Bill C-26 (Historical)

Tobacco Tax Amendment Act, 2001

An Act to amend the Customs Act, the Customs Tariff, the Excise Act, the Excise Tax Act and the Income Tax Act in respect of tobacco

Air Canada Public Participation Act

[David Collenette, Liberal, Minister of Transport]

moved that Bill C-38, an act to amend the Air Canada Public Participation Act, be read the second time and referred to a committee.

Mr. Speaker, it is a pleasure to rise to speak to Bill C-38 this afternoon to try to get the sense of the House on furthering the improvement of airlines in Canada. This is a very short bill and it has one purpose: to amend the Air Canada Public Participation Act to eliminate the 15% limit on ownership of voting shares in Air Canada by any one person. I hope there will be speedy passage of the bill.

As most people know because we have been engaged in the airline file for a number of years Air Canada took on Canadian Airlines a couple of years ago. Over the last couple of years it has done a remarkably good job of merging the two airlines together.

There have been problems, not all of them of Air Canada's making. Some had to do with bad weather in the summer of 2000. Others had to do with the increase in air traffic when the economy was doing well. There was also an inability to merge the workforces on time.

All these things came together to create a situation that combined with high fuel prices and a declining economy in the last year caused problems for Air Canada before the events of September 11. Air Canada had publicly stated its need to get its house in order to attain more equity before September 11. The events of September 11 have compounded the problem and there is no question that Air Canada, as other airlines, requires a new infusion of equity.

Because of the constraints parliament imposed when Air Canada was privatized, it was impossible for the normal kinds of investment to occur in Air Canada that occur in other public corporations in the country. Investors who wanted a say in the direction of the company were stymied because of the legislation and the restriction on voting shares.

If we are asking the House to eliminate the limit on individual ownership it would be useful to give a bit of the history as to why the limit was imposed in the first place.

Air Canada was privatized in 1988 and 1989 under the enabling legislation which is before us and which would be amended by this bill. At the time the act contained a section that limited individual ownership of voting shares to 10%. The justification for the 10% limit was to ensure that voting shares would be as widely held as possible by Canadians.

Most people do not realize that the 10% limit was accompanied by a prohibition on association between persons who hold voting shares. This was designed to ensure these persons could not act together and take control thereby nullifying the concept of a widely held company. At the time no one thought much about that and the bill was passed. The 10% restriction remained in place until the year 2000 when we raised it to 15% by way of Bill C-26.

Members may remember that leading up to that bill there was an initiative by the government in the fall of 1999 to find a private sector solution to the woes that were bedeviling Canadian airlines. As a result of actions we took we precipitated a private sector solution. Two offers were before Air Canada at the time. One was from Onex Corporation. The other was a proposal that originated with the management of Air Canada.

I will not go into all the details, but people know that Onex withdrew and subsequently Air Canada's management made good on its promise to take over Canadian Airlines subject to certain restrictions. At the time in December 1999 there were intense negotiations between the government and Air Canada because with the demise of Canadian Airlines there would be one large carrier with 82% of the capacity in the country.

As a result of those negotiations, Air Canada decided on certain guarantees with respect to no involuntary layoffs and service to small communities. It has made good on its promises. I emphasize that during those discussions at any time the Air Canada board of directors was free to walk away from that initiative. It made a conscientious business decision which it had to live with in good times and in bad.

Of course the times right now are not as good. That is why the original objection by Air Canada management to changing the 10% and having single shareholders potentially own the company has changed. It has publicly stated its willingness to agree to this kind of a change. It is in agreement with it. Therefore I cannot see any great controversy.

The decision to move to the 15% limit was one we felt was at least in keeping with other crown corporations such as Canadian National Railways. We cannot take that particular comparison too far because the ownership limits on former crown corporations have been tailored to the specific industry sector. CN and Petro-Canada for example have a 15% limit but no limits on non-residents. Nordion for example has no individual share ownership limits except for the 25% for non-residents. Major Canadian banks will allow 20% but there is a fitness test. What we are proposing for Air Canada is appropriate to the Canadian air services sector at this time in our history.

As I said there has been some degree of support for this from Air Canada. In coming to the decision to remove the limit, I have been told by a number of people that any limit in the past has been a disincentive to an investor with serious intentions when investing to have a say in the company. That is why we have decided to re-examine the entire operation and to ensure that there is an equity infusion into Air Canada.

We have been fully engaged with all of the airlines since September 11 to look at their finances and ascertain their financial health. Obviously they have been adversely affected, as have airlines around the world. What we see in Canada is not unique to us; it is something that is being played out elsewhere.

We know what the United States government has done in the aftermath of the terrorist attacks. It came forward with a $15 billion package for the airlines, $5 billion for immediate compensation, $10 billion for loan guarantees. There was another $3 billion included in the $40 billion appropriations bill for reconstruction specifically for security measures. As I have said publicly, we are examining the efficacy of the Government of Canada taking on more of those security costs.

We have watched with some concern as airlines have faced difficulty. They have all reduced capacity and made many adjustments.

Just last week I announced a loan guarantee package for Canada 3000. That airline met certain objectives such as equity infusion by investors, reduction in capacity, the paring of workforces and most important, a business plan that would restore Canada 3000 to profitability.

What I said publicly last Thursday night is that kind of program will be available for the five principal airlines in the country that cover 95% of the market. I realize from questions in question period there are other smaller carriers that would like to avail themselves of a similar loan guarantee program, but they were covered in the initial compensation program. They were covered, as were all the airlines and airports, by our agreement to pick up the war risk liability for 90 days, the third party liability that was terminated by insurance companies which affected not only Canada's air industry but air industries around the world. We did this for the air carriers, the airports and Nav Canada. Everyone has benefited.

One has to draw the line somewhere in how far one goes in terms of loan guarantees. That is why we have said the five largest carriers that cover 95% of the market that are national in scope, they being Air Canada, Air Transat, Canada 3000, WestJet and Sky Service, would be eligible for the loan guarantee initiative. I am not sure that all of them will require it.

There is no question that air traffic has come back to some degree in the last number of weeks. It is gradually coming back to approximate pre-September 11 levels. However, that is not the case certainly on transborder traffic where there is still a significant reduction as compared to the period prior to September 11.

In looking at Air Canada in particular, we have said that perhaps by eliminating the single ownership limit the company would become more attractive to investors. It would allow more of an infusion of equity. It certainly would facilitate with the overall restructuring of the company.

We come with the message that we are preoccupied with the health of the transportation sector in general, but in particular the airline industry. We have made a number of changes to security regulations and safety regulations on board aircraft with the locking of cockpit doors and the strengthening of cockpit doors. In fact last Friday after I boarded the plane and before it left the gate, I was asked by an Air Canada pilot to see the new measures that had been put in place. I was quite impressed with how quickly that had been done and it had been done with the co-operation of Transport Canada. This is being done not only here but in the U.S. and elsewhere around the world. We are facilitating extra security on planes with the new regulations.

I hear my friend from the Alliance who is preoccupied with Americana and wants the provision of armed security personnel to be blanketed on Canadian aircraft. We have said yes for those flights to Reagan national airport, specifically because the American government has said that is a condition for Air Canada to go back to that airport. I think everyone in the House understands that. Anyone who has flown into that airport knows its proximity to the downtown core. It is not just any downtown core; it has the seat of government of one of the largest nations, arguably the most powerful nation in the world. Obviously there have to be some extra security provisions. We have agreed to that because Air Canada is unique on the open skies treaty in being able to use that airport. We did not want to inhibit Air Canada in any way, so we have agreed that the RCMP, Canada's national police, will be on those flights. I have said that we would consider it elsewhere.

