EVIDENCE

[Recorded by Electronic Apparatus]

Monday, October 28, 1996

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[English]

The Chairman: Can we come to order, please.

The finance committee of the House of Commons is continuing its hearings on what should be in the next budget. We have a number of very important industries represented before us this afternoon.

We have, from the Canadian Real Estate Association, Pierre Beauchamp; from the Alliance of Manufacturers and Exporters of Canada, John Allinotte, Brian Collinson and Jayson Myers; from the Canadian Automobile Association, Richard Godding; from the Canadian Construction Association, Michael Atkinson; from Sun Life Assurance, D.J. McIver; from the Tourism Industry Association of Canada, Debra Ward; from the Canadian Association of Mutual Companies, Normand Lafrenière; and from the Direct Sellers' Association of Canada, Ross Creber, Jim Hunking and Jack Millar.

We welcome you all. We're very pleased you could be with us.

Maybe we could start off with an initial round of presentations of two to three minutes apiece. Then we will get into discussion. We'll make sure each of you has enough time to present all of your case to us. We'll close up with a very brief summary from each one of you.

Perhaps we could start with you, Mr. Beauchamp, from the Canadian Real Estate Association.

[Translation]

Mr. Pierre Beauchamp (Chief Executive Officer, Canadian Real Estate Association): Thank you very much, Mr. Chairman.

[English]

With me today is David Humphreys, our federal affairs adviser.

I have a few notes for those of you who may not know who we represent. The Canadian Real Estate Association is an association of 70,000 members who are licensed or registered real estate brokers, agents and salespersons in Canada. They do their business in 115 real estate boards across the country. They're closely involved with buyers and with housing transactions, about 300,000 a year, and they're often called on to assist with mortgage financing.

Our association has taken a strong position on deficit and debt reduction for many years. We published a major research paper in 1984, when mortgage rates were well over 10%. Ever since those days we've been advocating the kind of fiscal management that the minister has taken in the last three budgets. So our first point is that the minister must stay the course, because not until we see the actual debt come down will this battle be truly won. We urge the government to resist any pre-election spending goodies if they are not going to jeopardize the debt reduction strategy of the government.

In his economic and fiscal update to this committee on October 9, the minister justifiably drew attention to the pay-off that can be attributed to his tough fiscal policy. He showed how 17 interest rate reductions are helping governments, businesses and homeowners. For anyone with a $100,000 mortgage, he said, it means a savings of $3,000 a year.

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No one is more keenly aware of those benefits than our members. Nevertheless, despite the enormous benefit of low interest rates, many consumers continue to lack the confidence to purchase a home. They're afraid of losing a job, they're not confident that levels of income will continue or they're not sure about the economy. Unemployment remains too high.

We believe the government must be concerned about this situation. The government must look beyond low interest rates to strengthen the economy and build consumer confidence. Given this environment and given our record on deficit reduction, we're making some modest proposals that do not carry price tags for the government to implement, but we think they will add to consumer confidence and contribute to job creation.

In your report last year, Mr. Chairman, you recommended that the government give favourable consideration to three of the proposals that essentially make up our submission this year. They are as follows.

First, the Interest Act should be amended so that consumers have the right to prepay a mortgage, and penalties should be defined and disclosed at the time of the transaction.

Second, relatives of first-time buyers should be eligible to use their RRSP funds under the home buyers' plan to assist relatives to purchase a first home.

Third, as part of its reform of the immigrant investor program, the government should make investment in low-income housing one of the eligible investments. This will create jobs, expand low-income home ownership and give this maligned program a social as well as an economic purpose.

The government has not yet acted on these recommendations, but we believe they have merit and we urge you to revisit them in your report this year.

Mr. Chairman, I outlined our case for the Interest Act amendments to you recently. I will not take up any more time today, except to make three quick points.

One, it's simply not the case that standardizing a prepayment penalty interferes with the competitive environment. We have standardized penalties now for NHA and certain other mortgages over five years, and the market is healthy. Lenders have not made either the right to prepay or the penalty for doing so part of their marketing strategies.

Second, our proposal would leave the lender no worse off upon prepayment than he would have been if the mortgage had remained in force. So we want to dispel any notion that we're being unfair to lenders or that the consumer will be getting away with something through the prepayment process.

Finally, in the current low interest rate environment, it may be assumed that the sole reason for this proposal is to help consumers with higher rates get out of their contracts. Providing there's an appropriate penalty, we think consumers should have the right to renegotiate and take advantage of lower rates if it is in their interest to do so.

Our proposal has a long history, and it is designed for all situations. Death, job loss and marital breakdown are all real and valid reasons for giving the consumer the right and the means to prepay without being left at the mercy of lenders, as they are today.

Our other proposals are outlined in our submission. They're available in even more detail in papers previously published with your committee.

I want to close with a comment on the latest information about GST harmonization in the Atlantic provinces.

It has been one of our main points that housing should not be subject to a patchwork quilt of sales taxation across the country. Since the GST was developed, it was a fundamental principle that sales taxation should not reduce the affordability of housing and that newly built housing should not be disadvantaged vis-à-vis resale housing.

Now we find that Newfoundland has totally breached that principle by declining to offer any new housing rebates in its harmonization sales tax, and we find that Nova Scotia proposes a rebate that is less than half of what is required to maintain new housing affordability at current levels in that province. We wish the federal government would use its influence to see that the fundamental principles of the GST are brought forward into harmonization taxes.

Thank you.

The Chairman: Thank you very much, Mr. Beauchamp. You came in just under three minutes. Thank you very much for your cooperation.

From the Alliance of Manufacturers and Exporters of Canada, we have Mr. Allinotte.

Mr. John Allinotte (Chairman, Ontario Tax Committee, Alliance of Manufacturers and Exporters of Canada): Thank you very much, Mr. Chairman.

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Mr. Chairman, for those who may not be aware of the Alliance of Manufacturers and Exporters of Canada, we are an amalgamation of the Canadian Manufacturers Association and the Canadian Exporters Association. Our membership consists of -

The Chairman: Did that merger pass muster with the Competition Bureau?

Some hon. members: Oh, oh!

Mr. Allinotte: Most definitely.

The Chairman: It seems like a very big one to me.

Mr. Allinotte: It was.

Our membership consists of some 3,500 members that produce 75% of the manufactured goods in Canada.

Our manufacturing segment constitutes 19% of the Canadian GDP, with 40% of it being made up from the export units. We employ somewhere around 1.8 million people who are directly involved in manufacturing and 3 million who have jobs directly or indirectly associated with the manufacturing segment.

We have prepared - and delivered to the committee's clerk - a written submission covering in detail some of the proposals we have for the committee, but we will cover some more specific areas.

The first one that we bring to your attention is the deficit reduction. The alliance supports the government's deficit reduction initiatives and congratulates it for its success in bringing the deficit under control.

The alliance and its predecessor organizations have for some time emphasized that deficit reduction and debt reduction are the keys to improving the fiscal health of Canada. The decisions the Government of Canada has made with respect to deficit and expenditure reductions are hard ones, but we are firmly of the view that they will lead to economic pay-offs in the long run.

It is essential for the government to meet its debt reduction targets and to surpass them whenever it can. The government will soon be starting to pay down the debt and it should take no action that would reverse or slow this achievement.

The alliance shares the conviction of the Minister of Finance that the right strategy for increasing consumer spending and getting the domestic economy back on track is to sustain a low real interest rate over time while simultaneously keeping inflation in check. Only an economy that is producing jobs and growth as a result of sustained and increased levels of investment can afford economic securities to its participants.

Briefly, to cover some of the specific areas, since 1990 the competitiveness of the Canadian corporate tax area...since 1990 the industrial base in Canada has displayed a weak investment performance compared to prior periods.

Capital investment has been insufficient to cover replacement costs, which means that Canadian industrial capacity is shrinking. This decline in the net capital investment by Canadian industry is linked to the overall competitiveness of the Canadian corporate tax structure.

While it is true that statutory corporate tax rates have declined in recent years, there has been a significant increase in cash taxes paid by the corporate business community. This increase in cash taxes, through the introduction of new taxes such as our large corporation tax and the removal of favourable capital recovery measures, directly impacts on the level of capital investment.

Though the alliance is not suggesting that there be across-the-board reductions in income tax rates, we suggest to the finance committee to keep in mind that when circumstances present themselves the government should continue to provide incentives for investments.

R and D and the manufacturing and processing tax credit that are now afforded in the system go a long way to continue to make us, the manufacturers and exporters, competitive with the global world that we have to deal with.

In the area of payroll taxation, we noted with interest that the current government highlighted the fact that payroll taxes are costing jobs. The alliance believes that decreases in payroll taxation would remove one of the key barriers to creating and sustaining jobs and to economic growth in Canada.

Between 1989 and 1995, hourly rated payroll taxes increased by over 85%. We believe that hourly rated payroll taxes are an important factor in the current slow rate of economic growth and employment. Any further increases would certainly be highly destructive.

Industry is particularly concerned about the Canada Pension Plan and strongly supports the CPP reform. In a recent survey of alliance members, 87% of respondents indicated concern about the financial status of CPP and 70% indicated they could not afford to increase employers' CPP contributions. Increasing CPP contribution rates more quickly than originally planned would seriously impact the economy. Creativity and the courage to change are necessary to develop reform proposals that are affordable, sustainable and equitable for present and future CPP beneficiaries. The alliance would be pleased to work with the government officials to this end.

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The alliance is concerned about the government initiative to allow the surplus in the employment insurance fund to increase by maintaining contributions of employees and employers. As noted above, payroll taxes on both employees and employers are too high and contribute to a lowering of employment levels. The alliance would support allowing a surplus in the EI fund to be reduced if employee-employer contributions were reduced.

The LCT, which I referred to above, was introduced in the late 1980s as a tax on capital. If we are looking for investment in this country, taxing what we are looking to invest is certainly not acceptable. It's the business community that is the investor. Once circumstances allow and we have our financial house in order, we strongly suggest that we consider restructuring the LCT.

We suggest to you that there are measures that possibly would further reduce the deficit. We certainly support and suggest that there are strong indications that an additional 10% across-the-board reduction in government departmental budgets could be done over a two-year period.

