Finance Committee on Sept. 19th, 2006

[The Chair, Conservative, Brian Pallister]

I now call today's meeting to order.

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 continues our process. This year, the theme of our consultations is “Canada's Place in a Competitive World”.

We are looking forward to the presentations you are bringing us today. We'll ask you to keep your comments to five minutes or less to allow time for questions from our committee members.

We will begin with the Federation of Medical Women of Canada. I understand Madam Beck is here. I will invite you to start your presentation, please.

[Dr. Gail Beck, President-Elect, Federation of Medical Women of Canada]

Thank you.

Mr. Chair and members of the committee,

My name is Gail Beck. I work as a physician in Ottawa and I'm the President of the Federation of Medical Women of Canada.

The Federation of Medical Women of Canada represents Canada's women physicians, and we are honoured to have been invited to participate in your pre-budget consultations.

For this budget we are asking that the committee consider some recommendations that will fall into the realm of preventative medicine. We know you're interested in productivity, and we feel that preventing illness is the way to keep people well and able to do the tasks to which they're best suited.

In the brief we have prepared, which I am assuming is in your kits, our first set of recommendations relates to public health measures. One is for an education campaign directed toward young people regarding healthy lifestyles to combat the epidemic of obesity in Canada's children. We are looking at the very successful campaign, the anti-smoking campaign, that the federal government had. There is evidence that this was effective in convincing young people not to smoke, so we believe a similar campaign asking them to look at healthy lifestyles will also have an impact on their health in the long run.

We also know that at this time the immunization program is up for renewal, so we are asking for federal funding of vaccines, and in particular, new vaccines. We've been discussing in particular the release of the vaccine against human papillomavirus, and I want to read an excerpt from our president-elect, Dr. Janet Dollin.

I feel privileged to be a family medicine practitioner at this time- to be a witness to the beginning of the HPV vaccine program. I feel that this will ultimately be another medical revolution that will change the face of cancer and of medical services in Canada and internationally. Cervical cancer is the second most common cancer in women worldwide, and HPV is implicated in over 99% of these cancers.

While the need to suppress secondary effects of HPV vs the need to eradicate HPV altogether will be debated, I would caution us to address this infection as one that is important to both men and women, thus the need to include both in any strategy. Clearly we need a national strategy which is informed by our diversity.

Our second set of recommendations is a request to recognize gender as a determinant of health.

We are asking that gender analysis be an integral part of all new Health Canada program development.

Such analysis ensures that projects reflect the needs of all Canadians from the get-go.

Finally, we have seen how the House Standing Committee on the Status of Women and the expert panel on accountability mechanisms for gender equality have both made recommendations for Status of Women Canada that have never been operationalized. We are asking the Government of Canada to fund these recommendations. Our brief explains our recommendations more fully.

I am happy to address any questions you may have, either now or at a later date through the office of the federation.

Thank you.

[The Chair, Conservative, Brian Pallister]

Thank you very much for your presentation, Madam Beck.

We will continue with the Canadian Association of Railway Suppliers. Mr. Fisher, you have five minutes.

[Glen Fisher, Executive Director, Canadian Association of Railway Suppliers]

Honourable members of the House of Commons Standing Committee on Finance, good afternoon. I am pleased to be here with you.

The Canadian Association of Railway Suppliers is the association of companies that make the trains, the rolling stock, freight cars, track maintenance machinery, all the hardware, including some of the noisy stuff that causes the railways a little problem at railway crossings. We're working very hard on improving those products, so bear with us and you'll see the results of our developments in the next few years. Our companies provide things like nuts and bolts, as well as big freight cars, and I'll talk a little bit more about freight cars in a minute.

We believe our industry is on the brink of big expansion because of the growth in the economy and because of the changing fuel costs. Railways, as you may know, are about five times as fuel efficient per tonne moved as road trucks are. And of course movement of freight through railways requires some innovative planning on the part of the railways and innovative planning by our members to come up with the cars and rolling stock that will achieve those gains, albeit with lower freight rates and economies of scale for the size and length of trains.

