Mr Ted Arnott (Waterloo-Wellington PC)
Mr Marcel Beaubien (Lambton-Kent-Middlesex PC)
Mr David Christopherson (Hamilton West / -Ouest ND)
Mr Doug Galt (Northumberland PC)
Mr Monte Kwinter (York Centre / -Centre L)
Mrs Tina R. Molinari (Thornhill PC)
Mr Gerry Phillips (Scarborough-Agincourt L)
Also taking part / Autres participants et
participantes
Mrs Sandra Pupatello (Windsor West / -Ouest L)
Clerk / Greffière / Greffier
Ms Susan Sourial
Mr Tom Prins
Staff / Personnel
Ms Elaine Campbell, research officer,
Mr David Rampersad, research officer,
Research and Information Services
The committee met at 1002 in room 151.
PRE-BUDGET CONSULTATIONS
The Chair (Mr Marcel
Beaubien): If I can get your attention, we'll bring this
committee to order. Good morning, everyone.
Before we start with the
orders of the day, Mr Phillips requested from the research
officers a couple of pieces of information. You have one copy in
front of you and the other one will be coming shortly. The one in
front of you deals with relative tax levels and a comparison
between the American states, Ontario and other provinces. The
other piece of information will be coming later on and is an
update on the community small business investment funds in
Ontario, I think. You'll get that information later on this
morning.
CANADIAN FEDERATION OF INDEPENDENT BUSINESS
The Chair:
Our first presenter this morning is a representative from the
Canadian Federation of Independent Business. On behalf of the
committee, welcome. You have 30 minutes for your presentation
this morning. Could you please come forward and state your name
for the record.
Ms Judith
Andrew: Good morning, Mr Chairman and members of the
committee. I'm Judith Andrew, vice-president, Ontario, with the
Canadian Federation of Independent Business. I'm joined by my
colleague Brien Gray, who is CFIB's senior vice-president. Mr
Chairman, I trust the kits have been circulated. The main brief
that I'm going to be referring to today is entitled
Entrepreneurship 2000: A Vision For Ontario. Also in your kits
you will find various other pieces of information that may be
helpful to the committee in its pre-budget deliberations,
including our Ontario Outlook 2000 document; a report on
municipal relationships with small business entitled Assessing
City Hall; and Wage Watch, which is a report on compensation
comparisons as between the public and private sectors with some
specific Ontario data pinned to the top of that full report.
There's a document dealing with the Ontario government's
pre-election commitments to small and medium-sized businesses and
a report on attitudes toward small and medium-sized enterprises
entitled Small is Big.
Catherine Swift, our
president and CEO, appeared early in the committee's
deliberations and talked briefly about the high business
expectations we have from our small and medium-sized business
members in Ontario, over 40,000 of them. The majority, almost
95%, of our owner-managers foresee improved or stable conditions
for their own businesses.
But amid this good news
effervescing in the short term are some disquieting signs that
Canadians, Ontarians in general and independent business owners
in particular are worried about their long-term futures. I guess
the key policy question for all of us in this new century is, how
do policy-makers extend this solid growth into the medium and
long term while defeating the root causes of any underlying
malaise?
CFIB believes that a focus on
entrepreneurship is crucial, not only as a base for a healthy
economy but as a foundation for a healthy society. CFIB's
pre-budget recommendations to the Ontario government are focused
on the elements necessary to capitalize on this entrepreneurial
society while readying our economy to weather economic downturns.
On behalf of our 40,000 small and medium-sized business members
in Ontario, we appreciate this opportunity today.
I'd like to say a few words
on building an entrepreneurial society. We believe that is
crucial, not only as a base for a healthy economy but also as a
foundation for a healthy democratic society. The mainstay of most
communities is not the large corporations but the smaller
enterprises that are closely integrated into the community in
many ways.
Fortunately, Canadians and
Ontarians are really quite entrepreneurial. There's some
interesting data contained in the brief about the kind of renewal
that happens in our sector. We believe that renewal in small
business and the phenomenal growth in self-employment that we've
seen would hardly be possible without the very high job
satisfaction ratings found among small-firm employees, as well as
among self-employed people. The chart is there for your
perusal.
Our October 1999 poll, Small
is Big, which looked at Canadians' attitudes about small
business, once again placed farmers and small business at the top
of Canadians' most respected list. Paying the ultimate compliment
to small business in terms of career choice, nearly half of
Ontarians indicate a willingness to consider starting businesses,
and most would approve if their son or daughter or a close relative took the
entrepreneurship plunge.
We believe that apart from
business entrepreneurship, entrepreneurial values are very
inclusive. In fact, these attributes and values can permeate
every sector of society where contribution and success are
rewarded and self-reliance is encouraged as a value.
There are a number of areas
where the Ontario government can help position small business
entrepreneurs for growth in the province. The key area is to deal
with the number one problem. For eight out of 10 Ontario small
businesses, that is total tax burden.
CFIB members acknowledge with
appreciation provincial tax relief to date, including employer
health tax, personal income tax, corporate income tax and capital
tax, and we urge the Ontario government to adhere to its
pre-election commitment to continue reducing taxes for families
and small businesses in order to create jobs, strengthen the
Ontario economy and keep our growth rolling.
We trust the government will
also move quickly to fulfil its pre-election promise to publicly
identify provincial fees and charges paid by businesses in
Ontario and review existing fees to determine whether they exceed
the cost and the value of the service provided.
When we look at taxes, we
also look at tomorrow's taxes, and that leads us right into the
spending and debt arena. CFIB members welcome the Ontario
government's taxpayer protection and balanced budget legislation
and they acknowledge the greater progress made to date by the
province in controlling spending as compared to the federal and
municipal levels of government.
We issue a caution, however,
that the Ontario government, through its new agency, the Ontario
SuperBuild Corp, adhere to the proposed directions of investing
in genuine infrastructure that truly does support growth,
competitiveness and the entrepreneurial culture.
1010
I draw your attention very
briefly to another report we did entitled Wage Watch, which is in
your kit and which canvasses the public sector compensation
advantages over the private sector. Our recommendations in this
area are basically to develop a statistical database so that this
kind of information can be made available on a more timely basis.
Secondly, there need to be policies to bring public sector
compensation into line with the rest of the economy, including
the pension and employer pension contribution area.
In mid-1999 we asked our
members, through two different surveys, if they were in charge,
what proportion of future surpluses should be allocated to the
following areas. That included paying down debt, cutting taxes
and spending on priority programs, the charges on page 6 of your
material.
CFIB members placed the
heaviest emphasis in their responses at both levels of government
on debt reduction. However, small business would allocate more of
the federal surplus to cutting taxes than they would Ontario's
surplus, which is expected after the budget is balanced. CFIB on
this basis urges the government to announce its promised debt
reduction plan which, after balancing the budget on schedule, is
to set out a plan to pay down debt every year afterwards,
including timetables to meet target debt-to-GDP ratios.
Turning now to the worst tax
culprit, which is the profit-insensitive tax, I think it's well
understood. I know Minister Eves in his remarks talked about
profit-insensitive taxes punishing small businesses, and that of
course is because they have fewer profits and typically greater
labour intensity than their large-firm counterparts. There are a
number of profit-insensitive taxes here: employment insurance,
CPP, EHT and so on down the line.
We appreciate the support the
Ontario government has lent to our efforts federally and we call
on the government to continue pressing the federal government to
substantially reduce the EI surplus through payroll tax
decreases, linking this to any increases in CPP premiums so that
the total load does not continue rising.
On the employer health tax,
as we've repeatedly indicated, the first $400,000 exemption on
EHT was highly appreciated by our members. Without question, this
relief measure was more than repaid in substantial growth in tax
revenues.
One policy challenge facing
Ontario is that we're graduating relatively few small
entrepreneurs to the medium-sized category. We certainly think
that some of the reluctance to grow may be linked to the various
tax and regulatory thresholds currently in place. When we look to
the west, our nearest neighbour, Manitoba, has an initial
exemption threshold of $1 million in their payroll tax. CFIB
therefore encourages the Ontario government to consider
increasing the EHT exemption to $600,000, which would make it
consistent with the paperwork threshold for EHT, and subsequently
to match the Manitoba exemption level in the longer term.
Property tax stands out as a
profit-insensitive tax which is a severe problem here in Ontario.
A lasting solution to this tax problem is needed. It's certainly
a very huge issue, and the uncertainty about what the future
holds post cap, coupled with the sheer weight of this tax, is a
major impediment to business growth and economic development.
Our report card on municipal
governments in Ontario, which was based on an in-person survey of
over 16,000 businesses, found municipal governments receiving
disappointingly low ratings. This is a repeat of a study we did
two years ago. Each of the factors considered-property tax
levels, value for money, control of municipal wages, regulations,
bylaws and overall awareness of small firms-were not felt by our
members to be issues that the municipal government dealt with in
a satisfactory manner.
Property taxes in Ontario
remain very high relative to the rest of the world, as you can
see from the chart on page 8. We're the property tax capital of
the world here in Ontario, and the business sector is the most
ill-treated under this system.
The property tax rates for business as compared to
residential show an enormous business-residential gap, which we
don't believe is justified on any economic basis, but certainly
on a political basis it serves to cushion voter residence in the
short term from the full cost of the local services they enjoy.
Ultimately, it dilutes local government accountability to
voter-residents, resulting in higher-than-necessary spending.
The disproportionate load on
small business entrepreneurs locally dampens the economic growth
in the community, suppresses the creation of jobs and hurts
residents' children who are, of course, seeking their first job
experience with the small firms locally.
There is some information on
the top of page 10 about how the first round of province-wide
reassessment actually worked out in terms of perceived value by
our members. Clearly, there are some bumps to be worked out in
the next round of reassessment.
Turning to our members'
direction on what to do when the caps expire, we asked our
members this question. Clearly, figure 9 shows the most favoured
responses include removing more social services costs from the
property tax, setting out a multi-year plan to reduce business
education taxes and narrowing the business-residential property
tax gap. Probably a mix of a variety of these options will be
what ultimately works in the long term.
We've set out a series of
property tax principles of fairness that we hope will guide the
next round of property tax reform, fully understanding that
because the distortions developed over some years, it will take
some time to rebalance the system. However, there has to be some
evidence of progress in the right direction that's solidly
evident to small firms.
We recommend, in connection
with property tax, that the Ontario government implement a
permanent property tax solution for small firms, including a
target and timetable for narrowing unfair business-residential
gaps and including relief on the onerous business education
portion once the caps expire.
I'd like to say a couple of
things about personal income tax reductions, which we support as
a balanced approach for fiscal restraint and bringing stimulus to
the economy. The made-for-Ontario tax system is something that
CFIB has long been critical of. We've surveyed our members on
this issue many a time. The most recent was 1998, and that
particular mandate vote was attached on the issue: "Should
provincial personal income taxes be collected as a percentage of
taxable income rather than as a percentage of federal tax?" Sixty
percent of our members were opposed in that last vote.
Our concerns with tax on
income are the tax grab potential, compliance problems with
varying systems across the country and the distortions between
provinces. Notwithstanding our concerns about the fact that this
tax collection arrangement was done very quietly and without
consultation, it does in a sense offer a new and interesting
opportunity to address the most serious issue facing small firms,
and that is undercapitalization.
On corporate income tax, of
course we hope and recommend that the government will carry
forward on its announced plan to reduce the small business
corporate income tax rate until it reaches 4.75%. As well, we
believe that this is another threshold area which is preventing
growth to the medium size and we would urge the small business
deduction threshold be increased. Alternatively, raise the upper
bound for the clawback from its current $500,000 level to $1
million to allow the benefit to extend somewhat longer and take
account of the growth.
1020
The last area I wanted to
address is the barriers to entrepreneurship in business. We have
been working forward on the tax administration fairness issues
and we trust and hope that the Ontario government will continue
implementing its 1999 budget announcements, plus further tax
fairness administrative issues that are required. Catherine Swift
spoke about PST-GST harmonization, and again that's a barrier
that would need to be addressed. We've set out some principles
for future sales tax reform in that area. Also on sales tax, we
recommend that the government update the compensation for PST
collection by small retailers, as well as consider the effect of
a cut in the rate as a stimulus measure.
On regulation and paper
burden, this commission has done much, but much remains to be
done. In this regard we support enlarging its scope to include
such ministries as municipal affairs; finance, tax revenue
division, for the administrative side; environment; and
transportation. We urge the Ontario government to address the
specific reforms in the commission's final report. As well, we
support the launch of a working group to tackle paper burden and
forms with the relevant ministry.
There's also a
recommendation, given the concern over high fuel prices, to offer
relief on gasoline and diesel fuel taxes at this time.
Financing growth is a serious
issue, as I mentioned. A surprising 40% of our members indicate
availability of financing to be a serious concern for them. This
is double what it used to be in the late 1980s at a similar point
in the business cycle. Our banking sector is dominated by the Big
Five. Competition is narrowing, not broadening. There's no
effective second tier. The Canada Trust-TD bank fusion means the
loss of the last potential platform upon which to build a viable
alternative structure.
Equity availability is a
problem for most small firms. The most effective way of
supporting the equity position of small business is through the
tax system and not through artificially concocted programs that
assist a few.
There are several
recommendations here in the financing area which we commend to
your attention. The summary of recommendations follows, beginning
on page 18 of the report. Brien and I would be delighted to
attempt to answer the committee's questions.
The Chair:
Thank you very much. Continuing in the same rotation we had
yesterday, I'll start with the government side, Mr Galt. We have
approximately three minutes per caucus.
Mr Doug Galt (Northumberland):
Thank you for an excellent presentation. Good to have you with
us.
I want to go to your research
on Wage Watch and chat about that for a few moments. I gather
that's provincial employees and doesn't include our transfer
partners such as boards of education and their salaries. Do you
have that information?
Ms Andrew:
We have it all different ways, so if you were interested in that,
we could get it.
Mr Galt: I'd
be very interested in it. Mainly the reason I am is that we've
been on the road I forget how many days now, and we've heard from
umpteen teachers' unions, somewhere between 15 and 20; I haven't
added it up. They want to be able to charge property tax for
educational purposes again direct to school boards. What I found
absolutely intriguing is that we haven't had a single school
board come before this committee to look for money, as most
organizations come to this committee hoping there will be money
in the next budget. Similarly, we haven't had a trustee
organization come before us, which I think is rather ironic,
because they are the ones who need the money to pay the salaries.
We're hearing from the teachers that they haven't had an increase
in X number of years. At the same time I heard from a futurist on
the weekend that real dollars in purchasing power etc from 1989
to 1998 went down something like $3,000. I would think maybe our
teachers' unions should be quite thrilled that they are holding
their own with what's happened, particularly in the early
1990s.
So you do have this
information?
Ms Andrew:
There is a problem with the data, and our main recommendation in
this area is to get up-to-date data. Of course, what we're trying
to do here is compare for matched occupation, public and private
sector, so we will see what we can find in the teaching
arena.
Mr Galt:
Really appreciate that. The other question I have relates to
gasoline. Some of the consultation with the task force has
suggested that we should be cutting fuel taxes. If that was cut,
how many jobs would be created for each cent that we would bring
it down? Do you have any feeling on how many jobs might be
created?
Ms Andrew:
It would be very hard to hazard that kind of a guess. We made a
separate presentation to the gas prices task force earlier this
week, and included as part of that presentation were a number of
comments and concerns that have been flowing in to us from all
across the province, and we can certainly tell you that the
problems with gas and diesel prices are rippling right across the
economy. Independent operator-truckers and so forth are in many
cases out of business, parking their trucks, even bigger
companies-it's been felt in the agriculture area-in terms of all
kinds of problems. It's more what could be saved as opposed to
how many would be created.
The Chair:
The official opposition.
Mr Gerry Phillips
(Scarborough-Agincourt): Thank you. It was a very
complete presentation and there's little time to ask
questions.
To start with your members'
views on the allocation of "the fiscal dividend," whatever it's
called, they're suggesting that roughly 45% go to debt reduction,
roughly 30% to program enhancement, and roughly 25% to tax cuts.
The government, on the other hand, has announced what it's going
to do over the next four years. They've announced about 55% will
go to tax cuts, 35% to 40% to program enhancements and 5% to debt
reduction. Your advice to the committee is that the 5% to debt
reduction and the 55% to tax cuts is inappropriate?
Ms Andrews:
Clearly from these data at both levels of government our members
see debt reduction as a number one priority. That came up in a
slightly differently worded question last year as well. Our
members see debt as tomorrow's taxes. It's got to be paid
sometime, so at times total tax burden and deficits and debts
typically run neck and neck as issues. Reducing taxes and
reducing debts are not dissimilar in our members' view.
Mr Phillips:
On hindsight, do you think it was appropriate to add $22 billion
to the debt of the province since Harris became Premier? Was that
a good idea?
Ms Andrews:
We did some surveying, particularly around the income tax cuts
issue and the EHT cut issue and our members did see the tax
reduction stimulus as positive. They believed a balanced approach
was to deal with the spending side, stimulate the economy, and
bring the deficit down and eliminate it on target. But they are
concerned now that the debts be addressed and not forgotten,
because we do need to set ourselves up for the next downturn and
be able to weather it properly.
Mr Phillips:
It's actually $30 billion when you include Hydro in it, but it's
$22 billion when you don't include Hydro. It's quite amazing. The
government, I think, has indicated that they've added $22 billion
and over the next five years they'll reduce it by $2 billion,
which seems inconsistent with your members' advice here.
The second question is on
harmonizing the PST and GST. My recollection is that about $500
million of provincial sales tax goes on exports. First, is that
consistent with your research, and second, does your proposal to
harmonize it assume that no PST goes on exported product?
1030
Mr Brien
Gray: Mr Phillips, I can't give you an answer on the
$500 million right now, but I'd be glad to take a look at what
our numbers show us. With regard to the way the input tax credit
works, quite clearly one of the reasons for a blended system is
that you would have input tax credit, and that would be good for
business generally. From the perspective of our members, the
simplicity of one system as opposed to two quite separate systems
stacked on each other, we haven't been going out surveying about
this very much, but we constantly hear from our members that it's
ludicrous. It doesn't make any sense from their perspective that
they're having to work under two regimes. The costs and the
administrative compliance costs involved with that are nuts.
With regard to the input tax credit on exports,
that's not something we have surveyed our members on yet, but
it's something we probably should do.
Mr David
Christopherson (Hamilton West): Judith, good to see you
again. Thank you for the presentation.
Just to pick up on a question
that Mr Galt raised on behalf of the government, it's interesting
that when he talks about the teachers' presentations, he wants to
talk about the one or two lines that some of them happened to
mention in terms of teachers' wages. The vast majority, 99% of
each report, did not deal with that issue at all; they dealt with
all the problems that are happening, the crisis that is affecting
our children.
For example, I would draw to
Mr Galt's attention and to the presenters, there's a report
presentation in front of us from OSSTF district 8 and, if you'll
notice, nowhere in there do they talk about wages. They're
talking about the funding formula, they're talking about the
impact on children and the fact that there are no longer any
librarians, psychometrists, psychologists, educational assistants
or English-as-a-second-language teachers. All those things have
been cut. When you talk about education, let's be sure we talk
about what the teachers spend 99% of their time talking about,
which is the absolutely horrific damage that your government has
done to education through your funding cuts. Let's keep things in
perspective.
When we talk about public
sector wages, once again, government likes to think that they've
got a good punching bag with teachers, but when you go after
public sector workers, you're also talking about firefighters,
police officers, nurses, the folks who are out right now plowing
our highways. I don't hear him saying that those people-and this
is his subtext-are all paid too much. The fact is that you just
want to make sure everybody's wages are at the bottom so you and
your buddies can make as much money as possible, and everybody
else be damned.
I wanted to ask a question
about the capping, because your focus is, of course, small
business. In Hamilton, the nightmare of the government's
legislation to change assessment required six more pieces of
legislation to fix all the mistakes that were pointed out to them
in the first place. You know the damage that was caused out
there.
In Hamilton, you may be
familiar-and I've asked others in other communities; it's the
same elsewhere-the one side benefit to that whole exercise for
small business in Hamilton was that in the downtown and Westdale
area, assessments that had gone sky-high and made them very
uncompetitive were finally going to be adjusted and they'd be
back in the game. With the capping, it left them still
uncompetitive and, in fact, we've lost as much business since
then as we did before.
You mention that this needs
to be addressed. I think we all agree with that. Specifically,
though, what do you think the government ought to do in terms of
what some refer to as an exit strategy? Exactly what do you think
the government ought to do to correct this situation if we all
agree that businesses in areas like downtown Hamilton are being
adversely affected by the previous capping?
Ms Andrew:
Obviously if you're a business facing a 300% or 400% increase,
the cap was a welcome piece of legislation. For those for whom
taxes were going to go down but for the capping, it was very
unwelcome. We think that it's a greater sin to overtax than to
undertax and therefore there needs to be a way to bring down
taxes for people who are overpaying, possibly through better
spending control at the municipal level, narrowing the
business-residential gap so that you do get accountability for
local spending to the voter-residents and a variety of other
things as included in figure 9, such as the education portion
relief in that area as well.
On the education portion
alone, the average across Ontario is about 3.5%. The residential
education portion is extremely low. It went from 0.46% and it's
going down by 20%, worsening the gap. The government, even on the
piece of the pie that it controls, is not dealing with the gaps
in the right direction. We're very concerned about that.
The capping legislation for
businesses facing increasing taxes was needed, but it has been
very detrimental for those whose taxes should be going down.
The Chair:
On behalf of the committee, thank you very much for your
presentation.
Mr Galt: On
a point of order: Mr Phillips consistently, when he's drawing in
the debt increase, includes Ontario Hydro debt, which is very
unfair. If you want to include that, I can demonstrate that
there's actually been a reduction of $10 billion in Ontario's
debt. If you want to include-
Interjections.
The Chair:
Let's have a bit of order.
Interjections.
The Chair:
Mr Galt, Mr Phillips, please. If you don't stop, I'm going to
call a recess, so make up your minds.
ONTARIO HOSPITAL ASSOCIATION
The Chair:
Our next presenters are from the Ontario Hospital Association. On
behalf of the committee, welcome. You have 30 minutes for your
presentation. Could you please step forward and state your names
for the record.
Hopefully we will have a
little more decorum in the room.
Mr David
MacKinnon: My name is David MacKinnon, president of the
Ontario Hospital Association. With me is Murray MacKenzie, chair
of the Ontario Hospital Association board.
Mr Murray
MacKenzie: Thank you for the opportunity to be here
today. As indicated, I am chair of the Ontario Hospital
Association board and president and chief executive officer of
North York General Hospital. I would like to make some brief
comments before turning the microphone over to David.
As both an OHA board member
and a community health care provider, I am encouraged by the
recent comments made by Premier Harris and Health Minister
Elizabeth Witmer,
recognizing the imminent and urgent need to address the issue of
sustainability of our health care system and the tough decisions
that will have to be made about how much we as Canadians are
willing to spend on our publicly funded system.
The greatest strategic
threat confronting us in all sectors of the health care system in
the short and intermediate term is the shortage of nurses. This
is directly related to funding levels and sustainability.
Workload, job insecurity and international and interprovincial
competition are all critical components of this equation.
We are on the cusp of a
great demographic shift. Ontarians are living longer and their
health care demands are growing. This dynamic is challenging
health care providers and the government to rethink how we view
our health care system, and truly how best to organize it to
ensure sustainability for future generations. This is a terrific,
monumental challenge.
Much work is being done in
this area, from the primary care pilot projects currently
underway across the province to the establishment of the Ontario
Medical Research Council, which will support research in
Ontario's own hospitals and universities. These initiatives and
many others will form the basis of modernization of our health
care system, and there is much more that we can do.
Over the next few weeks,
the OHA will be releasing two ground-breaking studies. The first
will contain recommendations for building a sound and reliable
capital funding system for hospitals and creating an environment
conducive to private sector investment. The second report will
look at alternative pathways for the evolution of hospitals and
their potential partnerships in the community. We believe that
through partnership and innovation we can, and will, ensure that
our universal health care system is increasingly accessible,
accountable, affordable and of very high quality.
Now I'll turn the
microphone over to David.
1040
Mr
MacKinnon: Thank you very much, Murray. Good morning,
and thank you for the opportunity to be here.
I'd like to focus my
remarks on the key issue of sustainability that Murray has
mentioned. We believe that in general the universal health care
system that has been a part of the life of the province for so
many years is at risk. It's at risk of being overwhelmed or being
left behind by technology and other developments. We believe this
for a number of reasons. First, the pressures on the front-line
staff, as Murray mentioned, particularly on nurses but also on
physicians and many other categories of staff, are immense, and
in many cases they are working beyond what can reasonably be
expected on a sustained basis to provide the services consumers
require.
The second reason for our
concern is that new technology is reshaping society. Given our
current level of investment in technology in the hospital system,
we cannot really hope to keep pace with these changes.
The third fundamental
reason for our concern is the comment Mr MacKenzie made that our
population is growing and aging, and the demand on the health
care system as it is currently constituted is outstripping both
our physical ability to meet it and our financial ability to fund
it. All of this has fundamental implications for health care and
for society as a whole.
According to a recent study
commissioned by the Ontario Hospital Association, hospital
funding would need to be increased by 18% in real terms over the
next five years, and significantly greater amounts over the next
20, to accommodate Ontario's aging. Of course, this is a problem
we have along with every other advanced, developed country in the
western world. But this very difficult picture-and I find it hard
to underestimate how difficult it is and will come back to that
point-may not be as bleak as it might appear in terms of looking
to the future.
The Internet, advances such
as robotic surgery, the mapping of the entire human genetic
structure and advanced telecommunications are all fundamentally
transforming health care, making it an international business for
the first time in human history-and I'd like to think about the
implications of that-and creating massive new opportunities for
us to compete if we can serve our own consumer base well and
build on that to compete around the world in the new
international structure of health care. As that happens, as a
well-organized, single-payer system with substantial resources of
knowledge and skills, we believe we have a capacity to compete
that is exceptional and we're not without hope that we can
contribute more broadly to the economic base of the province if
we do.
Of course, there is a risk.
As health care becomes much more international, we must adapt. If
Ontario's hospitals particularly, but also the rest of the health
care system, fail to make that transition properly in terms of
quality patient care, high quality of life and all those other
issues, we think the future competitiveness of the province could
be significantly impaired.
The stakes are very high in
the transition that's about to transform health care in much of
the world. But we do believe, given our fundamental strengths,
that if we play our hand with imagination and with courage, our
system could be valued as much as a source of future economic
growth as it is valued for the vital consumer service we
provide.
Investing in hospitals and
the technology that supports their work would be a very important
step in making that transition as smoothly as possible. I'd like
to talk for a moment about why technology looms so large, because
it is a fundamental underpinning to everything that is happening
in health care.
How many times have each of
us sat in front of a physician or nurse and recited our medical
history? We all do that. Currently, in the vast majority of
hospitals and physicians' offices across the province, once that
initial consultation takes place, records have to be transferred
manually between caregivers or additional medical history and diagnostic tests have to
be retaken at a significant cost to the system. The cost of
transferring and the cost of redoing tests is high.
Internet technology can
change a lot of that. It can provide real-time access to records,
MRI results, diagnosis and consultation. It can do that for
people without their ever having to leave home.
Not long ago at a seminar
in the United States I watched a demonstration. A lady used to
have to leave her home, spend two or three hours on a bus and go
into a crowded hospital emergency room. She spent a couple of
hours doing all that and then had to reverse the process. One day
the staff of the hospital showed up with a little Internet-based
computer and self-diagnostic equipment, and the intrusion on her
day constituted spending 15 minutes going down to her basement
and coming back up. All the records and the testing involved were
done by this little self-diagnostic machine, and the next thing
that happened was a PowerPoint graph came off in her physician's
office at the hospital. Amazing things are possible.
But at the heart of all
those, our ability to make them happen, of course, is funding. We
still continue to experience funding challenges of the most
serious order. A particularly serious one relates to capital. Our
most recent financial review of Ontario's hospitals, conducted by
our change foundation and the Canadian Imperial Bank of Commerce,
reports that the rate at which hospitals have been investing in
capital assets has declined precipitously over the last three
years, particularly with respect to medical equipment and
information technology. In 1996-97, hospitals invested
approximately $1 billion in these areas. In 1998-99, that figure
had fallen to just $230 million, a sudden, serious fall-off.
Given that technological environment and the real possibilities
before us, you can see why we are particularly concerned at the
moment about our expenditure patterns.
To reach acceptable
investment levels, the provincial government would probably have
to spend an average of $960 million in each of the next four
fiscal years to equip us for the technological world we are about
to enter. This of course is in stark contrast to the 10-year
average contribution by government to health capital of about
$160 million. In an era of balanced budgets and very difficult
financial demands, we really need to think about how to access
roughly six times the annual capital spending in order to be
competitive in the new international world of health care than we
are currently able to access.
We know there is a wide
variety of possibilities before us, that it can't all simply be
the taxpayer, although clearly that's where most hospital funding
comes from. We have been working with a hospital capital funding
working group, drawn from the private sector, on how hospitals
can address funding shortfalls through a variety of means,
including new public-private partnerships and perhaps methods of
pooling to access funds, a whole variety of means by which we can
bring an additional element of private sector revenue into
this.
In light of our interest in
this area, we are very encouraged by the creation of the
$20-billion SuperBuild Growth Fund and particularly encouraged by
the people who have been appointed to its board. We hope that
organization will provide hospitals and other public sector
institutions with significant access to funding.
I would also like to talk
briefly about research. The people of Ontario should be
encouraged by the fact that some of our teaching and research
hospitals, despite all our challenges, continue to emerge as
world leaders in the areas of research and development and
technology. Take, for example, the world's first robotic heart
bypass surgery, performed at London's Health Sciences Centre last
September, and the recently announced development of a synthetic
human cornea at Ottawa's Eye Institute-just an amazing
transformation. These are but a few examples of the many and
varied advances that have been made from research done in our own
hospitals.
To us, as we look at the
combination of where we are in terms of funding and the potential
and the economic development importance of our industry, there is
really no choice: We have to find ways to make additional
investments, and we need to do it now. If we choose to do
otherwise, we'll see Ontario fall behind the world and we will
erode some of this country's most important assets. The
scientific capabilities of teaching in large community hospitals
constitutes one of the principal assets Ontario has to secure its
economic future, and if we erode them, it's not just the consumer
service that gets eroded; it's a serious blow at our economic
competitiveness in the years to come.
1050
What we are saying really
is that we see health care and hospitals as one of the most
important investment choices for our society and not just as a
cost to be borne. We also think the same logic, from what we can
see, is applicable to universities and community colleges as
well.
There are several other
things we need to do, of course, beyond addressing the
fundamental capital and operating financial issues that have been
developing in the hospital system for many years. First, we
believe we need to reorganize our delivery of care. We need to
change the delivery of retail medicine by supporting primary care
reform initiatives, including enlarging physician group
practices. Enlarged physician group practices, more physicians
working together more effectively, is probably the single most
important thing that has to happen to improve the overall
functionality of the health care system. If we do that, then
those physicians will be able to employ modern technology, nurse
practitioners and other health care professionals more
easily.
Secondly, we also need to
move quickly, in light of my earlier comments, on issues such as
telephone triage, teletriage, the Internet and expanded
communications services.
Thirdly, we also need to
become, as most health care sectors need to, more accountable and
more transparent with
the public as to how we're spending tax dollars. I believe the
hospitals in Ontario pioneered, with our hospital report card
project of the last two years, in making everything that we do
much more transparent and in giving consumers the information
they need for their own decision-making, and we intend to
continue to do that. We intend to be fundamentally accountable to
consumers in steadily improved methods in the years to come.
We'd like to recommend this
morning three specific things, in addition to the general
observations I've made, for the 2000 budget.
We'd like to recommend that
the government ensure hospitals have sufficient operating funding
to maintain access to patient care services, including emergency
room services. As part of that, we would like to see hospital
operating funding put on a more secure funding basis by providing
a three-year rolling funding commitment that allows some
predictability in the system. At the moment, a lack of
predictability in funding is a very serious problem for us, as
well as the overall problems I mentioned earlier.
Second, we would like to
see government amend capital funding policies to provide upfront
funding for hospital investment in new information and medical
technology. Again, from my earlier comments, you can see why we
believe that's so vital.
We would also like to
accelerate hospital-based health research. We welcome the many
ideas the government has, some of which are being implemented, to
assist with hospital-based and health care research so that we
can continue to create high-value-added jobs for the future.
I'd also like to note, as I
come to the conclusion of these remarks, that we really do agree
with the position taken by our provincial government and other
provincial and territorial leaders that federal transfer payments
to the provinces must be significantly enhanced. The federal
contribution, we believe, has fallen off too rapidly in the past
few years.
We'd also like to
recommend-and this may be a controversial issue-that federal
policy and transfer payment structures be amended to eliminate
all the distortions that discriminate against Ontario and that
could undermine the future development of the country. There is
at the moment significant evidence that the entire public sector
in Ontario, whether it is hospitals, universities, transit
systems or community colleges, is facing very significant
solvency and debt problems, and that the scale of those problems
is related to the massive net transfers from this province to
support public institutions and the public infrastructure in
other parts of Canada.
I don't want to overstate
that, but the numbers involved are huge. The question I think the
people of Ontario need to ask is, given the apparent solvency
problems in many parts of the public sector in Ontario, how can
that be related to the very significant transfer payments that
are going to support public infrastructure in other parts of the
country? That may be fairly substantially in relation to how we
fund our own. Nova Scotia's eight universities comes to mind.
I hope that issue can get
some thoughtful attention from the people of Ontario, not just
the funding of hospitals, but what we have to do to place this
province in a position so that its public sector institutions can
move to the future with some confidence and certainty and not
just be worried about their cash management and maintaining their
standing day to day. If we can get that predictability, if we can
get that certainty, I think there are wonderful possibilities
before us, but if we can't, the issues look to be very troubling
indeed. Thank you very much for your time.
The Chair:
Thank you very much. We have two minutes per caucus.
Mr
Phillips: There's hardly enough time, but I want to
start with a specific. About three years ago, a young lady went
to a hospital in my area. She was eight months pregnant. She had
a brain hemorrhage and the local hospital knew she was in
terrible difficulty. They tried to get her a bed here in Toronto.
The CritiCall made 21 phone calls and couldn't find a bed to
accommodate her. Finally, the closest bed was in Hamilton. They
tried to get an air ambulance. An air ambulance couldn't come.
They transported her by land and she passed away. They saved her
baby, although they had to get a doctor from another hospital to
come.
I spent two years-I did it
behind the scenes, not publicly, but with the minister-trying to
get an explanation of it. Finally, there was a coroner's inquest
last June. I went down to that coroner's inquest, and it made
several recommendations. Today in the newspaper I find the story
of a man who died under very similar circumstances, almost
identical-CritiCall making, I think, 15 calls, they could not get
a bed here in Toronto, transported to Hamilton and passed
away.
