Finance Committee on Sept. 19th, 2006

[The Chair, Conservative, Brian Pallister]

Mr. Jock or Mr. Watts, would you like to proceed to answer that?

[Richard Jock]

I have a couple of comments. Very clearly, in terms of the child welfare situation, in a sense this is a good example of putting kids at risk in an area where there is a clear federal responsibility. Our reason for presenting this as a case study was to show that there are some very real examples to show that not providing appropriate funding within what would be considered an appropriate standard, or comparable standard, has real costs and real implications for children now and essentially in the future, because of the inappropriate nature of the interventions that result from that lack of funding. I think child welfare is a good example.

We have also done a lot of work in terms of health. We actually feel we're on the brink of a health crisis in terms of access to health care. In terms of access to health services, we feel similarly--and we've worked very closely with departments to look at the impacts of those--that we're in a situation in which there's going to be loss of life or loss of limb, or other similar and very real and tangible losses.

We can go down the list in terms of education, and so on. It represents similar lost opportunities. Our point is somewhat similar to the point made by the oil sands and other groups--we really feel that this infrastructure is necessary to be part of participating in this prosperous future that seems to be out there for Canada. To us, dealing with these issues will enable us to participate fully and vigorously in these opportunities, but only if our youth have access to good education and similarly good access to the training opportunities. We see it as both a challenge and a very real area of difficulty.

I've tried to express some of the human terms, but I want to go back to the individual community example. In our analysis, these funding restrictions actually represent a 45% reduction in terms of costs that should be there to run those systems appropriately; those costs run from $1.5 million, depending on the size of the community, to $13.9 million in real terms at the community level.

[The Chair, Conservative, Brian Pallister]

Thank you, Mr. Jock, for your response.

I'm sorry, but your time is up, Mr. McCallum.

Mr. Paquette will be the next speaker.

[Pierre Paquette, Bloc, Joliette, QC]

Thank you, Mr. Chairman.

I too wish to thank you for your testimony. These are the first briefs we have heard, and they contain a lot of interesting information and food for thought.

I will first address my remarks to the representatives of the Canadian Association of Petroleum Producers and of the Railway Association of Canada. There is a desire to see tax reductions, especially on the part of large corporations, and one can readily understand why. However, the argument that income tax reductions make investments possible is not always borne out by reality. We have seen considerable tax reductions over the past years. Last year, investments did not follow suit; this is particularly true in Quebec.

I'll take the Canadian Association of Petroleum Producers' brief as an example. On the one hand you are asking that the government follow through on corporate tax reduction measures adopted in the spring 2006 federal budget and on the other hand, you ask that government continue to work with the provinces in order to ensure that public infrastructures not constitute a brake on ongoing economic growth.

If you had to choose between tax reductions and investments in public infrastructure — we can all see that the road network is deteriorating — what would you choose? What should our priorities be?

The question is indeed broad, but did you know that our theme was Canada's place in a competitive world?

[Pierre Alvarez]

Thank you for your question, Mr. Paquette. I think that we can indeed serve as an example. If we compare ourselves to other sectors, we note that in our case, taxes have dropped from 28 to 21% over the past five years. However, our contributions to the federal government went from two to seven billion dollars annually. There is, thus, an enormous increase in investment by our sector.

Moreover, the industry grew considerably. Throughout the country, this has meant that government revenue tripled and even quadrupled. We believe that in our sector this indicates quite clearly that both things can be done together. However, that may not be the case in other sectors.

[Pierre Paquette, Bloc, Joliette, QC]

May I point out that last year in Quebec, investments increased by less than 1%, although there were generalized tax reductions. I know that there is a particular set of economic circumstances in the petroleum sector.

And what do the representatives of the Railway Association of Canada have to say?

[Bruce Burrows]

We very much are focused on investments in infrastructure. As you say, the highway infrastructure has deteriorated and so has the railway infrastructure. Quebec is a prime example of a new partnership agreement that we have with the Quebec government and the federal government to spend up to $100 million on a shared basis in infrastructure in Quebec. We hope to conclude that very soon. We hope, as I mentioned earlier, to expand that type of partnership investment coming from the Canada strategic infrastructure fund to other parts of the country, again to support those smaller railway companies.

The proposal to convert our excise tax into a new technology fund again is an investment-orientated objective. The response in terms of reducing the capital cost allowance is that it's a very modest fiscal measure in terms of a reduction, but it has huge investment implications for new technology.

[Pierre Paquette, Bloc, Joliette, QC]

I must add that I very much like your approach concerning accelerated amortization. The committee has already spoken out on that topic and the Bloc Québécois expressed its agreement. I think that the time has come for tax cuts, tax credits, or, as you suggest, certain more targeted measures to encourage businesses to do what must be done to ensure economic growth and the competitiveness of the Canadian and Quebec economy.

