Finance Committee on Sept. 19th, 2006

[The Chair, Conservative, Brian Pallister]

Welcome back, committee members. I hope you had an enjoyable summer.

The House of Commons Standing Committee on Finance is mandated by the House of Commons on an annual basis to consider and make reports upon proposals regarding the budgetary policies of the government this year. The theme of our consultations is Canada's place in a competitive world.

As Canada's economic future is in part characterized by rapid technological change and the emergence of new trading partners, the committee is looking to receive from Canadians their views respecting the means of ensuring a prosperous economy by adopting the latest technology, having the needed skills, seizing market opportunities, and making sure that tax regimes enable the attraction of workers and foreign investment in order to maximize our potential as a nation. The decision needs to be taken in the short term to ensure productivity in the long term.

The committee will be holding meetings here in Ottawa and will be visiting other centres across Canada, from Whitehorse to St. John's, Newfoundland. Over 400 witnesses will be heard from between now and the end of October. Groups and individuals will cover an incredible spectrum, as is reflected by our witnesses here today. The committee looks forward to this challenge and the work in front of us. We appreciate your presence here.

We will begin our presentations with a maximum time allocation of five minutes to each presenter so that we can allow time for exchange and questions thereafter. I will ask the representative from the Royal Canadian Legion to commence.

I believe it's Mr. Frost. Go ahead, please.

[Jack Frost, Dominion (National) President, Royal Canadian Legion]

Members of Parliament, members of the committee, fellow presenters, my name is Jack Frost. I'm dominion president of the Royal Canadian Legion.

Change in Canadian society is unavoidable as we attempt to deal with challenges brought about by free trade. In adapting to an ever more competitive world, Canada must adopt policies to promote commerce beyond our borders. These policies should not negate Canada's defining attributes of fairness towards all segments of its society.

Canada's fundamental societal objectives are enshrined in section 91 of our Constitution Act, which directs our government, and for that matter Canadian citizens, to strive for peace, order, and good government. As we attempt to maintain our place in a competitive world, we cannot put aside these fundamental principles.

Among the numerous factors to consider in ensuring a balance among all segments of a society, one element that cannot be ignored is the reality of our aging population. If Canada wants to ensure a place in a competitive world, it must provide some measure of economic dignity to this growing segment of its population.

In 1921, the proportion of seniors was one in twenty. In 2001 it had climbed to one in eight. By 2041 it will be one in four. Another factor is that older women outnumber older men. In view of these statistics, there are certain realities we must deal with. For example, seniors should not be seen as a burden on our social welfare and health systems, nor should we assume that they care little about the needs of our society. It should be apparent that older adults will contribute even more in the coming years to Canada’s place in a competitive world as purchasers of goods and services. It should be evident that if our society is aging, so are consumers. Thus, it is important for our government to adopt specific measures to preserve the buying power of this segment of society.

To that effect, policies should be implemented in broad terms to meet the changing needs of seniors. Most importantly, any attempt to curtail publicly funded pensions should be resisted as being detrimental to Canada's place in a competitive world. The elimination of mandatory retirement should not be viewed as a substitute for a good mix of public and private pensions to meet the needs of seniors. Though it may be said that older adults have larger disposable incomes and that the rate of low incomes among older adults may have declined, poverty among older adults is still a reality, which will likely increase as that segment of society increases.

Generally, the source of income for seniors is threefold: the publicly funded old age security; the earnings-based Canada and Quebec pension plans; and finally, government and private pension plans, including registered retirement savings plans. There are questions concerning the viability of the employer-sponsored pension plans and the potential adjustments that may need to be made to the CPP or QPP if more seniors elect to take their benefits at age 60.

The bottom line is that for Canada to remain competitive it must provide adequate income to all segments of its population, including seniors. Two of these sources of income provided to seniors by the government, the OAS and CPP/QPP, constitute the largest federal income security expenditures--approximately $26 billion in 2003-04--and are projected to rise substantially.

The goal of social cohesion can be achieved not only through publicly funded revenue-sharing programs like these pension programs but also through tax measures such as pension or income splitting for seniors.