Government decisions that affect legislation on finance and budgets have a great impact on the rail industry and its ability to provide service to Canadians. Unlike other countries that Canada's producers compete with, particularly on issues like grain transportation, we have to move grain 2,000 kilometres to a port, whereas such competitors as Australia only move it a few hundred kilometres. The United States is a little bit smaller in girth, so again, it's easier for them. We have to be just that much more efficient to help our customers, the railways' customers, compete internationally.

The railway suppliers have about 60,000 employees in Canada. There are about 500 companies altogether, and that group makes a big footprint in Canada's economy. People are familiar with the railways because they see the trains, but if you stop and think about it, what you're looking at is the products of our members.

We want to see the railways invest in cleaner technology, but they need predictable, long-term funding to write off old technology and fund the new technology.

We need to see investment in environmentally sustainable transportation. The railways have come a long way in the last 25 years with greater fuel efficiency of their locomotives, and again, it's our members that have done this work for the railways.

We welcome the renewed Canadian strategic infrastructure fund, and we strongly recommend that the rail infrastructure remain an eligible item under the CSIF program.

We also support the Railway Association of Canada's submission to create a rail technology development fund from the proceeds of fuel tax collected from Canada's railways--about $75 million annually--and that this fund would be accessible to rail technology developers and manufacturers to create a more competitive environment in developing and marketing new technologies, which, in accordance with the last 15 years, do in fact reduce harmful emissions through fuel reductions and cleaner emissions from the locomotives.

We also recommend that investments be made by the federal government for commercialization of research so that innovative technologies can more easily enter the marketplace. An avenue for that has been the Transportation Development Centre, which has been Transport Canada's agency to provide funding for useful and productive research. Our members cooperate with TDC to access that funding, but it really is minimal at the present time. We need to go back to what it was 15, 20, or 25 years ago. One tends to think that these things increase with time, but actually there's one that has unfortunately diminished drastically.

[The Chair, Conservative, Brian Pallister]

Mr. Fisher, we're past our five minutes now, so I'd ask you to wind it up, if you would.

[Glen Fisher]

Yes. I have just one last thing.

We are very concerned about the inequality in capital cost allowance between our U.S. competitors and ourselves. One of the fallouts from NAFTA is that the railways can now buy or lease railcars from the United States, but the U.S. suppliers, manufacturers, and U.S. railroads get 30% capital cost allowance, whereas the Canadian leasing companies and Canadian railways just can't compete with that, with 7% capital cost allowance. So we need to level the playing field. That really is a serious issue for our members that manufacture the freight cars and rolling stock.

Thank you for this opportunity to talk with you.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Mr. Fisher.

We'll move now to the Canadian Meat Council representative, Mr. Jim Laws. Mr. Laws, please proceed.

[Jim Laws, Executive Director, Canadian Meat Council]

Thank you very much for allowing the Canadian Meat Council to present to you this afternoon.

We represent Canada's largest agrifood sector, the meat packers and processors. At the back of our brief, you can see all the member companies we represent.

In fact, for the meat sector in Canada, exports are extremely important. We've made some very specific recommendations under the four specific questions that the committee asked, to be as clear as possible. There are two major issues facing us right now in the meat industry in Canada: the shortage of labour, largely due to a booming economy out in western Canada, and the risks associated with foreign animal diseases entering Canada.

In terms of our recommendations on skills and health, we very strongly encourage the government to continue to invest in the high-calibre veterinarians we need to guarantee our export markets and the health of Canadians. We encourage the government to extend to all Canadians its very progressive tax credit for youth sport registration, which we commend, because obesity is a problem as well. Healthy Canadians means healthy workers who continue to come to work.

We also believe, in terms of competitiveness, that we need to make changes to the foreign workers program. Right now in Canada we need to be able to extend this pilot project to get workers in quickly for longer than a one-year period. We need changes as well in the tax regime, to allow and encourage Canadians to move where the jobs are, to keep them moving.

We also need the government to deliver on its smart regulations promise. We need to move quickly with the introduction of new food products, label registrations, new ingredients, or other food-borne illness issues that we can deal with, that other countries are allowed to use but we can't.

