Debates of March 31st, 1998

Division No. 123

[The Acting Speaker (Mr. McClelland)]

It being 6:20 p.m. the House will now proceed to the consideration of Private Members' Business as listed on today's order paper.

The House resumed from February 4 consideration of the motion that Bill C-223, an act to amend the Income Tax Act (deduction of interest on mortgage loans), be read the second time and referred to a committee.

Income Tax Act

[Keith Martin, Reform, Esquimalt—Juan de Fuca, BC]

Mr. Speaker, it is a pleasure to speak to Bill C-223 put forth by the member for Portage—Lisgar. I think he deserves an enormous amount of credit for putting forth his private member's bill, which goes to the heart of a very serious issue affecting members of the lower socio-economic groups as well as middle income groups, to enable individuals to obtain their first home, to move from the large pool of renters to the pool of home ownership, thereby ensuring their ability to have a roof over their heads.

Bill C-223 does just that. Its purpose is to provide for the deduction of interest paid by taxpayers on the the first $100,000 on a mortgage loan secured on the first qualifying home acquired by taxpayers.

My colleague from Portage—Lisgar spoke about this matter in the first hour of debate and made a very eloquent argument in favour of the bill. I would like to support what he said.

The bill addresses a number of concerns and illustrates a number of benefits. For example, it would lower the tax burdens of individuals and would ensure people would have more money in their pockets. This is particularly important in view of the fact that over the last several years individuals have been living with fixed incomes. Their disposable income has been eroded over time through bracket creep and the introduction of some 34 tax increases over the last four years. Therefore they have less money in their pockets to provide for basics such as home ownership. Bill C-223 would increase the amount of home ownership and housing affordability.

In my riding of Esquimalt—Juan de Fuca the issue of affordable homes is extremely important. There is a large pool of individuals who would like to own homes but cannot.

Contrary to what the Parliamentary Secretary to the Minister of Finance said in his speech, that a taxpayer's choice of accommodation, owning versus renting, is a personal choice, for many people it is not a personal choice. For those people who are in the lower socio-economic groups owning or renting is not an option. They do not make enough money to own a house.

How do we ensure that these people have enough money to eventually have the security of home ownership? Bill C-223 does just that. It would enable people to deduct the interest on the first $100,000 of mortgage from their taxes. This will not benefit the rich. It will not benefit the speculator. The bill specifically states that it only deals with the first $100,000. The bill specifically deals with those individuals in the lower socio-economic groups and those individuals who are first time homeowners.

The bill also provides an economic stimulus to the economy. It will increase the number of housing starts, put people back to work and generate more money through the economy.

The bill put forth by my friend from Portage—Lisgar is a win, win bill. It should not have any opposition. If one looks at the arguments put forward by members of the government, one sees that their concerns were addressed by my colleague. They are understandable questions from the government, but they are questions that have been answered and meet the objective not only of our party but of the government to ensure that people, particularly those with the middle and lower incomes, are able to finally own homes.

Renting is not something that people in lower socio-economic groups want. They want the security of home ownership. They do not like to rent. Renting takes away from the disposal income that they could use for other necessities such as food, clothing for their children and education needs. All these things would benefit those people who need it. Bill C-233 does just that.

The bill would also provide equity between homeowners with mortgages and those who do not have mortgages. Arguments against the bill have been that it would likely increase the price of houses. The price of houses is a function of supply and demand. We have an enormous demand but we do not have the supply. Bill C-223 would provide an influx of money that would provide a stimulus to the job market.

There are other issues to deal with. The bill can be seen as a backdrop against the declining disposal income of all people, the decrease in affordable housing and the declining economic situation of people from coast to coast.

I live in a city where housing is very expensive. There are a number of cities like that. This issue affects people who would like to own homes from Newfoundland to British Columbia. All provinces are affected.

The issue of affordable housing is serious. There has been declining funding for affordable housing because of the declining amount of resources governments have to spend. We understand that. We have to live within our means. If the government is to withdraw the amount of funding for affordable housing then it should at least give people the ability and the tools to provide for their own housing. Bill C-223 would do just that.

The government should consider other options like expanding the RRSP to allow for a registered home ownership plan of $5,000 beyond the current maximum for first time home owners, for those people who are purchasing homes for under $200,000. If they were able to do that perhaps they could put money away. Perhaps they would have the economic tools to finally own a home and provide security for themselves and their families.

The existing measures for RRSPs are not adequate. The Minister of Finance is considering carving away our RRSP maximum. That will take away the ability of people to provide for themselves.

It is good that RRSPs can be used toward the down payment of a first home. The government should be complimented on that. The government should also adopt Bill C-223, put forth by my colleague from Portage—Lisgar. It would be a fine complement to that measure.

Perhaps the government should also consider being innovative in providing tax shelters for individual Canadians who are prepared to invest in a home. Perhaps it should consider incentives for builders to provide affordable housing. This would remove the onus from the government and place it on the individual.

