Finance Committee on Dec. 3rd, 2007

[The Vice-Chair, Liberal, Massimo Pacetti]

Good morning, everybody.

We have a little bit of an intimate group. Some of us who decided to come here had a few problems, so you'll see some of us dressed funny, because all our luggage hasn't arrived here. I think some of the witnesses are still missing. We don't have all the members we thought we'd have, because we've also set up a subcommittee in Ottawa to study budget bills. That was a bit of bad planning on the government side, but I'm not going to get into that.

If we can begin, the way it's going to work is I'm going to allow you five minutes to present your presentation, your brief, and then we'll go to a round of questions. We'll see if we can fit it into the time. I'm going to try to stick to the five minutes as much as possible so I can allow members to ask questions. I think that's the most important part.

I'm going to go in the order I have listed here.

I have the Arrivals Duty Free Coalition. Ms. Stiene, go ahead. You have five minutes.

[Susan Stiene, Member, Arrivals Duty Free Coalition]

Thank you, Mr. Chair.

On behalf of the Arrivals Duty Free Coalition, we are pleased to appear before the committee. The coalition draws its membership from Canada's largest airport and duty-free operators. Coalition members include six airport authorities—Vancouver, Toronto, Calgary, Winnipeg, Montreal, and Halifax--and three airport duty-free operators—Aldeasa, Aer Rianta, and the Nuance Group.

The coalition's goal is simple: to put a framework in place to allow arrival duty-free operations at Canadian international airports.

Currently, Government of Canada policies allow only for the sale of duty-free products to passengers who are departing from Canada. However, Canada is falling behind the global trend. Already, 55 countries have implemented arrival duty-free programs that allow passengers arriving in a country to access duty-free shopping. Countries that have adopted this type of program include Hong Kong, China, Australia, New Zealand, and Italy.

The prohibition of arrivals duty-free creates a competitive disadvantage for major Canadian airports and reduces the potential revenues that could be generated by international visitors and returning residents. It is estimated that implementing arrivals duty-free in Canada would yield some $61 million per year in new revenue for Canadian airports. The addition of these non-aeronautical funds would in turn be directed toward improving the competitiveness of all major airports in Canada.

Implementing arrivals duty-free will offset some of the negative impact and lost sales incurred by duty-free retailers in the aftermath of restrictions on carrying liquids and gels on aircraft.

Canadian airports depend on retail operations to maintain their global competitiveness. While air travel has recovered since 9/11, between 2002 and 2005 duty-free sales have declined by some 23%. A large part of this decrease is attributable to the increasing trend towards arrivals duty-free at foreign competitor airports. As previously stated, 55 countries already have arrivals duty-free, and more countries are conducting feasibility studies.

The economic impact analysis of arrivals duty-free at Canadian airports suggests that over a five-year period, from 2007 to 2011, incremental sales would generate some $15.9 million in wages and $4.6 million in federal taxes. In terms of employment benefits, arrivals duty-free would generate direct employment for over 490 Canadians.

Other benefits have been noted in jurisdictions that have introduced arrivals duty-free programs. These benefits include: 1) increased tourism; 2) additional non-aeronautical revenue for airports, which in turn helps to keep costs to airlines and passengers low; 3) reduced carry-on luggage loads for aircraft, with corresponding reductions in operating costs; 4) reduced airline fuel consumption from not transporting duty-free goods, with a corresponding reduction in emissions; 5) the ability to promote Canadian products to travellers; and 6) increased customer convenience and purchasing options.

Arrivals duty-free is an excellent opportunity for Canada to repatriate sales that residents would normally make when departing foreign airports prior to returning to Canada. Further, experience in other countries, such as Australia, where arrivals duty-free has been in place for some time now, has shown no negative impact on domestic sales.

For these reasons, Canada's airports and duty-free operators, along with other organizations, such as the Retail Council of Canada and local chambers of commerce and boards of trade, support arrivals duty-free.

