Finance Committee on Dec. 7th, 2007

[The Chair, Conservative, Rob Merrifield]

But the principle of the Canada Health Act doesn't oppose that, so that's my conflict. The principle of the Canada Health Act is that we have a single-payer system. The delivery of the system is not talked about in the Canada Health Act. That's why I wanted to clear that up for the committee.

So what you're suggesting is that you're okay with the single payer system, regardless of who delivers it? Or do you want to shut down any private delivery?

[Catharine Laidlaw-Sly]

Oh, okay.

Perhaps the original writer of this brief used an unfortunate choice of words. We have always wanted a single-pay system with the guarantee that it's the taxpayers' money that is being used to fund the system. Every bit of work that becomes privatized becomes an unfair cost to low-income people.

[The Chair, Conservative, Rob Merrifield]

I'm just trying to discern whether you're against the Canada Health Act or for it.

[Catharine Laidlaw-Sly]

No, we have supported the Canada Health Act.

[The Chair, Conservative, Rob Merrifield]

Okay, then you're agreeing to some private delivery options within the Canada Health Act.

[Catharine Laidlaw-Sly]

Provided they're not coming out of the user's immediate wallet. This is an unfair burden.

[The Chair, Conservative, Rob Merrifield]

That's about paying for the system, not about delivery of the system. I just wanted to clarify that.

I have another quick question.

Mr. Brenders, you talked about $2 million going to $10 million. I'm wondering where that number actually came from?

[Peter Brenders]

It's a reflection of the cost of operation. If you increase $2 million by just the CPI in the last 22 years, you're going to get a little over $6 million, almost $7 million, but it's more a reflection of the cost of research today. When the $2 million was set in 1985, it kind of reflected the operation of the business. Today our companies are spending $10 million to $20 million a year in terms of their research. In retrospect, we should have said $2 million to $20 million.

[The Chair, Conservative, Rob Merrifield]

That's what I was wondering.

[Peter Brenders]

We hedged our bets on that one way too early. We'd welcome a more aggressive approach by the committee.

[The Chair, Conservative, Rob Merrifield]

I see. I was just wondering how you came up with that.

Let's say that we did this. What do you expect would happen?

[Peter Brenders]

What we'd expect is a bit of a cost, but we'd also see sort of a net positive generation. The Department of Finance's own paper shows that every dollar they spend creates $1.11 back, and I think that's a bit of an understatement. We heard Dr. Martin's estimate, which was even more than that.

More to the point, what we're going to see are more jobs. We are going to see companies that are going to stay in Canada longer. We're going to see more investment in our Canadian companies. Our industry will grow, and we will maintain and hopefully build on our leadership in biotech. And that's going to touch all our industries.

[The Chair, Conservative, Rob Merrifield]

“A bit of cost” is an interesting term.

[Peter Brenders]

It is $200 million.

[The Chair, Conservative, Rob Merrifield]

Okay, thank you very much.

Those are all the questions I have.

I thank the witnesses for coming forward and for presenting before the committee.

With that, we'll have a quick break as we reshuffle and get prepared for the next groups that we have.

[The Chair, Conservative, Rob Merrifield]

We'll call this segment of the meeting back to order. We have a full panel in front of us, so we hope you'll keep your time to five minutes. I'd encourage you not to try to sneak that extra minute and a half, which is so traditional. Let's try to keep this to five minutes.

We'll start right off the bat with Bioniche Life Sciences Inc., and we have Rick Culbert.

Mr. Culbert, the floor is yours for five minutes.

[Rick Culbert, President, Food Safety Division, Bioniche Life Sciences Inc.]

Mr. Chair, members of the committee, on behalf of Bioniche Life Sciences, thank you for this opportunity.

Bioniche Life Sciences is an innovative Canadian biopharmaceutical company based in Belleville, Ontario. Our mandate is to act on innovation and to improve the quality of life. We are publicly traded, invest heavily in research and development, and are currently employing 200 people in highly skilled, science-based jobs.

I'm here to speak about a vaccine against E. coli O157:H7, a deadly bacteria that continues to affect Canadians and consumers worldwide. The associated disease was originally termed “hamburger disease” as outbreaks were traced back to undercooked hamburger. It's hard to believe this was first identified 25 years ago, and yet huge recalls of hamburger still occur. This germ can also be present in produce, as you may recall the outbreak due to contamination in spinach in 2006.

