Finance Committee on Oct. 18th, 2011

[The Chair, Conservative, James Rajotte]

Thank you.

I wanted to thank all of the presenters here this morning. Your presentations and responses to our questions were all within the time limits, which makes my job much easier as the chair. If you have anything further to share, please do so with me and we will ensure that all members get it.

Colleagues, we will suspend for one minute--keep the visiting to a minimum--and bring the second panel forward.

Thank you.

[The Chair, Conservative, James Rajotte]

I'll ask colleagues and our guests to take their seats. If there are any conversations, please take them outside. Perhaps someone could answer that wake-up call. I will also ask our media guests to please cease from recording. Thank you.

We are going to start our second panel. We are on a very tight timeline. We have another seven organizations during this panel. We have the Canadian Bankers Association, the Canadian Federation of Independent Business, the Canadian Home Builders' Association, the Canadian Labour Congress, the Canadian Medical Association, the Federation of Canadian Municipalities, and the Public Service Alliance of Canada. Thank you all for being with us today.

You will each have a maximum of five minutes for an opening statement, and then we'll have questions from members.

We'll begin with the Canadian Bankers Association.

[Terry Campbell, President and Chief Executive Officer, Canadian Bankers Association]

Thank you.

Good morning, everyone.

Just when the CBA had submitted its pre-budget consultation brief to the committee, the global economy entered a troubled phase. There is no longer any doubt about the increase of economic uncertainty around the world.

As we all recently learned during the global financial crisis, Canada is not immune to the fallout from the problems that originate elsewhere. That's why banks are closely monitoring economic conditions at home and abroad and are taking steps to ensure that they can absorb any challenges that may come their way.

I think we're fortunate in Canada that we do have strong banks, and it's important that our banks remain strong so they can continue to contribute to Canada's economic recovery, job growth, and job creation.

I want to touch on three things in our submission that, in our view, the government can do to help shield Canadians from the impact of difficulties abroad, and also to encourage economic growth here at home.

Let me first talk about tax competitiveness. In our view, tax competitiveness, stated very simply, helps companies to withstand challenging economic conditions. It helps them to maintain employment and to create new jobs. This is why the CBA continues to support the government's efforts to enhance the competitiveness of Canada's tax system and to give Canadian businesses of all sizes—and therefore to give their employees as well—a competitive advantage. We encourage the government to stay the course, as they have been doing.

We also believe there are additional measures the government could take that would have only a minimal impact on government revenue but would significantly enhance the competitiveness of the Canadian tax system. In the past, this committee has recommended—quite wisely, in our view—that the government consider adopting a consolidated tax system. We know that consultations by the federal government are under way, and we do hope that decisions will be made so that the government can implement such a framework.

Second, I'd like to talk very briefly about Canada's pension system. We fully support the government's proposal for pooled registered pension plans. It's an unfortunate acronym—PRPPs—but there it is. We believe these plans will provide Canadians with a simple, efficient, and cost-effective opportunity to save for retirement. As we understand it, the public policy objective of PRPPs is to expand the retirement coverage of individuals who currently do not participate in a pension plan, particularly the self-employed and employees of small businesses.

A key benefit of this approach is that it builds on the existing expertise and the existing infrastructure in the private sector. We believe that banks have the necessary expertise and infrastructure to offer PRPPs. We very much look forward to working with the government to develop a framework that meets the government's objectives and meets the objectives of the Canadian public.

Finally, in terms of just touching on the points in our submission, the CBA very much believes in the importance of a strong, national regulatory framework for the financial system in Canada. That's one of the many reasons why we are on record as supporting the government's leadership in moving towards a national securities regulator, and we're very much looking forward to the Supreme Court's decision on this matter. That's the security side.

When it comes to banking, however, over the last few years we have observed a number of attempts by provincial governments to regulate the activities of Canadian banks in areas that fall within the exclusive jurisdiction of the federal government. Why is that a concern? Well, in our view, there are a number of benefits to having a single national policy and regulatory system for the banking industry. Such a system allows you to have a national banking system across the country, which allows you to mitigate risk through regional diversification, and it also provides benefits to consumers across this country in small towns and large.