Arrivals duty-free is tax neutral, as these goods would otherwise be purchased abroad. In no way are we seeking an increase in the current personal exemptions. Simply put, introducing this option to travellers who wish to purchase duty-free products would be beneficial to Canadian industry rather than to foreign markets. Implementing arrivals duty-free at airports is consistent with the federal government's Advantage Canada goals for innovative regulations in Canada's economy and with promoting a tax system that ensures that the Canadian economy remains globally competitive.

Our recommended action is that in order to support the competitiveness of all major airports in Canada, the committee should recommend that the Minister of Finance implement arrivals duty-free, permitting the sale of duty-free goods to international passengers upon arrival at Canadian airports.

Thank you for your time. I'd be pleased to answer your questions regarding arrivals duty-free.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you.

I'll put my finger up when you have a minute left so you can try to wrap up before then.

You got in on time, so thank you, Ms. Stiene.

The next person I have is from the Alliance pour l'égalité des personnes aveugles du Canada, Mr. Albert Ruel.

[Albert Ruel, National Equality Director, Alliance for Equality of Blind Canadians]

Thank you very much, Mr. Chair and committee members.

First, I want to welcome you to Victoria--stormy Victoria.

The Alliance for Equality of Blind Canadians is a national not-for-profit charity organization whose goals and aims are to work toward that Canadian dream, the total inclusion of full access to all that this fabulous country has to offer. We've been in operation in Canada since 1992. You may have heard our name in the past, as the National Federation of the Blind: Advocates for Equality. Two years ago we changed our name because we wanted to become truly Canadian. We changed it to the Alliance for Equality of Blind Canadians. Our goal today is to bring some awareness to three major issues facing blind, deaf-blind, and partially sighted Canadian citizens.

Employment among persons with disabilities in Canada is drastically low, and it seems a tragedy in this current environment and in an economy where businesses are closing early or shutting down altogether because of a lack of employees that we have a population here that enjoys about a 20% to 25% employment rate. We have many, many skilled individuals with disabilities, particularly those in the blindness field. Our education levels are equal or nearly equal to the able-bodied population, and yet we find ourselves very much unemployed.

We urge the Government of Canada to look again at its employment programs for persons with disabilities and look perhaps at a program of assisting, promoting, and perhaps giving concession to employers who will take a chance with a person who has phenomenal skills but perhaps lacks all the abilities. We desperately want a framework of employment programs that make more sense to today's economy, today's technology. And therein lies a great deal of the issue for persons who are blind, deaf-blind, and partially sighted, and that is, technology, which in some cases is a tremendous help and in other cases is a huge barrier to access.

The second issue is that of personal supports. The cost of disability is huge for a population that is 20% or 25% employed. In fact in Canada today, 48% of the people who are blind, vision-impaired, and deaf-blind live on a combined household income of $20,000 or less. About 25% of us have an income of less than $10,000 a year. For example, an ordinary bathroom scale to allow me to monitor my own health and fitness and weight will cost you about $19 at Canadian Tire; the cheapest one I can find is $60. Health issues are very much at the forefront of the whole personal supports program and the access to technology. The thermostat for my house is a $250 purchase. Only 20% of the people in my situation are employed, and they certainly can't afford to buy something as simple as a thermostat. Instead of a microwave being a $69 purchase at Wal-Mart, a microwave for me is $500.

Ladies and gentlemen, we are desperate for a program of assistive technology like the ones that exist in Alberta, Saskatchewan, Ontario, and Quebec. They need to be universal. We are all Canadians and we all have the same needs and wants and aspirations. We need a program of assistive devices that will be universal and will cross the boundaries from province to province and territory to territory.

The third item is the disability tax credit. It's a tremendous help in terms of leaving more funds in the pockets of those who live with a disability. But it needs to be higher. It needs to be indexed to the cost of living. It hasn't changed in several years and it doesn't change as often as the prices go up at your local grocery store. So the disability tax benefit that is there for persons with disabilities is a tremendous help, but it needs to be higher.

I guess the fourth item--and I didn't have it in the brief--is access to literature. Only 3% to 5% of printed material that's available to our fellow Canadians is available to the blind community. Alternate formats that we can read and enjoy and learn from are incredibly important. The $3 million that has recently been announced by the government to build a program where publishers would make available their work, so that charity can then transcribe it into a usable format for the blind and partially sighted...those $3 million could have produced a lot of books in an alternative format if it were granted to publishers for that express purpose.

