Finance Committee on Sept. 17th, 2009

[The Chair, Conservative, James Rajotte]

I call to order the 42nd meeting of the Standing Committee on Finance. Continuing our pre-budget consultations, we have two meetings this morning and six groups for each meeting.

In the first session, we have the building and construction trades department, AFL-CIO, Canadian office; the Canadian Federation of Agriculture; Quality Urban Energy Systems of Tomorrow; Citizens for Public Justice; the Vanier Institute of the Family; and Imperial Tobacco Canada Limited. Welcome to all of you.

You will have up to a maximum of five minutes for an opening statement, in the order in which I introduced you, and then we will go to questions from members from all sides.

We'll start with the building and construction trades department.

[Robert Blakely, Director, Canadian Affairs, Building and Construction Trades Department, AFL-CIO, Canadian Office]

Thank you for the opportunity to be here.

Appearing with me today are Mr. Chris Smillie, from the Canadian office of the building trades; and Mr. Steve Schumann, from the operating engineers.

Why are we here? Well, the unionized construction industry in this country has over 500,000 people working in it. We produce 12% of Canada's GDP and 8% of all direct employment. The building trades are the home of the skilled trades in Canada. Nearly 80% of Canada's apprentices are produced by our industry. Construction is a threshold industry on which everything else is based.

We have three major points that we would like to bring to you. One deals with the environment, one deals with tax measures that deal with investment in infrastructure, and one speaks about economic stimulus.

Let me speak about infrastructure first. We would urge in this budget that the Government of Canada think big. Effective stimulus means that putting people to work and allowing industry of all sorts to produce goods and services needs to be considered. Every construction job directly multiplies itself into seven jobs doing supplies and three jobs doing the engineering and all the support, so it's a ten to one multiplier. Major crown projects that have been talked about, such as the northern port facilities at Nanisivik and the rebuilding of Canada's fleets of ships, both for the coast guard and for the navy, need to be undertaken.

Somewhere in the budget, as you did last year, there needs to be support for Canada's nuclear industry. If we are going to have a clean environment, we are going to have to find a way to make that environment work, not being dependent on fossil fuels, and that means nuclear and that means some thought in respect of that.

That's infrastructure to the good. As for infrastructure to the bad, we haven't seen in our industry a lot of money being spent and a lot of contracts being let in all but a few isolated areas. The industry is going to rebound, and if it rebounds before the stimulus spending really has a chance to cushion the blow for construction, you're going to be competing in a hot marketplace and nothing that you have seen will avail.

What doesn't work effectively for infrastructure spending? The EI rate freeze as stimulus doesn't make a single job. The home renovation tax credit, while immensely popular with a number of people, does not create jobs. If you want to create a tax credit for homeowners, make it a little bigger, in the $10,000 range, where people have to go out and hire a contractor who hires people to go to work.

On the environment, if you look at what is happening to our neighbours to the south with the passage of the Waxman-Markey bill, sooner or later we have to have an economic policy that moves in step with that of the United States. If we become the victims of green protectionism, many of the commodity-producing jobs in this country are going to go away. We need to get on the environmental bandwagon now and we need to protect those commodity-producing industries across this country. That means money spent on carbon capture and sequestration; that means money spent on improving the environment through allowing capital cost allowance deductions for businesses that are going to help bring greenhouse gases down.

An acceleration of capital cost allowances, particularly classes 10, 16, and 38, is something we would urge. In budget 2009 there was an extension of those particular provisions. We urge that they be made permanent.

Investment in Canada's largest industry and the multiplier effect is something that will have a positive effect on the economy.

The last major item that we urge is mobility measures to help our workforce move across this country. Today, when the industry isn't quite as busy as it was, we still have 600 jobs for pipefitters in Alberta going begging. We still have jobs for 300 ironworkers and 600 electricians.

[The Chair, Conservative, James Rajotte]

Thank you.

[Robert Blakely]

It's because we can't move people from one place in the country to another. The only tax group that can't deduct travel from its income is construction workers, and we're asking for some tax fairness there.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Blakely.

[Robert Blakely]

And we're asking for it on the basis that--

[The Chair, Conservative, James Rajotte]

Okay. We're about one minute over here.

[Robert Blakely]

I'll be one second.

[The Chair, Conservative, James Rajotte]

There are five more groups, a lot of members, and a lot of questions.

[Robert Blakely]

Let me wrap up. We're asking for some tax fairness here, and that tax fairness comes from being treated the same as everybody else; and it's revenue positive, not revenue negative. We've given you those numbers.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to the Canadian Federation of Agriculture, please.

[Laurent Pellerin, President, Canadian Federation of Agriculture]

Good morning.

