Finance Committee on Oct. 21st, 2009

[The Chair, Conservative, James Rajotte]

Thank you. I thought you would say that. I guess I wanted to hear that.

The second issue is about colleges doing more research. I have a friend who used to work in politics, and then, as he tells me, he got into an honest living. He went to NAIT, which you now very well, obviously, in northern Alberta, in Edmonton. He took construction engineering. He actually works for Bird Construction and is a very proud employee of yours. But I think what he and perhaps others would argue is that NAIT now has such a demand that, in fact, they're turning students away who want access to teachers, who want to address one of our fundamental challenges, which is the shortage of skilled labour in Canada.

I take your point about applied research. Colleges obviously do that well, and we should direct some funding there. But there is a caution I would give about getting colleges too far away from their bread and butter, which is what they do very, very well—that is, training skilled labour for the shortage we're going to have. So how do we ensure that we're not turning away students? The concern from some at the university level, especially in the liberal arts, is that we focused a lot of money on research at the expense of teaching.

Could you address that briefly?

[Paul Charette]

I'll address it quickly and then let Linda respond.

In the college system, there's a balance between trades and the technology division, and we need to have that balance. It's not just about the trades. In fact, that's why we carefully worded our coalition. It's about skilled workers being properly trained, and that's not just in the trades. So there's already that balance.

[The Chair, Conservative, James Rajotte]

Yes. I'm talking about skilled workers.

[Paul Charette]

We need to have graduates coming out of the college system who know how to research and innovate problems. If we don't do that, we're doing a great disservice to our industry; they're not coming out, as graduates, as well prepared as they should.

[Linda Franklin]

I think there are a couple of things to say about that.

First, you're absolutely right that, at the end of the day, the colleges' core mandate is teaching, and that will never change. But we do have a lot of professors now who frankly have a real interest in the applied research side. So in part, to keep really high in professors, you need to keep them invested in things they are interested in as well.

I think the real value at the college level is that we engage students in applied research, and not just at the very highest levels or the very latest stage of their education but right through their education. So I would argue that there's a really interesting marriage between training and education on the one side and the ability to engage in research activity as a student that is probably a more powerful combination.

[The Chair, Conservative, James Rajotte]

Okay. I'm just running short on time. I thank you for that question.

I wanted to turn to Mr. Manahan. I found your presentation very interesting. I think you're absolutely right about the challenge related to multi-governmental jurisdictional infrastructure, which is a longer discussion. In terms of the 407, I'm from Alberta, so perhaps I'm a little naive on that. I don't have any scars from the 407 debate, and to me, when I ride on the 407, it seems to work very well. I would just add that.

Perhaps just a brief comment: in terms of the technology, are we actually able to replicate this across the country; and if so, would you only have it on certain types of infrastructure across the country?

[Andy Manahan]

On the technology, I'm not an expert, but I did talk to this group I mentioned to you earlier, and they have done some testing in urban canyon environments, and sometimes GPS bounces off the building walls. So there are some difficulties, but from my understanding they're getting to the point where it's quite accurate. I think, really, where we have to focus road pricing—and this is probably a 10-year plan—should be in the urban areas. It's not just Toronto's issue, it's almost every urban area.

[The Chair, Conservative, James Rajotte]

Thank you.

We do have a few minutes for Mr. McKay. Final round.

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

Just for clarification for those not from the GTA, the issue is not whether the 407 works well or whether it doesn't work well. It does work well, and if you have $15 in your jeans you're perfectly fine. But it drives people who don't care about $15 to the 407 and leaves everybody else driving on the 401, when there should be some more equitable distribution on the two roads.

Anyway, that's not the question I wanted to ask. The issue is with respect to P3--and Mr. Wallace was getting into the core of the issue--if the Government of Canada is going to participate in infrastructure funding. It's reasonable to assume that for the next several budget cycles the government is broke, but one way or another, they're going to have to deal with that reality. There's not going to be too much money available unless you get some innovation with respect to financing. P3s are an obvious way to get innovation.

The core question is--and Mr. Wallace hit on it--the issue that the government, when it expenses everything, it's cash, as opposed to life cycle financing. As part of your discussions, have you had any discussions with the folks at P3 as to whether that accounting methodology with respect to the government's contribution to P3 could be changed from cash to life cycle?

