Finance Committee on May 31st, 2006

[Andrew Thomson (Minister of Finance, Government of Saskatchewan]

Thank you very much, Mr. Chairman.

I appreciate the opportunity to appear before the committee today.

I understand it is somewhat unusual for provinces to appear before parliamentary committees, but I think given that we have a new government in place and taking office after a very active period of federal-provincial engagement, and that government being a minority one, it is important to make sure Parliament stays abreast of key federal-provincial issues.

The federal budget marks a change in direction, obviously, in terms of federal-provincial agreements that have been in place, notably with the end of the previous child care agreements that were in place, the end of the labour market agreements that had been signed, and a number of other changes that appear to be in the works.

I believe it is important to make sure Parliament continues to watch closely several key issues in the budget as it moves forward both this year and in future years. Key issues we would identify from a western Canadian perspective and Saskatchewan's perspective would include encouraging Parliament to support the federal government as it moves forward with the renewal of the agricultural programs, both in terms of the renewal of CAIS and the development of a true, stable, long-term national farm program.

We are encouraged by what we are hearing from the federal finance minister pertaining to equalization and the renewed dialogue around the fiscal imbalance. I think it will be extremely important that parliamentarians bring themselves up to speed on the issues pertaining to equalization and our ability both to resolve the historic imbalance in the equalization formula, while at the same time moving forward to address the fiscal imbalance issues that have been difficult for the high-population provinces of B.C., Quebec, and Ontario.

We need to do a great deal of work as provinces, as a federal government, and as legislators across this country on the issues affecting aboriginal people. There is a great deal of concern in the country today about what will come forward as a result of the decision not to proceed with Kelowna and about what will replace it by way of a new set of programs to deal with the problems facing first nations aboriginal, Métis, and Inuit people.

It is our view that the direction the federal government has taken, given its election commitments, is on balance worth supporting. We are obviously concerned about a number of the issues I've outlined pertaining to early learning and child care agreements. We have yet to fully comprehend what the departure on the climate change policy will be. We have yet to see what the impact on the renewed infrastructure agreements will be. And there is a growing concern, as all members will know, across the country about exactly what the pressure on provincial budgets will be as a result of the changes in the agenda from the so-called “tough on crime” initiative. We'll need to be mindful of that.

Certainly from Saskatchewan's perspective, we look forward to working with the federal government and Parliament on these issues.

[The Chair, Conservative, Brian Pallister]

Thank you, sir.

Mr. Savage, you have five minutes.

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

Thank you, Mr. Chair.

The first thing I'd like to do is congratulate the government. I agree with Mr. Peacock that the elimination of the capital gains tax on donations to charitable foundations is a very positive step. I think it's good.

I also want to indicate support for the national philanthropy day centre. Terry Mercer, who's a big proponent of it, has already got me on that, as has Teresa MacNeil from Nova Scotia, and others.

That's it, in terms of compliments for the budget from me.

I'd like to ask Mr. White about Bill C-48. You referred to Bill C-48. In your view, is the $1 billion of money in this budget going to post-secondary infrastructure aligned with what Bill C-48 intended?

[Toby White]

I would say no. Infrastructure is very important to our post-secondary institutions. You would know that, coming from Atlantic Canada; there are some serious infrastructure problems there. But if you look at the language of Bill C-48, it was clearly intended to improve access.

I would disagree with the minister's comments of yesterday that infrastructure funding naturally leads to improved access. I don't think that would be the case, and I think we do need to have some focus on improving accessibility as well as looking at funding infrastructure.

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

You referred to previous commitments to expand the Canada access grant. Were you talking about the fall economic update?

[Toby White]

Yes. There was a commitment in the economic update to expand the Canada access grant. Currently, it's only for the first year of studies for students from low-income families. There was a commitment to expand it to four years of study, which is something we would support.

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

So if we had passed it, it would have put money into access for low-income Canadians.

[Toby White]

Yes. That's something we're looking at hopefully seeing come from the government, an expansion not just to a full four years of study but also to look at covering a more comprehensive portion of students' expenses.

