Finance Committee on Oct. 5th, 2011

[The Chair, Conservative, James Rajotte]

Good morning, everyone.

Welcome to the Standing Committee on Finance, meeting number 14, as we continue our pre-budget consultations. It is wonderful to be here in Montreal.

I want to thank all of the witnesses for coming in. And I thank all of our colleagues for being here as well.

We have six presenters in the first panel this morning.

We will start with the Conseil du patronat du Québec.

Second, we have the Canadian Hospice Palliative Care Association.

Then we will move on to the Manufacturiers et Exportateurs du Québec, the Société de transport de Montréal, the Fédération des travailleurs et travailleuses du Québec, and finally the Confédération des syndicats nationaux.

You will have five minutes in which to make your presentations. Then the committee members will ask you questions.

We will start with the Conseil du patronat du Québec.

[Georges Dick, Vice-President of the Board, Conseil du patronat du Québec]

Good morning. Thank you for giving us the opportunity to join you today in your pre-budget consultations. My name is Georges Dick; I am the Managing Director, Hydropower and Dams, for AECOM Consultants Inc. I am also the Vice-President of the Board of the Conseil du patronat du Québec. With me today is Norma Kozhaya, our chief economist.

The Conseil du patronat du Québec brings together employers and companies in Quebec in all sectors and of all sizes. Our primary mission is to ensure that our companies can grow in a business environment in which they and their employees can prosper.

With that, I will give the floor to Ms. Kozhaya.

[Norma Kozhaya, Director of Research and Chief Economist, Conseil du patronat du Québec]

Good morning. Thank you for inviting us.

For the Conseil du patronat, the overall objective of the upcoming budget is to maintain the best possible conditions for sustainable prosperity in an uncertain global climate. Among the areas of focus that will allow this objective to be achieved, in our view, are the rigorous control of public spending and investment in infrastructure and innovation. Other aspects are of equal importance, but I will come back to them a little later.

The very unpredictable global economic climate requires us to be highly vigilant. As a result, Canada must also commit to prudent budgeting, specifically in order to provide elbow room, to be able to intervene where necessary, and to allow us room to manoeuvre in the event of another economic slowdown or recession. In that regard, the Conseil encourages the government to continue its efforts to return to balanced budgets by 2014-2015 by ensuring better control of spending, notably through the strategic review and without affecting transfers to the provinces.

Investments in transportation infrastructure are essential if the economy is to function smoothly. Quebec, in particular, is facing urgent, major problems with its transportation infrastructures. It is important for the federal government to do its part in funding these projects and to continue contributing to an efficient and effective transportation network in Quebec. We are thinking in particular of the rebuilding of the Champlain Bridge. We read in La Presse this morning that the announcement could come as soon as today. We certainly support the movement in that direction. We also have in mind projects such as the rail shuttle between Montreal airport and downtown.

Other essential ingredients of sustained economic growth are innovation and improved productivity. Canadian businesses unfortunately continue to fare less well in these areas. More must therefore be done to correct the situation. We are specifically thinking about simplifying the processes within the existing resource envelope. It's not about more contributions; it's about better contributions. The assistance must contribute more to innovation, wealth creation and increased productivity.

Among the other recommendations we make in our brief, let me mention investments in training that are better targeted and better tied to the needs of the market, with special attention paid to the needs of workers who are not eligible for employment insurance. We attribute equal importance to a review of the employment insurance program and to the increased need for combatting tobacco smuggling. We welcome the plan to reduce corporate income tax. We support the negotiations for economic partnerships with other economies such as the European Union, India and China, and the lightening of regulatory and administrative burdens.

In conclusion, we would like to take advantage of our time here to express the hope that Quebec will be entrusted with a significant number of the contracts to be awarded under Canada's National Shipbuilding Procurement Strategy. We think that this would serve, not only to create jobs in Quebec, but also, most importantly, to maintain, strengthen and develop our cutting edge expertise in this area.

Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

Next we will hear from the Canadian Hospice Palliative Care Association, please.

