Finance Committee on Oct. 4th, 2006

[Dr. Indira Samarasekera, President, University of Alberta]

Thank you. Good morning.

I am very pleased to be here as part of this consultation process and to lend my perspectives to a very important discussion.

Canada, like its global neighbours, is entering a new era, one in which the new global currency is knowledge. As members of this committee, you are well aware of some of the drivers of this: economic growth in countries like India and China; the aging workforce in Canada, North America, and Europe; the rapid transmission of knowledge and information; profound advances in science, technology, and innovation; and the great global challenges that we share—climate change, human security, and so on.

Global leaders have become very aware that the development of successful global economies is contingent upon the critical mass of particular ingredients, with human talent and achievement absolutely at the top of the list, and science, technology, and innovation.

In Canada, good progress has been made. Efforts by the federal government to provide world-class research facilities and attract world-class researchers have been quite successful and are beginning to pay off in terms of stemming the brain drain.

However, there are some warning signs suggesting that without continued and increased funding to research and development, Canada may be on the verge of falling behind its global peers. In September, the World Economic Forum released its annual report on global competitiveness. Four European nations—Switzerland, Finland, Sweden, and Denmark—assumed the top four spots. Canada did not even make the top ten; instead we slipped from 13th to 16th place. Given today's reality of global competitiveness, this is a great cause for concern.

In response to global challenges, many countries—notably the United States, the United Kingdom, Australia, and Germany—have just in the past year launched new frameworks for funding models, focused on innovation and competition with significant new investment.

In February, the U.S. launched the “American Competitiveness Initiative: Leading the World in Innovation” with $6 billion in 2007 to increase investments in R and D and to strengthen education and encourage entrepreneurship.

What does this mean for Canada? There is no better illustration of the importance of the application of knowledge than right here in Fort McMurray, where the University of Alberta researchers were instrumental in finding a way to harvest the oil from the oil sands. What better example of the benefits of science, technology, and innovation can one find—not just for today, but for what we must do to make regions like this totally viable for the future?

Leading the productivity and competitiveness agenda is a key role for the federal government. The federal government has a critical role to play in post-secondary education, research, and innovation. The success of this agenda is intimately linked to our talented people in research and development, and as a result, to universities. University competitiveness, including those individuals researching in and graduating from the nation's universities, is Canada's greatest ability to tap into the world's current and emerging knowledge pools.

Looking forward, what must Canada do? Canada must define a national goal that stakes out Canada's plan for competitiveness. I would suggest a few principles that could guide the government's actions in this ambition. First, create a world-class talent pool; second, attract the best students, professors, and researchers in the world to Canada and retain our best here; provide access to the best quality education in the world; ensure internationally competitive public investments in research; preferentially invest in areas where Canada has a comparative advantage by virtue of world-class excellence or fit with national need; and encourage increased engagement between the universities and the private sector.

The May 2006 budget included over $100 million in additional funding for granting councils, indirect costs, and tax exemptions. This is a very important investment by the federal government. But in order to be globally competitive, we must look at long-term, increased, stable funding mechanisms for Canada's post-secondary education, research, science, technology, and innovation.

Thank you for the opportunity to present here today. I look forward to answering questions by the committee.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Madam President.

We'll continue with Mike Allen, who is here on behalf of the Fort McMurray Chamber of Commerce as its president.

Welcome, sir. You have five minutes.

[Mike Allen, President, Fort McMurray Chamber of Commerce]

Thank you.

It's indeed my pleasure to present to the committee on behalf of the Fort McMurray Chamber of Commerce. We'd certainly like to welcome committee members to the most robust regional economy in the world, one that is driving profound economic change, not only for this region but for Canada.

The total reserves of the Athabasca oil sands have been estimated at more than 170 billion barrels, which accounts for Canada's global ranking that is second only to Saudi Arabia. For a period this year, oil was priced at more than $70 per barrel. It seems to have stabilized around the $60-a-barrel mark. Most oil sands developers say that they are able to produce oil profitably at $30 per barrel.

In contrast to much of the Middle East, Canada offers the rest of the world a stable government and economy. Continental energy security is becoming among the most discussed public policy issues, and the Wood Buffalo region has in the past year been visited by the energy secretary of the United States as well as several federally and state-elected legislators from the U.S. Foreign investment from other nations is also on the rise, and particular interest has been demonstrated by the Far East; many nations there are looking for an equity position in the oil sands.

