EVIDENCE Standing Committee on Finance NUMBER 016 1st SESSION 41st PARLIAMENT Tuesday, October 18, 2011 Le mardi octobre Standing Committee on Finance CANADA [Recorded by Electronic Apparatus] EVIDENCE October 18, 2011 Committee Edited Evidence * Table of Contents * Number 016 (Official Version) Official Report * Table of Contents * Number 016 (Official Version) Témoignages * Table des matières * Numéro 016 (Version officielle) 16 18 10 2011 2011/10/18 10:00:00 House of Commons Comité permanent des finances Standing Committee on Finance FINA Chair Mr. James Rajotte 41 1 (1000) [ English ] The Chair (Mr.

James Rajotte (Edmonton—Leduc, CPC)) : Good morning, everyone. I'll call this meeting to order. This is the 16th meeting of the Standing Committee on Finance. We are continuing our pre-budget consultations for 2011. We have two panels this morning. In our first panel we have seven organizations joining us here: the Canadian Construction Association, the Canadian Cooperative Association, the Canadian Healthcare Association, the Canadian Institute of Chartered Accountants, the Canadian Union of Public Employees, the Canadian Wireless Telecommunications Association, and the Hotel Association of Canada.

Thank you all for being with us. You'll each have a maximum of five minutes for an opening statement. We'll begin with the Canadian Construction Association, please. Ms. Nadine Miller (Chair, Canadian Construction Association) : Thank you, Mr. Chair. On behalf of the more than 17,000 members of the Canadian Construction Association, I want to thank you for providing us with this opportunity to appear before you today and share our views regarding the economy and our recommendations for this year's federal budget. My name is Dee Miller and I'm chair of the Canadian Construction Association.

In my outside world I am vice-president of JJM Construction, based in Delta, British Columbia. We're involved in road building, marine construction, and highway and bridge construction. I'm joined here today by our president from CCA, Michael Atkinson. With ongoing global economic uncertainty, it's not surprising that construction remains the choice of governments around the world as the best investment for economic stimulus. In Canada, construction accounts for 7% of our nation's GDP and employs over 1.25 million Canadians.

We are by far one of Canada's largest economic drivers, and our industry is projected to continue to grow throughout the decade. A recent report commissioned by PricewaterhouseCoopers forecast that Canada's construction market will become the world's fifth largest over the course of this decade, in part due to strong global demand for Canadian energy and natural resource exports.

In short, new infrastructure requirements to support the growing commercial needs of our economy as well as the long overdue renewal of our public infrastructure assets will become the primary driver of construction activity in Canada for the foreseeable future. Given that infrastructure is critical to the functioning of our economy as it impacts not only productivity but ultimately business profitability, we believe new solutions will be required to help share the tremendous costs associated with the expansion and renewal demands of our nation's infrastructure.

One solution to help lower the fiscal burden on governments will likely be public-private partnerships, which is something we have considerable experience at in British Columbia. However, this has drawn to Canada a large number of international firms that carry out much of their engineering and other back office functions in lower-cost countries. Furthermore, these firms often bring with them below market financing that makes it very difficult for Canadian firms to compete within our very own home market.

While our industry does not support protectionism, we expect that the federal government, when tendering P3 projects, will ensure that a level playing field exists and that Canadian companies are not disadvantaged. We're also very concerned about the capacity of cities to continue to fund their share of the infrastructure renewal burden. Since most cities do not have access to growth taxes, the annual transfers they receive from the federal government through the gas tax fund have become instrumental to their capacity to pay for infrastructure renewal.

Making this transfer permanent, as outlined in the government's last budget, is an important first step, but unless this transfer is indexed, inflation will erode the effectiveness of this program over time. So our first recommendation is that the federal government index the current gas tax transfer fund to the cost of inflation. Canada must also ensure that it has an adequate supply of labour. In construction, we expect a shortfall of 325,000 workers by due to retirements and increased demand for construction across Canada.

In a best-case scenario, we expect colleges and other training facilities will help fill approximately half of our new labour requirements, still leaving a shortfall of 150,000 workers. Therefore, going forward, our industry will continue to rely on Canada's immigration system to help fill nearly half of our workforce requirements. However, with chronic processing backlogs within Citizenship and Immigration Canada, our pressing demand for foreign skilled workers will never be realized unless significant new resources are dedicated by Parliament to overcome this challenge.

Therefore, CCA recommends that Parliament increase the annual budget to Citizenship and Immigration Canada, so as to permit the department to reduce, if not eliminate, the processing backlogs within the skilled foreign worker program. Another area of concern for our members is red tape and the cost of regulatory compliance. We are pleased to see the government taking action on this issue, and we look forward to the outcome of the red tape commission's review. One example we used to illustrate our frustration with red tape to the commission is that of security clearances.

When a contractor works on a military base for DND, it needs to obtain security clearances for firms and employees. If we decide to work at an airport, we have to go through this entire process again, which makes no sense, since CSIS and the RCMP are responsible for carrying out these reviews. The Chair: You have one minute. Ms. Nadine Miller: CCA members believe Canada needs to streamline its regulatory systems.

To this end, we recommend that the federal government engage with the provinces to undertake a broader review of federal government regulations, with a view to eliminating duplication and streamlining the regulatory compliance process.

(1005) Finally, we believe the federal government can play a significant role in improving economic productivity through the use of tax incentives designed to encourage Canadian industry to invest in the modernization of our businesses. CCA strongly recommends that the government extend the application of the current accelerated capital cost allowance for machinery and equipment to diesel-powered mobile equipment and machinery as well as to heavy-duty off-road vehicle purchases. Mr. Chair, this concludes my presentation. I hope you found it of interest and I look forward to answering any questions you might have.

The Chair : Thank you, Ms. Miller. We'll now hear from Mr. Anderson, please. Mr. John Anderson (Director, Government Affairs and Public Policy, Canadian Co-operative Association) : I want to thank you very much for giving the Canadian Co-operative Association the chance to present to you today. The 9,000 cooperatives and credit unions in Canada have over million members and $376 billion in assets, and they employ over 150,000 people. We are particularly pleased to be here this year because has been declared by the United Nations to be the International Year of Cooperatives.

We want to thank the Government of Canada for its consistent support for this UN year. We will be launching the international year on November at our parliamentary reception and across Canada on January in locations. We are also happy to be presenting here this week because it is Co-op Week, an annual event aimed at recognizing the contribution of cooperatives. The theme of this year's Co-op Week is the same as the theme of the international year: “Cooperative Enterprises Build a Better World”.

In his Co-op Week message to CCA, Prime Minister Harper noted: Co-operatives have helped many people and organizations find solutions to social and economic challenges in their communities, and this special week offers Canadians a chance to express their appreciation for the benefits that co-operatives provide. Recently the cooperative model is back in the news. For example, in the U.S., in the recent health care debate, and in the U.K. around public policy, there is talk of how to use the co-op model on a wider and more effective basis.

During the recent years of economic downturn, co-ops generally did well around the world because they are community-owned, make profits that go back into communities, and have set reasonable levels of staff pay, including that for CEOs. Just two weeks ago, out of the top employers featured in The Globe and Mail , three were cooperatives. In Saskatchewan, 11 of the top employers were cooperatives and mutuals. Cooperatives generally last much longer than investor-owned businesses, as a Quebec government report and a new B.C. study have both shown. But they often need help in getting started.

This is why we are proposing three legacy budget projects for the international year. All of them are partnerships between the co-op sector and the federal government; thus, for moderate amounts of government funding or foregone taxes, substantial amounts of capital can be leveraged. But it is not only capital that will be leveraged. One of the fundamental principles in the co-op sector is that of self-help; of communities and groups of people pulling themselves up with their own sweat equity.

This is the working principle that built an oil refinery in Regina in the depths of the crisis of the 1930s, a federation of co-ops in Nunavut and the Northwest Territories in the 1960s, and more than credit unions across Canada since 1900. These three projects are backed by many prominent cooperative organizations, including the Credit Union Central of Canada, Desjardins, Co-operators General Insurance Company, and the Co-operative Housing Federation of Canada. The first project is a federal cooperative investment plan based on Quebec's Régime d'investissement coopératif, which has existed since 1985.

It would provide a federal tax credit for co-op members and employees who invest in producer—that is to say, agriculture, fishery, forestry—and employee-owned cooperatives. Such a plan at the federal level is estimated to cost between $17 million and $20 million per year and would produce $120 million per year of new investment across Canada. This is a plan that the Canadian Federation of Agriculture has consistently ranked as one of their top priorities.

The second project is a cooperative development fund, which would be co-funded by the federal government and the co-op sector, that would provide large and medium-sized capitalization loans to new and emerging cooperatives. This sector is requesting a one-time federal government contribution of $70 million, after which the fund would be self-sustaining. This federal contribution would leverage important contributions from the cooperative sector.

In the federal government commissioned PricewaterhouseCoopers to examine the model for this new fund, and they concluded that the potential impact of the fund is positive and will assist emerging and existing cooperatives to grow and expand. These two projects were endorsed by the House of Commons finance committee in your December pre-budget report. The third project, the last one, is a permanent and expanded federal cooperative development initiative.

This is a program that provides grants and technical assistance to new and emerging cooperatives, and we hope can help also in providing solutions to business succession when new employee- and community-owned businesses can provide an alternative to the closure of family owned firms. This program was started in 2003, renewed in 2009, and goes until March 2013. This program is managed by the two national cooperative organizations.

Since 2009, 521 groups have applied for project funding, 140 projects have been funded in the last three years, and over cooperatives have been created through another arm of the program. It has also helped to leverage additional resources from provincial governments and our own charitable fund. In conclusion, I would say that cooperative enterprises can indeed help build a better Canada. Thank you very much.

(1010) The Chair : Thank you for your presentation. We'll now hear from Ms. Fralick from the Canadian Healthcare Association. Ms. Pamela Fralick (President and Chief Executive Officer, Canadian Healthcare Association) : Thank you, Mr.

Chairman, for the opportunity to speak to the committee. [ Translation ] I am going to speak to you in English, but I am always ready to try to answer your questions in French. [ English ] I thought I would take a moment to make sure that everyone on the committee understands on whose behalf I am speaking today: the provincial and the territorial health associations and organizations across the country.

This runs from the Newfoundland and Labrador Health Boards Association, through the Health Association of Nova Scotia, all the way across to the Health Employers Association of British Columbia, and also into the territories. You may have heard of us many years ago as the Canadian Hospital Association, but we now cover the continuum of health, and thus our name reflects the broader mandate. We're currently celebrating our 80th year of work on behalf of Canadians. Our board of directors is a bit different from many in the health world. It reflects the face of the public.

Members have emerged from local hospital and health boards. They've risen to govern at the provincial level and they now come to speak at the national level with CHA. They are HR experts from the mining and forestry sectors, registrars of community colleges, superintendents of educational systems, and chartered accountants. They run insurance companies and real estate firms; they work in sales and retail. They are the public, they are the voters, and they have strong messages to deliver. Perhaps most importantly, they are responsible for the allocation and monitoring of billions of dollars of public funds.

