Finance Committee on Sept. 30th, 2009

[The Chair, Conservative, James Rajotte]

I'd like to call the 45th meeting of the Standing Committee on Finance to order.

I'll remind all of our guests today that taking pictures or video is not allowed during the actual committee deliberations. It's not my rule; it's the rule of the House of Commons.

We want to welcome you all here today. This is the third visit we've done. We started in Vancouver on Monday. We were in Edmonton yesterday. We're very pleased to be here in Yellowknife today, and I'm very much looking forward to a discussion. We're also doing some visits later today with the entire committee.

Thank you all for coming this morning. We look forward to a discussion. We're going to ask all of the organizations to present, and hopefully each of your presentations will be no more than five minutes long. We have eight organizations with us here today. Then we will go into a discussion with members of all political parties.

I'll just remind all of you that we will be in both official languages, so if you need assistance with French there is immediate interpretation available for you.

I'll start with the witnesses here before us. We have Agnico-Eagle Mines Limited; the Northern Territories Federation of Labour; the Pembina Institute, Arctic Energy Solutions Program; the Alberta Association of Colleges and Technical Institutes; Alternatives North; the Government of the Northwest Territories; the Municipality of Baker Lake; and the Public Service Alliance of Canada.

We will start with Mr. Connell, please, and then work our way down the line.

[Larry Connell, Corporate Director of Sustainable Development, Corporate Office, Agnico-Eagle Mines Limited]

Thank you, Mr. Chairman and members of the committee.

I am here this morning representing Agnico-Eagle Mines Limited. AEM is one of the top 10 gold companies in the world and a Canadian success story. In addition to our operations in Canada, which are centred in Quebec and Nunavut, we are also operating mines in Mexico and northern Finland. The Canada Pension Plan is one of our largest shareholders.

I know that my time is very limited, so I will skip to the essence of my presentation.

The mineral resources are in Nunavut. In many cases they have been located and are awaiting development. The mining industry has the capacity to change the economy of Nunavut in a positive manner. This change can occur in this generation with strategic support from the Government of Canada. AEM believes in this potential and has invested $1.5 billion of its own financial resources to become a key player in this region.

Based on our experience, we've put in front of you three initiatives that could significantly increase the economic viability and pace of development of the mineral resources of the Kivalliq region of Nunavut to the benefit of all Canadians and ensure that the people of the region can use this development to advance their economic well-being in a sustainable manner.

The first initiative is an investment in the people of the north, the Nunavummiat. The creation of a sustainable future requires that we maximize northern-based employment. Mining is a non-renewable extractive industry. As an industry, we can balance what we take from the land by leaving behind transferrable skills that will allow the people of this region to participate in their own economic well-being after we have departed. The challenge is the lack of a skilled workforce in Nunavut. The solution is to invest in training and to teach employment and life skills to northern employees.

AEM will be spending $9 million over the next three years for specific job skill training at its Meadowbank mine in Nunavut. We are also participating with the Kivalliq Inuit Association, the Government of Nunavut, and the community of Baker Lake to find other ways to train and to prepare northerners for employment in the mining industry. But more is needed.

We ask the Government of Canada to help by providing additional investment, both in dollars and administrative help, in adult training and education focused on the skills required by the mining industry--miners, heavy equipment operators, and trades such as heavy equipment mechanics, millwrights, welders, instrument technicians, etc.--investment in programs to encourage Nunavut students to go on to post-secondary training, to be in a position to take on technical and managerial careers in the mining industry, and to work with industry to deliver this training now before these opportunities pass, leaving northerners behind. Only the Government of Canada has the resources to make this happen fast enough to help this generation. Without federal involvement we stand to lose having this generation of Nunavummiat be able to fully participate in the resource development occurring now.

The second initiative is the investment in the development of a new deep water port in the Kivalliq Region of Nunavut--Rankin Inlet being the desirable site. Transportation and logistics are critical components and often obstacles for mineral resource development in the north. It is expensive to work and live in the north, potentially reducing the attractiveness to future development of the north's mineral wealth. The Government of Canada can help change this by taking the lead in developing critical transportation infrastructure to open up Canada's north.

In Kivalliq, the construction of a deep water port in or near Rankin Inlet will significantly lower the high cost of transportation to the region, lowering the cost of living and laying the way for increased mineral development. For example, ocean shipping costs to the Meadowbank project are in excess of $20 million a year. An immediate first step is for the Government of Canada to complete a feasibility study. Over the long term, this type of federal investment will be cost-recovered through growth in the mineral sector in the Kivalliq region. Only the Government of Canada has the resources to make it happen now.

The third initiative is to assist the community of Baker Lake with investment in critical infrastructure that they need to participate in the mineral development that is occurring on their doorstep now. I will be brief here, as I know you will also be hearing this morning from the hamlet of Baker Lake.