In areas such as the defence department, we suggest there is the possibility of an additional $1 billion dollar reduction in annual expenditures.

The tax-free revenue to individuals in Canada in the area of lotteries is open for your consideration.

In conclusion, we believe the government is pursuing essentially the correct course with its fiscal strategy. Lower deficits leading to lower interest rates represent an effective method of assimilating growth in the domestic economy, which supports the success of our manufacturing and exporting sectors.

We thank you for allowing us to speak to you today.

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

From the Canadian Automobile Association, Mr. Richard Godding, please.

Mr. Richard Godding (Vice-president, Canadian Automobile Association): Thank you, Mr. Chairman. We're pleased to be here today and welcome the opportunity to discuss with you what the CAA considers to be an extremely important issue, the funding of the national highway system.

Few issues have as wide an effect on so many aspects of Canada's well-being as the condition of our highways. Good roads are the arteries of a healthy economy, especially in a large country such as ours. Roads influence corporate decisions about where to locate and when to invest and expand. CAA's Roads Work for Canada campaign and its partnership with CRCI, also here today, emphasize the vital role our roads play in our economy.

On October 4 in Vancouver we launched the Roads Work expedition, a travelling road show making its way across the country to raise awareness about the deteriorating national highway system. Stopping in over 50 communities, the expedition is encouraging Canadians to sign petitions or to send their views on Canada's highways to the Prime Minister.

We have a copy of one of the fliers we're sending to all of our members and David Leonhardt from our office is going to distribute those now.

Today the expedition team makes a stop in Toronto. In fact, this morning at 11 o'clock they held their news conference. Tomorrow it moves on to Kingston and Cornwall, Ontario. At every stop we underline the same message: good roads ensure greater safety and contribute to a number of key economic sectors.

Roads work for transportation and mobility. Adequate highways ensure that people and goods get to and where they need to go.

Roads work for trade and economy. Transportation is the basic ingredient for successful trade and commerce. Our NAFTA partners have recognized this. The United States is in the process of complementing its interstate system with a network of secondary highways called, interestingly enough, their national highway system. Mexico is also building first-class highways at a rapid rate.

Roads work for tourism. One of Canada's largest employers depends largely on mobility in order to thrive. Both the tourism association of Canada and the Hotel Association of Canada have endorsed a national highway program.

Roads work for jobs. Good roads can create long-term jobs and economic growth. At the CAA we find it unfortunate that such an important factor in Canada's economic health has been neglected for so long.

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In 1988, the national highway policy study found that, for Canada, 38% of our national highway system was substandard. We can only imagine what percentage that is today, eight years later.

At the time, transport ministers all agreed that Canada needed a national highway policy; however, the brakes were applied when it came to actually making the necessary improvements to bring our highway system up to standard. More recently, at their meeting in Jasper last summer, all provincial premiers stated their willingness to fund 50% of the upgrade costs if the federal government would contribute the other 50%.

The federal excise tax of 10¢ per litre on fuel collects about $5 billion annually. The federal government returns about 4% of this to highways. Gas taxes are a road user fee and should be linked to highway spending.

CAA's members have repeatedly expressed this view, and continue to do so. In our 1996 public policy survey, more then 90% of respondents considered that linking gas tax revenues to road funding to be an important issue.

The United States invests 31% of its gas tax revenues in highways. In Australia it's 50%. In Britain it's 100%. Canada ranks at the bottom of the list at 4%. CAA is seeking 2¢ from the existing 10¢ federal gas tax on gasoline to be invested in highways. The initial expenditure will be recovered through other benefits to the economy.

A recent study by Transport Canada discussed the initial findings from the national highway policy study in 1988. It stated that, at a discount rate of 5%, the benefit-cost ratio would be 1.5%, turning the program cost, in 1989 dollars, of $11.6 billion into $17.1 billion in benefits to the Canadian economy.

Today, more than ever, we are in need of a national highway program. We can't afford to sit idly by and watch our key roadworks crumble while our NAFTA partners are building and maintaining state-of-the-art highway systems. Canada is the only country in the developed world without a national highway policy. If Canada wants to remain competitive, it can no longer afford to lag behind.

What Canada needs now is the commitment of the federal government to work with the provinces in rebuilding our national highways. We are a country of great potential, but we require a basic infrastructure to make things work.

At CAA, we believe we are acting in the best interests of all Canadians by urging immediate action on the national highway issue. Our economic stability, our growth, our very future depends on it. We've put our 2¢ in. Now it's time for the federal government to do the same.

Thank you. I'd be pleased to answer any questions you have.

The Chairman: Thank you, Mr. Godding. Next is Michael Atkinson from the Canadian Construction Association.

Mr. Michael Atkinson (President, Canadian Construction Association): Thank you,Mr. Chairman.

The Canadian Construction Association certainly welcomes this opportunity to provide its views on what we feel are the key elements of the upcoming federal budget. The Canadian Construction Association, for those of you who do not know us, represents some 20,000 firms from coast to coast in Canada engaged in the non-residential construction industry. We in fact buildMr. Godding's roads, and we would like to build some more.

The vast majority of our industry, close to 95%, is made up of small, Canadian-owned businesses. The total industry employs upwards of 700,000 Canadians directly. It is arguably one of the largest, if not the largest, employer in Canada.

I would like to raise three key points that are in the written CCA submission to this committee. CCA is certainly encouraged by the recent progress the current government has made in reducing the deficit, but the CCA points out that this must remain a first step.

Canada's total cumulative debt continues to grow. It will continue to grow as long as government continues to allow annual deficits. The total net federal debt per Canadian rose by 4% in the last year alone to $19,235. What is required to pay off our current federal debt is $19,235 from every man, woman and child in Canada. That amount will continue to grow each year until we have balanced our budget.

The CCA urges the federal government in the upcoming budget to announce a target date for the complete elimination of the deficit. A planned date for deficit elimination should be set now. That's not after the next election, two years from now, or three years from now, but right now.

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How do we get there? The consistent message from our members right across Canada has been loud and clear that deficit reduction and elimination must come solely from spending cuts, not increased revenues in the form of new or increased taxes. There is no tolerance whatsoever among Canadians for new or increased taxes.

How do we promote economic growth and job creation? Consider the needed reinvestment in our infrastructure. What you have heard from Mr. Godding, you will hear from others around this table. As the current Canada infrastructure works program has shown, this has beneficial positive impacts on the Canadian economy. Indeed, by ensuring a state-of-the-art infrastructure, we ensure the right kind of economic and business environment to allow the private sector to create sustainable jobs.

As you listen to people talk about the need to improve, enhance and reinvest in our infrastucture, I would ask the committee members to remember these points. First, our infrastucture and national highway system and our municipal infrastructure was neglected even in the good fiscal times to the point that we have a second debt crisis in this country. It's an infrastructure debt crisis that is just as deadly and potentially crippling as our fiscal debt.

This investment is not spending; it is investment in our infrastucture. In many cases the net cost to government is minimal, if there's any cost at all, as Mr. Godding pointed out, in the return.

Also remember that in today's global competitive marketplace, the future prosperity of a nation and its future economic and social well-being is directly related to the quality of that nation's infrastucture. The other developed and developing nations of the world have realized this and are putting millions, if not billions, of dollars into their infrastructures as an investment for their future economic well-being.

It is not a matter of whether or not we Canadians should invest and reinvest in our infrastructure, but a question of when and how much. We must invest in our infrastructure, not because it will lead to the creation of immediate and long-term jobs, but because we must invest in our infrastructure.

The other area in which we can look for job creation and enhance the ability of the climate to allow economic growth in this country is with respect to payroll taxes and the amount that Canadians and businesses are taxed in this country, as mentioned by one of the earlier speakers.

Let me relate a little story to you about the unemployment insurance income program. In 1989, the previous government announced that it would stop contributing to the unemployment insurance fund, leaving employers and employees to assume 100% of the responsibility for the then UI program.

In addition, the federal government also announced that it was transferring major training and labour market development programs, or costs, from other government accounts into the UI program, referred to later as the UIDU, or the development uses part of the unemployment insurance program.

That was put on the unemployment insurance program in 1989. It included funding for apprenticeship training, which is absolutely vital to this industry. It is the main feed line, if you will, for trained and skilled workers.

So the UI fund was expanded in 1989 to cover funding for training programs that previously had been funded from other government accounts, and the full cost of both the unemployment insurance program and the additions was put on employers and employees solely.

Many groups, including the Canadian Construction Association, objected initially on the basis that the UI program was not the place for such programs. In addition, other employer and employee groups demanded a bigger say in how those funds would be expanded. The fact is that this was the motivation behind the establishment of the Canadian Labour Force Development Board.

Here we are now in 1996, some seven years later, and what has happened? The current government has announced that it will no longer fund training apprentices, but it will transfer the responsibility for labour market developments to the provinces. It will also apparently allow the UI/EI fund surplus to grow to endless heights without considering a substantial reduction in EI premiums.

The surplus, by the government's own projections, will be in excess of $5 billion at the end of this fiscal year, and over $10 billion in the following one. These are moneys that have been paid by employers and employees on the assumption that they would be used for UI/EI purposes such as training. Mr. Chairman, EI stands for employment insurance, not endless income.

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CCA estimates - and this is based on government estimates - that a 20% reduction in EI premiums would inject approximately $4.2 billion into the economy, creating upwards of 80,000 new jobs. A 20% reduction will still allow for an adequate EI account cumulative surplus required for a rainy day under the new legislation, or even under the arguably more generous program.

In conclusion, Mr. Chairman, the Canadian Construction Association would like to leave these five points with you. One, continue the good and right fight to eliminate the deficit, but make plans to begin paying down our cumulative debt as soon as possible. Two, seek a balanced budget through further spending cuts, not increased taxes. Using EI contribution surpluses to reduce the deficit is simply another form of increased taxation. Three, do not ignore the equally vital need to address our current infrastructure deficit and debt through prudent long-term planning and investment. Four, both reduced EI premiums and other forms of tax relief will help promote economic growth and job creation. And five, infrastructure investment will also greatly assist in shaping the right kind of economic climate to allow the private sector to grow and create sustainable jobs.