You have asked us to help you deal with ongoing difficult financial times, and we get that. You've asked us to bring concrete, doable solutions. We get that as well. You've asked us to be as specific as possible and you've also asked us to limit our recommendations to three. Well, we have more than three, but we're committed to respecting the committee's parameters and we're pleased to offer three concrete, doable recommendations, which I'll briefly review today, knowing that you have received the material in advance.

One additional comment that I would make before I do so is that CHA supports a very strong role for federal leadership in the health of the nation within our Canadian model, which confers the constitutional responsibility for health to the provinces and territories. We specifically require that this federal leadership help us move from a focus only on the illness system to one that truly addresses the need for a wellness system.

We need to keep Canadians out of hospitals; we need to prevent their becoming ill and move them quickly from acute care to appropriate continuing care; and again, we need courageous federal leadership to do so. That is a nice segue into the first recommendation. The recommendation is to reduce health system costs over time and target funds from current resources—new ones, if we have them, but current resources—to population health initiatives.

The Naylor report, with which you're probably familiar—and I can go into more detail, of course—recommends funding public health services in the amount of $1.1 billion per year and is a good starting point. The annual economic burden of direct and indirect costs of illness in Canada is estimated to be $188 billion. We need prevention. There is currently no earmarked funding for health promotion and disease or illness prevention activities under the Canada health transfer to date. Recommendation number two is to leave needed dollars in the health system by modernizing and bringing equity to the current

interpretation of rules concerning the GST-HST rebate eligibility criteria in the Excise Tax Act. This is a complicated issue, but we estimate that $300 million is being taken out of the health system. It's being given with one hand and taken away with the other, and we feel it needs to stay where it is initially given. Our recommendation number three is to enhance the health sector. It's about EHR and EMR, folks. We need to get these moving. There are funds being made available to emerging health professionals only within the physicians', nursing, and pharmacists' professions.

The rest of the workforce has never had this training. If we truly want to start taking advantage of the innovative processes and pieces that are coming forward, there are programs existing, we feel, that could be opened to these other health professionals to make them more amenable to the new technologies. I will finish with a thank you for hearing me, and I look forward to questions.

(1015) The Chair : Thank you for your presentation. We'll now hear from the Canadian Institute of Chartered Accountants. Mr. Gabe Hayos (Vice-President, Taxation, Canadian Institute of Chartered Accountants) : Good morning. My name is Gabe Hayos, and I'm vice-president of taxation with the Canadian Institute of Chartered Accountants. On behalf of Canada's 78,000 chartered accountants, thank you for the opportunity to appear before this committee.

In my remarks today, I will cover the CICA's views and priorities for the federal budget, highlighting measures we believe will support the nation's economic recovery by helping Canadians and Canadian business prosper. Recommendations include simplifying taxes and easing the personal income tax burden, reducing red tape, enhancing Canada's tax incentives for innovation, enhancing financial literacy, encouraging retirement savings, and continued support for international credential recognition.

With respect to red tape reduction, an element of key importance to the CICA's view is that the federal government's administrative agencies should focus first on providing compliance assistance, rather than focusing principally and perhaps almost exclusively on regulatory enforcement. We believe that a positive attitude change towards compliance assistance, motivated by a supportive tone from the top being expressed by ministers and their deputies, will contribute meaningfully to red tape reduction and enhanced efficiency in government.

Canada's domestic tax system must be simplified to lessen the regulatory burden placed on Canadian business, and we recommend that the federal government establish a national consultation process to obtain input on tax simplification initiatives. Measures that merit consideration include pursuing greater federal-provincial tax harmonization across all tax systems, adopting a loss transfer system of taxation for corporate groups, and extending personal income tax filing dates for those with income from trusts or partnerships.

The government's commitment to reducing the general corporate income tax rate to 15% by is important to our ongoing economic recovery and should be applauded. We also encourage the continued adoption of policies recommended by the Advisory Panel on Canada's System of International Taxation. We believe that action should be taken to improve our scientific research and experimental development tax incentives and that tax credits should be made partially refundable for all businesses.

In order to stay competitive and attract and retain human capital, Canada must stay attuned to the personal income tax burden placed on Canadians. Canada's chartered accountants favour the use of broad-based tax reductions over targeted measures. Over time, we encourage the government to increase the top two tax thresholds and the rates that apply to them, in order to bring them in line with those of our global competitors. Key to balancing this broader approach is the need to examine the appropriate mix of personal tax and consumption taxes.

Canada relies on personal income taxes to a greater degree and on consumption taxes to a lesser degree than the OECD average. Adjusting the revenue mix would improve Canada's tax competitiveness. We recommend that the government consider changing the revenue mix to bring it closer to the OECD averages. Reducing income tax on personal savings is crucial to helping Canadians prosper over the longer term. With this comes the need to enhance financial literacy to ensure Canadians have the financial skills to make the best choices on planning for their retirement.

Our research shows a clear link among financial literacy, higher rates of savings, retirement preparedness, and financial planning. We urge the government to continue its commitment to financial literacy. The CICA is working to support a national collaborative financial literacy strategy and will soon be launching a program to provide Canadians with the knowledge and confidence required to take control of their finances. With respect to the retirement income system itself, we support the government's commitment to increasing contribution limits to tax free savings accounts.

We believe reducing the income tax on personal savings will provide an incentive for savings and make the tax system more efficient, effective, and competitive. As an example, we recommend raising the RRSP maximum contribution limits and also taxing RRSP withdrawals according to the nature of the underlying income—that's capital gains, dividends, or interest—rather than all of it being taxed as ordinary income.

Finally, skilled professionals are vital for Canada's future, and the CA profession encourages the government's ongoing commitment to easing the transition of internationally trained professionals into the Canadian workforce. We support the development of streamlined bridging programs that help these professionals resolve any educational or experiential gap, so they can contribute their full potential as quickly as possible. To conclude, we believe the nation's economic recovery can best be supported by enacting measures that help Canadians and Canadian business prosper. Mr.

Chairman, thank you for the opportunity of appearing before this committee. I would be pleased to respond to any questions.

(1020) The Chair : Thank you very much for your presentation. We will now hear from the Canadian Union of Public Employees, please. Mr. Paul Moist (National President, Canadian Union of Public Employees) : Thank you very much, Mr. Chairman. Good morning. CUPE is very privileged to represent just over 600,000 Canadians, people delivering front-line public services from coast to coast to coast.

Our members don't just deliver these services; they depend on them as accessible, affordable, and quality features of our lives, and they're hit twice by restraint measures if they occur: they lose their jobs and they lose the services. The average salary for a CUPE member is just under $40,000 a year. The value of public services in totality that each Canadian receives is worth about $17,000 a year. Three years after the financial crisis struck, we continue to be in very difficult economic times. We ask this question: are we any further ahead?

Further recessions are imminent or arguably under way in the United States and Europe, thanks in large part to austerity measures, little progress on financial sector reform globally, more bank failures, particularly in Europe in the last week, and bailouts. We still have in Canada officially 1.3 million Canadians out of work and many more who have given up looking for a job. We've had slow job growth and negative real wage growth since the recession hit three years ago. Household debt—and I know Mr. Carney has spoken to this committee about this—is at record levels: 150% of income.

Public services are being cut and workers are being laid off while government maintains planned corporate tax cuts, which are adding $0.5 trillion in excess cash that, for the most part, corporations are hoarding and not investing at this point in time. The sale of luxury goods going up and dependence on food banks rising speaks to rising inequality in our country. Supply-side economic policies of corporate tax cuts, deregulation, and cuts to public spending haven't worked. We have a demand-side problem, worsened by structural inequality.

The International Monetary Fund, and recently the Conference Board of Canada, raised alarm about rising inequality hurting economic growth in Canada. Warren Buffett and many others are calling for government to raise taxes on those with the best ability to pay. Alex Himelfarb, a former Clerk of the Privy Council, wrote in The Globe and Mail on the weekend about that very subject matter. No wonder people are fed up and increasingly taking to the streets around the world. We need job growth, and workers also need decent real wages and services.

We don't need government policies interfering with free collective bargaining rights. That will make labour relations worse in our country. If workers don't have a voice and are constantly threatened by strong-arm measures favouring employers, they can't be expected to work productively. Austerity measures and federal spending cuts announced in the last budget were a mistake. We need to sustain and expand services, jobs, and spending, which are historically low in terms of the share of our economy. Public infrastructure investment was instrumental in stimulating economic recovery three years ago.

Funding for future years has been depleted. We need additional infrastructure investment, better planned, with a long-term commitment. I'll close with our three general recommendations. First, we need to sustain and expand services, jobs, and spending, in particular cancelling damaging federal program spending and job cuts from the last budget and protecting current rates of increase for social and health transfers to our provinces.

Second, we need to promote investment in sustainable growth and job creation, in particular making a long-term federal commitment to investment in public infrastructure, particularly public transit, to the tune of $18 billion needed over the next five years. We could start with an additional cent from the federal gas tax, which would be worth about $400 million, provided to municipalities to devote to public transit. Finally, Mr. Chairman, we need to implement fair tax reform both to improve the functioning of the economy and to generate revenues to pay for public services.

Here are two examples: set aside planned corporate tax cuts, and implement fair taxes on the financial sector—a financial transactions tax or a financial activities tax could generate about $5 billion a year in Canada. Thank you, Mr. Chairman. We look forward to any questions.

(1025) The Chair : Thank you for your presentation. We'll now hear from the Canadian Wireless Telecommunications Association. Mr. Bernard Lord (President and Chief Executive Officer, Canadian Wireless Telecommunications Association) : Thank you very much, Mr. Chair. Good morning to all of you. I'm pleased to be here this morning. I have a good news story to tell this morning. It's about the wireless sector in Canada. It's a fast-growing sector. It creates thousands of jobs.

It enables our communities and our families to be better connected, and it makes our communities safer as well. [ Translation ] The industry is enjoying tremendous growth. We are not here to ask you for money, but to tell you that things are going well and that certain steps can be taken to ensure that things keep going even better. [ English ] The wireless sector in Canada is a major driver of economic activity across all sectors of the economy, and it’s one of the few true enablers of success and growth in all other sectors of the economy.

Just to give you an example, traffic on Canada’s networks is growing exponentially. Some of our networks are growing at 5% per week. Now, most other sectors of the economy would be thrilled to have 5% growth in a year. But 5% growth a week means that the traffic on our networks will more than double; it will be times more by 2015. This means there's an ongoing requirement to make massive investments in networks to make sure Canadians continue to enjoy the service they want. We provided a submission to the committee. We also shared with you a slide deck.

