Finance Committee on Oct. 28th, 2009

[The Chair, Conservative, James Rajotte]

I call this meeting to order. This is the 58th meeting of the Standing Committee on Finance.

Before we get to the orders, I want to make sure colleagues know that tomorrow's schedule has been changed somewhat. We do have the meeting tomorrow morning from 11 a.m. to 2 p.m., but we do not have the meeting in the afternoon. The witnesses in fact have been moved from the afternoon to the morning.

There will be no meeting tomorrow afternoon. Please convey that to all of your colleagues. Thank you.

We have two panels here this afternoon. This will be a challenge, because we have votes at 5:30, colleagues.

The first panel is from 3:30 to 5 p.m., continuing our pre-budget consultations. We have with us Heritage Canada Foundation, Volunteer Canada, the Canadian Association of Social Workers, the Canadian Wireless Telecommunications Association, the Canadian Urban Transit Association, Sustainable Development Technology Canada, and the Insurance Brokers Association of Canada.

We will have organizations present in that order. You each have a maximum of five minutes for an opening statement. Then we'll go to questions from members.

We'll start with Ms. Bull, please.

[Natalie Bull, Executive Director, Heritage Canada Foundation]

Good afternoon.

Mr. Chairman, distinguished committee members, thank you very much for this opportunity to present our recommendations. The Heritage Canada Foundation is a national non-governmental charitable entity created as Canada's national trust. We believe that historic places are the cornerstones of community and identity, and we help Canadians protect the places that matter to them by sharing information and by engaging and inspiring the public.

I'm here today to tell you that the rehabilitation of historic buildings and sites represents an important opportunity to stimulate private investment and create green new jobs, with much less negative environmental impact than many other stimulus measures. An added benefit is more liveable neighbourhoods and greater tourism potential.

There are a couple of important realities to consider. Ten years into the future, as much as 90% of Canada's building stock will consist of buildings already built before today. Buildings are responsible for 30% of Canada's greenhouse gas emissions and offer the single most important opportunity to achieve significant greenhouse gas reductions. Forward-thinking stewardship and investment today in these buildings, including heritage buildings, will be crucial to Canada's economic and environmental sustainability. Measures that encourage rehabilitation and energy upgrading of existing buildings, including heritage buildings, will create green new jobs.

Rehabilitation is extremely labour intensive--66% more labour intensive than new construction. And these are skilled jobs for the competitive workforce of tomorrow. Further, rehabilitation projects and the jobs they create have been shown to increase tax revenue at all levels and to have a positive ripple effect in surrounding areas. I encourage you to think of places such as Fort Macleod, Alberta; downtown Picton, Ontario; Edmonton's Old Strathcona district; or Toronto's Distillery District—all historic areas that are generating great revenue.

Measures that encourage rehabilitation and energy upgrading of existing buildings will also have important environmental benefits. The greenest building is the one already built. New construction, no matter how green, cannot compete with the environmental imperative of wisely using the buildings we already have. Yet the current federal tax regime and funding programs do not encourage rehabilitation of existing buildings, let alone of heritage buildings. For example, owners of income-producing properties, including houses and apartment buildings, can earn a tax deduction by demolishing them. We actually need the opposite; we need measures that would assist and reward businesses and citizens who show leadership in reusing existing buildings.

Accordingly, our first recommendation is to build on the home renovation tax credit, introduced as an economic stimulus in the 2009 budget, by introducing a more substantial rehabilitation tax credit.

Rehabilitation tax credits have been hugely successful in the United States for over 30 years. In fact, the U.S. historic tax credit program was introduced as an economic stimulus measure in 1976 and has since leveraged over $25 billion in private investment and created an average of 45 new jobs per rehab project. Currently there's a bill before the U.S. Congress to offer an additional 10% in tax credits for heritage projects that also increase the building's energy efficiency.

There's broad support in Canada for these kinds of measures, notably from the Federation of Canadian Municipalities and the Royal Architectural Institute of Canada. The cost of such a program to the government can be managed through such eligibility criteria as limiting it to properties on the Canadian Register of Historic Places, or by setting ceilings for the available tax credit per property owner. That's our first recommendation.

Our second recommendation is to build on the success of the funding provided to the National Historic Sites of Canada cost-sharing program, also an economic stimulus included in the 2009 budget.