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

I'd like to ask Mr. Battle something. I had the opportunity to be at a meeting where he presented, some time ago, on the universal child care benefit, and I've seen some of the statistics and I think frankly they're startling in terms of who gets to keep the money and who doesn't.

I'll give you the opportunity to comment on that as much as you would like to, but--and this may seem harsh--my view of this budget is that it's very mean and that in Canada in the last number of years, under both Progressive Conservative and Liberal governments, even in difficult economic times there has been an effort to at least try to equalize the difference between the richest and the poorest. This has not always been done successfully, not always well enough, but the child tax benefit, for example, has in fact reduced child poverty significantly, I believe.

I'd like to get your view on this budget. Is this a change in terms of the way Canadian governments of all political stripes have viewed budget making?

[Ken Battle]

There are aspects in the budget, particularly things like some of the measures for disability policy, that I think are actually sensible and progressive, and I would commend the government on this, so I'm not condemning the whole budget.

You're absolutely right, though, the trend in recent years in the area of child care and child benefit has been to improve and increase benefits for low-income families, as you've said. The Canada child tax benefit, the federal benefit, reduces the rate of child poverty by about one-quarter, which is a phenomenal success.

When we look at the distribution of income in Canada over time there has been, particularly after recessions, a widening gap between rich and poor in terms of market income. The government programs like child benefits remarkably reduce that gap; in fact, we don't take enough credit for that kind of thing.

The difficulty I have with this particular measure is that it turns the clock back on progress that we've been making. The Canada child tax benefit and the national child benefit had all-party support, in fact all-governmental support, when those reforms were being implemented. Yet this program takes us back to the child benefit system we had in the early 1980s with its bizarre distributional consequences. The tragic thing is that it would have been so simple and such a win-win for this government to deliver it through the existing Canada child tax benefit. Not only could that have given a larger benefit to families, but it would have further closed the gap between where we want to get to in child benefits and where we're going to be.

In fact, the new program is going to be implemented through the existing Canada child tax benefit machinery, so I find it really hard to understand why we would turn the clock back when there's absolutely no need to do so.

[The Chair, Conservative, Brian Pallister]

The next speaker will be Mr. St-Cyr.

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

I'd also like to speak with Mr. Battle.

I really liked the chart that you presented to us, in which we see the more or less unusual changes in the net benefit to individuals based on their income, depending whether they belong to a single-parent family, a family with only one person working or a family in which both parents work.

The Bloc québécois proposed that the government grant a progressive tax credit. Although I don't have the exact figures, in Ontario, it could amount to a maximum of $1,200, for incomes up to $35,000. Then the figure would gradually decline to a universal floor of $700. That would be based on family income, whether it be for a single-parent family or for a two-parent family. Do you think this solution would be fair and more effective in helping parents who need it and who want to send their children to a child care service?

[Ken Battle]

Absolutely. I think the concept you're sketching out is exactly the same as the concept and proposal that we've made.

We've mentioned using the Canada child tax benefit because it's a $9.5 billion program; it's one of the largest anti-poverty weapons at the Canadian government's disposal. That program is already being used to deliver a number of provincial child benefits, it delivers the child disability benefit. It is a geared-to-income program like you're suggesting the Bloc is proposing--the amount you get depends upon your level of net family income.

For all intents and purposes, our proposal is actually the same as yours, except that we're saying to deliver it through an existing program, which is a refundable credit.

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

All right.

I'd also like to have Ms. Wilson's opinion on the Bloc québécois proposal to assist those who are in the greatest need, who have lower family incomes, rather than to wind up in a situation in which, as would be currently the case, a family with an income of $200,000 or more would get the full benefit where one of the two spouses doesn't work.

Wouldn't the Bloc's proposal have been fairer?

[Leslie Wilson]

I'm not 100% sure of all the tax implications, but I'm also somewhat confused, because most of the provinces already have assistance for lower-income families, especially Ontario, which I can speak mostly about. We have a great number of customers who do not pay anything for day care right now, and that's with two parents working.

