Finance Committee on Oct. 19th, 2011

[The Chair, Conservative, James Rajotte]

I call to order the 17th meeting of the Standing Committee on Finance.

I want to thank everyone for being here this afternoon. We have eight organizations who are presenting, but there will be one presentation on behalf of four organizations.

First of all, by video conference, from Calgary, Alberta, we have the Calgary Chamber of Commerce.

Second, we have the Canadian Federation of Nurses Unions.

Third, we will hear from the Fédération des communautés francophones et acadienne du Canada.

We have Oxfam Canada, the Canada Foundation for Innovation, the Social Sciences and Humanities Research Council of Canada, the Canadian Institutes of Health Research, and the Natural Sciences and Engineering Research Council of Canada.

I want to thank you all for being with us this afternoon.

We will begin with the video conference presentation from the Calgary Chamber of Commerce.

As an Edmontonian, I'll just request that you remove the jersey behind you, if at all possible.

[Voices]

Oh, oh!

[The Chair, Conservative, James Rajotte]

You did win the first battle of Alberta, last night, but not the last.

You each have up to five minutes for an opening presentation.

Mr. Brunnen.

[Ben Brunnen, Director, Policy and Government Affairs and Chief Economist, Calgary Chamber of Commerce]

Great. Thank you very much.

You know, these jerseys are on every wall in Calgary. I'm not sure if you have the same policy at the city, but we can't remove it. It's part of our heritage, if you will.

Thanks very much for the opportunity to present to the committee today. The Calgary Chamber of Commerce represents over 3,200 members in the Calgary business community.

My remarks today are informed by our 2012 pre-budget submission to the committee in August of this year and are structured around the consultation framework. The three key questions are how to balance the budget, how to achieve sustained economic recovery, and how to attain high levels of job growth and business investment to ensure shared prosperity.

First, on balancing the budget, the chamber urges the federal government to apply prudent fiscal management policies relating to program expenditures and debt levels to balance the budget and position the Canadian economy for stable growth. The chamber was pleased with the strategic operational review announced in 2011 as well as the reduction of corporate tax revenues to 15% from 16.5%, which, as we have seen, has led to increased corporate tax revenues in general.

To undertake further efforts in this regard, the chamber is suggesting that government adopt what we call a “bandwidth” approach to spending by targeting expenditure increases within a range delimited between population and inflation and real GDP and inflation. Using a five-year average, this range is between 0.03% and 3%.

This approach is beneficial in that it establishes future spending parameters in the context of the current fiscal climate and spending constraints, and sends a credible signal to the business community that Canadians and the federal government are committed to returning Canada to balanced budgets.

The 2011-12 federal budget proposes a spending increase well within this range, at approximately 0.2%. For 2012-13 the chamber suggests targeting increases at the lower end of this bandwidth, estimated at 0.03%, while earmarking the remaining capacity of the bandwidth for deficit reduction on an annual basis, estimated at approximately $6.6 billion.

Second, in regard to achieving sustained economic recovery, we're proposing some R and D changes. With Canada seeking to grow its economy and create new jobs, we believe research and development is the key to enhancing productivity, particularly in this economic climate, beginning with ensuring and strengthening the equity of the scientific research and experimental development tax credit, or the SR and ED credit.

The SR and ED program itself is a federal policy lever for incentivizing R and D. However, it creates an unlevel playing field for business through differential tax treatment based on ownership. The credit favours Canadian-controlled private corporations by giving them a 35% investment credit for expenditures up to $3 million, with 25% on amounts above that. Public companies and non-Canadian-controlled private companies get only 20%.

In addition, companies lose the cash refundable portion of the SR and ED claim when they go public, which lowers the amount of money they can use for R and D.

Effectively, the tax creates inequities across companies of different ownership structures and discourages private companies from becoming publicly owned. This ultimately hinders R and D investment and prevents the Canada Revenue Agency from benefiting from the improved disclosure records and audit trails offered by public companies. The chamber recommends that the government extend the 35% credit to all companies in Canada, provided the R and D activities are undertaken here.