National historic sites contribute to tourism in over 400 communities across Canada. The renewal of the cost-sharing program has already stimulated private investment in a number of sites that will yield visitor spending and spinoff economic activity, sites such as the Walker Theatre in Winnipeg and the Rosamond Woollen Mill in Almonte.

There has already been a strong demand for the modest amount of funding available. Only $20 million total in stimulus funding is available for this program over the next four years, but as of August, Parks Canada had already received applications totalling twice that amount. If all the current applications were funded, they would stimulate an impressive $180 million in rehabilitation work, five times the funding invested by government.

For this measure, we're recommending an increase of at least $10 million to $20 million per year to the budget for the cost-sharing program, to build on the success of this stimulus measure.

In closing, let me thank you in advance for considering our two recommendations, both of which represent proven approaches to leveraging private sector investment and making heritage and older buildings the cornerstones of a sustainable future.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. Bull.

We'll go to Ms. MacKenzie, please.

[Ruth MacKenzie, President, Volunteer Canada]

Thank you for giving me the opportunity to speak with you today.

Volunteer Canada is the national leader on volunteerism. We are devoted to building the capacity of voluntary organizations, to involving volunteers, and to promoting and fostering volunteerism in all its forms. We have more than 1,000 member organizations across the country, ranging from the very large to small neighbourhood groups that perform vital community services, often with no paid staff whatsoever. Of Canada’s 161,000 charities and non-profits, 54% are run by small staff teams of one or two people or led entirely by volunteers.

Volunteer Canada also has strong connections to the corporate sector. Our Corporate Council on Volunteering has 25 members representing some of Canada’s largest enterprises.

The Canadian community of volunteers is vast and varied. According to the 2007 Canada Survey of Giving, Volunteering and Participating, there are 12.5 million volunteers in this country contributing 2.1 billion hours of service, the equivalent of 1.1 million full-time jobs.

All this immense civic engagement does not just happen spontaneously. It requires organization, managerial expertise, and highly developed leadership skills to successfully mobilize volunteers. As many of our members say, volunteers do not come free.

Volunteer Canada’s members report that the recession is having a real impact on their work. Our presentation today reflects what we have been hearing from those members. We will summarize what they report to us and what is happening at the grassroots in our community and we will conclude by outlining what they think the federal government could do to make a positive contribution to support their efforts during these challenging times.

Our members tell us that organizations are being forced to lay off staff—often staff responsible for managing volunteers. When that happens, an organization's ability to mobilize the efforts of its volunteers is severely weakened.

The Victorian Order of Nurses tells us that because of staff cuts, some of their offices across the country have had to cut back on a very beneficial program called SMART. SMART stands for seniors maintaining active roles together. It's a program that provides exercise for senior citizens who would otherwise be at risk of becoming weak and socially isolated. This is a largely volunteer-run program, but the volunteers who carry it out must be trained and supervised by paid staff. As VON sites have cut back due to financial resources, they have made difficult choices, one of which has been to reduce the staff who train and supervise the volunteers for SMART.

In Hamilton, Ontario, the volunteer manager at the Brain Injury Services reports that they have had to cut back on their animal therapy program because they lack the resources to pay for training and training materials. This cutback hurts patients who have been benefiting in a very unexpected way. The animal therapy program is highly effective with a certain kind of patient—those who are aggressive or aphasic. These patients respond so well to the presence of gentle pets that they become calm and controlled and are able to receive the speech therapy they need. In this case, there's a sort of cascading effect. A lack of money means an inability to train volunteers for animal therapy, which in turn means that a speech therapist cannot provide a vital service to the patients who desperately need it.

Another challenge affecting volunteer-involving organizations is a generational shift in the world of volunteering. Baby boomers are replacing the older generation of super volunteers who contribute the predominant portion of the hours of volunteering, and baby boomers have different values than their predecessors.

This is how the manager of a large hospital in Burnaby, British Columbia, put it:

We are seeing more baby boomers applying...who have a high level of skills. Identifying and planning for effective ways of utilizing these high skilled volunteers requires very specific skills on the part of Volunteer Resources staff. This is a whole new area of volunteering and it requires organizational development, education, and planning.

There are many ways the federal government can help the volunteer sector to continue serving Canadians. Social investments can stimulate the economy just as much as investments in road construction and bridge building.

We have one specific fiscal recommendation for you. We suggest that the government should consider a targeted investment in a Canadian volunteer support system for communities across the country. The government should invest $5 million a year in a cost-effective, targeted system of training, knowledge sharing, innovation, and basic volunteer management resources for those at the grassroots level who must deal daily with the challenges of finding willing volunteers and assuring that those volunteers are effective in providing vital services.

