Monday 10 February 1992

Pre-budget consultations

Ontario Association of Non-Profit Homes and Services for Seniors

Paul O'Krafka, president

Michael Klejman, executive director

People Against the NDP Budget

Loudon Owen, representative

John Slattery, representative

Canadian Manufacturers' Association

Eric Owen, director of taxation and financial issues

Dr Jayson Myers, chief economist

John Carlos, director of taxation, Du Pont Canada

Ontario Prevention Clearinghouse

Bryan Hayday, executive director

Ontario Chamber of Commerce

Jim Carnegie, executive director

Don Eastman, chair, economic affairs committee

All Business Coalition

David Surplis, president

Neil De Koker, president, Automotive Parts Manufacturers' Association

Ontario Federation of Agriculture

Roger George, president

Carl Sulliman, chief executive officer and executive director

Cecil Bradley, manager of research

Social Planning Council of Metropolitan Toronto

Marilyn Roycroft, vice-president of the board

Andy Mitchell, program director


Chair / Président(e): Hanson, Ron (Lincoln ND)

Vice-Chair / Vice-Président(e): Sutherland, Kimble (Oxford ND)

Carr, Gary (Oakville South/-Sud PC)

Christopherson, David (Hamilton Centre ND)

Jamison, Norm (Norfolk ND)

Johnson, Paul R. (Prince Edward-Lennox-South Hastings/Prince Edward-Lennox-Hastings-Sud ND)

Kwinter, Monte (Wilson Heights L)

MacKinnon, Ellen (Lambton ND)

Mahoney, Steven W. (Mississauga West/-Ouest L)

Phillips, Gerry (Scarborough-Agincourt L)

Sterling, Norman W. (Carleton PC)

Ward, Brad (Brantford NDP)

Substitution(s) / Membre(s) remplaçant(s):

Drainville, Dennis (Victoria-Haliburton ND) for Mrs MacKinnon

Miclash, Frank (Kenora L) Mr Kwinter

Murdoch, Bill (Grey PC) for Mr Sterling

O'Neill, Yvonne (Ottawa-Rideau L) for Mr Mahoney

White, Drummond (Durham Centre ND) for Mr Christopherson

Clerk / Greffier: Decker, Todd

Staff / Personnel: Campbell, Elaine, Research Officer, Legislative Research Service

The committee met at 1008 in room 230.


The Chair: As I see a quorum here, we will continue our pre-budget consultations for the standing committee on finance and economics.


The Chair: I would like to welcome you here this morning. You are representing the Ontario Association of Non-Profit Homes and Services for Seniors. Would you mind identifying yourselves for the purposes of Hansard? You may start your presentation. You have a total of 40 minutes. At the end, please leave some time within that 40 minutes for questions from the committee. You may begin.

Mr O'Krafka: My name is Paul O'Krafka and I am president of the Ontario Association of Non-Profit Homes and Services for Seniors as well as being executive director of St Joseph's Villa, which is a home for the aged in Dundas. With me this morning is Michael Klejman, who is the executive director of OANHSS. We are pleased to have the opportunity to do this presentation to the standing committee on finance and economic issues. I will ask Michael to start with some opening comments.

Mr Klejman: Thank you, Paul. Although as an association we have reached the proud age of 72 years in existence, this is our first appearance before a committee of the Legislature to address the fiscal aspects of running this province. We do not bring with us a wealth of financial expertise, because our members have dedicated themselves to providing health and social services to Ontario senior citizens.

Our membership, in total 208 non-profit organizations, is made up of charitable and municipal homes for the aged, seniors' housing, non-proift nursing homes and community outreach agencies. Our members serve over 10% of Ontario's seniors through housing, facility care and outreach services.

As an association, we provide educational, professional development and group services to our members. More recently we have expanded our educational and informational efforts and have aimed them at decision-makers and opinion-makers in the province. We may not be able to offer much economic analysis or insight at the macroeconomic level, thus possibly sparing you the need to sift through our comments to detect what our political agenda may be. We do want to leave with you some of our more concrete ideas and recommendations, hoping they will be of value as you deal with one of the toughest budgets in this province's history.

I will present, first of all, some principles we feel are the underpinning of our comments and reflect our views in general. Our first principle: Most communities have the inherent ability to muster resources and generate the spirit necessary to fend off disasters and help each other in times of crisis. The second principle: Government structures, in spite of the best of intentions, result in confusion, lack of clarity as to the regulations and policies and cause delays to any initiative. The third principle: The process of government in Ontario must be opened up much beyond the current effort to seek input from ordinary citizens, consumers and groups which have lacked in the past access to decision-makers.

In addition to these principles, we want to state our belief that the government must continue its efforts to help the economy turn around. The government must do this in a fair and consistent manner without favouring or penalizing any one group or sector within Ontario's economic sphere.

Allow me now to go back to the three principles and put forward suggestions for measures or directions which may help in moving the economy of this province to a recovery.

Through this budget we should provide incentives to communities to improve their basic service infrastructures such as water, sewers, roads and transportation. These efforts provide employment, utilize locally and regionally produced products and create work opportunities for people least competitive in the job market. This will also encourage local municipal contribution and may make any municipal tax increases more palatable because of the tangible and immediate benefits.

I will stop at this point and Paul will continue.

Mr O'Krafka: Many of our homes for the aged in Ontario are and have been operated by charitable, non-profit organizations. Over the past five years, the cost of providing care to residents in these homes has significantly increased as a result of two primary factors. The first of those is resident acuity or the amount of care required by individual residents; it has increased significantly. Second, government programs including pay equity, workers' compensation and employer health tax have added to the expense side without offsetting additional funding being made available to cover these costs. As a result of this situation, the fees paid by residents in our facilities, together with government grants, have fallen far short of covering required operating expenses. This has resulted in significant operating deficits for many of our member facilities, particularly those operated by charitable organizations.

Prior to 1990, the province had in place what was referred to as an MB20 or Management Board 20 special grant process which was designed to deal with exceptional and extraordinary one-time unforeseen deficits incurred by charitable homes for the aged in Ontario. Since approximately 1984, the same process has been applied to charitable facilities in the province that are incurring not only one-time deficits but ongoing deficits. While the MB20 process has been appreciated by homes for the aged in Ontario, it was not designed for, nor does it satisfactorily respond to, deficits caused as a result of ongoing operating needs of facilities.

The MB20 process provides facilities with a maximum 70% of incurred deficits, thereby leaving the facility to raise the remaining 30%. On first glimpse this would appear to be a fairly generous approach on the part of government, but in fact it ties the hands of the volunteer boards of trustees and boards of directors of our member facilities. The only source of raising the remaining 30% is from existing reserves or through charitable donations. While many of our members are successful in obtaining charitable donations from the communities they serve, the majority of donors do not wish to donate towards the provision of direct health care, which they perceive to be an insured benefit in Ontario. In addition, charitable facilities are already required to raise from these same donors 50% of the cost of any major or minor capital additions to their projects or facilities. We are extremely pleased that donors have been very willing to respond to requests for capital funding. Over the past 100 to 150 years, many of our facilities have been built through charitable donations and continue to be expanded, updated or upgraded through these charitable donations.

It seems apparent to our membership that government should be prepared to fully fund the demonstrated health care needs of our residents. An argument has been made on a frequent basis by ministry staff that because MB20 funding is open-ended and contributes towards the total deficits, provision of this funding beyond the 70% level would in fact be writing a blank cheque to charitable operators. Our association agrees that government funding should have controls and accountabilities attached to it. What we are suggesting is simply that government share up to 100% of previously-agreed-to costs. This process would allow for negotiated resolution between the agencies and the ministry. The process could also be designed to reward cost-containment and revenue-generation initiatives on the part of charitable boards. The current system creates a significant disincentive when facilities are required to significantly cut staff or reduce services in order to obtain a very small, marginal financial benefit. So in fact, under the current system, good operators are penalized.

In the area of capital projects, in Premier Rae's January 1992 speech he encouraged the federal government to share with the province towards the development of capital projects which would create new jobs in Ontario. His suggestion was that this would be a very good investment on the part of the federal government. We would suggest that in developing the budget, the province could derive similar significant benefits by encouraging capital projects in homes for the aged around the province. These projects would benefit the 29,000 seniors currently living in our facilities, as well as benefiting that element of society that could be re-employed in the process.

The current capital funding structure for homes for the aged provides funding by the province on a 50% cost-shared basis. Most other programs funded by the province of Ontario for capital projects are cost-shared on a 66%, 70% or even as high as 100% basis. By increasing the portion of provincial funding for homes for the aged projects and by approving money for the projects which are on hold around the province, facilities for seniors could be updated to prepare us for the 21st century while at the same time putting the people of Ontario back to work.

I would now like Michael to expand further on some of the difficulties with the funding of capital projects.


Mr Klejman: The other step which can be taken would be to significantly decrease the bureaucratization of the capital approval process. As we mentioned earlier, private individuals and communities are prepared to donate towards capital projects in homes for the aged.

This may also be an opportune time to rationalize and speed up many of the decision-making, permit-issuing or approval-granting functions performed by the provincial ministries' bureaucracies. We can cite endless examples of projects or programs which are delayed, changed or lost altogether due to delays caused by the multitude of steps they have to go through, as well as jurisdictional wrangles or continuous changes to requirements and guidelines, or the most common scenario, which is lack of consistent and comprehensible guidelines. Why approvals should require more than one or at most two steps is difficult to comprehend, but there is little doubt that costs and time can be significantly reduced through such streamlining.

The governments in recent years and particularly in the last year have made a major commitment to open up the decision-making process and we, as an organization, are still reeling under the onslaught of discussion, draft legislation and consultation papers which we are trying to read, comprehend and react to. We note, however, that in some cases, key decisions and policies are still adopted without the full airing of the facts and data which influence government decisions. It is not uncommon to see the final pronouncements in terms of policies, yet have it be extremely difficult for us to obtain the figures and the data explaining why certain directions are taken. We continue to be told by bureaucrats that we cannot have the information they used to come up with policies, but are asked to comment or offer alternatives. We urge you and your colleagues to shed this outdated process of policy formulation. Put the trust into people, share the information and then ask for input through an open process. We believe the approach taken by the Premier and the Treasurer to put forward the information should be adopted more broadly in the government policymaking process.

With the relatively short notice we had to prepare for these pre-budget hearings, we resorted to an old standby, a brainstorming session, to develop ideas and suggestions for your committee, and we have grouped these under various headings. Some of them you may find more useful in your deliberations than others.

The first is taxation. Our members, like society at large, are of mixed opinion as to whether there is room for an increase in the tax burden on both individuals and corporations. Some of our members support an equitable minimal increase while others are quite concerned that this may further dampen any recovery.

Employment: Increasing employment will help to build consumer confidence and reduce the burgeoning social assistance roles. Besides direct actions to stem the rising unemployment, like a freeze and/or rollback of wages, the government should review all impending legislation which may increase the operating costs and put further squeeze on employers. Some examples -- but these are not exclusive, of course -- are health- and safety-related measures. In cases of not-for-profit organizations in the human services field, where salary costs represent close to 80% of budgets, these measures, if not supported by separate grants, usually result in layoffs. The issue we face is whether we need more jobs or fewer better-paying and higher-cost jobs.

User fees: The issue of user fees is an extremely sensitive one, particularly in the areas of health and long-term care. We believe that issues of physician cost and hospital operating budgets are coming under greater government scrutiny, and some more drastic changes will have the desired effect in the long run.

We would like to focus on user fees in long-term care services, which we represent. With the elderly population projected to double in the next 20 years -- and this is based on 1981 statistics -- we are looking at the government's proposed paper on the redirection of long-term and support services in Ontario, which proposes to eliminate user fees for most services except facility-based care. We believe this concept will result in woefully inadequate services and inequitable distribution of these services. We believe that with the exception of health-related services and care, users should pay according to their ability. Can the public in this province support a system which will provide services for individuals who choose to and can afford to spend several months and considerable funds in Florida, simply because they are 65 years of age?

This brings us to the end of our modest submission. We hope we have touched on the issues of interest to you. We would be glad to answer any questions you have.

Mr Miclash: Thank you very much for your presentation. I have a few questions in terms of the local municipal contributions to some of your non-profit facilities, homes for the aged and ones that are run by charitable organizations. What kind of relief do you get from the local municipal governments on these in terms of land taxation? Does that vary across the province, or is it pretty well standard procedure?

Mr O'Krafka: No, it is consistent across the province for homes for the aged. There is no municipal taxation on non-profit homes for the aged in the province.

Mr Miclash: That is in every municipality?

Mr O'Krafka: Yes, that is consistent.

Mr Miclash: What about the contribution of municipal land for the building of such facilities? What kind of response do you get to that?

Mr Klejman: There is no contribution from municipalities towards the construction, or any capital outlay, including acquisition of land, for charitable homes. This is quite different from the involvement municipalities have with hospitals. All municipalities in Ontario are required to be involved in the provision of facility-based care, but they do it through the municipal homes for the aged.

Mr Miclash: I understand.

Mr Carr: Thank you very much for your presentation. I was interested on page 7 where you talked about the capital projects. As you know, some of the premiers who are meeting today are even suggesting they proceed. Although it is interesting, all those who are calling for capital projects -- the premiers are saying the federal government should do it. It is a lot easier to spend somebody else's money, I guess, and not be accountable for it.

You talked about some of the funding formulas there and percentages. If the province were to go through with what you talked about, do you have a total dollar figure that we would be looking at? You mentioned doing that and changing some of the percentages. What would the province be on the line for in total cost?

Mr Klejman: We do not have the figure, but I am sure capital projects planners in the Ministry of Community and Social Services have more than ample information on projects that are held up due to lack of provincial approvals. I should point out that the provincial share of 50% is cost-shareable with the federal government, so it would bring both levels of government into the picture. I should also add that a number of charitable foundations that support homes for the aged, charitable homes, are in the position to move fairly quickly with their contributions. They are quite willing to play their role in this.

Mr Carr: You have had discussions, then, with ministry officials. You do not even have a ballpark figure? I do not want to pin you down, but are we talking about $200 million, $500 million -- even a ballpark guess?

Mr Klejman: When the last initiative in the capital redevelopment was announced of about $100 million, that was committed within several months, and there was another amount of at least $50 million still waiting. My hunch is that we are looking at at least $50 million to $100 million to be split 50-50.

Mr Carr: I was interested too on page 8 where you touched briefly on some of the redirections. We had a meeting in my riding where the people talked about some of the plans. As you know, what has come from the discussions is that we will be looking at fewer facilities and more in-home care and so on. Again, the big problem is that we are talking about a concept. We really do not have dollar figures, and many people are saying this is just a preliminary step. One good thing is that at least the public is now aware of where we are heading, then we can tie down the details. Do you see that changing your role in any way and, if so, how? Again, without knowing the dollar figures that are going to be coming into it, how do you see your role changing with the paper that is out there?

Mr O'Krafka: We are extremely concerned with some of the issues in the paper. As Michael mentioned earlier, there are a lot of unknowns in that paper in particular, where we have not had access to the information that is available. We have had no access yet to cost figures.


Some of the costing we have done ourselves indicates that there are going to be significant increases in costs to keep many of the people in the community. A lot of people who are in homes for the aged right now receive no government funding. When the province recently did a study using Alberta, it suggested many people being cared for in facilities could be returned to the community. Our initial assessment is that the majority of those are people in unfunded beds in homes for the aged at this point in time, so the province is going to be incurring costs to keep those people in the community, to send them back, but there are not going to be any offsetting costs by discharging them from homes for the aged because many of them are paying their own way in the facilities they are currently occupying.

Mr Klejman: If I may just follow up with a comment, it is a misconception, a myth that has existed for several years now that this province is overinstitutionalized, particularly when we look at the elderly population. Current figures suggest that we are on a par with most jurisdictions both in North America and in Europe. Looking at our demographic projections and if we remain even at the current level of facility beds right across the province, we will be among the lowest in another 15 years, so we are not concerned about our mandate or focus. We believe the need for facility-based services will continue and that their nature will change.

I also want to reassure you and members of the committee that for years now many of our members have been offering a full range of services: apartment living, totally independent apartment living, supportive housing living and outreach services to seniors in the community. We have had members with waiting lists for the last five and 10 years who realize then there is no way facility beds can meet the needs of all the seniors.

Our association has taken a firm stance, believing that all the seniors who can be supported in the community should be supported in the community. So I do not think we differ in perceptions of these.

Mr Carr: As I look around this room, most of us will be hitting that time period when there will be a tremendous explosion of people needing these services. Unfortunately what happens is that I get calls, as we as MPPs all do, when somebody needs to get his or her mother or father into one of the homes and says: "Don't you realize what a crisis there is? There's a waiting list and we can't get in."

One of the concerns I have is, again, meeting the needs. As a non-profit organization, what role do you see for people in the for-profit in order to meet those needs? Can we do it only with non-profit? You touched a little bit on some of the services that are doing it for profit now. How do you see yourself working with the people in the for-profit sector, and is there good cooperation? How do you see it working?

Mr Klejman: We have taken the position in the past that provision of care to persons who are most vulnerable should be in the hands of the non-profit sector. That has not changed. I think we have communicated that to a number of ministers who were involved in the human services field in the past year.

The cooperation where it is most effective and most necessary happens at the local level, where a crisis or demands like the ones you have referred to necessitate that administrators of facilities work together to find suitable placement in emergency situations. I believe it happens and it will always happen. Whether it is in the facility sector or in the community outreach sector, the relationship and understanding between the for-profit and not-for-profit organizations is there and continues.

I think the issue that is more difficult to deal with is, how can the province provide capital funding to for-profit organizations on the same basis as it does to non-profit, where you acquire equity, ownership in a non-profit facility? I am not sure how the province will handle that in the for-profit sector. Similarly, there is the issue of whether there will be a legislated margin of profit for the private sector operators. These are the issues we do not have answers to, and I am pretty sure you will have a difficult time, as the provincial legislators, to come up with an easy answer.

Mr Sutherland: First of all, let me say there is no need for you to be apologetic about your "modest" presentation. If this is a modest one I hope we get more modest presentations, because I think you have highlighted the issues and the concerns. Your points are well put together and you deal with some specifics and some good suggestions.

I just want to pick up on the one comment you made that we compare favourably or relatively the same with other jurisdictions in terms of institutionalized care for the elderly. Does that break down in all types of care, that we are relatively the same, or are there specific types of care where we are far lower and other areas where we are far higher?

Mr Klejman: Because various jurisdictions label and define the types of beds they have differently, the only comparisons we have seen are for the total sanctioned beds. So we would be looking at chronic, extended care and residential care beds in this province in comparison to whatever sanctioned beds there be in BC, Manitoba and Quebec; also, comparisons with Sweden and Great Britain put us on a par with them.

Mr Sutherland: I have just one other comment, and maybe we could ask research to look into this: the suggestion again about infrastructure. I guess I get a little confused when people say "infrastructure" and say, "You know, we should be doing things for water, sewer, roads." Here we have construction of institutions as well. I was wondering if there is any way research could find out for us what is most labour-intensive. I look at some of these and I think it seems like it is a good thing, but the proportion of it being spent on people actually working is very low. I was wondering if we could have that for those different sectors, and maybe some indication of the estimates of the ripple effect on those types of -- you know, if we put it into sewer, does the dollar go five times or four times versus building an institution or something like that?

Thank you very much for your presentation.

The Chair: We have some time left here. Do any other members of the committee wish to ask any questions? Mr Carr, do you have any more questions?

Mr Carr: Yes, I had one more. On page 10 you talked about one of your biggest costs being the cost of wages; I think you said about 80%. Municipalities are virtually in the same boat, and school boards and so on. You talked a little bit about being able to control those costs, like a freeze and rollback of wages. What would you say would be fair for the people who work for you in light of the situation? What are you looking for in terms of increase: 2%, 3%, a freeze, a rollback? What would you like to see?

Mr Klejman: Without being too greedy, I think what we need is a little more flexibility. I think, as we were chatting just before the meeting began, what is particularly worth noting in homes for the aged is that the client contributes a substantial amount towards the cost of operating facilities, to a great degree. As the level of income available to consumers using those facilities' services increases, their share increases.

It is quite conceivable that in the year of 1%, there may be some homes for the aged which will ask not a penny more of the province towards their operating budgets. On the other hand, there are others, like the ones that Paul was referring to, which are in dire situations, running multimillion-dollar deficits, and they are tied by the current funding systems.

I think we recognize that money is scarce. We are not going to sit here and say we believe everyone should get 8% or 9%. That is not realistic. What we are asking for is that there be some flexibility. In those situations where homes or municipalities can manage with 1% or 0%, then let that be, but in other situations where they need either additional special grants or a higher budget approval for the year, I think there should be flexibility to do that as well.

Mr Carr: What is your sense from the actual front-line workers about what their perception is? Are they giving you any feedback? One of the problems we have is what has happened in the hospital sector, where nurses got large raises and now a good portion of them -- we understand Joseph Brant Memorial Hospital in my area is now going to be laying off people. What are the front-line workers saying in terms of what their demands are? Are they still demanding, as are some of the teachers in Toronto, for example, "No, we still want our 5%"? What are the average workers saying out there on the front lines?

Mr O'Krafka: The workers and the unions we are dealing with I think are fairly reasonable and fairly understanding of the situation. What they want, though, is to be treated equitably with other segments in the communities they are part of. That is what many of our charitable homes for the aged face. I know in my own facility our lowest-paid workers are earning $1.50 less than the municipal home down the street simply because the money has not been available through the current funding formula. There needs to be some balancing within the system and, as Michael said, some flexibility. I think the workers are realistic at this point in time in their expectations.

Mr Klejman: You brought up the example of last year's settlement with nurses in terms of nurses in the hospitals. It is ironic that the greatest impact of that settlement is on homes for the aged. Homes for the aged tend to be long-term employers. Most of the RNs working in homes for the aged have the seniority that is so well recognized in the recent settlement, which means homes are the ones that are experiencing the greatest impact of the substantial increases for nurses with long-term service.

Mr White: I am curious. In your presentation you did not mention the issue of capping. Is that because your group does not represent the municipally run homes for the aged?

Mr Klejman: We do represent the municipal homes as well as the charitable homes. We feel the issues we have raised in terms of recognizing the cost of doing business address both municipal and charitable homes, specifically when we talked of the need to recognize the additional costs of safety-related legislation and health-related legislation and to provide additional funds to offset the impact of that legislation. We feel that would benefit all the homes for the aged, whether they are municipal or charitable.

Mr White: Is your suggestion that there be a user fee or that that issue be looked into for a range of services for the elderly a reflection of the municipal homes as well as the charitable homes?

Mr Klejman: Yes.

The Chair: I would like to thank you gentlemen for your presentation before this committee.

The clerk is presently out in the hall checking if the next group, People Against the NDP Budget, is here. The committee will take a five-minute break.

The committee recessed at 1043.



The Chair: We will continue with the pre-budget consultations. The next group is People Against the NDP Budget. Welcome to the standing committee on finance and economic affairs. Please identify yourselves for the purpose of Hansard. I think we have 35 minutes left. In that period of time, after your presentation, please leave some time at the end for questions from the committee.

Mr McBride: My name is John McBride. I am a spokesperson for People Against the NDP Budget. This is Loudon Owen and this is John Slattery. I want to first define our constituency. People Against the NDP Budget represents a wide range of Ontarians. Although sometimes branded as a business lobby group, the people represent a broad cross-section of concerned citizens in addition to prominent members of the business community.