Baker Lake is in the middle of a band of highly prospective mineral potential. The Meadowbank gold mine is under construction and will start in early 2010. The Kigavik uranium mine is now in the environmental assessment process as a high-level exploration is occurring in the lands around the community.

The hamlet of Baker Lake needs help to build capacity, infrastructure, and small business development to allow it to take advantage of these developments and not let these opportunities pass them by. The Government of Canada can help by strategic investments in the expansion of transportation infrastructure and in assistance to small business development in Baker Lake to allow the community to develop in support of the mineral industry in a sustainable fashion.

In conclusion, I offer the following thoughts for your consideration.

The economic future of Canada is aligned with the economic future of Nunavut. The mining industry has proven that there's a long-term resource development potential on which to build a solid sustainable economy in Nunavut. This is the opportunity of a generation for the people to acquire skills, jobs, and opportunities comparable to those in southern Canada. That potential can only be realized with strategic investment by the Government of Canada. These investments in infrastructure, skills, and education make resource development viable by dramatically improving project economics and making northern development costs closer to those of other regions in Canada and the world.

These investments will pay for themselves in new taxes, royalties, and reduced dependence on the federal government, while demonstrating to the world Canada's commitment to its Arctic territory. The cost is small. The payback is enormous for the people of Nunavut and Canada.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now go to the Northern Territories Federation of Labour.

[Mary Lou Cherwaty, President, Northern Territories Federation of Labour]

Thank you very much, Mr. Chairman.

On behalf of the 8,500 members of the Northern Territories Federation of Labour, thank you for providing this opportunity to present our recommendations for the 2010 budget.

The Northern Territories Federation of Labour comprises many different unions that represent workers in a vast number of occupations in both the Northwest Territories and Nunavut.

Given the restriction to limit our submission to three recommendations, the Northern Territories Federation of Labour will call on the government to create an EI board of referees for the Northwest Territories and Nunavut, to increase the northern residents tax deduction, and to improve our national pension system to provide retirement income security.

Workers and employers in the Northwest Territories and Nunavut contribute significantly to a federal unemployment insurance system that is virtually inaccessible to them. When EI board of referees centres were established over 25 years ago, Whitehorse, Yukon, was chosen as the only location in the north. Residents of the Northwest Territories, and now Nunavut as well, have been forced to have their appeals heard by the board of referees in Edmonton, Alberta.

In 2000, members of the Edmonton EI board of referees wrote to the commission to express their concerns and their frustration with conducting telephone hearings between Edmonton and the Northwest Territories. Despite their urging to pursue an EI board of referees in the territories, nine years later we are still without one. There are 83 boards across the country, and it is unconscionable that residents of the Northwest Territories and Nunavut must have their appeals heard in Edmonton.

The Northern Territories Federation of Labour has made inquiries as to why this disparity continues, but the only response we've received is that the north does not meet the appeal volume criteria. Unfortunately, these criteria are not clearly defined. For example, according to the statistics published for the NWT and Nunavut up to February 5, 2009, both the number of appeals processed and the number of appeals sent to the board exceeded those received and processed by the Yukon's board.

The number of appeals is far lower than it would be if we had an EI board of referees within our own region. The requirement to file an appeal in writing within 30 days of a decision prevents many unemployed workers from accessing the system. Due to the higher cost of living in the north, we suspect that many are not accessing the system and are giving up and moving out of the north. This has contributed to the out-migration of a much needed workforce here, especially during this economic crisis.

It is imperative that the 2010 budget allocate the necessary funds to create an EI board of referees for the Northern Territories.

Second, the northern residents tax deduction is a fair tax credit for assisting working families to live and work in Canada's north. It was established in 1988 and remained at the same actual value for 19 years. Finally, after extensive lobbying for a 50% increase, the government raised the northern residents tax deduction by a mere 10% in the 2008-09 budget. This falls far short of addressing the high cost of energy, food, housing, and almost all goods and services. Many northern communities have a cost of living double that of urban southern Canada. Because the cost of goods and services is so high for northerners, we pay more GST on essentials. Most of what is saved with the northern residents tax deduction is taken back with the GST.

In the Northwest Territories, where the economy has been fairly healthy for the last few years, there has been a net out-migration of between 1% to 2% per year. This is the only jurisdiction in the country to not have had an increase in population, while Canada has just realized a 1.2% increase.

The escalating cost of energy hits the north particularly hard, as the only source of heat and electricity for most communities is heating oil. Northerners are struggling to afford the high cost of living. The 2010 budget must include a 50% increase in the northern residents tax deduction.

On retirement income security, the implementation of registered retirement savings plans has proven to be a dismal failure. More than half of Canadians do not own any RRSPs, and those who do own them have nowhere near enough live on in retirement. Canadians should not live in fear of retiring. Northern residents should not have to leave their homes and families when they retire because they cannot afford to live where they have worked all their lives. The current benefits under the Canada Pension Plan are inadequate, and even when coupled with old age security and the guaranteed income supplement, they leave Canadians in poverty.