In reality, the government actively promotes income splitting as a tax savings strategy while denying the right to seniors to split private pension, superannuation, or RRIF benefits. More specifically, the Canadian tax system imposes an income tax penalty on private pension and RRIF income for seniors who favoured the traditional lifestyle of a single breadwinner who worked outside the home and a spouse who worked as a homemaker. Unfortunately, these retired couples pay significantly more tax than two-income couples.

This lack of basic fairness in ensuring economic parity and dignity for seniors must be addressed to promote not only social cohesion but also fiscally sound programs for all Canadians in a competitive world.

In addition to promoting social cohesion for seniors, the Government of Canada should recognize the exceptional contribution of a special category of Canadians who, day in and day out, have promoted peace and order at the risk of their own lives. I refer specifically to retired Canadian Forces personnel, who deserve improved superannuation benefits for their surviving spouses, who currently receive only 50% of the members’ superannuation benefits. This is clearly insufficient to meet the basic living expenses previously borne by a couple prior to the pensioner's death and is no longer in line with current standards.

In the same framework, the abatement of the superannuation benefits when CF members reach age 65 and are eligible to receive CPP benefits should be rescinded. This abatement of Canadian Forces superannuation benefits occurs at a time when these benefits are most needed because of declining health and financial realities.

Promoting Canada’s place in a competitive world can be achieved only by maintaining the buying power of all segments of our society, especially seniors, who will undoubtedly make up a larger percentage of the overall population in the coming years.

It is the belief of the Royal Canadian Legion that the above measures would indeed benefit a sector of our society that has already contributed to peace, order, and good government. These deserving Canadians should be given an opportunity to continue to contribute with economic dignity, while helping Canada promote social cohesion and maintain viable national infrastructures in a competitive world.

I thank you.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Mr. Frost.

Our next witness is Ms. Pearson, from Philantrophic Foundations Canada.

[Hilary Pearson, President , Philanthropic Foundations Canada]

I thank you for your invitation to come and speak to you today on behalf of Philantrophic Foundations Canada of which I am the president.

The Philanthropic Foundation of Canada speaks for Canada's independent and family foundations. Our members collectively manage almost $5 billion in charitable assets and give almost $200 million a year to many of Canada's 80,000 registered charities. Private foundations are major investors in the lives and activities of Canada's communities and charitable organizations.

Your paper on Canada's place in a competitive world refers to the fundamental importance of being prepared and proactive to meet the challenges facing a small, open economy. We couldn't agree more about proactivity and preparedness. This is what private foundations are all about, and I'm going to tell you a couple of stories about what they do.

You may have seen the news reports this summer about the unbelievable generosity of Warren Buffett, who pledged to give most of his fortune in publicly traded shares to the work of a private foundation, the Bill and Melinda Gates Foundation. As a smart investor, Warren Buffett decided that he could make the most impact on the lives of others by giving to a private foundation run by individuals he respects.

Would Warren Buffett make a similar gift if he lived in Canada? Almost certainly not. Through continuing taxation of gifts of publicly traded shares to private foundations, federal public policy today acts to discourage donors who give to private foundations.

We are here today to argue that the government should proceed urgently to eliminate capital gains taxation of gifts of public shares to private foundations, as it has for public foundations. This will complete the incentive extended in the 2006 budget to donors to public foundations, which has resulted in the unlocking of substantial gifts of assets. Charities could benefit even more if the government didn't discriminate against donors to private foundations. We believe that public policy should encourage giving and not discourage the individual's choice of giving vehicle.

Why do private foundations matter in this country? How do they help Canadian citizens and communities meet the challenge of competitiveness? They are risk-taking, long-term, social investors. Their actions are complementary and essential to the actions of public policy makers.

Let me tell you a few quick stories to illustrate.

We know that timely access to health care is of major importance to keeping people healthy and productive. In Alberta, a private foundation, the Max Bell Foundation, is funding an evaluation of pioneering work to reduce wait times for hip and knee replacements. Without the foundation's intervention, the public health system would take much longer to identify workable approaches to this problem and create a successful model that can be copied everywhere.

We know that charities have to work hard to hire and retain great people. Most charities don't have the money or the time to invest in their own human capital. The Muttart Foundation of Edmonton has funded a breakthrough innovation by funding the work of a human resources consultant with clusters of charities in Edmonton and Calgary. Sharing the services of this consultant has allowed them to manage their people issues more competitively and, even better, reach more clients and deliver more services in local communities.