The Chairman: We'll be asking you later where we get that money. Thank you very much.

Mr. Redfern, you are from the Coalition to Renew Canada's Infrastructure, and I suspect your testimony is very much like that of Mr. Atkinson.

Mr. John D. Redfern (Chairman, Coalition to Renew Canada's Infrastructure): I'm not in argument with it, Mr. Chairman. Would you like me to proceed now?

The Chairman: Yes, please.

Mr. Redfern: Mr. Chairman and committee members, thank you for the opportunity to appear before you as you prepare your pre-budget recommendations for the minister. In the few minutes I have I will address the issue that has been asked of us, which is ways to promote economic growth and job creation. In doing so, I will touch on only a few highlights from our full submission.

It is a generally accepted principle that the best vehicle for promoting growth and creating jobs is the private sector. On the other hand, it is important for governments to govern, and govern in a manner that is compatible with creating an economic climate conducive to investment.

Competing for business investment in the 1990s has changed. Today Canada must offer a climate that reflects worldwide realities, and business must now be prepared to compete on a worldwide basis. As you and others have already said, Mr. Chairman, providing necessary basic infrastructure is critical for any government that aspires to promote economic growth and job creation.

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

When the current Liberal administration was in opposition, the Liberal task force on infrastructure recognized the importance of highways in our economy. It recommended a federal commitment to rehabilitate and expand the Trans-Canada Highway. To quote the task force:

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

That was then. Now a recent Transport Canada study has come to the same conclusions.

The federal government has been directly involved in the design and make-up of the national highway system, with the provincial governments, for some eight years. The federal government is also currently involved, in a piece-by-piece way, in seven bilateral programs with the provinces. Given these two facts, CRCI recommends that the federal government adopt a long-term national highway policy and oversee future improvements, maintenance and expansion of Canada's national highway system.

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To do so, one question remains unanswered: how do we pay for the necessary work?

When governments examine how infrastructure investments are made, it is attractive to look at the private sector for assistance in the form of public-private partnerships. Recent Transport Canada work and work done by the national highway review policy study itself demonstrates that opportunities to apply user fees to the national highway system are limited. We therefore submit that the government should continue to contribute to the maintenance of Canada's national highway system. Governments are the primary owners of public infrastructure, including highways.

The building and maintenance of Canada's national highway system by provincial and federal governments was and is paid for with tax revenues. There is no direct link between what the federal government collects in gasoline taxes and what it invests in our national highway system, as opposed to the current system in the United States. In 1995, as has been said, Ottawa collected some $5 billion in taxes from the sale of gasoline. In fiscal year 1996-97, Transport Canada will spend only 5% of this revenue.

The quality of Canada's highways influences corporate decisions regarding location, capital investment, production methods, relationships with suppliers and customers, location and availability of inventory, access to labour and the need to constantly improve profitability. A long-term plan, one that covers ten years, as laid out by the national highway review policy report, would create a larger economy. There are employment gains across all industries. The ten-year,$13 billion option proposed by the study suggested that 146,000 direct person-job-years would be created. At the very least, economists seem to agree that an additional 146,000 job-years would be created.

Mr. Chairman, to borrow a quotation from an editorial in The Globe and Mail from August 24 of this year:

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

Mr. Chairman, with that I will end my discussion. I look forward to the opportunity for some closing remarks.

The Chairman: Thank you, Mr. Redfern.

From Sun Life Assurance Company of Canada, we now have D.J. McIver.

Mr. D.J. McIver (Chief Economist, Sun Life Assurance Company of Canada): Thank you. I perhaps represent a fly at the association's picnic. I don't carry a remit from any association. I don't even carry a remit from my employer, other than that I am the company's chief economist. Whilst I certainly do not represent the business economics community, I suspect that I am representative of it.

Let me start by noting that I subscribe largely to the conventional view of the Canadian economy's growth prospects over the next little while. I expect to see the Canadian GDP rise this year by a point and a half and by something in the order of 3% next year. Let me also note that I commend the prudent fiscal results the government has managed to deliver and the careful planning that is evident in the fiscal plan. However, I believe it is far too early to declare fiscal victory. For starters, the debt has not stopped growing. It hasn't stopped growing even as a proportion of GDP.

On balance, I think our economic prospects are good. For those who are interested, I regret that this is available only in English - it is an internal company document that details our economic forecast - but there are copies at the back of the room. It looks pretty good. It's not a bad world we're living in right now. However, I think there are some significant risks out there, and it is because of those risks that I believe it is far too early to say we've won. We haven't.

Let's take a look at those risks. The first is the possibility that the U.S. economy, which after all is fully mature in terms of its business cycle, slips into recession. Most economists expect that it will slow, is already slowing. Most economists do not expect it will fall into recession. But most economists don't know that a country is in recession until it's been in it for several months.

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If the U.S. economy slows appreciably, the fantastic export performance on which the Canadian economy has been fundamentally supported over the last several years has to falter. It doesn't have to collapse, but it will falter, and that means slower growth in Canada.

It would also be very premature to assume that interest rates can't rise. We've had a stellar period in which interest rates have fallen dramatically, dropping something like eighteen times in seventeen months. That's an excellent record, but what could cause interest rates to reverse? For starters, the fact that we've seen eighteen successive interest rate cuts might lead some international observers to the conclusion that our monetary policy, while perhaps appropriate for the current environment, is just a little in risk of becoming overly easy. Indeed, if the economy were to slow down, there might be a significant incentive for additional ease, which might then become recognized by the international financial community as excessive.

If, as I suggest, the U.S. economy perhaps slows down, our current account - which is one of the underpinnings of our strong dollar performance of late - is a very fragile animal. It could easily become a deficit again. In that case, as I suggest, the dollar would come under pressure, and we might have to see a reversal in rates in order to offset that deterioration.

I'm not here to provide political analysis, but I think we all recognize that the Canadian political situation at present is very quiescent, is very quiet, is very calm. Can we guarantee that no one in the coming years will take the opportunity to roil the waters? I think not.

What happens if either one or two of those happen, if the U.S. economy slides, if interest rates begin to go back up? If one of these happens, government revenues come under pressure - which means a weaker economy - and spending goes up because of higher debt service costs and because of perhaps additional social spending. If that happens, the deficit comes under fire and starts to rise again. That may, in itself, further weaken the Canadian dollar and lead to higher interest rates. Well, you get the cycle. It's not very long before we can generate an adverse cycle with respect to Canadian economic conditions.

Please don't misunderstand me, that's not my forecast. But it is a risk. When the wind dies down and the rain stops beating, it's not the time to get out there and to take the plywood off the windows. That comes when you've determined whether the storm has passed or whether you're in the eye of the hurricane.

I think we're going to have to have demonstrated to us a longer-term improvement in Canadian economic fundamentals with respect to debt reduction and deficit elimination before we begin to talk of some of the suggestions that I have heard made public today in the Canadian arena, and specifically the issue of tax cuts. Again, I would emphasize that it is far too premature. The time for tax cuts will come if we stay on this road and if, indeed, we enjoy a little serendipity. When those cuts come, they will immensely strengthen the Canadian economy; however, the time is not now. I therefore believe it would be inappropriate to raise the anticipations and expectations of the Canadian public at this time.

Thank you.

The Chairman: Thanks, Mr. McIver. I'm sure all the people who were calling for tax cuts, and particularly payroll tax cuts, were listening to your comments here with great interest.

Next, from the Tourism Industry Association of Canada, we have Debra Ward.

Ms Debra Ward (President, Tourism Industry Association of Canada): Thank you,Mr. Chairman. I, too, will shorten my comments by not talking too much about the size and scope of our industry. It's in our full brief, and it's very interesting and informative. I hope you read it.

Very briefly, we are pleased to report that our industry has grown. It is now a $42 billion industry in Canada. Of that, $11 billion is in foreign exchange, making it Canada's fourth-largest export industry after automotive parts, motor vehicles and business services, which means we are larger than natural gas, pulp and paper, and a lot of the things we traditionally associate with the Canadian export economy.

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A large part of our success has to do with our dollar, I think, but perhaps an even larger part of our success has to do with a new cooperation between the industry and the Government of Canada, whose commitment to tourism has been apparent over the last few years and is starting to pay off in wealth and in jobs.

In 1995 tourism industry employment, which stands at about 488,000 people, grew by 8,000 more, another 2%, compared to an absolutely flat economy and flat job growth in the Canadian labour force generally.

So you can see that some support of tourism does impact jobs and the wealth creation we can produce right across Canada. Of course one of the most important things to our future success is what is in the annual budget and, more importantly perhaps, in the policies of the Canadian government. It is this that I would like to talk to you about today, and I'm going to find myself in violent agreement with some things said earlier and less agreement with some other things that have been said.

Generally there are two main extremes that we are hearing, both in the press and on the Hill. One is the temptation to swing open the doors of the candy store and a return to prodigal spending. I don't think anybody here necessary agrees with that today, but there is a hankering after the good old days of public spending. I think that's not only dangerous to the dollars and cents of the economy, but it's very dangerous to the professionalism and real growth that this economy has experienced as a result of surviving and besting these hard times. We're all smarter and better in some senses, both in terms of government operations and certainly in private sector operation, and those are hard-won skills we don't want to lose.

I think there is another extreme, which is advocating the continuation of massive cuts, and continuing and new cuts to our social safety nets. It's equally damaging to Canada in the long run. I like to think, because we're Canadian and we tend to take the middle road, extremes of either type would be discouraged and we would look at fine-tuning and tweaking the budget rather than taking any dramatic action one way or the other.

The first recommendation we make is on behalf of the public, actually. We don't generally make representation on behalf of the public, but I think it's worth noting here that 85% of all of our tourism travel in Canada is generated by Canadians. Of course, disposable income and consumer confidence are necessary if tourism is to thrive. That includes especially the small and medium-sized businesses for tourism across Canada. We all know about the Banffs and the Jaspers and the great international tourism they get, but there are an awful lot of small businesses along the roadways and highways of Canada that need Canadians in order to survive, and those Canadians need disposable income and a sense of security.