On one of those slides, slide 3, you can see the contribution of the wireless sector in Canada. You can see it's $41 billion a year. [ Translation ] This is a contribution of $41 billion to the Canadian economy, $17 billion of which is a direct contribution to the gross domestic product, $15 billion is in indirect flow-through and $9 billion is in consumer supplies. [ English ] And you can see how this compares to other sectors of the economy.

But what we see and what's happening in the wireless world is something truly remarkable, and that is the combination of wireless telephony with broadband Internet to create the mobile broadband Internet. That's truly what Canadians want from coast to coast to coast, and that's what the wireless sector wants to deliver. If you look at slide 4, and this is a very interesting slide, you will see it gives an indication of what's happening in the wireless sector. A smartphone will consume times the bandwidth of a traditional feature phone. A laptop will consume over times the bandwidth of a traditional feature phone.

This is exponential growth. If you compare it to highways, for instance, it's as if we had a four-lane highway this year, and next year we'd have to have an eight-lane highway and a sixteen-lane highway the year after just to satisfy the traffic. The increase will be times between now and 2015. One of the roadblocks we face in Canada is high government spectrum licence fees. I refer you to slide 5. This compares the spectrum licence fees that are paid by the wireless sector to governments in all G-7 countries. You can see that Canada has the highest spectrum licence fees in the G-7.

In fact, Canadian wireless carriers hold licences for less than 2% of all the licensed spectrum in Canada, yet they pay for over 50% of all spectrum licence fees in Canada. If we had a regime comparable to that of the U.S., the wireless sector would pay $4 million in fees. In 2009, the wireless sector paid $130 million in fees. This is simply an obstacle to investment and an obstacle to growth in one of the fastest growing sectors of our economy. If you look at slide 6, you will see the investments that have been made by this sector in recent years.

While other sectors were struggling from to 2010, this sector of the economy made record investments in our networks around the country. All this is to say, Mr. Chair, that we have three recommendations to make. The first is to introduce in a temporary accelerated capital cost allowance for broadband network-related assets and move it from 50% to 100%. The second is that the government set a timetable for bringing the administrative licence fees paid by Canadian wireless carriers in line with comparable fees paid by wireless carriers in other G-7 countries.

The third is that Industry Canada eliminate outdated regulation and red tape on conditions of licence that impose an unnecessary regulatory overhead on both licences and the government. Thank you, Mr. Chair.

(1030) The Chair : Thank you. We'll now hear from the Hotel Association of Canada. Mr. Tony Pollard (President, Hotel Association of Canada) : Thank you very much, Mr. Chairman. [ Translation ] Thank you for the invitation to appear here today. [ English ] Ladies and gentlemen, travel and tourism in Canada is a $74 billion industry. We employ about 594,000 people. In the lodging sector, last year we generated in excess of about $16 billion. We employ 284,000 people across the country.

I like to say that every time I appear before the committee we're the good news sector, because we create jobs and generate a lot of money for the federal government. Last year $3.2 billion went to the feds, so we usually get a pretty good welcome when we come here. But ladies and gentlemen, we have some issues before us that I want to briefly touch on.

The first one is that I'd like to say we welcomed Minister Bernier's announcement of the federal tourism strategy a couple of weeks ago, particularly making various government departments accountable and also setting out a target of $100 billion of revenue for tourism by the year 2015. This is all good news. But what is needed? What are the problems? Well, Canada right now is the fifteenth most popular destination in the world, and yet our brand is number one. About ten years ago we were the seventh most popular destination and we had a travel deficit of about $1 billion. Now it's up to about $14 billion.

So obviously we have some issues. What we'd like to be able to do is get Canada back among the top ten destinations globally. What would this do for us? It would bring in 5.7 million more people a year, it would create about 46,000 jobs annually—you're going to hear me keep on talking about jobs in a brief period—and it would generate another $1.5 billion in taxes. But what is the problem that means we are not in the top ten? One of the biggest things is the aviation sector and why it is so expensive.

Let me tell you, one of the biggest problems we have right now is that 21% of Canadians leave this country to get onto a plane in places such as Bangor, Maine, or Buffalo or Bellingham, or whatever, right across the country. That represents about 2.5 million people, or million people inbound return. That's far too high. We need to reduce the aviation cost structure. The second thing is that we have a problem with visas. Let me give you Brazil as an example. Brazil's is the seventh largest economy in the world, soon to become the fifth largest.

What happens if you're a Brazilian wanting to go to Canada, the States, or Australia? Well, in Canada you go into the Canadian embassy, you surrender your passport, you surrender all the documentation, and hopefully within a week to three weeks you'll get your visa. If you're going to the States and you go into an American embassy, you surrender your passport and you get a visa the same day. If you're going to Australia, what do you do? You go online.

You get your visa online immediately, the same way as when you purchase an airline ticket in Canada and the airlines ask where you are going in the States and what your passport number is, etc. We need to speed it up. So visas are the second thing. The third item is funding for the Canadian Tourism Commission. The Canadian Tourism Commission budget has gone from basically $100 million in to about $72 million today. That's a drop of about 27%, but in real dollars it's 40%. We know that all budgets are being looked at right now across the board.

In fact, we like the government doing that; we want the government to do it. Why? It's because they will then come to the realization that the value of support for promotion is something that's real and will create jobs and will benefit everybody right across the board. I want to give you a quick example of what happens when you don't enhance your budget. The State of Michigan has a new Republican governor who was elected on the basis of cutting costs. He came in with a budget. He cut funding right across the board, in education, mental health, health promotion, correctional services.

But what did he do in March of this year? Remember, this is a Republican governor in Michigan. He increased the budget, first by $10 million and then by $25 million, because he saw the value in it. Ladies and gentlemen, we have an unemployment rate in Canada today of 1.7 million. We have 1.3 million Canadians looking for jobs. If you look at the StatsCan report, you will see that the sector that created the most jobs in the last quarter is the lodging industry and the service sector. We are a solution for the government in its economic recovery.

Ladies and gentlemen, thank you very much for the opportunity to be here today with you. I welcome any questions.

(1035) The Chair : Thank you very much for your presentation. We'll now begin members' questions, with Ms. Nash for a five-minute round, please. Ms. Peggy Nash (Parkdale—High Park, NDP) : Thanks very much, Mr. Chair. And thank you for all of those very interesting presentations. I want to spend about an hour discussing your presentations with each of you, but I have five minutes. Let me start on the issue of health care.

I completely agree, and I think it's completely intuitive that to reduce our health care costs and be more effective for Canadians, we need to promote wellness and we need to be more preventive in our approach. I'd like to hear you give a couple more examples. I know something that has been raised with me, for example, is the issue of midwives—that if there were greater recognition of midwifery across the country, especially in first nations communities, we would reduce our health care costs tremendously and really promote well-being, especially amongst mothers and newborns.

Could you talk very briefly about the impact of some preventive measures and specifically address the midwives issue? Ms. Pamela Fralick : Thank you very much. I can't actually speak to the midwifery issue. It's not my area of expertise, but I know you have other witnesses coming forward in the coming days who will be able to respond to that question. I might, though, suggest that there are at least two areas I would highlight. They both fall under the determinants of health. Again, in the history of our system we've focused on illness. We've focused on acute care.

We all know now that it is not going to solve the problem. You mentioned the aboriginal population. I would say that is a huge conundrum that we must address. It's not just about providing medical services. It is about good water and housing and employment. Mental health is the other issue that— Ms. Peggy Nash : Would you agree that investing in, for example, infrastructure to create potable water systems in first nations communities and investing in mental health services might in fact be an investment and produce savings later on, because we are preventing these kinds of problems? Ms.

Pamela Fralick : That's exactly what I'm saying. You've nicely highlighted that thought. The reason I mentioned the Naylor report by Dr. David Naylor after the SARS crisis—I have the executive

summary here, and we can get you the link—was that it was really focusing on public health. It's about safe water, air, food, housing, and employment. They are the determinants of health. To get very concrete, he has recommendations in there as to how much money for what, etc. We could go on for hours, of course. However, absolutely key to the health of this country are the determinants of health. This is not to exclude; we all want our doctors and hospitals there when we need them, with the greatest of respect, of course.

It's about the future, and it is why I spoke to this need for courageous leadership, because we know that at a political level, you have a four-year window of opportunity, if you're lucky. This is not a short-term solution, but this is the solution. Ms. Peggy Nash : Great. Thank you. We could have a long discussion about that. Paul Moist, I'd like to ask you a question. We've raised many times in the House of Commons the issue of infrastructure investment. Again, this is another investment that saves money and helps our economy.

Can you describe in your experience the situation of public-private partnerships, where they work and where they don't work, and any recommendations you might have on them? Mr. Paul Moist : Through the chair, thank you. Yesterday we presented to the transportation committee and spent a good deal of time talking about infrastructure. There's an appropriate role for the private sector in building Canada. But in the financing area and in the operation area, we're replete with examples of auditors general across Canada talking about deals that are not good.

We're at historically low interest rate levels for government to borrow and invest. We work closely with the FCM and the Canadian Urban Transit Association, and we don't need any Metronet examples, such as we've had in the United Kingdom.

(1040) Ms. Peggy Nash : Can you describe what happened there? Mr. Paul Moist : What happened in the United Kingdom was that the government was left to run the Metronet system after the private operator collapsed. The same things happened in heath care. We have examples from across Canada of the public being left at the gate when private companies fail, and Metronet is the largest failure in the world so far. The Chair : Okay, thank you. Thank you, Ms. Nash. We'll go to Mrs. McLeod, please. Mrs. Cathy McLeod (Kamloops—Thompson—Cariboo, CPC) : Thank you, Mr. Chair. I'd also like to thank all the presenters.

I'm going to start by directing my questions to Mr. Hayos. I think we've noted a couple of times that people who perhaps have the biggest vested interest in a complicated tax system are telling us to simplify it. We've heard that again from a number of different folks. I appreciate those comments. I'm going to give you what is perhaps a two-part question. Typically if government makes changes, you hear some significant criticism. We perhaps have programs that have run for 33 years and have never been reflected on.

As you're aware, we're undergoing a review right now in terms of government expenditures and we're looking at where we can perhaps fine-tune things. I'd certainly like your comments in terms of the expenditure review process. You've also heard that perhaps we shouldn't be doing any cutbacks, but right now what we have, of course, is a sovereign debt crisis, and really, we're trying to grapple with that. If you have any more general comments in that area, I'd really appreciate hearing your thoughts. Mr. Gabe Hayos : I'll just repeat a comment on the government's program on expenditure reduction.

First, I agree that they should be doing that generally. The fact that they are doing it sort of across the board is maybe a bit of the easy approach. To some extent, I would have appreciated a more targeted expenditure reduction. That would be my comment on the first one. On the sovereign debt issue, I'm not sure how to address that because I'm not sure it specifically fits into any.... It's a broader economic issue, so I don't know that I have a comment for you—not in a minute, anyway. Voices: Oh, oh! Mrs. Cathy McLeod : Okay. Thank you. For my next questions, I'm going to go to Ms. Fralick.