If governments are fiscally restrained, why not allow the individual to provide those funds? There is a large pool of funds in the private sector which could be used for investment. Those moneys could be targeted toward affordable housing. Why not provide a tax break for investors who are prepared to put up the money and fill the gap?

This is also a social situation. A home, a shelter, a roof over our heads is a basic necessity.

I support Bill C-223, which was put forward by my colleague from Portage—Lisgar. I would ask the government to support it for all individuals. The bill is primarily designed to address the huge need that exists for affordable housing, particularly for first time homeowners and those in the lower and middle income brackets.

[Jim Jones, Progressive Conservative, Markham, ON]

Mr. Speaker, it is my pleasure to speak today to Bill C-223. I begin by commending the member for Portage—Lisgar for introducing the bill. I commend him for providing the House with an opportunity to debate a very important principle, the principle of tax relief.

There is absolutely no doubt in my mind and in the minds of my Progressive Conservative colleagues that this nation is overtaxed. Once the House agrees on this then we can seek solutions. However, let me be clear. Tax relief solutions must be for the benefit of all Canadians. Tax relief must be equitable and it must be efficient. Bill C-223 does not meet this requirement.

There is a very simple question to answer here. The question is, if surplus money is available, who will decide how to spend it? Will it be the Liberal government or will it be the Canadian people? We in the PC Party put our trust in the people. By putting money back into the pockets of Canadians we will let them decide how to better their own lives. That is why my party has proposed raising the personal exemption threshold to $10,000 for every Canadian. That is the fair way to approach this issue.

My friends in the Reform Party are suffering from an identity crisis on this issue. The Reform Party trumpets itself as being the promoter of simpler and flatter taxes. This bill is neither. This is a call for a subsidy, a target tax break that benefits a few. When we enact legislation that targets only certain members of our society we are necessarily excluding others. In this case we would be doing nothing for the poorest members of our nation who are unable to even begin thinking of buying a home. Once again equity does not exist.

The message regarding our tax code is a tired, yet appropriate cliché: keep it simple. This bill at the very least adds another line to our already cumbersome income tax form.

Accountants are the overall winners with tax legislation that adds to the present complicated reporting nightmare that many Canadians are enduring as we speak. We need to make a collective decision that simplifying our Income Tax Act is a worthy goal. Then we need to strengthen our resolve to use our tax laws only to raise revenue, not to set public policy.

Fairness is conspicuously absent in this bill. The bill proposes that the interest paid on the first $100,000 of a mortgage loan secured by that first qualifying home acquired by a taxpayer would be allowed as a deduction for tax purposes. The problem is that $100,000 worth of property is not equal across this nation. The same home that sells for $100,000 in one part of the country might easily command twice that in my riding of Markham. Even if we were willing to complicate the Income Tax Act, we certainly could not accept a tax initiative that does not treat all citizens equally.

There is another component here which should give all of us in this Chamber great pause. If we were to allow tax deductions for mortgage interest we would be opening a Pandora's box. It would be good if the bill's sponsor would reflect on how sure he is that the Liberals would not move quickly to subject our homes to capital gains.

With regard to Bill C-223, we do not even have to wonder. We need only reflect on the words of the member for Etobicoke North. He stood in this House and said “If we allow the interest to be deductible, then surely the capital gains on the sale of the principal residence should be taxable”.

The reason a capital gain on a principal residence in not taxable in Canada now is that we do not consider an investment in a principal residence as an investment. It is the ownership of a private home. Then he continued on to say “You can't have your cake and eat it too”. This leaves little doubt in my mind as to the intention of this Liberal government if we were to pass Bill C-223.

There are other dynamics at play here and they need to be explored. At present there exists great acrimony within Liberal ranks. On the one side we have the Minister of Finance and his ever dwindling allies who know all too well that Canada's finances are still a long way from the Utopia he tried to sell in his budget.

Pushing and prodding them are the Minister of Health and his band of 1970 style tax and spend Liberals. They were thought to be extinct until recently when a small colony of 101 of them were discovered in Ontario.

We on this side of the House watch this battle with great concern. We do so because when the palace coup is complete all hopes for tax relief will be finished.

I say that we need greater vision than that which is represented in Bill C-223. We need to put aside all partisanship on the issue of comprehensive tax reform and come up with an acceptable alternative. This alternative must be effective in putting money back into the pockets of Canadians. It must be equitable so as to produce real bottom line benefits for all Canadians. We need to ensure it makes our tax system less cumbersome so that people can spend less time reporting to Revenue Canada. More importantly, we need to just do it.

I reiterate what my colleague from Kings—Hants said on February 4 when I say that a tax break is better than the status quo, but the public will is on side with those who seek comprehensive tax cuts. Let us not miss this opportunity.