[Sharon Baxter, Executive Director, Canadian Hospice Palliative Care Association]

Good morning, and thank you for the invitation to come and speak today. I'd like to take a few minutes to point out why investing in good end-of-life care is not only timely but also the necessary and the right thing to do.

Last year the Canadian Hospice Palliative Care Association presented at this committee with one of our champion council partners, Mike Sangster, from Telus Communications. We continue to engage new and existing partners in dealing with the end of life in a more comprehensive and integrated manner.

I'd like to thank the government for supporting the Canadian Hospice Palliative Care Association and the Quality End-of-Life Care Coalition with a $3 million grant to work on hospice palliative care integration. We hope to have that up and running in December.

There's more that we need to do, and all parties and all members need to be involved in this issue. In fact, all Canadians are going to need to be involved in this issue to make a difference. We want to challenge you all to go and visit a hospice or palliative care program in your ridings in the next three to six months. I think it's profound and it's a really important thing for all of you to do.

More than 259,000 Canadians will die each year, and most die in old age. Of those, only a small proportion receives quality hospice palliative care.

Seniors make up the fastest growing age group in this country, and in 2003 an estimated 4.6 million Canadians were 65 years of age or older. Their deaths affect up to five family members. Over 1.25 million Canadians were caring for dying loved ones in that year. Yet, in Canada, only 16% to 30% of Canadians—depending on where they live—who die now have access to hospice palliative care services. It's profoundly low.

The need is urgent and our capacity to respond is limited at this point in time. We need to look at how we can ensure that all Canadians have access to hospice palliative care.

The Economist Intelligence Unit put out a report in July 2010 that ranked Canada ninth out of 40 countries in how it did with hospice palliative care. It was not a terrible showing, but we can do much better. One of the startling facts was that 25% of the costs of dying in the last year of one's life in Canada are actually out of the pockets of Canadian patients and families. We came in 27th out of 40 countries in that regard. We really need to look at that, as it raises the question of how 26 countries did better than Canada. I think we really need to start to look at that.

The Quality End-of-Life Care Coalition, a coalition of 35 national groups, put out a blueprint for action. We've given you copies of it. They made four recommendations that still stand today. It's a 10-year blueprint. We understand that this is something that we all have to engage in over the next 10 years.

Of the four big recommendations, one was to ensure that all Canadians have access to hospice, palliative and end-of-life care. High quality palliative and end-of-life care must be integral to the health-care system—and it isn't today. It is really very much an add-on situation and many Canadians are not being referred. We want to provide more support for family caregivers. We realize that some measures have been taken in the last little while around accommodating family caregivers, but we need to do much more.

Also, in our roster of ideas in the blueprint for action, one that I want to touch on today is revisiting the compassionate care benefit to assist Canadian families. It needs to be increased. It's only six weeks of paid coverage, or eight weeks' coverage, and it is at an EI-based level. If you don't qualify for EI, you don't qualify for it. So there are things that we need to do around that.

The third area is improving the quality and consistency of hospice palliative care, and looking at investing in research.

Then, the last area was encouraging Canadians to discuss end-of-life care. We have a new campaign called the Speak Up campaign. It's something that we need to encourage Canadians to engage in. It's one of those things that we often don't talk about with our loved ones.

So we feel that quality end-of-life palliative care is the right of every Canadian, yet not every Canadian has access to these services.

Tomorrow I'm presenting to the Senate Committee on Social Affairs, Science and Technology, which is examining the progress that we've made in implementing the 2004 health accord. This is an important step, and as the government starts conversations with provincial and territorial governments on a 2014 accord, or whatever that's going to look like, we stress that the provision of quality end-of-life care must be looked at across all settings, across all diseases, across all professions, and across all ages, and must be integrated into our future thinking. We don't have the time to delay

The Canadian Hospice Palliative Care Association and its many partners look forward to working with the government and anticipates that actions that will be taken on many of these recommendations.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We now move to the representative from the Manufacturiers et Exportateurs du Québec.

[Audrey Azoulay, Director, Research and Government Relations, Quebec Region, Manufacturiers et Exportateurs du Québec]

Thank you, Mr. Chair.