So in terms of current policy - and to my friend to my right - we believe the Government of Canada must maintain zero or low inflation and low interest rates in order that we can grow our industry further.

One of the greatest strengths and one of the reasons I like representing tourism as much as I do is that this industry has the ability to employ Canadians from every part of the nation and at every skill level. But labour costs, especially payroll taxes, are a disincentive to labour force growth.

Therefore we ask that the EI surplus be capped and additional revenues be returned to both employees and employers as reduced premiums. This is not a tax-back as far as we are concerned. These revenues were increased to the government in response to a very difficult deficit situation within that account. That situation has now changed, circumstance have changed, and that surplus as noted earlier is climbing exponentially. That is a tax without going through the reasonable, usual tax structures and tax legislation that most taxes go through. We think the disposable income in workers' pockets and the payroll savings to employers would vastly contribute to economic growth within this country.

On the issue of new government spending - and I always think there is an appropriate place for government investment back into its country, regardless of other circumstances, as long as it's done judicially and with prudence - the Tourism Industry Association of Canada believes infrastructure development and improvement is a valid investment, providing not only short- and medium-term employment but forming part of the foundation of further industrial and economic growth. The sentiment has been espoused very cogently by my friend.

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For tourism, which requires safe, affordable and efficient access, it's as necessary as roofs are for houses. It is absolutely fundamental, and therefore we encourage the government, in cooperation with the provinces, to develop an infrastructure program that incorporates tourism development objectives. In other words, we're not saying roads for roads' sake or infrastructure for infrastructure's sake, but do it prudently and cogently with a plan to develop increased economic and social well-being within those parts of the country.

Another area that is of concern to our members is user-pay programs. You are seeing them of course in national parks and highways as well as other areas. TIAG does not oppose the use of these fees in principle; however, we are concerned that they have to be more than just another form of taxation without representation. Therefore, user fees should only be imposed in a responsible, accountable and equitable manner with input from, due notice to, and consideration of tourism businesses. I think it behoves all of us to keep an eye on these things and make sure they're used in a responsible way.

Moreover, we also believe the government should take steps to mitigate taxes and levies, including user fees, which are demonstrably counter-productive to business and job growth, and that all taxes be appropriate and proportional. That's just a fancy way of saying fair taxes all around.

Finally, after working on the file for four years, I would be remiss if I didn't conclude with our reaction to the harmonized sales tax. As you know, TIAG supports the concept of the single tax, single rate, implemented across Canada. However, as I'm sure you appreciate, there are serious difficulties to tourism in having only a partial system. The concept of the HST is not equally supported by different sectors or regions within tourism. However, before I go into the challenges, I'd like to review the positives, because they're there, too.

First, we commend you and the three harmonized provinces for retaining a full visitor's rebate. I know there was some discussion about it around the table. We have been working with Finance and Revenue to ensure that this program is more than just a cheque back to our foreign guests, but that we also use it as a strategic tool in order to find ways to retain that cash in Canada through a Canadian cash-back system at airports or some system where we get them to actually spend that cash rebate, the visitor's rebate, before they leave the country, so that the money stays within the Canadian economy. We are working on some ideas to see how that can be implemented.

Second, we're also pleased that the government extended the rebate to business travellers. We believe it will be a plus for convention incentive travel, which is a very competitive and lucrative market segment for us.

However, we face a couple of significant issues on the HST. Perhaps of greatest significance is the combined rate; 15%, 14% is too high. It's too high for people to absorb at a visceral level. When they hear a 15% or 14%, they react badly to a combined tax.

In our initial discussions with Finance we were looking at 10%, which was our magic number, and we were hoping for 12%. We think 14% will get tourism businesses across Canada in a bit of a difficulty, because that's pretty well the rate they're being charged now on separate taxes when you get west of Quebec.

The question of price exclusion is a tricky one for us. I've been reading the technical paper on how that's going to be handled. We don't have much unanimity among our members about it, but what we are faced with now, apparently, is a situation where the harmonized provinces are going to look in some ways very out of proportion with the rest of Canada.

In other words, they'll have to explain the fact that the Château Halifax is $115 a night, tax included, but the Château Frontenac in Quebec City is $100. It's not fair when it's out in the marketplace, and we had hoped that price inclusion would only happen when full harmonization was in place.

Those are the comments on what we'd like to see in the budget. I would like to thank you and turn this over to the next witness.

Thank you, Mr. Chairman.

The Chairman: Thank you very much, Debra Ward.

Last, from the Direct Sellers Association, Ross Creber.

Mr. Ross Creber (President, Direct Sellers Association of Canada): Thank you,Mr. Chairman.

It's a pleasure for me to be here this afternoon as the president of the Direct Sellers Association of Canada. I want to thank the committee for providing us with an opportunity to discuss some of our concerns, but more importantly to put forth some concrete recommendations during this round of pre-budget consultations.

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I have with me several of my colleagues: Mr. Jim Hunking who is the country manager of Amway Canada and is chairman of the DSA; Mr. Jack Millar, of the law firm of Millar, Wyslobicky, Kreklewetz, who is tax counsel to the DSA. There is also, though not at the table, Linda Herron, vice-president and legal counsel for Electrolux Corporation. She also is vice-chairman of the Direct Sellers Association.

The Direct Sellers Association of Canada was founded in 1954 and is the national organization of Canadian direct selling companies and their affiliated independent sales persons who market and distribute products and services directly to the consumer.

The DSA currently has 63 member companies, including such well-known names as: Amway, Avon, Electrolux, Mary Kay, Shaklee and Tupperware, which, through the activities of more 600,000 associated independent sales persons, achieved Canadian retail sales in 1995 of more than $1.4 billion.

We're here to talk about three major topics. I would like to note that although our submission was put on the table at the back it has not yet been circulated to committee members. I trust it will be prior to the conclusion of this session.

Our three major topics are first and foremost job creation and training; second, GST and the direct sellers mechanism; and third, the harmonized sales tax.

I would like to briefly outline our recommendations, which are set forth on pages 3 and 4 of our written submission.

First, in regard to job creation and training, we recommend that the government amend existing social programs to allow for a transitional period to facilitate those individuals moving from dependence on social assistance to independence. Specifically, individuals who wish to commence a small business should not be unduly penalized through the start-up phase.

We recommend that a project team be established with finance department officials and their colleagues from Human Resources Development to advance this job creation and training concept and report back to the finance committee.

We'll be putting forth these recommendations in a meeting with the representatives from the minister's office of Human Resources Development on November 20.

Second, with regard to the GST and the direct sellers mechanism, we recommend that immediate legislative action be taken to amend the direct sellers mechanism so that, one, it will be available to those direct sellers who operate through sales agents; two, shipping and handling charges from a direct selling company to its independent sales contractors are treated as non-taxable; three, the ``sales aids'' definition is expanded to ensure that exclusive products provided by direct sellers to their independent sales contractors for use as hostess gifts are non-taxable; and four, that the general bad debt relief provisions are made available to independent sales contractors and to direct sellers operating under the direct sellers mechanism.

Mr. Chairman, the Direct Sellers Association has discussed these inequities with the Department of Finance ; however, no action has been taken on these important concerns to date. Most disappointingly, none of these inequities were addressed in the April 23 technical bill, notwithstanding that other changes were proposed to the direct sellers mechanism at that time.

The Direct Sellers Association strongly recommends that immediate legislative action be taken to address these four inequities.

Our third recommendation concerns the harmonized sales tax. First, we recommend the federal government continue its efforts to bring about harmonized tax agreements with the provinces and territories, thus ensuring fairness and simplicity for business, consumers and governments and that the direct sellers mechanism continue to be retained in the ongoing process of harmonized sales tax agreements with the provinces and the territories.

We further recommend that the government give serious consideration to adopting a transition or grace period for national catalogues whose shelf life either straddles the implementation date or extends to the end of the calendar year 1997.

Further, we recommend that after further study and consideration the Direct Sellers Association appear before the finance committee once again in the near future to further comment on the impact the proposed enacting legislation will have on the direct selling industry. We look forward to hearing from the committee in that respect.

The most important of these three areas for the Direct Sellers Association - which, we believe, should also be for the finance committee - are job creation and training.

Our industry is a growth industry. It's an industry that has the capacity to offer unlimited full-time and part-time earning opportunities to ordinary Canadians, men and women in cities and towns all across this country, opportunities that are not qualified with respect to age, gender, education, previous experience and social or ethnic background. We want to help put these Canadians back to work, and we are here today to talk about jobs.

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Thank you.

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

I have to leave for a brief period of time, but I'll leave you in the much more capable hands of our vice-chair Sue Whelan. Thank you very much. I'll be back.

The Vice-Chair (Ms Whelan): We're going to go to questions now.

[Translation]

Mr. Rocheleau.

Mr. Rocheleau (Trois-Rivières): Mr. Beauchamp, I quickly read the brief from the Canadian Real Estate Association, in which you placed considerable emphasis on the importance of including the right to prepay mortgages in the bill.

I would like to know whether you have made the banking community aware of this eventuality and how it reacted, or whether you have studied the effect of potentially including in the act the right to repay mortgage loans sooner than is provided in the conditions of the contract between the lender and the borrower.

Mr. Beauchamp: We have had a number of meetings with the banking community. At the outset, we did not agree on the three-month penalty provided. We presented the arrangement set out in our brief, a fair and equitable arrangement for everyone, in our view, which would not have negative effects for the banking community, according to our research, and would offer a clear and distinct benefit for consumers. In our view, it is useful to have a standard arrangement providing for a right in the act. When a consumer takes out his mortgage, he can then study the conditions that will obtain if he decides to prepay.

Mr. Rocheleau: What is currently preventing a consumer from taking out a mortgage at a fixed rate over a period of 25 or 30 years, as was done in 1960? What has changed?

Mr. Beauchamp: The Interest Act already provides for a three-month penalty. That's automatic. Now we know perfectly well that mortgage terms today are five years or less. It is this period we are trying to discuss and that's what we talk about in our brief. There is no statute or standard respecting terms of less than five years.

Mr. Rocheleau: Why is it you can't take out a 25- or 30-year mortgage today as you could in the 1960s?