Of greatest prominence, however, would be the tragic outbreak in Walkerton, Ontario, in 2000. Thousands fell ill, seven died, and 27 will never return to normal health, all due to this bacteria. At the time, governments at all levels vowed to ensure that tragedies such as Walkerton never happened again.

The development of this vaccine resulted in an international award, and it is truly an across-Canada success story with genuine thanks to R and D funding from the Government of Canada. Initial discovery: UBC. Scale up: Alberta Research Council. Testing: VIDO at the University of Saskatchewan. Commercialization: Bioniche Ontario. The Bioniche research group is based in Quebec and we are considering some supplementary manufacturing in P.E.I.

Ruminants, particularly cattle, are the primary reservoir of this E. coli as these animals have no receptor for the bacteria's toxin. Consequently, this strain lives within the intestines of cattle without any ill effects to them, and exits their body regularly in the manure. When people are exposed, this germ causes common diarrhea in most. However, intestinal hemorrhage and severe bloody diarrhea develops in about 10% to 15% of cases, and 5% to 10% of these progress to kidney failure and/or death.

Perhaps the scariest hidden threat is how this E. coli, when present in water, can be drawn up through the roots and be inside fresh produce such as spinach and lettuce. Consumers should not have to fear that fresh produce could cause disease.

Although this innovative vaccine could easily be defined as a public health vaccine, as it reduces the public health risk, it is not given to the public but, alternatively and more strategically, to cattle. This way the vaccine can work to prevent the E. coli strain from entering the environment and the food and water supplies right at the source.

This breakthrough could not come at a better time. Just recently the CFIA recalled numerous beef products, and immediately prior to this was a huge recall for 22.7 million pounds of hamburger in the U.S.A. that was linked to Canadian beef. Needless to say, this attracted the attention of the USDA, and the negative publicity was yet another blow to Canada's beef industry, which frankly is still struggling to recover from BSE or mad cow disease.

An independent economic report estimates that vaccinating Canada's entire national herd would provide a two-to-one return on investment, with benefits of $63 million--a $30 million reduction in health care costs and a $33 million benefit to the agricultural economy. Canada is currently the only country in the world where regulators have granted cattlemen access to an E. coli O157:H7 vaccine. One might assume that cattlemen would quickly move to vaccinate their animals; however, it's not that simple, and hence the reason for this presentation.

Cattlemen receive no direct benefit for incurring this cost. Unlike animal health vaccines, this vaccine will not benefit cattle in any way. Canadian cattlemen are willing to administer the vaccine, but really cannot justify incurring any added expense without an offsetting increase in revenue. A Government of Canada program that encourages adoption of the E. coli O157:H7 vaccine over a period of three years would provide leadership for the agricultural sector, use innovation for the benefit of public health, and position Canada as a global leader in food safety. The goal of this program would be to vaccinate the national herd by 2010.

I'm asking this committee to recommend that $50 million be allocated in the next federal budget to facilitate adoption of a cattle vaccination program over three years. After three years, the benefits of inoculating cattle against this E. coli are expected to be readily evident and justify continuation based on normal marketplace forces.

In summary, this Canadian vaccine is a world first and a shining example of innovation. Widespread adoption will position Canada as a global leader in food safety and provide much needed assistance to the agricultural sector, particularly the beef industry. It will also preserve consumer confidence in Canadian food and benefit public health.

Thank you. I'll be pleased to answer any questions.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll get to the questions as soon as the panellists are all done, but we'll now move on to the Air Transportation Association of Canada. We have Sam Barone, president and CEO.

The floor is yours. You have five minutes.

[Sam Barone, President and Chief Executive Officer, Air Transport Association of Canada]

Thank you, Mr. Chairman.

Good morning, Mr. Chairman, and ladies and gentlemen. My name is Sam Barone. I am the President and Chief Executive Officer of the Air Transport Association of Canada, an organization which represents commercial aviation in Canada.

Before I begin my formal remarks, Mr. Chairman, allow me to apologize for the lack of translated copies of my remarks. We will be making those available as soon as possible.

Indeed, it is an impressive and important system that we are talking about today, the commercial airline system. Every day our members, representing companies as diverse as Air Canada, WestJet, Air Transat, as well as regional players like Air Québec and First Air, connect tens of thousands of Canadians and their products to each other and the world. Put simply, commercial aviation is a vital input to every segment of the Canadian economy, in particular travel, tourism, and trade.