We have already circulated a paper for this meeting. I will go directly to the three major points we put in the paper, and then I will make a couple of comments.

CFA represents more than 200,000 farmers across the country through our 10 general farm organizations, one in each province. We also have 16 national community federations that are members with us. So CFA is the one voice representing Canadian farmers.

In our paper, we present three things. First is the cooperative investment plan. The co-op doesn't have access to public money, so some provinces have already put in place a cooperative investment plan. We ask that the federal government make a similar change in their programs and budget to allow farmers and workers in those co-ops to invest in their own co-ops. It will give them access to capital, which is highly necessary to improve infrastructure everywhere in the country.

Second, the Canadian government put in place the ecological gifts program. It was a success. We ask that in the next budget the government look at the possibility of including an agricultural gifts program to make sure that the less than 11% of Canadian land where we can carry out agriculture is protected, where it's possible to invest. So help those farmers and owners protect agricultural land with this small program.

Third, we ask that the government, in the next budget, include a measure for young farmers who have invested in their retirement plan, studies, or are buying their first house, so that there is some provision there. We ask that they be able to use this money for a one-shot purchase, their first purchase of a farm, and use that money that they set aside as an investment.

I have two comments.

Regarding the budget and spending, it's one thing to have a budget and a program in place, but the money has to flow out of those programs. I'll give you the example of the five-year agricultural plan we have in place, Growing Forward. This program started last April 1. In one year, they have had plenty of time everywhere to make the transition, but we are now in September and no money is flowing out of this program. You have to use the money in the same year. If you don't use the money before March 31, that money will be gone. We are already in September and not one dollar has been paid out of that program. So it's a big problem.

In a similar sense, there's the announcement that the government made at the beginning of August for the pork sector. You know that some of our agricultural sectors are in major difficulty. For livestock in general, pork and beef, it's a very, very tough situation. There has been a drop of 20% in hog production in this country. In fact, we are afraid that we are at risk of completely losing both of those areas of production in some parts of the country, if not everywhere. So we have to look at that very seriously. There was an announcement at the beginning of August, but we still don't have Treasury Board approval and no money is flowing out. The banks, which are supposed to be partners in this announcement, are not very inclined to use the program, and not a dollar has flowed out of this program up to now.

The budget is one thing, but delivery after the budget is very important. Make sure that farmers have access to those dollars and that we change the tough situation we're in.

Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now go to QUEST, the Quality Urban Energy Systems of Tomorrow.

[Kenneth Ogilvie, Former Executive Director, Pollution Probe, Quality Urban Energy Systems of Tomorrow]

Thank you.

My name is Ken Ogilvie, and I'm with Shahrzad Rahbar from the Canadian Gas Association. I'm here to speak on behalf of QUEST, Quality Urban Energy Systems of Tomorrow, which is really about integrating our energy, land use, transportation, waste, and water planning at the community level, where 80% of Canadians now live—and that's growing—60% of energy is consumed, and about 50% of our greenhouse gases are emitted.

Our core message is to try to elevate the importance of energy efficiency and demand reduction policies to the supply side of the equation in Canada. We know, of course, that we do have a problem with climate change and do have targets and commitments; we all know that. We also know from the National Energy Board's reference scenarios that we're not going to achieve those targets with our current approach. There are some gaps in our plan that have to be filled, and the particular gap we're addressing is the 50% of greenhouse gas emissions that come from the community level in Canada. QUEST has brought together in a collaboration, or almost a movement across Canada, industry and the private and public sectors in a joint desire to look really closely at how we plan for and use energy in our communities. We believe that by 2050, we can help close the gap in current policy with achieving the targets Canada has set, through working together on integrated urban energy systems.

I think you've had presentations on the QUEST principles. I think Mike Cleland had mentioned those in a previous presentation. I don't want to cover old ground. What I do want to say is that the three asks we have for the federal government are really to help build the capacity that is partly there now but needs to be much more robust across Canada as a nation, to plan for and gather the data, do the analysis and planning for community energy systems, and to get on with the job of building these things.

We would also like to see new program support for demo projects in leading communities to help learn and prove out new technologies and new ways of integrating energy planning. We would like support for the groups across the country that are helping to move this agenda. So we have an ask of about a half billion dollars that we'd like to see over five years to help initiatives across the country—which are very much from the ground up, I should mention. This is not a top-down command and control process. This process is to help empower and catalyze the movement toward this new agenda across Canada, but it very much makes demands of local desire and provincial leadership.

So QUEST is really knitting all of this together. It has had a great deal of support from federal house committees and the energy ministers, with their energy solutions road map, and from provinces that are leading the way. We think this is a doable agenda and that it fits very nicely with an economic and social agenda that Canadians want.

