Finance Committee on Oct. 20th, 2011

[The Chair, Conservative, James Rajotte]

Good morning, everyone. I call this meeting to order. This is the 18th meeting of the Standing Committee on Finance, and we are continuing our discussion regarding pre-budget consultations for 2011. We have seven organizations in this panel and two panels this morning.

First, we have the Co-operative Housing Federation of Canada; Canada's Research-Based Pharmaceutical Companies; the Canadian Taxpayers Federation; the Certified Management Accountants of Canada; the National Roundtable on Travel and Tourism; the Rick Hansen Foundation; and the Rideau Institute on International Affairs.

You each have a maximum of five minutes for an opening statement, and then we'll have members' questions.

We'll begin with Mr. Gazzard, please.

[Nicholas Gazzard, Executive Director, National Office, Co-operative Housing Federation of Canada]

Good morning.

I would like to preface my remarks by saying we recognize the need for fiscal prudence in the coming budget. We would also, along with others, though, caution the Minister of Finance to show some flexibility and keep a fiscal open mind, given the international economic uncertainty we face.

In that context, I want to address very quickly the three elements of our brief.

The first is the need, in our view, to continue to invest in Canada's cities. We have an opportunity here in Budget 2012 to renew the federal government's good track record on investment in infrastructure and housing. This is an opportunity for Canada right now in the face of global uncertainty to ready its cities and its urban infrastructure to be economically competitive in the future, to create what we would like to call “joined up cities”, where transportation, housing, and jobs all come together to create an environment that is conducive to economic productivity.

Part of that, of course, is housing. The government has a good record in investing in housing. Close to $400 million a year is going in through the affordable housing framework, which runs between now and 2014. But we would argue, given the housing need in this country, that more is needed.

A number of witnesses, both before and after my appearance, will argue for tax-side incentives to create affordable housing. We would agree with that, with one caveat: that the housing that is created retain long-term affordability. We have seen tax-incentive housing developed in the past, which has lost its affordability. We would argue that if the government is going to invest on the tax side to create opportunities for affordable housing, it needs some sort of guarantee of continued affordability for the long term.

One possible way to do that is to look at the low-income housing tax credit system in the United States. This was actually a Conservative platform in the 2007 federal election. We would argue that you should revisit that and consider carefully whether that might be a scheme that could work in Canada to create more affordable housing.

Our second thing today actually is not one that is going to cost you any money. I'm sure the Canadian Taxpayers Federation will be happy to hear that. The federal government is in the process of completing agreements with the provinces in the affordable housing framework. Part of those agreements is an accountability clause, which we actually argued strongly for leading up to the renewal of the affordable housing framework.

The accountability framework requires the provinces and territories to actually account for the money they are spending on housing to demonstrate how they are creating affordability on the one hand and reduction in housing need on the other. What we are asking the federal government to do is to hold the provinces' and territories' feet to the fire here to make sure that the accountability framework is robust and that the provinces and territories really do account for the housing reduction that is caused through spending federal housing money.

I'd like to dwell now on the third point, which I think is perhaps the most pressing for us. Over the next five or six years an enormous number of funding agreements for existing what we might call legacy social housing are going to come to an end. That housing is facing a very uncertain future. The question is going to be the affordability of that housing for the low-income residents. What is going to happen is that subsidy streams will expire at the same time as the mortgage commitments those housing projects have. The question is, will those two things cancel each other out, or will they face an uncertain future in terms of the affordability of this housing for the low-income households?

What we argue is that there is not enough going on, not enough being talked about, not enough being discussed around the future of this housing. Last week the president of the CMHC, Karen Kinsley, was in front of the HUMA committee and said broadly that much of this housing is going to be okay.

We take issue with that. We don't believe it's going to be okay. The requirement to reinvest in this housing, coupled with very high ongoing maintenance costs, means that the affordability of this housing for low-income families is very much in doubt, very much at risk. We are looking at up to 200,000 units of affordable housing in this country that may no longer be affordable to seniors, to other people with fixed incomes, and to people with disabilities, going forward.

