EVIDENCE

Standing Committee on Finance NUMBER 037 3rd SESSION 40th PARLIAMENT Thursday, October 21, 2010 Le jeudi 21 octobre 2010 Standing Committee on Finance CANADA [Recorded by Electronic Apparatus] EVIDENCE October 21, 2010 Committee Edited Evidence * Table of Contents * Number 037 (Official Version) Official Report * Table of Contents * Number 037 (Official Version) Témoignages * Table des matières * Numéro 037 (Version officielle) 37 21 10 2010 2010/10/21 08:55:00 House of Commons Comité permanent des finances Standing Committee on Finance FINA Chair Mr. James Rajotte 40 3

(0900) [ English ] Dr. Chris Ferns (President, Association of Nova Scotia University Teachers) : Thank you. If you have in front of you a copy of the brief we submitted, you'll notice the venue is given as St. John’s, Newfoundland. It's not entirely clear why the venue switched, and I hope it does not reflect the marginalization of the concerns of Atlantic Canadians. I'd just like to flag two or three issues covered in our brief. I'm going to begin perhaps with somewhat of a general observation on the situation.

The cautionary words of Mark Carney notwithstanding, it's clear that Canada has weathered the recent global recession in considerably better shape than have most other industrial countries, and I guess now might well be the time to explore how best to ensure sustainable growth and development. In that context, I think the issue of adequate funding for post-secondary education is one of crucial importance, because this is an area where Canada has lagged behind many other industrial countries.

In 2009 the proportion of public funding to university revenues in Canada was 58%, compared with the OECD average of over 70%. This is not a new problem. It's something that's been going on for 20 years, ever since the cutbacks in federal transfers in the 1990s. But one result of this has been increasing disparity in the availability and access to education in different provinces, because effectively each province has had to devise its own strategies for addressing the consequences of the federal cuts.

For example, in some provinces you might find that they've tried to mitigate these cuts through increases in funding for PSE of up to 25% since 1993-94,

whereas in other jurisdictions you'll find cuts of almost exactly the same amount. Cumulatively, that is bound to result in disparities in terms of the quality of education and access to education in the different provinces. I would have thought that one of the bedrock concerns we have here is to ensure that all Canadians have equal access to an equal quality of education. So for that reason we would support the proposal, first, to increase federal funding for post-secondary education, but also to ensure that it is administered fairly and transparently through a post-secondary education act.

I'd also like to draw the attention of the committee to one other disparity, which is perhaps a structural one as opposed to simply being an issue resulting from perennial underfunding. This is of specific concern to Nova Scotia, where we actually educate a disproportionate number of students from elsewhere in Canada. In fact, roughly 30% of the students in Nova Scotia are from elsewhere in Canada. We think that's an important national endeavour. We think it's desirable in a country as large and as disparate as Canada that there be increased communication between people from different parts of the country.

But when the funding formula is based on the population of the province rather than the number of students it actually educates, the effect is that an already underresourced province like Nova Scotia is forced to devote a disproportionate amount of its resources to educating students from elsewhere. The other concern we'd like to draw the committee's attention to, and again this is something that is particularly acute in Nova Scotia, is the issue of student tuition fees and student debt. Once again, different provinces have adopted very different strategies for dealing with the funding challenges they face.

In some provinces, such as Quebec or Newfoundland, there have been concerted efforts made to try to moderate the effect of tuition increases. Elsewhere, most recently in Ontario, it appears that tuition fees can be allowed to rise by whatever the market will bear. That has a major impact both on the conditions of the students themselves and also on the quality of the education they receive.

In terms of the quality of education, in my over 20 years of experience in the university system in Nova Scotia, I've increasingly seen how students are forced to take on increasing amounts of part-time work, often translating into almost full-time work, to the detriment of their studies. But also, I think we're looking at a situation where student debt has increased massively over the last 20 years, one of the ironies being that it's effectively a result of decisions taken by policy-makers who, being of my generation or the generation before, had access to affordable education themselves.

In my own case, I graduated debt free, largely because I was educated in England, where tuition was free at that time. The result is that our generation has benefited from the tax cuts that have taken place, which clearly benefit us as we reach higher earning levels. At the same time, we benefit from the affordable education that was available to us. Now we're saying to our children, welcome to the harsh reality of the modern world--the harsh reality that we in fact didn't have to cope with.

I think when we look at a situation where what we've done, effectively, is to pull up the ladder behind ourselves...we're asking our children to pay for things that benefit us. I would have thought that regardless of your political affiliation, be it left, right, or centre, one bedrock conviction that we should have is that our duty in whatever forum we work is to ensure that our children have a better opportunity than we did. The effect of public policy with regard to post-secondary education over the past 20 years has ensured precisely the opposite.

I would put it to you that it's unwarranted, it's unethical, and it is just plain wrong. Thank you. The Chair (Mr. James Rajotte (Edmonton—Leduc, CPC)) : Thank you, Mr. Ferns. The Conseil national des cycles supérieurs. (0905) [ Translation ] Mr. Laurent Viau (President, Conseil national des cycles supérieurs (Québec)) : Thank you. Ladies and gentlemen, good morning. The Conseil national des cycles supérieurs (Quebec Council for Graduate Studies) represents some 30,000 graduate students in Quebec, and it is on behalf of the council that I am presenting some of the proposals included in our brief.

The brief that we submitted in August deals mainly with the need to support university research and thus help in the training of future researchers so that Canada can remain competitive within a knowledge-based economy that is ever more globalized and, especially, given the rather uncertain economic recovery. We have articulated three key proposals. First, with regard to the training of future researchers, the three federal funding councils have expressed significant needs in recent years. There are thousands of students whose applications are turned down despite their academic merits, for lack of funding.

Therefore, we believe that the federal government must cover part of those agencies' needs by maintaining the 900 additional scholarships that were created as part of the federal government stimulus plan, and by providing the councils, i.e., the SSHRC, CIHR and NSERC, with the funds needed to meet their expressed needs. Our second point deals with the issue of research infrastructure. Since 2001, the federal government has supported universities by offsetting their indirect research costs.

To support research funded by the government, universities incur indirect research costs, including the cost of maintenance, equipment and additional space. The federal grant only covers 20% of those indirect research costs,

whereas estimates show that Quebec covers about 65%. We believe that the federal government should set as its target the funding of at least 40% of indirect research costs. Furthermore, a noteworthy element of the economic recovery plan is the knowledge infrastructure program, which has injected $2 billion into Canadian universities and colleges. Among other things, that program has helped alleviate part of the significant problem of accumulated deferred maintenance within our institutions—a problem that amounted to nearly $10 billion in 2008 for all of Canada.

The program helped reduce the scope of the problem by 20%. Moreover, universities, provinces and, in some cases, municipalities provided matching funds and thus helped us make good progress. We think that the recovery is uncertain and that some stimulus measures must be maintained. As well, accumulated deferred maintenance in our universities remains a problem that we have to address. In our opinion, the knowledge infrastructure program should be extended for a number of years. The last issue we would like to address concerns post-doctoral fellows.

In our introduction, we highlighted the importance of remaining competitive within a knowledge-based economy. In that regard, post-doctoral fellows represent Canada's research elite. Their skills are highly coveted around the world. In fact, 65% of post-doctoral fellows in Canada come from abroad. The decision by the federal government to tax post-doctoral fellowships is contrary to what we are advocating and places Canada in a much less competitive situation. We therefore recommend that the federal government maintain the tax exemption on post-doctoral fellowships.

Because of their university training activities, we consider that post-doctoral fellows are students. Furthermore, the CNCS represents over two thirds of Quebec post-doctoral fellows.

(0910) We also want to point out the fact that, once their taxes have been paid, post-doctoral fellows receive less than a doctoral student with a $30,000 scholarship, for example, which is tax free. That leads to an imbalance in the salary scale of master's, doctoral and post-doctoral students, and eventually of full professors. The Chair : Very well, thank you. Mr. Laurent Viau : That makes us less competitive internationally. If I may conclude, what we would like is for the government to come back on its decision, and also ensure that the measure no longer be retroactive to 2006, as is now the case.

The Chair : Thank you very much. [ English ] We'll now go to the Canadian Clean Technology Coalition. [ Translation ] Ms. Céline Bak (Partner, Russell Mitchell Group, Canadian Clean Technology Coalition) : Good morning, Mr. Chair and distinguished members of the committee. I have the pleasure to be here today with one of the members of the Canadian Clean Technology Coalition, Nova Scotia-based LED Roadway Lighting. The Canadian clean technology industry is globally competitive and is a potential driver of the country's economic productivity.

We are an emerging sector—often under-appreciated—that can mean wealth, job creation, investment and international trade opportunities. But we must take time now to nurture the fundamentals that we discovered in our research, a report called the “2010 SDTC Cleantech Growth and Go-To-Market Report.” [ English ] There are more than 400 clean technology companies already in Canada. Our industry is national, broad, and deep, with B.C., the Prairies, Ontario, and Quebec each contributing between 90 and 110 companies and Atlantic Canada contributing its fair share.

Our technology products and services span nine sub-sectors, as indicated in the materials we've circulated. The Canadian clean technology industry is made up of companies that improve efficiencies in the production and use of energy, water, and resources. We do more with less. You should know that over 320 of these technology SMEs have products that are being sold today, and 80% are engaged in export sales. Newly published information from the U.S. trade department suggests that Canada has as many exporting clean technology companies, in absolute terms, as does the U.S.

This is an opportunity that we should not squander. [ Translation ] We are exactly the kinds of companies that will help stimulate and extend economic recovery. This is a sector that invests in research and development, brings products to market and can create jobs. During the economic recession in 2007 and 2008, Canadian clean technology companies grew on average by close to 50% annually, with the fastest growing among them achieving 170% growth. This sets our sector apart. [ English ] But there is a caveat.

Today, we risk our leadership because many of these Canadian companies could be sold before they reach their potential. The market for the purchase of these companies is heating up, and even since we took the census of the industry nine months ago, some of the country's very best companies have already been bought. For this reason, we would like the members of the finance committee to support establishing a federal strategy for this sector, an “own the podium” plan for Canadian clean technologies. The U.S. already has one.

We are calling for the Canadian Cleantech 20 by 2020, a plan that has, as its objective, the establishment of 20 Canadian clean technology companies having achieved annual revenues of more than $100 million by 2020. To do this requires not only patient investment, but also patient public policy and continued nurturing from both the federal and provincial governments. We can build on work already under way in several government departments: Natural Resources, Foreign Affairs, Environment, and Industry Canada, as well as others.

As a first critical step, we strongly advise that the government establish a mass adoption approach for clean technology that builds on the $40 million merit-based procurement program at Public Works so that SMEs can sell Canadian technology at home. This is a simple but powerful step with many benefits. It marries green government policy and Canadian technology, and it will support commercialization at a critical stage. I'm joined by Curtis Cartmill, whose company represents a living example of what we found in our study.

(0915) Mr. Curtis Cartmill (Chief Information Officer, LED Roadway Lighting, Canadian Clean Technology Coalition) : LED Roadway Lighting is emerging as a global leader in LED-based street and highway lighting technologies. In only 16 months of production, we've shipped our products to 225 locations in 10 countries. The conversion of roadway lights to LED technology is a $250 billion market globally.

