Finance Committee on Oct. 22nd, 2009

[The Chair, Conservative, James Rajotte]

I declare the 54th meeting of the Standing Committee on Finance in order.

This is our second day in Toronto, the ninth city in our cross-Canada pre-budget consultations. We're very pleased to be here in Toronto. We have four panels today, with an hour and a half for each panel. We'll be hearing about 60 witnesses in two days here.

I'll list the organizations we have with us here this morning in order of presentation to the committee: the Canadian Health Food Association, McMaster University, the Greater Kitchener Waterloo Chamber of Commerce, the Canadian Media Guild, Mr. Chris Smith as an individual, the Canadian Federation of Students Ontario, the Alliance for Equality of Blind Canadians, and GrowthWorks Capital Ltd.

I welcome all of you and thank you for being here this morning.

We'll start with the Canadian Health Food Association.

Each of you has five minutes as an organization for an opening statement, and then we'll have questions from members.

[Penelope Marrett, President and Chief Executive Officer, Operations, Canadian Health Food Association]

Bonjour and thank you very much, Mr. Chair.

I thank the members of the committee for inviting the Canadian Health Food Association here today.

My name is Penelope Marrett and I am President and Chief Executive Officer of the Canadian Health Food Association.

The Canadian Health Food Association, CHFA, is Canada's main national commercial association for natural and organic products. It represents more than 1,100 businesses, including growers, retailers, manufacturers, importers, distributors, consultants and health care providers. Serving Canadians from sea to sea, CHFA has faith in a world in which natural and organic products are an integral part of health and well-being.

In 2004 the natural health products regulations came into force. Natural health products include vitamins and minerals, herbal remedies, homeopathic medicines, traditional medicines such as traditional Chinese medicines, probiotics, and other products like amino acids and essential fatty acids. This sector is valued at $2.5 billion a year, a significant contributor to the Canadian economy.

The regulatory requirements to license some 50,000 products and over 800 domestic sites have led to serious challenges in the marketplace, including decreased product innovation, inability to advertise, and consumer confusion.

Furthermore, the current backlog of product licence applications is creating additional challenges to the industry, thereby creating consumer concerns and the inability to obtain necessary international trade certificates for export purposes.

We applaud the government for providing additional funds in the 2008 federal budget to the natural health products directorate for its regulatory responsibilities. However, it will be important for these funds to continue to flow over the long term and to be used in a manner that will enable a fair, predictable, and consistent regulatory environment. We are very concerned with the increasing pressure on the directorate to deal with the more than 41,000 applications it has received since 2004. Up to 50% of these applications have been refused or withdrawn, and just over 16,000 have been approved. That's taken five years.

Further, changing and increasingly rigid policy interpretations continue to frustrate applications, which is not within the spirit of the 1998 report from the Standing Committee on Health, “Natural Health Products: A New Vision”. According to a recent Health Canada survey, approximately three-quarters of Canadians—that is, 24 million Canadians—regularly take natural health products. As the demand continues to grow for these types of products, we believe the government needs to take specific steps to address industry and consumer needs and concerns.

As an industry dedicated to the health and well-being of Canadians, we want to ensure that Canadians can continue to rely on safe, effective, natural health products. However, this can only been realized if the directorate has a clear direction on how to move forward and the support of the department and stakeholders and is provided with the necessary resources and expertise.

On June 30, 2009, the organic products regulations came into force. Our members have expressed concerns about potential issues with the implementation of the regulations, including the importation of organic products. Canada imports approximately 60% to 70% of organic products throughout the year in order to supply Canadians. Canadians want to have access and choice. This government must ensure Canadians are able to continue to enjoy access and choice in a fair and predictable manner.

An increasing number of Canadians continue to purchase organic products. The Canadian organic sector is valued at $1 billion a year and growing at a rate of approximately 20%. Smart regulations are key to fostering competitiveness and a sound economy for all Canadians. It is predicted that consumer demand for natural health products and organics will continue to grow as more Canadians, in their quest to achieve optimal health and well-being, discover the health benefits associated with these products.