Part of the legacy of our affordable housing program in this country is security of tenure for low-income households. That security of tenure is in danger of being lost unless the federal government takes a leadership role to address the shortfall that's going to occur once the subsidy streams come to an end.

We are urging the finance minister to press CMHC to release a long-awaited report on the future of this stock and to address the financial shortfall that's going to occur.

One thing we don't want to see in the face of a real scarcity of affordable housing is the loss of housing that is already on the ground and is currently affordable, but that affordability is no longer guaranteed in the future. So we're urging you to address that in a meaningful and organized way with your provincial and territorial partners.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We will now hear from Mr. Williams, please.

[Russell Williams, President, Canada's Research-Based Pharmaceutical Companies (Rx & D)]

Thank you very much for the opportunity to present for Rx&D, Canada's Research-Based Pharmaceutical Companies, which represent about 50 research-based companies, with well over 15,000 men and women involved in high-level research in Canada.

We create, deliver, and research new innovative medicines that save lives, improve the health care system, and I believe will add to the sustainability of our health care system, which incidentally every government is looking at. Appropriate use of our medicines is part of that solution.

We're particularly pleased to share the panel today with the Rick Hansen Foundation, which is an excellent example of some of the research on spinal cord injury and shows a great collaboration with industry. We are one of the largest investors in health research in the country, about $1.5 billion a year and in the last 20 years well over $20 billion, and we are the largest private sector investors in health research.

In a written submission to you, we talked about three areas.

First, we need an intellectual property regime that enables us to be more competitive internationally.

This IP regime will make us more and more competitive. We've also asked to change to an expanded definition in the SR and ED tax credits to get to OECD levels because Canadians' definitions are relatively limited and don't catch all the research that is being done in the country.

We believe improvements in Health Canada's regulatory review process for drugs and biologics should be included in the 2012 budget. I want to underline that great progress is being made in Health Canada, but I think this area has to be addressed.

Let me focus my comments on the issue of IP, intellectual property, because that's the cornerstone, the pierre angulaire of our industry. There's a huge opportunity for Canada right now during the CETA negotiations, and frankly before they're even concluded, to create, number one, an effective right of appeal mechanism for innovators. Right now in Canada in front of the courts, generics have a right of appeal if their challenges are rejected. Innovators cannot. So I want to impress upon the committee that it's just basic fairness in front of our courts.

The second area is to increase our existing data protection regulations from eight to 10 years. Europe has 10 years. We already have eight, and I congratulate the government in 2006 that moved in this direction. So it is not from zero to 10, it's from eight to 10, to be globally competitive.

Finally, Canada is the only country in the OECD group that doesn't have something called patent term restoration. If there are delays in clinical and regulatory, you can add it later to a patent. Those three areas would have a huge impact. They're not major advancements. We've done the heavy lifting. These are incremental changes, but we could have a fundamentally positive impact. You are looking at how to increase our economy. This will bring in new dollars. You saw a phenomenal increase in the mid-1980s when Canada did move on IPs for the first time. We were investing a little under $100 million and now we're a little over $1.3 billion, $1.5 billion when you count our community projects.

So the cornerstone of our economy, I believe, can be innovation. The IP rights that we're looking at right now will help protect the investment that takes well over a billion dollars, 10 to 15 years, and it can help us. We invest about $100 billion in R and D around the world. Canada gets the $1.3 billion. We would like to grow that. So our message here is if we create the environment within Canada, our industry can bring those investment dollars right into our universities, right into our health care system. These will be great jobs and really help the health care system, with 75% of those dollars in clinical trials.

