Finance Committee on Oct. 29th, 2012

[The Vice-Chair, Liberal, Scott Brison]

Good afternoon. Welcome to the 84th meeting of the Standing Committee on Finance. Pursuant to Standing Order 83(1), we are continuing our pre-budget consultations for 2012.

I want to thank all the witnesses for joining us here today.

We have two panels of witnesses. In the first panel, we have five organizations that are presenting: Karen Leibovici, from the Federation of Canadian Municipalities; Andrew Van Iterson, manager of the Green Budget Coalition; Terrance Oakey, president of Merit Canada; Serge Buy, the CEO of the National Association of Career Colleges; and Nobina Robinson, the CEO of Polytechnics Canada.

We welcome all of you here today and look forward to hearing from you. You each have five minutes for your opening statements, and then we will have questions from the members.

We begin with Ms. Leibovici.

[Karen Leibovici, President, Federation of Canadian Municipalities]

Thank you very much. It's a pleasure to be here this afternoon on behalf of the Federation of Canadian Municipalities, representing almost 2,000 member communities across this great country of ours. We represent 90% of the Canadian population.

I would like to thank you all for working to create jobs and making critical infrastructure repairs in the last few years.

Right now, the federal government is developing a new long-term infrastructure plan to replace the Building Canada plan, which expires in 2014. This new long-term plan is a once-in-a-generation opportunity to build the on-ground conditions for a strong, growing, and competitive economy. It's also a chance to give Canadians what they need: good roads, clean water, and solutions to the traffic gridlock that costs our economy billions of dollars every year.

There is no surer way to create jobs today and strengthen our economic foundations of tomorrow than investing in municipal infrastructure. When provincial, territorial, and local partners bring money to the table, no other investment goes as far or achieves as much. With the right long-term plan, we can put an end to the long decline in Canada's municipal infrastructure once and for all.

However, local governments don't have the tools to do it alone.

We have to do this together. We own and operate 60% of Canada's core economic infrastructure, but we collect just 8¢ of every tax dollar paid in Canada. In a couple of weeks, the FCM will be releasing a formal proposal with fully costed recommendations, but in the short time that I have here today I want to tell you where things stand right now.

The government has said it will have new infrastructure programs in place for the 2014 construction season. To meet that deadline, the new plan must be part of the 2013 federal budget and must be a plan that we can all endorse.

Getting the plan ready and making sure it meets the needs of our economy and our communities has been FCM's top priority. We've worked with the government, other stakeholders, and thousands of municipal leaders in every province and territory. Based on all that work, I want to share three points with you today.

First, there is broad support for an affordable plan that achieves the key federal objectives of supporting job creation and long-term economic growth, leveraging matching dollars from other orders of government, and expanding the private sector's role where it benefits Canadians.

Second, there's a strong agreement that the new plan must make the most of every tax dollar that we invest together. Also, it must show Canadians measurable improvements in the state of Canada's infrastructure, build the capacity of local governments to maximize efficiency through best practices and innovation, and minimize bureaucracy, red tape, and costly project delays.

Third, the final and most important point is that the new plan must make secure, reliable, and truly long-term investments in Canada's local infrastructure that are flexible enough to meet different regional needs. Every city and community is facing an infrastructure challenge. The nature of their needs may vary, whether it's roads, water, or traffic gridlock, but in every case the solution is long-term planning and long-term funding. Without investments it can count on, no community can meet its infrastructure needs.

Also, in a world full of economic uncertainty, Canadians want to know that we're taking action to build the conditions for a competitive economy and strong communities. As well, Canadians want to know that all orders of government are working together to make progress on practical priorities.

The new long-term infrastructure plan must benefit Canadians.

Local governments have worked closely with our partners in the last few years, and we want to keep working together for all Canadians.

We want to keep Canada on the road to jobs, growth, and a future we can count on.

I'd like to thank you for your time. I look forward to your questions.

Thank you very much.

[The Vice-Chair, Liberal, Scott Brison]

Thank you very much, Ms. Leibovici.

Now we're going to hear from Andrew Van Iterson, from the Green Budget Coalition.

