Finance Committee on Oct. 26th, 2006

[The Chair, Conservative, Brian Pallister]

Good morning, ladies and gentlemen. Thank you very much for being here with us this morning.

We are the House of Commons finance committee. We've been charged with the responsibility of consulting across Canada over the last several weeks. This is the day I'm sure some of our committee members will admit they have been looking forward to: this is our final day of consultations. I'm sure we'll pay rapt attention to your presentations. We appreciate your submitting your briefs.

You've been asked to keep your presentations to five minutes, and I assure you I will hold you to that. I will give you an indication when one minute or less remains and then I will unceremoniously cut you off and move to the next presenter. This is all in an effort to make sure the committee members have a chance to have an exchange with you after your presentation.

[An hon. member]

He's very good at cutting people off.

[The Chair, Conservative, Brian Pallister]

Yes, I specialize in that.

Again, thank you very much for being here.

We will commence now with KAIROS, Michael Polanyi, coordinator. Welcome, sir, and over to you.

[Michael Polanyi, Coordinator, Canadian Social Development Program, KAIROS (Canadian Ecumenical Justice Initiatives)]

Thank you.

It's good to be here. Thank you for the opportunity.

KAIROS is a national ecumenical social justice organization engaging in education and advocacy for social justice in Canada on behalf of its member churches, which include Anglican, Catholic, Christian Reform, Lutheran, Mennonite, Presbyterian, Quaker, and the United Church. Their membership numbers in the millions of Canadians.

Budget-making is a core function of government. You know your budget will affect the attitudes and the behaviours of Canadians, and it will shape the Canada we have. I'm glad you're getting input, and I hope you're listening for two kinds of input. I hope you're listening for input about the values and objectives that should inform the budget, and I trust you're also looking for input about concrete measures that will achieve those objectives.

When I saw the press release you issued in June, I was a little concerned because the four questions you posed all related to measures and means. You proposed some objectives, but you didn't explicitly ask Canadians for input about what the objectives for the budget could or should be. So that's what I want to take a couple of minutes to emphasize, and that's what I emphasize in my brief. The onus is really on you to try to identify some shared values and shared principles you can agree on. Your parties disagree on lots of things, but looking at your party documents, I think you also share some common values, and I think Canadians share some common values as well.

The five values our church membership believes in, which are reflected in the Canadian public and also reflected in your party documents, I outline in my brief. They are: prosperity, which you emphasize, but I think there are some other values as well; opportunity; compassion; fairness; stewardship or sustainability; and citizen engagement. In our brief we give one or two policy measures or budget measures we think could advance these values.

We call for a poverty reduction strategy to ensure there's prosperity for all Canadians. We call for a working tax income benefit, something both the Liberal Party and the Conservative Party have called for, so that every Canadian who works has the opportunity to make a decent living.

We call for the continuation of the supporting communities partnership initiative for homeless people and an increase in overseas development assistance, and that's to build a compassionate Canada.

We call for strong reductions in greenhouse gas emissions, as per the Kyoto Protocol, and that's so we can build a sustainable Canada that's addressing the major environmental issue of our time.

Finally, we call for you to think about how you interact with citizens during this process, because you have a great opportunity to create spaces for citizens of different backgrounds and different views to come together around common values. I'm not sure you're making full use of that yet. There are ways to democratize the budget-making process. That's part of engaging citizens.

To conclude, you've got a big task ahead of you. My plea is that you take the time to try to identify your shared values and that you set some specific objectives in the budget that link to the core values you can agree on and Canadians agree on, and then you can talk about the measures you need to achieve those objectives.

If you do go to values, there's an opportunity in the 2007 budget to develop a visionary document, a document that unifies us rather than divides us, and that captures the best of Canadians and Canada.

Thanks.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Michael, and good words.

We'll continue with Calvin Weinfeld, from the Toronto Real Estate Board. Welcome, Calvin, and over to you.