You talked about targeting money for public health. My background is within the public health system. I know that the provinces and the health authorities actually have targeted the budgets they have in terms of how much they want spent on population measures. You've talked about $1.1 billion. Do you have an existing figure in terms of what the health authorities or provinces are currently targeting towards these initiatives? Ms. Pamela Fralick : If you're looking for a consensus or a discussion that has already taken place to come up with a different figure, no.

The support is there for the Naylor report and the divvying up, if you will, of the funds within his recommendations. Because we're here talking at the federal level, there is a wonderful example through the federal government: the primary health care transition fund, in which $780 million was put into a federally driven--but shared with the provinces--initiative that is generally viewed as one of the most successful ventures in a long time. So could we not do something like that, but target it more specifically to...? Mrs.

Cathy McLeod : I worked within population health and I knew that they targeted, so I would be very curious if we currently have, across the country, close to the targeted amount that you were talking about. My other quick question--and I absolutely agree--is on the critical importance of the electronic health records, what we're doing and where we're going. Certainly, through Canada Health Infoway, we've put significant dollars into that. Is there any recent

summary in terms of the success of what has been happening? I think there's some frustration that in spite of the considerable dollars that have gone into that program, and the importance of it, our uptake is not nearly where it should be. Do you have any quick comments on it? Ms. Pamela Fralick : Because there have been a few glitches along the way and we've put in an awful lot of money, it's a really tricky subject, isn't it?

My recent conversations with Richard Alvarez, the CEO at Canada Health Infoway...and I have seen some reports, but I don't have them in front of me, and we'd be more than happy to provide you with that information. They are indicating success. I saw something very recently coming out of Ontario, which, as we know, had maybe the biggest challenge of all, or at any rate the most public challenge. They are starting to produce some results that are being viewed positively. We could certainly get that information for you going forward.

(1045) The Chair : You have seconds. Okay? Thank you, Ms. McLeod. We'll go to Mr. Brison, please. Hon. Scott Brison (Kings—Hants, Lib.) : Thank you, Mr. Chair. Thank you to each of you for your interventions and valuable input this morning. I'd like to start with the whole issue of taxation, Mr. Hayos. We've heard from the CGA organizations about the need for tax reform or a comprehensive study of our tax system in Canada. There hasn't been a really comprehensive study of tax reform or the tax system since with the Carter commission, and the economy has changed dramatically since then.

You talked about tax simplification. There's been a trend in recent years for boutique tax credits for different types of activities that individual Canadians may participate in. If you look at different types of personal tax credits in Canada, there are a lot of costs associated with these. Just in this current budget, three of the tax credits add up to around $300 million per year.

Do you think broadly that we'd be better off to—instead of going into these boutique tax credits for specific types of behaviours or activities that families or individuals are participating in—just cut personal income taxes and perhaps focus on lower- and middle-income tax cuts instead of the sort of niche boutique tax credits? Mr. Gabe Hayos : The CICA has been quite public about that, and you couldn't have stated it better. We believe that would add a significant amount of simplification.

Frankly, the evidence we have shows that most of the people who could benefit from those credits don't even understand them or can take advantage of them, so I would agree fully. Hon. Scott Brison : They generally would be doing the activity in any case. Mr. Gabe Hayos : Exactly, so it's not really encouraging any increase. We just think that a general rate reduction, tax reduction, for the people you mentioned is exactly the approach that should be taken. Hon. Scott Brison : Prior to 1971, Canada didn't have a capital gains tax. We had an inheritance tax.

There have been proposals over the years to create a rollover provision for capital gains tax that, as long as you invested within six months, you wouldn't have to pay capital gains tax until, ultimately, the divestiture of the investment. During that period, you could invest in several cycles, in different asset classes. Do you think in general we should look at possible reform of our capital gains tax system to encourage more investment and capital accumulation and also to help Canadian individuals and businesses strengthen the productivity of the country? Mr.

Gabe Hayos : I think that's probably something that requires a bit more study. There are a number of provisions in the Income Tax Act that actually do allow for rollovers, some between generations and some in the public sector. I think there are number of implications with what you propose. I think it's something that's worth looking at, but I think it requires further study. Hon. Scott Brison : Mr. Pollard, it's good to have you back at our committee. Your organization, your members, pay out a lot in payroll taxes. Last January, the government increased payroll taxes, about $600 million was the take.

Next year, it's scheduled to be a $1.2 billion increase in January. Do you feel that during these times of high unemployment and the challenges that employers face in trying to expand hiring, it would be prudent for the government to freeze payroll taxes where they are now and not to increase them in January? Mr. Tony Pollard : I think we would definitely respond positively to that, Mr. Brison, and in fact I think most other sectors would as well. We've seen over the course of the last two or three years the great reductions in numbers of people working in sectors right across the board.

We lost about 120,000 employees since 2008. Anything that we can do to be able to facilitate the re-engagement of those people and to enhance our profitability, which right now is very flat—we lost about $4 billion in the downturn—would be very welcome news for us.

(1050) Hon. Scott Brison : You employ a lot of young people, and your members employ a lot of young people, and youth unemployment is around 15% now in Canada, so that would make a difference. Mr. Lord, on the— The Chair : Sorry, you've got seconds, Mr. Brison. Hon. Scott Brison : We can have another discussion, Mr. Lord, sometime, about the costs of wireless spectrum licences. The Chair : Thank you. We'll go to Mr. Van Kesteren, please. Mr. Dave Van Kesteren (Chatham-Kent—Essex, CPC) : Thank you, Mr. Chair. Thank you, witnesses, for appearing this morning. Mr. Moist, I have to tell you that I think you hit it right out of the park in your executive

summary when you talked about how to “achieve sustained economic recovery in Canada” and also to “create quality...”. I take some issue with that, though, and if I could, I'll just suggest making a little correction there to say “that the government create a climate where quality sustainable jobs can be created” and “ensure relatively low rates of taxation, and achieve a balanced budget”. Congratulations, sir. I think you're absolutely right. Mr. Lord, you have had a distinguished career. You're a former premier of New Brunswick.

I want to ask you, however, because the opposition is quite critical of the government's position of lowering corporate taxes and the importance of that, if you could just give us your feelings. I've read that a recent study says you expect to fill 100,000 new positions in the IT sector. If you could just tell us how important the position is that the government is taking to keep corporate tax lower and tell us if you would agree with that...maybe you could just enlighten the group on it. Mr. Bernard Lord : Thank you very much for the question. It's certainly my pleasure to answer this question.

I think that for every sector of the economy it's important to make sure we eliminate barriers for growth. At the same time, I think it's important that we do not penalize those who succeed, simply to subsidize other sectors. We need to realize that our economy is changing. You will see sectors that will grow and you'll see sectors that will not grow. Some may actually reduce in size. That's actually okay.

It's okay that some sectors grow and others may not, and for that, often we look at governments and we ask governments, “Can you tax somebody more so you can subsidize somebody else?” I certainly feel personally—and it is the position of the CWTA—that we're better off with lower corporate taxes, and lower taxes in general, to sustain economic activity, to create more jobs, and to create a climate for investment and for growth, where we invest in strategic infrastructure but we don't simply subsidize sectors.

That's what will enable more growth and more job creation, and that's in the end what enables us to pay for the social programs we want, whether they're health care, education, or senior care, whatever we need. But in all this discussion, I think one thing that we have to keep in mind, whether we talk about corporate taxes or personal taxes, is that we can't ask our kids to pay for us. Passing on a debt and a deficit to our kids just because there's something we want today is just not the right approach. Mr. Dave Van Kesteren : Thank you. Maybe I could go to the Canadian Construction Association.

The recent budget of announced that we would legislate a permanent annual investment of $2 billion in a gas fund to municipalities. This obviously has been welcomed by groups from the municipalities. Do you agree with this measure? Do you feel that this has helped your industry? Ms. Nadine Miller : Yes. The Canadian Construction Association absolutely supports dedicated funding to help pay for the cost of renewal of our infrastructure in Canada. We think that's one measure. There are other measures that we would like considered as well.

As I mentioned, our industry is the biggest creator of stimulus in the economy, as has been found throughout the world. So if governments, in their provincial transfers to the municipalities, could look at increasing additional amounts in those transfers in addition to the gas tax.... In the States, they're looking at ways that states can raise more money to help with that infrastructure renewal. A lot of our infrastructure is the responsibility of the municipal level, and they don't have ways to raise additional money, typically, outside of property tax. It has created some real hardships at the municipal level.

So the dedicated tax is absolutely a great measure, but we need it indexed, as we said, and any other way that we can look at increasing funding for infrastructure.... The government committed in the budget to work with all levels of government for developing a permanent, long-term, sustainable infrastructure plan, which is for water treatment plants for communities, for infrastructure for the fibre optic field...I mean, it's every area. We've been told that natural resources in Canada are going to grow-- The Chair: Okay. Thank you. Ms. Nadine Miller: --and we need infrastructure-- The Chair: Merci . Ms.

Nadine Miller: --to stay competitive in our global marketplace, so anything that gets money there will help. The Chair: Thank you very much. Voices: Oh, oh!

(1055) The Chair : Thank you very much. Thank you, Mr. Van Kesteren. We'll go to Mr. Marston, please. Mr. Wayne Marston (Hamilton East—Stoney Creek, NDP) : Thank you, Mr. Chair. Mr. Hayos, you said the government's ongoing corporate tax cuts were necessary for the country's economic recovery. I would like to know what specific analysis you base that on, but I'll go a little further. Witnesses before our committee have talked about the fact that the corporations are now holding in the area of $500 billion that they're not investing. That has to do with fears of a credit crunch again.

The FCM and the Conference Board of Canada have been calling for more government intervention particularly in the area of investing in infrastructure. We have interest rates at practically record-low levels. It strikes me that this is the time for the government to leave or to take a leadership role in investing in the infrastructure the $130 billion that's outstanding. The Department of Finance figures say that every dollar invested by the government in infrastructure generates $1.50 in the GDP. I'd like you to comment on that if you would, sir. Mr. Gabe Hayos : First, there are innumerable economic studies.

Jack Mintz recently did studies supporting the fact that lowering the Canadian income tax rate does generate jobs. As for the comment on the cash that's retained by corporations, they'll invest the cash when they have good opportunities for investing it. The best thing the government can do is create the opportunities for these businesses to make investments. We're in a global competitive environment, and the companies will invest the money where they think the best opportunities are. In this unstable, economic time, I think they're being very conservative about it.

Trying to do anything to force them to put money in places they don't think are appropriate is not the right approach. Mr. Wayne Marston : From my standpoint, though, to be part of the global competitive network, we have to have a sustainable infrastructure that supports the movement of our goods and services, training, and a number of things. We can disagree, and maybe we can chat another time on it. Ms. Fralick, witnesses who have come before this committee have talked about the state of health care, and the aboriginal situation was spoken to a moment ago.