Second, on the SR and ED, government has been challenged to apply and enforce the SR and ED tax framework on a consistent basis. The chamber suggests structuring the tax credit to more closely represent a fee-for-service model, similar to the patent office approach, as it would then be possible to write a more principled and consistent framework for administering and enforcing the SR and ED credit. That would further strengthen the effectiveness and integrity of the system and improve its use.

Finally, on the SR and ED, and more particularly on research partnerships, the federal government provides funding for research partnerships that represents up to 37% of total federal support for science and technology. All but two provinces provide additional subsidies--

[The Chair, Conservative, James Rajotte]

Just a brief wrap-up, Mr. Brunnen.

[Ben Brunnen]

Sure.

This approach creates regional distortions by driving R and D investment into provinces that don't match the partnership funding. The chamber recommends that government work with the provinces to restructure the research partnership program to eliminate these distortions.

Thank you very much for the opportunity to speak here today.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now hear from the Canadian Federation of Nurses Unions.

[Pauline Worsfold, Secretary-Treasurer, Canadian Federation of Nurses Unions]

Good afternoon. I am the secretary-treasurer of the Canadian Federation of Nurses Unions, and I'm a working nurse. I work in the recovery room of the University of Alberta Hospital in Edmonton, so hello to my fellow Albertans.

CFNU represents over 156,000 nurses and student nurses. Our members work in hospitals, long-term-care facilities, community health, and in our homes. We thank the Standing Committee on Finance for the opportunity to share our views today.

Budget 2011 focused on innovation, education, and training as key drivers for economic recovery. Our first two recommendations build on this trajectory by targeting education, training, and innovation programs to health care workers. Our final recommendation will ensure sustainability in public health care, improve health outcomes, and put more money in Canadians' pockets.

The federal government has recently invested in pilot projects to support partnerships of health care employers, governments, health care worker unions, and professional associations to improve workplaces. These pilot projects were called “research to action”, applied workplace solutions for nurses, and have supported research that shows that a small investment in changing the culture of a workplace can reduce overtime, turnover costs, and increase patient satisfaction.

To provide some perspective on the need to support innovation at the workplace, Canada is currently short by 11,000 full-time-equivalent registered nurses; that's approximately 16,500 people. Without immediate intervention, this labour shortage will increase to a 60,000 FTE RN shortage, approximately 90,000 people by the year 2022. The cost of this shortage, in paid overtime alone, is $660 million annually.

Our applied research shows that innovation pays off. Improvements in working conditions and opportunities for professional development and skills upgrading would convince at least half of the nurses contemplating retirement to extend their careers. I'm not one of them, just so you know.

By strengthening leadership and empowering nurses, we can reduce the turnover rate by more than half. In other words, we can reduce the nursing shortage and all the costs associated with the shortage and improve patient outcomes by simple innovations that increase productivity and improve retention rates.

We therefore recommend a health innovation pilot project fund of $30 million over three years, fashioned after the wait time guarantee fund.

Budget 2011 proposed to combat the shortage of health care professionals by forgiving a portion of Canada student loans for new family physicians, nurse practitioners, and nurses who practise in rural or remote communities. We encourage the federal government to expand this program to health care workers who have gone back to school to upgrade skills. A personal care worker who is seeking to upgrade to become a licensed practical nurse, an LPN seeking to become a registered nurse, or an RN seeking to become a nurse practitioner are some examples. They could all benefit from student loan forgiveness, as financial cost is a common barrier to skills upgrading.

We encourage budget 2012 to extend loan forgiveness to health workers entering programs that upgrade skills. We also recommend that an apprenticeship-like program be developed to support job laddering in health care.

A similar tiered pathway approach that allows EI support at various stages in training would provide health care students with the option to enter into the workforce at various stages of their education and training. We believe this would be of particular value for engaging aboriginal Canadians and internationally educated nurses in skills upgrading.