Ours is a group of ordinary Ontarians with no political affiliation; people who want to remain Canadian and want to remain in the province; a group that came together on Friday, May 3, 1991, because we wanted to create an opportunity for the people opposing the budget to be heard, as there seemed to be no other venue or opportunity. We represent a broad cross-section of the province. We are speaking out for ourselves, but not necessarily for the organizations we work for. Many of us are self-employed. We are people who feel that the April 29, 1991, budget was fiscally irresponsible.

Our group, we believe, is unique as it is a general interest group, in marked contrast to the plethora of special interest groups that are around. Our concerns are with the future of Ontario and not with lobbying for private objectives.

In order to appreciate the extent of our support and the commitment to our members, the following is an outline of actions we have taken to date. We held two successful rallies at Queen's Park which attracted thousands of concerned citizens. We appeared on most major public interest shows on radio and television. We received in support over 3,000 callers and 12,000 letters. We have participated in all committee hearings to date on the budget. We participated in a round table discussion set up by the NDP. At Floyd Laughren's invitation, we presented proposals to him at a private meeting in September 1991 that would have significantly reduced the deficit while maintaining Ontario's social services. We have been generally active in the public press as advocates of fiscal responsibility. We have distributed information throughout Ontario to various supporting groups. We have served as a liaison with other groups adversely affected by the budget.

In addition we have supported other groups at various rallies and discussion groups, met a host of economists and experts in public finance to assess and discuss the first budget and, what is important, commissioned two polls by Decima and Environics that indicated two thirds strongly agree that the provincial government should balance its budget over its term and, second, that 80% believe the foregoing should be included in the ballots of municipal elections.

At the core of our group are the following beliefs:

1. The government's role is more facilitator than provider.

2. A prospering economy provides opportunities for social change.

3. Individuals should have maximum choice and freedom.

4. Social support should be effectively targeted.

5. Efforts should be directed at the cause, not the result, of problems.

The purpose of our submission today is to explain the concerns that ordinary Ontarians have in connection both with the budget and with the budgetary process, which is important. We will make specific recommendations as we have done in the past, although I do not know to what end. In addition to identifying general concerns and establishing a framework for analysing the budget, we believe it is of great importance that the budget not be treated in isolation but be part of a concerted and coordinated effort to improve the economy and ensure future prosperity. Accordingly, we feel the need to highlight the problems and concerns generated by the government of Ontario to date. These concerns need to be fully addressed by the government.

I am now going to turn over our comments to Loudon Owen, who will deal with the concerns and directions of Ontario.

Mr L. Owen: My name is Loudon Owen. I am also one of the spokespersons for People Against the NDP Budget. Our name is somewhat self-explanatory. I think we are going to expand upon what John was saying here and explain why it is not appropriate to look at the budget in isolation and what concerns we have with the direction Ontario is going in.

Everybody in the room and everybody in Ontario knows it is a very tough period of time. It is tough for the Ontario government and it is tough for the people of Ontario. However, we think a host of problems has been created by the current governments and that these problems have not been addressed.

Ontario is being forced through a transition; many economies are. Our concern is that Ontario is not being put in a position where it can respond and in which that transition can be facilitated. It is being put in a position where that transition is being impeded. Ontario has not been able to develop and change the way it has to, to survive and prosper in the future.

I would like to identify some areas of concern. These are just representative areas we have come across in our dealings and our reviews of what has been happening.

Lack of fiscal responsibility: This does not appear to be a pressing concern of the government. By the way, I would like to emphasize we are speaking on behalf of an awful lot of people here. It is not three people sitting in front of you who have concerns who have typed this up. We represent one heck of a lot of people who have serious concerns. Fiscal responsibility does not seem to be on the top of the hit list. There are a lot of nebulous issues that have come up that of course bear examination, like the social charter and other concerns the provincial government has and some other areas which we will get into later. Fiscal responsibility, making sure you have control over your finances, does not seem to be at the top of the list and that is certainly at the top of the list of a lot of people across Ontario right now.

Ontario's economy is under attack. I am a lawyer. Every day I get information sent to me on what the benefits are for business moving out of Ontario. Last week the Buffalo Chamber of Commerce held a meeting. They had a roomful of lawyers, all of whom paid to be there, lawyers and accountants and other professionals, all being advised as to the tremendous benefits of moving down to New York state. This is not in isolation. Pick up the newspaper, read the ads and see how many different states are targeting Ontario.

Next, I would like to talk briefly about problems with the proposed legislation. Again, this is not news but it has not gone away. These problems and concerns are pressing. Every time somebody tries to make a decision as to whether they will expand in Ontario, whether they will stay or come in, these are at the top of the list. Employment legislation has been perceived to be extremely hostile to business. Bill 70, which was proposed and now has been put on the back burner again, scared the pants off a lot of people. There was the fiasco surrounding car insurance, there were the initially unreasonably high public sector settlements and finally, the result of all this, the failure of Ontario to address the downgrading of its debt.

I think a lot of the actions taken so far have been incompatible with growth or revival. The perception is that Ontario is not open for business. Again, I urge you to go to one of the meetings where all the business people, lawyers and other professionals attend and see them being lured out of Ontario. This is something that will have long-term ramifications.

The second issue is failing to face the issues clearly and simply passing the buck. It is very easy to talk about the problems that surround us right now in terms of the recession and global competition. The free trade agreement is constantly being pointed to. The free trade agreement is a reality. It exists. It has to be dealt with. Business across Ontario is facing it today. And 45% of the federal revenues come from Ontario so, in a sense, going to the feds for a handout is passing the buck. If Ontario is not pulling its weight financially then there are limitations upon what the feds can do. But even more important -- what our group is talking about -- if we are being taxed by the federal government or being taxed by the Ontario government, it does not make a damn bit of difference: We are still being taxed and we are paying for it.

The next thing I would like to highlight is the polarization occurring across Ontario. Another thing we have experienced directly is that Ontario seems to be experiencing lines being drawn: Labour is on one side; management is on the other. There have been a host of statements where the government and various representatives of the government have spoken about how this should not be the case. We agree. Unfortunately we think this is the result of the labour legislation that has been proposed. It has caused some severe problems across the province. It was also highlighted in the most recent municipal elections in the Toronto area. If any of you attended the meetings and saw what sort of discussions were going on, you saw they tended to be incredibly polarized. That is not the atmosphere we need to create a better Ontario.

Last -- this is something one hears on a recurring basis, and it is true -- is the whole concept of excessive regulation, the degree of intervention of governments in our private lives and in our business affairs. That is something that probably everybody in the room gets offended by, gets frustrated by, and I just want to underscore it here.

I am going to step into the second area and then pass it on to John Slattery. I will briefly talk about the Ontario Fiscal Outlook that was recently released. The issue I want to talk about is the openness of the NDP. There has been, I think, an admirable position taken that the NDP is an open government. We think it is tremendous: the idea to go to the populace to deal with their concerns directly, to listen to what they have to say. That is what has been vocalized, but is it true?

When the outlook was to be released and Premier Rae was to speak on television, our group asked to be part of the lockup. To us it was important because we knew we would be asked to comment on the contents of that speech. We were refused. We asked a second time; we were refused. We asked a third time in writing; we were refused. We then asked the reason for the refusal. We were told that only the interested parties would be admitted to the lockup. When we asked who the interested parties were, we were told they were the transfer payment recipients.

Unfortunately, and I think it is unfortunate, we had to take steps that were perhaps considered dramatic: We took the government to court. We launched an action against Premier Rae, Floyd Laughren and the government, asking for status to attend at the hearings. It did not receive widespread publicity because it was settled in the courtroom over the telephone. There was a telephone right in the room. We were finally admitted. Also, the lockup was expanded to allow in business groups. I think it typifies the problems we have faced with the government: There is a complete lack of respect for the business community. The people paying the money in were not considered interested parties; the people receiving the money were.

A second example is that we met with Treasurer Laughren in a private meeting in September last year and presented to him proposals which we had worked very hard on and which we thought were reasonable; we have not heard anything back. We also asked a series of questions, and we have heard nothing back.

Those are my questions. I would like to pass it to John Slattery.

Mr Slattery: The first area of concern I want to allude to is the change in the accounting procedures being proposed. I am referring to the way capital expenditures are going to be treated in future budgets. Though we agree with the concept of trying to bring a more realistic approach to accounting for long-term investments, we have some concern about how this is going to be accounted for in the current procedure. There seems to be a desire to take out of the bottom line, as it were, total cash expenditures on capital expenditures in any one given year. We fear that will mislead the public as to what is the true deficit in any given fiscal year and understate the amount of moneys the government is actually spending on behalf of the taxpayer.


The second concern is basically with the budget's credibility itself. Primary to any kind of confidence-building that this process or any budget is going to have is the need for credibility. First and foremost, it needs to be credible, and that will foster a sense of confidence.

Last April's budget made an attempt -- it was quite an ambitious goal -- to forecast for the entire term of the NDP government. They have revenue projections, expenditure projections as well as growth numbers. Last year, the numbers in April had the economy shrinking by 3.3%, I believe, before it grew this year by 3.4%, rather ambitious, and we felt so at the time. What was of even more concern was that last year revenues were expected to grow in 1992-93 at 130% of the underlying economy. The document itself acknowledged that typically revenues increase at only 90% of the underlying economy. Also, in the most recent document there is recognition that revenues are slow. There is a lag time between when the economy increases and revenues increase.

So our point was -- we made this point last year when we were in this room -- that the revenue projections were unrealistic and that they were going to demand tax increases just to meet them, even based on the overly optimistic growth numbers. Those growth numbers are not going to come in this year. We see the situation where the no-change deficit is going to have a revenue shortfall in the neighbourhood of $5 billion. That is a significant dollar.

What we are trying to impress on the government is that the document has to be credible. Revenue-expenditure predictions have to be realistic. They have to be cautiously produced. They cannot be overly leveraged on one particular aggressive growth number. As I say, we need that reasonable, balanced document before we can develop some credibility, before we can develop some confidence. This is confidence not just of the domestic investor but of the international investor as well.

Some specific examples of fiscal mismanagement or areas where we think that expenditures are probably not being prioritized appropriately are listed in 4.4.

The first one is day care. Here we see a situation where we have two systems working, coexisting, satisfying the need of a certain segment of the population. The government has decided that private day care is philosophically undesirable and is making every effort to eliminate that industry, at vast expense and cost to us. We do not think that is appropriate.

Housing costs: Again, this is something where expenditures have risen significantly and, we believe, beyond what is required. We think if support were better targeted, if individuals who truly needed help were identified more effectively, then a great deal of saving could be made in that area.

Government salaries: Again, it is in the document that 45% of all government expenditures are chewed up in salaries and benefits. It is a very large statistic and we think the government has been slow to check expenditures under its own charge.

Fairness in tax: This is something that is getting quite a bit of press now as the NDP has initiated its fairness in tax investigation. We also believe there is a fairness to the taxpayer, the individual has a right to expect that additional work should be awarded with additional money. The tax system, though it should be progressive, I quite agree, should not be a disincentive to work and develop. I fear that is the approach or the direction our current tax system is going in.

We have some general recommendations.

The first is the need for fiscal responsibility, not only to get control of budget deficits, not only to ensure that there are sufficient assets available to satisfy the truly needy in society, but also to develop and instil confidence both domestically and internationally.

As a government, the NDP policies should contribute to all constituencies.

We also have a companion document where we highlight several areas of recommendations. We believe skills development should be emphasized over welfare payments. We believe the housing stock and housing subsidy are an across-the-board, blanket approach that is very badly directed and misses the mark a great deal of the time. We believe that although efforts have been made to establish some kind of program evaluation process, it has not been done with a mandate that is strict enough. By that I mean, is this particular legislation going to impact on our competitiveness? If so, how much, and is that an acceptable cost to this particular legislation?

Last, I guess the point is that a government that is intent on shaping society must recognize that social changes intertwine with any kind of economic policy and that they are symbiotic. If you try to do one at the expense of the other the entire system will fail, and I think that is a failure for all members of that society.

In conclusion, we are making a heartfelt plea to the NDP government to address these concerns. We request that the NDP rethink its approach and bring forward a fiscally responsible budget that reflects sound economic and social judgement. A budget is needed that promotes permanent job creation, not higher taxes, that encourages investment in both capital and labour and that is not a disincentive to invest in work. We grow increasingly concerned about the damage Ontario's government policies will have on our future wellbeing, along with hundreds of thousands of our fellow Ontarians. That concludes our formal portion.

Mr Carr: Thank you very much for your presentation. I think some of the work you have done has paid off. I firmly believe that if some of the groups like yourselves had not taken a tough stand like you did last year, the government would not have implemented some of the things it has to try to control costs. We called for a 2% cap on the wages last year and this year we get 1%. It is a year late. It cost us $1 billion but we got it eventually. I remember watching them in the House saying, "No, we can't do it on the backs of the workers." A year later they are starting to listen.

I was interested in your comments on capital expenditure. As you know, some of the premiers are calling for it in their discussions now in Ottawa, and some groups are saying, and this government is saying that if you do it for capital expenditure reasons it is great; you can spend it and divide it up and somehow the public will not see it as being added to the deficit. I bet next year we are going to see that. We are going to see capital expenditures on one side in the operating and we are going to see a deficit, and people are going to see it down to $8 billion and say, "Oh, great, they've done a good job."

Could you just expand on what you would like to see happen now? Historically what has happened is that you do capital expenditures in bad times. The problem is we that did that and spent and taxed and borrowed during the good times as well. Looking at what the premiers are doing now, should we be going into massive capital expenditures at this period in time?

Mr L. Owen: We will divide the answer into two parts; I think there are two parts to the question.

The first thing is our concern with the cash to accrual, the shift. I hope everyone puts their pens down, because I do not want it written down. Right now we are talking about different capital expenditures and amortizing them over a 20-year period. First of all, 20 years was arbitrarily chosen and is unnecessarily long. It is not consistent with anywhere where they amortize these capital expenditures.

Second, I am not quite sure what capital expenditures are. The next thing that will happen is that there will be human capital expenditures. We all agree that human capital is as important, so why are human capital expenditures not amortized over 20 years? The whole trend is in a very dangerous direction.

The second thing is, our concern with disclosure of the expenditures is with the general public; it is not with the analysts, it is not with the analysts on Wall Street. Believe me, they know what is happening. It is not the analysts on Bay Street; they read the documents closely. It is the average person who looks at the numbers in the paper; the average person is offended when he or she sees billions and billions of dollars in deficits. As the number gets lower we think their level of upset and concern will get lower and we do not think it is being fairly conveyed to them.

Then, if John would like to address the expenditure issue itself.

Mr Slattery: Efforts have been made and they have had dubious success about trying to turn the public finances into a more privately recognized means of accounting. Any efforts by Organization for Economic Cooperation and Development and other organizations that have gone towards that end have indicated that the current deficit could be far worse. What I mean by that is if you are trying to depreciate your current stock of assets -- and that would be taking it to the logical extent -- the current effort is a halfway approach; it is not one and it is not the other. I think what is important is that the public gets full disclosure of all the moneys being spent in any given year and what the future obligations of those moneys are. Certainly capital expenditure in public goods does provide a net benefit. The question is, what is a net benefit and to what extent? A road is tremendous, but if it goes nowhere and there is nobody at the end of it, it produced some short-term jobs, but what is the long-term economic value of that? I think all the information needs to be made public. None of it should be hidden or distorted.

There is the other question about approaching the business cycle, which I think is probably what is most on this government's mind as opposed to dealing with the long-term structural factors that will impact economic growth. Government has very little control over the business cycle. It does however have meaningful control and influence over the long-term factors of production, and it is those things we would like see the current administration focusing more of its attention on.


Mr Johnson: As I listen to you and as I re-read this document, I see a lot of holes in it, quite frankly. It is not intended to be balanced; it certainly is not that. I would like to get a better idea of whom you represent. You have not really well defined these ordinary Ontarians that you represent and you were not specific with regard to how many people you represent. I would like to better understand that, quite frankly, because some of the things you say -- I have ordinary people in my office who would argue with you, as well as myself. I am just very curious to know if you could be more specific, if you could give me some more detail and better define the people you represent.

Mr McBride: What we meant to do at the beginning of this document was set ourselves apart from other interest groups that may be specifically representing their own interests, whether they be business or otherwise.

We were founded on a grass-roots basis just subsequent to the April 29 budget, and as far as the people we represent, I would say in numbers we had over 7,000 out at our second rally, over 4,000 at the first rally, and as we mentioned, we launched a letter campaign where we had 12,000 respondents from people across the province. We do not have a membership roster, and it is hard for us to give you a specific number other than to say that we were formed specifically to provide a platform for those people out there who were frustrated with the process and with the budget to voice their concerns and their opposition to it. We have liaised with many different groups, from the day care workers to the truckers and so on, at our rallies. I would say there is definitely a large business constituent, a lot of the people who streamed up University Avenue if for no other reason than because of the geographical closeness to where the rally was and the fact that it was warm. But we also, as is evidenced in the 12,000 letters we presented to Rae, represent people from all walks of life throughout the province. To sum it up, I think we are a grass-roots group that provides a platform for a variety of different concerned groups.

Mr L. Owen: I guess the answer is that we cannot give you a number, and I am sure you would have a hard time giving us a number as to how many people really support you. The numbers we can give you I think are very impressive. It shows how many people attended rallies. It shows how many people phoned in and wrote in. Geographically, we have had speeches across the province. We have spoken from Ottawa to Sudbury to west of Toronto. It is not something restricted to Toronto.

Who are we and where do we come from? We are not being paid for this. When we say we are ordinary citizens, that is what we mean. We work for a living and we pay our taxes and we work hard and we care about the future of Ontario. That is really who we are.

Another point is the purpose of our document. You say it is one-sided and full of holes. Let's be clear on the purpose of the document. That is really why it was included in the agenda. We are scared. We are very scared about the future of Ontario as it stands right now, and every day -- we do not have people who have to come to us pandering for handouts and asking for special treatment. We have people come to us asking for objective advice. For example, I am a lawyer. People come to me and they say: "Should I stay in Ontario? What's happening? What direction are we moving in?" The problem I face every single day is the extensive concern about Ontario's future.

I personally am very concerned and scared about the perceptions that are governing right now. Rational or not, correct or not, business -- and we are talking about business now -- is driven by perceptions, and the perception right now is that Ontario represents probably the most hostile jurisdiction in North America for business.

The Chair: Mr Sutherland, one quick question. One minute.

Mr Sutherland: First of all, even though you do not recognize yourself as such you are a special-interest group. You talked about this perception of being antibusiness. I just had the Minister of Energy give a cheque for $300,000 to a local manufacturing company in my riding so it can put in new energy-efficient equipment to cut its energy cost by 20%. If that is not working with business and helping it to be more competitive, I am not sure what it is.

I want to deal with the intervention issue. Everybody complains about intervention, but people do not seem to understand why we have regulations. It is not just because people are sitting there every day thinking what new regulation they can make up to make life difficult. Regulations are established in response to a problem, and we as lawmakers usually have to deal with the problems. The majority of people do not break the law or cause the problems, but unfortunately we still have to deal with that issue. Laws and regulations are established in response to a problem, not to create a problem.

Maybe Mr Phillips will give some of his time for the answer.

Mr Phillips: No. I appreciate your thoughtful presentation here and I just want to make a couple of comments and ask you a question. I totally agree with you on your observations on the capital, and in my opinion it is a misstatement. They are going to spend probably $16 billion to $20 billion on capital over the next four years and only show maybe an expense of about $2 billion. I think they should be showing every year essentially the depreciation charge, spending more in some years and less in other years. I think it is a distortion of the books, but that is done and I appreciate your observation on the budget credibility. I think you are bang on. The latest nine-month statement will prove to be just a document that people will begin to kind of make fun of, because if you examine that it will also undermine the credibility. Those observations on page 5 were very timely.

My question is, have you had a chance to look at what I think will be the economic renewal plan of the government it will announce? It will be the worker ownership stuff, the venture capital stuff run by the unions, the use of public pensions for investment and the Ontario Training and Adjustment Board; all the training and skills development will be put into an independent arm's-length agency with probably a $2-billion budget that will be jointly managed by the unions and business. I think that will be their economic renewal plan that we will see announced probably in the speech from the throne. Has your coalition had a chance to look at those and comment on those cornerstones of the plan?

Mr Slattery: We certainly looked at some of it in the three areas there. The latter I think is probably the most important in the long term, being the education and getting labour, business and educators working together so that we are providing the economy with the skills and trained individuals that are necessary. I think that probably has some very long-term benefit.

The idea of absconding with future pension moneys that are supposed to satisfy future pension obligations and directing them into public expenditure is a somewhat frightening concept. The Alberta government had a disastrous attempt with its heritage fund, with the oil revenues that came in. They were supposed to invest that, diversify their economy and live on that and it all evaporated, that does not seem to be the case. I am very suspicious of the government's ability to actually pick industries, let alone companies, that will do well.

The employee share ownership may have some value but there again it is to one special interest group. You have to satisfy some very strict requirements. I do not believe it is evenhanded and I do not believe it will be a very effective approach. It is probably more cosmetic than meaningful and it will not really address the mainstream industries that we rely on. Typically, the industries that are going to benefit by that are the ones that are failing. I am not certain whether they should not be allowed to fail. We need to keep vibrant industries here vibrant.


Mrs Y. O'Neill: Are you represented on any of the tax commission working groups?

Mr L. Owen: No, we are not.

Mr Slattery: No.

Mrs Y. O'Neill: I just wondered; I think you should be. The three changes in the budget direction we had before the actual third-quarter result came out: What is your perception of what that did to Ontario, the economy or the perception of the Ontario economy?

Mr Slattery: I am not certain. What changes are you referring to?

Mrs Y. O'Neill: The changes that were made by this government before we actually got the third-quarter report. Mr Laughren came in with two new fiscal statements. I think it was one after two or three months and another one after two or three months.

Mr Slattery: He made that announcement in September about having to adjust and appeared to be pretty superficial there again too. All he was doing was delaying much of the expenditure to the next term, and then it turned out the reason for the delay was not because they wanted to save the money but because they had not passed the legislation required to spend the money -- very little credibility or engendering of confidence.

Mrs Y. O'Neill: What effect does this have, in your perception?

Mr L. Owen: I think the major effect and the most important thing is just the whole lack of confidence. If there is a problem, recognize it and deal with it, and that is not what is happening. Like it or not, people do pay attention to what is happening with your decisions. People read them very carefully and people analyse them, and they are looking for some hope and they did not get it.

The Chair: I would like to thank you for appearing before this committee, gentlemen.


The Chair: The next group we are calling on is the Canadian Manufacturers' Association. Would you come forward, please. I would like to welcome you to the standing committee on finance and economic affairs pre-budget consultations. If you would not mind, please identify yourself and who you represent before this committee.

Mr E. Owen: I am Eric Owen, director of taxation and financial issues for the Canadian Manufacturers' Association. With me are John Carlos, who is director of taxation for Du Pont Canada and chair of the Ontario division taxation committee, and Dr Jayson Myers, who is the chief economist for the Canadian Manufacturers' Association.