As you might imagine, Canada's commercial aviation industry very much welcomes this theme of prosperity insofar as our industry is being dragged down by a highly punitive, industry-specific taxation regime that limits investment in new service and fair options for Canadians. Instead of enacting policies designed to spur such investment, the aviation industry in this country and our passengers are being asked to pay additional input taxes that drain approximately $0.5 billion a year out of our sector and the rest of the Canadian economy.

The airport rent regime continues to stand out as the most egregious example of penny-wise pound-foolish policy. Every year the Government of Canada collects between $200 million and $300 million in rents from not-for-profit airport authorities for simply having the facilities that they entirely built and paid for on crown land.

Let us recall that the Government of Canada transferred control of these assets to local authorities in the 1990s as a deficit-fighting measure. Transport Canada used to lose millions of dollars a year running these airports and had no financial means to invest in the upgrades. In one fell swoop, they transferred complete responsibility for the airports and their employees to these local authorities and absolved themselves of financial responsibility, while simultaneously guaranteeing themselves a perpetual revenue stream. To date, these airports have collectively been valued at over $295 million, when they were transferred, and have paid over $2 billion in rent to the crown. Toronto alone has paid over $1 billion.

While we clearly think it is only proper to eliminate the airport rent policy entirely, Canada joins Peru and Ecuador as the only developed nations with an airport rent policy regime. At the very least, we think this committee ought to immediately recommend that the rent formula used to calculate payments to the crown not include debt-servicing costs.

The air travellers security charge represents another critical element of taxation policy deserving of reconsideration. Although some may challenge my characterization of this fee as a tax, as there is a service provided in return, I would humbly suggest that our passengers are not actually receiving a unique service from which only they benefit. In fact, aviation security is clearly in the broader national interest. Securing our skies from threats, internal or external, is central to any country's broader national security plan.

In audited financial statements released by the Department of Finance this past summer, the air travellers security charge shows a surplus of revenue over expenses of $80 million. Since it's inception in 2002, we estimate that the federal government has collected approximately $200 million in excess revenue from this charge, which was used by CATSA to provide the screening services. This is, pure and simple, overtaxation. It's unfair to our passengers and shippers, and it should stop.

The last item of industry-specific taxation policy that should be reconsidered is the federal fuel excise tax. Originally introduced in the 1980s as a temporary deficit-fighting measure, this surcharge imposes a 4¢-per-litre levy on jet fuel, in addition to other such levies imposed provincially across the country. This rate is almost four times the rate applied in the United States, our largest bilateral aviation partner, where the charge stands at 4¢ a gallon or 1¢ per litre. We estimated last year the Government of Canada took in over $100 million from this tax, and with fuel approaching $100 a barrel, this is a very regressive one indeed.

In regard to all of these industry-specific taxes in our sector—rent, the security charge, and the fuel excise tax—we suggest that this committee ask one fundamental question: should government tax the inputs of doing business, as they are doing now in the aviation sector, or should they instead help lower the costs of doing business to encourage a healthy competitive industry, which should then be taxed like other industries on the outputs of their business activities, namely profits and wages?

You should receive, Mr. Chairman, a very receptive audience from the Minister of Finance. In various government policy statements, programs and initiatives, we hear the right kind of messaging that is very much reflective of what we are calling for here today. Minister Flaherty stated in his last budget that the government wants to create an infrastructure advantage for Canada as part of its Advantage Canada plan. However, they are perpetuating the single greatest infrastructure disadvantage for Canada through its rent policy.

If we can agree that developing gateways to move goods efficiently from overseas through North America is a worthwhile exercise, why is there no similar vision to facilitate the movement of goods and people through our airports? Are we just prepared to let Toronto and Montreal be beaten out by the Buffalos, Detroits, and Plattsburghs of this world when it comes to connecting travellers?

If the global commerce strategy is an important tool to identify and target new international competitive opportunities for Canada, why in our industry do we continue to permit security charges and fuel taxes that are out of line with what our international competitors are charging?

Finally, if we all agree that open skies and increased global liberalization is a worthy goal for our aviation sector--and let me stress, Mr. Chairman, that we definitely agree with that goal--why are we charging ahead with one hand tied behind our backs?

We are proposing--

[The Chair, Conservative, Rob Merrifield]

Very quickly.

[Sam Barone]

We are proposing that this committee recommend that the Minister of Finance actively seek out and destroy policy barriers to growth and competitiveness in this budget.

In short, we agree with this vision for growth and we want in.