Living in poverty after a lifetime of working is not something that we as a society should accept. The Government of Canada has an opportunity in the 2010 budget to start making improvements to our national pension system.

The Northern Territories Federation of Labour calls on the government to phase in a doubling of the benefits under CPP over the next 7 to 10 years. This could be financed by modestly increasing both employee and employer premiums.

The Northern Territories Federation of Labour also calls for an immediate increase in the guaranteed income supplement. We suggest that the maximum GIS should be increased by $110 per month. The goal of this should be to eliminate poverty among elderly Canadians. The estimated annual cost of this would be about $1 billion. Marginally reducing the high limits on RRSP contributions could cover this cost.

Those Canadians who are fortunate enough to participate in a pension plan should be guaranteed their benefits. The federal government should institute a system funded by contributions from pension plan sponsors to provide a maximum guarantee of $2,500 per month. This system could start by covering federally regulated pension plans with a view to creating a national system with the provinces and territories.

The Northern Territories Federation of Labour supports the Canadian Labour Congress' call for a national summit on pensions. Government, employers, labour, and other interested parties should meet and bring forth a concrete plan to rebuild and reform our pension system.

Thank you for your time.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We'll now go to Ms. Mackenzie, please, from the Pembina Institute.

[Katherine Mackenzie, Policy Analyst, Pembina Institute - Arctic Energy Solutions Program]

Good morning.

My name is Katherine Mackenzie. I'm a policy analyst with the Pembina Institute, with our Arctic Energy Solutions Program here in Yellowknife. The Pembina Institute is a national sustainable energy think tank. We work on energy issues, from conventional energy to sustainable energy, all across the country.

My brief today is based on an upcoming report that will be publicly available this fall, and I'll be touching on two of the main points.

The current oil and gas revenue system in the Northwest Territories should be reviewed and reformed in order to ensure a prosperous and sustainable future for the north. This is a very timely topic, as the Government of Canada has expressed its desire to see further resource development in the north.

Today I'll present two of our main recommendations to improve the NWT's oil and gas revenue system. The first is that the federal government should review and reform royalty rates and the bidding system for oil and gas leases in order to capture maximum revenue on behalf of Canadian citizens, who are, of course, the resource owners. Once collected--and this is our second recommendation--a portion of this revenue should be placed into a non-renewable permanent fund. These are also known as long-term funds, or heritage funds in some jurisdictions.

Currently, the royalty rate in the NWT is unnecessarily low and does not capture adequate revenue for its citizens. At 30% of net revenue, the rate is lower than rates applied in jurisdictions like Alberta, Alaska, Newfoundland, and Norway. For example, in Alberta the royalty rate for conventional oil is up to 40% of gross revenues and is up to 35% for natural gas. The 30% rate in the NWT is on net revenues, so it's once companies are making a profit. For another example, Norway has a profits tax of 50% on its oil and gas developments.

A work bid system is currently used to award oil and gas leases in the NWT. A work bid states what a company is willing to invest to develop a project. The current system of work bids, therefore, does not result in a transfer of revenue from companies to the government. In contrast to this, a cash bid system requires developers to bid cash for the lease rights. In this way they provide a useful way for the government to capture revenue from developers at the outset of a project.

Our second recommendation is that a portion of the federal government's revenue from oil and gas development should be placed into a non-renewable permanent fund. There are numerous benefits to these funds. For example, they provide us insurance against declining revenues, as non-renewable resources are depleted over time. They can be used to help mitigate boom-and-bust cycles that are often associated with natural resource development. They also encourage economic diversification and can help facilitate a transition to renewable resources. They can also help to ensure that development benefits all residents, both current and future, and they provide a source of revenue for addressing the negative socio-economic impacts from oil and gas development.

Non-renewable permanent funds are used in many other jurisdictions, including Alberta, Alaska, and Norway. Norway's permanent fund is considered to be one of the most successful in the world and is now valued at approximately $339 billion.

This year's federal budget should include funds for a full, transparent, and well-supported public review of the oil and gas revenue system in the NWT. An example of a recent public review process is British Columbia's Citizens' Assembly on Electoral Reform, which cost approximately $5.5 million. Such a review should be made up of a citizens' assembly, an expert resource revenue reform committee, and an avenue for public input, and also include a strong youth component to ensure that all voices are heard.

This year's budget should also include items to promote the transition to sustainable energy in the north, as this is an important part of ensuring prosperity and sustainability. Such an example is the remote community wind energy incentive program, which is described in the one-pager I've provided to you. Alaska, for example, has set up a substantial renewable energy fund by using the revenues from its oil and gas industry.

