[Recorded by Electronic Apparatus]
Wednesday, November 6, 1996
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[English]
The Vice-Chair (Ms Whelan): Good morning. Ladies and gentlemen, I'd like to welcome you all here today to our pre-budget consultation session taking place in downtown Regina.
Just to make everyone aware of what's happening, the finance committee has divided into two. Half of the committee has gone west and the other half of the committee has gone east. I'm chairing the western section and Jim Peterson, the chair of the finance committee, is chairing the eastern tour. We started in Vancouver. Yesterday we were in Edmonton and today we're in Regina.
I'd like to introduce you to the members of the committee we have with us. Ron Duhamel is the member from St. Boniface, Manitoba; Ron Fewchuk is the member from Selkirk - Red River in the province of Manitoba; and Gary Pillitteri represents the riding of Niagara Falls in Ontario. Monsieur Rocheleau represents the riding of Trois-Rivières in the province of Quebec; and Monte Solberg, who will be joining us shortly, represents the riding of Medicine Hat in the province of Alberta. I represent the riding of Essex - Windsor in the province of Ontario.
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The format today is a round table discussion. Everyone will give opening comments of approximately three minutes. I encourage you to summarize from your briefs and not read them if possible.
It would be helpful if you could try not to speak extremely quickly. It's difficult for our translators to give simultaneous translation if you're speaking too fast. If you do read from something...I'll just make you aware of that. There's a tendency to read a little more quickly than we would normally speak, and it's difficult for translation.
After the opening comments we'll go to an open forum of questions. If there's a question that's not directed to you but you'd like to reply to it, just indicate to me and I will call on you to answer that question.
Monte Solberg, the member from Medicine Hat from the province of Alberta, has just joined the table.
We'll start with Mr. Dan Schmeiser from the Saskatchewan Wheat Pool, please.
Mr. Dan Schmeiser (Manager, Economic Analysis and Policy Development, Saskatchewan Wheat Pool): Thank you, Madam Chairman. The Saskatchewan Wheat Pool appreciates the invitation to participate in this pre-budget round table exercise.
First, we'd like to compliment the government for several initiatives. The achievement of the succession of budgetary deficit targets has led to significant cuts in interest rates, thereby reducing expense, which is the major cost for the industry.
Farmers will also receive additional interest expense relief from the government's decision to continue interest-free cash advances through the Agricultural Marketing Programs Act. Furthermore, efforts to speed up the payment of $105 million to farmers, which has been allocated to compensate for a change in the basis for pooling Canadian Wheat Board grains, should also be recognized.
The pool wishes to identify five issues for the consideration of this committee with respect to the 1997 budget. These issues are cost recovery, the sale of the federal rail car fleet, amendments to the Canadian Wheat Board Act, credit guarantees for grain sales, and capital gains taxes.
In the last two years, government departments have been charging or increasing the fees for the services they offer. Our concerns include the cost recovery by Agriculture and Agri-food Canada, the Pest Management Regulatory Agency, and the Canadian Coast Guard service.
We are not opposed to the concept of user pay; however, there must be fair consideration to a sector's ability to pay and its competitive position. In the case of mandated services, users should have a say in how or if such services are offered and the amounts charged.
In 1995 the federal government announced its decision to sell its fleet of 13,000 hopper cars. This decision provoked an ongoing debate over who the cars should be sold to. It has been proposed that the government retain ownership for a five-year period, with the management of the cars assigned to a third party. At the end of this period, the operating agreement would expire and the cars could be sold.
The Saskatchewan Wheat Pool supports such action. We recognize this option will have a short-term fiscal impact on the federal government. However, delaying the sale will better enable potential purchasers to assess the true value of the cars.
Some time before Christmas, Agriculture Minister Goodale will introduce legislation to amend the Canadian Wheat Board Act. Although the pool is supportive of many of the proposed amendments, two areas concern us.
We do not support the discontinuation of the federal government guarantees on any adjustments to the board's initial payments and the establishment of a producer-funded capital base by the agency to accommodate this. Such action would be another offloading of costs onto producers. We do not support the transformation of the Canadian Wheat Board from a crown corporation to a mixed enterprise, unless its access to preferred interest rates continues.
In February 1995, the federal government announced the provision of up to $1 billion in credit guarantees for the export of grain and other agrifood products. We are unaware of any progress in implementing this guarantee program, and encourage the government to proceed as quickly as possible.
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Also in 1995, the federal government indicated it would not change the lifetime capital gains exemption for small businesses and farm property. Saskatchewan Wheat Pool supports continuation of this policy.
In closing, we'd like to add that the federal government has made significant cuts to program funding for the grain sector in recent years. In percentage terms, these cuts have been much deeper than those made by the U.S. and by the EU. Furthermore, the return in the use of export subsidies by the EU is cause for concern.
These issues affect the competitive position of Canadian agriculture and need to be taken into account during the annual budgetary review of domestic programs and expenditures.
Thank you.
The Vice-Chair (Ms Whelan): Thank you very much, Mr. Schmeiser.
I'll now turn to Mr. Casey Davis from the Saskatchewan Chamber of Commerce.
Mr. Casey Davis (Chair, Finance Committee, Saskatchewan Chamber of Commerce): Thank you very much. I'm pleased to be here today on behalf of the chamber. My comments will be perhaps a little more general than those of some of the other people who will be speaking today. We think that's appropriate, because most of the interest groups will make the points that they feel are important for their particular groups, but we think that in this process it's important for the government to keep a focus on where we're going and what we're trying to accomplish.
In the brief we presented, I made reference to the progress we have made in the past few years in attacking the deficit. Our interest rates are down. Both federally and provincially, our governments seem to be coming to grips with the issue to some extent.
However, it's our view that much still remains to be done. While we still have low interest rates, of the G-7 countries we still have the highest debt as a percentage of GDP and we have no expectation that it's going to get any better in the not-too-distant future. Our unemployment rates are approximately 4% worse than those of other countries such as the United States. And if we're having an economic recovery now, there are a lot of Canadians who aren't seeing it yet. Things are not as good as they could be, and we have to continue to move forward and try to improve.
Therefore, we advocate that the government continue in the same direction and accelerate the process even further. The issue of deficit reduction is something we have to maintain a focus on.
The idea of a percentage of GDP is a good way of measuring performance as it relates to the economy as a whole, but we also think we have to focus on absolute terms, not only on a percentage. Look to $10 million, $5 million, zero and budget surpluses - that is what we should be aiming for.
We suggest that a budget surplus should be attained by 1999 rather than 1999-2000 or 2001, as has been suggested in some of the finance department material. The reason for that, we believe, is that we have had some reasonably good economic times worldwide.
While our budget does contain some surplus or some amounts that will cover us in the event of some unexpected costs, I think the cushion really relates to covering interest costs. If we go into any type of recession, I don't think we have the capacity to make up the difference in lost revenue and increased costs.
The deficit has to be a continued focus. I know that's very difficult for people and that it has resulted in painful cuts, but we have to continue.
In the area of expenditure reduction, I think the government has made some significant progress. I can't recall when we've had - not a percentage drop in the increase in expenditures - a drop in absolute terms in operating expenditures from the federal government's perspective. We'll see if that's actually achieved in the current fiscal year. I'm hopeful it will be.
We have to continue in that vein and there has to be more work between the two levels of government. In our presentation I referred to Health Canada, and I just ask why we have as many jobs as we do in that area - I think there are over 9,000 people in that department - when health care is generally a provincial responsibility.
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We have two levels of review that relate to uranium mine development, provincial and federal. It's the same with environmental issues. There certainly has to be some way to streamline these things so that we still provide the same type of services people want, but in a more efficient manner.
Our last point really deals with tax reduction. It may seem inconsistent to advocate tax reduction while saying we have to get our deficit under control, but we do believe tax reductions can be positive and can encourage the economy to grow even more.
Many of the things that have to be done will have a negative impact on the economy. Lower interest rates are very good from the point of view of government expenditures in the sense of reducing the annual cost, but they also reduce the revenue in that you don't collect the income tax on investment income. Secondly, lower interest rates reduce consumption, because retirees don't have the same level of income that they had before. And cutting the civil service has a negative impact.
I've seen studies that suggest that for every dollar there is a two-dollar multiplier effect on the economy. A tax reduction that is aimed at increasing consumption can perhaps counter that. For every dollar that goes into creating new jobs, there's a three-dollar to five-dollar multiplier effect. So we believe that selective tax reductions can stimulate the economy and can help us go forward and create more revenue and a better economy.
In conclusion, we believe the progress that has been made is significant. I think that generally there is some hope among Canadians that we're starting to get our deficit under control. The key is not the deficit, of course, but the debt, and getting to the point where we start cutting into that is key. But if we don't crawl first in terms of dealing with the deficit, we're never going to walk in terms of starting to reduce the debt.
Thank you very much.
The Vice-Chair (Ms Whelan): Thank you very much, Mr. Davis.
I'd now like to turn to Mr. Ron Goetz from the Saskatchewan Motion Picture Association, please.
Mr. Ron Goetz (President, Saskatchewan Motion Picture Association): Thank you.