Merci, monsieur le président.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

I would just let the committee know that there's nothing like an Olympian to draw cameras, and we have cameras in the room. As long as nobody picks their nose at an inappropriate time, we'll get through this fine.

I want to say welcome and thank you for coming home to Mr. Alex Baumann with the Canadian Olympic Committee. The floor is yours for five minutes.

[Alex Baumann, Executive Director, Road to Excellence Program, Canadian Olympic Committee]

Thank you. The pressure is on.

Good morning. I'm Alex Baumann, the executive director of the Road to Excellence program, and I'm here on behalf of the Canadian Olympic Committee.

I would like to begin by thanking you for inviting us to the prebudget consultations of the Standing Committee on Finance.

I'm here to ask you to support the allocation of $30 million annually in the next budget in support of the Road to Excellence program, designed to help our Summer Olympians compete with and win against the best in the world.

Less than one dollar per Canadian a year will create role models who will inspire activity in our youth and put them in recreation centres instead of malls. Less than one dollar a year will unite this nation as we share in the pride of our athletes' achievements from coast to coast. Less than one dollar a year will help create heroes who are a metaphor for excellence in all dimensions of Canadian life.

I would like to share some of my insights as a former Canadian Summer Olympics gold medallist.

During my swimming career, Canada's team was strong and competitive with the rest of the world, but Canada has failed to hold its position in relation to other countries. In recent years, every other G8 nation has significantly increased its investment in sport because they recognize the social and health benefits of that investment. Sadly, Canada's support for sport has not kept pace with these nations and we lag far behind in funding high-performance programs that allow our kids to reach their maximum potential.

I was proud to represent Canada during my competitive career, as are athletes today. Canadian athletes want to be the best in the world, and there is a renewed focus on excellence in this country.

When I decided to return to Canada last year after helping build Australia's exceptional high-performance sports system, I made a commitment to Canadian summer athletes that I would try to give them every opportunity to succeed on the international stage.

But I can't do it all myself, and neither can our athletes. As you all know, the Canadian government and the Canadian Olympic Committee work hand in hand to help Canada's Olympic athletes perform at the international level.

This partnership has to be a priority for Canada through the Road to Excellence program. The program is unique and consistent with the government's objective of implementing shared responsibility structures. It relies on a partnership between the Canadian Olympic Committee, the Canadian Paralympic Committee, private sector partners, and the federal government to deliver high-performance summer sports programming and Olympic podium results in an accountability framework that provides a demonstrable return on investment for Canadian taxpayers.

Road to Excellence is a program that will give Canada's most talented athletes leading-edge support services, technology, equipment, science, and coaching in both daily and competitive environments to do this country proud and continue to inspire Canadians to achieve excellence, pride, and health in sport.

I'd also like the members of this committee to consider the fact that every Canadian on an Olympic podium means more community enrolment in sport. Let me give you an example. When the Canadian women's hockey team won gold in Salt Lake City in 2002, community enrolment in girls' hockey increased by 12% the following year. Kyle Shufelt's gold medal in Athens in 2004 inspired explosive growth in men's gymnastics throughout Canada.

Our athletes want to achieve podium results, and I want to see more young people committed to sport across this country. I want those who have the talent and the dreams I had to get the support they need and deserve to climb the podium for their country after years of hard work and sacrifice.

Increased community involvement in sport is consistent with the government's agenda of promoting sport through the sport tax credit and ParticipACTION. It is consistent with recent recommendations of the health committee, the Public Health Agency, and Health Canada to remedy the obesity crisis Canada is facing. In fact, last year the health committee presented a report to Parliament and stated that one study estimated that “obesity in the overall population currently costs Canada about $1.6 billion annually in direct health care costs.” If Road to Excellence can cut $1 in health care costs per Canadian because communities become more active, it will have generated a positive return on investment.

You have each received a copy of the Canadian Olympic Committee's brief, along with a copy of the Road to Excellence program. The program details a path for Canada's athletes to finish in the top 12 nations at the Summer Olympic Games in 2012 in London, and in the top five at the 2012 Paralympic Games. We will do that by making smart investments with measurable returns in research and training.

We know that the Road to Excellence program works because it's built on a proven template of the Own the Podium 2010 program, an equivalent program for winter sport. We all saw the results from that investment when our winter athletes finished third in the medal count in Torino, Italy, last year, which was Canada's best performance ever. The Own the Podium 2010 program will lead us to finish first in Canada's home games in Vancouver 2010.