In conclusion, a public review of royalty rates and the lease bid system, and the creation of a non-renewable permanent fund, are our two recommendations to make the NWT more prosperous and sustainable.

Thanks very much.

[The Chair, Conservative, James Rajotte]

Okay. Thank you very much for your presentation.

We'll now go to Mr. Schultz with the Alberta Association of Colleges and Technical Institutes.

[Tim Schultz, Executive Director, Alberta Association of Colleges and Technical Institutes]

Thank you very much, Mr. Chairman.

On behalf of the 17 members of the Alberta Association of Colleges and Technical Institutes and post-secondary learners in Alberta and across the country, I'd like to thank you for the opportunity to be in Yellowknife this morning and speak a little bit about our brief that was presented to the committee a while back.

I can't do that without doing a commercial on AACTI before I get into the meat of the brief. As I said, we represent 17 publicly funded post-secondary institutions in the province of Alberta. These institutes enrol about 56% of the province's post-secondary learners on an annual basis.

We have two technical institutions. The Alberta College of Art and Design and the Banff Centre are members. We have two newly constituted undergraduate universities in Alberta: Mount Royal University in Calgary and Grant MacEwan University in Edmonton. The balance of our members is made up of community colleges, which play a really valuable role in post-secondary education in Alberta.

Virtually all of our members are members of the Association of Canadian Community Colleges, ACCC. You'll find some parallels in our brief and the brief that ACCC is to present to the committee.

I'd like this morning to talk about booms and busts and recessions, opportunities and risks and rewards, pure research and applied research, and change and evolution, but I only have five minutes, so I'm going to talk about evolution because it seems to be the easiest one of the bunch I just listed.

It's a little-known fact that the Canadian government, about 50 years ago, was largely responsible for the Canadian community college system. Back at that point in time, high school education was the benchmark. If you didn't have a high school education, it was very, very difficult to get a good job in Canada. The thought was that if you got that high school diploma, you could likely get a career that would last you a lifetime.

Colleges were in the middle between universities and high schools. University education, 50 years ago, was the pinnacle. It was the key to massive success in the workforce.

Now we have evolved and things have changed. High school is a bare minimum. I wouldn't want to be too crass, but you must have a high school education or there is really no chance for good employment.

Post-secondary education is essential for success. Universities are starting to focus on post-grad studies as opposed to undergraduate, and there is a generational shift. There are three to four college graduates in the workforce in Canada for every university graduate. The Canadian Federation of Independent Business suggests that the ratio should be six graduates from colleges for every one from universities.

Only about 15% of the Canadian workforce has a university education, although about 65% of the Canadian workforce has post-secondary education, so the role of our colleges and technical institutes in the Canadian workforce is essential.

The dollars spent on post-secondary education are not a cost; they're an investment. We mention in our brief that we've recently completed a socio-economic impact study in Alberta. I won't go over the statistics in the brief, but it's easy to see that an investment in post-secondary education pays returns.

Post-secondary grads earn more over their lifetime, which means they pay more taxes. They're healthier, which means they use less health care dollars. They are less likely to draw down on social programs, which means that over the course of their lifetimes they do contribute much to the Canadian economy.

The post-secondary system enhances the skills of the workforce. We don't educate enough skilled workers to meet the demand.

The economy will recover. I noted in our brief that if we were to have presented this a year ago, times would have been different. Times would have been different, but I don't know that the recommendations would have been different from what they are today. We'll again wrestle with significant skills shortages.

In order to assist in meeting those skills shortages, we've made two recommendations, which, as I indicated, support what ACCC is trying to accomplish from a national perspective.

Do I just have one minute left? Is that all?

We recommend that the government establish a fund to support infrastructure in an amount sufficient to supply the economy with required advanced skills. ACCC's recommendation is that over the period 2009 to 2014, the federal government invest $500 million annually on a cost-shared basis with the provinces and territories. We also recommend increased funding for Indian and Northern Affairs so we can really engage first nations, Métis, and Inuit learners in the system.

There has been an evolution in research. Fifty years ago colleges and technical institutes did not do research. That was the realm of the universities. The focus these days is on tech commercialization. Our institutions work in 106 communities in Alberta in lockstep with small and medium-sized enterprises, industry, and the community.

We're building capacity in Alberta to do applied research and take the ideas of Albertans and Canadians to the worldwide market. The focus can't remain on universities for research. We shouldn't take dollars away from research for universities, but we need to recognize the necessary role played by colleges and technical institutes across the country.

The recommendation of ACCC, supported by AACTI, is that instead of redistributing the envelope for research dollars in the country, let's make it marginally larger. Increase it by 5% and inject that amount into research, product development, and commercialization projects of colleges and technical institutes across the country. That represents about a $250 million investment annually, in addition to what's currently being spent.

Thank you very much, Mr. Chairman.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We did hear from Grant MacEwan College and NorQuest College yesterday in Edmonton, of which you're probably aware.