When you look at it, the objectives of the Canadian Manufacturers' Association are the same today as they were when in 1987 one small group of manufacturers looked at the future and foresaw the importance of industrial expansion. They knew that domestic markets alone could not provide sufficient opportunity for growth, nor could Canadian industries successfully compete abroad without nurturing at home. Today the CMA is a national bilingual organization with more than 2,500 member companies, of which 1,400 are Ontario companies. It is difficult to say the number of 2,500, but when you review this and consider that the members of CMA manufacture 85% of all the goods manufactured in Canada, perhaps that gives you a better realization of what the Canadian Manufacturers' Association is. All of these companies vary greatly, both in size and they do represent all facets of manufacturing.

The association plays two vital roles. It monitors domestic and international government policies for manufacturing and it provides member companies with extensive information needed to operate effectively in today's highly competitive and rapidly changing world.

I would like to call on Mr Carlos to make an opening statement for the Canadian Manufacturers' Association about the document which we have tabled with the Treasurer, and I believe members of this House committee also have copies.

Mr Carlos: Thank you for the opportunity to appear before this committee and to provide our perspectives on the issues facing manufacturers in Ontario and our views on how we, the manufacturing sector, and you, the members of the Ontario Legislature, can work together to move forward out of this current economic problem to greater prosperity for all of Ontario.

I left my glasses back at the shop and I cannot really see too many of you other than blurs, so if you ask a question, please bear with me if I sort of look around.

What I would like to do is just cover some of the points of our submission, then leave you the opportunity to expand any points you would like and we will try to answer.

We, the CMA of Ontario, believe that the economic recovery in the short term depends on the turnaround of the general economically distressed financial conditions of Ontario industry. That will in turn stabilize employment and hence consumer confidence. A sustained recovery requires investment in new products and process technologies, new machinery and equipment, continuous improvement in the skills of our employees, searching out and capturing new market opportunities and delivering superior value to our customers, better than our competition. Our success in this endeavour will lead to more highly satisfying and highly-paid jobs and general prosperity.

The manufacturers of Ontario have proven they can rise to this task of providing high value to our customers, employees, shareholders and society generally, and we will do so again. But we need a provincial government that is willing to work with us, not against us; that demonstrates leadership, ingenuity, drive and commitment to establish and sustain a fiscal environment in which manufacturers are supported, encouraged to innovate, invest, take risk and grow.

Before I outline some of the forms of this leadership the government can take, let me describe the manufacturing situation today.

Manufacturers are suffering the most severe economic decline in postwar history. The recession in manufacturing has a profound impact in Ontario, considering that a full 50% of the economic activity of Ontario is driven by manufacturing. The severity of our recession is measured by the fact that 250,000 manufacturing jobs have been lost since mid-1989. That is a full 21% of our workforce. Cash flows are down 50%, a full 20% in 1991 alone, and our profit margins are at an all-time low.

At the same time, manufacturers continue to pay a greater share of their corporate revenues in the form of income and non-discretionary taxes. Corporate income taxes paid or payable, that is, cash taxes, increased from 30% of our before-tax profits in 1989 to 56% in 1991. In Ontario the provincial income tax accounts for 22% of manufacturers' earnings before tax. Non-discretionary taxes that must be paid even when manufacturers are losing money increased 15%, while our sales revenue declined 6%. Municipal taxes were up 10% as the provincial government passed on an increasing share of the fiscal burden to municipalities. These costs have to be borne by ratepayers and businesses together. This increased tax burden results in manufacturing employment and investment both suffering as we divert an increasing share of sales revenue to taxes.

The manufacturing situation is further aggravated by increased government deficits and the resulting impact on interest rates and competition for scarce capital. Since 1988 government financing -- this is all levels of government -- requirements have increased from 8% of private savings to 25% as more individual and business savings are being channelled into financing deficits. A significantly smaller proportion of savings is available to the private sector for investment and productive assets. The Ontario government knows the difficulties small and medium businesses have in obtaining credit for investment. The Ontario government's deficit is part of the problem.

To reiterate, manufacturing in Ontario is severely weakened. Until the financial position of Ontario manufacturers begins to recover, widespread uncertainty and further job losses will continue to undermine both consumer and business confidence. The overriding priority of the Ontario government is to create a fiscal and legislative environment that supports and encourages businesses to invest, innovate and prosper. That is ultimately the formula for full employment in Ontario.

Creating such an environment would include:

Do not exceed the 1991-92 deficit target of $9.7 billion.

Be brutal on cost containment and operating costs and be rigorous but balanced in spending reallocations.

Demonstrate commitment to improve productivity and value added of government services by benchmarking against Ontario manufacturers' success.

Harmonize the fiscal policies at all levels of government -- stop shifting the burden; resolve the underlying problem.

Hold the line on current corporate taxes -- increasing the tax load further on an already shrinking tax base is a formula for disaster;

Provide stimulus to invest.

Specific tax policy initiatives that could be included in the budget would be:

Reintroduce the Ontario current cost adjustment. Currently the equivalent manufacturing investment in, say, the US has a capital cost advantage of 2.5%. Therefore an Ontario manufacturer must find an offsetting advantage in labour, technology, marketing, distribution or anything else to offset that, just to stay even. The OCCA at 30%, which has been sunsetted as of December 31, 1991, for manufacturing and processing equipment turned a disadvantage into an advantage of 1.3%, which leads to attracting mobile investment capital.

Have the existing capital tax creditable against corporate income tax or abolish it altogether like British Columbia has done.

Harmonize the retail sales tax with the GST. Through the harmonization, the business and government resources tied up in the administration, legal and compliance and audit of a standalone provincial system could be reallocated to more productive uses.

No additional corporate minimum taxes are appropriate, considering the existing variety of minimum taxes such as capital taxes, payroll taxes, business and property taxes and provincial sales taxes. Taxes at both the federal and provincial levels are already having an increasingly negative impact on the weakened manufacturing base.

Cease taxing R&D incentives from other jurisdictions and ease the administrative burden on some of them.


In closing, we believe that our pre-budget proposals are a responsible and fair balance between the realities of both the government's fiscal constraints and the desperate financial condition of Ontario manufacturers.

We are now prepared to answer any questions you might have.

The Chair: We have pretty near 28 minutes. We will start off with Mr Sutherland.

Mr Sutherland: Thank you for your presentation, and we thank you for the detail in terms of what you have outlined, the specific areas.

My problem stems from -- I think it was part of the last presentation -- the perception about this government not being able to deal with business. Certainly when we are in a negative economic climate or recession, my sense is that the more some of the groups in here, like the one before, talk about that, we keep creating more and more of a level of that. In terms of dealing with the issue or the reality of what the real issues are in terms of some of the initiatives such as Ontario Training and Adjustment Board and those other things, I guess it kind of deals with this whole issue we hear about consumer confidence being low in general. Since consumer confidence is somewhat a perception thing, somewhat a psychological thing, what suggestions do you have as to how we can change that psychology from a negative one to a more positive one?

Dr Myers: The first thing, the most important thing, is to know that your job is going to be there tomorrow or next week. That is really what it comes down to. I know there are a lot of ideas about the psychological influences on consumers. I know there is a lot being said about how we should be putting more money into the hands of consumers so people will go out to buy, but it does not work unless people know they are going to have a job the next day. That is why I think we have to look not at the short-term fix, but at really strengthening the position of both labour and industry in the province. That has to come first.

Mr White: I am very interested in your submission -- very articulate and succinct. There were a couple of things I would like to inquire about. In regard to the worker-ownership, the investment program, that has been fairly successful in Quebec. Of course they have also the QSSP in Quebec, which I think has also been quite successful, with very limited room to manoeuvre in terms of moneys. What are your comments on those schemes as incentives to investment?

Mr E. Owen: That is a question we have not addressed in the pre-budget submission.

Mr White: I appreciate that.

Mr E. Owen: That is why you asked the question, I know. We did have an opportunity to study the worker-ownership draft that came out. Our immediate reaction to it was not very positive, although it was not totally negative. This is one of the things CMA really believes in, shall we say, share the profit, share the wealth. We looked at it, however, and one of our major problems was that it seemed to be, at least to us, only directed to those corporations that had a union affiliation because it was, as we understand it, only going to be handled by the union people.

We also felt that if we were into a profit-sharing mechanism indeed, where workers can participate as owners -- incidentally, as well as having a job with the Canadian Manufacturers' Association, I own retail outlets, and each and every one of my workers participates as an owner. They may be minority owners, but I do honestly believe in that.

However, how do you choose winners and losers? This is one of the problems. If indeed the money that is going to be generated through this type of scheme is only going to be put in the hands of losers -- and I look at that from the point of view of people who are on the threshold of going bankrupt -- that may well be an idea for keeping the job, but it is not improving competitiveness. If the money is going out and is being directed into areas where enhanced competitiveness comes from it, I do not see that we can be opposed to that. However, from the point of view of it being restricted to the small segment that we see, I do not believe in that.

As a matter of interest, we have gone to the Minister of Finance with a scheme. It is something that we have dusted off. First of all we went way back to John Crosbie, looking at this as a regional application. Right now, with the enhancement of the RRSPs, it makes a great deal more sense. We believe that if people wanted to invest in their own community they could use some of their RRSPs, which would be generated and retained in the community where they live; it would be handled and actually distributed by people who would be selected in the community. We think that may be a better way than saying only union organizers or union shops can participate in this.

The Chair: Okay, Mr Sutherland, three minutes left.

Mr Sutherland: Just one quick question. You talked in your presentation about the Canadian dollar falling to a more realistic level. In past presentations before this committee, you have given us a kind of range as to where you think the dollar should be. Could you give us some sense where you think it should be right now?

Dr Myers: I think about 78 cents.

Mr Sutherland: Okay, thank you.

Mr E. Owen: If you look at it from the point of view of 78 cents, our configuration indicates that for every drop in the Canadian dollar, it helps our exports by the amount of $2 billion.

Mr White: I have a further question from your earlier response. I am interested in the RRSP. The fact is that more and more moneys are going to be drained from investment by RRSPs, which I am not sure are the most economically vital instruments. Now you are suggesting a community-based RRSP. Could you expand on that?

Mr E. Owen: Community-based from the point of view that we even had an acronym for them: registered investment security certificates, which were a risk, if you look at it that way. I think that is very appropriate from the point of view that if indeed we now have a threshold of $11,500 for RRSPs, at the time we made the recommendation to the federal government it could be as low as $3,500. We are suggesting that, within the framework of the RRSPs, people could choose either to go into general registered retirement savings plans or to put certain of their moneys into the RISC program, and it would still fall within the framework of the $11,500.

I hear right now that people are advising or asking for the federal government to let people use RRSP funds to purchase houses. I personally -- and this is my own personal feeling; this does not come from the Canadian Manufacturers' Association -- have two observations on that. I do not like it, number one; and two, there is already a mechanism in place so that you can do this now. This is being missed by everybody. There is a mechanism in place right now for you to use your current RRSP and go into a mortgage and buy a house, using the house as collateral. That is why I say this has perhaps not been thought through well enough.


Mr Phillips: First off, I want to say that I believe you guys are the engine that drives the economy. I have no doubt about that. I worry a lot about investment decisions that are being made right now to invest not here but somewhere else; it is going to have a profound impact on our economy. The most frightening number in your proposal was the manufacturing investment going down another 6.5%. That worries me a lot because that is the third consecutive year of decline. So you do not have to sell us on its importance to the economy and the jobs.

My question is around this economic recovery plan. The speech from the throne I suspect will have an economic recovery plan in it. The three major components will be this worker ownership stuff -- people are missing this. RRSPs under that proposal will be used through the union-run venture capital funds to purchase companies. That is the proposal: Use RRSP funds run by the union venture capital to purchase it. You probably saw this; this thing is already out there. If you put $3,500 in, it costs you $350. The rest is all tax credits and it goes into the venture capital fund.

Have you looked at three of those economic recovery components: the union-run venture capital funds, the use of public sector pension funds as a source of capital, and the establishment of the arm's-length, independent OTAB with a $2-billion budget for training? Do you people have any comment on those three elements of the economic recovery plan?

Dr Myers: We have looked at it. The general point to be made is that in principle there is a real problem in capitalizing business in Ontario, especially small and medium-sized firms, in allowing those companies to secure credit or capital. That is a real problem. Some of our research has shown that 91% of Ontario companies, small and large alike, have counted on bank financing. It also shows that the banks are not willing to lend in many cases to small and medium-sized firms right now.

There are no two doubts about it. This is a major problem. Where the worry comes is with the mechanisms that are being set up in order to do that. First, I do not think venture capital is the main problem. There is lots of money that seems to me to be out there. One of the problems is securing money for capital investments: incremental capital, continuous improvements in technology. That is the type of financing that is not available. It is not the ability to get capital for ownership purposes of companies and it is not the ability to provide seed capital for startups of good ideas.

Second, I think there is a problem as well from the company's point of view of how the financing is going to be working in with what they want to do themselves in the way of technological improvements or training and education. It is very important, of course, to find a well-skilled workforce, to provide the training for that well-skilled workforce, but if the training does not take part in industry itself and follow industrial priorities, you can have as well-trained a workforce as you possibly could imagine, but if it is trained in the wrong types of technologies and technologies that industry is not using, what is the purpose?

The overall conclusion is that these are real problems we are addressing, but surely there are mechanisms that could be found to provide pools of capital or to provide training so that companies themselves would have a much greater say in taking part in that sort of thing.

Mr E. Owen: What Jay has said leads me to make a couple of comments here. If there are no jobs out there, if there are no places to work out there, we may have the most highly trained workers in the world, but if there is nowhere for them to work, why do we train them in the first place? If you look at this, where we have come from is to generate the facilities for the future. One of the big arguments we have had within the framework of the CMA is that we recognize that a great deal is being done out there right now for job training, so we have stepped back from that and we have offered a scenario which will put in place an environment so that these people can, maybe two, three or four years down the road, step into and have meaningful jobs.

I think Jay is quite right when he talks about venture capital. There is a lot of venture capital out there. He made the comment about technology. There is absolutely no one, and I mean no one, who will fund you, either a venture capitalist or more particularly a banker, if you are looking at creation of high-tech. It is not only high-tech, it is very high-risk; as such, I think people will say time and time again that the banks will loan you money providing you have three times their multiplier in your own bank.

One of the things Jay did not mention -- he did mention it in a way, to the extent that we do have certain mechanisms which are not creative in terms of making Ontario more competitive. This is the important thing we have to look at. It is no use saying that government can create jobs. Government cannot create jobs. Jobs happen when the environment out there is conducive to jobs being created. This is where we come from.

The other thing is that in terms of the mechanisms right now, we have too many mechanisms in Canada which are directed towards real estate. I can honestly say we have more real estate millionaires than we need in Canada. It is absolutely fallow money being put into buildings and this type of thing; it should be directed towards the wealth-producing that the Ontario people can generate.

Mrs Y. O'Neill: May I ask a question of you gentlemen, please?

The Chair: Two minutes left.

Mrs Y. O'Neill: Capital cost allowance: I was very distressed when I read the 1991 budget and saw about a quarter of a paragraph on this, what I consider a very important incentive in business. You have brought it forward and given it almost a page in your brief, and I am very happy you have. When I questioned this, and it was my area of responsibility to do that, I was basically told that the reason was that there were very few takeups on this incentive. Your brief does not seem to indicate that. I felt there were a lot of spinoffs with the investments in equipment that would be purchased as a result of the incentive, which would also create small businesses which you seem to indicate in the business equipment area. I wonder if you can say a bit more to us about how important this incentive is. I feel very strongly that it is something we should be pushing rather forcefully at this moment.

Mr E. Owen: I will just make a couple of comments and then I would like John to give you an indication of how important to the manufacturer it is. Number one, the multiplier of such an incentive is, as you say, great.

We recognize the heavy burden that parliamentarians carry in putting bills though the House. However, the actual Ontario current cost adjustment which was originally introduced at 15% was never put into law; the actual increase to 30% was never put into law until February 1991. A number of corporations will not go ahead if they are not certain that is going to be put into law. When we heard it had been put into law, we then found there was a sunset placed on it of December 31, 1991, and to expect manufacturers to go into huge, literally huge outlays of capital within a time frame of 10 months -- it is not possible.


Mr Carlos: About a year ago, when we sat before you, the point with respect to the impact of the OCCA and the impact of the ability to compete in other jurisdictions, wherever they are around the world, in capital investment, was very important. If I remember correctly, one of the members of this committee at the time observed: "Gentlemen, your manufacturing message is not coming through very loud and clear. A lot of other groups that are also vying for the attention of the government are making a lot stronger representations. Therefore, you have to do something dramatic." We said, "What can we do, other than what we have already done?" We have come back here a year later and we find that we have about 110,000 fewer jobs and a significant reduction in capital investment in manufacturing this last year. We say to ourselves, "What can we do this time to create a stronger" -- to use a colloquial term -- "passion in our groin so that we will not have to come back here and do the same thing again?" We have lost another several hundred thousand jobs and unfortunately Jay's economic forecast becomes a reality and there is a reduction again in the amount of capital investment in new machinery equipment in Ontario.

So what we said was, the best thing to do is to become a broken record on something that is very important to us, which is the cost of capital in Ontario versus our competing neighbours. As I walked up from the parking lot today, freezing, I said to myself, "I now know why it costs 20% more to build a polyethylene plant in Kingston, Ontario, than it does in Louisiana, because I have to insulate the darned thing because it freezes in Ontario at this time of year."

I use Louisiana not loosely, because as we sit here today there are decisions being made in corporate investments where the mobile capital is trying to determine where the best place to invest is, where it is going to get the highest return at the lowest risk. My people are competing with the people in Louisiana, or they could be in Singapore, or they could be in Marseilles, all around the world.

Something like the OCCA was a little thing that allowed a competitive disadvantage to change into an advantage and, as we indicated in our brief, right now we can be very proud of the productivity gains that have been achieved in manufacturing. I think we have the best-skilled labour force in North America. We have some of the best technology. We have very effective distribution systems, and our salesmen can match themselves head-to-head with any salesmen around the world. But when it comes to the cost of capital, that is where we have to find ways to offset the advantage our friends to the south have.

Our salesmen have to be better, our engineers have to be better, quicker on their feet to transform the technology into effective processes and our scientists have to be better in coming up with new products in order just to stay equal, let alone do better than the competition.

I remember the words of the Treasurer at a pre-budget meeting last year where he felt that the OCCA was not a well-focused initiative. Yet I think within two weeks after it was announced that it was going to be pulled back, a lot of long-term investment decisions and many corporations all of a sudden became not as assured as we had hoped. My company was among those.

The concern we have is that when you are building large, capital-intensive, high-tech machinery and equipment in Ontario, you are doing it for a long term. You do not put it in, just take it off the shelf and install it and it is there. It can take one, two, three years to put it in place. Therefore, the decisions we are making today are going to have an impact on the labour force and prosperity two, three and four years in the future.

The Chair: Mr Carlos, I am going to have to cut you short.

Mr Carlos: Am I getting too long-winded?

The Chair: Mr Carr is impatiently waiting for a question; if he wants you to finish your answer, that is his time.

Mr Carr: Actually, I was enjoying it very much and I did not want to interrupt you.

I take it that what you are saying is that in trying to get over one hurdle, the government at a different level puts another one up, you get over that and away you go again. I was interested in something in regard to training. Some of you may have seen Venture last night where it said that, even with the high unemployment rates, we need skilled people in a lot of areas and that we are not doing a very good job. I think everyone recognizes that. The difference is, how do we do it? The way I believe the government is going to do it is to have a pool of capital and say, "Okay, now you come to us." The government will dole out the money, the MPP for that area will go to the manufacturer and cut the ribbon when the money is given out, to help get re-elected, and it will be a great show.

One of the things I feel would be more productive is if, somehow, instead of the government doing that and picking the winners and losers, if somebody were to say: "I want to invest in people. I'm going to do some training so therefore I'm going to take some type of tax credits." Can that be done more easily in the way I see it working, where the people who lobby the best and know how to work the levers of power are the ones to get the money? How do you see that working?

Mr Carlos: I agree with you in that I would rather there be a broad-based process where all can stand forward and be accountable and can vie for either the capital pool, the technology pool, or the skilled labour force, whatever. I think it is very commendable, for example, that in your riding in Oakville the Premier came forward and provided some funding for both investment and job training for General Electric. But, according to my next door neighbour at GE in Mississauga, the tremendous amount of resources consumed for that particular opportunity was not worth it. At the same time, what about all the others who may not have been so effective in their lobbying efforts? These are not the Du Ponts and GEs. What about the smaller manufacturers, WCI and Canada Metals who just do not have that? If there were broad-based programs that could be available to all, I think it would be much more effective.

Mr Carr: I know what you are saying. For example, in my riding -- and that is a good point -- the Premier's office worked one year on that. To me, the Premier should be setting the agenda, not trying to worry about one particular case, as nice as it is. The amount of effort that went into it -- although I think it was probably done more for political reasons than anything else, because you get a big show and the big media. It is the same thing in the situation with De Havilland. I know a supplier who says: "We are a major supplier. We don't believe the government should have put money into that. We're successful. We can't come out and say that because we are one of their big suppliers." Again, even in Mr Murdoch's riding, where one of the furniture manufacturers will be getting a government grant to save the company, other furniture manufacturers say, "There we are, we beat them out and could have gained as a result of that and now someone else is going to be able to come in with government money."

From the Canadian Manufacturers' Association standpoint, you are saying the government should not be picking the winners and losers; they should not be giving out these grants that Kimble talked about -- which is great, but the only way people are investing now is if the government comes in with any type of grant. You are saying do not do that; level the playing field.

Mr Carlos: Let the customers decide who the winners and losers are, not the government. The government's job is to create the base we can all work from and then we can go forward and see who can deliver the best value to those four constituents: the shareholders, employees, customers and society generally. It is not the government's job.

Dr Myers: I think the evidence, as well, in both the United States and Europe, is that the tax credit along those lines has a far greater effect than actual grants that may distort the priorities of the businesses themselves.

Mr Carr: I had a situation where they changed one of those tax credits, and when I called the Ministry of Industry, Trade and Technology, it called them loopholes. It is funny how the perception of that has now changed.

Along the lines of taxes, as you know, this government in its election campaign went around the province and said, "Don't worry, your taxes are too high, but we're going to hit these corporations because all these big, bad corporations are making a lot of money." When you look at the statistics, only 7% of our revenue comes from corporate tax in this province. The Treasurer has not ruled out a corporate tax increase, but a very left-leaning economist was in, Michael McCracken -- I hope he will forgive me for saying that, but I think he is more towards that side -- who said what we should do is get rid of the minimum corporate tax, that it would send a great signal to the corporations that Ontario is open for business.

Two questions: What will happen to your membership if they increase any taxes, and do you think getting rid of the corporate tax, that 7%, will help?

Dr Myers: I think one of the misconceptions is that the corporate sector pays a tax and that is it. The cost of taxes is always passed on in some form to the consumer or to the workforce, either in the form of higher prices or what we are seeing right now in the form of higher unemployment.

Looking at the possibility of a corporate tax and looking at the cost of an incremental increase in either, say, income taxes or in non-discretionary taxes, I think there is a tremendous cost there. We were calculating that a one percentage point increase in the corporate income tax rate in this province would cost businesses something like $160 million. Well, that is $160 million that might have otherwise been invested in capital equipment and created a future stream of income, or certainly would have created jobs in the future.

