Finance Committee on Oct. 15th, 2012

[Sylvain Schetagne, National Director, Chief Economist, Social and Economic Policy, Canadian Labour Congress]

Thank you.

On behalf of the 3.3 million members of the Canadian Labour Congress, we want to thank you for the opportunity to present our views on the 2013 federal budget. As you know, the CLC brings together workers from virtually all sectors of the Canadian economy in all occupations in all parts of Canada.

Leading economists, including bank economists, say that Canada's economic recovery is stalling due to slow business investment, high household debt, and weak global growth. Business investments are not where they should be. The across-the-board corporate tax cut didn't deliver the promised investments in real assets, such as new factories and workers' training. Thus, these cuts failed to boost economic growth and productivity and didn't help create more and better jobs in Canada. Instead, those corporate tax cuts delivered high compensation to CEOs, cost Canadians billions in lower than expected government revenues, led to higher federal debt and deficit, and led to cuts in public services. However, those across-the-board corporate tax cuts have helped private non-financial corporations in Canada hoard over $500 billion in cash reserves, money that is not working to create better jobs and more jobs in Canada.

To compensate for the lack of investment from corporations, we need a major public investment program to create good jobs now in Canada, promote our environmental growth, stimulate new private sector investment, and boost productivity. The CLC calls for the federal government to launch, in partnership with provinces and cities, a major multi-year public investment program. The program should include an increase in support for things such as basic municipal infrastructure, mass transit and passenger rail, affordable housing, quality affordable child care, energy conservation through building retrofits, and renewable energy projects.

The CLC supports targeted measures to support and create good jobs in manufacturing and to maximize job creation in industries linked to the resource sector. This will require government strategies on trade, sectoral development, and domestic procurement strategies. Encouraging value-added production and investment in key sectors, along with green jobs and green skills initiatives, will enhance innovation and labour productivity. Having sectoral development policies seeking to promote more investment, production, employment, and exports, especially in important sectors of the economy, is key to attaining a more desirable mix of sectors in our economy.

Also, we cannot afford trade investment that gives priority to investors' rights over the rights of workers and their aspirations for decent work and decent lives. We need a new international trade and investment framework that has, at its core, the promotion of high labour standards and collective bargaining, high job quality, and sustainable global economic development.

Also, Canada's economic success and the future prosperity of every Canadian will depend on the capacity and capabilities of a skilled and educated workforce. While there is much talk on future skills shortages, Statistics Canada reports that there are more than five unemployed workers for every job vacancy in Canada. Training and lifelong learning are critical, and literacy and numeracy skills in Canada lag behind those in many other countries. Training Canadians instead of importing vulnerable migrant labour should be a top priority. The CLC calls for the development of a national tripartite skills development strategy in response to the growing skills gap, the aging workforce, and the specific needs of groups such as aboriginals, recent immigrants, and youth.

Finally, some of our key federal programs do not match today's reality. Only 37% of unemployed Canadians receive EI benefits. The CLC calls on the government to implement a uniform national entrance requirement of 360 hours, increase the benefits level from 55% to 60%, and base benefit and duration calculations on the 30-hour workweek.

The CLC continues to call for a doubling of future CPP benefits phased in on a fully pre-funded basis, and we welcome the support given to the CPP expansion by Ontario and many other provinces.

We call on the federal government and all provincial governments to pursue this option as an urgent priority.

[The Vice-Chair, NDP, Peggy Nash]

Thank you, Mr. Schetagne. Thanks very much. You'll have a chance during questions to add more.

Mr. Lindsay, you have five minutes.

[David Lindsay, President and Chief Executive Officer, Forest Products Association of Canada]

Good afternoon, everyone. Thank you very much.

I appreciate the opportunity to present to the committee today. Staff have already received our pre-budget submission and they have a copy of the more extensive remarks, so I'll try to keep my comments brief in the interest of time.

The forest industry in Canada remains an important part of our economy from coast to coast. There are some 200 rural communities across the country that depend on the forest industry as their primary employer. The forest industry in these communities has faced significant challenges and headwinds in the last number of years, but the Forest Products Association recognized that we couldn't sustain business as usual, and we launched on a path of transformation and renewal.

I'm pleased to report to the committee today that we've made considerable progress on that journey, so I'd like to talk today about some of that momentum and how we can work with our partners to continue.