[Tim Schultz]

I suspect the message was similar.

[The Chair, Conservative, James Rajotte]

We are now going to hear from Alternatives North, please.

[Suzette Montreuil, Co-Chair, Alternatives North]

I'm going to begin in French.

Good morning and welcome to the Northwest Territories.

Alternatives North is a coalition of churches, anti-poverty, labour, environmental, and women's groups, small businesses, and individual members.

In our submission, we have provided a historical context of the causes of the economic crisis. I would like to raise a few points. We have indicated that financial policies have a major impact on working families. The number of families living under the poverty line grew five times faster in the 1990s than the family population itself. Most income growth went to the top 20%.

In the Northwest Territories, we have noted growing inequality and poverty. I would like point out a fact to support this point. From 2006 to 2007, 4% of households in the Northwest Territories had an income of less than $10,000, and 19% had an income of less than $30,000. These households are most often located in small communities, that are mostly aboriginal, and the cost of living is very high. The Far North is also suffering from a shortage of affordable housing, as well as early childhood and educational centres. It has been noted that aboriginal populations have not prospered as much as the rest of the Canadian population.

We have established the following guiding principles: reducing social inequality must be one of the main goals of our efforts; public investments and wage increases will be crucial. These were significant factors that helped people overcome the Great Depression. Today we continue to believe that they are essential.

Alternatives North has three recommendations on stimulus measures. The first is to restore a more progressive tax system so we can decrease present inequality and fund spending on much-needed programs. A progressive tax system would remove tax obligations from those below the poverty line; tax unearned income at the same rate as earned income; return corporate tax rates to pre-1980 levels; and use tax incentives to foster conversion to renewable energy technology sources.

Our second recommendation is to focus our infrastructure spending on public projects aimed at energy conservation, conversion to green energy sources, and affordable housing stock. I'd like to point out that these types of projects could be done throughout the north, including in small, more remote communities.

Our third point is to address social infrastructure deficits, with an initial focus on the direct public creation of more child education and care spaces, and move toward a nationally funded early childhood care education program that provides quality care and is accessible and affordable. This would be an excellent job creation approach and would remove barriers to employment for many families.

You asked what changes should be made to federal stimulus measures. We say you should stop focusing on cutting tax for the rich. Tax cuts for the rich largely end up in savings, paying down debt, and buying imports. To quote Benjamin Tal, who is a senior economist with CIBC world markets, “infrastructure spending is a much more effective tool than tax cuts” in terms of economic stimulus.

The second point is that you need to remove the requirement for the matching of funds. We believe that many jurisdictions will not be able to raise those funds, so much of the promised federal money will go unused.

You need to stop asking for wage concessions for private enterprises receiving government assistance. I note the example of the auto workers.

You need to focus on public projects and not public-private partnerships that really hide the debt of government. There are additional costs because the private enterprise is looking for profit.

Finally, economic recessions come and go, but the ecological crisis we are facing will not. We have to combine our efforts to address both of these causes at the same time.

Thank you for your attention.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We will go now to Margaret Melhorn, Deputy Minister of Finance for the Government of the Northwest Territories.

[Margaret Melhorn, Deputy Minister of Finance, Department of Finance, Government of the Northwest Territories]

Thank you, Mr. Chair.

I'd like to thank the standing committee for the opportunity to meet with you today here in Yellowknife as part of your pre-budget consultations. Finance Minister Miltenberger regrets that he isn't able to meet you, as he's travelling on government business.

The Northwest Territories saw tremendous economic growth over the last 10 years, but we have not escaped the effects of the global downturn. There have been temporary shutdowns and layoffs in our mining industry, and exploration has slowed substantially.

The downturn will negatively affect our government's finances, but we are prepared to maintain spending to sustain economic activity. Canada's contributions through the economic action plan have been a welcome and important addition to our plans.

This fiscal year we will invest a record $475 million in infrastructure, including the stimulus funding from Canada. The Building Canada program has worked well in the NWT. We have been able to identify needed community and transportation projects, receive approvals, and get work under way. Our increased capital spending will be responsible for about 1,000 person-years of employment over this year and next.

Our government has long argued, however, against per capita allocation of infrastructure funding because this formula is not appropriate for the north. The RInC program is a good example. The three territories were allocated less than $600,000 using the per capita formula. Infrastructure programs need to include a base amount per jurisdiction.

Our government remains highly dependent on federal transfers. The NWT's vast size, small and dispersed population, significant social and human needs, and challenging climate mean that it costs much more to deliver services and build infrastructure than we can generate from tax revenues.

We rely on adequate transfers under territorial formula financing to fill this gap. This program was placed on a sound footing in 2007 and provides the territories with a stable source of funding. Reducing TFF would jeopardize the delivery of vital public programs in the north. It is critical that it be maintained.