When we look at the idea of tax increases at all and the desperate financial condition of manufacturers today in Ontario, all we can see is further cost, further unemployment, further investment that either does not take place in this province or cutbacks in investment. We are already seeing, I think, some of the effects not only of the recession but of fiscal policies on the corporate sector.

It is a very serious problem when you look at capital investment in this province, and I see no prospect of machinery and equipment investment in manufacturing picking up until late 1993. There is always about a one-and-a-half-year lag between the cash flow of manufacturers and investment. Yet we hear from everyone that we must become more competitive and productive. Where is the connection?

The Chair: Gentlemen, I would like to thank you for coming before this committee with your presentation.

The subcommittee is going to meet directly now for about five minutes. We are adjourned until 2 o'clock.

The committee recessed at 1203.


The committee resumed at 1411.


The Chair: I would like to welcome Bryan Hayday, executive director of the Ontario Prevention Clearinghouse. Go ahead, Bryan.

Mr Hayday: I would like to thank the committee members for the opportunity to present a number of financial priorities emerging from my organization's work with the private, public and non-profit sectors in this province.

Please allow me a few moments to place the work of the clearinghouse in context. The Ontario Prevention Clearinghouse is a terrific organization with a terrible name. We are a provincial, non-profit organization providing consultation, training and information services in health promotion, preventive programs, community development and social assistance reform. The clearinghouse is an active partner and organizer in the national and provincial healthy communities movement. The goal of the healthy communities movement is to establish healthy public policy and programs in municipalities and other jurisdictions across Ontario. Its efforts complement the formative work with programs such as Better Beginnings, Better Futures, a long-term project to demonstrate the effectiveness of integrated preventive programs which is now operating in 11 Ontario communities.

The clearinghouse is also the lead non-profit organization in Transitions: Corporate Strategies. Transitions: Corporate Strategies is the project name for a joint private, non-profit venture to help welfare recipients find jobs. The goal of this major project is to demonstrate a working model in Metropolitan Toronto which can be adapted in other parts of the province. It is in this context of healthy public policy and community economic development that I make my remarks this afternoon.

The clearinghouse recommendations are organized by expenditure area. The first area I wish to address is in the area of healthy public policy. The first recommendation is that the province reallocate additional resources for health promotion, preventive services and community development activity, equivalent to 10% of the dollar value of all transfer payments, purchase-of-service arrangements and block funding through Ministry of Health and Ministry of Community and Social Services agencies and institutions. Let me speak to this recommendation briefly.

Budgets for health promotion, preventive programs and community development activities do not generally fare very well during periods of recession. Government tolerates cutbacks to these programs to protect the much larger budgets of institutional and tertiary care programs. Virtually every major health and social service report in the past decade has called for a reallocation of resources to address a broader agenda of health which strengthens health promotion. When is this going to start? We cannot call for more investment in the determinants of health at the same time that we are busy squeezing it out of existence.

The members of this committee will no doubt know that we have reached a crossroads. We have to decide how much and what kind of community services we can afford and which ones make a substantial difference to our life in Ontario. We are now at one of these turning points where we must ask our public stewards to make sure that we stay the course and reallocate sufficient resources for health promotion, preventive programs and community development. The province's decision on whether to support the Ontario healthy communities movement will be an example of whether it has the will to make these choices.

We have far too many examples from our history, recent history included, where we have said one thing and done another. We embarked on a process of deinstitutionalization, notably in the fields of developmental disabilities and psychiatric institutions, only to find years later that those institutional dollars were not sufficiently reallocated into a full network of community support. The public needs some new examples now where we follow through on important recommendations for healthy public policy.

Our second recommendation is that the province invest the equivalent of 2% of its 1991-92 social assistance payments in opportunity planning, retraining and community economic development projects, in partnership with the private and non-profit sectors.

Ten per cent of the population of Ontario depends upon some form of welfare as the source of household income now. While there are some in this province who think the solution to this problem is to bash away at those living in poverty and blame them for our current economic situation, saner voices must be heard.

Our many contacts in the private sector are concerned with this problem. They have convinced us that this fundamental economic restructuring in the province requires some new approaches. We must replace jobs which have disappeared with new forms of livelihood, along with a combination of both new skills and a consolidation of foundation skills.

The province can stimulate support and enable this transition. I would therefore like to propose a further set of recommendations which pertain to the economic wellbeing of the citizens of this province. These recommendations also have a corollary impact on people's health, since we know that health status is influenced by employment, income, housing and the ability to make a meaningful contribution.

These recommendations include the following: that the province reduce the effective tax rate for wage earners in the lowest income quintile, thereby increasing real income among those who are least well off economically as well as facilitating the transition for those trying to move from welfare to employment and that the province immediately launch a series of opportunity planning projects for welfare recipients that are market driven, regionally sensitive and that develop partnerships across sectors in communities.

In September of 1988, George Thomson, the then chair of the Social Assistance Review Committee, recommended a series of sweeping changes for welfare in this province. One of the key recommendations called for the inclusion of opportunity planners to facilitate this move to increased independence for those who were then dependent upon the welfare system. This was intended to be a voluntary process and could in many cases lead to some form of employment.

Two and a half years later, in the spring of 1991, a subsequent provincial commission under the chair of Alan Moscovitch again called on the province to launch a range of pilot projects in the area of opportunity planning. Almost a year after that, three and a half years after Thomson's report, we are still waiting for the start of opportunity planning in the province. The pressures on the welfare system and the dissident voices of those who are blaming the victims of the economic recession compel us to find fast-track ways to launch innovative ideas. This means that new ideas should be launched as they are ready. This approach is entirely consistent with solid management strategies such as continuous quality improvement, which would enable the province to evaluate innovative activities for continuous progress and innovation as they operate. Good ideas would not be delayed for the sake of managing this process in lockstep. Market and regional pressures require flexible processes.

The fifth recommendation is that the province establish a public community economic development fund in partnership with the private and non-profit sectors. There have been numerous stories in the press over the past months, including today, where the private, public and non-profit sectors have collaborated to address the refinancing or restructuring of specific industries, companies and communities. These solutions have been developed, for the most part, in response to specific economic crises. A more proactive approach is called for. The economic restructuring in this province is not just about bailing out specific industries but rather about starting new ones, supporting micro-enterprises, encouraging innovation and self-employment and facilitating the development of new partnerships in communities from which new economic ventures can spring up.

Again, there are too many examples of saying one thing and doing another which undermine our efforts. As an example, at the same time that the province is looking to stimulate the housing industry through a series of amendments to RRSPs and adjustments to down payment requirements, the Ontario Access to Permanent Housing Association is struggling for its survival. Since this association concerns itself with non-profit and affordable housing in 37 areas of this province, there must be room for a fit between attempts to stimulate housing starts and the existence of an association concerned with housing accessibility. Public policy leadership requires that we integrate the best of what we are currently doing with our best sense of what we might try to do. The province has a clear role in setting out this kind of optimistic, balanced agenda. On behalf of the Ontario Prevention Clearinghouse I urge you to consider these recommendations as a part of this agenda.

Mrs Y. O'Neill: Thank you very much for your presentation. I agree with you. Your name is somewhat of a hurdle for us to get over when we try to discover what you are after.

Mr Hayday: The name "Hayday."


Mrs Y. O'Neill: I am really pleased that you brought forward in such detail the opportunity planning concept. I am going to ask you to say a little more about that. I happened to be around here in 1988 and I know how important it is and I know how important it was to the people who were helping us pull together the transition program.

I guess you did not have time to develop everything, but this community economic development is so important and not expensive. You may or may not be aware of the program we began -- I guess it was around that same time -- the eastern Ontario economic development grant. It was only $5 million, which is not a heavy price tag, and there were over 25 eastern Ontario communities that had never had an economic development plan that got one. It put people in touch with each other who had never spoken to each other. I think that is where the basis of renewal is, in the communities themselves.

If you would, please say a little bit more about how the opportunity planning program you are talking about works with an individual. I think your phrase -- I just hope this new budget is full of it -- fast-tracking innovative ideas is what we have to do and opportunity planning is one of those. Could you just say a little bit more for the record about what that means to an individual?

Mr Hayday: Fair enough. An opportunity plan is a voluntary contract between an individual who is on welfare or social assistance as it is provincially funded who wishes to become more independent of that system, which is not to be bogged in some sort of permanent arrangement where they become increasingly dependent and lose an attachment to the labour force.

The barriers facing an individual can run the gamut from child care to retraining to the need for specific life skills which would enable them to qualify for a career-track position or for a self-employment venture. The notion Thomson first recommended was that we not assume that the people who currently administer welfare are those in the best position to help people make that transition. Administering a benefit structure is a very different set of skills from helping somebody develop a set of presentation and market-ready skills which would enable them to be more independent, enable them to secure a job or to launch a micro-enterprise. They are just completely different sets of skills, and the Thomson committee recognized this back in 1988. We have been waiting subsequently for us to deal with the second major strand of welfare reform. One strand has always been adequacy: that people should have adequate supports. But those adequate supports were not intended to be permanent supports, and unless you actually put something into the system where you allocate resources to help people move off welfare, how is that an enabling system?

Mrs Y. O'Neill: The Thomson report, as you know, was developed after over a year's hearings with over 2,000 individuals who would need this kind of assistance. I am really pleased you have brought that forward to this committee. I have no further questions. I think your report is going to be very helpful to the government.

Mr Hayday: Could I just add a supplemental, Ms O'Neill? I believe the current estimates for welfare expenditure in Ontario are somewhere in the order of $7 billion this year. I may be out, but I am not out that much. The current call for opportunity planning projects would only spend $5 million. My math is not that great, but $5 million against $7 billion does not feel like a very reasonable investment when you are talking about economic restructuring.

Mrs Y. O'Neill: And we are talking about people's self-worth.

Mr Hayday: For a tenth of the population.

Mr Carr: Along those same lines, as you know, all parties agreed with most of the SARC report. It is kind of ironic, because you cannot get all three parties to agree on anything, including what day it is. Yet it seems to be stalled. I was wondering if from your perspective you could maybe give us an insight on why we seem to have stopped dead after all that tremendous amount of work -- we heard some of it today -- that has been done. Why has it not proceeded, in your estimation?

Mr Hayday: My explanation is speculative, Mr Carr, but I have never been known to shy away from speculation. This province is not made up of a homogeneous set of communities, and the reasons the people are on welfare are not homogeneous, yet the rules for welfare administration have tended to try to be homogeneous, meaning we try and set out a set of regulations that will work equally in Nipigon as well as in Cabbagetown, and life is not like that. So we have a system trying to manage a multifaceted community problem and it is not set up to adopt, sponsor and fast-track multifaceted community solutions.

It is easy to do a rate change and say, "Okay, 2% across the board." It is easy to do that because it is an administrative, accounting adjustment. Launching a different way of doing business is tougher, and I do not know that the public sector has a lot of experience in launching new market-sensitive systems on its own. It seems to me that some partnerships are called for there.

Mr Carr: I think you are right, and sometimes it is driven by crisis. I know in my region, Halton, the regional chairman is now talking about not implementing a lot of what the province tells them to do and that may sort of drive it, because before a lot of the municipalities went along with a lot of things. He said the other day, "We're not going to do what the province wants because they don't give us any support." Sometimes out of these crises maybe come some solutions, because now it gets pushed to the front of the list of the priorities.

I was also interested in point 3, where you talked about reducing the effect of taxes for wage earners. I wondered if you could be a little more specific, because, as you know, one of the big concerns is that, taking some of the jobs now, it is difficult to get back into the job, particularly if you do not have any of the skills, because it is at a low end of the wage scale that you jump in. I was wondering if you had some idea of what it would look like and maybe also -- and it may be difficult to do -- just some idea of what the cost would be and how you see that spinning back in. Would we regain that back now the way the economics work? Maybe you could just expand a little bit on that.

Mr Hayday: For people in the lowest economic quintile, or those making the bottom 20% of an income hierarchy, any income they have is for the most part not discretionary. It goes into the purchase of essential goods and services, most of which are consumed or sold directly within the control of vendors and producers within this province. So any increase in real spending by those in the lowest 20%, according to some economists I am familiar with from the University of Manitoba and the University of Toronto, has translated into direct local economic activity. There is an immediate recovery in that sense, minus the middleman of the government tax collector.


The second point I would make in response to your question is that the effective tax-back rate for people moving off welfare into employment still hovers around the 60% range, which is still as high as or higher than people in the top income quintile in the province. So it becomes an unnecessary tax barrier to moving people off a situation where they might be drawing as much as $20,000 to $22,000 a year in provincial support payments through the family benefits program, for the benefit of collecting 60 cents of every earned dollar they have. It feels like a kind of bizarre logic that we would tax back at such a high rate as to maintain somebody in a higher state of dependence upon the welfare system.

Mr Carr: You are right, because, as you know, those people at the lower end of the scale do put the money back in the province. They do not, like some of the higher-end scales, get condominiums in Florida or put it away and sock it away in RRSPs or whatever; they do mostly spend it.

Just on the other point, a little bit about the redirection in terms of health care in this province. Again, we are talking about the same type of process of jumping into a new system. The transition seems to be the difficult point, the same with the SARC situation. It is upfront money to long-term gain, as it were. The process now has not been too specific, but do you like the idea; do you like the consultation process; what are your thoughts in that area?

Mr Hayday: There are two parts to your question, if I heard them. One is the general set of new directions for health and the second one has to do with long-term care reform.

Mr Carr: Yes.

Mr Hayday: Let me speak to the first one first. Based on the last figures I looked at, I think we are spending about $17 billion a year on health and health care in Ontario, which the last time I played with a calculator translated to about $2 million an hour. So since I started talking to you, we have spent $1 million on health in this province. Part of the fallacious assumption is that we have spent $1 million on health. Really we have spent $1 million on health care.

The best research we have tells us that unless we begin to redirect resources to look at the determinants of health, unless we recognize the significance of research that says that if you are in that lowest income quintile and you are living in a city in Ontario or in Canada, you are going to die anywhere up to five years sooner than somebody who has a higher income, until we start to recognize that those markers are significant benchmarks about health and treat them with the same kind of fiscal importance as we treat health care, then we have a problem. We are going to continue to accelerate and have pressures to accelerate in double-digit terms institutional care rather than looking at programs which address determinants of health.

I am not telling you what you do not know. I think what you need to know is that there will be too many pressures to maintain bricks and mortar and not enough pressure to reallocate to community-based programs.

Mr White: Thank you, Mr Hayday, for your excellent presentation. I may be drawing some conclusions from your report, but certainly you seem to combine the economic and the social and health issues together very significantly. I am certainly reminded, from my own years working with the children's aid and in social service settings in the past, of how profoundly child welfare is almost directly equivalent to child poverty and, as you were suggesting a few moments ago, ill health is directly related fairly strongly to economic health.

What I am concerned about a little bit in terms of your recommendations is that while I think they are excellent and laudatory, they speak really to a specific ministerial portfolio as opposed to the holistic issue of: Where is the government spending its money? Frankly, I have some concerns about opportunity planning as it was enunciated by the SARC report, because it is one step from opportunity planning to workfare. It is a little too close. That is a major issue and I do not want to enter into that. If you are looking at the budgetary percentage in Comsoc or Health, in terms of prevention, in terms of opportunity planning, could you give some attention instead to the overall spending? For example, the Ontario Training and Adjustment Board, which is going to be a big budget item, as you are aware, what kind of percentage should be spent in those kinds of areas, and of course with health promotion, which can range into areas of Tourism and Recreation, areas of Health and Comsoc etc, across ministerial boundaries? I am wondering if you could spend a little bit of time addressing that on a more global basis as opposed to a ministry-specific basis.

Mr Hayday: One of the indicators of healthy public policy is that one sets out some clear benchmarks of what you consider to be values you hold absolutely essential and you look for evidence of those in every form of public spending.

Mr White: Indeed.

Mr Hayday: I am telling you what you know then, Mr White. You have already alluded to the fact that Tourism and Recreation is a ministry that is also concerned with community health, as is Industry, Trade and Technology, as is Labour, as is Education, as are the other portfolios.

My recommendations are addressed in the context of specific ministries, based on my previous experience that the more general comments do not generate sufficient activity because they are not close enough to what is. So I am starting from what is, but I would prefer to move to the more integrated approach you are recommending. We have created funding towers which are relatively artificial and do not make sense to most folks in the community and require people with my experience to translate into some kind of coherent public program or spending. While I am flattered by your comments, it should not be so. It should not have to be so difficult to translate it into an integrated approach. It is. I would like it not to be.

One of the ways to begin would be to begin with healthy public policy requirements such that Environment, Education -- and just keep going through the rest of the ministries -- are required to commit to some fundamental targets. You asked me to put a number on that. I picked a specific number of 10% in two areas of spending, which together represent upwards of 40% to 50% of provincial spending overall, I believe, in the current year, because that would represent an effective doubling of our best estimates of what is currently happening.

Mr Sutherland: One quick question and then another. Recommendation 1, the 10%, "equivalent to 10% of the dollar value of" the following -- what does that work out to in real dollars?

Mr Hayday: It would be somewhere in the order of $2 billion.

Mr Sutherland: Okay, and recommendation 3 regarding the lowest income quintile, about reducing the effective tax rate for wage earners: I forget what the exact numbers are, but once you are below a certain income you do not pay tax now. What percentage of those people in that lowest quintile is not paying tax right now?

Mr Hayday: I do not have not a specific number for you on that.

Mr Sutherland: A rough estimate?

Mr Hayday: Probably about half.

The Chair: Mr Johnson, one quick question.

Mr Johnson: It is a quick question; it probably has a long answer. Mr Hayday, with regard to the costs for health services, I was just wondering if you had an opinion on the investment in preventive measures versus care measures. That is the question. It probably has a very long answer, I suspect.

Mr Hayday: I will try and give you a short one, since that would be desired, I think. Most of the major gains we have made in what is called population health, where you look at the overall rate of disease and prevalence of disease and the onset of disease and the age of death -- all that gets wrapped together under the category of population health -- in the past century have been as a result of public policy, not as a result of any specific curative discovery or intervention. So we are not living longer because we have more hospital beds; we are living longer because our quality of life has improved, because our access to clean drinking water has improved -- and I can keep going.

I do not want to give you a long answer on that but I can say that we have talked the good talk on this. We have talked folk wisdom, that an ounce of prevention is worth a pound of cure, but we have seldom been able to actually get the budget for the ounce of prevention. We get the language; we do not get the budget. If we really are going to change the agenda, if we really are going to be serious and work across sectors on this, we have to allocate resources to it and that is reallocate resources. Mr Sutherland's question may have suggested that I was looking for a new $2 billion in spending. I am not. I am look for a reallocation. We are clear about that.

The Chair: Mr Hayday, thank you for coming before this committee and for your comments. Your brief will be part of our report.



The Chair: The next group we have to come before the committee is the Ontario Chamber of Commerce. Would you come and take a seat up here, please. I would like to welcome you to the committee, if you would not mind identifying yourself and whom you represent.

Mr Carnegie: My name is Jim Carnegie. I am the executive director of the Ontario Chamber of Commerce. The Ontario chamber is a federation of 170 community organizations comprising some 65,000 business people throughout Ontario, all the way from the small entrepreneur to the multinational.

Accompanying me today is Don Eastman, chairman of our economic affairs committee. My role is to introduce the chamber and Mr Eastman is here to make the presentation on behalf of the organization.

Mr Eastman: Given the circumstances we now find ourselves in, it seems appropriate to begin with a prayer. The one that seems to be most appropriate for what we are facing is the one by Reinhold Niebuhr: "Give us grace to accept with serenity the things that cannot be changed, courage to change the things which should be changed, and the wisdom to distinguish one from the other."

Serenity may be a bit of a challenge today, so let's focus on wisdom and courage.

We are in the midst of a serious economic mess. Because we are in an economic mess, the social systems that are an important part of who we are and what we have accomplished are also at risk. If it was not clear before, it should be now: A healthy economy is a prerequisite for quality in health care, education and our social safety net as well as for our material standards of wellbeing.

Our first message to you is to focus on the things you can do, not on those things you wish somebody else would do.

Our country is in trouble economically and politically. It seems to us that one of the major contributing factors to those problems has been the inability or unwillingness of both the federal and provincial governments to respect each other's mandates and responsibilities. Instead of each level focusing on those things that are within its control, there is a penchant for playing in each other's sandboxes and throwing dirt at each other. The country deserves better.

There are multiple sources for the economic problems we face. Some of them are due to the federal government's monetary policy, some are due to the cumulative legislative-tax-bureaucratic burden imposed by previous provincial governments and some are due to the actions and threatened actions of the current provincial government.

It is okay to be upset, even angry, at the federal government's conduct of monetary policy and some of its other policies. We may disagree on which those policies are, though. But this government's responsibility is to understand the economic situation we are in and then focus on doing those things that are truly within this government's control. The most recent example of this problem is the Premier's call for Ottawa to permit the use of RRSP funds to help stimulate the economy through house construction.

There are three things wrong with that proposal. First, it is bad economics, based on a misunderstanding of what money is and how it is created. The proposal may move jobs around; it will not create any. Second, it helps to perpetuate a serious, widespread misunderstanding of how the economy works. Third and most important, the Premier should be focusing on what he can and should be doing in this province to help the economic situation, not on providing gratuitous advice to Ottawa.

The problem is not new to this government. This province has a legacy of expressing moral outrage at anything that remotely resembles a restriction on federal transfer payments at the same time that it has been obstructionist on federal tax initiatives. We have some news for you. It may have escaped the attention of most people here, but the federal government's taxpayers and the provincial government's taxpayers are largely one and the same. Hard as it may be to believe, the federal government is actually in much deeper financial trouble than the provincial government is, so far. Dave Christopherson told a group of us last week that we are all in the same boat together. We could not agree more. This country and its economy cannot afford any more cute games of political one-upmanship at the expense of the economy.

Our second message is that you cannot have more than there is. That is the first and immutable law of economics. You can temporarily live off borrowings, but only for a while and only at a cost.

Our economy is in a depression, not a 1930s, style depression but definitely a depression rather than a recession. A recession is a temporary lull that you expect after a period of heated economic activity that overbuilds capacity. It is a short breathing space to consolidate what has been done and to gather breath to proceed upward and onward. By contrast, a depression is marked by systemic problems that are not self-correcting, that will not go away until we do something to make them go away.

Turn to the first graph, the one showing Canadian unemployment, at the back of the handout. The Canadian economy never did recover properly from the 1982 recession. By 1988, Ontario alone had returned to pre-1982 unemployment levels -- six years of serious economic underperformance. A year and a half later, in the middle of 1989, we were headed back into recession. We have been in that recession for two and a half years now. Recovery is still elusive and the consensus outlook is to forecast hope for a painfully slow, fragile recovery some time later this year, a recovery too slow to make any meaningful impact on unemployment rates.

We have good news and we have bad news. We believe that the economy could turn in a much stronger performance than those numbers, but it is also disturbingly possible that the consensus will turn out to have been optimistic. To a greater extent than we think most of you realize, that future is in your hands and will be determined by what you do over the next couple of months.

Turn to the second graph, the one showing industrial production indices for the US and Canada. Look at the Canadian line. That line represents what has happened to this country's economic foundation, the part of the economy that helps to support everything else. It is not specific to Ontario and it does not include all our tradable services, but it is representative of the base market economy that provides the driving force for the rest of the economy and the taxes for our social programs.