Permanent funding, such as A-based funding, is required to ensure appropriate expertise and resources for both the natural health products directorate and the Canada organic office. The government must ensure a fair, predictable, and consistent regulatory environment for natural health and organic products in Canada to enable Canadians to continue to have access and choice to a wide variety of safe, high-quality, natural, and organic products, which they demand. We must work together to ensure that this industry is able to continue to thrive and grow in Canada.

Thank you for your time today and for the opportunity to present to the committee on behalf of natural products and organics industries. I'll be happy to answer any questions.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now go to McMaster University.

Mr. George, please go ahead.

[Dr. Peter George, President and Vice-Chancellor, McMaster University]

Thank you, Mr. Rajotte, and thank you for the invitation to be with you this morning to share our views on the strategic role that Canada's universities can play in facilitating commerce and enabling wealth creation for Canadians.

McMaster endorses the presentations you will hear from the Council of Ontario Universities and the Association of Universities and Colleges of Canada. We urge you to support their priorities.

In our McMaster brief, we take a narrower focus that will directly impact on the prosperity agenda. Economic prosperity is driven by increased competitiveness, which in turn is driven by an increase in productivity enabled by innovation. It draws increasingly on intellectual resources found in universities among our researchers and our graduates.

Indeed, our universities are called upon to become more entrepreneurial in their dealings with industry, particularly the knowledge-intensive sectors. McMaster University, located in Hamilton, Ontario, is one of Canada's most research-intensive universities, with an annual research income of more than $350 million. McMaster, like other research-intensive universities, has a particular opportunity and responsibility to engage in economic and social development in our communities. At McMaster, our traditional mandate of education, research, and service is enhanced by our focused development of university-industry partnerships, spinoff companies, and knowledge transfer, supported by a full range of incubator and technology transfer facilities.

Our city and surrounding region have felt the impact of this economic downturn deeply. For Hamilton, the expectations of our university and the McMaster Innovation Park to be a catalyst for economic revitalization and renewal are huge. McMaster is committed to doing its part. Ensuring this happens effectively and efficiently will require strategic investments from the federal government, building on the past successes with Advantage Canada and the science and technology strategy.

McMaster's vice-president of research and international affairs, Mo Elbestawi, will share with you our thoughts on some specific steps we recommend for your consideration.

[Dr. Mo Elbestawi, Vice-President, Research and International Affairs, McMaster University]

Thank you, Peter.

Thanks as well to committee members for their attention and interest in our research activities.

The wealth and economic prosperity generated by university research are a mandatory reality for Canada, if it wants to remain competitive.

How we do this depends on our ability to turn our research into successful commercial opportunities and to strengthen existing companies.

Five years ago we began developing the McMaster Innovation Park. Today the first building is at capacity, and the addition of CANMET-MTL will create one of the most dynamic materials research clusters in the country. Plans for an automotive research centre and a life sciences complex are under way, but infrastructure funds are needed to complete the development.

The McMaster Innovation Park is a turning point for our community, and the one-time federal investment of $10 million to match the provincial investment will accelerate the development of the park and create economic prosperity for the region.

Start-up companies have profound effects on regional economies. A critical component is the need for space. Canada already has some strong, innovative initiatives through federal subsidies and tax incentive programs. We need to develop model mechanisms for global companies to expand and invest in Canada to take full advantage of these programs. To further this effort, a federal investment of $15 million over five years will allow Canadian universities to increase their capacity to develop and promote programs that will result in significant university spinoff companies.

Canadian universities need to market their research to industry to capture its true economic value.

The universities must also support current businesses through an industry engagement process. Businesses need to be informed of the capacity and faculty that are unique to Canadian universities.

Canada's world-class research universities are now producing a high level of patents, licensing agreements, industrial research, and spinoff companies. To capitalize on this activity, a federal investment of $25 million over five years is required to guarantee that our research output is moved quickly and efficiently from our laboratories and marketed globally while creating industry engagement opportunities for our universities.

