Finance Committee on Feb. 16th, 2016

[The Chair, Liberal, Wayne Easter]

I call the meeting to order.

This is our second meeting. Pursuant to Standing Order 83(1), we are doing pre-budget consultations for budget 2016.

First of all, welcome, witnesses. I definitely want to thank you for putting your submissions together quickly. I know we're under a very, very tight time frame, and I'm sure that has made it difficult for people to get their pre-budget submissions together. We have a very intense week of hearings, with somewhere between 84 and 90 witnesses.

To begin, I would mention to the committee—and I've talked to people who are on the steering committee about it—that we expected the minister to be here this Thursday. He can't attend, so, along with the Department of Finance, he will make his presentation next Tuesday. This means we can handle about six to eight more witnesses in the minister's slot this Thursday, so the steering committee will be meeting at eight o'clock tonight to make those decisions.

With that, I'll turn to the first witnesses.

From the Assembly of First Nations, we have Peter Dinsdale and Dale LeClair.

Go ahead.

[Dale LeClair, Chief of Staff, Assembly of First Nations]

Thank you very much, Chair.

First of all I'd like to acknowledge the honour song by the member. It is truly enlightening to see this in a committee.

For those of you who may not be aware, the role and function of the AFN is to serve as a national delegated forum for determining and harmonizing effective, collective, and co-operative measures on any subject matters that the first nations delegate for review, study, response, or action and to advance the aspirations of first nations.

Our 2016 budget submission focuses on the demonstrable need for additional funding to close the gap between first nations and the rest of Canada. This includes funding for education, health, housing, water, capital infrastructure, children and family, environmental stewardship, economic development, social development, and the removal of the 2% cap.

AFN continues to emphasize that in addition to significant investments to create equitable funding, a fundamental transformation of relationships between first nations and Canada is required in order to achieve significant change for first nations.

Prime Minister Trudeau has committed to:

...immediately lift[ing] the two percent cap on funding for First Nations programs and work[ing] to establish a new fiscal relationship that gives First Nations communities sufficient, predictable, and sustainable funding.

I will now turn it over to Mr. Dinsdale.

[Peter Dinsdale, Chief Executive Officer, Assembly of First Nations]

Thank you very much.

My name is Peter Dinsdale. I'm the chief executive officer of the Assembly of First Nations. Dale LeClair is the chief of staff. It's certainly an honour to be here to present to the committee. I'd like to thank the member for the honour song and acknowledge that we're on the unceded Algonquin territories. We're pleased to be here to present.

As Mr. LeClair noted, a number of spending priorities have been articulated over the past while, certainly during the campaign. We've endeavoured, as the Assembly of First Nations, to pull together a submission, which we just handed out here this morning. It outlines some of those funding commitments and priorities that were stated during the campaign.

Mr. LeClair already mentioned the need for the removal of the 2% cap. We would also acknowledge that in the federal election there was a commitment to create new funding mechanisms to make sure that first nations are funded appropriately as levels of government. As you may be aware, currently they're funded through contribution agreement-type processes through existing Treasury Board formats and models, which, of course, is problematic in the operation of government institutions.

We've also highlighted in our submission other areas of funding commitments that have been made. First nations education, of course, comes to the forefront—understanding the need for first nations control of first nations education, understanding that during the campaign there were various commitments in the platform and costing out in terms of what it would take. We have commentary around that.

Certainly the child protection and child welfare issue is really pressing upon us, given the recent Canadian Human Rights Tribunal findings of discrimination in funding of on-reserve child welfare. There need to be some remedies, and the budget is a natural opportunity to do that.

We've taken a moment to highlight the need for indigenous languages to be appropriately resourced. Across the country very few indigenous languages are expected to survive, so the kind of honour song you heard this morning would not be sung by future generations, because people would no longer be able to speak that language.

Investments in skills and training are critical. A number of programs are up for renewal and are lapsing. Over the past fiscal year, they have not been funded or increased in any way. We're looking for those to be addressed as well.

Areas of justice around family violence prevention, first nations policing, and aboriginal justice strategies are highlighted. All of them have various programs that are sunsetting, and there are various opportunities to increase programming and to make robust and better programming available.