In Quebec, the Fondation Lucie et André Chagnon has launched an innovative and unique partnership with the Government of Quebec. The objective of the Quebec en forme project is to contribute to preventing poverty by helping economically disadvantaged children from four to 12 years of age succeed in school, primarily through physical activity and sport. Thanks to the exceptional partnership between the foundation and the Ministry of Health and Social Services and the Ministry of Education, Leisure and Sport, we have been able to influence somewhat the practices and policies of several stakeholders who are responsible for improving the wellbeing of children and their families.

In Nunavut, the Walter and Duncan Gordon Foundation of Toronto is creating the conditions for successful integration of Inuit and southern concepts of justice by funding the teaching work of an Inuit elder in Nunavut's very first law school. The foundation's investment is supporting the development of a much-needed new generation of young Inuit lawyers.

These are just some stories of why private foundations matter in this country.

The federal government said in May that it would look seriously at extending the tax incentive it has delivered to donors to public foundations. Why has it waited so long? Government officials say they want to address concerns about those limited situations in which donors of shares in public companies controlled by the donor could create a conflict of interest situation for a private foundation controlled by the same donor. We recognize the government's wish to be prudent. We have taken this concern seriously, and we have a proposal to reduce it by putting a limit on the number of shares that could be gifted in this particular situation in a given year. We believe this is a very workable solution that will be easy to administer and to comply with. The continuing unfair treatment of donors of public shares to private foundations must be addressed quickly. There is no reason not to move on it now, given the government's stated commitment to look at it seriously and in advance of the next budget.

In conclusion, we ask the committee to recommend the final elimination of capital gains taxation of gifts of publicly traded shares to private charities. The country will see immediate benefits in terms of greater charitable contributions and more productive and effective community organizations. This is an important part of our competitiveness as a country. Healthy and well-functioning communities are the building block of a more competitive economy. The actions of proactive private foundations lead directly to more prepared citizens and communities. This is a straightforward, relatively inexpensive way to bring about very beneficial changes to communities right across Canada.

Merci de votre attention.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Madam Pearson.

Our next presenters are from the national Assembly of First Nations. I'll invite Mr. Jock and Mr. Watts to share their time, if they so desire.

Thank you for being here, gentlemen.

[Bob Watts, Chief of Staff, Office of the National Chief, Assembly of First Nations]

Thank you very much, Mr. Chair, and good morning to the honourable members.

I'd like to extend greetings to you from National Chief Phil Fontaine. He regrets that he's not able to be here to present today, and he would welcome the opportunity to spend perhaps more time going into detail with respect to this unique relationship between the Government of Canada and first nations and what the funding relationship should look like.

We have tabled with the committee a comprehensive pre-budget submission that goes into great detail and covers such areas as the truth with respect to first nations funding. This morning Mr. Jock and I intend to focus on one particular aspect, which is child welfare--the effect of funding of first nations with respect to our children. We have other examples that we can present to the committee, perhaps when there's more time; health would be a really good thing for this committee to get into.

It is estimated that there are at least 23,000 aboriginal children in the child welfare system overall. This is almost three times the highest enrollment figure of residential schools during the height of their operations. The high during that time was about 9,000. Indian and Northern Affairs data confirms that between the years 1995 and 2001, the number of status Indian or first nations children entering into care rose by an astonishing 71.5% nationally. In Ontario this number rose by over 100%.

The federal government agrees that the level of funding it provides to first nations child welfare agencies does not allow them to meet their own statutory obligations with respect to child welfare. On-reserve first nations agencies receive far less money than their non-aboriginal peers. Indian and Northern Affairs provides some 33% less funding per child to first nations child welfare agencies than the average province does. This is an annual shortfall of $109 million. The current formula drastically underfunds services that support families and allows them to safely care for their children in their homes and in communities. There's not much money, even within that, that is targeted at prevention.

This chronic underfunding means that for most first nations children, removal is often the only option considered--not a last option, the only option.

The status quo clearly isn't acceptable. The social cost of this crisis is beyond calculation. It leads to dependence and dysfunction and to a lot of the social issues that other programs are trying to deal with.

[Richard Jock, Chief Executive Officer, Assembly of First Nations]

Thank you.