So I don't know if I can accurately answer the tax consequences of that. I'm sorry.

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

Another one of the reasons we proposed a refundable tax credit was respect for the jurisdictions of Quebec and the provinces. Mr. Battle may have an opinion on that subject. Is a child care service support program a social program, and thus a program that essentially comes under provincial jurisdiction? If that is the case, the present allowance is an interference in areas of provincial jurisdiction.

[The Chair, Conservative, Brian Pallister]

Mr. Battle.

[Ken Battle]

The universal child care benefit is an interference with provincial jurisdiction in the sense that it affects provincial revenues. It's a benign interference; the provinces actually collect more tax revenue from the new benefit.

The difference with a refundable credit, as you probably know, is that there are no interference effects at all, because it's a purely federal transfer. What you see is what you get. It's a non-taxable benefit, and we think that's the way to go. It doesn't interfere with provincial competence, it's a transparent program, and people can actually see what they're getting.

[The Chair, Conservative, Brian Pallister]

Mr. Del Mastro, it's your round.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you.

I guess I'll start with Mr. Van Iterson.

I listened intently to what you had to say. One of the things you highlighted in your discussion was the $1.6 billion that you indicated is going as subsidies to the oil companies for exploration, which actually extends the industry.

I'm just wondering if you have any idea how much we receive in tax dollars from the oil companies in Canada, into the federal coffers.

[Andrew Van Iterson]

I don't have a specific number on that. It was $1.4 billion, on average, for oil, about $100 million for nuclear, and about another $100 million for mining exploration.

[Dean Del Mastro, Conservative, Peterborough, ON]

Right. That's actually a tax incentive that we're giving for exploration that will extend the industry.

I'd just like to indicate to you that I've heard this argument from one of the opposition parties in the House. It is a one-sided argument that fails to take into account exactly how much money we receive from this industry, and it's a lot. You might want to look into it.

Ms. Wilson, with respect to day care, first of all, I appreciate that you did refer to it a couple of times as “day care”, because I would make the contention that child care actually is much broader than day care is. It can involve lots of things, such as looking after your children in forms of ensuring that they have food and clothing. This child care benefit the parents can use for whatever they wish. It's not strictly for the purposes of day care.

You did make one comment, and I was going to ask if you are aware that day care expenditures are tax deductible already for federal tax. So the fact that they would be receiving receipts from an organization like yours, which would then be tax deductible, would pretty well be a wash. You had indicated that you'd like to see the benefit tax-free if it was used for day care.

[Leslie Wilson]

I think I would like to see that the $1,200 be used as an incentive for parents to go to a regulated setting.

There are still too many parents who are uneducated in day care, and sometimes they make the wrong choices based on cost. So I think if we are starting to supplement their day care costs, let's move them towards a regulated, licensed setting.

Again, is it fair to double supplement somebody whose day care is already being paid for? There should be an incentive for people to use licensed care.

Also, the federal tax credit for day care isn't enough any more. With average day care costs upwards of $200 a week, it's lagging behind.

[Dean Del Mastro, Conservative, Peterborough, ON]

All right, thank you.

Mr. Thomson, thank you for attending; it's a long way to come.

I have a couple of questions.

You mentioned the CAIS program, which I have to tell you is so incredibly unpopular in my riding. One of the big problems with CAIS is that it unfairly distributes money. Certainly it's not getting to the ground-level producer in the way it was intended. There are some big companies getting a lot of money; even the Saskatchewan wheat board gets quite a bit of money from CAIS. We have indicated that we would like to move towards a fairer income stability program. I'm wondering, would you be supporting a look at the CAIS program, in making it a much fairer program for producers?

[Andrew Thomson]

We certainly believe that CAIS is a fundamentally flawed program. It doesn't work in the best interests of producers, it's overly bureaucratic in its approach, and I suspect it's probably been better for the accounting industry than the farming industry. It's something we need to look at.

One of the big issues that remains—as all of us recognize, I think—is the unpopular, and many of us would argue unfair, 60-40 split that was put forward in agricultural financing by the former Liberal government. There remain concerns about that.