A very important and critical issue with all Canadians and with first nations is infrastructure. In the case of first nations, we're not talking about public transportation lines and P3s and green energy programs; we're talking about clean drinking water in communities. We're talking about basic housing. We're talking about the basic infrastructure required in communities just to function. It's what we'd expect across Canada. While we appreciate that there have been significant commitments made, there needs to be a specific first nations component. P3 projects won't work, because we don't have the fiscal arrangements in order to have the matching contribution. There are things of that nature, and the types of investments that are required are quite different.

The Prime Minister committed to having clean drinking water within five years. This budget is the perfect opportunity to launch that and get to work on it immediately.

There are other areas in our submission. There are full summary tables as well. I'd be happy to answer any questions.

We promised, because there are two of us, that we'd take only five minutes, so thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you very much, gentlemen.

I would mention as well that you did give us a presentation that will be translated and given to all committee members.

Turning to the Atlantic Institute for Market Studies, we have John Williamson, vice-president of research. He knows this place well.

[John Williamson, Vice President, Research, Atlantic Institute for Market Studies]

Mr. Chairman and members of the House of Commons finance committee, I'm pleased to be here on behalf of the Atlantic Institute for Market Studies to offer our viewpoint to you.

There are, of course, many challenges facing the new government, and indeed the government will want to act on them. We all understand that the government's spending power is considerable, but that power ultimately comes from its ability to tax and accumulate debt.

If the Atlantic Institute for Market Studies can leave members with one overriding objective, it is not to become hooked on chronic deficit spending that will eventually return Canada to the days of a government that is overextended.

Going into debt is a lot like getting entangled in a foreign conflict: easy to get into and very difficult to get out of. We know this from Canada's experience with deficit spending in the 1970s, 1980s, and1990s, and more recently but less dramatically in the last Parliament, when the former government worked to balance the budget following heightened spending in the aftermath of the 2008 great recession.

It is worrisome to hear from the current government that promised annual deficits of no more than $10 billion could see the red ink more than double this year. This would make it nearly impossible to return to balance in the near term. Once we start down this road, we know how it ends: rising and wasteful spending on annual interest payments, higher taxes, and even eventual cuts to federal transfer payments.

Here are three suggestions to control costs while still hitting policy objectives.

First, plan future infrastructure spending so that it achieves the maximum economic benefit. The finance minister is under great pressure to get money out the door quickly, but give him some room to manoeuvre so that the money isn't poorly spent. The original Liberal promise was to spend more over a four-year mandate, not push it all out quickly. Stick to that plan so that tax dollars are wisely spent.

Second, control the number of public sector workers, as well as pay, benefit, and pension costs. According to the public accounts, the cost per federal employee is $124,497. While there is debate over the size of the wage gap, there is near-universal agreement that public sector workers enjoy more generous benefits than those in the private sector.

There are two ways to control the overall budget envelope: reduce the number of workers or lower the cost by using outside benchmarks when negotiating contracts. This committee will be well advised to monitor the size and costs of the public sector, as the bureaucracy has the ability to quietly but quickly expand when attention is focused elsewhere. Indeed, our work at AIMS reveals that the size and cost of my region's public sector is larger and costlier than that in other parts of Canada. It is one reason for our budget deficits and why taxes back home are at punitive levels.

Third, incentives do matter. As the old proverb goes, give a man a fish and you feed him for a day, but teach a man to fish and you feed him for a lifetime. Provinces are very much like the proverbial man. Simply providing additional federal transfers for social programs to low-growth provinces ultimately does a disservice to these regions.

The fiscal gap these provinces experience is due in part to a dwindling workforce and the departure of young workers to other provinces. This results in these provinces having more seniors as a percentage of the overall population, which of course reduces the tax base and drives up the per capita health costs.

Equalization is the complex tool to ensure that so-called “have-not” provinces have similar fiscal capacity. Meanwhile, federal transfers to all provinces and territories for health, education, and social services should remain uniform and be calculated on a per capita basis across the country. This is the way to incentivize provinces to adopt pro-growth policies that create jobs in order to keep and attract young workers. Offering additional transfer dollars because of long-standing tough circumstances will not change the dismal economic outlook for these jurisdictions. If provincial governments are provided more transfers without a requirement to adopt growth policies and develop their resources, the economic outlook for Atlantic Canada will not improve, and after a few years, after more workers have departed and the situation has worsened, these governments will be back asking Ottawa for more.