Thanks to the recession/depression, the provincial economy is actually smaller this year than it was last year. That means the average person in this province has less this year than a year ago; some, those who have gone bankrupt, those who are unemployed, have a lot less.

In the face of this economic reality, the best that the province could do in its own labour negotiations was to slow down the rate of wage increases for public sector employees. As a result there will be fewer funds available to maintain social programs under stress and there will be higher taxes, either now or in the future, for the average provincial taxpayer. That is not just unfair; it is economically damaging.


If you think you have a revenue problem, have a close look at what this recession has done to the business base that drives your tax revenue. Think how higher taxes would affect what the business community has to do.

We do understand how difficult the civil service negotiations were, and in one context the settlement should be seen as a major accomplishment. Even in the market economy in the midst of this severe recession, cuts in wage rates have been few and far between. All employers seem to be caught in a trap. It is hard, if not impossible, to get even temporary wage reductions that will permit continued employment and a return to a productive, dynamic and growing economy. It is relatively easier to grant small increases and then conserve cash by laying off people or suspending hiring.

At both the government and business levels, declining revenue and steady-to-higher wage rates mean laying off otherwise productive people. As the economy produces less, it puts even more pressure on both business and government revenue streams and then further needs for layoffs. As a result, our economy has been falling in on itself.

When we look at Canada's international borrowings, our current account deficit and the combined federal and provincial deficits, we see a country and a province that are consuming far more than they are producing.

As a province we need to achieve a dramatic increase in employment, productivity and output or be prepared for a vicious decline in our living standards. Right now wage levels and economic expectations in this province are disturbingly out of touch with our current economic reality.

We do not want Ontario to become a low-wage area. We want to stop a process that threatens to turn it into one. You cannot have more than there is. Neither you nor we have translated that reality into the wage settlement process. As a result, we are making our economic problems much worse.

Our third message is that it is a lot easier to spend your way into trouble than out of it. Increasingly, legitimately frustrated people are calling on the use of fiscal stimulus to jump-start the economy. There is only one problem with that: It will not work. It will make our problems worse.

We have a federal budget deficit of over $30 billion and a provincial deficit of $10 billion and rising. If government spending really did stimulate the economy, we would not be in this mess.

Let's turn to the comments we made to this committee last year: that this recession was created by the Bank of Canada in response to its legitimate concern about inflation. That does not mean we agree with what the Bank of Canada has done; just that we understand it. As long as the bank is maintaining strict limits on the amount of money available to the economy, government spending does not stimulate anything other than perhaps our blood pressure. All this policy does is to destroy more businesses, the jobs they provide, the goods they produce and the tax revenue that comes from this activity.

As we suggested a year ago, provincial spending initiatives in this environment are like trying to fill a bathtub with a teaspoon while the Bank of Canada has the plug out.

Has the Bank of Canada put the plug back in yet? Certainly interest rates are a lot lower today than they were a year ago, but the bank maintains a substantial spread between Canadian and US interest rates. The differential on 90-day T-bills is still over three full percentage points, and it has been rising recently as the bank has been fighting the decline in the Canadian dollar.

The Canadian dollar has settled back to 85 cents from earlier higher levels, but purchasing power parity is something less than 80 cents and declining as more of our industrial base and tradable services are driven out of business. At 85 cents, our goods and tradable services are arbitrarily being made uncompetitive on world markets.

It looks to us like the plug is still out. Any attempt to stimulate the economy with government spending will not just be wasted money; it will be counterproductive. To use another analogy, it is like kicking a horse while still pulling tightly on the reins. The horse may get upset and jumpy, but it is not going to go anywhere, or at least not where you want it to.

The recession did not just happen and it was not caused by the free trade agreement any more than the 1982 recession was caused by the free trade agreement. It was created by the Bank of Canada to try to control rising inflationary problems centred primarily in Ontario.

A lot of that inflation problem has arisen from the provincial government through higher taxes, legislated cost increases, a costly and rising bureaucratic burden, expensive high-profile public sector wage settlements -- up until the current one -- and increased provincial competition for the scarce funds that are available.

We have raised our concern about provincial government-driven inflation not just with this government but with the previous one as well. The standard response has been, "It ain't us." Until the government of this province starts facing up to its responsibility on the inflation front, we will continue to have a lot of unnecessary economic grief.

The Bank of Canada may not be right, but it is the Bank of Canada. Help it find the comfort level it needs to put the plug back in the bathtub.

What can we do here? First of all, given the revenue situation, this province has to take a much harder look at its spending. We previously offered our services to help the province take a fresh perspective in looking at its program efficiency and spending commitments. We think this government could make use of some fresh insights and the experience of the business community.

On the revenue side, in the current environment it is hard to identify any areas where taxes can be raised without having a counterproductive, negative impact on the economy. The province needs more taxes, not higher taxes.

There are two areas we would like to draw your attention to -- areas where you can improve both provincial tax revenues and the economy.

First, Sunday shopping. For many people in this province shopping is a recreational activity, one that they want to pursue on Sundays. If we will not permit them to pursue it in this province, they will pursue it south of the border. That means lost revenue for Ontario businesses. It means lost tax revenue for the province. It is time to let legislation reflect today's realities.

Second, consolidate the provincial sales tax and the GST. Having two separate taxes has imposed a substantial and quite unnecessary burden on the business community. Paperwork costs money and wastes resources. In addition to the administrative burden of two separate taxes, the separate provincial sales tax has contributed to the cross-border shopping problem. The province is losing a substantial amount of revenue because the provincial sales tax is not collected at the border, and we lose business because it helps make US prices more attractive. Put the taxes together, simplify the paperwork, collect more taxes and get more business.

On the deficit: The deficit is going to be large, but at least let's not kid each other on how large it really is. Separating out capital spending without making any realistic allowance for deterioration and obsolescence -- for depreciation -- is fundamentally misleading. Please do it right or do not do it.

As for the deficit itself, we agree with the Treasurer that the current projections are unacceptable and that a significant reduction is required. We do not have a target number for 1992-93. What is critically important is whether this government does lay the foundation for a fundamental improvement in the provincial economy or whether we continue to have initiatives that worsen our economic prospects.

I would like you to turn to the table showing unemployment rates by region, and the end of the graph showing changes in unemployment. In July 1989, Ontario's unemployment rate was 5%. By September 1990 it had risen 1.5 percentage points to 6.5%. From then until December 1991 it rose a further 3.2% to 9.7%. Most of the deterioration in Ontario's economy took place after this government took office. Ontario's experience has been much worse than that of the rest of the country.

Not all of that increase in unemployment is due to the actions of this government. We would not even attribute all of the difference in Ontario's performance and that of the rest of the country to this government. Some of the difference is due to the legacy of the previous government, and some of it is due to high exchange rate monetary policy that has been particularly harmful to Ontario's manufacturing base. But a growing portion of that difference is due to what this government is doing.

In addition to a disturbing level of losses of businesses to bankruptcy, we are seeing a number of companies moving their operations out of this province, some to relocate in other provinces, more to relocate in the United States. At the same time there have not been a lot of people anxious to move to Ontario or to invest money here.


Ontario has become a high-risk, hostile environment for business. There is no comfort that business will receive fair treatment in this province. Unless that perception changes and changes quickly, our economic prospects are dim.

We have already provided a number of messages today. All of them are important, and if we have helped your understanding on any of them, the province will be well served by what we have done. However, as substantive as they are, they are dwarfed by the urgency and importance of the message we want to give you now.

We are not asking this government to set aside its principles of social justice and commitments for a better world, but to ensure that those principles are not compromised by preconceived, insufficiently researched solutions.

We want this government, and every government, to take the time to honestly and sincerely put itself in the shoes of all of those who are potentially affected by proposed legislation and administrative changes, to think through how those changes will affect our decisions and, subsequently, how the economy, our social systems and people will be affected.

Consultation is not a negotiation, a debate or some contrived set of hearings but an open communication process for helping you to truly understand our thought processes and the likely outcomes and to help ensure that you have not overlooked important aspects of the problem you are trying to solve.

Our responsibility as the Ontario Chamber of Commerce is to help keep our business members informed on upcoming legislative initiatives and how they may affect their businesses, and then to try to ensure that the government understands the full economic implications of those proposals and our members' concerns about them.

At the end of the day we expect the government to act in the best interests of the province, to honour its social commitment in the broad provincial context. Once those decisions have been made, it is up to each business to make its own decisions on how, or whether, it wants to be in business in this province.

The largest, most pressing problem we have right now is the proposed changes to the Ontario Labour Relations Act. The OLRA conflagration is a symptom of a fundamental problem with the consultation process. The proposed changes threaten to dramatically alter the business environment in Ontario in ways that will make it much more hazardous to be in business. Our attempts to communicate that concern quietly have been ignored, and when we have elevated those concerns to try to be heard, we have been accused of using scare tactics.

All we are asking is that you honestly and sincerely put yourselves in our shoes and in the shoes of all of the other players before making your decisions. If that had happened, the proposed OLRA changes and a number of other legislative initiatives would have been vastly different and our economy would be healthier. We need to quickly transform Ontario's high-risk, hostile environment for business to one of perceived fairness. You need that change if you are to truly honour your social commitments, and we need it to survive.

We are, all of us, in the same boat together and we had better find some way of rowing in the same direction before we hit the falls.

Thank you for your time and consideration.

Mr Carr: Thank you very much for a well-thought-out presentation. I appreciate your taking the time to put it together.

On page 6 you talk about what you see is the problem. You say, "It was created by the Bank of Canada trying to control rising inflationary problems that were centred primarily in Ontario," and then you list the major problems, the higher taxes and so on. In a nutshell that seems to be the problem, and if one is to carry that forward, the solution is to tackle the five bullets there and we would be in pretty good shape.

Anything more specific on some of those bullet points? Should we be looking at certain industries to reduce taxes, for example to spur car sales, reduce the provincial sales tax -- something along those lines? Could you be a little bit more specific on those five bullet points of what you would like to see the government do in the next budget?

Mr Eastman: Much as I would love to see dramatically lower taxes, I am not sure how you can get there given the deficit position we are looking at. At this point I think it should be a question of focusing on those non-tax issues that are presenting real challenges for the business community. Things like the proposed OLRA changes -- I do not want to beat that one to death, but it is tremendously important. On top of that there have been a number of legislative initiatives, all of which increase costs to business and then pretend that somehow nobody has to pay for them.

It is fine to do things on occupational safety and health and a whole bunch of other things as long as we, after we make those changes, recognize that we have increased costs and all of us have to pay for them. What we wound up with is a process where we make those kinds of changes, then when it shows up in the consumer price index we turn around and say: "Oh, gee, the CPI went up. We'd better pay everybody more." Well, I thought we said we wanted those things and we were really going to pay for them. You do not do it that way.

Mr Carr: You may have missed it coming in here, but I watched the premiers and the Prime Minister today. You would be happy to know that there was a lot of cooperation. There was no complaining back and forth. Amazingly enough, there was a fair amount of cooperation, which was nice to see. When you see the reports tonight, hopefully the news reports will show it, as I understood it, live and in colour.

You did say on one of the pages where you have offered to the government to come in and take a look at some of the expenditures. Maybe you can just give me an insight on what the reaction has been. The reason I ask that is that I asked the Minister of Industry, Trade and Technology -- because you have all your recommendations put together from your resolutions -- to take a look at some of those, and he said he would. I just wonder what the feedback is. What has the government said on some of the detailed proposals in your recommendations, plus your offer to help with the spending? What has the government said to you?

Mr Eastman: The basic response has been that the government had its own reviews under way and it was comfortable with its own internal reviews. I think there is some benefit from some outside perspective on that, if for no other reason than to help give those of us on the outside some comfort that the right things are really being looked at.

Mr Carr: What about the recommendations? They are fairly detailed, some of your proposals. How many of them have been implemented or looked at?

Mr Eastman: Jim, do you have the track record on that?

Mr Carnegie: There has certainly been a response to all of them. In some cases they are being looked at. We have not seen a major move towards most of them at this stage, although some of them are somewhat esoteric in their approach. The overall offer, as Don has said, is more or less shelved at this point, but is an oft-times repeated offer. Certainly we have every reason to believe that we have the capability of producing people who can give some good advice in that area. I would never try to run a box score on my provincial recommendations on an annualized basis. I would probably fall on my sword.

Mr Carr: You would be wanting to quit. I congratulate you for keeping trying.

Mr Sutherland: One of your recommendations is about wide-open Sunday shopping, and you talk about it creating jobs. BC has had wide-open Sunday shopping and it still leads the country in cross-border shopping. It brings me back to your comment on the use of the RRSP funds: "The proposal may move jobs around, but it won't create any." I think your proposal on Sunday shopping would do the same thing.

I want to focus in on the RRSP funds. Certainly I am sure, as you know, that the Ontario Home Builders' Association and the Ontario Real Estate Association have come out in support of that type of proposal. I know many of those people and members of those organizations are also members of your organization. I was just wondering if you could elaborate a little more as to what your specific concerns are about the proposal to use RRSP funds. Maybe you could correct me, because my understanding is that housing has a greater ripple effect than money in some other areas. If you could comment on that I would appreciate it.

Mr Eastman: Let me use an exhibit that I will not leave with you. One of the problems with the whole RRSP debate is that it pretends the funds in RRSP accounts are simply bundles of money that are not currently doing anything. You have to look past the sums to understand what is being held there and what happens if you want people to sell those assets off. When you start working through that process, yes, you do gain on housing, but you lose elsewhere.

Mr Sutherland: But do you not get a bigger bang for your buck because of the ripple effect of putting it into the housing market, rather than where it may be invested in some of the other areas that RRSP funds may be supporting?


Mr Eastman: The only time you get any bang for your buck is if the Bank of Canada permits that activity to get reflected through an increase in the money supply available to the economy. I truly sympathize with the situation the home builders are in. As well as some other sectors of the economy, they wind up taking the lead impact, taking it on the chin when interest rates are increased. They are not the only ones who suffer, but they tend to get hit much more in the cycle than other people.

Mr Sutherland: So the housing industry does not have a greater ripple effect in terms of its dollar going through the economy and getting a much quicker stimulus of the money being invested there than maybe in some other areas?

Mr Eastman: I cannot see where you can make any significant differentiation, that a dollar spent in housing generates more than it does someplace else.

Mr White: I very much appreciate your presentation; some very simple analogies. You start off with the prayer. I am reminded of the Unitarian minister who wrote those books -- what were they? It Was On Fire When I Lay Down on It, and All I Really Need To Know I Learned in Kindergarten.

Mr Drainville: Robert Fulghum's?

Mr White: Fulghum's, yes.

While I very much appreciate the analogies and your descriptions, I am a little concerned with the revenue enhancement. You had a couple of ideas. I do not think they are likely to be on the books in the next while. I wonder if you have other ideas in terms of revenue enhancement. In terms of laying the foundation for economic growth, the emphasis of your discussion really was about what one thing is that we should not be doing as opposed to what it is we should be doing in terms of the budget coming up, because of course the Ontario Labour Relations Act is not a budgetary issue per se. Would you comment about other ideas you might have in terms of revenue enhancement, and as well on other issues in regard to the foundations for economic growth as your paper indicates.

Mr Eastman: One of the challenges we face when we look at the economic prospects that will generate the funds in that budget is that the OLRA will have potentially a tremendous impact. The economic outlook for the province is very different with those provisions than it is without them.

The OLRA is not the only problem. As I said, the positive is what we really want you to do is to find some way of taking the time not to debate with us but to try and really get yourselves mentally into our shoes and understand how some of these proposed provisions will affect us. You have a business community that before this government came into office felt it was under tremendous duress, and that this province had already become a much less attractive place to be in business than it had been previously. Instead of being able to respond to those concerns and react to them, what we have seen has been an acceleration of all the things that created those concerns in the first place.

The Chair: Mr Jamison, I cannot let you ask a question. We have run out of time.

Mr Phillips: A few observations, then a question. I would really like to expand the deficit; we should be showing probably $4 billion a year. I have felt this way for a long while. "Scam" is too big a word, but to try to understate the deficit, the government has gone to this capital account. It will spend $16 billion over the next three or four years and show maybe $2 billion in expenses. I urge you to keep an eye on that.

I think the unemployment number is understated by at least two or three percentage points. Over two years the number of people in the labour force has stayed steady according to the numbers, when we all know it has gone up by probably 150,000 people. If they were there, the unemployment number would be three percentage points higher. I would watch that too.

I have a question for the chamber. The economic renewal plan the government is preparing has three major components; four, really, with the Ontario Labour Relations Act amendments. It has the whole training thing that is in the document Skills to Meet the Challenge: A Training Partnership for Ontario. That will probably have a budget of $2 billion, run by a bipartite board of unions and business. The working venture capital funds are the second component in its economic renewal plan, which, by the way, uses RRSP money to put into a union-run venture capital plan, which may or may not be a good idea. The third component will be the use of public sector pension funds for investment. Has the chamber had any chance to comment on that? The reason I raise it is I am sure they will all be components in the budget.

Mr Eastman: On the training one, I am really not up to speed on where that fits with the Ontario Training and Adjustment Board. I know there are some concerns we are looking at overall. We need a workforce that has better skills than it does currently. The things we can do to move in that direction we think are positive, and we endorse them.

On the venture capital funds, we have some serious concerns with Bill 150, particularly in terms of the venture capital aspect of it. We have some concern but not as much with the worker ownership component, but we certainly have a concern with a venture capital one that says, "Hey, this is something that is available only through the union movement." We certainly have a problem with that. There is a challenge on the availability of capital to small businesses, in a more open consultation process; I am not sure we would have come to that as being an appropriate solution.

On the topic of how the public sector pensions might get used, we have some apprehensiveness. When we look at what has been done in Quebec, superficially that looks like it has been effective. But one of the problems is that you wind up with jobs you can see and you never get much of a handle on the jobs you cannot see. If you step back from the specific fund and say: "Okay, what has been happening in Quebec? Is Quebec a better place economically now than it was before?" it is hard to say that very much has really happened there.

The Chair: Thank you for appearing before our committee today.

Mr Sutherland: I wonder if we could have research look into a couple of things. I know I am asking for a lot today, but I thought I had read somewhere, and maybe I am wrong and maybe it was from biased people in the housing industry themselves in terms of it having a greater ripple effect for its dollar. I wonder if we could have research see if there is any independent analysis on whether the housing dollar does seem to go a little further.

The other thing is regarding RRSP funds: I would like to know where they are going, in terms of which sectors they are going into, and how much Canadian RRSP money is actually staying within the country versus going out. I know that may be difficult to find out, but I would be curious and I think members of the committee might like knowing where RRSP money goes, whether it stays in the province and country or whether it goes out.



The Chair: The next group to come before the committee is the All Business Coalition. Would you please take a seat. I would like to welcome you to the standing committee on finance and economic affairs. If you would you identify yourselves for the purposes of Hansard, then you may begin your presentation.

Mr Surplis: My name is David Surplis. I am president of the Council of Ontario Construction Associations. With me is Mr Neil De Koker, who is president of the Automotive Parts Manufacturers' Association. We are representing the All Business Coalition.

We are delighted to be here representing our coalition, which in itself is an interesting phenomenon in terms of the discussions about the budget. You will see on the previous page the roster of our members, or at least those who attach themselves to the All Business Coalition: over 60 of the major business associations in the province, and we represent about 75% of the Ontario workforce, we have calculated, both organized and unorganized.

ABC is an interesting development because about one year ago we did not exist. The All Business Coalition started just about a year ago when a few of the leading business associations invited colleagues from about 20 other associations to compare notes on a single topic; that topic was access to the new government. It turned out we all had the same complaint: We could not get in to see anybody, despite our overtures. We were routinely turned down or referred to parliamentary assistants or staff.

Mrs Y. O'Neill: They are not that bad. Be careful; you are talking to some of them.

Mr Surplis: I know.

Mr Phillips: Very good meetings, incidentally.

Mr Surplis: Yes, excellent meetings.

The Vice-Chair: Sorry to cut in on the fun, but it looks like you have a fairly lengthy presentation and we have a short time.

Mr Surplis: We are going to zip through it as fast as we can.

Since that time, we have obviously found a mutuality of purpose and a need and a will to speak out on public issues.

We are really a very loosely organized group. We have a nominal chairman, a volunteer steering committee and a list of interested parties. I say "interested parties" because there really are no criteria for membership other than a willingness to support and participate in our affairs.

You might recall we also funded the first study of the economic impacts of the Labour Relations Act changes, the Ernst and Young study. We have been involved in a number of other things: radio ads to welcome Mr Mackenzie in each city where he went on his tour, and we have posters and some other things that you are probably familiar with. This is all by way of background simply because we want you to know that this is a coalition effort and what we present is more or less a consensus view of the members. We do not have to point out that we are in extraordinary and difficult economic circumstances. Our members are in dire difficulty right across the board. That is why, of course, we have a concern in the affairs of this committee. We want to play a role, that is, all the business associations involved in ABC, because everything that is lost in Ontario is a loss to us and we want to help any way we can. Regrettably, however, we do not believe the present government is helping Ontario enough along that road. As a result of our research and our experience, we genuinely and sincerely believe that many of the government's programs do not help us out of the depressed times but actually deepen them. We need some help in that regard because Ontario is not, and cannot be, a closed economy. We want more emphasis on the private sector because traditionally that sector has produced the most for Ontario. We listened with interest to the Premier on January 21, but we came away a little dissatisfied. Yes, there were some positive remarks in there, but we noticed a lack of emphasis on the private sector totally in what the Premier had to say. In our opinion, the very best part of the Premier's speech was when he said, "I have confidence that, if we pull together, the greatest years for Ontario, and Canada, are still ahead." But those were his very last words in his speech. We had hoped he would have begun with those words and built on that.

We want to see the inspiration, and blend our efforts with those of the public sector, because the private sector is so important.The importance of the words "pulling together" cannot be emphasized enough, because if there is one message the the All Business Coalition wishes to bring to government, it is the expression of the business community's sincere belief that we not only see very little evidence of partnership developing, we also see the government placing real impediments to that pulling together to improve the economy.

Here we must outline once again -- I know the previous comments were that it was not a budgetary consideration, but to the economic community, to the business community, to the All Business Coalition, the proposed amendments to the Labour Relations Act are very deep and sincere and relate directly to our opportunities for growth and development in this province. Our opposition to those changes has been expressed in many, many ways, but our message is very simple.

The reason for our opposition lies in the fact that we in the business community had absolutely nothing to do with the development of those proposals. Second, when they were leaked via the cabinet document -- you know all about that -- there was a passage in the communications plan that said the voice of business was supposed to be "neutralized." Whether or not that is the case, it was something that was published and it was part of a government document. A third reason, of course, is that we have been told by the government that whatever the consultation process is, many, if not most, of the proposals are non-negotiable.

The drive to do all that we think hinders a coming together of business and labour and government interests in the best interests of renewing the economy. We are really astounded that anyone would fail to see that the way those proposals have been brought in will not produce harmony. Proceeding from a single set of proposals put forward by one group just will not work, any more than it would work the other way, if management had a whole set of proposals and left labour out and tried to neutralize its voice.

We have repeatedly called as an organization for the opportunity to sit down with government and labour and pull together. Unfortunately, every overture in this regard has been rebuffed. Instead of cooperation we are witnessing increasing division as both labour and government representatives attempt to discredit every initiative of the business community. Labour and management are eyeing each other over ever-growing barricades. We fear that this division will grow to a battle and from there to a wasteful war of attrition in which there will be no winners and many losers.