Witnesses have said that poverty has a substantial impact on health care costs: in the area of 20% of our health care costs. I'd like your comments on that. Ms. Pamela Fralick : I could certainly agree to that and expand on some of my earlier comments, again with the greatest of respect, about needing hospitals and needing physicians in those hospitals, and so on, but the biggest bang for our buck is going to be in preventing people from getting there in the first place.

That does speak to some very specific health initiatives: for instance, the low-sodium strategies, physical activity initiatives, and ParticipACTION. These are all great things. In fact, we've known in Canada...and every province and territory signed on with the federal government back in 1994, I think, to a declaration on determinants of health. With regard to poverty, Mr. Moist mentioned the recent Conference Board of Canada report that speaks to the increasing inequities in this country. Poverty is a very broad-reaching piece of what I'm talking about.

Determinants of health include things like education, employment, and drinking water, and then health care is thrown in with that mix. Even though we're a Canadian health care association, my members, these regional health authorities and all the others, are very supportive of putting our funds where our mouth is, if you will. Mr. Wayne Marston : Mr. Moist, it's interesting. I'm not surprised Ms. Fralick agrees with your presentation, but having the government agree with your presentation was something close to shocking for me. I'd like to refer to a CBC report, Mr. Moist, that was up in the last day or so.

In the state of Texas, they're reversing their approach to criminal sentencing, in fact, to the point where...the state is noted around the world for its approach to crime and so-called justice. They actually closed a prison down there. What are your thoughts on the billions that could be saved if the government doesn't proceed in this country with the building of our super-jails and the changes they are going to enact? Wouldn't it be better for it to invest those moneys in child care, senior care, and some real job training?

(1100) The Chair : You have seconds. Mr. Paul Moist : Thank you. Budget will be like all the budgets that came prior to it. It's about choices. We talked at the transportation committee yesterday, and on page of our formal submission to this committee, we show that total government net debt to GDP is at low levels compared to what it has been over the last 21 years. There's a capacity for the Government of Canada to not see this country go back into recession.

Many Canadians would choose to repair the infrastructure and to invest in Canadians, our transportation systems, our water systems, and our health, as the previous speaker said. I wouldn't say that prison systems are at the top of CUPE's priority list; they would be at the bottom. The Chair : Thank you. We'll go to Mr. Adler, please. Mr. Mark Adler (York Centre, CPC) : Thank you, Chair. I want to thank all of the witnesses for appearing today. I want to begin my questioning with Mr. Lord.

A recent study by the Information and Communications Technology Council is saying that within the next five years we're going to need an extra 100,000 workers in the information technology sector because of the great success that sector has been having. Do you think the federal government has done enough in terms of attracting qualified IT workers? Is there anything more that can be done? Mr. Bernard Lord : This sector is growing very quickly and will continue to grow very quickly. It's a clear indication that the world around us is changing as well. I'm not one who always looks to the government to do more.

Usually I prefer it when the government doesn't get in the way, and I think that's maybe the difference with me and most of the other presenters you'll see: instead of coming here asking for more, we really just want less. We want less red tape, less regulation, and fewer obstacles to growth.

There's a lot of demand for infrastructure, but I believe the most important infrastructure in this next decade, if we really want to truly embrace growth in Canada, will be infrastructure dealing not only with how we move people and goods, but with how we move ideas, and that infrastructure and those ideas will be moved by wireless mobile technology. We're not asking for any money from the government to build those networks. We already have the fastest and best networks in the world. We just want to make sure that we continue, that we stay, and that we have those best networks of the next generation.

For that, we're not asking the government for more money. We're asking the government to take less from us so we can invest more. That, I think, is an approach.... Certainly governments have a role in making sure that we have good education and good training--absolutely--and that we have a fiscal environment that is competitive and attractive to business. But when we ask governments to try to do more and do too much social engineering or economic engineering, unfortunately sometimes it just doesn't work. Allow those who succeed to make the decisions and invest and you will see more growth. Mr.

Mark Adler : Thank you. Ms. Fralick, it's good to see you again. Here's my question. You will remember that throughout the nineties the government at that time balanced the budget by cutting transfers, the social transfers and health care transfers to the provinces, which had serious implications. Could you talk a bit about that and how it compares to our government's approach of increasing transfers to the provinces by 6% every year going forward? Ms.

Pamela Fralick : Well, certainly the nineties were the dark decade--or to use the phrase that Rick Hillier uses for the military, “the decade of darkness”--in terms of cuts to the health sector. The federal contributions decreased dramatically and started increasing into this century, basically. I think the levels that we're at now are quite reasonable. I don't hear a lot of people asking for more money, frankly. You'll hear that, but we know we can do it. However, I also would say that jumping on the bandwagon of “just throw in the 6% escalator” is not all that we need right now.

Clearly, the predictability and the sustainability of the funding for the health system are absolutely critical. We have to be able to do that. What we're looking for, what my members are looking for, is some leadership, some fiscal federalism, if you will, on top of that, in using that fiscal spending power to target and to make sure the nation benefits from directed actions. Mr. Mark Adler : Thank you. The Chair: You have one minute. Mr. Mark Adler: Mr. Moist, I have a quick question.

Would you be in favour, in the spirit of fairness, since you're calling for corporations to pay more taxes, of trade unions paying taxes?

(1105) Mr. Paul Moist : Mr. Chair, the member is asking about a private member's bill that has yet to come before committee. We'll speak to that bill when it comes through committee. But on page of our formal submission to this finance committee, we talk about something Mr. Carney has spoken to you about, and publicly, and that's the red line: household debt to personal disposable income, tracked against total government net debt and corporate credit market debt to equity. Those trend lines are downwards. Mr. Mark Adler : Excuse me, Mr. Moist. I asked a question that you're not giving an answer to. Mr.

Paul Moist : I think, Mr. Chairman, that this is a replay of yesterday. This is a triumph of partisanship over talking about Budget and I won't be party to that. Mr. Mark Adler : No, with all due respect, you're appearing before a parliamentary committee. An elected member of Parliament is asking you a direct question. If you could give a straight answer-- Mr. Paul Moist : Yesterday, Mr. Chairman, he asked me if I drove to the transport committee hearing. It's conduct unbecoming of parliamentarians, and I won't stand for it.

We're here to talk about Budget 2012, and I'd be pleased to answer any questions about that. The Chair : Well, the question I heard was whether you supported trade unions paying taxes. I didn't hear-- Mr. Paul Moist : We support the current income tax provision, which encodes there accountability measures that are enshrined in our constitution. We'll speak to Bill C-317, I think it is, when it comes before committee. The Chair : But I don't think this was a question about a bill. This was.... Mr.

Paul Moist : We're in complete agreement and compliance with the current Income Tax Act provisions vis-à-vis trade unions and we support those. Mr. Mark Adler : So “no” is your answer. The Chair : Okay. We'll take it as a no. We'll move on. [ Translation ] Mr. Giguère, you have five minutes. Mr. Alain Giguère (Marc-Aurèle-Fortin, NDP) : Thank you very much, Mr. Chair. My thanks to all the witnesses for coming before the committee. My first question goes to the representatives of the Canadian Institute of Chartered Accountants.

Essentially, you are asking for research and development credits to be made refundable immediately. Others have also come here to tell us that the problem is that the money is essential for Canadian-controlled private companies, or CCPCs. They also mentioned two other problems related to the research and development credit. First, there is the penalty that they have to pay when they receive grants from sources other than the federal government, from provincial or municipal governments, for example.

There are also issues with the way those credits are managed in terms of accessibility; basically because public servants take a narrow view. Could you give us a very quick response to those three specific requests? [ English ] Mr. Gabe Hayos : I'm not sure I got all of that, but first, as far as refundability is concerned, our position is that there is some broader refundability that would be appropriate, and that's actually to attract business into Canada.

Right now what happens is that foreign companies, for example, U.S. companies that come to Canada, actually don't benefit from the refundability, surprising as that may be, from the tax credit system. So refundability would encourage them to come to Canada. On the issue of the SR and ED program and its administration and the complexities around its administration, we think improvements could be made in that area. Frankly, I think that goes along our general theme of simplicity to the whole tax system. [ Translation ] Mr. Alain Giguère : You are asking for a loss transfer system for corporate groups.

As I understand it, the Income Tax Act already contains a provision that allows that. Unless I am mistaken, it is restrictive essentially because in the past it has been used to launder money, to bring dirty capital from overseas into the Canadian economy and to facilitate abusive tax planning. Some companies with large losses used those losses to avoid paying taxes. The regulations are strict because there were major abuses, as I recall. [ English ] Mr. Gabe Hayos : Sorry, is there a question...? [ Translation ] Mr.

Alain Giguère : If I am not mistaken, the regulations about transferring corporate losses are strict essentially because companies were engaging in abusive tax planning. (1110) [ English ] Mr. Gabe Hayos : I agree. I think some of the changes that have targeted some very aggressive tax planning are appropriate. I think the only comment we would have is that, as I said, what happens when we introduce legislation is that it tends to be far too broad and it captures the innocent companies that weren't involved in these kinds of transactions.

So I think targeting them is appropriate, but making it too broad is something that has to be carefully managed. [ Translation ] Mr. Alain Giguère : Thank you very much. You are asking for the Canada Revenue Agency to have the power to reduce losses and penalties. But that is already in the act. It is called an application for review. You are asking for things that already exist. The application for review already exists. [ English ] The Chair : A brief response, Mr. Hayos. Mr. Gabe Hayos : Unfortunately, I'm not sure I captured that question. Could you try very briefly again?

The Chair : Okay, we'll allow the question one more time. [ Translation ] Mr. Alain Giguère : Essentially, you are asking for the Canada Revenue Agency to have the power to reduce penalties and interest on unpaid contributions. You are asking for something that is already there. It is called an application for review. I do not see the relevance of bringing this up twice… [ English ] Mr. Gabe Hayos : It only exists to a limited extent.

I think in the theme of trying to make sure that Canadians comply, as opposed to forcing them to take penalties for innocent errors, it's important that this be much more broad than what currently exists. The Chair : Thank you. Merci. We'll go now to Madame Glover, please. Mrs. Shelly Glover (Saint Boniface, CPC) : Thank you, Mr. Chair. I'm going to try to be brief, but I'm going to make a comment to begin with. We invite witnesses here because we are interested in sharing opinions and ideas about the budget.

If ever a witness were attacked by a member of this committee, I'd be one of the first to stand up and defend them. When a person is invited here as a witness and attacks a member of Parliament, it's shameful. I'm going to suggest that this committee send a copy of the blues to Mr. Moist and that he submit a formal apology, in writing, to the member who asked a very simple question about taxes. Going back to the budget for a moment, I'd like to address my question to Ms. Miller. We talked a lot about the skilled trades and the need for more people who have the skills to do the jobs.