[Andy Manahan]

We didn't get specifically into that, but I mentioned earlier that we talked about bundling of bridges, and what we looked at was, in the U.S., the state of Missouri. They had put out an RFP to rehabilitate over 800 of their bridges. That didn't go so well because I think there was an underpricing. In any case, the concept of shifting from cash accounting to the government paying over a longer period of time, I think, is embedded in that concept.

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

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you.

I want to thank all of you for being with us here this morning. It was a very interesting discussion. Thank you for your presentations and your responses to our questions. We have another panel right away, so we'll suspend for a minute or two and say goodbye, and then we'll bring the next panel forward.

Thank you so much for being here.

[The Chair, Conservative, James Rajotte]

I know everyone is having very interesting discussions, but if I may ask members and witnesses to find their seats, we will begin the second panel of our pre-budget consultations here in Toronto.

We have for the next hour-and-a-half panel a number of organizations. We have with us the Ontario Coalition for Social Justice, the National Council of Welfare, the Canadian Institute of Actuaries, the Wellesley Institute, the Canadian Association of Physicists, the Association of International Automobile Manufacturers of Canada, the Canadian Association of Income Funds, and Hoffmann-La Roche Limited.

So we have a lot of organizations here for the next hour and a half. Let me ask each of you to present, for no more than five minutes, an opening statement, going in the order we outlined. Then we will have questions from members of the committee.

We will start with Mr. Argue, please.

[John Argue, Coordinator, Ontario Coalition for Social Justice]

Thanks very much, Mr. Rajotte.

I guess we're going in alphabetical order. I appreciate starting off.

[An hon. member]

Don't “argue” about it.

[Some hon. members]

Oh, oh!

[John Argue]

I am sure there will be no argument with our views at all, because we have such logical, persuasive views. We look forward to convincing the committee and thereby improving the economy of the province, along with the other people who are here.

The Coalition for Social Justice is a coalition of groups around Ontario, of both labour unions on one hand and community groups. We are interested in advocating social justice in the province but really have been concentrating on poverty, for obvious reasons, in the last number of years, just because of the way low income affects so many people. This is particularly relevant for this pre-budget hearing because of the economic crisis.

I would side with Jim Stanford, thinking of the CBC panel the other day when he was debating with Mark Mullins and...I forget who the investment person was. The two of them were saying that the economic prospects are looking very positive now in Canada, and Jim was saying, wait a minute, there are a lot of factors that are problems because of the huge number of unemployed. This is why we picked the three areas that we have picked

Probably the most general statement that the Ontario Coalition for Social Justice would argue is that we would hope the federal government would adopt a national poverty reduction strategy. We haven't said so directly; we chose instead to concentrate on three particular issues. I'm confident that advocacy for a national poverty reduction strategy will come up in your hearings, but I think the three areas we have identified are key areas that really affect many of the people with whom we deal directly.

Concerning EI, we quote various unions with which we are in association, mainly because of the dreadful effects on union members throughout Ontario—we are Ontario-focused—of the economic crisis and huge job losses, generally in the north of Ontario with mills shutting down and forestry workers having a hell of a problem, but with auto workers, obviously, in Windsor and other union members in manufacturing plants throughout southern Ontario, whether in Cornwall, Hamilton, St. Catharines, or wherever you go. People who were regarded for years and years as having union jobs that were well paid are suddenly facing the prospect of low income or poverty. It is a devastating prospect for the individuals involved and for the communities in which they are placed.

We advocate as strongly as we can that the CLC recommendations with which we finished the section on EI.... They have a number of recommendations about increasing the period of time during which EI would be paid—which the government has addressed, to a slight extent anyway, by extending the five weeks for a period of time—but then increasing eligibility for EI so that a greater number of people will be eligible for EI than is currently the case.

I think of the situation years ago. I'm old enough to think of accusations that people in various parts of the country would take advantage of EI because of seasonal work—work for a little bit and then get payment. What the country is facing now, and what your budget subcommittee is facing, is a much more serious economic difficulty, in which EI is really needed for people directly as a result of the economic difficulties we're facing and because of job loss.