Mr. Beauchamp: There has been a financial evolution. We now have a different way of doing things. Many people today prefer a six-month period so they can determine what goes on during that period and then do something else. At the time, rates were more standard, more regular. If you had a three or four per cent mortgage, you knew that the rate would be stable. There have been very sharp fluctuations in rates in the past 10 years and we have seen an evolution in this context.

Mr. Rocheleau: Very good. Thank you.

[English]

The Vice-Chair (Ms Whelan): Thank you, Mr. Rocheleau.

If anyone has anything to add, just indicate that to the chair when the topic comes up.

Mr. Solberg.

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Mr. Solberg (Medicine Hat): Thank you very much, Madam Chair.

Mr. Beauchamp, you were making reference to the GST harmonization and how it has affected Atlantic Canada. Can you tell us roughly what effect it has had on housing prices?

Also, I'm curious to know what it will mean - and maybe you haven't studied it to this degree - what kind of impact it would have on new housing starts, and what kind of impact it would have on employment in Atlantic Canada, where rather obviously unemployment is a very serious problem.

Mr. Beauchamp: Our main position with respect to harmonization in Atlantic Canada - a position that is shared fully by provincial associations in that area - is that the cost of housing under harmonization was not to increase.

Our research has indicated clearly that the price of a house in New Brunswick, Newfoundland or Nova Scotia would increase between $3,000 and $4,000. Therefore we have asked that there be rebates in that particular process. The main question is, why is it increasing where the actual provincial sales tax components are decreasing? The answer is very simply this. Before, the 11% or 12% used to apply to materials only; with the harmonization formula, even though it has gone from the 11% or 12% to 8%, the 8% now is applicable to materials, labour, and obviously profits, so that you have a wider tax base, which increases the cost.

Mr. Solberg: Given what you know, would you recommend that the GST, as it's presently expressed in Atlantic Canada - the harmonization deal - go forward in the rest of the country?

Mr. Beauchamp: Not in its current form. We are pleased that in Nova Scotia the recommendations we had made with respect to rebates have been at least partially endorsed. We are waiting; we understand there is a commitment by New Brunswick to do likewise, but we have to remember that these still fall short of the affordability basis that has been set in those provinces.

In Newfoundland, as we point out in our brief, there will not be any rebates, which means essentially that the public will be paying more under harmonization for their home than they did prior to harmonization.

Mr. Solberg: Do you have any idea what the effect would be on new housing starts?

Mr. Beauchamp: Well, if the price goes up.... We haven't studied the automatic impact and I can't produce a study for you in that respect, but it's obvious that if a product is going to cost more under a different system it will certainly cause the consumer to think about his activity before he purchases.

Mr. Solberg: Thank you.

The Vice-Chair (Ms Whelan): Thank you, Mr. Solberg.

Mrs. Brushett.

Mrs. Brushett (Cumberland - Colchester): Thank you, Madam Chair.

I want to direct my question specifically, but others can answer if they wish, to Mr. Godding of the Canadian Automobile Association.

In your brief you have consistently indicated that there should be no new taxes, and yet you want the Canadian government to spend money on building roads. I agree with you, we certainly need good roads and they are part of basic infrastructure, but if there are no new taxes I think it's maybe a little bit ironic that you'd be advocating this great expenditure.

If I understand it correctly, the Canadian Automobile Association doesn't pay any taxes. Why is it that a multimillion-dollar association would come before this committee not paying any taxes? The Auditor General has brought this to our attention. Is there a sense of fairness? You are a service industry, too...roadside breakdowns to the Canadian public. My plumber is part of a service industry, too, and so is my mechanic at the garage, but they are both paying taxes. Why should your association come before this committee advocating no taxes when you don't pay them?

Mr. Godding: Okay, I can respond to that.

First of all, we're here representing our members and our members' interests. Secondly, the Canadian Automobile Association is basically broken up into a number of parts. First of all, when you refer to our size, much of that size is made up of subsidiary travel agency operations, which are fully taxable. Another part of that size is insurance companies, which are subsidiary operations and are fully taxable. The only part of the association that is a not-for-profit is the association itself, which is heavily involved in advocacy, as we are here today. For that reason, and because it's providing a service to members in that regard - traffic safety, public and government affairs, all of those kinds of things - it is, as many associations are, deemed to be not-for-profit.

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Mrs. Brushett: Madam Chair, may I follow up on this?

As Ms Ward has indicated earlier, she wants a sense of fairness in taxes across this country. My mechanic provides me with great service as well for my car, and he pays those taxes. Your association is a multimillion-dollar association that does not pay taxes, and actually the Auditor General has asked us to look seriously at why some of these service sectors should be in the not-for-profit category. We're getting this complaint again from many Canadians: when the not-for-profit sector invades the private sector and doesn't pay taxes, there is a great inequity.

I would like to hear other people comment on this, if they choose.

The Vice-Chair (Ms Whelan): Mr. Godding, do you have anything further you wish to add? No?

Is there anyone else? Mr. Atkinson.

Mr. Atkinson: On the point of inequity in the tax system, one of the things our brief points out is that a lot of groups that come before this committee are funded with public funds. There's a big inequity there. I can't speak for Mr. Godding's association, but I assume it's like mine, which is dues supported.

Mrs. Brushett: This is another valid point that you raise. Why should we use taxpayers' dollars in certain sectors, and also maybe give large tax credits, when they are competing with the private sector or maybe competing with you? You may find a sector out there that's hindering you from being in business. I would appreciate your comments, because this sense of fairness comes up continuously.

Mr. Atkinson: I can say, through you, Madam Chair, that certainly a lot of the cuts we are proposing in our brief will essentially hurt some of our own members. We are calling for the elimination of direct subsidies to business. We are calling for cuts in certain government programs that are going to have a negative impact on our industry. But our industry is willing to take its fair share of short-term pain for long-term gain.

But I think the whole issue that prompted your question is a much more serious issue than whether or not not-for-profits, or service associations, or industry associations should be paying tax, and that is, what the heck are we going to do with our infrastructure?

We have an infrastructure debt in this country that's accumulating very quickly, and I haven't heard a single Canadian, politician or otherwise, tell me on any of my travels across this country that we shouldn't reinvest in our infrastructure. ``Heck, let's let it deteriorate to the point where it's no good. You can't use the road. You turn on the tap, nothing comes out.'' Nobody is saying that. It's not a question of whether we are going to reinvest in our infrastructure, but simply a question of when and how much.

Mrs. Brushett: Well, Mr. Atkinson, I agree. But where do you propose we get the funds? I'm questioning this. If we're not going to pay taxes in this area -

Mr. Atkinson: The federal government is collecting $5 billion in user tax from Canadian motorists and others right now, and is reinvesting less than 5%. If you look at what the other nations of the world are doing, that's how they are in fact funding their highways - through their fuel taxes. If you recall Mr. Godding's information about how we compare to other industrialized nations, we're at the bottom of the list with regard to what we reinvest in the highways and what we take from users.

The Vice-Chair (Ms Whelan): Thank you, Mr. Atkinson. D.J. McIver would like to speak.

Mr. McIver: I just want to make a small comment. It is very easy to find a list of projects that are worthwhile investments, obviously, in this country: airports, roads, affordable housing for individuals, ports. The problem is not that these projects are not desirable, not that they're not good, but rather a question of whether they are affordable in their current environment.

I think the criticism that one can mount against all of us collectively is that we have failed in the past to pay for the infrastructure we have built in the past. In fact, we have borrowed, and as a consequence today, we find ourselves, as any household would perhaps, in a situation where there are many good things.... The kids' piano lessons - it's good, it's proper, and it's an investment in the future, but the spaghetti comes first.

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The Vice-Chair (Ms Whelan): Mr. Redfern.

Mr. Redfern: I guess where the money comes from has always been the question. The federal government, as we said before, has been involved in the highway program in Canada since 1949, when they were involved in the Trans-Canada Highway system. As I also said, they're currently involved in seven bilateral agreements.

Where they get the money from is general funds, and the reason they take it from general funds is they choose not to have dedicated taxes. I think you're going to get your money from the same source as they have been who are involved in the highways today.

The problem that's been stated is highways are not something you can say you're going to tighten your belt and do without. It's not a discretionary expenditure. If you don't have a valuable, viable, competitive infrastructure system, you're not in the economic marketplace.

It's one of those things that is a given in running an effective infrastructure and an effective economy of the country. Some of the facts that will come forward from Transport's own study that they've investigated -

This is not a program we're pulling out for political purposes. This is a program that's been developed over some eight years and agreed to by the federal government and all the provincial governments. The payback - what they get for the investment, the money they're going to get back as a return - is a valid investment.

So the choice of the federal government is that they don't take special money and put it into this; they take it out of general revenue. I think you continue to do that.

The Vice-Chair (Ms Whelan): Thank you, Mr. Redfern.

Ms Ward.

Ms Ward: Thank you.

I have to disagree with Mr. McIver. I don't see infrastructure as piano lessons; I see it as food. I don't see how you can hope to maintain a viable nation with a sound economic base and not maintain the current infrastructure as we have it, or at least determine what the priorities are within the infrastructure and save what can be saved and develop what should be developed.

In terms of the funding, it's all a question of apportionment. We know the finance minister has been sending out little trial balloons saying, we have a little bit more money than we thought we would, so what should we do with it? Some people are saying spend it; some people are saying save it.

What my colleagues are trying to do today is say infrastructure should be a priority if you're looking at reapportioning current spending in this budget, which is part of the purpose of this budget. Infrastructure - roads, highways, ports - is important, and it shouldn't be lost.

It's difficult to compare with social programs and hospitals. That's a very good point. But it is equally important for many industries. We all know we're going to get into our cars and have a reasonably good chance of getting home safely tonight, and that's because we're maintaining our infrastructure. That's important. It goes beyond tourism concerns or other concerns like that.

None of us are asking you to spend the money. I don't think anybody said that here today. We are all asking that when you are doing your budgeting, you put a little more of the household budget into the roads, into maintaining the roof as well as paying down the mortgage.

The Vice-Chair (Ms Whelan): Thank you, Ms Ward.

Ms Ward: Thank you.