All Canadian have access to the full array of financial products offered by their bank at the same competitive prices across Canada. To be able to achieve those benefits, however, we need a national banking system that is underpinned by federal policies and supervised by a strong federal regulator. Duplication and fragmentation in regulatory requirements is costly. It's confusing to consumers, and it undermines the national nature of our banking system.

So we encourage this committee, and we certainly encourage the federal government, to continue its efforts to protect and enhance federal jurisdiction over banking in Canada.

Mr. Chairman, I'll stop my remarks there, but I look forward to engaging the committee in discussion subsequently.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll now hear from the Canadian Federation of Independent Business.

[Corinne Pohlmann, Vice-President, National Affairs, Canadian Federation of Independent Business]

Thank you for the opportunity to be here today.

CFIB is a not-for-profit, non-partisan organization representing more than 108,000 small and medium-sized businesses across Canada who collectively employ more than one and a quarter million Canadians and account for $75 billion in GDP. Our members represent all sectors of the economy and are found in every region of the country.

Almost all businesses in Canada are small or medium-sized, and they employ 64% of Canadians and produce half of Canada's GDP. As a result, in this year, the entrepreneurs addressing issues of importance to them can have a widespread impact on our job creation and the economy.

I'm hoping we have a slide deck that I asked to be passed around that I would like to walk you through as we go through this presentation. No? Okay. I'll try to speak to the issues as they come up.

Our most recent business barometer showed that small business confidence took a bit of a tumble in August as the global economic outlook started to weaken, but it's still nowhere near where it was in 2008 and 2009. September saw a slight upward trend, indicating that small business owners are getting by but are remaining cautious about their future.

Recently, CFIB released a report. It was entitled “Survival of the Smallest”, and I'm hoping you'll be able to get a copy. We found that small businesses manage recession in a variety of ways. You'll see that on slide 3, once you do have a copy of the presentation, that laying people off was certainly an issue in many small businesses. However, small business owners were much more likely to work longer hours, sell to new customers in the local market, introduce new products and services, and even cut their own salary before resorting to layoffs. Interestingly, this report also identified a group of small business owners, about 20%, who grew their businesses during the recession. We called them growth-oriented enterprises, or GOEs. About one-third of this group increased the number of employees during the recession. In addition, more than one-third sold to new customers in other countries, and almost two-thirds sold to new customers in other provinces or in their local markets. They also introduced new products and services, expanded their online presence, and increased their advertising and promotional efforts.

A key finding from this report was learning about those measures that can help small business owners maintain or strengthen their business during more difficult economic times. As you can see--it would be on slide 5--freezing EI premiums was the most important, for both--

[The Chair, Conservative, James Rajotte]

Sorry, Ms. Pohlmann.

I understand from the clerk that we don't have enough.... Does your organization have more copies for the committee?

[Corinne Pohlmann]

We were told to bring 12 English and 6 French. We called and asked. I do apologize.

[The Chair, Conservative, James Rajotte]

Okay. If we could ask members to share....

Sorry for interrupting. I just want to make sure they have that. Thank you.

Please continue. You have three minutes left.

[Corinne Pohlmann]

We did specifically call and ask. Sorry about that.

As we found from this report, freezing EI premiums was most important for both the general SME population as well as for these growth-oriented entrepreneurs. Also important, especially to the growth-oriented entrepreneurs, was the payroll tax credit for hiring new employees. It's not surprising these are the measures of greatest importance to SMEs as payroll taxes are regarded as having the biggest impact on the growth of a business. This is primarily because they are profit-insensitive and only add cost to hiring, making them particularly difficult to absorb in less stable economic periods.

So our key recommendation for 2012 was to freeze EI premiums, which are scheduled to increase by 10¢ for employees and 14¢ for employers in 2012. Given the growing economic uncertainty currently gripping the global economy, now is not the time to be increasing payroll taxes. At the very least, the government should be extending and even expanding the EI hiring credit introduced for 2011 into 2012 and beyond so that it offsets at least some of the costs of hiring among small firms.