What really concerns the business community is what we discuss in the next part here, and that is that the seemingly unresolvable differences between labour and management vis-à-vis the Labour Relations Act have been moved from the workplace to here, to the Legislature, and because they have been moved here, the perception of Ontario as a place for stable investment has been seriously challenged beyond our borders. It must be evident to everybody from the comments in the press and everything that the Japanese, the American and other jurisdictions are questioning the investment possibilities in Ontario. We think that is truly regrettable.

We must also here voice our deep frustration about both the lack of consideration for our concerns and indeed the denigration of our sincere and honest warnings as "scaremongering." It is extremely difficult for us in business to understand how anybody could seriously believe that the business community would do anything to hinder growth and development in the province. That is what we are here for. It is our mission. We also know, of course, the downside, the loss and dislocation and everything that occurs with a downturn. Decreased investment and enterprise mean loss of confidence, loss of jobs, loss of profits, loss of taxation, etc. You can see what we say about that. You know all that. You have been told that. The point we want to make is that we are not interested in scaremongering. We are genuinely concerned about recovery and growth, but that does not mean, of course, that we will sit quietly by when we see forces at work that could threaten recovery and growth.

Through the facilities and cooperation of our allies in Project Economic Growth and the More Jobs Coalition, both of which I think you are hearing from, we have presented many, many studies to government, but every study and every presentation has borne the same message. The proposed Labour Relations Act reforms will bring with them the message that anybody contemplating investment in Ontario had better be aware that this province intends to promote unionization to an extent unprecedented in Canada. Anyone contemplating investment in Ontario had better be aware that the province intends to give those unions power over the workplace to an extent unprecedented in North America.


Investors are leery. Wherever one stands in the political spectrum, it is an inescapable fact that investors do not consciously seek out jurisdictions where the perception is that the playing field is not level, and the perception of the business community inside and outside Ontario is that the playing field will not be level should the government's proposal be implemented. We cannot emphasize that strongly enough. Those are not our words; those are the words of people outside the province, and it will deter investment.

We have a list. Mr De Koker can go through the list of announcements of cancelled investment in Ontario already, for instance, the Hayes-Dana plant. The postponement of that investment has been specifically linked to the introduction of proposals for change in the Labour Relations Act.

That is what we are worried about, driving away investment and driving away the opportunity for an economic renewal which would bring a return in taxation revenue, among many other things. But it would appear that the government's approach has been to tough it out and find reasons to reject the studies we do. We are confused, of course, why anybody would go forward with proposals without adequate study of the economic impacts.

As I said, we in the ABC commissioned the earlier Ernst and Young study which surveyed investments, and you all know that 86% of the respondents said the passage of the reforms would lead to serious job loss in their businesses. You also know that the government immediately dismissed the study as unreliable because the questions asked related to all the matters in the so-called Burkett report and the leaked cabinet document, but the government claimed, "Of course, those aren't things that are going to be in our discussion paper."

The All Business Coalition and specific members of it had an immediate response. If the government would not accept the survey based on the leaked cabinet document, how about accepting a survey based on its own discussion paper and on its own preferred options? We will soon find out, because my own organization, the Council of Ontario Construction Associations, has commissioned Ernst and Young to do just that, and the results of that survey should be available very soon. It is our expectation that the survey will reveal that the discussion paper, with the perceived threats to the business community somewhat reduced -- as you know, a number of things have been thrown out -- will result in a concomitant reduction in job and investment loss, but, sadly, we are expecting that the results will still be completely indefensible: very high job loss and severe investment loss. What we obviously see is reducing those proposals to a zero effect, negative effect, and we do not know if that can actually happen.

In terms of Ontario's finances and economic affairs, we are here to stress the point that the perception of investors is extremely important. For Ontario to grow and prosper, this jurisdiction must not only be a good place to invest but it must be seen to be a good place to invest. Unfortunately, we must tell you that both we and the investors outside the province perceive a distinctly anti-business atmosphere in Ontario at the moment. We have put together a little list of things here to give you an idea of the consensus in the business community. We are worried about campaigns, for instance, which appear to dissuade private initiatives in rental housing, home building, day care, health care, and the list goes on. The scenario we see -- I did not hear all the chamber of commerce report, but I know it feels the same way -- is new taxes, higher taxes, increasing deficits, reduced service for municipalities, hospitals and universities and galloping government interference in virtually all aspects of business life.

It must also be remembered that in addition to government initiatives, there is also the prospect of seemingly uncontrolled spending at the Workers' Compensation Board. Interestingly, when you talk about deficits, the deficit announced last week of the Workers' Compensation Board rivals that of the government itself. So bear that one in mind.

We hope you believe us when we say that carrying this message does not bring us any satisfaction. We have heard it contended that All Business Coalition members are motivated by partisan considerations and are opposed to the government. Nothing could be further from the truth. At our meetings -- and they are quite frequent and quite large -- we are motivated by concern for the economy and are opposed only to policies, programs and actions which are harmful to the economy.

Unfortunately the Minister of Labour now tells us that because we have complained about the way we have been treated, we have virtually killed any opportunity for rapprochement or consensus with labour and all that remains is the prospect of a battle royal over the Labour Relations Act proposals which will further bemuse and deter investors. But you remember an old political maxim, "When they're talking, they're not shooting," and in the interest of Ontario's finances and economic affairs, we urge this committee to develop proposals for the Treasurer that will encourage pulling together rather than pulling apart -- or shooting, to go back to the analogy.

Turning to other issues, the standing committee will be hearing much more directly from many, if not all, of the individual associations that make up ABC, and certainly the Treasurer will be, and many of them have specific suggestions for you. For our part today, we hope it will be helpful to hear a consensus viewpoint from a very large group of business and trade associations on a number of matters.

The first thing that comes to our mind, of course, and something the chamber mentioned earlier, is the collective debt load. When we look around this province, it is not just the provincial deficit we see and not just the federal deficit we see, but we also see the debts or deficits of Ontario Hydro, the municipalities, hospitals, colleges and universities, and most recently and as I alluded to earlier, that unbelievable sink-hole known as the Workers' Compensation Board. And while of course it is true that most, if not all, governments employ deficit financing to varying degrees, we see the mounting debt load as a very serious impediment to progress in Ontario.

The public does not generally see a lot of the burdens that are hidden in these taxes and assessments and so on. To take an example out of my own industry, there is a burden in the Workers' Compensation Board in one particular part of the construction trade wherein the companies have had to pay increasing assessments to the WCB that have grown at over 1,400% in 20 years; that resulting, by the way, in this individual company paying $5,600 per worker per year before he or she lifts a tool. That is just for WCB. Then you add in all the other things in there, unemployment insurance, CPP, employers' health tax and so on -- which are fine; ee are not arguing against benefits, but we would like the committee and the public to realize that overwhelming costs of business are harmful to us, and they must be noted and addressed. We are not saying that benefits and so on are out the window, because that is not true. Higher costs, even at very high levels, are bearable, as long as there is high productivity and concomitantly high return for those costs.

We hope that the deficits will be addressed. We are optimistic that we can together address those kinds of things. As we mention here, we are optimistic about the proposals put forward by the government for retraining and adjustment of the workforce. That is the kind of thing we can certainly work with you on, and we are all part of it now anyway, but rejuvenating the economy will take much more than just a retrained workforce. Investors and management must be convinced that they will be able to apply their resources in the most productive, efficient and timely manner. In other words, there has to be that positive climate we were talking about.

Right now we see examples of distinctly anti-business sentiment finding expression in government circles. Yes, there has been a program to put $700 million into capital projects. Yes, the Minister of Industry, Trade and Technology has attempted to secure sales offshore. But against these efforts must be balanced the apparent desire to emphasize social programs instead of, rather than together with, economic programs. We hold it self-evident that social programs cannot be initiated and maintained without an equal emphasis on job creation in the private sector.


Just briefly on the subject of taxation policy, it is obvious with the current shortfalls and the continual addition of social programs that higher taxes and newer taxes are going to be absolutely unavoidable so that we can avoid those deficits which would crush us all. We are naturally in favour of improving the fairness of the taxation system, but if "fairness" is taken to mean more and more taxes on the business sector that provides the jobs in Ontario, we cannot see either the fairness or the economic sense. Business must be stimulated.

For instance, we just want to make a quick reference to the documents from the Fair Tax Commission announced by Mr Laughren. The question which those working documents put to the working group on corporate tax is not, "What kind of stimulus can be given to businesses so that employment can be increased and taxation revenue therefore increased?" The question put by the government to the committee is, "What type of corporate minimum tax would be most effective at improving the fairness of the tax system by ensuring that all profitable corporations pay a fair share of the corporate tax burden?"

That question is loaded with bias and innuendo against the business community. It does not ask if a minimum tax is necessary. It simply asks which one we can implement. Second, it raises the spectre of that hoary old thing -- back to David Lewis's days -- of the "corporate welfare bums" argument, as though it was the corporations' fault that various governments have chosen tax policy as a means of stimulating growth in certain areas of the economy. The point we are making is that business will not be attracted to a jurisdiction that is perceived to have punitive taxation policies which emphasize ideology instead of the principles of economic growth and development. What we are saying is that the best way to pay for social programs is by promoting economic programs that increase employment and therefore raise tax revenues.

We welcome this opportunity to expand on some of the issues which animate the All Business Coalition and its members. As to positive suggestions, you will be hearing many from our colleagues, such as undertaking a capital works program suggested by the Premier and using creative taxation policy to stimulate the economy. For instance, some of us will remember that a decade or so ago, the Treasurer of the day gave a provincial sales tax holiday for the purchase of new cars, and a strong resurgence in the automobile market was the result. The same kind of thinking can apply to the new housing market, and we applaud the suggestion of the Premier for allowing RRSP funds to be used to buy new homes, if that turns out to be viable and so on. It is the kind of thing we are looking for: stimulation, not regulation.

So we are all in favour of stimulating growth by creative and workable means. We will cooperate with the government -- we have said it a million times -- to implement any such plans to the limit of our abilities. But there has to be cooperation on all fronts. We would like very much to see the elimination of a current tendency to portray issues in terms of "us and them," "we and they." We would also like to see the elimination of non-negotiable items. I know that is a great thing in collective bargaining, but we are not in collective bargaining. We are setting policies and programs for the whole province. In the absence of a movement towards cooperation, Mr Chairman, we can tell you that the next three years will see protracted and increasingly bitter confrontations between labour and management over government policies. We do not want to see that.

As we said at the beginning, the ABC is a unique phenomenon in Ontario politics. Those of us involved in it, like Mr De Koker and myself, are absolutely amazed at the strength of commitment and cooperation displayed by virtually every business employer and association of business employers in Ontario. This has not happened before. The voice of business has never been so united or so focused. We have funded studies. We have purchased radio and newspaper ads. We are producing posters and otherwise preparing for what appear to be provincial campaigns, like an election campaign or a leadership campaign, across the province.

As we said before, the ensuing battle will not be contained within Ontario's borders. The international investment community will be watching every move. In fact, I have a clipping from a newspaper headline from just a few days ago that says, "Push is on to lure firms from Ontario." Other jurisdictions are here trying to lure companies away. That is not good for Ontario.

If there is a message we want to leave with you, it is that despite all the negative sides that we felt we had to impart to you, despite all the negative criticism and so on, we still believe there is time to create hope and restore confidence. The upcoming budget can contain incentives for business to get on with job creation. Municipalities can be freed to give incentives to factories and other job creators. Shopping laws can be tailored to maximize commerce, and whether that is moving jobs around, it certainly has to be addressed. It would be much preferable if it increased jobs and commerce.

Most important of all from the All Business Coalition's point of view is that business can and should be invited to sit down with our counterparts in government and labour. We have offered it over and over, and that is all we would like to do. Should these things come to pass, the image of Ontario would be greatly improved and we would have a much better opportunity to restore the province to its traditional role as industrial leader in Canada.

That is what we are here to tell you, and we thank you for that opportunity. We would certainly be happy to answer any questions about ABC and our consensus viewpoint.

The Chair: Okay, we have three upcoming questions from the government side, starting with Mr Johnson.

Mr Johnson: I listened to your paper and read along with interest, and I have to say that some of what you advocate is sort of like a self-fulfilling prophesy in my opinion. I mean, you are out telling the world that Ontario is not a good place to invest. If the rest of the world is listening to you, then surely to God the rest of the world will think Ontario is not a good place to invest.

You talk about Ernst and Young and the report they made as a result of investigating a paper that was not, in fact, the legislation that was drafted, but something prior to that. So now we have a reaction to something that was not something to be entirely concerned about, and that would indicate that people have a misconception, or a misperception if you will. I am very curious to see what the results of their new poll tell us. You talk in your paper about innuendo and bias. I kind of get the feeling that maybe the All Business Coalition has some innuendo and bias when it looks at the changes to the Ontario Labour Relations Act and what they were initiated for. My question is: Do you not think that labour inadequacies in the Ontario Labour Relations Act have been a problem in the past and that changes that will make relations more harmonious are the intention of these changes? Do you not think that in reality these things can happen? I mean, we are looking at a global economy now.

The Chair: Mr Johnson, could you get the the question out? We are members.

Mr Johnson: We will leave it at that, then. There is so much to say and so little time.

Mr Surplis: Thanks, Mr Johnson. I will try to be very brief in responding. It is not that we are telling people that Ontario is a bad place. When we wrote this document we wanted to show you that we are not saying that; that is what outsiders are saying. That is what the investment community in Chicago, Japan and elsewhere is saying.

Mr Johnson: Why?

Mr Surplis: Why? Because we have responded to a one-sided agenda. The whole answer is this. The government could have come to us and said: "Look, there are all kinds of problems that we perceive in certification, petitions and all that kind of stuff. Let's sit down and talk about them and together come up with some solutions." It did not do that. The government produced a one-sided agenda to which we responded: "Hey, that is not fair. Let us have some input, too." This is a two-way street; it is not a three-way street with government as well. That is why we are upset. It is not our perceptions.


We have not even heard the inadequacies of the Labour Relations Act spelled out fully. We have done other polling too -- with Environics, for instance. We asked the public: "Are you unhappy with the state of labour relations in Ontario?" Yes, they are upset about strikes and so on. We will share all that with you, and we have some more polls on that too, but we do not see any great demand from the public for increased unionization. In fact, there is a trend away from that.

What we hoped to tell you, Mr Johnson, is that these are not our statements. These are culled from the observations of others who are watching you and watching us wrestle with this problem, and who are saying, "Gosh, they can't solve this thing, so maybe it's not a good place to invest."

The Chair: One quick one, Mr Sutherland.

Mr Sutherland: Hayes-Dana, which you mention in here, said that it is because of the labour relations, but in fact Hayes-Dana is an automotive parts supplier mainly to the Big Three, primarily General Motors. How can an outside, independent observer really tell whether it is specifically just the labour relations or it is due to some of the downsizing going on among the Big Three auto parts suppliers, which they service primarily?

Mr De Koker: They service the Big Three. They also service other large trucking companies and a number of the Japanese investors, as well as large tier-1 suppliers. General Motors is not their largest customer as far as Hayes-Dana is concerned here in Canada. Very specifically, I have spent a lot of time as president of the Automotive Parts Manufacturers' Association of Canada, and the president of Hayes-Dana is vice-chairman of the association. We have spent a great deal of time on this, and this, very seriously, is the reason they changed that investment.

To counteract the concern that one example is probably unfair, in my presentation to Mr Mackenzie last Tuesday I listed six companies that were willing to put forth their names. A lot of them are not willing to do that. That is why we have difficulty having very specific examples. There are significant concerns about stating publicly what you will do or have done, business that has been moved and so forth, because it is anti-Ontario and anti-employment here and that is not a good thing to do. By and large, businesses on an individual basis have kept quiet, but there are a great many that are speaking very quietly but loudly by simply shutting down and moving. A lot of that has happened.

Mr Phillips: I really appreciate the presentation. You have a big problem because I think the NDP genuinely believe the only fair workplace is a unionized workplace. I do not believe that. I think unionized workplaces can be good workplaces and non-unionized workplaces can be good workplaces, but it is a culture that all of us are dealing with. I think if you want to see the government's economic agenda, it is the Ontario Federation of Labour's economic agenda. In fact, the OFL will not come to this committee. It is saying, "We will deal directly with the Treasurer."

My question to you is, has the All Business Coalition had a chance to look at the government's economic proposals around the venture capital funds for the unions, around the use of public sector pension funds and around this -- I realize you spoke favourably in your document towards this presentation and I just wonder if your group has had a chance to look at it. I see their economic renewal plan having four or five major components. One is the labour relations changes; second, the pensions; third, worker capital venture stuff; fourth, OTAB, and fifth is probably the industrial strategy they will announce shortly. What would ABC's comments on those be?

Mr Surplis: I will tell you quickly that ABC is a consensual group; we do not have a research basis or anything. That will be answered by our individual members much more directly than by us, I am sorry to say, but they all do have comments. For instance, we in the construction industry will be part of the Treasurer's committee on another aspect of the budget and will obviously put forward things there, too.

Mr Phillips: Right.

Mr Surplis: This is just the group, and as a group we do not have a position on that yet.

Mr Phillips: Yvonne, did you have a question? If you do not, I have another one.

Mrs Y. O'Neill: Yes, please go on.

Mr Phillips: You mentioned the $700 million capital program. I do not know whether anyone has noticed that the Premier is talking about spending money on capital, but they have cut $400 million of the $700 million out of the budget already, and heaven knows what by the end of it. Have the construction trades noticed the reduction in the capital expenditures?

Mr Surplis: We were given a list by the Minister of Industry, Trade and Technology that totals up to $700 million.

Mr Phillips: Their third-quarter results just came out and they have cut $400 million out of the capital; $400 million of the $700 million is gone.

Mr Surplis: Yes, we will be addressing that, as I said, in another venue. We have a long data base that shows the multiplier effects of construction and so on. But also, in fairness, I tell you, I have a list that totals up to $700 million from Mr Philip. so I am not sure. We have not had a chance to go through it. It is a great document, but it is there.

Mr Phillips: I wonder what is happening there.

Mr Surplis: I do not know.

Mr Carr: I appreciate your taking the opportunity to come here.

I was interested in page 2, where you say the coalition was formed because no one could get basically through to the government and consult. I think some of the points you made are valid. I speak to people all the time and they say: "We know you're supporting us in this particular concern, whatever it may be, but the reason we don't want to come out is because we have to deal with the government. We spend millions of dollars on our corporate image for advertising, and coming out against the government is negative regardless if you are right or wrong."

Your coalition, putting business together, can act as a front. Putting some of the powerful groups together here I think is very important. But since it was formed on the premise of not having consultation and now that you have been very aggressive, as you say, in trying to get your message out, do you see the shift on behalf of the government to wanting to cooperate more? Are you moving them further along? I sense there is a little bit, more out of panic than anything else on the other side, because they realize they are going to be judged on the results. I wonder what your thoughts are. Is the government listening in any of these areas?

Mr Surplis: We have had more meetings, that is for sure. We have been in to see Mr Mackenzie and Mr Philip a couple of times. Certainly as a group we have never met with the Premier.

Mr De Koker: I can add to that. We as three coalitions, the More Jobs Coalition, Project Economic Growth and the All Business Coalition wrote to Premier Rae in November asking for a meeting to discuss these very serious issues and we have not as of today even received a response to that letter.

Mr Carr: I was a little optimistic. I guess I should not have been. One of the questions I have relates to automotive. As you know, Ford is in Oakville. One of the concerns Ken Harrigan had, with the auto sector being so big in Ontario -- not only as individuals but the parts which you are familiar with. They had a problem last year when they introduced that gas guzzler tax. At that time they said, "Here we are gearing up, our Grand Marquis are the ones making money in full production down in St Thomas and you slap a tax on them." People hate taxes. They will pay $75 if you say that is what it costs to wash the car. If you say it is going to taxes they will say, "We don't want to pay it." If nothing else, if they listen to you before some of these things come in this time it will be worthwhile.

What is your sense with the Treasurer as it relates to the automotive sector? Are you going to see any improvements in some of those areas with regard to taxes and helping you out? What is your sense about it specifically for the auto parts people?

Mr De Koker: My sense at the present time is that there is still not much listening. We are talking very seriously about the gas guzzler tax and the impact of it and some of the other things. I visited a number of dealerships in the last four months and it is really sad when you hear a salesman talk about closing a deal until he adds 15% on top and someone says, "What is that?" And you add the PST and GST and it is a killer to a $20,000 purchase, $3,000 more on top of it, and that is what is really hurting.

If there were some way, as was suggested in here, as an incentive to have a tax holiday for a period of time. I think you would see amazing things if you created incentives for growth rather than additional taxes and additional burdens on industry. I think we can create positive things that could really help.

The Chair: We have run out of time. The clock has run out there. I would like to thank you gentlemen for coming before the committee with your brief. It will be considered in the report.

Mr De Koker: Thank you for allowing us to be here.


The Chair: I call on the Ontario Federation of Agriculture to present its brief to the standing committee on finance and economic affairs. I would like to welcome you here. Would you identify yourself for the purposes of Hansard.

Mr George: Good afternoon, Mr Chairman and ladies and gentlemen of the committee. My name is Roger George. I am the president of the Ontario Federation of Agriculture. With me are Carl Sulliman, OFA's chief executive officer and executive director, Cecil Bradley, manager of research, and the remainder of our research department, Ed Ketchabaw and David Armitage. I believe we have half an hour. Is that correct?


The Chair: Forty minutes.

Mr George: That is even better. I am going to take 10 or 12 minutes and go quickly through the brief you have before you, just hitting the high points. I certainly do not intend to read it all. Then hopefully we can get into some more meaningful dialogue through this.

Just for the record, I will say that OFA is the largest general farm organization in the province, with approximately 20,000 voluntary individual members and 29 affiliated commodity and education groups in membership. We have representation in 47 counties and regions across the province, so we are well represented. From just about wherever there is a farmer in the province we have a federation of agriculture.

Our brief is organized into five or six chapters. The first chapter outlines the importance of providing continued government support to our section, chapter three discusses the need for a comprehensive farm credit package, in chapter four we identify some tax issues and chapter five looks at the importance and the continuing work of the farm income safety nets. We are quite excited about chapter six, our new environmental farm plans, and we will have a document to put forward for the record as well on that. Finally, OFA's concern within the broad topic of rural development is presented to you in chapter seven.

Turn to page 2, section 2.1, agriculture's share of the provincial pie. Once again we come before this committee to say that agriculture's share of the provincial budget is less than 1%. It has been now for the last four years and that is if we take out the farm property tax rebate, which is $150 million-plus, which we certainly do not recognize as any sort of government initiative. We just see that as a redress of an inequitable tax that we should not have paid in the first place. To put that 1% in perspective, there are groups out there at the moment arguing, with some justification, I may add, that agriculture should be getting up to 5% of the provincial budget.

Moving right along -- as I say, I am just going to hit the highlights here -- in arguing our case for continued and indeed enhanced provincial government assistance for our industry, I think we have to take a good look at the economic factors of our industry, the amount of jobs that agribusiness does provide. It is not just farmers here. A vital and healthy agricultural sector can well be the building block for economic recovery and certainly plays a key role in the economy of rural Ontario and indeed the total economy of the province. Therefore, despite the rather gloomy projections for a massive $14-billion provincial deficit, the OFA firmly recommends that this is not the time for the government to look at agriculture's share of the budget -- as we said, less than 1% -- as a target for cutbacks. Rather, we believe that the government should be looking at agriculture as a vehicle to invest in for the future to help create more economic activity for this province.

