getting wet also. Is there something we can do? It's not only one letter I received; I have received numerous letters on that, from the Maritimes and Quebec. Is there something we can do to try to put something on top of that? You don't need to build a big gazebo. You just need something on top and maybe a few little things on the side to stop the water from going into those mailboxes.

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Mr. Alfonso Gagliano: Yes, definitely, if you will give us the location. It's the first time I've heard that. We'll make sure the mail doesn't get wet, to start with, and definitely if there are repairs, the chairman will make sure the repairs are done. We'll see. It depends on the location. There are some of those super-mailboxes that have a roof over them for the people when they go and get it, and some don't. The one I have doesn't have it, but it's a small section.

I think if you give me or the chair the locations, we'll make sure. I think we'll ask our regional people in the Maritimes if that problem is occurring. We'll look into it. Sometimes they need repairs.

Mr. Gilles Bernier: Mr. Minister, my next question is about the 1999-2000 estimates, part III, page 63. Why have you allowed the contingency funds in real property services to triple, to $184 million this year? This money is supposed to be for unforeseen costs or emergencies for major capital projects. Yet less than two weeks after the estimates part III were tabled, $118 million of that amount was already spent. What did you spend it on, and why? If it was spent within two weeks after your report, why did you not include it in the estimates? You remember just a while ago in one of your comments you talked about buying a chair. I think you can buy quite a few chairs for $184 million.

Mr. Alfonso Gagliano: Let me assure you... I'm going to let the deputy or the assistant deputy minister answer, because it's a very complicated system the way revolving funds or allocating funds and budgets work in this capital city.

Let me say that no money was spent. It's a question of allocation and approval that goes from one place to another. To make sure I don't confuse the situation even more, I'll let the deputy minister try to explain how our budget works in this place.

Mr. Ran Quail: Thank you, Minister.

Just to put it into context, first of all, it's quite correct that in the main estimates there is a figure of $131.4 million—and we're talking about capital expenditures for the department. In the book called “Public Works and Government Services Canada, A Report on Plans and Priorities” of the main estimates, on table 7 there is an outline that shows the capital moving from the $314 million that's in the main estimates up to a figure of $380.8 million for 1999-2000.

The $380.8 million is made up of $131 million on total spending on approved major capital projects, and those are listed in the book. Those are ones that are essentially ongoing and account for $131 million. Total spending on major capital projects to be approved, and not listed in the above, is $184 million. That $184 million would be composed of all kinds of projects, now that we know how much money we're going to get. Examples of that would be for instance the Campbellton Bridge deck repair, where we're looking at doing work in Campbellton for $2.2 million; the Lasalle Causeway east wharf repair in Ontario, in Kingston, for $2 million... Are you going to cut me off?

The Chairman: Can I ask you to wrap it up?

Mr. Ran Quail: Okay. I have other examples, but I'll skip them.

The $118 million the honourable member is speaking about is included in the $184 million. That's for work still to be done. It hasn't been approved. It is in the planning stage. It is a big operation. When we know how much money we have, we then move the stuff we have in planning to see what we can put into place with the money we have for expenditures in 1999-2000.

The Chairman: Thank you.

Thank you, Gilles.

Because of the circumstances today, we've had the minister for essentially over two hours. We appreciate your commitment. I want to thank you, Mr. Minister, and your colleagues for the time you've taken. I'm sure if members have more questions they can go see you.

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I'm going to ask my committee colleagues to take one minute with me here. Colleagues, are you listening to me?

This is for our B.C. mid-coast trip. We didn't pass our budget on Thursday because we had a few questions about whether we were going to go to Williams Lake or not. Basically, I have a motion so I can bring this to the budget committee, hopefully today. The motion is that the committee approve the budget submission in the amount of $73,595 for a visit and public hearings in Vancouver, Williams Lake, and Bella Coola concerning a study of Canadian forest management practices as an international trade issue, and that the chair present the said budget to the budget subcommittee.

Some hon. members: Agreed.

The Chairman: Okay.

The other thing is that the dates of the committee's travel be changed from May 16 to 19 to May 11 to 14.

Some hon. members: Agreed.

The Chairman: Okay. Thank you.

We're adjourned.