Next, small business owners are very worried about the growing government deficit and debt because they know that if this is not brought under control, it will result in higher taxes or drastic spending cuts down the road. Our members would like to see the government eliminate the deficit in the medium term, which means 2014-15. To do that, SMEs would like the government to cut back spending, just as many of them have had to do over the last few years.

As you can see, and it would be on slide 9, 82% believe there should be spending cuts in government administration, including employee wages and benefits. Furthermore, we're becoming more and more concerned with the growing unfunded liability in the federal public sector pension plan, which we understand to be more than $200 billion now. Currently it is unclear how this unfunded liability will be addressed, so our members fear it will eventually result in higher costs on those like our members and their employees who do not have access to such generous pension plans down the road.

We recommend that governments stay focused on eliminating the deficit in the medium term, and one important way of doing that is to start bringing federal public sector wages and benefits more in line with the private sector. There's also a need to review public sector pensions, and we suggest that governments start by implementing a common methodology for all public sector pension liability so that we can better understand what we're dealing with. In addition, we believe that federal public sector employees should increase their pension contributions from the current approximate 36% of their pension to 50% over time, which is the norm for most provincial public sector employees. Finally, we believe it is time to end early retirement provisions for new employees. We are pleased to hear that some federal government bodies are already moving in this direction, like the Bank of Canada, which we understand has plans to eliminate early retirement for new employees starting in 2012.

Finally, we want to touch on government regulations of paper burden, which costs Canadian businesses more than $30 billion a year to comply. The cost of employing is more than five times higher for firms with fewer than five employees than it is for those with more than 100 employees. We understand that the red tape reduction commission has been working toward addressing this issue, and we believe it can be done by making regulatory reform permanent through binding legislation that would require ongoing measurement and public reporting of regulatory activity in quality of government customer service, committing to paper burden reduction targets by placing constraints on regulators so that for every new requirement one or two will be eliminated, and having political oversight to ensure that these activities are being properly implemented. During this small business week, in this year of the entrepreneur, more and more people know that small businesses truly are the backbone of Canada's economy and the heartbeat of our communities. They employ millions of Canadians to take risks every day. Government's role is to foster that spirit and create conditions to help them grow into larger businesses.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now hear from the Canadian Home Builders' Association.

[Ron Olson, Acting President, Canadian Home Builders' Association]

Thank you, Mr. Chairman, for inviting us here today.

I am Ron Olson, acting CHBA president. I'm a new home builder and developer in Saskatoon, Saskatchewan.

With me today is Victor Fiume, CHBA's past president. Victor is a new home builder and renovator from Oshawa, Ontario. Also accompanying me is Dr. John Kenward, the chief operating officer of the Canadian Home Builders' Association.

Let me just note at the outset that we have tabled two documents with you this morning.

I will begin my remarks with a brief summary of current housing conditions and housing activity.

At the national level, new housing starts remain robust at over 200,000 starts, seasonally adjusted. Demand for home renovation services is also strong.

I would note that the current level of new home starts is influenced by high levels of condominium construction in Toronto and Vancouver. In other markets, activity is softer, and in some cases it is below normal levels. Current levels of new housing activity are not uniform across Canada.

On balance, the CHBA is pleased with our industry's performance. It means that our members continue to contribute significantly to Canada's economy, to create jobs, and to drive consumer demand for a wide range of consumer goods and services.

Assuming generally positive economic conditions in Canada in the near term, and a continuation of current interest rates, the CHBA expects housing demand to be in line with projected housing requirements, which is in the 188,000 range. However, this positive picture belies some significant issues.

In relation to both new home and renovation activity, the current abnormally low interest rate environment is a major factor. The outlook carries a strong note of uncertainty and caution, given significant uncertainties in the world economy. The weak U.S. economy and the European debt crisis threaten continued economic growth in this country.

