Finance Committee on Sept. 20th, 2006

[The Chair, Conservative, Brian Pallister]

You have approximately one minute for the response, Madam Watson.

[Judy Watson]

Thank you.

Studies have shown the impact of affordable housing and income security and the effect they have on mental health. This would affect everyone within the family. It affects the mother and it's going to affect the children. They're going to grow up in a more stressful environment.

So we must first of all invest in affordable housing, in income security for individuals, working with the businesses, as I said earlier, so they invest in the workers, because all of that helps reduce the stress, helps to keep people healthy. Then you would have a better chance for the children if they lived in a healthier home environment.

[The Chair, Conservative, Brian Pallister]

Thank you, Madam Watson. We'll conclude with Mr. McCallum.

Mr. McCallum.

On a point of order, Madam Wasylycia-Leis.

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

I know I went a little over, but could I just ask for the indulgence of this committee for 30 seconds--

[The Chair, Conservative, Brian Pallister]

No, Madam, it's Mr. McCallum's round.

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

Thank you, Mr. Chair.

I thought we'd flogged this horse to death, but I think for the record I should just note the fact that in the last budget the income tax rate was raised, the personal exemption was reduced, and the number of people on the tax rolls went up. I'll just quote a well-known economist, Dale Orr, who in his own words wrote the following. These are the words of Dale Orr:

What the Finance Minister did not say in presenting Budget 2006 was, “Mr. Speaker, with this reduction in the tax free amount from current levels, I have today pushed about 200,000 of the lowest income Canadians back onto the tax rolls”.

That's Dale Orr speaking, a neutral economist.

I thought we'd solved that. But I have not much time and I would like to simply ask one question to Monsieur Vinet.

The key problem, as I see it, is that in the last budget, the government spent virtually all of the resources available to it, or $15 billion per year, which means that there will be little, if anything, left if it doesn't address the fiscal imbalance. The last budget made no provision whatsoever for universities, innovation and research.

So my one question to you is, if there is little money available, which I think is the case, of all the things that you would like to see, can you name one--preferably not too expensive--that in your view might be the highest priority for your university?

[Luc Vinet]

Yes, if you force me to--and this would not address the issue of competitiveness for this country--I think it would be very important to complete the indirect cost-recovery program to bring it up to 40%, because without that we are sinking. We are underfunding our research projects and we are not doing the repairs or the maintenance on our buildings. So the whole university enterprise is in danger.

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

That's very useful.

If I have time, I'll ask the same question to Mr. Brimacombe, because you're also in research and innovation. What would be your one single greatest wish?

[Glenn Brimacombe]

Indirect costs are a vital program to our members. Roughly half of all indirect costs that are funded by the federal government are invested in our members' institutions. That's point number one.

So I wouldn't necessarily disagree with Mr. Vinet. What is related to our most important recommendation is around investing in infrastructure. Indirect cost is related to it, but I have to tell you as well that what the Canada Foundation for Innovation has done is revolutionize the infrastructure in which we actually undertake research, whether it's health research or university-based research.

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

The Canada Foundation for Innovation is about to run out of money, unless the government comes to the rescue.

[Glenn Brimacombe]

Hence, one of our recommendations before the standing committee today is not only investing, increasing investments in direct costs, but also looking at how you would rejuvenate an organization like CFI that currently has an endowment of roughly $3.5 billion.

[A voice]

Amen, brother.

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

Thank you very much.

[The Chair, Conservative, Brian Pallister]

Thank you.

To clarify Mr. McCallum's remarks concerning the amount of money pertinent to your presentations, we should not confuse the witnesses with comments that only the projected surplus is what's at issue here. We are, after all, charged with the responsibility of making recommendations on the budget--the entire expenditure regime of the government. So I want to make sure that the witnesses don't believe their appearance here today is of little consequence. I wouldn't like that to be on the record, because it is of great consequence.

On behalf of the committee, I thank you very much for being here. I appreciate your presentations very much. We invite the next panel to replace you in the seats you now occupy.

Thank you.

I'd like to announce to committee members that our next meeting is scheduled for 10 a.m. Thursday. Lunch will be provided.

[The Chair, Conservative, Brian Pallister]

The finance committee will resume its deliberations on the pre-budget consultative process. I will invite those who are not involved in the presentations to escape the room, if they wish to continue their conversations in the back. I thank you all for being here.

Our witnesses will have five minutes to make their presentations. We will commence with the representative from the National Children's Alliance, Peter Dudding, the executive director.

Please proceed, sir. You have five minutes.

I will give you a sign, witnesses, when you have about a minute to go.