Furthermore, emerging aboriginal self-governments in the NWT will face similar challenges. Canada must acknowledge its responsibility to adequately fund these new governments.

Valuable programs, like the territorial health access fund, that help us explore new ways to address the north's substantial health care needs should be renewed. Continued support for early childhood education and child care programs would also strengthen our ability to meet some critical social objectives.

Until devolution is concluded, the NWT lacks jurisdiction over our non-renewable resources. Resource development does not generate the revenues that would allow us to make investments that would generate long-term economic, social, and environmental returns and thereby increase our territory's self-reliance. We are also limited in what we can borrow to finance this investment and therefore need Canada to partner with us.

For example, the Taltson hydro expansion project would displace up to 100 million litres of imported diesel and eliminate approximately 280,000 tonnes of greenhouse gas emissions every year. It represents a tremendous opportunity to address climate change concerns while providing short- and long-term stimulus to the economy. Canada's investment in this project would signal a commitment to support legacy infrastructure that provides major long-term public and private sector benefits.

We are encouraged by renewed federal interest in the north, including the creation of the northern development agency and the federal northern strategy. Premier Roland has welcomed these initiatives, but he has also stressed the need for northern engagement in their implementation. Northern governments must play a role in decisions concerning our future.

The premier wants to advance work on key initiatives that will strengthen the north and Canada, including the Mackenzie gas project, aboriginal rights negotiations and implementation, transportation infrastructure, green energy, and devolution.

Finally, we are concerned about the NWT's declining population. The high cost of living is a real barrier to attracting and retaining residents. We need to nurture growth in the territory to strengthen our economy, increase economies of scale, lower the cost of living, and support Canada's goals for Canadian sovereignty.

The federal northern residents tax deduction is important. Last year's 10% increase was welcome, but it did not fully restore the deduction's real value. We had called for an increase of 24% and estimate that this would cost Canada an additional $14 million and our government $1 million.

To conclude, territorial formula financing transfers must not be reduced. Other funding arrangements that support important initiatives in health care, training, and early childhood education should be continued. Canada should make concluding devolution and aboriginal rights agreements a priority, and Canada needs to stay the course on its stimulus efforts on infrastructure, in particular transportation and green infrastructure.

Investments that help to lower the cost of living are of prime importance for the NWT. Infrastructure dollars should not be allocated on a per capita basis.

Thank you, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We'll now go to the Municipality of Baker Lake.

[David Simailak, Deputy Mayor, Municipality of Baker Lake]

[Witness speaks in Inuktitut]

Thank you, Mr. Chair.

My name is David Simailak. I'm currently the deputy mayor of Baker Lake and I am a business person in that community.

I was previously a member of the Nunavut legislature and a minister of the Nunavut government in the transportation, economic development, energy and finance portfolios. With me as a witness is Andrew Gamble, a consultant who has worked with the community of Baker Lake for many years. Also here with us is His Worship Mayor David Aksawnee, the mayor of Baker Lake, who has been very active in wildlife management and is now serving his third term as mayor of Baker Lake, a rarity in Nunavut actually. Along with our hamlet council, he has long been in support of the Baker Lake airport improvement project.

As you know, Mr. Chair, Nunavut is the most remote, the most sparsely populated, and the least developed of the three northern territories of Canada. The economy of Nunavut is far too dependent on government expenditures and federal transfers. We have the highest percentage of aboriginal residents, with relatively low levels of education and employment. It's not a pretty picture.

On the other hand, Nunavut has a huge non-renewable resource potential. Every study of the Nunavut economy undertaken by government and non-government organizations over the last decades have come to the same conclusion. By far the greatest economic potential for Nunavut lies in development of its non-renewable resources. This remains the only hope for significantly increasing employment and reducing dependence on government transfers.

Two key things are required from government to realize this potential. First is investment in people. Top-notch education and training programs are required to ensure that Nunavut can participate in the economic benefits of development. Second is investment in infrastructure. This means better seaports and airports, power, communications, community infrastructure, and housing. We don't expect highways, but we must rely on the best possible air and marine facilities. Let me simply say that Baker Lake has the only highway in all of Nunavut, a 109-kilometre all-weather gravel road from Baker Lake up to the Meadowbank gold project.

That is why we are here today. Today, Baker Lake and the Kivalliq region are leading Nunavut in non-renewable resource development. Agnico-Eagle's Mines is completing construction of the Meadowbank gold mine north of Baker Lake. This mine alone will add some 30% to the Nunavut GDP. It is already providing over 200 jobs and training to our residents and opportunities for our businesses. Agnico has had to invest in infrastructure that most regions of Canada take for granted, providing its own power, communications, and its own road to the mine.

Resources Canada is actively advancing its Kiggavik uranium property west of Baker Lake. There are other exploration and development prospects throughout the region. To support these developments and to ensure that Baker Lake benefits from them, we have been asking for improvements to our airport. That is what we are asking of you.