[Andrew Van Iterson, Manager, Green Budget Coalition]

Mr. Chairman and honourable committee members, thank you for inviting the Green Budget Coalition to speak to you today.

I am pleased to be joined by Nathan Lemphers from the Pembina Institute. I expect Alison Woodley, the national conservation director for CPAWS, the Canadian Parks and Wilderness Society, to be here later. We can all answer your questions.

The Green Budget Coalition, or GBC, is unique in that we bring together the expertise of 16 of Canada's leading environmental and conservation groups, collectively representing over 600,000 Canadians, including groups such as Ducks Unlimited, the Nature Conservancy of Canada, and the Pembina Institute. Our mission is to present an analysis of the most pressing issues regarding environmental sustainability in Canada and to make a consolidated annual set of recommendations to the federal government regarding strategic fiscal and budgetary opportunities.

Please note that my presentation today reflects revisions and more details with respect to the brief online submission that we made at the start of August. All the details were in this preliminary set of recommendations, which was sent to you on September 25 and again last Thursday.

We want to thank the government again for its progress in Budget 2012, including funding for renewing the Species at Risk Act and funding for the Great Lakes, the Rouge National Urban Park, and Lake Winnipeg. These are all important steps forward.

To build on this progress, for Budget 2013 we have identified and developed four feature recommendations as well as seven complementary recommendations. Our feature recommendations address the national conservation plan, subsidy reform in the extractive industries, green infrastructure in first nations communities, and federal environmental law and science capacity.

First, we are recommending that Canada's national conservation plan—a throne speech commitment that was affirmed by the House environment committee's report in June—focus on scaling up efforts to value and conserve nature for the benefit of current and future generations of Canadians and on ensuring that all parties work together in a coordinated way to achieve this goal. We have specific recommendations addressing oceans, national parks, and migratory birds.

Second, to build further on the government's subsidy reform momentum and to increase tax neutrality and support the government's strategy of responsible resource development, the GBC recommends three targeted measures: enabling the Canadian exploration expense only for unsuccessful exploration; removing the accelerated capital cost allowance for the mining sector, as the government has done for the oil sands; and not renewing the mineral exploration tax credit for flow-through shares. These were all identified as subsidies for potential reform by the Deputy Minister of Finance in a March 2010 memorandum.

Third, there are major opportunities to further pursue economic health and quality-of-life benefits for first nations communities by integrating green infrastructure thinking into the programs and policies that are needed for planning, building, updating, and repairing first nations infrastructure. While progress has been made in many first nations communities, there are still dire needs around improving drinking water systems and housing stock. Our recommendations address water and waste water systems, deep measures residential and non-residential energy conservation and efficiency programs, and reducing dependence on diesel fuel through increased green energy use.

Fourth, we want to emphasize that the Government of Canada's environmental laws and science capacity are fundamental to its ability to protect Canadians' economic prosperity, health, and quality of life, and the ecosystems and natural resources on which they depend. To support these laws and this science capacity, the GBC recommends establishing a comprehensive web-accessible and continually updated database of all federal environmental enforcement and compliance data, and financially supporting the provinces and territories, where intergovernmental agreements are in place, to effectively deliver environmental laws in their jurisdictions.

We also have further complementary recommendations in our document addressing energy sustainability, climate action, and healthy communities, including Canada's infrastructure future, as my colleague just highlighted. We will send you our final recommendations near the end of November.

To close, I would like to quote the man who will be delivering the budget, I assume, four or five months from now, the Minister of Finance, who emphasized that

...the environment and the economy are inextricably linked, and that by ensuring that Canada has a clean and healthy environment we will be able to build an economy strong enough to maintain the enviable standard of living Canadians have come to expect.

Thank you.

[The Vice-Chair, Liberal, Scott Brison]

Thank you very much, Mr. Van Iterson.

We're looking forward to hearing from Terrance Oakey from Merit Canada.

[Terrance Oakey, President, Merit Canada]

Thank you, Mr. Chair and members of the committee. I'd like to thank you for this opportunity to add Merit Canada's voice to the pre-budget consultations.