Earlier this year, the Forest Products Association of Canada launched what we refer to as “Vision 2020”. It focuses on ambitious goals for our products, our performance, and our people. By 2020, we want to have $20 billion of new economic activity; we want to have a 35% increase in our success in improving our environmental footprint; and we want to have an additional 60,000 new recruits, including women, aboriginals, and new Canadians, in those communities in which we work.

Vision 2020 is built on some of our recent successes already: we've improved our productivity, we've diversified our markets, we are making technological breakthroughs and producing innovative products with wood fibre, and we've established world-class environmental standards on behalf of the forestry sector.

The government and all of our partners have been instrumental in supporting these changes. Embassies and trade officials have been very helpful in our trade and marketing efforts. NRCan created the successful pulp and paper green transformation program. There has been critical support from industry, government, and the academic community for FPInnovations which, for those of you who are not familiar, is one of the world's largest forest research centres, located here in Canada. It's unlocking some world firsts for the commercialization of something called nanocrystalline cellulose. It's an amazing product that comes from wood and can be used for everything from bullet-proof vests to lipstick—and I'll leave you to fill in the humour there. A $100 million investment in the forest industry transformation fund, or IFIT, has been very helpful, but it's been oversubscribed by fivefold. That simply indicates the amount of enthusiasm for commercializing these new products that exist in our industry.

While we're very proud of the progress we've made, FPAC and our member companies certainly understand the current fiscal challenges faced by the government and by our economy, and the need for controlling our deficit.

We would strongly recommend that where the government does continue to spend, such spending should be aimed at supporting industry renewal and focusing on enhancing our ability to compete globally and create jobs and prosperity for the long run. The forest sector is one of those opportunities, I would put to you. We're green and we're a renewable resource.

We encourage the government to continue to support the bioeconomy for forestry and agriculture as well. Last year my predecessor at this committee mentioned the potential for the next generation biofuels fund, administered currently at Sustainable Development Technology Canada, and we'd like to see the government continue to look at opportunities to invest in the bioeconomy and to enhance the IFIT program.

By working together with government, the academic community, and our environmental partners, we've already accomplished a lot. We need to continue work with all of our partners to continue to help the forest sector and forest-dependent communities that we serve to meet the goals of Vision 2020.

Let me make a couple of specific suggestions for the committee today.

We need to continue to support research and innovation to make sure some of the groundbreaking products I alluded to are not only developed but also commercialized and taken to the global marketplace.

We'd like to see the government improve its strategic procurement programs to increase the purchase of next-generation forest products, ranging from building materials to biofuels to medical supplies.

We have a challenge with rail services. If we're going to get our product to market, we can't leave it at our loading docks. We need some help with rail service reform.

As my colleagues have already alluded to, we have some challenges with skilled labour shortages, so we need to focus on labour for the next generation coming along in the forest sector.

Madam Chairman, by working together with the government, we can help to create new opportunities for new jobs and new growth in rural and small-town Canada.

By working with all our partners to implement Vision 2020, we'll ensure Canada has a world-class green and renewable forest product sector well into the future.

Thank you.

[The Vice-Chair, NDP, Peggy Nash]

Thank you very much, Mr. Lindsay.

Mr. Duguay, you have five minutes, please.

[Patrick Duguay, President, Board of Directors, Social Economy Working Group]

Thank you for having us here.

My name is Patrick Duguay, and I am the director general of the Coopérative de développement régional Outaouais-Laurentides. My office is just on the other side of the river. I did not have to travel far. In fact, I was dropped off by Taxi Co-op.

The United Nations declared 2012 the International Year of Co-operatives. Last week, 2,600 co-operators from around the world met in Quebec City for the first international summit, at the invitation of Monique Leroux, the president of Desjardins Group.

I am from the Social Economy Working Group, a smaller organization that was created in 1996 at the invitation of the Quebec government at the time. That government had chosen to promote collective entrepreneurship and the meaning of entrepreneurship, to use it for the benefit of communities. So, the Social Economy Working Group is an organization that promotes the development of social economy and brings together major company networks, networks of organizations that support development, social movements and university networks. After all these years, the Social Economy Working Group has its own financial tools to support new projects, strategies to promote the social economy labour force, and research and transfer tools.

With respect to non-profit organizations in Quebec, there are approximately 7,000 collective enterprises, including 3,300 co-operatives, and close to $5 billion in sales, or $30 billion if you include the entire sector and Desjardins Group. The social economy represents 8% of the gross domestic product in Quebec, and that is just to start.

