Finance Committee on May 31st, 2006

[The Chair, Conservative, Brian Pallister]

Welcome, committee members. Welcome to our guests today.

Pursuant to the order of reference of Friday, May 19, 2006, we're dealing today with Bill C-13, an act to implement certain provisions of the budget tabled in Parliament on May 2, 2006. We are going to hear some presentations from our guests today, and we'll follow that up with questions till approximately 4:30 p.m., when a second panel will come forward for further presentations.

We'll begin with a representative from the Canadian Cancer Society, I believe, Mr. Cunningham.

[Rob Cunningham, Senior Policy Analyst, Canadian Cancer Society]

Thank you, Mr. Chairman, for this opportunity to testify here today.

First, let me express our support for a measure not included in this bill, and that was the budget announcement of significant funding for the Canadian strategy for cancer control. The Canadian Cancer Society has been extremely supportive of this initiative.

With respect to the bill, today is World No Tobacco Day, organized by the World Health Organization, and it is appropriate for us to express our support once again for the increase in tobacco taxes included in the bill to adjust for the 1% GST reduction. Had it not been for that measure, there would have been a decrease in cigarette prices across Canada. Given that higher prices are the most effective measure to reduce smoking among children, this would not have been a good thing. I urge all members to support that.

At the same time, national health organizations have called for a further increase of $10 per carton of cigarettes and the elimination of the loophole that allows lower taxes for roll-your-own cigarettes as measures to increase government revenue and protect public health.

There are a series of contraband prevention measures that could be implemented that would be beneficial, including asking U.S. authorities to shut down illicit manufacturing in St. Regis, New York, next to the Canadian border; to increase the minimum bond to $2 million for tobacco manufacturers; to revoke federal tobacco manufacturers' licences if a manufacturer does not have a provincial manufacturer's licence required in Quebec and Ontario; to prohibit the supply of raw materials to those manufacturers that do not have a federal licence; and to improve tax-paid markings on cigarette packages, as has been successfully implemented in California.

In conclusion, let me thank the government for introducing the tobacco tax measure included in the bill. Thank you.

[The Chair, Conservative, Brian Pallister]

Merci, monsieur.

We'll continue with a representative from the Canadian Federation of Students, Mr. Boyko.

[Ian Boyko, Government Relations Coordinator, Canadian Federation of Students]

Good afternoon.

The Canadian Federation of Students unites over 80 student unions in all provinces, and in all we bring together more than one-half million students at public institutions, big and small institutions, urban and rural.

Thank you, of course, for the opportunity to be here today to present some feedback on the 2006 federal budget.

Despite a healthy surplus, Budget 2006 made no headway on restoring transfers to the provinces for post-secondary education. By most estimates, these transfers fall short of 1993 levels by at least 20% on a per capita basis. Other federal initiatives such as the funding for indirect costs of research and the new infrastructure fund are not a substitute for core funding through transfers to the provinces. A budget amendment from one year ago was a promising step in the right direction. Bill C-48 was an important acknowledgment of the role of the federal government in improving access to post-secondary education.

However, the finance minister's answer to a question posed by Michael Savage during yesterday's hearings gives students and their families some cause for concern about the future of the Bill C-48 moneys. I think the minister is under the mistaken impression that a fund for infrastructure meets the objectives originally laid out for Bill C-48--it does not. The physical condition of our campuses is a distinct and pressing issue but should not be pitted as a priority against access to post-secondary education.

Budget 2006 also introduced a tax credit for textbook purchases. Let me be as clear as possible: this measure will not improve access to post-secondary education; in fact, it's unclear whether or not this public expenditure will achieve anything whatsoever. Tax credits are not available at the time when students and their families need money to pay for textbooks, or tuition fees for that matter, and tax credits' net benefit to students in real dollars is, quite frankly, insignificant.

Most importantly, tax credits are the worst way to allocate student financial assistance. They're blind to need and are useless to the vast majority of students, who aren't even on the income tax rolls.

The Canadian Federation of Students recommends that the federal government redirect moneys allocated to textbook, education, and tuition fee-related tax credits towards a national system of needs-based grants.

Thank you again for the opportunity to be here to express our opinions, and we look forward to your questions.

[The Chair, Conservative, Brian Pallister]

Thank you, Mr. Boyko.

We'll go to Monica Lysack, who is with the Child Care Advocacy Association of Canada.

Welcome. Please proceed.

[Monica Lysack, Executive Director, Child Care Advocacy Association of Canada]

Thank you.

My apologies for being late.

I, too, appreciate the opportunity to be here.