A robust economy is the result of good public policy choices. When the productive sector of the economy is healthy, it means governments have the resources to fund important social programs.

Finally, I'd be remiss if I did not make the case for the Energy East pipeline project. This project will create good-paying jobs across Canada and in the Maritimes, along with the other large projects in the region, such as shipbuilding in Halifax and the Lower Churchill project in Newfoundland and Labrador. Energy East is important to growth in our region and to the long-term development of Atlantic Canada.

Thank you very much. I appreciate your time and attention.

[The Chair, Liberal, Wayne Easter]

Thank you very much, John.

The next witness is from the Atlantic Provinces Economic Council. Go ahead, Mr. Poschmann.

[Finn Poschmann, President and Chief Executive Officer, Atlantic Provinces Economic Council]

Thank you, Mr. Chairman.

Allow me to put in another Atlantic vote for an Energy East.

Good morning, Mr. Chairman. Good morning, all.

Thank you for inviting me today. This is my first visit to this session. I've testified often before this committee and others under prior forums. I see familiar faces and some new ones, and to everyone I say that it is an honour to appear at the first substantive meeting of a committee I have always held in high esteem.

To turn the tables, from the perspective of a witness, welcome to you and welcome all around. This is a very important committee in the parliamentary process.

Now to business. I think we're all aware of the economic and fiscal backdrop, so I won't spend time on it. Instead, I'll suggest a few budget-relevant items from the new government's platform, suggest some areas where more study is needed, and add some substantive suggestions, if I may.

Items that need further study include the notion of an infrastructure bank. The case for it depends on federal borrowing costs being lower than those of subsidiary governments, yet if the federal government is to be a responsible steward, it would have to lend on terms that reflect borrowing costs, plus the borrower's idiosyncratic risks. An infrastructure bank cannot make those risks disappear, and taxpayers would still bear them.

As to prioritizing infrastructure spending, the idea that interests rates are low, so what better time for governments to borrow to finance infrastructure spending, is simply a mirage. Potential projects must always be ranked in declining order of public and private investment—always. Infrastructure projects that improve private sector productivity and build jobs and incomes—for example, transport linkages—are the projects to be preferred; otherwise, we toss good money after bad.

To give an example, the new government's mandate favours public transit, and that might be great. Public transit helps people where congestion is an issue, but it does little for the rest of us, and nothing at all for moving goods or for the international trade and services on which Canada depends. Exhibit A for how to get this profoundly wrong is the disaster of the rail link from Union Station to Pearson Airport in Toronto. This is a predictable and predicted and unprintable financial disaster, and it could stretch into nine figures.

Shifting back to the new government's platform, one item is the maintenance of Income Tax Act provisions for labour-sponsored venture capital corporations. On innovation, businesses in Canada have a mixed record in turning ideas into growth. There are successes and failures. LSVCCs, the venture capital corps, have a clear record on the failure front. They have a financial record of value destruction and as an unproductive tax system subsidy, and alternatives should be sought.

Switching to the more positive side, the personal income tax system hasn't had a serious look in 16 years, and it has grown ornaments in dubious credits and benefits. A top-to-bottom examination of the personal tax system is well overdue.

The corporate tax system last got a serious look in 1997-1998, and that led to useful changes.

Canada's system of international tax got another look in 2008 by way of a federal advisory panel, on which I had the honour to serve. We got some good changes at that time, but there is more to do on the business and international tax front, so I'm looking for a fresh review with an eye to innovation.

There are things we can do that don't involve directly subsidizing R and D, a habit for which we have very little to show. I would rather see us use the tax system to encourage innovation, to encourage the adoption of new ideas by way of a reduced tax rate for business income when we adopt and commercialize intellectual property. What I'm talking about is known as the innovation box, or a patent box, and it taxes business income from innovation at a lower rate than otherwise. This approach is becoming more common among our western European competitors and is on the table in the U.S. Congress as of this past summer.