I had assumed that the
coroner's inquest would have been enough of a signal to
whoever-the Ministry of Health, the Ontario hospitals. The reason
I'm raising it today-I realize it's a specific case-is I tried to
do all the things that a local member would do. I tried to deal
with it. I sent a private letter to the minister. The family
wanted to go public. I said "No, let's try and find an
explanation." Yet several months later we find another person has
passed away under almost identical circumstances.
My question really is this:
When you have a coroner's inquest that makes these specific
recommendations around things like CritiCall and making sure
there are intensive care beds available for something like this,
what happens? Does it just fall into a bureaucratic pit, or does
something really happen to try and save people's lives?
Mr
MacKenzie: Why don't I make a comment or two to give you
a perspective about what happens at the local level and then
David can talk a little bit about what the Ontario Hospital
Association does to try and facilitate lessons learned. I'm not
sure that either of us can comment fully about what happens
within the Ministry of Health. However, I know in hospitals
across the province all coroner's jury recommendations are
received by hospitals,
insofar as they may relate to some aspect of hospital care or
health care, and are widely distributed through the hospital.
Through a series of educational sessions, front-line staff are
engaged in thinking through, "What can we do in this organization
to make sure that it doesn't happen to us, to our patients,
clients and residents?"
At the Ontario Hospital
Association there's a broader process which the OHA uses to
facilitate coordination and co-operation as well as
communication, which David will mention, and liaison with the
ministry.
Mr
MacKinnon: When we get a major coroner's report, and we
get many of them-I'll use just one example, the Kyle Martyn
issue. You may recall the intensive publicity surrounding this
case in a hospital in Mississauga. When the coroner issued the
coroner's report, about 40% of the recommendations were directed
at the OHA specifically and many others at its members and the
OHA. We implemented all of the recommendations within the
six-month period given to us and it led to very significant
upgrading of triage training across the province, including the
rapid implementation of a more advanced triaging system.
1100
We do go through them, Mr
Phillips. We have a specific process to do that. When there are
system implications, we draw them to the attention of all our
members, and we intend to do that more and more intensely.
We also know from our
report card issues that once people get into hospitals they are
quite well treated, but the clear focus has to be on enhancing
access. We're going to expand that system so that we report more
on the access issue, so people can actually track it more
closely.
Mr
Christopherson: Thank you for your presentation,
gentlemen. As you know, the front page of the Toronto Star today
has a story headlined "Man Died After Five-Hour Search for
Hospital Bed." If I can just quote a part:
"`It was more urgent than
anybody anywhere-his condition was imminently life-threatening,'
says Dr Dan Watkin, the emergency physician on call at
Collingwood General Marine Hospital.
"`In 15 years in rural
areas, I've never seen a patient of that severity be
delayed.'"
The end of the article
states the comments from Mildred Lambe, who is the patient's
wife:
"But she says it's a bitter
irony that her husband may have been let down by a lack of
provincial spending.
"`He was always so
impressed at the cutbacks. To think that the time of his life
when he needed something from the system, it failed him.'"
I would just say
parenthetically that I think we're going to see a lot more of
this. People in general like the idea of the tax cuts, they think
it's wonderful to get government off our backs, but when it's
your family member who is affected directly, when you need the
bed, when your child needs help with special assistance or
supports in the classroom and they are not there because of the
funding cuts, suddenly the whole thing takes on a very different
perspective.
This is happening all the
time. In Hamilton recently, maybe you're familiar with the
situation of Barbara Mersereau's mother, who was in Mexico and
desperately needed to get back to Ontario. The physicians in
Mexico and her own physician agreed she needed to be air-lifted.
The insurance company was onside, everybody was onside, and they
couldn't find a bed. It was only because her husband happens to
be a local psychiatrist and has connections in the medical
community-and he admits this-that he was able to, as he says,
pull a string and get a bed for Barb Mersereau's mom.
Far too often we're seeing
that people aren't getting particularly the emergency service
they need. Hamilton Health Sciences Corp is running a deficit.
You talk about the debt problem of hospitals. Unfortunately, the
media often portray it, reporting the comments of others, that
these are hospitals that aren't managing properly. "They've got a
deficit, so what's this big problem? They never had it
before."
My view of it is that you
can always improve efficiencies, but the reality is that the
cutbacks mean that you make a choice: You either provide the
services and run a deficit or you don't run a deficit and the
services aren't there. And when the services aren't there, that's
how we get these headlines and that's how people like Barb
Mersereau's mom are not able to find a bed.
What do you think the
government ought to be doing immediately so that Ontarians can be
satisfied that the emergency service they are bloody well
entitled to will be there for them?
Mr
MacKenzie: I'll make a comment initially. One of the sad
realities which we have evolved into is that although adequate,
appropriate funding is totally necessary to sustain our health
care system at an appropriate level of quality and access-and we
give full credit to the government for the additional monies they
allocated just before Christmas to the system generally and to
help with emergency services-the problem is that nurses,
particularly emergency nurses and critical care nurses, are not
out there to be hired.
Mr
Christopherson: Why aren't the nurses in the hospitals
right now? Why haven't they been there all along?
Mr
MacKenzie: There was a recent study you may have heard
about that the Canadian Nurses' Association just released, and
there are lots of other data. Between 1990 and 1998 in this
country we've lost about 4,000 nurses net per year to the United
States-
Mr
Christopherson: Why?
Mr
MacKenzie: -and one in three nurses even today leaves
the profession within the first five years. Some 10% on top of
that go to the States. Why? Workload.
The Chair:
Thank you very much. We've run out of-
Mr
Christopherson: What I'm getting at is that the irony is
that the government cut the transfers-
The Chair: Let's have some
order.
Mr
Christopherson: -and that's why the nurses were laid
off.
The Chair:
Mr Christopherson, I will not warn you again this morning.
Interjection.
The Chair:
I will recess if you continue on your tirade. I've given you five
minutes. I said two minutes; I've given you five minutes. That's
more than fair. If you're going to take advantage of somebody
else's time, I will recess and everybody else will be penalized
on their presentation time. I will not repeat my statement.
Government side.
Mr Ted Arnott
(Waterloo-Wellington): Thank you, gentlemen, for your
presentation. I've got a quick comment and then I want to defer
to my colleague Mrs Molinari, who has a question.
I want to thank you very
much for the constructive suggestions and ideas that you
presented today. I know the government will give them all due
consideration.
I've heard the opposition
comments. Certainly there are problems in health care. We
acknowledge that. We're working to solve them. We're hoping to
receive further assistance in the upcoming federal budget to
fully restore health transfers. I recall the comments that were
made by you, Mr MacKinnon, before Christmas, that the government
has been very responsive in terms of working with you to solve
problems. I think you said we've done more in that respect than
any government in recent years. You've given credit to the
Minister of Health, and I want to thank you for that, and thank
you for your presentation today.
Mrs Tina R.
Molinari (Thornhill): Thank you very much for your
presentation. It's very comprehensive and it gives us a lot to go
into as we move along with the rest of the budget hearings.
On your point about the
more secure funding and the three-year budgeting, I certainly
agree with the multi-year budgeting and the benefits it can have
on any organization, so I certainly concur with that.
I do have one question. As
one of the recommendations, you have investment in new
information and medical technology. Could you give me an idea of
what percentage of the total budget you believe should be
invested in that area?
Mr
MacKinnon: We drive at it more from a question of how
much others are spending and the specific nature of the
technological investments we'll have to make. I think the figures
in our presentation show that we think we're about one sixth of
where we should be, and that is a really serious problem.
I think where it takes us
for the future is new partnerships with technology enterprises.
It's clear that government funding will have to increase
significantly to not only resolve the very important consumer
service problems that we're facing but also from an economic
development point of view.
In the end, I think it's
going to be two things: significantly enhanced government funding
and a much broader sense of partnership with the private sector
to get a level in hospitals that has to be a large multiple of
what it now is. I would say something in the order of four, five
or six times the current level would be necessary to be
competitive in the years to come.
The Chair:
On behalf of the committee, thank you very much for your
presentation this morning.
Mr
MacKinnon: Thank you very much, Mr Chairman.
The Chair:
I'd like to make a quick statement. I know this has been a long
three weeks for most of the members and I know that every one of
us is getting somewhat tired. We're running 10 minutes late
already this morning. We've been very punctual throughout all the
hearings across the province. I've had co-operation from all the
members, including you, Mr Christopherson, and I certainly
appreciate that. I don't mind running late. I've given everybody
their fair time.
Mr
Christopherson: You've had your say, Chair, and I've
listened to it. Get over it.
The Chair:
OK. I've given everybody their fair time, more than their fair
time, this morning.
RETAIL COUNCIL OF CANADA
The Chair:
We'll continue on with a presentation with the representatives
from the Retail Council of Canada. On behalf of the committee,
gentlemen, welcome. You have 30 minutes for your presentation
this morning.Could you please state your name for the record.
Mr Peter
Woolford: Good morning, Mr Chairman and members of the
committee. My name is Peter Woolford. I'm with the Retail Council
of Canada. I'm joined this morning by Brian Rudderham, who is the
controller with Wal-Mart Canada and the chair of our taxation
committee. We have provided a written submission. I've got a few
opening remarks and then we'd be glad to take comments and
questions from the committee.
First of all, we do
appreciate this opportunity to appear before the committee this
morning and provide the views and advice of our members in
advance of the 2000-01 budget. As well, on a personal note, I
would like to express my thanks to the committee and to the
Clerk's office for making it possible for us to be here today. I
know that I had given a very short window in which we were all
available to appear here, and I do appreciate that
opportunity.
1110
A little bit about the
Retail Council: We are the voice of retail in Canada, and are a
non-profit, member-funded organization whose more than 8,500
members across Canada include national department store chains,
national and regional discount chains, mid-size specialty stores
and independent merchants. Something that people don't always
know is that over 90% of our membership are independent retailers
with one or perhaps two stores. Our members account for about
two-thirds of Canada's general merchandise retail volume.
I'd like to talk a little about how we see the
retail market right now. I know that is helpful to the members of
the committee and to the government as we look at the budget for
next year. Then we'll run quickly through our budget advice for
the government.
Nineteen ninety-nine was a
good year for retailers. I'm delighted to be able to say that. It
seems I've been coming to this committee almost forever with
nothing but bad news about the industry. Our members enjoyed a
strong 1999, with growth in sales at around 5.4% in the period
from November 1998 to November 1999. That's a national number
from Statistics Canada; I believe we'll have the full-year data
next week.
Ontario's performance has
been even stronger, with sales rising over 8%. In our view, at
least part of the reason for this stronger growth in Ontario is
the major stimulus provided by the Ontario personal income tax
cuts implemented in previous budgets. As the committee knows, we
are supportive of those measures. Sales continued strongly
through the 1999 holiday season, and again Ontario results were
slightly stronger than the national picture.
Looking forward to 2000,
our members forecast another year of relatively steady, healthy
sales growth, probably in the range of about 4%. However, we will
continue to see significant variation in rates of growth among
different sub-sectors, different formats and, of course,
different individual retailers. In our view, what that reflects
is the ongoing battle for market share which is raging inside the
retail trade. Retail has always been a very competitive business,
and never more so than at the present time.
While productivity in the
industry has grown, in fact the benefits have flowed almost
exclusively to consumers. Retail profitability has not changed,
and while sales have grown we've seen very little or no increase
in employment in the industry since 1998. Even at that time, the
growth did not make up for the loss of jobs in the first part of
the decade.
This should be of concern,
because retail is a major employer in our economy, employing
about one-eighth of the labour force and acting as a major entry
point for people entering the labour force for the first
time.
Let me touch on a number of
policy issues we'd like to bring to the attention of the
committee.
First of all, in the
general area of fiscal policy and the broader issue of tax
reduction, our first recommendation is to encourage the
government to introduce in this year's budget for 2000-01 the
proposed income tax reduction initiatives they announced last
year. We take this position for two reasons. First, of course, as
a business that sells to the final consumer, we are always
grateful for more money in the pocket of the consumer. Secondly,
we support the government's desire to reduce the role of the
public sector.
Our second recommendation
is that depending upon the fiscal circumstances of the
government, we believe the provincial retail sales tax is another
tax that might be a suitable candidate for a reduction in rate.
I'd like to expand on that just a little. In our view, a rate
drop would provide an immediate, direct and visible reduction in
the cost of goods that people buy. Secondly, sales tax is one
area where Ontario's rates now are among the higher in Canada,
and Canadians have shown a willingness in recent years to bend or
break the law in order to avoid taxes that they see as unfair or
too high.
I can think of a couple of
examples that this committee will be very familiar with from
their past history. One would be the phenomenon of cross-border
shopping in the late 1980s and early 1990s, and the second would
be the widespread smuggling of tobacco in the mid-1990s. The
emergence of the Internet as a shopping channel only intensifies
the opportunity to do this kind of behaviour and adds competitive
pressure to retailers here in Ontario. We will address the whole
matter of taxation of Internet sales a little later on in the
presentation.
The second issue is that
familiar old chestnut, sales tax harmonization. I think I've been
talking to the committee about this for 12 years. Our
recommendation here is that the Ontario government should pursue
harmonization. However, and we want to be very clear on this, it
must not require merchants to include the tax in prices. The
Retail Council is adamantly opposed to a tax-in, harmonized
system with rates that vary by province. Again, I would like to
take a little time to expand on that, so people understand how
important this is for the retail trade, and in fact for the
consumers who shop in our members' stores. Retailers must be
allowed to display prices tax-out, to accommodate differing tax
rates across the country. I'll talk a little about the direct
impact that mandating tax-in pricing would have, and then a
little about the broader system effects it has.
The best example of a
direct impact that mandated tax-in pricing would cause is the
effect on item price marking, where the individual price of the
item is actually put on the container or product itself. There is
a dramatic cost-saving if price tags are put on merchandise when
it is manufactured. At this time the cost is virtually zero or
very small. But at the time a product is manufactured, the
province of destination is not known. When the iron, the can of
soup or whatever personal care product or piece of clothing is
manufactured, you don't know what province it's going to be sold
in. If you are trying to price at that time, you need a single
price to put on the product. If tax-in pricing is mandated, it
would force retailers back to the 1960s, back to the practice of
previous decades of pricing in the store. Everybody can remember
the sales clerks with their pricing guns pricing items. This is a
costly, wasteful process that retailers around the world are
trying to get rid of.
Let me talk a little about
the longer term impact of tax-in pricing, and that is to
essentially balkanize the national economy that we've struggled
for over 100 years to create in this country. Not only is the
national economy destroyed by tax-in pricing, but the entire
logistic system which is built around a single, national economy
would be eliminated. The additional costs and loss in efficiency
would far outweigh any tax saving and would destroy 20 years of technological progress in
retailing and in the supply industries.
Let me turn to a brand new
issue that is starting to emerge that we feel the government
should give some attention to, and that is taxation of sales made
over the Internet. The recommendation here is that we believe the
logical and best way to ensure fair taxation of Internet sales is
to harmonize the provincial sales tax with the goods and services
tax. However, if that is not the direction the government intends
to move in, we suggest that officials be directed to look for
alternative solutions.
Let me talk for just a
moment about this. Sales of merchandise to final consumers over
the Internet, as everyone knows, have grown at an explosive rate
and are forecast to rise rapidly going forward. The Retail
Council is the voice of retailers, and that includes pure play
electronic retailers, traditional bricks and mortar retailers,
and what are now called clicks and mortar retailers-retailers who
have both an electronic presence and a traditional store-type
presence. Our view is that retailers of whatever type, located in
Ontario, need assurance that out-of-province competitors do not
gain a competitive advantage simply because they do not have to
charge the tax because they do not have a footprint in the
province. The government must, of course, maintain a competitive
tax regime. But it should also be working with other governments
to establish the rules for Internet sales that cross
jurisdictional boundaries. That is simply a matter of tax
fairness and the proper application of tax. In this area I think
our interests line up very directly with the public interest and
with the interest of the government, and that is to ensure that
every sale carries its fair share of taxation.
The fourth broad area we
would like to touch upon very briefly, we are aware, is not one
that is the direct responsibility of the committee, and that is
environmental fees and levies. We recognize that in this area the
responsibility for designing funding for waste diversion has been
delegated to the Waste Diversion Organization, and we will be
participating in the work of the WDO. But we would like to draw a
couple of quick points to the attention of the committee.
The first stems from the
fact that however waste diversion is funded in this province, it
will be done through something that walks like a tax, smells like
a tax, looks like a tax and, by any other name, will be a tax.
For that reason we would suggest that officials from the Ministry
of Finance be involved in work on financing methods, because this
is, in effect, a new tax. Ministry of Finance officials are
experts in this area, and we believe it would be desirable to
have that expertise at the service of the organization.
1120
Second, we believe
governments are experts at administering tax systems. For that
reason we recommend that the government administer the new tax to
ensure neutrality, equity and efficiency of operation.
The final area is one that
the committee has already discussed briefly this morning with
other presenters, and that is property taxation. We have just one
point to make here, and that is that section 19 of Bill 14, which
I believe was passed last fall, should be amended to put in place
a more balanced process for reassessing specific properties and
classes of property and that this include a proper appeal
process. Our concern here is that the current legislation gives
the minister very broad power and discretion over the taxation of
specific properties and classes of property without any
established process for doing that, nor any proper means of
appeal.
In conclusion, we are
coming off a strong year, 1999, and our members are looking
forward to another year of healthy growth in sales. We believe
the policies of this government have done a lot to support the
environment and played a role in creating domestic conditions
that underlie that growth. The challenge for the government now
is to pursue policies that will sustain the economy over the
medium term and to support the private sector's efforts to
improve its competitiveness.
Those are the opening
remarks. We'd be glad to respond to any questions.
The Chair:
Mr Christopherson, we have five minutes per caucus.
Mr
Christopherson: Thank you for your presentation. It's
good to see you again. I have to say at the outset that I was a
little disappointed that you've given all the credit for the
economic activity we now have and the booming economy to the
Harris government. There's no reference whatsoever in here to
something that virtually every economist who has presented to
this committee has talked about and that is the fact that the
booming US economy, and therefore the export sales that's
generating, is really the main driver of the economy here. When
someone is buying something that we've exported in Wisconsin, the
personal tax rates here in Ontario have absolutely no impact on
that at all. I was disappointed that you didn't at least
acknowledge that there are many experts who are recognizing that
that's the main driver, not the tax cuts.
Mr
Woolford: May I respond to that for a moment, Mr
Christopherson?
Mr
Christopherson: Sure.
Mr
Woolford: First of all, we would never deny that the US
has played a role in promoting growth and promoting the health of
the Ontario economy; there's no question. What we tend to do as
retailers, of course, is look at the domestic economy, what local
citizens are buying and what they have in their pockets. In that
area, what we saw in the recovery, and then in the first part of
the expansionary phase across Canada, was a very unique process
whereby domestic demand inside the country lagged, throughout a
long part of the cycle, the overall growth of the economy, for
exactly the reason you've identified, and that is that the health
of the US economy was significantly greater than Canada's and it
was exports that were driving the economy. The benefits of that
were not flowing to ordinary citizens. The tax take on them was
rising at a dramatic rate at all levels, particularly at the
federal level, and that left, despite a strong economy, the final consumer in Canada and
Ontario with no more money. As retailers, that impacts the
business and was of great concern.
One of the things that we
do want to give credit to the government for is that they did put
some money back in the pockets of consumers and, in our view,
that did change the dynamics of the domestic market in
Ontario.
Mr
Christopherson: I appreciate that, but I also know that
there were a lot of small businesses in neighbourhoods in my
riding where the 22% cut to the income of the poorest of the poor
meant a lot of corner stores were almost going belly up, because
of course the less money you have, the more you spend immediately
in your community, in your neighbourhoods, and that's exactly
where small business-retail business-is, and they were hurt. But
I think we both take each other's point.
I would also point out to
you, though, that one of the things I think we all ought to be
concerned about is the incredibly, in fact historic, low level of
savings that StatsCan is now showing us exist. One economist, Mr
Hugh Mackenzie from the Steelworkers, pointed out that in the
ramp up to the Depression of the 1930s, in the booming 1920s-not
that I'm making a direct analogy but eventually this economy
that's defying gravity is going to go down-one of the things that
they learned was not to let people borrow against the paper value
of their stocks. It was called buying on margin and then, of
course, when the value of the original stocks went down, the
margins were called in, people didn't have the money and ergo
bankruptcy started happening all over and we entered the Great
Depression.
Now we have historic levels
of debt and historic low levels of savings, and what that could
mean is that, yes, we don't have the margins that'll get called
in and cause the economy to implode, like people's personal
finances, but if we see a dramatic downturn or correction in the
economy, to use the vernacular, then a lot of people may find
that the assets they thought they had in their mutual funds and
RRSPs won't exist, they've got no savings and they're loaded up
with all this debt. So while you're the immediate beneficiary,
and we all are, with a booming economy, of the money being spent,
at the end of the day if the bubble bursts we could find that
those very same consumers are now into a personal recession and
financial depression that could last god knows how long and then
you'll be back here in a few years saying, "We're hurting big
time because people aren't spending." I think it's something we
all ought to be worried about.
Mr
Woolford: We raised this before the committee last year,
in fact. I seem to recall our remarks focusing on our concern
with exactly the points you've just made, that debt levels are at
historic highs and still rising, that Canadians were very close
to dis-saving, not saving. Again, our sense is that that was
coming from the needs of very ordinary folks to make ends meet,
to have enough money in their pockets to pay for the daily
necessities of life. Again, our concern was that while the
economy was growing very healthily, the benefits of that were not
flowing to the ordinary citizen. Our members were seeing that in
store sales and in the health of the economy.
Mr Galt:
Thank you for an excellent presentation and for helping to put
things in proper perspective as to what really stimulated the
economy in getting it going.
At this point in time, I'd
like to extend my personal apologies to you on behalf of the
government of Ontario for the terrible economic policies we had
from 1985 through to 1995. It was most unfortunate for your
industry what happened to it and what happened to the province in
general. The loss of jobs: We lost some 50,000 net jobs in this
province in the first half of the 1990s, while the rest of Canada
gained 350,000 net new jobs. Certainly we're seeing how that
turned around.
My question to you relates
to retail sales tax, which you're suggesting should be reduced. I
asked the previous one on fuel tax. If it was dropped 1%, 2%, how
many jobs might that created in the province of Ontario, if we
were fortunate to encourage the Minister of Finance to look at
that kind of thing you're commenting on?
Mr
Woolford: There are two sides to this, and I'll ask Mr
Rudderham to address them as well. One is the immediate direct
impact on retail. A lot of the goods, in fact all of the goods,
that we buy as citizens move to us by some form of transportation
which, of course, is carbon-fuel-derived. My understanding is
that the cost of that is not a large part of the final cost of
the goods. The impact of higher fuel costs on the cost of
merchandise is not that great, and I'll ask Brian to confirm
that. But the second element then is that what the higher cost of
fuel does is drain funds out of the consumer's pocket. If they
are spending more for gas, more for home heating, then they have
less in their pocket for the other daily necessities. Those are
the two impacts we have. I don't think I can give you any sense
of the job impacts. What I can tell you is that it will have an
effect on consumer spending in the short term. I would imagine
that given the ferocity of competition in retail, retailers again
are going to be forced to eat this additional cost increase
rather than pass it on. But I'd like to, with your indulgence,
ask Mr Rudderham to respond as well.
Mr Brian
Rudderham: I won't pretend that I'm competent to comment
on the number of jobs it would or wouldn't create, but to Peter's
point, I think generally speaking anything that puts money back
into the consumer's pocket is a positive thing. If you reduce the
tax, you're redistributing where that money's going to go. I
think a significant portion of it would go into retail, drive
retail sales, which would definitely create jobs in Canada,
certainly from the perspective of my company. We source about 80%
of our goods from Canadian vendors, so in effect you do spread
that around quite well.
1130
There is a direct impact of
the cost of fuel on our business. Most of the goods in the
country that flow through any chain's logistics network do tend
to travel by truck. There are taxes and surcharges on that, so
there is an impact. But again to Peter's point, anything that
goes back there will
tend to flow back through to the consumer. Retail is probably one
of the most competitive industries in Canada today, and becoming
more and more so, and it's very much driven by price competition.
I personally believe that a major influence in holding inflation
down is the level of competition that's happening. There's just
no room for price increases in the supply chain. Certainly if our
vendors come with a recommendation for a cost increase to us, our
general reaction is, "Just say no."
Mr Galt:
Maybe I could sneak in one last question. I believe you said you
were with Wal-Mart?
Mr
Rudderham: Yes, sir.
Mr Galt:
Just questioning what sometimes is in the newspapers, is it true
that your company received a grant from Jane Stewart, from the
HRDC slush fund?
Mr
Woolford: In all fairness, Mr Galt, Brian is here on
behalf of the Retail Council this morning. I think we should
stick to Retail Council business.
Mr
Rudderham: I believe it was reported as a developer
also.
Mr
Phillips: Thank you for the presentation. I appreciate
your comments on the economy. The government put out its
quarterly accounts, and I note that from the second quarter of
1995 to the third quarter of 1999, the most recent quarter that
is reported, exports are up $80 billion and what's called
"personal expenditure on consumer goods and services" is up $20
billion. Not to underestimate the importance of consumer
spending, but we now are in an economy that is driven by exports.
We've heard presenter after presenter saying that, frankly,
that's what's driven the economy. No other place in the world
relies on exports as much as Ontario does. We have to be really
careful when we assign the key factors. Exports, according to
their own numbers, are up $80 billion; domestic spending is up
$20 billion. Tax cuts have been interesting and no doubt have
helped retail business, but let's recognize the key driver. By
the way, the export people tell us that the reason why they're
able to compete is the way we fund health care, which is heavily
funded by the taxpayer, the provincial government, and the
quality of our education system.
You mention harmonizing the
PST and GST. My recollection is that somewhere around $500
million of PST, provincial sales tax, goes on product that is
exported. If we harmonize it with the GST, I believe that would
require taking it off those products. This is an interesting
proposal from the retail people, because, theoretically, if one
raises the $500 million elsewhere, it helps boost exports perhaps
but it is $500 million that has to be somehow or other accounted
for. Is that $500 million the number you use, because that's the
number I've seen, and is that still consistent with your
recommendation to harmonize the PST and GST?
Mr
Rudderham: If you recall, when the GST came in, the 12%
tax was removed in favour of the GST. The manufacturer's tax that
was on exports was removed. That was transferred to the
consumption-based GST. Exports have definitely benefited,
probably by the figures that you're presenting.
Generally speaking, these
measures can be done to be relatively neutral.
There are also tremendous
savings to be had by dealing with a single tax base. There's an
efficiency on the business side from the point of view that right
now we as retailers administer the GST, QST, HST, Ontario's PST,
PEI's PST-Manitoba, Saskatchewan, BC. On top of that, we're
currently administering 17, and I believe it's soon to be 19,
different environmental levies on specific taxes. So from our
point of view there's a tremendous efficiency to dealing with one
tax regime, and certainly as few tax regimes as we possibly
can.
There are also collection
efficiencies at the different levels of government. If you're
harmonized with the GST, you only have one set of administration.
They have an allocation formula that the Maritime provinces have
benefited from, and in fact when they harmonized with the GST
they actually had a rate reduction for their consumers. I'm not
sure what happens to the $500 million, but they got a tax break
and a cheaper administration along the way. It seems to be a
system that has worked fairly well. It's worked fairly well for
the federal government, and I think from a retailer's point of
view it makes it easier and less costly to administer this tax on
behalf of the government. We're probably the single largest tax
collector at virtually every level, certainly the federal and
provincial governments, and it's a costly burden to us.
Mr
Woolford: If I could add to that just for a moment,
where this shakes out is that the goods and services tax is
levied on a much broader base than the provincial sales tax. It
taxes a lot of services that you cannot efficiently tax with a
retail sales type tax. So as the base gets much larger, that will
generate a revenue stream which is quite comparable to the retail
sales tax. My recollection is that when Ontario and the feds were
talking about this, Ontario believed they would lose some
revenues and the feds thought they would make some revenues by
the switch, if the tax stayed at the same rate.
The other major area where
taxes have apparently shifted is taxes on intermediate goods. I
believe Ontario receives about a third of its PST revenues, much
larger than on exports, for example, on taxes on business
imports, which would be much more cleanly flowed through to the
consumer. That would be seen as a shift of the tax to the
consumer. In fact, what happens is that that is stripped out of
the cost base and put on the final price, which means that all
the markups through the process are not built in on the
tax-included base price. Our expectation is that costs to
consumers might come down a little bit and revenues should be
more or less neutral.
The Chair:
Gentlemen, on behalf of the committee, thank you very much for
your presentation this morning.
ONTARIO FEDERATION OF LABOUR
The Chair:
Our next presenters this morning are representatives from the
Ontario Federation of Labour. On behalf of the committee,
welcome. Could you please state your name for the record, and you
have 30 minutes.
Mr Wayne Samuelson: Wayne
Samuelson. I'm president of the Ontario Federation of Labour.
Mr Ross
McClellan: Ross McClellan. I'm director of legislation
for the OFL.
Mr
Samuelson: Let me begin by thanking you for the
opportunity to spend a few minutes talking with you.
We have prepared a
presentation which I want to assure you I'm not going to read. It
has all the necessary graphs and charts to explain our positions.
I think it's safe to say that none of the positions will surprise
you. In fact, the points we make about the impact of interest
rate policies, tax cuts, service slashing, the need for support
for people who are hurting, housing, health care and education
are consistent with positions we and others have taken in the
past.
I should also tell you that
I actually have had some time to watch some of these
presentations, so not only does Mr Galt's mother watch, but there
are some other people out there who are watching.
1140
I agree that this is an
important forum and an important debate. I also want to assure
you that I'm going to talk slowly enough that you're going to
have time to go through my brief and highlight things and ask
really interesting questions. But I have to tell you, I can't
believe how far removed many of the issues discussed at this
committee are from real people out there.
I'm going to step a little
bit out of the box. I want to say off the bat, I understand how
this works. I know the government members have their marching
orders, that somewhere some gang of unelected people have
provided you with your message box-I see you looking, actually,
in the back of the room-and it's your role to defend government
policy and to say over and over and over whatever they've told
you you need to say.
I've actually been around
politics a little while and I understand how it works. But I also
know it's got to be tough at times. Over the Christmas season,
when there was a crisis going on in the emergency wards in
Toronto, I can't imagine how you must have felt-because I know I
felt bad-knowing that your policies were resulting in a situation
where sick people were being driven around this city in the back
of an ambulance trying to get into a hospital. I talked to
somebody in our building the other day and she was telling me how
she spent almost 48 hours in a hallway with her sick mother
because they didn't have any beds. That's got to bother you,
because it sure as hell bothers me. I don't have the kind of
control over how our government spends the money that you do.
You've got to wonder about the growing inequality gap in this
province and the impact that's having on people who are at the
bottom end of the scale.
You've also got your orders
to talk about job growth and how great things are, but it must be
tough when you know that between 1997 and 1999, less than 7% of
jobs that were created were permanent, that around 14% were
temporary and that over 20% were term or contract. It's got to
bother you, because it sure bothers me, to realize that 41% of
all the jobs created in the last decade were self-employed, and a
third of those people are living on less than $15,000 a year. I
understand it's hard for the government to engage in that kind of
debate, because they are in fact giving ground and acknowledging
that things aren't as great as they have said.
I want to talk to you a
little bit about wages. Again, you're in the position here of
actually defending the indefensible. You've got this freeze going
on with the minimum wage in this province coming up to five
years, and this just blows me away. The same people who give you
these orders were probably the people who had the brainwave to
put the public salary disclosure on the Web. They've got you in a
position of defending a minimum wage that's been frozen for five
years on people making $15,000 a year, while any citizen can now
click onto the Web and actually track the increases you've given
your employees over the last three years, not to mention the
$30,000 increase-which is twice the yearly salary of someone on
minimum wage-you've given to your political staff. We've got
another month to go and up come all the salaries again. You can
actually look on there and you can see people who are pretty
friendly to your government getting some pretty big wage
increases over the last four or five years.
I was in Kingston
yesterday. I was driving back down the highway last night and I
heard this ad that the Tory party has going. I thought how
embarrassing it must be to be a Tory MPP, especially a
backbencher who doesn't have a lot of input into these things,
when you've got your party running these silly ads to tell people
they're getting a tax break, if you can believe that, ads that
are primarily subsidized-you understand this-by your donors, a
big chunk of whom are very wealthy people and taxpayers, trying
to convince all the rest of us that we're getting a break so they
can get public support to give them more money in your tax break
system. I can't understand it. I'm sure people will figure this
out. I'm actually surprised that there aren't more accidents on
the highway with these Tory MPPs driving to work trying to hide
their faces because they're so embarrassed when these ads come
on.
I could go on. Believe me,
I could go on and talk to you about the things I hear when I
travel the province, the pain of people in the city of Toronto
who are trying to access housing.
I remember-and this it
sticks in my mind-I was in Thunder Bay some time ago and a woman
phoned in to a radio talk show I was on. She talked about how her
son used to get help from the special education department in the
school and he no longer does. She said to me: "Wayne, this
government cut will impact my son for the rest of his life
because he doesn't get that help now." So you have an incredible
responsibility.
I just want to say, though,
if any of you ever want to stand up to these whiz kids, who meet
in some hotel or in some office here, and actually say, "It's
wrong that minimum wage workers have had their salaries frozen.
It's wrong that people can't get into an emergency ward when
they're in an ambulance and they're sick," or if you want to say that it's wrong and
you're going to do something about hallway medicine or that kid
up in Thunder Bay, or you're going to try and fight for real
jobs, I don't think you'll be alone. There are a lot of people
out there who believe they elect people to take a stand; they
believe they elect people not to mimic the notes that come from
the back of the room or from the top floor of the building across
the street. They think they elect people not to simply repeat
message tracks. I just want to say to you that if any of you ever
feel the need to really make a difference, there'll be a lot of
support. Please feel free to give me a call. I'll do anything I
can to help you, because I actually believe in our democratic
system and I actually believe that each of you has to look in the
mirror every morning. I know that some day you'll all realize
that you're hurting people and it has to stop.
I'll stop there, because
I'd like to hear some message tracks but I'd like also like to
engage in some conversation.
The Chair:
We'll start with the government side. We have approximately six
minutes per caucus.
Mr Arnott:
Thank you, Mr Samuelson, for coming in today and for your
presentation. I look forward to reading it in detail. I haven't
had a chance to cover the whole thing because I was listening to
your comments. I think you've expressed your point of view very
effectively today on behalf of your membership.
I want to focus in on one
issue that you raised a couple of times, the issue of the minimum
wage. I was privileged to serve in the Legislature from the years
1990 to 1995, when the New Democrats were in power, and I recall
that the minimum wage was raised quite substantially during that
period of time. I forget the percentage increase, but it was
quite substantial. Numerous studies came forward. There were
expressions of concern from the Canadian Federation of
Independent Business and the retail business council, who were
just here, who suggested that the minimum wage increasing as it
was, was actually a deterrent to job creation. It was becoming
unaffordable for many companies to hire new people. That
certainly seemed to be the case, based on the fact that we had a
huge unemployment problem and a net job loss of around 10,000
jobs during that period of time.