To capture a portion of this global market, we must show leadership and deploy our technologies at home, particularly in cases where the technology can provide a substantial economic and environmental impact with easily quantifiable results. Incentives for mass clean technology adoption in Canada will drive overall costing and pricing down for Canadian manufacturers, which eventually will allow us to become more competitive in the global export of our technology. This will also be a significant driver of job creation in the clean tech manufacturing sector.

Within Canada and other industrialized nations, street lighting costs typically account for 30% to 80% of municipal energy budgets. In an assessment conducted by staff of the Province of Nova Scotia, it was determined that Nova Scotia municipalities could realize a net savings of $285 million by adopting our Satellite series roadway light. We estimate that the impact of converting Canada's 4.3 million street lights over to LED Roadway Lighting technology would result in an $8.5 billion savings and could create upward of 7,500 jobs.

There are significant environmental benefits to a Canadian conversion program, which we have distributed on a sheet. Your support would allow Canadian clean technology companies to grow locally, improve our global competitiveness, provide us access to export markets, and promote the reduction of Canada's carbon and resource footprint. In the case of LED Roadway Lighting, this support would also translate to substantial financial savings for municipal, provincial, and federal governments. The Chair : Thank you. We'll now go to the Canadian Arts Coalition, please. [ Translation ] Mr.

Eric Dubeau (Co-chair, Canadian Arts Coalition) : Mr. Chair, ladies and gentlemen members of the committee, distinguished guests, good morning. I would like to thank you for having invited the Canadian Arts Coalition to appear before the Standing Committee on Finance as part of its pre-budget consultations. I am pleased to speak on behalf of the largest association of arts, culture and heritage stakeholders in Canada and to talk about the importance of the arts as a driver of the Canadian economy and a sector that will help Canada come out of the current economic crisis in a stronger position.

We believe that the arts sector can play a key role in Canada's economic recovery, particularly with regard to job creation.

In fact, as you already know, Canada's cultural sector employs more than 600,000 people. [ English ] As the government is aware, investing in the arts is sound strategic economic policy, and I'd like to say a word of thanks to the Government of Canada for the arts investments it's made of late, particularly the $30 million permanent investment to the Canada Council in 2008, the renewal of significant investment in the arts and culture programs of the Department of Canadian Heritage in 2009, and the inclusion of Capital Arts Projects as part of the economic stimulus package.

Research by the Conference Board of Canada has shown that arts organizations generate $2.70 in revenues for every dollar they receive from government. [ Translation ] The best way to ensure that the arts sector delivers positive economic spin-offs is to invest directly in artists and the arts organizations that support them, through increased funding to the Canada Council for the Arts. [ English ] This is why the Canadian Arts Coalition recommends that the Government of Canada invest in Canadian creativity and Canadian communities by increasing the base budget of the Canada Council for the Arts by an additional $30 million per year in each of the next four years, bringing the council's funding base to $300 million per annum by 2015.

We believe that the Canada Council is essential to our cultural infrastructure in its role as the key public vehicle for supporting the arts continuum in Canada. [ Translation ] The Canada Council is familiar with Canadian artists and the communities in which they work and live. This awareness of the sector allows the council to implement programs that are tailored to the specific needs of organizations as well as to respond to an ever-changing environment. In 2009-2010, the Canada Council invested $158 million in over 4,000 artists living in 689 communities across Canada.

If the government were to choose to implement the coalition's recommendation and double the Canada Council's budget by 2015, the spinoffs from that enhanced investment would be even more impressive and Canadian communities would be even more dynamic, which would allow them to attract further investments and create more jobs. [ English ] Canadians view the arts as cornerstones of excellence, innovation, and creative leadership in Canada, and recognize that these attributes are the contemporary building blocks of an internationally competitive society.

In fact, the arts were the driving force behind the advancement of Canada's position in a global society that values economic prosperity, social cohesion, creativity, innovation, and excellence. Historically, Canada has always taken important steps to foster and develop a knowledge-based economy, domestically and internationally. We were the first country to accept the UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions and a founding force behind the International Network on Cultural Policy. [ Translation ] This leads us to the coalition's second recommendation.

If implemented, it would help artists and arts organizations obtain the funds needed to showcase Canadian excellence on the international stage. (0920) [ English ] The coalition recommends that the Government of Canada acknowledge the role that arts and culture plays in enhancing Canada's reputation internationally and put Canadian artists on the world stage by investing $25 million in strategic international market access and development initiatives. Arts and culture enrich us as people and contribute directly to our collective prosperity.

The essential role arts and culture play in our country’s economy was confirmed when the government embedded support for the cultural sector in Canada's economic action plan. Increased investment through the Canada Council will ensure that the core of Canada's cultural milieu—artists and arts organizations—are supported in the shared public purpose of exploring and expressing what defines us as Canadians. It will also help us to ensure that Canadians have better access to artistic work from all regions of Canada that reflects our rich cultural diversity.

Canadian communities of all backgrounds will have the opportunity to participate in and benefit from the broadest possible range of artistic experiences. I'll wrap up quickly. [ Translation ] Arts and culture, creators and cultural workers represent precious social and economic assets. If we want them to continue to improve our quality of life, strengthen the ties that bind us and help express what defines us as Canadians, the government must support those assets by investing in Canada's creativity and innovation leaders, i.e., artists and arts organizations.

By reaffirming the important role government has historically played in bringing the best Canadian art to international audiences, Canada will reclaim its place as cultural leader on the world stage. By sustaining and increasing its investment in the cultural sector, Canada will be first among equals in a global society that values economic prosperity, social cohesion, innovation and excellence. Canadian artists and arts organizations are playing an important role in Canadian society and they are eager to do more, in partnership with the Government of Canada. Thank you. [ English ] The Chair : Merci beaucoup.

We'll now go to Ms. Clayton for your five-minute opening presentation. Ms. Shelley Clayton (President, Canadian Association of Student Financial Aid Administrators) : Thank you. My apologies for being late. I'm representing the Canadian Association of Student Financial Aid Administrators, or CASFAA, and I want to thank you for the opportunity to present here today.

We administer a large spectrum of student financial aid programs at all levels, including government-sponsored aid programs such as the Canada student loans, provincial assistance programs, institutional scholarships, bursaries, and work-study programs. We are the front-line people who deal with students on an everyday basis. Because of that role, we are uniquely positioned to witness not only the success of the Canada student loans program but the gaps that seriously compromise the academic potential of a great number of students. This particular consultation will focus on borrowing and debt.

Government student loan and borrowing is a necessity for a large part of post-secondary participants. However, access to financial aid administrators and planning rarely happens before grade 12, or, in the case of mature students, until they are at their institution of choice. Most financial aid administrators, or FAOs, as we are known, will tell you that this process is way too late, and detrimental in some cases to the most disadvantaged of society.

FAOs are crucial to the development and enhancement of financial literacy at all levels and years of post-secondary education, undergraduate and graduate, for Canadian domestic and international students, including first year, first entry, mature, single parent, aboriginal, etc. We see the gaps in financial literacy that hinder academic and career pursuits.

We recommend that a national strategy that includes key points of intervention at elementary, junior, high school, and post-secondary build on the success already established by such programs such as Planning 10 program in B.C. high schools and the Future to Discover program in my home province, New Brunswick, to begin financial literacy early. For those of you who are not aware, Planning 10 is a course required by the B.C. Ministry of Education for all grade 10 students. It starts to prepare students for life after high school. It covers education and career paths, health, personal finance, and graduation.

The Future to Discover is a joint project of the governments of New Brunswick, Manitoba, and the Canadian Millennium Scholarship Foundation. It has two components. Explore Your Horizons helps students understand the range of occupational and post-secondary choices and make meaningful decisions about their future. They are also given learning accounts that support participation of students who face financial obstacles.

They have an incentive of $8,000, which is deposited into a trust account that can be accessed upon successful completion of high school and enrollment at an accredited post-secondary education institution. This second component, however, is only delivered in New Brunswick and is available to students from families with incomes below the provincial median. Recommendation two.

The government has spent increasingly on student assistance through fiscal measures introduced to the tax system such as scholarship and bursary exemptions, credit, tuition fees, and allowance for each month of full-time enrollment as well as contributions to registered education savings plans, or RESPs. These tax credits are distributed almost entirely without regard to financial need, disproportionately benefiting families with higher incomes.

They do little to assist high-needs students and underrepresented groups—students with disabilities, aboriginal students, adult learners—to enter our post-secondary education system. CASFAA believes that means-tested student financial assistance that is accessible through a simplified program delivering funds at the time expenses are incurred is the most effective use of taxpayer dollars. Recommendation three.

There is growing empirical evidence from the Canadian Millennium Scholarship Foundation and Higher Education Strategy Associates, formerly known as EPI, and private researchers that qualified students will abandon post-secondary education if their student debt load is too high. Canadian-based research also states that it is not the amount of debt incurred, but it is also the affordability of education. If the gap between resources and cost of education is too vast, students will discard their educational pursuits. Do I have one minute, or am I done?

(0925) The Chair : You're at about 40 seconds. Ms. Shelley Clayton : Okay. The changes to the Canada student loans program in the 2008 budget and the relaxation of special contributions, new grant programs for low- and middle-income students, and the repayment assistance program have enhanced this program, providing encouragement for many students and their families. However, CASFAA believes that more needs to be done to improve access to post-secondary and to encourage and support successful completion of programs, particularly for students who have traditionally been underrepresented in post-secondary studies.

The Chair : Okay. Thank you very much for your presentation. We'll now go to the Canadian Association of University Teachers. Mr. James L. Turk (Executive Director, Canadian Association of University Teachers) : Thank you, Mr. Chair. My colleague, David Robinson, and I are pleased to be here with you. We don't envy the job you have. You listen to hundreds of groups come to talk about their needs. We suggest there are some sectors and some needs that undergird virtually everyone else: health care, post-secondary education, and social services. And we want to speak about post-secondary education.

We feel there are some serious difficulties in post-secondary education in this country. We'd like to highlight three of those, talk a bit about the problem in each, and suggest some solutions. The three problems are what we see to be a misguided approach to research funding, inadequate federal support for post-secondary education, and restricted accessibility to universities and colleges.

With regard to a misguided approach to research funding, the problem starts if one looks at the 2009 federal budget, where the three federal funding agencies, which provide the bulk of the money for basic research and applied research in this country, had their budgets reduced by $147.9 million over three years. Budget 2010 increased core funding by just $32 million, which wasn't even enough to keep up with inflation much less offset the previous year's cuts. At the same time, there were dramatic increases in funding to the American granting councils.

As well, in last year's budget there was $45 million for five years given to the granting councils for the creation of the Banting post-doctoral fellowship program, which, unfortunately, only rewards a small handful of researchers and institutions that house them, leaving the vast majority of Canada's post-doctoral scholars and postgraduate institutions with no benefit whatsoever.

At the same time, the federal government, beginning in 2009, rolled out a $2 billion knowledge infrastructure program, which has created enormous building and construction, and further infrastructure, but it's been done at the same time as the operational side has been starved. Finally, part of the problem is the cuts to Statistics Canada. All of us in the research sector rely very heavily on data from Statistics Canada.

The $6 million reduction, as part of the government's strategic review, resulted in the elimination of a number of important surveys, and the elimination of the mandatory long-form census is going to have a devastating impact on our ability to have data that is only gathered through that survey. As well, it undermines other sample surveys because the long-form census was used to benchmark those. The solutions are to increase basic funding for research for Canada's three funding agencies over the next two years proportionally to what the Americans have put into theirs.