An important part of the role of the support system will be to identify and reach out to organizations in need at the community level in a proactive way and provide training and resources appropriate to their needs. At a broad national level, we believe such a support system should support a national goal of increasing the rate of volunteering in Canada from the current 46% to 60% over a four-year period.

The government projected in last year's budget that program spending for fiscal 2009-10 would be nearly $225 billion. An annual $5 million investment in volunteering is a tiny fraction of that amount. In fact, it's about 40¢ for every volunteer in the country or 15¢ for every Canadian who benefits from volunteering—a small investment with enormous results.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We'll now go to the Canadian Association of Social Workers. Mr. Pekrul, you have up to five minutes for an opening statement.

[Ray Pekrul, Board Member, Canadian Association of Social Workers]

Thank you for the opportunity to present on behalf of the Canadian Association of Social Workers, a federation of member organizations of social workers from nine provinces and territories.

We wish to advocate for the improvement of the financial status of low- and moderate-income women in Canada. Women, particularly low-income women, are disadvantaged by income transfer programs such as old age security and the guaranteed income supplement, the Canada Pension Plan, and employment insurance. Our recommendations are intended to address some of the limitations.

Why address low- and moderate-income women? When looking at income and wages, while overall prevalence rates of low income—measured by StatsCan low-income cutoffs after tax—are similar for men and women, we see that senior women, female-led families, and unattached elderly women are disproportionately poorer than men.

The low income of women is further affected by age, ethnicity, immigrant status, and aboriginal status. The average earnings of women relative to men remain in the 65% range. It is higher for full-time work, but there is still a significant gap. While the vast majority of adult women are in the paid workforce, women’s experience of paid employment is different from men's. More women are in part-time and non-standard work.

When looking at transfer payments, we see that the types of jobs in which many women are employed have low wages and limited pension coverage, making it difficult for women who work throughout their lives to accumulate retirement incomes and provide a secure financial future.

Women age 65 and older receive more of their income from government transfers than men do. Private pensions, which include both workplace pensions and RRSPs, are a more important source of income for men than for women. We see the basic guarantee under OAS and GIS is too low. Proportionately, more senior women are affected by this low guarantee. For single individuals, the maximum available from OAS and GIS combined is below the after-tax LICO, while for couples the maximum is only just above the LICO for a major urban area.

The combined amount of OAS and GIS for single seniors and those who have no other sources of income in old age should be at least at the level of the after-tax LICO. Since benefits are indexed for inflation using the consumer price index and not wages, and in order to avoid the erosion of the value of the pension over time, we recommend OAS and GIS be indexed to wages as well as prices, so the relative standard of living of future seniors does not fall below the rest of the population.

To address the problem of the denial of GIS benefits to those with small amounts of personal savings, higher amounts of income should be allowed before cutting back on GIS benefits. While the allowance component of OAS/GIS is available to low-income individuals age 60 to 64 who are married to a low-income pensioner or who are divorced, low-income women age 60 to 64 who have never married or are separated or divorced are not eligible. We recommend that this form of discrimination, where they would otherwise qualify for benefits, should end.

In regard to Canada Pension Plan benefits, women receive lower benefits because of their low earnings. To improve CPP retirement pensions for low-income individuals, the replacement rate could be increased from 25% of average earnings up to a limit of 50% for those with earnings at or below half the year's maximum pensionable earnings. Increased replacement rates could be financed by increasing the upper level of contributory earnings from the current amount, which is roughly equivalent to the average wage, to a factor of twice the average wage.

High CPP contribution rates may be problematic for lower-income earners, especially for those in precarious jobs. One way to address this problem is to increase the existing tax credit for CPP contribution or make it a guaranteed credit geared to income.

Measures are needed to help immigrants who may not have been in Canada long enough to accumulate adequate retirement from CPP—for example, the modification of the CPP contribution period to start when an immigrant entered Canada rather than at age 18. Attention should be given to the rules on surviving spouse benefits, so the survivors of recent immigrants are not penalized as they are under the current system.

With regard to employment insurance, the nature of unemployment and reasons for being unemployed are very different for men and women. Men tend to become unemployed because they lose their jobs. Unemployed women tend to be voluntary leavers. We recommend an expansion of the definition and category of just cause for voluntarily leaving a job in order to provide more flexibility. We recommend an increase in the weekly benefit amount from 55% to 65% of insured earnings. This may help raise the single person above the poverty line.