My name is Ron Goetz and I'm the president of the Saskatchewan Motion Picture Association. We are a provincial association representing the interests of 385 members, and we represent all aspects of film and television in the province of Saskatchewan. On behalf of our members, I would like to thank you for taking this opportunity to visit with us today.
The Government of Canada recently announced two major initiatives that have been very positive for our industry. In September, the Hon. Sheila Copps announced the new Canadian television and cable production fund, which will inject $200 million into our sector, primarily into the production industry. This was followed with the announcement of the refundable tax credit for independent production in Canada. Both of these initiatives are very positive for our industry and will help to show tremendous growth in Canada for this cultural sector.
I'd like to talk to you a little bit about the potential for growth in our industry and give you some facts and figures. In Canada we've seen an increase of 100% in jobs in this sector for the last five years. In Saskatchewan we've seen a 500% increase. In 1991 our industry generated approximately $5 million. This year we are estimating that we will generate about $26 million, a 500% increase in our industry. We are hoping, and we anticipate, that by the year 2000 our industry will grow to a $65 million one in Saskatchewan.
The film and television industry is a labour-intensive industry, with 52% of the funds going towards labour. About 30,500 Canadians are employed directly in this industry. In Saskatchewan we have seen this rise to 353 direct jobs and 812 allied or secondary jobs.
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If I may, I could speak for a moment on some of the success stories we've had in Saskatchewan. These are not just jobs related to producers, directors, and writers, which are significant to our industry. They have also now employed carpenters for set construction, painters, and the like. So the allied industry too is really growing in Saskatchewan.
In Saskatchewan we have a strategic training and professional development plan for the Saskatchewan independent production sector. We are trying to form alliances with federal agencies and institutions to carry out this plan.
The Saskatchewan government is developing a cultural industry development strategy. This strategy proposes a renewed federal-provincial agreement for cultural industries that would allow the province to implement the strategy. The previous agreement was very effective in providing development support for our sector.
The main player in our industry at this moment is the provincial government, and their support to our sector and our industry has been key. This includes things such as the provincial investment agency known as SaskFILM, the development of the provincial tax credit, support to training and skill development, international marketing support, and the establishment of the Saskatchewan motion picture sound stage. These elements will help ensure Saskatchewan can fully engage in the industry on national and international levels.
The success of the Saskatchewan industry, as I said, has been based primarily on provincial support. Our success has been achieved with limited support from the federal government or from federal programs. I'm not saying that is your problem. I'm saying that because our industry is young - it has really been in existence for only four or five years - we've not been able to capitalize on many of the opportunities our partners and friends in central Canada have, because they have been around for two decades or more.
However, for us to use the new programs that were announced this year, we need to ensure there is some opportunity for the regions to be represented in these new plans. In other words, if they are too restrictive there will be no opportunity for Saskatchewan to use the new programs as announced.
We would also like to raise a few concerns about the recent cuts to the CBC. Often these cuts come at the expense of the regions. One of the concerns we have as an industry is that pretty soon we will have few people to talk to in our province. As things become more and more centralized there will be no opportunity for our independent production community to talk directly to the people here in Saskatchewan. As things become centralized, how we will do that is a question many of our members have asked.
In a recent meeting with Telefilm, for instance, we were assured a high priority would be placed on a dynamic relationship with the regions. Our history - and our members have pointed this out to me - has not been good when these kinds of comments have been made. Often they are talked about but the actions aren't always there. Recently in The Globe and Mail we have seen in a lot of discussion in B.C. about the level at which Telefilm is involved in that particular province, which is far less than their level of production.
I would like to add that we think these new initiatives and the support of the federal government are commendable and we are very grateful for those types of opportunities. But if I could leave you with one thought, it's that we need to make sure the regions are able to participate in these programs and to find ways to ensure centralization will not have a negative impact on such industries as ours.
The Vice-Chair (Ms Whelan): Thank you very much, Mr. Goetz.
I would now like to call on Jonathan Sturm, from the University of Saskatchewan.
Mr. Jonathan Sturm (University of Saskatchewan): Thank you, Madam Chair. Good morning, ladies and gentlemen.
I'm a third-year commerce student at the University of Saskatchewan, Saskatoon. Currently about 120 of my colleagues and I are analysing the current federal budget in depth and creating our own version of the federal budget in our tax course, headed by Professor Marv Painter in the College of Commerce. The views I'm about to present for the most part represent the views of young Canadians in the College of Commerce and their perspective on Canada's current and future financial policy.
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The federal government should achieve a balanced budget by the year 2000-01 and then concentrate on running a surplus to bring our debt down. Debt charges should be brought down to about 30% of total federal government spending, compared to 50% of total government spending in next year's projected spending.
If over the next five years inflation remains at 2% to 3% and the GDP grows at a real rate of 2% to 3%, then we will expect a real growth in tax revenues of about $15 billion, which will eliminate 75% of our current federal deficit. Therefore there must be approximately $6 billion in real cuts in program spending.
However, it is important to begin to repay our debt of $600 billion, because if interest rates were to jump by 1% right now, then another $6 billion in real cuts would have to be made. Then the question would be, what would we have to cut to finance that shortfall?
During the next five years there should be no tax increases or tax decreases for anyone. Once the federal government has shown Canadians and the international community that our finances are solid, then tax breaks can be considered. Tax breaks should only come into being when it is clear that Canada is well on her way to repaying the debt and thus reducing our public debt charges.
With social programs, as students we would like to encourage you to maintain the transfer payments, namely the CHST. If this is cut, it is more than likely that costs will rise, especially for students attending university. The future of Canada depends primarily on how well educated our citizens are. The money invested in students now will more than repay this country in terms of benefits in the future.
The government should also consider phasing out CPP. If you notice, if you have a syllabus in front of you here, there is a detailed plan that my colleagues and I have agreed would be a suitable plan for phasing out CPP.
The government should also eliminate subsidies to businesses, yet provide boons for research and technology firms. This will ensure Canada's future leading role in technology and development.
Review funding to Indians and Inuit. There should be equal funding based on need for all, where funding is based on financial need.
Cut and privatize some crown corporations. Privatize especially where the private sector can do a much better job. Examples of this would be the CBC and Canada Post. With crown corporations, cut the hefty slush funds all of them have. The reason for privatizing is these corporations are no longer needed for the purpose they were originally intended for. The private sector can likely do a much better job. As well, there should be further cuts to defence in both capital and personnel.
In terms of jobs, if the government is going to try to jump-start the economy, it should facilitate the creation of long-term jobs in the private sector. However, if our debt is drastically reduced and to the point where tax relief can be given to business, it will greatly increase employment levels.
If the deficit is eliminated and the debt is drastically reduced, this will mean lower taxes. Madam Chairman, this will mean a higher standard of living for all Canadians. With a financially secure Canada, everyone will rush to invest in this great country.
In conclusion, it is in the best interests of Canada that we secure our financial future. To do so, we must first eliminate our deficit within five years and significantly reduce our debt. To argue over who is paying their fair share of taxes is futile. Once Canada's financial house is in order, then we can look at reducing taxes for everyone. Madam Chairman, follow this goal and our precious Canada will remain the world's greatest country.
Thank you.
The Vice-Chair (Ms Whelan): Thank you very much, Mr. Sturm. It's a very interesting presentation.
I'd now like to turn to Mr. Alex Wilson from the Canadian Association of Gift Planners.
Mr. Alex Wilson (Canadian Association of Gift Planners): Thank you very much. As a representative of the South Saskatchewan Roundtable of the Canadian Association of Gift Planners, I am pleased to have this opportunity to address members of the Standing Committee on Finance.
As part of an organization of over 600 members across Canada, the South Saskatchewan Roundtable of the Canadian Association of Gift Planners includes individuals whose primary responsibility for the charitable and non-profit organizations they represent is to encourage charitable giving. The tax incentives included in the 1996 federal budget relating to the annual limit for charitable contributions, bequests, and gifts of appreciated property were well received by members of our organizations and will go a long way towards maintaining much-needed support for the charitable sector.
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We are pleased, of course, that the government, in consultation with the charitable sector, is prepared to examine ways to encourage charitable gifts further. Members of our organization feel one of the most effective ways to encourage charitable giving further is to exempt gifts of appreciated property from capital gains tax.
We are aware of the presentation made to your committee on this subject by the Canadian Association of Gift Planners in Ottawa on October 29 of this year. We fully support the recommendations made in that presentation. We do not intend to restate the arguments contained in that presentation. However, we do wish perhaps to give the arguments a local flavour.
It is a widely recognized fact that there is a great deal of accumulated wealth in Saskatchewan. The wealth is in the form of assets. Our organizations find it more and more difficult, year after year, to maintain needed levels of support from gifts of income and must look for ways to encourage gifts from assets.
In Saskatchewan a great deal of accumulated wealth is held in agricultural land. Development officers employed by charities recognize that it is unlikely a donor will make a charitable gift for tax purposes alone. He or she must first have charitable intent. The exempting from capital gains tax of a gift of appreciated property creates an enhanced opportunity for those individuals with charitable intent to support their favourite charity or charities in a significant way which would not likely be possible from income. These opportunities, given the rural nature of much of the accumulated wealth in Saskatchewan, are likely to benefit not only large national charities but also smaller local community needs, including hospitals and nursing homes.
