Evidence of meeting #60 for Finance in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was students.
A recording is available from Parliament.
Conservative
The Chair Conservative James Rajotte
Thank you.
Thank you very much, Mr. Kramp.
I want to thank all of you for being with us this afternoon, for your presentations, and for your responses to our questions.
Colleagues, we are going to suspend for three to five minutes and then we'll bring the next panel forward.
Thank you all.
Conservative
The Chair Conservative James Rajotte
Colleagues, we ask you to find your seats, please. We do have votes at 6:45, so we will hear the bells at 6:30. We'll try to finish just before that.
We have another eight organizations before us in the second panel: the Canadian Construction Association, the Canadian Federation of Medical Students, the Assembly of First Nations, Fédération des chambres de commerce du Québec, Financial Executives International Canada, Retail Council of Canada, Visual Arts Alliance, and Jory Capital Incorporated.
Welcome to all of you, and thank you for being with us.
You each have up to a maximum of five minutes for an opening statement, and we'll start with Mr. Ferreira, please.
Bill Ferreira Director, Government Relations and Public Affairs, Canadian Construction Association
Thank you, Mr. Chair.
Good afternoon. On behalf of the more than 16,000 member companies of the Canadian Construction Association, I'd like to thank you for this opportunity to be here with you today and share our views in this year's pre-budget consultations. With so many worthy submissions before you, we know the task before you will be challenging, and we greatly appreciate your efforts.
I'm here today because we believe three things are paramount to the future of our nation's success: quality infrastructure, a skilled workforce, and a healthier environment that can be achieved by changes to existing tax policies that encourage businesses to adopt cleaner and more efficient machinery more quickly than standard turnover rates would dictate. With regard to infrastructure, this has been a concern of ours for more than 25 years. Since the mid-1980s, we have noticed the steady decline in the condition of these critical assets as a result of government efforts to tame budget deficits. While we are not advocating that governments run deficits--quite the contrary, we feel deficits are a drag on our economy--we do not want to see a return to policies of the past that reduced government deficits at the expense of our infrastructure.
To illustrate the impact of this decline on our economy, I'd like to highlight a 2008 study by the University of Waterloo with regard to manufacturing productivity. It found that Canadian and U.S. levels were essentially identical in the mid-1990s. By 2006, U.S. levels were more than 20% higher than those of Canada. During this period infrastructure investment in Canada declined by about 3.5%, whereas in the United States it increased by 24%. While these declines in spending were driven by the need to balance budgets, they were also a function of a dramatic transfer in ownership to local governments that has occurred essentially over the last 50 years.
In the early 1960s infrastructure development was a shared responsibility among governments. Since then, municipal infrastructure spending has increased from 30% to 55% today. At the same time, federal spending since the 1960s has declined from about 27% to just over 5% today. Since municipalities rely primarily on property taxes to pay for infrastructure, most of them are struggling to keep pace with demand.
While federal programs introduced since 2004 have been a particular help, especially the Building Canada plan in the most recent stimulus programs, we're very concerned about what happens when these programs lapse. Given infrastructure's impact on the quality of life of Canadians, the efficiency of our economy, and contribution to manufacturing productivity, it is critical that governments across Canada find a more permanent and sustainable means of funding infrastructure to meet the pressing demands of today as well as the anticipated demands of tomorrow.
To help address this problem, CCA recommends that the federal government consider doubling the gas tax fund transfers to municipalities, and in cooperation with provincial governments consider the development of new financial mechanisms for municipalities to help pay for future infrastructure development. One thing you could possibly consider is some sort of municipal bond or issuing a bond much like the Government of Alberta is now considering.
Our second recommendation is aimed at training capacity at our community colleges and polytechnics, which is where most of our skilled workers come from. Canada is facing a significant skilled worker shortage. In our industry alone, we estimate a shortage of more than 316,000 skilled workers by 2017. While immigration is part of the solution, these efforts will fail if community colleges are unable to provide new immigrants with the language skills, retraining, or skills upgrading they require upon arrival. To overcome this challenge and provide colleges with the estimated $6 billion they require to deal with these capacity issues, CCA recommends an extension to the current knowledge infrastructure program for a further five years at an annual funding level of $1 billion.