Currently, six weeks of compassionate care benefit and eight weeks of work protection are available to eligible workers who must be absent from work to provide support and care for a family. In 2006 the government expanded the eligibility criteria for caring for different family members. More time and flexibility are needed in order to address the concerns of women dealing with the short duration allowed for compassionate leave.

We also recommend that maternity and paternal benefits be increased up to two years.

The changes in working time in organization work in recent years affect all workers, but women more than men. We recommend that due to women's in-and-out position in the workforce, regular EI benefits be made available for all sorts of workplace training and upgrading.

Thanks for your attention.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now go to CWTA. Mr. Lord, please.

[Bernard Lord, President and Chief Executive Officer, Canadian Wireless Telecommunications Association]

Thank you very much, Mr. Chair.

I'm here with Jim Patrick, vice-president of government affairs for the CWTA. We've provided a short slide deck to help you with this very quick presentation.

Mr. Chair, members of the committee, as Canada comes out of the economic recession, Canada's digital economy will become more important than ever before. That's why we must continue to encourage investment, growth, and innovation to increase productivity and competitiveness. In order to do that, we have come here today to present one recommendation and to focus on one recommendation.

There's a mobile wireless revolution in Canada. It's increasing productivity, it's creating new jobs and opportunities, it's generating new investments, it's enhancing our social lives by connecting our family and friends, and it's making our communities safer. There are currently close to 22 million subscribers for wireless technology in Canada. We expect that number to grow by more than 30% in the next five years to well over 30 million subscribers throughout the country.

Wireless Internet usage in Canada is increasing. In fact, it's reaching a very critical mass: 99% of Canadian households now have access to wireless services, including wireless Internet, and 91% have access to 3G mobile Internet services in Canada.

In June 2009, 21% of mobile consumers were using their cellphones or their mobile devices to browse the web and access their e-mail accounts; that's 21% in June of this year, compared to 16% at the end of last year. You can see the growth.

Canadians sent 16 billion text messages in the first six months. That's close to 100 million text messages every single day. I think my daughter and my son sent one million of those 100 million text messages.

As we move to the next generation of networks and since the introduction of the wireless service in Canada in 1985, wireless carriers have invested over $25 billion in private sector investments in infrastructure. By early next year, Canada will have at least four, and probably five, separate 3.5G high-speed packet access--HSPA--providers with their own networks. This will likely be more than anywhere else in the world.

The next chart is very compelling. You can see that one smart phone uses, on average, 30 times the bandwidth of traditional cellphones and that one mobile wireless-connected computer uses 450 times the bandwidth of a traditional phone. It's expected that mobile data traffic in Canada and around the world will double every year between now and 2013.

What this means is that there's an appetite for more. What can government do? Well, Industry Canada has asked what can be done to make sure we meet these challenges. In 2009 the budget included $225 million over three years for the expansion and improvement of broadband networks in certain geographic service areas. Budget 2009 included accelerated capital cost allowance for desktop and local area network equipment for small businesses.

We believe that budget 2010 could and should close the loop. A temporary accelerated capital cost allowance for the class of assets most closely associated with network equipment would bring forward several years' worth of capital investment into a strategic timeframe.

We're not asking for a handout, we're not asking for a bailout, and we're not asking for any government cheques or any new government program. We're simply suggesting that budget 2010 should build on the forward-looking measures included in budget 2009. It should close the loop by stimulating the supply of broadband, specifically by implementing a temporary--we believe two years would be sufficient--accelerated capital cost allowance for network equipment.

Canadian broadband providers have invested billions to provide fixed and mobile high-speed Internet access, as I mentioned, to over 90% of the Canadian population. The focus should now be on quality, speed, and capacity to meet the growing demand. We believe that an accelerated capital cost depreciation would meet that objective.

This measure would not involve the creation of any new program or cutting of government cheques, and it's a straightforward measure to implement. The fiscal cost depends on the rate of depreciation allowed under the regulation. We are recommending that the government consider raising that rate to between 75% and 100% for a period of two years.

This recommendation is supported by the Canadian Chamber of Commerce and the Information Technology Association of Canada.

We would be pleased to provide any other information. Thank you very much for your time. Merci.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now hear from the Canadian Urban Transit Association.