Thank you for your time and your continued investment in Canada's research community.

[The Chair, Conservative, James Rajotte]

Thank you both very much for your presentation.

We'll now go to Mr. Sinclair.

[Art Sinclair, Vice-President, Greater Kitchener Waterloo Chamber of Commerce]

Thank you very much, Chair Rajotte, for allowing us to address the committee for this year's pre-budget consultations.

My name is Art Sinclair. I am vice-president of the Greater Kitchener Waterloo Chamber of Commerce. Our organization appreciates the opportunity to provide perspectives on the national economy and, most importantly, on the federal government's role in managing the current recovery.

Our chamber, sir, has over 1,700 members, representing all sectors of our local economy. The membership includes small, medium, and large employers who provide 70,000 jobs in one of Canada's most progressive and diverse regions.

As Minister Flaherty noted in last January's budget speech, industrialized nations of the world were taking and are continuing with unprecedented action to inject money into their economies in response to the global recession. The magnitude of this crisis necessitated swift action to mitigate the severity of the downturn, restore confidence, and promote recovery. A three-year $46-billion fiscal stimulus package was subsequently introduced in the 2009 budget.

The Waterloo region has benefited from some major investments in local post-secondary sectors through the knowledge infrastructure program. Conestoga College will receive federal and provincial funding totalling $72 million for increasing their educational capacity in advanced manufacturing and construction trades, renewable energy, and health care. Our chamber has been a strong advocate for increased government funding in skills and workforce development across all sectors of the regional economy.

Increasing the ability of local post-secondary institutions to meet future employer demands is critical for competing in global markets. We therefore recommend that the federal government continue with ongoing efforts to implement all announced stimulus measures to ensure continued economic growth and productivity.

With respect to fiscal measures for the next federal budget, we, like many business organizations across Canada, have been concerned with deficits at all levels of government. Rising debt and the accompanying interest payments severely constrain flexibility and will reduce the ability to address ongoing national competitiveness issues.

In July of this year, CIBC Economics indicated that while federal budgets will be in deficit over the next few years, Canadians likely won't be saddled with the massive debt and interest costs that plagued the nation nearly two decades ago. While stimulus spending and other demands have placed us in a tenuous situation, our fiscal standing, according to CIBC chief economist Avery Shenfeld, is not at risk; therefore, a cautious approach moving forward is critical for maintaining this position of stability.

Our second recommendation is that, in order to restore confidence for the future, Canadians must be presented with a viable strategy for balancing the books and avoiding structural deficits. Two days ago, on October 20, TD Economics released a report indicating that a fairly uniform national and global shift towards fiscal restraint is looming in the near future. According to report authors Don Drummond and Derek Burleton, current governments are likely working with less freedom than during the mid-1990s. Two forces in particular potentially limiting fiscal flexibility will be the likelihood of an historically slow rate of trend growth across the country and age-related spending challenges, or significant funding required for the health care system.

The October 20 TD report indicates that in order to return the aggregate budget balance to zero by fiscal 2015-16, which is still fairly unambitious, program spending growth should be held to 2%. Our chamber, consistent with the recommendation from the Canadian Chamber of Commerce in their submission to this committee earlier this fall, calls on the federal government to contain annual increases in program spending to 2% to 3%, in line with growth in inflation plus population, commencing in 2012-13 when more solid economic conditions emerge.

In conclusion, preserving public trust and the sustainability of public finances are essential for recovery. Policies must be implemented that promote employment, encourage entrepreneurship, enhance productivity, and strengthen long-term national competitiveness. While we address the current challenges and the economic realities of 2009, we must also focus on initiatives for long-term prosperity.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We'll now go to Ms. Lareau, please.

[Lise Lareau, President, Canadian Media Guild]

Thank you to the committee for having us here today.

I am Lise Lareau, the president of the Canadian Media Guild, which represents about 6,000 people at various media employers across the country. Most of my members work at CBC/Radio-Canada, and that's what I'm here to talk to you about today.