My name is Audrey Azoulay. I am the Director of Research and Government Relations for the Manufacturiers et Exportateurs du Quebec. I thank the committee for being willing to listen to our organizations's recommendations during these consultations.

Before listing our recommendations, I would like to make two comments. The first is specifically about the manufacturing sector. Mr. Chair, it has been a long time since we have seen a real resurgence in activity in the manufacturing sector. We have been able to discern some cyclical upswings, but nothing that has shielded us from the downward trend in employment. Depending on the sector and the company, there has at times been very good investment news, but, on the whole, investment is not going up. This fact has a number of causes. Of course, there is the performance of the Canadian dollar over the last 10 years. There is also the intense competition from developing countries in particular, and likely a number of others. Whatever the reasons may be, it is vital to boost manufacturing. Here in Quebec, we call it a manufacturing priority. I would like to highlight this because the priority is important to grasp. In that light, I will quickly go over some of the arguments.

Let us start with the manufacturing sector. We must count on it if our trade balance is to improve. In Quebec specifically, we are really in the red. In our view, if we continue along the same lines, we will run into imbalances on a macroeconomic scale that will not be tenable.

In addition, research and development activity, the value we get from them and the bringing to market of highly value-added products is clearly built on a solid manufacturing sector.

Another argument is that the primary source of increased productivity in our economy lies in manufacturing activity. The argument is supported by figures.

The development of the natural resources we have in abundance must be supported by the manufacturing sector, where, of course, their true value lies.

Finally, very many quality jobs in the service sector depend, as do those in manufacturing itself, on a strong manufacturing sector.

In general terms, the manufacturing sector makes up a fifth or a sixth of the economy of Quebec, as it does for the economy of Canada. This sector must be considered the key to wealth creation and it must be strengthened. We really cannot wait any longer.

I would like to stress that, with our demographics and with the world economy in my view becoming unstable by nature, we cannot afford to lose a single point of economic growth. In recent years, and despite ever-tighter budgets, the federal government has continued to build economic growth in Canada using measures that we have supported and that we still support. These are the lowering of income tax, the two-year accelerated capital cost allowance, the elimination of tariffs on imported machinery, and the incentives associated with the harmonized sales tax in some provinces.

All these measures were positive for the manufacturing sector. We think this course should be maintained and that on-going attention should be paid to the corporate tax structure. Certainly, we must not stop now. We are not opposed to the sustainable rationalization of public finances. In fact, it seems necessary in the context of a globalization where it is certainly not the first time that our competitiveness has been called into question.

We have three recommendations in the area of taxation. First, we think that the two-year accelerated capital cost allowance on the import of manufacturing and processing equipment should be made permanent. Among other things, this fits logically with the speed at which technology is evolving today.

Our second recommendation is that the research and development tax credit be reimbursable. Mr. Chair, research and development is an extremely risky investment, whose results will likely not be seen for a very long time. Cash flow really is necessary to encourage research and development in a visible and tangible manner.

The third recommendation is intrinsically linked to the first two. True investment does not exist without investment in human capital. They go together and they must be considered together. We recommend that the government encourage employee training to a greater extent using a tax credit that would be applied against employment insurance premiums.

We feel that this recommendation has considerable merit: the more training people receive, it follows that the less employment insurance they need.

I will conclude by saying that, as a general principle, to reduce social charges on the payroll is also to reduce a fixed and regressive tax on human capital. We are strongly committed to our third recommendation.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. Azoulay.

Now over to the representative from the Société de transport de Montréal.

[Marvin Rotrand, Vice-Chair of the Board, Société de transport de Montréal]

Good morning, Mr. Chair and members of the Standing Committee on Finance. Welcome to Montreal.

I do not feel that I have to convince you that investment in public transit is good for Canadian society. That goes without saying. Not only does it improve mobility and flow, it also reduces the need to invest in roads. It reduces traffic congestion. The Government of Quebec tells us that traffic congestion makes us lose an annual $1.5 billion in productivity in greater Montreal.