The Vice-Chair (Ms Whelan): Thank you very much, Mr. Wilson.
We will now turn to Mr. Gary Semenchuck, from the Canadian Cancer Society, Saskatchewan Division.
Mr. Gary Semenchuck (President-Elect, Saskatchewan Division, Canadian Cancer Society): Madam Chair, committee members, thank you for the opportunity to participate in your round table of pre-budget consultations. I'm a lawyer by profession, and I am here today as a volunteer of the Canadian Cancer Society, Saskatchewan division. I'm the president-elect of the Saskatchewan division, and the Canadian Cancer Society is one of the voluntary health organizations in the Council for Health Research in Canada. The council is a coalition of voluntary health agencies and medical research institutes across Canada, representing thousands of volunteers, medical scientists, and donors committed to medical research aimed at treating and curing diseases.
Health research is essential to ensure the long-term viability of Canada's health system and Canada's competitiveness within the G-7 group of nations as it relates to the development of science and technology platforms within Canada and the ensuing job and wealth creation. Health research represents an investment in Canada's future not only in terms of the health of Canadians and the nation's health care system but also in terms of job creation in a number of health care industries, including pharmaceuticals, medical devices, and biotechnology. Health research represents an important source of cost savings within the health care system and should not be viewed as a cost to society.
Health research is an investment in our future health and economic well-being. Canadian scientists have made enormous contributions that have improved the health and quality of life for all Canadians. Health research provides economic returns of incalculable value, ranging from increased productivity, by reducing the burden of disease and disability, to the growth of health-associated industries. For example, university-based Medical Research Council-funded research on many occasions has been the catalyst for the creation of new firms in the health sector, principally in the biotechnology field. However, without a strong government-funded research base there is little structural underpinning to support ongoing job training which attracts non-government investment.
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The reductions in funding to the Medical Research Council are threatening the viability of research supported by the Canadian Cancer Society and other volunteer health organizations. For example, in Canada over 60% of cancer research is supported by funds granted through the Canadian Cancer Society and other volunteer health organizations. In the United States 90% of funding for cancer research done in hospitals and universities is derived from federal government agencies.
While Canada has reduced the MRC budget, the United States increased the budget of the National Institutes of Health by 5.7% in 1996 because biomedical research was recognized as an engine of economic growth. Furthermore, the U.S. Congress will be looking at a proposal to increase 1997 funding for the National Institutes of Health by 6.9%.
The Canadian Cancer Society believes it is essential for the Canadian government to play a visionary role and make health research a priority. The federal granting agencies require stability of funding. We recommend that their budget be returned to the level existing in 1994, at a minimum, and then for the future that it be increased at a rate consistent with the growth of the Canadian economy.
The Canadian Cancer Society also has a suggestion on the revenue side, and that is to increase tobacco taxes to the same level as the one they were at before the roll-back. Not only will such an increase in taxation bring in more revenue, but more importantly you will reverse the unhealthy trend of increased smoking by teenagers, and that will save countless lives.
Thank you for your consideration.
The Vice-Chair (Ms Whelan): Thank you very much, Mr. Semenchuck.
Now that the presentations are complete, I'm going to turn to questions. Mr. Rocheleau.
[Translation]
Mr. Rocheleau (Trois-Rivières): Mr. Sturm, I was somewhat upset this morning with your perception of the government's role, given your age and your level of study. I would like you to clarify your views. What are the current and future roles of government, since right now, for example, $36 billion in differed taxes are not payed and theoretically will never be payed by businesses who owe the federal government that money? We all know that, even in these times of budget restraints, there are still some very rich family trusts, used by some great Canadian families to avoid paying taxes year after year.
Despite that, you would like us to abolish the Canada pension fund. Have you thought of the potential impact that would have on the most disadvantaged people? If you had heard what we heard yesterday in Edmonton, I hope you would think about it. In any case, I would like to hear your views.
I would like to know what you think generally about the government's role as a catalyst and wealth distributor. To what extent would you expect everyone to pay as much tax as he or she can afford and then have the government redistribute the wealth? Everyone would have to pay according to his or her ability to pay.
[English]
The Vice-Chair (Ms Whelan): Mr. Sturm, please.
Mr. Sturm: To answer your question about what is fair, it revolves around a big debate. What you decide is fair and what I decide is fair may be totally different. To come to a definition of what is fair in terms of taxes would also be futile, because we wouldn't be able to agree on something. But we can come to an agreement on the role of government.
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As a young Canadian, I believe the role of the Canadian government we have elected is to represent us in the best interests possible. This means it should provide for social programs to the best of its ability. It should allow us to maintain our standard of living, which would include keeping our taxes at an acceptable rate.
When you talked about eliminating the CPP, we thought about the social impact of eliminating that and its effect upon the poor people. However, the provincial jurisdictions look after welfare, which is the final safety net for people.
If you look in this note package I have provided for you, it also says that the government should consider making a law that companies must provide for a company pension plan. That is, each individual corporation would provide a plan for its employees.
If you look at CPP right now, I'm sure we've all heard that by 2005 the premiums might go up to about 15% of our wages. That's getting a little hefty, especially for us younger people, because when we look at it, there won't be anything for us. It's like a tax for us now.
Those who are older who will collect don't want to lose their CPP. They want to collect it, and that's understandable too. That's why we've devised this outline for them. Those who are older can still collect most of their CPP. For those of us who are younger, if a law were introduced that every company we worked for had a pension plan, then we should be okay.
I'm not saying this is something hard and solid, but it's something to consider.
[Translation]
Mr. Rocheleau: Mr. Schmeiser, in your brief you refer to mandatory cost recovery for the Coast Guard. Are you satisfied with the consultation process that led to that measure? Have you heard of impact studies by the Coast Guard to assess the effects of that cost recovery policy?
[English]
The Vice-Chair (Ms Whelan): Mr. Schmeiser.
Mr. Schmeiser: Thank you for the question.
The main thrust of the presentation was to identify a concern with respect to the competitiveness of the Canadian grain industry. The St. Lawrence Seaway route is under significant pressure from rail use or potentially even from the Mississippi River system. The additional costs of the coast guard activities and the navigational aids could add about a dollar per tonne to the cost of moving grain through the St. Lawrence Seaway system. There's also the other issue of pilotage, which could impose additional costs.
The point I'm raising is one of ability to pay and competitive position. The possibility exists that grain could be diverted from the St. Lawrence Seaway onto either rail routes or even potentially into the U.S. We think that would be unfortunate.
The Vice-Chair (Ms Whelan): Thank you, Mr. Schmeiser.
Mr. Rocheleau.
[Translation]
Mr. Rocheleau: Mr. Davis, given the accumulated surplus in the Unemployment Insurance Fund, which would be approximately $5 or $6 billion, as a representative of the Chamber of commerce, do you think the government should use that money to reduce the deficit or to reduce unemployment insurance premiums?
[English]
The Vice-Chair (Ms Whelan): Mr. Davis.
Mr. Davis: We would advocate - and we have it in writing to the federal government - that the UIC program should be an insurance program. As such, it should be self-funding and any surplus should be used for reducing the cost.
As much as we want to get the deficit under control, we feel the UIC and the CPP are job taxes, and the higher they are, the more impediments there are to creating new jobs.
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If I can comment on Jonathan's point about the CPP, I think the point is very valid as it relates to young Canadians. If you believe the actuarial people, the costs that young Canadians will have to pay in the future in order to get the funding are quite astronomical, and the benefits they will get do not appear to be there at first glance.
If you take the current level of contribution, which is 5.4% rather than the 10% we're looking at going to; if you put it in with someone who comes out at age 25 and works until retirement; and if you look at what they could get if they earned 6% on those funds if they were in an equivalent RRSP, you'll find that this person would be able to get a pension that would be two to three times the current level of the CPP benefits. So from the perspective of younger Canadians, I think they look at it and ask why they're paying this when it's a tax on them and it's a tax on jobs.
Having said that, we can't just cut off the CPP, because there are lot of people who are relying upon it. It's built into many of the pension plans and there has to be some transition period. But clearly I don't think that older Canadians - and I'm regrettably starting to get into that category - have the right to expect younger Canadians to pay for their retirement. There has to be a better way of dealing with it, because as a job tax it's very counter-productive.
We estimate that the proposed changes will significantly erode the profitability of very small businesses. When you have five or fifteen or twenty employees, if you take the 4.6% increase that's currently proposed, it will have a dramatic effect on profitability - either that or there will have to be significant increases in the prices of the products our businessmen sell.
The Vice-Chair (Ms Whelan): Thank you very much, Mr. Davis and Mr. Rocheleau.
Mr. Solberg, please.
Mr. Solberg (Medicine Hat): Thank you very much, Madam Chair.
I just want to start by saying I grew up in Rosetown, Saskatchewan. I did all my schooling there and worked in Saskatchewan for awhile. I have a friend who, when he comes back to Saskatchewan, always says he's coming back to the promised land. I feel that way, too. I never miss a chance to come back. And I just want you to know that if we ever get a quarterback here, we have a good chance of making it to the play-offs.