After all, we lose scholars to the United States when the money isn't available here and it is in the United States. Based on the relative size of the Canadian economy, that would require an increase of about $1 billion over two years to be matched on a proportional basis to what the Americans are providing. We also have to ensure that the research funding provided through the federal agencies is provided through them and not around them to ensure that decisions about what is funded are based on peer review based on merit, as determined by the scientific community.

Finally, the base budget of StatsCan should be increased by 10% and the long-form census should be restored. The second problem is the inadequate federal support for post-secondary education. Funding transfers for post-secondary education, on a constant dollar basis and recognizing the adjustment for inflation, are now about $410 million less than they were in 1992-93. On public funding for universities and colleges, government operating grants used to make up 80% of total university operating revenues in 1990. Today they make up only about 58%. The Canada social transfer is set to increase by 3% this year.

The Council of the Federation is telling the federal government it has to go up by at least 4.5% to more accurately reflect the projections. The solution is to bring the funding for post-secondary education at least back to the level it was at in 1992-93, which would mean a $410 million increase in funding in this budget year.

(0930) We think the long-term solution is to tie it to the GDP, to say that we can afford to invest one-half of one penny of each dollar created by the Canadian economy in our post-secondary sector, which all of you have acknowledged is key to the future of the country. That would require, over the next three years, an increase of $4.8 billion to get us back to half of 1¢ of every dollar created by the economy.

The method for doing that should be through a Canada post-secondary transfer governed by a Canada post-secondary education act, to ensure the funding the federal government provides is provided through a mechanism that ensures the money goes for post-secondary education in a way that's agreeable both to the federal government and to the provinces. Thank you, Mr. Chair. The Chair : Thank you, Mr. Turk. We'll now hear from the Canadian Federation of Agriculture. Mr. Ron Bonnett (President, Canadian Federation of Agriculture) : Thank you, Mr. Chair.

And thanks to the committee for having us in to make a presentation. My name is Ron Bonnett. I'm a beef farmer from northern Ontario, but I'm president of the Canadian Federation of Agriculture. The CFA represents about 200,000 farmers from across the country, and we represent a number of different commodity organizations. There are a few points I would like to make at the start about agriculture being core to economic activity in both rural and urban communities. We fuel jobs with our domestic production, as well as being a significant contributor to export sales to hundreds of other countries.

In general, when it comes to federal policy it should be designed with the idea of keeping farmers and farm businesses competitive in the worldwide scene. Taxes, investment, infrastructure, regulations, and fees should be designed with our competitors in mind and making sure that there are parallel standards, taxes, and fees in our area compared to other areas. We see agriculture with potential opportunity.

Global population that is projected to increase, climate change, and new markets emerging for agriculture products could create huge opportunities for economic activity, job development, and growth in the agriculture sector, not just at the primary sector but through the whole system. The Canadian Federation of Agriculture is currently working with partners in the whole value chain on developing overall strategies to capture some of these opportunities. In future presentations, that will guide some of our requests. There are lots of opportunities out there, but there are some investments needed in the short term.

We've decided to focus our request this year on three key areas. You have a full written brief in front of you. The first recommendation is to deal with changes to some of the existing programming. I don't think it's any secret that the AgriStability program has not responded to some of the financial issues facing the agriculture sector, particularly livestock. We are recommending that there be changes made immediately to the AgriStability program, removing the negative margin viability test and increasing negative margin coverage from 60% to 70%.

Also, if you could provide farmers with the choice of having either the top 15% of the reference margin coverage or participation in the AgriInvest program, that would allow farmers to make the most appropriate choice. Also, reference margin issues are a problem because of long-term declines in prices, particularly in the livestock sector. If you could choose from the three-year average reference period or take the overall higher average of a five-year period....

Additionally, to inject money into the farm community immediately, we would remind you of a promise made in the previous election to enact a 2¢ per litre reduction in the diesel fuel excise tax. That would directly put money in farmers' pockets for the 2010-11 crop year. Recommendation two is designed around creating a bridge to the future as we design new programming going forward.

The government did approve an AgriFlexibility program, and we congratulate them for that, but we had asked that the non-business risk management clause be removed to provide some flexibility to put specific solutions within different regions of Canada. On bridging to the future, we would ask that the federal government work towards restoring investment in research to pre-1994 levels. Research has been cut over a large number of years. As I said, we're poised to capture new and emerging markets, everything from energy markets to bio products, and that investment in research would give us the edge to move ahead.

Finally, we will be asking for a co-op investment plan, which would give a 125% tax deduction to members who invest in their co-op's preferred shares. This would spark value-added investment. Thank you.

(0935) The Chair : Thank you. The final presenter, la Fédération étudiante universitaire du Québec, s'il vous plaît, pour cinq minutes . [ Translation ] Mr. Louis-Philippe Savoie (President, Fédération étudiante universitaire du Québec) : Thank you. My name is Louis-Phillipe Savoie, President of the Fédération étudiante universitaire du Québec (Quebec University Students' Federation). With me today is Mathieu Oliny, Vice-President of Socio-political Affairs at the FEUQ. My presentation will be brief.

The FEUQ is the largest university association in Quebec, representing 115,000 students from across Quebec and 14 student associations, both in the francophone and anglophone sectors, as well as university associations in major centres and smaller regions. Today, we would like to present to you three federal funding proposals, more particularly in the area of post-secondary education. Clearly, the FEUQ believes that university education must be a priority. However, we should also keep in mind that university education is an area of provincial jurisdiction, and act accordingly.

The three concerns that are outlined in our brief and that I will briefly present to you today are consistent with those principles. Our first concern deals with federal transfers for post-secondary education. You are no doubt aware that there were major cuts to the federal transfers for post-secondary education in the early 1990s, and that the funding has still not come back to earlier levels. Taking into account inflation, there is still a gap of approximately $3.5 billion in federal transfers, with some $820 million to be allocated to Quebec.

That is according to the estimates done by the Government of Quebec last year. That figure is supported by all Quebec stakeholders. Those cuts had a very significant impact across Canada. In Quebec, funding has still not returned to 1994 levels, essentially owing to the cuts in federal transfers. We therefore believe that, when the federal government sits down to review federal transfers in 2014, priority should be given to increasing federal transfers for post-secondary education. That will help bring funding back up to 1994 levels.

In our opinion, those transfers must be made without any conditions and respect provincial areas of jurisdiction. Above all, the provinces are the ones with the expertise needed to make proper use of the funds allocated for university education. Another concern of the FEUQ deals with regional access to university education. In developing the university education system, it has become imperative to decentralize certain teaching activities. It has been recognized that the closer a student is to a university, the more likely he or she will enrol.

However, even today many students have to leave their regions of origin. In Quebec, 50% to 75% of students living in resource regions, which are the most remote, must leave home in order to pursue their studies. Many of those students never return to their regions of origin. We know that those regions are currently facing problems, including an exodus of young people that is having a very significant impact on the economy of Quebec's regions as well as in regions of Canada as a whole. Ultimately, this will be a heavy burden on the entire economy.

To counter that exodus, the government of Quebec, in the early 2000s, implemented a tax credit for post-secondary graduates who choose to return to their regions. This is an $8,000 tax credit over a three-year period for students who settle in a designated region. Over 15,000 people took advantage of that tax credit in 2007. That is of considerable help to Quebec's regions. We believe that the federal government should follow Quebec's lead and adopt Bill C-288 , which is currently being debated in the Senate and was previously passed by the House of Commons.

We believe that passage of the bill should be expedited in order to ensure the sustainability of Quebec's regions. And now, on to our third point. Needless to say, Quebec's students are also concerned by general taxation issues, given that they have major impacts on the funding of post-secondary education and social programs. We have highlighted two issues that are of recent concern. I will not get into the details, but the concerns are regarding adjustments made to equalization in recent years. There is also the issue of the harmonization of Quebec's sales tax.

Those two issues have not yet been resolved and are the source of significant shortfalls for the government of Quebec. As a result, the province faces significant challenges because it must adequately fund its various social programs, and post-secondary education in particular. Therefore, the three priorities that I have presented, i.e., federal transfers, Bill C-288 and the various taxation issues, must be urgently addressed by the federal government in order to ensure Canada's economic future. Investing in university education must be seen as a priority to ensure the future development of society.

(0940) The Chair : Thank you very much for your presentation. [ English ] We'll begin members' questions with Mr. Szabo, please. Mr. Paul Szabo (Mississauga South, Lib.) : Thank you. Ms. Clayton, I want to compliment your organization for their presentation. I think it is an extremely important point, as are the issues that you brought here about the need question. I don't know how to put it delicately, but in a lot of the presentations that we've had with regard to post-secondary education and the funding, the hardship, the debt, very rarely has there been analysis to back up the statements. We really need that.

I know it exists, but we don't have it. In recommendation 2 you made the broad statement that the tax credits and everything else we have disproportionately benefit families with higher incomes. You can't make that statement without having seen some evidence, some basis, for making the statement. That's important. I bet you it exists; I think it exists, and I think the committee should have it. Ms. Shelley Clayton : It exists with the Canadian Education Project, higher education strategies. There are many, many documents. I can provide you with backup on that, if you like, at a later date. Mr.

Paul Szabo : I'm not sure if we want “many, many documents”. The key is really to get the underpinning to the statements, to get a dimension. We need to be able to express ourselves in terms of recommendations in our report and say that it's not just an editorial conclusion, but substantive evidence with the support of various groups. I want to ask especially if you can help direct us somehow. It may be any of the groups. The post-secondary education thing is absolutely bang on: if you get the grades, you should get to go. One way or another we have to find a way to make that happen.

There are so many elements for families and students to get benefits that are directed or prompted by post-secondary attendance. It can be RESPs, student loan scholarships, or loan forgiveness. There are so many elements that are possible, not to mention students' own incomes. For one-third of the year they are not at school; they must be doing something, or should be doing something. We need the kind of analysis that really breaks it down to the reality of the average case, the average student.

I can give you a terrible case in which the family is destitute and the student is living on welfare and stuff like this, and that generates big numbers, but we need it for the preponderance of students. Do any of the other three presenters who talked about the post-secondary side have a concern with moving towards a needs-based focus for assisting post-secondary students? Ms. Shelley Clayton : I think I did say “means-tested”. Needs-based is where we're at in most provinces anyway, but it's not universal.

There are eight different tests out there, depending on which province you go to, and cars are more valuable in Ontario than they are in New Brunswick. That's facetious--they're really not--but there's a whole different needs testing that you can do by province. I think we need to make it universal, so that students who are going into an educational institution in New Brunswick are going to have the ability to get as much assistance as they would get if they were going to Quebec.

In reference to Quebec, in my career--because I am a paid financial aid administrator--I have often told students to go to Quebec, establish a residency, and then come back and see me, because it is probably one of the better provinces for funding educational experiences.

(0945) Mr. Paul Szabo : Okay. Monsieur Savoie, did you have...? [ Translation ] Mr. Louis-Philippe Savoie : The situation in Quebec is somewhat particular. Currently, one province, Quebec, and the three territories have opted out of the Canada Student Loans Program and the Canada Student Grants Program. Since the early 60s, Quebec has been administering its own student financial assistance program, which is based on two principles: a contributory principle and a supplemental principle.