I'm here to tell you things you won't hear anywhere else, the view from the front lines of the CBC, a company that has had to bend, scrape, and make serious compromises to get along on a shrinking parliamentary appropriation. In real terms, as you may or may not know, the CBC gets $400 million less than it did in 1990. I chalk this up to simple negligence, sometimes benign, sometimes not so benign on the part of Parliament, depending on the year. I'm here to say that I know Canadians value their public broadcaster. They like it, they want it, and they need it.

In a Pollara survey in May, 74% of Canadians thought the annual funding to the CBC should be increased. So if you want to be in line with what Canadians think and you want the CBC to be able to do quality work on behalf of you and all citizens, you need to change the way it's funded and how much it's funded. That's why we ask you to take the lead from your colleagues on another parliamentary committee, the heritage committee.

As you know, last year it recommended that there be a seven-year memorandum of understanding or contract between the Government of Canada and CBC/Radio-Canada, setting out their respective responsibilities. Funding should be assigned to the same period, the committee reported, and indexed to the cost of living—basic stuff that we think should be endorsed here and, ultimately, in the budget.

Obviously this would give the CBC an ability to plan ahead, something it hasn't had in years and years. Most importantly, this would give the CBC an independence from the partisan cut and thrust of the government of the day. So we echo this heritage committee recommendation.

We also echo the heritage committee recommendation that CBC's core funding be increased by about $7 per Canadian per year to about $40 per person per year. This too was recommended by the all-party committee, with the Conservatives on the committee objecting only in that they said they could not support a specific amount until the memorandum of agreement was finalized.

In the document we're circulating today, you'll see a chart indicating that the CBC is one of the least-funded public broadcasters in the entire industrialized world. It's shameful, really. Even at $40, even if the heritage committee recommendations were adopted, that would still bring it to only about half the average of all the industrialized countries in the world.

The committee noted some of the reasons for the recommended funding increase: new media initiatives, which we all know about; the transition to digital; and properly funded local news, valued more than ever now that the private sector has opted out of a few cities, so that it can expand to serve newly populated areas such as Barrie in Ontario, Red Deer and Lethbridge in Alberta, and Kelowna and Nanaimo in B.C. These are areas that the CBC has not been able to properly serve because they grew and expanded after it laid down its primary infrastructure, and it needs to do so.

Finally, I believe it's imperative that the CBC be removed from the government's strategic review process immediately. Why? The threat of losing yet another $50 million has already had an impact on how the CBC dealt with this year's $171-million shortfall.

Secondly, the media industry in this country, as you well know, is going through very rough times. It's one of the hardest-hit industries in the country, a story you don't hear very much about because the media doesn't cover its own disasters, ironically. This is not the time to cut the public broadcaster further.

Most importantly, one could strongly argue that the strategic review process itself, which is done under cabinet confidentiality, raises further questions about the real independence of the public broadcaster from the government of the day. This is not healthy for the CBC or the government.

I leave you with the following thoughts. The CBC is a place in crisis, a crisis of identity. It's funny; the management-union relationship is solid and better than ever, but there is a malaise that we believe is shared by management and those of us on the front lines. No one at the CBC knows where the future lies with all of this funding uncertainty. The chronic underfunding, the fact that there's no long-term contract with the government of the people--it feels like the place is drifting away.

We know that people generally like the services the CBC provides. They know it's the only place to find Canadian programming in prime-time TV, thoughtful radio, and programs in eight aboriginal languages in the north. From our members, we know it's the only place where there's sustained news content in communities under 300,000 people, for example. It's a leader in online programming. We know these things.

We also know that with the effect of all the cuts, we're watching a pull towards the CBC being a commercial broadcaster, with a public subsidy that's shrinking all the time. We know this because the CBC has had to move that way to survive. We know it isn't why we started working at the CBC, and it isn't what audiences expect or deserve.

Instead, the government needs to understand and embrace the idea that solid information is a public service. It's one that's more, and not less, necessary now because there are fewer sources of news content now because of media company convergence and fewer places airing made-in-Canada TV shows.