Investments in public transit provide structure. I have always said that the main argument in favour of public transit is an economic one. The environmental advantage is not to be ignored by any means, but the main argument is economic. Investments in all new public transit infrastructure projects must be increased. Greenhouse gas emissions are simultaneously reduced.

In our view, a lack of investment in public transit causes Canadian cities to lose productivity and, at the same time, adversely affects the residents' quality of life.

We are not here today to convince you that something must be done. Our role is rather to set off a debate about how things are going to be done, how much is going to be spent, when it is going to be spent and where the money will come from.

In December 2009, the City of Montreal, where I am a city councillor, adopted the Canadian Urban Transit Association's Vision 2040. We in fact demanded the same things as CUTA, such as that public transit become part of government policy, that investments be used not only to expand services, but also to encourage innovation so that the public transit system can become modern and efficient. That will help Canadian manufacturers to increase their markets overseas. We also subscribe to the view that public transit must become greener by increasing its energy efficiency so that greenhouse gas emissions are reduced.

The future of public transit is an electric one. Currently we are doing the switchover here in Montreal. We're beginning to plan for a point in 2025 that will have zero emissions, which, you can understand, in terms of infrastructure, means a major challenge.

I'd like to inform the members of the committee that the Société de transport de Montréal, in case you do not know, won the American Public Transportation Association prize as the best transit agency in North America for 2010-11. It's a huge distinction. We were the first among the over 1,500 transit agencies that are members of APTA. They gave us the prize because we were able to augment ridership and have better customer satisfaction, good customer retention, and better and more frequent services. That is largely because a consensus exists in Montreal for public transit. The city and agglomeration councils were able to increase funding to us for our operational budget from $241 million a year to $390 million. But we have now reached the limit of what municipalities can do.

Over the last five years, we've increased metro services by 27%. That includes, however, an extension of three new stations. In real terms, we have increased metro services by 17% and bus services by 16%, and we have gained and retained 8% more riders than we had before.

These are enormous figures, but we face the reality that we have current needs of $11 billion for new infrastructure. They're absolutely necessary projects; none of these are to go beyond what we currently can do. We have $4 billion for new metro cars coming up.

I'll finish rather quickly, Mr. Chair, and I'll add my other remarks in the free speech section.

We have three fundamental recommendations.

The first is the creation of a national public transit fund to provide stable, long-term capital funding.

Some people call that a national transit strategy. Others call it something else. Whatever it is,

we need it.

The Government of Canada has announced that it will make the gas tax fund permanent. We recommend that this be indexed.

Third, public transit must be made a part of the long-term public infrastructure program. That means replacing the Building Canada program with a new long-term infrastructure program.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much.

Now we move to the Fédération des travailleurs et travailleuses du Québec.

[Yvon Bolduc, Chief Executive Officer, Fonds de solidarité FTQ, Fédération des travailleurs et travailleuses du Québec]

Mr. Rajotte, members of the Standing Committee on Finance, good morning. I would like to thank you for having us here today.

My name is Yvon Bolduc, and I'm the chief executive officer of the Fonds de solidarité FTQ. With me is Mr. Mario Tremblay, the vice-president of public and corporate affairs at the Fonds de solidarité FTQ. This morning we are presenting the joint brief of the Fonds de solidarité FTQ and the FTQ, the Fédération des travailleurs et travailleuses du Québec.

Our brief will focus on a single topic: the importance of the venture and development capital industry in Quebec. Why is this important? It's important for the employment, innovation and productivity of companies. We will also speak about the importance of the existence of these workers' funds, which play so important and fundamental a role that the program is recognized in Quebec and across Canada.

The Fonds de solidarité FTQ was created in 1983 to address concerns about employment and economic development. I would like to thank the two levels of government for sustaining the Fonds de solidarité FTQ and other workers' funds for close to 30 years now. I want you to know that we are part of the solution. Actually, the fund has net assets of about $8 billion. We have a record high of more than 583,000 shareholders who represent 14% of the Quebec labour force. Fifty-eight per cent of the investors are unionized, while the remaining 42% are not.

The solidarity fund currently provides funding for 2,129 businesses, primarily SMEs in all regions of Quebec. The value added of those businesses amounts to almost 8% of Quebec's total GDP.