[The Vice-Chair, Liberal, Massimo Pacetti]

Mr. Ruel, perhaps you could start to wrap it up.

[Albert Ruel]

That does wrap it up, and I thank you very much for the opportunity.

Again, welcome to Victoria.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you.

From the Alma Mater Society of the University of British Columbia, Mr. Jeff Friedrich.

[Jeff Friedrich, President, Alma Mater Society of the University of British Columbia]

First allow me to thank you for inviting us to present today.

I'll quickly introduce myself by saying I'm a student at the University of British Columbia, Vancouver, and president of the student society there. We represent about 45,000 students.

Hopefully many of you are also familiar with the Canadian Alliance of Student Associations, which is a national student advocacy organization. On that organization I sit as the board chair, and we represent about 350,000 students, so I hope I won't be guilty of speaking from a UBC or university-centric view. The views we're presenting today are part of a broad consensus of students from across the country.

The things that Canadians hold most dear about their society also come at a high cost: public health care, a national defence program, and a clean environment are merely some of the many national programs that rely on the tax base of this nation in order to function.

In order to ensure a sustainable economy and, by extension, a sustainable tax base, we must show a considerable degree of foresight with regard to our post-secondary education system. The most effective way to ensure that Canada has a sustainable tax base is by fostering greater access to post-secondary education, particularly for those populations with low participation rates, such as first nations and individuals from low-income families and rural communities. By investing in the students of this nation, Canada can ensure we will have a workforce with the skills to keep Canada at the forefront of today's knowledge economy. Canada will have a workforce that is healthier and better educated, sustainable and self-sufficient.

We know that those who graduate from post-secondary education earn more and contribute more through the tax system than non-graduates. Canadian post-secondary graduates provide nearly 60% of government income tax revenues, while receiving only 30% of government spending. In spite of this, we have seen significant cuts to PSE funding since the mid-1990s, and we know students are being asked to cover a higher proportion of the costs of their education. In my case, tuition covers about 30% of the cost of my education; in the 1990s, it was around 20%.

I am also of the view that Canadians have assumed a level of quality exists in post-secondary education, partly because the demand persists, but we know that the demand is within students who are generally from higher-income backgrounds. We know that American institutions enjoy an $8,000-per-student funding advantage.

We also know that inequalities still persist within the system. You are less likely to attend post-secondary education if you're from a low-income background, you're a student with a disability, your parents did not attend PSE, you're from an aboriginal background, or you're from a rural locale. In this we are missing an opportunity to advance Canada and to fund our tax base sustainably.

We have suggestions highlighted in the brief, but I'll briefly prioritize a few of those for you.

The AMS encourages the Government of Canada to improve the national system of student financial aid, including making the Canada student loans program fairer and easier to understand and extending the Canada access grants to cover all years of an undergraduate education; currently that program just covers the first year.

We've asked for a review of student financial assistance. That is something on which the current government took a step in the right direction, but the current review is mostly focused around the Canada student loans program and lacks a holistic look at the interactions between jurisdictions and federal and provincial programs.

The federal government also currently spends about 40% of all student financial assistance in the form of tax credits. The research literature is consistently clear that this is less likely to benefit students who are underrepresented in the system. Those students who are underrepresented are more likely to be debt-averse and to underestimate the returns on an education while overestimating its cost, so it's really important that a review look beyond just the Canada student loans program and look also at the tax credits and the savings programs that represent a big portion of what the government currently provides.

I'll briefly outline the second priority, which is a really important one for us. It's the renewal of the Canada Millennium Scholarship Foundation. It's something we've been talking about a lot. The foundation needs to be renewed this year in order to keep sending students money in 2010, when the program is up. Not renewing the program amounts to a $350 million loss of around 90,000 instances of annual upfront, needs-based, non-repayable assistance to students in Canada.

Grants and bursaries particularly are an important part of the system, because they not only help people get in the door, but also help to improve graduation rates. That's more favourable than a tax credit or a savings program or something that would be delivered as assistance on the back end.