I just want to start by touching on a bit of background here. Over the last twenty years, we've seen successive governments build up a debt to the level of about $600 billion. That has obviously had a profound impact on our ability to fund social programs, programs that people believe are very important. It has driven up taxes incredibly, and that has had a dramatic impact on the ability of the economy to create jobs. Of course, we have unemployment today that sits at about 10%. It's very stubborn and we can't seem to ratchet it down. As a result, the government has moved to reduce the deficit and is trying to deal with the problem as it is today. That's commendable. We have to move in that direction.
My concern is that there doesn't seem to be an overlying philosophy that deals with this problem. I think we're putting out a fire here. I guess the argument I want to make is this, and I'll put this to Mr. Sturm or Mr. Davis, or anybody else who wants to address it: shouldn't the real debate be about determining the appropriate size of the federal government and its appropriate role, the appropriate size of the provincial governments and their roles, the municipal governments and their roles, and the role of private individuals?
We have Mr. Semenchuck and Mr. Wilson talking about what charities can do, for instance, and about what kind of research needs to be done, about all those sorts of things. Because of the huge debt pressure we have, we do have some changes that are being made, but there doesn't seem to be an overarching philosophy directing these things. So I guess I want to challenge people here.
You've laid down a plan here, Mr. Sturm, but you've started from the premise that we have to deal with the current problem. You didn't start from the premise that there is an appropriate size and role for the various levels of government. Isn't that the best way to begin? There are a number of issues that are being raised here, but I think if we agreed that there is an appropriate size and role for the different levels of government, it would be much easier to resolve some of these issues that we're talking about here.
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I'm just going to leave it at that. I'll throw it open.
The Vice-Chair (Ms Whelan): Mr. Sturm.
Mr. Sturm: To determine the role of each level of government would, I think, cost an incredible amount of money and would violate the part of our Constitution that gives provincial jurisdictions their own powers to look after what they want. If we want to try to set up an initial understanding by determining what the roles are and should be at each level of government, I think we would have to come to a decision and make all the provinces or all the levels of governments have the same sort of role. They wouldn't be able to decide their own thing if it came to -
Mr. Solberg: Let me be a bit more specific, because maybe I didn't make myself very clear.
You're right that the provinces do have jurisdiction in a number of areas, but right now the federal government is involved in those areas by virtue of its spending power. In the past, we have also had municipal governments that played much larger roles in delivery of certain programs. To some degree, that was taken away from them over many years. We also know, for instance, that the private sector does a much better job in certain areas than the federal government - or even provincial or municipal governments - but to some degree, as spending on social programs grew and the federal government assumed more powers unto itself over the last twenty years, the ability of the private sector to do those things was eroded.
I guess what I'm asking is whether or not the starting point should be to figure out what worked well in the past, and to then use some of that knowledge to go back that way instead of trying to fix the thing in reverse. For instance, let me give you a perfect example: unemployment insurance. The government is trying to fix that by ratcheting down the benefit level. But I would argue that the best way to handle this is by going back to see how it worked in the past and to see if it successful. If it was successful, why aren't we approaching it from that direction now? That's what I'm trying to get at.
Mr. Sturm: What direction do you mean by ``in the past'' in terms of UI premiums?
Mr. Solberg: Well, it was more of a true insurance program. I guess what I'm asking is whether or not you want the federal government involved in dictating where you have extended benefits, for instance, depending on what part of the country you come from. Unemployment is devastating to people no matter where they live.
Mr. Sturm: That's a very broad issue. As I said earlier, to get into something like that would take years of debate and no one would ever agree on it.
The point I've been trying to make, though, is that we should concentrate on our deficit, our current problem. If we don't concentrate on our current problem and take care of it, with debt charges amounting to about $40 billion, that's going to wipe out employment insurance. We then won't have to worry about any debates about it any more.
Mr. Solberg: You'll never get a dispute from me on that issue. I agree that we have to deal with this issue right away, but we also don't have to engage in a years-long debate. We have 125 years of history that points the way to resolving a lot of these problems. I would hate to see us cast that all aside to have some abstract debate.
The point I'm making is that people, including the present government, are starting from the assumption that the only way to handle these things is to pare things back until we get to the point where we have a zero deficit. Right now, there is no sort of guidance beyond that point as to what should happen with the size and role of government, what should happen with any surpluses that occur, what should happen with respect to federal involvement in provincial jurisdictions, to provincial involvement in municipal jurisdictions, and government involvement in the private sector, period. We need to have a better framework. I was just hoping that we could engage in a bit of a debate about what that should be, and I would argue that what we have right now is very inappropriate.
Mr. Sturm: If we can go back into Canada's history and can find something that would be good for us now, then I would by all means endorse it 100%, whatever that counts for - I know it's not much - but in everything that we've dealt with in Canada's past, including this Quebec issue, we really haven't come to a firm conclusion on anything, even with employment insurance levels.
I think the government is currently working to build a slush fund of about $10 billion for employment insurance.
Mr. Solberg: It's $5 billion.
Mr. Sturm: Is it $5 billion?
Mr. Solberg: The $10 billion figure is for the end of next year.
Mr. Sturm: Right, but I believe the goal is to get to $10 billion. Please correct me if I'm mistaken, but I believe that's set up in case something drastic happens in terms of our economy, in case we have a sudden loss of jobs, perhaps through major government cutbacks or whatever.
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Maybe just to please you in this debate, what I believe is that employment insurance levels should be equal. What we pay is what we should receive back. I believe more should be spent in terms of streamlining in order to make sure people don't abuse system. They should be out looking for jobs while on unemployment, because it's there just to help them get back on their feet while they don't have a job.
I don't know if that's as specific as you want me to get. I'm not as professional as you are in the field, granted, or as Monsieur Rocheleau.
Mr. Solberg: I appreciate that, but we don't have time to -
The Vice-Chair (Ms Whelan): Mr. Sturm, I'll let you know that there is no set goal to reach $10 million right now. You should be aware of that.
Is there anyone else who wishes to comment on different levels of government? Mr. Solberg, did you have another question?
Mr. Solberg: No, I don't think so.
The Vice-Chair (Ms Whelan): Mr. Davis would like to comment.
Mr. Davis: It almost sounds as though you're advocating a zero-based budget process, which has been used fairly effectively by business. I would share some of Jonathan's concerns that we can't afford to go into that type of process, discussion and debate - and there certainly would be significant debate. I do think the point we referred to, in terms of looking at the services between the provinces and the federal government, is an area in which much remains to be done.
I'd also like to say that I think there have been some federal departments, in my experience, that have done a very good job in terms of cutting their costs. For example, I'm involved in a small business advisory committee with Revenue Canada. They advised us that they've cut $300 million off their processing costs. Those are significant moves, and I think those are the areas in which we can make improvements.
I believe there is a level of services that most Canadians expect to get, within a range. We would have much debate in certain areas - the CBC would be one for which I suspect there would be very different views going around the table - but there is a certain level of services, plus or minus a bit. I think we have to get focused on how we are going to provide those services at the least cost, while trying to coordinate the three governments in the process.
Mr. Solberg: I have just one final remark, Mr. Chairman, if I could.
You mentioned before that the federal health department, for instance, is too large, that it has too many people. I would tend to agree. I guess the point I'm trying to get to is that my party has advocated that we settle on a size of government that's much smaller than it is today.
What I'm saying is that we've already tried to start the debate by saying that we believe government should be a lot smaller than it is today. We should reduce spending enough so that we can provide people with tax relief now, can start to pay down the debt, and can provide spending at the same time on the programs that Canadians have identified to us as being the most important ones - health care and research, higher education. But I think there is need for a much broader discussion than just within our own party, and that's what I'm trying to get to. I was trying to get there without laying out our own platform.
The Acting Chairman (Mr. Duhamel): Thank you. We're going to proceed withMr. Pillitteri.
Mr. Pillitteri (Niagara Falls): Thank you, Mr. Chairman.
Good morning, everyone, and welcome to the finance committee. As you know, sometimes when one comes to these pre-budget hearings - or any type of hearing - and sees Canadians making presentations as groups or as individuals, one wonders if we're hearing of Canada becoming all interest groups. I do understand that I live in the best country in the world. It's the best country in the world, and not by chance. It is because of individuals taking part in governments, or sectors, charitable organizations and so on, who are willing to give.
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This morning I'm seeing that every one of us has an investment in government: what can I get out of it and what am I putting in? I understand. Let's not forget that from day one the role of government has been and should be to take care of all of its people. When taking care of all of its people, its role is also to give support to those - not in charities, not in welfare handouts - individuals who are less privileged.
Not all Canadians have the education that we around this table do, and therefore they're not able to take care of themselves. There are individuals who are handicapped morally and physically who are not capable of taking care of themselves.
I'm not upset this morning, but I'm terribly confused when I see programs initiated by governments thirty years ago that were never intended - and first of all were never funded - to be investment sectors. They were intended to benefit Canadians.
I admire your first presentation of the government...when we're going here, where we're going. Once we touch the fundamentals of CPP, the old age security and the supplement to the old age security, we're touching the fundamentals people depend on. People are living for those things.