Finally, we recommend a change to existing capital cost allowance rates to encourage large fleet owners to accelerate equipment turnover and obtain the environmental and productivity benefits of cleaner and newer machinery. The new tier three and soon to be released tier four diesel engines are not only more efficient, but they reduce particulate matter and smog-causing emissions dramatically. Tier fours will reduce PM emissions by as much as 90%. However, since much of our industry operates on a 10- to 15-year return on investment cycle, they simply cannot afford to accelerate the uptake of this equipment without government incentives.
Consequently, we recommend that the federal government consider increasing CCA rates for classes 10, 16, and 38 on a time-limited basis and permit these purchases to be accelerated using a straight-line depreciation method.
With that, I will conclude. I look forward to your questions.
Thank you.
Conservative
The Chair Conservative James Rajotte
Thank you very much for your presentation.
We'll have the Canadian Federation of Medical Students.
Tyler Johnston President, Canadian Federation of Medical Students
Thank you, Mr. Chair and honourable members of the committee, for the opportunity to speak with you today.
Before we get into the specifics of our submission, I'd like to briefly comment on what the Canadian Federation of Medical Students is and why we're here before you today.
The Canadian Federation of Medical Students, or CFMS, is a national organization that represents over 7,000 medical students who are pursuing their education at 14 medical schools from coast to coast. We represent students in national medical organizations such as the Association of Faculties of Medicine of Canada, the Canadian Medical Association, and other groups. Additionally, we communicate national medical education issues to students, facilitate communication between schools, and provide services that support the needs of medical students. Mr. Mondoux and I are here today as the senior elected representatives of the CFMS.
The issue we're here to talk with you about today is the high debt load incurred as a result of pursuing medical education in Canada and the toll this debt load has on medical learners and their ability to function as front line health care workers. We'll close with a discussion of the solutions we propose to alleviate some of the stress and societal problems associated with these debt loads.
There's one more bit of context I have to provide before proceeding with our discussion. Becoming a fully certified medical doctor in Canada is a process that takes approximately 13 years. Most students must obtain a bachelor's degree of four years' duration, then complete a medical degree of four years' duration, then undertake a mandatory period of supervised practice, known as residency, which takes approximately two to seven years, during which they develop competency for independent practice.
The level of education-related debt learners incur over this 13-year period is $158,000, on average. This is a significant figure when you consider that the $2,000 in monthly payments required to service this debt can represent more than half a resident's take-home pay. This debt load is largely the result of the deregulation of medical student tuition in many provinces that has resulted in a tripling of the average Canadian medical school tuition. Tuition fees for medical students are three times higher than they are for other undergraduates. Tuition at some medical schools now exceeds $20,000 per annum, a figure that exceeds the maximum allowable government student loan for most Canadians. The additional costs of equipment, books, and living expenses must be covered through expensive private bank loans that accrue interest while a student is studying. They can easily exceed $100,000 by the time of residency.
This debt load is very stressful for trainees who are providing front line health care to Canadians. The monthly interest payments may be difficult to comply with and may hamper the ability of a trainee to start a family or buy a home. Ultimately, many residents only incur further debt during their training, despite having completed two university degrees and having provided thousands of hours of care to Canadians.
The cost of medical education may also be having a negative impact on the demographics in Canadian medical schools. The proportion of students from low- and middle-income backgrounds has decreased by over 20% since tuition deregulation, and students from low-income backgrounds are now severely under-represented in Canadian medical schools. Significant tuition fees and debt loads may also influence a student's specialty choice. Most studies suggest that higher costs push students away from primary care and produce fewer physicians who are willing to work in underserviced areas.
All these things considered, it has become clear to us that the government's new repayment assistance program doesn't help Canadian medical trainees.
So what do we propose? We propose that the federal government postpone repayment of principal and defer or provide relief from interest accrual on Canada student loans to medical trainees until after completion of their residency training. Interest relief programs already exist in at least five provinces--Alberta, Ontario, Nova Scotia, Newfoundland, and Saskatchewan. We're thankful for these programs, but unfortunately, these programs could actually negatively influence physician distribution in Canada by preferentially attracting students to provinces with interest relief.