As Bob has stated, essentially we feel that child welfare represents a case study and that in a sense this is not the only program area that effectively represents a two-tier system of care and a two-tier system of funding.

Since 1997-98 the federal government has retained an overall 2% cap on Indian Affairs funding that relates to off-core services. The cumulative amount of these unrealized INAC funds is estimated at over $10 billion. This cap of funding is really a key factor in the lack of progress that's been made over the last 10 years in terms of closing the gap between first nations and those other statistical measures that represent all Canadian people. In fact our research has shown that recent federal payments under the Canada health and social transfer program have risen at a rate of 6.6%. If you take into consideration the equalization program that have-not provinces receive, that represents a 9.9% increase in 2004 and 8.4% in 2005-06. The 2% cap on first nations budgets means that in a sense we've lost over $10 billion over that period in terms of purchasing power. Those large figures tend to not look real or not show what the impact is at the community level, but just as illustration, at a community level this represents a loss of about 45.5% of existing funds for an average of $1.5 million to $13.9 million at the community level. This is also something that affects not only Indian Affairs--Health Canada has a 3% cap--but in fact there are 33 other government departments that deliver aboriginal programming and this effect is spread over those departments as well.

In terms of a solution, it's very clear that to achieve real and sustainable improvement in terms of not only the child welfare system--and this could be a quick win for the federal government--and other related first nations socio-economic gaps...really it's important that there be opportunities created for first nations citizens to participate in this perspective and competitive economy. To achieve sustainability will be a key element in terms of those program funds as well as to implement structural changes, which we will be happy to discuss as part of the questions.

[The Chair, Conservative, Brian Pallister]

Thank you very much for both your presentations.

Our next presenter will be from the Canadian Association of Petroleum Producers.

Mr. Alvarez, please, for five minutes.

[Pierre Alvarez, President, Canadian Association of Petroleum Producers]

Thank you very much, Mr. Chairman. I've never been with a panel that has stayed on time so ruthlessly, so I've cut mine back. I hope the results are coherent. Congratulations to my colleagues.

I'd like to begin very quickly by giving you an overview of the size and scope of the industry I represent here today. Canada is currently the third largest natural gas producer in the world and the eighth largest crude oil producer. In 2006, direct payments to government in the form of royalties, taxes, and land payments will exceed $27 billion, $7 billion of which flows directly to the federal government. Capital investment this year will exceed $45 billion, with another $30 billion in operating costs. Environmental spending by the industry on the capital side will exceed $1.2 billion, which makes us the largest single spender in the economy. Finally, the total employment impact this year, direct, indirect, and induced, will exceed half a million Canadians, making us among the largest employers and contractors of first nations and rural people and businesses.

Let me put these numbers into some perspective. By 2015, Canada will be the number four oil producer in the world, and it is the only OECD country with a growing energy sector. The industry now represents 30% of the value of the Toronto Stock Exchange, which is an awful lot of stocks, units, trusts, dividends, and other interest-bearing securities. We represent 25% of the total private sector investment in Canada and we are active in 12 of the 13 jurisdictions. British Columbia, Alberta, and Saskatchewan, all significant producers, are have provinces paying into equalization, and Newfoundland and Nova Scotia have made dramatic improvements in their fiscal position over the last number of years. In other words, Canada continues to benefit hugely from its natural resource base, and the time is right to focus on how to continue this winning streak.

CAPP strongly supports the finance committee's focus on ways to ensure Canada's place in a competitive world. The major concerns for our sector are the availability of skilled labour, international tax competitiveness, public infrastructure development in areas of growth, and promoting energy research and development. As we have already submitted a detailed brief, Mr. Chairman, I won't go through it; I will simply jump to the recommendations we make to the federal government.

The first is that with the provinces, the federal government needs to promote more trade, technical, and professional training and insist on identifying, coordinating, and implementing multi-stakeholder strategies to address existing and forecast human resource shortages. Priorities for us here at home include non-traditional workers in areas outside of where we have traditionally been, in addition to women, first nations, and disabled people, and foreign workers in key areas, which have been identified. To that end, we want to thank the government for the opening of the immigration office in Calgary. We hope it will be a big assistance with our foreign worker program.

Second, we urge the government to continue to complete the business tax reduction measures introduced in the spring 2006 budget.