Our last recommendation is for a federal commitment to universal pharmacare. Premiums for private drug insurance soared by 15% annually between 2003 and 2005, while drug costs rose by 8%. Canadians pay 30% more than the OECD average for prescription drugs.

Research has shown that savings can be gained from implementing a public insurance plan for pharmaceuticals by changing drug pricing practices. If Canada modeled its pharmacare program after New Zealand's in how it tenders and prices drugs, Canada could reduce its drug expenses by as much as $10.2 billion annually. With additional savings from dispensing fees, cheaper administration, and removal of tax subsidies, total savings could be $10.7 billion annually.

A national pharmacare plan is a spending program that pays for itself.

We urge the federal government to enter into a cost-sharing arrangement with the provinces and territories on a comprehensive national pharmaceutical program. After all, it's a win for the federal government that introduces it, it's a win for the provinces and territories, and most of all it's a win for all Canadians.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We will now hear from the representatives of the Fédération des communautés francophones et acadienne du Canada.

[Marie-France Kenny, President, Fédération des communautés francophones et acadienne du Canada]

Thank you very much, Mr. Chair, ladies and gentlemen, members of the committee.

I would like to begin by thanking you for inviting FCFA du Canada to appear today, on behalf of Canada's francophone and Acadian communities.

Commitment to linguistic duality and the influence of both official languages are matters that concern all parliamentarians. This committee is showing that today by taking an interest in the repercussions of the next budget on the 2.5 million French-speaking Canadians living in nine provinces and three territories.

It is with these 2.5 million French-speaking citizens in mind that we prepared the brief you have before you. In their actions, the FCFA and the organizations serving Canada's francophone and Acadian community share one commitment: to ensure that these citizens can live and thrive in French, one of Canada's official languages, through access to a wide variety of services and activities in all aspects of daily life.

Faced with increasingly limited resources, those organizations have come up with innovative solutions and have succeeded, despite everything, in producing real results in the form of services, programs and activities for individuals and families who wish to live in French.

Although insufficient, federal investments intended for those organizations and institutions still provide some leverage. Each dollar invested by the Government of Canada generates at least $8 in volunteer services and enables organizations and institutions to seek out additional funding from other sources. Those investments help the government spend less money on meeting its commitments to francophones in minority communities. Therefore, improving those investments is far from being unreasonable in this time of budget restraint. It is more akin to a strategic realignment of resources.

That's a summary of our brief.

That being said, I would like to raise two issues concerning the ongoing strategic review of current expenditures and programs. First, we were pleased to learn, during a meeting with the Minister of Canadian Heritage, Mr. Moore, that the investments included in the Roadmap for Canada's Linguistic Duality would not be compromised by this exercise. We are talking about the current roadmap. However, yesterday, the Commissioner of Official Languages said something that is relevant to this committee. It was during the launch of his annual report. And I quote:

Departments are being asked to find ways to reduce their expenditures by 5 or 10% [...] The government must ensure that the decisions that are made during each department's budget review take into account potential consequences for official language communities. [...] if each institution independently makes cuts to official languages programs, the cumulative effect will be much greater than 5 or 10%.

We share the commissioner's concern in that respect, and we strongly encourage the committee to take a very close look at that cumulative effect.

We are also interested in other aspects of public funds management, and we want to support the government in its search for ways to save money and increase efficiency. So, I would like to take advantage of my time here to talk about two other important issues.

The first has to do with expectations when it comes to the Canadian government's fund transfers to provinces and territories. Like all Canadians, francophones expect to benefit from those transfers in education, health, human resources development and other areas of activity. The government does include a linguistic clause in some of its agreements. However, those clauses are often very weak.

For instance, that it did not stop the Government of British Columbia from announcing, in October 2010, the closing of five francophone employment centres. They were closed even though they had been created thanks to Service Canada's support and funding provided under an agreement between Human Resources and Skills Development Canada and the provincial government. That also did not stop the Government of Yukon from redirecting funds that had been transferred specifically for French-language education to immersion.