My associate, Andrew Gamble, will provide you with a brief overview of the proposal itself.

[Andrew Gamble, Consultant, Andrew Gamble and Associates, Municipality of Baker Lake]

Good morning.

By way of introduction, I'm a professional engineer with 10 years of experience with the federal government and 20 years with the territorial government. The last nine years I've been a consultant in the north. Most of my work is intracommunity and for aboriginal governments, and I'm currently doing some work for Baker Lake.

Mr. Simailak spoke about education, training, and infrastructure. These have been constant themes in my experience of 30 years in the north. The springboards of prosperity for the territories will certainly be its resources, just as it was more than a century ago for the eastern provinces and more recently for Alberta and Newfoundland. The key to realizing this potential will be investment in infrastructure. The key to ensuring that Canada's aboriginal population can participate in the economic mainstream is education and training.

In 2000 I was asked to investigate the options for upgrading the Baker Lake airport. It didn't go ahead at that time. In 2007 I was asked to take a second, more detailed look. We examined the option of extending the existing airstrip, as well as a realignment at the current site to reduce zoning restrictions. We also looked at relocating the airport. Following consultation with Transport Canada, the territorial government, the industry, and operators, the recommended option was the relocation of the airport to a site northeast of the hamlet and the construction of a new 1,525-metre runway, along with other facilities.

This location meets all of Transport Canada's standards and offers full unrestricted use for a Boeing 737 aircraft, with ideal wind orientation and flexibility for future expansion. The cost is estimated at $20 million. The current financing proposal seeks contributions from the governments of Nunavut and Canada and from industry. It can make Baker Lake a new air transportation hub for mining, exploration, and development in the region, with direct passenger and cargo routes to Yellowknife, Edmonton, Winnipeg, and Val d'Or.

We will leave a copy of the study and the current financing proposal with you.

[David Simailak]

Mr. Chair, the Meadowbank mine project will generate over $3 billion in GDP over its life. It will provide several hundred million dollars in direct government revenues. Because the territory of Nunavut, unlike provinces, does not own the resource, these revenues will go to Canada. Twenty million dollars may seem like a lot of money to invest in a small community airport, but it is only a tiny fraction of the revenues this project will provide to Canada.

Canada is investing billions in gateways to the west, the south, and the east. We urge you to consider investing in gateways to Canada's north. If we're going to be serious about arctic sovereignty, let's spend a few dollars there. We believe this investment will pay dividends by supporting current developments and encouraging new ones. It will also ensure that the fair share of the benefits remain with us.

Please, Mr. Chair, come to Baker Lake, come to Nunavut. You have an open invitation.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you. I certainly appreciate that.

I think we should take the entire committee up there.

We will now hear from the Public Service Alliance of Canada as our last presenter this morning.

[Jean-François Des Lauriers, Regional Executive Vice-President, Northern Region, Public Service Alliance of Canada]

Thank you, Mr. Chair.

Thank you to the members of the committee for coming to Yellowknife to hear what the people of the north have to say on the upcoming budget.

In a way I'm glad to be the last person to speak, because I realize that we all agree on some very fundamental points in terms of what is needed for the north to develop.

The Public Service Alliance of Canada represents upward of 12,000 workers across the three northern territories, so I'm speaking on behalf of workers in Yukon, NWT, and Nunavut. The bulk of the membership is employed by the territorial governments, but we also represent employees of the federal and municipal governments and of a number of non-governmental and para-governmental organizations. We also represent workers in the private sector, for example, the employees of BHP-Billiton, working at the Ekati diamond mine in NWT; Nuna Contracting, involved in the Giant mine reclamation project, and many more.

My brief does not deviate from the one to be filed by Brother John Gordon, national president of PSAC. On the contrary, it augments and reinforces it, especially on the issues of unemployment and government involvement in the economy.

Here's the shocker: unemployment in the region. The official figures on unemployment for the north are generally higher than those for the rest of the country, but the north's figures do not necessarily reflect reality. Real unemployment in this region is easily two to three times higher than official figures. Rural areas are worse than urban ones. The situation in the NWT is worse than in the Yukon, and Nunavut is the most affected.

Anecdotal information would suggest that a full one-third of the potential workforce in Nunavut is unemployed, and this is a conservative estimate. Aboriginal people—Inuit, first nations, and Métis—in all three territories are especially affected by this scourge.

As a result, a vast segment of the population is living in crushing poverty. This is having devastating effects on every aspect of people's lives: health, education, family relations, and self-esteem. If these conditions existed in the provinces, all levels of government would declare a state of emergency and immediately instate a rescue package in the billions of dollars.

These conditions have existed on a systemic basis in the north for decades. Some intervention has taken place, but nothing near the scale of what is required to provide significant relief and recovery and to bring the people of the north on a par economically with the rest of Canada. Nunavut, in particular, has been grossly underfunded.