As my colleague indicated, we rely on exports. A lot of meat gets transported across Canada, and we need to make sure that we have efficient transportation systems. We need to have new bridges and very secure rapid crossings into the United States, because they remain our major customer for beef and pork.

We need to widen the agricultural essential services designation for agricultural products. The strike at the port of Vancouver had a serious effect on meat products. We sell fresh pork to Japan, and we can't have strikes at the port of Vancouver affecting Canadian trade.

We need to invest in the future electrical supply source in Canada. We can't have another ice storm or another issue where the power is shut down. We have very time-sensitive products of huge value--$15 billion--to the Canadian economy. We need to keep this industry moving.

On the actions to secure a prosperous future, we need the Government of Canada to step up and get this WTO deal going. It's very important for us. We need some more free trade agreements that do not exclude agriculture. We have to be aggressive. Canada is an export nation, and we don't want to miss the boat.

We encourage the government to keep with its target to restrain government spending, to ensure that the value for tax dollars is monitored.

We also need the government to commit to a long-term agricultural policy framework that doesn't keep sending these ad hoc income support expenditures. We need secure funding for farmers, but we also need clear policy direction for the long term.

Finally, we do encourage the government to strengthen provincial government accountability by reducing the federal taxes and trimming non-equalization transfers to the provinces.

Our recommendations are all very clear and summarized.

Thank you very much.

[The Chair, Conservative, Brian Pallister]

Thank you for that very succinct presentation. I appreciate that.

We move on to Mr. Myers, who is here from the Canadian Manufacturers and Exporters.

[Dr. Jayson Myers, Senior Vice-President and Chief Economist, Canadian Manufacturers and Exporters]

Thank you very much, Mr. Chairman and members of the committee. I'm very pleased to present the Canadian Manufacturers and Exporters budget recommendations for this round.

As you know, Canada’s manufacturing and exporting sector represents together around 24% directly of the Canadian economy. For every dollar of manufacturing output another $2.05 is generated somewhere else in the economy in the services sector and the primary sector. These are the industries and the businesses at the forefront of global competition that are competing every day and expanding business in global markets.

The challenges and changes that are facing manufacturing and international Canadian businesses operating on a global basis are outlined in the report we've distributed, Manufacturing 20/20. That's a report of our findings from over two years of consultation with over 3,500 manufacturers and exporters and community leaders across the country about the future of manufacturing and international business in Canada. The report focuses on what should be done to make sure we have a competitive manufacturing and exporting sector in this country. It points out that the success of these sectors really will determine Canada's place in a competitive world, the theme you're looking at this year.

Canada's place in a competitive world, our ability to sustain and increase the economic prosperity and the standard of living of all Canadians, depends on our ability to add value in the economic activities, the businesses, the jobs—all the activities in which we're engaged. Today our customers and our competitors are located around the world. The competition for investment, for market share, for knowledge and technology and skilled labour is pretty intense. Canadians have remarkable assets working in our favour: the richness of our natural resources, a highly educated and highly skilled workforce, our knowledge base, a highly productive business sector, and our well-developed logistics, services, and knowledge infrastructure.

Our future economic prosperity rests on our ability to grow these assets and to create greater value from them. That depends in turn on an investment strategy focused on four priorities: one, investing in technology; two, investing in innovation; three, investing in people; and four, investing in infrastructure. Our budget recommendations reflect those priorities.

To maintain investor confidence, the government must continue to ensure that budgets are balanced, that there are adequate contingency reserves to offset economic downturns, and that unspent reserves continue to be used to pay down the federal debt. To encourage Canadian businesses to invest in value-adding, productive technologies, the government should provide a two year CCA write-off for investments in new manufacturing, processing, and associated information and communication, energy, and environmental technologies.

The put-in-use rule for CCA should be eliminated. Over the long term, the government should not only maintain its commitment to lower the federal corporate tax rate to 19% by 2010, but undertake to reduce it by a further two percentage points, to 17%, by 2012.

To encourage investments in value-creating innovation, the government should improve the SR&ED tax credit system by making the credits refundable, excluding them from the calculation of the tax base, providing an allowance for international collaborative R&D, and extending the tax credit to cover costs for patenting, prototyping, product testing, and other pre-commercialization activities.