This isn't a message track,
this is reality; this is the truth: There have been around
640,000 new jobs created since 1995, I think partially due to the
supportive tax cuts on the part of this provincial government,
but more importantly due to the initiative of business people who
have seen confidence in the future and have felt that it was
possible to hire new people. I think too often the government
pats itself on the back for these new jobs that have been created
and probably we should be giving credit to the people of Ontario
a little more.
1150
It was the position of the
government during the 1995 election that we should freeze the
minimum wage until competing jurisdictions caught up. We're
monitoring that closely. If you have any information which shows
minimum wage levels in our competing jurisdictions and the other
provinces across the country, as well as some of the states,
because as we know we certainly have competition for jobs and
investment from jurisdictions in the United States, I'd be very
happy to look at that and take that forward to the Minister of
Finance.
Mr
Samuelson: Let me say, first of all, that I was pleased
to actually have an opportunity to hear the previous presentation
and hear the representative from Wal-Mart speaking on behalf of
the independent retail organizations and companies. It was
somewhat interesting.
Let me make a couple of
points. I can't believe that you can sit there with a straight
face and tell me you're going to freeze the minimum wage until
what, Illinois, catches up? I don't know what you're calling it
but-
Mr Arnott:
I'm not telling you-that was the position of our party in
1995.
Mr
Samuelson: I understand the position that was worked
out, wherever they work out these positions. What I'm saying to
you is that you give the answer with no comment on the impact it
has on the people who have been sitting out there working for
minimum wage and haven't had an increase since 1995. You just
ignore that whole side of the equation. I'm sure that may be of
interest to whoever wrote out that first document that you ran
on, but I think people out there realize that it's not
unreasonable to think that somebody should get some kind of wage
increase.
As a matter of fact, I just
heard these people say things were going great. I just sat right
where Ross is. He said: "Everything is going wonderfully. Great
year." I think you should show some leadership here. You've got
an opportunity to take this guy at his word, my good friend Peter
who was sitting here, and tell the government that they think
everything is great and it's time to increase the minimum
wage.
I think you would have to
go a long way to catch up, because we have had inflation every
year since 1995. So actually these workers have had a huge
reduction in their wages. I think the argument about what was in
the Common Sense Revolution in 1995 about competing jurisdictions
may be good spin but it holds no reality to what people are
facing every day out there.
Mr Galt: I
would like to respond on the minimum wage as well. I come from a
rural riding. When we go around on tour and talk to the apple
growers in Northumberland county, what is the message I come back
with? I come back with two very strong messages. They start
pounding the tractor tire and they tell me, "Don't increase the
minimum wage because we can't afford to pay any more than that
for labour if we're going to compete with our fruit, our
vegetables, the various products coming out. The second is,
"Whatever you do, don't stop the offshore labour from coming into
this province because we so desperately need them."
I was on a farm where there
were 96 offshore workers-this was back in the fall when I was
there, not yesterday but back in early October-and he would take
50 Ontario workers that day if they would just come and work
there. He's going to have to go offshore. That's consistent with the fruit and
vegetable people in my area having to go offshore to bring people
in to work in those areas. They are just pleading, "Don't
increase the minimum wage or we can't survive and we can't
compete." That's no tract message, that is direct from the
farmers of Ontario in my riding.
Mr
Samuelson: Mr Galt, I'm sure you've been around politics
a while. Did you really expect that when you go to see an
employer he's going to hammer on the tire and say, "Please
legislate a raise for my employees"? It should not surprise you,
nor does it surprise me, that employers will say, "Don't raise
the minimum wage." That's not rocket science.
I agree, you have some
responsibility to whoever it is who is banging the tire, but you
also have a responsibility to people who are working all around
this building, in every community of this province, who have had
a wage reduction every single year. These are people at the very
bottom of the economic ladder. I think it's important that
someone reflect the views of that farmer, but someone also needs
to reflect the views of those people whom you've been hurting
every single year. You've frozen their salary and forced them to
lose money because of inflation. And many of those are not just
teenagers, although lots of them are. You're trying to-
The Chair:
Thank you very much.
Mr
Samuelson: Can I just finish up? I don't want you to
yell at me.
The Chair:
If you yell, I yell back at you. If you talk nice to me, I'll
talk nice back to you.
Mr
Samuelson: I think it's important that you remember that
many of these people are supporting families on these wages.
Mr
Phillips: Thank you for your remarks and your
presentation. I want to talk a little bit about exports. Mr
Mackenzie, whom I view as knowing as much as anybody in the
province about the Ontario economy and the finances of the
province-he truly does-was the one who really highlighted the
export situation. He went over the Ontario economic accounts and
pointed out, and I strongly agree with him, that what's been
driving the Ontario economy is exports. If you look back since
Mike Harris became Premier, exports are up $80 billion and
domestic spending up $20 billion. It is the driving force behind
the Ontario economy. In my opinion, we just have to understand
that and what the implications are. As you say, it has very
little to do with the tax cut and much to do with a variety of
things.
I do think that after
health care this is the most significant issue for us because it
has profound implications for Ontario. I carry this document
around with me, and I'm sure you've got it. It highlights some of
the reasons why Ontario has been competitive. It points out,
"Ontario hourly labour costs range from $4.71 to $13.65, lower
than competing jurisdictions in the US." It points out that these
are the labour unit costs-you probably can't see it-the United
States going up and Ontario staying flat. So one of the reasons
we've been successful is because the wage differential has
widened.
One of the other two key
reasons is the way we fund our health care system. The government
itself acknowledges that that is one of the two key reasons to
locate in Ontario. We in Canada, we in Ontario, believe that
everyone should have access to quality health care so we fund the
bulk of it, over 60% of it, from public funds.
The second one is the
quality of our workforce. Again, it's the government's own
document that points this out: "Ontario's labour force is highly
productive and labour costs competitive." It points out a variety
of good things about our labour force.
I'm wondering what message
the OFL would have for us in terms of the implication of this
growing dependence on exports and where that may lead us. Many of
the presenters say: "We have to harmonize taxes with the US. We
have to have the same income tax, the same sales tax, the same
fuel tax, the same property taxes, the same corporate taxes." My
own judgement is that if we were to do that, by definition we'd
end up with the same way of funding health care as the US, or
lower funding. You can't have both. I wonder if the OFL has done
much work on this and if you have any advice for the committee on
where we're going to be heading on this.
Mr
Samuelson: First of all, I think it's a very good
question and it speaks to what we're facing in terms of the
bigger picture. The government is actually moving towards-and we
all know this-a health care and an education system that mirrors
the United States. It raises a whole range of issues for us as
Canadians and as residents of Ontario about whether we want to
see that happen. So rather than do it quickly, it's done by
stealth. It's done by privatization. It's done by cutting back on
the amount of money that's available to support our health care
system.
I'm in complete agreement
with you in terms of Hugh Mackenzie and his never-ending work to
try and understand and explain the Ontario economic situation.
The committee would be well advised to heed what he says. But
you'll notice on page 12 that we draw also on Hugh Mackenzie for
some of our support. It speaks to the incredible facts around the
growth in our economy and how it has become tied to export
markets. I think this committee needs to note that. It needs to
make sure that while we're tied to these markets we don't find
ourselves tying, God knows, our minimum wage to the United
States, let alone our health care system. I think Ontario
residents and Canadians expect more, and I don't think they're
going to stand for it.
What we need to watch is
that the government doesn't do it inch by inch and people don't
see it coming until it's too late. But I can tell you that my
personal experiences with the health care system in the last
couple of years are much different than they were 10 years ago
when I was forced to spend some time in the system. Clearly,
we're heading into trouble.
1200
Mr
McClellan: Just on auto and health care: If you took
auto out of the Ontario economy, there would be a pretty big hole
in the economy. There wouldn't be much left of the Ontario economy if you took the
auto sector out. In the auto sector alone, our medicare system
gives us a wage advantage of $6 an hour compared to the American
auto industry. That's something to think about: $6 an hour is
what sustains the most booming sector of our export economy,
which is the auto sector. Any weakening of the health sector
fundamentally weakens our competitive position and our ability
compete in American markets.
Mr
Phillips: I was interested that you were using data from
the Canadian Institute for Health Information. Interestingly
enough, the provincial government uses the same source now, and
they provided some response to some questions. I don't know if
you've had a chance to look at it, but it shows that provincial
spending as a percentage of total health spending is heading down
or approaching 60%. Those are the government's own numbers now.
Therefore, obviously 40% is coming from elsewhere. So the stealth
you talk about, Mr Samuelson, may not be as stealthy as you
think. It may be a kind of all-out trot. I do think that, without
any question of a doubt, we are heading that way.
Mr
McClellan: Eventually that will end up on somebody's
bargaining table. Sooner or later that 40% that people now have
to pay out of their own pockets instead of its coming out of
medicare is going to be on the bargaining table, and it's going
to be reflected in the cost of doing business instead of in our
medicare system.
Mr
Christopherson: Wayne, Ross, it's good to see you again.
Thanks for your presentation. As we all note today, Mr Galt is in
full flight. Unfortunately, he's going in circles because he's
only using his right wing again today.
The fact of the matter is
that if you take a look at the track record of this government,
if you're very well off, you've done really well by Mike Harris.
If you are one of those in poverty, you're in deeper poverty than
you've been comparatively in the past. You've had your income cut
by 21.6%, and minimum wage, as you point out, Wayne, has been
frozen for five years. They're falling behind.
The fact of the matter is
that we are now behind the Americans in terms of our minimum
wage. Most of us of the boomer generation grew up with an
understanding that we were always just a cut ahead in terms of
the investment we were prepared to make as a society that would
benefit everyone, for the benefits of all as opposed to just a
few. Now we see that the American minimum wage is actually ahead
of the Ontario minimum wage. Further to that, the President of
the United States, who has presided over the biggest economic
boom in the history of the United States, not only has increased
the minimum wage during this boom, but the other day, in a
presidential year, called on Congress to increase it again. I
would think that if somebody who wanted his buddy, Vice-President
Al Gore, to become the next president, thought this was going to
be a serious drag on the economy, the last thing he would want to
do is urge Congress to do it.
The reality is that if you
listen to Mr Galt's arguments, and his arguments only, the way
they used to provide labour in the Deep South before the American
Civil War would still prevail. You're correct, Wayne, when you
point that you have to take a look at all sides of the equation.
If the only thing that mattered was competitiveness, then don't
pay anything to anybody. Just make sure you have indentured
workers and pay them nothing, just sustenance. The fact of the
matter is that we have a civilized society; at least we used to
in Ontario.
I want to draw attention to
a quote that I raised before you came in, Wayne, and ask your
comments on it. I raised the issue of the unfortunate situation
on the front page of the Toronto Star today about the gentleman
who died while doctors were spending five hours trying to find a
hospital bed. At the end of that article, his wife said that it's
a bitter irony that her husband may have been let down by a lack
of provincial spending: "He was always so impressed at the
cutbacks. To think that the time of his life when he needed
something from the system, it failed him."
You're out in the real
world everyday talking to, not those who are at the very high end
of income in our province, but with the working, middle-class
people who make this economy go. What do you hear from people in
terms of the tax cuts? What are they telling you when you talk to
them about whether the tax cuts have been worth the cuts to our
education system, our health care system, environmental
protection and things like that? What are they telling you out on
the streets, in shops, on the floors and in the stores of
Ontario?
Mr
Samuelson: I think the very fact that the PC party has
run ads to tell people about the tax cuts speaks to just how
people feel about them. I think people understand that it doesn't
matter how much of a tax cut you got; it won't buy you access to
an emergency ward if you're sick. You can give someone a $500 tax
cut, but if their kid doesn't get the help they need in special
education when they're in school, the $500 doesn't mean a
lot.
We've got a lot to learn
from just talking to people who need help. Nobody talks to me
about the tax cut they receive. Most people talk to me about the
services they expect, and they know they aren't there. As you
said, I travel all around the province, and the issues are the
same everywhere I go. The reality is that the people who are at
the bottom end of the scale, the 10% at the bottom in after-tax
income, in the last decade now represent 14%. There's a huge
growth in people who are suffering. There's also a huge growth in
those who are doing well.
I've taken a look at the
election expenses commission Web site. I've seen pages and pages
of corporations and numbered companies that send a lot of money
into the Conservative party. Maybe those people believe in this
and think it's great, and there's probably some benefit to a lot
of them. But the people who don't show up on those donors' lists
are my neighbours who want to get into a hospital when they're
sick or expect they are going to have services for their children
or their community when they're needed.
I think you need to get beyond the sort of
message box, the approach that tax cuts are just great, and
really look at what it means to people. Because at the end of the
day that's what matters. It doesn't really matter what the graphs
look like. It doesn't matter whether you get a front page in your
local newspaper talking about how great the government is. What
matters is the impact it has on people. And you're going to have
a hard time convincing me, based on what I've seen over the last
couple of years, that you aren't hurting a lot of people.
Certainly, the quote in this newspaper story this morning sums it
up: At the end of the day, even some people who may think that
it's doing them some benefit are at risk themselves.
Mr
Christopherson: It seems unfortunate that that's the
only way the message is going to get out there. As you say, if
you've got $500 in tax cuts it doesn't do you a lot of good if
you need a bed in an emergency ward or if you need care for your
children or there's an environmental spill or if you find out
that the air that your children are breathing is more polluted
than ever.
Obviously, not everyone
affiliated with the OFL is making minimum wage. I would hope that
most of them are making considerably above that, because they
benefit from free collective bargaining. What do you sense in
terms of people who would consider themselves to be middle class?
It's my sense that if we've got a growing pool of people who are
in poverty, and that they're in deeper poverty than they've been
historically, then it's not millionaires who are broke and are
suddenly in poverty; it's people who once considered themselves
to be middle class who have now seen their standard of living
fall to the point where they are now statistically considered to
be in poverty.
Do you have that sense of
apprehension and insecurity on the part of people who most would
think of as sort of middle class, that they may not, not only be
able to improve the quality of life for their families, but
they're fearful that it's slipping away? Do you sense that kind
of apprehension out there?
Mr
Samuelson: Certainly, and I guess the government
somewhat naively thinks they can get this short message out about
tax cuts and that is going to ease that apprehension. But I have
three daughters who are going into the world to try to find work,
most of them trying to string enough part-time jobs together
after leaving school to find full employment. I think that has to
worry a lot of the so-called middle class, the impact of this new
economy on their children.
There is a lot more
insecurity out there than government numbers might lead you to
believe. To simply say that 650,000 jobs have been created, or
whatever number you're being told to use today, doesn't make it
any more secure. We've had a major restructuring taking place in
the Canadian economy, and certainly in Ontario, over the last
decade. I think the apprehension comes from their personal
experience of not feeling as secure in their jobs as they used to
and the fear about their children.
I think a lot of it comes
from the deterioration of the services around them, everything
from having to pay to put your garbage on the curb, to the fact
that there is less because of downloading-the municipalities are
in crisis in many areas-to the trip they just took with their
elderly mother or father to a hospital. This is creating
incredible apprehension. I think there's a general unease just
because of what's going on around people, and I don't think this
committee should ignore that. I don't think you should get caught
up completely in the graphs and charts and people who sit here
and talk about how great the tax cut is and not once in their
whole half hour do they mention the words "health care."
The Chair:
On behalf of the committee, gentlemen, thank you very much. We
have run out of time.
The committee recessed
from 1213 to 1303.
The Chair:
If I can get your attention, we'll bring the committee back to
order.
Mr Arnott:
Mr Chairman, I just want to draw to the attention of the members
of the committee that CAA Ontario, the Canadian Automobile
Association, has sent a written brief of four pages. They've
outlined very succinctly and directly the concerns of their
membership. I just wanted to make sure that all members of the
committee had an opportunity to read it.
The Chair:
Every committee member has a copy of the letter. It will be filed
with the clerk.
CANADIAN TAXPAYERS FEDERATION
The Chair:
Our first presenter this afternoon is the representative from the
Canadian Taxpayers Federation. I see you're already comfortable.
On behalf of the committee, welcome. You have 30 minutes for your
presentation. Could you please state your name for the
record.
Mr Walter
Robinson: Thank you, Mr Chair. My name is Walter
Robinson. I'm the federal and Ontario director for the Canadian
Taxpayers Federation.
I trust, Mr Chair, that
we'll have some of the other members trickle in shortly. I was
watching the hearings on TV and you had a busy morning.
I presented my brief in
front of you and I will just highlight various key points out of
it for about the next 10 minutes, and then be open to your
questions.
By way of background, the
CTF is a 10-year-old organization. We are non-partisan and
not-for-profit. We do not receive any federal or provincial
political contributions, nor from governments, nor am I or any
members of our board of directors allowed to hold memberships in
a political party while we are employed by the Canadian Taxpayers
Federation.
We have a threefold
mandate: to act as a watchdog on government spending, to advocate
on behalf of taxpayers to get involved in the political process
and exercise their own democratic rights and responsibilities,
and to advocate fiscal and democratic reforms through
presentations to legislative committees such as yours this
afternoon.
Very clearly, the focus of
our pre-budget presentation to you deals with four key areas. The
first is the provincial debt. While we have been appreciative and
supportive of many of the efforts made by the current government in reducing the tax
burden, we believe at this point in time-and it should have been
much sooner-we must turn our attention to the provincial debt. In
our paper we highlight that the provincial debt is now at about
$20,000 per taxpayer, looking at the growth of the provincial
debt on page 8. While the debt itself has receded from its torrid
growth rate through the early 1990s, it continues to inch
upwards.
I have seen the
presentations and the debate that Mr Phillips has had with Mr
Galt in the committee with respect to the Hydro debt and those
sorts of issues, but, at the end of the day, debt is nothing more
than deferred taxes. If you want to cut tomorrow's taxes, reduce
the debt today. Whether it be federally or provincially, in your
case, debt is nothing more than an intergenerational transfer of
wealth. It is a tax-evasive manoeuvre, where we benefit today and
our children pay tomorrow.
What we have advocated is a
legislated schedule of annual debt reduction payments of 5% of
gross provincial revenues. It would be in the neighbourhood, to
start, of about $3 billion per year. You will note further in our
submission that we believe some of this money can come from the
province's increasing reliance on user fees and gambling profits,
those sorts of areas. We believe that provides a very false sense
of security for the province if it continue to rake in those
fees: (a) because that money, if it's going to be voluntary taxes
such as gambling revenues, should go to debt reduction; and (b)
because as long as you continue to have your increased revenue
licensing fee take, it gives you cover to not exert the fiscal
discipline that we believe is still necessary in terms of
restraining program expenditures to the priority areas.
I can tell you, as somebody
who has spent a lot of time at the federal level, that the
challenges that will be placed on all of you as we move into a
post-deficit era in this province are greater than the challenges
that were placed upon you in the deficit-reduction era. People's
expectations are much higher. They want government to play
certain key roles in their lives, specifically in health care and
education. It is your challenge to avoid the temptation of having
government being all things to all people and to focus on those
key areas of public good where people want their tax dollars
spent.
The second key area of our
presentation is an area of criticism with respect to the
provincial government's lack of resolve on alternate service
delivery or the privatization agenda. We still continue to ask
the question, why is the provincial government in the business of
liquor retailing? Why is the provincial government in the
business of running French- and English-language broadcast
services in a 500-channel universe?
We commend the government
caucus for its agencies, boards and commissions review which it
undertook early in the mandate, in 1995 and 1996. I believe it
was Bob Wood chaired that. That provided a very good cursory
overview of looking at what agencies, boards and commissions need
to be strengthened and still have a very essential public policy
role to play, what could be divested to other providers, whether
they be not-for-profit or other levels of government, and then
what should be wound down in their entirety. Sadly, that report,
which was a very good cursory overview, did not get the detailed
follow-up or the legislative attention we believe it deserved.
The telling case in that point is that in the first mandate of
this government you had a minister responsible for privatization.
You now do not have a minister responsible for privatization. In
the absence of re-appointing a minister with cross-departmental
responsibility to take a look at how you can continually evolve
government services, because public services some days serve a
function and 10, 15 or 20 years later certain agencies, boards
and commissions do not serve a key public policy function, we
would hope that you recommend to the Minister of Finance an
ongoing, once-per-legislative review of all agencies, boards and
commissions to see whether they're still serving public policy
interests.
1310
The third area we'd like to
focus on in our submission is a federal tax policy issue which
has some very severe ramifications at the provincial level. On
page 10 of our submission we talk about bracket creep. Many of
you are aware that at the federal level the tax brackets are not
indexed for inflation. People who simply keep pace with the cost
of living in terms of their wage increases, if they're fortunate
enough to get those, get themselves pushed onto the tax rolls or
have more of their income exposed to higher and higher tax
thresholds. This is a federal tax policy, but because the Ontario
government calculates its tax payable as a function of federal
tax payable, this policy at the federal level, this bracket
creep, a stealthy, invisible taxation, affects Ontario
taxpayers.
In a report we released
earlier this week, on Monday, we highlighted that over the last
decade a whopping $90 billion has been paid in extra federal and
provincial income taxes by Canadians for the past 14 years due to
bracket creep. In Ontario alone, the bracket creep increase in
1999, the cumulative effect of extra taxes that Ontarians are now
paying because of this federal tax policy, was $1.2 billion. Over
the last 11 years, Ontarians have paid an extra $10.8 billion in
provincial income taxes due to the federal tax policy known as
bracket creep. I have a copy of that study. I will be more than
willing to table it for the benefit of committee members this
afternoon and leave it with you. We use numbers derived from Finn
Poschmann at the C.D. Howe Institute. It's a very credible
study.
What I'd really like to
point out with respect to this issue of bracket creep is that it
punishes all taxpayers, but most importantly it punishes working
poor and lower- to lower-middle-income taxpayers. I am somebody
who does not receive any federal tax credits based on my family
income, but there are many people, federally and provincially,
who do receive various entitlement payments or credits from both
levels of government. Here in Ontario, this $1.25 billion that
taxpayers have paid in extra taxes in 1999 alone disproportionately
affects lower-income taxpayers.
So we have recommended,
until Ontario moves toward a tax-on-income system-and we do
applaud and support and appreciate that the government is moving
in that direction-the government should provide some offsetting
measures, either in terms of further income tax reductions or
year-end adjustments when taxes are filed. I can tell you that
these extra income taxes were approved once at the federal level.
The extra provincial income taxes that were paid due to bracket
creep never passed the Ontario Legislature. There was never a
vote held on paying extra income taxes. If I may say so, as much
as we've been supportive of the province's taxpayer protection
legislation, this sort of continuous hidden increase violates the
spirit and intent of the taxpayer protection law.
The last point I'd like to
make with respect to our presentation before you this evening,
because I'd much rather listen to your questions, is with respect
to gas price volatility, and specifically gas taxes. If I may say
so, we believe the current exercise in calling people before the
gas-busters committee to talk about and investigate the
volatility in gas prices-well, it's like an old saying: A
committee is a group of people who take minutes and waste hours.
Not this committee but the other committee, we believe, truly is
doing that. If the other committee wishes to haul somebody before
it to testify and talk about the volatility of gas prices and why
they are so high, we believe that committee should call the
Premier, the Minister of Finance and the transportation minister
to ask why only about 43% of all gas tax revenues the provincial
government currently collects are returned to road construction,
highway development or public transportation initiatives. Public
transportation spending is at an all-time low in this province,
yet provincial gas tax collections are at an all-time high, as we
clearly highlight on page 13-bad luck for the government, I
guess-of our pre-budget submission to you.
Finally, I mentioned in my
opening remarks that the government continues to rely on
non-traditional revenue sources. We've taken the numbers from the
budgets from 1995 to 2000. You can very quickly see that
non-traditional revenue sources were stable at between around
10.5% and 10.6% for the last four years. They started to spike up
to 13.28% for this fiscal year; these were the estimates from the
1999 budget.
As I mentioned at the
outset, in a post-deficit environment the challenge is upon you
to meet people's different demands, whether it be for health care
spending or environmental initiatives or debt reduction or tax
relief-the gauntlet of presentations you've heard in your
hearings this month. The pressures will be immense. People have
greater expectations in a surplus era. We believe you have to be
as vigilant in restraining and controlling program expenditures
in the post-deficit era as you were in the deficit era.
We've also advocated that
if you're going to provide money for health care, which is an
extremely important area, you seek to reallocate within existing
budget envelopes first before you jack up the spending envelopes
again and again and again.
In health care
specifically, the government has made many announcements in terms
of returning some of its savings to health services restructuring
or whatever the case may be, but there hasn't been that sort of
follow-up, and I provide an example to you. The provincial
government last year provided the Ottawa Hospital with
$6 million in one-time funding to help hire nurses in terms
of the nursing shortage that you're facing here in Toronto and
communities that you represent, and that your constituents are
facing around the province. That $6 million did not go to hire
nurses. It went to the bottom line to reduce the hospital's
deficit. That was not the intent when the minister made the
announcement to stem a very acute nursing shortage.
So if you're going to
spend, you need to have expenditure controls. If you're going to
put money into those program and priority areas, you need to have
outcomes-based measurements. We know that perpetuating the status
quo, just spending after spending, is not the answer. We need to
ensure that the money that's given to those institutions is tied
to outcomes.
In summary, we believe that
budget 2000 represents a crossroads for you. What you can do is
keep your fiscal vigilance up, restrain and prioritize program
spending, because it's now more important than ever, or you can
sadly perhaps return to the old days of spiralling deficits and
accumulated debt.
I say this with great
personal conviction. One of the reasons why I do my job and why I
enjoy doing my job is to ensure that when my son, who will turn
two next week, is old enough to buy a house and pay taxes and
earn a full-time living and raise a family, he has the dignity of
ensuring that he can provide the most for his family, knowing
that his tax dollars are going fully to fund public services and
public goods and knowing that today's 16 cents out of every tax
dollar which goes to pay provincial debt obligations will not be
a burden or a yoke around his neck or that of his children and
his family when he is ready to pay taxes. That's why we've
entitled our submission this afternoon "Cut Tomorrow's Taxes by
Reducing Debt Today."
There are other things in
the submission. I look forward to your questions.
The Chair:
Thank you very much. We have five minutes per caucus. We'll start
with the official opposition.
Mr
Phillips: Thank you for your presentation. I start on
the debt, and I wondered where you were-someone else was here
five years ago when the government decided to take the debt up by
$22 billion to fund the tax cuts and to implement tax cuts worth
about $5 billion a year in forgone revenue. Those aren't my
estimates; those are the government's estimates. They figure that
the amount of money in forgone revenue from the income tax cut
was about $5 billion, and you can see it's restrained the growth
of personal income tax by the figures you've shown here. I think the federal
income tax has gone up by about 35% over that period of time and
the provincial one is essentially up a very few percentage
points.
The government has also
said what they are going to do on debt reduction, and that is
over the next four years about a $2-billion reduction in debt:
$500 million a year. That's what they've said they are going to
do, and I have no doubt that's what their plans are. I think your
recommendation is, instead of $500 million a year, $3 billion a
year. Where would you rank debt reduction in the debate: debt
reduction, tax cuts or program enhancement?
Mr
Robinson: A very good question, Mr Phillips. Let me deal
with some of the issues you've dealt with and I'll get back to
your question.
You talked about the tax
cuts. It's an interesting parallel you draw between the growth in
federal revenues, which I know very well, and it is about 35%
over about seven years in terms of the current government's
mandate, and almost the stagnation or let's say about a 10%
growth, really, if you look from 1995-96 to 1998-99, about a
$1.6-billion increase.
1320
Where was I? I was in
private industry five years ago, to answer your question. In
terms of growth in provincial income tax revenues-and our
organization supported the tax-cutting agenda; there's no doubt
about that and I would not hide that-there were great cries that
provincial revenues would be depleted, you would lose provincial
revenues. In four to five years, the provincial government has
now cut income taxes basically by about 35%. Personal tax
revenues have not gone down; they have gone up marginally, by
about 8% to 10%. That's a function of many things. The tax cuts
have had a stimulative effect on the economy. There are also
other issues-the auto pact, the growth in the high-tech sector,
things that would have happened anyway; of that there is no
doubt.
In terms of answering your
question as to where debt reduction ranks with tax cuts and
program spending, I think unfunded liabilities, which our debt
is-and also health care is an unfunded liability, if I can square
the circle there-are the most pressing public policy challenges
that the federal and provincial governments face. Our debt
reduction, as I note, is just deferred taxes, and we believe the
$500 million that was outlined by Minister Eves in his recent
statement is insufficient. At that rate, you're going to take 200
years to pay down the debt. I talked about my son at the end of
my presentation. The grandchildren of my son's grandchildren
would still be paying off the provincial debt to pay for the
excesses of what we've basically racked up in the last 25 to 30
years, in my lifetime. I think that's fundamentally immoral and
is an intergenerational example of tax evasion. So debt is
extremely important.
Let me just square the
circle there. The other unfunded liability issue is health care.
We know, through demographic pressures and technology costs and
overutilization when people overconsume a product of perceived
free value, it's a simple economic truth that you will
overconsume in health care. We know that we have
$1.2 trillion as a country in health care expenditures that
we have no way of funding. We know we're going to incur them.
We're going to get old; we're going to live for 30 and 40 years
past retirement. We have no way of covering those, even through
our basic taxation system now. I haven't addressed that because
health care policy is not my great mandate, but I'd love to come
back and speak on that at another time if you ever do a special
subcommittee studying it.
The issue is that we would
hope the provincial government would take a leadership role in
acknowledging the fact that we have a blend of public and private
medicine in this country. We always have. Every European nation
has a blend of public and private medicine. We need to find out
what the public system is going to support for the greatest good,
ensuring that those principles of equality of access regardless
of income are maintained, and then what else we can do on top of
that. You'll notice that I didn't mention the American
system.
To answer your question,
debt reduction is an unfunded liability. We need to get rid of
our debt. Health care is also a future unfunded liability. We
need to prioritize program expenditures, which is why we've asked
for a further move on privatization in terms of selling off some
Ontario crown corporation assets and getting the best value or
putting out those tranches of stock capitalization so we can
ensure a revenue stream to fund those important program
areas.
Mr
Christopherson: Thanks for your presentation. I would
draw to your attention that early on we heard from a senior
economist from the Royal Bank. He suggested that the younger
generation-and by that I think he meant even younger than
yourself. The boomer generation benefited from the expenditures
that created the debt in terms of it building our society; we
benefited from that. As boomers, who are in their peak earning
powers, are now also getting the benefits of a tax cut, this
economist was suggesting that the generation that's coming up-I
have a young daughter who is seven, so it would be her
generation-may be fair in looking at our generation as pigs at
the trough.
I disagree but can
appreciate and understand that you might want to make debt
reduction the number one priority or that you might want to
continue with the Harris philosophy and believe that tax cuts
ought to be the number one priority no matter what. But I'd like
you to explain to me how you think both should happen at the same
time when-and I know that you've been watching because we talked
earlier; I know you've been paying attention to these
hearings-you will know that we've had some very credible people
come forward and talk about the crisis that exists in our health
care system, the crisis in our education system, the crisis in
our environmental protection. All these things are being eaten
away.
It was pointed out in the
story on the front page of the Toronto Star by the wife of the
man who died that he was a big supporter of the cutbacks, so I would
assume he was probably a Harris fan, yet when it comes to the
reality of how you go about paying for these tax cuts, there
wasn't a bed for him in the hospital system. You like to square
the circle. Square that one for me, please.
Mr
Robinson: A very good question, Mr Christopherson. Let's
be very clear: If we continue in our publicly funded,
pay-as-you-go health care system, we will never square the
circle. Demand is outstripping our capacity to pay, whether that
be for pharmaceutical medicines, hospital beds, much-needed
capital improvements, MRIs at $3.5 million a pop or lithotripters
for kidney stones which cost about $800,000 a year to run. As
long as we continue in this fiction that only the public system
is the be-all and end-all in terms of medicine and health care in
this country, we will never be able to square the circle. I can't
pull a rabbit out of the hat and work miracles in that
regard.
If we have a government
that is willing to provide performance outcomes, which it has not
done so far-and I mentioned that example in terms of the Ottawa
Hospital for you-and strings attached to the money that is
provided to health care institutions and other providers, then we
may be able to start managing a bit of that money.
Moving back to the issue of
tax cuts, you will recall that in my presentation I focus on the
issue of bracket creep. I'm really alarmed. I've heard some of
your allies in terms of organized labour who spoke here this
morning, and even your party, who have not addressed this at all,
not one iota. It's really surprising on the tax-cutting side
because, yes, it's a federal tax policy but the provincial
government benefits from it. We've seen in Alberta and New
Brunswick and other areas where they're moving to decouple from
the system so they don't benefit or punish their constituents and
taxpayers because of that policy. Supporting our move on the
bracket creep agenda would be the intersection of very good
fiscal policy and great social policy in terms of ensuring that
the people who most need the money don't have their credits and
benefits eroded.
Mr
Christopherson: You asked me beforehand, did we address
it, and I said no, I don't believe we did anywhere. You mentioned
that you thought it was an area we'd be interested in and I said
we'd keep an open mind on it. As the finance critic, I will
commit to that. We'll take a look at it.
I want to come back to
health care. Here's where I have a bit of a problem. When people
say, "We can't afford the public health care system," the
impression is left that somehow by taking it out of public hands
it won't get paid for, that we don't have to worry about paying
for it. It's got to be paid for somewhere. I've got to believe
you're a big fan of, "There's no free lunch." So either it's paid
for by all of us collectively chipping into the middle, into the
pot, if you will, and then providing a health care system that's
available so we don't have people like we have on the front page
of the Toronto Star where there isn't a bed when they're in a
dire emergency-because none of us is going to build hospitals on
our personal savings, certainly not anybody I know-or we go the
private route and pay it through private insurance, through the
premiums.
The fact is, when you look
at the comparisons, the American system where there's a lot more
privatization-in fact, it's almost totally privatization-is not
as efficient as ours. You mentioned the OFL presentation. We
heard from Ross McClellan that there is a $6 advantage to us in
terms of our competitiveness vis-à-vis our auto workers in
Ontario as compared to those in the States because we have
universal health care. It's something that we all contribute
towards and it's not something that Ford or Chrysler or GM alone
has to provide to their workers, as they do down in the United
States, in order to meet their contractual obligations.
If the only two choices are
private or public, our system, while it's not perfect-far from
it-is more efficient than the American private system. I don't
understand how it's supposed to be beneficial to the average
working middle-class family to go away from the public system and
expect that somehow we won't have to pay for this any more
because it's not within the public domain.
Mr
Robinson: Very good questions again. Let me start with
the only area where we're going to agree, on the small point that
regardless of whether it's public or private we're going to have
to pay for it. Of that there is no doubt.
Let me point out two
100%-less-than-truthful statements you have made. One is that we
have a universal system. We do not have a universal system.