Third, we encourage the government to adjust business taxes as necessary to maintain and improve Canada's international tax competitiveness. Once again, we are strong supporters of the elimination of the large corporation tax and look forward to the upcoming changes to the dividend tax credit in the current session of Parliament.

Fourth, we urge the federal government to continue to work with the provinces to ensure that public infrastructure is not a constraint to continued economic growth. I point to where the federal government contributed in excess of $150 million to do an expansion of Highway 63, which leads from Edmonton to Fort McMurray, as an excellent example of federal-provincial cooperation on key infrastructure.

Lastly, we'd ask that the federal government ensure research and development as highlighted in the forthcoming federal science and technology strategy. We are not running out of resources in this country, but there is no question that the resources we are seeking are further, deeper, and more costly to develop. And it's ideas that will hold the key, not the availability of resources.

Taken together, these measures will improve Canada's overall competitive position, and I would be delighted to answer any questions you or the committee may have, Mr. Chairman.

Thank you.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Mr. Alvarez. I'll note that you didn't use your full five minutes. We thank you for that. It will allow more time for questions after these presentations are completed.

From the Railway Association of Canada, Vice-President Bruce Burrows, please proceed.

[Bruce Burrows, Vice-President, Public Affairs and Government Relations, Railway Association of Canada]

Good morning, Mr. Chair and committee members.

Good day, everyone.

My name is Bruce Burrows, vice-president of the RAC. Joining me today is John Lynch, chair of our taxation committee and also AVP of taxation for Canadian Pacific in Calgary.

Thank you for inviting us to share some thoughts today about how rail, under a modernized fiscal and funding structure, could better help Canadians achieve a more prosperous future with improved quality of life and environmental and economic sustainability--in other words, maximize the potential in the long term, to quote the chair from his introductory remarks.

Rail faces many growth challenges for the first time in decades, with significant changes in the works in terms of services, technologies deployed, security provisions, and an evolving workforce. This year alone, the rail sector has to spend over $2 billion in Canada. Today we are fundamentally talking about getting Canada's products to market faster and cheaper and moving passengers and tourists quickly and more efficiently.

First, a little bit about who we are. We are the Railway Association of Canada, representing some 60 railway companies across the country. These are the well-known large class 1 freight railways such as CN and CPR, but also over 40 entrepreneurial short lines from across the country, all of the main commuter authorities in the main urban centres, our intercity service provider--VIA--and up to 10 tourist passenger railway companies. We employ, with our suppliers, over 100,000 people. We are a key partner with the Canadian ports. And we represent, interestingly, a small footprint environmentally with a big capacity on separate and very secure corridors. That's a third of the land use of highways and the equivalency of over 1,000 cars and up to 280 trucks per train.

This means we are producing only about 3% of transport GHG emissions with less energy intensity than other air quality emissions. For example, one tonne of freight can move 165 kilometres with just one litre of fuel. With the right technology, rail has become an effective way to minimize the shock of rising fuel prices.

Before I turn to my colleague, I'd like to acknowledge the continued progress made in Budget 2006. In particular, the reduction of the corporate income tax, the elimination of the large corporation tax, and the phasing out of the federal surtax are all welcome and sensible fiscal measures.

[The Chair, Conservative, Brian Pallister]

Mr. Lynch, you have about two and a half minutes.

[John Lynch, Assistant Vice-President, Taxation - Canadian Pacific Railway, Railway Association of Canada]

Okay. I'll try to be brief. Thank you.

Bruce was talking about the capital-intensive nature of rail. The issue of CCA rates is particularly important. I would like to refer the committee to the 2004 committee report, in particular recommendation 14, which emphasizes that three criteria should be used to evaluate CCA classes: essentially, similar asset classes should be treated in the same fashion; Canadian rates should be competitive with the U.S.; and Canadian rates should reflect the useful life of assets.

The rail sector feels that using these criteria, which we agree with, there is a compelling case that rail rolling stock should be at a 30% CCA rate. Certainly if you use the first criterion, trucks are at 40%, road trailers are at 30%, vessels are at 33%, and aircraft are at 25%. As for the second criterion, comparability with the United States, they have a different tax depreciation system, but essentially, for U.S. rail, it would be equivalent to about a 30% CCA rate, which we're proposing for the Canadian side.