You will be pleased to know that, unlike many organizations and witnesses you've heard at this committee in the past, I am not here to seek more government spending or more of your money. I am here, though, to ask for your assistance in ensuring that the money you do spend creates maximum value for taxpayers and creates more jobs.

First a little bit about Merit Canada. We are the national voice of Canada's eight provincial open-shop construction associations. Open-shop companies and their workers build more than 70% of the industrial, commercial, and residential construction projects from coast to coast. Simply put, employees in open-shop companies build Canada, and we are proud of their record.

I am here today to speak to an issue of fairness for hundreds of thousands of these workers who choose not to belong to the building trades unions. Some of those workers may choose to be union-free or belong to another union such as the Christian Labour Association or other independent unions. Unfortunately, in many cases these workers are barred from working on projects that are funded with their federal tax dollars.

Our message is very simple: when government funds infrastructure, all qualified contractors should be allowed to bid on those projects. Unlike the building trades unions, we are not asking for rules to be written so our employees have a greater chance of working on these projects; we just want the ability to compete. We believe that fair and open competition is what ensures the best project for the best price.

A degree in economics is not needed to understand what happens when you shut out 70% of the construction industry from competing on public infrastructure. Costs increase and quality decreases. Some U.S. studies suggest that closed tendering rules increase the cost of construction between 12% and 18%.

Federal procurement rules would never allow union-only schemes for projects that it exclusively funds, but this is not true across the country. Far too many jurisdictions have rules that limit competition. For example, the federal government recently contributed $28 million in stimulus funding to a project for the City of Hamilton. Of the approximately 260 qualified contractors, only 17 had workers registered with the union that the city rules require, so the other 243 contractors, or 94% of the available workforce—some of your constituents—were not even allowed to bid on this project. We believe this is unfair, and it only serves to increase costs and keep some of your constituents from working on these projects.

Recent media reports about the Toronto District School Board's problems with repair work show all too well the consequences of such restrictive bidding. Costs are inflated: $143 was billed for installing a pencil sharpener. Productivity is reduced: bills were inflated to pay for people who didn't even bother to show up for work. Taxpayers are ultimately the ones left paying the price.

Closed tendering rules ultimately harm workers. Companies they work for aren't even allowed to bid on these projects, and we must remember that it is their tax dollars that are paying for these projects. Therefore, those employees are at a significant disadvantage.

All Canadians pay for federally funded projects; therefore, we believe that all Canadians should have at least an opportunity to provide services that these tax dollars pay for. It makes no sense for federal funds to be spent, with restrictions put in place that would never be allowed on a project that was exclusively funded by the federal government. In the end, fewer projects get funded and fewer jobs are created.

We all have a responsibility to hard-working Canadian taxpayers to ensure that each dollar the government spends goes as far as possible. Therefore, our members feel that the federal government should ensure that all construction projects financed with federal funds be tendered in an open and competitive manner, and that union-only schemes should not be allowed, as they simply drive up the cost and harm the majority of workers in the industry.

The Canada–Nova Scotia Building Canada Fund Communities Agreement could easily serve as a template. Let me quote from that agreement under schedule A, “Mandatory Criteria”:

The contract award process will be competitive, fair and transparent (e.g., no sole-source contracts, no union-only processes).

Our members and their employees could not agree more with this language, and we think this clause should be inserted in all agreements with the federal government.

Thank you, and I'd be happy to answer your questions.

[The Vice-Chair, Liberal, Scott Brison]

Thank you, Mr. Oakey.

Now we'll hear from Serge Buy from the National Association of Career Colleges.

[Serge Buy, Chief Executive Officer, National Association of Career Colleges]

Thank you, Mr. Chairman.

Good afternoon, ladies and gentlemen. I would like to thank you for allowing the National Association of Career Colleges to make this presentation on such an important issue, the 2013 budget and how it can help our country move forward.

Let me first thank this committee and this government for the work done in previous budgets, especially the measure that in 2011 enhanced and extended the eligibility for the Canada student loans and grants programs for part-time and full-time students.

For the past 116 years, the association has represented career colleges in Canada. We are the oldest post-secondary educational association in our country. We represent over 500 career colleges located throughout our country.