The conclusion is that linguistic clauses, as they are currently worded, do not make it possible to reach the government's efficiency objective and that they must be improved so that the investments reach Canadians, as intended. In addition, this is not an issue limited to official languages. Generally speaking, as soon as the Government of Canada transfers funds—

[The Chair, Conservative, James Rajotte]

You have one minute.

[Marie-France Kenny]

That's just enough.

As soon as the Government of Canada transfers funds, the provincial and territorial accountability obligation in terms of those investments is limited, almost non-existent.

The last issue I would like to talk about quickly is that of cooperation among a number of federal institutions in matters of interest to francophone and Acadian communities. The implementation of the Strategic Plan to Foster Immigration to Francophone Minority Communities is an example of that cooperation. The plan brings together a number of departments, including Citizenship and Immigration Canada and Industry Canada. However, cooperation among institutions on specific matters like this one presents challenges and often involves a doubling of the resources mobilized across government. The government could increase efficiency by implementing policies that would promote better lateral cooperation where a number of federal institutions would combine their resources for the same issue.

Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

Now we'll hear from Oxfam Canada, please.

[Mark Fried, Policy Coordinator, Oxfam Canada]

Thank you very much, Mr. Chair.

Oxfam is pleased to be with you here today to share our thoughts about the federal budget for 2012. Oxfam, as you know, is an international development and humanitarian agency working in 90 countries around the world.

We have three proposals for the budget plus two suggestions on how to finance the costs that may be implied.

First, we'd like to propose that there be a modest increase in the aid budget in 2012. We know that the government declared a freeze the year before last. A modest increase of 8% would help put Canada on track to achieve our fair-share contribution to the poorest people in the world.

We know the government has taken many very positive steps to improve the effectiveness of Canada's aid program to make it even more effective. We believe that Canada has one of the best aid programs in the world, the only fault being that its size is relatively small.

I'll give you two reasons as to why we should increase aid. One is a moral reason; the other is a practical one.

Aid saves lives. The poorest people in the world depend on our assistance to go to school, to get health care, to be able to improve their own lives and survive and prosper.

Secondly, it saves us money in the long run. It's a practical thing; it's in our interest. If we invest in education, health care, and economic growth in the poorest countries, we're going to save later when those systems don't break down and oblige us to intervene in a humanitarian or military manner, which costs us much more in the long run. It's a good investment.

I know that when cuts are contemplated here at home, an increase in aid could be seen as controversial. If I may, I'd like to paraphrase David Cameron, the Prime Minister of the United Kingdom, who has said that he will continue to increase the aid budget despite the very dire situation they face. As he would say, in the time it makes me to make this short presentation, 15 children will have died of a preventable disease in the poorest countries.

We shouldn't let that happen. There's no reason we have to. If the United Kingdom, in a much more difficult economic situation, is going to continue to increase, then Canada, which has the strongest economy in the G-7, must increase its aid budget. We mustn't balance our books on the backs of the most vulnerable people in the world. A modest increase could set Canada on the course to achieving the 0.7% of our economy that all parties pledged to achieve in the year 2005.

Our second proposal, more briefly, is regarding fossil fuel subsidies. Canada is one of the largest emitters in the world of greenhouse gases that cause climate change. Oxfam is concerned about climate change because the communities we work with in poor countries around the world are reeling from those effects. Extreme weather, changes in temperature and precipitation, which undermine agricultural yields, have caused terrible problems for the poor people we work with.

We have to begin to address this situation. Canada pledged, along with all the other G-20 countries, to phase out inefficient fossil fuel subsidies. That pledge was made in 2009. Canada should move on it in 2012, at least. According to the Department of Finance, it could save in the neighbourhood of $750 million per year.

Our third recommendation is that Canada should continue to provide its fair share of global climate finance. In the United Nations, at the big Copenhagen meeting on climate change, Canada pledged, as part of a wealthy country pledge, to help the poorest countries reduce their own emissions and adapt to changes that are already under way.