On the third criterion, in terms of the useful life of assets, with the rapid technological innovation that has taken place--the computerization of the railway sector--a modern locomotive is very much a highly technological asset. Under all three criteria we feel that there is a compelling case for the CCAs to be at 30%.

In terms of the benefits of such a move, because of the capital-intensive nature of the rail sector, we feel there would be an economic spinoff for supply and component companies and, as Bruce referred to, improved emission performance for the rail sector with increased investment. It also helps Canadian trade competitiveness with, again, the requirement for Canada's infrastructure to move the enormous amounts of freight that the rail sector does move.

[Bruce Burrows]

In addition to that request, which by the way this committee has endorsed many times before, we also have on the table two other proposals. One is to continue working with the provinces and the rail industry on a partnership basis to fund short-line infrastructure--these are the many small railway companies across the country that face many financial hurdles.

Finally, we are also proposing that we create a rail technology development fund. The U.S. government is abolishing, by the end of this year, its federal excise tax. We suggest, at least in the short term, that in Canada that fund or that amount of money be rolled into a new development fund that can focus on a national innovation effort for the creation, acquisition, and use of some new rail fuel saving and emissions mitigation technologies.

In conclusion, going forward, rail must be able to make investments that yield significant public benefits in terms of congestion mitigation, emissions relief, and energy conservation. We are at an environmental crossroads, so the actions we are calling for today, including the establishment of this new fund, would nicely complement clean air and greenhouse gas emission thinking that currently is very active in Ottawa, and they would help further reduce rail's environmental footprint while attracting more people and freight back on track for the future.

Thank you.

[The Chair, Conservative, Brian Pallister]

Thank you, gentlemen.

From the Sport Matters Group, Mr. Ian Bird.

Mr. Bird, welcome.

[Ian Bird, Senior Leader, Sport Matters Group]

Bonjour, tout le monde.

Thank you, Chairman Pallister.

You'll appreciate, since the theme of the brief is competition, that we in sport are pleased with the frame; it's a natural environment for us. You'll also appreciate that it's a difficult position for me to be speaking last, in the sense that we prefer the first, second, or third position.

We're already in Olympic gear, with 2010 on the horizon. We're at a time when, quite frankly, the generation of children between the ages of 8 and 14 will not live as long as we will. This is the first such generation of young people to be in that situation in modern time. It is up to public policy makers like yourselves and those who care about the future of the younger generation to respond to that scenario. We make the argument--as has the Conservative Party in the most recent election and the Liberals prior to them--that this can be addressed through some new fiscal measures.

Our specific request to the committee today is for you to encourage the government to fulfill its commitment to invest the equivalent of 1% of federal health spending in the field of physical activity and sport. This is a preventative measure. It responds to a number of things that we know play out in community life and that citizens are endeavouring to pursue on their own terms, to which I'll speak.

We make the case, as the governing party has, that the comparator is really quite relevant. Here we're speaking to the equivalent of 1% of total federal health spending as an upstream investment, or $435 million. We will look for that in the upcoming budget to fulfill that commitment.

It begs the question, of course, of what this can achieve. I think the primary concern is the health one. We know about the opportunities that can be taken to raise awareness of the benefits of sport and physical activity. We know how to do it. In fact we've done it in the past, and over the course of the last 15 years we've allowed that to regress.

We know that there are issues of infrastructure to be addressed. This is community-based infrastructure that enables citizens to form associations and create the kinds of sport opportunities and local recreation opportunities for young people to go out and pursue activity. Quite frankly, we think it's a modest request.

There are three million Canadians who volunteer and 34,000 citizen-based associations that go about making sport happen in this country, and we think there are certain things they can do on their own terms. They can volunteer and better enable young people to participate in sport, but they cannot build the kind of infrastructure and create the kinds of programs that we know can happen through effective public policy and an effective system. So we're turning to the committee to intervene and encourage the government to fulfill its commitment to invest $435 million in physical activity and sport.

I would also point to some of the other elements in the brief, which no doubt you've read. Despite the burgeoning need for volunteers. there are some trends that you are no doubt familiar with in your challenges to raise volunteers to participate in the political process. We share those same challenges in the Canada volunteerism initiative, as well as the sector strategy promoted by Imagine Canada. Those are two effective and cost-effective ways that we can address those trends.