If I have any time left, Mr. Chairman, I would like to put a question to Mr. Fontaine.

Your presentation touched a chord with me. In Manawan, in my riding, there is an Atikamekw community. I go there regularly and I see that the needs are enormous, especially as concerns social housing. The demographic growth in that community is well known. This year, 20 units are to be added, which means that this is an exceptionally good year.

There are a whole array of social problems pursuant to this overcrowding. Consequently, should we not this year, in our report, prioritize the issue of social housing? The objective here is that large investments be made to help the communities meet their housing needs. There may be other issues you would like to bring to our attention.

[The Chair, Conservative, Brian Pallister]

There's approximately a minute and a half remaining in the allocated time.

Mr. Watts.

[Bob Watts]

Perhaps I'll start.

In our action plan that was presented to first ministers, housing was highlighted. We talked both about social housing and market value housing. Our plan calls for a mix of both fair market and social housing. There are some who think that if only we had private land ownership and more private housing, all the problems in the world would be taken care of, but that's just not the case. Social housing requires huge investment. We're looking at the development of an institution outside of government that would work directly with first nations to develop both fair market housing and social housing.

In terms of priority, I think that's something we need to do some joint work on. We've highlighted child welfare in this presentation to bring a sharp focus to something that's very real in terms of the youth of this country, in terms of the future of first nations. We present it as a case study, but in our full report we cover all of the areas. Clearly, the relationship between a good house to live in, being able to do homework, and the relationship between overcrowding and disease can't be overlooked. The relationship between poor-quality housing and respiratory problems and diseases related to mould--all those things are there. Again, what we wanted to do is present a case to really focus the committee's attention on how the 2% cap has affected our communities very directly.

[The Chair, Conservative, Brian Pallister]

Merci, monsieur Watts.

Madam Ablonczy, seven minutes.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Thank you, Mr. Chairman. And thank you to all of you for good presentations, not only in boiling them down to the time you had available--a very short time--but giving us additional background material, which you can be sure will be looked at and considered.

I particularly, though, want to take a minute to address the musings of my friend, “Cassandra” McCallum. To listen to him, you would think that Canada is on the brink of disaster. Sadly, sometimes politics does intrude in what should be straightforward considerations. But I can tell all of you that in fact under our government, spending on a number of programs actually increased from what it was before. In addition, we believe that by putting money back into the hands of job creators and ordinary citizens, tax revenues will actually go up. This has been demonstrated in jurisdiction after jurisdiction. We know that in the government that Mr. McCallum was part of, spending increased 15% a year and more, and yet you're still here with tremendous concerns. We want to continue to meet those concerns in meaningful ways. All of you in various ways have given high marks to our government's first efforts, and now we're going to our next budget and again we are considering the needs of all your organizations and your different sectors of the economy. You all contribute in many ways.

So I want to just ask some brief questions, starting of course with the gold medallist. The first shall be last and the last first.

You mentioned in number three of your recommendations that new fiscal policy measures, including tax measures, would remove economic barriers to participation in sports and promote activity at the community level. I'm wondering if you could be a bit more specific about the tax measures you have in mind, but very briefly please, because I do have other questions.

[Ian Bird]

Thank you for the question.

I think it's a given that we know about the children's fitness tax credit that's been tabled, and we're seeking its extension beyond the age of 16 to the age of 18. It's exactly at the age of 16 that we see a decline in participation, especially among young women. So at the point at which the tax credit ends and when the economic barrier is then put back in place over this next two years, we're likely to see a continuing downward trend in especially young girls' participation.

There would be a real benefit to looking at the tax system as a means to support volunteer training. This has yet to be explored by any government, including provincial and municipal governments. Yet it could respond to both a downward trend in volunteerism as well as the importance of volunteers to physical activity and sport.

And we've sought an upward amendment of those corporate donations to sport, to go from a 100% write-off to 150%, to promote the involvement of the private sector in sport participation opportunities. You likely all know of the local dry cleaner and supermarket that seek to support the local baseball group or the trail-walking group. We think it's a viable approach to support those small businesses who are supporting the small local community non-profit organization.

We'd consider those three opportunities as worth your consideration at the committee level.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Good. Well, we appreciate that level of detail. That's very helpful to the real people.

You're looking for opportunity to make greater investment. I note that greenhouse gas emissions and the use of fuel is a great concern, I think for all of us here, all parties. And it has been suggested that moving goods more often by rail would address that problem to some degree. I'm wondering if your industry has done any studies that you might be able to share with the committee that show how increased use of movement of goods by rail may impact the environmental considerations. You alluded to that. But do you have any studies you could share?