[Philip Mayfield, Reform, Cariboo—Chilcotin, BC]

Mr. Speaker, I am very pleased to rise to debate Bill C-223, an act to amend the Income Tax Act with respect to the deduction of interest on mortgage loans. Before I get into the speech itself I would like to take this opportunity to thank the member for Portage—Lisgar for all his hard work in seeing this bill come to fruition and debate in this House.

The purpose of this bill is to provide for the tax deduction of interest paid by a taxpayer on the first $100,000 of a mortgage loan to first time home buyers.

Many of us here have had the experience of purchasing a home. It is a huge investment which gives a lot of security and joy. However, it is also the cause of a lot of stress and doubt. This, in many cases, is not simply the purchase of property, but the purchase of a home. A home is for families to grow together in, a place of security and a site of well-being.

Although the physical house may hold some importance for families, it is the psychological and social aspects of a home that people hold dear to them. A house is for living, but a home is to cherish.

One may wonder where I am going with this. In today's economy many young families simply cannot afford to purchase a house to make a home. Many young people start out facing an enormous financial burden, as most already have a huge debt load from pursuing their post-secondary education and getting started in their lives.

Knowing the economic realities that most young people face today, they have some other debts to pay, such as credit card debts with large balances. There is also the unseen debt that every single Canadian faces every time they pay a tax and also the enormous national debt that has been built up over the decades.

We should look at this bill as an intervention toward tax reduction. To put it more simply, young people today simply cannot afford to purchase a house on top of all the other expenses and taxes they have to pay. Instead of purchasing a home many couples, in essence, withdraw from their disposable income and throw money into rental properties that they will never recover and never receive benefits from when they could be using that money toward creating equity in a house.

The money saved in taxes could be used for paying down other debts or to increase their savings. In essence, buying a home is the largest single step that most people take in achieving retirement security. It is an investment that lasts a lifetime.

Bill C-223 would provide Canadians with an extra opportunity to purchase their first house by giving them a much needed tax break, making ownership more feasible. The economic spinoffs of such a move would also help local economies, especially the Canadian housing industry. It would also benefit the industries that supply furniture, finishings and fittings that go into equipping and maintaining a home.

This initiative, Bill C-223, which has been brought forward by the hon. member for Portage—Lisgar, has widespread support from a variety of groups and individuals. In the short time I have I would like to quote from one of the supporters, although the theme expressed here is shared by many other organizations. I speak of the national trade association of the manufactured housing industry.

After reviewing the content of Bill C-223, the association said they “support both the logic behind the provisions of the bill and the limitations that have been applied. Limiting the benefits to first time homebuyers and the first $100,000 of a mortgage will have a highly desirable effect of increasing home ownership among our young families”.

The association goes on to say “In our opinion, increased home ownership is of considerable benefit to the homebuyer, the community and the greater economy. Home ownership helps to foster stable families and stable communities. More housing demand will stimulate new housing development and produce secondary benefits throughout the local economy”.

I believe that the provisions of this bill would create a very enviable situation. I am sure that I speak for many of my hon. colleagues on all sides of the House when I say that stimulating the economy is very desirable and something that should be encouraged as much as possible.

Looking at my own riding of Cariboo—Chilcotin, I know that I would readily support any initiative, whether federal, provincial or local, which would have a positive economic spinoff for our local economy. With the economic downturn in the province of British Columbia we are in need of initiatives that will boost local economies.

There has been some opposition to the idea proposed in the bill. However, I feel this opposition is unwarranted. Opponents suggest that this would give an unfair financial advantage to homeowners over those who rent. This is simply untrue.

There are provisions by Revenue Canada that benefit those who own rental properties. Many types of expenditures are deductible from rental revenue in the year they are incurred, including property taxes, insurance, advertising, maintenance and repairs. Also interest paid on money borrowed to purchase or to improve rental properties can be deducted. Savings experienced by rental property owners can be passed on to tenants in the form of lower rents.

There has been some concern in recent years over the brain drain that has plagued Canada. With the highest level of taxation in all the G-7 countries, many of Canada's finest talents leave our country in search of jobs in the United States. Why do many Canadians leave for jobs south of the border? Very often it is for a lower rate of taxation.

Currently all U.S. mortgage interest payments are deductible. When homes are sold the vendors do not have to pay capital gains tax on the first $500,000. Bill C-223 would place Canada on a more level playing field with the United States and may make the decision to remain here a lot easier for Canadians.

In closing, I encourage members of all parties to support the bill. This initiative can play an important role in serving as a building block for not only a stronger family unit but a stronger local community and a stronger economy.

Passage of the bill would provide great and needed benefit, particularly to young Canadians who despite their economic vulnerability bear enormous financial burdens. Young Canadians would be given the opportunity to set down roots and to eliminate some of their debts while at the same time being helped to prepare for the future. This is something we could all be proud of. It could even mean the difference between the same individuals staying in the community or leaving the country.

Again I thank the member for Portage—Lisgar for introducing the bill and for his initiative with regard to tax reduction.