In short, the CBC needs you and your attention in this vital time in the history of the media in this country. It needs the seven-year deal, the $40-per-capita funding, and an end to the strategic review process.

I thank you for your attention and I look forward to answering your questions.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We'll now go to Mr. Smith please.

[Chris Smith, As an Individual]

Good morning.

My name is Chris Smith. I own a small business in Uxbridge, Ontario.

I may be out of my element here. I'm clearly not as prepared as everybody else, but after discussions with my MP and a consultation with the Minister of Revenue's office, I was asked to present this idea. It's a very simple idea and I won't take much of your time.

It's clear that among small and mid-sized business, we have had a rough year. We're not looking for bailouts or handouts, just for an environment that will promote success and job creation.

The idea is simply this: for every employee that a small or mid-sized company adds to the current employee payroll, the employer will retain the employer source deductions. It's a wash for the government, as you're taking somebody out of the safety net and putting them into the workforce. It's easily implemented, as the Receiver General already has that information; it's in their database and is easily measured.

I'd be happy to answer any questions and to create a dialogue on this.

That's about all I have to say. Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Smith.

We'll now go to the Canadian Federation of Students for Ontario.

[Shelley Melanson, Chairperson, Canadian Federation of Students (Ontario)]

Good morning, committee members. I hope everyone is doing well.

My name is Shelley Melanson. I am the chairperson for the Canadian Federation of Students in Ontario.

The federation represents more than 300,000 college and university students at 38 student unions across the province. We are the Ontario affiliate for the Canadian Federation of Students, Canada's national student lobby organization.

Before I start, I think it is important to highlight the student context that surrounds this year's budget deliberations for the federal finance committee. Data released this week from Statistics Canada, just two days ago, indicates that Ontario has surpassed Nova Scotia in having the highest undergraduate tuition fees in Canada, an honour that we have actually held at the graduate level for a few years now. National student debt surpassed $13 billion this past January, and this number doesn't include personal lines of credit, credit cards, or provincially held debt, which in Ontario surpassed an additional $2 billion last year. On top of this bleak picture, student unemployment reached record high levels this past summer, over 21% on average.

The government has demonstrated its commitment to helping students, with the introduction of a new Canada student grants program. Despite these tough economic times, and perhaps because of them, we believe post-secondary education should become one of the government's fundamental priorities.

In our submission, the Canadian Federation of Students in Ontario has highlighted three key priorities. Students also illustrated our priorities this past week in Ottawa, where over 50 student representatives from across the country presented Canada's education action plan to nearly 200 parliamentarians during an intensive lobby week that we have been participating in.

First, students are calling for the introduction of a federal post-secondary education act, modelled after Canada's health act, and a dedicated cash transfer for post-secondary education. We believe it is essential for establishing national standards for quality and affordability and ensuring that the federal government is committed to making education accessible across the country. We estimate that this will cost $1.2 billion and will go a long way towards equalizing the quality and cost of post-secondary education from province to province.

We also believe such an act would provide greater accountability and transparency for federal moneys allocated to the provinces for funding post-secondary education. Let's face it, when the federal government commits taxpayers' dollars to an important national priority, it has the right to ensure that the subsidy is being used to meet benchmarks for quality and access.

Our second recommendation is for the government to convert money dedicated to tuition fees and education tax credits into needs-based grants. The current system of providing tax credits does very little for students, who need money at the time of paying their tuition fees. Instead, tax credits are disbursed in May, nine months after students and their families have had to pay their first semester tuition fees. We believe that by converting the money that is indicated for tax credits to upfront grants, students will benefit from this government program, because the money will be there to open the door to educational opportunities. This is, of course, a cost-neutral recommendation that could benefit all students greatly.