Career colleges in Canada fill a need; they train students for jobs that exist. Our students range in age and socio-economic and ethnic backgrounds. They're the young person coming out of high school who wants a career as a skilled tradesperson, the unemployed single mother who would like a career in officer administration, or the lawyer trained in another country who wants to use his legal knowledge and become a paralegal in Canada. The average student is 29 years of age. While their backgrounds differ, they are all united by the same desire: to succeed in a new career and have a better life.

Our 160,000 students have chosen to attend our institutions. They've made a conscious decision that is based on the access to our programs in the region in which they reside, the types of programs offered, the quality of the institution, and the availability of condensed programs.

A graduate from MC College Group based in Edmonton, Mr. Chairman, is well known for being the hairdresser of a number of senior ministers in Ottawa.

Graduates of the Trebas Institute regularly win prestigious awards, such as Jutra Award and Grammy awards, and they occupy important positions, such as production manager for Céline Dion.

Others work on the oil platforms near the shores of Newfoundland, in the skilled trades sector in Saskatchewan and Alberta, in health care in British Columbia, and in business in Ontario. Our members' programs were accredited by professional bodies, such as the Law Society of Upper Canada, the Canadian Medical Association, and many others.

Employers come to us, as our members' programs are current. Their instructors still work in their profession, and their graduates are uniquely qualified to immediately apply their skills in their new careers.

We are a dream partner to a government that wishes to get unemployed Canadians back to work or that wants to help underemployed Canadians obtain more productive positions.

You would think that we would support students who wish to quickly re-enter the workforce by upgrading their skills and attend institutions that offer condensed programs. However, that's not the case. The Canada student grants program will offer a grant to the student who wishes to attend a program of 60 weeks or more in length. But low- and medium-income students attending institutions that offer condensed programs that allow students to graduate within 60 weeks are not eligible for the Canada student grants program. We believe that needs to be changed. In a society increasingly focused on getting things done now in a very competitive world, it is our opinion that the government should be encouraging students to get back to work faster and not discriminate against them.

What's the cost? We estimate this measure would benefit the government by diminishing reliance on social assistance programs and by allowing Canadians to become more productive members of Canadian society faster, and therefore pay more taxes.

We presented a proposal to HRSDC, and to date they have not contradicted our numbers. Actually, it was fairly well received.

Our members are regulated by provincial governments. They do not receive grants or contributions, and they do pay taxes.

We're not asking for a special deal. We're just asking for fairness for our students. We're asking that you help us get our students to employers who need to fill jobs in important sectors, such as the skilled trades and the health care and IT sectors.

On another topic, we know this government has put special emphasis on attracting international students to Canada, and we agree, but if this committee is going to make a recommendation regarding the funding of the government strategy to attract international students, we hope the recommendation will include a statement about the need to include funding for the private educational sector. Too often our sector is ignored or receives crumbs, when compared with our colleagues in the public sector. However, an international student attending a career college benefits Canada the same way had he or she attended a public institution.

When the government states that it wishes to promote education, it should state that clearly, and it should state that the private education sector should not be ignored or given ridiculously low support when it comes time to fund initiatives.

In conclusion, we respectfully ask that this committee recommend that the 2013 budget include measures to reduce the number of weeks for the Canada student grants program to match the Canada student loans program and to fund a strategy to recruit international students with no difference between the public and private sectors.

Merci.

[The Vice-Chair, Liberal, Scott Brison]

We will hear from Ms. Robinson from Polytechnics Canada.

[Nobina Robinson, Chief Executive Officer, Polytechnics Canada]

Thank you, Mr. Chair.

My greetings to the members of the committee as you undertake your important annual deliberations.

I'll dispense with the 101. You have our final submission from August about Polytechnics Canada and our members.

Polytechnics Canada suggests that the urgent priorities you must consider are the talent needs of our employers and the innovation needs of Canadian firms.