[Calvin Weinfeld, Member, Government Relations Committee, Toronto Real Estate Board]

Thank you. I appreciate being here today.

The Toronto Real Estate Board is an association of approximately 23,000 members from across the GTA, or the greater Toronto area. As one of those realtors, I can tell you we're proud of the contributions we make to our communities and to the economy. Whether it's supporting local minor sports leagues or organizing charity fundraisers, realtors are always at the forefront of community service. Realtors understand that the success of their businesses and their communities is indelibly linked.

In this regard, we believe the proposals presented to you last week by the Canadian Real Estate Association would create significant benefits for Canadian communities and the economy. From the perspective of Canada's largest urban region, we believe the Canadian Real Estate Association's proposal to promote reinvestment in real estate, to provide funding for rehabilitation of residential properties, and to adjust the homebuyers' plan for inflation are particularly important in addressing some of the key issues facing not only the GTA, but communities across Canada.

The first issue is the proposal to amend the Income Tax Act to allow for the deferral of the capital gains tax when an investment property is sold and the proceeds of the sale are reinvested in another property within one year. I want to stress that this would be a deferral of tax and not a forgone revenue for the federal treasury. The deferred taxes would eventually be paid when the investment property is sold and the proceeds are not reinvested. Furthermore, it is important to note that many owners of investment properties are not selling their properties because of the capital gains tax they would have to pay if they did. Therefore to some extent, the Canadian Real Estate Association proposal would be maintaining the status quo from a tax perspective, while creating new economic and social benefits for many communities.

From an economic perspective, the benefits of this proposal are clear. The sale of investment properties triggers economic spinoffs, such as renovations and everything associated with them. A study recently prepared for the Canadian Real Estate Association by Clayton Research Associates Ltd. indicates that each housing transaction generates close to $25,000 in spinoff spending over and above actual residential property sales, which last year meant $12.4 billion to the economy. Spinoff spending of investment property tends to be significantly higher.

In addition to economic spinoffs, there are a number of other benefits from this proposal. The Canadian Real Estate Association already articulated many of them to you last week, so I'd like to focus my comments on the benefits from this proposal that the Toronto Real Estate Board believes are most relevant to our region, specifically the quality of life in our urban centres.

The second issue I'd like to discuss is the residential rehabilitation assistance program, otherwise known as RRAP. This program helps homeowners with lower or fixed incomes to finance essential home repairs and upgrades and bring housing units up to a minimum standard for health, safety, and accessibility. A significant number of Canadian households are in dire need of this program.

Home ownership helps to form the basis for the economic well-being of families as well as individuals. Policies and programs that help Canadians with lower incomes access home ownership have significant economic and social benefits. The RRAP program plays an important role in this regard. The current federal funding commitment to RRAP ends in March of next year, and we're asking the committee to recommend a further three-year extension of RRAP funding to 2010.

The last issue I'd like to discuss is the highly successful homebuyers' plan, which allows homebuyers to borrow from their RRSP. This program has helped more than 1.5 million Canadians fund the down payment on their first home.

The continued success of this program depends in part in making sure it keeps pace with current real estate markets. Currently, first-time homebuyers are allowed to borrow up to a maximum of $20,000 from their RRSP to put toward the down payment of a home. This limit was set in 1992 and has not been adjusted since then to reflect inflation and specifically the considerable increases in home prices. As a result, down payments funded through the homebuyers' plan are covering an increasingly smaller portion of the purchase price of a home. In this regard, we are asking the committee to recommend the maximum loan be raised from $20,000 to $25,000 to account for inflation.

The Toronto Real Estate Board and the Canadian Real Estate Association both believe these issues are important, not only to realtors but also to the people and communities of Canada.

I hope you found our views helpful. Thank you for this opportunity. I'm sorry I raced through that last part; I wanted to squeeze it all in. Of course, I'd be happy to answer any questions.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Mr. Weinfeld. I'm sure the translators appreciate your apology. They've risen to the challenge all week and have done very well with it.