I'll leave it at that, unless the chair has anything additional to say.

Thank you.

[The Chair, Conservative, James Rajotte]

Okay, thank you very much for your presentation.

We will now go to Citizens for Public Justice.

[Chandra Pasma, Policy Analyst, Citizens for Public Justice]

Thank you.

Citizens for Public Justice is a national faith-based organization with more than 1,500 members and supporters across Canada.

CPJ recognizes the important work that this committee does in advising the federal government on fiscal priorities. Budget decisions are unquestionably moral decisions. They reveal our values, affect how resources are allocated, and shape our common future as Canadians. For this reason, it is important to reflect on core values when thinking about how to shape the budget.

As a Christian organization, CPJ's work is rooted in the call to do justice and to love our neighbours. We believe that a faithful response to God's call requires respect for the dignity of all human life and the well-being of the earth. These values should be reflected in our collective decisions and in our public policies and practices.

Fundamentally, we believe that our economy should be an economy of care. An economy of care would recognize that the goal of all economic activity is meeting the needs of people and caring for the earth. Because of this, people must be at the heart of economic planning. Social and environmental concerns shouldn't just be add-ons; they should determine our economic goals as well as our method of achieving them.

I would like to highlight what an economy of care would look like in practice. All Canadians should be able to live in dignity. Currently, one in ten Canadians lives in poverty, unable to meet all of their basic needs or to provide for their families. Public justice and an economy of care require that we create public practices and policies to ensure that all Canadians have the means to exercise a sustainable livelihood that provides a livable income. This includes social security for all Canadians, even when we cannot secure all we need through paid work.

Canadians long to see this vision of dignity for all become a reality. Within its first few months, over 100 organizations and 1,200 individuals have signed on to the Dignity for All campaign for a poverty-free Canada, created by CPJ and Canada Without Poverty.

We recommend that budget 2010 adopt a federal poverty elimination strategy to provide a pan-Canadian blueprint for reducing and eventually eliminating poverty.

Another fundamental Canadian value is fairness. Although it can be hard to define, most of us intuitively tie it to well-being. We don't believe that inequality is fair. While everyone doesn't have to be the same or have the same things, we nonetheless believe that it is only fair if people have equal opportunities. Poverty and economic insecurity erode both equality and opportunity. Far too often, programs that are designed to help people in need perpetuate this lack of choice and opportunity.

It's time for a new approach to economic security. We believe Canada should implement a guaranteed livable income for all Canadians that ensures every citizen has access to the basic necessities of life without stigma, while respecting dignity and enabling participation and inclusion in community. It will take time to create and design the appropriate model for Canada, but budget 2010 can take steps towards the GLI by extending income security to working-age adults, the one demographic that currently has no universal income security program.

In moving towards an economy of care, all sectors of society have a role to play, including businesses and unions. But governments have a leadership role. Through public programs and services, the federal government contributes to social security for all Canadians. The government can reduce poverty and inequality, promote opportunity, and support the health, well-being, and education of all Canadians. But this requires sufficient federal revenue to invest in social security.

Many economists have criticized the value of tax cuts as stimulus. Economic modelling by Informetrica has shown that the same amount of money invested in social infrastructure as opposed to tax cuts will more than triple the number of jobs created. Tax cuts also permanently cost the government revenue, while investments in social infrastructure pay off for years to come. We recommend that the budget roll back the recent corporate tax cuts and GST cuts and invest the revenue in social infrastructure programs like child care, social housing, and EI.

By promoting dignity for all Canadians, strengthening social security, and supporting fairness and equal opportunity, budget 2010 can help Canada take steps towards an economy of care for all Canadians.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now go to Imperial Tobacco Canada Limited.

Mr. Clayton, please.

[John Clayton, Vice-President, Corporate Affairs, Imperial Tobacco Canada Limited]

Thank you, Mr. Chairman.

I suspect there are some people in this room who do not like the products we sell. However, I am going to ask that you listen to this message I have to deliver today, regardless of your views of my industry. I would also add that I am a non-smoker.

For too long governments at all levels and of all political stripes have ignored a problem that poses a grave threat to public safety, robs governments of billions of dollars annually, and forces the closure of small businesses. That problem is illegal tobacco. As a direct result of the government ignoring this problem, the illegal market has doubled in three years, government revenue has shrunk, and public health objectives are failing.

Let me be clear about the scope of this problem, the people behind it, and the implications.

Fact: illegal tobacco is now out of control. The illegal tobacco market now makes up 33% of the market nationally, or 13 billion cigarettes a year. In Ontario, 48% of all cigarettes sold are illegal. In Quebec, it's 40%. The illegal trade is now spreading rapidly into Atlantic Canada and Manitoba. There are hundreds of examples, such as on May 13 when the RCMP seized 1.7 million cigarettes in West Hawk Lake, Manitoba.