When individuals reach the age of 60 or 65...if I've failed everything in my life, at least I know that I have something so that I can live for the rest of my life in dignity. If we start to touch those bastions we have built, we take away the dignity of individuals. And that is what troubling me this morning when I hear a presentation about what investment is for each and every one of us.
Mr. Sturm, you made a presentation here this morning about the elimination of the Canada Pension Plan. Have you ever thought of the consequences? I know that you...as an investment sector, it does not benefit you.
It did not benefit me when I went into it and started paying for it. It benefited someone who today is 80 years old - who's 90 years old, because we have longer lives in Canada - and I never questioned that, because I thought of that person living in dignity for the rest of his life.
Have you ever thought of the consequences if we started to touch all of it, if we dismantle those safety nets that we have built for Canadians, for the less fortunate? I pose that question to you or to anyone else who would like to answer.
Mr. Sturm: My colleagues and I have considered the social impact and the consequences of eliminating the fundamentals in Canada in terms of social programs. To be totally honest with you, I believe that CPP's original intent was an excellent idea and that it should have stayed, right up to now, except that somewhere along the line in government something went wrong. Suddenly we have to pay a lot more money into this program and people like me will probably never see a dime out of it anyway. Some people say it will collapse.
It's not that we want to get rid of this program. We believe that when people retire - even if they maybe have financially failed in their lives - they can at least retire with dignity and with something in their pockets. We too believe that should be there.
That's why we don't believe that old age security and welfare should be touched. We believe there should be a final safety net in Canada. In part, that's what makes this country so great in the world's eyes, but if we look at our current situation, it's hard to decide what to do with this program.
I'm sure you've gone through many -
Mr. Pillitteri: Challenge me. Challenge our colleagues here to fix it. Challenge us to fix it, not as it has been done in the past. They have not cared to take the responsibility and fix it. Challenge us to fix it.
Mr. Sturm: I challenge you to fix it.
The Vice-Chair (Ms Whelan): Thank you.
Thank you, Mr. Pillitteri. Are you finished?
Mr. Pillitteri: Yes.
The Vice-Chair (Ms Whelan): Just to let you know, Mr. Sturm, there have been cross-country consultations on the CPP. The report is not complete.
Mr. Duhamel, please.
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Mr. Duhamel (St. Boniface): Thank you, Madam Chair. I just want to make the comment that I had hoped my colleague from the third party would be here to make. It's not a partisan thing, but I just want to remind people that at the federal level we have indeed - and it's not a partisan comment - looked at the size of government. We've pared it down by 45,000 people. Clearly the assumption was that it was too large. We've undertaken significant program reviews, and in fact, we've determined that the federal government would no longer be participating in a number of areas.
So I guess it's just a little bit of an alert here. Let's not accept everything that's said at face value, because a lot of work has been done in that area. That doesn't mean to say there isn't a whole lot more to do, but the process has begun and it continues. I want to make that point.
I want to make a couple of comments and I'd like a reaction from whoever wants to respond. Mr. Davis may want to, because I think there are a couple of points that may apply directly to his presentation.
Mr. Sturm mentioned - I believe it was you, sir - that firms should be forced, I think, to provide pension plans. The notion is not unappealing, but I'm just wondering how others, in particular Mr. Davis, might feel about private firms providing pension plans for their workers in a compulsory kind of way so that, I guess, we could look at other options in terms of retirement. That's one of my points.
The other one is this. Again, I think it was Mr. Davis who talked about - and correct my wording if it's not precise - strategic tax cuts. Could you give us some examples? It's an appealing kind of notion...but where? Would you then also support strategic investments, for example, in the area of research? It was mentioned this morning. I think we all feel that certain areas are underfunded. In fact, some additional investment might produce some significant results and some jobs, good jobs.
Would people go so far as to say that if we're going to look at strategic tax cuts - and I don't know if that's in the works - and perhaps strategic investments, we should be looking at strategic ways of permitting more charitable donations, recognizing the reductions in support from virtually all levels of government?
Finally, again, I'm open to the whole notion of CPP. I won't be the person who will be making the final decision, but clearly I want to look at options. I guess what bothers me a little - and perhaps you would respond to this, Mr. Sturm - is that I hear from older people sometimes who no longer have children in schools who ask me why they should be paying an education tax or who tell me that since they don't have any children they shouldn't have to pay taxes so that people can go to colleges and universities. They say, why shouldn't they be paying for that?
My concern - and I know your intent was noble, and I say that with a great deal of sincerity - is that if we start looking at it perhaps from a perspective other than the one we have now, it could lead to some sort of almost intergenerational conflict, like this: Hey, whoa, just a minute now, my kids are grown up, they're educated. I paid my tax while they went to school. That's it, it's over.
And you could say, listen, you're getting on and you're going to start costing the state a lot of money, because I know that you old guys do, so I don't want to pay any more.
Perhaps you could react to that. Thank you.
The Vice-Chair (Ms Whelan): Mr. Sturm, did you want to begin?
Mr. Sturm: We have looked fully at that point that older people -
Mr. Duhamel: About the old guy?
Mr. Sturm: Yes.
Mr. Duhamel: There are some of us around here, so you had better be careful!
Some hon. members: Oh, oh!
Mr. Sturm: Older people have looked at that idea that their children are finished school - or they don't have any children - so why should they pay any more. Another characteristic that makes Canada so unique is this sense of communalism within this country. We all care for each other, whether it's within our own provinces where we all want to bind together for the greater cause of our province, or whether it's as a nation, where we want to see each other progress and become successful in the future.
That is why I made the point earlier in talking about education and providing the funding for the post-secondary education especially. This investment will allow these young people, these students, to grow up in Canada and will allow them to be able to support their country, to make it better. While it will not directly affect positively those who have to pay for people, especially if they don't have their own children, I believe if people understand it's an investment made now for Canada's future, to make it a great country, a greater country than it is now, they'll understand it would be well worth it.
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Mr. Duhamel: I'm willing to make a deal with this young gentleman and all other young people. I'm going to continue to pay taxes for your education because I really want you to do well, because you'll be paying more taxes in the future; but I want to make sure you make a commitment to me that when I need you later on you're going to be around. Okay?
Mr. Sturm: Okay.
Mr. Duhamel: Thank you. It's a deal.
The Vice-Chair (Ms Whelan): Mr. Davis.
Mr. Davis: I'll try to touch on the points that were raised about mandatory pension plans. I don't think our members would necessarily have any problems with that.
Most companies of any size do have pension plans. The issue is really how you deal with the small businessman and the incredible cost, depending on the type of plan. If it's a defined benefit plan it's ridiculously expensive to administer. So there are some real problems you would have to deal with, affordability and things of that nature, but in general terms there is good logic in it.
Part of the problem with the CPP - we made a presentation on this - is the whole funding mechanism, the fact that the fund wasn't segregated and it just comes out of general coffers. There has been no building of the fund, so to speak. It has been funded on a year-to-year basis, based on what comes in. I'm not telling you anything new, but I think that's the fundamental problem we run into. We now have to find a way to build up an accumulation of funds as we go forward.
The issue about providing something to people when they hit retirement age and a certain level...those are fair points to raise. But let's just put into perspective what the consequences are. Everybody says, well, we'll raise this 10%; we need this funding. Somebody earning $25,000 a year is going to have $1,250 coming off their pay to fund CPP. That's before UIC. That's before income tax. I think somebody at that level should have the assurance that if $1,250 comes off, they are going to get something significant at the end of the day. That's a lot of income. It takes away from consumption, and I think it will have a dramatic effect on jobs.
If a benefit needs to be provided, maybe it should come out of the general tax system, if that's what the people want. If that's what the government wants to put forward, fine, do it out of general revenues.
The changes in the CPP will have very little impact on me. I make a lot more money than $25,000 a year. But for that guy earning $25,000, those are big-time dollars you're talking about.
This is more directed at your colleague than at your comments. When you're looking at it, just remember what the consequences are, because I think they are very significant for lower-income people. It's just like a sales tax.
Tax cuts: I wrestled with that, and I really wrestled with putting something specific in. I lean towards something that will increase consumption, something in the area of sales tax. Again, it would probably help middle- and low-income people more than it would help upper-income or higher-income individuals. That's as a general stimulus.
In Saskatchewan we had a manufacturing and processing tax reduction. You already have that in your federal legislation. We've done some work on it at the chamber level, and it shows there have been direct benefits that would exceed the tax cost to the provincial government. We've seen where, if there is a specific area you want to jump-start, these tax incentives do have benefits in excess of the tax cuts.
I don't like to talk in terms of ``tax breaks''. I like to think the income the people earn is our income and we pay our fair share in order to fund the necessary programs.
About R and D and strategic investments, I guess the difficulty with the government getting into that area is that its track record in the past has not always been that good and the concern would be that we may make some bad mistakes again. Some of the research and development programs that are in place right now are fairly good. The scientific tax credits of the 1980s were an absolute disaster. I never did hear the final totals, but it was probably $3 billion to $4 billion that it cost us.
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Mr. Duhamel: Just to clarify, I wasn't necessarily specifying that kind of program. I was primarily interested in additional investments.