Finally, we are calling for the number of Canadian graduate scholarships available to master's and doctoral students to be doubled, and for increases to the scholarships to be tied to future increases in enrolment growth. As part of Canada's strategy to become a knowledge-based economy and a leader of innovation, Canadian universities have aggressively expanded graduate studies, but funding has not kept pace with enrolment. We estimate that, for $125 million, graduate student funding could meet the needs of new students who have entered graduate school and ensure that we have enough funding to be able to undertake the quality research that this country needs to compete in a knowledge-based economy.

I have brought copies of our written submission and our latest policy document. I've also translated copies of our submission for those who would like them.

Thank you so much for your time. I hope that we can work together to build Canada's knowledge potential to transform our economy by ensuring our place as world leaders in post-secondary education.

I have with me here today our federation's government relations coordinator, Joel Duff, and we both look forward to your questions.

Thank you so much for your time.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We're now going to hear from Mr. Rae, please.

[John Rae, First Vice-President, National Board of Directors, Alliance for Equality of Blind Canadians]

Good morning, Mr. Chair.

Mr. Chairman and members of the committee, my name is John Rae. I'm the first vice-president of the Alliance for Equality of Blind Canadians, a national not-for-profit organization of Canadians who are blind, deaf-blind, or partially sighted.

On this occasion, I want to frame my comments a bit differently. I don't like to do things the same way each time. I don't want you all to get bored with what I might be here to tell you. Today I want to frame my comments in the context of the pandemic and the poor, a contrast in government response.

Think about it. Today Canadians are concerned about the possible swine flu pandemic. Government officials are doing something about it. They are concerned. They are acting. A vaccine has just been approved, and plans are being developed to make it available to Canadians.

Will we, as persons with disabilities, have the same access to that remedy, or will we be expected to sit on the sidelines and wait our turn, as is often the case? Well, that's a question for a different time and place.

When we think about the poor, however, the situation is quite different. Years ago Parliament passed a resolution to eradicate child poverty in Canada. We're still a long way away from achieving that goal. Report upon report has talked about the plight of the poor, and Canada's disabled population is among the poorest and most unemployed in our country.

Report upon report has talked about the benefits--psychologically, socially, economically, and in all other aspects--of doing something concrete to deal with the chronic poverty that continues to plague far too many Canadians. This is why the AEBC has called upon the government to develop a national economic strategy for persons who are blind in this country.

You notice I used the term national “economic” strategy and not national “employment” strategy. We do that purposely.

Here are some of the major aspects of that economic strategy. Number one is government will, the kind of will that seems to be present in fighting the pandemic, the kind of will that we've never seen when it comes to dealing with persons with disabilities. We believe the Prime Minister should call upon business, labour, and community leaders, put them in a room, and lock them there until they come up with a new deal. He should keep them there until emerging smoke shows that they are ready with that new deal.

Second, we believe the Government of Canada needs to embark upon a national outreach strategy, just as it is doing in the area of racial minorities, to increase our representation within the federal public service.

Third, in the area of income there is a chronic need to put more money into the pockets of Canada's poor. The current disability tax credit does assist some disabled Canadians who work, but it's misnamed. It's not really a credit but a deduction. We believe the DTC should be revamped and become a true tax credit that would go to all disabled Canadians who qualify.

Fourth, in its last budget the government earmarked a fair bit of money for infrastructure programs. Here was an opportunity lost. Why did those programs not include a provision that earmarked some of those funds to assist in making transportation systems more accessible, retrofitting some old buildings at some of Canada's colleges and universities, and doing things of that sort?

In closing I will note that way back in 1981, the federal government released the landmark Obstacles report, and the International Year of Disabled Persons was conducted under the theme of full participation and equality. That wasn't yesterday. That wasn't last year. That was 1981. Old guys like me remember that year. We remember that theme. We thought it was very forward-looking at the time.

It is high time that the Government of Canada showed some leadership and brought us into the mainstream. We are tired of sitting on the sidelines. We want to be part of Canada's mainstream.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We will now hear from GrowthWorks Capital Ltd., from Mr. Levi.

[Daniel Levi, President and Chief Executive Officer, GrowthWorks Capital Ltd.]

Thank you very much, Mr. Chair.