Fact: the criminals are now running the show. By their own admission, the RCMP is losing the battle, estimating that they seize only one of every 50 illegal cartons. The RCMP believes that over 100 organized crime groups are involved in the illegal trade. Of those, 69% are also involved in drugs and weapons trafficking.

Fact: small businesses are suffering. Law-abiding business owners cannot compete with organized crime. Illegal cigarettes sell for as little as $6 for 200 cigarettes, versus $70 to $100 for the same number of legal cigarettes. As a result of that lost revenue, convenience stores are closing every day.

Fact: government regulation of tobacco is becoming increasingly irrelevant. The clear plastic baggies in which illegal cigarettes are sold abide by none of the over 200 federal and provincial regulations governing tobacco products, including mandatory warning labels. They are manufactured in unlicensed factories, with no safety or content monitoring. Most importantly, illegal cigarettes are being sold to young people, since the criminals behind the trade do not ask for identification. Illegal cigarettes are literally available for pocket money prices. I say this as the father of a 13-year-old and an 11-year-old.

The illegal trade undermines every single tobacco control measure put in place by government. This is why the Canadian Cancer Society, amongst others, has reported that smoking rates are stagnant or even climbing now after decades of decline.

Fact: this committee should care about money. Governments are losing $2.4 billion—$2.4 billion—in tax revenue annually to this illegal trade. Our lost taxes are going straight to organized crime, which is reaping hundreds of millions in profits that are then used to fund other criminal activities.

Fact: governments have failed Canadians on illegal tobacco. Did you ever imagine that you would see the day when organized crime has taken over a multi-billion dollar industry in Canada? A task force was created in May 2008 to examine this problem. However, it has yet to issue any kind of report, and now, 16 months later, there is no evidence it has accomplished anything.

Furthermore, recent tobacco tax increases in many provinces have exacerbated the problem by increasing the price gap between legal and illegal cigarettes.

This committee can help. The key reason for the lack of progress is that no one seems to be in charge of this file. The committee could recommend the government appoint a senior politician to take charge, liaise with the provinces, and coordinate actions of all departments and jurisdictions involved. The appointee must be given a clear mandate to tackle this problem and must be held accountable for the government's efforts in this regard, with regular reporting back to the House of Commons on the initiatives undertaken.

Secondly, this committee can follow the money and launch a study of the illegal cigarette trade, its impact on law-abiding businesses, and the cost to the public purse.

We have more proposals in this area, which we hope the committee will take into consideration.

In closing, I accept there are no easy solutions to this problem and that it touches on politically sensitive areas. However, ignoring it will only make things grow worse over time and more difficult to solve.

Thank you for your time. I look forward to your questions.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We'll go to questions from members.

We'll start with Mr. McKay, please.

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

Thank you, Chair.

Thank you, witnesses.

I'll start with the last presentation from Mr. Clayton.

You are brilliant in your description of the problem. The only concrete suggestion you had was to appoint a senior politician to, in effect, be the tobacco czar. It's not clear to me what a tobacco czar would do to actually clamp down on what everyone would agree is a very serious issue here.

The other question I would ask is how do the manufacturers contribute to the problem? I've heard of things like company X manufacturing them, and they sort of fall off the back of the truck on their way to Estonia and somehow end up in the smuggler's hands, and so on.

Can you give me a bit of a handle on both of those questions?

[John Clayton]

On the first question, one of the main problems in solving this problem is that it's a political hot potato. You go to one department and they say it's the responsibility of another department, and that continues at the provincial level as well. So having someone who can coordinate across all of the different government departments is essential.

Public Safety sees their remit as public safety; Revenue sees their remit only as revenue; and Health only sees it as health. Without coordinating all of these to a comprehensive solution, I don't think we'll ever solve this problem, and it will continue to grow over time. That is why we recommend we have someone who can reach across all government departments, speak to the provinces, and engage with the first nations communities as well.

To the second question, the situation in Canada is very unique in terms of the illegal market. The majority of these products are coming from unlicensed factories on the first nations reserves. They are not branded products by the legal manufacturers, going from one country and slipping into the other. They are not counterfeit products either. The majority, according to the RCMP, are flowing out of those first nations reserves.

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

The majority are flowing out, but is there a contribution on the part of the manufacturers?

[John Clayton]

There is absolutely zero contribution on the part of my company, and I believe that has been validated by the RCMP as well.

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

Can you say that's true of all the other legal manufacturers?

[John Clayton]

I certainly hope it is true of all of the legal manufacturers.