The central message of our presentation today is that home ownership affordability has deteriorated significantly. By home ownership affordability, we mean the relationship between housing prices and income levels. Given the current record low interest rates, access to home ownership is extremely positive. However, overall affordability levels, as measured by the share of income required to purchase an average home, are markedly worse than they were in the decade prior to 2005. To the point, today's artificially low rates are masking the ongoing deterioration of housing affordability. As interest rates inevitably rise to more normal levels, the deterioration in affordability will become more evident and will be reflected in a market reduction in housing activity levels as would-be purchasers are priced out of the market. It is imperative to take action now to improve housing affordability so that this does not happen.

The major factors in the erosion of housing affordability are government-mandated costs, which have escalated rapidly, and regulation. Direct government-imposed costs come through the ever growing array of taxes, fees, levies, and other development-related charges on every new home. At the upper end, such costs now total well over $100,000 per new home. In many communities, the total exceeds $50,000 per home. These costs are financed through the mortgages held by new home buyers. In short, government-imposed costs effectively transfer public sector debt to household mortgages. This is the most significant factor behind the serious decline in housing affordability. It will lead inevitably to lower housing activity and reduced employment in our industry overall.

As well, this decline will exacerbate intergenerational inequity. First-time home buyers, in particular, will be faced with increased house prices due, in part, to government-imposed costs.

In this context, it is important to note that while overall employment has recovered to above pre-recession levels, the recovery has been uneven. The job losses during the recession were much more pronounced among young people aged 15 to 24 than among workers over the age of 25. And the jobs recovered since the end of the recession have been predominantly among older workers.

All three levels of government drive up the cost of housing.

In closing, I will very briefly address the federal responsibility in this area. The CHBA has called upon the federal government to introduce a single threshold, full rebate treatment of GST on new home purchases. In 1991, the full rebate threshold was set at $350,000, with an upward cutoff point of $450,000. The government made a commitment to review these limits and adjust them over time, and 20 years later this has not happened.

Today, in most urban markets, few new home buyers are eligible for a full or even partial GST rebate on a new home purchase. This undermines directly housing affordability.

Similarly, the federal government has not addressed the inequitable impact of GST on home renovation costs. The CHBA has called for the introduction of a permanent renovation tax rebate to restore fair treatment of home owners who carry out renovation projects. This would have the added benefit of addressing directly the problem of the underground cash economy in home renovations, a problem driven in large part by high taxation.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now hear from the Canadian Labour Congress, please.

[Andrew Jackson, Chief Economist, Canadian Labour Congress]

Thank you, Chair. I'll attempt to be brief.

The 2012 budget is being developed against the backdrop of a very tentative and uncertain recovery globally and here in Canada. In our view, there's a real danger of rising unemployment. The International Monetary Fund has just forecast an increase in the Canadian unemployment rate from 7.1% last month to an average of 7.7% in 2012.

One neglected sign of the softening of the job market in Canada is the disturbing and rather under-noticed fact that real hourly wages are now falling. For the last three months, average hourly wages have been increasing by only 1.4% over the previous year. That's well below an inflation rate of 3%.

The high dollar and the slowing Canadian economy have now given us the highest current account deficit of any of the advanced economies. That current account deficit as a country is now significantly greater than that of the U.S., because of the slow growth of exports caused by the high Canadian dollar. We also see weak rates of business investment outside the mining and oil and gas sectors.

Low interest rates have certainly given a boost to the Canadian economy over the last little while—supporting the housing sector and consumer spending. The household debt is now a record 150% of disposable income. House prices in relation to incomes are as high in Canada as they were before the collapse of the housing bubble in the United States. In our view, it's totally unsustainable for our economy to continue to grow by means of households going deeper and deeper into debt.

So what is going to sustain growth and investment in our economy? Public investment funded by the stimulus program, which, it should be acknowledged, gave a great boost to recovery in Canada, has now virtually come to an end. We're now seeing a turn to spending cuts by both federal and provincial governments. Based on IMF numbers, cuts to spending by federal and provincial governments in Canada will cut our growth rate by about 1% in the year ahead. So public investment has gone from being a source of growth to a drag on growth.