[Bruce Burrows]

Yes, in fact we do, and I'd be pleased to pass the material forward to you that clearly illustrates that.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

If we could get that, Mr. Chairman, that would be very helpful.

To Mr. Alvarez, as you well know, sometimes the oil industry is seen as the fat cat of the corporate world. Yet you pointed out that it is a real contributor to the fiscal pie that we can use to support other measures in our society and other groups. But I wonder specifically, again on the environment--because this is a big concern of mine and many others--what the industry can offer in terms of cooperating with other measures in reducing the environmental impacts of oil and gas production.

[Pierre Alvarez]

In 30 seconds or less?

[The Chair, Conservative, Brian Pallister]

In one and a half minutes.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

No, in 30 seconds.

[Pierre Alvarez]

There are two parts to this. One is the way you operate your business, and we have seen dramatic changes, particularly at the provincial level, on things like flaring and venting the gases that are released. We're looking forward to the government's upcoming air quality and climate change package, because clearly that's going to push things a little further, and we will participate in it.

Quite honestly, Ms. Ablonczy, the biggest issue is capital stock turnover. When you bring in and build an $8 billion facility, which is what a new oil sands project costs, you're not going to turn around and change out the equipment in two years. Changing out equipment and the processes that go with that take time, both in terms of development and in terms of deployment.

To throw out one statistic, the new oil sands plant will have 99.5% SO₂ recovery. If you go back to a plant built 15 years ago, it's probably less than 80%. On the other hand, you don't retrofit a facility quickly, so we support capital cost allowances and those kinds of things, and we think they are important. It's clearly something we spend a lot of time on, and we will, I imagine, continue to do so.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

That's helpful.

Mr. Watts and Mr. Jock, I do want to get to you. I appreciated the fact that in your presentation you had a page on solutions. It's easy to point out problems, but we don't always get solutions. I wonder if you could just--

[The Chair, Conservative, Brian Pallister]

I'm sorry, Madam Ablonczy, your time is up.

We will continue with our next questioner, Madam Wasylycia-Leis. Please proceed; you have seven minutes.

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

Thank you, Mr. Chair.

I thank everyone here to kick off what's going to be a very lengthy and exciting process as we try to shape the next federal budget and try to shift some of the priorities of the present government. Notwithstanding what John McCallum has said, I think this is about choices. Many of you have confronted the difficult challenge we face.

One shouldn't assume the cupboard is bare. When you read the reports on the growth in the economy and surplus dollars available, I think we will soon find there is significant flexibility in the government coffers, and we really do need to grapple with some outstanding obligations. If we're talking about choices, in a competitive economy it's not just about the size of the oil reserves or the profits of banks, but about how we treat our seniors and our youth, and about how we invest in the future.

I want to start with seniors and our veterans and ask Mr. Frost if he could give us a little more detail on his two proposals. Given what is happening in Afghanistan and given the fact that we do have troops who are dying and others who are coming home with many health problems, how can we advance this issue of improved superannuation benefits for surviving spouses and prevent the abatement of the benefits when CPP kicks in? It seems to me, given the economic and social conditions facing our troops, this is a pretty basic request. What obstacles have you run into, and what can we do to advance this cause?

[Jack Frost]

Thank you for the question.

I'd like to draw your attention first to the private and crown industries, in which the survivor pension benefit runs anywhere from 50% to 75%. Actually, the benefits they receive are more to the tune of about 65%.

I think it's only fair that we look at our CF personnel, the ones who today are putting their lives on the line. For example, since 2002, 36 Canadian soldiers have lost their lives, including the four who just lost their lives yesterday. Since August, 13 have died and 150 have been seriously injured and have returned to Canada. They deserve not only great benefits from Veterans Affairs Canada, which they do receive, but they require the same eligibility and the same fair and equitable treatment from the superannuation benefits, which, as we have suggested, would include a 60% survivor benefit as well as the abatement of the CPP.

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

Thank you.

Mr. Chair, this is a very specific recommendation, which we ought to consider seriously.

Richard and Bob, concerning children, you've identified a very serious problem in terms of building a sustainable and competitive society, and you've given us some clear solutions.

There's another area where I think we need to address the problem, and that's with respect to the cap on INAC funding, which has been in place since 1995. Without it, there would have been another $10 billion in funding that would have helped deal with these problems.

My question is, is the cap still in place? And is the present government's freeze on internal spending still there? Does it affect your areas, and specifically what about in Health Canada?