To encourage employers to invest more in upgrading the skills and capabilities of their workers, the government should introduce a training tax credit creditable against EI premiums.

To ensure that Canada’s infrastructure meets the competitive requirements of the future, the government should focus its investments on the provision of a reliable and cost-competitive supply of energy, further improvements to the security and efficiency of our borders, improved and expanded north-south and east-west logistics networks, more effective support for innovation activities on the part of Canadian businesses, and more effective financing mechanisms for Canadian exporters engaged in new market development around the world.

I would also say we need a much more efficient and much more rapid and responsive regulatory system in the country. We not only encourage the government to follow through with the objectives of the smart regulation initiative, but the one thing this committee could recommend that would have a direct impact on improving the efficiency of regulatory process at the federal level would be to require departments across the government to implement the User Fees Act that was passed two years ago.

Thank you very much. I would be glad to take questions.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Mr. Myers.

We'll move on to the Canadian Paediatric Society and Dr. Gary Pekeles. Proceed for five minutes, sir.

[Dr. Gary Pekeles, Canadian Paediatric Society (President Elect), As an Individual]

Good afternoon everyone.

Thank you very much for having invited the Canadian Paediatric Society to participate in these pre-budget consultations.

A society's good health is key to its economic growth and sustainable development. Jeffrey Sachs estimated that poor health accounts for about 50% of the growth differential between rich and poor nations.

Policies and programs based on effective health promotion strategies are needed to ensure a healthy society. These represent an investment in the future.

Our brief focuses on the starting point of that investment, the health of our children and youth.

Unintentional injuries are the number one cause of death in children, adolescents, and young adults. More children die of injuries than of all childhood diseases combined. The cost of these injuries is staggering, an estimated $9 billion in Canada in 1995. The potential economic benefits of investing in injury prevention are equally impressive. European data show that one euro, for example, spent on child safety seats results in a saving of 32 euros to the economy.

Canada has certainly made remarkable progress in this domain over the last several decades, but we retain a misconception about so-called accidents. Accidents are not accidents. We can sharply reduce death and disability by providing safer physical and social environments.

The Canadian Paediatric Society recommends that the federal government allocate $20 million this year for the development of a federal-provincial-territorial strategy on injury prevention, together with a multi-year financial commitment, which would facilitate the implementation and evaluation of related policies and programs.

The disease prevention strategy we know best, and with good reason, is our immunization program. The $300 million allocated under the national immunization strategy for new childhood vaccines has been an outstanding success, including vaccines against bacteria causing meningitis and serious pneumonia. Almost all provincial and territorial governments now make these vaccines available as part of their routine funded immunization schedules. The result is that parents who may have been unable or unwilling to pay for vaccines can now readily obtain these vaccines for their children at no cost to them. The impact of these expanded programs has already been felt.

Infectious disease prevention is especially important with the threat of an influenza pandemic. The Public Health Agency of Canada estimates that 15% to 35% of the Canadian population will become ill during a pandemic. Sherry Cooper compared the prospect of a flu pandemic with the Great Depression. Infectious disease outbreaks have the potential for huge costs. The Bank of Canada estimated that the 2003 SARS outbreak caused a 0.6% drop in the GDP. While it was devastating to those involved, the scope of the SARS outbreak was very small compared with that of an influenza pandemic.

The CPS recommends that current funding for the provincial childhood vaccine programs be made permanent and that it be reviewed annually to ensure that all Canadians, regardless of where they live, have equal access to new vaccines approved by the National Advisory Committee on Immunization.

Lastly, we recommend the continued allocation of $10 million annually to the Public Health Agency to ensure that the objectives of the national immunization strategy are achieved.

The costs associated with treating mental illness affecting youth have increased in recent decades. These costs are expected to increase by 50 per cent over the next 15 years. Twenty per cent of children and adolescents are afflicted with emotional, developmental or behavioural problems.

The cost to the Canadian economy of mental illness is estimated at $30 billion a year. This includes direct costs to the health and social services as well as indirect costs from family breakdown, poverty, disability, and crime.