When people say we can't move on that, I say the numbers speak for themselves. We have grown, a huge increase over the last few years of 1,500%. There's room for generics in this too. They have grown 2,000% in terms of the business. So our message today is if we create an environment of intellectual property, the research-based pharmaceutical industry can increase our investment. We want to. It's our commitment to the country. We can bring in those innovative medicines that all your constituents are looking for that can improve our quality of life and ensure we have a sustainable Canadian health care system that we can be very proud of.

I thank you for the opportunity to highlight these three areas that are important to our community.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We shall now hear from Mr. Thomas, please.

[Gregory Thomas, Federal and Ontario Director, Canadian Taxpayers Federation]

Thank you, Mr. Chair and members of the committee. We appreciate the opportunity to speak on behalf of our 70,000 supporters. The Canadian Taxpayers Federation is the largest and oldest national not-for-profit, non-partisan taxpayers advocacy group.

We will be circulating our remarks, and we'll also be making reference to our “Zero in Two: Taxpayers Deficit Action Plan”, and the most recent issue of our “Taxpayers' Agenda, the Canadian Taxpayers Federation Top 20 Policy Priorities for the Harper Government”. You can get that at taxpayer.com, on Twitter, and on Facebook.

Mr. Chair, we want to salute the government's action in cutting 42 positions and $15 million in spending at the Atlantic Canada Opportunities Agency yesterday. That was a blow in favour of taxpayers. It was long overdue. The head count under the three minority parliaments with the Government of Canada went up by 39,000 people. You added 5,000 or 6,000 people to the roster of National Defence headquarters. You grew National Defence headquarters in the minority parliaments to a size greater than the Royal Canadian Navy. The “bloatation” in Ottawa is absolutely out of control, and we salute this first tiny step on the part of the Government of Canada to rein in its spending.

In 2007, the boom year, you had record revenues of $242 billion and you ran a $9 billion surplus. For the year just ended, you were $7 billion shy of your all-time record revenues and you ran a $33 billion deficit. You're calculating in this current fiscal year $14 billion in additional revenues and you're still talking about borrowing another $32 billion and indebting future generations of Canadians.

We salute your efforts to rein in spending. We salute your efforts to balance the budget. We all know that in an emergency you could balance the budget this year with effects that wouldn't flow too far from the boundaries of the national capital region, and we strongly urge you to get on with it.

We're here to support your pooled registered pension plan proposal. We think this is something that all new members of Parliament, elected in all future by-elections and general elections, should be enrolled in. If it's good enough for Canadians, it's good enough for you guys. The same is true with the Public Service of Canada. If you're proposing a new pooled retirement pension plan for all Canadians, for the four out of five Canadians who aren't government employees, then start enrolling your new hires in this wonderful program yourselves. Let's all be in the program together.

We recognize that it's going to be utterly impossible to get sitting MPs to go for this. If I had a deal where $5.50 were contributed by my employer for every dollar I contributed, there's no way you could get me to vote myself out of that. We also believe that there is no reason to panic public servants who have made life decisions based on the incredibly generous pension plan they have—which is running a $200 billion unfunded liability, according to the C.D. Howe Institute—after their lifetime of service to Canada, but we urge you to get it back on a sustainable, honest funding level with every new hire.

We've touched on a few other issues. We've touched on debt and deficits. We also urge you to have a look at payrolls. Since the end of the boom in 2007, it's become apparent to the people in Kitchener—the people at Maple Leaf Foods who got short notice of the end of their employment—that a federal government employee with 16 years of service will have one year's notice on full salary, and many of these people will never end up losing their jobs. There are two classes of humanity here: the people on the public service dime and everyone else who is paying for it. Unless that gets addressed in a serious way, there's going to be some serious blowback on all the people sitting around this table.

Thank you, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Monk now, please.

[Richard Monk, Advisor, National Affairs, and Former Chair, Certified Management Accountants of Canada]

Mr. Chairman, committee members, fellow witnesses, ladies and gentlemen, I'm very pleased to be with you this morning to represent the Certified Management Accountants of Canada, also known as CMA Canada. Thank you for inviting us.