[Peter Dudding, Executive Director, National Children's Alliance]

Good afternoon, ladies and gentlemen.

My name is Peter Dudding and I'm the co-chair of the National Children's Alliance and the executive director of the Child Welfare League of Canada. Also present with me today is Larry Gemmel, the executive director of the National Children's Alliance.

The National Children's Alliance is a coalition of 66 national organizations working collectively to enhance the well-being of children, youth, and families in Canada. In addressing the questions posed by this committee in the pre-budget consultation process on Canada's place in a competitive world, the National Children's Alliance is pleased to have this opportunity to respond by articulating the enormous importance that Canada's children and youth will have in securing our future.

Our children and youth represent our best opportunity to ensure that in the future, Canada's citizens are healthy, well-educated, and positive contributors to our society and to our economy--I'm sure we all agree with that--ensuring our success in an increasingly competitive world. In seeking the appropriate measures for Budget 2007, we urge the committee to consider the significant role that our members and Canada's voluntary community sector play in supporting the positive development of our children and youth.

The majority of Canada's children and youth are doing well, but those with disabilities, aboriginal children, victims of child abuse and neglect, children living in poverty, and youth who are recent immigrants and visible minorities face many obstacles. It is essential for the well-being of all Canadian children and youth that the current levels of funding to support health, mental health, education, and social services be maintained or increased. Our marginalized populations need consistent support in order to thrive and to have the opportunity to become fully contributing members of society, ensuring that the next generation of the workforce is well educated and positioned to meet the challenges of a global economy.

The committee has already received our full brief, so I will highlight the key factors that affect the well-being of children and youth that this committee will need to consider in creating the budget, securing our future in the competitive world by enhancing and strengthening programs across Canada for children and youth.

In seeking new initiatives to enhance Canada's competitiveness, we urge the government not to lose sight of the important investments in our children and youth that must continue to be made. Of course, the federal government must exercise vision and leadership, both directly through its national programs and indirectly through transfers to the provinces and territories. I want to emphasize the importance of that second point as we talk about children and youth.

Family income is recognized to be a key determinant of healthy child development. Canada's child poverty rate has been stuck at 16% for the last 30 years, and we're doing poorly compared to many OECD countries. The majority of two-parent families are dual income, while 65% of female, single-parent families are employed. This does not meant that all families are thriving. The gap between families with the highest and lowest incomes is increasing; the working poor face job insecurity characterized by part-time, seasonal, or contract work. Typically, these jobs do not provide enough hours or sufficient pay and benefits to enable families to make ends meet. Canada needs to continue to develop a strong and thriving domestic economy in order to ensure the availability and quality of employment opportunities while continuing supports for low-income families. As well, the practice of allowing provinces and territories to claw back the child tax benefit from families on income assistance must be eliminated.

In the area of physical and emotional safety, the reporting of child maltreatment, child abuse, and neglect of children and youth continues to grow in this country. Child neglect remains the largest category, and children witnessing domestic violence has increased dramatically. Community resources play an extremely important role in supporting children and youth and their families, contributing significantly to the social infrastructure that we all want. Among the key indicators of a strong and healthy social infrastructure to Canada's global competitiveness are quality child care options, recreation, education, and of course social services to provide access to parenting skills, adequate income, affordable housing, family violence, substance abuse, mental health, and counselling programs.

The “Out of the Shadows at Last” Senate report on mental health indicates that 15% of Canadian young persons face significant mental health challenges. The government should move quickly to implement the recommendations of this report, including creating the Canadian mental health commission and the mental health transition fund.

With that, I can see we're at time. I thank you very much, and I'm available for questions.

[The Chair, Conservative, Brian Pallister]

Excellent. Thank you very much, sir.

We'll continue with Deanna Groetzinger. She represents the Multiple Sclerosis Society of Canada.

Welcome.

[Deanna Groetzinger, National Vice-President, Communications, Multiple Sclerosis Society of Canada]

Thank you very much. I am joined today by Yassemin Cohanim, from our Ottawa chapter, who will be sharing the presentation time.

We're very pleased to have this opportunity to speak to the Standing Committee on Finance.

The Multiple Sclerosis Society is a national voluntary organization that supports both multiple sclerosis research and services for people with MS and their families and caregivers. MS touches people across a wide spectrum in this country. In fact, Canada has one of the highest rates of MS in the world, affecting an estimated 55,000 to 75,000 Canadians.

In our brief we have focused on three broad areas of concern to people with living with MS. Today we'll focus our comments on a few highlights, and Yassemin will start us off.

[Yassemin Cohanim, Volunteer, Multiple Sclerosis Society of Canada]

Thanks, Deanna.