I'm just going to highlight my statement because you already have it in your hands. I'll just add a few things.

I want to thank you very much for inviting me back. Some of you probably won't remember this, but I was here two years ago, talking about the need for venture capital and the crisis we're facing.

I'm pleased to tell you that two years later, we are now 30% lower in the amount of venture capital available in the country, and the crisis is very significant right across the country. We have, on average, two to three venture capital groups having available capital to invest in each of the provinces across the country, with the exception of Quebec. So it is a very desperate time, in particular for start-up technology companies and life sciences companies.

We're an organization that operates right across the country. We're in seven of ten provinces. The only province we don't operate in that has retail venture capital is the province of Quebec, which is, I think everyone knows, very well served by the two funds there.

I'll get to the recommendations in just a couple of minutes. The key for most of the folks in this room, quite honestly, is that the government has made some very strong forward movement in the amount of money that's been spent in basic research and development. Over $13 billion has been spent in the last 10 years in research and development. The key to that is to capture that and to commercialize it. Most of the universities are getting to the point now where they are able to figure out which companies have the opportunity for commercialization, but there is no venture capital available for them.

On a per capita basis, the United States has more than 45% venture capital compared to Canada. And the United States is our major competitor. Many companies leave this country to find venture capital in the United States because there is so much more capital available.

We have been very active, as an organization, going to the U.S. and trying to bring that venture capital to Canada as well, but as most of you know, that line between Canada and the United States is more than just a line on the map. Most American venture capitalists would prefer their companies move to the United States where they understand all the laws and the regulations. It's only because of strong venture capital groups in Canada that we're able to attract venture capital to the country and maintain those companies here. Otherwise the U.S. venture capitalists would move the companies south, and that's a key issue for us.

Venture capital supply has fallen, as you can see. From 2001 it dropped from $4.5 billion a year down to $1.4 billion, and in this province it's now dropped to less than $300 million. So it's a very serious issue here.

It's interesting, because one of the things we do very successfully, as a retail venture group, is that we are able, through government incentives through the tax credits, to raise money from the public. That incentive is approximately 30%, and I'll talk a little bit more about that in a minute. That incentive is about 50% less than what you would get if you invested in oil and gas or in mining in this country because the incentive there is a full 40% to 44% tax savings for individuals who invest in oil and gas and in mining, depending on which province you're in.

My suggestion to you is that we seriously consider the need to give our technology industries and our life sciences industries and our alternative energy industries the same incentive. We're not even asking for that, but I think it's time we gave them the same incentive that we give our oil and gas sectors and our mining sector in this country.

Since 1985 there has been almost no adjustment to this program at the federal level. Tax credits that were maxed at the federal level at $750 per $5,000 investment, and the maximum RSP contribution, which has now gone to $21,000 in comparison to ours, have remained unchanged at $5,000 since the beginning of the program. So in 1984, when the program began, we had a $5,000 cap and 30 years later we have the same cap.

My recommendation to the committee is really just to match what the provinces have been doing now over the last few years. In British Columbia, the cap is now $13,000. Saskatchewan has increased its tax credit from 15% to 20%. Manitoba has increased its size from $5,000 to $12,000. Nova Scotia, New Brunswick, and Newfoundland and Labrador all increased their tax credit and the amount available for investment. And Quebec has gone as high as 25% for one of the funds in that province.

This is a program that's been proven to work. It's a program that, with matching funding already in place from provinces, will allow us to raise up to $1 billion more at a cost of only $100 million per year for the next three years across the country.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much.

I thank all of you for your presentations.

We will now go to questions from members, and we'll start with Mr. McCallum.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you, Mr. Chair.

Thank you to all of you for being with us this morning.

I think I'll start with post-secondary education, beginning with students and then universities, partly because I've spent twice as many years working for a university as I have in politics. I have some understanding and sympathy for the case.

Beginning with the students, I certainly agree that more student aid is desperately needed, partly because the unemployment rate for young people is at record high, so it's harder to get a job, and the parents of students may be financially more pressed than normal because of the financial crisis.