Although the regional municipality has expressed concerns about its ability to support ongoing oil sands development without an immediate injection of infrastructure funding, all indications are that development of this resource will proceed unabated for the next several years. Analysts have predicted investment of $125 billion over the next decade. To put it a little more accurately, the figures are more likely $10 billion to $12 billion on an annual basis.

What is happening here in our backyard has an impact on the whole of the country, and it is with that impact in mind that the chamber makes its presentation to the committee today.

We are concerned about three primary areas within the jurisdiction of the federal government: fiscal policy, including employment insurance and taxation; infrastructure; and labour supports, including immigration and post-secondary education.

Among the challenges for all employers in the Wood Buffalo region is finding qualified, committed employees in one of Canada's most competitive labour markets. We believe the current EI system is subject to abuses and serves as a disincentive to work. The surplus within the system seems to be used to subsidize government spending in other areas as well, which would effectively be a misappropriation of public funds.

The employment insurance program was originally created to provide insurance against unintended unemployment. If the administration of EI is refocused on that original intention, it will result in changes that benefit citizens and employers alike. It will enable the government to reduce EI premiums further and eventually enable employers and employees to have matching contributions.

We refer this committee to a more specific recommendation of the Canadian Chamber of Commerce on employment insurance. When Canadians are working, we need to ensure their prospects in Canada are competitive with those offered abroad. Recent changes in the American economy, including the rise in the Canadian dollar, have reduced the incentives that drove skilled Canadians to the U.S., the so-called “brain drain”.

However, Canadian personal income taxes are still not competitive with American taxes. We recommend changing tax policy to improve the benefits to a shrinking middle class, without failing to recognize our obligation to lower-income Canadians. We also suggest that the federal government make it more attractive to potential employees to move to the northern reaches of the country by increasing the northern living allowance to offset the higher costs of living there.

Municipalities across Canada have approached the federal government with concerns over their ability to fund municipality infrastructure, essential to the delivery of services to citizens. The new Canadian government has honoured the commitments of its predecessor and has also enhanced funding to support transportation and public transit initiatives. Here in Wood Buffalo, that included the August 29 announcement of federal funding of up to $150 million to support the twinning of Highway 63. The chamber applauds the federal government's contributions to road construction.

However, Wood Buffalo is the least typical municipality in Canada. Canada's energy security, not to mention substantial international trade, depend on our municipality, and our infrastructure requirements are more extensive than simply twinning an important highway. The 2006 census pegged Wood Buffalo's population at 79,000. That is an increase of 9% since 2005, not including the shadow population; people in this group number between 7,000 and 12,000 and reside in work camps, but they make significant use of municipal services. This is not sustainable, given the funding limitations of the municipality.

Several years ago a tripartite working group was announced for the region that, as we understand it, was supposed to investigate our unique requirements and determine opportunities for joint funding of critical initiatives, such as waste water treatment. This group has yet to make any significant announcements.

The chamber strongly encourages the federal government to acknowledge that regional economies of national significance, Wood Buffalo's and others, must receive greater federal support.

We ask the federal government to show leadership with respect to the tripartite working group and to renew its commitment to the special infrastructure requirements of the region. We also recommend careful investigation of public-private partnerships, or “P3s”, especially as practised in Europe, to see how Canada can learn to expedite the construction of necessary infrastructure without compromising public interests.

It's a bit of a joke up here that Canada's second largest Newfoundland city is Fort McMurray. Alberta offers many young men and women from Canada's Atlantic region, which has suffered economic declines in nearly every sector, new opportunities to make a good living and raise a family. It isn't only for the oil sands industry that finding skilled employees is a challenge; employers in the service, retail, and hospitality sectors are challenged to recruit and retain good employees.

One of the proposed solutions is to increase the number of foreign workers admitted to Canada to work in Alberta's oil sands.

[The Chair, Conservative, Brian Pallister]

Could you draw to a conclusion in the next few seconds, please?

[Mike Allen]

Yes, I will. Thank you.

There's already a program to permit nannies to apply for landed immigrant status after only six months of employment. We do not know whether a similar program is available for skilled workers in other disciplines, but if it isn't, it could be.

Again, changing personal taxation for middle-class Canadians to be more competitive with the United States will also encourage younger Canadians to put their skills to work in the country that helped them develop those skills, to the benefit of us all.

In closing, I'd like to thank the committee for this opportunity, and I'm happy to answer any questions you may have.

[The Chair, Conservative, Brian Pallister]

Thank you, Mr. Allen. Thank you all for your excellent presentations.

We'll move now to questions, and we'll begin with Mr. McCallum, for seven minutes, sir.