We'll continue with Annalisa King now, who is with Maple Leaf Foods Inc.

Welcome, Annalisa. Over to you.

[Annalisa King, Senior Vice-President, Vertical Coordination, Maple Leaf Foods Inc.]

Thank you.

Thank you for allowing Maple Leaf to participate in this process.

As a leading Canadian agrifood processor, Maple Leaf Foods is confronting the consequences of currency appreciation and intense global competition by making some tough choices: driving for scale, efficiency, and innovation in every aspect of our business and doing some significant restructuring and refocusing to allow us to compete effectively in the future. This has involved some painful choices. I am here to ask the government to embark on a courageous journey of its own, built on better federal-provincial coordination, to strengthen our home-field advantage while building our global opportunities.

Ironically, most of the important items in our brief are not money issues. The areas of regulatory climate, trade policy, and labour market issues are fundamentals of business prosperity, which in turn will grow the economic and tax base to assist in meeting the government's other important goals. Pivotal to all these areas is the need for better federal-provincial coordination. I understand the difficulties and complexities of this, but being caught in between legislation, combined with duplication of some efforts, can diminish our ability to be nimble and competitive.

I'll talk about a few items in our brief. With regard to regulation, we would like to see revisions to the federal legislation for food safety, quality, and animal and plant health. We encourage more responsive federal and provincial government mechanisms and increased funding to deal with the growing number of food safety issues. Sometimes, smart regulations mean deliberately protecting the home-field advantage and not just assuming regulatory harmonization with the U.S. is the best solution to maximizing our competitive position. Yes, we want a level playing field when it comes to our primary input, but as we go up the value chain, we need to make strategic choices in terms of harmonization, just as our competing countries do.

With regard to trade, globalization means today, more than ever before, countries are competing on a global basis. A key component of creating a global competitive advantage for Maple Leaf's supply chain is ensuring that a highly efficient transportation gateway and corridor is available. Improved port and surface transportation infrastructure, especially in western rail service, the Deltaport container facilities and the container facility at Prince Rupert, and the investment in the Pacific gateway are vital to our export businesses.

With regard to labour, along with many other companies, we face significant labour recruitment and retention problems in western Canada, especially in our meat processing plant. We need quicker and easier access to the foreign worker program. Specifically, we need changes in legislation to facilitate the more rapid entry of workers into sectors where labour shortages are currently experienced. This includes a simplified efficient process to get workers into the country, an approval process that doesn't allow unions and competitors to block, and a clearer process on how foreign workers can eventually become permanent residents.

With regard to science and innovation, the federal government can strengthen partnerships with industry, academia, and the provinces to achieve a more cohesive national agrifood science and innovation strategy, joining efforts with a few key centres of excellence across Canada. All these priorities should be built into a new agricultural policy framework that places a specific focus on innovation and makes Canada unique and valued on the world stage as an innovator in food production.

Finally, with regard to financial stability for our farmer partners, this is critical. We have to move beyond a reactive, crisis-driven approach in income support to building policies and programs that support sustainable growth, innovative competition, and wealth creation in the whole agrifood value chain. The food industry, not just the farm sector, needs to be more fully brought into policy and program design and funding decisions. A new APF, better balanced toward innovation, food safety, and international trade, will be of great assistance.

In conclusion, Maple Leaf Foods is committed to a growing and prosperous Canada. We are now counting on the government to provide action in the five areas I have spoken of: one, implementation of smart regulation, with a more strategic approach to harmonization; two, an open, predictable trade environment, including improved infrastructure to facilitate competitiveness; three, better, more efficient access to foreign workers; four, a more strategic federal-provincial approach to science and innovation; and five, stable support for our farm sector.

Thank you for your time, and I appreciate the consultations you're embarking upon.

[The Chair, Conservative, Brian Pallister]

Thank you very much for your presentation.

We continue with Elizabeth Ablett, or should I refer to you as E. Elizabeth Ablett?