The investment in the Road to Excellence program will put more Canadian athletes on the podium. It will give Canadians something to be proud of and will inspire more Canadian communities to get active. I think you will find that this is a sound investment, and I urge you to recommend in your report ongoing funding of $30 million per year for the Road to Excellence program.

Merci.

[The Chair, Conservative, Rob Merrifield]

Thank you very much for your presentation.

We'll now move on to Hoffmann-La Roche Limited, Mr. Jim Hall, vice-president of sales and marketing.

The floor is yours.

[Jim Hall, Vice-President, Sales and Marketing, Hoffman-La Roche Ltd.]

Good morning, ladies and gentlemen. Thank you for giving us the opportunity to participate in the 2007 pre-budget consultations.

International health experts, including the World Health Organization, have warned that an influenza pandemic is inevitable; it's just a matter of time. The WHO is currently at phase three of six of their pandemic alert status. A movement to phase four would mean that avian flu influenza has gained the ability to spread efficiently between humans.

SARS taught us that we are vulnerable to the health, social, and economic consequences of a public health emergency. From a financial perspective, SARS cost the Toronto economy close to $2 billion, and according to the Toronto Dominion Bank it cost the national economy an additional $1.5 billion to $2 billion.

While harmful, the cost of SARS pales in comparison to the projected impact of an influenza pandemic. The Canadian Manufacturers & Exporters have predicted that Canada's economy could suffer by as much as $60 billion in lost productivity and medical expenses. Earlier this week the World Bank told the international conference on avian flu that the global economic impact could be up to $2 trillion. This economic downturn could result in a serious erosion of federal tax revenues. However, unlike SARS, the world has been made aware of the possibility of the next influenza pandemic. This provides government and the private sector the time to adequately prepare for this community-based illness.

Canada should be commended for its early action. It has been a recognized leader in pandemic preparedness around the world. However, according to published government figures, our national antiviral stockpile remains at 17%--sixth place among G7 countries--with no antiviral medicines allocated to prevent the spread of infection before treatment is required.

All other G7 governments clearly understand the value of preventative measures and have planned accordingly. France presently has the highest stockpile, with enough antivirals to cover over 50% of its population. Most recently, the United Kingdom announced its intention to double its antiviral stockpile to 50% of its population. Those countries' stockpiles allow for a strategy that incorporates both prevention and treatment. A prevention strategy is in line with and can help Canada achieve its pandemic planning objectives to minimize serious illness, death, and social disruptions.

Given the potential impact of a pandemic on the economy and our society overall, Hoffmann-La Roche recommends the committee adopt three key recommendations in its report.

First, the Government of Canada should expand its pandemic plan beyond treatment to include the preventative use of antiviral medications, or prophylactic use, especially during this initial six-month period when effective vaccines will not be available. Governments must be prepared to prevent the spread of infection before treatment is required, to mitigate health impacts and reduce worker absenteeism.

As an example, a recent public opinion survey of Canadian health care workers learned that more than 40% would not report to work if a pandemic hit. Health care workers claim that if proper preventative measures were in place by their employer, up to 90% would in fact report to work. The take-away message is that proper preparation and preventative strategies need to be in place to ensure essential workers are able to remain on the job in the event of a pandemic.

Second, the Government of Canada should be clear about its role with the private sector during a pandemic. At present, the government's Canadian pandemic influenza plan for the health sector does not provide clear direction to the private sector of their pandemic preparedness responsibilities. We are hearing from the private sector that this absence of clear direction has created a climate of confusion amongst businesses as to their responsibilities in the event of an avian flu outbreak.

The pandemic could significantly affect human resources and the ability of many businesses to maintain normal business operations. The Public Health Agency of Canada has estimated that during a pandemic, up to 35% of the population will become sick enough to miss work, and up to half of those people will require additional medical care. Providing clear direction to the private sector is needed for businesses to prepare effectively and maintain business continuity during an outbreak, thereby minimizing the impact of a pandemic on the overall economy.

Finally, the Government of Canada should assist small and medium-sized enterprises in their pandemic planning. SMEs play an integral role in our economy. Collectively they are the largest private sector employer, yet they do not have the financial resources or the skills and knowledge to effectively prepare for an pandemic on their own. This is why the government should introduce a targeted tax credit for the SME sector. This credit could be used for developing an organizational pandemic plan; acquiring a stockpile of antiviral medicines; and purchasing basic medical supplies, such as masks, gowns, and gloves.

Thank you very much for your attention to this recommendation. I will be happy to answer your questions during the question period.