Starting this fall, a student from British Columbia who chooses to do a residency in Ontario rather than in British Columbia could save tens of thousands of dollars by choosing to train in Ontario, because Ontario has an interest deferral program that defers payments on all government student loans in exchange for a five-year return-of-service agreement. Once a trainee has completed five years of residency and an additional five years of return-of-service, that trainee will likely have strong ties to Ontario and will be unlikely to relocate.
A national program of interest deferral could ensure that trainees practice in their province of choice, most often their home province, and not in the province with the most attractive incentive package. The potential for unequal physician distribution as a result of unequal interest relief is one reason we believe the government should adopt our second recommendation: a unified national strategy for debt relief for medical residents.
Our last recommendation is that the federal government increase the yearly limit on student loans for medical students, given that tuition fees alone often exceed maximum medical student loan amounts available, which forces students to seek even more expensive loans from private financial institutions.
It's our belief that a national program that provides interest relief to medical trainees and provides increased government funding to help them pay for their education will decrease medical training stress, help prevent an unequal distribution of physicians across the country, and ultimately will help improve the care that Canadians receive from this important group of health care providers.
Thanks very much. I look forward to your questions.
Conservative
The Chair Conservative James Rajotte
Thank you for your presentation.
We'll now hear from the Assembly of First Nations, please.
Chief Shawn A-in-chut Atleo National Chief, Assembly of First Nations
Thank you, Mr. Chair.
I really appreciate the opportunity to make a submission today, and we will build on a previous pre-budget submission that we've made. Thank you to the members for having me here.
The Assembly of First Nations advocates for and supports over 600 first nations governments across the country, over 800,000 citizens, and I was honoured by having been put in the office of national chief just over three months ago.
I want to cover some areas we've touched on in the past. Really, it's about advocating on behalf of first nations governments for fair and equitable treatment when it comes to funding. What people are looking for is that it would be on par with the kind of access that other Canadians enjoy.
Historically, especially over the last decade or so, first nations have been faced with a 2% funding cap that's created some significant shortfalls in critical areas, and we've spoken about this in the past. Since 1996 the 2% figure has been either equal to or below the average inflation rate. At the same time, of course, first nations are the fastest-growing population in Canada.
So this is one of the major areas that we want to highlight and put forward to the committee. I know it's a blurring assembly of presentations that you're facing, but particularly in an era that follows on the apology by the Prime Minister that occurred in the House of Commons, reflecting on the past policy of the residential schools, never again should we have such an effort undertaken. It should never have happened. In that spirit, we would suggest that it's time to invest in first nations communities.
Firstly, stop the chronic underfunding of first nations. Secondly, commit to annual investments in first nations education, infrastructure, and skills development in order to increase productivity and participation in economic opportunities. Thirdly, we must shift from this notion of always being bound up in conflicts and in crises when it comes to issues in our communities, and move to a sustainable, predictable, and non-discretionary funding regime like those enjoyed by provinces and territories.
Speaking specifically about economic participation, we suggest very strongly that education and skills development are key to building first nations economies and adding to Canada's productivity. There is an inordinate amount of work that must be done in this area. In the short time that I've been national chief, I've been reaching out to the education establishment, the full spectrum of those who provide education. I know, in having travelled to many communities, particularly those isolated at this time, that there are still communities where kids have not gone to school in the last two or three years because of the need for infrastructure in communities.
First nations students definitely need the physical and cultural supports to be successful learners. This is evidenced not only anecdotally by the Assembly of First Nations, but it's been demonstrated in report after report. We should build on the good work of the Canadian economic action plan. There were commitments made in 2009 under this plan that we move to an annual dedicated allocation to new schools, build on the work that's been done. Over 60 schools are required in first nations communities across this country as I speak.
The provision of culturally grounded key education supports would build on the spirit and intent of what was expressed by the Prime Minister in the apology. If residential schools, under the guise of education, removed children from family, land, culture, and language, shouldn't, in addition to the development of human capital for a market economy, the education system be one to reconnect learners with land, language, culture, and family? We would suggest strongly, and it's backed up by a good number of reports that have been authored in recent years, that this will make for much more productive and healthy communities.