I would also point to the new sources of funding, which we've indicated are viable alternatives worth consideration and lead us back to the frame of the brief and the frame of competition.

There are fiscal measures that have yet to be explored in the field of physical activity and sport. There have been some long-standing contribution agreements that have enabled investment in programs.

We've seen in the 2006 budget, and we're pleased to see, the use of the tax system to support parents who place their children into organized physical activity and sport programs. But we've yet to explore some of the other fiscal measures, and we would encourage the committee to look at those--the establishment of a foundation, a national lottery or a sport bond.

Thank you, Mr. Chairman, for the opportunity to speak to the issue. I look forward to your questions.

[The Chair, Conservative, Brian Pallister]

Well done, Mr. Bird. Thank you all for your presentations. I assure you, Mr. Bird, that committee members who at this point aren't aware of the need for physical exercise will in 10 weeks from now be well aware of it as we sit through this process. I appreciate your presentation very much.

[Ian Bird]

I'll have lunch, and maybe I'll walk around Parliament.

[The Chair, Conservative, Brian Pallister]

That's a good suggestion. We'll note that.

Our first questioner will be Mr. McCallum. Mr. McCallum, you have seven minutes, sir.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you, Mr. Chair.

Let me begin by congratulating all of the presenters for what I thought were really first-rate, succinct, and compelling presentations. I'd like to begin, since this is the first of many meetings we're going to have, by stating our party's overall view and thrust. The basic fact of the matter is that the fiscal cupboard is bare.

As a member of this committee, I feel not a little bit embarrassed to be inviting members of the public to come and make proposals for making our economy more competitive when the government essentially spent all the money in the last budget. In the last budget, the annual cost was $15 billion--a record high--on matters such as GST cuts, which, every economist would agree, do absolutely nothing to enhance Canada's competitiveness or productivity.

According to the best current estimates by Don Drummond, the amount of money available currently for the rest of the decade is not more than $2 billion per year. The first proposal from the Canadian Legion alone would cost more than $2 billion a year. And this $2 billion is before the government has devoted a penny to the fiscal imbalance. I think most estimates of the cost of a minimal solution to fiscal imbalance are $3 billion to $5 billion per year.

So it's almost fraudulent and almost insulting to invite Canadians to come and make their requests when the government has already blown its budget in unproductive ways. We're inviting you to make great proposals in a situation where there isn't any money. We will get final budget numbers for last year perhaps this week. Instead of $2 billion, it might be $3 billion to $4 billion. We shall see. But the point remains that having blown the budget in an unproductive way, we're now inviting Canadians in good faith to come and propose productive solutions in a fiscal situation where there's little if any room for manoeuvring.

[The Chair, Conservative, Brian Pallister]

Mr. Turner on a point of order.

[Garth Turner, Conservative, Halton, ON]

We have some very important witnesses here before us today whose time is valuable. I'm sure they can listen to CPAC if they want to hear a second-hand political diatribe against the government. But if there are truly some questions from a noted economist with a background as distinguished as yours, cough them up.

[John McCallum, Liberal, Markham—Unionville, ON]

Mr. Chairman, I was actually--

[The Chair, Conservative, Brian Pallister]

Mr. Turner does not have a point of order, although he does have a point, and it's a point of interruption. Mr. McCallum may use his time as he desires. I would encourage him to involve the witnesses in some way in the exchange.

[John McCallum, Liberal, Markham—Unionville, ON]

I had finished my opening comment, and I made it because this is the first of a series of hearings and I wanted to put our overall view on the table. I was about to come to the witnesses, which I will now do.

I'd like to direct my question to AFN. I've had some involvement with your leader, Phil Fontaine, over the years, having written a paper before I got into politics called The Cost of Doing Nothing and having followed and supported your activities over these years. My question has to do with the Kelowna accord.

Here, at least, was inaction that did something. We talk about the cost of doing nothing. The Kelowna accord did something, at $5 billion over five years. I guess my question to you is whether you can explain to the committee, in human terms, the cost to your community of not proceeding with the Kelowna accord. Also, more specifically, if we had proceeded with the Kelowna accord, the specific issue you raised today might have been addressed through that accord.