The Vice-Chair (Ms Whelan): Thank you, Ms Brushett.

Mr. Fewchuk.

Mr. Fewchuk (Selkirk - Red River): Thank you, Madam Chairman.

There's a little bit more to this country than roads.

Take Manitoba, for example. We're very fortunate. We have the Trans-Canada Highway going through from the east to the west boundary, with four lanes, plus we have a major highway to the U.S. and right through to Mexico. I don't think it's fair to our province if we can only spend infrastructure money on highways when our roads are in very good shape and we're also doing work at Pembina, North Dakota now to upgrade the functions for customs and so forth for the truckers.

I don't hear one of you from the motor league saying that maybe if the money is not needed for roads only, we could give support to something other than roads in the municipalities. Maybe there could be a school they needed. I don't hear you guys. You just seem to be stuck on one thing: roads.

Mr. Atkinson: Certainly the stress of the Canadian Construction Association has been on our infrastructure, using the word in general terms to pick up municipal infrastructure as well. The argument we've consistently made is we need long-term, prudent planning for all of our infrastructure. Roads and highways are right now a particular priority. We've had a municipal infrastructure program.

We've had a national highway program sitting on the shelf collecting dust. It's there ready to use and we haven't had the leadership, quite frankly, from federal governments, plural, to in fact implement that.

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From that perspective, certainly our association is preaching the prudent need to reinvest in our infrastructure beyond just roads and highways. I stress that we need long-term planning in both of these areas - not piecemeal, two, three years, let's get to the next election type of thing, but long-term planning so that we know as a country what we are doing with one of our critical assets. Quite frankly, it's needed in both municipal infrastructure and roads and highways.

Mr. Fewchuk: You know that we're not collecting dust, speaking for Manitoba. As you know, most of our perimeter highways and everything are now cost-shared, 50% federal and 50% provincial.

Mr. Atkinson: But with respect to -

Mr. Fewchuk: Just a moment. I know you came a long way. So did I. We have a question to you. Are you aware of what's happening in Manitoba?

Mr. Atkinson: Yes. But first of all, those are under bilateral agreements with the federal government, the shift program, and those are two- to three-year programs. What is collecting dust on the shelf is a ten-year bilateral national highway program involving all of the provinces and the federal government. It was designed and put together by the Transportation Association of Canada, basically highway ministers from all government levels across the country. It has been sitting on the shelf since about 1988-89, gathering dust for one reason and one reason only: federal governments haven't had the gumption to put it in place and implement it. We came very close a couple of years ago when all ten provinces put their money on the table and said, let's go, fifty-fifty, in a long-term program.

It's true that some highway reinvestment and reconstruction is being done under bilateral agreements. That's great, that's good, but what we need is long-term planning, not piecemeal approaches.

The Vice-Chair (Ms Whelan): Thank you, Mr. Atkinson. Mr. Myers also wanted to respond to that question.

Mr. Jayson Myers (Alliance of Manufacturers and Exporters of Canada): Thank you very much. There isn't another group at the table, and perhaps not in the economy, as affected as the manufacturers and the exporters by the condition of our transportation infrastructure, east and west and north and south. Communications infrastructure, education infrastructure - all of this is extremely important. These are priorities, but where does the money come from? Unless we're also putting ideas on the table about what should be done to find that money, then these suggestions don't work to begin with.

Over the past several years we've been very involved with the federal government's program review initiative. I think it's time for another round of program reviews. I think there are savings to be made. There are programs today that.... Ask the customer if these programs are necessary or not and you might get a different point of view from outside the government.

One of the problems in looking at government programs is that there is no cost accounting. There's no structure on a program-by-program basis. There's no measurement to say what works and doesn't work. Often program reviews are simply left at the general level of, well, maybe these work, maybe they're priorities, maybe we should be spending more money.

I'd like to suggest that these are all priorities, and infrastructure is priority number one. It goes well beyond the physical infrastructure. But we can't even begin to look at those priorities and we can't even begin to say where costs should be cut unless there is a systematic process of program review in place, and systematic cost accounting on a program-by-program basis. I would certainly urge the government, through Treasury Board and Finance, to move very rapidly in that direction. Otherwise we're going to be sitting around this table arguing this for years to come.

The Vice-Chair (Ms Whelan): Thank you, Mr. Myers.

Mr. Godding, did you have a brief comment?

Mr. Godding: I'd like to respond to the comment that in Manitoba there's no need for road investment. One of the premiers leading the charge to get some federal involvement in a national highway system is Premier Filmon. Based on his comments in public and at the ministers conferences that there is a great need in Manitoba, I would disagree with your comment that there is no need there.

As much as there is a need within the provincial borders, I think you also need to look a little beyond them. For example, the highway across northern Ontario, which incidentally is labelled the Trans-Canada Highway but has had nothing to do with the federal government since about 1970, is being avoided by most transportation companies. If they're going west from Ontario, they go through the United States because the roads in Canada are so bad. It is in the interest of Manitobans to have that road improved, whether it's in Ontario or not.

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The Vice-Chair (Ms Whelan): Thank you, Mr. Godding.

Mr. Fewchuk, you can have one final question.

Mr. Fewchuk: Fortunately, he hasn't travelled across Canada lately by car.

My question relates to the EI programs. As a former businessman, it has always made sense to me that if we make money, we should try to keep it for tough times. When things were tough here and there was no money for the EI program, all taxpayers paid.

Don't you think it's better to have this kitty now and build it up for the tough times?

The Vice-Chair (Ms Whelan): Who are you addressing that question to?

Mr. Fewchuk: To anybody who wants to answer it.

The Vice-Chair (Ms Whelan): Mr. Atkinson.

Mr. Atkinson: Even under the old program, which was supposed to be a more generous program, the most the federal government ever paid in under a deficit-type situation was about$6 billion to $7 billion. The projections on the current surplus are going to be beyond $10 billion in one and a half fiscal years. What we're asking is, when does it stop? It seems that the EI fund is just going to continue to grow, and there is no sign of any kind of question of returning payments.

I told a little story earlier about the fact that when the UI premiums were increased in 1989, businesses, including both employees and employers, were told that this was in fact done to enhance training, to pay for training. Now the federal government is saying, we're getting out of that, but we're going to keep the money anyway, thank you very much.

The Vice-Chair (Ms Whelan): Thank you, Mr. Atkinson.

Mr. McIver.

Mr. McIver: On this issue, of course, we need an insurance program that should be run on insurance principles. But what we're doing right now in creating a surplus is so notional that it doesn't exist, as you all know. It goes straight to the bottom line of the treasury.

I always find this difficult, because the notion that something is out of whack, that the employment insurance premiums have grown out of line with what was projected by government, is very troublesome. What do you do if you decide, then, to cut those premiums? It's the same as any other tax cut in terms of its physical effect on the bottom line. It has obvious distributional benefits on where you cut taxes. Yes, it's better in many ways to cut a payroll tax than it would be to cut other types of general taxes.

My answer to cutting employment insurance premiums would be yes, let's do it, but let's fund it with additional expenditure cuts somewhere else in the government accounts.

The Vice-Chair (Ms Whelan): Thank you, Mr. McIver. Thank you, Mr. Fewchuk.

Monsieur Rocheleau.

[Translation]

Mr. Rocheleau: My question is for Mr. Atkinson and Mr. Redfern. Do you feel that the previous management of railways and trucking in Canada and Quebec had something to do with the quite lamentable state of the Canadian road system? What thoughts do you have about the past? What should we consider for the future in light of the past treatment of the railways and of the circumstances that have led to trucking? We know that a large, heavy truck passing on a highway is the equivalent of 20,000 cars.

Mr. Redfern: I'd better speak in English.

[English]

You've hit on a very key point. The federal government has taken leadership in all these other sectors of the transportation infrastructure. We've looked at rail and we've looked at ports. We're looking at airports, and we're putting them under a national program in some cases and privatizing them. We're looking at rail abandonment and other programs that we will make our rail system efficient.

What we're looking at now is the part of the transportation package that ties all of this together.

You can talk about the connector links of rail, and you can talk about the other ways of carrying products or people. But it still boils down to the fact that the highway system carries the bulk of passengers, tourists and freight. I think this has been left in abeyance. We have a long-term plan now for our other infrastructure needs, but we have yet to put one into place for the highway system. I think this would be very compatible with what's been done.

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I think it would be a way of putting it on a practical long-term national basis that would allow you to get the best value for your investment dollar.

I don't know if that's exactly the question you're asking, or if I've hit your point or not.

It would carry on and be the same as we now propose. The enhanced new highway system would be the property of the provinces and carried on their books. The maintenance would continue to be a provincial requirement, but we would get the basic infrastructure capitalized and started on a proper level and on a well-planned national basis.

We have a plan, and you can't expect one of the provinces to turn around and take the lead on what should be a national system.

The Vice-Chair (Ms Whelan): Thank you, Mr. Redfern.

Mr. Atkinson.

Mr. Atkinson: I would obviously agree, but another thing has happened. Because of the problems that have been associated with those other surface transportation sectors, there is a greater demand on our highway systems.

In fact, this is the case even with some of the changes that we've seen in business with respect to just-in-time inventory, where your warehouse is a large truck moving on the highway. Many more of our goods now go by rubber tire, as they say. So there's a greater demand on the highway system than perhaps there was before. This makes it all that much more important to have long-term prudent planning of that important asset.

The Vice-Chair (Ms Whelan): Mr. Grubel, did you have a question?

Mr. Grubel (Capilano - Howe Sound): No, I've just arrived, so I'm not plugged in. Thanks very much.

The Vice-Chair (Ms Whelan): Okay, maybe later.

Mrs. Chamberlain.

Mrs. Chamberlain (Guelph - Wellington): I'd like to ask a question, because we're going around in a circle. Obviously you people are here to put forth ideas of what you think is very important for this next budget process. But in doing that, what happens is that there is an increase of service to what we're able to give at this point in time.

Fundamentally, if we do upgrade our roads...and quite frankly, right off the top, I'm very much in favour of infrastructure. I think it is fundamental to what we do. But having said that, right from where we are today, in order to better our road system, to give employers really what amounts to a tax cut in payroll taxes, this is an increase of service.