Over the past 10 years, the Fonds de solidarité FTQ has directly invested close to $6 billion in businesses and specialized private funds, including $1.5 billion in sectors such as the new economy and life sciences, making the fund a leader in venture capital in Quebec.

However, I think that the private investment industry has recently gone through several bad years, especially in fundraising, with 2010 and 2011 being particularly weak. Quebec was less affected by this decrease. Venture capital funds established in Quebec accounted for 42% of all commitments in Canada, far outstripping the ratio between the Quebec and Canadian economies.

Quebec's strong financial support for SMEs stems primarily from the ability of labour funds, especially the Fonds de solidarité FTQ, to attract Quebeckers' retirement savings and use those savings, which constitute a new source of funding, directly to provide equity funding for private companies or by contributing to independent private funds.

I'd like to quote Gregory Smith, president of the Canada Venture Capital Association, who said:

Quebec has been a leader. But no one province or one fund can prop up the entire industry. You need to work in collaboration. If all the provinces had a strategy as robust as Quebec, you'd see a market pickup.

I'd like to point out that, because the labour fund model, especially where it is well structured and complements other financial institutions, helps promote and develop saving habits and allows those savings to provide equity funding for private businesses, we endorse and approve of the recommendation made by the Standing Committee on Finance in its December 2009 report, which was to increase the labour-sponsored funds tax credit to 20% of eligible investments.

This proposal is especially responsible in difficult financial and economic times, because the tax credit not only supports a program that is vital to the future of Canadian businesses, but also enables both levels of government to recover their investments in an average of three years, according to studies carried out in 2010 by the Montreal firm SECOR and Regional Data Corp. in Ottawa. This would ensure strong support for the funding of businesses, venture capital and innovation, and would encourage saving for retirement, which has become a major issue for all Canadians and all governments in Canada.

[The Chair, Conservative, James Rajotte]

Thank you very much.

Lastly, I give the floor to the representative for the Confédération des syndicats nationaux.

Go ahead.

[Pierre Patry, Treasurer, Confédération des syndicats nationaux]

Mr. Chair, I would like to thank the Standing Committee on Finance for its invitation to the CSN. We are pleased to be here to share our point of view.

The Confédération des syndicats nationaux is a trade union organization composed of 2,100 unions representing over 300,000 members primarily residing in Quebec.

The economic crisis of 2008 and the great recession should have demonstrated the importance of government in a mixed economy in which all parties have a role to play in economic and social development. Governments and individuals throughout the world have paid very dearly for the years of financial sector deregulation, which led to the virtual bankruptcy of the sector.

Unfortunately, as we came out of the recession, most of them quickly reverted to their orthodox vision of the economy, a vision in which government intervention is often regarded as an obstacle to the private sector and the public sector is by definition less effective than the private sector.

While some countries are showing large budget deficits coming out of the financial crisis and recession, the Canadian government's budget deficits are modest. The difference in the case of public debt is even more in Canada's favour compared to other countries. Unfortunately, the Harper government decided to balance the budget by 2014-2015, which we feel is unnecessary.

To achieve that objective, the 2011 budget adds to the cuts already announced by calling for new recurring cuts of $4 billion starting in 2014-2015. In the fall of 2011, federal departments and agencies will have to propose ways to reduce their spending by 5 to 10% to Treasury Board. The CSN sees no need for this. Not only could the government live with a deficit for a few years longer, the time it will take for growth to start again on a firm foundation, but it could also have been much more prudent in its tax policy.

Since the Harper government came to power, cuts to income and other taxes have been made in budget after budget, both for corporations—mainly for them—and for individuals. Even when the recession had become a fact, the government chose to retain the corporate tax cuts handed out in earlier budgets. From that perspective, it is foreseeable that the tax cutting strategy adopted by the Harper government will ultimately undermine important government missions.

With respect to the employment insurance program, the CSN reiterates what it has called for, first for reasons of fairness, but also for economic reasons. We believe that it is urgent that changes be made to the employment insurance scheme to improve access, increase benefit rates and eliminate the waiting period.