If I were allowed just two things in this budget, one would be a thorough tax system review, including a tax expenditure review, and the other would be a call for a proper evaluation of the case for an innovation box in Canada's corporate income tax system with an eye to generating the innovation that we say we seek.

With that, I think my time is up, and I thank you for yours.

[The Chair, Liberal, Wayne Easter]

Thank you very much. I thank everybody for remaining within their allotted time.

From the Canadian Airports Council, we have Mr. Gooch, the president.

Welcome. The floor is yours.

[Daniel-Robert Gooch, President, Canadian Airports Council]

Thank you.

Mr. Chair, ladies and gentlemen of the committee, and colleagues on the panel, thank you for the opportunity to speak to you today on two areas of urgency to Canada's airports. One is infrastructure funding criteria for six small airports on federal land. The other is the provision of sufficient resources to support CATSA screening.

As an industry, airports are a key component in Canada's $35 billion air transport sector, supporting 141,000 direct jobs around the country. The CAC has 48 members, with airports that range in size from global hubs like Toronto Pearson and Vancouver International to smaller community airports in places like Charlottetown and Prince George.

According to the current user-pay approach imposed by the Canadian air transport policy, passengers are expected to cover the cost of infrastructure and airports services.

This approach has served Canada well in several ways. According to the World Economic Forum, we have the best airport infrastructure in the world. Moreover, without the help of taxpayers, our airports have invested over $19 billion to improve infrastructure, since 1992 when the federal government began to transfer jurisdiction for airports to non-stock corporations.

However, I respectfully suggest that the two files I'm here to talk to you about today support the need to update our air transport policy approach. While we look forward to working with Minister Garneau on the recommendations we anticipate in the Canada Transportation Act review report, we hope you will agree that there is some urgency to our work in the two areas we're outlining today.

Canada's airports have confidence in the security value being provided by the team at the Canadian Air Transport Security Authority, which has a tough job, but at the best of times, security screening isn't pleasant for travellers, and these haven't been the best of times. Aviation is an economic issue, and it's a sector that's growing. This growth means that our airports have been experiencing ever-increasing demand. In fact, Canada's airports have seen a 24% increase in traffic over the past five years. With one of the highest air traveller security charges in the world, this has meant record revenue for the federal government, but the money transferred to CATSA has failed to keep pace with traffic growth. Funding has been unpredictable from year to year.

As a result, we have seen wait times grow at our largest airports. At Toronto Pearson last year, for example, about 17% of passengers waited more than 15 minutes, and waits of 45 minutes were experienced at some peak hours.

This is more than just a problem of passenger experience for Canadian travellers, however, as it also impacts air carrier on-time departures, and it impacts our competitive positioning in the world for valuable transit passengers, who don't need to travel through Canada, and will not if the experience is unpredictable or unpleasant.

Any solution to the problem has to start with the establishment of service level standards. Under the standard jointly proposed by the airports, Air Canada, and WestJet, nearly all passengers would be screened in 10 minutes or less, and no passenger would wait more than 20 minutes. This approach will require a commitment to fund to the standard, and it will require some time to work through the machinery of government.

This is why our request at this hour is specific: provide CATSA with the additional funding it needs to provide a competitive level of service at screening for the next fiscal year. To compete globally, we need to ensure screening at Canada's airports is provided at a level of service better than current levels. I hope you will agree that travellers should be receiving value for money in the government services they pay for, but when it comes to the passenger experience at screening, we cannot say today that they are, and growth continues. Toronto and Vancouver alone anticipate 3.8 million additional passengers this year. That's equivalent to an airport about the size of Halifax or Winnipeg being added to the system this year.

On the infrastructure side, it was an essential tenet of the national airports policy that NAS airports on federal lands be self-sufficient for operating and capital costs. As a system, this has been the case, and it will continue to be the case even if federal infrastructure programs are to be opened up as we suggest. While airports around the country have invested $19 billion in infrastructure improvements without taxpayer support, they have also contributed more than $4.6 billion back to the government in airport rents since 1992. This far exceeds the $38 million a year in capital assistance that goes back to other small airports and a handful of other one-time investments made by past governments under regional development funds.