[Ken Epp, Reform, Elk Island, AB]

Mr. Speaker, it is a delight to stand in the House of Commons to speak on behalf of families across Canada and to add my words of encouragement to the government to show a little compassion for families, especially young families starting up and buying their first homes.

It is a pleasure to speak in favour of a tax break, something the Liberals just cannot get into their heads. If there is a little surplus, would the Liberals turn it back in terms of a tax break? No. Most of them think they better put it away for an election fund. They think they better keep that money ready in case there is an election. Then they can haul out the millennium fund. They would have all this money to reduce the debt and to reduce taxes and everything will be tickety-boo, great.

The Liberals will win the election because they will have all this money. It is unconscionable. It is terrible that they hang on to their money to use for political purposes. Meanwhile, they are shutting their eyes to the needs of Canadian families, young people and their children.

The bill before us is a private member's bill. I wish we could strengthen Private Members' Business. In my observations in the few years I have been here it seems the ideas which best represent the needs and the wishes of Canadians are presented in Private Members' Business. Those are the times when we get motions and bills like the one before us today which say to the House of Commons, to the government, that there is a need out there which has been identified by an elected representative. The individual MP has raised a matter that has been chosen and we can vote if it is a votable motion as this one is.

Most of the motions go by after debate for an hour and are set aside and nothing is ever done. What a total waste of the time of representatives elected by the people to run the country.

My colleague from Portage—Lisgar has brought forward a very important motion that would provide for a tax break on the money used to pay interest on a mortgage. I think that is absolutely necessary.

When I was a young man, and of course that takes us back decades, it was considered a big expenditure to buy a home. At that time when my wife and I bought our first home. The capital expenditure was $20,000; that was the price of our first home. I remember saying to my wife that a mortgage for 25 years was a long time. The amount of money we had borrowed was $14,000 and I calculated that we would pay over 25 years about $14,000 of interest and $14,000 against the principal.

I am speaking in round numbers, in case anyone is out there checking my mathematical credentials. I have rounded off liberally. If anyone wants the exact numbers, I will provide them. However this is a fact. To purchase a home at 6.5 % over 25 years one pays about 50:50 interest and principal.

Where does that interest go? It goes into the profits of people who have invested money through their banks and other financial institutions. The financial institutions turn around and give people like my wife and me a loan in the form of a mortgage.

It is absolutely incredible because as a home owner borrowing money I have to earn the money, pay taxes on the money and then with the money left after all the taxes pay interest. What happens to the people who receive the interest? They end up paying taxes on it.

As a matter of fact any business can deduct an interest cost as part of their business. Why can a family not deduct their interest cost as part of operating and providing for their family? My colleague is setting forth an eminently sensible proposal. I am amazed because I have read into what other members have been saying in their speeches that they will probably vote against it. It just blows me away. Why would they do that? Why would they continue to make it difficult for young families to get ahead, to buy homes and to start building some capital savings for their future?

Instead the government is most interested in tax, tax, tax and preferably tax the taxes, which it does too. That is another speech that I will give at some other time.

I urge all members to vote in favour of the bill. It is a very good bill. It is long overdue. It would put us, at least in this area, on an equal level with our American neighbours. Goodness knows what kind of a brain drain we have because our brightest young people are going to the States with its favourable tax situation and favourable job situation with a much lower rate of unemployment.

This is a very important measure. I urge all members to use their heads, to think independently and to carefully analyse, as we have done, the implications of the bill. Let us not hide behind technical excuses, that we cannot do this because of that. On and on they will go. Let us not do that this time. Let us rather make a bold decision to do what is right and to vote in favour of the bill.

[The Acting Speaker (Mr. McClelland)]

The mover of a bill in Private Members' Business is afforded the opportunity to recap. I must make clear, though, that the mover of the bill having spoken will terminate debate.

There being no other members on their feet, I recognize the hon. member for Portage—Lisgar.

[Jake Hoeppner, Reform, Portage—Lisgar, MB]

Mr. Speaker, it is a pleasure to get to stage of the bill.

First I thank all participants in the debate on this private member's bill. I appreciate their thoughts. I especially appreciate those of my colleagues in the Reform Party who supported me in this regard.

The bill concerns a tax refund or a tax reduction. This will make home ownership more achievable for many. It is my intention that young families would reap the benefits of the legislation. My concern has been to do something right in the House to benefit future generations. I have children and grandchildren so that is why the bill is so dear to my heart.

In the aftermath of the government's budget it has become apparent to Canadians that the Liberals ignored their demands for tax relief. Canadian taxpayers shouldered the load for the elimination of the federal deficit, but the Liberal government apparently has no interest in giving them relief through tax reductions. This was a serious oversight on the government's part.

What a great opportunity for all members to support the bill and take a small step in righting that which was not done in the budget. This is especially important when we realize that we are asking young families to deal with a taxation burden never seen before in Canadian history. Going into the next century they are being forced to service Canada's $600 billion debt.