I certainly agree that gimmicky things like the textbook tax credit should be replaced with core grants to students. My only question though—and I'd ask Peter George to answer this question too—is about your proposal for a post-secondary act and the transfer of $1.2 billion or whatever the number is. I have a little bit of a concern over that--one, because it gets into all sorts of jurisdictional issues, notably with Quebec, and two, because money is fungible. If you give an extra $1.2 billion to the provinces dedicated to post-secondary, there's nothing to stop them reducing the amounts they contribute.

So I'm not sure it's all that effective, and I'm not sure that it wouldn't be better to use that same amount of money to put it directly into the pockets of students. The money would then flow to the students rather than flowing to provincial governments. Once it flows to provincial governments, it's kind of like a black hole. You don't know where it will end up.

Ms. Melanson, what would you say to that?

[Shelley Melanson]

I certainly appreciate the concern of money essentially going missing once it gets to the provinces or somewhere into a government coffer. But I actually think that having a dedicated transfer payment is one of the ways of alleviating that, because what we have now is essentially a series of transfer payments that have been coupled together. It makes it far more difficult for students on our lobbying end—I can speak on behalf of the representatives for the provincial component—to actually go to the provincial government and say, “Well, this is how much money is being specifically allocated for post-secondary education”. We feel that with a dedicated transfer payment, it's a way of being able to touch base. If we see that $1.2 billion being allocated, well, we know that's exactly what we need to be going after.

But you're also attaching a requirement, when you have an act in place, to determine how that money should be allocated and what it should be used for, which is giving direction. And I think that in consultation with the provinces....

I've heard the comments before about the difficulty associated with negotiating with a variety of different provinces. But I do believe there is a will on behalf of the provinces to have investment in education, certainly in Ontario. I think it's important to recognize that when we're talking about students today, we're not talking about 18- and 19-year-olds who are graduating from high school. We're talking about the upwards of 200,000 people in this province who have lost their jobs, many of whom are in the manufacturing industry, who do not have the skills to be able to access the vast majority—more than two-thirds—of new listed jobs that require some form of post-secondary education.

So I think investing into education and increasing the amount of money is a political priority for provincial governments but also, quite frankly, for citizens in Canada, because they need that access.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you.

This question is to Peter George. If you had the choice between a dedicated transfer of so much money to the provinces and the money being constrained to go to post-secondary education versus the same amount of money going directly into the pockets of students, which would you think would be better?

[Dr. Peter George]

Well, Mr. McCallum, I believe it's really important to get student aid right, and I think putting the money directly into the hands of students is an effective way to promote efficiency in the student aid program.

On the other question, there is a consummate need for us to get more resources from all levels of government directly into the universities to enhance the quality agenda. I think you put your finger on a major concern—that is, that federal transfers, while appealing, may not ultimately find their way into the hands to which they were intended by the federal government. I regard that as a major concern. It's something we have been working on for a number of years, as you know.

My own view is that higher education, especially as it's linked to the economy and to the future prosperity of our country, is too important to be left for the federal government to have a limited role, as it is to research and student assistance. I believe it's very important to have a national post-secondary educational priority, for the federal government to have a strong voice in helping provinces set national standards and national priorities.

[John McCallum, Liberal, Markham—Unionville, ON]

Okay.

Can I ask you something else, though?

[Joel Duff, Organiser, Canadian Federation of Students (Ontario)]

We don't agree on much, by the way, but...[Inaudible--Editor]

[John McCallum, Liberal, Markham—Unionville, ON]

Well, I'm not sure you'll agree on my next question.

One problem with transferring money, dedicated money, to provinces is that the money may not end up with the universities, as you just said. But a problem of putting lots of money into the pockets of students--let's say we had a program to give every student $2,000 extra to pay for the fees, or you pick the number--is that universities might take the opportunity to raise their fees by that amount. So if we try to get money to students, universities may just take that money away by raising their fees by a similar amount.

What would you say to that, Peter George?