Against that backdrop, the priority of the 2012 budget must be to create jobs and to maintain the recovery, not to engage in counterproductive spending cuts. We call for the federal government to launch a partnership with the provinces and cities in a major multi-year public investment program that would create jobs now and promote our environmental goals. We believe this would also stimulate private sector investment and private sector productivity if we choose the right kinds of public investment projects. Such a program would include increased support for basic municipal infrastructure, mass transit and passenger rail, affordable housing, and energy conservation and renewable energy projects.

One opportunity we have now results from the fact that Government of Canada borrowing costs are incredibly low, 2.4% for 10-year bonds. That's a really historic opportunity to finance major public investment projects that make a lot of sense, owing to their decent rates of return. Many major public investment projects more than pay for themselves over time. Economic growth fueled by increased productivity in the private sector boosts future government revenues. In our view, investment in public transit is a key example. The Toronto Board of Trade argues, correctly, that major investments in mass transit will substantially reduce business costs.

In our view, some of the initial costs of such a program could be raised by raising the federal corporate tax rate from the planned 15% in 2012, which is well below the tax rate in the U.S. It would be our assertion that the cuts in corporate tax rates to date have not generated the expected increase in business investment. To the contrary, over the past decade the growth in after-tax corporate cashflow has far exceeded the growth in private investment—to the point that corporations in Canada are now sitting on $475 billion of uninvested cash reserves. We think the recent example of the discussion on the scientific research and development tax credit suggests that targeted tax measures would be much more effective in boosting private investment. Our point would be to raise corporate tax rates and to direct those proceeds into more effective ways of supporting private and public investment.

To conclude, Canada has a very low rate of public debt. Our interest rates are low, and there are major public investment opportunities ahead of us.

I'll shut up now.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We'll now hear from the Canadian Medical Association, please.

[Dr. John Haggie, President, Canadian Medical Association]

Thank you.

Over the past year, the Canadian Medical Association has engaged in a wide-ranging public consultation on health care, and we have heard from thousands of Canadians about their concerns. This exercise provided a road map for modernizing our country's health care system so that it puts patients first and provides Canadians with better value for money.

We found there was a groundswell of support for change amongst other health care providers, stakeholders, and countless Canadians who share our view that the best catalyst for transformation is the next accord on federal transfers to the provinces for health care.

That said, we have identified immediate opportunities for federal leadership in making achievable, positive changes to our health care system, which would help Canadians be healthier and more secure and would help ensure the prudent use of their health care dollars.

During our consultation, we repeatedly heard concerns that Canada's medicare system is a shadow of its former self. Once a world leader, it now lags behind systems in comparable nations in providing high-quality health care. Improving the quality of health care services is key if Canada is ever going to have a high-performing health system.

Excellence in quality improvement will be a crucial step towards sustainability. To date, six provinces have instituted health quality councils. Their mandates and their effectiveness in actually achieving lasting system-wide improvements vary by province. What is missing and urgently needed is an integrated pan-Canadian approach to quality improvements in health care in Canada that can begin to chart a course to ensure that Canadians ultimately have the best health and health care in the world. Canadians deserve no less, and there's no reason why these should not be achievable.

The CMA recommends that the federal government fund the establishment and adequately resource the operations of an arm's-length Canadian health quality council, with a mandate to be a catalyst for change, a spark for innovation, and a facilitator to disseminate evidence-based quality improvement initiatives so they become embedded in the fabric of our health system.

Canadians are increasingly questioning whether they are getting value for the $190 billion a year that goes into our country's health care system, and with good reason, as international studies indicate they're not getting good value for the money. Defining, promoting, and measuring quality care are not only essential to obtaining better health outcomes, they are crucial to building the accountability that Canadians deserve as consumers and funders of the system.