Similarly, the CSN reiterates what it has said regarding federal transfers for social programs. In health care, even with average funding increases of 6% in recent years, the system is hard pressed to meet all of the public’s needs. Clearly, we must be sure that in 2014 those transfers are renewed in accordance with the present formula. In the area of postsecondary education, the Government of Quebec is still waiting for the additional $800 million that would bring it back up to the 1994-1995 level of federal funding.

A number of other social problems call for genuine involvement by the federal government. The situation of aboriginal people in Canada is a national scandal that just keeps going. Their unemployment rate is twice the rate for the general population. As well, while Canada ranks eighth in the human development index, First Nations communities rank 78^th.

Lastly, we think the Canadian pension system should be reviewed. It is necessary to reform the Canadian pension system by taking all of its components—public and private—into account. The public cannot simply count on the pooled registered pension plans recently announced by the federal government. Although employers will be responsible for enrolling their employees in those plans, this does not mean that employers will make any contributions.

Public consultations would make it possible to assess the options available for modifying the Canadian pension system to ensure that it in fact provides income security for retired workers. Options that must be seriously discussed and assessed include improving the public plan and creating mandatory supplementary plans that would cover all Canadians.

We also feel that an effort must most certainly be made in the area of sustainable development. Just this morning, we read in the papers that, even though the government committed itself to less ambitious objectives than those of the Kyoto Protocol, it will not even be able to achieve its objectives. In 2020, the greenhouse gas emissions will be much higher than they are now. Effort must be made in this area to reconcile economic development, the environment and social development in a perspective of sustainable development.

This completes my presentation, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We'll start with Mr. Mai.

You have five minutes.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you, Mr. Chair. First, I'd like to thank the witnesses for being here today. I would also like to welcome by colleagues to beautiful Montreal and the beautiful province of Quebec, which I call home.

We have asked the Standing Committee on Finance and the government for more investment in infrastructure. We insisted on the fact that it was important, especially now. I especially insisted on the case of the Champlain Bridge. But the government said that it's not necessarily the time to invest or that there are other priorities, like tax cuts.

My question is for the STM representatives. What is your vision? Should we invest, have a national infrastructure plan? Why is it important to have it now?

[Marvin Rotrand]

The Canadian Urban Transit Association clearly said that $40 billion needs to be invested between 2008 and 2012 in public transit infrastructures. But the current programs count only $20 billion. So there is a shortfall of $20 billion. We need to come up with a strategy to make up for this shortfall because the current challenge is not just to reduce congestion, to maintain—and perhaps increase—current service and have a very high ridership; we also need a longer term vision.

According to the OECD, Canada is the only industrialized country that does not have a national public transit strategy, which is why the Montreal city council, with members from three different parties, unanimously adopted Vision 2040. We aren't telling the government what to do and we aren't promoting the private bill that Ms. Chow just introduced in the House of Commons. We are simply inviting the government to focus on the need for a national fund, for long-term, foreseeable, indexed funding, that will support fixed assets.

I spoke earlier about the $11 billion we need at the STM. Our strategic plan is ambitious.

I don't know if you speak English, Mr. Mai, but I'll say this in English for everybody's benefit.

We are rivaling the 1940s in terms of our ridership. We're almost breaking the level in 1949, which I think was our best year. We're at 390 million riders a year, but our strategic plan calls for 540 million in 2020. We can do it if we have predictable sources of funding for the long term. That's why we're making these three recommendations today.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you.

I will now address Mr. Patry of the CSN. You said that, in times of economic downturn, government policy is to continue cutting corporate taxes.

Could you tell us how investing in sustainable development can also be good for the economy?

[Pierre Patry]

I would like to go back to what the STM representative said. In Montreal and across Quebec, there are significant shortcomings in this regard. When investments are made in public transit, jobs are created at the same time. For instance, in La Pocatière, Bombardier created jobs that helped the region survive. The fact of the matter is that a significant drop in employment at Bombardier would create problems in that region of Quebec.