You talked about strategic tax cuts. Would you be supportive of strategic investment in research and development, though not necessarily in that form, or in strategic moves on the part of government to assist charities raise more funds in view of the cutbacks from government?
Mr. Davis: Yes, in general terms, we would be. But as it relates to business, part of the problem in the past was not enough ante was put in by business. For the business person or anyone going into a program, if it's a handout, I don't think there's the incentive necessarily for them to use the money as efficiently as possible.
Many of the programs that exist now are ones where there is some assistance to a certain level, and then the business has to come up with the other funds. That's a very good way of doing it, because it forces people to be as efficient as possible.
In the area of charitable donations, probably the government is going to have to rethink the basis as it goes forward. Funding for the various charitable groups is getting tougher and tougher, and it's not just the traditional charities everyone thinks of. Universities, for example, are spending a lot of time and effort raising funds, and that's becoming a much bigger area of spending for them.
The one area I would caution the government on is enforcement, to ensure we do have valid charities that are truly carrying on charitable activities. I'm certainly aware of a number of instances where I don't believe there has been a reasonable review of the activities and I do not believe the activities are charitable. Quite frankly, I think the people of Canada are being ripped off. That's the function, sometimes, of not having enough people in the department and focusing resources.
If you're going to have greater benefits, you have to assume there will be more unscrupulous people getting into that type of business.
Mr. Duhamel: Thank you.
Others may want to comment on some of the points that have been made. I'd welcome any input they might want to share.
The Vice-Chair (Ms Whelan): Is there anyone else who wishes to comment?
Mr. Goetz.
Mr. Goetz: One of the things that has always concerned me, being the head of this association, and particularly in Saskatchewan, is there is an inference that we have to make change. When we make change, somebody is going to be a victim of change.
I'll give you an example. Some of our companies doing major business development and production in central Canada are well established, but they've done so with a lot of government support. Now that they have that support and are well on their way to becoming what you would consider a private company not needing that support any more, they're now advocating closing the door, because they already have their support and it doesn't really matter to them any more.
But many other companies are trying to develop, and many individuals and young workers are trying to develop, and they still need that type of support. Many of the people in our industry are young. Most are under the age of 30, and they do not have private pension plans. They will rely pretty heavily on some form of fund designed by the government.
I'm not saying there isn't room for change and discussion, but many of these young Canadians are self-employed in our industry. Unless there's a tax reduction so they can put money into their own private plans or some kind of combination, they simply will not have the types of pension plans that many of us around the table will have when we retire. They're not company-sponsored.
Strategic tax cuts that enable industry to grow and become private are worth looking at. We're not advocating that the government not look at reduced expenditures, but we sure would like to have reduced tax so some of that money could go into these other things.
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I think there's some balance here. I think we've heard a lot about scrapping certain things because it's important for our future. I'm not saying that's not important, but there is another side. There are a number of Canadians who don't have the advantages that some of us at this table have, and we need to respect that.
The Vice-Chair (Ms Whelan): Mr. Duhamel, do you wish to comment on that?
Mr. Duhamel: I was simply going to tell Mr. Goetz this. I believe you said your industry had enjoyed a 500% increase over the last five years. If that's a formula that could be packaged and shared with others with similar results, I think you won't have to worry about a pension plan.
Mr. Goetz: Yes.
Mr. Duhamel: Is there a secret formula there?
Mr. Goetz: No. It's a combination of things, but the reality is.... I'll give you an example here of how fast that can fall off. At present, a lot of our funding comes from the provincial government for seed money. This is not the total budget, this is seed money. In other words, we had a $8 million project in Saskatchewan in which the government of the province, through the SaskFILM investment agency, put in $400,000. That brought that project here to Saskatchewan.
These funds are often becoming over-committed, or they're fully committed within a short period of time. When those funds fall off and there's nothing to replace them because of budget reductions, those kinds of things, the industry will fall down again, the number will fall off. The combination is being able to combine what I would call public seed money to bring in private investment. That's been the secret of our success, not that government has to fund the whole thing. We're trying to get away from that because we see that in the long term we need to become a private industry.
The Vice-Chair (Ms Whelan): Thank you, Mr. Duhamel. Mr. Fewchuk is next.
Mr. Fewchuk (Selkirk - Red River): Good morning, ladies and gentlemen. I'm so delighted to see so many young people here today. As we left Vancouver and Edmonton and we come to Saskatchewan, I see a different interest. The young people here remind me of the days when I was young.
I have a question for all of you here to answer. If you had the opportunity to speak to the Prime Minister of Canada, what would be your priority, the number one message you'd like to give him?
The Vice-Chair (Ms Whelan): Who would like to start with that? Mr. Semenchuck.
Mr. Semenchuck: My message to the Prime Minister would be that what we're really lacking is a vision for Canada, a vision for how Canada should develop in the future and what we expect from our federal government, from our provincial governments, and what our nation provides to us as a whole rather than all of the parts that are there.
I don't think we have seen or been given a sense of a Canadian vision for a long time. That's what's missing from the ordinary Canadian's life. We have different factions looking for different results across Canada. I think it would be most important to us to have some vision about what we're going to do and accomplish as a country and what it means to be a country.
The debt and the deficit in Quebec, I guess, have taken the entire agenda for the last number of years. I think it's time we provided some positive interest and attitude for young people particularly, but for all Canadians.
There are many young people going to university who are having difficulty, once they borrow enough money to go to university, to find jobs and to stay in the country and to have some hope of succeeding. I think it's important that we bring back and create that excitement about our country. I think it's here but no one has taken that role and provided us with that kind of goal.
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Mr. Fewchuk: Well, that is more than one question. I just want one basic question, if I can, from all of you. We're not writing a book.
Mr. Wilson: Mr. Fewchuk, if I had to speak to the Prime Minister, I think this would be my first attack. I would say we must keep on the track of attacking the deficit and then attacking the debt. If we could somehow reduce the debt to manageable levels, it would be like the ad says about winning the lottery. Think of the freedom. Think of the freedom you people would have in dealing with the problems of the country if we didn't have this debt. This would be my attack.
Mr. Fewchuk: Thank you.
The Vice-Chair (Ms Whelan): Mr. Schmeiser.
Mr. Schmeiser: Thank you, Madam Chair.
I would say stay the course financially. I wouldn't dwell on this, because I'm concerned about the future of my country. I need a commitment to this country. My three children are in French immersion schools. It wasn't an opportunity available to me when I was a child. As you can tell from my last name, more likely the instruction available would have been in German rather than French. Be that as it may, I would like to see the Prime Minister emphasize national unity.
We hear talk of plan A and plan B. I'm not sure which is going to be best, but I would like to see solutions dealing with a unified country. We'll work together.
The Vice-Chair (Ms Whelan): Thank you, Mr. Schmeiser.
Mr. Sturm.
Mr. Sturm: If I had the great opportunity to meet the Prime Minister and I had a message to give him, first of all I'd say: ``Good job.'' The number one priority, though, is to keep on track of the deficit, get rid of it, reduce the debt. The number two priority is to keep our country together.
Mr. Fewchuk: Thank you.
The Vice-Chair (Ms Whelan): Mr. Goetz.
Mr. Goetz: This is sort of out of the area of finance, but I would like him to know I'm very proud to be a Canadian. I would tell him I've had the good luck and opportunity to travel around this world, and we live in the very best country. I would encourage him to do the things that would keep us in this position.
I agree with many of my colleagues that we have to look at finding a way to reduce the deficit, but we also have to find a way to reduce taxes and increase opportunities for all Canadians.
The Vice-Chair (Ms Whelan): Mr. Davis.
Mr. Davis: I would ask the Prime Minister to maintain the financial course the Minister of Finance has set forth and accelerate it, because I think it will achieve all the things people around the table are looking for.
The Vice-Chair (Ms Whelan): Thank you.
Mr. Pillitteri, you had another brief question. Sorry, I cut you off before.
Mr. Pillitteri: Thank you, Madam Chair. My question is specifically for Mr. Schmeiser.
You mentioned this morning the wheat cars and having them held for five years for the federal government. What would the position be after the five years?
Let's put it this way. There has been quite a lot of discussion. Mostly every rural member in Canada on both sides of the fence, whether Liberal or Reform and so on, has asked those questions. Of course there was also some other plan between farmers and industry about getting together and possibly purchasing those rail cars instead of giving them to the highest bidder in Canada. What is your plan after five years? Is anything in place?
Mr. Schmeiser: Really, this is a recommendation that has been proposed to Transport Canada by the consultants retained to develop options for the future of those cars, which we support. The reason for the five-year delay in putting those cars up for sale is that we're in a very uncertain environment as far as regulatory issues are concerned. We're going to have a regulatory review in 1999. Five years would allow us to conduct that review and find a better transportation system for grain movement in western Canada.
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The main issue that has to be dealt with, and the major stumbling block, is the right of first refusal held by the railways for those cars. With the existence of this right of first refusal the government's hands are really tied in terms of what they can do with these cars.
So again, it seems logical to allow that operating agreement and the right of first refusal to expire, as would occur if notice were given and five years were allowed to elapse. We would be in an environment, a new millennium, where there would be greater certainty about what our transportation system will be, to what degree we have deregulated it, what the grain-handling system will look like. We'll be in a better position to have whoever is interested in those cars at that time put a fair value on them.