A representative of the Toronto-Dominion Bank stated that on a typical 25 year mortgage at 6.35% first time home buyers could claim $1,700 on their income tax. That is a tremendous amount of money for some young families. That is a good amount of extra money for a young family that is starting out. It would be especially good, considering that federal taxes will continue to increase to service our needs.

If members agree that the family is an essential building block for a strong society they should support the bill. By making it a little easier for families to acquire homes and build up some equity in them we would be supporting an essential building block of the nation.

If hon. members explain the bill to their constituents it would be widely supported. History has shown that in times when Canadians have been able to afford homes there has been a tremendous uplifting effect on the economy.

I have received numerous letters from individuals and groups in support of the bill. Those people with knowledge of the housing industry have given very positive support because they realize it will make home ownership more attainable for Canadians and therefore will create beneficial spin-off effects for the Canadian economy.

Young families would have extra money for appliances and furniture. They could possibly purchase big ticket items which were previously out of reach. They might be able to afford a better car or they might be able to put a few dollars away for education.

It is true that there is a program that allows putting RRSP funds toward a home. After many young people pay for rent, clothing and food there is no money left for RRSPs. The bill would give them a hand.

I hope all members of the House will recognize the bill as something non-political to give young people the opportunity to invest, to own a home in which they can build equity and in future years will be an asset for their retirement.

When I look at the building of the country and the homes that were affordable at the turn of the century and compare them to the homes of today, I wish and hope that every young couple could afford a home in the future. The quality of the homes has improved and the quality of family life will have to improve. I hope that we as a House take that issue seriously.

To comment on what support I feel this bill will get, the saying no news is good news and not having heard from the Liberals tonight, I am sure that every one of them is supporting this bill. I congratulate them for that.

I hope that when this bill goes to a vote they will show up and exercise their right and support the young families that would love to move into these new homes with a tax break, that they will receive some beneficial effect of carrying the burden of debt that we have put on their shoulders, and that they can have a more comfortable home doing it.

[The Acting Speaker (Mr. McClelland)]

Pursuant to order made earlier today, the motion is deemed to have been put and a recorded division deemed demanded and deferred until Tuesday, April 21, 1998, at the expiry of the time provided for government orders.

A motion to adjourn the House under Standing Order 38 deemed to have been moved.

[Garry Breitkreuz, Reform, Yorkton—Melville, SK]

Mr. Speaker, last July the commissioner of the RCMP accused officials in the Department of Justice with misrepresenting RCMP firearm statistics by overstating the number of firearms involved in violent crimes. He also criticized the Minister of Justice and the Canadian Association of Chiefs of Police for using these false and misleading statistics during the debate on Bill C-68, the firearms act.

I obtained the RCMP commissioner's letter by using an access to information request. Here are some excerpts. They are rather long:

The RCMP investigated 88,162 actual violent crimes during 1993, where only 73 of these offences, or 0.08% involved the use of firearms.

The RCMP investigated 333 actual homicide offences, including attempts, but only 6 of these offences involved the use of firearms according to the statistics provided to the Firearms Control Task Group.

We determined that our statistics showed that there were 73 firearms involved in a violent crime compared to the Department of Justice findings of 623 firearms involved in a violent crime.

It is of particular concern that the Minister of Justice and the Canadian Association of Chiefs of Police relied on these statistics while Bill C-68 was being processed in Parliament as evidenced by statements in the report, “Illegal Firearm Use in Canada”.

The incorrect reporting of RCMP statistics could cause the wrong public policy or laws to be developed and cause researchers to draw erroneous conclusions. Considering the data is clearly marked as belonging to the RCMP, we must accept ownership and responsibility for the harm the data may cause. For these reasons, something must be done to remove it from circulation.

I asked the Minister of Justice to explain why the RCMP's analysis of its own firearm and violent crime statistics has never been made public?

The misleading analysis of the RCMP data was introduced six times into the Alberta Court of Appeal by the Department of Justice and interveners supporting the federal government.

Will the minister explain why the RCMP's analysis of its own firearms data was never introduced into the Alberta Court of Appeal? Why was justice department lawyer David Gates removed as a federal government lawyer in the provincial court challenge of Bill C-68? Why was a government lawyer replaced by a lawyer from the private sector midway through this important case? Did Mr. Gates object to the affidavits being filed by his own department?

On September 3, 1997 Tony Dittenhoffer, senior researcher for the Canadian Firearms Centre, sent an e-mail message to CFC's director of policy and programs, Gordon Parry: “It is important that we have full explanation on the public record”.

Can the minister explain why Mr. Dittenhoffer did not make this important information public when he appeared as a witness before the Alberta Court of Appeal? Why is the minister ignoring the advice of her own bureaucrats?

Yesterday the minister received a letter from the Canadian Police Association which said that the misuse of RCMP firearms and violent crime statistics in public, in Parliament and possibly the courts “will result in a justifiable lack of confidence amongst Canadians”.