Through the years we have consistently supported and advocated policies to improve Canada's productivity that in turn would enhance our competitiveness and increase Canadians' standard of living. In our submission we focus, once again, on innovation, or what we call creativity. Why? As stated by the 2008 Competition Policy Review Panel, “Innovation drives productivity and competitiveness in the 21st century”. We also believe that focusing on innovation would aid in achieving a sustained economic recovery and help to create quality, sustainable jobs, two objectives guiding the work of the committee.

CMA Canada is well aware of today's realities, two in particular. First, the global economy is even more fragile than it was when we put together our submission this summer. Second, we believe that Canada's business community must be the primary innovator.

Nevertheless, governments can play an important role as a catalyst of innovation and creativity. To that end, CMA Canada recommends that the committee direct its attention to the following three items: one, commercialization of creative ideas; two, improving Canada's keynote research and development program; and three, investing in basic skills training to help drive greater productivity.

One of the keys to capitalizing on creativity of Canadians is transforming their knowledge into products and services for the global marketplace. The government has introduced initiatives to foster commercialization and business innovation, and it is a partner in the recently launched national commercialization study. These are positive steps, seeing that Canada believes that two initiatives could further enhance and advance the government's objectives for commercializing innovation.

The Government of Australia has recently established Commercialisation Australia. In the current fiscal and economic climate, we do not recommend such a robust program for Canada; however, at least one component of the Australian program merits consideration. We recommend a program of repayable grants to assist innovative small and medium-sized enterprises in developing a new product, process, or service to be taken to market. Applicants for a repayable grant would be required to match the funding on a 50-50 basis.

Moreover, we think there is merit in promoting greater interaction between the business community, governments, and universities and colleges. The University of Waterloo has a unique creator/ownership policy, permitting professors and students to own their creations and encouraging them to commercialize their research. Perhaps the government could examine how the federally funded granting councils might lever their grants to encourage other universities and colleges to do the same.

Our second recommendation is with regard to investing in research and development. A key public policy tool encouraging investment in innovation is a scientific research and experimental development tax credit. We believe the program would be improved by expanding the refundability provision currently available only to smaller businesses to claimants of all sizes.

Most R and D in Canada is performed by large companies. Extending the refundability to them would encourage smaller businesses to grow and recognize the innovation advantage of larger companies.

Finally, Mr. Chairman, as many as 40% of working Canadians lack the basic literacy skills needed to participate in the knowledge economy. Poor basic skills act as a drag on economic growth. CMA Canada was pleased to see that imperative of basic skills training was recognized in Budget 2011, and we encourage more of the same in 2012. We recommend that the government continue to invest either directly or in partnership with provincial and territorial governments as well as in collaboration with private sector partners, in literacy, numeracy, and problem-solving skills programs across the country.

In closing, Mr. Chairman, we are well aware of the fragile economic times in which we live, and that governments face particularly difficult decisions among competing interests in the name of the public good. We believe the public good would be well served by increasing Canadians' standard of living through improved productivity. Our suggestions to you are made in that spirit.

We wish you well in your deliberations, and I look forward to your questions.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now hear from Mr. Goldstein, please.

[David Goldstein, President and Chief Executive Officer, Tourism Industry Association of Canada, National Roundtable on Travel and Tourism]

Thank you, Mr. Chair.

Good morning, members of the committee.

My name is David Goldstein. I'm the president and CEO of the Tourism Industry Association of Canada, and it's my pleasure to appear before you today on behalf of the National Roundtable on Travel and Tourism and the 617,000 Canadians who work in this $74 billion sector.

Our industry is not a regional industry. It is a 308-riding job strategy, with the smallest number of people in Nunavut, where 1,200 participate in this industry, and the greatest number of people in Niagara Falls, where more than 16,000 participate in this industry. Later, if you have questions, I can break it out by your riding as well.