Mr. Pillitteri: Mr. Davis, by the time I reach age 65 I doubt very much if I'll collect a pension, because I'm in the same category as you will possibly be - that is not getting a pension as an elected member either. So there is no need for me there.
Let me ask you a question. You said right now it would cost anyone earning $25,000 the sum of $1,250 in CPP. What do you mean, you would forgo your portion of the employer to the employee who is paying? It's split right now. Under the $25,000, half is to the employer and half is to the employee. It's a contribution that is halfway each. It's not a full contribution of one.
Mr. Davis: I agree with that. I was actually going to make a comment on that just to clarify.
I think the assumption is that if the rates go up the employer will just assume that cost. That may happen. I suspect it won't; it will be a cost that will in effect be passed on to the employee in the sense that he might not get the same pay raise he otherwise would. I also would assume that in the process the unions and the people negotiating will make sure that if the benefit drops off in one area it will be picked up in another area. It may or may not happen.
Mr. Pillitteri: There's also no difference for the drop in the employment insurance. When the drop occurs the employer benefits more than the employee, because of the ratio, which is 100 to 140.
Mr. Davis: As I say, I think the CPP plan is a very regressive plan. Do you agree with that?
Mr. Pillitteri: Yes.
Mr. Davis: The percentage of my income I will pay towards CPP as opposed to someone earning $15,000 or $25,000 is far less. To me it doesn't make a lot of sense to say we want to provide a benefit for some people. We want to be absolutely sure they can get a benefit when they hit 65. I wasn't directing my comment to imply you needed to get the pension. I just think the issue of the cost to these people has not been focused on in this whole debate. I've never been as frustrated in my life as when I attended the hearings, because my impression is this 10% was decided on before we even walked in the door. It was a very unsatisfactory process.
When you look at it and you see someone earning $20,000 or $25,000 a year being asked to fund these other people, I think you're just taking from Peter to pay Paul. If this is the system and this is something that is a priority for Canadians, why wouldn't you fund that type of retirement or whatever it is out of general tax revenue? Why wouldn't the government be accountable for the cost of doing that, as opposed to taking the money in a regressive fashion from lower-income taxpayers to pay other lower-income taxpayers, potentially? That would be the challenge I would put to the government in looking at the issue.
The Vice-Chair (Ms Whelan): Mr. Rocheleau.
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[Translation]
Mr. Rocheleau: Mr. Sturm, you advocate the abolishment of the Canada Pension Plan and you say it could perhaps be replaced by a private system, where each business would have its own fund. What would happen to small businesses that do not have the money for a private fund? What about self-employed workers? What about small businesses and small local restaurants whose employees will have to depend on their old age pension to survive? For some people, retirement might be the richest time of their life? How much have you thought about all that?
I would also like to remind you that this is part of living in a society. You have the privilege, and it is indeed a privilege, of getting a higher education at a university that is no doubt funded by society, where Professor Painter's salary is paid for with public funds. You use a publicly funded library that was paid for by your predecessors.
After all so called developed societies are based on the principle of collective sharing. I find it very upsetting that people such as yourself would favour neoliberal attitudes that prevail in places such as Alberta and Ontario, despite all the disastrous social and economic consequences of that attitude. We have only just started to see them. When I see a well-spoken young man like yourself who has learned to skate so quickly, I really wonder. I find it shameful and I wanted you to know that.
Humanity needs more compassion than anything else. Tremendous progress could be made immediately, as with our finances, but the real issue here is humans, human progress.
[English]
Mr. Sturm: To start off with your first comment, about CPP and making it mandatory for all businesses to have their own private pension plans, again, this is just a suggestion. The debate we had to struggle with was, yes, for smaller firms it would be very costly. That's something the government will have to look into. With any situation, political decisions especially, it's hard to come to solid, concrete answers that make everybody happy.
You were talking about my having the privilege of being educated. Yes, I do consider that a great privilege. And yes, I realize it comes from taxpayers' money.
Is it highly characteristic of society - I think that was the question you asked - that they should pay for my education? I would like to turn this back on you. Is it highly characteristic of Canadian taxpayers to pay for your income in the House of Commons? Is it highly characteristic of the Canadian taxpayer to pay for your own private pension in the House of Commons when you retire?
That's what disappoints me. There is something wrong with our system, especially over there. But I don't want to get into that, because it frustrates me.
You talk about compassion, how we should have compassion. It's a human characteristic, compassion for Canadians, is it not? Do we agree, compassion for everyone? Oui ou non?
Mr. Rocheleau: Together.
Mr. Sturm: Okay, together; then we open a whole new can of worms with this Quebec issue. You want to separate. I don't know your personal views on this, but in general there is a consensus in Quebec - half - that some people want to separate. Is that compassionate? Is it compassionate for all Canadian people that they want to separate and put a chasm within our country? That's not compassion.
So for you to say I'm not compassionate.... I would like to reflect that back on other people.
Mr. Rocheleau: Madam Chair -
The Vice-Chair (Ms Whelan): I don't want to get into another debate. We're here to talk about the budget.
Mr. Solberg.
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[Translation]
Mr. Rocheleau: You mustn't confuse issues that are purely political and constitutional with economic and social issues. I am concerned about the plight of the outsiders with your approach. What do you do with those who are not part of the club? What do you do with those who can't share the benefits? What about the homeless? What about the food banks? That is part of the problem. You cannot just forget about them. What are the consequences of your suggestion? I do not want to get into a debate over this.
[English]
The Vice-Chair (Ms Whelan): It was supposed to be a brief question and then to Mr. Solberg. I apologize, but we're running out of time.
Mr. Solberg, a brief question, please.
Mr. Solberg: Thank you very much, Madam Chairman.
I just must say it's a characteristic of people on the left that, when they get into these debates, they immediately think people who believe otherwise are not compassionate. That must be dispelled. A lot of people, no matter what side of the issue they're on, are working toward the best end for all people. They just come at it from a different way. I really disagree with Mr. Rocheleau.
Mr. Duhamel: Define ``compassion''.
Mr. Solberg: Well, let's face it, CPP is not working today. It's not working. It's going to be bankrupt, according to the chief actuary, by the year 2020. Changes must be made.
In the interest of compassion for all people, I'm wondering whether or not we could look at doing something along the lines of what Chile has done. They take essentially CPP premiums and pay them into an RSP account in the individual's name. That way government can't get its grubby hands on it and misuse it, as they've done under the current system, as they've done with the federal superannuates and as they've done in several provinces.
The result is threefold. Not only are the funds more secure for people when they retire; they also create probably a better standard of living for the beneficiaries of those funds. The money is allowed to be turned over, for instance, to a widow or a spouse, whereas under the current plan that's not possible, so people may have to live on much less income if they pay into a system -
The Vice-Chair (Ms Whelan): Mr. Solberg, please ask your question briefly.
Mr. Solberg: Okay. My final point is that it creates a lot of equity for the economy. My question is, have people here considered this approach? Does it sound like a viable approach to you? Do you have any comments on it?
Mr. Goetz: What was the question?
The Vice-Chair (Ms Whelan): Good question.
Mr. Solberg: It was on a super RSP-type idea to replace CPP.
The Vice-Chair (Ms Whelan): Mr. Goetz, did you wish to comment?
Mr. Goetz: I don't really have an answer to that, but could I just take three seconds to make a comment?
The Vice-Chair (Ms Whelan): [Inaudible - Editor]
Mr. Goetz: I think it is.
I'm sure Mr. Sturm and I would be on the opposite side of many of his discussions, but I'm a little disappointed this morning that he represents a lot of young Canadians. I believe his views are simply a starting point.
There are some things that are not right in our country. It's still a wonderful country, but there are some things that need to be fixed. People like Mr. Sturm are just saying, here's our idea; what are you going to do about it?
I think that's what you're saying.
Mr. Sturm: Yes.
Mr. Goetz: Okay. We need to listen to people, because people are getting frustrated.
The Vice-Chair (Ms Whelan): Mr. Goetz, that is the whole point of these discussions: to have everybody from across Canada around the table and all views represented, including the young, the old and the in-between, on all different aspects. That's the whole point.
Mr. Goetz: Yes, but my comment is that a lot of focus has been put on this one particular issue this morning, and there are many others that are just as important. We really heard a lot on the CPP thing, and some other issues were missed here this morning.
That's fine, but I'm just saying this is the starting point for this man, and whether we agree with it or not is something a little different.
The Vice-Chair (Ms Whelan): Every round table discussion takes a bit of a different turn.
Mr. Goetz: Yes.
The Vice-Chair (Ms Whelan): It depends on the witnesses who are before us. Unfortunately two of our witnesses weren't able to be here this morning; they would have added a further dimension to the discussion.
We focus on different things at each round table, based on different points that are raised. You're definitely correct: there are other very important issues that were raised today.
Mr. Wilson, you wanted to make a comment?
Mr. Wilson: Yes. This has to do with the subject of mandatory pensions or some sort of new system, as Mr. Solberg mentioned.