The new federal Conservative government says it developed this year's budget much like a typical Canadian family would approach their own budget. Canada is currently the economic equivalent of a family that has a steady income, a decent home, pays its bills on time, and holds a reasonable mortgage that is regularly paid down. Given these financial strengths, we at the Child Care Advocacy Association of Canada believe that as a key investment priority, a typical Canadian family would now ensure that all of its children are well cared for and educated.

Canadian families know that such an investment provides the best start for children now while it pays dividends for the future. So why is this federal government cutting funds that were specifically dedicated to developing quality early learning and child care services in communities across Canada? It's not because our country can't afford child care. As everyone knows, it provides a positive and prompt return on our investment. It's not because Canada already has a decent system in place, because study after study shows that outside of Quebec, Canada's inability to ensure families access to high-quality early learning and child care is an international embarrassment.

The federal Conservatives have made it clear that they believe there is little role for their government to support the care and education of our nation's greatest asset. This federal government is cutting funds that would support community-based child care because they think someone else should do it. The message seems to be that businesses and provincial and territorial governments, child care workers, and volunteers all need to do much more for families with much less support from the federal government. They're telling Canadian businesses that it's now their responsibility to deliver child care programs that meet all of their employees' child care needs--an idea that businesses, incidentally, are strongly objecting to.

Finally, by eliminating provinces and territories from the equation, the federal Conservatives are undermining provincial-territorial responsibility for ensuring that quality child care services are developed according to their communities' needs and priorities. Ironically, the provinces and territories are also being set up as the inevitable go-to guys when reality sinks in and businesses realize they can't build and sustain child care on their own.

The provincial and territorial ministers for child care who met here in Ottawa earlier this week expressed a united position on this issue. They have agreements that work, and they want the current funding commitment to continue.

It's not only the $1 billion cut that frustrates them. They're also frustrated by the lack of understanding from this government of how child care operates, as well as the inadequacy of a program whose aim is nothing more than to create empty spaces that will probably close because of the lack of operational funding.

In effect, the new federal government's approach to child care in this year's budget is akin to our equivalent moderate-income family's saying, “Sure, we can afford to fund our children's care and education, but we think someone else should do it for free”.

Risking their children's future is hardly the approach of the typical Canadian families that we talk to every day. Families recognize the important role that early learning and child care plays in supporting young families in their important role of raising our youngest citizens. Families are counting on our federal government to support parents and children by maintaining and building on the existing investments for early learning and child care services in communities across Canada.

Thank you.

[The Chair, Conservative, Brian Pallister]

Thank you.

From the Mining Association of Canada, Paul Stothart.

Please proceed.

[Paul Stothart, Vice-President, Economic Affairs, Mining Association of Canada]

Thank you, Mr. Chair.

I'm the vice-president of economic affairs for the Mining Association of Canada. MAC members account for most of Canada's production of base and precious metals, diamonds, and oil from oil sands.

With respect to the recent federal budget, there are three areas where we see very good progress having been made. There are also a couple of areas where we would like to see further progress and where we will be focusing our efforts in the coming year. I would be pleased to expand on these areas during the question and answer session.

The first positive relates to the changes made to the business tax regime. We welcome the reduction in the corporate income tax rate from 21% to 19% by 2010, and we welcome the elimination of the corporate surtax by 2008. If there's room to accelerate this timetable in a future budget, we would certainly welcome this as well. We also obviously support the elimination of the federal capital tax.

A second positive relates to what is in effect a two-year extension of the super flow-through share initiative aimed at mineral exploration. I'm now in the process of compiling statistics for our industry's annual facts and figures report. It's interesting to note that junior mining companies have increased exploration spending from $284 million in 2003 to $790 million in 2005, partly in response to this flow-through tax treatment.

A third positive of the recent budget relates to the issue of a common securities regulator and rests in the commitment of the finance minister to engage with provinces and territories on this issue on a priority basis. While this issue mainly affects our small and medium-sized companies, it is an issue that MAC also supports on behalf of our larger companies. Canadian companies face added costs, paper work, and time commitments because of the balkanized securities regulation structure that we have in Canada.

Thank you, and I look forward to further discussion on these issues.

[The Chair, Conservative, Brian Pallister]

Thank you, Mr. Stothart.

From the Wellesley Institute, we now have Michael Shapcott.

[Michael Shapcott, Senior Fellow in Residence, Public Policy, Wellesley Institute]

Thank you very much for the opportunity to appear today.