We are part of a broad consensus of students who support the foundation's renewal. Through our partnerships we represent around 650,000 students. That's the largest partnership in Canada. We're also part of a consensus of premiers, ministers of education, and post-secondary stakeholders across the country who are talking about the renewal. It does represent 30% of all student grants in Canada. We're particularly anxious about the lack of conversation around this program. We know there has been conversation about putting this money into other areas where it might be less effective, in the form of tax credits or other programs.

One last thing I'll highlight is dedicated transfer and a pan-Canadian accord. With respect to post-secondary education, Canada is one of the few OECD countries that doesn't have a national vision for education. I know the NDP colleagues have spoken about a ministry. We're talking, first, about a pan-Canadian vision, to get the conversation started. A dedicated transfer is a way of ensuring that the federal dollar that's invested in the province actually goes to where it was intended. This is something we've been talking about for quite a while.

The Conservative government did earmark the $800 million that was announced in Budget 2007, but we're concerned with how that will be continued in future budgets. We see the transparency and accountability that's obtained through a dedicated transfer to be optimal.

Thanks.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you.

The next group is the BC Association of Magazine Publishers. Ms. Tores.

[Anna Tores, Executive Director, BC Association of Magazine Publishers]

Good morning. My name is Anna Tores, and I'm the executive director of the BC Association of Magazine Publishers. Thank you for the opportunity to present.

The BC Association of Magazine Publishers represents, connects, and promotes the B.C. magazine industry. BCAMP membership is made up of more than 75 titles, including arts and culture, news, business, lifestyle, leisure, and special interest magazines. British Columbia's magazines are part of a successful cultural policy story. Our federal cultural policy endeavours to ensure that Canadian creators of cultural products, like books, TV, and magazines, have space on our airwaves and on our newsstand shelves so that Canadian content is available and so that our marketplace is not totally dominated by foreign--mostly American--products.

We are pleased in the magazine sector to be able to boast that about 41% of Canadian purchases of consumer magazines are Canadian titles. This compares very favourably with other cultural sectors where the greater share of the market is taken up by U.S. content. We want to do better, and we are committed as an industry to attracting more Canadians and encouraging them to buy and read more Canadian magazines. Our goal is to have a majority of sales and readership in our own market.

In our brief, you will see that our recommendation is that the federal government endorse this goal and continue to support efforts to build Canadian readership.

You have our full brief, so I won't repeat it all, but please allow me to focus on the distribution of Canadian content magazines, in particular the importance of the publications assistance program, in making Canadian magazines available nationally.

A year ago this month, the Government of Canada directed the Canada Post Corporation to maintain its contribution to the publications assistance program until at least March 2009. We welcome and appreciate this action. Canada Post still intends to withdraw its $15 million contribution at that time, a date that is not far off.

It's important that government and our sector work together on confronting this issue, determining how to support magazine distribution and the future role of Canada Post in this process. A reduction of $15 million of support from the postal assistance program would cause an immediate 31% increase in postage costs for the average magazine. For national circulation magazines, there are simply no alternative options for subscription sales.

If the PAP is reduced by 25%, the effects will be many. It will mean cutting back on the amount of editorial and Canadian content pages that can be produced. It will mean fewer jobs and assignments for Canada's writers, creators, illustrators, and photographers.

The fact that some magazines won't survive means there will be fewer Canadian magazines in the marketplace and less choice for readers. It will also drastically alter the way magazines are delivered to Canadians because Canada Post will no longer be an affordable option. If the industry is forced into alternative delivery methods, it could mean prohibitive distribution costs, especially in rural areas of the country. This will mean that Canadians living outside major urban centres will not have the same access as others to affordable magazines.

Canada Post's withdrawal from the PAP effectively puts an end to a century-long distribution partnership and to a highly successful subscription-based delivery model that has evolved because of federal government policy.

What we are asking today is for the finance committee to recommend that adequate budgets be maintained for the publications assistance program. This can be achieved either through direction to Canada Post that the crown corporation maintain its support or that this portion of funding be delivered as part of the budget of the Department of Canadian Heritage.