In a nutshell, that means that the student and his or her family must contribute and the government provides an additional amount to meet living expenses that are calculated bearing in mind educational expenditures and tuition fees. This is a system which, in Quebec, works relatively well despite some shortcomings. However, it does enable students in Quebec to have a much lower debt load than those from the other Canadian provinces. The average debt, following completion of a bachelor's degree, is $15,000 as compared to approximately $27,000 in the rest of Canada.

This is a system that has proven itself, which overall works very well. Some aspects of its administration require adjustment but the infrastructure itself enables widespread accessibility to post-secondary education without acquiring an unreasonable level of debt. [ English ] Mr. Paul Szabo : Go ahead, Mr. Turk. Mr. James L. Turk : This government actually did make an important contribution by introducing the Canada student grants program. Currently that program provides low-income students with just about $2,000 a year, which doesn't even cover half the cost of tuition in most provinces.

We'd certainly recommend raising the maximum grant under that program to $5,000, which is a level that more accurately reflects the average undergraduate tuition fee in the country. That's a very concrete step that would provide enormous help, because it's a national needs-based grant program. I think it would be a very important step forward. The Chair : Mr. Szabo. Mr. Paul Szabo : My time is up, so I just want, for the arts, I absolutely support.... On the clean technologies, more, more. Our committee is going.... Carry on. [ Translation ] The Chair : Mr. Viau, did you want to answer? Mr.

Laurent Viau : Just to add to the question, you talked about allocating financial assistance in accordance with requirements. In Quebec, this is primarily how we operate. That being said, as Ms. Clayton pointed out, there is a great deal of federal money—and we see the same thing at the provincial level—that is being channeled to tax measures which may be less attractive when compared with, for instance, reducing tuition fees or awarding additional bursaries. The CNCS and the FEUQ have been examining ways to direct this money better.

There is the option of redirecting this money to additional bursaries, even perhaps waiving certain federal tax credits to ensure that the money is redirected to the Government of Quebec so that it can in turn invest more in university financial assistance and drop tuition costs.

(0950) The Chair : Thank you. Thank you, Mr. Szabo. Mr. Paillé, please. Mr. Daniel Paillé (Hochelaga, BQ) : Basically, there is a solution to all of the problems that you have raised. Earlier, you said that when you live close to a university, it is more likely that you may go there. So, the closer a government is to its constituents, its students, its citizens, the more sensitive it is to their concerns. In our opinion, it does not make sense that the federal government should meddle in the educational jurisdiction, and we have good evidence to show that this is the case.

Yesterday we heard from the Canadian Student Association and they expressed their way of seeing things. The association wanted, for example, to cancel $12 billion or $13 billion in current debt which would be converted into non-refundable grants. That is one way of seeing things, but we can clearly see, from the FEUQ and all of the people associated with this association, that in Quebec, we can have another way of viewing things. Mr. Savoie and Mr. Oliny, you talked about going back to the 1994 transfers. You seem to be saying that you are hoping that the government will think things through properly.

I will leave you with your illusions—no doubt, God, over time... That being said, I would point out to you that on page 19 of the brief submitted to the Minister of Finance last year, we stated all of this very clearly. You are in favour of Bill C-288 . Should I tell you—and you know this full well—that this too was an initiative from the Bloc Québécois as part of its parliamentary work. So when people say that we're useless, that is false. I would like to hear your opinion on one matter. You said that you are going further compensating Quebec financially through the equalization system.

Do you really think that the Government of Canada would, in a flash of genius, go back to the table and hand over this money? Or again, basically, would it not be better for the federal government to give the Government of Quebec tax points—and not amounts—to enable the latter to sustain its student labour force—because students are our workforce in the making? Mr. Louis-Philippe Savoie : With respect to all of these questions, particularly those pertaining to sales tax and equalization, there is a broad consensus in Quebec. Nearly all of the organizations agree on these two issues.

That is why we want to send out this message today. As far as the various scenarios are concerned, there are certainly all kinds of ways to finance the various social programs through transfers between the federal and provincial levels. This is an extremely complex issue. We believe that the basic guiding principle that underpins the federal government's investment in education must first and foremost be a recognition that education is a matter that comes under provincial jurisdiction and that any action taken must bear this in mind in each and every case.

This jurisdiction belongs to Quebec and the other provinces, and this must be respected. We have seen this, for instance, during the debate that was held on student financial assistance programs. The Canadian financial assistance program works differently from that of the other Canadian provinces, and that is what, in part, gives it its strength. The diversity that exists in the student financial aid programs is also present within the Quebec university network, just as each university network, in each Canadian province, has its own features that are unique.

These features, in our opinion, must be respected in federal financing. This is what will enable us to use the transferred money as effectively as possible.

(0955) Mr. Daniel Paillé : Thank you. I would like to question the people representing the arts sector. Last year as well, when we tabled our brief—because the Bloc Québécois, in addition to contributing to this committee, also surveyed its state—we presented some measures regarding cutbacks in the exporting of our works. You talked about $25 million; we suggested $30 million. I would invite you to continue supporting us on this matter. Two measures were included, which are not present in your brief.

We had suggested that once again income averaging should be given consideration for federal taxation, a measure that exists in Quebec. Also, why did you remain silent about the Société Radio-Canada, which is supposed to be this great broadcaster of the arts? Mr. Eric Dubeau : Excellent questions, excellent points. Mr. Daniel Paillé : Thank you. Mr. Eric Dubeau : I would answer by saying that these two issues, these two recommendations that you have before you and which are in our brief, are those for which there is the widest consensus within the artistic community from one end of the country to the other.

Clearly, there are other priorities, there are other requirements and we could have presented you with a long 10-page shopping list, full of concerns and priorities. Mr. Daniel Paillé : Santa Claus does not exist, he is a bad guy. Mr. Eric Dubeau : Pardon me? Mr. Daniel Paillé : Santa Claus is just a cad. The problem is that he does not exist. Mr. Eric Dubeau : That is why we have turned to the committee, and not Santa Claus. However, I would tell you that of course there have been many discussions about the tax measures that could have been implemented in order to promote artists and cultural workers.

This remains a concern, but it is not a priority for this year, given the economic situation and the nature of the proposals we have made to you. Mr. Daniel Paillé : And as far as Radio-Canada is concerned, do you feel that, at one point, if too many cuts are made, it may break? Mr. Eric Dubeau : Radio-Canada remains a vital ally of the artistic community from one end of the country to the next. Obviously we are concerned about its continuity and stability, but it does not figure in our recommendations this year. Mr. Daniel Paillé : You should be in the diplomatic world, sir.

That's all. [ English ] The Chair : Merci, monsieur Paillé . We'll go to Mr. Wallace, please. Mr. Mike Wallace (Burlington, CPC) : Thank you, Mr. Chair, and I want to thank our witnesses for coming this morning. How long do I have, seven minutes? The Chair : You have seven minutes. Mr. Mike Wallace : Thank you very much. I'm going to share a few minutes with Mr. Hiebert. Where to start? First of all, I just want to thank the presenters from the arts organization. It was a very reasonable approach today, I would say, and sometimes we don't always get that, and I'm going to get to that in a little bit.

The first question I have, though, is for my friends from the Canadian Clean Technology Coalition. Can you confirm for me that organizations that are in the thermosolar business would be part of your organization? Ms. Céline Bak : They would be. Mr. Mike Wallace : When does your business industry become self-sustaining so that you don't need government funding? Ms. Céline Bak : Thank you for the question. The Canadian clean technology industry is made up of companies that today have an economic proposition. LED Roadway Lighting is a very good example of it.

Clean technology includes companies that both increase the efficiency in the use of energy and give— Mr. Mike Wallace : That was not my question, ma'am. When does your industry become self-sustainable, so that you're making money and don't need government money? Ms. Céline Bak : Many of the companies in the industry are already. Mr. Mike Wallace : Okay. What are you asking for, then, today? Ms. Céline Bak : We're asking you to take advantage of the technologies that actually enable government to be cheaper, better, and faster. Mr.

Mike Wallace : I'll turn to your colleague from his own company, since he's put himself out here today. If it's so efficient and effective, why isn't it an economic benefit for Canadian municipalities and provinces to buy your technology? Mr. Curtis Cartmill : For us in particular, it's a very new technology that people need to try out, first of all, to see for themselves that it can save energy and lower maintenance costs and that there's definitely a pay-back cycle.

We developed a high-reliability product—I actually have it running at the side of the room, if you'd permit me to show it to you for a second—and we use high-quality components, for a 20-year design life. Mr. Mike Wallace : Other countries around the world are recognizing that; that is what you're saying—you're selling it to other countries. What is the difference between that customer and the customer domestically? Mr. Curtis Cartmill : I would say for us in particular, we're such a new industry that people are still trying out the technology.

(1000) Mr. Mike Wallace : The other point you made— Ms. Céline Bak : May I respond? Mr. Mike Wallace : I have only a little time. I'm sorry, ma'am. The other point you made was that other organizations are being bought by foreign investors. What I'm looking for is what we could do to make the Canadian investment climate better so that Canadians buy into Canadian technology instead of using tax dollars. Do you have any suggestions in that area? Ms. Céline Bak : We know that Canadians are not necessarily early adopters of technology.

I think we need to show leadership in the adoption of technology that enables government and other levels of government to be cheaper, better, and faster. Mr. Mike Wallace : Okay. I have one more question, and then.... How much time do I have left? The Chair : You have three and a half minutes. Mr. Mike Wallace : Okay, it's 30 seconds, then. Mr. Turk, we've seen each other for numerous years of your coming back here. Thank you for coming back. You're representing university teachers, isn't that correct?

Let me ask you: is comparing us with the United States—which is in really bad economic shape and they have no sense of where they're going on their deficit or their debt...? Is it wise to compare our spending with what they're doing south of the border, when they're in such financial trouble? Mr. James L. Turk : Actually, it is. They recognize that to get out of the economic trouble they're in, they have to invest heavily in research, and they have targeted academic research as a key to their future. So I think it's actually a very apt comparison.

As well—we see this with young graduate students who complete their PhDs and are looking for places—the top students can find substantially more research support in the United States and often take positions in American universities, and we lose them precisely because we haven't funded our granting councils on a proportionate basis. Mr. Mike Wallace : Okay. The Chair : You have about two minutes. Mr. Russ Hiebert (South Surrey—White Rock—Cloverdale, CPC) : All right. To continue the conversation with the Canadian Clean Technology Coalition, Ms.

Bak, you stated in your presentation that Canadian companies are being sold before they reach their potential. I'm trying to understand this from the investor's perspective. What's the problem? That's a typical exit strategy for many companies that they're delighted to experience, and the shareholders even more so. Ms. Céline Bak : And it should occur, and thank you for the question. Investors look for vibrant domestic markets. Canadian companies typically have between 10% and 30% of the level of investment that globally competitive companies have in the U.S. and elsewhere. I'll give you an example.

A Canadian smart grid company has just raised $10 million and is competing against companies that have raised $100 million. We are really good at what we do, but it's hard to be ten times better. If there is a more vibrant domestic market, investors will be more likely to invest in our companies. The level of investment that companies have is directly related to the growth they experience, and growth is directly related to the time at which they are bought. There's a time in which companies should be bought, and it's not when they reach $10 million, which is what's happening today. Mr.