Chapter 3 deals with farm credit and finance. We have been over this ground many times. I am not going to take you through the three or four pages we have here, because we have submitted all this for the record before. Just to hit on the highlights, section 3.1 deals with immediate credit needs. These are things we would hope that the Treasurer would be able to address very shortly, the most critical of which being the crop insurance-based loan program. Rather than getting into the details of this, because we have had committees working with Mr Hayes and other members of the government and the Ministry of Agriculture, the crop insurance-based loan program is a new program that is urgently needed in time for the spring planting. I think we are just at the point where we are waiting for some cabinet approval on the types of guarantees the government would have to put up. It is not really going to be an out-of-pocket cash cost to the government; it is a question of guarantees we are looking at and this will have a profound effect on the ability of farmers to have the availability of credit this spring and get on with the job at hand of planting that crop.

In addition, we commend to you for speedy results the beginning farmer income insurance enhancement program, under which we are looking for government to help beginning farmers to pay their insurance costs for, say, crop insurance and safety nets, and third, to deal with the issue of getting legal aid, making moneys available for legal aid and accounting assistance for farmers in financial distress who are probably going through the debt review process or whatever. The $3.5 million that the minister announced in his special package last fall for farmers in distress once again fell short of helping these individuals. Many farmers, and there are getting to be more all the time, who go through whatever types of legal process they have to go through do not have available to them good legal counsel or any process from government where they can get assistance to pay their legal costs and get the type of sound financial assistance they need in these difficult times. Those are the three big ones.

If we turn to page 5, right at the top, I just want to put before you what is a new suggestion from OFA's point of view, an interest rate renegotiation proposal. While we have not worked out the details, the idea would be that at a time when many farmers are left sitting there with 13% or 14% mortgages and now long-term mortgages can be had for 8.5% or 9%, it might be worth thinking about a program that would pay or help to pay a farmer's penalty involved in renegotiating that mortgage down from 14% to, say, 9%. I think that would probably be a very good bang for the buck. When we look at the leverage factor, a few thousand dollars upfront to renegotiate a mortgage rate could save that farmer many tens of thousands of dollars over the term of that mortgage. That might be something we need to do some work on and we commend that to your committee for thought.

With that I am going to move to page 7, section 4, on tax issues; getting back to section 4.1, an old favourite, property taxes. We understand that once again, from the Ontario Fiscal Outlook, the farm property tax rebate is being reviewed by the treasury board with an eye to reducing expenditures. The farm community had an extensive consultation with our Minister of Agriculture, Mr Buchanan, before Christmas. Our formal advice to the government was then, and still is, that we give fast-track consideration to the property tax issue by the Fair Tax Commission. We really believe that it is the place where it should be looked at. We do not expect this government to start taking property tax apart piece by piece before it has gone to that commission.

Second, we suggest that the government renew the current order in council for periods sufficient to allow the Fair Tax Commission to complete its work. Going into 1992 we do need a new order in council for this fiscal year. The program, which has a two-year mandate, has expired as it is.

In section 3 we do agree with the fact that strict administration of the current program criteria should be done to control costs and eliminate abuse. If there is any abuse there, and we do not know to what extent there is, particularly along the lines of those farmers or where land has been sold for development, there is provision in the order in council in the legislation for cost recovery, for property tax rebates to be recovered. We do believe that should be followed up on. I do not think that in the past there has been much recovery. We agree with our minister that the government should go after that.

Beyond that, we are basically saying to leave the property tax issue alone and let the Fair Tax Commission do a thorough review. I think the property tax issue for farmers becomes a very important and critical thing, particularly at a time when farming incomes and cash flows are very tight, the fact that now farmers do not know whether that tax rebate is going to be paid or not because the order in council is not in place. That causes some nervousness in the farming community and, as you know from past experience, it has always been a top priority of our organization. It would be a real political hot potato if there was any attempt to fiddle around with it beyond the recommendations we made.


Item 4.2, again an old favourite, and is the issue of tobacco and wine products. Once again I stand before this committee recommending to the Treasurer and the government that the government consider the fairness of its taxes, particularly the fairness to those prime producers of tobacco and wine products. Time after time it seems that the sin taxes are the easy taxes to grab and there seems to be precious little concern for those prime producers who ultimately end up paying a price as consumers stop using that product to one degree or another. So again we would recommend to the Treasurer that he take a good hard look at his other options before he once again comes down hard on those two sectors.

We move to page 8 on safety nets, and that is GRIP, the gross revenue insurance plan, and the net income stabilization account. We have had those programs now for one year. It has been a learning process for us all. There will be evolution of those programs. We recommend to the provincial government that the GRIP and NISA programs be expanded to provide adequate protection to all sectors of the industry. In particular we have red meats -- hogs and beef cattle -- that are interested in getting in, as are horticultural products. I believe there was a decision made by ministers when they met last Friday in Ottawa to give active consideration to widening the safety nets to include some of these other commodities, subject to the provincial and federal governments' ability to finance those. It does become a very important issue for those producers, many of whom feel they do not have equitable treatment with other sectors, particularly the grain sector. That becomes an important thing. The other issue that is before us on safety nets with fiscal ramifications is the fact that the target prices and the premiums for the 1992-93 crop under the GRIP program are not what farmers are going to like to see. The coverage has dropped faster than we would have liked to see it and the premiums have gone up a little higher than we would like to see them, too. We are looking to see if we can adjust the formula within the spirit of the act to make allowances for that. Again, that may well have some fiscal ramifications for government. We are at the same argument we were at last year. We cannot let these producers swing in the wind. They have to have that support to get us through to the brighter days we hope may be ahead.

Page 9 deals with the environment. I am going to ask David if he will pass out a new document which we call our farm environmental agenda. This document is the result of six or seven months' work by a coalition of farm organizations led by the Ontario Federation of Agriculture, the Christian Farmers' Federation of Ontario, AGCare and the Ontario Farm Animal Committee. In addition to that there were another 28 groups working with us and we have produced this document, which is our vision of and our commitment to the environment. We believe farmers will -- we know they will because farm groups will be encouraging them to -- take a good look at what goes on on their farms and develop individual environmental farm plans. We believe by doing it this way and by giving farmers the necessary assistance they need -- there will be a need for some assistance on capital facilities in some cases: Manure storage is one example. Certainly they will need training and probably some financial assistance in helping them put these farm plans together, but in the long term our target is to get 40,000 farmers to have environmental plans by the turn of the century.

We believe this farmer-driven commitment is going to be far better and accomplish far better environmental results than any government program and any government legislation ever can. This is farmers creating their own destiny on environmental issues and we are very proud that we have been able to come to a consensus in the farm community to set a standard that I think is going to be a far higher standard than you could ever hope to legislate, because when you legislate you end up working with the lowest common denominator.

We recommend, as we say in our brief, that the Ontario government consider paying farmers a development fee of $250 upon the completion of an environmental farm plan. We believe any of the measures that are needed on environmental issues of a capital nature should get some government assistance. We will be also talking to the federal government through the Green Plan for some of this assistance. But things like low-interest, long-term loans such as those presently provided to farmers under the Tile Drainage Act might be the type of thing we need to be looking at for the future once our environmental farm plans come in place.

At the bottom of page 10 we talk about fuel ethanol. Again, I think that becomes an important issue. We believe the federal government is showing signs of making progress to this end and we certainly commend it to the Ontario government to look at that again. We recommend that the Ontario government continue its present tax exemption on ethanol, which is used as a transportation fuel, and work to develop other strategies to assist in creating an increased consumer demand for ethanol-based gasolines and be supportive of any initiatives by the farm community to get ethanol plans going.

In light of some of the trade negotiations and the thought that there are many hundreds of thousands of tonnes of corn that are currently fed to supply-managed livestock that may or may not have a home in the next couple of years, one of the comments we make is that ethanol production is one market for some of our grain production in Ontario that may otherwise be looking for an export market.

Finally, on page 12 we talk about rural development. We have spoken about that many times around here. Let's get on with it. Let's get down to business and get some programs going. We all have different visions for rural development, but there is a need for the government to recognize the rural system and let the rural system structure itself to meet its own needs. So OFA recommends once again that the Ontario Ministry of Agriculture and Food take the lead on an interministerial rural development coordinating committee. We firmly believe that the Ministry of Agriculture and Food should be the lead group there.

We recommend that the government develop a type of grant program and get some pilot projects going to provide start-up funding to rural entrepreneurs.


Before I close, I want to talk briefly about the trade negotiations. As you know, they are coming to a critical time in Europe. Maintaining the balanced position, which is to on the one hand clarify and strengthen article XI of the GATT, which is the article that allows us to maintain our supply management, is the critical issue. The other side of the equation is to eliminate or at least greatly reduce the export enhancement programs which have caused such devastation in the international grain circles.

While trying to maintain that balanced position, we are very concerned at this point in time about the threat that tariffication will bring to our supply management sectors. I do not think I need to tell any of you people about that issue; you have been reading the papers in the last two or three weeks. Our minister, Mr Buchanan, I know has been giving tremendous support as has the Premier to those farmers in supply management, but we are coming to a very critical period of time and on 18 and 19 February, which is next week, 300 farm leaders will be meeting in Ottawa, hopefully with the Prime Minister, and at that point in time we expect the national supply-managed groups to be calling a national rally.

The OFA is currently in the process of working with all commodities in Ontario to put together farmers, rural people, friends of rural people, MPs, politicians, anybody we can get on the buses to come in support of the Canadian farm family, because on Friday 21 February we are going to put together the rally of all rallies in Ottawa. We are hoping to have as many as 25,000 people on the Hill in support of not just supply management, although it is a supply management focus, but of Canadian farms. From coast to coast -- it does not really matter what commodity you are involved in -- if our supply-managed sector is badly damaged by the GATT negotiations, over time that is going to have a profound effect not only on those producers of dairy products and feather products but on every farmer across the country as we start to see feed suppliers, processing plants, tractor dealerships, and local hardware stores close down. The spinoff effect is going to be profound. Supply management accounts for about a third of Ontario's agricultural gross dollars, significantly more when we talk about net dollars in agriculture. There are going to be many tens of thousands of people in this country who, I am afraid, are going to wake up too late if we do not make the statement now.

So I would commend to each and every one of you and I invite each and every one of you to join us on the buses. Get on your own constituency buses and be in Ottawa on Friday 21 February in support of the Canadian farmer. Thank you, Mr Chairman. We are open for questions.

Mrs Y. O'Neill: Thank you so much, gentlemen, for coming today. I want to thank you for sending us your news bulletin on a regular basis, because it is very helpful to us.

I do not think I am going to ask you questions on the GATT and the supply management question because I think you have a lot on the record on that and I think we are pretty much up on that issue. You have talked a bit about the tax commission. I wanted to ask you what your input into that has been. Are you on some of these working groups that you have mentioned, for instance, the real estate, the corporate wealth tax? Are you represented there?

Mr George: We are involved in some of those committees. I am going to ask Cecil Bradley, our research manager, to expound on that.

Mr Bradley: Yes, we have a representative on the land speculation, wealth, environment and taxes. We do not have directly an organizational representative on the corporate minimum, although through our relationship with The Co-operators we have been in touch with that individual and have been able to keep a watching brief on developments before that working group.

Mrs Y. O'Neill: Okay, I hope you will continue to have your input there because I think it is very important.

I watched with interest the things you have been saying on the cross-border shopping issue in your bulletins. I am wondering if you can say a little more. I was surprised you have not put anything specifically in your brief because I know that issue is very important to you as well. For the record, I wonder if you would say a little bit about that, because what people think about that issue is important in budget planning.

Mr George: We did not include it in this presentation. I think we will when we meet with the Treasurer in a couple of weeks for his pre-budget consultations. Clearly the federal government is playing a lead role in this.

I am from northern Ontario. I know my colleagues there tell me that fully 25% of the dairy product in their area is coming across the border. That has a significant dollar effect on the average milk producer in northern Ontario. I do not have all the answers. I do not know anybody who has the answers. I guess if we had the answers, we would have them out there.

Mr Sulliman: The short answer, Ms O'Neill, is it would be just great for the economy and for jobs if the Ministry of Transportation were to close all the lanes to the border crossings for road repair, put people to work and just cut down the people going across the border. That is a very simple solution, is it not? A winter works program here in Canada. But it is a federal responsibility primarily. I know the Premier is on record, as are most members of this House. When we come and submit these briefs, we try to hit those things that are most pressing on our agenda. That does not mean cross-border shopping is less important. It is like the GATT: It is not really written in here today, but it is an issue. OTAB has a tremendous impact on the rural sector, the rural economy and farming as an agricultural workplace. They are all pressing issues.

Mrs Y. O'Neill: I just wondered if you felt there was anything directly related to the tax issues in your industry that would be a policy area we should look at in the development of this budget.

Mr Sulliman: I cannot give you a straight answer today. I suspect there is, but the short answer is, again, that I was being only half-facetious when I suggested a winter works program on all the roads to border crossings.

Mr George: Presumably, if there were no GST and no provincial sales tax, there would be that much more incentive for people to stay on this side of the border too.

Mrs Y. O'Neill: Have you taken a position on the harmonization issue?

Mr George: No, we have not.

Mrs Y. O'Neill: Mr Phillips, I do not know whether you want to finish our time.

Mr Phillips: Yes. We have heard a lot about the industry leaving Ontario and some feeling that some of the policies of the new government are contributing to that. One of the industries that, I gather, may be leaving the fastest is the food processing business. I am wondering -- I did not see any comment in your brief on that -- whether you have any advice for us in terms of the food processing business and how we might slow down what looks to be a bit of a move.

Mr George: There are several issues there. First, I think there is a myth out there that one of the reasons the food processing businesses leave Ontario is because the cost of the raw materials from the farm are higher over here. That is a very small part of the issue. One reason they are going to move over there pretty quickly is related back again to the issue of these trade deals. If we start to lose the ability to produce some of this product domestically, then there is absolutely no point in saying, "We'll bring this stuff in from south of the border and process it here." The factories are going to move to where the product is. That makes me very nervous.

When we stop and think that there is only 4 cents' worth of wheat in a loaf of break and 14 cents' worth of corn in a box of corn flakes that costs $4, I do not think we can say it is the cost of the raw products that is the problem; it is all these other things. It is the cost of labour. It is the cost of local and provincial taxes. I do not know. Because of all that tax regime, it seems to me that the cost of doing business in Canada is that much more.

We all know there is a price to pay for living in Canada too. We have climate. It costs us more to insulate our buildings. But there again, our regulations bother me. It seems to be a bit of a dichotomy with this government that we keep on putting in new regulations, and with every regulation there becomes a cost of compliance and a cost of enforcement. That just makes the price of doing business that much higher. It seems to me that regulations which were put in for presumably good reason have the opposite effect of driving business south of the border.

It is a very worrisome problem. Again, we do not have the answers, but it is one I think this country has to come to grips with right off the bat. I suggest that Canada's ability to be competitive and have that competitive environment where businesses will be attracted to is far more important than any constitutional debate, far more important.

Mr Phillips: I just thought I would raise it. I just --

The Chair: Excuse me, we have to carry on.

Mr B. Murdoch: I have two or three questions. First, you mentioned the rally on the 21st. The last I heard, if negotiations go fine -- some 300 leaders are going to meet with the government -- that rally may not be on. Are you saying it is on, regardless?

Mr George: That rally is on, regardless. In my mind, it cannot be called off. The only possible thing the Prime Minister could say that would call that rally off would be if he could come and say: "I've got a signed declaration here by George Bush and Delors from the European Community that article XI is now safe. We've gotten it clarified. Here's the document." It would take that from the Prime Minister to stop it, and I do not think the Prime Minister can deliver on that. The Prime Minister is not going to turn around and say no either. The Prime Minister is probably going to say, "Be patient guys, we're working on it." That is not going to be good enough for the farm community. So the rally is on.


Mr B. Murdoch: I just wanted to make that clear, because we had heard other things.

On rural development, you have mentioned here that maybe OMAF should take the lead. I am wondering where the Ministry of Municipal Affairs comes in, because right now we have a problem in rural development within rural Ontario. OMAF actually is causing more trouble than it is helping and Municipal Affairs, I think, maybe should be taking the lead, with OMAF being part of it. But if OMAF starts taking the lead on rural development, then we may have a problem.

Mr George: I certainly hope we would not have a problem. We want to get the job done. It seems to me that OMAF would be the natural one to take the lead. I assume they would have the competence to do that.

Mr B. Murdoch: I just want to suggest that Municipal Affairs may be the better one to take the lead on that and work with the Minister of Agriculture and Food. A lot of the planning issues are under the Planning Act, which is under Municipal Affairs, and right now a lot of the problems are being caused by the Minister of Agriculture and Food.

Mr George: I guess what we are looking for is a cabinet committee. It is obviously a multiministry business. We are suggesting OMAF be the lead ministry. I will leave it at that.

Mr B. Murdoch: Maybe they can kickstart it at least.

I am impressed with your environmental agenda, but I am also concerned that we not lose our focus. Up until this agenda came out, our focus with your group was that the prices for our agricultural products in the last while -- I have watched it on television and it is in the shows. You are excited about this, which you should be, but I do not want us to lose our focus that there will not be any farmers to implement this if the same trend that is going on today keeps going on. This sure is fine, but boy, if we do not do something for the prices, and the prices are not mentioned in this, I am really concerned that we are going to get away from it and get into environmental issues and forget about the farmers.

Mr George: There is very clearly an economic linkage with environmental responsibility. The two things go hand in hand, in my judgement. Quite frankly, it is just like your business. At any point in time we have a whole bunch of issues in the air. With the environment and GATT and the whole pricing thing, it just so happens there are three of them.

While we are excited about this, we are no less excited about prices or any less excited about GATT, but just as affairs of state have to be done on many fronts, so does this one. Let's get started on this one, because the environment is going to be around for many more years to come and it is going to be an issue for us to keep on working at. I am excited that we have gotten it started. We are certainly not putting all our energy into it, but it is going to be an ongoing watching brief.

Mr B. Murdoch: This is part of my issue, because I still farm. If I have to start being concerned more about the environment than getting my prices for my products, then I will not be around to fill this out. I think we just do not want to lose where we are going.

I know you mentioned maybe an incentive from the government that farmers be paid $250 to fill this out. Do we have any criteria of what a "farmer" is going to be? Are we going to say that maybe they should belong to the OFA before they can tap into that? How would we control that?

Mr George: No, we are looking to get 40,000 commercial farmers. There are no strings attached to what farm organization. We are saying that as long as they are commercial or quasi-commercial farmers, they should be filling in an environmental farm plan. There is no cross-compliance between existing financial programs, but we are saying that for future environmental programs it would be necessary for a farmer to deliver a completed farm environmental plan in order to access any grant programs that might be there in the future.

Mr B. Murdoch: Just one --

The Chair: No, no more questions. I will go on to Mr Drainville. I believe that when this came out, it was not there. Was it, "Educate, don't legislate"?

Mr George: Yes.

Mr Drainville: Thank you very much for the very full brief you presented to us and also your manual on the environmental agenda. I have a couple of questions. First I want to affirm a couple of things. One is, as far as my understanding in talking with the minister is concerned, our continued support of your position vis-à-vis the GATT. I have made strong representation on behalf of the federation to the minister from the farmers who live in my own area and I have been lobbied quite extensively by them. I must say that I have felt very --

Mrs Y. O'Neill: Not on the weekends.

Mr Drainville: Not on the weekends, no, but I was on a dairy farm just recently with members of the federation.

I want to also recognize that the points you are making about ethanol are very important. I think you need to stress that to the government. I myself have been trying to stress that. I have a resolution that is on the Orders and Notices paper -- at least it was before we prorogued; I am afraid it has probably gone the way of the dinosaur now and I will have to reintroduce it -- in support of the ethanol issue.

I am going to pose a difficult question to you, though, around the taxes. I mean this within the context of respect for your position and what you are trying to say. You draw attention to the area around the commodity taxes and also as regards the property tax. I too want to see the farmers continue with the property tax program that is there and set up. I want that to continue and I will be supporting the minister in trying to make sure the government continues that. But in terms of the commodity taxes on wine and tobacco, I certainly hear the concerns you have in that area.

I also am even willing to acknowledge that with governments in the past it has been rather easy to slap taxes on. There is no party around these tables that has not done it at this point in time, so we are all guilty of this particular proclivity, but what I would like to know is, what taxes should we increase?

Each group that comes before this and other committees of the Legislature is indeed very explicit about those areas that would impinge upon it, but we in government find ourselves in a dilemma right now, with the present financial situation being what it is. Trying to understand your position, are there taxes that you feel that can be increased fairly? Obviously these two should not be, and I hear you on that, but are there taxes that should be increased fairly? Should taxes not be increased?

I also see in your document that you are also recommending continued funding from the government in other areas, for programs that are important. I do not doubt their importance at all. What I am trying to do is solicit a little help for the government. If you have some help on how we can try to arrange the present fiscal difficulties we are in, I am all ears. We need that kind of input.

Mr George: I am not going to stand here today and tell you what taxes I think you should increase, because I do not believe the Ontario or Canadian taxpayer is in any mood for tax increases. We are all looking to our legislators to take one hard look at expenditures. I think we can all see examples in our backyards of things where you think, "That seems to be a waste of money." I think we should take a good, hard look at that, as painful as it may be for those people who try to defend those programs.

It gets back, in my mind, to find ways of generating economic activity. When we look at the heyday in the late 1980s, when this province was booming, and the hundreds of millions of dollars of taxes -- income taxes, sales taxes and whatever -- that were generated through that economic activity, surely to God that has to be the way to go. We are not in the business of taxing the nation to death to pay for government activities, nor are we in the business of shutting the nation down by curtailing all the programs.

Surely to goodness we can creatively find ways to stimulate this economy. From my sector we are saying, "Give agriculture a chance and we can create some economic activity in our sector." We know we have this spinoff effect in agriculture. When farmers have money they spend it and that money soon gets recycled through the system. I think we have to be taking that type of approach rather than saying, "Well, we've got to put up taxes here or else we'll totally eliminate these things."

Carl or Cecil, I do not know if you have anything to say on that.


Mr Sulliman: The only thing I would add to what Mr George has said in response to Mr Drainville's question is that the way in which you have targeted certain agricultural producers because society somehow finds their processed product a social pariah has been quite inappropriate.

If tobacco is deemed to be an inappropriate product for the marketplace, then say so, and for heaven's sake buy out the quota for these producers and allow them to get on with their lives. Do not slowly twist the noose around these farm families' necks because you do not like their product. The same goes for the grape growers in Ontario. If you do not like their product and if you think that socially it is unacceptable and therefore is subject to a "sin tax," then call it such. Tell them to get out, pay them honourably, as you would in any corporate cannibalism where you take an industry over, pay them off at a fair price and move on.

When it comes to property tax rebate for the farmers of Ontario, I want you to be very clear about the fact that it is not a personal taxation issue. It is a real property taxation issue. It is taxation on property. It is inappropriate taxation of productive farm assets -- land and buildings. We cannot prejudge the outcome of that, other than to say that it has been long established through the Progressive Conservative government, the Liberal government, and now the New Democratic government that it is an unfair tax burden on productive farm assets. The only stopgap remedy we have had is the property tax rebate program. Therefore, please leave it in place intact until the government's Fair Tax Commission comes back with a course of action that is fair and equitable and just to these people, period.