Welcome today. I'm curious as to what the “E” signifies. You don't have to tell me, but you can if you wish.

[Elizabeth Ablett, Executive Director, Ontario Coalition for Better Child Care]

It's Emily.

[The Chair, Conservative, Brian Pallister]

Beautiful. It's five minutes to you, Elizabeth.

Elizabeth is here on behalf of the Coalition ontarienne pour de meilleurs services de garde d'enfants.

[Elizabeth Ablett]

My name is Elizabeth Ablett. I'm the executive director of the Ontario Coalition for Better Child Care. The OCBCC was founded in 1981 to advocate for universally accessible, high-quality, non-profit, regulated child care in Ontario. Since then, as a non-partisan advocacy organization, the OCBCC has continued to press successive governments at all levels to improve child care to benefit children and families across Ontario.

Our membership includes representatives of more than 500 organizations and individuals from across the province from education, health care, labour, child welfare, injury prevention, rural communities, first nations, francophones, social policy, anti-poverty professionals, student and women's organizations, as well as community-based child care programs and local child care action. We're also a member of the Child Care Advocacy Association of Canada, and I'm the Ontario representative on the CCAC board of directors. Our presentation today is based on the submission by the CCAC to the federal Standing Committee on Finance last month.

The OCBCC defines early learning and child care as a non-compulsory program that supports the optimal development of learning of children aged zero to twelve years at the same time as it enables parents to work, study, and care for other family members and participate in their community. It provides supports and resources to help parents become active participants in their children's early learning and promotes women's equality. An effective child care system works to provide a range of high-quality and inclusive service options for all families.

As a society, Canada invests less in early learning and child care services than most other developed countries. The OECD's recently released study, Starting Strong II: Early Childhood Education and Care, shows that of the fourteen industrialized countries included in its findings, Canada ranks the lowest in terms of public investment in early learning in child care, lower even than Mexico. The OECD's study is only one of the most recent of many conducted over the last thirty years. I have a few of these with me today. Most of them are studies and research conducted by Canadians about Canada. Report after report concludes what we should already know as citizens, parents, and advocates: publicly funded, high-quality, regulated early learning in child care is good for children. What is shocking is that even after thirty years of conclusive evidence, we still hesitate to take the steps needed to provide Canadian children and families with the early learning and child care programs they both deserve and need.

The best way to do this is through sustained focused public investment in these programs and services, not targeted, not exclusive, not patchwork. Ultimately, focused public investment in these programs benefit not only our children and families but our communities and our economy as well. Not only do quality early learning and child care programs help children acquire the foundation for lifelong health, learning, and skills development, but they also support the ongoing learning, skills development, and labour force attachment of their parents.

Investment in these programs represents an investment in the potential and competitiveness of all Canadians today and in the future. Therefore, the OCBCC calls on this federal government, first, to adopt the recommendations in our briefing to restore and increase sustained long-term federal funding to the provinces and territories dedicated specifically to the development of early learning and child care programs that are high quality, non-profit, universal, accessible, fully inclusive, and meet the needs of every child; second, to enact legislation that recognizes the principles of a pan-Canadian child care system; third, to replace the capital incentives for child care spaces with dedicated capital transfers to the provinces and territories; and finally, to provide effective income supports for all Canadian families.

Thank you so much for the opportunity to present today. I appreciate it.

[The Chair, Conservative, Brian Pallister]

Elizabeth, you're not quitting because I gave you that signal?

[Elizabeth Ablett]

No, I was right at the end. I timed it for four minutes.

[The Chair, Conservative, Brian Pallister]

Thank you very much.

We'll continue with Jay Heller, who is with Vengrowth Private Equity Partners.

Welcome, Jay. Over to you.

[Jay Heller, General Partner, Vengrowth Private Equity Partners]

Thank you very much. Good morning. It's my great pleasure to have the opportunity to speak to you today.