Before I begin, let me take a moment to recognize the recent important step, the announcement of the federal tourism strategy. This whole-of-government approach will help provide alignment between the 15 federal departments and agencies that touch on our industry. We hope this will spur investment growth and create jobs across the country at a time when job creation is a top priority for Canadians.

We have three recommendations in our submission. We will focus on one today, which is our aviation cost structure here in Canada.

International tourism is one of the fastest growing industries in the world, and Canada is blessed with the basics as a travel destination. We deserve more than our share of that growing export market. However, we have fallen from seventh in the world in international arrivals in 2002 to fifteenth last year.

The key impediment to our creating growth at this time is an aviation cost structure that fundamentally creates barriers to access. This taxes us out of contention for international visitors and drives Canadians south of the border. All of this contributes to the $14 billion trade deficit in this sector. Canada, especially post-9/11, has become a fly-to destination, and price competitiveness is vital to attracting visitors.

Sadly, Canada is ranked 125th in the world in its cost competitiveness when it comes to taxes and fees on our airline tickets. If you want a clear example of how this affects us, you need only look at the number of Canadians who are cross-border shopping for their flights. Last year, 21% of Canadian leisure travellers chose to fly from U.S. airports. Airlift is oxygen to our sector, and our current cost structure is so onerous that it impedes our ability to attract that vital airlift. This discourages competition and drives up prices for air tickets, both to Canada and within Canada.

Most governments around the world treat airports as economic spark plugs that catalyze growth. We have fallen into the trap of treating our airports as toll booths. Airport ground rents, the air traveller security charge, navigation charges, payments to municipalities, and aviation fuel surcharges are all piled into the final price of the ticket. I refer to these as the club sandwich of fees and taxes that we impose on our users and end up adding upwards of $160 to the cost of an overseas ticket. That is in difference to what that same ticket would cost in the United States.

So here is our question. Do we want to be a player in one of the fastest growing sectors of the global economy, or do we want to be the B team or the “also ran”?

As a result, our recommendation to the committee is for a prompt and comprehensive review of the aviation cost structure in Canada, with a view to achieving a fair tax and regulatory regime that would allow us to better compete for international travellers.

Before I end, I will say that we too recognize this is an era of fiscal restraint. As I stated earlier, one of the challenges we face as a sector is that there are 15 different departments and crown agencies that impact our sector. Through the strategic review exercise, if all departments had to take a 5% or 10% cut, and therefore we ended up being the low industry on the totem pole in each of those departments, there could be a disproportionate impact on our sector. We have written to the federal finance minister on this issue and we hope it is part of your deliberations as part of this process as well.

I thank you for your time, and I look forward to your questions.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We will now hear from the Rick Hansen Foundation.

[Colin Ewart, Vice-President, Strategic Relations and Development, Rick Hansen Foundation]

Good morning, and thank you for the opportunity to present today. My name is Colin Ewart. I'm with the Rick Hansen Foundation. This is my colleague, Mark Aston, from the Rick Hansen Institute.

We're here today to highlight our submission about the 25th anniversary of Rick's Man in Motion Tour, to highlight how his leadership has created the Rick Hansen Institute as a catalyst for collaboration among spinal cord injury researchers, clinicians, and other stakeholders across Canada and globally, and lastly, to talk about how our future plans will continue to positively impact Canadians, Canada's economic well-being, and quality of life.

Rick Hansen started a journey 25 years ago with a dream, to find a cure for spinal cord injury and make our world more accessible. Since then, his foundation has driven initiatives that have accelerated breakthroughs in spinal cord injury research and cure and greater accessibility and inclusivity for those with disabilities.

Additionally, Rick's leadership has extended into many other areas of social change in building civil society. For example, this past weekend he was in Quebec supporting our national relay of “difference makers”, a nine-month, seven-person event from Cape Spear to Vancouver along his original route.