The global pledge was $30 billion over three years. Canada's fair share—which Canada provided in 2010—was $400 million that year. Canada has said that it will supply that again this year, in 2011, although it has not yet been announced and we're almost at the end of the year. Certainly budget 2012 should include an explicit commitment of at least $400 million to help poor countries adapt to climate change and reduce their emissions.

I should note that the pledge that all countries made was to have a balanced approach to this funding, between adaptation and mitigation—that is, helping countries reduce emissions. Canada unfortunately, in its funding in 2009, provided 89% of its funding for mitigation and only 11% for the poor communities who desperately need assistance to adapt to changes that are already hitting them. We would hope there will be a more balanced recommendation from this committee, that 50% will be set aside for climate change adaptation.

We propose a couple of ways in our submission that revenue could be raised to fulfill our proposal for greater spending: through taxing financial transactions and taxing international shipping, both of which are on the table at the G-20 as innovative measures to raise development and climate change finance.

Thank you again. You have hard choices to face. I hope our recommendations will help you in your deliberations. I'd be very pleased to answer your questions.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

My understanding is that Mr. Patry will represent the four organizations.

[Gilles Patry, President and Chief Executive Officer, Canada Foundation for Innovation]

That's right. Thank you, Mr. Chair.

Ladies and gentlemen, members of the committee, on behalf of my colleagues and myself, I want to thank you for inviting us to appear before your committee.

On September 16, at the opening of a world-class research facility in Saskatchewan, the Prime Minister said the following: “Our government will continue to support science, technology and innovation—key drivers of economic productivity, competitiveness and growth”.

I'm here with my colleagues from the federal research granting agencies to tell you how we will continue to support this agenda by enabling discovery research and making connections between academia and the private, the public, and the non-profit sectors. This is crucial to building innovative communities and driving the Canadian economy. We understand that governments everywhere are facing difficult decisions because of ongoing uncertainty in economies and markets around the world. At the same time, we are in the midst of a global innovation race, a race that Canada cannot afford to lose.

Some countries are increasing their investments in research and innovation. They know that achieving a good balance between the immediate priority of expenditure control and the long-term objectives for stimulating innovation is important. That balance will enable them to emerge out of the economic downturn stronger and be better prepared, economically, to move forward. In fact, the report published earlier this week by the task force whose mandate is to examine federal support for R & D stresses the importance of improving Canada's innovative capacity.

Since the brain drain of the 1990s, Canada has made solid choices in building its knowledge assets. Sustained investments by the Government of Canada have created a vibrant ecosystem in this country. There have been new investments in unique research initiatives, including the Centres of Excellence for Commercialization and Research, the business-led Networks of Centres of Excellence, the Canada Excellence Research Chairs, the Vanier scholarships, and the Banting post-doctoral fellowships. Today these investments are paying off. We're now attracting and retaining top researchers from around the world and are giving them the tools they need to think big.

Only a few days ago, a respected global university survey ranked nine of Canada's universities in the top 200 in the world. Combine this with the fact that Canada is the lowest business tax jurisdiction in the G-7 and it seems clear that the time is right for Canada to capitalize on its investments and become a global leader in innovation.

CFI, NSERC, SSHRC and CIHR have played a crucial role in cultivating winning conditions for ongoing social and economic progress.

Together, we facilitate the creation of research partnerships and the sharing of knowledge between universities, colleges and the private sector. Those initiatives help foster a culture of social and commercial innovation. Through our programs, we support cooperation between those who advance knowledge and those who turn that knowledge into benefits for Canadians.

Take the strategy for patient-oriented research, for instance, which seeks to improve both health outcomes and the cost-effectiveness of health services. The outcomes of one of its projects—the Alberta hip and knee replacement project—have been adopted in provinces across the country and will save the national health care system more than $225 million a year by ensuring patients have faster access to surgery, less pain, and little decrease in quality of life.