I hope you'll agree that this has been a good value for taxpayers, but even back when the national airports policy was being written, it was understood that NAS airports with particularly low traffic volumes would find it challenging to cover both operating and capital costs.

Nevertheless, language barring airports on federal land has been inserted into eligibility criteria for federal funding programs, most notably Building Canada and the airports capital assistance program. This criterion has seen federal money go to some airports with higher traffic volumes, while the airports at Charlottetown, Fredericton, Gander, London, Prince George, and Saint John have been barred from even applying to the same programs. These airports also, I might add, are either paying rent to the federal government today or will start paying rent this year. In fact, all but one of the airports will start paying rent this year; the other one already does.

The air transport sector, including airports, is concerned by the cost increases due to operations and the competitiveness of the industry. There are, however, few options to finance airport infrastructure under the current policy. That is why we are pleased that the Liberal Party came out in favour of this during the last election. With your support, we hope to see the necessary changes.

In 2016, we look forward to your support on the areas that I outlined today.

It will be my pleasure to answer any questions you may have.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Gooch. I'm well aware of the complaints from small airports. I live near one.

Next is Ms. MacEwen, who is is a senior economist in social and economic policy with the Canadian Labour Congress.

The floor is yours.

[Angella MacEwen, Senior Economist, Social and Economic Policy, Canadian Labour Congress]

Thank you very much.

I'm here on behalf of the Canadian Labour Congress, which is the national voice of 3.3 million unionized workers in Canada. Our affiliated unions' members work in virtually all sectors of the Canadian economy, in all occupations, and in all parts of Canada.

As you know, in the near term the macroeconomic picture for Canada appears bleak. Fortunately, Canada has a comparatively strong fiscal position and has ample fiscal room to undertake significant long-term investments in public, physical, and social infrastructure. The federal government has a historic opportunity to make targeted and strategic investments in infrastructure that will lift long-term productivity growth while also repairing a portion of the badly frayed social safety net that Canadians rely on.

We have provided the clerk with a longer brief outlining some of our priorities for building a fairer and more prosperous Canada. Given the time constraints, I will focus my comments on infrastructure, training, and employment insurance.

The Canadian Labour Congress absolutely supports the federal government's plan to invest in physical and social infrastructure. In the short term, infrastructure spending, housing investments, and transfers to low-income households carry the highest stimulus multipliers, with relatively small leakages to savings or to imports. We recommend that all infrastructure spending should consider the necessity of a transition to a green economy. There's enormous potential here to create good jobs and build for the future.

In fact, the labour movement in Canada has developed a plan that would create one million climate jobs over five years. That would put us on track to reduce our greenhouse gas emissions by one-third in a decade. This plan includes just, fair transition commitments and labour adjustment mechanisms. The three priority infrastructure areas that we've identified in this plan are energy efficiency, public transit, and renewable energy. These investments will help us achieve our greenhouse gas reduction goals and provide good jobs for workers.

In addition, we urge the federal government to invest in a green jobs skills training program to ensure that workers are equipped and available to perform the energy-efficiency home and building retrofits that are needed to reduce energy consumption. This is the lowest-hanging fruit we have. The biggest difference we can make is in energy efficiency. We have people who are mostly trained to do these things, but with a little bit of additional training, they can be rerouted from jobs they've lost in the oil sands, for instance, to jobs in energy efficiency. To this end, we encourage the federal government to develop a green skills fund in advance of anticipated federal transfers for new infrastructure investments.

Federal infrastructure projects are also a perfect opportunity for the federal government to work with unions, industry leaders, and the Assembly of First Nations to remove barriers and create opportunities for women and other under-represented groups in skilled trades.

I want to second what was said earlier, which was that within infrastructure there is a very special requirement for first nations. Federal funding for drinking water and sanitation in indigenous communities should be a high priority for this government. It is unacceptable that in a nation as wealthy as ours, this critical necessity is not available to everyone.

The labour movement also encourages the federal government to ensure that social infrastructure investments, such as child care and health care, are provided publicly, and to implement uniform national standards.

With regard to employment insurance, we urge the government to act swiftly on their commitment to eliminate the current 910-hour eligibility hurdle for new entrants and re-entrants to the labour market and to reverse the 2012 changes that were punitive to unemployed workers.