[Michael Roschlau, President and Chief Executive Officer, Canadian Urban Transit Association]

Thank you very much, Mr. Chair, for inviting us to make a presentation.

My name is Michael Roschlau. I am the president and CEO of the Canadian Urban Transit Association. I'd like to talk today about the state of federal transit investment in Canada.

Over the past several years, Canada has seen a lot of improved federal investment in transit. In fact, there's been a doubling of annual capital investment since 2001, which represents the growing recognition that sustainable transit systems are now demanded by the public at record levels. In that context, I'd like to make four key points.

First, let me point out that Canadians want improved transit infrastructure. Polls demonstrate that over 90% of urban Canadians think that public transit makes their community a better place to live, and 73% feel that it benefits them personally. Canadians are choosing transit at unprecedented levels as more and more people understand the importance of their travel choices in reducing emissions and easing traffic congestion. Public transit ridership for 2008 showed an increase of 3.5% nationally, for another all-time record, with 18.2 billion trips—astonishing growth that represents a 16% increase over the five-year period since 2003.

Second, Canada lags behind the rest of the world in this area. We still lack a long-term predictable approach to transit investment, leaving us alone among members of the OECD. Modernizing Canada's approach to transit funding is a significant opportunity for the federal government and the Canadian public.

What are other countries doing? Most Canadians would be amazed to find out that the Canadian government's investment in public transit lags well behind the federal leadership and funding for transit in the U.S. The U.S. federal government funds about 80% of capital projects and ensures consistency with federal program goals. Such an approach is sorely needed here in Canada.

Third, the infrastructure needed to meet demand is enormous. CUTA’s most recent report on Canadian transit infrastructure needs has estimated the total requirements, over a five-year period from 2008 to 2012, at $40 billion. Additionally, a study commissioned by CUTA last year showed that an economically optimal level of transit supply would involve a 74% increase in annual transit service compared with 2006 levels, which in turn would generate more transit demand among existing users. It showed that over a 30-year period, reaching this optimal level would generate a long-term internal rate of return of 12.5%. Most of these benefits would accrue from reductions in congestion, vehicle operating costs, collisions, and emissions.

Finally, we must view transit as an economic stimulus. As well as modernizing Canada's infrastructure, these investments have a powerful effect on the economy. Over the past two years, governments from all G8 nations have placed an unprecedented level of attention on proactive economic stimulus. Transit investment's effect on employment is very significant. Every billion dollars invested in transit infrastructure can generate at least 11,000 full-time equivalent jobs for one year.

While stimulus has been significant, there has never been a more pressing need for intelligent infrastructure spending. Increasingly, policy-makers have come to realize that accelerated spending on “pothole filling” is no match for investments in sustainable infrastructure. In this context, at CUTA we're making the following three pre-budget recommendations.

First, the federal government should create a new permanent program of direct transit-specific investment to meet current and future needs related to infrastructure expansion and renewal.

Second, infrastructure investment mechanisms that can support major rapid transit projects, such as the Building Canada Fund, are vital to transit's future success and should become a permanent fixture of the federal-provincial-territorial financial landscape. Transit projects should continue to be an eligible category, and local governments should have maximum flexibility to select priority projects.

Third, the federal government should give tax-exempt status to employer-provided transit benefits. This would complement the current federal tax credit for transit pass purchases and encourage employers to financially support transit commuters, levelling the playing field, so to speak, with employer-provided parking benefits, which are generally currently not taxed.

Those are our three recommendations. Thank you very much for your attention.

Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We'll now go to Sustainable Development Technology Canada.

[Sailesh Thaker, Vice-President, Industry and Stakeholder Relations, Sustainable Development Technology Canada]

Merci, monsieur le président.

My name is Sailesh Thaker, and I'm the vice-president for industry relations at Sustainable Development Technology Canada, or SDTC.

I would like to thank the members of the Committee for the opportunity to take part in these consultations.

I would like to start by introducing SDTC--who we are, and what we do.

SDTC is a policy instrument created by Parliament that helps Canadian innovators and entrepreneurs commercialize their clean technology solutions. You may have heard a bit more than usual about us last week as we held here in Ottawa our first conference, entitled “Greening Canada's Economy: The SDTC Cleantech Summit”.

The summit brought together over 250 clean-tech players, including CEOs of Canada's leading clean-tech companies, private sector clean-tech investors, federal and provincial government officials and many other stakeholders in this emerging sector of the Canadian economy. The clean-tech companies at the summit told us about the arduous path they have had to follow in commercializing their intellectual property into clean technology products and the difficulties they face in raising capital for it.

