Indigenous and Northern Affairs Committee on June 15th, 2010

[Todd Russell, Liberal, Labrador, NL]

Thank you, Mr. Chair.

I thank each of you for being with us this afternoon.

This certainly is a vital program to many of the communities in Labrador, and particularly in northern Labrador.

I have just a couple of questions. If there's a retailer in Postville and a retailer in Nain--Postville is a little farther south and Nain's a little farther north--and they order the same goods, you're telling me the subsidy for the retailer in Nain will be different from that for the retailer in Postville if the shipping costs are higher for Nain than they are for Postville.

[Patrick Borbey]

If they're higher, that difference will be reflected in the cost through a higher subsidy in the case of the higher-cost community, yes.

[Todd Russell, Liberal, Labrador, NL]

Then of course different goods will get a different subsidized rate, depending on the nutritional value of the goods.

[Patrick Borbey]

We'll have two categories. One will be the most nutritious goods, which will be things like milk, fruit, vegetables--the higher-rated foods. Then there will be a lower subsidy rate for those that are less nutritious, and we'll be working with the advice of Health Canada for that, as well as in consultation with the advisory board.

[Todd Russell, Liberal, Labrador, NL]

There will be no different regime in place for the three large retailers as opposed to the smaller retailers. Is that right? They'll both have access to the same subsidy, the same type of programming and everything else?

[Jamie Tibbetts]

It will be the same rate.

[Todd Russell, Liberal, Labrador, NL]

So that will all be equalized?

[Jamie Tibbetts]

Yes.

[Todd Russell, Liberal, Labrador, NL]

This is an ongoing argument, but you say here in your notes that this increases the competition; it allows market forces to be more at play, and therefore, theoretically, we'll get cheaper goods, nutritious goods going into remote communities.

[Patrick Borbey]

Yes.

[Todd Russell, Liberal, Labrador, NL]

Can you give me an example of how you figure that's going to play out?

[Patrick Borbey]

There are two factors at play here. First of all, in terms of the market forces, retailers will then be using the full power of their purchasing power to be able to order goods as a whole, rather than parcelling out their orders. So that's a more efficient way--

[Todd Russell, Liberal, Labrador, NL]

But just to be clear, right now under the food mail program, if I'm a retailer I can order goods basically from anywhere, except that they have to come through a Canada Post entry point. But nothing prohibits me from buying from any retailer right now under our food mail program.

[Patrick Borbey]

That's right, and that won't change. But if you go into the grocery store, you will see that part of what's available in that store will be subsidized, but the majority of the goods that are for sale are not subsidized, they are ordered without a subsidy. So what the retailers will be able to do is consolidate their orders. As I said before, for fruits and vegetables, they may have to only get an order in on a certain day of the week because that's when Canada Post is able to put together the order. So they are going to be doing that logistics and that will be more efficient.

So that's the first way. The other way is that if you have a higher subsidy on the most nutritious goods, that means your milk, fruit, and vegetables should be less expensive than they are under the current regime.

[Todd Russell, Liberal, Labrador, NL]

I suppose, if the retailer is willing to have a consistent mark-up, right? If you get a higher subsidy, you could technically mark it up higher.

[Patrick Borbey]

And that's why we need control to make sure the subsidy is passed on to the consumer. Right now we don't really have a mechanism by which we can ensure that this takes place. But with the verification of the waybills that are supplied to us, before payment is made, we will know that the subsidy has been applied against the goods.

[Todd Russell, Liberal, Labrador, NL]

I don't think you'll have a problem with verifying that certain goods were shipped into a community, to a particular retailer at a certain rate and that they bought x amount, and then you apply a particular subsidy against them. How do you then verify the sale price? Are you going to have independent verification officers go into all these retail outlets?

[Patrick Borbey]

We'll have to do price surveys. We'll have to be able to see. That's sometimes fairly simple. You go into a store and you ask, “What does a pint of milk cost?” If it's $4.99 or $5.99, you know it's probably a subsidized rate. If it is $7.99 or $8.99, there's a problem. So we'll have to rely on spot surveys, and again, one of the roles in which the advisory board will be able to help us is to collect information from the communities, from their constituents, who can say, “Look, there's something wrong here. In this particular store, the price of milk is way out of whack compared to other stores.”

[Todd Russell, Liberal, Labrador, NL]

How do you penalize a retailer if they choose to mark it up 40% instead of 30%?

[Patrick Borbey]

We'll have to keep the retailers honest through the subsidy. If they want to be eligible for the subsidy, they'll have to play by the rules and make sure that the benefits are going to the consumers. If they're pocketing the subsidy and just jacking up the price of milk, then that subsidy has not been passed on to consumers.

[The Chair, Conservative, Bruce Stanton]

Okay, thank you, Mr. Russell.

Mr. Clarke, go ahead.

[Rob Clarke, Conservative, Desnethé—Missinippi—Churchill River, SK]

Thank you, Mr. Chair.

I'd like to thank the witnesses for coming in today. I'd like to thank Elizabeth for coming in here. It's quite a distance to travel for a short committee meeting here. I do really appreciate it.

In northern Saskatchewan, I do have a lot of remote communities as well. What I'm really kind of curious about, just in regard to the food mail program exactly, is the federal role. When you're looking at the provinces and the territorial areas, just how much partnership is involved with the food mail program, for one? What types of other programs are involved with provincial partners or programs?

[Patrick Borbey]

Thank you.

There are some small programs that have been put in place in Newfoundland and Labrador as well as in Quebec. They only subsidize a small number of goods. I think in the case of Quebec there are about 20 different products that are subsidized, so a flat price is guaranteed. It is not a program that is comparable to what we're talking about here, which is much broader, much wider, and much more complex.

[Rob Clarke, Conservative, Desnethé—Missinippi—Churchill River, SK]

I notice that you also have here the aboriginal head start program, the aboriginal diabetes initiative, and the Canadian prenatal nutrition program. What I see here now is basically getting away from the junk food of the pop and the chips that have basically become synonymous across my northern riding of Saskatchewan, where a lot of the kids or a lot of the adults are just turning to junk food, which is just contributing to diabetes.

From my understanding, the food mail program was increased substantially from the past. I believe it was $25 million and it has been increased considerably.

Just with regard to the cost of actually the individual items, how much of a cost saving is going to happen in regard to the staples, like the milk, the eggs, the butter, and the vegetables? Do we have a breakdown of what the costs are going to be? Some of the items up north now are $12 for a four-litre jug of milk.

[Jamie Tibbetts]

We know that it will be more affordable. That's the intent of the program. We'll be measuring that through the reports coming back from the suppliers.

Right now, though, under the current program, we subsidize a lot of non-perishable and non-food items, which would be part of the list you mentioned, which will no longer be subsidized. The money saved from that part of our spending will be redirected to subsidize those higher, most nutritious foods. We see four or five million moving from our current spending pattern to the subsidy of most nutritious foods. Some of that money will also be invested in those health programs and promotion programs, as well as toward that increased oversight.