However, our preoccupation has been to ensure that airport security be made more stringent and that those rules be put in place quickly and be enforced. Yes, there is some inconsistency across the country, but we are getting to that. We are dealing with that through inspections.

I was on the CBC town hall meeting last night. The Leader of the Opposition was on the panel. I was very happy when he agreed that the security regime has improved and that lineups at airports are diminishing as people get through the new rules.

Of course the one disagreement, in terms of substance, was the question of whether the government should go along with armed security personnel. As I have said publicly, we have that under advisement.

We have done much to help the airline industry and the airports. There are new regulations, new security regulations. I have no doubt that the security regime at Canadian airports, in the skies generally, and in other parts of the world is much better than it was before. I thought it was good before September 11 but it is much more stringent now. Canadians should feel very comfortable in flying. Indeed gradually people are going back. Even business class passengers who stayed away in droves following September 11 are starting to travel again, even some of them to the United States.

Our decision to amend the Air Canada Public Participation Act at this time is to provide another kind of assistance to Canada's largest carrier in its attempts to return to financial stability.

Air Canada is the world's 11th largest airline. It is an airline of which we can be proud. It has not been easy for Air Canada in the last couple of years with some of the problems that it has undergone. However, the quality of the professionals that work at Air Canada both in the air and on the ground is unparalleled. The quality of service we get on Air Canada is among the best in the world. It has been adjudged as such by international bodies.

We have an airline of which we can be proud. It is an airline that is having some problems, but it is an airline which I think has the ability to get over those problems. It is incumbent upon us as politicians and upon the House in general to facilitate solutions, certainly private sector solutions, on the part of our airlines, particularly Air Canada.

I am confident that if we enact the bill it will provide the private sector greater opportunities for investing in Air Canada which will contribute to a successful restructuring of the company. With the enactment of the bill, Air Canada will find itself on the same footing as all of the other airlines. No one else has a single ownership limit. We are not at this time proposing to raise the 25% foreign ownership limit. We do not think that is necessary. We are being consistent with many other countries around the world, including the United States, which keep that 25% limit. They believe inherently that an industry so fundamental to the economy, the fibre and the being of the country should indeed not only be operated by Canadians but controlled in effect by Canadians. If we need to change that we would not need legislation because current legislation allows that change to occur, at least the raising of the limit from 25% to 49%, by order in council. However we do not think that would be necessary.

We believe that the passage of the bill would be timely. It would give Air Canada the investment. As I said before, it is a very simple bill. It has three sections. The first removes the 15% limit and the prohibition on association. The second renders as null and void any other corporate documents that address the 15% limit. The third deals with when the changes will come into force.

I would hope that my colleagues would agree that this is just another step in the government's response and parliament's response to the tragic events of September 11. But in particular, it is also a response to the ongoing restructuring and realignment of the Canadian air industry which predated September 11. I hope that my colleagues would ensure speedy passage of the bill. Certainly at committee if there are any detailed questions members would like to ask, I am fully prepared to be there with my officials.

This is a bill that is in the national interests. It is certainly in the interests of airline passengers and all of those who believe that our national air carrier, Air Canada, should continue to be the great carrier that it is.

Airline Industry

[David Collenette, Liberal, Minister of Transport]

Mr. Speaker, I am very surprised. The Alliance Party, Reform as it then was, actually supported the government's policy. There were no divisions. In Bill C-26 we enacted the recommendations of the commissioner of competition, so I would ask the hon. member to get his facts straight.

With respect to the announcement I made last night with Canada 3000, is he telling Canadians that the government is wrong to give short term cash support to the number two airline to provide competition? Is that where the Alliance Party is?

[David Collenette, Liberal, Minister of Transport]

Mr. Speaker, my hon. friend knows that Bill C-26, which was passed recently, provided for Competition Bureau powers to deal with predatory pricing.

Application was made to the tribunal after the findings of the commissioner. The tribunal has adjourned those proceedings, but that is a matter that is separate from the government. It is a quasi-judicial tribunal that will deal with the matter in its own time.

Canadian Airline Industry

[Shawn Murphy, Liberal, Hillsborough, PE]

Madam Chairman, I appreciate the opportunity to speak to this take note debate on the difficulties being experienced at present by the Canadian airline industry. Our airline industry has long and short term challenges.

These challenges should be dealt with separately. We should not be mixing apples and oranges. The short term challenges result from the dramatic decrease in the appetite of the consumer for flight travel, especially international flight travel resulting from the terrorist incidents that occurred in New York City, Washington, D.C. and Pennsylvania on September 11.

Before dealing with the financial assistance that a lot of us are speaking about tonight, the first issue that has to be addressed is providing consumers with total confidence in the security of our airline system. Our Canadian system is safe and has been safe. Canada has an enviable aviation safety and security record and is committed to improving that record. However the system is not perfect and improvements have to be made.

Canada and all other countries around the world are taking extraordinary steps to improve the system. Changes must be made in both airport and air flight security. There must be increased terrorism response training for flight crews; increased use of sophisticated technology; total separation of the cockpit from passenger areas; worldwide identification and tracking of known terrorists or people who in the past have associated with known terrorists; and increased penalties for both the travelling public and, more important, the companies that operate within our Canadian airports for any violation of airline security regulations.

It has been said tonight that many of these actions are being taken. I compliment our Minister of Transport for the actions that have been taken to date.

I support the privatization of our airports. I have read or heard nothing that convinces me the Government of Canada is better able to operate the country's airports than the companies that are presently operating them.

Improvements have to be made, especially with the financial plight of our smaller airports. The Government of Canada must make and enforce the rules. What the Canadian airline industry needs right now is a return to normal flight levels.

Airline traffic will return. We are seeing positive signs, especially on domestic flights, that the number of passengers is slowly returning. Immediately after the September 11 incident traffic was down by 60%. Today it is my understanding that traffic is down by approximately 20% and decreasing daily.

On the issue of financial assistance to Air Canada, I am compelled to recommend a go slow and cautious approach. Any decision has to bear in mind that Air Canada lost $108 million in the second quarter of this year. That is nearly a million dollars per day for every day that it was operating during that period.

Robert Milton, president and chief executive officer, announced that Air Canada had to adopt a new business plan and lay off approximately 4,000 employees. That announcement was made prior to the September 11 incident.

Many of the commitments made by Air Canada during the takeover of Canadian Airlines and incorporated in Bill C-26 were in serious jeopardy prior to the September 11 incident. Any compensation package should be based on losses directly incurred as a result of the September 11 incident, and any package should be available to all airlines operating in Canada. That is the short term solution.

Unlike some of my colleagues, I am against the Government of Canada taking over Air Canada. A government owned airline would be cumbersome, uneconomical and inefficient. It would not have the flexibility to operate in today's complex airline industry.

Unlike many of my colleagues, I am against the Government of Canada taking an equity position in Air Canada. This would be politically pleasing in the short term but would cause considerable grief to the Government of Canada. I see difficulty convincing the public as we go forward that the government is not operating Air Canada. As the saying goes, “if you are in for a penny, you are in for a pound”.

The industry's long term problems are caused to a large extent by the sheer size of our country.

Canada is a geographically large country, the second largest country in the world, with a relatively small population. Servicing cities like Montreal, Ottawa, Toronto, Calgary and Vancouver will not be the challenge. The challenge will be providing air service to other cities, towns and regions that require economical, stable and reliable air service.