We should have education support systems in place, and libraries. There's a need for books and for supporting increased literacy in our communities, for special education, for technology, and we know the value of sports initiatives in our communities. There should be increased investment in skills development that links to opportunities and first nations' economic goals.
On the structural side, we should look to recognize that first nations aren't the only governments in Canada whose budgets for core and essential services are discretionary. To that effect, I would like to specifically recommend that Canada needs to work with first nations to strike a joint senior officials task force to examine the mechanisms for sustainable funding and shared accountability.
We need to move away from lurching from conflict to conflict and crisis to crisis. We need to apply the principles of the Royal Commission on Aboriginal Peoples, move to stable and predictable transfers with built-in escalators that are related to real need—population and inflation—and these are of course used by other governments.
Thank you, Mr. Chair.
Conservative
The Chair Conservative James Rajotte
Thank you very much for your presentation.
This is your first time before us as national chief, and I think we should certainly recognize your election three months ago. So welcome to the committee. I'm sure we'll see you back here again.
Conservative
The Chair Conservative James Rajotte
The next testimony will come from the Fédération des chambres de commerce du Québec, please.
Stéphane Duguay Senior Economist, Fédération des chambres de commerce du Québec
Thank you, Mr. Chairman and committee members. The Fédération des chambres de commerce du Québec wishes to thank the Standing Committee on Finance of the Government of Canada for this opportunity to speak today and is pleased to take part in the 2009 pre-budget consultations.
Over the past 100 years, the Fédération des chambres de commerce du Québec has represented the interests of business people with respect to public policy. The FCCQ network extends to 158 chambers of commerce throughout Quebec and represents more than 40,000 businesses and 100,000 business people.
The financial crisis and recession have tested Quebec's economy and its private sector. Since the start of the fourth quarter of 2008, many jobs have disappeared, exports have decreased, profit margins have shrunk and government finances have deteriorated. However, the rest of the recession seems to be behind us, and economists are confident enough to talk about a recovery. As the most recent economic growth figures show, the recovery will be slow and gradual since the U.S. economy is still shaky and the Canadian dollar is gaining strength.
However, with economic conditions improving, the FCCQ no longer feels it is necessary to develop mechanisms to stimulate the economy. Instead, it encourages the government to refocus its attention on the structural problems threatening the Canadian economy. These problems include an aging population, slowdowns in productivity, uncertain government finances and reducing greenhouse gases.
One of the first ways to attack these major challenges is to use a tax system that promotes competitiveness among businesses and attracts foreign investors. Governments have seen a dramatic drop in revenue because of the recession and increased debt owing to recovery plan spending. The public and the business community anticipate that taxes and other sources of government revenue will increase in the coming months.
Senior Economist, Fédération des chambres de commerce du Québec
The FCCQ urges the government to resist the temptation to increase corporate taxes in its next budget. Canada has the characteristics of a small economy with a very large international component. The intensity of business competition suggests that it should rely instead on investment growth.
The FCCQ therefore urges the government of Canada to seize the opportunity afforded by its next budget to equip Canada with a smart taxation system that makes businesses more competitive and attracts foreign investors. Another objective that should be pursued is to promote a business climate that improves productivity through investment and innovation. Productivity growth, which relies in large part on innovation, has for many years been one of the main priorities of the governments of Quebec and Canada.
Unfortunately, despite their efforts, Canada and Quebec continue to lag far behind the United States and other industrialized nations in terms of productivity. One of the main reasons for the productivity gap is the relatively low level of private investment. The FCCQ therefore recommends, in particular, that the Government of Canada increase investment tax credits and enhance investment loan programs for Canadian businesses, particularly small and medium-sized businesses, and make R and D tax credits refundable to enable businesses that are making little or no profit to continue to innovate.
Third, Canada's aging population will have a negative impact on consumer spending in Canada. Domestic demand will not increase as quickly in the future and, consequently, the Canadian economy will have to focus more on exports in order to grow. International sales, the diversification of exporters and Canadian business activity abroad bring very significant benefits. The FCCQ recommends that the government accelerate the negotiation of trade agreements, particularly those leading to a Canadian exemption from the "Buy American" clause and to accelerate negotiations on a free trade agreement with the European Union.