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

Thank you, Mr. Chair, and I thank all of you for your very interesting presentations.

For all of us, I think it's our first time here. It's a very unique place. We're delighted to be here and are looking forward to our tour after these meetings.

I think I'd like to start with Ms. Samarasekera. As one who's been an academic longer than a politician, I can say that I agree with virtually every word you said. Also, I was proud to have been part of the Martin-Chrétien legacy, which I think made a big difference to universities and research and innovation. I don't expect you to agree with me out loud on this, but I think concerning the current government, the court is still out as to whether the small contribution they made in the last budget will translate into a continued push in this area, which to me at least is critical.

But my question is, if you have to make choices, if there isn't all that much money available in total—maybe because the GST cuts are crowding out so much—would you assign a greater priority to increasing the transfer to the provinces designated for post-secondary education or to direct federal measures along the lines of what we've done over the last decade?

[Dr. Indira Samarasekera]

I think it comes down really to the role of the federal government and how it's defined. I see increasing importance for the federal role to be stepped up in the area of innovation; in that area, really that's the investment in graduate training. This is masters and PhDs, who are really at the heart of creating new ideas, new companies, new businesses, which then go on to employ the rest of the people who are educated in the post-secondary sector.

If that definition is one that's worthy of consideration, then I obviously would favour investments that are directed at the innovation end of it, which means research and graduate students.

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

I've seen evidence suggesting that large pools of highly skilled labour are perhaps the number one determinant of where leading-edge companies tend to invest. That points to graduate education; I agree with you on that.

I would have thought also that in terms of support for innovation in universities and so on, the next step going forward might involve greater support for commercialization. I know this is not always popular with academics, who see themselves as pure researchers, whereas commercialization is getting ideas to market. We in Canada I think are pretty good at the pure end. I'm not sure we're all that good at transforming those good ideas into commercial products.

Do you agree with that point of view? Do you see a substantial role for the federal government in moving into pushing commercialization, or would you rather see us stay in our more traditional area?

[Dr. Indira Samarasekera]

I think the role for the federal government is to create a climate in which the private sector can really take those ideas and make them into commercial outcomes. I think the challenge has been the misconception, in some ways, that academics know how to commercialize research. They don't. That's not what they were trained to do. I think the really important role for the federal government and for the academics is to protect the ideas in a manner in which they can be commercialized by the private sector. So I would say one of the most effective mechanisms of commercialization is really getting our graduates employed in companies that traditionally have not employed graduates, small business and large companies that don't traditionally employ PhDs. What incentive can the federal government create to make that happen?

The second thing is the issue around venture capital and the tax laws and the fiscal and regulatory environment to allow small businesses not only to get going but then to be successful in getting second- and third-round financing in order to sustain growth.

There's the business about making sure you have a management pool and you can attract that, and that comes back to the cities agenda. Attractive places to live attract top-quality people.

So that's a huge set of opportunities that really support commercialization. But finally, commercialization is very much something that the private sector needs to aggressively undertake.

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

Thank you. I think that makes a lot of sense.

Mr. Allen, you were cut off when you were starting to talk about foreign workers, having previously spoken about people coming here from other parts of the country. To allow you to proceed on that point, my question is, do you need special dispensations or greater access to foreign workers, or can you rely on the existing situation and perhaps expend more effort to bring in people from other parts of the country?

[Mike Allen]

We recognize that there is shortage of skilled labour all over the country. I know there are lots of issues with the Constitution on directing immigrants and that sort of thing. We do believe a large number of immigrants tend to settle in the Toronto, Montreal, and Vancouver areas. We hear many stories about the doctor from Sri Lanka who's driving a taxicab. Certainly that is an issue for the college of physicians to address as well, as to how they transfer their qualifications.

But we believe that between all three levels of government and industry, we should be able to come up with some solutions as to how best to attract people into regions where there are specific skill shortages. I know we can't direct people if they're applying to come into the country, but if they're a skilled machinist, we can recognize that we have needs for machinists in these areas of Canada and perhaps just come up with various ways of encouragement.

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

Okay, thank you.

[The Chair, Conservative, Brian Pallister]

Thanks, Mr. McCallum, and thank you, Mr. Allen.

We will continue now with Mr. St-Cyr.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Thank you, Mr. Chairman.

I thank you for being here today. You are part of a very limited group, which is good because it allows us to have more exchanges with you than if you were a group of four, six, seven or eight.

My first question is for Mr. Peters about the Telus World Science Center of Calgary. I believe it is extremely important to develop new scientists. Since I am an engineer, I am very aware of that need.