The Government of Canada has been a vital partner by providing critical support at many points along Rick's journey. As a result, Canada has become a global leader in spinal cord injury cure where people with disabilities lead healthier and active lives.

This year our organizations are seeking the renewal of federal funding of $21 million each year over the next five years to continue the impact and benefits of our work for all Canadians. This funding will be leveraged with significant private sector and other government funding.

While a detailed proposal has been submitted to the government, Mark will now share information specifically on the current and future impact of the institute.

[Mark Aston, Senior Director, Strategic Partnerships and Initiatives, Rick Hansen Institute, Rick Hansen Foundation]

The Rick Hansen Institute has, in a short period of time, accelerated the progress of new treatments and standards of care through developing a national network. This network of over 450 researchers, clinicians, and other stakeholders share common goals and are supported by infrastructure, resources, and knowledge dissemination. It is already making a difference and resulting in better outcomes for individuals with spinal cord injury.

In the last 25 years we have made tremendous progress to fulfill Rick's vision; survival after the initial years of a traumatic injury has significantly improved. Overall acute hospital stays for those with spinal cord injury have been reduced by more than half. However, 25 years into the journey, our work is far from complete. More than 86,000 Canadians live with a spinal cord injury, and on average today 12 new cases will occur at an estimated cost to the Canadian economy of $3.6 billion annually. Unless we continue to advance progress, these costs will only escalate as injuries with the aging population increase.

In Canada, we are on the leading edge to advance improvements. Through our network we are able, for the first time, to track injuries and the outcomes of interventions across provincial jurisdictions at our 34 sites across the country, which collect information on 85% of new traumatic spinal cord injuries. That information is invaluable in improving clinical practices and advancing clinical research studies. It enables the optimization of the use of resources at health care facilities by helping ensure that the right patient receives the right care at the right time and at the right location.

One example of our ability to coordinate collaboration on research studies is demonstrated by the institute's spearheading the development of the first ever multi-centre clinical studies in Canada for acute spinal cord injury. One of those studies is on a drug called Minocycline, where the institute is now establishing a six-site clinical study to show that the results of a smaller, earlier study can be replicated. If proven, this would be the world's first neuroprotective drug treatment for spinal cord injury that could be applied immediately at the accident site to reduce the severity of injury. That reduction in the level of disability will also reduce the length of stay in hospitals, readmissions to hospitals, and the economic burden on home care services.

We're in the process of expanding our network internationally, including at this time to Australia, China, Israel, and the United States. Additional international expansion is planned when we showcase our work to 2,500 delegates from around the world at our Interdependence 2012 Conference in Vancouver in May. International engagement is critical. It will enable us to scour the world to help us determine the best of the best, the most promising research to advance through clinical evaluation here in Canada.

It will allow development of best practices to be first adopted here in Canada and then spread throughout the world. As well as benefits to people with spinal cord injury, many of the advances are applicable to non-spinal cord injury populations as well. For example, our focus on pressure ulcers and urinary tract infections will have a much broader impact. A new study stated that by reducing the incidences of pressure ulcers and urinary tract infections alone by 30%, it is estimated the reduction costs in Canada in the spinal cord injury population would be $125 million per year. However, applying the same interventions to the general population in Canada, the impact would be $2 billion a year.

While we realize the investment requested is significant and in the current fiscal environment everyone, including government, needs to select key priorities to support, our research will result in a real return on investment for government: improvements to the quality of life for people with spinal cord injury and their families; new interventions that can be applied to non-spinal cord injury areas; large reductions in health care costs; job creation in highly skilled areas; and further enhancing Canada's international leadership.

On behalf of the foundation and the Rick Hansen Institute, I thank you for your time and your support.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We will now hear from Mr. Staples of the Rideau Institute, please.

[Steven Staples, President, Rideau Institute on International Affairs]

Good morning. My name is Steven Staples. I am president of the Rideau Institute, an independent research advocacy and consulting group with demonstrated expertise in defence policy.