Mr
Christopherson: Less than truthful, or you disagree with
me?
Mr
Robinson: They are less than truthful. They are
categorically untrue. We do not have a universal system; we have
a rationing system. In the pure fiction of the American model,
people ration by cost. In Canada, we ration by waiting lines.
That's why we have 200,000 people on waiting lists in this
country. That's a fact. Ignoring it will not make it
disappear.
1330
To deal with your assertion
that our system is more efficient, by what measure is our system
more efficient? Is it a function that we spend less of our GDP?
Well, let's take a look at that. We spend less of our GDP in
Canada. We spend 9% of our GDP on health care. In the United
States it's about 14%. It's 14% for a couple of reasons. One is
that the University of Texas M.D. Anderson Cancer Center spends
more on research and development in its cancer clinics than the
entire government of Canada and provincial governments combined.
There's a fundamental cost there. The reason why they spend more
is because they have a slightly older population and demographic
pressures have kicked in. The reason why they spend more is they
have greater acuity of disease in terms of heart disease, cancer,
AIDS, a whole bunch of inner-city, urban problems to deal with
which also clog up the health care system.
The other issue to deal with is efficiency. A
lot of people will say that because of the high insurance
premiums people pay and that we don't have that sort of paper jam
in our system, we're more efficient. Well, in terms of looking at
HMO providers-there are literally thousands of insurance
companies that provide health care insurance in the United
States-they have a paper trail. You can ask, "How well are you
doing in providing services to your people?" They have a paper
trail. They can tell you, "In certain plans it's 48 hours or 72
hours for an MRI." In Canada we do not have that paper trail.
Minister Rock at the federal level has embarked on a $143-million
initiative, which we support, to measure what we're getting for
our combined $83.5 billion that we spend on health care each
year. Because right now if you ask anybody around this country,
"How long does it take you to wait for an MRI?" in Ontario it's
about four months, in BC it's about seven months. We have four
provinces, including this one, that send their Workers'
Compensation Board patients to the United States of America for
care because they can't get it here. Our system is not more
efficient; that is fundamentally untrue.
The last thing to measure
is in terms of the GDP growth. What we need to measure is the per
capita growth in health care expenditures because our economy as
a smaller unit has grown considerably more than the larger
American economy, which has a greater critical mass and lower
unemployment. So when you measure percentage of GDP expenditures,
as many people-and I've heard you argue in the past and your
colleagues argue that that's why our system is more efficient.
There's a numerator and there is a denominator, and the
denominator is the GDP. Our GDP growth has been great, so any
inefficiencies in our system or cost overruns are massed in that
9% figure. You need to measure per-capita expenditures and we're
at 4.4% to 4.5%-
The Chair:
Sorry, but I have to move to the government side.
Mrs
Molinari: Thank you very much for your presentation. I
focus on some of the comments that you've made in your
conclusion. My colleagues have some questions, but I'd just like
to make a few comments. For elected officials, it's certainly a
balancing between what one presenter says and what another
presenter says, so I thank you for recognizing the difficulty of
our job in doing that. I agree with your comments that choosing
the path of political expediency without clear plans is a recipe
for fiscal chaos; we agree with that as well. Trying to balance
all of the requests and looking to any decisions that we make,
our long-term decisions, will benefit all Ontarians throughout
the years and not just for the immediate needs. So I thank you
again for your presentation. I concur with some of your
concluding comments.
Mr Arnott:
Mr Robinson, I noticed in your written presentation the fact that
you've commended the provincial government "for passing Bill 7,
the Taxpayer Protection and Balanced Budget Act, into law on
November 23, 1999. This law covers the majority of provincial tax
acts and outlaws future deficits ... and binds governments to
holding referenda on any future tax increases." Of course, that
legislation was passed at third reading in the fall. I just
wanted to know if you would care to rank the current provincial
government relative to other provincial governments over the
last, say, 20 years in terms of their response to the overall
agenda that your organization proposes.
Mr
Robinson: This government has done better, in our view,
than the previous NDP administration, the Liberal administration
or the Davis administration, in terms of working through your
20-year time frame, Mr Arnott. I would add, though, that we
commend the government although it took this government five
years to finally live up to its pledge. After two strikes and
many foul balls, Mr Harris finally hit a home run for taxpayers,
but it took the prodding of the opposition in the last campaign,
using some of our words and criticism of the government, to
finally make the government pass that law.
Mr
Phillips: Keep us out of this.
Mr
Robinson: Mr Phillips, I'm only going by the screaming
letters I saw on those Liberal campaign ads in May and June with
our "CTF" right underneath.
The issue for us though is
that we'd like to see the legislation go further in terms of
encompassing tobacco taxes, and I know there's an issue there in
terms of joint federal-provincial administration you have in
tobacco taxes, and also in alcohol taxes and those sorts of other
areas where I note the growth in non-traditional revenues which
can lull you into a false sense of security because those
non-traditional revenues that are growing are the first to go in
times of an economic downturn. Your lottery proceeds, which are a
tax on people who are bad at math-although I admit if Super 7 is
$18 million on Friday I might buy a ticket-your other gambling
revenues and some of the sin taxes in terms of tobacco and
alcohol revenues and then also your fines and licences and
stuff-some of those are functions of economic activity, and in an
economic downturn you won't have that. That's why we pointed that
out.
The Chair:
We've run out of time. On behalf of the committee, thank you very
much for your presentation this afternoon.
Mr
Robinson: Thank you, Mr Beaubien. I'll leave the bracket
creep study for you and I'm sure I'll engage Mr Christopherson
again. Appreciate your time.
ONTARIO CONFEDERATION OF UNIVERSITY FACULTY
ASSOCIATIONS
The Chair:
Our next presenter this afternoon is the Ontario Confederation of
University Faculty Associations. On behalf of the committee,
welcome. You have 30 minutes for your presentation this
afternoon. If you could please come forward and state your name
for the record.
Dr Deborah
Flynn: I'm Dr Deborah Flynn, president of the Ontario
Confederation of University Faculty Associations.
The Ontario Confederation of University Faculty
Associations is very pleased to make this presentation to the
standing committee on finance and economic affairs on behalf of
over 10,000 university professors and academic librarians. For
many years now, OCUFA has approached these hearings as an
opportunity to document the corrosive effect of two decades of
inadequate funding on the quality of higher education in Ontario.
While it continues to be important to reflect on the past, with
the advent of a new millennium we feel it has become more
important to focus on the future.
The mission of advanced
education must not be limited to rapid skills training and to job
placement. While important, these objectives must be complemented
by the need to teach people to think freely, openly,
unprejudicially and to respond creatively to the world's
challenges. Post-secondary education must teach people to sort
and to evaluate information in this input-laden era. And it must
help our society to discern what is good to do among the things
that are possible to do. Ours is a knowledge-based economy. Now,
more than ever, a reinvigorated university system is vital for
ensuring that the potential of society is realized.
In the Ontario Economic
Outlook and Fiscal Review tabled in November 1999, the Minister
of Finance announced that the government had exceeded its deficit
target of $2.1 billion by more than $1 billion for the budget
year 1999-2000. The province is on track for a balanced budget in
2000-01 and the minister's own projections conclude that a strong
economic growth will continue. But the minister also noted that
it is essential to make "the right investments to sustain our
economic competitiveness."
OCUFA believes that in this
knowledge-based economy the right investment is to recommitment
to a world-class university system that can lead Ontario into the
21st century. In our written brief, we have provided committee
members with a detailed analysis of our concerns about the future
of Ontario universities. We have highlighted our concerns about
accessibility, the government's tuition policy, student debt,
student assistance, and the emerging enrolment pressures and
efficiencies in the physical plant confronting our
institutions.
OCUFA's recommendations on
each of these issues are outlined in the executive summary
provided on the first two pages of our written summary. This
afternoon, I would like focus the oral presentation on our two
primary concerns: the impending shortage of faculty members
throughout the university system and its impact on the quality of
post-secondary education in Ontario, and the issue of
accountability as seen by this present government.
As members of the committee
will know, the single most important factor in both the teaching
and the learning process is interaction between students and
faculty. It is absolutely essential therefore that as we prepare
our students to participate in the knowledge-based economy we can
keep the student-faculty ratio low enough to ensure that our
graduates will receive the kind of education which will help them
compete in the global economy. At present, Ontario is
ill-equipped to meet that challenge, making faculty renewal a
critical issue.
1340
Three factors in particular
are contributing to faculty shortages at our universities. First,
Ontario has already lost over 2,000 full-time equivalent faculty
members since 1990-91, representing over 15% of the total
complement. This loss is directly attributable to government
policies. Funding cuts have led universities to offer early
retirement packages in order to save costs, while further savings
were realized through layoffs, unfilled vacant positions, days of
unpaid leave and salary cuts or freezes. Already this has had
major implications on the quality of university teaching and
research, and the loss of faculty to other jurisdictions.
The second factor
contributing to the magnitude of the faculty shortage is the
anticipated record rate of retirement by professors over the next
10 years. Currently, one third of the professors in Ontario are
between the ages of 55 and 64. These faculty will be lost due to
retirement just as student enrolment begins to crest.
Universities across North America confront a similar challenge,
suggesting that Ontario will be competing against every other
jurisdiction to fill a high percentage of its current academic
positions as these become vacant over the next 10 years.
A compounding factor
affecting the magnitude of the faculty shortage is the drastic
increase in projected enrolments. One-for-one replacement hirings
will therefore not be enough to deal with the anticipated demand.
The need now is not just to stabilize the system, but to prepare
universities to meet the challenges ahead.
Already student-faculty
ratios at Ontario universities have reached unprecedented levels.
Between 1988-89 and 1997-98, the ratio of full-time students to
full-time faculty members has risen by over 30%. This represents
the highest student-faculty ratio in Canada, exceeding the
average of the nine other provinces by more than 20%.
In order to lower this
ratio, to offset faculty losses and to meet the new projected
demand, 13,000 new faculty members will need to be in place
within the next three years. A commitment to faculty renewal at
this time is certainly not a luxury, particularly for a
government that claims to be serious about maintaining Ontario's
edge in the knowledge-based economy.
OCUFA calls for an
immediate financial commitment to ensure that universities can
begin now to implement a plan for the necessary recruitment and
retention of faculty. Not including recruitment costs, but
accounting for average salaries, benefits and the cost of staff
support, this would require an additional expenditure of $1.4
billion.
When thinking about the
role of faculty, the duty of teaching is often at the forefront
of our minds. However, constraining the research capacity of
universities reduces their ability to attract and retain the very
best faculty, which in turn has caused concern about Canada's
ability to remain competitive in the international
marketplace.
Canada depends on its higher-education sector
for almost one quarter of its national research and development
effort. Most major technological advances of the second half of
the 20th century, including those in the new biotechnological
industries, telecommunication and the development of new
materials for manufacturing, originated in university research.
No other G7 country relies so heavily on its universities for
R&D. Since Ontario is home to 40% of the scholarly and
research activity in Canada, the innovators that our Canadian
economy relies upon are the faculty and student researchers right
here in the Ontario universities.
Given this link between
Ontario's ability to compete economically and the strength of
university research, it is hardly surprising that 94% of Ontario
business leaders surveyed by Angus Reid supported increasing
funding for university research. What is surprising, however, is
that a government for whom the yardstick of its own success is
the performance of Ontario's economy has failed to adequately
support the research capacity of its universities. It's not as if
the government were unaware of the system's shortcomings. After
all, it commissioned and received a report recently by Heather
Munroe-Blum entitled Growing Ontario's Innovation System: The
Strategic Role of University Research, which specifically points
out, "The government of Ontario fails to provide the funding
required to conduct internationally competitive research." OCUFA
encourages the government to heed the advice it sought, instead
of continuing to cut operating grants and circumscribing both
research and capital allocations.
Instead of supporting
research through block operating grants, the Ontario government
has moved towards a model premised on public and private sector
collaboration. For example, in the May 1997 budget, the Ontario
Research and Development Challenge Fund was created. Yet instead
of providing broad-based research support, the fund primarily
focuses on support for research-intensive universities which
conduct applied research in the natural sciences, engineering and
the health sciences. Disciplines and universities not geared to
the production of applied, commercially viable research have
difficulty accessing this fund.
In a climate of limited
resources, universities will be tempted to divert support away
from less "lucrative" basic research as well as social science
and humanities research in order to lever money for the matched
fund. Yet, as Munroe-Blum points out, this kind of research
policy is extremely short-sighted. Not only does innovation draw
on the full range of sciences, humanities and social sciences,
but Ontario's current approach puts the province at a competitive
disadvantage vis-à-vis its Canadian counterparts. According
to Munroe-Blum, Ontario's lack of a coherent research policy has
placed the province behind Quebec, Alberta and BC in attracting
federal grant awards.
The government's ad hoc
approach to fostering innovation is reflected most immediately in
its reductions to basic research support. Whereas in comparable
US jurisdictions, state research infrastructure funding as a
percentage of total cost ranges between 50% and 120%, Ontario's
support currently lies at 10%. A decade ago, government support
was closer to 20%. A similar comparison emerges when Munroe-Blum
examines Ontario and Michigan. While Ontario's spending on
research and development represents a mere 1.77% of its economy,
Michigan's investment is an impressive 5.12%.
Premier Harris's own words
suggest that he understands the critical link between university
research and economic competitiveness. In 1997, he noted,
"Theoretical research is absolutely crucial to our ability to
lead and excel in the race for the new ideas of the next
century." In practice, however, his government's actions
undermine his stated objective.
To marry the two, OCUFA
urges the government to act on the recommendations that have now
been made in two government-commissioned reports: the most recent
Munroe-Blum report and Framework for a Research Policy for
Ontario, authored by David Smith back in 1997.
OCUFA urges the government
to adopt and support a comprehensive research policy.
Specifically, OCUFA supports the call for a balance in the
support for both basic and applied research, recognition of the
neglect in support for the social sciences and the humanities,
wider recognition of the importance of integrative-interpretive
research, as well as recognition of the linkage between research
and teaching and the concomitant need to recruit and retain
exceptional faculty.
1350
Before turning the floor
over to give you an opportunity to ask questions, let me close by
reflecting on the government's objective of achieving greater
accountability in the university sector.
OCUFA certainly agrees that
universities do not exist in a vacuum. They are an integral part
of society as a whole, and clearly linked to the performance of
both local and national economies.
We are concerned, however,
about the government's attempt to measure university relevancy
simply in terms of the institutional ability to undertake job
training. While it is true that students are often attracted to
universities because as graduates they will earn more and are
more likely to get jobs than those with less education, the
mission of universities is not simply rapid skills training and
job placement As a result, the performance indicators currently
in vogue with this government tell only part of the story. To
properly assess the university's performance, it is not enough to
focus simply on graduation rates, graduate employment rates and
OSAP loan default rates. To threaten to tie university funding to
performance evaluations based on such a limited range of
indicators is to completely misunderstand the role of
universities in delivering a much larger public good.
Ironically, while the
government purports to be pursuing these measures on behalf of
Ontario taxpayers, both members of the general public and the
province's business leaders understand that other factors are
equally important in
assessing universities' performance. For example, while Ontarians
value the impact of university research on economic development
and innovation, they also value research for its contribution to
the public good. To rely on quantitative measures only would be
to misunderstand the motivation of survey respondents when 94%
agreed that increased funding for university research must be a
priority. To propose a series of more appropriate performance
indicators is clearly beyond the scope of this submission, but
OCUFA would encourage the government to create a new academic
advisory committee to act as an arms-length agency for providing
a system-wide overview of university programs that is based on
peer review. Any future measures on program evaluation must have
faculty representation to reflect the fact that faculty create
and deliver those higher-education programs.
In the meantime, the
government should act in the knowledge that Ontario taxpayers do
indeed value what universities have to offer. Their only fear is
that the past standard of excellence may not be maintained in the
future. They are concerned about the fact that Ontario isn't
keeping pace with its American counterparts. They know that while
state appropriations in comparable US jurisdictions had increased
by an average of 32% in the last five years, Ontario's support
for higher education has decreased by 8% over that same time
period.
Ontarians know that this
kind of underfunding won't keep our graduates competitive, and as
a result, fully 88% of Ontarians surveyed agreed that increased
government funding for universities should be a priority. Our
submission has indicated that Ontarians are quite correct. The
Minister of Finance has indicated that the province's fiscal
framework finally allows for significantly increased spending.
All that's left now is for the government to take accountability
seriously and to make the investment necessary to satisfy this
public demand. Thank you.
The Chair:
We have two minutes per caucus.
Mr
Christopherson: Thank you for your presentation. We
don't have a lot of time. I have two quick questions. One is, we
hear from a lot of people on the business side of things who
continue to argue that tax cuts are the number one priority and
ultimately will benefit everyone, and that that's why every one
of us should agree that that's the priority. To put your words to
it, what argument would you make that an investment in our
post-secondary education system, our university system, is such a
high priority that even if the tax cuts have to be delayed, or
forgotten, or set aside, it's worth doing.
Second, one of the members
of the government side talked earlier-it's in the Hansard and I
am paraphrasing-about the fact that one of his daughters was
taking arts and humanities courses at university. He spoke of how
almost cute that was, that it was nice and important for her, but
it really wasn't going to lead anywhere. I think a lot of us were
taken aback by that. If you could address those two things, I'd
appreciate it.
Dr Flynn:
Let me address the second comment that you made first. It's
certainly an irritant for me as well when people speak of higher
learning in that way. I think it's indicative of perhaps some
qualities of the person and their value of knowledge themselves.
A university education is not simply to provide a job for
someone; it's to educate someone. The present government seems to
fail to recognize the difference between training someone and
educating someone. What we would hope for the Ontario public is
that we have an educated public that's going to move into the
21st century.
With regard to some of the
comments that have been made by the Premier, yes, some of those
people even study Greek and Latin and still have a significant
contribution to society as a whole. We first of all would also
like to state that those students who graduate in the humanities
and social sciences do indeed become employed. As a matter of
fact, the statistics that we have in front of us are that after
six months, in the social sciences we have 89.3% employed, and in
the humanities, 91.8% of those people are indeed employed. It's
not as though those graduating with a general BA are not
employable, because they certainly are. What we hear from the
business sector is that they want people who are not necessarily
trained-most of those individuals are trained on the job-but they
want someone who is taught to think critically and who can learn,
and that is what universities do.
Mr Galt:
Thank you very much for your presentation. I appreciated your
concerns.
The area I want to explore
is teaching techniques in the future for universities. Back in, I
believe, the 1960s there was a bill passed that essentially gave
the monopoly to Ontario universities to grant degrees within the
province. We're now seeing other universities granting degrees in
Ontario via the Internet. That, I understand, is happening at
quite a high level, or significant anyway.
I'm wondering about how
you're changing and teaching technology more efficiently. I think
back to the early 1980s when I did post-graduate training in
veterinary pathology. I was absolutely amazed when I could sit in
a room with a carousel of Kodachromes and a diagnostic sheet-this
is a very hands-on activity; excuse me, in pathology maybe I
shouldn't talk about hands-on-and how much you learn from that.
Today, I wouldn't have to be in that university; I could do that
at home. This is a very expensive course, parallel to medicine
and dentistry.
What are we doing to move
into this 21st century as universities to make sure that we are
as efficient as possible? Because if we aren't, others are going
to do it and sell into Ontario, and we're going to be lost. We
need to be selling outside, because we do have this kind of
knowledge-based culture. I think that was the term you used a
little earlier.
Dr Flynn:
Knowledge-based economy. I think if you take a look at the high
levels of enrolment in the universities over the last 10 years,
the universities are anything but inefficient. If you look at the
numbers of faculty that have been lost in the province and look,
over that same period,
at the numbers of students coming into the universities,
universities have become more and more efficient.
I think the point you made
is a very good one. Hands-on experience is very, very important.
What we see many of our programs doing now-and I can give you an
example of what happens in psychology at my own university-is
that because the lecture halls are so enormously filled with
students, we have to create part of the course that is a hands-on
experience so that we have fewer numbers of students dealing with
a professor to learn some of the things that you've talked about
that simply could not be learned in a lecture hall of 200, 300,
400 and 500 students at a time.
We have been creating
smaller labs, for example, to accommodate more hands-on
experience. That's one of the issues that we're trying to
confront. Right now we simply don't have the professors to deal
with the numbers of students. We are using all kinds of new
technology. We have universities that have live professors and,
in other rooms, we have students who are sitting watching that
professor on video because we simply don't have a room large
enough to accommodate all of the students. So we are using the
Internet, we are using high technology, but there are no studies
to indicate whether the quality of that education is just as good
over the Internet or using these forms of high technology as
opposed to the learning experience that one has sitting in a live
classroom classroom with a professor. We certainly believe that
if we're going to maintain the quality of education, we need to
keep the ratio down as low as we can. Right now, we have probably
the highest in the country, and that's simply unacceptable to
us.
1400
Mr
Phillips: Thank you for a very thorough presentation.
You've raised many points with too little time to debate them.
But two that caught my eye were, first, your comment on
challenging ourselves to evaluate things on more than just the
material side of things. It reminded me of a comment-I think it
was made at this committee-by one of the government members, who
said people on social assistance want to make a contribution to
society but can't unless they get a job. I don't buy that; I
don't agree with that. Many people on social assistance do not
have the technical skills for a job or may have other challenges,
but can make a meaningful contribution to society without "a job"
in a thousand other ways. Similarly, I think you've got your
finger on, yes, we should measure how well one is prepared for
the workforce, but that will not be the only measure.
I'll ask both my questions
because sometimes we don't get a chance to ask two questions.
Dr Flynn:
OK, and I'll try to be quick.
Mr
Phillips: The second one that you raise is a matter of
growing concern, and that is, "In the absence of reasonable
tuition fees and adequate student assistance, students from
low-income families will be disproportionately unable to further
their formal educations." I worry a lot about that. I think one
thing that has distinguished Canada is that young people,
regardless of their background, aspire to and have been able to
pursue post-secondary education.
I wonder if you might
comment on both those issues for us a little bit, and any advice
you've got for us on them.
Dr Flynn:
The lower-income issue is a very interesting issue because it has
come up quite recently in the media with regard to the Premier
stating that there have been studies and studies and studies done
in the area that indicate that rising tuition does not affect
lower-income students. In fact, there have not been any studies
done in the area. We've requested these studies. What we have
found is a very old study done by Stager, an 11-year-old study,
and the other two were commentaries that were made by individuals
that had no basis in data for these comments.
We're not only concerned
with lower-income students being affected by increases in tuition
but also with middle-class students being affected as well. We
have families in the middle class that are able to hold a
mortgage, to support themselves, but simply don't have the funds
to put away for a university education, and those students do not
get OSAP loans because their parents are making too much income.
So we have a great concern with the rising tuitions. That is
certainly an area where we would like to see the government have
a study commissioned and see what impact increases in tuition
have on lower-income students, because these policies are based
on absolutely no data whatsoever.
The Chair:
On behalf of the committee, thank you very much for your
presentation this afternoon.
GREATER TORONTO HOTEL ASSOCIATION
The Chair:
Our next presentation is from the Greater Toronto Hotel
Association. On behalf of the committee, welcome. Could you
please state your name for the record, and you have 30 minutes
for your presentation.
Mr Rod
Seiling: My name is Rod Seiling. I'm president of the
Greater Toronto Hotel Association.
I want to start by thanking
the committee for giving us this time today. I think you have a
copy of our submission. I put it in bullet form to be a little
more brief and hopefully allow some time for questions.
I do want to say that the
Greater Toronto Hotel Association and its members support the
general policy direction of the government of the day. We
certainly believe that lower taxes, whether they be personal,
indirect such as employer health, property tax-and I'm going to
comment on that later. We deeply appreciate the efforts to date
which the Minister of Finance has made to try and reform the
property tax system. It was 40 years in getting, shall we say,
screwed up, and obviously in one year it's not going to be fixed,
but it's certainly a start and we want to give him some credit
for having the courage to make that start.
Also, in terms of corporate
taxes I would like to point out that right now the corporate
taxes on the service industry are 25% higher than other corporate
taxes. Given that the service sector is now the engine of the
economy in this province, I hope the minister and this government
will take a look at the tax on the service industry in the
corporate field, because if we want to have those industries
thrive and prosper and create more jobs, I think we need a level
playing field in that area.
We also want to
congratulate the government on removing red tape, again reducing
debt, its Taxpayer Protection Act, and progressive legislation
and regulations, whether it be on workers' compensation or the
Safe Streets Act. I know some people are less than supportive of
that piece of legislation, but I can tell you from our personal
involvement and the comments that we are receiving from our
guests here in Toronto that the once lofty position of "safe and
clean" was fast eroding by the fact of the aggressive panhandling
and squeegeeing that is taking place here. It's something that we
pride ourselves on here and hopefully the new tools will allow
the police to help correct that.
I must say that tourism
benefits from this type of legislation, and tax-cutting
especially, because tourism relies on discretionary income. The
more income taxpayers have, the better it is for our businesses
because we're able to compete for that discretionary income.
A little bit about the
Greater Toronto Hotel Association: We represent about 130 hotels
here in the city, with approximately 32,000 rooms and more than
20,000 employees. We've been in place since 1925, and I should
add that we're about 40% of the hotel industry in the province,
which is approximately the same as the greater Toronto area
representing the tourism business.
Tourism is a key to
economic growth. It's not a frill. It's the fastest-growing
industry in the world. In Toronto alone, it's the second-largest
industry, only behind the financial services sector. It's an
export. It brings fresh dollars to this city and this province,
and it's a crucial source of income for government. For every
dollar spent by tourists, 41 cents goes to the three levels of
government: 19 cents to the federal government, 14 cents to the
provincial government and eight cents to the municipal
government.
The competition for the
tourism dollar is getting greater and greater. Virtually every
jurisdiction and country in the world has realized and recognized
that tourism is a great way to grow their economy.
It's also a great way to
create jobs, and it's the jobs that we like to call "point of
entry." We specialize in giving people their first job, or people
who are being retrained and coming back into the workforce,
whether they've been laid off or retired. They come back in and
learn new job skills. We're the perfect place for them. Not
everyone will stay in our industry, but they learn new skills,
learn how to work in the new economy, and move on.
In terms of economic
impact, you have figures in front of you based on 1998, both for
the province and Toronto. You will note that initial tourism
spending is over $11 billion province-wide and over $3
billion here in Toronto; in terms of wage income, $7 billion
province-wide and a little over $2 billion here in Toronto; in
terms of output/sales, $23 billion province-wide and almost
$6 billion here in Toronto. In terms of the number of jobs,
though, you have 332,000 province-wide. The Ministry of Tourism
is now saying there are well over 400,000 jobs in the tourism
industry. As of our 1997 survey, there were almost 80,000 jobs
here in Toronto.
In terms of taxes, you'll
see over $4 billion province-wide and $1.2 billion here in
Toronto in total: federal taxes, $1.8 billion province-wide and
almost $600 million here; provincial, $1.5 billion and almost
half a billion here in Toronto; municipal, $808 million, and $255
million here in Toronto. I should point out that of that $255
million, over $160 million is in property taxes alone, and I'll
come to the property tax issue later.
Hotels really are the
backbone of the industry. We're not the main reason why someone
comes to visit a location, but the accommodation must be there
for the system to function well. So the fiscal health of our
industry is an accurate barometer of the overall health of the
tourism industry.
I'll give you some figures
on the economic impact. Here in Toronto we contribute $1.2
billion to the gross domestic product-that's based on the 1997
survey by KPMG-and 22,000 jobs. An interesting stat for you: Over
half the room nights sold in 1997 were to visitors from outside
the province of Ontario; 2.3 million room nights were sold to
visitors from the United States, with an additional 800,000 to
those from overseas. So we are the gateway to this province.
Again as I said earlier,
total tax revenue generated by Toronto hotels for the three
levels of government was over $600 million, and $161 million of
that was in property taxes alone.
1410
We do have some concerns
for the future. The future success of tourism is in jeopardy.
Although we're doing much better, I must say that we're not doing
as well as people think we are. We're losing market share. Return
on investment for the hotel industry is marginal. Our tourism
product is declining and hotel expansion is stagnant. When you
compare that to what's happening in other major cities across
North America and even in Canada, we're a real anomaly. There is
no hotel construction going on here in the city.
In talking about future
success, fact number 1, and I want to talk about this, is that
we're having a slow recovery from the recession.
Our property tax burden is
still too high despite the benefits to date of the current
legislation and regulation.
Our return on investment is
not competitive.
We need to recover market
share here in Toronto. We're losing market share.
We've got inadequate
funding for destination marketing.
Finally, our image here in
Toronto is at risk.
I want to conclude with a
summary and some proposed solutions.
Fact 1: Despite recent improvements, Toronto's
hotel industry is still a long way off from doing what it needs
to do in terms of performing well economically. In the mid-1990s,
our industry was virtually bankrupt. Occupancy rates declined by
24%, from 76% to 53%, between 1988 and 1993. Average room
rates-our revenue-declined by 12% during that same period. Even
in 1998, hotels had the "Vacancy" sign on for more than 275
nights. Despite the fact that most people believe Toronto is
virtually sold out, that's not the case. Recovery has lagged
behind other jurisdictions in North America.
I apologize for the next
chart. These charts were supposed to be in colour, but again with
modern technology the colour printer did not work, so you've got
them in black and white. But you can see there that the top line
is average daily rates and the second line is our occupancy. You
can see where we've come from in 1988 to where we are now. I can
tell you that based on 1999 figures, our occupancy has actually
dropped off about a half per cent in 1999, although our rate has
continued to increase and we're going to see about a 6% or 7%
increase in average room rates. You can see at the bottom of that
sheet where it shows you the average nights per year that we've
had with rooms available. In other words, in 1998 one in every
four rooms across the city was empty.
I'm going to move on to
average daily rate. Actually, I will take you back to show you
occupancy performance and how we compare against other cities,
and again I apologize. The top line is New York. That's what we
call nirvana. You can see they are well above the 80% occupancy.
The next line is Boston. The one below that is Chicago. Vancouver
is one that's decreasing, and the reason for that is that they've
had rapid expansion and the supply has increased dramatically,
but they have been showing some recovery in 1999. You see Toronto
there, and below that Montreal, which is fast catching up to
us.
The next page shows the
average daily rate. Again, the top line is New York, followed by
Boston, Vancouver and Chicago, with Toronto and Montreal being
almost equal.
The next chart you have in
front of you is on bankruptcies. You can see what's happened over
the past 10 years on sales versus forced sales. You can see the
staggering impact that the forced sales have had on our industry.
In fact, back in 1992 they were all forced sales. If you move
your way through, it is not until about 1996-97 that there is
somewhat of a balancing out where normal business sales start to
overtake forced sales. I can tell you in 1999 the market
virtually dried up, and if we were to chart this, and we could
now, you would have a hard time seeing any sales there, partly
because of access to capital, which I'll talk about a little
later, and the fact that the price per room to build versus the
price to sell is about even, although we're still not seeing any
hotel construction starting.
Fact 2: Our property tax
burden is still too high. Toronto hotels have the highest tax
burden in North America. We are the king when it comes to
property tax, for a number of reasons. One is the property tax
rate here in the city. The rate of tax is way too high. Again,
it's a function of the education tax. The government is doing
something. It's moving at it over the eight-year period, which
will help bring some equity to it. It's one of competitiveness.
It's not just competitiveness within this area, but across North
America.
I can give you an example.
In the Toronto Airport Marriott, which is situated in the former
city of Etobicoke, the tax in that hotel is over $5,000 per room.
The Hilton Toronto Airport, which is about 400 or 500 yards up
the road, happens to be sitting in Mississauga. The tax per room
in that hotel is $1,450 per year. They are virtually the same
hotel, cater to the same demographic competitive set. You can see
what it means in terms of competition, return on investment,
ability to market, all those things.
I want read you a quote
from Bill Fatt, who is the chairman and chief executive officer
of Canadian Pacific Hotels Corp: "Canadian Pacific Hotels Corp
wants to fill a need in Toronto for an additional convention
hotel. We have the will. We own the land. We have the resources.
The high property tax burden for hotels is stopping the project."
It's one of the unique situations where a company actually has
the resources-not just the land available and the need, but they
have the money to build it-and they can't build.
As I said, high property
taxes have been identified as the single greatest objection to
new hotel development here. Numerous projects have been
considered, and again they all fall off the shelf.
You can see why in the next
chart. It's a chart prepared by KPMG this past year. You can see
that here in Toronto over 13% of hotel revenues are required just
to pay property taxes. You can see the competing jurisdictions,
where Montreal is next, all the way down to Los Angeles, where
it's about 2.5%. We compete with these people. We'll talk about
it in a minute.
Fact 3: Return on
investment is not competitive. This is where it really hits home.
As we said, there have not been any new hotels built in Toronto
in the past decade. In the past it has been less expensive to buy
than to build, and return on investment has been inadequate to
attract new investors. The average approximate ROI for hotels in
the Toronto area has been 8%. Owners can get 12% to 16% in
competing markets and, as you all well know, I'm sure, capital
today has no loyalty. It is fickle and it's like the lady of the
night: It goes where the highest bidder is. With that happening,
we are not only not getting the new construction that we
desperately require here, but we're not getting the investment we
need to keep our hotels competitive. Owners must produce a
return, so they do it by cutting services.
I want to read a quote from
Stephen Foster, vice-president of operations, Starwood Hotels and
Resorts. Their brands includes Sheraton, Westin and Four Points
Hotels.
"Hotel owners continue to
be reluctant to reinvest in their Toronto properties for upgrades
and substantial renovations. The return on investment, even
with the recent favourable economic performance, is far from
where it needs to be, especially if you compare Toronto to other
major North American cities of comparable size. Owners know that
they can achieve better returns elsewhere, with less risk than
they are currently receiving from their hotels."
What happens is general
managers are forced to reduce services, cut back on improvements,
and what they end up doing in order to produce the return that
the owner requires is turning an A product into a B product,
which lessens our competitive ability even more, so we are in a
Catch-22 and a downward spiral.
As a result, no investment
means no new growth and the long-term benefits for our city and
our province go lacking. We're not getting the job creation that
we can, not just out of major construction and ongoing
maintenance but also out of our hotel operations. As I referred
to earlier, many of those jobs are entry-level positions.
However, the anomaly is that Toronto has been recognized as an
important potential market for new hotel development, and while
we have the need and it's recognized, the conditions are not
there for new investment.
If you look at the next
chart, it shows you what has happened in our industry in terms of
return on investment. As I said earlier, back in 1994 we were
virtually bankrupt. Only 11% of the hotels were showing a return
of equal to or better than simple bank interest. In other words,
they were the only ones making a profit. Some 33% of them were
operating at a loss even before debt service, depreciation or
income tax; 72% of them were experiencing a loss after debt
service but before depreciation and income tax. With 150 rooms or
more, that figure jumped to 80%. By the time 1997 rolled around,
we were basically back in the black. Luxury hotels were earning a
7% return, full-service hotels an 8.5% return, and economy hotels
about 12.9%. When you compare that to what an owner could get
simply by investing in GICs-7.25% back in 1994 or 5.3% in
1997-you can see why they're reluctant to invest here in Toronto.