Are there any studies indicating that your type of center encourages people to choose science as a field of study? Do you believe that Science Centers really have an impact on the career choices of young people?

[Bill Peters]

Yes, in fact we're accumulating a very significant body of knowledge that young people need resources outside of the conventional school system. We get about 20% of our learning through the conventional school system, and parents, business people, and educators realize that 80% comes through informal channels.

The programs that the Science Centre in Calgary offers, that the Oil Sands Discovery Centre here in Fort McMurray offers, are very directed at enhancing young people's ability to form a view of the ability they have to frame a career as they go forward. For example, one highly successful program that we offer in Calgary is called the Science Olympics, and it actually starts people as early as middle school, junior high, actually working with scientists, engineers, and technologists. Through this personal interaction we know that our Science Olympics students very often, much more than you would expect by chance, go on to, for example, the University of Alberta, the University of Calgary, and other institutions of higher learning in the sciences.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Since I have studied science, I know--and you know it too--that very few women choose science studies when they go to university. I know that there are special programs a bit everywhere, in Quebec and in Canada.

Do you have this type of programs here?

[Bill Peters]

In fact we do, and in fact many science centres across Canada are very concerned about attracting more women into science and technology. I'm very proud that Suncor, a company that's very active in the Canadian oil sands, sponsors a program for young women, to interest them in science and technology, at our Science Centre in Calgary. This is not unique. There are many corporate sponsorships of similar programs in our 35 institutions across the nation.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

The name of your organization, Telus World Science-Calgary, leads me to believe that you receive private funding.

What percentage of your revenue comes from the private sector and from the public sector? I suppose that people have to pay an admission fee when they come to your Center.

[Bill Peters]

We do. On an operating basis our facility is very similar to facilities across Canada where one-third or less of our annual operating budget actually comes from government. When we look at the capital investments made in centres, and the proposal under the Canadian Association of Science Centres for the $200 million program, that will be amplified three to four times over by private investment and investment from other levels of government. So it is a strong example of a community and public-private partnership.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Since I have only two minutes left, I will address this question to Mrs. Samarasekera.

In your first recommendation, you refer to the development of a human capital strategy that would mainly be aimed at training the right mix of science, engineering, business and arts graduates.

I would like to know what that would be based on: the needs of the market, an ideal society or the wishes of students? How do you believe this mix could be achieved: by creating quotas for programs, by preventing students from selecting the program of their choice, or by giving them incentives to choose one field instead of another?

[Dr. Indira Samarasekera]

It's a very good question.

If you look at Canada and compare it to countries like Japan, Korea, and some of the other nations that are really leaders in innovation, you will find that they have a much higher percentage of people who are engineers and scientists, relative to those who are in the arts. So one of our challenges is to ensure that we have that balance correct. I think there's a good amount of statistics to say what would be a right number.

The other challenge we have is that students who want to go into the arts I think have to be encouraged, because we do need people in those disciplines. I'm a great believer in that. I think our challenge has been that we've underinvested in those areas, so those who do go into the arts do not get a quality education necessarily. There are disciplines like music, fine arts, and so on that are really suffering in this country because, again, we've not invested adequately.

So when I talk about a balance, on the one hand it's having adequate numbers of engineers and scientists and on the other hand having quality education in the arts so that the people who come out with business and other degrees have what they need.

[The Chair, Conservative, Brian Pallister]

Mr. St-Cyr, are you finished?

We continue now with Mr. Dykstra for seven minutes.

[Rick Dykstra, Conservative, St. Catharines, ON]

Thank you, Mr. Chair.

Ms. Smith, I want to start my questions in terms of your presentation with respect to how a single-income family is actually penalized for one of the parents staying at home. Do you have some thoughts on how to correct that, and potentially what the cost might be from an overall federal perspective?

[Beverley Smith]

If you agreed with the principle that the person at home is doing useful work, there are a number of ways.... You could increase the spousal deduction to full personal, as we do in Alberta already. You could have a household-based tax, instead of an individual-based tax, allowing income splitting, as they do in France or as they do in the United States. That's a possible option. You could make the universal child benefit, which you guys have to the age of six, go to the age of fourteen or sixteen, and be a more significant amount. Dr. Pierre Lefebvre of the University of Quebec suggests $5,000 per child. The money flows with the child; the people can purchase day care or nanny care with it, or subsidize their costs at home. The maternity benefits would have to flow with the fact of maternity, not with paid employment status.

There are a number of mechanisms.