If Canada is to remain a strong country, regular, stable and cost efficient service is needed in smaller centres. We need a competitive environment, the environment that existed prior to the September 11 attacks. We also need mechanisms that in the long term protect service to our smaller communities.

Looking at the long term and going forward, I invite the transportation committee and the Minister of Transport to look at the following positive recommendations.

First, all airlines should be required, depending on the number of flights they have, to offer service to outlying communities, to the smaller towns, to the smaller regions. This would be done on a comparative basis, based upon the size of the airline and the flights they operate.

Second, all airlines operating on major routes should be required to accept passengers of a competitive regional carrier at a reasonable cost. This code sharing is similar to the concept that has been already successfully adopted in the long distance telephone industry.

Finally, and most important, there are many routes because of their remoteness that will require government assistance. Air service is the lifeblood of many communities in the western part of Canada, right across the northern part of the country and in Atlantic Canada.

The Government of Canada provides assistance for roads and wharfs. It assists the rail industry. It is only normal to accept the proposition that some assistance would go directly to the airlines that provide service to these communities.

There is tremendous pressure today, tonight and tomorrow on the government to straighten all the problems of the airline industry. We are under some artificial deadline this week. There is suggestion the train is leaving town and that everyone should be on the train.

What I am saying tonight is that the trains are already gone from a lot of these smaller towns, cities and regions. They do not have trains and they need air service.

The public is returning and will continue to return to the air. The short term difficulties should be dealt with as such. At the same time the government should seize this opportunity, this crisis, to look at a made in Canada solution to the long term challenges facing our Canadian airline industry.

[Don Boudria, Liberal, Minister of State and Leader of the Government in the House of Commons]

moved

That this Committee take note of the difficulties experienced in the Canadian airline industry.

With respect to the U.S. measure on funding of $500 million for cockpit modifications, we are now discussing similar modifications with the industry. With respect to the measure to restrict the opening of the cockpit doors, I announced that prior to the U.S. announcement. With respect to the fortifying of cockpit doors to deny access from the cabin to the pilots in the cockpit, together with funding for cockpit modifications, we are pursuing these issues with the FAA and European authorities because any new regulations really have to affect Boeing in the U.S., Airbus in Europe and Bombardier. Those funding issues are now being discussed with the industry.

Another measure the U.S. is bringing forward is that of alerting the cockpit crew to activity in the cabin and ensuring continuous operation of the aircraft transponder in the event the crew faces an emergency. Again, we are working with the FAA and others to make the best use of new technology to enhance aircraft security.

We are part of this effort. It is a transborder, it is an international effort.

The U.S. announced the establishment of new standards for security operations. We already play a strong role in the management and oversight of airport security services. Our current role includes setting standards for the training and performance of screening personnel. Transport Canada employs inspectors across the country at all major airports to oversee the test and performance of screening procedures. Our inspection and testing procedures have been increased since September 11. We have retained additional personnel, many of them with experience in security and other technical areas, former Transport Canada employees. We will be building on that as the weeks go ahead. In this case the new U.S. measures bring them more into line with Canadian practice.

With respect to the supervising of the passenger baggage security at 420 commercial passenger airports in the U.S., we already play a strong role in the management and oversight of airport security services. This includes setting the standards for training and performance of screening personnel. The U.S. is following Canada in becoming more involved in security oversight. The government's assuming direct management and operation, which of course was the practice a few years ago, is something that has been advocated by many in the House. We are not closing the door on anything, but I would like to have the views of hon. members on this.

Last, the president of the United States talked about extensive background checks and test screeners and security personnel. We are already doing this. We are working with the RCMP and CSIS conducting background and security checks of anyone requiring a permanent restricted area access pass, including screeners and airside workers. Steps are already under way to further improve the clearance program. In fact, again the U.S. is adopting practices which are already in place in Canada.

That is not to say that we have all the wisdom. We are learning from the FAA. We are working together. Canadians have to know that there will be a seamless security regime in North America. It does not mean to say that we cannot do things our own way, implement our own measures as we did on September 11. Of course the FAA was comfortable with the measures that we instituted on September 11, as we were comfortable with theirs.

In the remaining minutes I want to talk about the viability of the Canadian airline industry because there has been a lot of discussion on that in the last few days. Certainly the House provided leadership in the restructuring of the airlines because we ensured that the interest of the general public, travellers, employees and small communities were protected. Despite the difficult problems of merging operations of the two carriers in the last 18 months or so, and there have been many bumps as we know and we all have our own little tales to tell, frankly Air Canada has done a very good job on a macro level of merging the two carriers. In recent months it was turning its attention to improved customer service and plans for the future when the business environment began to change.

Bill C-26 was designed to protect and enhance competition and express confidence in the ability of the industry to meet the needs of the travelling public. That competition was there before September 11. The market share domestically of Air Canada declined from about 82% to 65%. Even before the events of September 11 the combination of an economic slowdown, a rise in fuel prices and a major drop in the level of business travel began to take a bite out of the airline industry worldwide. Canadian carriers, including Air Canada, announced plans to adjust its operations to the new realities.

The terrible events of September 11 and the major cost of the shutdown period have pushed the airline industry, already suffering from the beginnings of an economic downturn, into a tailspin. The losses threaten the financial viability of some carriers.

The situation has been made worse because many travellers choose not to fly or use alternative modes for travel. Forward bookings are down.

In response to the changed conditions, airlines all over the world have announced painful restructuring programs to deal with the crisis. Air carriers have announced layoffs, capacity cuts and aircraft withdrawals. Within two weeks, over 125,000 jobs worldwide have been lost, including in Canada.

Stock prices of major carriers around the world have declined dramatically in the aftermath of September 11. Carriers have experienced problems in raising loans as the perceived risk of investing or lending to air carriers has increased. The cost of the shutdown, the drop in revenues from declining air travel and the inability to borrow money has placed a great strain on the cashflow of most Canadian carriers.

The crisis in the airline industry has wider impacts beyond the industry itself. The drop in airline travel has affected a broad range of related industries, NavCanada, airport service providers, aerospace and tourism to name but a few.

I would like to reassure Canadians that the government will take firm action to maintain the viability of the Canadian airline industry throughout this crisis. I want to hear the views of members of the House tonight before the government moves forward. I must remind my colleagues that the government has already acted in some areas, such as in providing 90 day indemnity for third party war and terrorism liability for essential aviation service operators in Canada. I think that since September 11 we have shown that we want to act and we are prepared to act.

Everyone has a view on the future of the airline industry. However, I can say categorically that the government is committed to the continued viability of all of the air carriers in the industry and especially our nation's flag carrier, Air Canada, which is the world's 11th largest airline. We are committed to that.

The shape and the form of Air Canada as we go forward in the months ahead is something for debate in this House and is something to be determined. I believe that when this is all done, Air Canada and the other companies affected will come out of this crisis stronger and renewed to provide Canadians with the kind of air service that they want and deserve.

Airline Industry

[David Collenette, Liberal, Minister of Transport]

Mr. Speaker, the minister from Toronto is from a city where the largest number of Air Canada employees actually work and reside, so I do not need to be lectured by the NDP or anyone else.

This matter is extremely serious. Last week Air Canada approached us with respect to the interpretation of Bill C-26. We agreed, after discussions with our lawyers, that the interpretation of no involuntary layoffs in Bill C-26 dealt with the merger of Canadian Airlines and not with the extraordinary situation with which we are now faced.

Message From The Senate

[The Deputy Speaker]

I have the honour to inform the House that when the House went up to the Senate chamber the Governor General was pleased to give, in Her Majesty's name, the royal assent to the following bills:

Bill C-12, an act to amend the Judges Act and to amend another act in consequence—Chapter No. 7.