I work with Vengrowth Private Equity Partners, and I'm going to be speaking to you this morning about Canada's supply of venture capital. By way of background, Vengrowth is Ontario's largest venture capital firm. Since 1982, we've invested over $1.1 billion in 180 small and medium-sized Canadian businesses. The funds we manage have been raised from over 180,000 individual investors as well as from institutions such as banks and pension funds.

Venture capital is the financing entrepreneurs use to turn ideas into businesses. Companies need venture capital to conduct R and D, build new products, and ramp up sales. Venture capital is particularly critical to start-up companies in the high-tech and life sciences sector, which require on average over $50 million apiece before they reach profitability. With sufficient access to capital, these types of companies have the potential to grow into giants, employ thousands of people, and serve as the economic development engines for their regions.

Most of Canada's leading young companies were funded with venture capital, including Research in Motion, Tundra Semiconductor, and Angiotech Pharmaceuticals. Disruptive technologies are continually being generated and commercialized in start-up companies. In the U.S., firms such as Microsoft, Intel, Cisco, and Amgen, which were born within the last generation, are now on a list of the world's fifty most valuable companies and they employ thousands of people. If they had not been able to raise venture capital at their formative stages, they would not exist today, and if Canada wants to grow companies like these, we need a stable supply of venture capital.

However, the supply of venture capital is highly cyclical, generally following the technology markets. When the tech sector is hot, as was the case in the late 1990s, the supply of venture capital naturally expands. But when returns from technology investing are weak, as has been the case since 2001, the supply of venture capital contracts.

In Canada, that contraction has been very significant, and a lack of early-stage capital has become a crisis in Ontario. I'm going to give you some numbers. First-time venture financings in Ontario totalled $440 million in 2001. This declined to about $260 million in 2003 and collapsed to $130 million in 2005, and it looks as if that decline is continuing in 2006. Historically, Ontario has trailed jurisdictions like California, Massachusetts, Texas, and New York in venture capital investment, but through the first half of 2006, Ontario also fell behind second-tier states like Pennsylvania, New Jersey, Washington, and Maryland, and historically we've been far ahead of them.

If this trend does not reverse quickly, Ontario will simply cease to be a place where entrepreneurs can set up shop.

What can the federal government do to help? Currently, the federal government supports venture capital through the labour-sponsored venture capital program or LSVCC, as well as through the Business Development Bank. As other sources of venture capital contract, the government should look carefully at ways to deliver more capital through these programs.

LSVCCs have been essential to Canada's entrepreneurs. Since 2002, they have supplied almost 30% of all of Canada's venture capital, more than any other source. For the youngest companies raising venture capital for the first time, LSVCCs have provided 40% of the money. This has enabled hundreds of young companies to ramp up their operations, creating thousands of high-paying jobs in cutting-edge sectors. The program is a uniquely successful partnership between the federal government, the provinces, and hundreds of thousands of individual investors, including over 500,000 people in Ontario and over 600,000 Quebeckers.

The financial security of all these individuals is tied to the success of the LSVCC program. The federal government can help the program to continue to prosper by enabling LSVCCs to raise more money. This can be achieved by raising the maximum annual investment in LSVCCs from $5,000 per year to $15,000. The cost to the federal treasury should be modest. A 2002 study shows the payback period to the federal government for its contribution to the program is only thirteen months.

Apart from helping LSVCCs and maintaining support for the Business Development Bank, the federal government can do many other things to help our young companies to succeed, and they're outlined in more detail in my written submission.

Enabling the growth and development of innovative companies must be one of our most important economic goals. A large and stable pool of venture capital is essential to achieving this goal, and I hope you will find our submission to be of assistance in formulating policies that will help our entrepreneurs access the capital they need to succeed.

Thank you.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Mr. Heller.

We'll continue with SenTax. Daniel Braniff is here.

Welcome, sir. Over to you.