If you were an owner who lived in this community and wanted to
invest here, you had to shake your head and say, "Why would I go
for the risk?"
1420
Going to availability of
capital, which still is a huge problem in our industry, Lyle
Hall, a partner in KPMG's consulting division within their
hospitality side, says: "Debt financing for new hotel development
is extremely difficult to find, as the traditional lending
sources view the sector as high-risk. The magnitude of operating
costs and municipal property taxation in Toronto play a
significant role in reinforcing this view."
Fact 4: Toronto is losing
market share. We're losing it to the rest of Ontario and to the
rest of the world. For the first time in history, total
visitation declined in 1997, recovered slightly in 1998, and
remains flat. I can tell you, we're seeing from early numbers for
1999, and they will show a decrease.
The decline in market share
is due to a number of reasons: chronic underfunding of
destination marketing; declining product at major attractions-the
majority of those, I should note, are owned by government-and the
decline in live theatre. We have no blockbusters, we have no
long-running shows. It's hard to market something that's here for
four, five or six weeks. We've also lost Livent, which meant that
in terms of marketing dollars we've lost $15 million annually in
marketing in this city, because that's what Livent spent annually
in marketing in Toronto. So not only did we lose their product,
we lost their dollars as well.
If we go to the next chart,
I'll draw your attention to the US visits. This is a most
disturbing number. With the advantage that we have on our
currency rate, the exchange rate, that number should be jumping.
It's not. I'll go to what is disturbing about that in a
minute.
On the next chart you'll
see the category in different classes. One of the reasons why the
alarm is just sounding now is that the plight of our business has
been camouflaged by relatively strong meetings and convention
business. That business was booked five to seven years out.
That's the cycle. But if you look at our leisure business, it's
in the tank. It's down over 14% in 1998 from 1996. Why we're so
concerned is that it's a well-accepted fact that to be a
successful meetings and convention destination, you need to be a
"hot destination" on the leisure side.
Meetings and convention
planners are very risk-averse and they only want to take their
delegates to where the destination is perceived as hot. So if you
lose that shine in the leisure side, your meeting and convention
business will soon follow in the same decline, and we are seeing
that. I can tell you that while our meeting and convention
business for the current year is relatively good, next year is
awful. We believe the two are linked. When you look at the
booking cycle, the business that we're still enjoying now was
booked when we were that hot destination.
If you go to the next chart
you'll see how dramatic it is. The visitors from all markets are
showing increases except for the leisure, the negative decline.
That's what we talked about. So it is real, and we need to fix it
immediately, before it becomes catastrophic.
Fact 5: For a number of
years we've experienced inadequate funding levels for marketing
here in Ontario. Ontario dramatically cut back marketing funding,
from $26 million in 1991 to $11 million in 1997. Ontario
overnight stays in that period dropped 31% from 1988 levels.
Fortunately, in 1998 the Ontario government restored the
marketing budget to $30 million for the next three years. That's
$30 million annually.
Here in Toronto, the city
cut its budget from $7.6 million in 1992 to $4.2 million in 1999.
I should add that in the current budget process the city is
recommending a 5% increase in that budget. We're not sure whether
it will carry or not when it comes to the final budget process,
but it looks like there may finally be a stop the continuing
budget-cutting process here in Toronto.
Tourism Toronto, our major funding organization,
has been trying to fly with one wing. As I referred to earlier,
image platforming, which is so needed by both the province and by
the city, is lacking because we certainly don't have the money.
There isn't any happening right now; it has all been eliminated
due to the cutbacks.
From the private sector
standpoint, it has increased its funding from $2.8 million in
1992 to $4.3 million in 1999. I should add that the hotels
contribute 50% of this, plus an additional $1.5 million in
convention subsidies, to help buy down the price of conventions
so that we are competitive with our major markets that use their
convention centres as loss leaders. In addition, collectively we
spend another $150 million marketing this destination.
Compounding this marketing
problem, both the federal and provincial government marketing
programs are now dollar-for-dollar matching programs. As we have
lost dollars, we get a triple whammy, so we are unable to
participate in the federal and provincial programs. Other
jurisdictions are able to use the money they have, which should
be earmarked and is earmarked for Toronto. We not only lose the
ability to market, but the money that was available for us is
used to market against us.
Competition-wise, Toronto
is being outspent by its competitors. We rank 43rd in North
America. We're now even outspent by Vancouver and Montreal.
Montreal's budget is $6 million greater than ours. If you look at
the next slide, you can see an outline of where we are in public
and private sector contributions and see where it has levelled
out. If you go to the next chart, you'll see where we are in
North America. I think you can eliminate the first four, because
they are anomalies. I don't think anyone thinks they're going to
compete with Las Vegas, Honolulu or Orlando. But when you get
down to the next of them, you see Atlanta at $19.9 million and
Montreal at $14 million. We're simply not competitive in the
marketplace.
I want to add that
destination marketing is an investment, not a cost. Tourism
advertising delivers incremental dollars to a visitor
destination. This not only creates jobs etc, but it creates new
activity and new revenues. For example, in New Jersey, the state
was going to cut their marketing budget. They hired Longwoods
International, a very well regarded research company based here
in Toronto, to take a look at what the impact would be. They
found that for every dollar expended by the state on marketing,
the return was over $150 in incremental expenditures and $19 in
state taxes. A similar study found very positive benefits in New
Orleans. Conversely, phen Colorado cut their marketing budget, it
led to a loss of over $2 billion annually in tourism expenditures
for that state.
I talked earlier about our
image. For__`_tely, the city has done some things recently and it
looks like we will see our image restored. They've tried to clean
up the garbage and, with the safe streets legislation, we're
expecting a change in the squeegeeing and aggressive panhandling.
It's not supposition. A 1998 study conducted by Ryerson
University confirmed the comments we were getting from our hotel
guests.
I talked earlier about the
loss of Livent. I also want to talk briefly about the lacklustre
or sporadic programming at government attractions. Mainly due to
underfunding, whether it be the zoo, the AGO or the ROM, we're
lacking blockbusters. I think it's important to note that because
they are government-owned and -operated, the ability for risk and
aversion to risk-their management style has to be that they can't
afford it, so their ability to take chances to improve
programming is somewhat retarded. Of course, the low return on
investment of our hotels is also stopping that, because we simply
aren't keeping ourselves up to date, especially from a functional
standpoint.
In terms of solutions,
we've talked about a fair and equitable property tax system for
hotels. Right now, the way hotels are assessed really an income
tax. The Income Tax Act states that the valuation for property
tax purposes is supposed to be on the value of land plus
buildings. But we can demonstrate that as our income goes up, our
property taxes go up proportionately. We need a revised
methodology to get rid of that. We're asking the province to
accelerate the business education tax averaging so that we can
close the gap between ourselves and the Mississaugas and
Peels.
We are also concerned about
what's going to happen with property tax stability once the caps
are removed. We're in the unique situation right now where we
have a lot of hotels that will benefit when the cap comes off. A
number of hotels will also get hurt when the cap comes off. No
one foresaw the impact of amalgamation that hotels in Scarborough
and Etobicoke, where the tax rates were below the average of the
new, combined city, were actually going to see an increase in
their taxes because of that.
On the destination
marketing side, we need to recapture our market share on both the
leisure and business sides. We can only do this by improving our
ability to market ourselves here in the city. Again, if we market
ourselves well in the city, it's going to benefit the province.
We are the gateway. The new "du jour" in marketing is what they
call "hub and spoke." You get people into your hub and then feed
them out to the hinterland across the province. It's the
benchmark today of how you market a destination in a wide
geographic area.
We need to see an increase
for funding Tourism Toronto from the city, but we also need to
find a stable funding mechanism not just for Toronto but across
the province. So a long-term funding mechanism is required.
1430
The Chair:
We have time for a very quick question from each caucus, and I'll
start with the government side. You have one minute.
Mr Arnott:
Thank you very much for your presentation, Mr Seiling. I thought
it was very thorough and very helpful. You have, of course,
outlined some proposed solutions and not just come here with
problems, and we appreciate that. It must be very difficult for
you to articulate what the government ought to do with business
property taxes when the 10, 5 and 5 expires. It's a challenge for
us.
Mr
Seiling: Actually, in Toronto right now we're at 2.5,
2.5 and 2.5.
Mr Arnott:
Right. What should we do?
Mr
Seiling: I think there are a number of tools. As I said
at the beginning, we congratulate the government for having the
fortitude to at least start the process of reforming the property
tax system, which was so wildly out of whack. Unfortunately the
tools are, in effect, maintaining the old system to a certain
degree. Depending on what happens after the caps come
off-because, as you know, if a municipality has adopted the tool
of capping, it is prevented from increasing taxes in that
sector-we could actually end up seeing tax increases on sectors
that are entitled to a tax decrease simply because the capping
stops the system from working. We recognize that there are ways
and means to modify some of the serious increases that some of
the smaller businesses will incur.
On the same side of the
equation, there are businesses, such as hotels, that have been
supporting inequitably for quite some time, overpaying their
taxes for 40 years. At some time they need to have a return. If
they don't, the owners simply aren't going to invest, and we're
not see
U
TJ$T9&::^,áOPA.#^UeY[XZEGere are some tools there. But
eventually we have to get to where there is fairness and equity
in the system, where people pay their fair share, whether you
phase it in, cap it or create some special classes-perhaps one
thing the government will have to look at; it provided some
ranges of fairness. It's interesting to note that basically every
city in the province with the exception of, I think, one is
operating outside those ranges of fairness. A large part of it
comes back to residents, including you and me, having a tax
holiday at the expense of our businesses. At the end of the day,
if we don't fix some of that, we're going to lose some of the
businesses.
Mr
Phillips: Your presentation was somewhat pressing, Mr
Seiling. There are two parts to your solution: one is the
property thing, which you've just talked about, and the other is
finding a way to increase the Toronto area as a destination-a
kind of leisure destination, I gather. There hasn't been anything
particularly new, in a big way, that I can recall over the last
five years in Toronto. We're going to invest a lot of capital, in
time, energy and money, in the Olympic bid, and hopefully we'll
be successful. My judgment would be that that would be very good
for us.
From your perspective, will
that be enough, or should all of us be looking at putting some
energy into other destination attractions?
Mr
Seiling: Certainly the Olympics will be very good for
this city, this province and this country. However, first of all
we have to win them. We're very concerned that if our sights are
trained on the Olympics and we don't get them, what happens?
Also, we have this problem now and in the interim. We can't look
so far into the future that we forget the present. I can tell you
that we're hemorrhaging right now, and it's not just the hotel
business; if you look at the tourism sector it's comprised of
retail, restaurants, transportation and attractions. If you look,
virtually every attraction across the city is down and it's down
simply because we're not in the marketplace. It's also down
because we clearly identify the need to have some new
attractions. Certainly some of that infrastructure would be part
and parcel of a successful Olympic bid.
For the leisure traveller
the window for buying is about three weeks out, so if you're not
top of mind with that traveller when they're looking to go
somewhere, you're simply not on the radar screen; they're not
coming to see your city. There are so many competing
jurisdictions out there because they've all identified tourism as
a way to grow business and to create jobs, and to create those
jobs at the level that virtually every government has trouble
creating, the entry level job; especially to get young people and
those who have gone through retraining employed. As I said
earlier, we're ideal for that. We spend a huge amount of money
training people continually and we know that we always have to
because it's the nature of our business. While there are people
who make their career in industry and they do very well, we don't
expect that everyone who comes into our business is going to stay
in our business.
Mr
Christopherson: Thank you for your presentation this
afternoon. I noted that in your presentation you talked about
hoping to see the municipality of Toronto make greater investment
in tourism, overall the province to be making investments in
tourism, and, as part of that reinvestment in the Toronto Zoo,
AGO, ROM, which are important to your industry. Recognizing that,
municipalities are tight because of the downloading that the
government put upon them in order to pay for their tax cut and
that there's no money for these other things because they used
that to pay for their tax cut, given a choice, what would you
rather see? Would you rather see these investments take place or
the 20% tax cut that's currently on the books with this
government, if you assume that you can't have it both ways,
recognizing that the last 30% tax cut cost us $5 billion to $6
billion, and those are real services that we don't have any
more?
Mr
Seiling: I'd like to point out first that the cuts in
the budgets to tourism in Toronto started long before there was
any downloading exercise. But I'm happy to report that the city
of Toronto especially has recognized the importance of tourism
and has come out in favour of reversing that trend. There's a
general recognition, if you listen to the mayor, the chief
executive officer of the city and the head of the economic
development committee, that tourism is an important industry.
It's one of their identified clusters that needs to be nurtured
and helped, and so I'm hopeful there. Obviously, though, not all
the funding can come through the municipality. We don't have the
solution yet but we have to find a stable funding mechanism to grow this
industry, because if we do not, we're going to lose out. Other
jurisdictions, as I said earlier, are far ahead of us. Money is
not the root of all evil at this point in time; it's the root of
success.
The Chair:
Thank you very much. On behalf of the committee, thank you very
much for your presentation this afternoon.
ONTARIO ASSOCIATION OF INTERVAL AND TRANSITION
HOUSES
The Chair:
Our next presentation is from the Ontario Association of Interval
and Transition Houses. Could you please come forward and state
your name for the record.
Ms Eileen
Morrow: Thank you very much. We're here today
representing the Ontario Association of Interval and Transition
Houses. My name is Eileen Morrow; I'm the lobby coordinator and
staff person at the association. I'd like to introduce Corinne
McCordick. Corrine is going to share the presentation with me
today. Corinne is a front-line worker at Rosewood Shelter in
Midland and a member of the lobby committee of OAITH.
The Chair:
On behalf of the committee, welcome. You have 30 minutes.
Ms Morrow:
We certainly appreciate the chance to come and speak to the
committee about our concerns. We have over the years often come
to present before the finance and economic affairs committee. We
thank you for this opportunity this year.
Just to give you a little
bit of an idea about what OAITH is, the association represents
approximately 63 members across the province of Ontario. They are
primarily first-stage emergency shelters for abused women and
their children who are escaping violence against women. We are
the largest shelter association in Canada, and in that regard,
approximately one third of women who use shelters in the entire
country actually use shelters in the province of Ontario. It's a
significant area and a significant sector of services that we'll
be speaking about today.
1440
Shelters actually were
begun and started by women who were victims of violence, and ever
since that time, approximately 1975 in Ontario, abused women and
their children have continued to say that shelters for abused
women and their children are the most supportive community-based
services they use. They continue to have a very high level of
support for shelters in addressing their issues. Of course, we're
here today before the finance and economic affairs committee and
so we're here to talk about finances and the funding of services.
For the members of the committee who may not have been around
then, I just want to give you a little bit of a brief
history.
Shelters actually began in
1975 in the province of Ontario, but it wasn't until the last
Conservative government in Ontario that the task force was set up
to study the problem in 1982. That was the first time the
province of Ontario as a government began to recognize that
shelters for abused women, for instance, needed to be established
on a permanent basis and that they were essential services for
women.
However, by 1986 it was
very clear that the system set up with grants and piecemeal
funding under the General Welfare Assistance Act could not
continue to provide the services that women and children needed
and that, in fact, were in serious danger of falling apart
financially. The Liberal government implemented a shelter funding
review in 1986 and, as a result, developed what's known as the
funding formula for shelters in Ontario.
It was an interesting
funding formula because it did provide more stability for shelter
funding in Ontario, but it had this very interesting aspect to
it: Although I haven't done the internal research, I believe we
may be unique within the Ministry of Community and Social
Services in that shelters for abused women are required within
their contract to use 20% of their base core service funding for
crisis intervention. That means anything beyond that-and the
province has recognized that shelters provide many services
beyond basic shelter and counselling for women-needs to be
fund-raised as well, but for 100-cent dollars. I certainly can
assure you that shelters in the province do extraordinary amounts
of fund-raising within the community. Even at that high level of
required fund-raising, they are at this point not able to meet
the demands that women and children have.
As you know, in 1995,
government spending reductions, in order to reduce the deficit,
put challenges and restraints on everyone in the province, and
that has included first-stage and second-stage shelters for
abused women and their children. It's important for me to let you
know that historically shelters did not evolve to the point where
they had a lot of middle managers and people like that, so there
was not a lot of infrastructure to cut from without digging into
the direct services for women and children; and that in fact has
happened.
As you know, there is no
second-stage funding for programs; it was eliminated. This has
resulted in a unique problem, where a certain part of the
anti-violence envelope in the province has been jettisoned to the
municipalities. I think you heard a couple of days ago from the
Alliance of Canadian Second Stage Housing and I'm sure they gave
you more detail about the struggles. We support their submission
and we would really like you to look closely at addressing that
issue.
In terms of the first-stage
shelters, of course, since 1995 we have been struggling, and at
this point we are in a bit of a crisis. We did a report last year
calling on the shelters to give us information about the service
demands. We found that more women and children than ever are
requesting services at women's shelters and service demands have
increased significantly between 1995 and 1997-98, from 11% to 30%
in various programs within the shelter. Within the first half of
1999 that increase continued, and I'm sure it's even worse
now.
We found out that women
were staying longer in women's shelters between 1995 and 1997-98
and that rise in stay represented about 18%. Now in the province
a stay in shelters can
range from three or four weeks to three or four months in
communities like Toronto where housing is unavailable and women
can't move on.
We also heard from shelters
that because of these reduced resources at the same time that
there was increased demand, about 60% of the shelters reported a
decline in the overall service they were able to give to women
and children. As a result, one quarter of the shelters have lost
front-line staff and all staff are now having to work harder,
fund-raise more and work more overtime. That, of course, has its
impact on the women and children within the shelter.
It's important for us to
realize that at this point we are facing a crisis within the
community-based services for women and children because of the
increasing demand. Almost 85% of the shelters in Ontario report
that services within the community, as well, are not at the same
level they were for women. What this means within first-stage
shelters is that it takes longer for us to find the supports and
services within the community for each woman, and that
contributes to an increased length of stay and a reduction in
service for each woman and child.
I'd just like now to let
Corinne tell you a little about how we might start to address
some of the challenges that are facing women and children and the
shelters and services that they're using in Ontario.
Ms Corinne
McCordick: We recognize that there have been initiatives
taken by the Ontario government to respond to issues of violence
against women. However, almost all significant long-term
initiatives undertaken by the Ontario government have been
focused on the criminal justice system, which sees abuse against
women and abused women as victims of crime.
Women's groups have called
for criminal justice system reform as an addition to, not an
alternative to, community-based programs. A narrow focus which
works primarily on one system may address some of the crimes of
intimate violence against women, but will not address the
experience of intimate violence that often keeps women and
children trapped in abusive situations.
The inquest into the death
of Arlene May is as yet the most significant initiative
undertaken by the government of Ontario. Of the 213
recommendations carefully developed by the jury, 203 were
directed towards the Ontario government.
We recognize that while the
province has been working on some of the recommendations
primarily within the criminal justice system, we have concerns
that community-based recommendations have not yet been addressed
and feel strongly that these would go a long way to improving
services for women and their children. This is especially true of
the recommendation for a shelter funding review, as well as those
recommending improved independent advocacy services for women and
programs for child witnesses of women abuse, which the jury
suggested should be located in women's shelters and other women's
community services.
Most abused women will not
use the criminal justice system to address violence, and even
when they do, they still need ongoing, comprehensive support on
issues related not only to the crime of violence but to the whole
experience of violence and its impact on children. Many women
experience abuse for which no criminal charges can be laid.
While we're hopeful that
reforms within the criminal justice system will provide positive
support for women in time, we know that it takes a long time for
changes to large, province-wide systems to become effective
practice. Women and children need improved support now.
1450
During Wife Assault
Prevention Month, OAITH called on the government of Ontario to
take action to support women and children escaping violence. We
are asking today that this committee support the recommendations
we made at that time, which are listed in the material you've
received today; that is, to provide immediate funding for the
equivalent of at least one additional women's direct service
community support worker and one additional child and youth
support counsellor for each women's shelter and each second-stage
housing program for abused women and their children in
Ontario.
Assuming that approximately
100 shelters and 20 second-stages could receive an estimated
$120,000 for the cost of these programs, the total cost would not
exceed $15 million. The total initial cost would be less than the
$18 million announced for the new crown attorneys and domestic
violence courts to support the May-Iles changes to the criminal
justice system. This would restore the balance between the
criminal justice system and community-based services envisioned
by the inquest jury.
We further ask that you
support our call for immediate implementation of a review of the
funding for women's shelters and second-stage housing programs
with a view to increasing funding resources, as recommended by
the jury in the inquest into the death of Arlene May.
The Chair:
Does that complete your presentation?
Ms Morrow:
Yes. We wanted to leave lots of time for questions.
The Chair:
We have approximately five minutes per caucus, and I'll start
with the official opposition.
Mrs Sandra
Pupatello (Windsor West): Thanks for coming today to
speak to us. I didn't see your specific request in the proposal
sheet.
Ms Morrow:
We had distributed a copy of the material that we wrote for Wife
Assault Prevention Month. It's called Ten Years from Montreal. I
brought 25 copies.
Mrs
Pupatello: Those specific proposals are in here?
Ms Morrow:
The first couple of pages are an executive summary of the
document, so you don't have to read the entire thing unless you
really have lots of leisure time, which I'm sure you don't. They
actually outline some of the statements we've made today and the
request that we made. I think it's on the second page of the
executive summary.
Mrs Pupatello: You said
specifically that you need an extra youth counsellor at every
shelter in Ontario, and the other was the extra full-time staff
person-
Ms Morrow:
A front-line community worker advocate for women. These are in
line with a couple of the recommendations. I have a copy of the
inquest recommendations today if you want me to leave it behind
for you. There are several recommendations within the inquest
jury's list focused on community-based supports for women,
because they were very much in support of that.
One of them is that the
province of Ontario do a funding review of shelters. I was
present every day of the inquest so I know the evidence they
heard from the Ontario Women's Directorate and also from
shelters. That was one of their recommendations.
They recommended that there
be additional supports for child witnesses and that they be
placed within shelters in order to provide seamless service to
the woman and child rather than being separated out into a
different service.
There were several
recommendations under what they called "victims' services." One
of those was additional advocate support for women within the
community. What they were trying to say was that they recognized
that women have a lot of challenges and struggles; for instance,
to find housing in communities where it's difficult to find
housing; in particular with regard to the criminal justice system
and family law, which is a particular part of the justice system
that women don't get a lot of support within; and within social
assistance systems to liaise and work with the community.
Mrs
Pupatello: You made some good points in your brief about
what the challenges are for women who must leave, and those
aren't going to be served by the addition of the workers because
it's a function of, is there housing in the community for these
women to find? We've had many presenters to this committee talk
about the need for 20,000 units a year in Ontario just to meet
the current demand. This government is nowhere near that and it
doesn't look as though they're going to move anywhere close to
that. So that's not going to resolve some of the very basic needs
that women have when they must leave.
I wanted to hear your
commentary on other ministry cuts that are affecting this area.
Some of the people who presented to this committee talked about
the booming economy, that things have never been better. We've
seen the retail sales talk today about how it's record-breaking
etc. They're very pleased with it all. So when the economy is
going very well, everyone's happy, everything's going swimmingly.
My question is, why is there an 11% increase in the demands for
service for your shelters? Why in this booming economy are we
having an increase in violence against women? What are the
effects in terms of education and what they've cut from
programming that would support the kind of education for young
people, as well as the cuts to the male batterer program? What
effect have you seen that have on the shelters and on women?
Ms Morrow:
As I said, almost 85% of the shelters report that because of the
reduction in services within the community-they are seeing
that-it is having an impact on abused women and their children.
Women are returning to abusive partners because they can't find
affordable housing or they can't afford market rental housing.
Often women, in fact the majority of women, who are on social
assistance in the province of Ontario have experienced violence.
When they're leaving an abusive situation, at least temporarily,
they often find themselves having to access social assistance in
order to initially begin an independent life.
What they're finding within
the shelters in Ontario is that abused women have returned to or
remained with abusive partners because they can't feed their
children, they can't find housing that they can afford. Some
women report that they are having to use food banks, which is not
what abused women should have to be doing. This is just not
right. Many women are not eating so that their children will have
food. So in some communities where there are not food banks we
are now seeing shelters beginning to provide food bank kind of
services, food and clothing for women after they've left the
shelter.
We didn't want to come here
and have a litany of every issue, but it certainly is true. The
executive summary of last year's report, which I also submitted
to you today, provides some of the background in terms of the
increasing difficulties that abused women are facing. As long as
that continues it will be more difficult for shelters and we will
need more support for women to negotiate those systems.
Mr
Christopherson: Thank you for your presentation. Good to
see you again.
I know there's never been a
time when enough money was dedicated to this, but it did seem as
we got through the late 1980s and into the 1990s that we were at
least starting to make some strides towards providing the level
of service that's required.
I know you don't want to go
into the whole litany, but my fear is that in cases like this, if
we don't put the issue in context, then you're too easily
labelled, especially by government members, as just "special
interest," and somehow that means you're not part of society and
therefore the issues you raise are somehow less important than
the business friends of the government, who of course couldn't
possibly be a special interest group.
I'd be interested to hear
where you think we're going to be if this isn't addressed in
another five or 10 years. Where are we heading? What's it going
to mean for the women who are affected, their children, who in
effect are still society's children? If you can-and I know you
don't like to do this because it moves off the point, but somehow
we've got to penetrate the government's psyche where they've got
these walls up that we're not getting through on these
issues-point out where, as a society, we're going to pay a price,
both in terms of the human price and a fiscal price, if we
continue down this road unabated, which unfortunately it looks
like we may.
Let's get on the record now so that the
government can't say they didn't know. Where are we going to be
in four or five years hence, 10 years hence, if we continue down
this road that the current government's set us on?
Ms Morrow:
Already in the province of Ontario 40 women a year are murdered
by their intimate partners, and that's the most extreme form of
the violence that we're talking about. But many thousands of
women and children experience forms of very severe violence up to
and until that tragedy happens. Since the inquest recommendations
were released, at least 33 women have died, and that inquest was
designed to prevent further deaths in the future. The clock is
ticking. We know that at least another woman has been murdered
since the 33 were killed. That is the human cost.
1500
It's very difficult to
exaggerate when you talk about this issue, because simply to
minimize sounds like an exaggeration. Make no mistake, lives are
at risk and the community life is at risk. Some 30% of women in
the province of Ontario experience criminal violence by their
partners. That's one third of the women in this province, and all
of their children are experiencing the impact of that, if not
direct child abuse as well. That has a huge human cost.
We know from research that
the cost of violence against women in Canada is already at $4
billion for social services, health, education, prisons, the
justice system and so on. If we don't stem this tide, those costs
will simply rise. It would be much more fiscally effective for us
to seriously address the issues of crisis intervention and to
seriously address the prevention issues with the children so that
we can hope in the future to prevent further violence.
Just as an example of the
shelters and the struggle that they're facing, as you know,
according to the law, shelters are required to provide a 1%
increase in salaries for pay equity, and we certainly agree. In
fact, that's not enough. The shelter workers are very poorly paid
and haven't had increases for years in a very stressful and
dangerous job. However, there will be no further coverage for
those salary increases by the province within the budgets of
shelters. That may be possible to cover this year with additional
fundraising, but I must tell you, I've already heard from several
shelters that next year we will be into talking about cutting
services in order to obey that law. We're talking about a
situation where, as time goes by, we will be cutting more and
more services within the shelters. There are other examples I
could give of resources and work that shelters are being asked to
take on, some by the province of Ontario itself, that require
resources in the future, but there have been no resources
dedicated to them. As the years go by, increased demand and
reduction of services can only lead to deterioration and disaster
for the women, quite frankly.
Mr Galt:
Thank you for your presentation. Yesterday I had an opportunity
to have a presentation made to me by the Quinte sexual assault
centre, looking for funding from the Solicitor General. I guess I
was a little appalled, not being all that familiar with the area,
with some of the statistics they were giving to me. I look at
some of the figures I have in front of me here, like $100 million
annually for women's prevention services, some nine ministries
involved, $73 million for abused women, 98 emergency shelters.
This is all good information for me. I have a little difficulty
with how much and where. I hear victims of crime, I hear shelters
for women and these centres and so on.
It was interesting, the
opposition's comment. They were so concerned about shelters that
they refused to build one in Northumberland county in my riding.
It was our government that came in and built a shelter for women,
and I was very pleased to be part of that and to be there at the
sod-turning and at the opening. Similarly, they wouldn't build a
hospital in Trenton, which our government is doing, and they
wouldn't build a school in Cobourg for the separate school board,
which our government has carried out.
The area I'm concerned
with, though, is this basic problem of violence in our society,
whether it's to children or to women, and to some extent other
men. It's just wrong, but it has crept in here and it has almost
been accepted, if I dare use that word.
Ms Morrow:
Almost? I think it has definitely been accepted.
Mr Galt:
How do we get this turned around? Yes, it's one thing to help a
woman who is in trouble, and her family and kids, and I agree
with that. But how do we prevent this? Does it come in through
our media, the films, the videos that we see? What is it we can
do as a government, as a society, to redirect this?
Ms Morrow:
It's a very complex issue, there's no question about that. Part
of it comes to us through our culture, through our movies,
through our media, through our education system, through our
faith communities, through our history within law. It wasn't that
long ago in North America that in fact it was regulated within
the law whom you could beat and how. For instance, the expression
"rule of thumb" comes from the British common law, which was the
basis for our law. You could beat your servants, children and
wife with a stick, as long as it was no bigger than the
circumference of your thumb. Whenever you use that phrase "rule
of thumb," from now on you're going to think of that. It's deep
within our history, not just within the media but within our
law.
Mr Galt:
So it's not new.
Ms Morrow:
Absolutely. It's very new to actually think it's wrong and do
something about it. We have the happy experience within the year
2000 to know that it's wrong and that violence is unhealthy for
all living things.
In terms of solutions,
definitely we need to continue our public education. It has been
a huge positive force within the community. We need to continue
with reform within the systems of family law, criminal law,
social assistance, all of those, education within faith
communities, and there is a lot of work being done in all those
communities.
We also need to be very clear that we need to
support and protect children who are witnessing violence and
experiencing violence in order to create a different mindset, if
I can put it that way.
Mr Galt: I
think maybe you've corrected my comment. It hasn't crept in; it
has been here all along. I think I see the Chair leaning forward.
With reference to our party thinking of you as a special interest
group, as the opposition was saying, I disagree with that very
much. We see you as a special group doing some very difficult
work.
The Chair:
With that, Mr Galt, I must bring the discussion to an end. On
behalf of the committee, thank you very much for your
presentation.
ONTARIO REAL ESTATE ASSOCIATION
The Chair:
The next group this afternoon is the Ontario Real Estate
Association.
The Vice-Chair (Mr
Doug Galt): If you don't mind just stating your names
for the record. Welcome. We appreciate your comments. You have 30
minutes. You can present and then whatever is left over will be
divided between the three parties for questions or
statements.
Mr Ron
Merkley: We do appreciate this opportunity to be with
you this afternoon. My name is Ron Merkley and I am
president-elect of the Ontario Real Estate Association and chair
of its government relations committee. With me this afternoon is
Jane Doyle, chair of the government relations committee of the
Toronto Real Estate Board; Jim Flood, who is the association's
director of government relations; and Von Palmer, who is manager
of government relations for the Toronto Real Estate Board.
Before I begin my comments,
just a reminder about who we are and why we're here. The Ontario
Real Estate Association represents approximately 35,000 real
estate brokers and salespeople throughout Ontario. We are one of
the largest trade organizations in the province, with members in
virtually every riding. We work to create a legislative and
regulatory environment in which our members can succeed and do
so, I might add, with the highest degree of professionalism.
The ability to own and use
real estate is one of the economic underpinnings of our
democratic society. Real estate forms the basis of most of the
personal wealth of Ontario families, and the goal of home
ownership is a dream that many still aspire to. It is our job
today to convince you to help make that dream a reality for more
Ontarians by improving housing affordability in Ontario.
1510
In our written submission
you will find substantive comments on our recommendations, but
allow me to give you the highlights.
First and foremost, we
would like you to consider removing provincial sales tax from
mortgage insurance premiums. This tax, originally introduced in
1993 by the NDP government, hits those who can least afford to
pay it at a time when they can least afford to pay it. It becomes
one of those nasty little surprises when a purchaser goes to
close their housing transaction.
Let me explain. First, only
individuals who do not have a down payment of 25% or more require
mortgage insurance in the first place. In many cases these folks
only have 5% down, which compounds the problem. They tend to be
young families starting out who have not had the time to save
that 25% down payment, or lower-income families who find it
difficult to save that amount. They are the people who must have
mortgage insurance, and they are the people who pay the tax.
The second problem relates
to timing. Provincial sales tax is not like mortgage insurance;
you can't roll it into your mortgage and amortize it over the
life of the mortgage. This tax must be paid in full on closing
and, as I mentioned earlier, it's one of those nasty little
surprises that purchasers aren't prepared for.
The elimination of this tax
would not cost the government a huge amount of money. In fact,
OREA estimates that the total revenue generated by this tax is
less than $28 million annually. If the government were to
eliminate this tax for mortgage insurance premiums, it would
help, by our estimates, over 100,000 Ontario families achieve
their goal of home ownership. That is a big return on a
relatively small investment.
Our second tax-related
initiative, and one that we have talked with this committee about
before, relates to the land transfer tax rebate program for
first-time buyers of new housing. First of all, let's be clear
that we support that initiative and we want the government to
continue it. However, we also want the government to expand the
program to include first-time buyers of resale housing. We
understand that the government may not want to do this from a
revenue standpoint, but we believe that simple fairness and tax
equity demand similar tax treatment.
OREA's research undertaken
some two years ago indicated that, notwithstanding the tax rebate
program, 80% of first-time buyers buy resale housing. That's
quite a high ratio. Unfortunately, that decision about where they
want to live and what form of housing they prefer costs them, on
average, $1,350. That's an awful lot of money to penalize an
awful lot of people because the government some years ago decided
to encourage job creation in the residential construction
industry.
In addition to the tax
penalty, the rebate program distorts normal market decisions. For
example, there is relatively little new residential housing
available in older urban areas, with the result being that
first-time buyers must then look to the suburbs. Those who wish
to live closer to their work environment or closer to their
parents or closer to city services are discouraged from doing so
or pay a premium for that privilege.
While we acknowledge that
new home construction generates more economic activity than
resale housing, it is not a one-way street. Research commissioned
by our association indicates that every resale transaction
generates an economic spinoff of $17,000: not as big as new
housing, but not insubstantial either.
The expansion of the rebate program to include
resale housing would raise the total cost of the tax rebate
program to approximately $106 million a year from the current
level of approximately $22 million per year. However, some of
that tax would certainly be recovered in improved sales.
Many of these issues were
debated in the Ontario Legislature a few years ago when Mr Dan
Newman brought forward a resolution to extend the program to
include first-time homebuyers who purchase a resale home. Members
of both the Progressive Conservative and Liberal parties spoke in
favour of Mr Newman's motion, and the motion was subsequently
passed by the assembly.