Bill S-24, an act to implement an agreement between the Mohawks of Kanesatake and Her Majesty in right of Canada respecting governance of certain lands by the Mohawks of Kanesatake and to amend an act in consequence—Chapter No. 8.

Bill C-8, an act to establish the Financial Consumer Agency of Canada and to amend certain acts in relation to financial institutions—Chapter No. 9.

Bill S-17, an act to amend the Patent Act—Chapter No. 10.

Bill C-17, an act to amend the Budget Implementation Act, 1997 and the Financial Administration Act—Chapter No. 11.

Bill S-16, an act to amend the Proceeds of Crime (Money Laundering) Act—Chapter No. 12.

Bill S-3, an act to amend the Motor Vehicle Transport Act, 1987 and to make consequential amendments to other acts—Chapter No. 13.

Bill S-11, an act to amend the Canada Business Corporations Act and the Canada Cooperatives Act and to amend other acts in consequence—Chapter No. 14.

Bill C-13, an act to amend the Excise Tax Act—Chapter No. 15.

Bill C-26, an act to amend the Customs Act, the Customs Tariff, the Excise Act, the Excise Tax Act and the Income Tax Act in respect of tobacco—Chapter No. 16.

Bill C-22, an act to amend the Income Tax Act, the Income Tax Application Rules, certain acts related to the Income Tax Act, the Canada Pension Plan, the Customs Act, the Excise Tax Act, the Modernization of Benefits and Obligations Act and another act related to the Excise Tax Act—Chapter No. 17.

Bill C-3, an act to amend the Eldorado Nuclear Limited Reorganization and Divestiture Act and the Petro-Canada Public Participation Act—Chapter No. 18.

Bill C-18, an act to amend the Federal-Provincial Fiscal Arrangements Act—Chapter No. 19.

Bill C-28, an act to amend the Parliament of Canada Act, the Members of Parliament Retiring Allowances Act and the Salaries Act—Chapter No. 20.

Bill C-9, an act to amend the Canada Elections Act and the Electoral Boundaries Readjustment Act—Chapter No. 21.

Bill C-25, an act to amend the Farm Credit Corporation Act and to make consequential amendments to other acts—Chapter No. 22.

Bill C-4, an act to establish a foundation to fund sustainable development technology—Chapter No. 23.

Bill C-29, an act for granting to Her Majesty certain sums of money for the public service of Canada for the financial year ending March 31, 2002—Chapter No. 24.

Bill S-25, an act to amend the Act of Incorporation of the Conference of Mennonites in Canada.

Bill S-27, an act to authorize The Imperial Life Assurance Company of Canada to apply to be continued as a company under the laws of the Province of Quebec.

Bill S-28, an act to authorize Certas Direct Insurance Company to apply to be continued as a company under the laws of the Province of Quebec.

Pursuant to order made on Wednesday, June 13, the House stands adjourned until Monday, September 17, at 11 a.m. pursuant to Standing Orders 28 and 24.

(The House adjourned at 5.26 p.m.)

Points Of Order

[Don Boudria, Liberal, Leader of the Government in the House of Commons]

Mr. Speaker, I rise on a point of order. Moments ago a bill was introduced, Bill S-15. I take this occasion to indicate to the House that it is my belief that the bill cannot proceed to the next reading because it is out of order.

Bill S-15, which was just introduced in the House, creates an independent foundation to provide funding for programs to prevent the use of tobacco products by young people. It is obviously a very laudable initiative.

The funds would come from a tax on tobacco products. The senator who introduced the bill expects that such a tax will bring in $360 million each year to fund the foundation.

As members know, section 53 of the Constitution Act, 1867, states:

Bills for appropriating any Part of the Public Revenue, or for imposing any Tax or Impost, shall originate in the House of Commons.

Beauchesne's states:

A Ways and Means motion is a necessary preliminary to the imposition of a new tax, the continuation of an expiring tax, an increase in the rate of an existing tax, or an extension of the incidence of a tax so as to include persons not already payers.

Whether we are talking about imposing a new tax, continuing an expiring tax, increasing a tax or extending the incidence of a tax, a ways and means motion is necessary. Beauchesne's also states:

Only a Minister of the Crown can move a motion to impose a new tax.

Bill S-15 is essentially the same as a bill tabled in the first session of the 36th parliament, Bill S-13. The principal differences between Bill S-13 and Bill S-15 are a detailed preamble and the addition of part III which sets out what are claimed to be the bill's benefits to the industry.

However the new bill is the same in purpose and operation as was Bill S-13. The main purpose of Bill S-15 remains: to prevent the use of tobacco products by young people. Its mechanics to implement that purpose are completely identical. I therefore suggest that the same treatment be reserved for this bill as for the prior one. The taxation powers of Bill S-15 of $360 million per year are increased fivefold over Bill S-13, which would have raised $70 million annually.

Mr. Speaker, your predecessor, Speaker Parent, concluded that Bill S-13 constituted a tax bill and as such constitutionally and procedurally could be initiated only in the House of Commons and only after the House had concurred in a ways and means motion tabled by a minister of the crown. The bill was therefore ruled not to be properly before the House.

I submit that the ruling on Bill S-13 applies to Bill S-15. As I have indicated, the two bills are in essence the same in purpose and operation. Like Bill S-13, Bill S-15 must be considered a taxation measure which should have been initiated and could only be initiated in the House and not the Senate after concurrence in a ways and means motion proposed by a minister of the crown.

The government and the House recently took action to address tobacco use, and in particular smoking by young Canadians, by passing Bill C-26, the tobacco tax amendment bill. I will quote a speech made in the other place by Senator John Bryden who noted that Bill C-26 and Bill S-15 both claim to reduce tobacco consumption to meet national health objectives. Senator Bryden said:

I have much difficulty making the difference between Bill S-15, which will charge $1.75 per carton, and the bill that was introduced from the other place today, which will charge $2 per carton. One is called an excise tax; the other one is called a levy.

Bill C-26 was introduced in the House after concurrence in a ways and means motion which was introduced by a minister of the crown.

I submit to you, Mr. Speaker, that although Bill S-15 has the laudable objective of reducing smoking by young Canadians, it is a taxation measure. As such it should have been initiated and can only be initiated in the House of Commons after concurrence in a ways and means motion which furthermore can only be proposed by a minister of the crown. The House did almost the same thing by introducing Bill C-26 which was preceded by a motion of ways and means that was concurred in prior to the bill's introduction.

I therefore submit that the bill cannot be introduced in the House. Now that the member has gone through the process of introducing it, it is not properly before the House, to use the language your predecessor used, Mr. Speaker. Therefore I ask the Chair to rule that the bill is out of order and not properly before the House.

Tobacco Tax Amendments Act, 2001

[The Acting Speaker (Mr. Bélair)]

It being 6.30 p.m. and pursuant to the order adopted earlier today, Bill C-26 is deemed to be read a third time and passed.

(Motion agreed to, bill read the third time and passed)

[Scott Brison, Progressive Conservative, Kings—Hants, NS]

Mr. Speaker, it is with pleasure that I rise today to speak on Bill C-26. I thank my colleague, the member for Richmond—Arthabaska, for his comments and personal reflections on this issue.

It is important to realize that smoking is on the rise in Canada, particularly among young people. That is the most troubling part of this whole trend relative to smoking. In 1990 in the age group between 15 and 19, 21% of that age group was smoking. That rose to 28% by 1999.