On the issue of greenhouse gas reductions, the FCCQ wishes to emphasize that, if the government wishes to invest in sustainability, without slowing business development, it will have to emphasize the use of various green technologies to achieve its objectives.
In Quebec, 40% of GHG emissions are related to transportation. We therefore ask that this aspect be taken into consideration in GHG reduction objectives. Investments promoting the greater use of public transit or electric transportation would definitely be promising.
In conclusion, government intervention in the economy has two main objectives: to create wealth and to redistribute it. The two should not be confused. The government must ensure that its actions do not thwart the creation of wealth, the entrepreneurial spirit or efforts to become more efficient. In other words, the government must ensure that its intervention supports the growth of its economy.
Thank you.
Conservative
The Chair Conservative James Rajotte
Okay. Merci beaucoup pour votre présentation.
We will now go to Financial Executives International Canada.
Michael Conway Chief Executive and National President, Financial Executives International Canada
Good afternoon, Mr. Chairman and committee members. It's a pleasure to be appearing back before your committee.
I'm Michael Conway, and I'm pleased to present Financial Executives International Canada's views on the forthcoming federal budget.
FEI Canada is a voluntary professional association organized into 11 chapters across Canada. Our 2,000 members represent a broad cross-section of Canada's most senior financial executives. Our recommendations are the result of the collective effort of our tax committee, represented today by Grant Smith, senior manager, taxation, at Ernst & Young's Ottawa office.
Our submission focuses on three key recommendations that will protect Canadians' quality of life: one, stimulate economic growth and job creation; two, increase access to capital and cashflow, especially for entrepreneurial initiatives; and three, monitor government spending and restrain deficit growth.
Canada faces serious economic challenges, and the solutions to these problems must be prudent and fiscally responsible. The budget must be rebalanced before major non-recovery initiatives are contemplated. We believe our recommendations encourage competitiveness, savings, and investment; foster innovation, productivity, and initiative; and enhance the economic and social well-being of all Canadians.
To stimulate economic growth and employment, economic initiatives should be timely, targeted, and temporary. They should be designed to achieve the desired results. The focus should change from short- to medium-term policies, designed to alleviate the immediate negative impacts of the recession, to catalyst-type investments, which will stimulate self-perpetuating growth.
In addition to needed physical infrastructure spending, recovery investments should also focus on knowledge-based infrastructure, technology incubators, and public-private partnerships, all of which create an environment that will unlock entrepreneurial initiative and ingenuity. Government should encourage the creation of Canadian research and development champions, the corporations recognized worldwide for creative and innovative approaches to employee skills development. We need to create more technology leaders that become tomorrow's employers, like Research In Motion, Open Text, WestJet, and Porter. We encourage your committee to recommend that the government balance spending between infrastructure and the knowledge economy.
Two other critical issues facing the Canadian corporate sector are decreased availability of affordable credit and declining cash flows. An FEI Canada survey earlier this year indicated that about half of respondents felt there had been a significant decrease in the availability of both working capital and long-term financing. While credit availability has improved somewhat since then for larger issuers, smaller businesses continue to face challenges.
Capital formation is critical to economic development and growth. Whereas government can create employment and sustain the economy for a short time, the private sector will generate long-term economic growth and increased employment. Action is required on several fronts. A national securities regulator is imperative, and we are pleased to see the creation of the Canadian securities transition office to further this important initiative.
Start-up funding is required for Canadian technology companies, especially those engaged in innovative R and D. Government-sponsored lending agencies should increase existing loan limits, streamline the application process, and create new types of loans that tailor terms to recession-plagued corporations. Corporate cash flow could be improved if the time limit for funding defined-benefit plan solvency deficits were extended from five to fifteen years.
Because many Canadians have suffered steep declines in their pension plans and must now consider working beyond their expected retirement date, we urge your committee to recommend measures to encourage Canadians to save more for their retirement. We have included various suggestions in our recommendations summary, including providing a 125% super-deduction on the first $5,000 of RRSP contributions and expanding the tax-free savings account annual limit.