How does the minister intend to restore the public confidence that has been shattered by the revelations in the RCMP commissioner's letter.

Manitoba Attorney General Vic Toews has said this is an example of the police being used as political tools. This it will breed disrespect for the law.

When the government rams through this 137 page bill and 130 pages of regulations, it has to answer this final question. Is that why the minister and her bureaucrats did this and why—

[The Acting Speaker (Mr. McClelland)]

The hon. Parliamentary Secretary to the Minister of Justice.

[Eleni Bakopanos, Liberal, Parliamentary Secretary to Minister of Justice and Attorney General of Canada]

Mr. Speaker, I take great objection to some of the allegations made by the hon. member and I will answer him in the same manner that he chose to ask the questions.

I will quote word for word from the letter that the minister tabled in this House from the RCMP dated March 20, 1998:

I am responding to Lorne Gunter's column of March 15, 1998 titled “False stats used to support gun registry”. The column did not indicate that on December 30, 1997 the RCMP commissioner wrote the Department of Justice indicating that we had reached an understanding on the statistics and how they were reported in “The illegal Movement of Firearms in Canada”.

There was simply a different methodology used by the RCMP and the Firearms Smuggling Work Group in interpreting the original data. As part of our examination, we were focusing on criminal incidents in which a firearm was actually used in the commission of a crime. The Firearms Smuggling Work Group's examination criteria were broader, gathering information on all firearms recovered by police and categorizing them according to their circumstances. Not surprisingly, this generated a discrepancy which was the source of our original concerns. With this methodological approach we are satisfied that the conclusions of the smuggling report are reasonable, and are satisfied that there is no need to amend the report.

I want to once again state that the RCMP continues to fully support the new firearms legislation and its objectives.

[Peter MacKay, Progressive Conservative, Pictou—Antigonish—Guysborough, NS]

Mr. Speaker, I have been listening very intently to the comments by the hon. member from Yorkton—Melville as well as to the parliamentary secretary.

I rise on the same subject matter. It has been brought to the House's attention that the data on which Bill C-68 has been based are seriously flawed. On July 21, 1997 the commissioner of the RCMP wrote to the deputy minister of justice informing him that the RCMP data used by the government and by the department officials during the debate over Bill C-68 were in fact flawed.

This is shocking. The statistics that were put forward and the references in both letters mentioned by the hon. member in the opposition set out that there is a serious problem here that has to be addressed. The commissioner states unequivocally that the incorrect reporting of the RCMP statistics could cause wrong public policy or laws to be developed and cause researchers to draw erroneous conclusions. That was in July 1997.

There is a lot of water under the bridge and a lot of things have happened since that time, including a challenge to the Supreme Court of Alberta by four provinces and two territories.

The serious question is have those statistics been put before the Alberta Court of Appeal without qualification, without correction if that is what is necessary? This is a very serious matter if that is in fact what has happened.

The allegations by the commissioner himself that they do not want the RCMP name attached to these statistics unless corrections are made speak in and of themselves to the confidence that the RCMP has in these statistics. Yet there is no disclosure, there is no open dialogue here on the part of the government. What we are getting here is that the RCMP is now satisfied, or certain members may be satisfied.

We want to know what has transpired from the time the commissioner wrote to the minister or deputy minister and what is this talk of methodological difference or somehow this has been glossed over. What does methodological difference mean? Does that mean economical with the truth? Does that mean these statistics have been used to spin a certain purpose or a certain objective?

There are many concerns that arise out of this bill, not the least of which is the broad widespread opposition that exists in rural parts of Canada.

The cost element again is something that has been exposed as being completely erroneous. The government suggested that it is going to cost $48 million. It has already exceeded $100 million. It is going to exceed $500 million.

Recent information that has surfaced and been brought forward to the House must cause the government serious concern. There are questions that have to be answered by the minister or by the government. If the conclusions that have been drawn, conclusions the government wanted Canadians to draw, are based on seriously flawed statistics that do not truly represent the incidence of violent crime and the use of firearms in the country, that is something that has to be addressed and has to be corrected soon.

The e-mails and letters that have been sent back and forth between various government officials and members of the RCMP have to be looked at in a very close and meticulous way before we go any further with this piece of legislation.

The minister has a duty to the House of Commons and she has a duty as a lawyer to slow the process down and give Canadians the truth on what has taken place in this process.

As a member of the opposition it is my responsibility to ask questions. As members of the government it is their responsibility to give us answers, and truthful ones.

[Eleni Bakopanos, Liberal, Parliamentary Secretary to Minister of Justice and Attorney General of Canada]

Mr. Speaker, as the minister answered in the House, we have been truthful and we have brought forward all the information.

This question has been discussed many times. Not only is the RCMP now satisfied with the report, the hon. member should also understand that the firearms smuggling work group conducted the original study. Membership of the group included experts from the RCMP, the Ministry of the Solicitor General, the Canadian Association of Chiefs of Police, the chief provincial firearms offices in both Quebec and British Columbia and the Ontario Provincial Police. The group selected the researchers and the principal researcher was under secondment from Statistics Canada.