The co-operative and mutual aid movement has deep roots in Canada. Public policies in favour of co-operatives have been adopted in most Canadian provinces. A very sizeable association movement, which is seen mainly in the volunteer sector, is present in all communities in Canada.

Increasingly, collective entrepreneurship is being rediscovered, with its objectives of meeting new needs or needs that had not been properly addressed until now. Social economy enterprises invest in all economic activity sectors, be it transport, forestry or others. In all these sectors, there are enterprises that have chosen to operate under different rules.

Briefly, I would like to present a few approaches, expectations or hopes so that the Canadian government can perhaps better recognize the International Year of Co-operatives. The last thing that was done this year was do away with the only program to support the development of new co-operative initiatives. It was the co-operative development initiative, and came under Agriculture Canada. Its staff went from 94 to 6 employees.

The most important thing for us is to guarantee that all social economy enterprises have fair and adapted access to the SME support programs. Even if the goal of the social economy enterprises is not individual enrichment, but community enrichment, they are still enterprises. Access to development capital would be important. In his last budget speech, Minister Flaherty referred to the

report of the Task Force on Social Finance,

which our organization signed.

[The Vice-Chair, NDP, Peggy Nash]

Thank you very much, Mr. Duguay.

Mr. Tétreault, you have five minutes.

[Dr. Michel Tétreault, President and Chief Executive Officer, St. Boniface Hospital]

Thank you very much, Madam Chair.

Thank you very much, Madam Chair.

I was going to start by saying thank you for the opportunity to talk about some daunting challenges, but when you said speak slowly and do it in five minutes, that just replaced the first challenge. However, I'd like to also talk about some exciting opportunities.

Health care is very rapidly creeping up to a $200 billion industry in this country, and by all analysis, it's an unsustainable industry. That is not only in Canada but throughout the developed world, and totally regardless of who is paying for it. Whether it's private or public or mixed or mutuals, as in Europe, no one can afford to pay the price we are paying for health care now.

St. Boniface Hospital wishes to propose to contribute to trying to help in this phenomenon.

There are really two pieces to this equation. One is, obviously, when there's not enough money, you can either grow the income or reduce the expenses. We have some ideas on both of those.

On the first, in terms of growing income, we think we should be investing more in supporting research in Canada. St. Boniface Hospital was the first stand-alone basic research centre in a hospital in the country. We've had some successes, and some companies have grown quite nicely, thank you. I think of Intelligent Hospital Systems with, the last time I looked, 80 employees in Manitoba. It just didn't exist a few years ago.

However, we still aren't capable of supporting our researchers with our advice and our expertise as much as they need. Everyone wants to support the home-run hitter that everyone knows is a home-run hitter, but people find it very difficult to find the wherewithal to support the guys and girls who are going to hit the singles and doubles for us until they produce that home run.

The other thing that St. Boniface is proposing is to allow our infrastructure to be used in off hours and on weekends by fledgling small and medium-sized enterprises. It might not surprise you to learn that Canada produces 4.1% of the scientific papers in the world, but only 1.7% of the patents that come to fruition. We believe that more products will create more companies, more companies will create more jobs, and more jobs will create more wealth.

That's the plus side of the equation.

I will now speak in French.

On the other side, we need to reduce our health care spending, which is unsustainable. We feel that this is doable. It may seem somewhat contradictory, but it can be done through quality.

A few years ago, at St. Boniface Hospital, we proposed that there be a single strategic priority—quality—and that the way to do it was through the Lean quality transformation approach. We often use the Lean transformation to improve the process and efficiency. But, John Toussaint, who is one of the world's Lean experts in healthcare, said that wasn't the case, that it involves a radical culture change in the approach toward treating patients.

I will say very quickly that we have four main strategic directions: satisfy patients, engage staff, decrease injury to patients, so harm them less, and manage resources.

In four years, the results show that our patients have never been more satisfied. We have hit peaks of client satisfaction twice in the year. Up to 87% of our patients have said that the care they received was very good, or excellent, and not just satisfactory. Our employees have also never been as engaged. In five years, we have had an increase in involvement of 34%.