Finally, on the issue of government spending, we recognize government had to take action on the recession; a temporary deficit was therefore inevitable. Having said that, there are two critical questions of concern to our members: who will pay for the current spending and when the payment will occur. Government must ensure we do not slide down the slippery slope to a permanent structural deficit.
Due to our aging population, the health and retirement benefits Canadians enjoy will consume an increasingly greater percentage of government spending in future years. To ensure Canadians continue to receive the benefits they are accustomed to, we must reduce expenditures in other areas.
Our concern is simple. Will repayment of today's government spending happen within the medium term, and more specifically before the next economic downturn, or will our children and grandchildren bear the burden of this debt? FEI Canada believes now is the time for prudent and fiscally responsible action.
Conservative
The Chair Conservative James Rajotte
Thank you very much, Mr. Conway.
We'll now go to the Retail Council of Canada, please.
Diane Brisebois President and Chief Executive Officer, Retail Council of Canada
Thank you, Mr. Chairman.
I want to first thank all members for the opportunity to provide retailers' views on the government's future economic direction.
The last time the Retail Council was at this committee, we presented on the several credit and debit issues facing merchants. Today I want to focus in on debit issues, to no one's surprise. I would be happy to field questions about the broader economy and its impact on merchants, but I can assure you that the single biggest issue for retailers is the entry of the multinational credit card companies into the Canadian debit market.
Canada has a globally recognized and emulated made in Canada debit system that is in serious jeopardy, although we are hopeful that some relief may be on the way. I am here today as president of the Retail Council of Canada but I'm also voicing the views of more than 30 associations representing over 250,000 Canadian businesses and two million employees. Members of all parties have played a role in raising the profile of this issue and we are grateful for the many discussions and interventions over the past year. It is to the government's credit that it has understood the need for a code that will promote a made in Canada debit system. We are cautiously hopeful that the code will incorporate values that retailers have been advocating for some time.
In that light I must emphasize that big debit market changes are already under way. Tens of thousands of merchants are already enabled for Visa or MasterCard debit, many of them unknowingly, as they were quietly equipped for the new debit products at the same time that their processors switched them to chip and PIN. Millions of new cards have been issued to the consumers--possibly as many as 2.5 million cards from one bank--equipped for both Interact and Maestro, the MasterCard debit brand.
Without prompt action we may have a larger group of merchants and consumers whose arrangements precede the code's release than to whom the code would apply. In short, this moment is the crossroads for public policy on whether to protect and enhance some of the best consumer safeguards in the world. We want a transparent, accountable, market-based solution to which all industry players are committed, one led by the Canadian government.
As to the specific elements, allow me to speak to four principles.
First, merchants must be allowed complete choice of which system and cards to accept in their stores and any such choice must be by express written consent, not by negative option. All too often, negative option is paired with the provision of little or no information and can hardly be said to be much of a choice at all. Express consent ensures that an informed decision was made.
Second, the presentation of options for the routing of transactions at the PIN pad or website should be within the control of merchants. Merchants are surely entitled to determine the order in which goods and services are presented to consumers in their stores. This is as true for the sequencing of payment options as it is for the placement of goods on a merchant's shelves.
Third, merchants should not bear additional charges or fees simply for exercising their rights. Otherwise the big institutions can set a price barrier to keep merchants from exercising those rights.
Fourth, debit transactions should be treated as equivalent to cash, as with Interact today, without any chargebacks to merchants or requirements for reserve accounts.
Last, but by no means least, debit transactions should be priced to the merchant on a flat fee basis only. There is simply no excuse for taking a percentage fee on a transaction that simply withdraws a customer's own funds from his or her account. No credit is being extended and the cost to the bank is exactly the same whether the transaction is for $10 or $1,000.
We are looking for major steps towards a made-in-Canada solution, one that supports a strong and competitive retail sector. On behalf of all those merchants who can't be here today because they are preparing for the make-or-break season of the year, I want to thank this committee for taking the lead on this issue and for the opportunity to speak today.
Merci.
Conservative
The Chair Conservative James Rajotte
Thank you, Madame Brisebois.