An example of SDTC's unique role in filling this need was reported by one of the participating CEOs. His company originally received SDTC funding to undertake commercial demonstrations of their truck engine technology in the GTA. He began with a handful of people and almost zero revenue, while today, six years later, this company has a revenue stream of close to $100 million and markets in China and California.

This is one example of more than 170 projects we have across the country. During the question and answer period, I would be pleased to provide you with other examples.

SDTC operates in a manner akin to that of early-stage venture capitalists, or VCs, in order to provide not only funding but also innovative partnerships and capacity building primarily to small and medium-sized enterprises. SDTC manages two funds. The SD Tech Fund, which is the subject of this presentation, was established in 2002 and has been recapitalized twice since then. This fund operates beyond R and D funding sources and earlier than traditional lenders, such as the BDC and banks.

A second fund, the NextGen BioFuels Fund, was established in 2007 to focus on Canada's biomass advantage by helping establish first-of-kind near-commercial-scale plants for the production of ethanol and biodiesel from non-food sources.

Through the SD Tech Fund, SDTC has built a network of over 5,000 private sector companies and other entities that are involved with this new sector of the Canadian economy. Today the SD Tech Fund is the single largest clean technology portfolio in North America, with over 171 investments that have a total project value of $1.4 billion. These represent $425 million in federal government funds and over $1 billion leveraged, with 84% of it coming from the private sector.

What SDTC needs in order to continue its important work is a commitment in the 2010 budget for recapitalization of the SD Tech Fun by $90 million per year for seven years. This figure is based on the volume of applications that we have been seeing over the past several funding rounds. Such multi-year predictability of the SD Tech Fund will help ensure continued innovation and commercialization of clean technologies in Canada.

As was stated last week at our clean-tech summit by Mr. John Podesta, an adviser to President Obama, Canada has had an early start in clean technology development and a unique model through SDTC, but the U.S. and other jurisdictions are now jumping in with both feet. This is evident when one sees the many billions of dollars the U.S. is spending on clean technology development and deployment, or the U.K.'s indication that the clean technology sector will be a key driver in the country's emergence from the current recession.

The potential trillion-dollar clean-tech market in China alone creates a strong global clean-tech business opportunity. At this critical juncture, it is important that Canada remain a technology maker, capturing its share of an emerging and significant global clean-tech market. For Canada as an exporting and innovative nation, clean technology represents a scenario wherein its mark may be felt around the world.

I would be pleased to take your questions.

Thank you for your attention. Merci encore.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We will go now to the Insurance Brokers Association of Canada.

[Steve Masnyk, Manager, Public Affairs, Insurance Brokers Association of Canada]

Thank you, Mr. Chair. Merci, monsieur le président.

My name is Steve Masnyk. I am the manager of public affairs for the Insurance Brokers Association of Canada.

As most of you know, the Insurance Brokers Association of Canada represents over 33,000 general insurance brokers across Canada. These brokers purchase insurance on behalf of Canadian consumers in virtually every community across this country. The vast majority of our member brokerages are small and medium-sized businesses that employ nearly 100,000 Canadians and together constitute a major player in an industry that contributes over $6 billion in direct corporate and personal taxes to Canadian governments.

As you will know, small and medium-sized businesses are the engines of prosperity in every community across the country. These businesses are also very geographically and operationally diverse. Insurance brokers write the vast majority of policies insuring these businesses and the individuals that run them and thus have a very good understanding of the challenges they face in their respective markets.

The insurance brokerage industry has grown and has earned a reputation over the past century as an industry that is local in nature, one in which consumers can deal directly with an experienced insurance professional to advise them on the complicated process of making an insurance purchase. This local component is one of the strengths that consumers benefit from tremendously. It is this neighbourhood presence that Canadians have come to expect and trust.

In the last century, family-owned brokerage firms were often passed down from generation to generation. A brokerage firm operated by the same family for several generations normally stays in the same geographical area, where it continues to serve a community and a clientele it knows well. That stability goes against the general trend of an increasingly interprovincial and interterritorial economy.

In Canada, almost 50% of insurance brokerages go back two or more generations. That number shows that consumers and communities recognize the importance of the stable and efficient services provided by brokerage firms. The marketplace, meanwhile, clearly recognizes the value brokerage firms give to consumers and the important role of their ongoing presence as a community service.