I was in Alberta last week, and I found that many of the sectors were desperately in need of skilled trained workers. We've provided things like tax credits for tools and cash grants for apprentices, and I know you would like to see us somehow increase the number of skilled workers. You did mention immigration, but how else can we get Canadians trained in those very important skills required in jobs your industry has and that the sectors in Alberta were mentioning to me last week? Ms.

Nadine Miller : I think some of the areas the government has already addressed through investment in infrastructure and trade schools and skills training facilities. Certainly money was invested during the stimulus to help to that end. As well, there was a more balanced split between university funding received for infrastructure investment versus trade school investment. We very much applauded the federal government for doing that. It is a challenge. We talked in our submission about having a look at the federal skilled worker immigration system.

Even with our birth rate in Canada at 1.5, replacement for workers is 2.1. With the baby boomers retiring, we can't grow enough from within our domestic sources, so we really do need improved ways to bring in skilled people with the necessary training. The challenge is that in some areas those skills are not learned overnight—heavy crane operators, for example. Unfortunately, we've had some devastating incidents recently in Canada. Those skills are not learned overnight, and unfortunately we're losing those really experienced operators. Mrs.

Shelly Glover : If you do come up with some ideas on better ways to offer incentives for that, we'd be very much interested. I have a very quick question to the Canadian Institute of Chartered Accountants. Mr. Hayos, you spoke very briefly about the reviews that are coming up, and I want to clarify something. There have been no determinations as yet with regard to the strategic and operational review, either cuts or extensions. We hired Deloitte to have an outside set of eyes to help us determine where we might find some inefficiencies.

Those have not been reported, and yet you made a comment that you want to see more targeted expenditure. I see a quote from your organization that says, “...it strikes the right balance by keeping Canada competitive” and also demonstrating prudent financial and fiscal management, and it sends a very important signal that Canada is indeed open for investment. “It is gratifying to see a determination to confront that deficit”, and “the earlier the government can balance its books, the better.

A planned comprehensive review of departmental spending should prove useful in this regard.” I was a little surprised to hear you say that you—

(1115) Mr. Gabe Hayos : I think that's fair. In my discussions, I'm seeing sort of a broad.... It's a fair comment that it hasn't formally been announced, so I agree with that comment. Mrs. Shelly Glover : So you withdraw the comment you made earlier? Mr. Gabe Hayos: Yes. Mrs. Shelly Glover: Okay. And what do you think of us doing an actual operational review? Do you think it's worthwhile, inefficiencies being found to capitalize on those savings? Do you think that's a prudent thing to do? Mr. Gabe Hayos : Yes, in my experience, I think that's a great approach.

You don't know how effective it will be in this circumstance; only time will tell, but I think that is an excellent approach, and I've seen many experiences where it's been very productive. Mrs. Shelly Glover : Very good. I would just like to add that the Hotel Association has been very good to Manitobans. In fact, Manitoba has done very well, thanks to many of the initiatives put forward by the Hotel Association. I want to comment, sir. The opposition talked about EI increases. I want to remind you that this government did freeze them, and then raised them 5¢ and 10¢.

What you didn't hear in that initial intervention is that the opposition actually wanted to raise them by $4 billion, not $1.2 billion, which is what we initially did. What would that do to your business? The Chair : We'll have to leave that as a comment. You may come back to that in another round. [ Translation ] Mr. Mai, you have five minutes. Mr. Hoang Mai (Brossard—La Prairie, NDP) : Thank you, Mr. Chair. [ English ] I have a question for the Canadian Union of Public Employees and the Canadian Construction Association.

The Department of Finance itself has noted that infrastructure investment has more than five times the economic impact of corporate income tax cuts. Instead of reducing corporate taxes—which we found back in were still very competitive—we've been asking the government instead to invest that money in infrastructure. What is your opinion, especially considering that right now for us would be the right time, but the government has said no, it will continue with the budget it had before? What's your view on that? We'll start with Mr. Moist. Mr.

Paul Moist : Through the chair, Budget made a commitment to Canada's mayors and councillors, all of whom met in Halifax in June. The Minister of Transport spoke for the Government of Canada. The commitment made in Budget was to sit down and talk about a long-term, stable system of funding to deal with the...what is it, $125 billion municipal infrastructure deficit? I'm not here speaking for the FCM, but one quarter of our 600,000 members work with failing infrastructure each and every day.

That stability in long-term funding, from all levels of government, not just the federal government, is essential to create a climate for business and communities we can live in. Ms. Nadine Miller : Thank you, Mr. Chair, through to the speaker. Yes, we totally support the long-term infrastructure investment strategy, working with all three levels of government. As I mentioned earlier, different governments are responsible for different infrastructure. I think Canada would benefit from putting all the stakeholders at the table, including the engineering society and the construction industry.

The reason for my comment is that collectively I believe the stakeholders can help bring better solutions for that long-term plan. We mentioned three Ps. Three Ps are being widely used throughout the world. One of the strengths of three Ps is allowing all participants, from the finance right through sometimes to the operator, to work together to come up with more cost-effective solutions. A long-term sustainable plan, as committed in the budget, with all levels of government and stakeholders, including industry input, would be very beneficial. One of the challenges in Canada— Mr. Hoang Mai : Thank you.

A quick question for the Canadian Co-operative Association. If we were to focus the economy towards another greener, more sustainable economy, how would that benefit the cooperatives, in terms of giving them tools?

(1120) Mr. John Anderson : First of all, I would say that the cooperative sector has some of the leaders in sustainable economic development. Mountain Equipment Co-op, The Co-operators insurance company, Vancity credit union—they're all leaders, not just in the co-op sector, but leaders in Canadian industry in their respective areas. We've also seen, in terms of renewable energy, a huge growth in the number of renewable energy co-ops being set up—particularly in Ontario, but in other provinces as well—around wind, solar, and biomass.

Right in Ontario, ethanol...the Integrated Grain Processors Co-operative in Aylmer, Ontario, is a community-owned centre. There's a whole wave of new community-owned businesses that are co-ops in the renewable energy sector. Mr. Hoang Mai : I'd be interested in having a list. Maybe you can submit it to us. Mr. John Anderson : We've just done a study on that, and I would be happy to send it to you. Mr. Hoang Mai : I have a quick question for Monsieur Lord. [ Translation ] Mr. Lord, you are of the view that the government should interfere less and give industry more room.

If studies show that wireless communications are linked to cancer, is the industry going to compensate users? Mr. Bernard Lord : I very much appreciate your question. I would add this to your premise: in my opinion, the government should intervene less so that individuals can make their own choices. On the question of cancer, the standards we use are those of the Canadian government. The industry and Canadian service providers comply fully with the rules that have been set.

But I think that we have to bring up a very important point: out of all the studies that have been done around the world, none has been able to make a link between cancer and the use of cell phones. The Chair : Fine. Thank you. [ English ] We'll go to Mr. Hoback, please. Mr. Randy Hoback (Prince Albert, CPC) : Thank you, Chair. I want to thank all the witnesses for being here this morning. I want to apologize for my tardiness this morning. Fortunately, today is a great day for Canadian farmers.

Today we had legislation put in the House that will allow farmers in western Canada to have the same freedom as farmers in eastern Canada. I know that all the members here are excited about that, because we all believe in freedom. Without freedom, we wouldn't be sitting here talking about what we're talking about today. Mr. Scott Brison: [ Inaudible--Editor ] Mr. Randy Hoback: We'll let Mr. Brison talk about what he wants to talk about, but there are a few things he pointed out that I'd like to maybe highlight, just to get them on the record. Ms.

Glover talked about the increases in EI and what we've done there, and I think she has it on the record. But what's not on the record is the 45-day work year that the opposition was proposing and the $4 billion price tag that would have. I can open that up to any of the business members and they'd all probably give the same answer, so I don't think I need to do that--on what that would do to our economy, especially coming from Saskatchewan, where the unemployment rate is 4%. We're looking for plumbers and electricians.

In fact, I just did a riding tour where I talked to all the towns and municipalities, and it's a very interesting scenario. Four years ago in Saskatchewan, when you talked to the mayors they would say, “People are leaving. They're going to Alberta. How are we going to pay to maintain our infrastructure?” That was a quite common theme. Now when I talk to them they say, “We need infrastructure because people are moving back. We need commercial lots.

We need more residential spaces.” It's a good problem to have, but it's also a good example of what happens when government gets out of the way and lets business get on with doing business. It's also a good example of having policies on balancing your books and maintaining a strong financial situation, which the Saskatchewan government has done. I give them credit for doing that. I go back to Mr. Brison's comment about a $4 billion tax hike and exactly what that would be. I know he wouldn't want to see that, so I'm sure he would deny that right now, or would at least say that's not the thing.

Getting back to the agriculture sector.... Chair, I will apologize. I'm a little bubbly this morning because I'm so excited about this. We've been fighting for this for quite a while. The Friday before the break week we saw a durum plant announced in Saskatchewan. This is what happens when you get out of people's way, let regulations go where they need to go, and get out of where you don't need to be. We had a durum plant announced in Regina--the first durum plant on the prairies. There is one more durum plant. It's in CIGI, in downtown Winnipeg. Otherwise, there are no durum plants in western Canada.

We're the largest producers of durum and not one durum plant. Does that maybe tell you there's a regulatory problem there? Anyway, we're addressing that. But what is so exciting is that this plant is being built with not one federal or provincial dollar. I look at that and say, “That's what we need to target to see our economy boom. What other things can we do to see that type of scenario?” It's not costing the taxpayer a penny. It's employing people. It's buying local farmers' grain. It's marketing a value-added product. If you can't be excited about that, what can you get excited about? Mr.

Lord, I think I'll go to you first. In what other areas can we remove regulations to see this type of excitement in other sectors of the Canadian economy?

(1125) Mr. Bernard Lord : I share your excitement. In a way, you're describing what's happening in the wireless sector. The wireless sector is growing through investments from the private sector without government investment. We're not looking for handouts. We're not looking for bailouts. We simply want regulation that will not prevent us from investing more. If there's one area I would like to highlight...when you look at the fees that are paid by the wireless sector to the Canadian government compared to fees paid by wireless sectors to other governments of the G-7, we have by far the highest government fees.

We feel that is a barrier to growth that could be eliminated gradually by the government. That investment would go back into networks to satisfy the demand of Canadians. I talked about growth of times. Some of our networks are growing by 5% a week. I want to repeat that because most other sectors would be happy to have 5% in a year. We're not looking for handouts or government subsidies. We're simply saying, “Please stay out of our way. Let us continue to invest and deliver services that Canadians want.” Mr. Randy Hoback : Thank you. Mr. Hayos, you talked about Jack Mintz's study.