[Daniel Braniff, Past Chairman and Co-founder, SenTax]

Good morning. My name is Dan Braniff. I'm representing SenTax here today, but I wear several hats. I'm also the chairman of the Georgian Bay chapter of CARP. There are 10,000 of us and about 400,000 in CARP, and I represent them here as well. I'm also the founder and past chairman of SenTax, but I'm most of all the representative or the liaison for nineteen organizations that have chosen pension splitting as their focal point and their issue.

You've heard from eight of these in your submissions. Several have presented to you in previous committee hearings, so I'm not going to try to repeat what they've already said. The issue, of course, is that we wish to have pension splitting for all registered retirement income, as we have now with CPP/QPP. Our argument is based on fairness and equality, and we believe it is substantiated by the Charter of Rights and Freedoms, section 15. We see pension splitting as an issue of family, particularly our generation, and we see it particularly as a women's issue, because women have suffered the most from this penalty.

The nineteen organizations I mentioned represent 2.4 million members. That's a significant force--possibly the largest organization of this kind on one issue ever assembled in Canada. If you're wondering who these organizations are, they are the Royal Canadian Legion, the Federal Superannuates National Association, and the various corporate pension workers' groups. They represent Quebec very strongly: FADOQ, which has 280,000 members in Quebec and represents seniors in Quebec. The list goes on, and I think it's on your record for referral.

We believe pension splitting has a universal appeal, because even you young people here--I exclude John McCallum--have to look forward to being able to retire with some degree of dignity some day.

I'm glad you're here, John, because I felt alone with this young group.

[The Chair, Conservative, Brian Pallister]

Perhaps you're alone in being glad he's here too.

[Voices]

Oh, oh!

[Daniel Braniff]

Maybe I'm really alone now.

If you look at these organizations, you'll find they represent all generations--predominantly seniors and pensioners, but all generations--because everyone has the right and the expectation to retire with some degree of confidence and security, when their time comes. As the principal founder of this movement, I'd be happy to answer any questions you have. I realize your time is limited, but I'm going to stick around, so if you have some questions that don't get answered, I'd be glad to answer them.

I like a challenge. I might be older than most of you, but don't worry about exciting my heart too much; it can take it.

We think you people in government--politicians, not just the ones in this room--have already recognized this as an issue that has to be dealt with. You've done it many times. Family law recognizes the rights and entitlements of both spouses to assets and pensions, and if you don't understand that, you probably haven't gone through a divorce, because divorces separate, and you can split.

CPP/QPP has recognized this. You're allowed to share--in fact, you're encouraged to share--your pension with your spouse. If you look at the website, it spells out that there's an incentive: you can save taxes. And when you introduced the spousal RRSP in 1985, you recognized there was an entitlement for that other spouse. The problem is we don't think you did it in the most universal way, because it discriminated against some people--people who had pensions other than RRSPs and people who couldn't afford it because of financial reasons. So we see it as a precedent. You've done it already, and what we're asking you to do is to do it right, now.

Thank you very much, Mr. Chairman.

[The Chair, Conservative, Brian Pallister]

Thank you very much, sir, for your presentation.

Thank you all for your presentations.

We'll begin with questions now.

Mr. McKay will commence with a six-minute round.

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

Thank you, Chair.

So many good presentations, so little time.

As the senior member on the committee--

[Voices]

Oh, oh!

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

--I'll ask Mr. Braniff the first question, and there are a couple of other questions I'd like to ask him.

Let me put it this way, Mr. Braniff. Canadian seniors are, as a demographic, among the most affluent in the world. They occupy, disproportionately, the upper 25% quartile of income and capital assets. Yet you say that income splitting, which would overwhelmingly favour that upper quartile, is a matter of fairness and equity. I'm hard pressed to know how the Government of Canada should be favouring what is already an affluent demographic over, say, groups like young families, or middle-income families, or single families, or things of that nature. So I'd be interested in your argument as to how you framed this question of fairness, and I appreciate that one of the arguments you will likely make is that when you're on a pension, your income is frozen. I appreciate that argument. Nevertheless, I think you'll agree with the premise of my question. I'd be interested in your response on the fairness issue.