The second general area is the temporary worker program. There we have contact primarily with the United Food and Commercial Workers as well as with the centres they operate in five different places in Ontario where migrant workers or temporary foreign workers are assisted. They do excellent work. The difficulty they are having is that here we are, inviting foreign—

I have one minute? Okay, I'll deal with it quickly. I was going to talk about housing, but Michael Shapcott is here, so I don't even have to say a word. The experts will speak directly.

The migrant workers and the temporary foreign workers are facing huge difficulties in not having their rights recognized in the context of the work they actually do. The UFCW and the community centres that UFCW operates are of great help to those people. The federal government really must take a role—through the budget, I think—in investing in greater employment standards and helping those people become like Canadian workers. If Canada is benefiting from the work they do, I think it's only reasonable and correct that we extend the rights that the workers usually have in Canada.

Why don't I just stop there? Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now go to the National Council of Welfare.

[Mark Chamberlain, Member, National Council of Welfare]

Thank you.

I'm Mark Chamberlain. Thank you for this opportunity.

You have, hopefully, in front of you a full brief that was provided along with an additional document called The Poverty Profile; it's bulletin one. I'm going to refer to it a little during the presentation.

It shows graphically that we are at a pivotal point in Canada. If we follow the traditional course, we face an agonizing, slow recovery for many Canadians. Others will not recover or were disadvantaged even in good times. You'll note on page 2 a graph. You'll see that during the last two recessions poverty continued to climb after the recession was declared over, and you'll see how many more years it took for poverty rates to come back down.

On page 3, you'll see that in the last recession, even when the unemployment situation improved, poverty rates did not. That is the story of many working-age Canadians and their children. Now, if you turn to page 5, you'll see an entirely different story. This is where you see a dramatic decline in poverty that reflects policies that help protect seniors from poverty and the effects of the recession.

In the current recession, both good and bad jobs are disappearing, and EI is not as available as it used to be. Welfare benefits have eroded, in some cases to staggeringly low levels. With severe asset limits and hundreds of rules that can sabotage any rebound to get ahead, or any personal resiliency, it is hard to imagine a program having more work disincentives built in than social assistance has; there is nothing more difficult. Poverty and insecurity are costing us a lot, and this is not a recipe for future prosperity in Canada.

On the positive side, some provinces as well as cities have adopted strategic, coordinated approaches to solving poverty. Hamilton is one of those. It is where I live and have been working with the poverty round table. There are both good results and inspiring practices being generated at municipal and provincial/territorial levels of government. But they cannot do it alone.

I'm a businessman. In fact, I'm an engineer and a businessman. I grew a business that Mike Wallace would know very well. It does about a quarter of a billion dollars' worth of business today. It has 600 high-tech employees in Burlington. I'm also a National Council of Welfare member. We come from all walks of life as a council. We all look at the 40-plus years of constructing a tangled safety net and are confounded at its paltry results.

If you look again at the graphs on page 2 and 3, going up and down and landing where we started is simply not progress. We celebrated our 40th year this year as a council and we're disgusted. We have not made progress as a country, as a province, as a municipality. Canada as a whole must make wiser investments to solve poverty and get better, larger, more permanent returns. The federal government has a unique capacity—and not just unique capacity, but responsibility—to help make that happen.

Poverty has many dimensions. It's not always about money, but that is a dimension in which the federal government plays its most significant role. We say that it's not always just about money, but it's always about money. Through EI, pensions, guaranteed income for seniors, and child and other tax benefits, the federal government has the capacity and the mechanisms in place to provide individuals and families with income security and stability. Those types of policies can operate as poverty preventer, safety net, and springboard to opportunity. Government policy across Canada does a relatively good job for seniors, as page 5 of the bulletin shows, but it can and must do far better for children, youth, and working-age adults—all those individuals who are our future workers, our future skilled workers.

The federal government can do its part effectively by, as a first point, restoring and improving employment insurance to safeguard the livelihoods and the assets of workers and their families during the recession and beyond.

Build on child benefits, employment supplements, GST credits and other potentially refundable credits, including disability and caregiver credits, that deliver the greatest benefits to those who are most economically disadvantaged. These benefits can provide more adequate and stable income; cushion periods of financial difficulty; and prevent, to the greatest extent possible, recourse to social assistance. As one woman put it to us, “welfare” really means “farewell”—to hopes, dreams, even your life. All tax and investment measures proposed to the committee should meet this test of reducing inequalities and providing proportionately more benefits to disadvantaged Canadians than to those who have more money, privilege, ability to pay tax, and options.