My name is Michael Shapcott. I'm a senior fellow at the Wellesley Institute, which is a research and policy institute. Our focus is on the social determinants of health, those factors that help people to become healthy and to remain healthy, and much of my work focuses on housing and homelessness in particular.

Of course, budgets are about priorities. The Wellesley Institute believes the most important priority for the Government of Canada is to build a healthy Canada. We're concerned that this priority is not reflected in the 2006 budget, nor is it listed as one of the five priorities for the federal government in its fiscal discussions with the provinces and territories.

The federal government has obligations to the people of Canada. One expression of those obligations is the international covenant on economic, social, and cultural rights, which was ratified by Canada about three decades ago.

A committee of the United Nations reviews Canada's compliance with this international obligation every five years. The most recent review was released on May 22, 2006, in Geneva, which was about eight days ago, and I've asked for a copy of this to be tabled with the committee. Considering the normally restrained language of international diplomacy, this latest review was powerful and it was direct. In 73 detailed paragraphs, the UN committee found that the Government of Canada has failed in its obligations to women, aboriginal people, children, and low-income people generally.

In paragraph 62, in particular, the committee found that Canada's affordable housing crisis is “a national emergency”. In the face of what the United Nations is calling a national housing emergency in Canada, this federal budget of 2006 offers to the people no new spending and no new programs. The government has promised to finally allocate $1.4 billion of the $1.6 billion in housing spending authorized by Parliament last year in Bill C-48. That's welcome news, but it's not new spending.

Budget 2006 contains no commitment to renew and enhance the vitally important federal homelessness program, which provides services and shelter for more than 250,000 Canadians who experience homelessness annually. Budget 2006 contains no commitment to renew and enhance the equally important federal housing rehabilitation program that helps upgrade substandard or abandoned housing. Budget 2006 contains no commitment to renew and enhance the federal-provincial-territorial affordable housing initiative that was launched in 2001.

This program has been painfully slow to roll out, especially in Ontario and the Atlantic provinces, but it does offer some hope to the 1.5 million Canadians who are trapped in the nation-wide affordable housing crisis.

In addition, the federal government has said it's going to cancel the EnerGuide for the low-income housing program. This would have cost the government about $550 million, but it would have saved at least $1 billion in energy costs, which is good for low-income people and for the environment. It would have leveraged countless millions in additional housing spending, which is a great investment in local communities.

The federal government can finance a significant portion of its housing obligations through prudent reinvestment of the federal government's own massive housing surplus. The Wellesley Institute prepared a submission to the finance committee on this matter earlier this week, and I'd be pleased to provide further information for committee members.

I'd also be pleased during question time to speak more about the UN decision that came out last week and to speak about our recommendations on housing priorities for Canadians.

Thank you.

[The Chair, Conservative, Brian Pallister]

Thank you, sir.

And now, from Imagine Canada, we have Teri Kirk.

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

Good afternoon, Mr. Chairman, members.

My name is Teri Kirk, and I am Vice-President for Public Policy and Government Relations at Imagine Canada.

Imagine Canada is the largest intermediary organization working in what is sometimes called the community non-profit sector and sometimes called the voluntary or charitable sector. The sector is larger and more diverse than often people realize. There are about 160,000 incorporated non-profit organizations in Canada, of which about half are registered charities. There are about 750,000 unincorporated community non-profit organizations and about six and a half million volunteers in Canada.

We would like to comment today on subclauses (1) to (3) of clause 51 under part 2 of the bill, which are the provisions eliminating capital gains tax on gifts of listed stock and environmentally sensitive lands to registered charities. The sector is very supportive of these tax measures, which both supplement government financial support for the sector without the need to increase taxes and of course spur taxpayers' willingness to give. There have been some very high-profile examples in the media of the sort of giving that has been unleashed since these measures were announced.

When the capital gains tax was cut to 50% in 1997, Revenue Canada found that donations increased from $69 million a year to $200 million a year, about a threefold increase over a three-year period. It is anticipated that donations into the community non-profit sector will increase by about $250 million to $300 million per year as a result of the measure. It is therefore our recommendation that the provisions proceed.

There was provision in budget plan 2006 that if certain obstacles could be addressed, the measures would also be extended to private foundations. We are working in the sector to address those obstacles to ensure that private foundations can be included the next time around.

Thank you.

[The Chair, Conservative, Brian Pallister]

Thank you to each of our witnesses for their presentations.

Before we move to questions, I will quickly remind members of the standing orders we've agreed to, the purpose of which is to make sure that all or as many members of committee as possible are able to get a chance to ask questions. We have time limits that I would ask members to respectfully observe.