Russ Hiebert : To restate an earlier question from my colleague, if the savings of using the technology are so great at LED and some of the other companies, why are the incentives needed? Ms. Céline Bak : In some cases capital needs to be deployed, so the technology needs to be depreciated over time. There needs to be access to P3 types of arrangements that can fund it. But to be very blunt, in Canada we prefer to buy from IBM. We're not good at buying technology from ourselves. We often prefer to wait until our companies are bought by the equivalent of IBM so that we can buy something that is prepackaged. Mr.

Russ Hiebert : Just briefly, this says Canada would be “the first dark sky nation”. What is a dark sky nation? Mr. Curtis Cartmill : I'll just show my fixture off for a second. As you can tell, this is actually only consuming 43 watts of energy— The Chair : You'll have to speak into the microphone; otherwise, translation will not catch it. Mr. Curtis Cartmill : I just wanted to demonstrate that the actual fixture I'm demonstrating is fully cut off, so that basically all the light is directed downward.

With a lot of the high-pressure sodium technology that was introduced in the 1970s, about 15% to 20% of the light is going upwards. Wasted light is wasted energy.

(1005) The Chair : Thank you. Maybe you can fix a light on Parliament Hill and the waste we use. Mr. Pacetti, you have five minutes, please. Mr. Massimo Pacetti (Saint-Léonard—Saint-Michel, Lib.) : Thank you. [ Translation ] I would like to thank the witness for coming to meet us today. I would like to ask Mr. Viau, from the Conseil national des cycles supérieurs, a brief question. In talking about indirect costs, you stated that an amount is paid by the federal government. Is there also an amount paid by the Government of Quebec? Mr.

Laurent Viau : Yes, the Government of Quebec currently provides measures through the budgetary rules of the ministère de l'Éducation, du Loisir et du Sport to cover indirect research costs. Currently, if my memory serves me correctly, 55% of the indirect costs of research are covered at the Quebec provincial level. At the federal level, as I explained, only 20% of the costs are covered, forcing universities to use their operating funds in order to be able to— Mr. Massimo Pacetti : There is a request to increase the federal portion from 20% or 25% to 50%, I believe. Mr.

Laurent Viau : We are saying that, at a minimum, we have to set a threshold of 40% over the next few years, in order to be able to begin to improve the position of the federal government. It was only in 2001, relatively recently, that the federal government started to cover indirect research costs. The program was not made permanent until 2003. Since then, not much has changed. [ English ] Mr. Massimo Pacetti : Ms. Clayton, you were talking about the cost of education and the debt.

There's a big debate going on, depending where we come from in this country, about whether the cost of education is too low and the debt is too high. How do we reconcile the two? Some people are saying that we should probably increase the cost of education, but then we have students who are coming out with huge amounts of debt. I think your organization faces that on a daily basis. Ms. Shelley Clayton : We do indeed, and it is a balancing act. In reference to the earlier question, there is a quote that I have in my submission. It says clearly that this is the key.

Students will come if they have their needs met, but if the loan is too high, then they have a propensity to just discard their education, because if they can graduate with a debt of $60,000 that is not within their ability to repay, then they'll just— Mr. Massimo Pacetti : But if they're coming out with an education, what's wrong with $60,000? Ms. Shelley Clayton : There's nothing wrong with $60,000 if you're getting an LLB degree. Mr. Massimo Pacetti : I'm not saying $60,000 is the right number; it could be $100,000 or twice that. Ms.

Shelley Clayton : But if it's $60,000 and you're getting a Bachelor of Childhood Education, that's a huge issue. I talk with students on a daily basis who are graduating with a $50,000 student loan debt and an $80,000 line of credit debt, and they're coming out with their law program degree. Well, they have no problem paying that off within a reasonable amount of time. Mr. Massimo Pacetti : Would you advocate that the amount of debt you are carrying should be based on the type of degree you get? Ms. Shelley Clayton : They already do that.

There are already provinces that recognize that there is a long-term projection for the particular degree you get and what you're going to be able to earn. An example of that is in the province of Newfoundland, where they help students who are taking their early childhood education degree, and they reduce their debt upon completion because they understand that they're going to be working with children and they are not going to have that potential to earn as much as a lawyer will earn. So that's already in place. Mr. Massimo Pacetti : Okay, thank you. [ Translation ] Mr.

Savoie, I would like to make a comment and ask a question. First of all, I would like to say that the Bloc Québécois bill was improved by the Liberal Party. [ English ] Just for the record.... [ Translation ] I wanted you to know that. The Fédération étudiante universitaire du Québec is asking the federal government for $2.6 billion... I apologize, I am reading the English version. Are you saying that the Quebec sales tax has been harmonized with the GST? Mr. Louis-Philippe Savoie : That has been the case for a very long time. Mr. Massimo Pacetti : Are you sure? Mr.

Louis-Philippe Savoie : Harmonization occurred a very long time ago. Unfortunately, I am not a tax expert. Mr. Massimo Pacetti : I am an accountant and I can tell you that that is not true. That is the problem. Mr. Dubeau, you are asking for $25 million to be invested in strategic international market access and development initiatives. Could you explain why this $25 million should not be included in the $300 million that will eventually be transferred to the Canada Council for the Arts?

(1010) Mr. Eric Dubeau : We recognize that there are probably other mechanisms which would enable the government to promote arts and culture internationally. The Canada Council for the Arts certainly has a role to play in this sector, however, it is not the exclusive player nor is it the only intervener that should be supported in— Mr. Massimo Pacetti : Where should this $25 million be going? The Chair : Thank you, Mr. Pacetti. Mr. Carrier, you have the floor. Mr. Robert Carrier (Alfred-Pellan, BQ) : Thank you, Mr. Chairman. My question is for Mr. Viau of the Conseil national des cycles supérieurs.

You raised the issue of taxing post-doctoral bursaries. I'd like to talk a bit more about this issue. I have been looking into this issue for approximately one year, when I became aware of the problem. We met with fellows from Laval University who raised this issue. Some individuals are in favour of it and others not. Did the government inform you that this whole issue has been stalled? Mr. Laurent Viau : Up until now, we have been unable to meet with government representatives, be it from Industry Canada or the Canada Revenue Agency. I know that the Government of Quebec was made aware of the problem.

The ministère du Développement économique, de l'Innovation et de l'Exportation does not intend to tax bursaries. The Government of Quebec will not be following in the footsteps of the federal government, which is a good thing. That being said, we have no indications as to whether or not the federal government will overturn its decision. This year, what is important is to find out whether or not the government is looking back, namely will it be taxing bursaries retroactive to 2006, which, for certain individuals, will be extremely problematic.

Some post-doctoral fellows want to brandish posters and sign petitions, which is extremely rare and strange, in our opinion. Mr. Robert Carrier : How many fellows in Quebec will be affected by this issue? Mr. Laurent Viau : In Quebec, that will have an impact on approximately 2,000 post-doctoral fellows. Mr. Robert Carrier : The Canada Revenue Agency has issued comments stating that there is a relationship of subordination between the employer and the fellow, and define the fellow as an employee. Are you aware of these discussions? Mr.

Laurent Viau : There is a consensus in Quebec, particularly within the Association des doyens des études supérieures in Quebec, the ADESAQ, and the ministère de l'Éducation: we recognize these individuals as students in training because there is guidance given from the supervisor. So it's more like the relationship of a doctoral student rather than a student-researcher relationship. Mr. Robert Carrier : Very well, thank you. I would like to ask Mr. Turk, of the Canadian Association of University Teachers, a question. You do not refer to this problem in your brief.

Is this issue of taxing post-doctoral fellowships raised outside of Quebec? [ English ] Mr. James L. Turk : We have a different view from Mr. Viau. We see post-doctoral fellows not as students but as academics who are in an employment relationship. The problem is not that their income is being taxed; the problem is that what they're paid is far too low. That's how it needs to be addressed. These people have completed their PhDs, are accomplished scholars, and typically in the sciences will spend two or three years working in a lab getting more experience before they then take on a professorial position.

But they are fully accomplished scholars. In most fields in the humanities you go straight from your PhD to a professorial job. In the sciences, typically you spend two or three years in a post-doc before doing that. But we think the problem is they're paid as if they're students when they're not. They are employees and they should be paid appropriately. We think that's the solution to the problem. [ Translation ] Mr. Robert Carrier : However, you did say that their salary is not very high. In addition, if they are deemed to be employees, this salary will be taxed. [ English ] Mr. James L. Turk : That's right.

But the solution to it is not to not tax them. That still leaves them with a low income. The solution is to pay them properly. The granting councils have a level of pay so post-docs are paid out of grants, and it's remarkably low. I think, as Mr. Viau said, it's sometimes less than a PhD student will get. That's the problem. Not taxing them was an attempt to create some benefit, given how badly they're paid. But we have to address the real problem, that if we want to retain them, if we want to attract and keep top-notch post-docs, then we have to pay them appropriately. (1015) [ Translation ] Mr.

Robert Carrier : Thank you. How much time do I have remaining, Mr. Chairman? The Chair : You have 10 seconds remaining. Mr. Robert Carrier : Thank you. [ English ] The Chair : Merci, monsieur Carrier . Mrs. Block, please. Mrs. Kelly Block (Saskatoon—Rosetown—Biggar, CPC) : Thank you very much, Mr. Chair. I am more than happy to share my time with you, so if you just indicate when I'm done, that would be great. Great presentations evoke a lot of questions, but the question I'm going to ask is for the Canadian Clean Technology Coalition. You mentioned a number of challenges facing clean technology companies.

There are five on the first page of your document. You also mentioned that the market for these companies is heating up. You suggested an own-the-podium strategy, which could see 20 companies achieve revenues of $100 million. Could you explain that strategy just a bit? Ms. Céline Bak : Thank you for the question. Many of our companies are at a pivotal stage in their development right now. They are exporters, but they're relatively small. About 60% of Canada's clean technology companies intend to be globally competitive and intend to secure investment. I'll give you some quick numbers.

There are 436 companies, 320 of which are in commercialization and 60% of those intend to be globally competitive. That's 200 companies, and they intend to be globally competitive while raising financing. There are between five and ten investments per year in Canada in this sector. That means there is 5% coverage of the 200 companies. This isn't necessarily a bad thing. The investments have to be of quality and investors have to get a return on their investment. Moreover, as I said earlier in the question regarding the financing, our companies get between 32¢ and 10¢ compared to our American competitors.

So a management team will have three vice-presidents instead of nine or ten. It's a very substantial difference. We want to move to the point where as Canadians we have confidence in procuring our technologies in clean technology, which is much more than wind and solar technology. You'll notice the diagram speaks of nine different sectors, the majority of which have to do with the conservation of resources, be it water or energy. The first thing is we need to procure from ourselves. We don't procure technology readily and we don't procure clean Canadian technology readily.

So that's part of the own-the-podium plan. The second thing is that as Canadian businesses we prefer to build great technology rather than focus on selling it. So the companies themselves have changes to make in the way they operate. Then the third thing is that investors have to be attracted to Canada, and a buoyant domestic market is part of that. Mrs. Kelly Block : Thank you. Ms. Céline Bak : Thank you for the question. The Chair : Thank you, Mrs. Block. I just wanted to ask one follow-up question for the clean tech.

This morning I was at the breakfast and I asked a gentleman from NextEra what his biggest challenge was. He said access to capital, by far. He said that's why SDTC was important, because it's small access to capital, but it also is increasingly a signal to the venture capital community that SDTC has done its homework on that specific company. But I didn't notice that in your brief. Is there a reason for that? Or do you agree with that statement? Ms. Céline Bak : Absolutely. The recapitalization of SDTC is an important part of the investment strategy for the Cleantech 20 by 2020.