We would also like to bring it to your attention that cuts to front-line services have meant long delays in accessing benefits for many unemployed workers, particularly in the west, surprisingly, and in Atlantic Canada. We urge an immediate allocation of $100 million in 2016-17 to the EI program in order to improve processing times and reduce delays in appeals and reconsideration-of-benefits decisions.

We note that there will be an accumulated surplus in the employment insurance account in 2016 and ask that the government use this surplus to implement these promises immediately, in their first budget.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you very much as well.

From the Conference Board of Canada, we have Mr. Hodgson, senior vice-president and chief economist. The floor is yours, sir.

[Glen Hodgson, Senior Vice-President and Chief Economist, Conference Board of Canada]

Thank you very much, Mr. Chair. Welcome to all members of the committee. I've been here many times. For some of you it's the first time, so I hope we get a chance to know each other a bit better.

I'm part of the circle of economists who give advice to Minister Morneau directly. In fact, we were meeting with the minister in Toronto on Friday, so I thought one of the things I could usefully put on the table this morning are my comments from Friday. I have four points to make.

First of all, on the economic outlook, I think the consensus is that our economy is growing. I think the best word for the growth is probably “feeble“. We think Alberta will be in a recession again this year. Growth is going to be very weak in both Saskatchewan and Newfoundland, but in other parts of the economy, growth will probably be robust. We think B.C. can grow around 3% and central Canada around 2.25% to 2.5%, but overall our forecast is for national growth of 1.7%.

The purpose of this first budget should be to give the economy a gentle nudge without necessarily building up a large stock of debt down the road. That's my second point. I do think it's important for a new government to establish fiscal anchors and to give the public a sense of what your strategy is going forward. I would put a lot of weight on the debt-to-GDP ratio falling over the next four years to ensure that we have the capacity to add more significant fiscal stimulus if we fall back into the kind of recession we saw in 2008-2009. Don't take just a one-year view; take a whole-term view about the debt load the federal government can afford to carry going forward, knowing that the more interest payments you make, the less you have available for other purposes.

I advised Minister Morneau to be prudent in this budget. That's my third point. You can be prudent by using a fairly modest growth forecast. The federal government forecast nominal income growth—not the real growth of the economy, but real growth plus inflation. I think there's a widespread agreement amongst economists that nominal income growth is going to be fairly weak, and I would aim toward the lower end of the band to ensure that you have upside potential. Another way to add prudence to your budget is by increasing the reserves built into the budget and have a sense that you can hit your fiscal targets and even have a bit more room to spare. Prudence is either a matter of using modest growth assumptions or building reserves into the budget, but I do think prudence is called for.

For the fourth point I'm going to pick up on some of the comments of my colleagues here.

The real purpose of the budget should be to start setting out a plan for stronger growth in Canada. We're now in a period of aging demographics, when economic growth of even 2% is going to be hard to reach, and we should be examining all possible options to try to add greater growth to our economy going forward. I mean things like making the right investments in infrastructure, which includes not spending on things that just give payback today but on things that are going to give the economy a long-term payback going out 20 to 25 years.

I also mean things like rethinking the tax system. Finn, I liked your comments a great deal. I've been writing about that for a decade or so. It's time to rethink the tax system to deal with the massive tax expenditures that leak out about $100 billion a year in federal revenue. We don't know what the interaction is amongst all the expenditures as well. That might be a challenge for this committee. You could show leadership by taking on the task of rethinking the tax system. You're going to be here for at least four years. What a great opportunity to add to the vitality of the Canadian economy.

Mr. Chair, I'll close by saying I've never tweeted from a committee before, but I had a chance to take a photo and tweet, so the committee is now being shared with my followers across the country, which is kind of a fun thing to do.

[The Chair, Liberal, Wayne Easter]

Thank you. I hope we were all smiling when that tweet went out. Were we?

[Glen Hodgson]

You certainly were, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Thank you.

Thank you to all the witnesses. I'll turn now to the first round of questions, which is seven minutes. I will remind the witnesses that first there will be some questions in French, so if you could have your translation device on, we won't have to take a lot of time for that.