Let us look at our strategy to combat smoking. We have seen the banning of sponsorship of auto races and cultural events across the country. It is questionable whether or not that ban has helped reduce smoking. What it has done is reduce funding for cultural events across Canada. I question the government's strategy on whether or not banning sponsorships of cultural activities has made a big difference in reducing smoking. That has been part of the government's strategy.

Another one strategy has been these garish, egregious packages which have pictures of gangrenous feet and cancerous lungs. Now we have teenagers trading them like playing cards, with one teenager saying to another “I'll give you a gangrenous foot for a cancerous lung”. That sort of thing is going on, so I sometimes question whether or not that initiative is achieving its mark.

One jurisdiction that has made a difference in reducing the incidences of smoking with young people is California. We should take a serious look at how their best practices achieved that reduction in smoking. Certainly its advertising and promotion was very sophisticated. There was not a banning of sponsorship of events by the cigarette companies. Those have continued. The warnings on the cigarette packages are discreet but we have seen in recent years a 43% decline in smoking in California. The big difference is the funding of educational programs.

In Canada the government's latest initiative will result in what I think works out to about $2.33 per Canadian per year. In California the amount of funding devoted to smoking cessation or anti-smoking initiatives, from a marketing and educational perspective, is closer to $5 per person.

California focused on community groups, schools, the education system and on trying to avoid the behaviour from being developed in the first place. We really should take a hard look at California and other jurisdictions that have been successful in this light.

The government has the best of intentions with a lot of these initiatives. That is not to be questioned. What is more important than just having the best of intentions is having great results. We should take a serious look at a more significant investment on the education side and working with the provinces to ensure that we are doing everything we can to prevent young people from smoking.

As I said, I personally question the banning of the sponsorship of sports and cultural activities. I do not think that has had an impact. I stand to be corrected. I also question the garish packages with the pictures on them. I think that has perversely in its own way, through some type of reverse psychology, created an attraction to young people who, for some reason that is beyond me, are drawn to these sickening packages.

Whether or not the price will affect people's decisions, I can only speak in an anecdotal way from constituents who have told me that increases in cigarettes prices make a difference. They make a difference in their lives in terms of the affordability. It is intuitive to expect that raising prices will have an impact on reducing the actual incidence of smoking.

I do not smoke any more. When did I never bought them, I used to bum them off my colleague from Richmond—Arthabaska, so the price was never a factor for me. However smoking caused a few friendships. It was my efforts that slowly reduced the incidence of smoking in our caucus because none of the other members could afford to smoke and give me free ones. There are reasons why I am finance critic. Parsimony may be one of them.

I am very pleased that I have quit smoking. I feel very good about that. I am looking forward to the day when our caucus is completely smoke free. We are nearing that day very quickly. By that I mean I want the member for Richmond—Arthabaska to quit smoking, not that I want him to leave caucus. I see the hon. member for Compton—Stanstead opposite and I just wanted to make sure that I was being absolutely perfectly clear on this.

In any case, I commend the government's efforts in this regard. It is something of which we have to do more. I question some of the directions and initiatives, but I certainly do not question or dispute the positive intentions of the government. I just hope we are doing everything we can to fight this scourge on the health of Canadian citizens and to foster a healthier Canada, as we have now entered the 21st century. We have to work together to ensure that happens. As policy-makers and as leaders, we have to ensure that we do everything we can to ensure that. With health costs rising, the one way we can make a difference is to reduce the incidence of smoking, particularly with young people.

[André Bachand, Progressive Conservative, Richmond—Arthabaska, QC]

Mr. Speaker, that is it exactly. I thank the parliamentary secretary for his remarks. Indeed, in Canada, when there has been a marked, rapid and brutal increase in the taxes on tobacco products, the black market has moved in.

That said, the data are available and studies, which are, more or less conclusive, have been done. In the U.S., for example, increased taxes on cigarettes had limited effect on the number of smokers per age group. When one state is located in the central part of the States, and its partners from the other states have similar measures, data are available.

In Bill C-26, the most interesting measures, as I was saying earlier, concern a tax on tobacco products at the factory gate. This is about what we have. The old federal taxes we had prior to the arrival of the infamous, questionable and questioned GST, like the old federal manufacturing tax, resolved part of the problem.

It will be interesting to see the effectiveness and the impact of a tax on health. There is a study that has nothing to do with health. At one point a curve was developed, which was used frequently by Mr. Reagan in the States: the higher the taxes, the higher the revenues. At a certain point, however, revenues drop.

It will be interesting to see what tax on cigarettes will be the optimum in discouraging smoking among the young. I hope that the Department of Health will monitor this closely.

[André Bachand, Progressive Conservative, Richmond—Arthabaska, QC]

Mr. Speaker, I have a couple of technical points to make before I start. I advise the Chair that I will be splitting my time with my colleague from Kings—Hants who has not had a cigarette since the holiday season. He is setting a example for the House.

I would also like to thank the translation service and the interpreters. I find it very hard to stick to my prepared speech. I want to thank them for their understanding and for trying to follow me. I will try to speak more slowly. They do an absolutely remarkable job and I take this opportunity to congratulate and thank them for their understanding.

This being said, Bill C-26 is a tax bill, which hopefully will change things in the area of health. While I was looking at the bill I was thinking “Can a tax bill really save lives?” We certainly hope so, and this is the reason why we have been asking the government for a long time to put money back into health. The government should put more money into health.

If we are willing to levy an additional tax to put warnings on cigarette packages alerting young people to the dangers of tobacco, if it works, and we hope it will, we should take this opportunity to invest massively in transfer payments to the provinces so that they can deal with others issues.

Bill C-26 sets this amount at $4 per carton of cigarettes. I am a smoker, the only one in the Progressive Conservative caucus, and I am wondering why $4, why not $3, why not $10? Honestly, I do not know why. The government is proceeding cautiously, step by step. It claims smuggling is not an issue, yet it is still moving very timidly, according to anti-tobacco groups both in Quebec and the rest of Canada.

The parliamentary secretary said that $4 will give us this much money. It would have been interesting to know what the impact of a tax increase is on cigarettes sales. If people buy less, revenues will be lower. What are the mathematics? What is the government's objective in introducing Bill C-26 as it relates to the reduction of tobacco use, particularly among young people? We do not know.

Of course, it is not ethically correct to say that $4 are added to the price of a carton of cigarettes. However, we do not know what the government's plan in the fight against tobacco is. We know that a bill is coming from the other place.

People are applauding Bill S-15, except that there is a problem with parliamentary tradition. The problem is the fact that a tax is asked for by the other place. The House will examine that bill. I am not worried about that. If Bill S-15 is not acceptable to this House, in accordance with parliamentary tradition, the government, if it is serious, will introduce a bill the very next day, using the same arguments and the same information and will identify it with a C instead of an S. If the government is serious about its fight against tobacco, it must arrange to apply the principle behind the details in the bill.

This being said, $4 is one thing, but interestingly, the government is controlling something controllable in the fight against tobacco. We remember that, when there was a major increase in taxes, companies would sell their cigarettes to the United States and the cigarettes came back through somewhat illegal channels. We would buy Canadian tobacco, but it had made a short trip to the United States before coming back here. This bill corrects this situation.

We knew that one of the reasons why there was a black market was the fact that there was no tax on cigarettes coming out of the production plant. It took years to deal with that issue. We were aware of the problem and of the legislation, but it took six or seven years to make it into an efficient tool.

Now we are told that there is no problem anymore. We know that the black market is active again, albeit to a lesser degree than before, because it is harder now. However as we all know, if there is money to be made, criminals are usually quick to get involved.