In May 2006 the Senate Standing Committee on Social Affairs, Science and Technology released an outstanding report on mental health in Canada called Out of the Shadows at Last. Among its findings it concluded that “children and youth are at a significant disadvantage when compared to other groups affected by mental illness, in that the failings of the mental health system affect them more acutely and severely.”

The CPS calls on the federal government to invest the $536 million annually recommended in the Senate Report Out of the Shadows at Last. It had many recommendations, but principally it called for developing a national and coordinated strategy for mental illness and mental health.

[The Chair, Conservative, Brian Pallister]

Could you wind up your presentation, Mr. Pekeles?

[Dr. Gary Pekeles]

The focus of our submission was Canada's children and adolescents, but we mustn't forget children elsewhere in the world. Each year, 11 million children die before the age of five.

Canada has much to contribute to improve health in the global community. Helping developing countries strengthen their health systems contributes to our own health and economic security. We remind this committee of the target of 0.7% of our GNP going towards international aid by 2015. That needs to start now.

[The Chair, Conservative, Brian Pallister]

Thank you very much, sir.

We'll move on to the Care of the Child Coalition and Madame Landriault, for five minutes.

[Sara Landriault, Care of the Child Coalition]

I'd like to remind you today that I am not an accountant, nor am I an economist, but I'd like to show you what I see as a stay-at-home mother. I appreciate being invited to speak to you today regarding financial benefits to the economy.

My initial thought for this is “fund the child.” “Fund the child” is an idea that many groups and advocates have fought for over the 30 years this has been going on. The idea behind ”fund the child” is that the funding must flow with the children. Doing this, the parents would be able to choose their own personal style of child care, whether it is child-caring your own children at home, day cares, or everything in between. The universal child care benefit that is in place right now is showing great faith by funding the child without discrimination. We appreciate that the current government shows equality in the universal child care benefit for all child care choices.

There is still, however, discrimination by other government departments, in this case in taxation, among families and their different child care choices.

I have prepared three scenarios for the basic 2005 taxes with the help of UFile.ca. In these scenarios, I have made up one family with three different ways of child care. For every tax preparation we have for the Simpson family, Homer and Marge have three children—Bart who is twelve, Lisa who is ten, Maggie who is two—with the same amount of salary and income tax deducted. The difference, though, is in the child care expenses and income tax brackets.

The first scenario shows Homer as a father at home who is able to child-care his own children, where Marge is the main breadwinner, working nine to five Monday through Friday and has an estimated salary of $80,000 per year.

The second scenario shows Homer and Marge both working. They both work shifts to ensure one parent is at home with the children at all times. Homer works four to midnight, and Marge works 8 a.m. to 3 p.m. They have a combined estimated income of $80,000.

The third scenario shows Homer and Marge both working while using full-time day care for Maggie, who is two; before- and after-school and summer camps for Bart, who is twelve, and for Lisa, who is ten. Child care costs for day care and summer camps for all three children are estimated at $19,200 a year.

In the first scenario, where there is a stay-at-home parent, they are paying in a 21.5% tax bracket and have no child care expenses, yet Homer does child care in the home. The result of their income tax for 2005 is to owe $3,534.64.

The second scenario, wherein both parents work and are able to do child care on their own, but which shows a high strain on the marriage, puts them in the 15.4% tax bracket. The result of their income tax for 2005 is a refund of $1,306.59.

In the third scenario, where both parents work and use outside-of-the-home child care while being able to deduct the expenses, they are also in an 11.1% tax bracket. The result of their income tax for 2005 is a refund of $4,764.41.

This shows a full discrimination against the single-income family. They are paying over $8,000 more in income taxes. The second family, with two incomes and no outside day care costs, are also discriminated against by paying over $3,400 in income taxes. It seems the family that has both parents working and uses centre-based child care is highly favoured through the Canadian tax system.

There is no difference in the child care costs of all three scenarios, except who does the child caring. Each family pays for breakfast, lunch, snacks, outings, movies, toys, etc. Everything the day care does for family number three and similar families, the other families pay the exact same amount to do at home instead. Yet the economy will not recognize this as a child care cost. Therefore, the taxation is discriminating against anyone who does not use outside child care.