We will now hear from the Visual Arts Alliance, please.
Lise Leblanc Chair, Visual Arts Alliance
Ladies and gentlemen, members of the Standing Committee on Finance, thank you for welcoming us here today.
The Visual Arts Alliance is a consortium of 12 national visual, media and craft arts service organizations. Representatives of some of those organizations, CARFAC and the Canadian Museums Association in particular, have previously appeared before the committee. The Visual Arts Alliance joins with them and the Canadian Conference of the Arts in asking the Standing Committee on Finance to take into consideration the value of Canada's cultural economy.
The Conference Board of Canada released a study in the summer of 2008 entitled "Valuing Culture: Measuring and Understanding Canada's Creative Economy." This expansive study estimated that the culture sector generated about $46 billion in real added GDP in 2007, which constituted 3.8% of Canada's real GDP. The study also revealed that Canada's cultural sector employed about 616,000 persons in 2003, representing 3.9% of national employment. The figures from the Conference Board of Canada's study underlined the importance of the cultural industries in Canada, industries of which the visual arts are an essential part.
The recommendations of the Visual Arts Alliance are as follows. We first recommend sustainable long-term investments in programs that encourage the production, presentation and distribution of Canadian art. As we state in our brief, the Visual Arts Alliance supports the recommendations of the Canadian Conference of the Arts related to market development and cultural diplomacy, investing in the creative economy and in cultural infrastructures, people and places.
Beyond our support for the CCA's recommendations, the Visual Arts Alliance makes the following three recommendations specifically to the Standing Committee on Finance. First, it would like to see an increase in support for Canadian artists and arts organizations' international programming. In recent years, significant funding has been cut from programs geared towards touring Canadian art. Support from the federal government allows both public and private galleries to promote Canadian art abroad, affording artists opportunities to travel and educate the world about what they do. Commercial galleries are able to open the Canadian art market to a wider international audience through foreign sales and exhibitions. It is estimated that, in 2006, exports of Canadian visual art amounted to $73 million. The Visual Arts Alliance therefore recommends additional funding for international programs.
The second recommendation is that attention be urgently given to Canada's museums and galleries, which play a vital role in disseminating Canadian artwork in the regions and internationally. The Museums Assistance Program, MAP, currently delivered by the Department of Canadian Heritage, supports traveling exhibitions, outreach programs, improvements in museum management and aboriginal heritage initiatives. MAP provides approximately $6.7 million per year, which is below its inaugural 1972 level. The funding is primarily available only for one-year projects. MAP is currently undergoing a thorough review. The Visual Arts Alliance recommends that the Museums Assistance Program be revised and updated to meet the needs of today's museums with new funding and a new approach.
Third, we would like to see a system of tax incentives and interest-free loans put in place to encourage the purchase of art by living Canadian artists. Private investment in visual arts has increased and surpassed government spending on culture in recent years. In 2005, $25 billion was spent on cultural goods and services, or $821 per person. Of that amount. $830 million was spent on purchases of artworks, demonstrating that Canadians have interest in purchasing original works of art. Despite this impressive figure, the Canadian art market is far smaller than in other countries of similar or smaller size. There are few incentives in place to encourage it to grow.
For models of fiscal measures to promote acquisitions of artists' works by individuals and private enterprises, we suggest looking to the U.K., the Netherlands and France. For example, the Own Art system in the U.K. is designed to make it easy and affordable for anyone to purchase contemporary works of art and craft. Individuals may borrow up to £2,000 or as little as £100 and pay back the loan in 10 monthly instalments. In the Netherlands, Kunstkoop, the National Art Purchase System, offers individuals interest-free loans for the purchase of art. This loan allows buyers to purchase work with no interest fees, and the purchase may be made in up to 36 monthly payments.
In 2008, the French government announced that it would offer interest-free loans to allow individuals to purchase art.
Under the proposed system, any member of the public is eligible to receive an interest-free loan of up to €10,000. Financial institutions providing the loans will be compensated through tax breaks for corporate art patronage.
The schemes in place in these countries allow individuals who may not otherwise be able to purchase a work to do it so that they can live with art that they love in their everyday environments. The measures also help artists earn a living from their art and support galleries that promote and sell artworks.