Of course, our long-term
goal is the complete elimination of the land transfer tax. It is
a tremendous barrier to home ownership and is not tied to any
products or services related to real estate. It is quite simply a
tax grab, one we hope to see reduced and eliminated as time goes
by and the government's finances improve.
I would now like to comment
briefly on a number of issues that have particular relevance for
Ontario's larger urban centres. As you know, homelessness has
become a significant problem for some of Ontario's less fortunate
citizens. For a certain segment of the homeless population, those
with mental or physical illnesses, addictions etc, OREA believes
government must be prepared to support permanent forms of
housing. These individuals have no ability to house themselves
and unfortunately may never have the ability to house
themselves.
For lower-income
individuals, we believe that rent supplement programs can be
designed to bring housing within their economic reach. We do not
favour a return to the old bricks-and-mortar approach to solving
these difficulties, ie, non-profit housing. We believe that a
program of targeted rent supplements will help more people at
less cost than building non-profit and co-operative housing.
We also believe the private
sector should become more involved in helping the homeless
through charitable organizations, job training and hiring
programs. Across Ontario, individual realtors and member real
estate boards are involved in supporting hundreds of charitable
activities, the majority of them targeted toward housing-related
programs. We are very proud of our members and our boards who
give both time and money to support those less fortunate. Our own
association, through our charitable foundation, targets over
$60,000 a year of charitable donations to housing-related
charities across the province. We believe that with the right
combination of government support and private sector assistance,
no one need be homeless in Ontario.
A second issue we wish to
bring to your attention relates to the need for extensive
investment in infrastructure if Ontario's economy is to continue
to grow in the years ahead. Governments at all levels must begin
thinking about how to finance new roads, transit, sewers, schools
and health care without undue damage to the public purse. Many of
our urban real estate boards have expressed concern that unless
these infrastructure issues are addressed, Ontario will lose one
of its major competitive economic advantages.
We admit we don't have any
easy answers on how to finance these new initiatives. The
government's recently announced SuperBuild fund may hold a
partial answer, and public-private sector partnerships such as
the consortium that built Highway 407 may be the wave of the
future. We believe, though, that the government should commit
itself to increased funding for infrastructure as the best kind
of economic investment it can make.
1520
In closing, we want to
congratulate the current government on its economic and fiscal
policies. We believe that tax cuts have resulted in improved
housing affordability, and we support government initiatives to
eliminate deficits and reduce debt. These two initiatives have
resulted in the creation of an economic climate that is good for
realtors and good for real estate.
We trust that the
government will continue its efforts to reduce taxes and promote
economic growth. In the final analysis, the best housing
initiative any government can undertake is the creation of
secure, permanent jobs for its citizens.
Thank you for your
attention. We would be pleased to answer any questions you may
have on my remarks or on our written submission.
The
Vice-Chair: Thank you very much for the
presentation-most informative. We start with the NDP, and we have
barely five minutes for each caucus, about four and a half to
five.
Mr
Christopherson: I'll jump right in because I don't have
a lot of time. I know of no one who likes to pay the land
transfer tax and I'm of an age where my age peer group have
bought homes along the way, so there's been a lot of that sort of
thing. Every one of them has said that they don't like paying the
land transfer tax, but then nobody likes to pay any tax at all.
But I have to tell you I've never heard one, not one, say: "Gee,
we had a great deal. We had the perfect house. We had the down
payment. We had it all lined up, everything was all set, years of
saving. But, you know, we had to cancel the deal because we
couldn't pay the land transfer tax."
I realize that from where
you sit it's an impediment, it's something that you'd like to see
removed, and if we could wave a magic wand, I'm sure a lot of
homeowners or potential homeowners would like to see it
disappear, but I'm not convinced that it has really prevented
anyone-certainly not in my personal experience nor in my
professional or public life experience-from actually purchasing a
home. If they did a list of things that were prohibiting it, I
wouldn't argue that it might not be on that list, but I've never
experienced that alone being the deal-breaker.
The other thing is, and I'm
sure that we'll just, at the end of the few minutes we have,
agree to disagree on the issue of affordable housing in bricks
and mortar, but if you take a look at the numbers that even CMHC
is providing in terms
of the number of units that are necessary, if we were to do it
all through rent supplements, you'd break the treasury because
it's more expensive at the end of the day for the provincial
government, and there are studies to show that, than it is to
actually provide the bricks and mortar. I know there are
complaints and people have differences with it, but nonetheless,
at the end of the day for the taxpayer, for the public, for
society over a period of 10, 20 years, the life of the building,
there's actually a win. It's for the simple reason that when a
family moves out the unit is there, available for another
Ontarian family to come in and benefit from.
I also compliment you and
all your members on the charitable aspects. I think it's very
noteworthy. Certainly I'd give it as much praise in my home town
of Hamilton as anyone does in their community, and it's not to be
trivialized in any way, shape or form. But I have to say to you
that when you put that much emphasis on charity-a lot of people
who are in circumstances through no design of their own aren't
looking for charity; they're looking for their rights as
Ontarians, their share of the wealth that we all generate-what
came to my mind right away was George Bush with his thousand
points of light, that we're going to rely on the altruism of
those who have to sprinkle some of the benefits around through
charity.
Trying to address the issue
of homelessness in that fashion is just going to come up short
each and every time. It's not enough. Government has to accept
the fact that Ontarians in a province as rich and wealthy as ours
have a right to a safe and warm place to live and that
collectively we can provide that if the political will is
there.
I afford you the chance to
respond.
Mr
Merkley: Mr Christopherson politely asked three
questions, I believe. So, back off to the first one. Yes, you may
be right when you say that land transfer tax may not be the major
impediment whether a deal goes together or not, but why we're
asking that it be extended from new housing-it puts the
affordability of new housing out of the reach of most first-time
homebuyers. Our long-term goal is to have government eliminate it
completely. Do we think that will happen in the next few years?
Probably not, but as a long-term goal-we do feel it's an
impediment to folks trying to buy a home. At least if the program
is extended to resale housing, that's a start.
The second question: I
won't belabour the point about our position with respect to
non-profit housing, but you did mention something that's very
enlightening, that at the end of the day someone owns these
properties. We find at the end of the day, which is probably 25
years when the mortgage-if in fact it is paid off, all the repair
bills start coming in, for instance, and we find those projects
aren't getting paid off. I guess our proposal with respect to
rent supplements is targeted rent supplements. Can we give
everybody a rent supplement? Probably not. Will we break the bank
as you say? Probably. Targeted rent supplements, in our view,
work.
Mr
Christopherson: What about the balance, though, for
those who don't-
The
Vice-Chair: We're going to have to move on to the
government.
Mr Arnott:
Thank you very much for your presentation. We appreciate your
ideas and you've come forward with some very good ideas that the
government has to consider. My wife and I sold our house in
Arthur in the summertime and bought a new house in Fergus in
September, so that I could live in my new riding after the
boundaries were changed, so we know something about those hidden
surprises that you mentioned, although we were very well served
by our realtor. He did a great job for us.
I wanted to ask you about
the suggestion that you've made to eliminate the retail sales tax
on premiums that would be paid for mortgage insurance. You have
calculated that it would cost the treasury around $28 million.
Can I ask how you came to that figure?
Mr
Merkley: Yes, you may. We had a survey done, and it came
right from the government itself, on how many people actually
have high-ratio mortgages. The figures that we were given since
they-
Mr James
Flood: The insurable portion.
Mr
Merkley: That's the portion that they're paying the tax
on.
Mr Flood:
Part of the answer relates to information that we obtained from
Canada Mortgage and Housing Corp. They estimate approximately
100,000 insured loans in Ontario every year. Truthfully, we just
did the math.
Mr Arnott:
Because if we assume that it would stimulate additional sales,
additional activity, it might not even cost $28 million. Is that
correct?
Mr
Merkley: You're very, very right. In fact, beyond the
fact it might create more sales. What about the appliances these
folks might be able to buy instead of paying out money? They
don't have a lot of money when they have a low down payment,
which they've scrimped and saved or borrowed to get. So they're
going to be putting money back into the economy anyway. It may
very well be a lot less than that estimate.
Mr Arnott:
I'd agree with you it doesn't seem like a huge amount of money,
yet it might be a positive incentive that would give more young
couples the opportunity to purchase their first homes.
Mr
Merkley: Exactly.
Mr Monte Kwinter
(York Centre): Thanks for your presentation.
I just want to question the
practicality of one of your suggestions. We have heard from house
builders, we've heard from mortgage companies, that the
construction of rental units is minimal and the simple reason is
developers cannot make any money selling to the low end of the
market. The only rental units that are being built, and there are
very few of them, are for people who for lifestyle reasons don't
want to have a condo, don't want to have a house; they want to be
able to rent and that's it. They're prepared to pay the price for
a level of rental accommodation that makes it economically
feasible for the builder and developer to build it. So my
question is, if in Toronto you've got a 0.9% vacancy rate, which
means there are a lot of people chasing a very, very small number
of apartments, how is providing a rent supplement going to work?
I don't care what segment of the market, how are you going to
satisfy that need?
Mr Flood:
The short answer is rent supplements alone aren't going to solve
the problem. You're going to need some form of government
assistance at the municipal level, you're going to need help at
the provincial level, and you're going to need help with things
like GST at the federal level. I think from all the submissions
you've heard, the people you've mentioned still believe that the
route to go is to have the private sector meet that demand, not
have governments trying to meet that demand. But you're right, a
rent supplement program, especially with vacancy rates like you
have in some of Ontario's urban areas, are not going to solve the
problem, in and of themselves.
1530
Mr
Phillips: I want to pursue that a little bit. In one of
the most memorable presentations-I think it was from the Ontario
homebuilders-they indicated that to keep up with the rental
demand, there should be 20,000 units a year built. My
recollection-I don't have their presentation in front of me-is
that in the last three years in the province of Ontario there
have been 3,000 rental units built, against a theoretical demand
I guess of 60,000. And as my colleague just said, probably a
majority of those rental units would be built for the upper end
of the rental market.
So here we are with advice.
The Premier says they'll never build a brick or mortar on this
thing. The private sector says "Don't do it." Nothing is
happening. We now have a three-year backlog at least. Your brief
says, as Monte Kwinter just said, that the vacancy rate is now
below 1%, and you say it's going to get worse. Your brief says,
"Three principle demand factors will squeeze rental markets
further over the next few years."
We need help from
professionals like yourself. I know it's fashionable to say that
government should not get involved in any bricks or mortar.
Certainly that's the Premier's mantra. Aren't we hanging an awful
lot of people out to dry here who will inevitably be homeless? I
just wonder what advice you've got for us.
Mr
Merkley: I think, Mr Phillips, one thing we all have to
recognize is that we live in a very diverse province. When you
use factors of 1% vacancy rate, that's Metro Toronto. I live in
eastern Ontario, and the vacancy rate is 7%. In Ottawa it's about
4%. My colleagues from Toronto can answer those questions, but
we're talking about building these apartment units in Metro
Toronto only. The vacancy rate is so high in other areas, people
are turning their apartment buildings into condominiums.
The
Vice-Chair: Thank you very much. Our time has run out,
unfortunately, unless one of your other delegates wanted to make
a quick comment.
Mr Von
Palmer: If I could jump in on that question from a
Toronto perspective, there have, for example, been some
provincial announcements of PST grants in affordable housing, but
that's only $2,000. It doesn't go very far. We have to look at
this as a package. The problem is that the feds are the only
holdout. For example, the city of Toronto is trying to do certain
things like development charges, which is a crucial part. They
just brought in the exemption for affordable rental housing. The
province is making certain announcements, but the feds have yet
to address things like the GST on construction materials similar
to the provincial announcement. That's a bigger factor for
developers in the business, and things such as income tax
provisions. So there are a number of things at the federal level
that have to be addressed as well. They're not looking at the
whole picture. We've had little announcements back and forth, and
that just doesn't seem to do it.
Mr
Kwinter: On a point of order.
The
Vice-Chair: Thank you very much for your comments. We'll
look forward to the federal budget as well. Sorry, Mr Kwinter,
we're way over.
Mr
Kwinter: On a point of clarification.
The
Vice-Chair: Point of clarification, but very quick.
Mr
Kwinter: In your brief, you say that the vacancy rate in
Ottawa is 0.7%, and you've just said it's 4%. I'm just curious
that we have the right number.
Mr
Merkley: It's lower than 4%.
Mr Flood:
The information that's in the brief is based on a CMHC estimate,
and I would take that to be the accurate number.
Mr
Kwinter: So it's 0.7% in Ottawa.
The
Vice-Chair: Thank you very much for your presentation.
It's much appreciated.
AGGREGATE PRODUCERS' ASSOCIATION OF ONTARIO
The Chair:
Our next presentation is by Carol Hochu, president of the
Aggregate Producers' Association of Ontario. How did I do? You
can repeat it and state your name when you come forward. Welcome
to the finance committee pre-budget hearings. You have a
half-hour for your presentation. Whatever time is left over after
your presentation we divvy up between the three caucuses for
questions and/or comments.
Ms Carol
Hochu: Good afternoon, everyone. My name is Carol Hochu
and I am president of the Aggregate Producers' Association of
Ontario. I am joined today by Bob Albrough, our association
chairman and president of Nelson Aggregate Co; and Ian Duff, the
association's vice-chairman, who is also president of J.C. Duff
Sand and Gravel Ltd.
We thank you for the
opportunity to appear before you today. We would like to use this
opportunity to tell you a little bit about our industry, our
members, and our contribution to Ontario's economy. Quite
literally, we are the foundation upon which Ontario's economy
grows and prospers. We
are fundamental to this province's infrastructure and continued
growth.
Let me begin by giving you
some background about our industry.
Aggregate products include
sand, gravel and crushed stone. Recycled aggregate consists of
concrete, asphalt and brick products that are crushed and reused.
Aggregate is used in construction for stability and structure.
Whether a highway, house or shopping mail, structures are
dependent on a sub-base and base of aggregate. About 90% of the
concrete and asphalt used by Ontario's construction industry is
composed primarily of aggregate. In addition, aggregate products
are used in a variety of manufacturing processes, including steel
and iron, insecticides, aluminum, crayons, rubber, plastics,
glass, ceramics, floor coverings and fertilizers. Each and every
day, Ontarians use and benefit from non-renewable aggregate
products. We all live and work in buildings built with aggregate.
We travel on roads and highways constructed from aggregate. Even
the water we drink is filtered and purified by aggregate.
However, this ongoing
consumption of aggregate products means the industry is always
challenged to find new sources and deposits to feed future
demand. In 1998, the per capita usage of aggregate translated to
over 14 tonnes per person in this province. As Ontario's
construction and growth figures increase, this amount will
increase correspondingly.
To help meet this
challenge, we continually work with the ministries of natural
resources, environment, and northern development and mines, as
well as the planning unit of the Ministry of Municipal Affairs,
to identify and appropriately develop aggregate operations. This
means striking a balance between the need for a close-to-market
supply for such places as the greater Toronto area while
respecting the conservation initiatives of the communities that
border our operations. We are always looking for innovative ways
of meeting the demand for our products while respecting this very
important balance.
Now I'd like to take just a
couple of minutes to tell you a little bit more about the
Aggregate Producers' Association of Ontario, or the APAO for
short.
Our mission is threefold:
to ensure that our members are the best producers in the
aggregate industry; to manage the affairs of the association in
an effective way; and, perhaps most importantly, to build
partnerships with government and the public to promote the wise
management of aggregate resources.
Our association is made up
of some 240 member companies, 115 of which are producer members
with licensed pits and quarries. The remaining member companies
supply equipment and other products, and consulting and other
services to the producer members. Our members represent about 75%
of the sand, gravel and crushed stone produced in Ontario every
year and they support Ontario's $30-billion construction
industry.
The aggregate industry
employs over 41,000 workers both directly and indirectly in
services and transportation. Literally hundreds of thousands of
jobs in the construction industry also rely on an adequate supply
of quality aggregate products.
In 1998, aggregate
production was 146 million tonnes. That represents about a 1.4%
increase over 1997, when we produced 144 million tonnes. The
production numbers for 1999 are not yet available, but we are
expecting production to rise to about 150 million tonnes. If I
could just paint a picture for you about what 150 million tonnes
means, picture an area bounded by College, that is, the front of
the Queen's Park building, west over to Spadina, east over to
Yonge and down to the waterfront. If you dug 60 feet into the
ground in that whole area bounded by those roads, that represents
about 150 million tonnes of aggregate product.
This increase in production
is a direct indicator of the strength of Ontario's economic
growth and is intricately linked to construction spending. In
fact, one of the reasons our industry has been so successful is
because of the growth of the construction industry throughout
Ontario over the past few years.
1540
We are pleased to hear
about this government's creation of the SuperBuild Corp and its
plans to inject $20 billion into capital spending over the next
five years. We support this clear commitment to strategic and
coordinated planning for Ontario's future infrastructure needs.
The APAO would be pleased to contribute in any way we can to the
process and consultations leading up to the development of those
infrastructure investments.
As a proven, successful
industry, we would like to see the government adopt a model that
favours stimulation of Ontario's domestic economy-local
suppliers, contractors and expertise-as these new projects are
planned, developed and built. We want to be the foundation of
Ontario's future success stories.
We would also like to take
this opportunity to commend the government on its Red Tape
Commission. As business people whose goal it is to produce a
quality product at an affordable price, we support any
initiatives that reduce costs to our members. Our industry is
different from most, as we have an abundance of small
owner-operator companies and only a handful of large
multinationals. These smaller members are greatly affected by
burdensome and costly paperwork. We encourage the commission to
continue working towards the reduction of red tape for good
aggregate operators and licence applications.
It should also be noted
that as part of our business operations, Ontario's aggregate
producers are committed to being environmentally responsible
citizens. Aggregate extractive sites undergo a process called
"progressive rehabilitation." Rehabilitation begins not after the
pit or quarry has been depleted, but rather while extraction is
taking place. As work finishes in one part of the site,
rehabilitation begins. Progressive rehabilitation means that a
site can be returned to its previous use or developed for other
uses very quickly after extraction has been completed.
Pits and quarries have been a part of the
landscape in Ontario for more than a century. These pits and
quarries have been rehabilitated for a wide variety of
after-uses. For example, did you know that the Royal Botanical
Gardens in Hamilton was once a gravel pit? The Quarries of Hunt
Club in Ottawa is another example. We are proud of the fact that
most people would be hard-pressed to recognize any of the more
than 70 rehabilitated pits and quarries within Metropolitan
Toronto alone, because the rehabilitation has been so
successful.
We don't just talk about
our commitment to the environment, we prove it. We have brought
with us today copies of an eight-minute video called The Next
Landscape that describes our industry's successful rehabilitation
efforts. I know the clerk has distributed these to you, so we
hope you will find some time at leisure to review this video.
As part of our ongoing
efforts to build on our members' strengths, we have recently
become more involved in the management of our industry. Through
the Ontario Aggregate Resources Corp, or TOARC, as it is commonly
known, we are working with the Ministry of Natural Resources and
other industry stakeholders to find innovative ways to continue
to provide important services related to the aggregate industry.
Established by legislation in 1997, TOARC assumed administrative
responsibility for a number of activities, including collection
of fees, administration of a trust fund, the management of
abandoned aggregate properties program, research and publications
and self-compliance. This initiative is, we feel, an indicator of
the strength and maturity of our association and of our success
in taking on new challenges. We are ready and willing to live up
to these challenges, but we see partnership as the key to any
sustainable evolution of our industry.
As some of you may know,
the existing aggregates program core budget allocation of $1.8
million has been accepted as a reduction to the MNR's budget for
fiscal year 2000-01 by Management Board of Cabinet. This is not
the first budget cut for the aggregates program either; in 1997
program expenditures were cut by 71%.
Aggregate producers in the
province currently send about $2.8 million to the consolidated
revenue fund. That funding provides salaries, benefits and
operating budgets for 14 aggregate resource officers, six crown
land full-time equivalents and seven staff members in the policy
office in Peterborough. Collectively, this group is responsible
for policy, enforcement and compliance issues, a very important
aspect of our business.
Aggregate producers have
been asked to make up this $1.8-million financial shortfall,
despite the fact that the industry has already taken on increased
responsibilities and costs through TOARC. A number of options
have been put on the table, including the potential for a 50%
increase in the levy paid to the province under the Aggregate
Resources Act. We are working closely with the Ministry of
Natural Resources to examine all funding mechanisms and options
and to ensure that there is a viable future for the aggregates
program in Ontario.
Although we want to work
with you to develop solutions, let us be clear that the future of
our industry and the future of Ontario's economic progress
requires that no further erosion to the aggregates program takes
place.
In conclusion, on behalf of
the APAO, thank you for your time and attention today. We would
like to leave you with this message:
Ontario is a growing,
thriving and exciting place to be conducting business right now.
The growth of the economy leads to a boom in the construction
sector, which demands quality products from our members.
Aggregate producers are the
foundation upon which Ontario has been built and will continue to
grow. We are an integral part of the economic foundation of our
strong economy.
Aggregate producers want to
continue to provide high-quality products, produced in an
environmentally sensitive way, to this province. We look forward
to continuing our work with you to achieve mutually beneficial
goals of success, growth and sustainability.
Thank you very much and we
would be pleased to address any questions you might have.
The Chair:
Thank you very much. We have four minutes per caucus and I'll
start with the government side.
Mrs
Molinari: Thank you very much for your presentation. You
made several good points. I'm going to enjoy watching the video
you've left for us. I'm pleased to see that you're in the process
of working with the various ministries trying to get the points
across and to see that what you need in order to fulfil your
goals is reflected. I'm also impressed with your comments on the
environmental issue and that you're looking very closely at
making sure that the environment is one of the considerations
throughout.
As a committee such as
this, we've been hearing a number of presentations across the
province, and it's always a challenge for us to balance all of
the needs and requests that come through to the committee. But
it's certainly helpful for us to have a good picture of what the
individual needs and requirements are in order to fulfil what you
need to do your jobs correctly. With that, I thank you for the
presentation and for all your comments. I'll leave some time for
my colleagues. I know they'll want to speak as well.
Mr Arnott:
Thank you for your presentation. I wanted to ask you about the
MNR funding cut that you highlighted. It says that the existing
budget for the aggregates program is $1.8 million. That entire
amount is being cut? Is that what you're telling us?
Mr Hochu:
Yes.
Mr Arnott:
The government is saying to you, how can you as an industry come
up with that money to maintain the programs?
Ms Hochu:
That's correct.
Mr Arnott:
I understand. A 50% increase in the levy paid to the province
under the Aggregate Resources Act is one of the things that's
under consideration. How much do you pay at current levels? What does
this 50% increase potentially mean?
Ms Hochu:
The members pay a levy of six cents per metric tonne of
material.
Mr Arnott:
Directly to the province?
Ms Hochu:
Yes. It is divided; it goes to different things.
Mr Arnott:
The municipality gets some of that money.
Ms Hochu:
Yes, they do indeed.
Mr Arnott:
How does it break down?
Mr Ian
Duff: Four cents go to the municipalities, one cent goes
to the province, half a cent goes to the regions and half a cent
goes into a fund for rehabilitating abandoned pits from years
gone by.
Mr Arnott:
So with a 50% increase, the additional money would go to the
province, I guess.
Ms Hochu:
Yes. The proposal is to increase from six to nine cents a tonne
and all three additional cents would go to the province.
Mr Arnott:
You really didn't go into what impact that might have on your
industry and the construction industry in general. I assume that
would just drive up the cost of road building.
1550
Mr Robert
Albrough: Maybe I could give you an example on that.
There's one operation where it could make the difference this
year of about $400,000 off their bottom line, one single quarry
operation.
Mr Arnott:
If they were forced to eat it.
Mr
Albrough: Yes.
Mr Arnott:
But presumably they'd pass it along to their customers, would
they not?
Mr
Albrough: It's a very competitive market. It would be
nice to say that, but it doesn't always happen.
Mr
Kwinter: I'd like to pursue this idea. MNR has
eliminated the $1.8 million that they used to provide for these
various administrative services. Is that correct? You pay,
through fees and everything else, $2.8 million. And there's a
trust fund. What is that trust fund? How is that funded and what
does it do?
Mr Duff:
The trust fund through TOARC is money that the industry raised.
It went into the government, into a fund, to ensure that if any
aggregate producer went out of business and left an open pit that
pit would be rehabilitated. Funds were accumulating without a lot
of I guess you'd say action on some of the old pits that had been
abandoned. The industry, as part of the latest Aggregate
Resources Act, took over the responsibility and took over part of
that fund that was available and is now actively
rehabilitating-how many have they done?
Mr
Albrough: It's 37.
Mr Duff:
There are several pits every year in all different
municipalities. Some that trust is there and is basically
cleaning up some of the landscape that has been left from the
1940s or 1950s, the early years of the industry before there was
proper regulation.
Mr
Kwinter: But is that also used for, let's say, a current
case where an aggregate company goes broke and just abandons the
quarry, and that's used to rehabilitate that quarry?
Mr Duff:
It's also there for that purpose, although it does not
happen-
Mr
Kwinter: So are you required to contribute any more to
that trust fund, or is there enough in there and it's
self-perpetuating and just keeps going?
Mr Duff:
As long as interest rates keep the fund alive, that's the intent,
yes.
Mr
Kwinter: What is it that you're looking for? Are you
looking for the government to reinstate that approximately $1.8
million into MNR to look after these administrative costs?
Mr Duff:
The simplest thing would be to do that, absolutely, but there are
realities that they are trying to face as well. So we're trying
to work with the government to find the best possible solution.
One is in increasing the fee, which would do that, but then the
aggregate producer is faced with how do you pass that on to the
customer unless it's set up as some sort of tax or something.
What ends up happening is that the public are the ones paying the
bill in the long run anyway, so throwing the dollars around is
not necessarily accomplishing anything.
What we're trying to do
through the APAO is just produce better producers through
training, through seminars that we hold. We've been doing this
since 1956 and it's been working very well. We have a good group;
it's the majority of producers in the province. The topics that
we cover with them stress the importance of rehabilitation on
pits and quarries, of doing it sooner, of minimizing the impacts
on the taxpayers of Ontario by minimizing our haul routes,
minimizing the amount of truck traffic out there.
Mr
Christopherson: Thank you for your presentation. How
many abandoned pits are there, do you think, in the province
right now?
Mr Duff:
We could get you those figures. I don't know if-
Mr
Christopherson: I'm just curious.
Mr
Albrough: It was around 5,000 when they did the first
inventory. There are other areas of the province that haven't
been inventoried yet.
Mr
Christopherson: At what rate annually do we find
abandoned pits, do you think?
Mr
Albrough: At what rate do we-
Mr
Christopherson: How many per year?
Ms Hochu:
How many do we rehabilitate?
Mr
Christopherson: Sorry?
Ms Hochu:
Do we find or do we rehabilitate, the abandoned pits?
Mr
Christopherson: Those that are abandoned, where nothing
is done. I'm just looking to see. You gave me the figure for how
many there are. I wonder just how many per year are added to
that, roughly.
Mr
Albrough: We haven't added any since the first
inventory, and that was mainly southern Ontario and the
designated areas of the province.
Mr
Christopherson: So there aren't any more?
Mr Albrough: There are more in
the undesignated areas of the province.
Mr
Christopherson: That's what I mean. You mentioned good
producers versus bad producers. Can you give us an example of
what the difference would be between what you would characterize
as a bad producer versus a good one?
Mr Duff:
Anyone who breaks the law, I guess, is a bad producer. There are
strict rules in our industry. If a person has a licence on a
piece of property and digs through that boundary of the licence
to someone else's property or into an environmentally sensitive
area, that is bad. People who have little respect for their
neighbours by not caring about their hours of operation or not
getting back to a neighbour who has a question about their
operation would be characterized as bad operators.
Mr
Christopherson: Just out of curiosity, where exactly
does the word "aggregate" come from? Why is that the word used to
cover this? You're all laughing. Is there a story there? Do you
know, or is it just one of those, "It is."
Mr Duff:
It used to be sand and gravel. But sand and gravel were produced
10,000 years ago by the glaciers, and as you use it up, it gets
scarce. So nowadays there is more of a need for quarries in
Ontario when the gravel that's close to the market is
disappearing. The general term "aggregate" has to do with the
size of the particles, from small particles up to larger
particles, that would make a proper mix for concrete.
Mr
Christopherson: I always knew what was being referenced
but for the life of me I couldn't figure out where the actual
word came from, why this is the word. Anyway, thank you for your
presentation.
The Chair:
On behalf of the committee, thank you very much for your
presentation this afternoon.
Mr
Kwinter: Mr Chair, as you know, there is an event taking
place right now that has some significance for members of the
Liberal caucus. I understand we have an agreement that we will go
and will come back.
The Chair:
Certainly I'm more than willing to abide by this agreement.
Mr
Kwinter: We also have an undertaking that nothing
untoward will happen while we're out.
The Chair:
We will welcome you back when you come back.
REGISTERED NURSES ASSOCIATION OF ONTARIO
The Chair:
Our next presentation this afternoon is the Registered Nurses
Association of Ontario. Could you please come forward and state
your name for the record, unless you want to follow the two
gentlemen for the unveiling.
Ms Jacqueline
Choiniere: I was just curious as to what the noise
was.
The Chair:
They're unveiling a portrait of former Premier Peterson. It's the
formal portrait, so it's a big ceremony.
Go ahead, please.
Ms
Choiniere: My name is Jacqueline Choiniere. I'm the
director of policy at the Registered Nurses Association of
Ontario. With me is Kim Jarvi, the economist-health analyst at
RNAO.
RNAO, as I think most of
you know, is the professional organization for registered nurses
in this province. We welcome the opportunity to participate in
this consultation and to convey the issues and concerns of
Ontario's registered nurses to the committee members.
First of all, we
acknowledge the investments made by government in health care and
nursing over the past year. But our major theme today is that
there is still work to be done. Investment is still required to
ensure that our health care system continues to sustain us.
Furthermore, Ontario's budgetary situation has improved
significantly in the last few years. Prudent investment in the
health and wellbeing of all Ontario residents is clearly less
fiscally challenging now. There are several reasons:
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(1) Growth and growth
prospects are good. The province has enjoyed several years of
significant growth in real GDP: 4.8% in 1997, 4.2% in 1998, and
an estimated 5% in 1999. Private forecasters continue to predict
strong real growth in the range of 3% to 4% for the coming fiscal
year. Some economists expect that real growth will continue at 3%
per year for the next few years as well.
(2) The deficit has fallen
steadily since 1995-96 and has consistently been below target
levels. The 1999-2000 deficit is projected to fall to $1 billion,
with the 2000-01 target of a balanced budget being well within
reach.
(3) Federal transfers are
up. In the past year, federal transfers for health have risen
sharply after having undergone an equally steep decline since
1995-96. Ontario received an increase of about $1 billion in
health transfers. Further, the federal government has also
committed a substantial, though unspecified, portion of its
current surplus on new spending and the federal Minister of
Health has tentatively offered new cost-sharing in home care and
in primary health care services. This would greatly benefit
Ontario residents, given the intention to implement primary
health care reform and the recent Health Services Restructuring
Commission recommendations.
Thus, our argument is that
there is now more room to reinvest in sectors of the economy that
have suffered from years of cutbacks and restructuring, including
health. RNAO firmly believes there is fiscal room and indeed it
is essential to reinvest in the long-term health and wellbeing of
our society.
Next we want to deal with
some of the reasons why we need to invest at this point.
First is that our health
care system remains stressed. In our full submission we note the
obvious, that the health care system in spite of recent
reinvestment in health care is indeed under stress. Funding
cutbacks and radical restructuring are widely seen to be part of
the problem. Another problem is that only hospitals and
physicians are covered
by the Canada Health Act. Consequently, other critical sectors
like the community sector are underfunded. Given that the federal
Minister of Health has offered to discuss cost-sharing and given
that Ontario is already investing in this area, a partnership in
this area might be mutually beneficial.
Secondly, the public
remains concerned about our health care system. The polls are
unanimous in this area. The public is indeed losing confidence in
our system. Measured public satisfaction with health care
institutions is declining. Unfortunately, the public lays the
responsibility for this decline at the feet of the provincial
government.
Thirdly, there is
unwavering public support for a publicly funded, universally
accessible health care system. In spite of this problem of
confidence, the public has not abandoned its commitment to a
publicly funded health care system. On the contrary, Ontarians
demonstrate a strong willingness to support a health care system
that is appropriately funded, as witnessed by the overwhelming
opposition to funding cuts. A very recent Angus Reid poll
reported that 66% of the public was opposed to a two-tiered
health care system. The same study even found substantial
support-55%-for raising taxes to spend directly on health
care.
Our fourth reason is that
challenges persist in solving the crisis in nursing. The
government has started to seriously address the concerns of
nurses and has reinvested. This is a positive step. When a sector
is hit as hard as the nursing sector has been, there are
inevitable lingering costs. Nurses continue to report difficult
work circumstances that limit their ability to perform the care
they have been trained to do.
Nurses are waiting for the
money that has been reinvested in nursing, in all sectors, to
translate into substantial numbers of new, permanent nursing
positions. There is no mechanism to ensure that funds earmarked
for new nursing positions are being used as intended, and this is
extremely problematic. On many occasions, the joint provincial
nursing committee has expressed concern about the use of these
funds, alerting the government of reported instances of misuse.
These include the creation of temporary or casual nursing
positions or applying the funds towards accounts other than
nursing human resources, such as equipment purchases and deficit
reduction.
Our full submission also
speaks to the factors that influence a healthy population, only
one of which is the health care system. In this area the research
is clear: Fiscal and economic policies play critical roles in the
health of the citizens of any jurisdiction. This goes beyond the
obvious factors such as spending on health care and illness
prevention.
Fiscal and economic
policies have significant impacts on a series of social and
environmental factors that in turn have long been known to be
critical to health status. These include absolute and relative
poverty, which adversely affects health and causes premature
mortality. In Ontario and the rest of Canada, income disparities
and poverty have been growing, so there is room for action at all
levels of government. The sharp rise in child poverty is the most
distressing feature of the upward redistribution of income.
Unemployment: Although
fortunately this has decreased, we need to further reduce current
levels.
Social support and social
cohesion are demonstrated to improve population health. The
growing income disparity combines with the fraying of the social
safety net to greatly reduce the degree of cohesion in our
society today. Even the best health care system in the world, if
it were combined with an inadequate social safety net, would
still compromise the health of a significant portion of the
population. Now is the time to invest in all areas that have been
hard hit by budget cutbacks and by private sector retrenchment:
physical, human and social capital.
Our submission also calls
for the need for what we term true economic sustainability, and
we have a number of recommendations. Ontario, like other
provinces, is at the mercy of outside forces, subject to the
vagaries of federal economic policy and of global markets. The
feds substantially cut transfers to provinces after 1995-96,
which contributed to tremendous fiscal pressures at the
provincial level. More importantly, the federal government has at
its disposal a very powerful tool, monetary policy, which can
help or hurt the provinces.