Carving out a space for the Canadian voice has always been a challenge in Canada, for two reasons. The country's geography, with a relatively small population spread across a huge land mass, makes magazine distribution more difficult and costly than in many other countries. Culturally, competing with the enormous size and influence of the U.S. entertainment industry is daunting.

Before we allow drastic cuts to successful programs, we ought to be looking at how we can do things differently and how we can ensure there continues to be a choice of Canadian content available across the country.

The magazine sector has been highly effective in utilizing public investment to ensure a healthy presence for Canadian options, perspectives, and information, thanks in large part to the postal assistance program. This is why it's absolutely critical that the $50 million contribution to PAP be maintained by either Canada Post or the federal government. Stability is required until Canada's magazine policy has been reviewed and understood.

Thank you for allowing the BC Association of Magazine Publishers to appear today.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you.

Next, from the BC Sustainable Energy Association, is Mr. Hackney.

[Tom Hackney, Vice-President, Policy, BC Sustainable Energy Association]

Greetings, Mr. Chair, vice-chairs, and committee members.

The BC Sustainable Energy Association is a not-for-profit society registered in B.C. It has eight chapters around the province and some 600 members, including individuals, businesses, municipalities, and other organizations. Our vision is a future in which British Columbia's energy comes from clean, renewable, efficient sources so we can meet our present energy needs without compromising the ability of future generations to meet theirs.

We are motivated by a strong sense of urgency. The climate change that is taking place now has become undeniable, as has the main driver of it: human-caused greenhouse gas emissions, particularly from the burning of fossil fuels. Fossil fuel resources around the world, especially natural gas and oil, are becoming scarcer and more expensive; the large, easily accessible resources are becoming depleted; and the scarcity is increased by the dramatic rise in the global demand for energy.

Finally, the environmental effects of developing energy resources are inadequately addressed in society's planning. This is especially evident in the production of non-conventional fossil fuels, such as coalbed methane and tar sands. Great quantities of water are used up and contaminated at a time of increasing water scarcity and predictions of increasing droughts and water stress due to climate change.

The present consultations here are entitled, “The tax system the Country needs for a prosperous future”. True long-term prosperity cannot be achieved by a business-as-usual approach. The main thrust of the BCSEA's submission to this committee is that the federal tax system should, as a priority equal to other tax priorities such as revenues and economic stimulation, encourage a broad societal shift away from fossil fuel use and other greenhouse-gas-emitting activities.

Present economic valuations still systematically ignore or discount the harm of climate change, the long-term global depletion of fossil fuels, and the strategic benefits of diversity in energy systems. Instead, we see continuing massive investments that are based on the false premise of supposedly cheap fossil fuels.

Climate change has already hit British Columbia through the mountain pine beetle infestation. This is destroying our interior forests and the economies that depend on them. Dollar losses are in the hundreds of millions; the personal and social losses are incalculable.

Although the causes of global climate change are global, Canada's greenhouse gas emissions are small on a global scale, yet it is still crucial for Canada to act to control its emissions. The only practical way to control emissions globally is through international cooperation. Canada's present example, as one of the highest per capita emitters in the world, stands as a powerful disincentive to other nations to take effective action. If we improve our performance, we encourage others to do likewise, to the benefit of all.

Second, we should anticipate not only that fossil fuels will become scarcer and more expensive, but that the international community may impose disincentives on greenhouse gas emissions and promote non-greenhouse-gas-emitting energies. If we remain over-invested in fossil fuels, we can expect to suffer economic disadvantages and lose trade opportunities.

Finally, morally and philosophically, how can we as a nation continue to give credence to our own values of democracy, prosperity, peace, and good government if we and our government take an attitude of denial and avoidance toward this critical issue? We can only take our values seriously to the extent that we truly face reality.

On behalf of the BC Sustainable Energy Association, I thank you for the opportunity to submit our brief to the committee and to make this presentation.

I will be glad to field questions.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you.

Mr. Munro.

[Murray Munro, Senior Vice-President, National Sales, Marketing and Government Relations, GrowthWorks Capital Ltd.]

Thank you very much, Mr. Chair.