In conclusion, we acknowledge that the decisions the government has to make are not easy ones to tackle in these times of financial turbulence and economic difficulties worldwide.
We believe, however, that creative industries, which include the visual arts, are integral to,and have an important place in, the national labour market and encourage Canada's international trade relations.
We are also convinced that increased federal investments in the arts in general, and in visual arts in particular, will ensure sustainable economic growth and improve Canada's economic performance in all sectors.
My colleague Robert Labossière and I will be pleased to answer your questions.
Thank you.
Conservative
Patrick Cooney President and Chief Executive Officer, Jory Capital Inc.
Thank you, Mr. Chairman.
I think our presentation is going to encompass and touch on what everybody has presented here.
Clearly, we're going through epic volatility in world equity markets, and what has happened in the United States and in Europe is going to continue. We've had this pregnant pause, and my concern going forward is threefold. One is that defined benefit plans as they exist today will have to cease to exist because the asset allocation models are too heavily weighted to equities and the average investor's expectations about rates of return on asset classes are going to be a lot lower than they think.
My third point, Mr. Chair, and my biggest concern, is that we have $593 trillion off balance sheet. What does that mean to us? Global GDP is $45 trillion. It's an enormous undertaking. In 1987 we had $852 billion off balance sheet. So I'll clarify it. A million dollars of thousand-dollar bills is six inches. A trillion dollars of thousand-dollar bills is 500,000 feet. We can't grasp the enormity of the off balance sheet exposure the financial institutions have today.
When you're analyzing stocks or bonds and looking at pension plans, to ignore the biggest asset class in the world is foolhardy. Today in the Financial Times of London there's an article on systemic risk in derivatives, and the Senate is currently taking a look at that. As we go forward, the Canadian banks and insurance companies have exposure to this systemic risk and it's going to impact us dramatically.
Currently in the United States, what they're recommending is that the U.S. banks start putting up money, collateral for their off balance sheet leverage, and we're going to have to do the same thing here. The long-term consequences for the capital ratios of the banks are very, very important and we're going to have to do two things. The federal government, in its budget, is going to have to increase capital for the banks, raise money, and give the banks more money to improve their balance sheet, or they will have to go to market and dilute dramatically their common equity and preferred shares.
We've never seen anything like this in the history of finance. It's very, very serious and it's going to impact everybody around the table on a serious level. I think it's important, when we're looking at the budget, that we demand transparency in derivative markets generally, and specifically as they apply to our financial institutions.
Thanks for your time, Mr. Chair.
Conservative
The Chair Conservative James Rajotte
Thank you very much for your presentation.
We'll now go to questions from members. We'll start with Mr. McKay for seven minutes.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Thank you.
Starting with Mr. Conway, your first recommendation is to monitor government spending and encourage spending restraint in light of the increasing deficit, and support for the parliamentary budget officer. This government shows no great enthusiasm for spending restraint, and certainly their support for the parliamentary budget officer is tepid at best. I think that's probably the best way to say it.
You probably know that this committee heard representations from Nortel employees and the executives. The concern arises that you're asking the government for spending restraint, but there doesn't seem to be any corollary spending restraint on the part of executives running large financial institutions and large companies in this country. I was wondering, in light of the Nortel debacle, in light of the huge pension meltdown, in light of the devastating circumstances in which many Canadians find themselves, whether your organization of Financial Executives International has actually addressed the issue of restraint on the part of executives and their salaries.
Chief Executive and National President, Financial Executives International Canada
FEI Canada has long come forward to talk about transparency and accountability as one of the basics of our organization. We brought in a code of conduct about a decade ago. Actually, our sister organization in the U.S. had it incorporated into the Sarbanes-Oxley Act, and we have a similar act. We view transparency and accountability very strongly.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
I don't know whether you caught 60 Minutes last night on CBS, but the piece had to do with Wall Street in particular, and to a lesser extent Bay Street. Basically, the good times are back, as well as the time for running amok for salaries, mergers, acquisitions, and things of that nature. I think the point of the article was, have these people learned nothing?
What's your observation on that?