We also heard during our consultation that Canadians worry about inequities in access to care beyond the hospital and doctor services covered within medicare, particularly when it comes to the high cost of prescription drugs. Last year, one in 10 Canadians either failed to fill a prescription or skipped a dose because they couldn't afford it. I have an 82-year-old lady in my practice who takes her diabetic medications every second or third day because she can't afford to take them every day.

Our second recommendation, therefore, is that governments establish a program of comprehensive prescription drug coverage to be administered through reimbursement of provincial, territorial, and private drug plans to ensure that all Canadians have access to medically necessary drug therapies. This should be done in consultation with the appropriate insurance industries and the public. In the 21st century, no Canadian should be denied access to medically necessary prescription drugs because they are unable to pay for them.

Our third and final recommendation relates to our aging population and the concerns Canadians share about their ability to save for their future needs. We recommend that the federal government study options that would not limit PRPPs to defined contribution pension plans. Target benefit plans should be permitted and encouraged as they allow risk to be pooled amongst plan members, providing a vehicle that is more secure than are defined contribution plans. As well, the administrators of PRPPs should not be limited to financial institutions. Well-governed organizations that represent a particular membership should be able to sponsor and administer PRPPs for their own members.

The CMA appreciates that governments are moving ahead with the introduction of PRPPs; however, we note that they represent only one piece of a more comprehensive savings structure. We also continue to be concerned about the ability of Canadians to save for their long-term care needs. Whilst we have not included them in this pre-budget brief, the CMA holds to recommendations we have made in previous years that the federal government study options to help Canadians pre-fund long-term care.

In closing, let me simply say that carrying out these recommendations would make a huge positive impact soon and over the long term in the lives of literally millions of Canadians from every walk of life.

Thank you for your time.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now hear from the Federation of Canadian Municipalities.

[Berry Vrbanovic, President, Federation of Canadian Municipalities]

Thank you, Mr. Chair and members of the committee, for inviting us to speak today.

FCM has been the voice of municipal governments since 1901. Our members represent 90% of the Canadian population, or almost 2,000 municipal governments across this country.

When the global economic crisis hit, the federal government teamed up with municipalities to take coordinated action to create jobs and protect Canadian families and businesses.

Now, as growing uncertainty again threatens world markets, the Government of Canada must continue working with cities and communities to strengthen our economic foundations and to protect our quality of life.

Although stimulus spending is over, Canada must build on the economic action plan's successes, overcoming barriers to common-sense cooperation that too often keep governments from working together.

By the end of this year, municipalities will have built and helped pay for $10 billion in EAP projects. In doing so, our communities are creating 100,000 jobs and meeting 50% of the plan's total jobs target. Ottawa's growing collaboration with municipalities has produced policies and programs that deliver better value for Canadians, cutting red tape and streamlining funding approvals. Together we have started to repair some of the damage done to our communities by many years of under-investment and downloading. We cannot afford to lose that ground. Better planning, partnerships, and programs--these are trademarks of smart government.

But despite recent investments, we can still see the danger signs all around us: traffic gridlock, crumbling roads and bridges, rising police costs, and a housing shortage that puts new jobs out of workers' reach.

From St. John's to Montreal, from Inuvik to Victoria, the symptoms vary but the cause is the same: a tax system that has taken too much out of our communities and put too little back in.

Without a share of the income and sales taxes generated by new growth, communities have been forced to raise property taxes, cut core services, and, more often, put infrastructure repairs off. The resulting infrastructure deficit is bad for families, businesses, and our economy.

Of current federal investments in municipalities, 40% are scheduled to expire by 2014. These are not one-time stimulus dollars. They are core investments to repair roads, house low-income seniors, and keep police on our streets. These investments must be protected and put on a long-term track.

In Budget 2011 the government committed to work with municipalities, provinces, territories, and the private sector to develop a new long-term federal infrastructure plan. The new plan will give Canada the opportunity to end a long decline in its municipal infrastructure, improve transit and transportation networks, and fight traffic gridlock. In Budget 2012 the federal government must build on the intergovernmental partnership that pulled us through these darkest days of the global recession to achieve other important national objectives as well, including supporting front-line policing, protecting public safety, and fixing holes in Canada's housing system.