Our mortality rate at the hospital has decreased by 30% in the past three years. Our goal was to have it drop by 10%. Our financial performance has improved in the past two years, and we have managed to reach our goal, which was 1% year over year. So, over two years, with 1% of our budget of about $300 million, we managed to increase service delivery by $3 million. Last year, it was $6.2 million, and our objective for this year is $9 million.

In short, I am asking you to stop and think. If we were to take the $200 billion spent on healthcare in Canada and applied 1% improvement over five years, year over year, that would be a cumulative total of $30 billion in improvement to financial performance.

If the St. Boniface Hospital managed to help Canadian society overall to reach 10% of that goal, and if the St. Boniface Hospital's contribution was 1% of $3 billion, that would equal $30 million. We recommend that a centre of expertise and learning in these techniques be established so that we can help other institutions in Canada progress in this direction, in order to have patients who are more satisfied and employees who are more engaged, and to gain better clinical results.

Thank you, Madam Chair.

[The Vice-Chair, NDP, Peggy Nash]

Thank you very much, Mr. Tétreault.

We will now have questions, and we will start with Mr. Mai.

You have five minutes.

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

Thank you, Madam Chair.

Thank you all for being here today. We know that some of you had to travel further than just across the river, but it is always wonderful to hear from people as qualified as you. It's unfortunate that you only had five minutes each.

Mr. Schetagne, you mentioned that the government's corporate tax cut has meant that a lot of money, some $500 billion, has not been reinvested into the economy by private companies. The Governor of the Bank of Canada and the Minister of Finance both acknowledged that.

We also suggest that investments be made in infrastructure or, as you mentioned, in public transit. The AMT representative mentioned that as well. I will let you talk about that. We know that the representatives of the Federation of Canadian Municipalities mentioned an amount of about $123 billion, and that there had been an infrastructure deficit. Why did this amount not work? Why did the Minister of Finance and the Governor of the Bank of Canada say that reducing the tax rate has not worked in this respect?

[Sylvain Schetagne]

The main reason it has not worked is that it was based on a false understanding of the economic model. In fact, it works, but only for a certain group. Tax cuts benefit companies that pay them, while companies that needed help, in a strategic or non-strategic sector, did not get any help.

We think one of the main reasons this did not work was that it could not work. It favoured the interests of the managers of these companies. We see the companies whose profits have increased, we see the bonuses paid by these companies to the key owners/managers, we see the dividends increasing, but we do not see any jobs or investments being created, which these famous tax cuts were supposed to produce.

So we are now sitting on $500 billion that is not being used to improve the Canadian economy, whether we are talking about productivity or training workers. It is wasted money. The money accumulated because the tax rates were reduced. That money needs to be put to work for the benefit of all Canadians. It needs to be recuperated, not retroactively, but proactively, by again increasing the tax rates for Canadian companies and allocating that money to strategic investments.

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

Mr. Bergeron, you mentioned a national public transit plan. My colleague, Olivia Chow, had put forward a plan but, unfortunately, it was rejected by the government or by members across the way.

Could you please tell me why it is important to invest in public transit and in infrastructures? What are the benefits for the economy?

[Daniel Bergeron]

Across Canada, public transit represents $10 billion injected directly into the economy. That means 45,000 direct jobs and 24,000 indirect jobs associated with public transit. So it is quite significant for the workers.

For families that use public transport, savings are in the order of $5 billion. That's one thing for the entire Canadian economy. However, even individually, it accounts for overall savings of $5 billion.

I'm not even talking about greenhouse gas reductions or the environmental quality of our major cities.

It would be extremely beneficial for Canadian families in a number of ways.

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

Thank you.

Mr. Lindsay, I know that your industry is really moving towards renewable. You are advancing in terms of reducing greenhouse gases. Would putting a price on carbon help your industry in terms of investing in ways to reduce the greenhouse gas effect? Would it have a benefit in terms of all the investment you're already making and the fact that you can actually compensate for other industries that are bigger polluters?

[The Vice-Chair, NDP, Peggy Nash]

Mr. Lindsay, you have 15 seconds.

[David Lindsay]

The Forest Products Association has not got an official position on a carbon tax per se. Different provinces, Alberta and others, have some carbon tax. What we've done, on the pulp and paper side in particular, is reduce our emissions by 67%. Then, with the most recent program the government brought forward for pulp and paper transformation, we added another 12%, so we're pushing an 80% reduction in our sector's emissions in the last five to seven years. We're making as much of a contribution to reducing greenhouse gases as we can.