As for the Canada—United States agreements, we do not know what measure was taken so that both sides would talk to each other. The case of duty free shops is interesting. People used to go to Old Orchard or elsewhere in the United States for a day or two, perhaps a week, and come back with cigarettes that cost a lot less. That situation is being corrected. This only makes sense.

Indeed, if tobacco products are taxed in Canada because they are deemed to be dangerous products, there is no reason to sell them for less to Canadians who buy them in duty free shops. We must be consistent. The Minister of Finance and his American counterpart deserve praise for having taken the necessary steps to deal with this issue.

We support Bill C-26, but the fact is that according to statistics, over 40,000 people die every year because of tobacco. If two people die from another cause, the government takes immediate action to ban that cause. However tobacco kills 40,000 people per year, and all it does is increase taxes and tell Canadians that it is a dangerous product. I find this a bit cynical.

I come from a town called Asbestos. What is being said around the world? “Asbestos kills. We are banning it”. If we apply the anti-tobacco logic, why not ban tobacco? Why not say that it is a dangerous product and that we are simply banning it. Why not? Because there is a certain degree of social acceptance.

We hope that the anti-tobacco program will be aimed not just at young people, but at all Canadians. Smoking must become unacceptable. I am a smoker and I must say that the bylaw recently passed by the new city of Ottawa, which will take effect August 1, promises to make life difficult.

They are talking about increasing the buffer zones, even outside. There will be buffer zones, as there are in hospitals, for instance. When one goes to the hospital, one may not smoke. There are even restricted areas at entrances. We do not have this situation in the parliamentary buildings; we have our famous smoking urns outside.

I recall being outside smoking a few years ago when the temperature was minus 35 Celsius. Neither cold, nor snow, nor sleet, nor rain will stop a smoker. We are like letter carriers, so we go outside to smoke, and the current Deputy Prime Minister went by and said: “My God”. It smelled terrible. Eventually the buffer zones will be enlarged.

That having been said, it is true that there are people who die because of tobacco. An additional $4 per carton will not solve everything. Bill S-15 will not solve everything. What is missing in this battle is a united front. The battle does not involve the federal, provincial and municipal levels. They do not talk to one another. This is nothing new on the part of the federal government, which acts on its own most of the time, but it ought to talk to its partners.

What other municipality would act like Ottawa? Does it have the support of the provincial and federal governments? We do not know. Within the information program, will the federal government spend money to encourage the provinces and municipalities to pass bylaws, as it has with the City of Ottawa? If there is a constitutional problem relating to a total ban on smoking, will the federal government be prepared to listen to the arguments?

There are logical measures being put forward and we applaud them, but taxation measures are not what is going to solve health problems.

I will close with the remark that, if it is a good thing to address youth smoking by adding more tax and to use those funds for awareness and education campaigns, it is surely also a good thing to reinvest in the entire health system the necessary funds to provide choices to people, not just Quebecers but all Canadians, so that they can live healthier lives.

We applaud Bill C-26 and await Bill S-15, these financial legislative measure introduced in this parliament, which make sense for the health of those we represent. The Conservative Party will be supporting them. Thank you, Mr. Speaker, and may I wish you good health.

[Judy Wasylycia-Leis, NDP, Winnipeg North Centre, MB]

Mr. Speaker, I cannot help but begin my portion of the debate on Bill C-26 by commenting on developments within the Canadian Alliance ranks.

I did not believe we would ever see the day when members of the Canadian Alliance would be supporting a tax hike. However, here they are today. I guess stranger things have been happening over the last little while. It is wonderful to see the transformation of Canadian Alliance members. I say good for them for recognizing that the tax system is an important part of shaping good public policy.

I hope they are able to use the logic they have applied to this debate in seeing tax increases as playing an important part in creating responsible social behaviour. It is something that needs to be extended and looked at in a whole number of areas, including conservation of our natural resources, the reduction of poverty in our midst and the pursuit of social justice. That is the bottom line in terms of the taxation system and what is important for Canadians.

I am also tempted at the start of the debate, following developments earlier in the House today, to say hello to my mom. It is a wonderful opportunity to pay tribute to mothers across the land and to make the connection between mother's day and the debate we are having today on tobacco control.

Many times in our history mothers have led the fight to create safer communities to protect the health of our young people. They have been involved in stopping drinking and driving. They ensure that pregnant women take all the necessary precautionary steps. They are also trying to prevent young people from getting addicted to the deadly product of tobacco. Women have been doing an incredible service for the country in the pursuit of health and well-being for all our citizens.

Today we have an opportunity to talk about tobacco control and to acknowledge the work of the federal Liberal government in pursuing one part of a comprehensive strategy to reduce the use of tobacco in society and to prevent addiction to cigarettes.

I acknowledge the importance of Bill C-26. It is a bill that would increase taxes on tobacco products. It would amend a number of acts which would result in an increase of $4 on a carton of cigarettes. That is an important development.

The members of the New Democratic Party certainly will support Bill C-26 at the final stage of approval by the House. However, I think it is incumbent upon us at this moment with this opportunity to look at what else the government could have done and to urge it to do more in this regard.

I was pleased to hear the Parliamentary Secretary to the Minister of Finance suggest that this is a beginning, that there are more tax increases on the way and that the government recognizes there is room to move when it comes to increasing the price of cigarettes and still not be worried or pressured because of the threat of smuggling.

I think it is fair to say that the government is actually making up for lost time. It has perhaps, I hope, seen the error of its ways in that devastating decision in 1994 when it caved in to the tobacco lobby, rolled back the tax increase on cigarettes and actually contributed to the very serious problem of smoking among our young people today.

It has to be acknowledged what that kind of taxation policy does and what that kind of caving in to tobacco companies can do in terms of our collective pursuit of preventing the use of tobacco and stopping addiction to cigarettes among our young people.

I hope the Liberals recognize what they have done and I hope today's measure in the form of Bill C-26 is an acknowledgement of their past wrongdoings and a determination to right a wrong and to move forward, doing everything we can.

In 1994 we had an opportunity to keep the taxes high on cigarettes, to keep products out of the hands of young kids and to stop a lot of folks from getting addicted. I think we really did a great disservice to this country. Because of the threat of smuggling, we dropped the tax increase and actually caused more young people to get addicted to cigarettes. It is fair to remind the House that under the Liberal government, addiction to cigarettes among young people has actually increased.

It is important to refer to the government's own document put out by Health Canada, entitled “Canadian Tobacco Use Monitoring Survey” for February to December, 1999, which points out that smoking by teens aged 15 to 19 years, though down significantly from 43% in 1981, has increased 21% since 1990 but appears to have reached a plateau at around 28% since 1994.

In the Liberal era, smoking among young people and addiction to cigarettes has actually increased significantly. That has to be the direct result of caving in to the tobacco industry in 1994 around the tax increases and a result of a failure of the government to actually implement a fully comprehensive smoking cessation program.

The question for us today is this: is a $4 increase on the price of cigarettes enough? Could we do more? The answer is clear. Many groups have said there is all kinds of room to move. We know from some of the mapping done by those involved in this field that there is still a considerable gap between the price of cigarettes in Canadian provinces and the price of cigarettes in U.S. border states. The statistics suggest that we could raise cigarettes prices quite a bit more in order to be even closer to the price of cigarettes in the United States, so there is no need to be leery about the whole issue of smuggling in that context.

The comments of groups that have pointed out that we have overreacted to the threat of smuggling are legitimate. It is very important to remind ourselves that perhaps the government got caught up in something that did not necessarily have a basis in fact.