Most recently, the RCMP reviewed the statistics—they were available—this time counting only those guns actually used in crime. If you ask a different question you must expect a different answer, and that is what happened in this case.

Commissioner Murray stated in his letter of December 30, 1997 which was quoted earlier: “The RCMP now understands the scope and methodology of the original”.

There is also question about the firearms mentioned in the original RCMP letter and cited by the hon. member for Yorkton—Melville. The member indicated that only 73 of the 88,000 violent crimes investigated by the RCMP involved firearms. This is simply not possible. Statistics Canada indicates that there were 195 firearms homicides in that same year and more than 8,000 firearms robberies were committed. Given that the RCMP is responsible for policing about 25% of Canada, if this is true then the investigation is a larger proportion than that indicated by the member.

I remind the House that recent events in the United States have shown us again that this legislation is important to Canada and to the safety of our fellow Canadians.

[Pat Martin, NDP, Winnipeg Centre, MB]

Mr. Speaker, this is the last and final day for working people in the provinces of Ontario and Quebec to invest in labour sponsored venture capital funds as RRSP contributions. Their timeframe has been lengthened due to the time lost during the ice storm.

Indications are that the contributions to labour sponsored venture capital funds for this year will be down dramatically, a total of $505 million by March 1, compared to $1.2 billion in 1995.

The industry officials feel this slide in contribution rates is due to the changes made to the tax system where the rate of contribution or the maximum allowable contribution has been lowered from $5,000 to $3,500. The maximum tax credit was reduced to 30% from 40% and the minimum holding period is raised to eight years rather than the previous five years.

Another rule upsets the industry in that a person is disallowed from reinvesting in a fund for two years if that person withdraws money out of the fund.

All these factors have had a devastating effect on the health of these important financial instruments and we cautioned the government that this would happen were these changes put into effect. At the current rate of decline in less than two years labour sponsored venture capital funds will be out of investment capital to invest in the community.

Conventional lending institutions, chartered banks especially, have not been meeting the needs of industry with adequate supply of venture capital. No matter what they say in their ads or their promotional material the fact is small to medium size businesses willing to expand their operations and grow their businesses and create jobs are being turned down flat when they go to their banks for business loans.

It does not seem to matter how good your business plan is or what your ideas are for increasing your business. More loans are being turned down than are being granted. This is unlike in the United States where banks are required through the community investment act to reinvest some of their profits every year into risk ventures that otherwise would not necessarily qualify for business loans. No such regulation exists in this country.

The banks will tell us about the small business loans they have actually given out, but a more telling figure would be to know how many they have turned down in the same period of time. This is all the more reason then that labour sponsored venture capital funds are important to small business.

In the province of Manitoba 80% of all venture capital put out last year was through the Crocus labour sponsored venture capital fund. In other words small businesses that are tired of going to banks and being turned down end up entering into an equity position with the Crocus investment fund. I am pleased to say there are more businesses in my inner city riding of Winnipeg Centre that have benefited from these funds than any other riding in the province.

The Minister of Finance and his department have stated in letters to the Crocus fund that they recognize the problem. They feel that perhaps they have gone too far in limiting the access to using the funds for RRSP purposes. They have promised to monitor the situation. To quote the Minister of Finance “action will then be taken if the situation warrants it”.

In light of the numbers now made public, $505 million down from $1.2 billion and the fact that within two years these venture capital funds will be out of capital to invest in the community, will the Minister of Finance review the situation now and make the necessary changes for the next RRSP season?

[Tony Valeri, Liberal, Parliamentary Secretary to Minister of Finance]

Mr. Speaker, first of all I would like to remind the hon. member that as a result of the generous tax assistance provided by the federal government and many provincial governments, labour sponsored funds experienced very rapid growth in the past few years.

When the decision was made to limit the tax assistance, LSVCCs had about $2 billion in assets. Despite the fact that LSVCCs raised about 50% less in the RRSP season which followed the 1996 budget, their total assets surpassed the $4 billion mark at the end of 1997.

As well, let us not forget that the LSVCCs are not the only providers of venture capital in this country. During 1996 the amount of venture capital in Canada rose from $6 billion to $7.1 billion. The availability of venture capital for Canadian businesses has never been greater. In fact, I pose the question, is there sufficient capital available to meet the demand? Let me provide a few figures.

At the end of 1996 labour sponsored funds had $1.4 billion available for investment in small businesses. They invested about $400 million in 1996, a record year for them. Based on this information there seems to be no evidence of a shortage of funds available for investment.

This is not to say as the hon. member has mentioned, that there is no need for ongoing monitoring of the situation. On the contrary, preliminary figures do indicate that LSVCCs invested in excess of $600 million in businesses during 1997. This investment pace combined with the possibility of large amounts of redemption could signify, at least in some provinces, future shortages of venture capital.