I will begin now with questions from Mr. Savage. You have seven minutes, sir.

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

Thank you very much, Chair.

Thank you to all of you for taking the time. I know some of you on short notice have come to discuss the budget and its implications.

I'd like to start with Mr. Boyko. You mentioned the questioning we had yesterday with the minister. I've had the chance to meet you over the past year as chair of the government caucus on post-secondary education and research. While we don't agree on everything, I think in general we're looking for the same kinds of things.

I want to talk about Bill C-48, because I think there is a significant question of where the money is going that is allegedly Bill C-48 money. I would remind members that Bill C-48, specifically on post-secondary education, indicated that the money was for:

supporting training programs and enhancing access to post-secondary education, to benefit, among others, aboriginal Canadians, an amount not exceeding $1.5 billion.

Those are the direct words from Bill C-48. But there seems to be confusion, because when I spoke about Bill C-48 with Finance officials some weeks ago, their first thought was, “I think it was a billion.” Well, it wasn't a billion; it was $1.5 billion. The minister's initial reaction yesterday was that it was $1 billion. The confusion I think is coming from the fact that they're putting $1 billion into infrastructure for universities.

The question is, is that enhancing access? We've come a long way in the last number of years in Canada in putting money into research and innovation and into infrastructure. It's been very important, and we need to make sure we keep that going. But it seems to me that in Canada the issue now, more than ever, and in fact the primary issue for universities—post-secondary, including community college and skills upgrading—is the issue of access. In the last number of years, we have in fact put a lot of money into research and infrastructure, but I don't think we've increased access for students, particularly the lowest-income students.

I'd like to ask you your view, because I suspect you were probably involved and very closely watching, at least, the Bill C-48 discussions between the New Democrats and the Liberals a year or so ago. I'm wondering what your thoughts are about the Bill C-48 money and how it's being allocated.

[Ian Boyko]

Thank you for the question, because it's a good one.

If the finance minister wants to allocate funds for infrastructure, then that's great. There is a problem on our campuses in terms of the physical infrastructure, but the finance minister shouldn't say he's fulfilling the obligations under Bill C-48, because you read it out and it's crystal clear that it's about enhancing access. So we would like to see the federal government sit down with provincial premiers who are clamouring for this increased funding that can go towards improving access.

It's stalled in some provinces, but there's a movement in Canada--and I might add, led by Quebec--to keep tuition fees low, to reduce them and to freeze them. That can only be done I think with the support of the federal government. The infrastructure fund included in the federal budget in 2006 will do nothing to support that. We're looking for the federal government to meet its obligations both within existing legislation, Bill C-48, but also to just get us back to where we were at the beginning of the 1990s in terms of core funding to the provinces.

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

Would you agree that there is information that indicates that in spite of the increased money that has gone into research and innovation, and even infrastructure, it has actually been more difficult for low-income students to access post-secondary education?

[Ian Boyko]

There is a substantial gap between the participation rates of students from low-income households and middle- and high-income households. That gap is a substantial one, and it's not going to be closed by building a new classroom here and there. It's going to be closed by making a substantial and ongoing year-after-year annual investment in transfers to the provinces and by building the best possible student financial aid program, founded on grants. Unfortunately, there's nothing within this budget that points us in that direction.

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

What the minister actually said yesterday was that by creating more infrastructure, one creates more access. I don't think that's correct. I think you agree that's not necessarily the case.

[Ian Boyko]

No.

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

First of all, are you familiar with the economic update in the fall, which the Liberal government brought in, the fall update?

[Ian Boyko]

The economic and fiscal update, yes.

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

Are you familiar with some of the benefits that were in there for low-income students, persons with disabilities, and aboriginal Canadians?

[Ian Boyko]

The expansion of the existing grant, yes.

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

The Canada access grant.

I'm just trying to put a comparator between what we had proposed in November and what the government is proposing now.

I think Canadians care, and in answer to Mr. Turner's sarcastic question, I think students care, because the issue is access and there's nothing in this budget that addresses access.

Can you talk a little bit more about the tax credit and how wonderful that will be in enhancing access for low-income Canadians?

[Ian Boyko]

Again--and I'm not suggesting you are--we don't have to pit infrastructure support against access. I think Canada is in the position to do both, invest in infrastructure maintenance and improvements and enhance access.

Frankly, I think there were a number of measures in the fall economic and fiscal update that should and could have been maintained. I'm thinking primarily of the expansion of the low-income grant that you're referring to. But there was also a substantial increase in the number of scholarships available to graduate students that has disappeared. We would like to see that find its way back into the framework.