Our support of innovative technology from concept to prototype to market readiness is particularly impressive. Look at Future Vehicle Technologies, of Maple Ridge, B.C. Last year the company partnered with Simon Fraser University to explore ways to cool the battery in its high-performance electric sports car. This $25,000 NSERC engage grant has turned into a $1.4-million collaboration under the Government of Canada's automotive partnership program to design a system that recycles waste battery heat for use in other applications.

As you know, innovation takes many forms. SSHRC provides funding for the Queen's University project that boosts rural economies and creates new jobs. That program enables researchers, students and community organizations to meet significant challenges, such as attracting immigrants to rural regions and promoting the communities as tourist destinations.

Canada's enviable research environment is based on measures introduced over several years, and on the strong signals that have been sent to the research community and the private sector here and abroad that Canada means business when it comes to research and innovation.

With budget 2012, the Government of Canada has an opportunity to address the country's fiscal challenges. Canada's research community understands this need, and it firmly believes that only through knowledge, research, and innovation can we ensure a brighter future for Canadians.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

Members, we'll start with questions.

We will begin with Mr. Mai.

You have five minutes.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you, Mr. Chair.

I want to thank all the witnesses for being here today. Unfortunately, we don't think that five minutes is enough.

My first question is for the FCFA representatives. The Commissioner of Official Languages published his report yesterday. At the press conference, he said that he was very concerned about the cumulative effects of the 5% to 10% cuts in federal spending and the repercussions on official language communities. You mentioned that in your presentation.

Could you explain what you mean by the cumulative effects of potential budget cuts?

[Marie-France Kenny]

Thank you for the question.

All the departments clearly have obligations under the act. A number of departments administer programs that directly affect official language communities. Human Resources and Skills Development Canada, Industry Canada and Citizenship and Immigration Canada, among others, have those types of programs. If each of those departments were to cut 5% from the programs, the cumulative effect on francophone and Acadian communities would be much greater than the intended 5% or 10% cutbacks.

Similarly, a restructuring has repercussions on services to the public. For instance, if Service Canada were to decide tomorrow morning to restructure its services, that could result in the closing of certain service points. Services would then be offered in other ways. We have to be able to provide comparable services at offices designated bilingual and ensure that we have adequate staff providing those services. Therefore, the effect would be much greater.

Currently, there is no one person who calls all the shots. No one has the supreme authority in terms of the Official Languages Act. So, Minister Moore is responsible for a part of the act, the Minister of Justice is responsible for another part, and the same goes for the President of the Treasury Board. Under those conditions, when each department is looking into the issue independently and there is no single leader or supreme authority, it is difficult to see the big picture.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

How could we mitigate those repercussions?

[Marie-France Kenny]

The departments would first need to talk to each other. Those of us here, at this table, need to be aware of the impact of those budget cuts. In addition, each minister would have to look into this matter.

Basically, all departments and institutions should be clearly instructed to take into account the potential repercussions. Similarly, the committee made up of ministers, which will ultimately consider the decisions to be made as part of the strategic review, will also have to look into the cumulative effect of those cuts on the communities.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

My second question is for the Oxfam Canada representatives. You said that the target of 0.7% of GNI promised by Canada has not been reached yet.

Where does that promise of assistance that was made stand?

[Mark Fried]

We are talking about an international promise made in 1969 and supported by the UN. In 2005, all the parties in Canada's Parliament voted in favour of reaching that goal, but they failed to set a deadline.

So, it's a matter of increasing assistance in every possible way. We feel that this increase of 8% in funding, which represents about $500 million a year, could help Canada reach the 0.7% target.

Currently, Canada is the second to last G7 country in terms of total donations; only Italy donates less than Canada. At this time, Canada donates the equivalent of 0.33% of its GNI; the United Kingdom donates 0.56%. Despite their size, countries such as Spain and the Netherlands donate more money than Canada.

Therefore, I think that reaching the target is possible.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you very much.

[The Chair, Conservative, James Rajotte]

You have 15 seconds left.