Last year's RRSP season was the first under a reduced tax credit. We need to analyse the results, the adequacy of the supply of venture capital and the efficiency of tax incentives at improving access to capital for small and medium size businesses to be able to determine if changes are warranted.

I want to assure the hon. member as in fact the Minister of Finance has assured him, that this government will continue to monitor the situation very closely and take measures to ensure that venture capital is in supply in strong measure in this country.

[Chris Axworthy, NDP, Saskatoon—Rosetown—Biggar, SK]

Mr. Speaker, some time ago I raised with the Minister of Industry the subject of innovation and research and development in Canada. In particular I wanted to know why the minister and this government had not made research and development a priority. Why do they continue to let Canada fall behind the rest of the world in this area?

The Minister of Finance in his most recent budget stressed that our goal must be “to make Canada not just a participant in the modern economy, but a world leader”. That is right. The problem is that budgets have put Canada further and further behind. All experts agree that Canada suffers from a serious innovation in R and D gap.

President Clinton of the United States recently stated that sustained prosperity requires a continuous stream of technological innovation. That is quite right.

The minister might say that they have increased funding to the three granting councils that finance research and provide grants to students. Those three research agencies have seen their budgets restored in this last budget to 1994-95 levels. In other words, this last budget simply restored some of the cuts. By the year 2000-01, Canada's support for basic research and education for researchers will be no higher than it was six years earlier.

There are no new dollars, no new investment in R and D. That simply is not good enough. Others in Canada agree.

The president of NSERC, the National Sciences and Engineering Research Council, recently said that more will have to be done in the coming years to build that capacity up to a competitive, world class economy. Even the Secretary of State for Research and Development has said the same thing. The president of Memorial University, just as an example, has said that Canada is acting like a third world country when it comes to R and D.

We are a vital trading nation. We need to get the message through to the government that we have to invest in the future. Other industrialized nations have listened and taken action. I mentioned President Clinton who has proposed future spending increases for institutes in the United States which are significant in comparison to ours.

The National Institutes of Research, the U.S. counterpart of the Medical Research Council, would see its funding rise by 50% by the year 2003, which is after steady increases through the 1990s, unlike in Canada. There is a 10% increase for the National Science Foundation, the U.S. equivalent of NSERC, building up to a 24% increase by the year 2003.

I could go on, but the point is that Canada is simply not in good shape when it comes to R and D and innovation. In fact while our funding has decreased, Australia, Germany and France have doubled their funding on basic research.

When the OECD studied this question, it called Canada a middle technology country along with other countries such as India, Greece and Mexico. Of the top 14 countries, only Italy's record on R and D spending is worse than Canada's.

This is not only embarrassing but it places Canada on a very dangerous path. Relying on other countries to do our basic research for us is simply not acceptable because it means that the information we get will be based on their priorities, not ours. The fact that Canada grossly underinvests in research and development is an important reason why the Canadian economy is left with more than 1.5 million people unemployed.

We know that Canada simply cannot continue in this way. We know that being competitive is the way in which we will make our way in the world. It is time this government and this minister recognized that and acted accordingly.

[Tony Valeri, Liberal, Parliamentary Secretary to Minister of Finance]

Mr. Speaker, Canada's innovation gap was first mentioned in 1995 when the OECD stated that Canada had low levels of R and D expenditures and industrial innovation when compared to other developed countries. Since that report was released, this government has in fact taken bold initiatives to improve the situation.

We have created Technology Partnerships Canada, a $250 million a year investment with the private sector, to assist the development and commercialization of new technologies. As of April 1, 1998, TPC will have approved $521 million in R and D investments which will lever $2.2 billion in R and D and downstream investments by industry.

We established the Canada Foundation for Innovation, an $800 million partnership investment to renew research infrastructure across Canada. The CFI issued a request for proposals on December 9, 1997.

We also renewed our commitment to the networks of centres of excellence by making this program permanent at a level of $47 million annually. Over 400 firms and industry associations are network partners who have benefited from leading edge research.

We established a partnership between the Medical Research Council and the Canadian Medical Discoveries Fund to help bridge the innovation gap for life sciences research through investments which will commercially exploit research in universities and hospitals.

We have given the Business Development Bank of Canada a new mandate to support the growth of knowledge based, export oriented small businesses.

We are working with private and public sector partners to ensure that all of Canada's 16,500 schools and 3,400 libraries are connected to the Internet by 1998. We are also setting the conditions for Canada to become a laboratory for the creation of interactive, multimedia learning software and networks.

These actions demonstrate clearly that we are committed to making Canada an innovation based economy.

[The Acting Speaker (Mr. McClelland)]

The motion to adjourn the House is now deemed to have been adopted. Accordingly, this House stands adjourned until tomorrow at 2 p.m. pursuant to Standing Order 24(1).

(The House adjourned at 7.24 p.m.)