SDTC showed its leadership as a title sponsor of the report, which we referred to, which is the basis of the coalition. Investors around the world, whether they're strategic investors in industry or venture capitalists or pension funds, all look to SDTC because of the quality of those companies. The problem is, though, it becomes a bit of a shopping list, so we have to actually have the next step.

We are funding companies to get to the point where their technology is scalable and economic through SDTC, which is critically important, but then we need to start adopting it ourselves so that investors will come into our Canadian companies with conviction.

(1020) Mr. Curtis Cartmill : I'll just add to that point as well. Last night actually was the deadline for another round of SDTC funding, and we did put an application in as well, because we see the importance of that as a step and a signal out to investors. The Chair : Okay, thank you. We'll go to Mr. Pacetti and Mr. Szabo. [ Translation ] Mr. Massimo Pacetti : Thanks. Mr. Dubeau, who will administer the $25 million? Mr. Eric Dubeau : That is a good question.

Earlier, I had started to say that clearly, the Canada Council for the Arts has a role to play in supporting the promotion of arts and culture on the international scene, however, it should not be the only player that promotes and is responsible for cultural diplomacy. No doubt there are roles to be played by the Department of Foreign Affairs and by the Department of Canadian Heritage, at other levels, as they must intervene elsewhere than in areas of jurisdiction— Mr.

Massimo Pacetti : Twenty-five million dollars, that is a lot of money, but you do not want to share this money with three departments and a separate entity. Mr. Eric Dubeau : I am fully aware of the fact that we are presenting you with a real puzzle. Mr. Massimo Pacetti : I asked the same question last year. So perhaps you could take a look at this issue with your members and provide us with a response later on. Mr. Eric Dubeau : We could get back to you with some proposals. Mr. Massimo Pacetti : You can have them sent to the clerk. [ English ] Mr.

Turk, just quickly--and this is a question the government members should probably be asking, but I have to ask it--we keep going back to the famous 1994 numbers, and some people are using 2000 and 2001 numbers, but if we look at the amount of money that's been transferred in post-secondary, we always included the money transferred to granting councils, so is it not equitable or pretty similar? Or are we totally excluding transfer moneys that are given to granting councils? Mr. James L. Turk : We were looking, in the figures we quoted, at the transfers to the provinces for funding post-secondary education.

I don't know if my colleague, David Robinson, wants to elaborate on that. Mr. David Robinson (Associate Executive Director, Canadian Association of University Teachers) : Sure. In the brief we're referring to the federal transfers that help fund the core operating costs of the universities. The research envelope is separate. The difficulty is-- Mr. Massimo Pacetti : That was something that didn't exist in the 1990s, I believe, or I think it was-- Mr. David Robinson : No, it did exist in the 1990s as well.

There's been a significant increase in research funding, but the problem has been that the core operating costs of universities have borne the price of that, and they haven't seen an increase. They've seen a real reduction, which has led to rising tuition fees and the problems with student debt that we've seen. Mr. Massimo Pacetti : Would you be supportive of making or forcing or telling the government to separate the transfer payments between post-secondary and the transfer? Mr.

David Robinson : Certainly we've recommended, and I think the government's taken the first step towards, disentangling the health transfer from the social transfers, but we would certainly be in favour of having a separate post-secondary transfer, just mainly for accountability and transparency reasons. I think one of the challenges you have, as members of Parliament, is that you have to make a decision-- Mr. Massimo Pacetti : Exactly. Mr. David Robinson : --as to whether we are spending enough money on post-secondary education.

If you don't know what that level is, it's very difficult to make that decision. [ Translation ] Mr. Massimo Pacetti : Mr. Savoie, you agree on a need for greater transparency so that post-secondary funds be separate from social transfers, right? Mr. Louis-Philippe Savoie : On the issue of very specific transfers under social programs, we do not hold any particular position. However, we believe funds should clearly be managed in the provinces first and foremost, and the transfers must have no strings attached. Mr.

Massimo Pacetti : But if we don't know where the money is going, it is very difficult to know what the conditions are. We do not know how much is being transferred for post-secondary education, health or other social purposes. Mr. Louis-Philippe Savoie : To us the main problem is funding in the provinces to fund basic operations. Then there is the issue of how this funding would be split at the federal level. For us, in Quebec, it is important to have the most timely funding possible so we may make appropriate choices.

Expertise in the area of university education can be found, in the main, within provincial departments. Mr. Massimo Pacetti : Very well, thank you. [ English ] The Chair : You have one minute, Mr. Szabo. Mr. Paul Szabo : On the arts, the stat about $2.70 in revenue for every one dollar the government invested is kind of interesting. The other dimension I thought was really important was that the cultural sector contributes $46 billion to Canada's GDP and generates approximately $25 billion in taxes to all levels of government. That's more than a 50% return. How does it compare to other countries?

(1025) Mr. Eric Dubeau : I don't have those numbers in front of me. What I can tell you is that those numbers you've just cited seem to reinforce the idea that the arts and culture are a sound investment. How it fares and how it compares to other nations is certainly something we can provide. The Chair : Thank you. Ms. Block, you have about two minutes for a final round. Mrs. Kelly Block : Thank you. My question is for CNCS. You mentioned increased funding you have received from the federal government since 2005, including 900 additional Canada graduate scholarships.

I want to speak to recommendation number one: “The CNCS recommends that the federal government increase the budgets of funding agencies to reflect the needs they express.” Can you speak to the criterion used by organizations in evaluating the applications recommended for funding, and how do they come up with those needs? [ Translation ] Mr. Laurent Viau : I cannot speak on behalf of granting councils.

That said, in terms of strategic directions, these organizations assess their needs based on the demand in their respective fields and they are there to support the needs expressed in their respective research fields. We know, for instance, that in 2008-2009 NSERC needed approximately $1.2 billion. There was a $200 million shortfall. CIHR, in the same year, expressed a need in the order of $75 million, and the calculations are slightly different for the SSHRC.

What has been determined is the importance of stable federal funding for research to ensure social sciences are not cast by the wayside, which has too often been the case, and has again been the case over the last few years. SSHRC is asking for federal research funding to be maintained at at least 25%. I do not have the figures before me to know what that would represent but I could provide you with them. [ English ] Mrs. Kelly Block : Thank you. The Chair : Thank you, Ms. Block. I want to thank all of our witnesses for being here this morning to present your briefs and respond to our questions.

If you have anything further, please submit it to the clerk. We will ensure that all committee members get it. Colleagues, we will suspend for two minutes to bring the next panel forward.

(1030) Mr. Massimo Pacetti : Perhaps we can begin. We are on the second panel on the pre-budget consultations 2010, pursuant to Standing Order 83(1). I think we have six groups. We have the Investment Industry Association of Canada; Institut des fonds d'investissement du Canada; Culture Montréal; GrowthWorks Capital Ltd.; Chantiers maritimes Irving inc.; and the Rick Hansen Institute. I will just remind everybody that you have five minutes. I'm going to try to be lenient, but not very lenient, because then members around the table are going to want to ask questions. So in the order I have here, Mr.

Russell, perhaps you'd like to begin, for five minutes. Mr. Ian Russell (President and Chief Executive Officer, Investment Industry Association of Canada) : Thank you, Mr. Pacetti. It's my pleasure to be here this morning. I have formal remarks, but I'll just talk a bit informally on the substance of my presentation. I'll preface my remarks by saying that while I think Canada faces some huge challenges in a very competitive global economy, we do have the advantage of having managed our finances prudently and having weathered a serious financial crisis very effectively.

I think the upshot of this is that the fiscal measures that we need to get more sustained private sector growth and recovery in the Canadian economy will be less harsh than they will be in other jurisdictions. But that said, I think there are areas where fiscal policy can make a positive contribution. I want to talk just briefly about recommendations that relate to the savings investment process, and in particular I think there is a pressing need for an incentive to encourage capital formation in the country, especially for small and, I should emphasize, mid-sized companies that need capital.

The Governor of the Bank of Canada in the Bank of Canada October report commented on business investment spending, which is only 5%, really, off the trough. We had a collapse in business investment spending through the crisis and into 2009 and a very modest recovery coming out of that. The governor has attributed that to low profits, to low demand or low capacity levels in business, and he also talked about restricted access to capital. I think that is an important issue. I gathered from the earlier discussions that this is something that witnesses have brought forward as a concern.

I think what we're finding in our industry is that small and mid-sized companies, especially those that want to list on exchanges or those that are already listed, are having a very hard time in finding capital. It's very selective, depending on the nature of the business. If it's a resource company in a particular resource sector, it probably has a better chance. The markets have also been very volatile and the windows of financing have been very short, which have increased the difficulty.

I would draw your attention to the fact that many of these small companies have found it difficult since the removal of the income trust. The income trust proved to be a very critical financing vehicle coming out of the technology market crash in 2002. It benefited a lot of small companies and it also benefited a lot of investors. We haven't had a substitute for an instrument like that since. So I think it's important to be looking at what incentive might make some sense. Our recommendation to the committee is to perhaps lower the inclusion rate from the current 50% to, let's say, 40%.

That would move the effective capital gains tax rate for the higher-income individual from 25% to about 20%. It would have an impact I think as a positive incentive. It would be cost effective, it would send a positive signal, and it would be administratively easy to do, because as we've talked about more complicated mechanisms, I think there's been a lot of push-back for administrative reasons. Finally, I think we have to find a solution to the capital-raising problem for mid-sized companies.

Once these companies reach mid size and they move above those thresholds where government has put in an incentive in terms of tax credits or lower tax rates or the capital gains tax exemption, these companies really have nothing more to go on. And as they get to mid size, they find it difficult to access capital, and that's one reason that we see acquisitions taking place, particularly with companies looking south for partners. So that's the key recommendation we make.

The last thing to say is that we're very pleased at the recommendations the Senate banking committee have brought forward in terms of pension savings, and we would support those recommendations. Thank you.

(1035) The Vice-Chair (Mr. Massimo Pacetti) : Thank you, Mr. Russell. That was below your five minutes and I appreciate that. From the Investment Funds Institute of Canada, Ms. Weinberg. Ms. Debbie Pearl-Weinberg (General Tax Counsel, Canadian Imperial Bank of Commerce, Investment Funds Institute of Canada) : Thank you. My name is Debbie Pearl-Weinberg, general tax counsel at CIBC and chair of the Taxation Working Group of the Investment Funds Institute of Canada, or IFIC. I'm here representing IFIC, and my comments do not necessarily reflect the views of my employer, CIBC.

I'm joined by Barbara Amsden, director with IFIC. IFIC is the national association of the investment funds industry. For Canadians, mutual funds lower the cost and risk of investing in securities, provide access to capital markets that was once only available to large institutional investors, and generate an important source of income, especially retirement income, for those without, and even those with, company pensions.

Eighty per cent of mutual funds in Canada are held in registered plans, RRSPs, RRIFS, and now TFSAs, and therefore the ability to save and maximize income from these plans is of primary importance to us and we believe to you. You have our submission, so I will not repeat it, but I am going to focus on three items in the submission. The first is addressing the new work reality. We note that while RRSPs have changed since their inception in 1957, demographics and the typical job have changed even more.