Support provincial, territorial, municipal, and aboriginal governments in their efforts to solve poverty and work with them, in consultation with Canadians, towards a pan-Canadian strategy to solve poverty.

And fourth, be a leader in ensuring that our actions as a country match our values as a country. We've got to stop allowing our economics to drive our values and start having our values drive our economics. We speak of deficits. The greatest deficit we have today is our social deficit.

Thank you.

[The Chair, Conservative, James Rajotte]

Okay, thank you very much for your presentation.

We'll now have the Canadian Institute of Actuaries.

[Robert Howard, President, Canadian Institute of Actuaries]

Good morning. My name is Bob Howard, and I am president of the Canadian Institute of Actuaries. We appreciate being invited to this meeting, and I look forward to an exchange that benefits all Canadians.

The Canadian pension system, especially defined benefit, has been challenged for many years, and recent events have forcefully brought home issues that need long-term remedies. It's time to bring together decision-makers at a national pension summit to reach conclusions on a road map and timetable to increase the coverage of private sector defined benefit pension plans, to improve the environment for defined contribution pension plans, to foster sound innovation in post-retirement income security, and to implement intergovernmental harmonization of pension legislation and regulation for the benefit of all Canadians.

On August 6, the premiers indicated their agreement by calling on the federal government to host a national summit on retirement income. We've yet to hear a reply from the government on this important item, and we urge the finance minister to act.

The Canadian Institute of Actuaries would be pleased to assist with this summit in any appropriate way. The institute has met with many members around this table regarding pension reforms proposed in our Prescription for Canada's Ailing Pension System. The dire circumstances that the pension system faced when we released that report in 2007 persist, and the economic crisis has made things even worse.

Canadians are not saving enough for retirement. Canadians need defined benefit pension plans, and these plans need to be saved and revitalized. Claude Lamoureux, special adviser on pensions to the institute, has said that if the trend continues “the only Canadians covered by DB plans will be politicians, government employees...”. Imagine how taxpayers will feel about supporting these plans through their taxes when their own workplace offers either a less effective plan or none at all.

We have, in our earlier report, said that legislation should be put in place to remove disincentives to employers starting up or maintaining defined benefit pension plans, which would improve benefit security. This legislation would include three important interrelated changes for pensions plans.

First, permit the use of a 100% employer-funded pension security trust. This is a side fund, independent from but complementary to the regular defined benefit pension fund. It is a practical solution to the surplus asymmetry issue. Employers gain because they can contribute more than the absolute minimum, knowing that if a surplus arises in the future it can be recovered. Pensioners and employees gain because higher employer contributions will make their benefits more secure.

Second, require each defined benefit pension plan to establish a target solvency margin. A target solvency margin would recognize the volatility of pension plans and their assets and help establish a risk-based approach to planned funding contributions. At present, when times are good, employers stop contributing when the plan becomes 100% funded, so when the inevitable downswing occurs, the plan goes into a deficit and members' pensions are at risk. Under our proposal, the funding target would be higher than 100%, so the risk of a deficit would be reduced. Employers would be more willing to accept additional funding through the pension security trust as it remains under their control. The institute would be pleased to work with regulators to develop guidance on the required levels of target solvency margins.

Third, increase the maximum allowable surplus in a pension plan to the greater of two times the target solvency margin or 25% of the going concern liabilities.

Had these proposals been in place prior to the recent crisis, pension funds would have been less threatened and some relief measures may not have been necessary, and the risk of members' pensions being cut back would have been reduced. The task now is to put in place long-term measures that will, over time, improve and safeguard the retirement incomes of all Canadians.

Mr. Chairman, this ends my formal statement. I look forward to answering questions from the committee.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We'll now go to the Wellesley Institute, please.

[Michael Shapcott, Director, Affordable Housing and Social Innovation, Wellesley Institute]

Thank you very much, Mr. Chair.

My name is Michael Shapcott. I'm the director of affordable housing and social innovation at the Wellesley Institute. With me is my colleague Nimira Lalani, who is a research associate.