In the early 1990s,
perversely tight monetary policies choked off physical investment
through high real interest rates. At the same time, tight money
overvalued the Canadian dollar, which devastated the trading
sectors of the economy. This saddled the provinces with debts
largely not of their own making. Mercifully, this policy has been
substantially reversed, to the great benefit of Ontario.
At the same time,
expansionary policy in the US is fuelling a boom in Ontario. This
happy coincidence of favourable external circumstances is rapidly
changing fiscal realities in our province. However, these
circumstances could easily change. Conventional economic wisdom
is to make hay while the sun shines. Fiscal prudence is always in
order.
Economic sustainability
arises around a number of issues. Having the right infrastructure
is essential to economic prosperity. The market tends to
underprovide certain infrastructure-for example, transportation
networks, schools, hospitals, water treatment facilities and so
on-because the market cannot generate appropriate incentives.
Governments traditionally have had to step in to fill the gap,
and it is long overdue for provincial governments to start to
address the erosion of the infrastructure in a truly serious
way.
Now is not a time for tax
cuts. Tax cuts as a method of raising demand have a very limited
effect. They disproportionately benefit higher income people, who
will spend the smallest share of the cut of any group in the
economy. An equal rise in government spending would have a much
stronger stimulative effect on demand. Furthermore, if these tax
cuts are matched by spending cuts, as they have been, the net
effect on spending is negative. Thus, we share the expressed
sentiment of the public on this issue. We do not want tax cuts if
they are purchased by cuts in spending or services, or if they
come at the expense of an increased debt.
Even if tax cuts were
effective as a provincial demand-management tool, now is not a
good time to do them. This is not to say that we should not
change the way we collect taxes. It is desirable that taxes be as
efficient as possible, and distort correct prices as little as
possible. On the other hand, taxes that correct for market
imperfections would be desirable. For example, the market
overprovides environmental destruction and harmful substances.
Green taxes-for example, carbon taxes and increased gasoline
taxes, and tobacco taxes could both help to correct underpricing
of harmful activities.
We also call for prudent
spending. Fiscal responsibility is not only a matter of
generating sufficient revenue, but also in spending money in the
most effective way possible. The province has belatedly taken
some steps forward in this respect with the health care system,
and should continue on this path. For example, it has started
listening to nurses and has begun to address the serious problem
of recruitment and retention of nurses. Nursing is strongly
supportive of changing the way that health care is delivered in
Ontario. The old, expensive, hospital-centered, cure-focused,
fee-for-service model should give way to a more community-based
model with doctors and nurses working in collaboration in a
system that rewards better health outcomes and illness
prevention. The government's Health Services Restructuring
Commission has pointed the way towards primary health care
reform, as we have already noted. We know that needs will
continue to rise in the future as the population ages, so there
must be a way to deliver health care and illness prevention in
the most efficient way possible.
1610
We caution the government
to beware of costly privatization. Fiscal responsibility also
entails choosing the most efficient way to fund and deliver
health care and other social services. With respect to health
care, the economics are very clear. Public funding not only
guarantees universal access and controls over quality, but it is
also the cheapest way to fund health care. The present government
appears to be in accord with most Canadians on this point.
Research overwhelmingly also shows that public or not-for-profit
provision of health care services is also cheaper and of better
quality than for-profit provision. The major nursing
organizations in this province have publicly declared their
concern about the increasing privatization of health care in
Ontario and indeed in Canada. This is of particular concern in
the areas of home care and long-term care facilities especially.
Nurses' concerns in this regard are both about cost and
quality.
In the area of social
sustainability, we argue that this area is even more neglected.
This includes both the development of human capital and the
maintenance of social support structures that maintain a healthy
society. Deep cuts to social assistance have definitely pushed
many marginalized people even closer to the edge, with unknown
consequences for the future. Already, levels of poverty are
reported to have risen sharply since 1989. At this point, we
cannot assess if the economic turnaround has helped to reverse
this trend.
Social sustainability can
be addressed on many fronts. A full-employment policy would go a
long way in this direction. There still remains the need to deal
with those who do not get enough income on their own. There is a
patchwork set of programs for this purpose, which has endured
cutbacks at a time when the need was greatest. A more coherent
set of programs is called for.
Environmental
sustainability is also a great challenge. The effects of
environmental degradation are often very delayed and hard to
identify. Thus they are easy to ignore, particularly since there
is very little money to be made in protecting the environment.
This is very unfortunate from the point of view of the long-term
health of Ontarians. When cutbacks swept through the Ontario
government, the Ministry of the Environment was particularly hard
hit. Capacity to monitor and analyze has been greatly reduced. It
is clear that we cannot rely on industry to police itself, as the
incentives to pollute are too strong. Firms that are guided by
environmental concerns may be put at a competitive disadvantage
against other firms that choose to ignore these concerns. Thus
both the public and industry gain by having a level,
environmentally responsible playing field for all firms. As
Ontario approaches a balanced budget, a reinvestment in
environmental protection is long overdue.
Finally, some final RNAO
recommendations. We still have much work to do in developing what
we call a true accountability framework not just for health but
for all ministries. In the health care sector, this entails the
collection and processing of data essential to analyzing the
performance of the institutions and agencies that make up our
system. This means having access to needed information on a
timely basis. We urge the government to organize a formal process
of consultation by which key stakeholders can help to define the
accountability framework that we need so deeply.
RNAO also continues to
await the promised patient safety act as one means of increasing
access to information, but also of protecting the health care
providers who need to report when there are significant problems.
RNAO urges the government to finalize the entry-to-practice
regulations for those entering the profession as registered
nurses, and relatedly, to begin flowing funds to implement the
recommendations for collaborative education programs that have
been outlined in the report of the nursing education
implementation committee.
In conclusion, RNAO
appreciates the opportunity to address these critical issues. The
spending and taxing decisions made by the province have a
significant impact on the health and welfare of Ontarians for
good or ill. The government has already taken steps in the right
direction in health care. With adequate accountability and
collaboration, we will
see continued improvements in this area.
Finally, we offer our
assistance to the government in dealing with any and all of the
issues we have presented today.
The Chair:
We have five minutes per caucus. I'll skip the official
opposition and come back to them later. Mr Christopherson.
Mr
Christopherson: Thank you for your presentation; it is
most helpful.
Right now, we have a
situation where the hospitals have finally been given the green
light by the government to hire nurses. Part of our difficulty is
the fact that it was initially the government's cutbacks to
hospitals-almost $1 billion-that caused nurses to be laid off in
the first place. A big chunk of the money that the government
said was an increase in health care spending was money they had
set aside for severance for all these nurses. So the government
chops the budgets of hospitals, hospitals lay off the nurses, the
government sets aside money to pay the severance and calls this
increased health care spending, the nurses go and find jobs
elsewhere, the government gets into trouble before the election,
makes a promise about hiring nurses and now they can't find
enough nurses.
Number one, if I've got it
wrong, please tell me so, and tell where I'm going wrong.
Secondly, assuming that I'm
correct, where are we going to be in the next couple of years
vis-à-vis getting enough nurses back into the health care
system, particularly in the hospitals, to meet the need?
Ms
Choiniere: I'll answer at least one or two parts of that
question. What our members tell us, and what we know from other
nursing organizations as well, is that if there is an increase in
full-time, permanent positions, nurses will essentially come.
Relating back to some of the recommendations we have presented
here today, this is why we believe an accountability framework, a
true accountability framework, is so critical. That would help us
in tracking the money that is invested for full-time, permanent
nursing positions to ensure that that money is indeed spent in
that way.
Mr Kim
Jarvi: We don't have the data for 1999 yet, but it
doesn't appear from the first indications from the Ontario
College of Nurses that the number of actual employed positions
has risen significantly over the past year. So that's a bit of a
disappointment. It may be that this split is a little more
towards full time than it was. The percentage of nurses who have
full-time employment is less than 50%, which is certainly a major
deterrent to nurses coming into the profession.
It is interesting that when
the government made that commitment to nurses, at least on paper,
there was a substantial increase in applicants to nursing
schools. So another part of the equation would be to make sure of
the positions for those students, if they want to come in.
But actual circumstances
are going to have to change. Part of the problem, I guess, is
making sure the institutions are spending on nurses the money
that was in fact allocated to nurses. We are hearing that that's
not the case in many cases.
Mr
Christopherson: Where might some of it be going? To the
other areas that-
Mr Jarvi:
Other areas, even paying off deficits. I suppose it's not
entirely surprising, given that many hospitals are tight for
money.
Mr
Christopherson: Nurses have an excellent reputation
among Ontarians, and for good reason. I found it striking that on
page 6, when you talked about some of the situations nurses are
facing on the job, you could almost interchange the word "nurse"
with "teacher" in terms of the morale, the pressure and the lack
of adequate supports in place to do the job. It's so important
that you are using that credibility to come forward and both talk
about the issues that affect nurses directly, which of course is
your role, but also to talk about how that affects all of us in
the provision of health care. I really appreciate your submission
today.
If I have time, I'd like to
ask you-
The Chair:
Quickly, go ahead.
1620
Mr
Christopherson: You state that, "However, research
overwhelmingly also shows that public or not-for-profit provision
of health care services is also cheaper and better quality than
for-profit provision." If you check Hansard, you'll find that
earlier on, I and a representative of a taxpayer group crossed
swords over this very issue. I was making the case that our
system is more efficient than the privatized system that exists
in the States. You are making the same statement I did. Can you
expand on that and, if you know first-hand, what studies were
referred to? He was adamant that I was telling an untruth.
Mr Jarvi:
Some of the studies are referenced in the endnotes, so you'll
have a start there. We can certainly supply you with an endless
list of major studies.
Mr
Christopherson: I know they're there. I just wanted you
to get them on the public record.
Mr Jarvi:
The New England Journal of Medicine, the Journal of the American
Medical Association, British medical journals-top medical
journals; if you get an article in them, you've done very well by
yourself academically.
Mr Galt:
Thank you for your presentation. Also, thanks to your
organization for working with the government as we've come
through a very difficult time with health care and some of the
challenges, and what HSRC has come through and recommended. I
meet with the local nursing association as well, and appreciate
those opportunities and those breakfasts. Thanks for recognizing
where the cuts really have come from: the federal government and
the lobby it is putting forward.
We've been hearing so many
things. Just today we heard that if we doubled the amount of
money going into health care, we'd still need more. We've heard
that there are rations in Ontario and in Canada because of
waiting lines, and the US is rationed because of cost.
Last summer I had an
experience to go through some hospitals. I was in four, and the
nursing care was top drawer in each and every one of them. I have no
complaints about the system at all. I don't have people coming to
me with complaints, other than the odd phone call that comes to
my office and, of course, reading the front page of the Toronto
Star. I find that the problem with the health care system really
seems to be with the ambulance chasers, which the opposition
sometimes likes to do.
I'd like to recite to you
as best I can a letter to the editor that was related to an
incident in, I think, early January. It was in the community
paper in the Belleville-Stirling area. This woman came to Toronto
because her mother was very seriously ill with the flu. She
called 911-non-emergent. The ambulance came and asked, "Which
hospital?" and they suggested Scarborough Grace. They radioed and
it was on critical care bypass. They radioed another hospital,
critical care bypass. They radioed another. Soon they were
outside of her area. She said, "No, I don't want my mother to go
that far away." The paramedics said: "How be we help you put her
in the car? You drive her to the hospital and they'll accept
her." She drove to the hospital expecting an eight- to 10-hour
wait in the emergency ward. When she got there, there was not a
single soul in that emergency waiting room. She got the
wheelchair and brought her mother in, and her mother was seen
immediately. Her last sentence was to the effect, "Who is playing
games with whom?"
I see the Toronto Star and
then I read this letter to the editor. Can you comment on what's
going on from your point of view?
Ms
Choiniere: Certainly our members are telling us that the
problems we are having in our health care system are real. I
think what is going on in many emergency rooms is but one
symptom. For example, in speaking specifically about the
emergency situation, one of our recommendations is that we need a
good, comprehensive primary health care system, which I think
will mean that people will get the care they need. Quite frankly,
what happens now is that individuals who need care, not
necessarily emergent care, after five in the afternoon, really
don't have much choice but to go to an emergency department. That
means we have a situation in which they, and however many other
people, are there, which means it's a little congested when a
real emergency comes through the door.
We think it is critically
important to take a system view of what's happening. I think that
means we need to do some upfront investment in order to get our
system to where the components of it can be utilized
appropriately.
Mr Galt:
Something you didn't put in here that I thought you might have
has to do with nurse practitioners as one solution for primary
care. Do you want to comment on that?
Ms
Choiniere: Yes. As you know, we have approximately 400
nurse practitioners in the extended class, who are able to order
certain medications and tests and so on-so it's an extended
role-who would be exceedingly helpful as we expand this primary
health care system. They work in collaboration with physicians,
just truly successful partnerships that we have already in
certain areas between nurse practitioners and physicians, and we
also know that physicians are anxious to work with nurse
practitioners as well. So we see it as one key answer for the
system.
The Chair:
On behalf of the committee, thank you very much for your
presentation this afternoon.
TORONTO BOARD OF TRADE
The Chair:
Our next presentation is from the Toronto Board of Trade. We're
running a couple of minutes ahead of time. Are you ready to
go?
Ms Terri
Lohnes: Our director of policy just stepped out to make
a quick phone call. Would you mind if we tried to track her
down?
The Chair:
No, go ahead; you've got a couple of minutes.
Ms Lohnes:
Thank you.
The Chair:
Welcome. If you wouldn't mind stating your name for the record,
please, and you have 30 minutes.
Ms Louise
Verity: Good afternoon. My name is Louise Verity. I'm
the policy director with the Toronto Board of Trade. Regrettably,
our president and chief executive officer, Elyse Allan, has come
down with the flu, so she send her regrets. I'm the poor
replacement.
With me today is Terri
Lohnes. Terri is the staff economist with the Toronto Board of
Trade and also very much our numbers guru.
It is my pleasure to
address the standing committee on finance and economic affairs on
what Toronto's businesses believe are the priorities in the 2000
budget. We will be submitting a detailed series of
recommendations to the committee shortly, and my comments today
reflect the major highlights. Our submission is based on two
pillars.
As a non-profit board, we
have a process that we go through in order to get to the point
where we can make our recommendations public. So we will have a
very detailed submission, in the neighbourhood of 17 to 20 pages,
and we hope to get it to all committee members by this
Friday.
First, in terms of our
pillars, the province must fine-tune the provincial economy
through debt reduction and corporate tax reform.
Second, the province must
strengthen Toronto through property tax reform, infrastructure
renewal and initiatives to assist the homeless.
The Toronto board has
supported many of the economic reforms initiated by this
government. Personal income tax reductions and deficit
elimination spur economic activity and result in a stronger, more
attractive Ontario for business.
We expect the Minister of
Finance to balance the budget in 2000-01. Now we must establish
an aggressive debt reduction plan.
1630
Forecasts for the
provincial economy are very robust, indicating that the province
will soon experience the same pressures as the federal government
in dealing with these types of surpluses. Spending should not
increase by more than population growth and inflation combined.
This still allows for increases in program spending around 3%
annually. We believe this is adequate.
The province must first
commit a substantial amount of potential budget surpluses to debt
reduction, then tax cuts, and then, only once these areas are
competitive internationally, program growth.
We believe the government
must continue its positive initiatives to reduce the taxes that
hard-working Ontarians pay.
Corporate tax reform also
must be part of the tax reform agenda and include, first, the
elimination of the Ontario corporate minimum tax, a competitive
disadvantage for businesses in Ontario; second, the reduction or
elimination of taxes on capital, a profit-insensitive tax that
deters businesses from growing in Ontario; and finally, the
harmonization of the provincial and federal sales tax regimes to
reduce business costs and increase transparency for the
taxpayer.
The province is well
positioned to continue its strong economic performance, but only
if it acknowledges and addresses the importance of Toronto to
this success. Ontario's economic success requires a strong,
vibrant and growing Toronto, which leads to the second pillar of
our submission. There are three criticals the government must act
on in this area. Business property taxes must be reformed,
SuperBuild must have a significant Toronto focus, and
homelessness must be addressed.
Last week, the Toronto
Board of Trade released Why Grow Elsewhere?, our recommendations
on property tax reform. I have brought copies for the committee.
Currently, Toronto's commercial and industrial tax rates are six
to eight times more than the total residential rate and more than
two times those of neighbouring jurisdictions. This is simply
uncompetitive. It means that our city is not as strong and
competitive as it should and could be. If the property tax
disparity is not fixed soon, jobs and businesses will be
lost.
The city of Toronto cannot
implement all the necessary reforms without assistance from the
province. Our report outlines in detail what the province must
accomplish.
The province must require
all municipalities to cap tax revenue from all property tax
classes with a tax ratio greater than the weighted provincial
average. To protect our communities, the province must create a
separate property class for neighbourhood commercial. These are
the smaller businesses, in most cases the street retail, that are
critical to the fabric of our communities and that populate our
main streets.
With respect to the
municipal education tax, the province must accelerate the
education tax reduction phase-in by 24 months. The board was
really delighted a couple of years ago-it was either in the last
budget or, I think, the budget before-when the province announced
the education tax relief. We still see this as a major impediment
and we hear from our members that the education tax component is
still the highest, really, in the province.
The province, with the
city, must also look at innovative tax-related financing tools to
encourage economic development and investment and how these tools
can be applied to Ontario.
The province must also
examine the continued applicability of the current value
assessment methodology in comparison to the value-in-current-use
type of assessment. We suspect the latter would reduce the impact
on small business.
Finally, the province must
implement a rolling average assessment for longer than three
years and consider instead a rolling average of nine or 10 years.
Earlier this week we saw the results of this with respect to the
potential changes, certainly the cyclical nature of what's
occurred in particular in the Toronto real estate market.
I refer you to our paper
for a more detailed explanation of the reforms.
Toronto's business
community is also very interested in and committed to improving
our roads, rails and transit systems. We commend this
government's announcement of the SuperBuild program in response
to these challenges. SuperBuild's priorities must focus on
projects that have the greatest economic return for the province.
Projects related to the Toronto area accomplish this objective.
The Toronto board offers to work with the province to identify
projects that provide a positive economic return and attract
private sector partners to the table.
Finally, I will close by
talking about homelessness. I want to raise the concern the
Toronto board has for the rising incidence of homelessness. There
is a provincial role to play that extends beyond the commitments
made so far by this government. Access to affordable housing is
one of the key elements in reducing the incidence of homelessness
in a city like Toronto.
Specifically, we encourage
the province to, first, examine the potential for public-private
partnerships in providing affordable housing; second, waive the
PST on materials used in constructing affordable housing; and
third, examine the feasibility of expanding the provincial rent
supplement programs to assist families and individuals who are at
risk of becoming homeless. These are some of the initiatives with
minimal cost that can make a difference for our city's
homeless.
We believe the framework
presented today is achievable for this government. To that end,
we offer our support and assistance in achieving these
recommendations. I'd be pleased to answer any questions you may
have.
The Chair:
Thank you very much. We have approximately six minutes per
caucus.
Mr
Christopherson: Thank you for your presentation. I noted
that on the first page you state, "The province must first commit
a substantial amount of potential budget surpluses to debt
reduction, then tax cuts, and then, only once these areas are competitive
internationally, program growth."
We had a presentation
earlier today, in fact the one before yours, from the nurses. You
may have heard some of that presentation, speaking to the
deficiencies-crises, actually, in some cases-that exist in our
health care system right now. We heard just a little earlier
today from women making presentations about the cuts to first-
and second-stage housing, women who are facing abuse, who are
fleeing an abusive situation. Both the shelters where they go as
a first stage and then an interim housing accommodation with some
supports as the second stage-both those programs have been cut
severely to pay for part of the tax cut. We know, through
submissions made to this committee, that there are serious
problems in child care provision in the province of
Ontario-again, cuts in those programs to pay for the 30% tax cut
that so many hail as being so wonderful. Education: We've had
teachers, psychologists, psychometrists coming in and talking to
us about the crisis that exists in our education system in terms
of not having enough educational assistants for kids with special
needs, not enough support services for children, especially in
the inner cities, for instance English-as-a-second-language
programs. All of these things have been cut, cut, cut. Protection
for our environment-that affects the health of our children, the
health of our communities.
Yet with all of that,
you're still maintaining on behalf of the board of trade that all
of that is secondary and that the number one priority has to be
the debt, and then the number two priority is more tax cuts, and
then, and only then, start to address some of these other issues.
You feel that 3% at the most ought to be what's spent on those
areas. I have some trouble understanding how you believe that's
going to give us a stronger community and a stronger economic
unit-not just social, but economic unit-in the future if we
actually followed what you're recommending and ignored all these
crises that affect so many people.
Ms Verity:
Thank you for your question. In responding to you, I'd have to
come at it from a number of different ways.
The first is that
obviously, in terms of being government, you will hear a variety
of recommendations from a number of different groups, many of
them in direct contrast with one another; certainly a number have
been put on the table now. Our feeling from a business standpoint
is that at this point we have an operating budget in the province
of over $50 billion. The challenge is, how can we best allocate
those dollars in such a way that those who need the supports and
the types of programs get those services the most? That is a
tough decision that requires making some tough choices. That's
not to say that we have the best mix right now. From the Toronto
business community's perspective, our sense is that there is one
taxpayer. People are feeling as though taxes are a very serious
problem. In order to protect the economy to ensure that people
have jobs, to ensure that we have health care, to ensure we have
a strong education system, to ensure that we have a strong
training system, we have to make sure we have a strong and robust
economy that will prepare us for the future so we can deliver
these types of programs and services.
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Mr
Christopherson: Fair enough; I understand that
perspective. My difficulty is that all of these cuts and crises
are happening at a time when we're in the biggest economic boom
that North America has ever seen, led by the American economy. If
we can't solve these problems in the good times, how can we
possibly-I can't imagine you rolling in here in three or four
years, if we're in the ditch economically, saying, "It's time now
to spend a whole lot more money in education, health care,
environmental protection." If it's not going to happen in the
good times and it's not going to happen in the bad times, when is
it going to happen? I say this very sincerely.
For a lot of people in
Toronto and elsewhere across the province-and I referenced it a
number of times today. There's a story on the front page of the
Star today about a man for whom doctors spent five hours trying
to find a bed in an emergency. They didn't. There may be an
inquest as to whether that delay caused his death. His wife is on
record as saying, and I'm paraphrasing, that the irony is that
her husband supported all these cuts, but he found when he needed
the system it wasn't there. Why wasn't it there? Because in order
to give the tax cut, which even this gentleman thought was good
at the time, it has to be paid for from somewhere. Part of it is
coming out of the health care system and part of it is coming out
of the education system.
I have trouble
understanding why people should believe that a 20% or a 30% tax
cut, of which the average middle-class person doesn't get the
best benefit-it's the well-off who do-is a good deal when the
price is the education system for our kids, child care services
for our kids, environmental protection for our kids and the
health care system for our kids. How can this possibly be a fair
deal? If we don't deal with it now, when are we ever going to
deal with it? It's not going to happen during the bad times.
Ms Verity:
In terms of responding to that kind of question, if we had the
kinds of dollars that we're spending in debt service charges and
other ways-we're spending more still on debt service costs. I
think it is somewhere in the neighbourhood of $9 billion. That
would more than fund the education budget, probably the two
education ministries combined. You reach a certain point where
the cost of not doing the right things with the economy can
result in some consequences that are extremely dire, and more so
perhaps than we have today. What you're hearing from us is about
protecting the future of our children.
Mr Galt:
Thank you for your presentation. I'm not surprised that it was an
excellent presentation, coming from you.
I was just listening to the
opposition and some of their comments. I don't know how many
times he has brought up the front page of the Star. I guess their
party's policy is
based on the front page of the Star. This happened last July; it
wasn't yesterday. The subheading is, "Doctors Disagree Whether
Delay Caused His Death." Aortic aneurysms are very dangerous
things, just to put it into perspective. We've been ranting and
raging about the front page of the Star most of the day and I
think we could put it to rest.
Looking at some of the
property taxes, I want to ask some questions. We had a
presentation earlier from the Greater Toronto Hotel Association.
In 1998, property tax as a percentage of hotel revenue per room
in Toronto was 13%; in Los Angeles it's 3%. Both councils have to
run a city. I have difficulty understanding why there would be
that big a percentage difference. Also, he told us that in
Toronto it works out to taxes of $5,000 per room and, if my
figures are right, in Mississauga, a hotel right next door, it is
$1,400 per room. When I was on the Hydro select committee a
couple of years ago, we were told about the horrendous difference
in rates between Mississauga versus Toronto. Why is Toronto in
this much trouble with property tax when Mississauga isn't?
Toronto is booming as well. It's the engine of Ontario, as
Ontario is the engine of Canada. Why? I don't follow what's
happened here.
Ms Verity:
The situation in Toronto is somewhat unique. A big part of that
had to do with the fact that until the changes were made in the
later 1990s, moving to a current value type of system, it was
very difficult to assess the differences from one location to
another. Now our system is completely transparent, so you can see
the differences in a much clearer way. As well, historically
Toronto was one of two cities in the province that actually paid
full freight for education. This is a result of the historical
funding formula. But really what's happened is that over the
years the decision has been made that in order to deal with new
expenditures, whether it's for programming or maintaining
existing programming, that money would come from any type of
property class outside of the residential sector.
While our report is very
much geared to the commercial and industrial sector, about one
third of the benefit of our recommendations would go directly to
the multi-residential sector in Toronto. If you look at the
number of renters-and, granted, this wouldn't cover
everyone-about 53% of all Torontonians actually rent their
accommodations, so the benefits would actually go to them as
well. But in Toronto it's a very complicated system and it has
evolved over a number of years. It's a difficult sell.
Our feeling in talking to
our members is that it is a very serious problem that has to be
addressed. The reason why we picked this as the time to come
forward is that we've got a couple of things happening this year.
One is a municipal campaign. Secondly, the 2.4% cap will expire
at the end of this year, which means no holds barred; there will
be incredible changes if some action isn't taken.
Mr Galt:
It will be looked at again.
Just one other area I'd
like to go into for a moment and that has to do with
harmonization of the retail sales taxes. In theory it sounds
good, but every time our Minister of Finance has had a look at
it, as I understand, it just means more tax from the public. It
goes into different areas because it's the services, whereas our
provincial sales tax is more on goods. There doesn't seem to be
an easy way to bring them together. In theory, yes, it is good.
But to make it work in practice, do you have any suggestions?
Ms Verity:
I'll have Terri answer that question.
Ms Lohnes:
You're quite right: Harmonization of the two taxes is rather
complex given that they tax two different tax bases. One of the
recommendations we've made in the past and continue to make
around this is that Ontario would be the linchpin in a
harmonization right across the country. One of the leverages that
the province could have is exploring the application of the GST
in a combined system. We believe that the province can in fact
have leverage in deciding what a harmonized tax would actually
tax, that you wouldn't have to have the PST necessarily moved to
the full GST base. We also think there's an opportunity for a
rate reduction in a combined PST-GST system which would mitigate
some of the base-broadening impact on taxpayers. There are some
options that could be looked at in dealing with the harmonized
system that would make it perhaps more attractive than it seems
on the top.
Mr
Phillips: Just a comment on the health issue because the
other two parties have commented on it. The reason that it was
commented on this morning was-I'll give you a specific example. A
young lady in my area went to the local hospital. She was eight
months pregnant and got a brain haemorrhage. The hospital made 21
phone calls trying to get her a bed in Toronto and couldn't. She
was transported to Hamilton but couldn't get an air ambulance.
She got there and she passed away, tragically. This was two and a
half years ago. I pushed to have a coroner's inquest. It took me
two years to have that-me and others pushing it. They made
several recommendations. Then I read today the exact same
conditions existed when someone else passed away. That's perhaps
something to do with the board of trade but not directly on your
presentation.
I wanted to ask a couple of
questions. You mentioned the homeless, that it would require a
partnership between the private and public sector. I'll ask both
questions and you can comment on the public sector
involvement.
I carry this around with
me. It is a document called Ontario, Canada: The Future's Right
Here. It says in this document: "`Downtown core service sector
operating costs lower in Ontario: The overall costs of running a
financial services business with 100 staff and 20,000 square feet
of space in downtown Toronto is 26% to 48% lower than in downtown
Atlanta, Dallas, Chicago, Boston, Jersey City, San Francisco, Los
Angeles or New York,' according to a June 1998 KPMG business cost
comparison." I'm wondering, and I've read the briefs of the Board
of Trade, which are always excellent, but why would the government be saying
that the costs are that much lower in downtown Toronto, ie, 26%
to 48%, when the facts you're presenting would indicate something
different.
1650
Ms Verity:
First of all, in terms of looking at that report, I've seen it.
It has crossed my desk at a point in time. I haven't had a close
look at the methodology, so I'd have to do that, and Gerry, I'd
be pleased to do that and get back to you. Terri may actually
want to comment on that.
What I can tell you is I
had a conversation earlier today, and it was with a retailer.
This is a group that has stores across the country, stores in the
downtown area, and I think I was told that the median price per
square foot-and this is a predominantly Canadian business-is
something in the neighbourhood of I think $1.83 per square foot,
that was the median price. The price in Toronto, and this isn't
in the Bloor Street area either, is somewhere in the
neighbourhood of $5.83. That was a telling example that just
crossed this morning. A business person called up and said: "You
know, we've seen your report. We like the message that you're
trying to put forward. We understand that it's a difficult one to
sell, but, look, we agree and this is what we're hearing." Then
we say: "Can we use your name?", and they say: "Oh no, no, that's
a tough one."
In terms of the KPMG
report-Terri, have you had a look at it?
Ms Lohnes:
Yes. That was an interesting study, but when you actually come
down to what one of the major cost competitors was for Toronto,
it was the dollar and the fact that our dollar was so low,
particularly about a year and a half and the two years ago when
this study was done. Because you have such a low Canadian dollar
when you look at purchasing power with US dollars for Canadian
retail space, it becomes very cheap in that respect, but if
you're within Canada, you don't have US dollars to buy the space,
or to run the space. That was one of the things. When you factor
that in, the disparities shrink significantly between some of
those other major international jurisdictions. As well, they
factor in a lot of other costs which aren't directly paid by
businesses in running their retail but in fact come in other
ways, through payroll taxes and those sorts of things that don't
immediately show up on the bottom line.
Mr
Phillips: You recommend the province create a separate
property tax class for neighbourhood commercial. Your members
believe that would be an important element in dealing with-that
seemed to be the group that was most dramatically impacted by the
changes. Do you think that would be a significant move by the
province?
Ms Verity:
We think that actually could be a significant solution to part of
the move towards CVA. The point that I would put on the table,
though, is that cannot be the only step that the province
takes.
I don't have all the
numbers in front of me, but just going on memory, what we looked
at there was roughly five different codes and classifications,
which would pick up many of the street retail and others who were
negatively impacted. What we found in 1996 when we first started
running these numbers is that about 75% of all businesses would
actually have increases under the move to a straight CVA type of
model, so this is really seen as a way to protect the types of
businesses that are really instrumental to community.
The Chair:
It looks as though we've used all our time. On behalf of the
committee, thank you very much for presentation this
afternoon.
COUNCIL OF ONTARIO UNIVERSITIES
The Chair:
Our next presentation this afternoon is from the Council of
Ontario Universities. If could you please come forward and state
your name for the record.
Dr Ian
Clark: It's a pleasure. My name is Ian Clark. I am the
president of the Council of Ontario Universities. I will be
joined soon by Rob Prichard, the president of the University of
Toronto and the past-chair of the Council of Ontario
Universities. Professor Prichard is meeting with the minister at
the moment, and he'll be here momentarily, but I can begin if you
wish.
The Chair:
Certainly. On behalf of the committee, welcome. You have 30
minutes for your presentation this afternoon.
Dr Clark:
I have distributed our brief. We have two visual aids which my
colleagues are mounting. When Professor Prichard comes, I hope he
gives an impassioned description of why the Ontario universities
have need of further support and assistance from the people and
the government of Ontario.
Let me give a little bit of
background information before he arrives. I'd ask the members of
the committee to turn to page 6 of our brief. Page 6 and the
succeeding pages contain no requests for funds or further
attention from the government of Ontario. They are intended to
describe what the universities themselves are doing to respond to
the challenges that face the higher education sector in Ontario.
They're meant to try to address the perception that somehow
Ontario's universities have been insulated from the pressures to
be innovative, efficient and responsive, behind their ivy-covered
towers.
Let me just point out some
of the things that have been going on in Ontario's universities.
First of all, I'm relatively new to the position of president.
I've taken the opportunity to look around at other jurisdictions
and how they manage the universities. I guess my sense is I
haven't seen any jurisdiction in the world where the university
sector makes more efficient use of the resources available and is
more innovative in the way they're doing that.
In the examples shown on
page 6, we have constituted-it has just about completed its
work-a task force on learning technologies to make sure that
Ontario universities are at the leading edge in the use of new
technologies. We have a very impressive collective effort to
digitize all the library resources of Ontario's universities and potentially
to extend that out to the college sector and the rest of the
school sector, which is a tremendous example of collaboration
among the various institutions.
Under the "Responsiveness"
bullets, the Ontario universities responded very quickly and
effectively to the government's access to opportunities program
so that there are now 23,000 more new spaces in these high-tech
professions, more than the government had originally targeted.
Similarly, with respect to teacher education and nursing
education, when the government has indicated a need for education
in particular areas, the universities have responded promptly and
provided the necessary spaces. On college-university
collaboration, we had been working hard with the colleges and
signed this college-university degree-completion accord.
On the next page, under
"Economies and Efficiencies," it goes through a standard list of
what members of the Legislature would want to see in their
university sector, taking maximum advantage of co-operative
purchasing, revenue generation, contracting out in efficient ways
to deal with administrative services. When one looks at the
overall administrative efficiencies of Ontario universities, they
have the lowest expenditures on general administration as a
proportion of total expenditures of any of the Canadian
jurisdictions.
1700
Finally, on page 10, under
"Accountability," Ontario universities provide information
publicly on graduate employment rates, degree completion rates,
and OSAP default rates. We have commissioned a study, which is
nearing completion, by Dr David Smith who is the former principal
of Queen's University, to look around the world at quality
indicators and measures of quality enhancement that other
universities and university systems use to make sure that Ontario
universities have access to the best available practices. We are
working with the ministry and the minister to address the issues
raised in the last report of the Provincial Auditor. I guess the
point we would like to make is that Ontario universities are
devoting a great deal of attention to making the best possible
use of the public resources that they are provided with.
Turning now to the earlier
part of the presentation, the two charts that I have beside me
show the nature of the challenge that we face. Committee members
have probably seen versions of this chart. This shows the
dramatic increase in demand for university placements that we
anticipate. I know that some of the previous presenters before
you have described the impact of that. We're facing a significant
increase in the work we have to do, of 20% or 30%.