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My past life many years ago was in the financial sector, where I sat through and participated in some pension commission hearings. A suggestion was made at that time that in a perfect world, if we were to start over and have each employer share in a pension plan where there was a shared contribution from employees and employers, total portability and a lock-in until retirement age - these would be money purchase plans - we wouldn't have any need for Canada Pension Plan or any other kind of support at retirement. I think that ties in a little bit with what Mr. Sturm was also saying.
Somehow, I think the fund has to be segregated, built up and allowed to follow the individual to his or her retirement and be a money purchase sort of plan.
The Vice-Chair (Ms Whelan): Thank you, Mr. Wilson.
Mr. Duhamel, you had a brief comment.
Mr. Duhamel: Thank you, Madam Chair. I simply wanted to say, Mr. Sturm, that I'm delighted with your presentation. It isn't necessarily because I agree or disagree with it but because you've thrown out a challenge, and I know human nature sufficiently well to recognize that's exactly what you did. I'm not so old that I don't remember what it was like to be your age, and I assure you that your presentation this morning made me extremely proud of you and other young Canadians. I want you to understand that.
The other thing I wanted to say is that we unfortunately didn't get to a number of issues, and I won't forget that there were some comments made about CBC cuts.
Thank you.
The Vice-Chair (Ms Whelan): Thank you, Mr. Duhamel.
I have a brief question for Mr. Wilson and Mr. Semenchuck before we go to final comment. I'm wondering if you could expand a little bit on the wealth in Saskatchewan in the form of assets. You talked about a great deal of wealth accumulated and held in agricultural land. Your proposal talks about a capital gains exemption, and we already have a capital gains exemption for farmers for agricultural land to $500,000.
I'm just not sure if you're talking about an additional exemption for charitable donations. How would they go about doing this? When I read it I think back to legal training and the ability to segregate land or separate land and the ability to donate small parcels. Are you talking about huge farms? I'm just not sure what you're talking about in terms of Saskatchewan. Maybe you could clarify that for me.
I understand the need for changes to ensure that the charity sector is able to be maintained and be strong and vibrant, so the Canadian Cancer Society is able to continue its research. So perhaps you could just expand a bit on your opening statement, Mr. Wilson.
Mr. Wilson: The provisions that were made in the 1996 budget went a long way toward improving the situation with appreciated property. However, it's still not without cost to the people who want to donate appreciated property. This is why we felt it was important to keep it on the agenda for consideration to exempt appreciated property from the capital gains tax totally.
On the agricultural lands, it does get a little more complicated because of the existing exemptions. The fact of the matter is that if there are family members involved it's not likely that we're going to see a charitable donation of the property in any case. We feel there are situations where people, after their family considerations are taken care of, would consider making significant charitable donations of property if there was a way to get around triggering the capital gains.
The Vice-Chair (Ms Whelan): Thank you, Mr. Wilson.
Mr. Semenchuck, I would like to make a comment with regard to the aspect of health research that we all know is very important. In the 1993 statistics for agricultural research and development, the return was seven to one - $7 for every $1 invested. I'm a strong believer in the importance of research and development, and I believe Saskatchewan would be too with regard to the canola industry, which all started because of government research and development, I will remind everyone around the table. I think it's important that we push our government to continue research and development and maybe do things differently, but continue to do that.
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I'm just wondering if you have one message to us in the health sector. Are you finding it difficult to deal with private industry in partnership? Does it follow along the lines of Mr. Wilson to allow these types of donations to assist you, or is there a much greater problem than that?
Mr. Semenchuck: I think it's all of those, because there can be gains from any sector in that way.
If I could comment first about the issue of capital gains or the issue of a credit for charitable giving, if someone is making a sizeable donation to a charity and there is a tax consequence to it, that means the amount that goes to the charity will be reduced because the individual doesn't want to bear an additional cost over and above that, of course. So it reduces the amount the charity receives. I think it's important to take that into consideration and, if the charity is receiving the funds, make sure it is tax-free.
If I could talk about research and your comment about the investment in research and the development that comes from it, you're quite correct, the return is many times more than the amount invested. We need only look at some other examples such as insulin, which was discovered by Banting, and what that meant in the end for the potential saving with regard to that disease.
The same goes for a number of evidence-based treatments in relation to heart disease and high blood pressure, and a number of incidents like that. Although there is a great initial investment in the research that goes into it, the savings that result from that and the creation of jobs are many more times that.
I certainly think it's important to have the basic structure, the underpinning, in the universities and in other areas supported. That's where the real problem lies in research, because the funding the Canadian Cancer Society does for research is really for pure research. We don't have enough money to even cover that, so we can't start dealing with the cost for the structure that is necessary to begin that research and to support it.
That's really where government investment in research becomes important. Partnering with private industry, of course, can only expand that. I think that's clear from groups like the pharmaceutical industry.
The Vice-Chair (Ms Whelan): Thank you.
I'm going to ask each of you to take about 60 seconds to just give us one final comment. If you want, it can be your message to the Minister of Finance or just what you believe is the most important point of your presentation that you brought forward to us today.
Before I do that, I just want to mention, Mr. Sturm, that I was pleased - as well as Mr. Duhamel and everyone around this table - to see your presentation. The researcher and I have been discussing your facts and figures. If you would like to speak with him later, he'd be happy to point out some things that I thought were great at first, until he explained to me the exact financial impact of an increase of 1%. It is not exactly $6 billion because of the way the debt is renewed. So maybe you would like to discuss that with him to help you as you continue to do this research project at school. I think it's very important.
With that, I'll start with Mr. Davis and go around the table for one final comment to the Minister of Finance, please.
Mr. Davis: Thank you.
I've spoken quite a bit today, so this might be pretty much of a repeat. Again, I'd just ask the minister to continue to stay the course with the deficit battle and try to get to surplus budget as soon as possible.
I'd really like to emphasize the issue of the provincial-federal coordination. There weren't any questions on that and I don't know if it wasn't of significance or you think enough is being done in that area, but our impression in Saskatchewan is that there is not that much coordination between the two levels of government. I think it's an area where we can make improvements without drastically changing the level of services that are provided to Canadians.
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The Vice-Chair (Ms Whelan): Mr. Goetz.
Mr. Goetz: I want to make sure it's clear in regard to the CBC cuts that we're not arguing for or against them. What we're arguing is that as cuts do come to things like CBC Telefilm, they have a direct impact on the regions more significantly than anywhere else. So our comment to the minister would be that as you do what you have to do to reduce the deficit and manage the country, do it in a compassionate way and remember the regions.
I'll give you an example: the new fund that was recently announced by the Hon. Sheila Copps. The board of that fund has not one member from Saskatchewan. Who will speak for us here, and how will we ensure that the regions are protected? So while there are lots of good things going on in the country and lots of good decisions are being made, we have to question whether we from this region will be there.
The Vice-Chair (Ms Whelan): Mr. Sturm, sixty seconds or less, please. We're running out of time.
Mr. Sturm: Once again, to reiterate, I believe this country's number one concern should be with the elimination of our deficit to significantly reduce our debt to a satisfactory level to international markets, and then to re-evaluate our social programs. This means also taxes, which I believe for the short term shouldn't be changed at all - no increases, no decreases - and also re-evaluate the social programs so that there's still something there, a bottom safety net for all Canadians in case times do get really rough.
Thank you.
The Vice-Chair (Ms Whelan): Thank you, Mr. Sturm.
Mr. Schmeiser.
Mr. Schmeiser: I would like to emphasize that agriculture is very important in Saskatchewan and in the prairie region, and so government action in the area of cost recovery does pose a significant burden on those that are affected. In that, the issue of the hopper car fleet disposition is one that government will have to give careful consideration to and should think strongly about delaying for five years' time.
The Vice-Chair (Ms Whelan): Thank you, Mr. Schmeiser. I should make you aware that there have been discussions going on quite vibrantly in Ottawa about this whole issue for the past two months.
Mr. Wilson.
Mr. Wilson: We're aware that the proposal we're making for these exemptions had to have a financial impact in the way of potentially lost tax revenue to the federal government, and we know the Department of Finance has done some studies on that to try to identify just what the impact might be. We don't necessarily see this as lost revenue; it's just where the funds are going to be used for the public good. A lot of the charities we represent have a long history of being very accountable and of transferring these funds to the public good in a very efficient way, so I would like you to take those factors into consideration.
The Vice-Chair (Ms Whelan): Thank you, Mr. Wilson.
Mr. Semenchuck.
Mr. Semenchuck: Madam Chair and committee members, let me leave you with two comments.
One is that health research is very important to our health system and to our economy and cannot afford any further cuts. Health research funding must be adequate and must be increased on a level that will allow the research to create the jobs that it can.
Second, on tobacco taxation, the rollbacks that occurred are totally wrong and should be increased back to the levels they were at, in order to save lives.
The Vice-Chair (Ms Whelan): Thank you very much, Mr. Semenchuk.
I want to thank all of the witnesses for joining us here this morning. Your time is very valuable, and we appreciate your input into the pre-budget process. Your comments will definitely be taken back to Ottawa, as well as the briefs you've presented us with. We do look at them in a very thorough manner, and we hope you'll follow our recommendations to the finance minister and participate with us again in the future. Thank you very much.
The meeting is adjourned.