A couple of people stated they don't favour an increase of taxes. Does anybody here favour toll roads?

Ms Ward: We looked at toll roads carefully, and we can find no one who disagrees with them as far as tourism is concerned. We find them fast and efficient. With reasonable safeguards to make sure this is not a cash grab and to make sure nobody sees this as a cash cow but a piece of worthwhile infrastructure, we support user fees on toll roads.

Mr. Redfern: The national highway plan did look very carefully at toll roads. Certainly with the advent of the new electronic methodology, tolling is a lot more efficient than it used to be when you had to stop and pay a token.

What they found is that in the national highway system we're basically looking at existing roads being brought up to a current standard. You have roads that weren't ever built for a tolling system. You do not have limited access or offsets.

In a lot of cases you also do not have a parallel, not-tolled option. There are a number of user pay facilities that are now in vogue. There is, of course, the 407, which is under way and should open shortly. This is a classic in itself, because it's one of the most densely travelled roads. In the case of the 401, we also have an existing road that won't be tolled, so you're giving them both access.

I think there are some places that should be looked at. There are bridges, there are some sections of roads, there's the Coquihalla in B.C. Of course, in the non-road part where they're doing the airports by user fee, they should all be looked at. Whenever possible, that should be instigated for those portions. But it is a limited amount of the overall infrastructure system that we need.

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So I think you're going to end up with a kind of joint hybrid toll system or user fee system where possible, as well as the continuation of funding. We've just gone through an infrastructure program that the federal government did find $2 billion to put into from existing budgets. This was not money that was charge.... We're looking at that type of funding, and obviously the federal government does feel there are types of investments that are worth while. This one is certainly one that is basic infrastructure, and it's not something that's pulled off the shelf to take advantage of a program. As other people have said, the thing has been designed and put in place by the people who run the transportation part of the federal government and the provincial government, and it's there and ready to go.

The Vice-Chair (Ms Whelan): Thank you, Mr. Redfern.

Mr. Atkinson, did you want to reply to that?

Mr. Atkinson: No. John said it well.

The Vice-Chair (Ms Whelan): Mr. Collinson.

Mr. Brian Collinson (Director, Commercial Policy, Alliance of Manufacturers and Exporters of Canada): Madam Chairman, our association favours the use of public-private partnerships whenever possible. We believe there needs to be an extensive exploration of exactly when that is possible. We do think there are some very encouraging signs with regard to that, such as Highway 407 and other such roads.

However, we would emphasize that any such use of a public-private partnership that's built around the concept of user fees must apply an approach to user fees that emphasizes justice and equity in the application of the fees and that ensures that the fees are applied in a responsible manner. We think that principle in general applies to the application of user fees right across any activity that's related to government in any way.

Thank you.

The Vice-Chair (Ms Whelan): Thank you, Mr. Collinson.

Mr. Godding had to leave, but Mr. Leonhardt is sitting in for him. You wanted to respond to that?

Mr. David Leonhardt (Manager, Public and Government Relations, Canadian Automobile Association): Thank you very much. I think you'll find from the motorist's perspective.... We've done our surveys, and motorists are not particularly keen on seeing tolls. They would essentially be the equivalent of raising the gas tax, just in another fashion, because both of them are in fact user fees. As long as motorists understand that the federal government is putting only 4% of those user fees into the highways now, they are very unlikely to fork over more money.

There's a question of fiscal integrity here as well. On behalf of our member, CAA would certainly be out there very vociferously fighting it. I think what this government would much prefer is CAA's being out there patting Mr. Chrétien on the back and saying that there is finally some leadership from the federal government.

Mrs. Chamberlain: I would like to respond to that. We would love to have you out there patting Mr. Chrétien on the back for leadership, and we would hope that would be the case, but we would really hope too that you understand.... think Mr. McIver, to his credit, does see fairly clearly that we haven't turned any real corners. We've made some very real gains, and we're going in the right direction, but we have to be very careful.

In these pre-budget hearings, we have many groups come forth with obviously the same.... If we had a group of people, for instance, from the CBC here, we would have the same types of things. We have many areas to look at, and because there isn't a dedicated tax, I think we have to understand that those dollars are being reallocated in other areas also.

Mr. Leonhardt: There perhaps is the mistake, and there's something fundamental.

Mrs. Chamberlain: That could be your hospitals, that could be those areas, and I don't know that you can say that's a mistake - or education.

Mr. Leonhardt: Or a lot of other areas - direct subsidies to businesses and associations and cultural groups, dance troops and what have you. But there is money being paid that is in a sense a user fee because it's applied only to gasoline and diesel; in fact, on gasoline, only to gasolines purchased for road use purposes. To say that it's not a dedicated tax is only a sleight of hand on the part of the system as it's set up right now. Motorists recognize it that way, and our surveys show that over 90% of them feel there should be a direct link between gas taxes and highway investment. They're not necessarily saying it has to be 100%. They're not necessarily saying, in fact, that it even has to be the full cost of highways that's being paid by users. They do recognize other benefits to society, but they are saying they would like to see a substantial link.

The Vice-Chair (Ms Whelan): Thank you, Mr. Leonhardt. Mr. McIver.

Mr. McIver: I want to make a simple point here. I think it is inappropriate to think of gasoline tax as being a user fee. I think it is no more a user fee than the high taxation on alcohol products in provincial liquor stores. They're not intended in any way to be returned to the user of the product.I think it's a misnomer to speak of it as a user fee.

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The Vice-Chair (Ms Whelan): Thank you, Mr. McIver. Ms Ward.

Ms Ward: It's very sad that we have to sit debating the merits of road safety versus hospitals and schools, and I don't think it's a useful debate to enter into. Something we all tried to allude to earlier which may be more helpful is the fact that nobody has all the answers and nobody has all the money.

What we need from this government and from this table is a sense of goodwill. Yes, we have issues. Yes, we have to sit down with the provinces and the private sector and people who have toll roads and people who want to build the Confederation Bridge, and say, this is one issue; how can we deal with it? Then we have our social issues, which are equally important. None of us here is saying we shouldn't spend money on hospitals and schools, as you appreciate. But I'd like to emphasize that nobody has an answer. Jurisdictionally, you don't have the answer any more. We certainly are flawed; we don't have all the answers. But we know that problems exist and it is in attempting to be helpful in finding the answers to those problems that we will sit down together.

The Vice-Chair (Ms Whelan): We appreciate that, Ms Ward.

Mr. Collinson wanted to reply to that.

Mr. Collinson: Madam Chairman, we feel very acutely the needs with respect to infrastructure, highway infrastructure, transportation infrastructure in general. We're not convinced that the railways are on anything like a sound footing in this country as of yet. Telecommunications infrastructure we also regard as being a very important priority.

There are many priorities that an umbrella organization like ours is very sensitive to throughout the economy. However, our overarching perspective on everything we've heard today is that deficit reduction has to be the number one priority for what the government is doing for Canada. We hope there will be room for other measures, but we emphasize that we do not believe the government should jeopardize its deficit reduction policies for any particular program.

The Vice-Chair (Ms Whelan): Thank you, Mr. Collinson.

I have a question that goes back to one of the opening statements by Mr. Allinotte. I believe in your opening comments you talked about a 10% reduction by all departments across the board. I'm a little concerned about those types of suggestions because I'm not sure if everyone has had the opportunity to look at every department's books to determine who was actually squeezed prior to our first cuts in the 1993-94 budget. I'd like to know if there has been any study to make you come to that conclusion.

I can tell you that the federal services in my home community have been squeezed much more than 10%, 20% or 30%. I get a little nervous when I hear about another 10% reduction, and my staff in my riding office feels more stretched when they hear those things as well. I'm just curious as to whether you've had any analysis done on that.

Mr. Allinotte: Maybe A.J. could address that.

Mr. Myers: It's a little difficult to defend departmental budgets or budgetary spending when there really isn't a good cost accounting system in place. Looking at the efficiency improvements that businesses had to make over the past several years, 10% over a two-year period is not out of the ordinary at all.

Looking at the whole administration cost of government, it seems to me that line personnel, the people who know anything about the conditions in local communities, have been withdrawn. I think that's been a tremendous cost, to the detriment of many departments. I'm not so sure if the existing operational spending on a department-by-department basis is actually allocated in the best way today that it could be. There has been a loss in the ability of many departments to operate effectively.

One area in particular is the regulatory process. I think this is maybe one of the main areas in which we can see a tremendous gain, not in the ability to regulate - in fact, I could argue that the effectiveness of regulation at the federal level would actually be improved - but in a process that would lower the cost of regulation for people and businesses that are being regulated, as well as for the people in government who are regulating. It's a more efficient system of performance-based regulation.

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It seems to me there are solutions that departments could look for to both get better service and lower the cost of administration. I'm not so sure those have been adequately addressed. I think if you were to ask the customers, the people who are affected by government programs, about whether these programs are effective or not, you might come up with something very different.

First of all, I'm sure you would have a very different pattern of cost-cutting in the first rounds of program review. I'm sure you could find efficiency improvements, if not right across the board, then certainly in some departments, that could be cut much more than 10%. I'm not so sure there would be any loss in service.

The Vice-Chair (Ms Whelan): Mr. Myers, I'm not going to disagree with you that in business 10% over two years may not sound like a lot, but I do know that some departments have been reduced in a lot of areas by up to 30%. To suggest an additional 10% across the board, we would need a little further study. That's from my point of view for the services in my riding. I'm sure others would feel the same way. I'm not going to disagree. There's probably still room for improvement. We'll continue to strive for that.

Mr. Myers: I agree. One of the problems - I want to come back to this again - is that we really don't have an adequate way of measuring the effectiveness of government programs. We really don't have an adequate way of measuring how much these programs cost on a program-by-program basis.

I have not heard, in this one area of user fees, about the coast guard and the ice-breaking issue in terms of user fees. I have not heard how much it costs to run an ice-breaker. I don't know if it's possible for anybody to tell you how much it costs to run an ice-breaker. I think it's terrible not to have the cost broken down at that level.