The first priority area is the area of income security and support.

MS has a profound impact on the ability to work. Most people with MS are diagnosed between the ages of 15 and 40, with the average age of diagnosis at 30. Secondly, MS is a disease that is episodic in nature, especially in the first ten to fifteen years, when it is characterized by unpredictable attacks followed by periods of recovery. Nearly 80% of people with MS are eventually unable to work full time. The challenge we have is that federal disability benefit programs, namely the Canada Pension Plan disability benefit and the disability tax credit, are both tied to income.

For those with episodic disabilities, such as MS, lupus, mental illness, and AIDS, long-term attachments to the workforce become difficult or impossible. For people with MS, there are two threads to the income security discussion. The first concerns people who are unable to work because of the severity of their condition. Programs tied to earning an income often preclude them from eligibility. Given that the issue of income security is a complex one, we recommend that the government establish a special group to study the issue of income support for people with episodic and other disabilities. We believe there is an opportunity to do this within the context of the government's proposed national disability act.

The second thread of the income security discussion concerns people who are well enough to manage part-time work. The current disability benefit programs don't recognize or accommodate the needs of people with episodic disabilities for flexible work options and income support, nor do they recognize the concept of part-time work.

The MS Society has identified specific opportunities for short-term policy and program improvements that would make a meaningful difference in the lives of disabled Canadians and would potentially create savings in administration and program costs. For example, allowing for part-time benefits with part-time work within the employment insurance program would encourage an ongoing attachment to the workforce. Harmonizing the applications for the disability tax credit and CPPD would make it simpler for applicants and provide cost savings to government.

Another recommendation is to allow CPP administrators to do research and carry out a pilot project on approaches that could target people with episodic disabilities. A similar recommendation was also made by the Standing Senate Committee on Social Affairs, Science and Technology in its recent report on mental health.

Deanna.

[Deanna Groetzinger]

Thank you.

The MS Society is also recommending some changes to existing programs to benefit caregivers. These changes would help address the inequity currently faced by caregivers when they leave the workforce to care for someone who is disabled. In so doing, they compromise the future level of their pension at retirement. This is patently unfair, since they save the government hundreds of thousands of dollars in annual costs for hospitalization or institutional care.

Specifically, we'd like to see that EI benefits be extended to caregivers of people who are severely disabled, similar to what is now in place for caregivers who leave their jobs to care for gravely ill or dying family members. In addition, we recommend that the CPP program provide drop-out provisions for caregivers that are the same as the child care drop-out provisions. And finally, the caregiver tax credit should be extended to spouses as it is to other family members. Spouses often provide care out of love and compassion, not because they're required to do so. A caregiver spouse makes an important contribution, and it should be recognized and compensated.

The second priority area in our brief is the area of health care, and I'd like to highlight the urgent need for catastrophic drug coverage and a national pharmaceutical strategy. Drugs to treat MS are expensive, up to $25,000 a year, and we recommend that the government look very quickly at moving to a catastrophic drug program as soon as possible.

In health research, the MS Society has its own research program, but we depend significantly on the funding that is available from CIHR. Again, we recognize the importance of this and urge this committee to make a recommendation to the government that CIHR funding be increased and sustained.

Thank you very much.

[The Chair, Conservative, Brian Pallister]

Thank you both very much.

We continue with Imagine Canada representative Teri Kirk. You have five minutes, Madame.

[Teri Kirk, Vice-President, Public Policy and Government Relations, Imagine Canada]

Thank you, Mr. Chairman.

Good morning everyone. My name is Teri Kirk and I'm the Vice-President of Imagine Canada.

I'm speaking to you on behalf of Imagine Canada and the approximately twenty agencies listed on page one of our submission. This list includes professional organizations, church groups, cultural associations, volunteer agencies and others that contribute to the quality of life of Canadians which has made us the envy of the world. The community non-profit sector attracts and retains individuals and businesses that help make Canada competitive. Our submission includes an overview of Imagine Canada and of the non-profit community sector agencies that support its recommendations.

Principally, we urge the Government of Canada to develop a sector investment strategy for the community non-profit sector and to commit to a joint examination of a significant new funding instrument to support investment in the sector, which would supplement and complement federal funding to sector organizations through grants and contributions.

The sector is now sufficiently large in terms of its economic impact--8.6% of GDP--its role in job creation--2.2 million jobs, giving it more paid employment than the manufacturing sector in Canada--and its significance in attracting and retaining people and enterprises in Canada to merit being treated as a sector.