However, communities are getting smaller and smaller because the younger generations are leaving home to look for work in urban centres. We believe that one of the government's roles is to help young entrepreneurs invest in the community where they grew up and where they still live. The appeal of high-paying jobs in urban centres tends to dissuade young people from staying home and exploring business opportunities in their own community.

We propose that the government consider making it easier for younger generations to invest in their local communities by deferring the capital gains tax should a transfer of a small business occur between an owner and his or her children. This deferral would lower the already high barrier to entry into a business and make it more attractive and affordable for children to invest in their parents' businesses. The parent/seller could lower the purchase price by the amount of the capital gains tax and make it easier for the child to make an investment. We do not believe in tax breaks or subsidies simply deferring this tax to promote family-owned businesses.

With the average age of principals in brokerages being 57 years old, succession is of vital importance to this industry, more so than at any time in the past.

The CD Howe Institute notes that most industries are going through tremendous consolidation. As a result, fewer businesses are likely to remain in family hands. It is therefore vital to make it easier for younger generations to invest in the family business.

We believe it is crucial for Canada to maintain strong, dynamic economies in all rural communities. The government can and should adopt incentives to make it easier for younger generations to invest in their parents' businesses. We firmly believe that this will go a long way toward promoting a solid small business culture in communities from one end of the country to the other.

Thank you for giving me this time.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now hear from the Canadian Community Economic Development Network, please.

[Michael Toye, Executive Director, Canadian Community Economic Development Network]

Mr. Chair and members, thank you for the opportunity to present our recommendations to you today. I'm especially pleased to be part of the influential group that gets to follow up your hearings yesterday with the Governor of the Bank of Canada and the Minister of Finance. We're clearly in good circles for recommendations.

Very briefly, the Canadian Community Economic Development Network is a relatively young national network of local organizations working on integrated approaches to economic and social development in their communities. We have several hundred members in every province and territory and support professional development, research, peer learning, and policy work for our members.

Our membership represents a new approach to development, one that integrates economic development—the provision of needed goods and services—with social and environmental goals at the firm and community levels. This movement, which has been growing both in Canada and internationally in recent years, is successful in large part because it inspires Canadians to take action on the challenges facing their communities.

The growth of this sector reflects the emerging understanding of the need for integrated, coordinated responses to complex social and economic issues that cut across sectors, departments, and levels of government. You can see it in the growth and success of horizontal initiatives in the federal government and the increased need for intergovernmental cooperation. This may be most evident in the area of health, where the reality of the determinants of health is becoming more widely understood. I would recommend to the committee to study carefully the Senate's Subcommittee on Population Health's final report, which makes clear and specific recommendations for a whole-of-government approach.

Like traditional entrepreneurship, the power of community economic development in this social economy lies in its ability to mobilize local leadership and action for the challenges facing communities. Locally adapted solutions building on local assets and leadership are more effective and sustainable. We see this, for example, in the survival rate of social economy enterprises, 65% of which are still operating after five years, compared with 35% for traditional SMEs.

Infrastructure stimulus spending, while some of it is available to non-profit organizations and to jurisdictions such as Ontario, still does too little to address the immediate needs of the most vulnerable Canadians who are hardest hit by the economic downturn, including youth and those with weak labour market attachment. CED and social economy enterprises are positioned to support those populations that have been hardest hit. While many businesses have seen consumer demand soften over the last three quarters, many non-profit organizations are experiencing increased demand. For example, Momentum, a community economic development organization in Calgary, has experienced a 47% increase in demand for its business development, skills training, and financial literacy programs since the third quarter of 2008. Over the same period, the employment rate in Calgary increased by 3%.

For this sector to continue to grow, we need modifications to federal policies and programs similar to what has been done in other jurisdictions internationally and provincially.

Last November, the Government of Quebec launched its social economy and collective entrepreneurship action plan in response to the economic situation. It also allocated funds for research and information on the social economy, labour force development and support for development of the social economy in new sectors, with new population groups. The federal government can do the same thing

Our brief contains specific recommendations for changes to federal policies and programs that would involve no increase in spending by the federal government but would enhance the range of programs available to cooperatives and non-profit enterprises.

Other options, such as tax credits, have demonstrated success in leveraging private investment in employment enterprises and affordable housing. A 30% Nova Scotia tax credit has generated over $30 million in assets for local community economic development investment funds across the province.