The five targeted solutions we propose are designed to link the benefits of the polytechnic model of applied education to the persistent challenges of innovation and of skills. The talent I refer to is the people who innovate, make high-value products, deliver high-quality services for the country, and work at jobs that will stay here. Currently, federal programs are doing a poor job of supporting these people. The firms I refer to are the 1.1 million small and mid-size firms in all industrial sectors, with an average of six to seven employees, who need encouragement to grow, to commercialize products and services, and who are underperforming when it comes to global competition.

Many of the challenges of mismatched skills and innovation lag emerge from policies and programs that exclude these people and businesses from access to important government support, either through benign neglect or outdated assumptions and, frankly, models that no longer work.

Let me list a few of these broken models and suggest the fixes. That basic research alone will get you innovation is a broken model. Canada does a poor job of commercializing the results of billions of dollars invested in basic research each year. The current 20-year-old model of academic-industry partnerships pushes ideas onto the private sector—whether they have asked for them or not—in hopes that industry will be able to turn them into commercial successes. Yet the payoffs are elusive. The next budget needs a laser-like focus on business innovation.

The first fix is to invest in the sole program in the granting council suite that addresses market pull, solving industry-identified problems: the college and community innovation program administered by NSERC. It is bursting at the seams. The very modestly funded program cannot keep up with demand from industry for applied research solutions that colleges provide. A modest $15 million increase in CCIP's budget will enable the program to meet the backlog of demand from SMEs forced to put innovation on hold because the program ran out of annual funding.

A second fix for innovation is the national voucher program for late-stage commercialization support at approved R and D service providers. SMEs are cash-strapped. The SR and ED tax credit doesn't cover late-stage applied research. Investors won't open their wallets unless there is a guaranteed return. Commercialization vouchers require companies to put a skin in the game, leverage that contribution to get the R and D project done on an accelerated timeline, and get the innovations to market where customers with cash in hand are waiting. It works in Alberta and in other provinces as well. It is used by the Dutch and the Australians. A national version with national definitions, but delivered regionally, will help Canada bridge the commercialization gap. The OECD recommends this.

Now to turn to skills. The brain drain is no longer the problem. It's yesterday's fight that today's programs are still trying to win. Critical concerns abound about the complex labour market conditions facing new entrants to the labour force—chiefly, the low completion rate for mature learners enrolled in our apprenticeship programs and the lack of connection to the work world for graduates of general arts and science university programs.

The fix? We need to develop the same sense of urgency for the skills shortage that we had for the brain drain of the nineties. The mistake back then was leaving skilled trades people on the sidelines when all the investments were targeted at post-secondary attainment and building top talent. As we advocated last year, we need to treat apprentices as post-secondary learners, not employees, and provide them with access to the same supports that other students receive.

There are three specific fixes: adjust the terms of the Canada student loans program; offer tax credits to companies willing to see an apprentice through to completion of their certification; and ensure that procurement projects award points to firms that maintain registered apprentices as part of their teams.

Finally, the bias that BA degrees are the purview of the university sector alone needs to be broken. Today, 144 bachelor degrees are on offer by the entire college sector. Those students should be eligible for the same support as other undergraduates, be it through granting council research awards or international scholarships.

Some of you have inquired about the German model of post-secondary education and training. Features of that German approach to talent development that are relevant to our considerations are a highly differentiated education sector that is responsive to the needs of industry and an economy that values practical experience and instruction and respects applied education. As with Germany, Canada needs a manufacturing culture built on engaging a wider pool of talent for innovation.

I look forward to your questions. Thank you.

[The Vice-Chair, Liberal, Scott Brison]

Thank you very much, Ms. Robinson.

And thanks to all of you.

Now we'll have the questions from members.

We will start with Mr. Caron.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Chair. I would like to thank all of you for your presentations. They were very interesting and quite varied. I will start with Ms. Leibovici.

First, congratulations on your assessment on infrastructures. It was very interesting and very complete with respect to the needs of municipalities.

You spoke about an immediate bill of about $20 billion for infrastructures that included roads, water supply systems, wastewater, transportation in general, bridges and water facilities.

Over how much time could this amount be spread out? It obviously wouldn't be $20 billion in one year. Are you thinking of four, five or six years?

