Finance Committee on Oct. 25th, 2006

[Denis Juneau]

Exactly.

[Steven Blaney, Conservative, Lévis—Bellechasse, QC]

My second question is for Mr. Langlois.

It is quite clear: housing costs have risen tremendously. If you had to choose one recommendation to make to the committee would it be to increase the HBP from $20,000 to $25,000?

[Pierre Langlois]

The HBP may be the easiest program to enhance at this point because it has been in existence since 1992. Yes, it could help out first time home buyers.

[The Chair, Conservative, Brian Pallister]

Thank you, Mr. Blaney.

Before we continue, ladies and gentlemen members of the committee,

I have a little announcement or forewarning. We will commemorate this event at noon with a photograph, so don't run away. That will be done immediately after the testimony ends and before the visits with the witnesses commence.

All right. We will now move to a three-minute round.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

Thank you.

I'm going to ask my question in English, I'm afraid, so if you need assistance.... It's not that my English is good, but my French is a lot worse.

Monsieur Patry, Pierre Patry, I'm surprised to see that you say the recent reduction in the rate of the GST would seem to be a potentially worthwhile way of focusing primarily on low- and middle-income households. Every anti-poverty group, every group that's appeared before us that deals with people who are of a disadvantaged social or economic condition have indicated that the GST reduction is virtually a waste of time for low-income Canadians. The government says that the lowest-income Canadians don't pay tax, so reducing personal income tax is not a way to go. There are lots of other ways of doing it, such as through the child tax benefit, particularly the low-income supplement to the child tax benefit, or by investing in things like tuition access or even social housing and things like that.

Can you explain to me whether you have done any studies to indicate that cutting the GST is a good way to help the lowest-income Canadians?

[The Chair, Conservative, Brian Pallister]

That is for Monsieur Pierre Patry.

[Pierre Patry]

I did not criticize lowering the GST. I did not mention that in my presentation. We said that consumer taxes are generally more regressive than other taxes. It is not something that we criticized. I would not want to be misquoted.

However, in answer to a question, I mentioned that if I had to choose between reinvesting in post-secondary education through federal transfer payments and tax cuts, I would favour federal transfers.

While I have the floor, I would like to point out that we want to help Mr. Blaney go down in history. But in order to do that he would have to do more than delivering speeches on the fiscal imbalance. The fiscal imbalance actually needs to be settled, as early as the next budget.

The CSN would be pleased to contribute to our going down in history together for having settled the fiscal imbalance in Canada.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

I appreciate your clearing that up. I think this is your presentation, and there is a comment in here about the GST, so you might want to check that. I agree with your secondary comment.

I'd like to ask a question, if I could, of the other Monsieur Patry, Denis Patry--a comment on university funding. There are two asks in here. One is that you recommend that the federal budget include a substantial increase in the amounts allocated to university networks in order to maintain the quality of teaching and to develop research. You also propose that federal transfers for post-secondary education revert to the levels that prevailed in the 1990s.

The government's own documents indicate that federal contributions to post-secondary haven't changed. They've been 25%. What has changed is that they have been directly for research and directly for students since the late 1990s.

[The Chair, Conservative, Brian Pallister]

Thank you, Mr. Savage.

We'll continue now with Mr. Del Mastro for three minutes.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you, Mr. Chair.

Mr. Godbout, could you, in very basic terms, describe the fiscal imbalance? What is it?

[Prof. Luc Godbout]

Briefly, the fiscal imbalance exists because the federal government has more financial resources than necessary, whereas the provinces do not have the necessary resources to meet the needs related to their respective areas of jurisdiction.

[Dean Del Mastro, Conservative, Peterborough, ON]

No, it's not really that. It's actually the difference between taxes collected and taxes redistributed to the province, and that's what would indicate what the imbalance is.

You also spoke about equalization. Could you define equalization for the panel?

[Prof. Luc Godbout]

I could also add that there is a fiscal imbalance between the federal government and the provinces as well as between the provinces. There is an horizontal fiscal imbalance and a vertical fiscal imbalance. The first one I defined was the vertical imbalance. The other one is the horizontal imbalance. In other words, some provinces are wealthier than others. The Canadian Constitution sets out to strike a balance between the provinces through equalization. This responsibility is enshrined in the Constitution; it is a federal responsibility.

[Dean Del Mastro, Conservative, Peterborough, ON]

So for the record, equalization is actually a redistribution of federal tax dollars, so that all provinces can maintain approximately the same level of social safety nets, health care, and so on.