I noted that other organizations have been presenting on the issue of defence spending to this topic, and I just want to make it clear that we do not receive funding from the Department of National Defence, which may differentiate us from others.

I would like to thank you for giving me the opportunity to present my recommendations on spending reform in the Department of National Defence to contribute to the goal of balancing the budget.

The first recommendation is for the Government of Canada to reduce national defence departmental spending, with the goal of returning to pre-September 2001 levels.

Second, we recommend a review of planned equipment spending to ensure that projects still meet Canada's national defence priorities.

Finally, the Department of National Defence equipment spending oversight should be increased by establishing a parliamentary committee or subcommittee to be responsible for major crown projects.

In response to the events of September 11, 2001, Canada, along with others, undertook an extensive program of defence procurement, weapons acquisition, and operational expansion. We've estimated that this, along with other public security spending increases, amounts to about $92 billion in nominal spending, as we put out in our report earlier this year, and $69 billion adjusted for inflation over the last 10 years has been added to overall national security spending since the terrorist attacks on the United States.

A decade later, the Canadian military mission in Afghanistan is winding down, the country's international obligations have shifted, and the global financial crisis has developed into the primary threat to the livelihood of Canadians. Despite these changes, however, Department of National Defence spending will reach $22.2 billion in 2010-11, a level 19% higher than it was at the end of the Cold War. In fact, we are now spending more on defence, in adjusted dollars, than at any time since the Second World War. It is 40% higher than the year before the attacks of 2001.

In other areas, the government has responded to the financial crisis by developing plans to balance the budget, reduce public sector spending, and require departments to demonstrate the need for new spending programs. In the field of defence, however, the government plans to divert an additional $1 billion to capital spending within the budget over the next two years, with particular emphasis on equipment procurement. These levels of spending are unsustainable in the future and have been set without adequate demonstration that the benefits to the security of Canadians will outstrip these significant economic costs.

That brings us to the need for a comprehensive review of planned equipment spending. The ambitious build-up of the last decade has allowed military equipment programs to proceed without always ensuring that the new material is essential to defence or that these billion-dollar procurements are acquired in an open and transparent manner. The selection of the F-35 stealth fighter for the next-generation fighter capability project provides a prime example of the drawbacks of the current spending scheme. The F-35 program, which includes no contract, contains zero offsets, so there are no guaranteed jobs from it, and includes no guaranteed cost, is the product of a non-competitive contract system that appears to be driven by private interests rather than Canadian security considerations, which should always be the main determiner of military spending.

The long-term success of improvements to the equipment procurement process and of efforts towards a return to pre-2001 spending levels in the Department of National Defence depends on increasing parliamentary oversight of these spending programs. The Parliamentary Budget Office, the Office of the Auditor General of Canada, and other fiscal monitoring agencies have repeatedly cautioned against the continued increase in defence spending programs, to little avail. A mechanism to systematically inform parliamentarians of developments in major crown projects, such as a subcommittee on major crown projects of the Standing Committee on Government Operations and Estimates, would be a useful tool to provide greater oversight and curtail overambitious capital equipment costs.

In light of the major shipbuilding announcement yesterday, this is even more critical.

Supporters of a continued defence buildup will argue that military spending cannot be considered discretionary and that a return to 2001-level defence funding will entail a reduction in the security of Canadians. This argument ignores the changing realities of the Canadian security situation a decade after 9/11, as well as the threat to economic security that unchecked defence spending poses to Canadian taxpayers. A responsible, transparent, and more democratically accountable attitude towards military spending, with the goal of returning to pre-September 11 spending levels, is the best means of ensuring long-term defence sustainability.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We will begin with Ms. Nash for members' questions.

I am informed that we will likely have bells at about 10:40, which is very shortly.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Mr. Chair, do you recommend that I begin my question and complete it later? How do you want to proceed?