This side shows the
challenges that we face relative to our competitive
jurisdictions, whereas Canadian jurisdictions generally have
actually reduced their expenditures on higher education over the
last four or five years.
Every American state-it's
quite remarkable when you look at it, and many of these states
have been reducing their personal taxes and so on-has found it,
for whatever reason, and it's kind of puzzle, to be good public
policy and a good investment to invest massively, increase
massively in their higher education systems. This is, as you
know, a highly competitive area for professors, for research
dollars, and even for our best students. While we face this
increase in demand which is much greater than most American
jurisdictions face, they have been investing at a rate that is
dramatically more than Ontario and most of the other Canadian
jurisdictions.
The four parts of our brief
then can be found starting on page 2, and we've presented this in
terms of a shared challenge that we think that the facts of the
enrolment increase indicate some government action.
This is, as many of you
will recognize, my colleague Professor Prichard. I've just
finished setting the table for you here, Rob. This is getting
some of the background, demonstrating how efficient Ontario's
universities are, for which I take no credit. As I said I'm
relatively recent to the scene. As some of you may know, this
will be Professor Prichard's last presentation to this committee
on behalf of universities, at least for a long time, and I
thought this might be a nice occasion for Professor Prichard to
give some personal thoughts.
Mr Robert
Prichard: Let me begin by apologizing for being late. I
was meeting with the honourable Minister of Training, Colleges
and Universities for the past hour, and she kept me five minutes
longer than I hoped she would. I hope you'll excuse me for being
late.
While breathless, having
just run here from there, I'm grateful for the opportunity to
represent my colleagues at the Council of Ontario Universities. I
am the past chair of council, having served as chair for two
years. Professor Davenport, the president of the University of
Western Ontario, is not able to be here today. He was here
yesterday to meet with Minister Eves and asked me to appear on
his behalf today.
As Dr Clark indicated, and
I notice it brought a smile to the faces of those of you who have
heard me before, this will be my last time. I saw Mr Phillips
say, "Thank goodness this is the last time." I think I've
appeared here seven times over the past 10 years-
Mr
Kwinter: Who's counting?
Mr
Prichard: -to try to put to you, and through you to the
people of Ontario, as best we can, the case for investment in the
future of our young people. I'm here to do it one more time, but
I'll confess that I think the stakes for the young people of
Ontario are greater today than on any of those previous occasions
on which I've had the privilege of appearing.
For me, the moment in time
you and your colleagues in government face is comparable to the
moment in time immediately following the Second World War, when
the troops came home and there was a need for radical expansion
of the capacity of our public university system to respond to
their needs. Similarly, it's comparable, I believe, to the period
in the 1960s and early 1970s, when the children of the troops who
had come home came to the university level-I was one of them-and
where again there was
a need for a major expansion. We had the Davis-Robarts policy of
that period, the expansion of the public university system and
the introduction of the colleges to meet that need.
This is the third great
wave of the post-war period that's now upon Ontario. Just as
Ontario responded, I think magnificently, in the post-war period
and in the 1960s, we have to do it again if Ontario is to be as
prosperous and as good a place to be for a family, as good a
place to work, as good a place to live, for the next 25 years as
it has been for the last 50. This question that you face now, I
believe, there is no question more important than the investments
we will make in the intellectual and human capital of our people
over the next couple of years to prepare ourselves for this next
decade. There is no more important question for the future of
Ontario than this.
As Dr Clark has explained,
we face a major increase in the number of students who will want
to attend our institutions. This happens at a time when every
observer from left to right, anywhere around the globe, concedes,
acknowledges that it will be the quality of people's minds, the
power of the mind-it will be human capital, intellectual
capital-which will be determinative of the relative success of
jurisdictions in the global economy. This convergence of the
importance of intellectual capital with the demand that's coming
from all these students-we can see them all. They're all in grade
school and high school already. This isn't a prediction based on
fantasy. These students are countable. These students can be
counted. We know we must meet their needs. We know we must give
them a terrific opportunity if we want to give Ontario an
opportunity.
All I say to you in the
context of all of this is please get it right. For the sake of
not just the young people of Ontario who want these places but
for the sake of all of us in Ontario, please get this as right as
your predecessors did in the 1960s and in the late 1940s when the
two previous waves of great change in our system had to be
met.
1710
We have put forward a plan.
We have worked closely with the government. We have worked
closely with Pricewaterhouse Coopers. We have worked closely to
develop, we think, an intelligent, workable, measured plan to
make sure Ontario gets this right for the next decade.
I'm in a happy position, in
terms of my employment. Whether we get it right or wrong will not
affect my life in any direct way, because I won't be the
president struggling to make it work the way it's been my
privilege to for the past 10 years. But if I pull back from being
the president to just being the parent that I am, with three
children, all of whom will go through this system during this
period of expansion, as a parent I ask you to get it right, I ask
you to attend to this issue, I ask you to attend to creating the
additional places, making the additional investments in research
and innovation, the additional investments in our physical plant
and in our capacity to renew our physical plants, our investments
in faculty renewal, our investments in student financial support.
We set this case out. We need the government of Ontario, the
people of Ontario, to embrace this cause for the sake of all of
us as Ontarians, as parents, as young people and as teachers. All
of us have a stake in getting this right.
I have to confess that I'm
not confident we will get it right or that we are getting it
right yet. There are some very encouraging signs. We've made some
real progress in the last two or three years. The Ontario
challenge fund is making a real difference. The Ontario
Innovation Trust is making a powerful difference. I expect the
SuperBuild investments that will be announced in the weeks ahead
will make a powerful difference. The access to opportunities
program, which doubled computer science and electrical
engineering, has made a powerful difference already. The Ontario
student opportunity trust fund has made a powerful
difference.
We've had a number of very
positive developments, but what we need now is to pull that
together with a multi-year plan with the adequate operating
support to our institutions to allow us to take full advantage of
each of these individual initiatives that have been taken and to
ensure that we have the opportunity for our young people coming
through.
I'm not at all here to
complain. I actually come here with gratitude for numerous
important steps that have been taken in the right direction and
to endorse them and to underline what a difference they have
made, but also to say we cannot relax, we cannot back away.
Indeed, we have to take even bolder steps, because the pace of
change facing us is much greater going forward than it is looking
backwards.
Just as Ontario faces this
challenge, as our charts will indicate, other jurisdictions have
noticed this same challenge. Other jurisdictions have understood
and have come to the front of the pack in the race to be
competitive in the global economy. You'll see the chart behind me
which shows that Ontario has not yet been a leader in this
process, that Ontario needs to catch up and accelerate and go by
other jurisdictions.
We're here to say please,
as a finance committee, advise the Minister of Finance that he
must assign the highest possible priority to investing in the
future of our young people in our universities and colleges. I
hope you will commend to him the specific recommendations we have
made in our brief. I hope you will urge him to build on the
successes of the last three or four years and get Ontario from a
position where we're playing from behind to get Ontario
accelerating to a position of leadership not just in Canada but
in North America and around the world.
As the province's economy
has begun to roar, as we're beginning to experience the fiscal
dividends of that tremendous financial success, this is the time
to lay the foundations of opportunity for our young people and
the future prosperity which we're now enjoying because of the
investments that came before.
Mr Chairman, thank you for the opportunity to
make that rather personal statement. My colleague Dr Clark will
have the last word.
Dr Clark:
Just to note the four specific areas that our brief refers to-as
I said at the outset, we have presented this as a partnership;
we're not coming asking the government to solve all the problems.
We have the framework of a plan, as Professor Prichard has noted,
and this requires significant action on the part of the
universities, and each of the proposals has with it a commitment
and an expected result. That is the way we have put forward the
framework.
We would be pleased to
respond to any questions.
The Chair:
We have four minutes per caucus, and I'll start with the
government side. Mrs Molinari.
Mrs
Molinari: Thank you very much for your presentation. It
was certainly very comprehensive. Showing the graphs is a good
visual to see exactly where we are and where we need to go in the
next few years.
As you have met with the
ministry, you're aware of a number of initiatives-and you've
highlighted some of them-the government has done for student
assistance and to provide for the needs we see coming forward.
It's a challenge for any government to balance all the needs
within the system with all the requests, within the limited
envelope we have to work with. Your expertise-and I know the work
you've been doing with the minister and the ministry-is helpful
to us as we move forward to make the decisions we need to make
that are so necessary.
We had a presentation
earlier from another organization, the Ontario Confederation of
University Faculty Association. They didn't call it KPI-the key
performance indicators-but I think that's what they were
referring to. Can you talk a little about how you feel about that
inevitability?
Mr
Prichard: First, I should say that I commend the brief
from OCUFA. I have read all the briefs you have received from the
student groups, from the faculty and from ourselves. There are
some points of difference on certain policy issues, but
fundamentally I think they are all saying the same thing about
the need for investment in opportunity to reap dividends for the
province.
On the issue of performance
indicators, the province's universities have all embraced
performance indicators as a way of judging their own
contribution, measuring their own success in meeting their
missions. The Council of Ontario Universities led an important
performance indicators exercise, which has now been taken down
into each of the institutions. Most of the universities now
publish a significant number of performance indicators about
their performance. My institution does, but I say that not to be
boastful; it's but representative that we publish annually a
significant list of indicators.
In addition the province,
in partnership with us, has mandated that we publish certain
indicators ourselves every year. The two indicators that we
publish are, first, the default rates on OSAP loans and, second,
the employment rates of our graduates six months after graduation
and two years after graduation. These are both mandated. They're
on our Web sites, and each of us publishes them.
If I can just comment on
what we see, first, with respect to default rates, the default
rates on student loans are dropping quite sharply. They're down
by about a third this year. Even though universities have by far
the highest tuition, university default rates are the lowest;
public colleges, as a group, are second; and private vocational
schools have the highest default rates, on average. So it's
interesting to see that despite the tuition, because university
graduates do so well, they are handling their student loans
better than the graduates of the other two places. As I say, the
default rates came down by a third this year, and they are quite
low at most institutions.
Second, on employment, the
results are extraordinary. The results on employment two years
after graduation-again, these are posted on all our Web
sites-show that medicine, law and dentistry are all 100%. Two
years after graduating, 100% employment. Then it drops all the
way down to 96% employment in the case of arts and sciences
undergraduates in humanities. The band is from about 96% to 100%
two years after graduation. They are extraordinarily powerful
figures showing the virtues, as a performance indicator, of the
significance of the investment that the student and the public
make in this experience.
So we embrace the
indicators. We are pleased to participate in that program, and
most of us have many more indicators that we publish on an annual
basis as well.
1720
Mr
Phillips: First, I congratulate you on a terrific job at
the U of T. It's one of the most difficult organizations to lead,
and you've done a great job. It's very complex, and you leave it
a much strengthened operation, with a very good financial
resource base as well, if I'm not mistaken.
Mr
Prichard: Thank you for that. Coming from you, it means
a lot to me.
Mr
Phillips: The Premier's job is difficult, but being
president of the U of T is probably slightly more difficult.
These are very useful
statistics, by the way, indicating that over the next five years
enrolment will go from around 240,000 to a little above 300,000,
which is quite an enormous increase. I gather that the students
now are paying 35% of the cost and other sources 65%. What would
be your advice to the committee about what we should be looking
at for the next five years in terms of who pays what, and how
much you think the provincial government needs to be looking at
to maintain a quality education system?
Mr
Prichard: Thank you for the question. Our position is as
follows. First, the expansion of opportunity that is required
cannot happen on the backs of students. We do not think it is
possible to imagine that any tuition fee policy can solve this
problem. This problem is only going to be solved through
significant new public investment.
Second, the universities
believe it is fair for the students to pay a fair share,
recognizing that that is a malleable concept and there is room for debate
as to exactly what is a fair share. I know of no university
president who believes it would be good public policy to have the
provincial investment, going forward, at a level any less than
the existing level of investment per student. I think it's the
case that every university president believes the investment per
student needs to go up over current levels in order to not create
enormous pressures on the tuition side.
The universities view it as
a case where we must have a fair and adequate public investment
and then leave it to the individual university and its students,
program by program, as to how much the student might be asked to
pay. The term we have used is not very elegant term-it's full
average cost funding. It must be done with new investments per
student that are at least as substantial as they are at present,
while trying to find ways to enrich the quality of the experience
through specialized envelopes of intervention. We do not wish to
associate ourselves with any view that this expansion can be done
on the backs of the students alone.
Mr
Phillips: Using that kind of benchmark, that would
indicate we should be looking at a 25% increase in provincial
support for university and college operating expenses over the
next four to five years. I think the enrolment is going up about
25%.
Dr Clark:
That's absolutely correct.
Mr
Phillips: So is it fair to say that the university
presidents feel that would be the base requirement?
Mr
Prichard: I think you've added the important word. What
we've recommended in our work with the government is that we make
a base investment to expand places based on the same per student
funding we receive at present for the existing students. That
would lead to a figure a bit north of where you are, in terms of
the exact number. It depends which year we get to, in terms of
growth.
Second, we've tried to
identify very specific needs where Ontario needs to strengthen
its performance and not stand still. We want to strengthen
performance. In particular, we want to bring down class size and
increase student contact with individual faculty members and give
them more individualized attention. We want to strengthen the
research and innovation performance of our institutions. These
additional goals require investments on top of that base rather
than being accomplishable within the base to which you refer.
Mr
Christopherson: Thank you for your presentation.
Hopefully you will be more successful than we have been at
getting the message through about the importance of getting
funding where it needs to be for our post-secondary
institutions.
To set a context for the
comment I'm going to make, I want to refer to a brief that was
presented within the last couple of hours from the Toronto Board
of Trade. In their brief they say, "The province must first"-this
is their top priority-"commit a substantial amount of potential
budget surpluses to debt reduction, then tax cuts, and then only
once these areas are competitive internationally, program
growth." Earlier, they make the statement that no increase in
program spending needs to be above 3% annually. So I leave that
contextually. When you presented this, that's pretty terrifying.
That ought to tell the message. Most of these jurisdictions are
close to our borders, so they are our trading partners. That's
who we compete with. It's also the home country of the economic
boom that's driving the economic boom that we are enjoying. Not
one of these is in deficit. In fact, they're way out in front in
terms of the money they are spending. And there's Ontario at
minus 8%.
Would you, just in your own
words, to help nail down the message, state why it makes not just
good social planning sense but economic sense to make these
investments, so that those who are coming in and saying,
"Spending anywhere is not as important as cutting taxes more or
paying off the debt quicker"-because that's their message. They
are keeping it very straight, and this government listens to
that. We've got to get a message through that economically we
can't afford not to be investing in other key areas of our
economy, and the university system is one of them. McMaster
University is in my new riding of Hamilton West. Help us get that
message through. In your own words, please tell the government
members why there's an economic argument to this, why it's not
just some kind of fluff program where we should only spend
someday down the road when we've got enough bucks floating around
doing nothing else.
Mr
Prichard: I believe it is the case that there is no
investment any jurisdiction can make that has a higher rate of
return in terms of economic benefit in the economy of the 21st
century than investing in human capital. Second, I think it's
clearly the case that Ontario's investments in human capital have
lagged behind our investments in other aspects of our social and
cultural infrastructure, and that we need to repair that
situation. Third, I believe it's the case, and there's abundant
evidence, that the specific new investments that have been made
in Ontario over the last three years have paid dramatic and
virtually immediate dividends. We have doubled enrolment in
computer science, electrical engineering and computer engineering
across the province. That is moving faster than any other
jurisdiction I know in North America. Of the 60 jurisdictions,
we, I believe, in Ontario have moved the fastest and the farthest
because of that investment.
The Ontario challenge fund
is at the cutting edge of the kinds of partnerships that can be
created between government, universities and the private sector.
It's paying immediate and substantial dividends and will continue
to do so. The Ontario student opportunity trust fund, an
investment where the province's money was doubled literally in
the course of the year of endowment for student aid-these
initiatives and investments show immediate and powerful
dividends. Our problem and the province's challenge is how to
deal, not looking backwards but looking forwards, with another
90,000 students about to arrive, each wanting that opportunity,
and with our
competitor jurisdictions taking advantage of their strengthening
financial situation to lay the foundations for their next century
of success. Ontario can't look at itself and be complacent.
Ontario has to look at the competition.
The Munroe-Blum report that
was done looked at the competition, at the government's
invitation looked at Michigan and compared. We must move much
faster if we're going to keep pace with the state of Michigan,
which is right across the border. That's not a criticism of the
past. I'm trying to endorse the initiatives that have been made,
because they've made a powerful difference. But I'm saying we
cannot be complacent. We must make these investments. We must
make them now. Whatever the Board of Trade's brief might have
said, I believe the case that I'm making to you today is not a
case from university presidents; that same case is made to me
over and over by leaders in the private sector and leaders in the
public sector. Leaders in the public and private sectors around
the world are taking this message to their governments. I fear
that if we don't embrace this case, we will find ourselves
falling behind. Our ambition as a province is to be the best
place to work, live and raise a family. An essential element of
that capacity will be investments of the kind that are described
in our brief.
1730
The Chair:
On that positive note, we've run out of time. Gentlemen, on
behalf of the committee, thank you very much for your
presentation this afternoon.
ALLIANCE OF MANUFACTURERS AND EXPORTERS CANADA,
ONTARIO DIVISION
The Chair:
Our next presentation this afternoon is from the Alliance of
Manufacturers and Exporters Canada. Welcome. Could you please
come forward and state your name for the record. You have 30
minutes.
Mr Ian
Howcroft: Good afternoon, Mr Chair and members of the
committee. First, I'd like to say thank you very much for the
opportunity to present this afternoon. We appreciate that. My
name is Ian Howcroft, vice-president of the Ontario division of
the Alliance of Manufacturers and Exporters Canada. With me are
Joanne McGovern, our director of taxation at the alliance, and
John Allinotte, director of corporate taxation at Dofasco, one of
our member companies. John is also a member of the Ontario
division board of directors and chair of the Ontario taxation
committee.
The alliance was created
almost four years ago with the merger of the Canadian
Manufacturers' Association and the Canadian Exporters'
Association. We're a voluntary association with thousands of
members across the province and across the country. Our
membership is composed of companies of all sizes and from all
sectors of manufacturing. Over one million individuals are
employed directly by manufacturers and exporters, and another two
million people's jobs are dependent on the manufacturing sector.
It's also important to note that the members of the alliance
produce approximately 75% of Ontario's and Canada's manufactured
output. Our members are also responsible for approximately 90% of
the province's and the country's exports. It may sound trite, but
it's true: The manufacturing sector is the engine of the
economy.
What we're going to present
today in our brief are 13 recommendations that basically fall
into three categories. The first are three general ones.
Secondly, we have five that are targeted tax reform
recommendations. Finally, we have five that are administrative
tax recommendations.
I will turn to the experts
that I have with me this afternoon, Joanne McGovern and John
Allinotte. Joanne will be taking us through the general
recommendations.
Ms Joanne
McGovern: The general recommendations that the alliance
has put forward are, first of all, to commend the government for
balancing last year's budget and also for introducing Bill 7, the
act to balance the budget. We encourage the government to
continue to balance the budget, including the upcoming 2000
budget being introduced this spring.
We also commend the
government in paying down the deficit and encourage continued
paying down of the deficit and to start to also pay down the
debt.
Thirdly, we'd like to make
a point that we also support the recommendations in the strategic
skills initiative contained in last year's budget and wish to
extend our support for more support in this area, including an
industrial training tax credit.
I will now pass it on to
John Allinotte, who will detail the targeted tax reductions.
Mr John
Allinotte: I noticed on the list that we're the last. I
used to teach tax in university too, and I used to get a class in
the afternoon, so I'll try not to bore you with a lot of
detail.
I was interested in the
presenter who preceded us, talking about the need to invest in
education, in our young people and the capital assets. From our
vantage point, the members of the alliance feel that investment
is certainly necessary. However, we have to ensure that we have
someplace to put these people to work. Right now, we don't. We're
seeing an awful lot of our people going. I read an article from
Mr Manning this morning that isn't talking about personal income
tax rates causing the brain drain; it's the high rate of
corporate tax.
So one of our
recommendations to you is to take a look, now that we are on the
surplus side of the balance sheet, and possibly consider reducing
the corporate income tax rate in the province of Ontario,
remembering that our competitor is not just south of the border;
it is in the world.
The next item on the list
of recommendations goes to the capital recovery system. As you
all can appreciate, the manufacturers in the province of Ontario
spend billions of dollars in hard assets that we lay in the
ground, and to pay for them we need cash flow. One of the things
that was in the system in prior years was the current cost
adjustment, and we would recommend that you consider re-implementing that. That was
repealed by the previous Ontario government. Alternatively, going
back to the accelerated write-off on manufacturing equipment,
this was introduced in 1972 and I can speak for the steel
industry that between 1972 and the early 1980s, there was almost
$5 billion worth of capital assets put into this province solely
because of that initiative.
The other initiative that
we strongly suggest you consider is the abolishing of the
corporate minimum tax. Again, this was introduced by the previous
government. It was more of a nuisance tax than anything else, but
it is perceived by possible investors as something they would shy
away from, coming into Ontario. We understand that with the high
rate of the economy and the high amount of taxes now being paid
by corporations, very little is being collected out of the
corporate minimum tax, so again we suggest that it be
repealed.
The fourth item is the
abolishing of the capital tax. Like the minimum tax, we find it
to be a nuisance. It's directly targeted to the manufacturing
group that is required to invest large amounts of capital into
our plants. If an abolishment of it can't be done, one of the
recommendations is that we at least consider using the capital
tax as an offset to the regular income taxes.
Fifth, we certainly commend
the government for the initiatives they have made in the area of
reducing personal income taxes. It is certainly something that we
encourage you to continue to do. It directly affects the costs of
manufacturing to the extent that the take-home pay is higher.
Because of a lower withholding tax at source, employees have a
bigger spending power.
One of the administrative
issues that we would bring forward to you today, one that the
alliance has come here on many occasions for, and I've
accompanied them on most of them, is to suggest the harmonization
of sales tax. We certainly encourage the Ontario government to
take the lead in this initiative with the federal government and
the other provinces which have not harmonized.
Municipal property taxes
under this government: We were certainly encouraged by the
introduction of the CVA program. I myself saw that come on board
in 1970. That's when the legislation originally was introduced to
bring it forward, and each year it was deferred. The current
value assessment program is something that we encouraged.
However, what happened was not unknown to everyone. There would
be a shift in taxation, and it caused a burden on many people.
Unfortunately, you had to introduce capping. We would certainly
suggest that some of the basic principles-that Ontario go back
and review it. We think the system is good, but keep it simple
and competitive and predictable.
The super allowance
modification is a proposal that is solely from an administrative
standpoint. Even the complexities that are involved in
calculating it are found by tax administrators such as myself and
the people in the treasury department who have to administer it
on behalf of the government to be a very difficult allowance to
audit, and we find from an administration standpoint it's
difficult. We suggest that a single rate allowance be implemented
with no incremental so that we don't have to go back two or three
years after an adjustment has been made, and we certainly would
recommend that you consider it.
1740
Implementation of the stock
option credits in the 1999 Ontario budget: The government
proposed the development of a framework for a new Ontario tax
credit that would substantially reduce or eliminate Ontario
personal income tax arising from the exercise or disposition of
stock options. We understand that this plan has not been put
forward yet. We strongly recommend that you move on that as
quickly as possible.
The last item is with
regard to the application of provincial sales tax on software.
This is, again, more of a nuisance situation than anything else.
It adds to the cost-innovation, computerization-the technology is
something that the manufacturing community in the province of
Ontario desperately needs. By adding sales tax to it, it adds to
our bottom cost; it adds to the cost of our product going out the
front door. We would again recommend to you that you consider
removing the tax on software.
Thank you. If there are any
questions, we'd be more than happy to answer them.
Mr
Howcroft: I'd just like to add that there's only so much
that any group can do in half an hour of time. We have provided
some supporting documentation with these recommendations, but I'd
also like to extend the offer to any member of the committee. We
have two very active standing committees, one dealing with
taxation at the national level and one dealing at the Ontario
level. We'd like to make the invitation to any member of this
committee or any MPP to come out and meet with us. We can discuss
these in a more fulsome environment and address all the concerns,
again recognizing that there's only so much time and opportunity
that exist in a half-hour presentation. I just wanted to make
that offer.
The Chair:
Good point. Thank you very much. We have five minutes per caucus.
I'll start with the official opposition.
Mr
Kwinter: Gentlemen, I want to tell you I've been waiting
two weeks for you to appear. The reason is quite simple. I was
travelling the first day of these hearings and I wasn't here for
the Treasurer's remarks to this committee, but I did get a copy
of them and I want to quote something that he said. I'd like to
get your reaction to it.
This is a direct quote from
his speech to this committee: "While exports are critically
important to the Ontario economy, some analysts have mistakenly
concluded that all of Ontario's economic growth has been due to
export growth and thus the tax cuts have not had any effect.
However, when net exports-that's exports minus imports-are
examined, it becomes clear that external trade has been
responsible for only about 20% of Ontario's economic growth over
the last four years." Do you have any response to that? Do you
agree with it, first of all?
Mr Howcroft: I think I'd like
to see the full speech and put it into proper context.
Mr
Kwinter: There's nothing before that or anything after
that has anything to do with trade.
Mr
Howcroft: Our view is that exports are extremely
important. We have two economies in Canada. We've seen a lot more
growth in the export economy than we have in the domestic
economy. Probably most of the numbers that we have deal with
Canada, as opposed to just dealing with Ontario, but I think
they'd be quite similar. Our view is that exports have been
extremely important to the economic revival of Ontario and
Canada. Again, without getting into the details of the full
speech, I can't offer too much in commentary on that.
Mr
Kwinter: OK, can I ask you this question. The
implication of that is that an import dollar to the gross
domestic product is equal to an export dollar to the gross
domestic product. Do you agree with that?
Mr
Howcroft: John, do you want to handle that one?
Mr
Allinotte: I'm not an economist, but that is not what
has happened in the last five to seven years relative to the
steel industry. Our exports have gone up, and we contribute our
success to our export markets. Comparing export dollars to import
dollars as being equal-from a capital investment standpoint, new
capital investment in Canada, and I can't speak for just Ontario,
has gone down considerably. The US capital investment has to be
30% higher than in Canada. Consequently, to the extent that we
don't have new capital investment in Canada, we don't have that
growth in our own domestic economy. It's because of the
exports.
Mr
Kwinter: Also, the other point is that most imports that
come into Canada, not all but most of them, are finished
goods.
Mr
Allinotte: Heavens, yes.
Mr
Kwinter: By far. What happens is that those finished
goods come in and they get sold. The only value-added you get is
whatever the markup is on what you sell. When you have export
dollars, those are products that have been manufactured, so you
get all the benefits throughout the whole chain, which is really
what drives this economy. To suggest that imports are as valuable
to the economy as exports is ludicrous. It defies description
that a Treasurer of Ontario would make that statement, and I only
regret I wasn't here to call him on it. What he what is in fact
saying is that when you take the imports and the exports, exports
only contribute 20% to the economic activity in Ontario. When you
consider that Ontario's exports constitute about 52% of the gross
domestic product of this province, it defies belief that anyone
would make that statement.
You people are in that
business. This is your territory. To suggest that what you do in
the manufacturing and export business is just equal to what
happens to people who import products that are made in Japan or
elsewhere, as I say, defies belief. I just wanted to get your
reaction to that.
Mr
Howcroft: We just reaffirm that exports are extremely
important. That's been the root of our success over the last
several years. We're the Alliance of Manufacturers and Exporters,
not the alliance of manufacturers, exporters and importers, so I
think we'll just leave it at that.
Mr
Christopherson: Thank you for your presentation. A
special welcome to John out of the steel city.
I'm curious, and I realize
you may not have the figure at your fingertips, but what
percentage of the total exporting that your part of the economy
does do you think goes into the North American auto industry?
Mr
Howcroft: I'm sorry, I don't have that figure
specifically; 87% of our exports go to the United States, and I'd
say the lion's share of that would be related to the auto
industry, but I don't have the specific number with me.
Mr
Christopherson: Here's the essence of my question. We're
in the biggest boom right now that we've seen in the history of
North America. It is still defying gravity and will go on, who
knows how long? At some point it will drop to some degree, but
while it's going well now and things are fine on the corporate
side of things-the finance minister trotted out what all finance
ministers from every political stripe do when they're making
these presentations and showing how wonderful everything is, and
the numbers look good.
At the same time-and you've
heard some of it today-we are getting a lot of other people
rolling in and saying, "But the price of this, in terms of the
Harris approach, with the tax cut being done first and foremost
over everything else, is leaving us with a real crisis in
education and health care." Health care, of course, is a key
competitive advantage for us in the auto industry, and by
extension, therefore, those that provide parts and supplies into
the auto industry and everything else-environmental protection,
our social services-all of this is at risk.
When the downturn comes, as
it will, and it will affect autos probably fairly quickly-it's
usually one of the most sensitive to the overall macroeconomy.
When that drops and your work diminishes, as it will for a short
while, overall, where is this going to leave us in terms of these
key components? I argue they're not just part of our social
fabric. They are part of our economic fabric, again, health being
the example there is. If we aren't tending to these things now,
during the boom times, where are we going to be when we get into
the recession? As a society and as an important economic unit in
the world-Ontario's economy is a player-where are we going to be
with all these crucial foundations that make up our economic and
social system, if they are crumbling during the good times and we
get into the bad times, and what will that mean for our ability
to take advantage of the recovery at the other end of the cycle
when indeed that takes place?
1750
Mr
Howcroft: I think you're right that eventually this boom
will come to an end and we will be dealing with a downturn in the
economy, and we'll have to deal with that. It's more prudent now,
on the positive side, to get the deficit down, to deal with the
debt, so that when the economy does go down we don't start increasing
the deficit, increasing the debt, as happened 10 years ago, which
put us into a difficult predicament.
What we would like to see
is a structured approach, which we've been supportive of over the
last four to six years, to deal with the deficit, to deal with
the debt, and also to create the wealth that will allow us to
have the social programs. Health is extremely important, to me
personally and to all residents of Ontario. It's also important
to the manufacturing sector. As you pointed out, it is a
competitive advantage for companies locating here and keeping
their businesses here as opposed to other jurisdictions in North
American and the world. We want to see that advantage maintained
here.
We also have concerns about
the education system. We need a quality education system that
produces the workers who are going to be able to help the economy
in the future. So we feel that we can do that, but the priority
has to be getting the deficit down, which has been taken care of,
and now we have to start dealing with the debt. It also doesn't
stop us from restructuring the health care to take into account
the problems we're experiencing-we recognize there are problems
and there have to be some changes made-and also to improve the
education system.
We're working with several
of the colleges and institutions of higher learning to develop
courses and to work on novel and innovative ways to ensure that
we have a workforce and that the quality of education continues
to improve, recognizing there have been some problems.
I think you've made some
good points. I think we would just differ on the way we would
deal with them, the solutions that we would proffer or offer
up.
Mr Arnott:
Just very briefly, because Dr Galt has some questions too, I want
to thank you very much for your presentation. You've given us
some excellent suggestions, as you always do.
You've encouraged us to
recommend to the minister that the corporate minimum tax be
abolished, and you've suggested that wouldn't cost very much
money. I recall the New Democrats bringing in the corporate
minimum tax. To me it's a no-brainer. If it's a disincentive to
investment, it's discouraging job-creating investment and it's
not really netting any substantial revenue to the provincial
government, we should be doing something in that regard.
The capital tax is a
different matter. I know we have made some changes to the capital
tax, which, as you pointed out correctly, is a profit-insensitive
tax, which means companies have to pay whether or not they're
making money, and it is a real disincentive to investment. How
much would that cost the treasury if we were to abolish the
capital tax in the next year? Any idea?
Mr
Howcroft: I don't have that number with me. I'm sorry.
Joanne, I don't know if you have that.
Ms
McGovern: I don't have that figure, but we can do some
research.
Mr
Arnott: I'm sure the Ministry of Finance people could
get that for us too, but certainly that's a consideration. I know
there have been some changes to the capital tax in the last year
to reduce its impact on quite a number of businesses. I suppose
we should be continuing to look at-
Mr
Allinotte: Yes, but the nature of the changes were more
on the administrative side relative to the quantums of the
taxation of it. And you're correct; abolishing any tax will take
funds from the treasury initially.
Mr
Arnott: In the short term.
Mr
Allinotte: One of the things we have to keep in mind is
our competitiveness. Taxing capital, taxing the investor you want
in your province, is not the way you encourage them. We have a
plant in Kentucky where we make steel, the same type of steel
that we make in Hamilton. We don't pay any capital tax.
Mr Galt:
If I can just make a couple of comments, I think you're number
120 in presentations to this committee, and the last, but
certainly a great presentation. I'd like to extend my apologies
to you on behalf of the government for the kind of fiscal policy
that's been around from 1985 to 1995. I'm sure you'd appreciate
that.
What I'd really like to
ask you about is the taxes that you're suggesting be cut or
reduced, as to how it would relate to jobs. As you've heard from
the opposition, we need the money for the various programs,
particularly health care. We're not in the business of giving
back money, but if the tax was cut, do you have any idea how many
jobs would be created? As you said a moment ago, there's that
first lull, and that wouldn't be too surprising. You put it very
capably. Do you have any feeling on the number of jobs, as you
look at items 4, 5, 6, 7 and 8, that would be created if we
carried out any one of these, or all of them? Do you have any
feeling? Have you had an economist run it through? That's the
selling point to the Minister of Finance and to this
government.
Mr
Howcroft: Again, it's difficult to cover all that in a
half-hour presentation, but I will undertake to provide you with
a study that we commissioned a couple of years ago that looks at
making $100-million reductions in a variety of areas and what the
impact would be on investment, on job creation, on several other
criteria that were set out. That would give an idea as to where
you can get the biggest bang for the tax reduction or
investments. It was a study that we had done, again, looking at
Canada as a whole, but you can use that for a model in Ontario as
well. So I will provide that to the Chair of the committee for
distribution. That would cover some of that in a little more
detail than we can do in a minute and a half. Not being a tax
expert, I'd rather take that than attempt to do it here.
Mr Galt:
Anything along those job creation lines, because once the jobs
are created, you're going to stimulate revenue, as we found out.
We get criticized with the personal income tax about losing $5
billion, according to the opposition; then you see the revenue
coming in of another $10 billion. So they only made a mistake of
$15 billion. It's just tremendous to see the resurgence in the revenue
that's come in, not all because of the tax cuts; we recognize the
exports. We also recognize what happened in the early 1990s in
job creation and what's happened in the second half of that
decade.
Anyway, thank you very
much.
The
Chair: With that comment, Mr Galt, we've run out of
time. On behalf of the committee, thank you very much for your
presentation this afternoon.
The research officer will
provide us with the draft copy of the report by March 1. The
committee will meet March 6 through 9 to discuss the report.
At this point in time,
before we adjourn, I'd like to thank the members for your
co-operation and your punctuality. This committee is now
adjourned.