While the CPP adjusts for people leaving the workforce for certain reasons by excluding the lowest years of income, there is nothing equivalent for those saving through RRSPs. It is common for people to leave the workforce for child or elder care reasons or due to job loss. They're never able to make up RRSP contributions and tax-free growth of earnings for any period without income. Also, as more Canadians begin to work freelance or on contract, they will have widely varying incomes and they may not be able to benefit fully from RRSPs.

So our first recommendation is that the committee consider allowing RRSP contributions to be based on average income, allowing the carry forward or back of earned income above the annual limit to maximize RRSP contributions. Second, establish greater equivalency between those in registered pension plans and those in RRSPs. There has been a proportional decline in defined benefit pensions plans, and defined contribution pension plans have certain features that make them less attractive, especially for small businesses.

At the same time, there has been a growing use of group RRSPs, but there are tax provisions that disadvantage RRSP holders. We recommend that the Income Tax Act be amended to bring Canadians with registered pension plans and RRSPs on more equal footing. For example, we suggested extending the minimum income splitting age with a spouse or partner from age 65 down to age 55 for RRIF income, consistent with rules governing registered pension plan income.

As well, we would also recommend that the pension credit be made available to those people age 55 or more who receive income from a RRIF as it is to those receiving income from a registered pension plan. Third, we would like to address the implications of the GST and HST on mutual fund investors. It is not well understood that these economically good taxes, which generally promote competitiveness and fairness, apply in different ways to financial services and specifically in a way that taxes fund holders more heavily.

For nearly twenty years the GST has applied to mutual and other investment funds at effective rates of four to five times that of other financial products. Indeed, mutual funds were in their infancy as a retail product when the GST was introduced in the late 1980s and the rules were established. GST at 5% may be manageable, but an HST in the double-digits makes the long-standing unequal treatment of fund holders a lot worse.

This inequity is not because of the higher value added in the mutual fund where additional taxation would be expected, but because the labour and salaries that are part of delivering the financial product are fully taxable for funds, but they're tax exempt in the case of direct holdings of GICs, equity, and debt instruments.

The federal and provincial governments are studying ways to improve retirement savings, and we think Canadian fund holders should be taxed to the lower effective rate equivalent to that of other financial products in Canada and similar to the approach taken in other major value-added countries. We appreciate the opportunity to appear before the members of the finance committee today as this is where ideas that affect the lives of millions of Canadians can receive a fair hearing and discussion. Thank you. I would be pleased to answer any of your questions.

(1040) The Vice-Chair (Mr. Massimo Pacetti) : Thank you, Ms. Weinberg. [ Translation ] Ms. Jean, the director general of Culture Montréal now has the floor. Ms. Anne-Marie Jean (Executive Director, Culture Montréal) : Mr.

Vice-chair, ladies and gentlemen, members of the committee. [ English ] Ladies and gentlemen, good morning. [ Translation ] Culture Montréal would like to emphasize the importance of maintaining and strengthening support for culture and the arts as a way of stimulating the economy. [ English ] Culture Montréal is an independent organization and place for reflection and action that contributes to building Montreal's future as a cultural metropolis through research, analysis, and communication activities.

Culture Montréal contributes to the branding of Montreal as a cultural metropolis at the national and international levels. [ Translation ] Over the years, many studies have shown that culture and the arts are powerful levers for social and economic development. The arts and culture sector is resilient, very flexible and creates jobs. Investing in it stimulates the economy, thereby helping the federal government in its bid to rebalance the budget.

A recent study done by the Board of Trade of Metropolitan Montreal, Culture in Montreal: Economic Impacts and Private Funding , found that the cultural sector generates close to 100,000 direct jobs in the city, with an annual growth rate of 4.6% for the last 10 years, almost three times the total labour market average. Another study carried out in 2009, L’économie des arts en temps de crise , showed the instability of artistic and cultural organizations in Quebec while also highlighting their exceptional resilience and flexibility during the economic downturn.

Cultural organizations proposed various short-term solutions and came up with innovative long-term solutions that would encourage development and protect the sector from future economic disruptions. Culture Montréal believes that to improve the competitiveness of the Canadian economy, Canada must pursue its strategic plans to encourage investment, creating sustainable jobs that will last beyond Canada's Economic Action Plan.

This is why looking ahead to the 2011 budget, Culture Montréal recommends that the federal government increase its investment in the arts and culture sector to ensure that it grows and to maximize the economic and social spinoffs; that it encourage international recognition for Canadian artists and creators; that it contribute more to developing and maintaining cultural infrastructure, and more specifically increasing and improving areas to create, produce and broadcast and that it continue developing the Lachine canal, Old Montreal, the Old Port of Montreal and the Bassins du Nouveau Havre; that it establish new support measures for encouraging attendance at artistic and cultural events and for acquiring works of art; that it enact legislation to preserve and value our cultural heritage and pair it with an action plan with the provinces and territories, in keeping with the international conventions Canada has signed; that it establish a policy to integrate arts and architecture in federal buildings and that it increase access to employment insurance for all self-employed workers to create a better social safety net in Canada.

Without taking away from what we have already accomplished, the legislation should contain provisions allowing self-employed workers to join a public employment insurance system. In conclusion, we wish to have the Government of Canada recognize the essential contribution of artists to the social and economic development of Canada and of Canadians, and that this recognition be made clear in all its policies, programs and bills. Bill C-32,

An Act to amend the Copyright Act , for instance, must guarantee artists adequate compensation and value intellectual property. Creators, like all other Canadians, must be able to make a decent living from the fruits of their labour. Thank you for your attention.

(1045) The Vice-Chair (Mr. Massimo Pacetti) : Thank you. [ English ] From GrowthWorks Capital, Mr. Hayes. Mr. Thomas Hayes (President and Chief Executive Officer, GrowthWorks Atlantic Ltd., GrowthWorks Capital Ltd.) : Thank you, Mr. Chair, for providing me with this opportunity to present this morning. I am aware that two of my colleagues from the Canadian Venture Capital Association were here several weeks ago, providing some insight on the CVCA's recommended five-point plan to deal with the venture capital crisis in Canada.

I'm going to focus on one solution this morning, but first I have a few remarks about who GrowthWorks is. We are one of the few national VC players still investing in new deals in Canada. We manage funds across the country totalling about $600 million in AUM. I think outside of Quebec we're probably the largest VC player in the country. Portfolio companies in our portfolio have won the deal of the year in four of the past nine years. We have offices across the country: Vancouver, Winnipeg, Toronto, Fredericton, Halifax, and St. John's. We have a team of 20 seasoned investment professionals.

We're a top quartile VC manager. Our focus is on commercializing early-stage technology companies. Recently we did a scan to discover that about 40% of the companies we funded had their origins in R and D in Canadian universities. We've invested in over 250 companies in the country since we began operations in 1992. I also want to define retail venture capital. Most folks are familiar with traditional institutional VC. They raise their capital from pension funds, institutions, corporations, and endowment funds.

In the retail business we raise all of our capital from individual investors, and governments encourage investors to buy into this asset class through the provision of tax credits. The federal government offers a 15% tax credit, it used to be 20%, and the provincial governments, depending on which province, offer anywhere between 15% and 25% tax credit. Retail venture capital accounts for about 50% of all VC raised and invested in Canada, and it continues to receive good support from both levels of government. In the past two years, many provincial governments enhanced the retail venture programs.

British Columbia increased the tax credit; Saskatchewan increased its tax credit; Manitoba, Nova Scotia, New Brunswick, and Newfoundland and Labrador increased both the tax credit and the annual contribution limit; and Quebec recently introduced increases to tax credits for a particular retail fund. In terms of the Canadian landscape--you probably heard this a couple of weeks ago--the Canadian VC investment is at a 14-year low. Canada's multi-billion dollar annual investment in R and D is at risk because of the dearth of venture capital available to entrepreneurs.

Many private institutional VC funds have withdrawn from the marketplace. Canadian entrepreneurs are finding it much more difficult to access equity capital compared to their American counterparts. The reason that is important is the companies we fund here in Canada have to compete against those competitors in the U.S. Retail venture capital investors have invested more dollars across Canada than private, independent investors nine out of the last 10 years, and as a result, retail venture capital investors are much more consistent suppliers of VC to Canadian entrepreneurs.

So in our view, the most cost-effective and quickest way to get VC funds flowing again to Canadian entrepreneurs is for the federal government to do two things. First would be to return the federal tax credit to the original 20% level for investors from the current 15% for a three-year period, and to increase the annual maximum contribution to $20,000 from the existing limit of $5,000. The rationale for those changes is this. The tax credit was 20%. It was reduced in the mid-1990s to 15% when there were significant inflows of capital to this asset class. That's no longer the case.

When the original retail program was introduced in the mid-1980s, the RRSP maximum was $7,500 and the venture capital maximum was $5,000. The RRSP maximum today I think is $22,000, but the retail venture maximum hasn't changed. It remains at $5,000. This is a problem for us because many of the bank-owned brokerage firms discourage their investment advisers from tickets of that size, so it has serious ramifications in terms of that distribution channel. The members of the IIROC channel virtually are no longer supporting the asset class.

(1050) In terms of cost implications, we feel that with these changes, the industry would raise an additional $300 million a year. That would bring the annual raise nationally up to about $1.5 billion. The investment on behalf of the treasury, in addition to its existing commitment, would be an additional $100 million a year. Independent commissioned studies have shown that these tax credits are recouped by both levels of government within one to five years.

A recent study that was just completed by the Sauder School of Business at UBC is going to report some very compelling statistics in terms of tax credits repaid to both levels of government and in terms of job creation. Thanks, Mr. Chair. I'm happy to answer questions when we get to that part of the program. The Vice-Chair (Mr. Massimo Pacetti) : Thank you, Mr. Hayes. From Irving Shipbuilding Inc., will we have Mr. Cairns or Mr. McArthur? Mr. Andrew McArthur (Consultant, Chairman of the Shipbuilding Association of Canada, and Vice-Chairman (Retired), Irving Shipbuilding Inc.) : Thank you, Mr. Chairman.

I will start. We are delighted to be here today and to have this opportunity. I am chairman of the Shipbuilding Association of Canada. Peter is the full-time president. The position of the association is also the position my company supports, but I will talk as the chairman of the association. Shipbuilding in Canada is in a transition state. If you go back to the mid to late eighties and early nineties, we had a program of rationalization whereby the government in fact paid many shipyards, east to west, to get out of the business. There were too many people in it.

Today we are going through another form of rationalization. We have the national shipbuilding procurement strategy, which in effect will create two centres of excellence, one for large combatant ships and one for large non-combatant ships for both the navy and the coast guard. This strategy will be vital for the continuation of shipbuilding in this country. The question that arises, as there will be only two selected, is what will happen to the remaining shipyards. There are probably about 116 vessels, which will be outside the centre of excellence, available to the rest of the industry.

We have one thing we can do to encourage commercial shipbuilding in the country for small ships. At this time, I would pass to Mr. Cairns, who is going to outline the proposal.

(1055) VAdm Peter Cairns (President of the Shipbuilding Association of Canada, Irving Shipbuilding Inc.) : Good morning, sir. I am the president of the Shipbuilding Association. The association is a relatively new one. It was formed in 1995. It's national in its scope. It goes from coast to coast, and we are primarily interested in shipbuilding, ship repair, and the industrial marine industry in Canada. Shipbuilding policy in Canada is being crafted by several government departments in what appears to be a somewhat uncoordinated fashion.