I'd now like to take a quick moment to expand on each of these three priorities: infrastructure, policing, and housing. Municipal infrastructure is the foundation of our economy. Our small businesses need quality roads and bridges to deliver their goods and services. Workers need fast, efficient public transit to connect them to jobs. And growing companies count on high-quality community services, from libraries to hockey rinks, to attract skilled workers. The federal government's recent commitment to develop a new long-term federal infrastructure plan is an opportunity to stop the decline in our infrastructure and secure our future economic foundations. All governments, federal, provincial, territorial, and municipal, must work together and with the private sector to take stock of Canada's infrastructure and establish a fully funded long-term infrastructure plan.

Second, there is nothing more important to Canadians than the safety of their families and communities. Canada's policing system, however, is badly in need of repair. During the past 30 years an unsustainable share of Canada's policing duties have been shifted onto municipalities, either through direct downloading or the inability of an overburdened RCMP to fulfill its full responsibilities. Today, municipalities pay more than 60% of the total policing costs, including $600 million worth of downloaded federal policing duties in areas such as border security, international drug trafficking, and cyber crime. All orders of government must work together to address the issues of policing roles and responsibilities and the allocation of resources.

Growing holes in Canada's housing market are harming communities, taxpayers and the national economy.

Rising house prices and rental shortages are making it difficult for communities to attract the workers they need to support the national economy.

Tens of thousands of families, senior citizens, and new immigrants are struggling to find adequate, affordable shelter, yet $380 million per year in affordable housing and homelessness programs is currently set to expire in 2014. I'd be pleased to share more with you on the housing aspect of our presentation later on.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now hear from the Public Service Alliance of Canada, please.

[John Gordon, National President, Executive Office, Public Service Alliance of Canada]

Thank you very much, Mr. Chair.

This committee has been travelling across the country asking four questions: how to achieve sustained economic recovery in Canada, create sustainable jobs, ensure relatively low rates of taxation, and achieve a balanced budget. Well, I've been travelling across Canada, too, and Canadians are telling me different things. They're concerned that their government is offering only one choice: eliminate the deficit by cutting billions of dollars of public services and the jobs of the people who provide them. The Canadians I talked to want another choice: they want a way forward that grows our economy and protects our long-term social safety net.

Take Meghan Thomson, who was a chemist at Environment Canada working to reduce fuel emissions. Her work is critical to our future and our children's futures. This was her dream job and she felt lucky to be doing work that was about making a difference. At just 30 years old, her dreams were dashed. In July, one month before earning a permanent position after three years of term work in government, her job was cut. What message is government sending to young Canadians like Meghan, who should be the future of the public service? Eliminating good-quality sustainable jobs for Canada's next generation is not a sound economic plan for growth and prosperity.

I imagine John Kelly would agree. Until this fall, he was an integrity account specialist at the federal government's pension centre in Shediac, New Brunswick. He had one of those good-quality jobs you're looking to create, but his dream was destroyed very suddenly. After a meeting with his director, his job and the jobs of 150 others were gone. What does the loss of 150 jobs mean in a small community like Shediac? It's a loss of $4 million or $5 million in salaries that helped keep the community's economy alive, according to the Shediac mayor, and it will be the small businesses, the local restaurants, and the corner stores that will be hit hardest.

The government says it's just cutting services that aren't relevant or useful to Canadians. The Canadians I've spoken to would disagree.

Bill Dicks, from St. John's, Newfoundland, has worked for the coast guard for 30 years. For the last six and a half years, he has dedicated his expertise to the St. John's search and rescue substation, helping rescue people in trouble at sea. But the government is shutting down the station, along with another one just like it in Quebec City.

The St. John's subcentre watches over 900,000 square kilometres of ocean and almost 30,000 kilometres of shoreline, some 90% of the fishing vessel activity, and the highest level of transatlantic shipping in Canada. The government says that all this work can be coordinated out of Halifax instead.