You made a couple of comments that, quite frankly, indicate that you may not have a full understanding of the situation. Secondly, you indicated that meetings with the government are failing. Are you involved in those meetings?

[Prof. Luc Godbout]

I was referring to what we see in the media. The provinces met.

[Dean Del Mastro, Conservative, Peterborough, ON]

Oh, I wasn't aware the media was in them. I'm sorry.

Mr. Patry, you indicated that you thought it was better to spend the surplus than to put it against the national debt. Do you think it's better to spend $660 million a year on interest into perpetuity—and spend the money now—than put it against the debt?

[Pierre Patry]

In our brief, which I would invite you to look at, we prove that the $12.9 billion spent on paying down the debt this year—or $81 billion total since 1996-97—has had a minimal effect on increasing wealth. Actually, the debt to DGP ratio went from over 67% in 1996-97 to 35%.

Even if the government had not paid down the debt, the percentage would have gone from 67% to 41%. Most of the work on debt reduction is due to an increase in wealth. We believe that this trend will continue and that we could have used the $81 billion for better purposes, namely to increase federal transfer payments for health care and education. That type of measure would provide for good services to the public and ensure a more just society.

[The Chair, Conservative, Brian Pallister]

We will now move to Mr. Pacetti.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Chairman.

Mr. Juneau, I would like to know how we could be sure that higher transfer payments for post-secondary education would go to CEGEPs. I looked at your chart, because it was simpler that way. It shows -15% next to core funding in current dollars. It goes from -15 to -26%, meaning that the percentage would be -37% in a few years' time.

For the benefit of my colleagues from outside Quebec, I would also like you to tell us how CEGEPs compare to their equivalent in other parts of Canada.

[Denis Juneau]

How can the government ensure that a fair part of the funding will go to the CEGEPs, and still respect areas that come under provincial and federal jurisdiction? I think this needs only be mentioned during the discussions that will be held. I can imagine that when the money is transferred, some of it will go to the CEGEPs.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

If things continue the way they are going, there is no doubt that we will have no say about the way the funds are distributed. That is why I ask you the question. I do not want the conclusion to come before the proposal. I am trying to help out the CEGEPs a little, because, if I understand correctly, their budget was not increased.

[Denis Juneau]

This table has nothing to do with federal-provincial transfer payments but simply with the funding granted to the CEGEPs by the province of Québec. We notice—and the table says it all—that since 1992-93 there has been a $300 million reduction every year in the education funding to CEGEPs. Consequently, we are saying that it is time our governments assume their responsibilities and provide adequate funding for post-secondary education. That is why we mentioned the $300 million amount.

I will now deal with the second question about what the CEGEPs do in Quebec. Outside Quebec, post-secondary technical education is offered in community colleges. In Quebec it is offered at the CEGEPs. In addition, the equivalent of grade 12 and the first year of university in the other provinces is provided by the CEGEPs.

[The Chair, Conservative, Brian Pallister]

Thank you. Mr. Pacetti and Mr. Juneau.

Ms. Ablonczy.

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

Thank you, Mr. Chair.

I think it's interesting to note that there's quite a bit of concern about the so-called fiscal imbalance and the federal government's progress on it. In fact, as the panel is aware and we're all aware, the former government denied there was fiscal imbalance and refused to deal with it in any way, shape, or form.

Our government has taken on that task. We have not only put out a paper just a few months after we were elected as to some proposals for this, but we are engaging in very intensive discussions with all the provinces in order to bring together a pan-Canadian proposal that will resolve this issue as best as possible. We know that whatever comes forward, there will be naysayers, and we want to make it as good as possible. We are targeting the next federal budget to bring forward some proposals.

So I would caution the panel about being too negative about this process. In fact, I think it's moving along with amazing quickness, because there are a lot of people to consult and a lot of work that has to be done in order for a truly good proposal to come forward, remembering that we started from ground zero on this. So this is going ahead, this will go ahead, and we are hoping that all the players in Quebec will work constructively with us instead of simply making negative comments about a very good and very reasonable process that is moving as quickly as possible.

That's a statement, not a question, Mr. Chairman, but I think it's very important that we do put that on the record and do get that in front of people.

[The Chair, Conservative, Brian Pallister]

Thank you very much.

I would like to thank you for making your presentations to us today. The committee would like to thank you for coming today and for taking the time to prepare for this meeting.

The meeting is adjourned.