The first question is from the Liberal Party. Go ahead, Mr. Ouellette.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

Thank you very much, Mr. Chair.

I thank all of the witnesses for their statements today. We appreciate them greatly.

My first question is for the representative of the Assembly of First Nations.

I would like to know why there are very few urban reserves in Canada. We know that these economic development zones can create a lot of jobs and allow for the accumulation of capital, but there are not very many in our country. Why?

[Peter Dinsdale]

Thank you very much for the question.

Frankly, that's something we're trying to have more of. Many TLEs and additions to reserve that are outstanding were with the last government. For whatever reason, they weren't pushed through. That is certainly something to look at, and it is certainly something we support.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

There are not enough urban reserves, and I often think about how it's often not the amount of money the federal government spends but simply ensuring that there is a faster and more efficient process to create these economic development zones, these urban reserves in communities, where people can actually accumulate capital, which I think is so important for first nations people and for anyone who wants to participate in the modern economy.

[Dale LeClair]

Thank you very much.

I think you are correct. We have a great number of urban reserves out there, more commonly on the Lower Mainland in the Squamish and Tsleil-Waututh and Musqueam communities.

I think a lot of dynamics go on with urban reserves. Probably our greatest difficulty is having communities, regions, municipalities, and provinces agree when we start to negotiate land deals and TLEs. I think there is a great deal of resistance because there's a misunderstanding that first nations reserves are not part of the local economy. I think that's quite wrong. The Squamish Nation certainly demonstrates that it can be a co-operative economy and a very lucrative, informative, and successful program.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

Thank you very much.

My next question is for Mr. John Williamson from the Atlantic Institute for Market Studies.

I think you were suggesting that in various regions of the country that are not doing well economically, it's normal for people to move away, and that in fact this is actually beneficial for the long-term economy, so we shouldn't even be doing too many transfers to these regions that aren't doing well.

I would also like to point out to you that I was reading one of the reports from your institute, “A Good Problem to Have: Lessons for Atlantic Canada from Alberta’s Experience with Natural Resource Revenue”. I thought it was a very well-written paper. It talked about how we should save for those times in the future when we might not have those resources, or the market for natural resources might not be doing so well.

If you know about this report, could you discuss it a little bit?

[John Williamson]

Thank you for your question.

First of all, I'd like to be very clear on a point you made. It is actually not beneficial for people to leave a region. We see that now in Atlantic Canada, where the drain of young workers is having a serious negative economic impact on the region. As a result of that, social spending has increased and is set to increase to levels that are unsustainable because the tax base is just not there.

With regard to the report you cited, I'm not familiar with it in detail. I will say that obviously there is a debate in the country over how best to use natural resources and how to balance the economic opportunities with the environmental costs. These are decisions for every single province and region to make on their own, under the federal framework.

[The Chair, Liberal, Wayne Easter]

Mr. Ouellette, you still have three minutes.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

Great.

Mr. Poschmann, thank you very much for being a witness today. I want to ask you about manufacturing, because in the past you wrote a report on manufacturing. I'll quote from it:

Aggregate data show that Atlantic manufacturing firms are smaller than nationally, with exports per plant about 30% lower. Atlantic plants also tend to have lower productivity (measured in terms of output per hour worked), are less likely to innovate and adopt advanced technology, and are less likely to export or be otherwise involved in global business activities.

Could you talk about some of the ways we could support these value-added industries to create really good-paying, long-term jobs?

[Finn Poschmann]

Mr. Chairman, that is a very great question.

Some of the measures apply everywhere. Some of them are more particularly helpful in the Atlantic region. Key is education at the primary and secondary levels and building a foundation through education for the long haul, which is where we lag in terms of standards. Then your post-secondary performance improves as well, and you have a better-trained workforce that has the skills to engage globally and compete globally.

The other issues are around scale. The cities in the Atlantic provinces tend to be small. This is one of the reasons that population and population growth are such key issues. Generating centres of attraction that attract, bring, and retain people, especially young people, are very long-term approaches, but I think they're the ones we have to take. One of the reasons I think about scale and attracting and retaining people, including immigrants, is that if you build up enough density with enough people, they'll figure out what to do. They'll create their own markets and opportunities.