However, we can encourage sustainable development by expanding our public transit network in Quebec, while reducing greenhouse gas emissions. I think that we can make those kinds of investments. That's why a group in Quebec was created. The group is called Écotech Québec, and it studies all matters related to clean technology that tie job creation to the development of new industries. For instance, an attempt is being made to develop more energy-efficient cars and even electric cars. That way, we would reduce greenhouse gases while promoting economic development and encouraging the creation of quality jobs. It's possible to do all that at the same time.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

We urged the government to invest and act now. However, the government has decided to keep the tax cuts in the budget. Do you think that's the right way to go forward?

[Pierre Patry]

We don't think that's the right way to do things. We actually criticized the cutting of corporate taxes from 16.5% to 15% as of 2012, while the country is in a budget deficit.

In addition, as we mentioned in our brief, tax cuts are being made while federal public service jobs are being eliminated. This summer, jobs at Environment Canada were cut. We also need to tie in the need for a sustainable development policy. That has an impact on all communities.

We think that investments need to be made now. The Canadian deficit is actually not very high. In terms of the gross domestic product percentage, it is among the lowest in the world. Canada's debt-to-GDP ratio has decreased by half over the last 15 years. Therefore, Canada has some flexibility that many other countries don't, but, unfortunately, it's not taking advantage of it. We think that investments need to be made now to encourage economic development.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Mai.

We'll go to Ms. McLeod, please.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thank you, Mr. Chair.

Certainly, it's our pleasure to be here on a sunny day and looking at the beautiful fall colours. It's always a treat to be in eastern Canada. We don't get the colours out west that you do here.

I'd like to start with a question for le Conseil du patronat du Québec. We're talking about Canada absolutely being in a better position in terms of our deficit. But in terms of increasing spending, we see what's happening in Greece where people there have not got that country's deficit under control.

Could you talk about the real-life implications for you and your members if the government continues to add to the deficit.

[Norma Kozhaya]

Of course. Thank you for the question. We used Greece as a good example. Unfortunately, other European countries are on the same track. We are seeing the consequences of unchecked deficits and public spending increases, and the devastating effects that can have on the countries in question.

In Canada, we were lucky enough to be in a good financial position when the recession began. That enabled the government to implement an economic action plan that was helpful, through enhanced employment insurance benefits and infrastructure projects, among other things. So there was some room to get involved, and the government took advantage of it.

However, we still need to be prudent and vigilant, and keep spending under control, since we must have a long-term vision in addition to a short-term one. You could say that, in the short-term, the deficits are not very significant, but they can increase quickly if we are not careful. So we must always think about long-term sustained growth and about the long-term effects of a serious deficit and debt problem.

You'll no doubt recall that, in the mid-1990s, Canada had a substantial deficit of 6%. That led to some difficult decisions. Therefore, we have to be careful not to fall into the same trap once again.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thank you.

Perhaps to the same group again, you certainly will have heard some of the other witnesses and also the great debate on raising corporate tax rates.

Could you talk about the real life implications? Obviously, our government has felt it's very important to have the tax structure that we do. Could you talk about that in terms of you and your members.

[Norma Kozhaya]

Clearly, for our members, for Quebec employees and companies, tax cuts were more than necessary. We operate in a context of global competition—which is increasingly competitive—where other emerging countries may operate in different environments. In order to set ourselves apart, we have to be competitive through competitive tax rates, among other things, as there are many factors we have no control over. We cannot control what's happening in the United States and Europe, but we can control Canada's fiscal environment.

The best way to boost private investments is to ensure profitability, ensure that taxation allows investors to generate solid profits. Speaking of taxation, I want to point out that, until very recently, Canada's tax rates were among the highest of all OECD member countries. We were third on the list, with very high rates. We were lucky to have a healthy American neighbour and a weak dollar. However, the situation is now completely different, as we have a weak American neighbour and a dollar at par. So we need to find another way to help and have competitive tax rates. That's the best way to boost private investments and create jobs.

A number of studies show that cutting corporate tax rates is beneficial for employment, for private investments, for productivity and, thus, for salaries. Our population is aging, and labour shortages are expected. We have to offset those disadvantages through higher productivity, quality jobs and higher private investments.