The Wellesley Institute is an independent research and policy institute dedicated to advancing urban health. In our written submission we made several specific recommendations in terms of the next federal budget. Today we want to focus on affordable housing and community innovation.

Mr. Chair, even before the current recession, hundreds of thousands of Canadians were experiencing homelessness and millions more were precariously housed. Our research shows that the toxic combination of insecure housing and inadequate incomes is causing increased illness and premature death.

Just recently we prepared a paper for the federal government's consultation on housing and homelessness in which we totalled up federal government spending on housing and homelessness. We found that the federal government is actually spending a substantial amount of money. In fact, the figures from the federal government show that it'll spend $17.5 billion this year on housing-related expenditures. That doesn't include the $64 billion that's been committed to the banks through the insured mortgage purchase program.

The problem isn't the level of spending, it's the fact that only a small fraction of those dollars are going to reach the households with the most urgent need. I'll give you two examples.

The federal government estimates that the home renovation tax credit will cost about $2 billion this year. Yet most of the 3.2 million households—and that's about nine million women, men, and children—who are living in substandard housing, according to Statistics Canada, won't be able to qualify for the home renovation tax credit. What's offered to them is another federal program called the residential rehabilitation assistance program, which is funded at $128 million annually--$128 million...$2 billion. What $128 million buys is assistance for about 20,000 homes a year for ownership and rental homes. If you do the math--20,000 homes, with 3.2 million households in need of repair--it'll take about 160 years at the current level of spending to meet the repair needs of those households.

Another issue we are concerned about is new supply. We continue to have new households that need new affordable housing, yet we're not generating enough new households. Only about 15% of the $3.5 billion the federal government spends on affordable housing will be devoted to new supply.

Members of the committee will remember that about two weeks ago you voted on Bill C-304, which is an act to ensure adequate accessible and affordable housing. That bill passed second reading and is going to another committee for review. We believe that Canada urgently needs a comprehensive national housing plan, and we commend that legislation.

However, in the meantime we'd like to urge this committee to make a recommendation for a substantial down payment towards a national housing plan. In particular, we want to offer three recommendations: first, an additional $700 million for new affordable housing supply; second, double the funding for the homeless partnering strategies with an additional $135 million; third, $128 million to double funding for the residential rehabilitation assistance program.

I know there's a concern in recommending new spending at this time. I want to say that it doesn't necessarily mean that you have to commit new revenues. The federal government should be starting to re-profile some of its existing housing investments to make sure it goes to the households that need it the most.

In addition, we want to recommend to this committee that the federal government should be reinvesting the estimated $1.353 billion surplus from Canada Mortgage and Housing Corporation this year. Some of that can be reinvested in affordable housing and homelessness initiatives.

[Nimira Lalani, Research Associate, Wellesley Institute]

The recession is not only making an already bad affordable housing crisis worse, but it is also delivering a critical blow to Canada's non-profit sector. The non-profit sector is a vital web of health, education, housing, community services, recreation, culture, and faith groups that enriches our communities and makes a major contribution to our economy, contributing five times more to Canada's GDP than auto manufacturing.

As the recession deepens, community-based health, housing, and social services are being asked to deliver critically important services with reduced grants and donations. Our partners throughout Canada tell us that hundreds, perhaps even thousands, of organizations will collapse under the fiscal and service pressures of the recession.

Governments in Britain and the United States, to name just two, recognize that the community sector is vital to the health of a nation and its communities. Canada's federal government is lagging far behind, and the community sector is suffering from a lack of effective partnership at the federal level.

Two days ago, a newspaper column by Microsoft CEO Steve Ballmer had this headline: “Investing in innovation will fuel Canada's economic growth”. That's true in the private sector and it's also true in the community sector. Just as Canada needs a comprehensive national housing plan that engages all the actors, the federal government also needs a comprehensive community innovation plan.

We can learn a great deal from the successes and failures overseas, as we build a made-in-Canada plan. In the meantime, the next federal budget should include a substantial investment in community innovation, including $150 million for a national social innovation fund for social purpose ventures; $50 million for a national community innovation fund for non-profit enterprises; and $15 million for a new national health equity fund to invest in innovative community-based, multi-sectoral demonstration projects.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We will now go to the Canadian Association of Physicists, please.