Currently, Canadian workers everywhere are suffering an historical surge in unemployment and loss of jobs. Even under these conditions, the rates of unemployment in the north are several times higher than in the provinces. Compounding the problem is the fact that a lot of workers who actually have jobs cannot afford the prices of food and housing. The price of good, nutritious food in many communities north of 60 is three to four times what it is in the rest of Canada, and yet people's incomes are only a fraction of Canadians' average income. The consequences are utterly disastrous. Northerners, especially aboriginal peoples, are plagued with health problems that put them on a par with some of the poorest parts of the world. This is unconscionable in a country as rich as Canada.

Our recommendation for the north to the finance committee is an immediate increase in transfer payments to each of the three territories in the following range: for Nunavut, 50%; for the Northwest Territories, 20%; and for the Yukon, 20%. The representative from the Department of Finance has asked that transfer payments not be reduced. It's even more imperative that they be brought up to a level where we can start to address some of the major problems.

These increased funds should be, in order of priority, targeted to housing, food subsidies, and health and social services. Unless these areas receive a substantial financial boost from the central Canadian government, it will be impossible for northerners to attain the level of functionality they need in order to fully participate in the industrial developments that are being contemplated by industry and governments, now and for the future. One cannot learn and prosper unless one has a decent house to live in, nutritious food to eat, good health, and a stable, healthy family and community to live in.

In conclusion, there is a cost to everything we do, but there is also a larger cost to everything we do not do. The neglect of populations in the north, especially of aboriginal peoples, carries a huge human cost. Now is the time to deal with this long-standing injustice and demonstrate that Canada cares about all of its citizens, no matter how far they live from the capital.

Do I have a little more time?

[The Chair, Conservative, James Rajotte]

You have about 30 seconds.

[Jean-François Des Lauriers]

I'll give you some stats on the reality in the north.

For housing in need of repair, the percentage of households that are in core housing need, meaning that they do not live in and cannot access acceptable housing, is 17.4% in NWT. It is 15.8% in Yukon and 38.8% in Nunavut. They are all well above the national average of 13.7%.

The cost of living is much higher for those living in the territories. I have added a table here, but there is one figure that makes it absolutely clear. Nunavut households spend 92% more on food than the Canadian average. Their salaries are a whole lot lower than those of the average Canadian. How do they make ends meet? How can they possibly participate in the industrial developments that are being proposed unless their--

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation. I want to thank all of you. We'll now go to questions from members, and the first round will be seven minutes for each party.

We'll start with Mr. Pacetti, please.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Chair. Thank you to the witnesses for coming forward and appearing before us.

I was a little bit disappointed until I heard the presentation from the Public Service Alliance of Canada, because the reason we came here was to feel what you guys are feeling. I'm an urban MP from Montreal. I've heard about the problems in the north, but I haven't really seen it. I've been pushing for this committee to come up here. I've been a member for about four to five years now. We've heard stories, and we're going to do some site visits. I don't think we're going to probably spend enough time. I think the only person around the table who could probably feel what you guys are feeling is Dennis, who is a member of Parliament here.

I don't want to put a downer on things, but some of the questions I had are going to change now that Mr. Des Lauriers made his presentation. I'm going to try to understand. In the brief there were some good points in the sense that we need funds, from my understanding, for the northern areas or the northern territories for housing. At least it's properly stated for housing and food subsidies. That's what we've been hearing for years. The question is, how do we get the money to people who need it the most.

To the contrary, things like...and I'm not even sure who I'm going to ask this question to. I heard in presentations that we need to increase the northern tax deduction. In a sense, if a large segment of the population is under the base level of poverty, nobody's going to be able to take advantage of this, or very few people are going to take advantage of it. I think that was Ms. Montreuil's point. I don't know who'd like to comment on that.

I'd like to have you comment on that, Ms. Melhorn, because I think you asked for an increase in the northern tax deduction.

[Margaret Melhorn]

The issues in the north are very many, varied, and challenging, but the issue of attracting and keeping residents in the Northwest Territories who face the very high cost of living is a real one, and the tax deduction is one that does affect northern workers. Many northern workers do take advantage of the tax. In fact, I would say that most people who live here and file tax returns and who earn income up here do take advantage of it.

One aspect of the north is that, yes, there are very many people who fall into the low-income category, but we also have those with high nominal incomes. The incomes are high because the cost of living is high, but given the progressive nature of our tax system, that doesn't recognize the fact that costs are high. People get moved into higher tax brackets because their wages are higher to cope with the higher cost of living. It pushes them into higher effective tax rates. Also, because a lot of benefits delivered through the tax system are income-based and they have higher nominal incomes, they are cut off from those benefit programs sooner than they would be if they had similar real incomes in the south. So the northern tax deduction--