It's a pleasure to present to the committee. I'd like to thank the committee for its support on the same issue we raised last year.

GrowthWorks Capital is the second-largest manager of retail venture capital funds outside the province of Quebec in Canada. We manage over $900 million on behalf of 250,000 Canadians in seven provinces.

I'm here today to talk about an important economic development issue for Canada. It really revolves around the purchase size for investors in retail venture capital funds like the Working Opportunity Fund here in B.C.; the GrowthWorks Canadian Fund in Manitoba, Saskatchewan, and Ontario; and the GrowthWorks Atlantic Venture Fund--increasing the federal labour-sponsored fund tax credit from $750 to $1,500.

In B.C. the Working Opportunity Fund has approximately $400 million in assets under management. We're the largest single source of venture capital in western Canada, and we account for a full 20% of the venture capital marketplace in B.C. In the past 14 years we've invested $450 million in 120 entrepreneurial B.C. companies. We have created over 10,000 jobs in the province. In addition, we partner with other venture capitalists in the majority of the deals we do, which means that for every $1 million we invest we bring another $4 million from outside of British Columbia. If you look at the 15% tax credit the federal government provides, this is equivalent to $20 million of investment in B.C. for every $1 million in tax credits provided by Ottawa.

On average, the companies we invest in have less than 15 employees at the time we do the deal. These companies tend to grow rapidly as a result of our financing and increase their employment levels to an average of 50 to 60 employees. The capital we provide allows them to invest in R and D, sales and marketing, and commercialization of the product. As such, we're an integral part of the commercialization process in Canada. We've been involved in 30 company spinoffs from universities allowing scientists to bring their research to life, given the federal government's support of basic research. These companies we invest in typically grow to become global competitors in their respective markets.

In Atlantic Canada we started a fund in 2005. We raise and invest money in four Atlantic provinces. It has local management and a local board of directors, along with offices throughout the region. We have broad support from all governments in Atlantic Canada and the four provincial federations of labour. The fund currently has $32 million in assets and 12 companies in its portfolio, and we're committed to investing in entrepreneurial Atlantic Canadian companies, helping to grow that region's economy and provide jobs there.

There is a real inequity in Atlantic Canada, which has 8% of the population yet only 2% of available venture capital. Every year $1.2 billion leaves that region during the RRSP season, and the vast majority of the money is invested outside of Atlantic Canada.

The first problem our industry faces is that there is fierce competition for RRSP investment dollars. You might think that the 30% tax credit given to our investors--15% from the federal government and 15% provincially--is sufficient. While it looks great on paper, there are more lucrative options for investors. Flow-through shares, for example, effectively give investors a 44% tax credit and allow them to transfer the shares into a registered retirement savings plan.

Our industry is not here to ask for an increase in the tax credit percentage. We're here to ask the federal government to increase the federal labour-sponsored fund tax credit limit to $1,500.

B.C., Manitoba, and Nova Scotia already have increased the provincial tax credit limits to this amount. The federal legislation was created in 1985, and over the past 22 years there has been no increase in the maximum purchase size for investors. RRSP contributions, by the way, have increased from $5,500 in 1985 to $15,500 today. As a result, the relatively small $5,000 purchase of our funds has become a nuisance trade for investment advisors, and these are our bread-and-butter clients who raise the money for these funds, which then get invested in entrepreneurial companies throughout the country.

In addition, the banks, which have taken over most of the brokerage firms, have created new compensation structures. These structures have resulted in advisors getting paid up to 75% less on a $5,000 purchase compared to a $10,000 purchase. A number of the largest investment dealers are proposing to remove small purchases from the compensation grid completely, effectively cutting off any source of income to investment advisors who purchase our funds. As advisors are increasingly no longer getting paid to make purchases in our industry, the amount we are able to raise, and therefore invest across Canada, has been steadily declining.

Increasing the maximum purchase size of our product in the marketplace will allow advisors to return to the level of sales they've done previously, effectively increasing the amount of venture capital available to grow and develop Canadian companies. We estimate the cost to the federal government to be approximately $20 million due to sales caps that exist in most provincial jurisdictions. We'd be happy to work with federal finance officials regarding the estimated costs.