The creation of a federal cooperative investment plan could be modelled after the plan in Quebec, where from 1985 to 2006 some $393 million was invested by members in eligible cooperatives. The cost of such a plan at the federal level is estimated to be $17 million to $20 million per year but would generate some $120 million per year of new investment in Canada.

Finally, it is important to note that poverty needs to be addressed not only in Canada but also abroad. We are happy to hear that the government notes a relatively strong fiscal position compared with other G8 countries. That's even more reason to enhance our international commitment to poverty reduction. In concert with non-governmental organizations, churches, and other civil society organizations, the Canadian CED Network asks the federal government to increase our international development aid spending by an average of 15% a year for the next ten years in order to reach the internationally agreed target for aid spending of 0.7% of gross national income and continue Canada's leadership in promoting a greater role for civil society in the delivery of development assistance.

Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you all for your presentations. We'll now have questions from members.

We'll start with Mr. McKay, please.

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

Thank you, Chair.

Thank you, witnesses. I apologize in advance for not being able to ask questions to each and every one of you, but time is what time is.

My first question is to Mr. Roschlau, with respect to your three recommendations.

Your first recommendation, with respect to the flow-through of the gas fund, I think is actually a good idea. If that could be enhanced, I think it makes a lot of sense.

Your third recommendation, however, builds upon this transit pass business that was introduced a couple of budgets ago. My recollection of it was that it was going to cost about $900 million to the federal treasury, that its cost per tonne in reducing greenhouse gases was astronomical—something like $6,000 a tonne—and that it was not going to increase ridership. Yet your proposal here is in effect to “level the playing field”. You want to actually add to what I respectfully submit is a flawed public policy.

Do you have any evidence of increased ridership as a consequence of this particular policy? If you have, I'd be interested in hearing it.

[Michael Roschlau]

Thank you very much. That's an excellent question, because there's a lot of confusion about this issue.

What we're proposing is a tax exemption for employer-provided transit benefits, which is very different from the tax credit that's currently in place. Let me explain.

Right now, most people in Canada get a free parking spot at their place of work. Most Canadians who get that free parking spot aren't paying tax on it as a taxable employer benefit, because there aren't enough parking spots for everybody. In other words, if there are 100 people working at a place with only 80 parking spots, it's considered scramble parking, because it's not reserved and hence it's not taxable. Yet, if an employer wants to provide a transit pass or a transit benefit towards your trip to work on transit, it's fully taxable at the marginal rate. That's the “unlevel playing field”, if you will.

The U.S. has this kind of measure. In the U.S., an individual can claim—and the employer can claim—up to I think $120 a month right now for non-taxable transit benefits at the place of work. If you look at the places where this has been taken up in a big way—San Francisco, Chicago, the New York area—there have been massive increases in ridership. I'd be happy to share the details of that with you.

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

Thank you.

So your argument is that effectively you want to level the playing field between free parking and a taxable pass.

[Michael Roschlau]

The beauty of this is that it's targeted to the journey to work. Its success is entirely correlated with the extent to which it's promoted, which is very different from the tax credit that's currently in place.

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

But you still don't have any evidence with respect to any increase in ridership linked with the transit pass that was introduced by the government.

[Michael Roschlau]

On the tax credit side of it, we don't. It's been very hard to make any direct link between the implementation of the tax credit and the ridership increase.

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

I know that in previous incarnations the Department of Finance thought this was one of the goofiest ideas going, but I'll just leave it at that.

Turning to Mr. Lord, first of all, welcome. From time to time we have sitting premiers at this committee; it's an honour to have you as a former premier in this country.

You are advocating introducing a temporary accelerated capital cost allowance. I should think that your experience in government would tell you that temporary is never temporary, that it is always permanent. Can you recollect any “temporary” measure that was actually ever repealed?

[Bernard Lord]

Thank you very much for the question. And it's certainly a pleasure to be here.

There are measures that can be temporary, and we are recommending that it be temporary. If the Parliament were to decide to make it permanent, then I'm sure our providers and members wouldn't be disappointed. But making it a temporary measure to accelerate the investment is what we're looking for.

There will be significant investments made. Let's keep in mind those of the carriers of broad spectrum, with over $4 billion just last year. This year is one of the largest build-outs in many years, and there's more to come. We're saying that if you accelerate the depreciation, you will accelerate the investments. We know going in that it should be temporary and we're recommending that it be temporary.