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

As you know, we are also against a carbon tax; we're for cap and trade.

[The Vice-Chair, NDP, Peggy Nash]

Thank you, Mr. Lindsay.

Thank you, Mr. Mai.

Ms. McLeod is next.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

With the green transformation fund, the mill in the community I represent managed to decrease particulate emissions by 70%. These are huge, major changes. I think you've flagged something that the industry has accomplished through some of the existing programs. It has really managed to step up to the plate to take technological opportunities that will provide a much greener industry.

Mr. Lindsay, you have gone through 2008 watching the mills close in the communities that I represent. Can you talk to me about how a competitive corporate tax rate affected the decisions of the mills? Do I open a mill? Reopen? There are a lot of factors that play into it. What are the factors that played into decisions made by companies about their mills?

[David Lindsay]

There have been a lot of initiatives by both the provinces and the federal government to try to help the forest sector, including the green transformation program. The report by the Canadian Forest Service in September itemizes a number of those benefits. We've made changes to the pulp mills across the country to deal with particulate matter while generating new revenues by putting energy back into the grid. The pulp and paper and forestry sector is now, as a result of this program, putting enough electricity into the grid to light all of the houses in Calgary. That's another source of revenue through government investment.

The expansion in China has been a huge effort, and the folks at the Chinese embassy and the people who have been helping us with marketing our green forest sector around the world have been incredibly helpful. The tax regime and competitiveness climate are always part of any industry decision. We also need a transportation system that can get our products to market. I hope someone will ask me about the need for a transportation service agreement with the shippers and the rail industry.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

I'm happy to ask you about that. We have the goal of trying to get back to a balanced budget by 2015-16, and so ideas that reduce the burden of regulation and support a thriving economy without being significant expenditures are certainly most welcome.

[David Lindsay]

The forest industry is part of a larger shippers' coalition, including the grain industry, the chemical industry, the auto industry, the mining industry, and others. We're not looking for additional regulations; we're looking for a dispute settlement mechanism. I can't speak for all the other industry partners in our coalition, but in the forest sector 80% of the mills we represent are in communities at the end of railway lines or in remote regions where there isn't another alternative. While people may debate the proper limits of regulation or whether they believe in competition and free enterprise, when there's only one supplier, what you have is a monopoly. If the trucks are not able to get through the roads, rail is the only way to do it, and if we want to be shipping to China, the railcars need to be there so that we can get to port and get over to our international markets.

It's a matter of timing, of having enough cars, and of making sure the cars are clean enough to put our product in so that they can go to our international customers. We're asking for a mechanism in the act such that when there is a disagreement between the shipper and the rail company, that mechanism would provide a procedure for dispute settlement and an agreement on an acceptable level of service. If you're the monopolist, you can penalize shippers for not putting their product on your railcars, but if the railcars aren't ready for the product, the shipper can't penalize the monopolist. We need a balance in the agreement between the shippers and the rail companies.

[The Vice-Chair, NDP, Peggy Nash]

Thank you very much, Ms. McLeod.

Ms. Sgro, you have five minutes, please.

[Judy Sgro, Liberal, York West, ON]

Thank you very much.

Thank you all very much for coming today and providing us with some very interesting information.

Mr. Duguay, on the issue of co-ops, we have a big shortage of affordable housing in Canada no matter what province you're in. There's a real need for affordable housing for seniors, for low-income people, and for lots of families. What's the plan?

I congratulate you and the whole organization on achieving a milestone. The concern is, where is it going in the future? What do you see in the next 10 years when it comes to the co-op industry?

[Patrick Duguay]

In fact, we are expecting some growth in the coming years, be it in the number of co-operatives, their financial effectiveness or the service to individuals. You were talking about housing, which is a major issue in cities, especially when it comes to finding housing adapted to the changing needs of an aging population. This will be a problem in both rural and urban areas, but the conditions are extremely different.

The co-operative sector today should not be considered an island unto itself. Interaction is constant between the co-operatives, all social economy enterprises, the private sector and the government. In my opinion, the major change coming has to do with the hybridization or collaboration among these various models with a view to always being focused on people's needs. We are seeing today that it is possible to obtain private funds to invest in collective projects, especially in housing, by agreeing on a common goal.

[Judy Sgro, Liberal, York West, ON]

Have you had any indication from the current government that they are interested in partnering with the private sector, and so on, in order to achieve some of that desired goal?