The government has recently announced a national shipbuilding procurement strategy for its own fleets. This has the promise of being an excellent program, but it is still in its infancy, and non-government ships and the shipbuilders who construct them still need assistance. Canada is in fast-track negotiations with the European Union. Whatever the result, it will have an effect one way or another on shipbuilding in Canada. The finance department has just announced a change in tariff policy for some ship types imported into Canada.

The association supported this change, provided that changes were made to the government-structured financing facility and the accelerated capital cost allowance. This was not done. This change in tariffs also has the potential to affect free trade negotiations in Europe's favour. Repeated requests for changes to the structured financing facility and the accelerated capital cost allowance have not been acted upon. Now, an accelerated capital cost allowance is an excellent incentive for Canadian owners who are generating healthy profits to build their vessels in Canada.

ACCA, as it's commonly known, allows an owner to write off the capital costs of a new Canadian-built vessel in four years. The value of ACCA is calculated at 10% of the vessel price. Structured financing facility, or SFF, was introduced in 2001 and 2002 to stimulate demand for Canadian-built vessels. It provides interest rate support as an interest rate buy-down of financing used in the acquisition or modification of a Canadian-built vessel or offshore structure. This support is in the form of a non-repayable contribution. The value of the SFF is nominally 15% of the contract to the shipyard.

After taxes, however, that value reduces to 8%. A Canadian owner has a choice between structured financing facility or the accelerated capital cost allowance. Funding of the SFF program is sporadic. There is presently about $6 million to $7 million in the fund, with no guarantee that there will be anything beyond the end of this fiscal year. The government needs, in our view, to commit $20 million per year to the SFF program for a minimum of five years, with a review of progress at that time before considering further investment.

The SFF, combined with the ACCA, is a very useful program for those small shipbuilders who will not be designated as a centre of excellence under the national shipbuilding procurement strategy. They desperately need this to stimulate commercial construction in Canada. In conclusion, shipbuilding policy and finance require a whole of government policy framework that must include procurement policies for both government ships and commercial vessels, trade negotiations, tariff policy, and tax and program policy.

Critical to small shipbuilding enterprises at this time is an adequately funded structured financing facility that can be combined with the accelerated capital cost allowance to encourage Canadian shipowners to build in Canadian shipyards. Thank you. The Vice-Chair (Mr. Massimo Pacetti) : Thank you, Mr. Cairns. From the Rick Hansen Institute, we have Mr. Colin Ewart. Mr. Colin Ewart (Vice-President, Strategic Relations and Development, Rick Hansen Institute) : Good morning, Chair, and members of the committee. I'd like to thank you for inviting us to speak on behalf of the Rick Hansen Foundation and Institute.

My name is Colin Ewart of the foundation, and this is Marie Trudeau from the board of directors of the Rick Hansen Institute. We're here today to talk to you about the 25th anniversary of Rick Hansen's Man in Motion tour, introduce the institute, and highlight the value and impact of the federal government's investments in Rick's visions to date. You've likely heard of the foundation, which is responsible for implementing Rick's dreams of a world inclusive and accessible for all. You may not have heard of the Rick Hansen Institute, a relatively new organization, which is a key legacy of Rick's vision.

The institute focuses on collaborative, interdisciplinary research that improves lives and contributes to finding a cure for spinal cord injury. Thanks to investments by the federal government, from all political stripes, Canada has become a world leader in spinal cord injury research and services similar to that of cancer, genomics, and HIV/AIDS. This government in particular has been very supportive of Rick's vision through its financial support to date. We want to urge you to continue to support health research such as this.

Investments in research and best practices such as those that we develop make a significant difference in the lives of people and result in significant savings to the health care system by governments across Canada. Twenty-five years ago, we saw how one person could inspire many. After becoming injured, Rick Hansen was inspired to make a difference. He wheeled around the world--34 countries in over two years--and inspired athletes, politicians, doctors, scientists, young people, and people with spinal injuries, like Marie, into becoming difference-makers.

As a result of his efforts and those of the people around him, people today with physical disabilities are looked at in a new light. The world is more accessible, and the science has become so advanced that someone with Rick's injuries today would likely walk away after treatment. We're currently involved in the international phase of the 25th anniversary of the Man in Motion tour, following a very successful launch leading up to and during the 2010 Olympics and Paralympics. We're looking to recognize those difference-makers who have been part of our teams since 1987 and inspire new difference-makers.

Between now and May of 2012, you will see Rick travel to several prominent locations around the world that he originally passed through between 1985 and 1987. With the help of the institute and our partners, these places are looking to collaborate with our work across Canada to accelerate the pursuit of the cure for paralysis and make communities more accessible and inclusive.

Following momentum-building announcements of collaboration in four countries--Israel, Australia, China, and the United States--we will return to Canada in August of 2011, and with our Canadian partners we will launch a new national relay tour across the country and recognize difference-makers all across Canada. This will take nine months in 700 communities with 7,000 participants. We'll ultimately conclude the relay tour with a significant homecoming event recognizing the day Rick returned to Vancouver.

Concurrently, a global conference in Vancouver focused on two symposium streams--cure and accessibility--and a trade show will highlight how progress can expand across the world and through the participants from over 100 countries. Canadian leadership and inspiration will be on display. Our ability to engage leaders nationally and internationally can have a profound benefit for Canadians up to and beyond 2012. We're looking forward to partnering with and recognizing those who have been instrumental to our success over the years.

We are already successfully securing partners and funding from corporations and individuals, and we plan to follow up this fall with key federal departments who will be interested in our plans. Now I'll let Marie speak about the institute's programs about making a difference.

(1100) The Vice-Chair (Mr. Massimo Pacetti) : You have one minute, une minute . [ Translation ] Ms. Marie Trudeau (Director, Board of Directors, Rick Hansen Institute) : Mr. Chairman, distinguished members of the Standing Committee on Finance, I would like to thank you for having invited us here today to speak to you about the Rick Hansen Institute, in Vancouver, and also to give us an opportunity to tell you about some of our accomplishments.

Thanks to investments from the federal government and other financial partners, Canada has become a leader in treatment and care for the spinal cord and spinal cord injuries. I would like to tell you about some of the return on investments made to date. [ English ] One of the tangible outcomes of these investments— The Vice-Chair (Mr. Massimo Pacetti) : Ms. Trudeau, you're not going to have time to go through it. Your time is up: you only had one minute. It's five minutes shared between the two of you. Ms. Marie Trudeau : Oh, I see. The Vice-Chair (Mr. Massimo Pacetti) : It's not five minutes per speaker.

I'm going to let the members ask questions, and then you'll be able to incorporate some of what you wanted to talk about in some of your answers— [ Translation ] Ms. Marie Trudeau : I will include that in the responses [ English ] The Vice-Chair (Mr. Massimo Pacetti) : —to the questions some members will ask. We have plenty of time, so I don't think you won't have an opportunity to talk about your situation. If we can start with Mr. Szabo, for five minutes, or Mr. Brison.... Hon. Scott Brison (Kings—Hants, Lib.) : Sure. Thanks. (1105) [ Translation ] The Vice-Chair (Mr. Massimo Pacetti) : You have six minutes.

Hon. Scott Brison : Thank you, I appreciate that. [ English ] The Vice-Chair (Mr. Massimo Pacetti) : We'll do a first round of six minutes. Hon. Scott Brison : Thank you very much, each of you, for being with us today and for your interventions. I'd like to start with questions on the venture capital side. What is the risk to Canadian discovery and commercialization in five or ten years if we don't take significant action on venture capital in Canada today? Why is there such a gap between how our venture capital industry is doing in Canada compared with some countries like Israel, for instance?

What are the public policy measures and the differences between them? It strikes me as pretty important that we get it right now, because if we don't, we're going to face a real challenge in ten years in terms of the jobs of tomorrow. Mr. Thomas Hayes : Thank you for the question. I've seen various statistics on what Canada invests in R and D. The number that the CVCA used recently, I think here at committee, was $18 billion annually. That's a pretty significant investment. I think Canada does a good job at that end of the spectrum.

But if we don't fix the gap, or lack of access or lack of capital for these early-stage companies, we're going to have significant problems. We have significant problems today and they are only going to be exacerbated if we don't deal with the issue today. We see countless companies that are unable to raise adequate capital for where they want to take their business plans. In terms of other countries, I've just been reading the book, Start-Up Nation , which talks specifically about Israel.

But on my way here yesterday from Halifax, I was reading some papers for a policy conference in Quebec City next month, where a number of folks in the industry will be making presentations about what's been done in China, the U.K., France, Mexico, Israel, and other countries where government have recognized that the private sector, to some extent, has withdrawn from the industry in terms of supply, and where government is now making very aggressive interventions or policies that encourage not only the private sector to get back into the game but also doing some direct investing themselves, either through funds of funds or direct investments in companies.

In some cases they are using the retail model in Canada. It's surprising to read about France, where they've adopted some of the uniqueness of the retail model that was developed here 20 years ago. Hon. Scott Brison : Thank you. In terms of the shipbuilding industry, the Liberal Party's position is that the structured finance facility needs to be reinvested in and there ought to be access to it and the accelerated capital cost allowance at the same time—and of course procurement is critically important.

But the recent government measures to eliminate the tariffs on ships was considered a positive announcement when the government made it recently. What is the impact on Canadian shipbuilding of the elimination of these tariffs? I'm not a protectionist at all; I'm a real free-trader, but we have to recognize the importance of a level playing field, and we know that other countries are taking a different approach when it comes to shipbuilding. But what is the impact of the recent government announcement on eliminating these tariffs on ships coming in from other countries? What will be the impact on your industry?

VAdm Peter Cairns : We believe the impact to our industry with regard to those tariffs will not be overly significant, because in fact we were actually part and parcel of these negotiations, as you may well know. We did work with the Canadian Shipowners Association on this tariff issue, knowing that they had a significant problem. You might say we took one for the team here. We recognize, realistically, that we will probably never build certain classes of ships of certain sizes in this country.

To face the reality, we said that if those are the sorts of things that you're going to want to bring in duty free, and we're not going to build them here anyway, why should we hold that up? That is one side of the story. The other side of the story is that one class of ships, ferries, we were adamantly against. That one was put into the finance committee's reduction in tariff. That, in our view, was a distinct, pure lobbying effort by British Columbia ferries. It was accepted by the finance committee.

We don't think that made any sense, to be very honest with you, and I could talk at length about that, but this is not the place. We believe that the ferries mentioned in that tariff remission could have been built in Canada. That's not an issue. The company did not want to build them in Canada, and that's essentially where we come from.

(1110) Hon. Scott Brison : You described it as being willing to compromise or to take one for the team on this one. In exchange for that, were you able to negotiate a commitment under the structured financing facility or the accelerated capital cost allowance? VAdm Peter Cairns : That was part and parcel of our negotiations with the shipowners when we did this, and that was when we put our response to the government on their issue. We did put that in, but it was never picked up. The Vice-Chair (Mr. Massimo Pacetti) : Thank you, Mr. Brison. Monsieur Paillé-- Mr. Andrew McArthur : Excuse me. Could I add something?

The Vice-Chair (Mr. Massimo Pacetti) : Yes, Mr. McArthur. Mr. Andrew McArthur : One thing that really ticks us off quite badly, though, was what a time to do it. Why give up the 25% import duty when we're in negotiations with the EU on a free trade agreement? We know that shipbuilding is a small industry worldwide. The Europ