I wonder if I could get you to table that study, because it talks about the impact of corporate tax relief. I think Mr. Marston would enjoy that read. He'd probably be happy to see that. So if we could get that study tabled, that would be great. The Chair : It would be nice to obtain that for everyone here. Thank you, Mr. Hoback. I wanted to follow up, Mr. Hayos, on your recommendation, especially on modifying the RRSP and the RRIF rules to allow greater tax deferrals on retirement savings. You talked about increasing the age limits for withdrawals and reducing the RRIF minimum withdrawal requirements.

This is something I'm approached a lot about by seniors. Have you costed this? Do you have a cost that you can provide to the committee either today or in the future? Mr. Gabe Hayos : No, we don't have it at this point. But it's something that we would look to provide to the committee, because it's something we believe in. The Chair : If you do have anything further on that, I would certainly appreciate it. Mr. Lord, your organization may want to comment on Ms. Fralick's third recommendation. It's a very interesting recommendation.

I know the wireless industry is doing a fair amount of work on electronic health records. So if you would provide some information to me and the committee, I would certainly appreciate it. And now I want to give Mr. Pollard the opportunity to answer the question by Ms. Glover. Mr. Tony Pollard : We appreciate what the government has done with the freezing of the EI premiums. The question that Mr. Brison had asked me was, would I be in favour of having that continue in the future? I said yes. But we recognize fully what the government has done in that area with the freezing, Ms. Glover. The Chair : Thank you.

I wanted to thank all of the presenters here this morning. Your presentations and responses to our questions were all within the time limits, which makes my job much easier as the chair. If you have anything further to share, please do so with me and we will ensure that all members get it. Colleagues, we will suspend for one minute--keep the visiting to a minimum--and bring the second panel forward. Thank you. (1125)

(1130) The Chair : I'll ask colleagues and our guests to take their seats. If there are any conversations, please take them outside. Perhaps someone could answer that wake-up call. I will also ask our media guests to please cease from recording. Thank you. We are going to start our second panel. We are on a very tight timeline. We have another seven organizations during this panel.

We have the Canadian Bankers Association, the Canadian Federation of Independent Business, the Canadian Home Builders' Association, the Canadian Labour Congress, the Canadian Medical Association, the Federation of Canadian Municipalities, and the Public Service Alliance of Canada. Thank you all for being with us today. You will each have a maximum of five minutes for an opening statement, and then we'll have questions from members. We'll begin with the Canadian Bankers Association. [ Translation ] Mr. Terry Campbell (President and Chief Executive Officer, Canadian Bankers Association) : Thank you.

Good morning, everyone. Just when the CBA had submitted its pre-budget consultation brief to the committee, the global economy entered a troubled phase. There is no longer any doubt about the increase of economic uncertainty around the world. [ English ] As we all recently learned during the global financial crisis, Canada is not immune to the fallout from the problems that originate elsewhere. That's why banks are closely monitoring economic conditions at home and abroad and are taking steps to ensure that they can absorb any challenges that may come their way.

I think we're fortunate in Canada that we do have strong banks, and it's important that our banks remain strong so they can continue to contribute to Canada's economic recovery, job growth, and job creation. I want to touch on three things in our submission that, in our view, the government can do to help shield Canadians from the impact of difficulties abroad, and also to encourage economic growth here at home. Let me first talk about tax competitiveness. In our view, tax competitiveness, stated very simply, helps companies to withstand challenging economic conditions.

It helps them to maintain employment and to create new jobs. This is why the CBA continues to support the government's efforts to enhance the competitiveness of Canada's tax system and to give Canadian businesses of all sizes—and therefore to give their employees as well—a competitive advantage. We encourage the government to stay the course, as they have been doing. We also believe there are additional measures the government could take that would have only a minimal impact on government revenue but would significantly enhance the competitiveness of the Canadian tax system.

In the past, this committee has recommended—quite wisely, in our view—that the government consider adopting a consolidated tax system. We know that consultations by the federal government are under way, and we do hope that decisions will be made so that the government can implement such a framework. Second, I'd like to talk very briefly about Canada's pension system. We fully support the government's proposal for pooled registered pension plans. It's an unfortunate acronym—PRPPs—but there it is.

We believe these plans will provide Canadians with a simple, efficient, and cost-effective opportunity to save for retirement. As we understand it, the public policy objective of PRPPs is to expand the retirement coverage of individuals who currently do not participate in a pension plan, particularly the self-employed and employees of small businesses. A key benefit of this approach is that it builds on the existing expertise and the existing infrastructure in the private sector. We believe that banks have the necessary expertise and infrastructure to offer PRPPs.

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

When it comes to banking, however, over the last few years we have observed a number of attempts by provincial governments to regulate the activities of Canadian banks in areas that fall within the exclusive jurisdiction of the federal government. Why is that a concern? Well, in our view, there are a number of benefits to having a single national policy and regulatory system for the banking industry.

Such a system allows you to have a national banking system across the country, which allows you to mitigate risk through regional diversification, and it also provides benefits to consumers across this country in small towns and large. All Canadian have access to the full array of financial products offered by their bank at the same competitive prices across Canada. To be able to achieve those benefits, however, we need a national banking system that is underpinned by federal policies and supervised by a strong federal regulator. Duplication and fragmentation in regulatory requirements is costly.

It's confusing to consumers, and it undermines the national nature of our banking system. So we encourage this committee, and we certainly encourage the federal government, to continue its efforts to protect and enhance federal jurisdiction over banking in Canada. Mr. Chairman, I'll stop my remarks there, but I look forward to engaging the committee in discussion subsequently. Thank you.

(1135) The Chair : Thank you. We'll now hear from the Canadian Federation of Independent Business. Ms. Corinne Pohlmann (Vice-President, National Affairs, Canadian Federation of Independent Business) : Thank you for the opportunity to be here today. CFIB is a not-for-profit, non-partisan organization representing more than 108,000 small and medium-sized businesses across Canada who collectively employ more than one and a quarter million Canadians and account for $75 billion in GDP. Our members represent all sectors of the economy and are found in every region of the country.

Almost all businesses in Canada are small or medium-sized, and they employ 64% of Canadians and produce half of Canada's GDP. As a result, in this year, the entrepreneurs addressing issues of importance to them can have a widespread impact on our job creation and the economy. I'm hoping we have a slide deck that I asked to be passed around that I would like to walk you through as we go through this presentation. No? Okay. I'll try to speak to the issues as they come up.

Our most recent business barometer showed that small business confidence took a bit of a tumble in August as the global economic outlook started to weaken, but it's still nowhere near where it was in and 2009. September saw a slight upward trend, indicating that small business owners are getting by but are remaining cautious about their future. Recently, CFIB released a report. It was entitled “Survival of the Smallest”, and I'm hoping you'll be able to get a copy. We found that small businesses manage recession in a variety of ways.

You'll see that on slide 3, once you do have a copy of the presentation, that laying people off was certainly an issue in many small businesses. However, small business owners were much more likely to work longer hours, sell to new customers in the local market, introduce new products and services, and even cut their own salary before resorting to layoffs. Interestingly, this report also identified a group of small business owners, about 20%, who grew their businesses during the recession. We called them growth-oriented enterprises, or GOEs.

About one-third of this group increased the number of employees during the recession. In addition, more than one-third sold to new customers in other countries, and almost two-thirds sold to new customers in other provinces or in their local markets. They also introduced new products and services, expanded their online presence, and increased their advertising and promotional efforts. A key finding from this report was learning about those measures that can help small business owners maintain or strengthen their business during more difficult economic times.

As you can see--it would be on slide 5--freezing EI premiums was the most important, for both--

(1140) The Chair : Sorry, Ms. Pohlmann. I understand from the clerk that we don't have enough.... Does your organization have more copies for the committee? Ms. Corinne Pohlmann : We were told to bring English and French. We called and asked. I do apologize. The Chair : Okay. If we could ask members to share.... Sorry for interrupting. I just want to make sure they have that. Thank you. Please continue. You have three minutes left. Ms. Corinne Pohlmann : We did specifically call and ask. Sorry about that.

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

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

Next, small business owners are very worried about the growing government deficit and debt because they know that if this is not brought under control, it will result in higher taxes or drastic spending cuts down the road. Our members would like to see the government eliminate the deficit in the medium term, which means 2014-15. To do that, SMEs would like the government to cut back spending, just as many of them have had to do over the last few years. As you can see, and it would be on slide 9, 82% believe there should be spending cuts in government administration, including employee wages and benefits.

Furthermore, we're becoming more and more concerned with the growing unfunded liability in the federal public sector pension plan, which we understand to be more than $200 billion now. Currently it is unclear how this unfunded liability will be addressed, so our members fear it will eventually result in higher costs on those like our members and their employees who do not have access to such generous pension plans down the road.

We recommend that governments stay focused on eliminating the deficit in the medium term, and one important way of doing that is to start bringing federal public sector wages and benefits more in line with the private sector. There's also a need to review public sector pensions, and we suggest that governments start by implementing a common methodology for all public sector pension liability so that we can better understand what we're dealing with.

In addition, we believe that federal public sector employees should increase their pension contributions from the current approximate 36% of their pension to 50% over time, which is the norm for most provincial public sector employees. Finally, we believe it is time to end early retirement provisions for new employees. We are pleased to hear that some federal government bodies are already moving in this direction, like the Bank of Canada, which we understand has plans to eliminate early retirement for new employees starting in 2012.

Finally, we want to touch on government regulations of paper burden, which costs Canadian businesses more than $30 billion a year to comply. The cost of employing is more than five times higher for firms with fewer than five employees than it is for those with more than employees.

We understand that the red tape reduction commission has been working toward addressing this issue, and we believe it can be done by making regulatory reform permanent through binding legislation that would require ongoing measurement and public reporting of regulatory activity in quality of government customer service, committing to paper burden reduction targets by placing constraints on regulators so that for every new requirement one or two will be eliminated, and having political oversight to ensure that these activities are being properly implemented.

During this small business week, in this year of the entrepreneur, more and more people know that small businesses truly are the backbone of Canada's economy and the heartbeat of our communities. They employ millions of Canadians to take risks every day. Government's role is to foster that spirit and create conditions to help them grow into larger businesses. Thank you. The Chair : Thank you for your presentation. We'll now hear from the Canadian Home Builders' Association. Mr. Ron Olson (Acting President, Canadian Home Builders' Association) : Thank you, Mr. Chairman, for inviting us here today.

I am Ron Olson, acting CHBA president. I'm a new home builder and developer in Saskatoon, Saskatchewan. With me today is Victor Fiume, CHBA's past president. Victor is a new home builder and renovator from Oshawa, Ontario. Also accompanying me is Dr. John Kenward, the chief operating officer of the Canadian Home Builders' Association. Let me just note at the outset that we have tabled two documents with you this morning. I will begin my remarks with a brief

summary of current housing conditions and housing activity. At the national level, new housing starts remain robust at over 200,000 starts, seasonally adjusted. Demand for home renovation services is also strong. I would note that the current level of new home starts is influenced by high levels of condominium construction in Toronto and Vancouver. In other markets, activity is softer, and in some cases it is below normal levels. Current levels of new housing activity are not uniform across Canada. On balance, the CHBA is pleased with our industry's performance.