There are many other programs like that whereby it's impossible to tell how much these programs cost. If there were these performance measurements in place, if there were cost measurements on a program-by-program basis, then maybe you could have an effective method of assessing what the impact of government cutbacks actually were. You could actually have a stronger defence.

The Vice-Chair (Ms Whelan): Thank you, Mr. Myers. Mr. Grubel now has a question before we go to final statements.

Mr. Grubel: I would like to react to the idea that there are no more cuts. At Reform, we have done our homework. We have come up with many, many billions of dollars. I'm not at liberty to give you the details, but let me just tell you about subsidies to business and agriculture, regional development, the privatization of CBC and VIA Rail, keeping just to a few core issues.

When I arrived here, I asked for a copy of the Nielsen report. It takes up about two feet on the shelves. It details how duplication and overlap of functions between the federal government and the provincial governments have led to an enormous burden on the economy, as well as costing a fortune.

For example, there is lots of room for the further decentralization of transportation, fisheries and agriculture, which all involve departments that functionally have work that affects all Canadians, but which really typically involve functions whereby the local people should have the first stab at what should be done about those issues.

I just recently saw a study. I couldn't believe this. I had to check several times that I had these numbers right. In the Department of Foreign Affairs, there is a centre that used to receive annually $142 million. It now receives $102 million. It's called the International Development Research Centre. The person who is trying to find out what this centre is doing is having a terrible time finding this out, except that it does research abroad through consultations and so on.

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This is just to say that I believe there is still room for slimming down our government in ways that will not touch the essential functions of health education and, to some extent, welfare and the basic functions of government.

If we have time, there's one thing that really keeps on puzzling me and the people from business around here. Why are Canadian consumers not spending? As you know, we're in the doldrums economically. We're driven by exports, but why are they not spending? What do you see that the federal government could do to get them to spend again?

The Vice-Chair (Ms Whelan): Thank you, Mr. Grubel. We'll take your question. Maybe everyone can incorporate their final comment into that in a minute or less. We have about 10 minutes left. We'll start with Mr. Beauchamp.

Mr. Beauchamp: Our input today is that I think there are basically things that government can do that don't actually cost that much money. I cite here, obviously, the recommendations we've made to modify the Interest Act. I cite the harmonization situation in Atlantic Canada particularly and, generally speaking, the future of harmonization for the rest of the country. I also mention the enhancements we have recommended with respect to the home buyers plan for first-time home buyers, as well as a proposal that we have made now for well over a year concerning the home investment program, which in our view is a key to low-income home ownership in Canada.

I will stop at this point. Again, the emphasis is that things can be done that don't cost too much money.

Mr. Allinotte: As my colleagues have said, and as I said in my opening address, one of the main things that we believe this committee and the government should address is the continued reduction in the deficit and the debt.

Through that - we are seeing it, and I certainly agree with my friend at the end of the table - we have certainly made steps in the right direction. We have not turned the corner yet. We are not supporting reductions in income tax rates to corporations. We are suggesting that the credit programs in place are there to maintain a competitive position with world markets, and I think they should be retained. With this continuing move to reduce the deficit and debt, we see interest rates coming down.

The question was asked as to why consumers are not spending. They have not seen us turn the corner. They are anxious. The people out there in the workforce are the ones who are walking in each morning concerned about whether they are going to continue to go to work. The federal government has to ensure that to the people. As I say, we haven't reached the full length of those steps. It's a job I wouldn't want to have to do myself.

Mr. Leonhardt: The CAA came here essentially saying one thing, which was that we'd like to see the federal government putting some of the gas taxes and legal taxes it collects into our national highway system. We don't think that has to be done at the expense of deficit fighting. In fact, it's absolutely necessary if this country is going to maintain its economic advantage and build on its economic advantage to have that basic highway infrastructure to move goods around.

One of the things someone brought up here that has come up from time to time is health. They think we'll have to stop spending on health. Maybe the committee should go over to Mr. Grubel and have a look at his list, because there are a lot of other things that government does other than health in which resources can be reallocated. Perhaps the message we are getting here from a number of groups is that we should look at what our priorities should be. We are simply asking you to make at least some basic highway spending a priority.

The Vice-Chair (Ms Whelan): We are all waiting anxiously to see his list as well.

Mr. Atkinson: Just to answer the question, I thought Mr. Grubel was reading from page 13 of our pre-budget submission, because those are in fact the areas we're suggesting should be cut, such as direct subsidies to business, etc.

What I would like to leave with you is this. First of all, continue the good and right fight, as I mentioned earlier. One of our big keys to economic prosperity is in fact to fight our fiscal deficit and get on with paying back our debt.

I would add as a caution, however, that you should not forget about that other debt and deficit bite we have on the infrastructure side, which is one that we neglected even during the good fiscal times.

We're not suggesting that we start spending or investing billions of dollars immediately; we're talking about sitting down to start planning for the long term about how we're going to manage that very important asset.

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With respect to employment insurance premiums, the message we would like to leave with you is: remember the history. Remember that quite substantive increases in premiums were made back in the late 1980s on the basis and the supposition that those moneys were going to be used for training purposes under UIDU. Remember the recent announcements by the federal government that it was not going to be providing that funding for those purposes. It fact, it is just going to keep the money.

I guess from our perspective, we're saying that this is not right. That's not what the money was asked for. Employers and employees in this country contributed to that fund. If it's simply going into the consolidated revenue fund, then let's just tell them that and be very honest with them the next time we increase premiums.

Finally, I'd like to leave the thought with you that certainly, as I mentioned earlier, we really feel you're on the right track.

Why aren't consumers spending? Uncertainty. Why aren't investors investing? Uncertainty is the keyword. I think the more we can show people we have a plan beyond just the next election in our fiscal area, our infrastructure area and other key areas, then that's the key thing both consumers and investors want to see.

Mr. McIver: Both the deficit and debt have necessitated a tremendous restructuring in this economy both in the private and government sectors. That has cost us jobs. It has resulted in a tremendous degree of employment uncertainty. That is, of course, the root cause of the lack of consumer confidence in this country.

I think economic prospects, on balance, look quite bright at this stage. We may have rounded the corner. We don't know it yet. Let's not blow it at this stage by not staying the course.

Mr. Redfern: The federal government has been involved in roads since 1949 with the Trans-Canada Highway system. They continue to this day with the seven bilateral arrangements across the country. They've now been involved some eight years in the national highway plan.

In fact, as I said before, if anybody is going to take the leadership in this plan, it has to be the federal government; it can't be one of the provinces. I think if it's not going to take leadership and be involved in this program, it should state clearly that it's not going to do it.

If, on the other hand, it is going to take a leadership role and go ahead with a valid project,I would state that the federal government should adopt a national highway policy that needs to be long term in nature and that would oversee the future improvement, maintenance and expansion of Canada's national highway system. This would facilitate the efficient use of taxpayers' money in infrastructure investment.

Ms Ward: I'll speak to Mr. Grubel's point, which is a very good one.

To add to what some of my colleagues said, I think the other issue is trust. I don't think there are a lot of people who trust us right now in what we're saying about deficits, debts and when the economy's going to get better. That's because we've said it before, and things haven't gotten better.

I think you have to give people a little bit of a chance to understand what's happening. Give them a sense of stability. With interest rates plummeting to 40-year lows, or whatever it is, the dollar is starting to get shaky again and people don't know what to expect each morning when they open their paper. I don't think that kind of feeling is very conducive to spending. Trust and stability are things of which I don't know how much people have, but I don't think they've got a lot of it.

To our professional point on tourism, we commend the government for backing a winner. Tourism has taken a government investment and turned it around into more income, more jobs, more business starts and more opportunities for Canadians. This is what was in the red book. This is what you have been able to give back to the Canadian people because of the tourism industry.

We ask you to continue the good work there, and we will, as an industry, continue to provide those jobs and business starts that Canadians deserve and require.

As far as deficit and debt reduction go, I echo what my colleagues have said across the table: remember that we are not the States; it's always that we are Canada and we have a commitment to our people that cannot be forgotten. Thank you.

Mr. Creber: We came here today specifically to talk about jobs. Although there were not any specific opportunities to do so, I would certainly encourage the committee's review of our proposal.

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I think we have an opportunity in our industry to put people back to work in both full- and part-time opportunities, and with little or no investment. We also have a huge capacity to bring people into this industry and make a difference to their lives. Over the years, our industry has made a difference to people's lives in Canada, and we can continue to do that. All we need is an opportunity to do so, and through discussions with the various government departments, we hope we can continue the partnership we have established over the years with the federal government in terms of doing things such as this.

In response to Mr. Grubel's comment about how we can get people to spend, one of the ways in which we can get them to spend is by putting people back to work, and that's what we're proposing.

We look forward to discussing any of our proposals with any of the committee members outside of the committee room here. We're ready and willing to talk to you at any given time, and we thank you for the opportunity to appear today.

The Vice-Chair (Ms Whelan): Thank you, Mr. Creber.

We want to thank all of the witnesses for being with us today. We thank you for the written submissions as well, which we will look at in further detail.

Is there anyone else who has a final comment? Did you have something to say, Jim?

Mr. Peterson (Willowdale): No, but I apologize very much for being out. You're in very capable hands, though, and I will read the transcript with a great deal of interest for those parts that I missed.

Sue and members, I guess we have seen - and I guess those who are listening in can see - part of the dilemma that we have. Everybody here likes what we're doing. There are some people who think we have to say where we're going to be three years from now instead of two years from now, but that's the only difference in terms of the debt and the deficit. We are seeing people who say, however, that we do need additional expenditures in certain areas, such as roads, or that we do need fewer taxes in certain areas, such as payroll taxes. And we're also seeing some representations where it won't cost us anything to make administrative changes, but those changes might have an impact on an industry or a particular group.

As politicians, if you know of unnecessary expenditures, specifically.... We've heard that business expenditures can be cut. We've cut them from 3.7 to about 1.4. There might be a few little other measures left in there, although there are mainly agricultural measures left. If those are the ones you want us to cut, would you be specific? It would be of great help to us if you and your organizations would put your credibility out there with ours to support those cuts in particular in order that people would know where they were coming from.

Thank you.

The Vice-Chair (Ms Whelan): Thank you very much.

The meeting is adjourned.

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