I point specifically to much work done by the Canadian Cancer Society and the Non-Smokers' Rights Association, which over and over have reminded the government that it has room to move in terms of increasing the price of cigarettes. In fact, they suggest that even if the Canadian government raised tobacco taxes by $10 per carton the price gap between Ontario-Quebec tobacco and the now much more expensive American cigarettes would only close by about 50%. They said that in a letter and documentation put together by those two organizations in March of this year.

The executive directors of those two organizations, Ken Kyle for the Canadian Cancer Society and Garfield Mahood for the Non-Smokers' Rights Association, stated:

—we believe the fear of smuggling in some quarters has been greatly exaggerated. If the United States can maintain high tobacco taxes without significant smuggling, so can Canada.

I put that on the record because I take in all seriousness the parliamentary secretary's comments about potential future increases and indicate to him that there certainly would be no opposition from us. I believe that he would have the support of many Canadians if his government chose to do that on an expeditious basis.

There is another question around this announcement and this bill. Is there enough money for and is Canada doing its part in tobacco prevention and cessation? The announcement that was tied to the tax hikes under Bill C-26 indicated that there would be an additional $480 million over five years for the tobacco control program in Canada. That is clearly still far below the levels that most groups active in this field have called for. It is certainly not much of an increase when we break it down in terms of what the government is spending today.

The government's own press release indicates that about $210 million over five years would be assigned directly for prevention of tobacco addiction and for tobacco control programs. That is about $42 million a year. That is hardly in line with what Canada is obligated to spend if we are to deal with the serious problem in our society today. I do not need to repeat the figures.

We heard from the Alliance and other members today about the 6 million smokers in Canada today, the 45,000 deaths per year, the fact that 250,000 young people annually become addicted to cigarettes, the fact that 90% of all smokers are addicted before the age of 18 and the fact that we spend $3.5 billion annually in terms of the health costs associated with smoking. All of those facts should be obvious to the government and should point this government clearly in the direction of an increased expenditure for smoking prevention and cessation programs.

That is precisely the essence and the purpose of Senator Kenny's bill, which has been through this House a couple of times and is on its way for the third time. Bill S-15 is due to arrive in the House very shortly. It follows on the heels of Bill S-20 which died on the order paper when the election was called. That followed Bill S-13 which was killed here in this place as a result of the government rising on a point of order and suggesting that it was out of the bounds of this place to pursue a money bill, a tax bill, that came from the Senate.

There is a question for all of us today. Given everything we have learned, given the work by groups on this bill, given the clear changes to Bill S-15 to make it compatible with the rules of this place, what will this government do in the next couple of days when the bill makes its way from the Senate to the House of Commons?

I hope that under no circumstances would the government try to put the kibosh that bill and suggest that it is not within the purview of this place to proceed with a bill that would actually raise the price of cigarettes on a much more significant basis than the government has been prepared to do to date and would ensure that the money is targeted specifically for smoking prevention and cessation programs. We are looking under that bill at a fund of approximately $360 million a year to be dedicated to smoking cessation and prevention among young people and others in our society.

If we compare that $360 million a year to the $210 billion that the government promises to dispense over five years, we can see the huge gap in the proposals and the clear need for Senator Kenny's bill. I would hope that when the bill enters this place we would all be united in support of the bill to ensure it is allowed for debate so that we can have a meaningful discussion about the values of a tobacco control initiative that increases the cost of tobacco by another $10 per carton and ensures that the money goes into a special fund to be administered by non-profit organizations.

That would bring us much more in line with other countries that are taking the issue seriously. It is important, for the record and for the government today, to be mindful of the fact that under the government and the way we administer our programs dealing with tobacco prevention, we spend about 66 cents per capita on this important endeavour. Many others have pointed out how that compares to other jurisdictions. For example, $32 per capita is spent by the state of Ohio and $16 per capita by Massachusetts and so on. All academic overviews of the issue and all analyses by experts on this serious problem in our society show that Canada should be spending more like $270 million to $720 million a year on dealing with a problem that is growing as we speak.

The facts that more young people are turning to cigarettes, that smoking at an early age leads to a lifelong addiction and that it very likely leads to ill health and even death should be enough to tell us to get on with the job and do something now. The old expression that a penny of prevention is worth a pound of cure suggests that if we invest a little bit now we will save a heck of a lot later on if we are serious about this problem.

Finally, as part of a comprehensive strategy dealing with the high rate of tobacco and cigarette smoking in society today, we must have an increase in the cost of cigarettes, as the government is doing in part today. We must have a clear focus on education and prevention, a model of which is provided by Senator Kenny's bill coming from the Senate this week.

We also must do more in terms of advertising and restricting tobacco companies' attempts to get through to our young people. It was just over a month ago that we raised in the House a totally destructive ad by du Maurier which ran in dailies across the country. It was a huge colour advertisement that basically suggested there was a free trip to the city of New York to be won if one was a smoker and over the age of 18. The ad said “Live it up in the city that never sleeps. Win one of two amazing New York experiences”. It went on to set out the terms and conditions for applying for that prize.

The government has done nothing. We have appealed to the government to look at the Tobacco Act and to realize that this is contrary to the law. We have called upon the Minister of Health to take action. I wrote to the Minister of Health on March 23 and asked him to please take action against du Maurier and do something about that deplorable ad. I have yet to hear from him. I am hoping that this is still under advisement and that the Minister of Health and the government are prepared to apply the full force of the law in regard to this ad by du Maurier, because it is contrary to the law. We have heard clearly from many groups about how it violates the law.

I am referring to the Coalition québécoise pour le contrôle du tabac, which said, on March 27, “The tobacco industry is thumbing its nose at the government and its Tobacco Act”.

This was the reaction of the Coalition québécoise pour le contrôle du tabac to the new du Maurier ads announcing a contest to win a five-day trip to New York.

That organization gave the Minister of Health some very specific articles in the tobacco act to pursue in terms of contravention. Specifically that organization and others have referred to articles 21 and 29 of the tobacco act. We hope the government will take action. If it is serious, as it indicated today, about controlling access to cigarettes by raising the price then surely it is prepared to take on tobacco companies when they break the law. Surely the government is prepared to show leadership by example.

Leadership by example would do more than anything to deal with this tragic epidemic in society. I am thinking specifically of the government's decision to include tobacco industry representatives on the trade mission to China in February.

It struck us and many Canadians as odd that the government would show such hypocrisy. On the one hand it pretends to be interested in controlling tobacco use and on the other hand it promotes tobacco in a country where there is already an epidemic of smokers. Some 800,000 Chinese people die every year because of tobacco addictions.

The government is involved in global efforts to control tobacco and we commend it for that. Given the fast flow of goods and services around the world, dealing with cigarette addiction and coming up with meaningful tobacco control programs must be done internationally. That is precisely where we would like to see the government show leadership.

We commend the government for being involved in what is clearly an important initiative, one that requires more time and effort by all of us. However it is hard to take seriously the government's efforts regarding international tobacco control when it is neither showing such leadership domestically nor leading by example in terms of ensuring we practise what we preach wherever we go.

We support Bill C-26. Increasing the price of cigarettes is an important and necessary step. However it falls far short of a comprehensive strategy that involves education, prevention, advertising restrictions and ever increasing prices on tobacco so that it is priced out of reach of our young people.

I thank the House for its attention and urge the government to follow these suggestions.

[Bob Mills, Canadian Alliance, Red Deer, AB]

Mr. Speaker, it is my pleasure to speak to Bill C-26, the tobacco tax amendments act, 2001.