This can easily be rectified by income splitting. Income splitting is one way the family, as a unit, can pay taxes. Whether the family unit is mom-to-mom, dad-to-dad, or mom and dad doesn't matter; income splitting will achieve the goal for equalizing the parents' income taxes payable, thereby eliminating the tax bracket discrimination of the individual child care choice.

This still leaves us with a tax reduction for parents who use outside-of-the-home child care. But we did not have time for the full explanation of “fund the child” today, so I shall leave that one for another day.

I have recommendations, as follows.

Since parents are in the best position to decide what their children need, funding support for their decisions shouldn't be contingent on any one choice. Amending the tax code to allow income splitting removes the penalty currently being paid by single-income households that choose to have a parent at home caring for the child.

This measure, along with increasing the choice in child care allowance, would empower all parents, no matter what their choices are. Both are important steps toward a child care policy that allows Canadians to be successful, at home and in the workforce.

The supporting argument is that these two measures also achieve other important goals, including strengthening Canada as a democratic, entrepreneurial nation; enhancing the freedom and privacy of Canadian citizens; reducing the tax burdens that keep families from achieving the goal of home ownership; reducing the tax burdens that can keep Canadian companies from expanding so they can provide good jobs for parents who are working outside of the home; eliminating the cost overruns, diversion of money, and lack of accountability that currently pervade the child care administrations of lower tier governments; enhancing child care quality by focusing on consumer protection through regulation and licensing; enhancing child care quality by empowering parents and fostering competition among providers; and growing a sustainable licensed child care industry by eliminating barriers to private investments and parents.

I've left background material from associations that represent the child care programs throughout Ontario and Canada that are all in support of this position, of both at-home parents and parents who work outside of the home.

Thank you.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Madame Landriault, and thank you all for your presentations.

We'll move to questions now, commencing with Mr. McKay. You have seven minutes.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you, Chair.

I happen to think it's a huge advantage to be on this committee and not be an accountant or an economist.

My first question is to the Federation of Medical Women of Canada. You recommend that the concept of gender as a determinant of health be embedded in all policies of Health Canada. As I understand it, prostate cancer takes the lives of roughly the number of women that breast cancer claims on an annual basis--I think that's correct, that it's a rough equivalent in terms of death per thousand--yet the research dollars that apply to breast cancer are something in the order of 300% greater than the moneys that would apply to prostate cancer. Would your concept address that inequity between men and women?

[Dr. Gail Beck]

If you look down the second-last page of my brief, the federation's parent organization, Medical Women's International Association, has produced a gender mainstreaming manual. I think gender analysis doesn't favour one gender over another; it favours the equality of gender. So we're asking for a gender lens to be applied to all health care.

I'm a practising psychiatrist. I'm the director of youth in-patient psychiatry for eastern Ontario, and I can tell you that young men have had some difficulty in schools recently and I can tell you that schizophrenia is an illness that afflicts young men more than it does young women.

In psychiatry, my speciality, you often find that the description of illnesses are those that present in women, simply because, in a traditional sense, men are not felt to have, for example, mental illness. It's an old view, but it is something that has happened. So our gender lens, we believe, would assist in ensuring that a disease is considered in terms of not only how it appears in one gender, but how it appears in both.

[John McKay, Liberal, Scarborough—Guildwood, ON]

But my question was, would a gender lens create a rough equivalency in terms of available research dollars for both genders, when those diseases are killing roughly the same number of people on an annual basis?

[Dr. Gail Beck]

A gender lens would allow you to look at whether or not a certain program is being looked at fairly from the point of view of both genders. So it's something that ensures equality.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I'm taking that as a yes--

[Dr. Gail Beck]

It is a yes.

[John McKay, Liberal, Scarborough—Guildwood, ON]

--that in fact, were a gender lens applied to this specific subset of diseases, one would have to conclude that the research money available for male prostate cancer is not nearly equivalent to female breast cancer.

[Dr. Gail Beck]

I have to say, I'm not familiar with the statistics with respect to the two, but I point out in the second-last paragraph that the inter-gender working group of the United States Agency for International Development has actually done studies on the efficacy of using a gender lens in various areas of health. So I think it would be of assistance.