The Chair: I would like to thank you gentlemen for coming before the standing committee on finance and economic affairs. I know we had some more questions and maybe, Mr Jamison, later on you could see Mr George outside. Thank you for coming.

Mr Sulliman: See you on the bus in Ottawa.

Mr Drainville: By the way, I'm going.

Mr Sulliman: So is the Minister of Agriculture and Food.

The Chair: Thank you for appearing before this committee.


The Chair: The next group we have coming before the committee is the Social Planning Council of Metropolitan Toronto. Would you come forward, please. With the names I have here, I am not going to say, "Welcome, Peter and Andy," so would you please identify yourselves for the purposes of Hansard. I would like to welcome you for appearing before this committee. We have 40 minutes and in that time you make your presentation. At the end the three parties will be divided equally to ask questions. You may begin.

Ms Roycroft: My name is Marilyn Roycroft. I am the vice-president of the board of the Social Planning Council of Metropolitan Toronto. With me today is Andy Mitchell, who is the program director. We are very pleased to have this opportunity to present before this committee.

We understand and appreciate the difficult issues facing the province of Ontario as it prepares its 1992 provincial budget.

Just a little background on the council: The Social Planning Council of Metropolitan Toronto is a 50-year-old organization, independent, voluntary and made up of a 36-member board of directors representing a wide variety of community interests. The council is funded principally by the United Way and by a grant from the municipality of Metropolitan Toronto. We are mandated to undertake social research, policy analysis, public education and advocacy, and, along with many others and in collaboration with them, we try to develop innovative service development.

Our principal concern is for social policy. We are committed to the view that social and economic goals are wedded fundamentally and completely. Economic policy must be set in the context of its social consequences. The tools of economic policy, such as spending and taxation, should be seen not merely as tools of economic management but also as a means to achieve social goals. That same relationship operates in reverse and the pursuit of social policy objectives will enhance and reinforce the achievement of economic goals.

Our approach to the Ontario budget is consequently based on viewing economic policy, as expressed through the budget, as a way of achieving economic goals, but also as a means of ensuring that all of Ontario's residents live in dignity and share in the wealth of this province.

The province has signalled that restraint will be a component of this year's budget. We are all aware of the transfer payments, announced in January, of 5% in the next three years. We are all aware that this also will not keep pace with projected inflation. The 2% increase in social assistance payments already announced for 1992 will not keep up with inflation, which is forecast at 2.3% this year, and will do nothing to address the fundamental inadequacy of benefits.

It is most important for the province, as it addresses the most serious challenge that any Ontario government has faced since the Depression, that this government not abandon its commitment to partnerships, equity, social justice and the protection of the very vulnerable in our society.

I would like to take just a minute or two to set the context in which some of our recommendations are made. Andy will then outline some of the specific options we see for this government and for this province in the next few months.

In our last submission on the Ontario budget the council emphasized the integration of social and economic development. Some views -- narrow, we would say -- of the role of the state, characterize state intervention as inhibiting private initiative and crowding out private-sector investment. More modern views, in our point of view, recognize that the state can guide social and economic development in a positive manner.

For example, through enhanced skill training and infrastructure investment, Ontario could be better able to retain an industrial base. Welfare state expenditures can be used as a tool to shape more desirable labour market outcomes through the creation of high-quality service-sector jobs and the provision of adequate income security to help Ontarians who are undergoing this transition in this period of economic restructuring.

The most successful and productive economies in the world operate according to such thinking, in our view. The least successful ones look at the short-term view. So, again, it is our submission that we should stress the importance of protecting and enhancing the social infrastructure as an integral part of a strategy for achieving economic goals of productivity and competitiveness.

The ideas of social justice, which I have already mentioned, and of equity and of partnerships are ones that enhance and reinforce productivity and competitiveness. Competition in the global economy today requires significant investment in social and physical infrastructure. Neglect of either will not help in the long run and in fact will lead to a deterioration in our ability to respond.

Most analyses of the globalization of the economy emphasize the importance of productivity and the ability of any economy to adapt to changing circumstances. A recent report from Investment Canada, which we refer to in our brief in greater detail, stresses the factors of education and training and their importance in influencing productivity. It also stresses the maintenance of a first-class transportation system, water and sewage system, communications, and other forms of public infrastructure. Indeed, in a 1991 budget paper the province identified a number of the ways of influencing the ability to compete, including skills and adaptability of the workforce, management skills, and technological advancement and innovation.

We believe that a narrow vision of competitiveness and the role of the state is not the way to go. It seems clear that a policy of eroding social infrastructure and not investing in physical infrastructure will impede our ability to compete in the long run. We want to increase the province's flexibility, not decrease it.


Finally, it is important when looking at this challenge to understand that Ontario's revenues and expenditures are not high in relation to the gross domestic product of other provinces. After growing substantially in the 1960s, provincial expenditures have now stabilized at 15% to 16% of provincial gross domestic product. There have been expected upward movements due to economic recession, but revenues have not grown to the same extent to keep pace with these expenditures. This is a key problem and it is exaggerated and amplified by the downloading from the federal government to the provinces. I am not going to go into that in detail -- I am sure many others have before you -- but we hope the province would not further download to the municipalities, which must depend on a narrow and regressive property tax base.

Now I will turn over to Andy Mitchell, who will outline some specific options.

Mr Mitchell: It has been our practice in the past in making submissions to give quite a bit of detail on different programs where we would see the requirement for enhancement. But the province has signalled, at least this time around, that it really wants to hear suggestions about taxation -- less about where to spend the money and more about where to find it. So for that reason I turn my attention to some of the options.

We observed that personal income taxes and retail sales taxes, which are two of the larger tax sources for the province, have increased in relation to provincial gross domestic product in response to the increased responsibility of the province to fund social programs. We also observe at the same time that the taxation of corporations has not similarly increased.

As Marilyn mentioned earlier, Canada and Ontario are not high tax jurisdictions in comparison to neighbouring jurisdictions or internationally for that matter. I think you will find a quotation from a study by Neil Brooks in our submission which shows that by most international comparisons we are not a high-tax jurisdiction. Therefore, we believe that the province has some flexibility to meet the current crisis without jeopardizing a recovering economy, at the same time as offering protection to the most vulnerable in society and maintaining our vital programs.

For example, there are at least two and probably many more options for redesigning the provincial sales tax. For example, and this is strictly hypothetical, the province could reduce the rate to around 4% and raise a corresponding amount of money by raising provincial income taxes, by increasing the rate of tax on basic federal tax. Alternatively, the province could lower the sales tax rate by 2%, for example, and raise income taxes by an amount sufficient to offset the revenue loss at the same time as it enriched the Ontario tax-reduction program for lower-income people.

Without going into very much more detail about that, the benefits we would see from those kinds of changes would be to leave more money in the hands of lower-income people. Lower-income people have a higher propensity to consume. They have to consume almost all their income just to live and therefore it would be our expectation that you would see an economic stimulus out of changing the tax structure in that way. It is entirely possible that such changes might stem cross-border shopping as well, with additional benefits. I will leave that one alone for now. You might want to ask some questions about that.

There is a historical precedent for a program like that. I do not know all the details, but I believe in 1978 there was a temporary reduction in the Ontario provincial retail sales tax, again for the express purpose of economic stimulation.

Another example would be a 1% increase in capital taxes that would yield about $1.4 billion, according to provincial estimates from the Ontario Fiscal Outlook. My reading of the document suggested that would still leave our capital tax rate at or below every jurisdiction in Canada, with the sole exception of Quebec. Similarly, a 1% increase in the employer health tax would yield approximately $1.5 billion, again leaving the level of taxation competitive with our principal trading partners and other jurisdictions.

We observed previously that corporate taxation has not increased to reflect the increased provincial responsibility to fund vital social programs in the same way retail sales taxes and personal income taxes have. It would be our submission that these forms of taxation reflect our common interest in and responsibility for maintaining a healthy, just and equitable society. Avenues for increasing corporate taxes should be explored. Different routes would include increased rates, cutting down on tax expenditures, or possibly one of the options for a corporate minimum tax being explored by the Fair Tax Commission at this time.

This is not to say that we necessarily would endorse the downloading of responsibility to the provinces for funding social programs, it is just the reality of the current context. A different form of federalism might be something desirable, but that is not what is at issue with us today.

Again, without specifically endorsing any particular set of solutions, we note that the province has significantly more flexibility than it might first appear in the area of debt. The level of provincial debt, while an area of concern in terms of our future ability to fund programs, is not high and is not yet a problem of critical magnitude.

The province perhaps should explore borrowing options from some of its historical sources of funds. I noticed, poring over the public accounts, that historically the largest sources of funds for the provinces have been Canada pension and teacher pension funds, OMERS, the Ontario municipal employees retirement system fund; there are three or four. At the same time last year, though, the province was relying on public bond markets for the lion's share of its debt. Although I understand there are some legislative reasons why the province does not currently borrow from its historical sources, it would be our submission that it should explore those avenues again. It only seems logical, if you are going to borrow, to borrow from domestic sources to the greatest extent possible, because then at least the interest you pay is income received in Ontario.

We have short comments in the area of capital spending. We would encourage the province to extend the offer made by the Premier to the federal government to fund capital spending on a dollar-for-dollar basis to further extend that to the municipalities as well.

I will leave it there so we can have the greatest opportunity for questions about some of the specifics we have raised. Sorry, I will make one more comment. That is to do with the budget consultation process itself. The province made a commitment to a more open and democratic budget consultation process. Some of the characteristics of this year's round we would very enthusiastically endorse. For example, the release of information through the economic projections in the Ontario Fiscal Outlook really helped us to view the situation with the same kinds of information the Treasurer is looking at, so we could not support that any more. That was very helpful.

At the same time, limiting the number of groups that come before this committee to make submissions has caused a number of groups out in the community to not have the same kind of access to the budget process that they have enjoyed in the past. I would make similar comments about the Treasurer's plans to cancel his one-on-one consultation meetings and substitute the round table discussions on a number of selected issues. Again, limiting it to a number of pre-selected groups has cut off an avenue of access that a lot of groups had previously enjoyed. That is where I will close it.

The Chair: Thank you. Mr Murdoch, you have a question?

Mr B. Murdoch: The only one I have right now -- and maybe I will have more when you go around the table; there may be some more time -- is, did I hear you correctly that you felt maybe we should be putting higher taxes on people who are making more money, or a corporate tax? We have been here all day, and we have just heard from many of the corporations anyway that they are already taxed too much. I have been in many meetings where they feel that if they are taxed any more there will be a tax revolution, and then if there is, unfortunately there are going to be payments that are defaulted and we are going to be in a heck of a mess here because they are not going to receive any revenues. Is this what you are saying we should be doing?


Mr Mitchell: All I have that I can work with, since I do not know a lot of corporate people, is the evidence, which to me suggests that by most comparisons, Ontario is not a high-tax jurisdiction. I imagine that if you asked anyone on the street or any individual corporation you selected, they are going to feel like they pay too much tax. I just have trouble finding the evidence to support it.

Mr B. Murdoch: And we do not have it here, but there certainly is. But I think the corporations are saying that the atmosphere in Ontario right now is poor for them to invest and that is why they are leaving. If at this time we put on a higher tax, I think it will even be worse. I am not saying they will, but they were here and that is what they are telling us anyway. I think this would be a dangerous time to start incorporating more taxes.

Mr Mitchell: I do not pretend to know everything, but I would say that taxation decisions are probably only one out of a myriad of factors in corporate location decisions. A friend of mine, when I made the same argument, playing devil's advocate to him, said that if corporate taxes were the sole criterion for location, then Cape Breton would be the industrial heartland of Canada, which stopped me dead in my tracks.

I would say that I am not interested in seeing the corporate sector taxed out of existence. I am talking about taxing profitable activities. I would say that you can always design a program such that corporations, business activities, that are fragile can be dealt with in a sensitive way, because I am not interested in taxing things out of existence either.

Mr B. Murdoch: I can understand that when times are good, but with everything that is happening, and as I say, the atmosphere is not good now, one more thing -- as they say, the straw that broke that camel's back -- that could be it and we would be in serious trouble in Ontario if they start going after more corporate tax.

Ms Roycroft: May I just respond for a moment? The other issue I think is really looking at the reality of the existing corporate taxes in relation to the rest of the country. I echo what Andy is saying. There is lots of fearmongering being done by various groups in this province now. I do not believe that is helpful, and that is certainly not the basis on which we are coming. I think a far more healthy, respectful approach is to treat it as seriously as the rest of the groups that will be taxed are going to treat it, and that is to come with a much more reasonable approach than, "We simply can't do it," which is the approach I hear from a number of corporations also.

It is up to the province to make those tough decisions, based on the information you have in front of you. That information points to certain things in our eyes, and that is all we can say.

Mr B. Murdoch: I really do not think it is fearmongering, I think it is just to bring in reality to us so you can take whichever one you want to use. That is all.

Mr Drainville: It is a pleasure to have you come before the committee today. I should say that I was a member of the board of the social planning council for a period of time in the middle of the 1980s, so I am quite familiar with much of the work you have done.

I want to say how you have put forward your position, which is quite different from most of the positions that have been brought before this committee -- I must say that because of my background I tend to favour much of your analysis. It is analysis that bespeaks a certain view of the social integrity of our country and believes that somehow we need to see taxation and the economic situation as being a handmaid, if you will, of our society and not try to have an economy that is based upon fear, which I believe is what is presently being put forth by some economists and some people.

We have heard that we are taxed out of all proportion, and we also hear a lot of complaints about the government and the role of government in society. What you are putting forward here is asking government to continue its support of social programs and the social service network, and the means by which we are to do that, of course, is by ensuring that we use our taxation dollars wisely, and you have given some indication about how we can do that.

Part of our concern as we as a government try to deal with this very serious economic situation is to decide, in terms of taxation, whether we are undertaxed, according to your report, or overtaxed, according to other reports. I think the reality out there is that people do not want us to raise taxes. I do not think there is any question about that, so our government finds itself in a very difficult situation and position, being unable to manoeuvre itself and so provide the services we believe are important.

The question I would ask you is, quite apart from the taxation issue and the issue about a cutting of programs, what role do you think the government should be taking if we are going to continue to prosper? I am asking for you to go beyond the social contract, but to look at what role the government should be having if we are going to continue to generate the economy.

I turned this around on the federation of agriculture at the last presentation they made. They were very particular about the things we should not tax, and they were also asking us for significant amounts of money. I found that very hard for us to hear, because on one hand they are saying, "Don't tax," but they are saying, "Don't cut programs; in fact increase the amount of money you're giving us."

What I am saying to you on the same score is that I, as one who believes in the social service system in Ontario and in Canada, want to see that continue, but to make that continue, prosperity has got to be a goal we achieve. To achieve prosperity, what are the directions in which this government can go and what are the means by which we can engender prosperity so we can continue to have the social services we need in Ontario?

Mr Mitchell: You have asked a large question, so we will have to share the answer.

I think the key thing the way I look at this is in analysing how Ontario will be productive and competitive in the future. This is where I start to see the vital links back to the social sector. I think fundamentally the government can contribute to the productivity and hence the competitiveness of this economy by ensuring the strength of our infrastructure, by ensuring high levels of education and retention in post-secondary education, by ensuring the health of its citizens and by ensuring that there is a high level of training. I might add, although it is not the purview of this government to ensure the strength of unemployment insurance, it is programs like that that ensure that the labour market will have enough security and feel secure enough to become a flexible labour market rather than engage in defensive protecting of positions. I think that is the fundamental key to how a government can ensure that it remains competitive and productive. That is my short answer.

Mr White: I very much appreciate your suggestion of the change from a regressive form of tax, the RST, to the progressive income tax base and your analysis of the actual numbers involved, which are striking, to put it mildly, of course.

Like Mr Drainville, I have also been involved with social planning councils, although I have not lived in Toronto for the most part of my life.

Your emphasis is primarily upon social services and that kind of support network, yet in other communities, in other jurisdictions with a social democratic government, the emphasis is upon a social contract and a solidarity where it is a full employment and a full participation. The residual welfare is still there for those who are disabled, who are unable to participate, but as a much smaller proportion of the community. In Dr Mishra's book, which I recently read, he speaks very strongly of that social contract and how effective it has been in other communities. I wonder why your community here is emphasizing "social service network" and the residual benefits.

Ms Roycroft: I will start and Andy can jump in. That is what we do, if I can put it that way. We started off as a neighbourhood workers' organization 50 years ago, and the social planning council has evolved since them to look much more at the relationship between economic development and social welfare policies. Our focus comes at it from a different angle, unless I misunderstand what you are asking. I suppose the other way of viewing it, something that Mr Drainville just said, is that one has different definitions of prosperity. The other major work the council has done this year is a report called Unequal Futures, which is an analysis of child poverty across this country. It is tough-decision time about where you trim the costs, where you put the money and where you raise the money. I guess our emphasis and our work tend to be on one side of it. We see the tremendous need on that side so it is not easy for us in any way to de-emphasize that, I guess is what I am saying.


Mr Mitchell: I will add one thing, if I could. If I got the nub of your question, we historically have supported the notion of full employment in the economy, but I guess I am tailoring my message to the audience. I do not imagine the Ontario government can be charged with the responsibility of creating full employment in Ontario. I will be talking more about that at the end of this month when the Treasurer brings down his budget.

Mr Sutherland: Just one quick comment about the process going on here. You are quite right that this committee is not able to meet with as many groups as it has in the past, but I do want to make it clear that any written submission from organizations you are in contact with that want to send them in to this committee we would be more than happy to have.

Mr Mitchell: I will pass that message on.

Mrs Y. O'Neill: Without any prejudice to Andy, it is very nice to see Marilyn because in the entire day you are the only woman who has presented on behalf of any group. Having just been part of electing a woman as my leader I find that regrettable, because I do think women should and can be very directly involved in economic issues.

I want to ask you a couple of questions. Are you on any of the working groups in the tax commissions.

Ms Roycroft: Yes, we are.

Mr Mitchell: I serve on the working group on low-income relief.

Mrs Y. O'Neill: You know the transfer payments now. You have had the news: 2%. I thought you might mention a bit about that, but I understand you explained why you chose the brief you did. You said a moment ago that it is a time for tough decisions. Would you tell us a little about what the 2% means to you, what kind of process you are into now regarding your decision-making?

Ms Roycroft: In terms of the 2% transfer payments to --

Mrs Y. O'Neill: The agencies you work with. Can you tell us a little about the effect of that?

Mr Mitchell: This will have to be kind of anecdotal, since I have not really turned my mind to it.

Mrs Y. O'Neill: That might be very helpful.

Mr Mitchell: You are hearing stories about cutbacks, closures, in different agencies that are in receipt of provincial funds. A couple of groups I have worked with are seriously scaling down their projected operations for the year.

Mrs Y. O'Neill: I know in the community I come from, Ottawa, there seems to be a real concern particularly about the drug rehabilitation area. I wonder if you and people like yourselves, umbrella groups, are having to make choices between different kinds of needs. How is this being done? You must be into it pretty heavily.

Mr Mitchell: I will restrict myself to a short comment about the difficulties facing Metro Toronto in its budgeting.

Mrs Y. O'Neill: Yes, I heard some of it on the news.

Mr Mitchell: When you are starting to talk about cutting medical aid to social assistance recipients, which is the kind of difficult choice they have put in front of themselves, then I would call that a fairly serious crisis for them.

Mrs Y. O'Neill: Are you being helpful in that? Are you being called upon to help prioritize at such a critical time?

Mr Mitchell: We have been part of a group that has been talking to Metro at meeting after meeting, encouraging it to look at every possible option to avoid the kinds of scenarios they are painting for their budget for this year.

Mrs Y. O'Neill: I am quite happy with what has happened in Ottawa in such a tight circumstance. I do not know whether you are familiar with that, but I think it was over $300,000 that was reinstated in the social services area as the budget discussions progressed. I have a feeling it was the chairman of that committee who had a lot to do with that, but that is personal.

I just want to ask you one more question. We had the Ontario Prevention Clearinghouse here this morning. They decided to devote almost half their brief to the opportunity planning project that was part of the SARC Transitions document. I wonder if there is anything like that happening in Metro that you know of. Has that taken off at all? Do you feel it is something that should be pursued by this government?

Mr Mitchell: We have appeared before the government on numerous occasions over past years endorsing the moves towards social assistance reform. For example, as I said earlier, we have not gone into details with this brief, since I think our views on that are known.

All our past briefs are available, if you are looking for input on how to reform social assistance or how to enhance housing programs, how to do labour-market training. We have years' and years' worth of briefs to do that.

Mrs Y. O'Neill: Are you still as convinced, I guess is what I want to ask you, about the opportunity planning project or are there any pilot projects in the Metro area where people are trying this out?

Mr Mitchell: I do not think I have any details for you.

Ms Roycroft: Sorry we just do not, Yvonne, but we can get it for you. If the executive director, Peter Clutterbuck, had been able to be here he would have some background.

Mrs Y. O'Neill: I am still getting good vibes and updates on the supports to employment program, but it is certainly not nearly as broadly based as I would like it to be. I know opportunity planning is very closely tied to STEP. I just wonder if you had anything for this committee, because I think there will have to be very difficult decisions made on retraining and the re-establishment of self-worth through a project like that. That may be one of the choices that would be helpful to us if we thought that was where you felt the focus should be. Mr Mitchell: All the reports I am getting about STEP indicate very positive results in terms of the number of people who are getting into the labour market and reducing their dependence on social assistance through STEP. The simplest thing the province could do to improve with that program would be wider publication of it, wider advertising to get more people.

Mrs Y. O'Neill: We have been hearing that for about three years. That is right; I guess our government and perhaps this government now is not listening well enough to that. It does turn people's lives around, especially single mothers.

Ms Roycroft: Can I just add two very brief things? As you are aware, I also spent a fair bit of my life in the education field. Reports from the adult education centres right across the province are that they are flooded, especially in English as a second language. They are turning people away who are in fact eager to be retrained and upgraded. That is one piece of evidence, in the sense that you were looking for what the effect is going to be and what the other demands are going to be out there.

I am also part of a committee looking at the United Way's allocations.

Mrs Y. O'Neill: I did not realize the pressure would come so quickly. I thought it would take them longer to respond, the United Way.

Ms Roycroft: My friend who is doing admissions said the other day that the normal period is a week, and they were completely out of spaces for ESL within three hours. People had lined up at midnight the night before. She could not believe it. That is a very fast response to problems.

The other committee I sit on is a group working with the United Way in trying to deal with the same amount of money and a greater need. There is no question that the 2% passover in terms of transfers is going to have an enormous impact certainly on the smaller agencies. We as an agency will weather it, but there are other ones that simply will not because of the increased demands. They are just not going to be able to meet it. The United Way would certainly have evidence of that from the work that it has been doing.

Mrs Y. O'Neill: Thank you very much for being so specific with your answers. I am very happy you brought up continuing education, because that could easily be one of our recommendations.

The Chair: I would like to thank you on behalf of the committee for appearing here. Your brief will be added into our report.

The committee is dismissed until 10 o'clock sharp tomorrow morning.

The committee adjourned at 1722.