[Karen Leibovici]

The timeline we're looking at is somewhere between 15 to 20 years, in terms of our long-term infrastructure program. When you look at asset managers and what makes sense, it is more than a three-year or a five-year program. Assets that we're looking at developing are for a much longer period of time, in terms of how long they're around. A bridge, for instance, lasts 50, 60, 70 years. So when we say “long term”, we mean a long-term infrastructure program.

I'm not sure where that $20 billion figure comes from. Perhaps you can clarify. I know when we talked about waste water, we indicated that our initial calculations on what it will take, over a 30-year period, to meet the waste water demands in this country are somewhere within a $20 billion and a $40 billion range. So I'm not sure where your $20 billion comes from.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I was basing it on your presentation. I that it was the immediate bill for the municipalities' most pressing needs.

If we are talking about $20 billion, we are talking about an infrastructure replacement program over the longer term. In fact, we need not only to restore what is in a poor state, but we also need to ensure that, gradually, we can ensure the quality of the infrastructures. A plan over 15, 20 or 30 years would be ideal.

However, your suggestions deal only with the municipalities. If we think about what is in between the municipalities, we're talking about highway overpasses, for example. Anything that isn't the responsibility of the municipalities is included. If we're talking about infrastructure deficit in the country, it goes beyond what you are talking about.

Is what you are talking about only for municipalities?

[Karen Leibovici]

What we're referring to is municipalities, but we're also referring to a partnership. We really believe this is a once-in-a-generation opportunity to work together with provincial-territorial governments and other stakeholders in looking at what our infrastructure needs are for the long term, and determining what the appropriate amount will be in order to meet those long-term needs.

We also believe that we need to be able to show how we're making progress in meeting the infrastructure deficit we have across the country, and having a measurable is very much part of meeting that particular need as well.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much.

How much time do I have left, Mr. Chair?

[The Vice-Chair, Liberal, Scott Brison]

You've got a minute and a half.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Mr. Van Iterson, you probably know that there's been a little game being played since the session resumed in September. In fact, there are three possible carbon policies for dealing with climate change.

The first is imposing a carbon tax, which was favoured by the Liberals and others in 2008.

The second is instituting an emissions cap and a carbon exchange, which is the solution favoured by the NDP.

The third is a sector-by-sector regulatory approach, which the Conservatives have decided to set up, but that is not free, and the partial costs to date have been estimated by The Canadian Press and by Maclean's at over $16 billion.

Do you think the sector-by-sector regulatory approach, as advocated by the government, is the solution to go with? Should there instead be a price on carbon, as put forward by the NDP? It would be a carbon exchange with an emissions cap.

[Andrew Van Iterson]

Thanks, Guy, for your question.

We appreciate that the government is making efforts to deal with climate change. As we have also said, we believe that a price on carbon, be it via a carbon tax or cap and trade, would be a more efficient and cost-effective way to more quickly and rapidly reduce greenhouse gas emissions across Canada.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Could you please give us some more details on this and tell us why this approach would be more—

[The Vice-Chair, Liberal, Scott Brison]

That's all the time.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I'm sorry. Thank you.

[The Vice-Chair, Liberal, Scott Brison]

Now we're going to hear from Ms. McLeod.

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

Thank you, Chair.

Thanks to the members.

I'd like to focus on the Federation of Canadian Municipalities and some of the issues around infrastructure. Certainly, as a former mayor, I remember waiting desperately for a program to come along when there was need. I think the fact that we had a program and that we've started the planning for the next one is going to be very significant. I'm really pleased with that.

I also recall with our economic action plan a number of very important programs that needed to be done. But I can also remember the municipalities and the provincial governments saying, “Halt, we have no capacity.” So they were actually not in a position....

Could you speak briefly about the provinces and the municipalities and whether there are challenges that are going to come to fruition as we look at the long-term infrastructure planning?

[Karen Leibovici]

Definitely. It's one of the aspects on which we've been working with our membership, as well as with the provincial and territorial governments.

What I think makes this different is that we've had the time to plan for the long-term infrastructure plan. In the past there hasn't been as much lead time to work with our provincial and territorial partners and the federal government in developing a plan that meets the long-term needs of municipalities across the country. That really is a key element in working together in partnership to develop something that will work.