The government has in place a sector strategy for virtually every other sector, whether it be SMEs, manufacturing, IT, mining, or fishing, and yet there is no overarching strategy for addressing the well-being of this sector and informing investment decisions in the sector. This is in stark contrast with the SME sector, for which there are a half dozen crown corporations in place, from BDC to EDC to CCC, to address the financing, exporting, insurance, and other needs of small and medium enterprises.

We're asking that this strategy incorporate a joint examination of investment instruments such as a national foundation, fund or granting council. Examples at the federal level include the Canada Foundation for Innovation, and at the provincial level, the Trillium, the Wild Rose, and the Fondation communautaire du grand Québec.

We would also like to bring forward the Budget 2006 measures, which eliminated capital gains tax on donations of listed stock to charities, and ask that they be extended to private foundations. Considerable work has been done on this recommendation by Philanthropic Foundations Canada and the 20 sector organizations that Imagine Canada is representing here today that support that brief.

Finally, I'd like to bring forward a couple of information items. The first relates to charitable remainder trusts. Again, the Canadian Association of Gift Planners has done considerable work on this. These charitable remainder trusts are existing instruments; however, the law and taxation of these instruments is unclear. Donors and the gift planning community are reluctant to use them when the law remains so unclear, so we're asking for a clarification of the law.

Finally, in respect of the federal charitable donation tax credit, as some of you may know, this is a two-tier credit. For the first $200 that each of us gives to a charity, one receives a credit of 16%, which moves up to 29% at the $200-plus threshold. This has given rise to some administrative challenges, with people pooling among spouses or deferring for a number of years to attract the higher credit rate. The recommendation is that we move to a single tier at the 29% level. Associated with that, the federal policy has been to provide a credit based on the highest marginal tax rate, which in the past has been 50%, and therefore, effectively, to match our individual donations. The decline of marginal tax rates, which is of course welcome, has meant that the federal contribution to donations has declined, so that Canadians are bearing more at the 60% to 70% rate.

Those are our comments. I certainly welcome any questions from members.

[The Chair, Conservative, Brian Pallister]

Well done; that's the first presentation we've had that has finished at exactly five minutes. Thank you.

Mr. James Parks is here for the Canadian Bar Association.

Sir, try to do as well.

[James Parks, Chair, National Charities and Not-for-Profit Law Section, Canadian Bar Association]

Thank you, Mr. Chairman and honourable members.

We also are pleased to be here, and we welcome the opportunity to make this submission.

The CBA represents over 34,000 jurists, including lawyers, students, notaries, law teachers, etc. I'm here speaking for the charities and not-for-profit section, which has approximately 1,300 members, all lawyers or law students. We've had a long-term interest in tax legislation and tax policy, particularly as it relates to charities and not-for-profit organizations, and we have seven recommendations in our written brief. I'll touch on them briefly.

First and foremost, we echo what you've heard already from the Canadian Association of Gift Planners and Imagine Canada. We strongly recommend the extension of the relief for capital gains, the non-recognition of capital gains, on donations of marketable securities to private foundations. We also believe that should be extended to gifts of real estate.

From an administrative perspective, as we indicated last year, we also strongly recommend the setting aside of resources and a direction to the Department of Finance to simplify the rules in the Income Tax Act dealing with the disbursement quota and the monitoring of the expenditure of funds by registered charities that have been raised, with tax relief for donors. We see that as a serious drain on the sector because of the complexity and uncertainty.

There are some technical issues touched on in our brief that relate to current proposals in the July 18, 2005, draft legislation, including the concept of control for charities where significant donors give a lot of money. If they're deemed to control the foundation, it will be private, which is usually an adverse result.

We're concerned about holding periods. When you track the cost of an asset that's given, if it was acquired within three or ten years its cost becomes its value at the time of a donation. That's problematic where a property stays within a related group.

We also echo the recommendation about pursuing legislation to implement charitable remainder trust. They're a very useful vehicle for donors. We need legislation. The CAGP has taken the lead on that, and we would strongly recommend that this be pursued.

My final recommendation is a technical point, that non-resident charities be entitled to be treated as exempt organizations in Canada, even if they're charities. At present that's not possible because of a glitch in the law. We recommend that the rule be changed so that a non-resident charity, such as a foreign university that wants to come here, is able to seek exemption as an unregistered not-for-profit organization. Right now it can't do that because the Minister of National Revenue must express the view that it's not a charity, and of course that can't be done unless there are some extreme circumstances.

Those are my comments, Mr. Chairman.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Mr. Parks.

We'll continue with the representative from the Canadian Foundation for Climate and Atmospheric Sciences, Jacques Derome.

Monsieur, cinq minutes.