Through the venture capital it provides, our industry has a large impact on the growth and development of the Canadian economy, in terms of commercialization, business development, global competitiveness, and job creation. To continue to have the same level of impact in the future, we need to have an increase in the maximum purchase size of our funds to $10,000, so advisors will continue to sell the product to their clients, raising money for investment in new technology companies across Canada.

Thank you very much.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you.

Mr. Garrison, we're going to go to you. You're here as an individual.

[Randall Garrison, Instructor, Criminology, Kwantlen University College, As an Individual]

Yes. Good morning.

I want to start by saying I will pick through a submission I made earlier this summer and try to highlight a few points in the interest of time.

I will start by saying that from a certain perspective it is the best of times. We have record low unemployment, a 30-year high for our dollar, and yet another in a series of balanced federal budgets. But when we look up from the ground directly in front of us, we see the enormous challenges facing us: climate change, rising health care costs, growing inequality, and conflict and extremism on the world stage. So it's disappointing to me that the finance committee has adopted what appears to be such a narrow theme for its pre-budget consultations: the tax system the country needs for a prosperous future.

This theme ties our thinking about the budget to a narrow perspective that ignores the urgency and the immensity of the challenges we face. In the end it ignores the fact that a federal budget is obviously about much more than just taxes. A budget is about what we want to accomplish together through our federal government.

I would argue there is a basic consensus among Canadians that there are several essential ingredients to a prosperous future. Canadians believe a sustainable environment, healthy individuals living in healthy communities, and a stable world free from the scourge of violence and war are necessary to any kind of meaningful and durable prosperity.

If we are going to avoid climate change on a catastrophic level, we need a tax system that produces enough revenue to support a rigorous attack on global warming and one that creates incentives to act now. If we are going to have healthy individuals, we need a tax system that will help the provinces reform and expand our public health care system.

Make no mistake. The growing prosperity gap that has begun to divide us into a nation of haves and have-nots is one of the most serious threats to our future prosperity. If we are going to live in a stable world, we also need a tax system that will allow us to attack the yawning prosperity gap at the international level and the resulting hopelessness that fuels conflicts and extremism.

Let me suggest a couple of priority areas where we could save money and where we must spend.

On the environment, we must end the more than $1.4 billion annual subsidies now provided to the oil and gas industry, including those for further development of the tar sands. It will save us billions of dollars and begin to wean us away from our dangerous addiction to burning fossil fuels. Let's also reduce federal infrastructure spending for new roads and new highways and shift that money into spending on rail, mass transit, and repairing the crumbling infrastructure we have now.

Yes, I am from Vancouver, and I say yes to an Asia–Pacific gateway strategy, but no to $1 billion of federal contributions to build new roads and twin bridges. We need a strategy to take goods and people off the roads and put them on the rails. We need to create incentives that will reduce our individual and collective environmental footprint. We also need revenues to support a transition program to help make sure workers don't pay with their jobs for this transition to a green future. When Canadians have good choices, they will make the right choices, but my neighbours can't ride the full buses that pass them regularly on Broadway. Only collective investment can help push the skytrain through a tunnel out to UBC. Most of all, what residents in my neighbourhood need is fewer cars in their neighbourhood.

Do we need new taxes to meet the environmental challenge, and particularly, do we need a carbon tax? I don't think so. I can't help thinking a carbon tax would do little more than make ordinary people walk, as gas prices skyrocket, while the privileged continue to drive.

In the area of health care, we need to expand our national health care program into the areas where we have significant opportunities for cost savings. A national home care program could reduce the cost of care for seniors by up to 50% and allow seniors to remain in their own homes and communities. A national pharmacare program could make sure all Canadians get the prescription medicine they need and reduce our overall health care costs by allowing us to bulk-buy important drugs. Most importantly, given the fact that we've just come through another World AIDS Day, we need a renewed national commitment to public education on the ongoing HIV/AIDS pandemic and other preventive health measures.

What we need is a budget and tax system driven by a system of who we are and where we want to go, which reflects the urgent needs and priorities of ordinary Canadians. It's time for the federal government to take the lead on global warming, protecting public health care, and closing the prosperity gap.