[The Chair, Conservative, James Rajotte]

For the information of our witnesses, my understanding is that we'll have bells very shortly for 30 minutes. Committees aren't allowed to sit during bells unless there's unanimous consent, but we all have to get to the House for a vote.

I apologize for this. It is a bit of a challenge.

Would you like to begin now?

[Peggy Nash, NDP, Parkdale—High Park, ON]

Well, I can ask my question, and maybe I'll get the answer.

[The Chair, Conservative, James Rajotte]

Can we have unanimous consent to do maybe one round?

All right, Ms. Nash, we'll start with your five-minute round.

[Peggy Nash, NDP, Parkdale—High Park, ON]

First of all, I thank all the witnesses. This is a bit of a challenging format, with so many different views and fields represented.

I have to begin with Mr. Gazzard and the issue of housing, because we're noting with concern the increased challenges in housing affordability, the real challenges for home ownership, and also the challenges for those who need supportive or subsidized housing.

In Toronto, the city is the largest landlord of housing stock, and it is in great need of investment. So I take your point about the ongoing sustainability of the existing affordable housing let alone the investing in new stock.

We've been arguing that investment in such things as housing is a job creator and is good for the economy. Could you comment on the importance of housing and the potential benefit—not just spending, but benefit—to our economy?

[Nicholas Gazzard]

Where does one begin?

First of all, it's worth noting that you can't discuss a productive economy without also considering how the people who work in that economy are housed and, importantly, where they're housed with respect to access to their jobs. This is why we talked about the idea of joined-up cities, where people can live, work, and travel with relative ease and efficiency between work and home. For example, it's estimated that the productivity gap based on commuting alone in this country costs us about $5 billion.

I think your point about Toronto and the existing housing is important. Canada, together with the provinces, has invested over the years, as I said, in something like 630,000 units of affordable housing. But what we don't have in this country is a plan to sustain that housing beyond the present funding commitments.

We're arguing that we need a plan for that. We can certainly discuss and argue what that plan should contain, but what's worrisome right now is the deafening silence around the issue. Canada's own housing corporation has said for some time that it's considering the financial future of this housing, but nothing has come out.

Meanwhile, the agreements are coming to an end. There are projects out of funding now with the federal government that are not sustainable. Just last week I heard from an aboriginal housing cooperative under the urban native program. It's losing its subsidy and it's not going to be able to supply affordable housing to its existing residents. If you multiply that across the country, we have a real danger that while we fight for more affordable housing, the housing we have already is lost.

We have a major affordable housing problem in this country, and it can't be addressed in one budget cycle. I think we have to recognize that we have 1.5 million households that are considered, not by me but by the federal government itself, to be in what's described as core housing need.

We need a plan to address that. Part of that plan is not losing what we already have, because it's enormously valuable. The real estate assets that we have for affordable housing in this country are priceless, and we need to sustain them.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you so much. I think we could probably have a longer conversation as well about the importance of retrofitting the housing stock for energy efficiency and the enormous job creator that would be.

I want to get one more question in, but I would like, without a question, to acknowledge Mr. Staples' comments. At a time when the government is saying it wants to be fiscally responsible and prudent, there are of course tens of billions of dollars going out the door in defence procurement. I'm sure Mr. Thomas would agree that may not be the wisest avenue for Canadian taxpayer dollars.

I want to ask Mr. Goldstein about tourism, because it is such a major part of our economy. I heard your presentation on the issue of cross-border competitiveness.

I know we don't have much time, but can you tell us what the top three or five factors would be that affect a tourist's decision to come to a destination such as Canada?

[The Chair, Conservative, James Rajotte]

You have about 20 seconds.

[David Goldstein]

They would be marketing, access, and product: marketing, or what we spend with the Canadian Tourism Commission to promote our country; access, or issues such as whether people can afford to buy a ticket to get here; and product—festivals, events, things that help make that decision point for the consumer to decide to come to Canada.