Last year as a member of the health committee I listened to a lot of testimony from various tobacco producers and sellers. I also listened to many health experts and it became fairly obvious after several months of hearings just how damaging tobacco is to society and how it impacts on our health care system.

Whether it is the heart association or the cancer association, all of them bring solid evidence that tobacco kills. They tell us that 45,000 Canadians are killed directly by the use of tobacco every year. They also show figures representing billions of dollars taken from our health care system as a result of this habit.

Like the last member who spoke I find the most discouraging, disappointing and despicable part of the whole tobacco industry is the targeting of young people and the various ways that it operates around the world.

While in Germany recently I went past a number of schools. Adjacent to a school, sometimes on all four corners, there would be cigarette machines and advertisements targeting young people. We do not have that in Canada because we have progressed a long way from that. However that is the kind of industry we are dealing with, one that targets young people even in an advanced country like Germany.

Over the many years that I have travelled to developing countries I have seen little 10 packs of cigarettes being given to children outside schools. These children are only 8 and 9 years old. Many reports indicate that these cigarettes contain many times the nicotine level contained in normal cigarettes. In this fashion, tobacco companies hook them young.

The tobacco industry does not want the bill to pass. It is hard for me to agree with the tax increase, but in this case if the money is put toward stopping people from using this very dangerous product then this tax is reasonable and legitimate, and my party will support it.

It is hoped, however, that the dollars collected would not be like the dollars collected on the gasoline tax. That money is collected but is not put into roads. I hope this extra money would go to the health system and toward stopping our kids from smoking. In supporting the bill I have to say that this provision must be included. The dedication by the government must also be there.

Our country's health system is deteriorating. Many experts would say that we are 23rd out of the 29 OECD members, the most industrialized countries. That is not something to be proud of. Obviously one of the problems, and there are many others, is the lack of funding. Hopefully this funding would help that.

It is also hoped that the tax increase would allow some other tax decreases to occur. The thing that is probably hurting us the most and the reason that many of us came to the House was the debt of $550 billion of which $43 billion is paid out in interest every year. I imagine what we could do with the $43 billion to help our health system, to help kids stop smoking and many other things.

It has to be remembered that today we are spending $15 billion on health. We spend $12 billion on advanced education and $22 billion on various other social programs. If we had $43 billion we could probably stamp out the problem that the bill is addressing.

I believe that the bill is good for Canada as long as the money from it is used in the right way. It is hoped that it would go a long way to stopping young people from wanting to smoke.

[Philip Mayfield, Canadian Alliance, Cariboo—Chilcotin, BC]

Mr. Speaker, we are here today to debate Bill C-26. The bill has some good qualities and our party agrees with some aspects of the bill.

However, I would like to suggest that the government look to the Senate to study a bill that addresses the real problems of tobacco use, particularly with children. Bill S-15 has gone before committee and may soon come before this House. Although Bill C-26 has some good qualities, I believe the bill from the other place really would be more appropriate. It targets youth and suggests a model for accountability of the delivery of government services. I believe, despite our support for Bill C-26, that Bill S-15 deserves more careful scrutiny.

Earlier in the day we debated Bill C-22 and Bill C-17. We talked about the complexity of the imposition of taxes and the tax act. Taxes in this instance are also extremely complex with some 40 pages of legislation and another 50 pages of explanations. My goodness, why does it always have to be so difficult for people to understand the government's intentions?

One of the main difficulties in increasing taxes, particularly for constituents who have service stations and corner stores, and those who are rural merchants, are that their businesses have been so caught up in the economic decline of the country, particularly where I come from, that the loss of this income in tobacco sales is a real difficulty.

Should the bill go forward, I would suggest that there be a commensurate reduction of tax on other economic activities that are sensitive to price changes. A reduction of taxes in other areas for people who are hit with these increases would be appropriate.

While it may seem equitable to some that the big, bad tobacco industry take this on, taxes are not necessarily borne by those who have the responsibility to pay those taxes.

I do not think I need to lecture adults about cigarettes and all the associated health risks but I do want to talk about why I am supporting the bill even though there is much about it with which I disagree.

We all know the facts. What needs to be addressed in the bill is the central reason for this bill coming into existence. We can argue over the wording of the bill. Some may call it a tobacco recovery levy and some may call it a tax. What we cannot argue about is the fact that the tobacco companies target children. These are the smokers of the future who the tobacco industry will depend on for their future income and profits.

Young people are the most important target for smoking prevention activities. Since most smokers in Canada begin to smoke in their adolescence, a major challenge for smoking prevention is to counteract the influences of the tobacco companies. Tobacco use among young Canadians must be reduced.

What does the data say? What are the numbers? There are close to 6.7 million smokers in Canada. Smoking among adolescents aged 15 to 19 has risen from 21% to 29% over the past 10 years, and females make up a large percentage of this group.

Smoking accounts for about 30% of cancers in Canada and 80% of those who suffer from lung cancer are smokers. Cigarette related deaths account for 40,000 deaths in Canada every year. These facts speak for themselves. We must do everything possible to stop children from getting involved with this killing habit. The bill is one step in the right direction.

Some may argue that tobacco farmers would suffer enormous economic hardship. However during the 1980s the number of tobacco farmers declined by about 50%. These farmers began to grow other crops and have benefited from assistance programs. There are others in the retail end of smoking who suffer as well. There must be compensation for those who suffer. There must be an ability for them to continue on but smoking is evil. It is wrong for us to poison our young people and have them sacrifice their lives. This has to be the bottom line.

In 1991 consumers spent over $10.1 billion on tobacco products. Of that amount about $6.6 billion went to the federal, provincial and territorial governments. There is no denying that this is a substantial amount of money but it amounts to less than 2% of federal and provincial revenues. Considering that tobacco taxes make up less than 2% of the federal revenue, there is even more incentive to reduce the number of children who want to smoke.

I want to compare the 2% of federal revenue to the health care costs in our public health care system. With over 40,000 deaths directly related to tobacco, the strain on our overburdened health care system is enormous. Those suffering from lung cancer as a result of years of tobacco use costs billions of dollars in health care costs. By reducing the number of children smoking, we not only save their lives but we can help save billions of dollars in health care at the same time.

These are very important reasons to help stop tobacco use among our children. When people stop smoking completely, the country saves money. In 1993 the societal costs attributed to smoking were estimated to be $11 billion, which is far higher than the income from tobacco.

The Canadian Cancer Society surveyed thousands of smokers and over 85% indicated that they wanted to quit and that they only smoked because they were addicted and could not get out of the habit. In 1994 almost 75% of Canadian smokers reported having tried to quit at least once.

What is needed from the government is leadership on the issue. The Minister of Health has taken some small steps to address the crisis of smoking among youth but small steps in the past have not been enough. The government needs to put the health of young children ahead of partisan politics and show some determination. We all must recognize the enormous health risks of tobacco and the true costs of allowing this habit to continue.

Children are one of the most vulnerable groups in our society and that is why aspects of the bill are so important. The bill would create an educational fund.

Bill C-26 would put a levy on tobacco and put the health of children ahead of everything else. By reducing tobacco caused illnesses and death through prevention, we are helping society as a whole.

Some argue that non-smokers should impose their views on smokers. Perhaps there is some merit in that. However I am arguing for the vulnerable children. Adults are responsible for the protection of children from this kind of harmful activity. The government is the watchdog and the guardian over that which would harm our children. The societal costs of smoking are tremendous.

We cannot forget that children need our protection from harm. They are vulnerable and impressionable. This is why elements of the bill are worth examining. Children are the future and the reason I am supporting the bill. Let us give them a fighting chance.