My message today, therefore, is a simple one: no more tax cuts. While no one begrudges the small relief a cut in the GST will bring, it's not too late to stop the enormous tax giveaways to the most profitable corporations in the country that were recently passed in the last mini-budget. And there's still time to turn away from the kind of thinking the Minister of Finance was illustrating when he began musing about higher-income Canadians needing further tax breaks.

The residents of Vancouver Centre don't need further tax cuts. Right now, we need more federal money for urban transit. We need more federal funding for non-market housing to tackle the problem of homelessness and to make sure that ordinary people can continue to live in our community. We need a national pharmacare program to help seniors and others with high drug bills, and we need funding for home care and renewed HIV/AIDS prevention work.

If we don't want Canada to be engulfed by the rising tide of conflict and extremism in the world, then let's invest some of that surplus and meet our promise to hike Canada's foreign aid spending. The next federal budget should be about much more than taxes. It should be about our collective national priorities. The next federal budget must be about tackling climate change, building healthy communities, and ensuring we all live in a more just, peaceful, and sustainable world.

Thank you.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. Garrison.

Usually we go to seven minutes, but we're going to go to a five-minute round because we only have one representative from each party; then we'll go to a second round of five minutes for anybody who wants it. The members have five minutes, but that includes the questions and comments or answers from the panel. If you will keep it to a brief intervention, I think we'll get more out of the debate.

What I did not mention at the beginning is that all your testimony is recorded, it's all transcribed, and it will be public. Even though there are some members who are missing, they will have the opportunity to review the presentations you have made. There are also officials from the Department of Finance who are here listening to you, so it does not go for nought.

Based on that, we'll go to Mr. Sukh Dhaliwal for five minutes, please.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Thank you, Mr. Chair.

Welcome to beautiful British Columbia. The weather is usually not like this, but I'm not going to put the blame on you fellows for bringing it here. I would like to welcome the panel as well.

My first question is to Jeff from UBC. You talked about a fairer system for grants and scholarships. Could you please tell me about the Millennium Scholarship, whether it is viewed as fair and easier to understand?

[Jeff Friedrich]

Do you mean is it fair and easy to understand in how it's delivered to students?

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Yes.

[Jeff Friedrich]

I think so. Certainly, that's something we've heard from the large number of students who are on the program. It's upfront in nature, so it's money that's going to students to offset the high cost of tuition, the country-wide average of which has risen 180% since the mid-1990s.

Since it's on the front end, it helps students understand how much they're going to be paying for their particular education. That helps those students from under-participating backgrounds to understand the debt they're taking on; those are students who may be more debt averse and have a tendency to work more hours off-campus, those sorts of things.

Upfront grants provide an important part of the envelope of student financial assistance programs because they help students understand how much debt they're taking on and what the full cost of their program and education will be.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

If you take a scale from one to ten, or percentage-wise, can you give me the consensus among students as to how many students are happy with this? Would you say it is over 90%?

[Jeff Friedrich]

I don't think any students in the country are actually.... I would say 100% are saying that.... There's a broad consensus around a looming loss, I guess, of $350 million of upfront non-needs-based non-repayable grants. Everybody is supportive of that.

I think what you're getting at is the difference of opinion there has been between some of the constituency groups around the mechanism of Millennium itself. But we've felt the three government reviews or audits have shown that Millennium is an effective way to get the money to students.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Thank you.

If I still have some time, my next question is to Susan.

On the arrivals duty-free, I've travelled across many countries, and I certainly agree that I personally like the system under which we land and buy things there. You talked about the positives, right? Do you see any negative impact as well? When we take this to the minister, are there any challenges you think we may be facing from the minister on this particular issue?

[Susan Stiene]

We have actually met with the finance team in Ottawa, and the only negative issue that has come forward, of course, is that the policy dictates that all duty-free is for departing passengers only. So there will have to be some legislation change in order to put it into effect. Other than that, I think it's a win for absolutely everyone, from the passenger or the resident here to the international arriving passengers. It's purely a win for Canada altogether.