It means that our members continue to contribute significantly to Canada's economy, to create jobs, and to drive consumer demand for a wide range of consumer goods and services. Assuming generally positive economic conditions in Canada in the near term, and a continuation of current interest rates, the CHBA expects housing demand to be in line with projected housing requirements, which is in the 188,000 range. However, this positive picture belies some significant issues. In relation to both new home and renovation activity, the current abnormally low interest rate environment is a major factor.

The outlook carries a strong note of uncertainty and caution, given significant uncertainties in the world economy. The weak U.S. economy and the European debt crisis threaten continued economic growth in this country. The central message of our presentation today is that home ownership affordability has deteriorated significantly. By home ownership affordability, we mean the relationship between housing prices and income levels. Given the current record low interest rates, access to home ownership is extremely positive.

However, overall affordability levels, as measured by the share of income required to purchase an average home, are markedly worse than they were in the decade prior to 2005. To the point, today's artificially low rates are masking the ongoing deterioration of housing affordability. As interest rates inevitably rise to more normal levels, the deterioration in affordability will become more evident and will be reflected in a market reduction in housing activity levels as would-be purchasers are priced out of the market.

It is imperative to take action now to improve housing affordability so that this does not happen. The major factors in the erosion of housing affordability are government-mandated costs, which have escalated rapidly, and regulation. Direct government-imposed costs come through the ever growing array of taxes, fees, levies, and other development-related charges on every new home. At the upper end, such costs now total well over $100,000 per new home. In many communities, the total exceeds $50,000 per home. These costs are financed through the mortgages held by new home buyers.

In short, government-imposed costs effectively transfer public sector debt to household mortgages. This is the most significant factor behind the serious decline in housing affordability. It will lead inevitably to lower housing activity and reduced employment in our industry overall. As well, this decline will exacerbate intergenerational inequity. First-time home buyers, in particular, will be faced with increased house prices due, in part, to government-imposed costs.

In this context, it is important to note that while overall employment has recovered to above pre-recession levels, the recovery has been uneven. The job losses during the recession were much more pronounced among young people aged to than among workers over the age of 25. And the jobs recovered since the end of the recession have been predominantly among older workers. All three levels of government drive up the cost of housing. In closing, I will very briefly address the federal responsibility in this area.

The CHBA has called upon the federal government to introduce a single threshold, full rebate treatment of GST on new home purchases. In 1991, the full rebate threshold was set at $350,000, with an upward cutoff point of $450,000. The government made a commitment to review these limits and adjust them over time, and 20 years later this has not happened. Today, in most urban markets, few new home buyers are eligible for a full or even partial GST rebate on a new home purchase. This undermines directly housing affordability.

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

(1145) The Chair : Thank you for your presentation. We'll now hear from the Canadian Labour Congress, please. Mr. Andrew Jackson (Chief Economist, Canadian Labour Congress) : Thank you, Chair. I'll attempt to be brief. The budget is being developed against the backdrop of a very tentative and uncertain recovery globally and here in Canada. In our view, there's a real danger of rising unemployment. The International Monetary Fund has just forecast an increase in the Canadian unemployment rate from 7.1% last month to an average of 7.7% in 2012.

One neglected sign of the softening of the job market in Canada is the disturbing and rather under-noticed fact that real hourly wages are now falling. For the last three months, average hourly wages have been increasing by only 1.4% over the previous year. That's well below an inflation rate of 3%. The high dollar and the slowing Canadian economy have now given us the highest current account deficit of any of the advanced economies. That current account deficit as a country is now significantly greater than that of the U.S., because of the slow growth of exports caused by the high Canadian dollar.

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

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

Against that backdrop, the priority of the budget must be to create jobs and to maintain the recovery, not to engage in counterproductive spending cuts. We call for the federal government to launch a partnership with the provinces and cities in a major multi-year public investment program that would create jobs now and promote our environmental goals. We believe this would also stimulate private sector investment and private sector productivity if we choose the right kinds of public investment projects.

Such a program would include increased support for basic municipal infrastructure, mass transit and passenger rail, affordable housing, and energy conservation and renewable energy projects. One opportunity we have now results from the fact that Government of Canada borrowing costs are incredibly low, 2.4% for 10-year bonds. That's a really historic opportunity to finance major public investment projects that make a lot of sense, owing to their decent rates of return. Many major public investment projects more than pay for themselves over time.

Economic growth fueled by increased productivity in the private sector boosts future government revenues. In our view, investment in public transit is a key example. The Toronto Board of Trade argues, correctly, that major investments in mass transit will substantially reduce business costs. In our view, some of the initial costs of such a program could be raised by raising the federal corporate tax rate from the planned 15% in 2012, which is well below the tax rate in the U.S. It would be our assertion that the cuts in corporate tax rates to date have not generated the expected increase in business investment.

To the contrary, over the past decade the growth in after-tax corporate cashflow has far exceeded the growth in private investment—to the point that corporations in Canada are now sitting on $475 billion of uninvested cash reserves. We think the recent example of the discussion on the scientific research and development tax credit suggests that targeted tax measures would be much more effective in boosting private investment. Our point would be to raise corporate tax rates and to direct those proceeds into more effective ways of supporting private and public investment.

(1150) To conclude, Canada has a very low rate of public debt. Our interest rates are low, and there are major public investment opportunities ahead of us. I'll shut up now.

(1155) The Chair : Thank you very much. We'll now hear from the Canadian Medical Association, please. Dr. John Haggie (President, Canadian Medical Association) : Thank you. Over the past year, the Canadian Medical Association has engaged in a wide-ranging public consultation on health care, and we have heard from thousands of Canadians about their concerns. This exercise provided a road map for modernizing our country's health care system so that it puts patients first and provides Canadians with better value for money.

We found there was a groundswell of support for change amongst other health care providers, stakeholders, and countless Canadians who share our view that the best catalyst for transformation is the next accord on federal transfers to the provinces for health care. That said, we have identified immediate opportunities for federal leadership in making achievable, positive changes to our health care system, which would help Canadians be healthier and more secure and would help ensure the prudent use of their health care dollars.

During our consultation, we repeatedly heard concerns that Canada's medicare system is a shadow of its former self. Once a world leader, it now lags behind systems in comparable nations in providing high-quality health care. Improving the quality of health care services is key if Canada is ever going to have a high-performing health system. Excellence in quality improvement will be a crucial step towards sustainability. To date, six provinces have instituted health quality councils. Their mandates and their effectiveness in actually achieving lasting system-wide improvements vary by province.

What is missing and urgently needed is an integrated pan-Canadian approach to quality improvements in health care in Canada that can begin to chart a course to ensure that Canadians ultimately have the best health and health care in the world. Canadians deserve no less, and there's no reason why these should not be achievable.

The CMA recommends that the federal government fund the establishment and adequately resource the operations of an arm's-length Canadian health quality council, with a mandate to be a catalyst for change, a spark for innovation, and a facilitator to disseminate evidence-based quality improvement initiatives so they become embedded in the fabric of our health system. Canadians are increasingly questioning whether they are getting value for the $190 billion a year that goes into our country's health care system, and with good reason, as international studies indicate they're not getting good value for the money.

Defining, promoting, and measuring quality care are not only essential to obtaining better health outcomes, they are crucial to building the accountability that Canadians deserve as consumers and funders of the system. We also heard during our consultation that Canadians worry about inequities in access to care beyond the hospital and doctor services covered within medicare, particularly when it comes to the high cost of prescription drugs. Last year, one in Canadians either failed to fill a prescription or skipped a dose because they couldn't afford it.

I have an 82-year-old lady in my practice who takes her diabetic medications every second or third day because she can't afford to take them every day. Our second recommendation, therefore, is that governments establish a program of comprehensive prescription drug coverage to be administered through reimbursement of provincial, territorial, and private drug plans to ensure that all Canadians have access to medically necessary drug therapies. This should be done in consultation with the appropriate insurance industries and the public.

In the 21st century, no Canadian should be denied access to medically necessary prescription drugs because they are unable to pay for them. Our third and final recommendation relates to our aging population and the concerns Canadians share about their ability to save for their future needs. We recommend that the federal government study options that would not limit PRPPs to defined contribution pension plans. Target benefit plans should be permitted and encouraged as they allow risk to be pooled amongst plan members, providing a vehicle that is more secure than are defined contribution plans.

As well, the administrators of PRPPs should not be limited to financial institutions. Well-governed organizations that represent a particular membership should be able to sponsor and administer PRPPs for their own members. The CMA appreciates that governments are moving ahead with the introduction of PRPPs; however, we note that they represent only one piece of a more comprehensive savings structure. We also continue to be concerned about the ability of Canadians to save for their long-term care needs.

Whilst we have not included them in this pre-budget brief, the CMA holds to recommendations we have made in previous years that the federal government study options to help Canadians pre-fund long-term care.

(1200) In closing, let me simply say that carrying out these recommendations would make a huge positive impact soon and over the long term in the lives of literally millions of Canadians from every walk of life. Thank you for your time. The Chair : Thank you for your presentation. We'll now hear from the Federation of Canadian Municipalities. Mr. Berry Vrbanovic (President, Federation of Canadian Municipalities) : Thank you, Mr. Chair and members of the committee, for inviting us to speak today. FCM has been the voice of municipal governments since 1901.

Our members represent 90% of the Canadian population, or almost 2,000 municipal governments across this country.

When the global economic crisis hit, the federal government teamed up with municipalities to take coordinated action to create jobs and protect Canadian families and businesses. [ Translation ] Now, as growing uncertainty again threatens world markets, the Government of Canada must continue working with cities and communities to strengthen our economic foundations and to protect our quality of life. [ English ] Although stimulus spending is over, Canada must build on the economic action plan's successes, overcoming barriers to common-sense cooperation that too often keep governments from working together.

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

Better planning, partnerships, and programs--these are trademarks of smart government. But despite recent investments, we can still see the danger signs all around us: traffic gridlock, crumbling roads and bridges, rising police costs, and a housing shortage that puts new jobs out of workers' reach. [ Translation ] From St.

John's to Montreal, from Inuvik to Victoria, the symptoms vary but the cause is the same: a tax system that has taken too much out of our communities and put too little back in. [ English ] Without a share of the income and sales taxes generated by new growth, communities have been forced to raise property taxes, cut core services, and, more often, put infrastructure repairs off. The resulting infrastructure deficit is bad for families, businesses, and our economy. Of current federal investments in municipalities, 40% are scheduled to expire by 2014. These are not one-time stimulus dollars.

They are core investments to repair roads, house low-income seniors, and keep police on our streets. These investments must be protected and put on a long-term track. In Budget the government committed to work with municipalities, provinces, territories, and the private sector to develop a new long-term federal infrastructure plan. The new plan will give Canada the