The real search and rescue experts like Bill Dicks disagree. He doesn't want to downplay the expertise of the workers in Halifax, but there's just no way they would know the Newfoundland and Labrador coast as well as the locals do. Canadians along the coast are asking, “Is saving money more important than saving lives?”

There is no way around it: cuts to services undermine our safety, our health, and our environment. Canadians are smart. They know that gutting public services just doesn't make sense. They know there must be another way forward and that we can improve our public services and grow our economy. We think we can do this, but it means choosing another path and asking the right questions. There are alternatives.

If this is really about cutting costs and waste, then we suggest that the government start by reining in outsourcing costs, which, under this government, have risen by 79%. Also, if departmental budgets have been capped, why are we still spending $1 billion a year on outside consultants? As well, if this is really about quality sustainable jobs, why don't we keep people like Meghan Thomson and John Kelly in their jobs? Finally, if this is really about sustainable economic recovery, then why are we cutting jobs in communities--your constituencies--jobs that keep small and medium-sized businesses open?

Ordinary people should not be asked to bear heavier burdens and lose vital public services in order to satisfy a misguided quest to balance the books at all costs. There are alternatives.

The government says it is consulting experts from outside government and plans to make public service cuts. Well, we represent experts on the public service--the people who provide them--and we won't charge anyone $90,000 a day to share this expertise, because we know that it's possible to offer Canadians another choice and a better way forward.

Thank you very much for allowing me to appear before you today.

I'm sure the questions will be interesting.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll begin members' questions with Ms. Nash for five minutes.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you, Mr. Chair.

Again, it's very frustrating that we have five minutes each to ask you all questions, so apologies to those who don't get asked questions.

I do need to begin with the Federation of Canadian Municipalities. Coming from the city of Toronto, I know how strongly the board of trade in our city has been advocating for infrastructure investments, especially in transit.

I'd like your opinion about whether spending on transit, for example, is just an expenditure or whether it is an investment, whether this is something that pays for itself over time. I think there's a very important distinction between spending for something on which we won't get any return and an investment. Can you comment on that?

[Berry Vrbanovic]

Absolutely, and thank you for the question.

I think it's fair to say that transit, along with all infrastructure, is something that we feel very strongly is an investment in the future of our cities and communities across this country and in the economy of this country in this new global reality we're all facing. Some of the challenges we're facing—from gridlock in cities like Toronto, Montreal, and Vancouver, to the crumbling roads and bridges we're seeing across the country—are impacting on our ability to do business and on the quality of life for our citizens. And all of those areas are important investments, we believe, in the long-term sustainable future of Canada.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Okay, thank you. I'd like to ask you about housing, but I'll maybe try to come back to that.

Both Mr. Gordon and Mr. Jackson talked about the difference between austerity measures and job creation right now. I know that Mr. Campbell referred to further corporate tax cuts as creating jobs. I don't have time to ask him a question. If he has any empirical evidence on that, I'd like to see it because I've not seen any.

I would like to ask Mr. Gordon and Mr. Jackson whether this is the time to be cutting services and increasing unemployment when the IMF, as Mr. Jackson said, is predicting even higher unemployment in 2012. What could that mean for Canadians, and what would it mean for economic growth if the government continues cutting $4 billion a year from services?

Whichever one of you wants to can go first.

[John Gordon]

Thank you.

Maybe I can give you one example from right here.

Right here in Ottawa, Melissa Ferland is a young theatrical worker who works at the Museum of Civilization. Here's what she said to me when her job was cut and lost: “You need to understand that for every job you cut in the public service, other people's livelihoods are lost. My childcare provider lost income from two spots, and my after-school care provider lost the income she had earned caring for my daughter. A woman who was on contract for 22 years making costumes for the Dramamuse program lost her entire livelihood. Another woman who did make-up, props and hair for the company lost her livelihood.”

So each cut hurts a number of different people, and that's a real live story from right here in Ottawa.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you.